QCR HOLDINGS INC

The following tables set forth the various categories of noninterest expense for the three and nine months ended September 30, 2025 and 2024:

Management places a strong emphasis on overall cost containment and is committed to improving the Company's general efficiency.

Salaries and employee benefits, which is the largest component of noninterest expense, increased 9% when comparing the third quarter of 2025 to the same period of the prior year, and decreased 5% when comparing the first nine months of 2025 to the same period of the prior year primarily due to capital markets revenue and its impact on variable compensation associated with performance.

Part I

Item 2

Occupancy and equipment expense increased 19% comparing the third quarter of 2025 to the same period of the prior year, and increased 8% when comparing the first nine months of 2025 to the same period of the prior year due primarily to higher depreciation expense with the opening of a new office in the Cedar Rapids market and an increase in service contract costs.

Professional and data processing fees increased 51% comparing the third quarter of 2025 to the same period of the prior year, and increased 29% when comparing the first nine months of 2025 to the same period of the prior year. The increase was due primarily to higher professional fees related to the Company’s digital transformation projects. Generally, professional and data processing fees can fluctuate depending on certain one-time project costs. Management will continue to focus on minimizing such one-time costs and driving recurring costs down through contract negotiation or managed reduction in activity where costs are determined on a usage basis.

There were no restructuring expenses in the three or nine months ended September 30, 2025. Restructuring expenses totaled $2 million for both the three and nine months ended September 30, 2024 due to the decision to discontinue offering new loans and leases at m2. These charges were primarily consisting of severance and retention compensation as well as vendor contract termination fees.

FDIC insurance, other insurance and regulatory fee expense increased 19% when comparing the third quarter of 2025 to the same period of the prior year, and increased 8% when comparing the first nine months of 2025 to the same period of the prior year due primarily to asset growth.

Loan/lease expense decreased 41% when comparing the third quarter of 2025 to the same quarter of the prior year due primarily to lower legal expense on loan workouts and higher recoveries of legal expenses incurred on loan workouts. Loan/lease expense increased 2% when comparing the first nine months of 2025 to the same period of the prior year due primarily to a one-time legal fee reimbursement received in the second quarter of 2024, offsetting the expenses.

Net cost of (income from) and gains/losses on operations of other real estate includes gains/losses on the sale of OREO, write-downs of OREO and all income/expenses associated with OREO. Net cost of and gains/losses on operations of other real estate for the third quarter of 2025 totaled $3 thousand, compared to net income from and gains/losses on operations of other real estate of $42 thousand for the third quarter of 2024. Net cost of and gains/losses on operations of other real estate for the first nine months of 2025 totaled $44 thousand, compared to net income from and gains/losses on operations of other real estate of $44 thousand for the first nine months of 2024.

Advertising and marketing expense decreased 14% comparing the third quarter of 2025 to the same period of the prior year, and remained stable when comparing the first nine months of 2025 to the same period of the prior year. The decrease in expense was primarily due to a decrease in sponsorships in the third quarter of 2025.

Communication and data connectivity expense decreased 88% comparing the third quarter of 2025 to the same period of the prior year, and decreased 43% when comparing the first nine months of 2025 to the same period of the prior year. The decrease was primarily due to improvements to our data center connectivity channels and a reduction in cell phone and air card expenses as the Company continues to improve operational efficiencies.

Supplies expense decreased 7% comparing the third quarter of 2025 to the same period of the prior year, and decreased 12% when comparing the first nine months of 2025 to the same period of the prior year. These decreases were primarily due to improved management of supply stock and the timing of purchases.

Bank service charges, a large portion of which includes indirect costs incurred to provide services to QCBT's correspondent banking customer portfolio, increased 12% when comparing the third quarter of 2025 to the same period of the prior year, and increased 11% when comparing the first nine months of 2025 to the same period of the prior year. As transaction volumes and the number of correspondent banking clients fluctuate, the associated expenses are expected to also fluctuate.

Part I

Item 2

Correspondent banking expense increased 4% when comparing the third quarter of 2025 to the same period of the prior year, and decreased 1% when comparing the first nine months of 2025 to the same period of the prior year. These are direct costs incurred to provide services to QCBT's correspondent banking customer portfolio, including safekeeping and cash management services.

Intangibles amortization expense decreased 4% when comparing the third quarter of 2025 to the same period of the prior year, and decreased 4% when comparing the first nine months of 2025 to the same period of the prior year. The amortization expense is due to the prior acquisitions. These expenses are expected to naturally decrease as intangibles become fully amortized unless there is an addition to intangible assets.

There was no goodwill impairment recorded for the third quarter or first nine months of 2025. Goodwill impairment expense totaled $432 thousand for the third quarter and first nine months of 2024 due to the decision to discontinue offering new loans and leases at m2.

Payment card processing expense decreased 28% when comparing the third quarter of 2025 to the same period of the prior year, and decreased 20% when comparing the first nine months of 2025 to the same period of the prior year due to a decreased volume of transactions.

Trust expense increased 4% when comparing the third quarter of 2025 to the same period of the prior year due to increased assets under management. Trust expense decreased 1% when comparing the first nine months of 2025 to the same period of the prior year due to higher custody charges in the second and third quarters of 2024.

Other noninterest expense decreased 14% when comparing the third quarter of 2025 to the same period of the prior year decreased 1% when comparing the first nine months of 2025 to the same period of the prior year. The decrease was primarily due to increased insurance claim loss reserves at our QCRH Risk Management entity in 2024. Included in other noninterest expense are items such as meals and entertainment, subscriptions and sales and use tax.