Note 7 - Common Stock Offering and Balance Sheet Restructuring

9 Months Ended

Sep. 30, 2015

Common Stock Offering And Balance Sheet Restructuring [Abstract]

Common Stock Offering And Balance Sheet Restructuring [Text Block]

NOTE 7 – COMMON STOCK OFFERING AND BALANCE SHEET RESTRUCTURING

On May 13, 2015, the Company announced the closing of an underwritten public offering of 3,680,000 shares of its common stock at a price of $18.25 per share. The net proceeds to the Company, after deducting the underwriting discount and offering expenses, totaled $63.5 million. As a result of the capital raise, the Company’s regulatory capital ratios increased significantly. Additional information regarding regulatory capital is described in Note 8 to the Consolidated Financial Statements.

The Company utilized the proceeds from the common stock offering to restructure certain debt obligations and to bolster overall capital levels. Specifically, the Company repaid $15.3 million of holding company senior debt at an interest rate of 3.27%, and $2.7 million of subordinated debt at an interest rate of 6.00%. Additionally, $85.5 million of FHLB advances and wholesale structured repurchase agreements at a weighted average interest rate of 4.36% were prepaid at QCBT and CRBT. As a result of this planned restructuring, the Company incurred $6.9 million (pre-tax) in losses for debt extinguishment that were recognized in the second quarter of 2015.

Of the $103.5 million in debt extinguishments, $63.5 million was funded with the proceeds from the common stock issuance. Approximately $27.7 million was funded through the maturity of low-yielding securities. Brokered CDs and overnight FHLB advances were utilized to fund the remaining $12.3 million. The weighted average interest rate on these new borrowings was approximately 0.90%.

This restructuring and deleveraging significantly reduced the wholesale borrowings portfolio of the Company, which includes FHLB advances, wholesale structured repurchase agreements, and brokered time deposits. The table below presents the maturity schedule including weighted average cost for the Company’s combined wholesale borrowings portfolio.

	September 30, 2015					December 31, 2014
			Weighted					Weighted
			Average					Average
			Interest Rate					Interest Rate
Maturity:	Amount Due		at Quarter-End			Amount Due		at Year-End
Year ending December 31:	(dollar amounts in thousands)
2015	$	84,916		0.33	%	$	103,818		0.92	%
2016		26,142		1.52			50,642		3.51
2017		49,055		2.07			53,965		2.96
2018		60,283		2.93			60,042		3.41
2019		59,341		3.07			83,152		3.59
Thereafter		51,141		2.64			51,141		2.64
Total Wholesale Borrowings	$	330,878		2.00	%	$	402,760		2.66	%

Total wholesale borrowings decreased $71.9 million from December 31, 2014 to September 30, 2015. Specifically, FHLB advances decreased $70.5 million, wholesale structured repurchase agreements decreased $15.0 million, and brokered time deposits increased $13.6 million, as liquidity needs were supplemented with this source. The average cost of wholesale borrowings decreased from 2.66% to 2.00% and the average duration shortened, as many of the borrowings that were extinguished were long-term in nature. Of the $85.5 million in FHLB advances and wholesale structured repurchase agreements that were prepaid, $30.5 million were set to mature in 2016, $15.0 million in 2017, $10.0 million in 2018 and $30.0 million in 2019. The weighted average duration of these borrowings was 2.56 years.