Note 9 - Regulatory Capital Requirements

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

REGULATORY CAPITAL REQUIREMENTS

NOTE 9 – 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, 2018 and December 31, 2017, 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, 2018 and December 31, 2017 are presented in the following table (dollars in thousands). As of September 30, 2018 and December 31, 2017, each of the subsidiary banks met the requirements to be “well capitalized”.

										For Capital					To Be Well
										Adequacy Purposes					Capitalized Under
					For Capital					With Capital					Prompt Corrective
	Actual				Adequacy Purposes					Conservation Buffer*					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio		Amount			Ratio
As of September 30, 2018:
Company:
Total risk-based capital	$	449,655	10.87	%	$	330,798	>	8.00	%	$	408,329	>	9.875	%	$	413,497	>	10.00	%
Tier 1 risk-based capital		406,578	9.83	%		248,098	>	6.00			325,629	>	7.875			330,798	>	8.00
Tier 1 leverage		406,578	8.87	%		183,278	>	4.00			183,278	>	4.000			229,098	>	5.00
Common equity Tier 1		368,952	8.92	%		186,074	>	4.50			263,605	>	6.375			268,773	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	160,806	11.72	%	$	109,744	>	8.00	%	$	135,466	>	9.875	%	$	137,180	>	10.00	%
Tier 1 risk-based capital		147,532	10.75	%		82,308	>	6.00			108,029	>	7.875			109,744	>	8.00
Tier 1 leverage		147,532	9.32	%		63,297	>	4.00			63,297	>	4.000			79,121	>	5.00
Common equity Tier 1		147,532	10.75	%		61,731	>	4.50			87,452	>	6.375			89,167	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	145,066	11.79	%	$	98,462	>	8.00	%	$	121,540	>	9.875	%	$	123,078	>	10.00	%
Tier 1 risk-based capital		131,839	10.71	%		73,847	>	6.00			96,924	>	7.875			98,462	>	8.00
Tier 1 leverage		131,839	9.83	%		53,659	>	4.00			53,659	>	4.000			67,074	>	5.00
Common equity Tier 1		131,839	10.71	%		55,385	>	4.50			78,462	>	6.375			80,001	>	6.50
Community State Bank:
Total risk-based capital	$	72,601	11.43	%	$	50,801	>	8.00	%	$	62,708	>	9.875	%	$	63,501	>	10.00	%
Tier 1 risk-based capital		67,149	10.57	%		38,101	>	6.00			50,007	>	7.875			50,801	>	8.00
Tier 1 leverage		67,149	9.62	%		27,918	>	4.00			27,918	>	4.000			34,898	>	5.00
Common equity Tier 1		67,149	10.57	%		28,576	>	4.50			40,482	>	6.375			41,276	>	6.50
Rockford Bank & Trust:
Total risk-based capital	$	45,314	10.19	%	$	35,583	>	8.00	%	$	43,923	>	9.875	%	$	44,479	>	10.00	%
Tier 1 risk-based capital		39,692	8.92	%		26,688	>	6.00			35,027	>	7.875			35,583	>	8.00
Tier 1 leverage		39,692	8.20	%		19,365	>	4.00			19,365	>	4.000			24,207	>	5.00
Common equity Tier 1		39,692	8.92	%		20,016	>	4.50			28,356	>	6.375			28,912	>	6.50
Springfield First Community Bank:
Total risk-based capital	$	54,108	11.64	%	$	37,196	>	8.00	%	$	45,914	>	9.875	%	$	46,495	>	10.00	%
Tier 1 risk-based capital		48,870	10.51	%		27,897	>	6.00			36,615	>	7.875			37,196	>	8.00
Tier 1 leverage		48,870	9.31	%		20,988	>	4.00			20,988	>	4.000			26,235	>	5.00
Common equity Tier 1		48,870	10.51	%		20,923	>	4.50			29,640	>	6.375			30,222	>	6.50

										For Capital					To Be Well
										Adequacy Purposes					Capitalized Under
					For Capital					With Capital					Prompt Corrective
	Actual				Adequacy Purposes					Conservation Buffer*					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio		Amount			Ratio
As of December 31, 2017:
Company:
Total risk-based capital	$	383,282	11.15	%	$	275,090	>	8.00	%	$	318,073	>	9.25	%	$	343,862	>	10.00	%
Tier 1 risk-based capital		348,530	10.14	%		206,317	>	6.00			249,300	>	7.25			275,090	>	8.00
Tier 1 leverage		348,530	8.98	%		155,256	>	4.00			155,256	>	4.00			194,070	>	5.00
Common equity Tier 1		313,012	9.10	%		154,738	>	4.50			197,721	>	5.75			223,510	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	160,112	12.35	%	$	103,711	>	8.00	%	$	119,916	>	9.25	%	$	129,639	>	10.00	%
Tier 1 risk-based capital		147,472	11.38	%		77,783	>	6.00			93,988	>	7.25			103,711	>	8.00
Tier 1 leverage		147,472	9.52	%		61,985	>	4.00			61,985	>	4.00			77,481	>	5.00
Common equity Tier 1		147,472	11.38	%		58,337	>	4.50			74,542	>	5.75			84,265	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	138,492	11.88	%	$	93,272	>	8.00	%	$	107,846	>	9.25	%	$	116,590	>	10.00	%
Tier 1 risk-based capital		126,601	10.86	%		69,954	>	6.00			84,528	>	7.25			93,272	>	8.00
Tier 1 leverage		126,601	11.68	%		43,348	>	4.00			43,348	>	4.00			54,185	>	5.00
Common equity Tier 1		126,601	10.86	%		52,465	>	4.50			67,039	>	5.75			75,783	>	6.50
Community State Bank:
Total risk-based capital	$	66,271	11.71	%	$	45,293	>	8.00	%	$	52,370	>	9.25	%	$	56,616	>	10.00	%
Tier 1 risk-based capital		61,941	10.94	%		33,970	>	6.00			41,047	>	7.25			45,293	>	8.00
Tier 1 leverage		61,941	9.77	%		25,354	>	4.00			25,354	>	4.00			31,693	>	5.00
Common equity Tier 1		61,941	10.94	%		25,477	>	4.50			32,554	>	5.75			36,801	>	6.50
Rockford Bank & Trust:
Total risk-based capital	$	45,684	11.28	%	$	32,413	>	8.00	%	$	37,477	>	9.25	%	$	40,516	>	10.00	%
Tier 1 risk-based capital		40,615	10.02	%		24,310	>	6.00			29,374	>	7.25			32,413	>	8.00
Tier 1 leverage		40,615	8.94	%		18,177	>	4.00			18,177	>	4.00			22,721	>	5.00
Common equity Tier 1		40,615	10.02	%		18,232	>	4.50			23,297	>	5.75			26,335	>	6.50

*     The minimums under Basel III increase 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).