Note 15 - Regulatory Capital Requirements and Restrictions on Dividends

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 15.     Regulatory Capital Requirements and Restrictions on Dividends

The Company (on a consolidated basis) and the subsidiary banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and subsidiary banks’ financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the subsidiary banks must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the subsidiary banks to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets, each as defined by regulation. Management believes, as of December 31, 2013 and 2012, that the Company and the subsidiary banks met all capital adequacy requirements to which they are subject.

Under the regulatory framework for prompt corrective action, to be categorized as “well capitalized,” an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. The Company and the subsidiary banks’ actual capital amounts and ratios as of December 31, 2013 and 2012 are also presented in the following table (dollars in thousands). As of December 31, 2013 and 2012, the subsidiary banks met the requirements to be “well capitalized”.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2013:
Company:
Total risk-based capital	$	217,011		12.87	%	$	134,935	>	8.0	%		N/A		N/A
Tier 1 risk-based capital		193,044		11.45	%		67,468	>	4.0	%		N/A		N/A
Tier 1 leverage		193,044		7.96	%		97,029	>	4.0	%		N/A		N/A
Quad City Bank & Trust:
Total risk-based capital	$	101,168		12.25	%	$	66,049	>	8.0	%	$	82,562	>	10.00	%
Tier 1 risk-based capital		91,820		11.12	%		33,025	>	4.0			49,537	>	6.00	%
Tier 1 leverage		91,820		7.13	%		51,527	>	4.0			64,408	>	5.00	%
Cedar Rapids Bank & Trust:
Total risk-based capital	$	74,912		12.54	%	$	47,808	>	8.0	%	$	59,760	>	10.00	%
Tier 1 risk-based capital		67,432		11.28	%		23,904	>	4.0			35,856	>	6.00	%
Tier 1 leverage		67,432		8.78	%		30,736	>	4.0			38,420	>	5.00	%
Rockford Bank & Trust:
Total risk-based capital	$	38,778		14.59	%	$	21,263	>	8.0	%	$	26,579	>	10.00	%
Tier 1 risk-based capital		35,449		13.34	%		10,631	>	4.0			15,947	>	6.00	%
Tier 1 leverage		35,449		10.54	%		13,459	>	4.0			16,824	>	5.00	%

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2012:
Company:
Total risk-based capital	$	188,841		12.71	%	$	118,878	>	8.0	%		N/A		N/A
Tier 1 risk-based capital		167,475		11.27	%		59,439	>	4.0	%		N/A		N/A
Tier 1 leverage		167,475		8.13	%		82,357	>	4.0	%		N/A		N/A
Quad City Bank & Trust:
Total risk-based capital	$	98,789		12.12	%	$	65,218	>	8.0	%	$	81,522	>	10.00	%
Tier 1 risk-based capital		90,533		11.11	%		32,609	>	4.0			48,913	>	6.00	%
Tier 1 leverage		90,533		7.74	%		46,784	>	4.0			58,480	>	5.00	%
Cedar Rapids Bank & Trust:
Total risk-based capital	$	55,736		12.87	%	$	34,652	>	8.0	%	$	43,315	>	10.00	%
Tier 1 risk-based capital		50,297		11.61	%		17,326	>	4.0			25,989	>	6.00	%
Tier 1 leverage		50,297		8.49	%		23,685	>	4.0			29,606	>	5.00	%
Rockford Bank & Trust:
Total risk-based capital	$	36,894		15.33	%	$	19,255	>	8.0	%	$	24,609	>	10.00	%
Tier 1 risk-based capital		33,870		14.07	%		9,628	>	4.0			14,441	>	6.00	%
Tier 1 leverage		33,870		11.13	%		12,177	>	4.0			15,221	>	5.00	%

The Company’s ability to pay dividends to its stockholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies.

The payment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. Notwithstanding the availability of funds for dividends, however, the Federal Reserve may prohibit the payment of any dividends by the subsidiary banks if the Federal Reserve determines such payment would constitute an unsafe or unsound practice.

The Company also has certain contractual restrictions on its ability to pay dividends. The Company has issued junior subordinated debentures in four private placements and assumed two issues of junior subordinated debentures in connection with the Community National acquisition (see Note 2). Under the terms of the debentures, the Company may be prohibited, under certain circumstances, from paying dividends on shares of its common stock. Additionally, the Company has issued shares of non-cumulative perpetual preferred stock and under the terms of this preferred stock, the Company may be prohibited, under certain circumstances, from paying dividends on shares of its common stock. None of these circumstances existed at December 31, 2013 or 2012.

In July 2013, the U.S. federal banking authorities approved the implementation of the Basel III regulatory capital reforms and issued rules effecting certain changes required by the Dodd-Frank Act (the “Basel III Rules”).  The Basel III Rules are applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies” (generally bank holding companies with consolidated assets of less than $500 million).  The Basel III Rules not only increase most of the required minimum regulatory capital ratios, but they introduce a new Common Equity Tier 1 Capital ratio and the concept of a capital conservation buffer.  The Basel III Rules also expand the definition of capital as in effect currently by establishing criteria that instruments must meet to be considered Additional Tier 1 Capital (Tier 1 Capital in addition to Common Equity) and Tier 2 Capital.  A number of instruments that now qualify as Tier 1 Capital will not qualify, or their qualifications will change.  The Basel III Rules also permit smaller banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income, which currently does not affect regulatory capital.  The Basel III Rules have maintained the general structure of the current prompt corrective action framework, while incorporating the increased requirements. The prompt corrective action guidelines were also revised to add the Common Equity Tier 1 Capital ratio.  In order to be a “well-capitalized” depository institution under the new regime, a bank and holding company must maintain a Common Equity Tier 1 Capital ratio of 6.5% or more; a Tier 1 Capital ratio of 8% or more; a Total Capital ratio of 10% or more; and a leverage ratio of 5% or more.  Generally, financial institutions become subject to the new Basel III Rules on January 1, 2015.  Management is in the process of assessing the effect the Basel III Rules may have on the Company’s and the subsidiary banks’ capital positions and will monitor developments in this area. At present, management believes that its current capital structure and the execution of its existing capital plan will be more than sufficient to meet and exceed the revised regulatory capital ratios as required by the new Basel III Rules.