Note 8 - Regulatory Capital Requirements and Restrictions On Dividends

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 8 – 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 common equity Tier 1 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 June 30, 2015 and December 31, 2014, 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 June 30, 2015 and December 31, 2014 are also presented in the following table (dollars in thousands). As of June 30, 2015 and December 31, 2014, the subsidiary banks met the requirements to be “well capitalized”.

											To Be Well
											Capitalized Under					New
						For Capital					Prompt Corrective					Basel III
	Actual					Adequacy Purposes					Action Provisions					Minimums*
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of June 30, 2015:
Company:
Total risk-based capital	$	267,743		12.92	%	$	165,750	>	8.0	%	$	207,188	>	10.0	%	$	165,750	>	8.0	%
Tier 1 risk-based capital		241,548		11.66	%		124,313	>	6.0			165,750	>	8.0			124,313	>	6.0
Tier 1 leverage		241,548		9.62	%		100,436	>	4.0			125,545	>	5.0			100,436	>	4.0
Common equity Tier 1		241,548		9.97	%		93,234	>	4.5			134,672	>	6.5			93,234	>	4.5
Quad City Bank & Trust:
Total risk-based capital	$	130,828		12.91	%	$	81,107	>	8.0	%	$	101,384	>	10.0	%	$	81,107	>	8.0	%
Tier 1 risk-based capital		118,182		11.66	%		60,830	>	6.0			81,107	>	8.0			60,830	>	6.0
Tier 1 leverage		118,182		8.86	%		53,347	>	4.0			66,683	>	5.0			53,347	>	4.0
Common equity Tier 1		118,182		11.66	%		45,623	>	4.5			65,900	>	6.5			45,623	>	4.5
Cedar Rapids Bank & Trust:
Total risk-based capital	$	101,472		13.73	%	$	59,112	>	8.0	%	$	73,889	>	10.0	%	$	59,112	>	8.0	%
Tier 1 risk-based capital		92,223		12.48	%		44,334	>	6.0			59,112	>	8.0			44,334	>	6.0
Tier 1 leverage		92,223		10.73	%		34,387	>	4.0			42,984	>	5.0			34,387	>	4.0
Common equity Tier 1		92,223		12.48	%		33,250	>	4.5			48,028	>	6.5			33,250	>	4.5
Rockford Bank & Trust:
Total risk-based capital	$	37,885		11.71	%	$	25,891	>	8.0	%	$	32,363	>	10.0	%	$	25,891	>	8.0	%
Tier 1 risk-based capital		33,838		10.46	%		19,418	>	6.0			25,891	>	8.0			19,418	>	6.0
Tier 1 leverage		33,838		9.42	%		14,369	>	4.0			17,961	>	5.0			14,369	>	4.0
Common equity Tier 1		33,838		10.46	%		14,564	>	4.5			21,036	>	6.5			14,564	>	4.5

*The minimums under Basel III phase-in higher by .625% (the capital conservation buffer) annually until 2019. The fully phased-in mimimums are 10.5% (Total risk-based capital), 8.5% (Tier 1 risk-based capital), and 7.0% (Common equity Tier 1).

											To Be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014:
Company:
Total risk-based capital	$	204,376		10.91	%	$	149,876	>	8.0	%		N/A		N/A
Tier 1 risk-based capital		178,364		9.52	%		74,938	>	4.0	%		N/A		N/A
Tier 1 leverage		178,364		7.62	%		93,658	>	4.0	%		N/A		N/A
Quad City Bank & Trust:
Total risk-based capital	$	104,869		11.26	%	$	74,495	>	8.0	%	$	93,119	>	10.0	%
Tier 1 risk-based capital		93,785		10.07	%		37,248	>	4.0			55,872	>	6.0
Tier 1 leverage		93,785		7.10	%		52,817	>	4.0			66,021	>	5.0
Cedar Rapids Bank & Trust:
Total risk-based capital	$	76,662		11.54	%	$	53,126	>	8.0	%	$	66,407	>	10.0	%
Tier 1 risk-based capital		68,772		10.36	%		26,563	>	4.0			39,844	>	6.0
Tier 1 leverage		68,772		8.21	%		33,525	>	4.0			41,906	>	5.0
Rockford Bank & Trust:
Total risk-based capital	$	35,906		12.56	%	$	22,875	>	8.0	%	$	28,594	>	10.0	%
Tier 1 risk-based capital		32,325		11.30	%		11,438	>	4.0			17,156	>	6.0
Tier 1 leverage		32,325		9.16	%		14,112	>	4.0			17,640	>	5.0

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 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 $1 billion).

The Basel III Rules not only increased most of the required minimum regulatory capital ratios, but they introduced a new common equity Tier 1 capital ratio and the concept of a capital conservation buffer. Failure to maintain capital levels above Basel III minimums may lead to restrictions on dividends, share buybacks, discretionary payments on Tier 1 instruments and discretionary bonus payments.

The Basel III Rules also permit smaller banking organizations to retain, through a one-time election, the existing treatment for AOCI, which excluded the affect from regulatory capital. The Company made this election in the first quarter of 2015.