Market Overview

QCR Holdings, Inc. Announces Second Quarter Earnings and Successful Closing of Springfield Merger

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Q2 2018 Highlights

  • Completion of merger with Springfield Bancshares, Inc. on July 1, 2018
  • Net income of $10.4 million, or $0.73 per diluted share
  • Core net income (non-GAAP) of $10.9 million, or $0.77 per diluted share
  • Annualized loan and lease growth of 7.8% for the quarter and 10.1% year-to-date
  • Annualized noninterest income growth of 17.4%

MOLINE, Ill., July 19, 2018 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ:QCRH) (the "Company"), today announced net income of $10.4 million and diluted earnings per share ("EPS") of $0.73 for the second quarter of 2018, compared to net income of $10.6 million and diluted EPS of $0.74 for the first quarter of 2018. The second quarter results included $0.5 million of acquisition and post-acquisition compensation, transition and integration costs (after-tax), compared to $0.1 million of similar costs in the first quarter of 2018. Excluding these non-core items, the Company reported core net income (non-GAAP) of $10.9 million and core diluted EPS of $0.77 for the second quarter of 2018, compared to core net income (non-GAAP) of $10.6 million and core diluted EPS of $0.75 for the first quarter of 2018  For the second quarter of 2017, the Company reported net income of $8.8 million and diluted EPS of $0.65. 

For the six months ended June 30, 2018, the Company reported net income of $21.0 million, and diluted EPS of $1.48. Excluding non-core items, the Company reported core net income (non-GAAP) of $21.5 million  and core diluted EPS of $1.51. By comparison, for the six months ended June 30, 2017, the Company reported net income of $18.0 million and diluted EPS of $1.33.

Completed merger with SFC Bank, Springfield, Missouri

Effective July 1, 2018, the Company completed its previously announced merger with Springfield Bancshares, Inc., the holding company of Springfield First Community Bank ("SFC Bank").  Established as a de novo bank in 2008, SFC Bank is headquartered in Springfield, Missouri and, as a result of the transaction, became the Company's fifth independent charter. SFC Bank had approximately $573 million in assets, $487 million in loans and $439 million in deposits as of June 30, 2018.

"We are generally pleased with our core operating performance for the second quarter," commented Douglas M. Hultquist, President and Chief Executive Officer. "We recorded another solid quarter of net income, driven by continued organic loan growth, strong fee income, improved credit quality and careful management of noninterest expenses. We recently welcomed the clients, employees and shareholders of SFC Bank into the QCR Holdings family on July 1st, less than 75 days from the initial announcement date of the transaction. We are excited they have joined us, as this merger fits well with our strategic growth plans by combining two high-performing financial institutions who share similar values and approaches to client service and community involvement. The merger also positions us to continue growing our franchise and creating value for our shareholders."

Annualized Loan and Lease Growth of 7.8% for the Quarter
And 10.1% Year-to-Date

During the second quarter of 2018, the Company's total assets increased $80.6 million, to a total of $4.1 billion, while total loans and leases grew $59.9 million, or 2.0% on a linked quarter basis. Loan and lease growth was primarily funded by an increase in core deposits and short-term borrowings.  Core deposits (excluding brokered deposits) increased $61.7 million, or 2.0% on a linked quarter basis.

"Annualized organic loan and lease growth was 7.8% during the second quarter. Combined with strong growth in the first quarter, the first six months of 2018 produced an annualized growth rate of 10.1%, within our long-term target of 10% to 12%," added Mr. Hultquist.  "Our loan growth for the second quarter was driven by strong, broad-based demand for commercial and industrial loans and was partially offset by loan payoffs."

Net Interest Income of $32.1 million

Net interest income for the second quarter of 2018 totaled $32.1 million, compared to $32.4 million for the first quarter of 2018 and $28.0 million for the second quarter of 2017. The slight decrease in net interest income was primarily due to an increase in funding costs, driven by the Federal Reserve's March and June rate hikes, partially offset by an increase in average loan balances and the impact of higher loan yields. Acquisition-related net accretion totaled $0.5 million for the second quarter of 2018, compared to $0.7 million in the first quarter of 2018 and $1.6 million for the second quarter of 2017.  Excluding acquisition-related net accretion, net interest income of $31.5 million for the second quarter of 2018 decreased 0.5%, compared to $31.7 million for the first quarter of 2018.

Net interest income totaled $64.5 million for the six months ended June 30, 2018, compared to $55.7 million for the six months ended June 30, 2017.

Net interest margin for the second quarter of 2018, excluding acquisition-related net accretion, was 3.46%, down ten basis points from the first quarter of 2018. This margin compression was primarily due to increases in the cost of funds  (due to both mix and rate), as well as reduced loan fee income and higher loan fee amortization on a linked quarter basis.

"Our core loan yields, excluding acquisition-related accretion and loan fee amortization,  increased by 13 basis points on a linked-quarter basis," stated Todd A. Gipple, Executive Vice President, Chief Operating Officer and Chief Financial Officer. "However, the competition for deposits remains fierce and consequently our overall cost of interest-bearing liabilities increased  by 18 basis points during the quarter."

Annualized Noninterest Income Growth of 17.4%
 Swap Fee Income of $1.6 million

Noninterest income for the second quarter of 2018 totaled $8.9 million, compared to $8.5 million for the first quarter of 2018.  The increase was primarily due to $0.7 million in higher swap fee income, partially offset by the lack of gains on the sale of government guaranteed loans. Wealth management revenue was $3.1 million for the quarter, a slight decrease from the first quarter of 2018. Noninterest income increased 31.4% from $6.8 million in the second quarter of 2017. The increase was primarily attributable to higher wealth management revenue and swap fee income.

Noninterest income totaled $17.5 million for the six months ended June 30, 2018, compared to $14.1 million for the six months ended June 30, 2017.

"We delivered annualized noninterest income growth of 17.4% for the second quarter, driven primarily by higher swap fee income. Swap fee income and gains on the sale of government guaranteed loans totaled $3.0 million for the first six months of 2018, well ahead of our annualized expectation of $4.0 million," added Mr. Gipple. "We are pleased with our wealth management revenue growth of nearly 20% year-to-date and look forward to the addition of the Bates Companies into our Rockford Bank & Trust wealth management group, as that acquisition is expected to close in the third quarter."   

Noninterest Expenses Well-Controlled and Total $26.4 million for the Second Quarter

Noninterest expenses for the second quarter of 2018 totaled $26.4 million, compared to $25.9 million and $21.4 million for the first quarter of 2018 and second quarter of 2017, respectively. The linked quarter increase in noninterest expenses was primarily attributable to a $0.5 million increase in acquisition and post-acquisition compensation, transition and integration costs.  

Asset Quality Remains Solid

Nonperforming assets ("NPAs") totaled $26.8 million, a decrease of $4.2 million from the first quarter of 2018, primarily due to the upgrade of one large credit that was taken out of troubled debt restructure status.  The ratio of NPAs to total assets was 0.65% at June 30, 2018, which was down from 0.77% at March 31, 2018 and 0.75% at June 30, 2017. 

The Company's provision for loan and lease losses totaled $2.3 million for the second quarter of 2018, which was down $239 thousand from the prior quarter, and up $278 thousand compared to the second quarter of 2017.  The linked quarter decline in the provision for loan and lease losses was due to improved credit quality and a slower pace of loan growth. As of June 30, 2018, the Company's allowance to total loans and leases was 1.21%, which was relatively flat from 1.20% at March 31, 2018 and down from 1.31% at June 30, 2017.  

In accordance with generally accepted accounting principles for acquisition accounting, the loans acquired through the acquisition of Community State Bank and Guaranty Bank were recorded at market value; therefore, there was no allowance associated with the acquired loans at the acquisition date. Management continues to evaluate the allowance needed on the acquired loans factoring in the net remaining discount ($6.6 million at June 30, 2018).  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 1.21% to 1.42%.

Capital Levels Remain Strong

As of June 30, 2018, the Company's total risk-based capital ratio was 11.33%, the common equity tier 1 ratio was 9.27%, and the tangible common equity to tangible assets ratio was 8.18%.  By comparison, these respective ratios were 11.25%, 9.14% and 8.10% as of March 31, 2018. 

Continued Focus on Seven Key Initiatives

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

  • Strong organic loan and lease growth in order to maintain loans and leases to total assets ratio in the range of 73% - 78%
  • Grow core deposits to maintain reliance on wholesale funding at less than 15% of assets
  • Generate gains on sale of government guaranteed loans, and fee income on interest rate 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 industry to further boost ROAA, improve efficiency ratio, and increase EPS

Conference Call Details

The Company will host an earnings call/webcast tomorrow, July 20, 2018, at 9:00 a.m. central time.  Dial-in information for the call is toll-free 888-317-6016 (international 412-317-6016).  Participants should request to join the QCR Holdings, Inc. call. The event will be  available for digital replay through August 3, 2018.  The replay access information is toll-free 877-344-7529 (international 412-317-0088); access code 10121802.  A webcast of the teleconference can be accessed at the Company's News and Events page at http://www.qcrh.com. An archived version of the webcast will be available at the same location shortly after the live event has ended.
             
About Us

QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company serving the Quad Cities, Cedar Rapids, Cedar Valley, Des Moines/Ankeny, Springfield and Rockford communities through its wholly owned subsidiary banks which provide full-service commercial and consumer banking and trust and wealth management services. Quad City Bank & Trust Company, based in Bettendorf, Iowa, commenced operations in 1994, Cedar Rapids Bank & Trust Company, based in Cedar Rapids, Iowa, commenced operations in 2001, Community State Bank, based in Ankeny, Iowa, was acquired by the Company in 2016, and Rockford Bank & Trust Company, based in Rockford, Illinois, commenced operations in 2005.   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, which merged with Cedar Rapids Bank & Trust in December 2017.  In July 2018, QCR Holdings completed a merger with Springfield Bancshares, Inc., the holding company of SFC Bank of Springfield, Missouri. With the addition of SFC Bank, QCR Holdings has 27 locations in Illinois, Iowa, Wisconsin and Missouri.  As of July 1, 2018, QCR Holdings had approximately $4.7 billion in assets, $3.6 billion in loans and $3.7 billion in deposits.  For additional information, please visit our website at www.qcrh.com.

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, 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.

Contacts:

Todd A. Gipple
Executive Vice President
Chief Operating Officer
Chief Financial Officer
(309) 743-7745
tgipple@qcrh.com

Christopher J. Lindell
Executive Vice President
Corporate Communications
(319) 743-7006
clindell@qcrh.com

           
QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
  As of
  June 30, March 31, December 31, September 30, June 30,
  2018 2018   2017 2017 2017
           
  (dollars in thousands)
CONDENSED BALANCE SHEET          
           
Cash and due from banks $ 69,069 $ 61,846 $ 75,722 $ 56,275 $ 77,161
Federal funds sold and interest-bearing deposits   51,667   59,557   85,962   61,789   72,354
Securities   657,997   640,906   652,382   583,936   593,485
Net loans/leases   3,077,247   3,018,370   2,930,130   2,641,772   2,520,209
Core deposit intangible   8,470   8,774   9,079   6,689   6,919
Goodwill   28,091   28,334   28,334   13,111   13,111
Other assets   214,342   208,527   201,056   186,891   173,948
Total assets $    4,106,883 $    4,026,314 $    3,982,665 $    3,550,463 $    3,457,187
           
Total deposits $ 3,298,276 $ 3,280,001 $ 3,266,655 $ 2,894,268 $ 2,870,234
Total borrowings   380,392   334,802   309,479   296,145   230,263
Other liabilities   58,627   51,083   53,244   47,011   51,607
Total stockholders' equity   369,588   360,428   353,287   313,039   305,083
Total liabilities and stockholders' equity $    4,106,883 $    4,026,314 $    3,982,665 $    3,550,463 $    3,457,187
           
ANALYSIS OF LOAN PORTFOLIO          
Loan/lease mix:          
Commercial and industrial loans $ 1,273,000 $ 1,201,086 $ 1,134,516 $ 1,034,530 $ 942,539
Commercial real estate loans   1,349,319   1,357,703   1,303,492   1,157,855   1,131,906
Direct financing leases   133,197   137,615   141,448   147,063   153,337
Residential real estate loans   257,434   254,484   258,646   239,958   233,871
Installment and other consumer loans   92,952   95,912   118,611   89,606   84,047
Deferred loan/lease origination costs, net of fees   8,890   8,103   7,773   7,742   7,866
Total loans/leases $ 3,114,792 $ 3,054,903 $ 2,964,486 $ 2,676,754 $ 2,553,566
Less allowance for estimated losses on loans/leases   37,545   36,533   34,356   34,982   33,357
Net loans/leases $    3,077,247 $    3,018,370 $    2,930,130 $    2,641,772 $    2,520,209
           
ANALYSIS OF SECURITIES PORTFOLIO          
Securities mix:          
U.S. government sponsored agency securities $ 35,667 $ 36,868 $ 38,097 $ 39,340 $ 41,944
Municipal securities   458,510   438,736   445,049   379,694   381,254
Residential mortgage-backed and related securities   158,534   157,333   163,301   158,969   164,415
Other securities   5,286   7,969   5,935   5,933   5,872
Total securities $    657,997 $    640,906 $    652,382 $    583,936 $    593,485
           
ANALYSIS OF DEPOSITS          
Deposit mix:          
Noninterest-bearing demand deposits $ 746,822 $ 784,815 $ 789,548 $ 715,537 $ 760,625
Interest-bearing demand deposits   1,865,382   1,789,019   1,855,893   1,614,894   1,526,103
Time deposits   519,999   496,644   516,058   430,270   478,580
Brokered deposits   166,073   209,523   105,156   133,567   104,926
Total deposits $    3,298,276 $    3,280,001 $    3,266,655 $    2,894,268 $    2,870,234
           
ANALYSIS OF BORROWINGS          
Borrowings mix:          
Term FHLB advances $ 46,600 $ 56,600 $ 56,600 $ 58,600 $ 57,000
Overnight FHLB advances (1)   207,500   159,745   135,400   110,455   49,500
Wholesale structured repurchase agreements   35,000   35,000   35,000   45,000   45,000
Customer repurchase agreements   2,186   3,820   7,003   3,671   4,897
Federal funds purchased   15,400   13,040   6,990   12,340   13,320
Junior subordinated debentures   37,581   37,534   37,486   33,579   33,546
Other borrowings   36,125   29,063   31,000   32,500   27,000
Total borrowings $    380,392 $    334,802 $    309,479 $    296,145 $    230,263
           
(1) The weighted-average rate of these overnight borrowings was 2.09% as of June 30, 2018; 1.90% as of March 31, 2018; 1.63% as of December 31, 2017; 1.32% as of September 30, 2017; and 1.31% as of June 30, 2017.
         


             
QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
             
    For the Quarter Ended
    June 30, March 31, December 31, September 30, June 30,
    2018 2018 2017 2017 2017
             
    (dollars in thousands, except per share data)
INCOME STATEMENT            
Interest income   $ 40,799   $ 39,546 $ 37,878   $ 33,841   $ 32,453
Interest expense     8,714     7,143   6,085     5,285     4,406
Net interest income     32,085     32,403   31,793     28,556     28,047
Provision for loan/lease losses     2,301     2,540   2,255     2,087     2,023
Net interest income after provision for loan/lease losses   $    29,784   $    29,863 $    29,538   $    26,469   $    26,024
             
             
Trust department fees   $ 2,058   $ 2,237 $ 2,034   $ 1,722   $ 1,692
Investment advisory and management fees     1,058     952   1,071     969     868
Deposit service fees     1,610     1,531   1,622     1,522     1,459
Gain on sales of residential real estate loans     102     101   101     98     113
Gain on sales of government guaranteed portions of loans     -     358   34     92     87
Swap fee income     1,649     959   2,460     194     327
Securities gains (losses), net     -     -   (63 )   (63 )   38
Earnings on bank-owned life insurance     399     418   445     428     459
Debit card fees     844     766   741     755     743
Correspondent banking fees     213     265   231     239     200
Other     979     954   1,038     746     796
Total noninterest income   $    8,912   $    8,541 $    9,714   $    6,702   $    6,782
             
             
Salaries and employee benefits   $ 15,804   $ 15,978 $ 16,060   $ 13,424   $ 12,931
Occupancy and equipment expense     3,133     3,066   3,221     2,516     2,699
Professional and data processing fees     2,771     2,708   3,382     2,951     2,341
Acquisition costs     414     93   661     408     -
Post-acquisition compensation, transition and integration costs     165     -   3,787     523     -
FDIC insurance, other insurance and regulatory fees     840     756   795     690     646
Loan/lease expense     260     291   352     257     260
Net cost of operation of other real estate     (70 )   132   120     (160 )   28
Advertising and marketing     753     693   778     670     568
Bank service charges     466     441   439     460     447
Correspondent banking expense     204     205   203     204     202
CDI amortization     305     305   308     231     231
Other     1,325     1,195   1,245     1,221     1,052
Total noninterest expense   $    26,370   $    25,863 $    31,351   $    23,395   $    21,405
             
Net income before taxes   $    12,326   $    12,541 $    7,901   $    9,776   $    11,401
Income tax expense (benefit)     1,881     1,991   (2,001 )   1,922     2,635
Net income   $    10,445   $    10,550 $    9,902   $    7,854   $    8,766
             
Basic EPS   $ 0.75   $ 0.76 $ 0.72   $ 0.60   $ 0.67
Diluted EPS   $ 0.73   $ 0.74 $ 0.70   $ 0.58   $ 0.65
             
Weighted average common shares outstanding     13,919,565     13,888,661   13,845,497     13,151,350     13,170,283
Weighted average common and common equivalent shares outstanding   14,232,423     14,205,584   14,193,191     13,507,955     13,532,324
             


           
QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
           
      For the Six Months Ended
      June 30,   June 30,
      2018   2017
           
      (dollars in thousands, except per share data)
INCOME STATEMENT        
Interest income   $ 80,345   $ 63,798
Interest expense     15,857     8,082
Net interest income     64,488     55,716
Provision for loan/lease losses     4,841     4,128
Net interest income after provision for loan/lease losses   $    59,647   $    51,588
           
           
Trust department fees   $ 4,295   $ 3,432
Investment advisory and management fees     2,010     1,830
Deposit service fees     3,142     2,775
Gain on sales of residential real estate loans     203     209
Gain on sales of government guaranteed portions of loans     358     1,038
Swap fee income     2,608     441
Securities gains, net     -     38
Earnings on bank-owned life insurance     817     929
Debit card fees     1,610     1,446
Correspondent banking fees     477     445
Other       1,934     1,483
Total noninterest income   $    17,454   $    14,066
           
           
Salaries and employee benefits   $ 31,782   $ 26,238
Occupancy and equipment expense     6,198     5,201
Professional and data processing fees     5,479     4,424
Acquisition costs     506     -
Post-acquisition compensation, transition and integration costs     165     -
FDIC insurance, other insurance and regulatory fees     1,597     1,267
Loan/lease expense     551     554
Net cost of operation of other real estate     62     42
Advertising and marketing     1,446     1,177
Bank service charges     907     871
Correspondent banking expense     409     400
CDI amortization     609     462
Other       2,523     2,042
Total noninterest expense   $    52,234   $    42,678
           
Net income before taxes   $    24,867   $    22,976
Income tax expense     3,872     5,025
Net income     $    20,995   $    17,951
           
Basic EPS   $ 1.51   $ 1.36
Diluted EPS   $ 1.48   $ 1.33
           
Weighted average common shares outstanding     13,904,113     13,151,833
Weighted average common and common equivalent shares outstanding   14,219,003     13,502,505
           


                 
QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
                 
  For the Quarter Ended   For the Six Months Ended
  June 30, March 31, December 31, September 30, June 30,   June 30, June 30,
  2018 2018 2017 2017 2017   2018 2017
                 
  (dollars in thousands, except per share data)
COMMON SHARE DATA                
Common shares outstanding      13,973,940       13,936,957       13,918,168       13,201,959       13,175,234        
Book value per common share (1) $ 26.45   $ 25.86   $ 25.38   $ 23.71   $ 23.16        
Tangible book value per common share (2) $ 23.83   $ 23.20   $ 22.70   $ 22.21   $ 21.64        
Closing stock price $ 47.45   $ 44.85   $ 42.85   $ 45.50   $ 47.40        
Market capitalization $ 663,063   $ 625,073   $ 596,393   $ 600,689   $ 624,506        
Market price / book value   179.41 %   173.43 %   168.81 %   191.89 %   204.70 %      
Market price / tangible book value   199.10 %   193.33 %   188.81 %   204.85 %   219.08 %      
Earnings per common share (basic) LTM (3) $ 2.83   $ 2.74   $ 2.69   $ 2.62   $ 2.49        
Price earnings ratio LTM (3)   16.77    16.37    15.93    17.37    19.11      
TCE / TA (4)   8.18 %   8.10 %   8.01 %   8.31 %   8.29 %      
                 
                 
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY        
Beginning balance $   360,428   $   353,287   $   313,039   $   305,083   $   295,840        
Net income     10,445       10,550       9,902       7,854       8,766        
Other comprehensive income (loss), net of tax     (1,335 )     (3,201 )     (295 )     275       702        
Common stock cash dividends declared     (836 )     (834 )     (693 )     (658 )     (657 )      
Proceeds from issuance of 678,670 shares of
  common stock, net of costs, as a result of the
  acquisition of Guaranty Bank & Trust
    -        -        30,741       -        -         
Other (5)     886       626       593       485       432        
Ending balance $    369,588   $    360,428   $    353,287   $    313,039   $    305,083        
                 
                 
REGULATORY CAPITAL RATIOS (6):                
Total risk-based capital ratio   11.33 %   11.25 %   11.15 %   11.49 %   11.65 %      
Tier 1 risk-based capital ratio   10.31 %   10.21 %   10.14 %   10.35 %   10.51 %      
Tier 1 leverage capital ratio   9.22 %   9.08 %   8.98 %   9.23 %   9.34 %      
Common equity tier 1 ratio   9.27 %   9.14 %   9.10 %   9.33 %   9.46 %      
                 
                 
KEY PERFORMANCE RATIOS AND OTHER METRICS                
Return on average assets (annualized)   1.03 %   1.06 %   1.01 %   0.90 %   1.04 %     1.04 %   1.08 %
Return on average total equity (annualized)   11.45 %   11.84 %   11.67 %   10.15 %   11.65 %     11.64 %   12.13 %
Net interest margin   3.37 %   3.50 %   3.41 %   3.43 %   3.54 %     3.43 %   3.59 %
Net interest margin (TEY) (Non-GAAP)(7)   3.52 %   3.64 %   3.69 %   3.71 %   3.81 %     3.58 %   3.86 %
Efficiency ratio (Non-GAAP) (8) (12)   64.32 %   63.17 %   75.53 %   66.35 %   61.46 %     63.75 %   61.16 %
Gross loans and leases / total assets   75.84 %   75.87 %   74.43 %   75.39 %   73.86 %     75.84 %   73.86 %
Effective tax rate (11)   15.26 %   15.88 %   -25.33 %   19.66 %   23.11 %     15.57 %   23.11 %
Tax benefit related to stock options exercised and restricted stock awards vested (9)   200     133     406     191     90       333     623  
Full-time equivalent employees (10)   666     639     641     580     585       666     585  
                 
                 
AVERAGE BALANCES                 
Assets $   4,053,684   $   3,994,691   $   3,923,337   $   3,503,148   $   3,378,195     $   4,024,188   $   3,326,454  
Loans/leases     3,077,517       3,019,376       2,930,711       2,629,626       2,488,828         3,048,447       2,443,608  
Deposits     3,343,003       3,239,562       3,256,481       2,882,106       2,835,711         3,291,283       2,763,861  
Total stockholders' equity     365,031       356,525       339,468       309,596       300,868         360,778       295,887  
                 
(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 / TCA : tangible common equity / total tangible assets.  See GAAP to non-GAAP reconciliations.
(5) Includes mostly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation. 
(6) Ratios for the current quarter are subject to change upon final calculation for regulatory filings due after earnings release.
(7) TEY : Tax equivalent yield.  See GAAP to Non-GAAP reconciliations.
(8) See GAAP to Non-GAAP reconciliations.
(9) 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.
(10) Full-time equivalent employees increased in the 2nd quarter of 2018 due primarily to the addition of summer interns and several new positions created to build scale. Full-time equivalent employees increased in the 4th quarter of 2017 due to the acquisition of Guaranty, as well as the filling of open positions throughout the Company.
(11) The effective tax rate for the fourth quarter of 2017 and the full year were impacted by a $2.9 million tax benefit recorded as a result of the Tax Act.
(12) The efficiency ratio was unusually high in the fourth quarter of 2017 due to one-time acquisition costs and post-acquisition transition and integration costs totaling $4.4 million.
 


                         
QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
                         
ANALYSIS OF NET INTEREST INCOME AND MARGIN                    
                         
    For the Quarter Ended
    June 30, 2018   March 31, 2018   June 30, 2017
    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   $ 18,561 $ 61 1.32 %   $ 19,703 $ 56 1.15 %   $ 18,742 $ 38 0.81 %
Interest-bearing deposits at financial institutions   54,879   228 1.67 %     49,531   197 1.61 %     86,236   220 1.02 %
Securities (1)     648,276   5,752 3.56 %     649,035   5,839 3.65 %     573,747   5,384 3.76 %
Restricted investment securities   21,100   212 4.03 %     21,830   234 4.35 %     13,226   132 4.00 %
Loans (1)     3,077,517   36,008 4.69 %     3,019,376   34,573 4.64 %     2,488,828   28,881 4.65 %
Total earning assets (1) $ 3,820,333 $ 42,261 4.44 %   $ 3,759,475 $ 40,899 4.41 %   $ 3,180,779 $ 34,655 4.37 %
                         
Interest-bearing deposits $ 1,919,406 $ 4,089 0.85 %   $ 1,828,228 $ 3,019 0.67 %   $ 1,566,106 $ 1,835 0.47 %
Time deposits     665,643   2,439 1.47 %     616,661   1,862 1.22 %     527,719   1,156 0.88 %
Short-term borrowings   19,024   63 1.33 %     17,271   33 0.77 %     17,936   19 0.42 %
Federal Home Loan Bank advances   174,826   882 2.02 %     236,689   1,064 1.82 %     76,739   354 1.85 %
Other borrowings     67,044   733 4.39 %     64,680   718 4.50 %     72,000   696 3.88 %
Junior subordinated debentures   37,558   508 5.43 %     37,510   447 4.83 %     33,530   347 4.15 %
Total interest-bearing liabilities $ 2,883,501 $ 8,714 1.21 %   $ 2,801,039 $ 7,143 1.03 %   $ 2,294,030 $ 4,407 0.77 %
                         
Net interest income / spread (1)   $ 33,547 3.23 %     $ 33,756 3.38 %     $ 30,248 3.60 %
Net interest margin (2)     3.37 %       3.50 %       3.54 %
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)     3.52 %       3.64 %       3.81 %
                         
                         
    For the Six Months Ended        
    June 30, 2018   June 30, 2017    
    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   $ 19,132 $ 118 1.24 %   $ 14,917 $ 53 0.72 %        
Interest-bearing deposits at financial institutions   52,205   425 1.64 %     89,394   418 0.94 %        
Securities (1)     648,656   11,418 3.55 %     567,101   10,543 3.75 %        
Restricted investment securities   21,465   446 4.19 %     13,549   262 3.90 %        
Loans (1)     3,048,447   70,753 4.68 %     2,443,608   56,741 4.68 %        
Total earning assets (1) $ 3,789,905 $ 83,160 4.42 %   $ 3,128,569 $ 68,017 4.38 %        
                         
Interest-bearing deposits $ 1,873,817 $ 7,109 0.77 %   $ 1,486,876 $ 2,974 0.40 %        
Time deposits     641,152   4,301 1.35 %     519,419   2,249 0.87 %        
Short-term borrowings   18,148   95 1.06 %     21,562   43 0.40 %        
Federal Home Loan Bank advances   205,758   1,946 1.91 %     95,548   758 1.60 %        
Other borrowings     65,862   1,451 4.44 %     73,381   1,379 3.79 %        
Junior subordinated debentures   37,534   955 5.13 %     33,514   680 4.09 %        
Total interest-bearing liabilities $ 2,842,271 $ 15,857 1.13 %   $ 2,230,300 $ 8,083 0.73 %        
                         
Net interest income / spread (1)   $ 67,303 3.29 %     $ 59,934 3.65 %        
Net interest margin (2)     3.43 %       3.59 %        
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)     3.58 %       3.86 %        
                         
                         
(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 prior to March 31, 2018 and 21% for periods including and after March 31, 2018.
(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.
                   


           
QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
           
  As of
  June 30, March 31, December 31, September 30, June 30,
  2018 2018 2017 2017 2017
           
  (dollars in thousands, except per share data)
ROLLFORWARD OF ALLOWANCE FOR LOAN/LEASE LOSSES          
Beginning balance $ 36,533   $ 34,356   $ 34,982   $ 33,357   $ 32,059  
Provision charged to expense   2,301     2,540     2,255     2,087     2,023  
Loans/leases charged off   (1,525 )   (436 )   (2,979 )   (650 )   (851 )
Recoveries on loans/leases previously charged off   236     73     98     188     126  
Ending balance $    37,545   $    36,533   $    34,356   $    34,982   $    33,357  
           
           
NONPERFORMING ASSETS           
Nonaccrual loans/leases $ 12,554   $ 12,759   $ 11,441   $ 20,443   $ 13,217  
Accruing loans/leases past due 90 days or more   20     41     89     423     424  
Troubled debt restructures - accruing   1,327     5,276     7,113     7,563     6,915  
Total nonperforming loans/leases   13,901     18,076     18,643     28,429     20,556  
Other real estate owned   12,750     12,750     13,558     5,135     5,174  
Other repossessed assets   150     200     80     120     123  
Total nonperforming assets $    26,801   $    31,026   $    32,281   $    33,684   $    25,853  
           
           
ASSET QUALITY RATIOS          
Nonperforming assets / total assets   0.65 %   0.77 %   0.81 %   0.95 %   0.75 %
Allowance / total loans/leases (1)   1.21 %   1.20 %   1.16 %   1.31 %   1.31 %
Allowance / nonperforming loans/leases (1)   270.09 %   202.11 %   184.28 %   123.05 %   162.27 %
Net charge-offs as a % of average loans/leases   0.04 %   0.01 %   0.10 %   0.02 %   0.03 %
           
(1) Upon acquisition and per GAAP, acquired loans are recorded at market value which eliminated the allowance and impacts these ratios.
           


                       
QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
                       
      For the Quarter Ended   For the Six Months Ended
      June 30,   March 31,   June 30,   June 30,   June 30,
  SELECT FINANCIAL DATA - SUBSIDIARIES   2018   2018   2017   2018   2017
                                           
      (dollars in thousands)
  TOTAL ASSETS                    
                       
  Quad City Bank and Trust (1)   $ 1,563,643     $ 1,526,830     $ 1,400,308          
  m2 Lease Funds, LLC     234,566       224,301       215,689          
  Cedar Rapids Bank and Trust     1,345,431       1,331,209       993,769          
  Community State Bank - Ankeny     712,139       696,979       642,761          
  Rockford Bank and Trust     484,123       468,112       426,160          
                       
  TOTAL DEPOSITS                    
                       
  Quad City Bank and Trust (1)   $ 1,283,766     $ 1,302,005     $ 1,205,516          
  Cedar Rapids Bank and Trust     1,080,685       1,058,251       789,750          
  Community State Bank - Ankeny     596,291       563,540       554,767          
  Rockford Bank and Trust     376,240       379,552       346,893          
                       
  TOTAL LOANS & LEASES                    
                       
  Quad City Bank and Trust (1)   $ 1,184,879     $ 1,150,120     $ 1,045,625          
  m2 Lease Funds, LLC     233,297       223,654       214,253          
  Cedar Rapids Bank and Trust     1,034,057       1,011,971       728,562          
  Community State Bank - Ankeny     509,207       513,951       442,845          
  Rockford Bank and Trust     386,649       378,860       336,534          
                       
  TOTAL LOANS & LEASES / TOTAL ASSETS                    
                       
  Quad City Bank and Trust (1)     76 %     75 %     75 %        
  Cedar Rapids Bank and Trust     77 %     76 %     73 %        
  Community State Bank - Ankeny     72 %     74 %     69 %        
  Rockford Bank and Trust     80 %     81 %     79 %        
                       
  ALLOWANCE AS A PERCENTAGE OF LOANS/LEASES                    
                       
  Quad City Bank and Trust (1)     1.12 %     1.16 %     1.28 %        
  m2 Lease Funds, LLC     1.49 %     1.67 %     1.60 %        
  Cedar Rapids Bank and Trust (2)     1.28 %     1.24 %     1.58 %        
  Community State Bank - Ankeny (2)     1.02 %     0.95 %     0.71 %        
  Rockford Bank and Trust     1.50 %     1.51 %     1.59 %        
                       
  RETURN ON AVERAGE ASSETS                    
                       
  Quad City Bank and Trust (1)     1.30 %     1.37 %     1.26 %     1.33 %     1.24 %
  Cedar Rapids Bank and Trust     1.46 %     1.45 %     1.23 %     1.45 %     1.28 %
  Community State Bank - Ankeny     1.27 %     1.10 %     1.26 %     1.19 %     1.28 %
  Rockford Bank and Trust     0.74 %     0.61 %     0.82 %     0.68 %     0.84 %
                       
  NET INTEREST MARGIN PERCENTAGE (3)                    
                       
  Quad City Bank and Trust (1)     3.45 %     3.51 %     3.63 %     3.48 %     3.67 %
  Cedar Rapids Bank and Trust (5)     3.51 %     3.70 %     3.66 %     3.60 %     3.70 %
  Community State Bank - Ankeny (4)     4.31 %     4.40 %     5.06 %     4.36 %     5.21 %
  Rockford Bank and Trust     3.13 %     3.29 %     3.40 %     3.21 %     3.41 %
                       
  ACQUISITION-RELATED AMORTIZATION/ACCRETION INCLUDED IN NET                    
  INTEREST MARGIN, NET                    
                       
  Cedar Rapids Bank and Trust   $ 209     $ 243     $ 6     $ 452     $ 15  
  Community State Bank - Ankeny     382       504       1,580       886       3,635  
  QCR Holdings, Inc. (6)     (46 )     (48 )     (33 )     (94 )     (66 )
                       
(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 ) 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 prior to March 31, 2018 and 21% for periods including and after March 31, 2018.
(4 ) Community State Bank's net interest margin percentage includes various purchase accounting adjustments.  Excluding those adjustments, net interest margin would have been 3.96% for the quarter ended June 30, 2018 and 4.04% for the quarter ended March 31, 2018.  Excluding those adjustments, net interest margin would have been 4.05% for the six months ended June 30, 2018.
(5 ) Cedar Rapids Bank and Trust's net interest margin percentage includes various purchase accounting adjustments.  Excluding those adjustments, net interest margin would have been 3.44% for the quarter ended June 30, 2018 and 3.54% for the quarter ended March 31, 2018. Excluding those adjustments, net interest margin would have been 3.53% for the six months ended June 30, 2018.
(6 ) Relates to the trust preferred securities acquired as part of the Guaranty Bank acquisition in 2017 and the Community National Bank acquisition in 2013.
                       


                             
QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
                             
    As of        
    June 30,   March 31,   December 31,   September 30,   June 30,        
GAAP TO NON-GAAP RECONCILIATIONS   2018   2018   2017   2017   2017        
                                                 
    (dollars in thousands, except per share data)        
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS RATIO (1)                            
                             
Stockholders' equity (GAAP)   $ 369,588     $ 360,428     $ 353,287     $ 313,039     $ 305,083          
Less: Intangible assets     36,561       37,108       37,413       19,800       20,030          
Tangible common equity (non-GAAP)   $ 333,027     $ 323,320     $ 315,874     $ 293,239     $ 285,053          
                             
Total assets (GAAP)   $ 4,106,883     $ 4,026,314     $ 3,982,665     $ 3,550,463     $ 3,457,187          
Less: Intangible assets     36,561       37,108       37,413       19,800       20,030          
Tangible assets (non-GAAP)   $ 4,070,322     $ 3,989,206     $ 3,945,252     $ 3,530,663     $ 3,437,157          
                             
Tangible common equity to tangible assets ratio (non-GAAP)     8.18 %     8.10 %     8.01 %     8.31 %     8.29 %        
                             
                             
    For the Quarter Ended   For the Six Months Ended
    June 30,   March 31,   December 31,   September 30,   June 30,   June 30,   June 30,
CORE NET INCOME (2)   2018   2018   2017   2017   2017   2018   2017
                             
Net income (GAAP)   $ 10,445     $ 10,550     $ 9,902     $ 7,854     $ 8,766     $ 20,995     $ 17,951  
                             
Less nonrecurring items (post-tax) (3):                            
Income:                            
Securities gains, net   $ -     $ -     $ (41 )   $ (41 )   $ 25     $ -     $ 25  
Total nonrecurring income (non-GAAP)   $ -     $ -     $ (41 )   $ (41 )   $ 25     $ -     $ 25  
                             
Expense:                            
Acquisition costs (4)     327       73       430       265       -       400       -  
Post-acquisition compensation, transition and integration costs   130       -       2,462       340       -       130       -  
Total nonrecurring expense (non-GAAP)   $ 457     $ 73     $ 2,892     $ 605     $ -     $ 530     $ -  
                             
Adjustment of tax expense related to the Tax Act   $ -     $ -     $ 2,919     $ -     $ -     $ -     $ -  
                             
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (2)   $    10,902     $    10,623     $    9,916     $    8,500     $    8,741     $    21,525     $    17,926  
                             
CORE EARNINGS PER COMMON SHARE (2)                            
                             
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above)   $ 10,902     $ 10,623     $ 9,916     $ 8,500     $ 8,741     $ 21,525     $ 17,926  
                             
Weighted average common shares outstanding     13,919,565       13,888,661       13,845,497       13,151,350       13,170,283       13,904,113       13,151,833  
Weighted average common and common equivalent shares outstanding   14,232,423       14,205,584       14,193,191       13,507,955       13,532,324       14,219,003       13,502,505  
                             
Core earnings per common share (non-GAAP):                            
Basic   $    0.78     $    0.76     $    0.72     $    0.65     $    0.66     $    1.55     $    1.36  
Diluted   $    0.77     $    0.75     $    0.70     $    0.63     $    0.65     $    1.51     $    1.33  
                             
CORE RETURN ON AVERAGE ASSETS (2)                            
                             
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above)   $ 10,902     $ 10,623     $ 9,916     $ 8,500     $ 8,741     $ 21,525     $ 17,926  
                             
Average Assets   $ 4,053,684     $ 3,994,691     $ 3,923,337     $ 3,503,148     $ 3,378,195     $ 4,024,188     $ 3,326,454  
                             
Core return on average assets (annualized) (non-GAAP)     1.08 %     1.06 %     1.01 %     0.97 %     1.03 %     1.07 %     1.08 %
                             
NET INTEREST MARGIN (TEY) (6)                            
                             
Net interest income (GAAP)   $ 32,085     $ 32,403     $ 31,793     $ 28,556     $ 28,047     $ 64,488     $ 55,716  
                             
Plus: Tax equivalent adjustment (5)     1,462       1,353       2,585       2,311       2,201       2,815       4,218  
                             
Net interest income - tax equivalent (Non-GAAP)   $ 33,547     $ 33,756     $ 34,378     $ 30,867     $ 30,248     $ 67,303     $ 59,934  
                             
Average earning assets   $ 3,820,333     $ 3,759,475     $ 3,699,193     $ 3,303,014     $ 3,180,779     $ 3,789,905     $ 3,128,569  
                             
Net interest margin (GAAP)     3.37 %     3.50 %     3.41 %     3.43 %     3.54 %     3.43 %     3.59 %
Net interest margin (TEY) (Non-GAAP)     3.52 %     3.64 %     3.69 %     3.71 %     3.81 %     3.58 %     3.86 %
                             
EFFICIENCY RATIO (7)                            
                             
Noninterest expense (GAAP)   $ 26,370     $ 25,863     $ 31,351     $ 23,395     $ 21,405     $ 52,234     $ 42,678  
                             
Net interest income (GAAP)   $ 32,085     $ 32,403     $ 31,793     $ 28,556     $ 28,047     $ 64,488     $ 55,716  
Noninterest income (GAAP)     8,912       8,541       9,714       6,702       6,782       17,454       14,066  
Total income   $ 40,997     $ 40,944     $ 41,507     $ 35,258     $ 34,829     $ 81,942     $ 69,782  
                             
Efficiency ratio (noninterest expense/total income) (Non-GAAP)     64.32 %     63.17 %     75.53 %     66.35 %     61.46 %     63.75 %     61.16 %
                             
(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% for periods prior to March 31, 2018 and 21% for periods including and after March 31, 2018.    
(4) Acquisition costs were analyzed individually for deductibility.  Presented amounts are tax-effected accordingly.                
(5) Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 35% tax rate for each period prior to March 31, 2018 and 21% for periods including and after March 31, 2018.
(6) 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.
(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.
 

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