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QCR Holdings, Inc. Announces Third Quarter Earnings And Successful Closing of Guaranty Acquisition

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MOLINE, Ill., Nov. 02, 2017 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ:QCRH) today announced net income of $7.9 million and diluted earnings per share ("EPS") of $0.58 for the quarter ended September 30, 2017.  This included $601 thousand of acquisition costs and post-acquisition transition and integration costs (after-tax) related to the previously announced acquisition of Guaranty Bank and Trust Company ("Guaranty Bank"), based in Cedar Rapids, Iowa, which closed on October 1, 2017.  Excluding these costs and other non-core items, the Company reported core net income (non-GAAP) of $8.5 million and diluted EPS of $0.63.  By comparison, for the quarter ended June 30, 2017, the Company reported net income of $8.8 million and diluted EPS of $0.65.  For the quarter ended September 30, 2016, the Company reported net income of $6.1 million and diluted EPS of $0.46.  This included $1.5 million of acquisition costs and post-acquisition transition and integration costs (after-tax) related to the acquisition of Community State Bank ("CSB") based in Ankeny, Iowa, which closed on August 31, 2016.  Excluding these costs and other non-core items, the Company reported core net income (non-GAAP) of $7.5 million and diluted EPS of $0.57 for the quarter ending September 30, 2016.

For the nine months ended September 30, 2017, the Company reported net income of $25.8 million, and diluted EPS of $1.91.  Excluding acquisition costs, post-acquisition transition and integration costs, and other non-core items, the Company reported core net income (non-GAAP) of $26.4 million and diluted EPS of $1.96.  By comparison, for the nine months ended September 30, 2016, the Company reported net income of $19.2 million, and diluted EPS of $1.52.  Excluding acquisition costs, post-acquisition transition and integration costs, and other non-core items, the Company reported core net income (non-GAAP) of $20.6 million and diluted EPS of $1.64 for the nine months ended September 30, 2016.

"We are generally pleased with our core operating performance for the first nine months of the year," commented Douglas M. Hultquist, President and Chief Executive Officer, "and we continue to strategize and pursue ways to improve our profitability through our ongoing key initiatives.  Our return on average assets has improved to 1.02% from 0.94%, when comparing the first nine months of 2017 to the same period of the prior year.  This is the result of strong organic loan growth, solid growth in core deposits, and margin improvements.   The acquisition of CSB in the third quarter of 2016 also contributed to our improved profitability.

"Our quarter-over-quarter results were down due to three key factors.  First, acquisition-related net accretion was down $1.1 million when comparing the third quarter of 2017 to the second quarter of 2017.  Secondly, swap fee income and gains from the sale of government guaranteed loans continue to be slow.  Lastly, we've seen an increase in noninterest expense of approximately 5% excluding acquisition costs and post-acquisition transition and integration costs.  Salaries and employee benefits increased from filling open positions, and legal expense also increased."

Net Interest Income Improvement
Driven By Strong Loan Growth and Yield Increase

Net interest income totaled $28.6 million for the quarter ended September 30, 2017.  By comparison, net interest income totaled $28.0 million and $23.6 million for the quarters ended June 30, 2017 and September 30, 2016, respectively.  Acquisition-related net accretion totaled $474 thousand for the quarter ended September 30, 2017.  By comparison, acquisition-related net accretion totaled $1.5 million for the quarter ended June 30, 2017.  Excluding acquisition-related net accretion, net interest income of $28.1 million for the third quarter of 2017 increased 6%, compared to $26.5 million for the quarter ended June 30, 2017.

Net interest income totaled $84.3 million for the nine months ended September 30, 2017.  By comparison, net interest income totaled $65.2 million for the nine months ended September 30, 2016. 

"Net interest margin (excluding acquisition accounting net accretion) increased three basis points when comparing linked quarters at 3.65% for the third quarter of 2017 and 3.62% for the second quarter of 2017," stated Todd A. Gipple, Executive Vice President, Chief Operating Officer and Chief Financial Officer.  "Due to our exceptional loan growth during the second and third quarters of this year, we've been able to shift our mix of earning assets, driving margin improvement.  Additionally, loan yield (excluding loan discount accretion) increased three basis points from 4.39% to 4.42% when comparing the second quarter of 2017 to the third quarter of 2017."

Annualized Loan and Lease Growth of 19.2% for Second Consecutive Quarter

During the third quarter of 2017, the Company's total assets increased $93.3 million, or 3%, to a total of $3.55 billion, while total loans and leases grew $123.2 million, or 4.8% (19.2% when annualized).  Loan and lease growth was primarily funded by short-term borrowings and deposit growth.

 "Organic loan and lease growth totaled $271.3 million for the first nine months of the year, or an annual growth rate of 15.0%," commented Mr. Hultquist.  "This was another very strong quarter of loan growth and while we've already attained our annual loan growth target for the year of 10-12% and are optimistic about the fourth quarter, we believe organic loan growth for the fourth quarter will be at a more normalized level.  We intend to continue our organic growth primarily through market share increases, as customers continue to appreciate the way we do business and are attracted to our relationship-based community banking model."

"Swap fee income and gains on the sale of government guaranteed loans totaled $1.8 million for the first nine months of the year.  The third quarter of 2017 continued to be slow in this area but the pipeline remains active.  Given the nature of this fee income source, large fluctuations can occur from quarter-to-quarter," said Mr. Gipple.  "We plan to continue executing these types of transactions, as they provide unique and beneficial solutions for our clients."

Nonperforming Assets Increase in Third Quarter
Due to the Addition of One Large Relationship

Nonperforming assets ("NPAs") increased $7.8 million in the current quarter.  The ratio of NPAs to total assets was 0.95% at September 30, 2017, which was up from 0.75% at June 30, 2017 and up from 0.69% a year ago. 

 "One large CRE relationship was the primary cause of the increase in NPAs in the third quarter.  We believe that this issue is isolated and not reflective of the overall portfolio," stated Mr. Hultquist.  He continued, "We remain committed to improving asset quality."

The Company's provision for loan and lease losses totaled $2.1 million for the third quarter of 2017, which was up slightly from the prior quarter, and up $479 thousand compared to the third quarter of 2016.  As of September 30, 2017, the Company's allowance to total loans and leases was 1.31%, which was flat compared to June 30, 2017 and up from 1.22% at September 30, 2016. 

In accordance with generally accepted accounting principles for acquisition accounting, the loans acquired through the acquisition of CSB were recorded at market value; therefore, there was no allowance associated with CSB's loans at acquisition.  Management continues to evaluate the allowance needed on the acquired CSB loans factoring in the net remaining discount ($5.6 million at September 30, 2017).  When factoring this remaining discount into the Company's allowance to total loans and leases calculation, the Company's allowance as a percentage of total loans and leases increases from 1.31% to 1.52%.

Capital Levels Remain Strong

            As of September 30, 2017, the Company's total risk-based capital ratio was 11.49%, the common equity tier 1 ratio was 9.33%, and the tangible common equity to tangible assets ratio increased to 8.31%.  By comparison, these respective ratios were 11.65%, 9.46% and 8.29% as of June 30, 2017.
             
            "As a result of solid earnings performance, capital ratios continue to be strong and we are growing tangible common equity at a steady pace," stated Mr. Gipple.  He continued, "Tangible common equity has increased $35.1 million or 14% year-over-year when comparing September 30, 2017 to the same period of the prior year."

Acquisition of Guaranty Bank, Headquartered in Cedar Rapids, Iowa

            Effective October 1st, the Company completed its previously announced acquisition of Guaranty Bank.  The acquisition and subsequent merger of Guaranty Bank into Cedar Rapids Bank & Trust Company ("CRBT") in the fourth quarter of 2017 will enhance the footprint and deposit base of CRBT.  Guaranty Bank had approximately $257.2 million in assets and approximately $212.3 million in deposits as of September 30, 2017. 
             
            "We are delighted to welcome the Guaranty Bank employees, clients and shareholders to QCR Holdings," commented Mr. Hultquist. "This transaction provides the opportunity for us to expand our footprint in Cedar Rapids, partner with a financial institution with a rich legacy and help create the dominant community bank franchise in the Cedar Rapids area. Both organizations focus on recruiting the best people, delivering exceptional, local client service and building the communities they serve."

Continued Focus on Seven Key Initiatives

                The Company continues to focus on the following initiatives in an effort to improve profitability and drive increased shareholder value:

  • Continue strong organic loan and lease growth to maintain loans and leases to total assets ratio in the range of 73-78%
  • Continue to focus on growing core deposits to maintain reliance on wholesale funding at less than 15% of assets
  • Continue to focus on generating gains on sale of USDA and SBA loans, and fee income on swaps, as a significant and consistent component of core revenue
  • Grow wealth management net income by 10% annually
  • Carefully manage noninterest expense growth
  • Maintain asset quality metrics at better than peer levels
  • Participate as an acquirer in the consolidation taking place in our markets to further boost ROAA, improve efficiency ratio, and increase EPS            

Conference Call Details

The Company will host an earnings call/webcast on November 3, 2017 at 11 a.m. central time.  Dial-in information for the call is toll-free 1-888-317-6016 (international 1-412-317-6016).  Participants should request to join the QCR Holdings, Inc. call. The event will be archived and available for digital replay through November 17, 2017.  The replay access information is toll-free 1-877-344-7529 (international 1-412-317-0088); access code 10112157.  A webcast of the teleconference can be accessed at the Company's News and Events page at http://www.qcrh.com or https://services.choruscall.com/links/qcrh171103.html .  The archived audio webcast will be available until November 3, 2018.  Participants should visit the Company's website or call in to the conference line set forth above at least 10 minutes prior to the scheduled start of the call.              

About Us

QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company, which serves the Quad City, Cedar Rapids, Cedar Valley, Des Moines/Ankeny, and Rockford communities through its wholly owned subsidiary banks.  Quad City Bank & Trust Company, which is based in Bettendorf, Iowa, and commenced operations in 1994, Cedar Rapids Bank & Trust Company, which is based in Cedar Rapids, Iowa, and commenced operations in 2001, Community State Bank, which is based in Ankeny, Iowa and was acquired by the Company in 2016, and Rockford Bank & Trust Company, which is based in Rockford, Illinois, and commenced operations in 2005, provide full-service commercial and consumer banking and trust and wealth management services.  Quad City Bank & Trust Company also provides correspondent banking services.  In addition, Quad City Bank & Trust Company engages in commercial leasing through its wholly owned subsidiary, m2 Lease Funds, LLC, based in Milwaukee, Wisconsin.  Additionally, the Company serves the Waterloo/Cedar Falls, Iowa community through Community Bank & Trust, a division of Cedar Rapids Bank & Trust Company.  The Company enhanced its presence in Cedar Rapids, Iowa with the acquisition of Guaranty Bank & Trust Company in October 2017.

Special Note Concerning Forward-Looking Statements.  This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company.  Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "predict," "suggest," "appear," "plan," "intend," "estimate," "annualize," "may," "will," "would," "could," "should" or other similar expressions.  Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.
               
A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements.  These factors include, among others, the following: (i) the strength of the local, national and international economies; (ii) the economic impact of any future terrorist threats and attacks, and the response of the United States to any such threats and attacks; (iii) changes in state and federal laws, regulations and governmental policies concerning the Company's general business; (iv) changes in interest rates and prepayment rates of the Company's assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) unexpected results of acquisitions, including the acquisition of Guaranty Bank, which may include failure to realize the anticipated benefits of the acquisition and the possibility that the transaction costs may be greater than anticipated; (viii) the loss of key executives or employees; (ix) changes in consumer spending; (x)  unexpected outcomes of existing or new litigation involving the Company; and (xi) changes in accounting policies and practices.  These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  Additional information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in the Company's filings with the Securities and Exchange Commission.

 

             
    As of
    September 30,   June 30,   March 31,   December 31,     September 30,
    2017   2017   2017   2016   2016
             
    (dollars in thousands)
             
CONDENSED BALANCE SHEET            
             
Cash and due from banks   $ 56,275   $ 77,161   $ 56,326   $ 70,570   $ 61,213
Federal funds sold and interest-bearing deposits     61,789     72,354     173,219     86,206     96,047
Securities     583,936     593,485     557,646     574,022     564,930
Net loans/leases     2,641,772     2,520,209     2,403,791     2,374,730     2,331,774
Core deposit intangible     6,689     6,919     7,150     7,381     7,614
Goodwill     13,111     13,111     13,111     13,111     13,632
Other assets     186,891     173,948     169,770     175,924     205,776
Total assets   $    3,550,463   $    3,457,187   $    3,381,013   $    3,301,944   $    3,280,986
             
Total deposits   $ 2,894,268   $ 2,870,234   $ 2,805,931   $ 2,669,261   $ 2,594,913
Total borrowings     296,145     230,263     231,534     290,952     312,104
Other liabilities     47,011     51,607     47,708     55,690     93,112
Total stockholders' equity     313,039     305,083     295,840     286,041     280,857
Total liabilities and stockholders' equity   $    3,550,463   $    3,457,187   $    3,381,013   $    3,301,944   $    3,280,986
             
ANALYSIS OF LOAN PORTFOLIO            
Loan/lease mix:            
Commercial and industrial loans (1)   $ 1,034,530   $ 942,539   $ 851,578   $ 827,637   $ 804,308
Commercial real estate loans     1,157,855     1,131,906     1,106,842     1,093,459     1,070,305
Direct financing leases (1)     147,063     153,337     159,368     165,419     166,924
Residential real estate loans     239,958     233,871     231,326     229,233     229,081
Installment and other consumer loans     89,606     84,047     78,771     81,666     81,918
Deferred loan/lease origination costs, net of fees     7,742     7,866     7,965     8,073     8,065
Total loans/leases   $ 2,676,754   $ 2,553,566   $ 2,435,850   $ 2,405,487   $ 2,360,601
Less allowance for estimated losses on loans/leases     34,982     33,357     32,059     30,757     28,827
Net loans/leases   $    2,641,772   $    2,520,209   $    2,403,791   $    2,374,730   $    2,331,774
             
ANALYSIS OF SECURITIES PORTFOLIO            
Securities mix:            
U.S. government sponsored agency securities   $ 39,340   $ 41,944   $ 47,556   $ 46,084   $ 67,885
Municipal securities     379,694     381,254     356,776     374,463     360,330
Residential mortgage-backed and related securities     158,969     164,415     147,504     147,702     133,173
Other securities     5,933     5,872     5,810     5,773     3,542
Total securities   $    583,936   $    593,485   $    557,646   $    574,022   $    564,930
             
ANALYSIS OF DEPOSITS            
Deposit mix:            
Noninterest-bearing demand deposits   $ 715,537   $ 760,625   $ 777,150   $ 797,415   $ 764,615
Interest-bearing demand deposits     1,614,894     1,526,103     1,486,047     1,369,226     1,298,781
Time deposits     430,270     478,580     458,170     439,169     420,470
Brokered deposits     133,567     104,926     84,564     63,451     111,047
Total deposits   $    2,894,268   $    2,870,234   $    2,805,931   $    2,669,261   $    2,594,913
             
ANALYSIS OF BORROWINGS            
Borrowings mix:            
Term FHLB advances   $ 58,600   $ 57,000   $ 59,000   $ 63,000   $ 83,343
Overnight FHLB advances (2)     110,455     49,500     47,550     74,500     55,300
Wholesale structured repurchase agreements     45,000     45,000     45,000     45,000     45,000
Customer repurchase agreements     3,671     4,897     7,170     8,132     8,265
Federal funds purchased     12,340     13,320     12,300     31,840     51,750
Junior subordinated debentures     33,579     33,546     33,514     33,480     33,446
Other borrowings     32,500     27,000     27,000     35,000     35,000
Total borrowings   $    296,145   $    230,263   $    231,534   $    290,952   $    312,104
             
(1) m2 Lease Funds, LLC also originates equipment financing agreements, which are classified as commercial and industrial loans.  
(2) At the most recent quarter-end, the weighted-average rate of these overnight borrowings was 1.32%.    
             

 

           
      For the Nine Months Ended
      September 30,     September 30,
        2017       2016
           
    (dollars in thousands, except per share data)
           
INCOME STATEMENT        
Interest income   $   97,639     $   74,232
Interest expense       13,367         8,995
Net interest income        84,272         65,237
Provision for loan/lease losses       6,215         4,879
Net interest income after provision for loan/lease losses   $    78,057     $    60,358
           
Trust department fees   $   5,154     $   4,607
Investment advisory and management fees       2,799         2,117
Deposit service fees       4,297         3,029
Gain on sales of residential real estate loans       307         289
Gain on sales of government guaranteed portions of loans       1,130         2,701
Swap fee income       635         1,358
Securities gains (losses), net       (25 )       4,628
Earnings on bank-owned life insurance       1,357         1,324
Debit card fees       2,201         1,127
Correspondent banking fees       684         801
Other          2,229         2,027
Total noninterest income   $    20,768     $    24,008
           
Salaries and employee benefits   $   39,662     $   32,921
Occupancy and equipment expense       7,717         5,798
Professional and data processing fees       7,375         4,921
Acquisition costs       408         1,364
Post-acquisition transition and integration costs       523         1,037
FDIC insurance, other insurance and regulatory fees       1,957         1,867
Loan/lease expense       811         420
Net cost of (income from) operation of other real estate       (118 )       513
Advertising and marketing       1,847         1,367
Bank service charges       1,331         1,247
Losses on debt extinguishment, net       -          4,220
Correspondent banking expense       604         565
Other         3,956         2,939
Total noninterest expense   $    66,073     $    59,179
           
Net income before taxes   $    32,752     $    25,187
Income tax expense       6,947         6,030
Net income     $    25,805     $    19,157
           
Basic EPS   $   1.96     $   1.55
Diluted EPS   $   1.91     $   1.52
           
Weighted average common shares outstanding       13,151,672         12,398,491
Weighted average common and common equivalent shares outstanding       13,509,566         12,580,042
           

 

               
      For the Quarter Ended
      September 30,  June 30, March 31, December 31, September 30,
        2017   2017  2017  2016   2016
               
      (dollars in thousands, except per share data)
               
INCOME STATEMENT            
Interest income   $   33,841    $   32,453  $   31,345  $   32,236    $   26,817
Interest expense       5,285       4,406     3,676     2,956       3,186
Net interest income        28,556       28,047     27,669     29,280       23,631
Provision for loan/lease losses       2,087       2,023     2,105     2,599       1,608
Net interest income after provision for loan/lease losses   $    26,469   $    26,024 $    25,564 $    26,681   $    22,023
               
               
Trust department fees   $   1,722   $   1,692 $   1,740 $   1,558   $   1,519
Investment advisory and management fees       969       868     962     876       766
Deposit service fees       1,522       1,459     1,316     1,411       1,151
Gain on sales of residential real estate loans       98       113     96     142       144
Gain on sales of government guaranteed portions of loans       92       87     951     458       219
Swap fee income       194       327     114     350       334
Securities gains (losses), net       (63 )     38     -      (36 )     4,252
Earnings on bank-owned life insurance       428       459     470     447       450
Debit card fees       755       743     703     688       475
Correspondent banking fees       239       200     245     249       254
Other          746       796     687     886       859
Total noninterest income   $    6,702   $    6,782 $    7,284 $    7,029   $    10,423
               
               
Salaries and employee benefits   $   13,424   $   12,931 $   13,307 $   13,396   $   11,202
Occupancy and equipment expense       2,516       2,699     2,502     2,630       2,086
Professional and data processing fees       2,951       2,341     2,083     2,192       1,931
Acquisition costs       408       -      -      -        1,037
Post-acquisition transition and integration costs       523       -      -      40       1,009
FDIC insurance, other insurance and regulatory fees       690       646     621     683       583
Loan/lease expense       257       260     294     242       103
Net cost of (income from) operation of other real estate       (160 )     28     14     78       133
Advertising and marketing       670       568     609     760       548
Bank service charges       460       447     424     446       415
Losses on debt extinguishment, net       -        -      -      357       4,137
Correspondent banking expense       204       202     198     186       206
Other         1,452       1,283     1,221     1,298       1,090
Total noninterest expense   $    23,395   $    21,405 $    21,273 $    22,308   $    24,480
               
Net income before taxes   $    9,776   $    11,401 $    11,575 $    11,402   $    7,966
Income tax expense       1,922       2,635     2,390     2,873       1,858
Net income     $    7,854   $    8,766 $    9,185 $    8,529   $    6,108
               
Basic EPS   $   0.60   $   0.67 $   0.70 $   0.65   $   0.47
Diluted EPS   $   0.58   $   0.65 $   0.68 $   0.64   $   0.46
               
Weighted average common shares outstanding       13,151,350       13,170,283     13,133,382     13,087,592       13,066,777
Weighted average common and common equivalent shares outstanding     13,507,955       13,532,324     13,488,417     13,323,883       13,269,703
               

 

                   
    For the Quarter Ended
  For the Nine Months Ended
    September 30,  
  June 30,
  March 31,
  December 31,
  September 30,
  September 30,   September 30,
      2017       2017       2017       2016       2016       2017      2016 
                 
  (dollars in thousands, except per share data)      
 
COMMON SHARE DATA                
Common shares outstanding          13,201,959         13,175,234         13,161,219         13,106,845         13,075,307        
Book value per common share (1)   $ 23.71     $ 23.16     $ 22.48     $ 21.82     $ 21.48        
Tangible book value per common share (2)   $ 22.21     $ 21.64     $ 20.94     $ 20.11     $ 19.74        
Closing stock price   $ 45.50     $ 47.40     $ 42.35     $ 43.30     $ 31.74        
Market capitalization   $ 600,689     $ 624,506     $ 557,378     $ 567,526     $ 415,010        
Market price / book value     191.89 %     204.70 %     188.41 %     198.41 %     147.77 %      
Market price / tangible book value     204.85 %     219.08 %     202.26 %     215.36 %     160.79 %      
Earnings per common share (basic) LTM (3)   $   2.62     $   2.49     $   2.36     $   2.20     $   2.13        
Price earnings ratio LTM (3)  17.37 x   19.11 x   17.94 x  19.68 x   14.90 x       
TCE / TA (4)     8.31 %     8.29 %     8.20 %     8.04 %     7.92 %      
                 
                 
CONDENSED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
               
Beginning balance   $   305,083     $   295,840     $   286,041     $   280,857     $   275,117        
Net income       7,854         8,766         9,185         8,529         6,108        
Other comprehensive income (loss), net of tax       275         702         411         (3,681 )       (361 )      
Common stock cash dividends declared       (658 )       (657 )       (657 )       (523 )       (521 )      
Other (5)       485         432         860         859         514        
Ending balance   $    313,039     $    305,083     $    295,840     $    286,041     $    280,857        
                       
                 
REGULATORY CAPITAL RATIOS:                
Total risk-based capital ratio     11.49 %     11.65 %     11.90 %     11.56 %     11.33 %      
Tier 1 risk-based capital ratio     10.35 %     10.51 %     10.75 %     10.46 %     10.29 %      
Tier 1 leverage capital ratio     9.23 %     9.34 %     9.37 %     9.10 %     10.09 %      
Common equity tier 1 ratio     9.33 %     9.46 %     9.64 %     9.41 %     9.22 %      
                 
                 
KEY PERFORMANCE RATIOS AND OTHER METRICS                
Return on average assets (annualized)     0.90 %     1.04 %     1.12 %     1.04 %     0.85 %     1.02 %     0.94 %
Return on average total equity (annualized)     10.15 %     11.65 %     12.63 %     12.04 %     8.78 %     11.45 %     10.02 %
Net interest margin     3.43 %     3.54 %     3.65 %     3.80 %     3.48 %     3.54 %     3.42 %
Net interest margin (TEY) (Non-GAAP)(6)     3.71 %     3.81 %     3.90 %     4.02 %     3.71 %     3.81 %     3.65 %
Efficiency ratio (Non-GAAP) (7)     66.35 %     61.46 %     60.86 %     61.44 %     71.89 %     62.90 %     66.31 %
Gross loans and leases / total assets     75.39 %     73.86 %     72.04 %     72.85 %     71.95 %     75.39 %     71.95 %
Effective tax rate     19.66 %     23.11 %     20.65 %     25.20 %     23.32 %     21.21 %     23.94 %
Tax benefit related to stock options exercised and
restricted stock awards vested (8)
    191       90       533       N/A       N/A       814       N/A  
Full-time equivalent employees (9)     580       585       561       572       572       580       572  
                 
                 
AVERAGE BALANCES                 
Assets   $   3,503,148     $   3,378,195     $   3,274,713     $   3,277,814     $   2,865,947     $   3,385,352     $   2,702,992  
Loans/leases       2,629,626         2,488,828         2,398,387         2,358,960         2,077,376         2,505,614         1,937,086  
Deposits       2,882,106         2,835,711         2,692,009         2,717,923         2,243,397         2,803,275         2,085,524  
Total stockholders' equity       309,596         300,868         290,906         283,292         278,369         300,457         255,002  
                 
(1) Includes accumulated other comprehensive income (loss).                
(2) Includes accumulated other comprehensive income (loss) and excludes intangible assets.            
(3) LTM : Last twelve months.                
(4) TCE / TA : tangible common equity / total tangible assets.  See GAAP to non-GAAP reconciliations.          
(5) Mainly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation.   
(6) TEY : Tax equivalent yield.  See GAAP to Non-GAAP reconciliations.  
(7) See GAAP to Non-GAAP reconciliations.  
(8) ASC 2016-09 became effective on January 1, 2017 and affects the accounting for stock compensation.  This amount reflects the tax benefit recognized as a result of this new standard.
(9) Full-time equivalent employees ("FTEs") increased in the second quarter of 2017 due to the addition of summer interns (13.6 FTEs).   
   

 

                       
ANALYSIS OF NET INTEREST INCOME AND MARGIN
                 
                       
  For the Quarter Ended
  September 30, 2017   June 30, 2017   September 30, 2016
  Average
Balance
Interest
Earned
or Paid
Average
Yield
or Cost
  Average
Balance
Interest
Earned
or Paid
Average
Yield
or Cost
    Average
Balance
Interest
Earned
or Paid
Average
Yield
or Cost
                       
  (dollars in thousands)
                       
Fed funds sold $ 19,966 $ 52   1.03 %   $ 18,742 $ 38       0.81 %   $ 17,685   $ 13    0.29 %
Interest-bearing deposits at financial institutions   42,178   141   1.33 %     86,236   220   1.02 %     67,807   103 0.60 %
Securities (1)   593,451   5,808     3.88 %     573,747   5,384   3.76 %     525,417   4,826 3.65 %
Restricted investment securities   17,793   173   3.86 %     13,226   132   4.00 %     14,877   132 3.53 %
Loans (1)   2,629,626   29,978   4.52 %     2,488,828   28,881   4.65 %     2,077,376   23,330 4.47 %
Total earning assets (1) $ 3,303,014 $ 36,152   4.34 %   $ 3,180,779 $ 34,655   4.37 %   $ 2,703,162 $ 28,404 4.18 %
                       
Interest-bearing deposits $ 1,613,162 $ 2,230   0.55 %   $ 1,566,106 $ 1,835   0.47 %   $ 1,116,325 $ 717 0.26 %
Time deposits   530,120   1,326   0.99 %     527,719   1,156   0.88 %     422,603   755 0.71 %
Short-term borrowings   16,138   33   0.81 %     17,936   19   0.42 %     30,208   12 0.16 %
Federal Home Loan Bank advances (4)   146,556   608   1.65 %     76,739   354   1.85 %     118,564   421 1.41 %
Other borrowings   72,617   726   3.97 %     72,000   696   3.88 %     116,856   975 3.32 %
Junior subordinated debentures   33,563   362   4.28 %     33,530   347   4.15 %     33,430   306 3.64 %
Total interest-bearing liabilities $ 2,412,156 $ 5,285   0.87 %   $ 2,294,030 $ 4,407   0.77 %   $ 1,837,986 $ 3,186 0.69 %
                       
Net interest income / spread (1)   $ 30,867   3.47 %     $ 30,248   3.60 %     $ 25,218 3.49 %
Net interest margin (2)       3.43 %         3.54 %       3.48 %
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)       3.71 %         3.81 %       3.71 %
                       
                       
  For the Nine Months Ended        
  September 30, 2017   September 30, 2016    
  Average
Balance
Interest
Earned
or Paid
Average
Yield
or Cost
  Average
Balance
Interest
Earned
or Paid
Average
Yield
or Cost
       
                       
  (dollars in thousands)      
                       
Fed funds sold  $ 16,600   $ 105   0.85 %    $ 16,364   $ 36   0.29 %        
Interest-bearing deposits at financial institutions   73,655   560   1.02 %     53,063   226   0.57 %        
Securities (1)   575,884   16,350   3.80 %     527,162   14,084   3.57 %        
Restricted investment securities   14,963   435   3.89 %     14,396   396   3.67 %        
Loans (1)   2,505,614   86,821   4.63 %     1,937,085   63,784   4.40 %        
Total earning assets (1) $ 3,186,716 $ 104,271   4.37 %   $ 2,548,070 $ 78,526   4.12 %        
                       
Interest-bearing deposits $ 1,528,971 $ 5,205   0.46 %   $ 994,476 $ 1,931   0.26 %        
Time deposits   522,986   3,575   0.91 %     415,808   2,175   0.70 %        
Short-term borrowings   19,754   76   0.51 %     55,623   74   0.18 %        
Federal Home Loan Bank advances   112,550   1,365   1.62 %     125,319   1,278   1.36 %        
Other borrowings   73,126   2,104   3.85 %     106,201   2,624   3.30 %        
Junior subordinated debentures   33,530   1,042   4.15 %     33,825   913   3.61 %        
Total interest-bearing liabilities $ 2,290,917 $ 13,367   0.78 %   $ 1,731,252 $ 8,995   0.69 %        
                       
Net interest income / spread (1)   $ 90,904   3.59 %     $ 69,531   3.43 %        
Net interest margin (2)       3.54 %         3.42 %        
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)       3.81 %         3.65 %        
                       
                       
(1) Includes nontaxable securities and loans.  Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 35% tax rate    
for each period presented.                      
(2) See "Select Financial Data - Subsidiaries" for a breakdown of amortization/accretion included in net interest margin for each period presented.        
(3) TEY : Tax equivalent yield.  See GAAP to Non-GAAP reconciliations.                  

 

 
  As of
  September 30,  June 30, March 31, December 31, September 30,
    2017     2017     2017     2016     2016  
           
  (dollars in thousands, except per share data)
           
ROLLFORWARD OF ALLOWANCE FOR LOAN/LEASE LOSSES          
Beginning balance $   33,357     $   32,059     $   30,757     $   28,827    $   28,097  
Provision charged to expense     2,087       2,023       2,105       2,599       1,608  
Loans/leases charged off     (650 )     (851 )     (893 )     (755 )     (987 )
Recoveries on loans/leases previously charged off     188       126       90       86       109  
Ending balance $    34,982   $    33,357   $    32,059   $    30,757   $    28,827  
           
           
NONPERFORMING ASSETS          
Nonaccrual loans/leases   $   20,443   $   13,217   $   14,205   $   13,919   $   14,371  
Accruing loans/leases past due 90 days or more     423       424       955       967       392  
Troubled debt restructures - accruing     7,563       6,915       6,229       6,347       1,825  
Total nonperforming loans/leases     28,429       20,556       21,389       21,233       16,588  
Other real estate owned     5,135       5,174       5,625       5,523       5,808  
Other repossessed assets     120       123       285       202       353  
Total nonperforming assets $    33,684   $    25,853   $    27,299   $    26,958   $    22,749  
           
           
ASSET QUALITY RATIOS          
Nonperforming assets / total assets   0.95 %   0.75 %   0.81 %   0.82 %   0.69 %
Allowance / total loans/leases (1)   1.31 %   1.31 %   1.32 %   1.28 %   1.22 %
Allowance / nonperforming loans/leases (1)   123.05 %   162.27 %   149.89 %   144.85 %   173.78 %
Net charge-offs as a % of average loans/leases   0.02 %   0.03 %   0.03 %   0.03 %   0.04 %
           
           
(1) Upon acquisition and per GAAP, acquired loans are recorded at market value, which eliminated the allowance and impacts these ratios. 
   

 

                         
      For the Quarter Ended   For the Nine Months Ended  
      September 30,    June 30,    September 30,     September 30,   September 30,  
  SELECT FINANCIAL DATA - SUBSIDIARIES     2017       2017       2016       2017       2016    
      (dollars in thousands)  
                         
  TOTAL ASSETS                      
                         
  Quad City Bank and Trust (1)   $   1,456,251     $   1,400,308     $   1,407,733            
  m2 Lease Funds, LLC       216,997         215,689         208,080            
  Cedar Rapids Bank and Trust       1,007,062         993,769         887,593            
  Community State Bank       631,963         642,761         580,210            
  Rockford Bank and Trust       445,099         426,160         393,192            
                           
  TOTAL DEPOSITS                      
                         
  Quad City Bank and Trust (1)   $   1,164,828     $   1,205,516     $   1,110,512            
  Cedar Rapids Bank and Trust       845,576         789,750         727,446            
  Community State Bank       547,915         554,767         481,256            
  Rockford Bank and Trust       358,940         346,893         294,193            
                         
  TOTAL LOANS & LEASES                      
                         
  Quad City Bank and Trust (1)   $   1,111,964     $   1,045,625     $   994,628            
  m2 Lease Funds, LLC       214,959         214,253         206,800            
  Cedar Rapids Bank and Trust       755,817         728,562         634,929            
  Community State Bank       453,898         442,845         419,498            
  Rockford Bank and Trust       355,075         336,534         311,545            
                         
  TOTAL LOANS & LEASES / TOTAL ASSETS                      
                         
  Quad City Bank and Trust (1)     76 %     75 %     71 %          
  Cedar Rapids Bank and Trust     75 %     73 %     72 %          
  Community State Bank     72 %     69 %     72 %          
  Rockford Bank and Trust     80 %     79 %     79 %          
                         
  ALLOWANCE AS A PERCENTAGE OF TOTAL LOANS/LEASES                      
                         
  Quad City Bank and Trust (1)     1.28 %     1.28 %     1.30 %          
  m2 Lease Funds, LLC     1.68 %     1.60 %     1.69 %          
  Cedar Rapids Bank and Trust     1.55 %     1.58 %     1.69 %          
  Community State Bank (2)     0.82 %     0.71 %     0.07 %          
  Rockford Bank and Trust     1.52 %     1.59 %     1.58 %          
                         
  RETURN ON AVERAGE ASSETS                      
                         
  Quad City Bank and Trust (1)     1.19 %     1.26 %     1.12 %     1.22 %     1.10 %  
  Cedar Rapids Bank and Trust     1.30 %     1.23 %     1.48 %     1.28 %     1.44 %  
  Community State Bank (3)     1.04 %     1.26 %     0.39 %     1.20 %     0.39 %  
  Rockford Bank and Trust     0.67 %     0.82 %     0.96 %     0.78 %     0.81 %  
                         
  NET INTEREST MARGIN PERCENTAGE (4)                      
                         
  Quad City Bank and Trust (1)     3.60 %     3.63 %     3.61 %     3.65 %     3.63 %  
  Cedar Rapids Bank and Trust     3.72 %     3.66 %     3.93 %     3.71 %     3.82 %  
  Community State Bank (5)     4.54 %     5.06 %     4.99 %     4.98 %     4.99 %  
  Rockford Bank and Trust     3.35 %     3.40 %     3.50 %     3.39 %     3.51 %  
                         
  ACQUISITION-RELATED AMORTIZATION/ACCRETION INCLUDED IN NET                      
  INTEREST MARGIN, NET                      
                         
  Cedar Rapids Bank and Trust   $   (7 )   $   (6 )   $   (9 )   $   (22 )   $   360    
  Community State Bank       513         1,580         447         4,149         447    
  QCR Holdings, Inc. (6)       (32 )       (33 )       (34 )       (99 )       (103 )  
                         
(1)    Quad City Bank and Trust figures include m2 Lease Funds, LLC, as this entity is wholly-owned and consolidated with the Bank.  m2 Lease Funds, LLC      
   is also presented separately for certain (applicable) measurements.                      
(2)   Upon acquisition and per GAAP, acquired loans are recorded at market value, which eliminated the allowance and impacts this ratio.           
(3)   Community State Bank's return on average assets includes acquisition costs and various purchase accounting adjustments.              
(4)   Includes nontaxable securities and loans.  Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using       
  a 35% tax rate for each period presented.                       
(5)   Community State Bank's net interest margin percentage includes various purchase accounting adjustments.  Excluding those adjustments, net interest      
  margin would have been 4.21% for the quarter ended September 30, 2017, 3.95% for the quarter ended June 30, 2017 and 3.90% for the quarter ended September 30, 2016.  
(6)   Relates to the trust preferred securities acquired as part of the Community National Bank acquisition in 2013.                
                         

  

                             
    As Of        
    September 30,   June 30,   March 31,   December 31,   September 30,        
GAAP TO NON-GAAP RECONCILIATIONS     2017       2017       2017       2016       2016          
  (dollars in thousands, except per share data)      
TANGIBLE COMMON EQUITY TO TANGIBLE
ASSETS RATIO (1)
                           
                             
Stockholders' equity (GAAP)   $   313,039     $   305,083     $   295,840     $   286,041     $   280,857          
Less: Intangible assets       19,800         20,030         20,261         22,522         22,755          
Tangible common equity (non-GAAP)   $   293,239     $   285,053     $   275,579     $   263,519     $   258,102          
                             
Total assets (GAAP)   $   3,550,463     $   3,457,187     $   3,381,013     $   3,301,944     $   3,280,986          
Less: Intangible assets       19,800         20,030         20,261         22,522         22,755          
Tangible assets (non-GAAP)   $   3,530,663     $   3,437,157     $   3,360,752     $   3,279,422     $   3,258,231          
                             
Tangible common equity to tangible assets ratio
(non-GAAP)
    8.31 %     8.29 %     8.20 %     8.04 %     7.92 %        
                             
                             
    For the Quarter Ended   For the Nine Months Ended
    September 30,   June 30,   March 31,   December 31,   September 30,   September 30,   September 30,
CORE NET INCOME (2)     2017       2017       2017       2016       2016       2017       2016  
                             
Net income (GAAP)   $   7,854     $   8,766     $   9,185     $   8,529     $   6,108     $   25,805     $   19,157  
                             
Less nonrecurring items (post-tax) (3):                            
Income:                            
Securities gains, net   $   (41 )   $   25     $   -     $   (23 )   $   2,764     $   (16 )   $   3,009  
Total nonrecurring income (non-GAAP)   $   (41 )   $   25     $   -     $   (23 )   $   2,764     $   (16 )   $   3,009  
                             
Expense:                            
Losses on debt extinguishment, net   $   -     $   -     $   -     $   232     $   2,689     $   -     $   2,743  
Acquisition costs       265         -         -         -         674         265         887  
Post-acquisition transition and integration costs       340         -         -         26         832         340         850  
Total nonrecurring expense (non-GAAP)   $   605     $   -     $   -     $   258     $   4,195     $   605     $   4,480  
                             
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (2)   $    8,500     $    8,741     $    9,185     $    8,810     $    7,539     $    26,426     $    20,628  
                             
CORE EARNINGS PER COMMON SHARE (2)                            
                             
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above)   $   8,500     $   8,741     $   9,185     $   8,810     $   7,539     $   26,426     $   20,628  
                             
Weighted average common shares outstanding       13,151,350         13,170,283         13,133,382         13,087,592         13,066,777         13,151,672         12,398,491  
Weighted average common and common equivalent shares outstanding       13,507,955         13,532,324         13,488,417         13,323,883         13,269,703         13,509,566         12,580,042  
                             
Core earnings per common share (non-GAAP):                            
Basic   $    0.65     $    0.66     $    0.70     $    0.67     $    0.58     $    2.01     $    1.66  
Diluted   $    0.63     $    0.65     $    0.68     $    0.66     $    0.57     $    1.96     $    1.64  
                             
CORE RETURN ON AVERAGE ASSETS (2)                            
                             
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above)   $   8,500     $   8,741     $   9,185     $   8,810     $   7,539     $   26,426     $   20,628  
                             
Average Assets   $   3,503,148     $   3,378,195     $   3,274,713     $   3,277,814     $   2,865,947     $   3,385,352     $   2,702,992  
                             
Core return on average assets (annualized)
(non-GAAP)
    0.97 %     1.03 %     1.12 %     1.08 %     1.05 %     1.04 %     1.02 %
                             
NET INTEREST MARGIN (TEY) (5)                            
                             
Net interest income (GAAP)   $   28,556     $   28,047     $   27,669     $   29,280     $   23,631     $   84,272     $   65,237  
                             
Plus: Tax equivalent adjustment (6)       2,311         2,201         1,950         1,727         1,587         6,632         4,294  
                             
Net interest income - tax equivalent (Non-GAAP)   $   30,867     $   30,248     $   29,619     $   31,007     $   25,218     $   90,904     $   69,531  
                             
Average earning assets   $   3,303,014     $   3,180,779     $   3,076,356     $   3,069,122     $   2,703,162     $   3,186,716     $   2,548,070  
                             
Net interest margin (GAAP)     3.43 %     3.54 %     3.65 %     3.80 %     3.48 %     3.54 %     3.42 %
Net interest margin (TEY) (Non-GAAP)     3.71 %     3.81 %     3.90 %     4.02 %     3.71 %     3.81 %     3.65 %
                             
EFFICIENCY RATIO (7)                            
                             
Noninterest expense (GAAP)   $   23,395     $   21,405     $   21,273     $   22,308     $   24,480     $   66,073     $   59,179  
                             
Net interest income (GAAP)   $   28,556     $   28,047     $   27,669     $   29,280     $   23,631     $   84,272     $   65,237  
Noninterest income (GAAP)       6,702         6,782         7,284         7,029         10,423         20,768         24,008  
Total income   $   35,258     $   34,829     $   34,953     $   36,309     $   34,054     $   105,040     $   89,245  
                             
Efficiency ratio (noninterest expense/total income)
(Non-GAAP)
    66.35 %     61.46 %     60.86 %     61.44 %     71.89 %     62.90 %     66.31 %
                             
                             
(1) This ratio is a non-GAAP financial measure.  The Company's management believes that this measurement is important to many investors in the marketplace who are interested in changes period-to-period in common equity.  In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to stockholders' equity and total assets, which are the most directly comparable GAAP financial measures.
(2) Core net income, core net income attributable to QCR Holdings, Inc. common stockholders, core earnings per common share and core return on average assets are non-GAAP financial measures.  The Company's management believes that these measurements are important to investors as they exclude non-recurring income and expense items, therefore, they provide a more realistic run-rate for future periods. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to net income, which is the most directly comparable GAAP financial measure.
(3) Nonrecurring items (post-tax) are calculated using an estimated effective tax rate of 35%. 
(4) Acquisition costs were analyzed individually for deductibility.  Presented amounts are tax-effected accordingly. 
(5) Net interest margin (TEY) is a non-GAAP financial measure.  The Company's management utilizes this measurement to take into account the tax benefit associated with certain loans and securities.  It is also standard industry practice to measure net interest margin using tax-equivalent measures.  In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to net interest income, which is the most directly comparable GAAP financial measure.
(6) Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 35% tax rate for each period presented. 
(7) Efficiency ratio is a non-GAAP measure.  The Company's management utilizes this ratio to compare to industry peers.  The ratio is used to calculate overhead as a percentage of revenue.  In compliance with the applicable rules of the SEC, this non-GAAP measure is reconciled to noninterest expense, net interest income and noninterest income, which are the most directly comparable GAAP financial measures. 
 

 

Contact:
Todd A. Gipple
Executive Vice President
Chief Operating Officer
Chief Financial Officer
(309) 743-7745

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