Note 8 - Regulatory Capital Requirements

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 8 – REGULATORY CAPITAL REQUIREMENTS

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 September 30, 2016 and December 31, 2015, 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 September 30, 2016 and December 31, 2015 are also presented in the following table (dollars in thousands). As of September 30, 2016 and December 31, 2015, each of the subsidiary banks met the requirements to be “well capitalized”.

						For Capital					To Be Well
						Adequacy Purposes					Capitalized Under
						With Capital					Prompt Corrective
	Actual					Conservation Buffer*					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2016:
Company:
Total risk-based capital	$	316,063		11.33	%	$	240,629	>	8.625	%	$	278,991	>	10.0	%
Tier 1 risk-based capital		287,015		10.29	%		184,831	>	6.625			223,192	>	8.0
Tier 1 leverage		287,015		10.09	%		113,737	>	4.000			142,172	>	5.0
Common equity Tier 1		257,119		9.22	%		142,983	>	5.125			181,344	>	6.5
Quad City Bank & Trust:
Total risk-based capital	$	138,333		11.71	%	$	101,861	>	8.625	%	$	118,100	>	10.0	%
Tier 1 risk-based capital		125,410		10.62	%		78,241	>	6.625			94,480	>	8.0
Tier 1 leverage		125,410		8.86	%		56,628	>	4.000			70,785	>	5.0
Common equity Tier 1		125,410		10.62	%		60,526	>	5.125			76,765	>	6.5
Cedar Rapids Bank & Trust:
Total risk-based capital	$	104,206		13.13	%	$	68,474	>	8.625	%	$	79,390	>	10.0	%
Tier 1 risk-based capital		94,266		11.87	%		52,596	>	6.625			63,512	>	8.0
Tier 1 leverage		94,266		10.36	%		36,407	>	4.000			45,509	>	5.0
Common equity Tier 1		94,266		11.87	%		40,687	>	5.125			51,604	>	6.5
Community State Bank:
Total risk-based capital	$	67,008		14.09	%	$	41,031	>	8.625	%	$	47,572	>	10.0	%
Tier 1 risk-based capital		66,735		14.03	%		31,516	>	6.625			38,058	>	8.0
Tier 1 leverage		66,735		11.74	%		22,745	>	4.000			28,431	>	5.0
Common equity Tier 1		66,735		14.03	%		24,381	>	5.125			30,922	>	6.5
Rockford Bank & Trust:
Total risk-based capital	$	41,130		11.95	%	$	29,680	>	8.625	%	$	34,412	>	10.0	%
Tier 1 risk-based capital		36,821		10.70	%		22,798	>	6.625			27,529	>	8.0
Tier 1 leverage		36,821		9.45	%		15,587	>	4.000			19,484	>	5.0
Common equity Tier 1		36,821		10.70	%		17,636	>	5.125			22,367	>	6.5

Part I

Item 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-continued

												To Be Well Capitalized Under
						For Capital						Prompt Corrective
	Actual					Adequacy Purposes*						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). At December 31, 2015, the New Basel III

 

minimums mirrored the minimums required for capital adequacy purposes. The first phase-in of the Basel III capital conservation buffer occurred in 2016.

On October 27, 2016, the Company filed a universal shelf registration statement on Form S-3 with the SEC. When declared effective by the SEC, the registration statement will allow the Company to offer and sell various types of securities, including common stock, preferred stock, debt securities and/or warrants, from time to time up to an aggregate amount of $100 million. The Company utilized $30.1 million of its previous $100 million shelf registration filing through the offer and sale of its common stock in the second quarter of 2016 to help fund the acquisition of CSB. This Form S-3 filing will replenish the amount available to the previous level of $100 million. The specific terms and prices of any securities offered pursuant to the registration statement 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.