Note 8 - Acquisition Of 20% Noncontrolling Interest In M2 Lease Funds

9 Months Ended

Sep. 30, 2012

Business Combination Disclosure [Text Block]

NOTE 8 – ACQUISITION OF 20% NONCONTROLLING INTEREST IN M2 LEASE FUNDS

On August 27, 2012, the Company’s largest subsidiary bank, QCBT, entered into an amendment to the operating agreement of m2 Lease Funds and purchased the 20% noncontrolling interest in m2 Lease Funds.  QCBT previously owned an 80% equity interest in m2 Lease Funds.  The acquisition is structured in two payments with the initial payment of $1,653,755 made on September 11, 2012 and the final payment to be made in September 2015.  The initial payment represented a 50% premium over the book value of the 20% equity interest of $3,307,509 as of August 31, 2012, calculated in accordance with the operating agreement.  The final payment will consist of the book value of the 20% equity interest as of August 31, 2012 plus 20% of the earnings from m2 Lease Funds for the period September 2012 through August 2015.  As a result, for the portion of the final payment related to the book value of the 20% equity interest as of August 31, 2012, QCBT calculated the present value of the future payment using a discount rate of 5% and recorded the resulting liability of $2,847,687.  QCBT will accrete the discount using the effective yield method over three years.  For the portion of the final payment related to the 20% of earnings from m2 Lease Funds for the period September 2012 through August 2015, QCBT will record compensation cost and increase the liability on a monthly basis.  As a result of acquiring additional equity in a majority-owned company, the premium paid is reflected as a reduction of additional paid-in capital.  The total premium paid and resulting reduction of additional paid-in capital totaled $2,133,417 which consists of the 50% premium over the book value as defined by the operating agreement ($1,653,755) and the difference between the discounted book value and the equity in the 20% noncontrolling interest as of August 31, 2012 ($453,884).