Note 16 - Regulatory Capital Requirements and Restrictions on Dividends

12 Months Ended

Dec. 31, 2015

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 16.     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 December 31, 2015 and 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, Tier 1 leverage and common equity Tier 1 ratios as set forth in the following tables. The Company and the subsidiary banks’ actual capital amounts and ratios as of December 31, 2015 and 2014 are also presented in the following table (dollars in thousands). As of December 31, 2015 and 2014, 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, 2015:
Company:
Total risk-based capital	$	280,273		13.11	%	$	170,969	>	8.0	%	$	213,711	>	10.0	%
Tier 1 risk-based capital		253,891		11.88	%		128,227	>	6.0			170,969	>	8.0
Tier 1 leverage		253,891		9.75	%		104,163	>	4.0			130,203	>	5.0
Common equity Tier 1		220,800		10.33	%		96,170	>	4.5			138,912	>	6.5
Quad City Bank & Trust:
Total risk-based capital	$	135,477		12.50	%	$	86,726	>	8.0	%	$	108,407	>	10.0	%
Tier 1 risk-based capital		123,498		11.39	%		65,044	>	6.0			86,726	>	8.0
Tier 1 leverage		123,498		8.87	%		55,718	>	4.0			69,648	>	5.0
Common equity Tier 1		123,498		11.39	%		48,783	>	4.5			70,465	>	6.5
Cedar Rapids Bank & Trust:
Total risk-based capital	$	105,285		14.39	%	$	58,537	>	8.0	%	$	73,172	>	10.0	%
Tier 1 risk-based capital		96,118		13.14	%		43,903	>	6.0			58,537	>	8.0
Tier 1 leverage		96,118		10.96	%		35,079	>	4.0			43,848	>	5.0
Common equity Tier 1		96,118		13.14	%		32,927	>	4.5			47,562	>	6.5
Rockford Bank & Trust:
Total risk-based capital	$	38,544		11.96	%	$	25,772	>	8.0	%	$	32,216	>	10.0	%
Tier 1 risk-based capital		34,514		10.71	%		19,329	>	6.0			25,772	>	8.0
Tier 1 leverage		34,514		9.59	%		14,401	>	4.0			18,001	>	5.0
Common equity Tier 1		34,514		10.71	%		14,497	>	4.5			20,940	>	6.5

*The minimums under Basel III phase in higher by .625% (the capital conservation buffer) annually until 2019. The fully phased-in minimums are 10.5% (Total risk-based capital), 8.5% (Tier 1 risk-based capital), and 7.0% (Common equity Tier 1). Currently, the New Basel III minimums mirror the minimums required for capital adequacy purposes. The first phase-in of the Basel III capital conservation buffer will occur in 2016.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective 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

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. Under the terms of the debentures, the Company may be prohibited, under certain circumstances, from paying dividends on shares of its common stock. These circumstances did not exist at December 31, 2015 or 2014.

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 the Basel III minimums may lead to restrictions on dividends, share buybacks, discretionary payments on Tier I instruments and discretionary bonus payouts.

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

On August 27, 2015, the Company filed a universal shelf registration statement on Form S-3 with the SEC. This registration statement, declared effective by the SEC on October 5, 2015, will allow the Company to issue various types of securities, including common stock, preferred stock, debt securities or warrants, from time to time, up to an aggregate amount of $100.0 million. The specific terms and prices of the securities will be determined at the time of any future offering and described in a separate prospectus supplement, which would be filed with the SEC at the time of the particular offering, if any.