QCR HOLDINGS INC

The following tables set forth the various categories of noninterest expense for the three and six months ended June 30, 2026 and 2025:

Management places a strong emphasis on overall cost containment and is committed to improving the Company's general efficiency and operating leverage as discussed in the “Strategic Financial Metrics” section.

Salaries and employee benefits, which is the largest component of noninterest expense, increased 13% when comparing the second quarter of 2026 to the same period of the prior year, and increased 14% when comparing the first six months of 2026 to the same period of the prior year primarily due to annual merit increases and capital markets revenue and its impact on variable compensation associated with performance.

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Occupancy and equipment expense increased 7% comparing the second quarter of 2026 to the same period of the prior year, and increased 12% when comparing the first six months of 2026 to the same period of the prior year due primarily to higher property tax expense and depreciation expense with the opening of new offices in the Cedar Rapids and Ankeny, Iowa markets.

Professional and data processing fees decreased 8% comparing the second quarter of 2026 to the same period of the prior year, and decreased 4% comparing the first six months of 2026 to the same period of the prior year. 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.

FDIC insurance, other insurance and regulatory fee expense remained stable when comparing the second quarter of 2026 to the same period of the prior year, and increased 3% when comparing the first six months of 2026 to the same period of the prior year due primarily to asset growth.

Loan/lease expense decreased 29% when comparing the second quarter of 2026 to the same period of the prior year, and decreased 50% when comparing the first six months of 2026 to the same period of the prior year due primarily to lower legal expense on loan workouts and higher recoveries of legal expenses incurred on loan workouts.

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 income from and gains/losses on operations of other real estate for the second quarter of 2026 totaled $11 thousand, compared to net cost of and gains/losses on operations of other real estate of $50 thousand for the second quarter of 2025. Net cost of and gains/losses on operations of other real estate for the first six months of 2026 totaled $5 thousand, compared to net cost of and gains/losses on operations of other real estate of $41 thousand for the first six months of 2025.

Advertising and marketing expense increased 4% comparing the second quarter of 2026 to the same period of the prior year, and increased 7% comparing the first six months of 2026 to the same period of the prior year. The increase in expense was primarily due to an increase in other sales promotions.

Communication and data connectivity expense decreased 11% comparing the second quarter of 2026 to the same period of the prior year, and decreased 21% comparing the first six months of 2026 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 increased 5% comparing the second quarter of 2026 to the same period of the prior year, and increased 9% comparing the first six months of 2026 to the same period of the prior year. These increases were primarily due to 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, decreased 1% when comparing the second quarter of 2026 to the same period of the prior year, and increased 5% when comparing the first six months of 2026 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.

Correspondent banking expense increased 7% when comparing the second quarter of 2026 to the same period of the prior year, and increased 4% when comparing the first six months of 2026 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 23% when comparing the second quarter of 2026 to the same period of the prior year, and decreased 23% when comparing the first six months of 2026 to the same period of the prior year. The decreases across both periods were due to no longer needing to amortize an intangible at CSB as done in the prior year.

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These expenses are expected to naturally decrease as intangibles become fully amortized unless there is an addition to intangible assets.

Payment card processing expense decreased 9% when comparing the second quarter of 2026 to the same period of the prior year, and decreased 12% when comparing the first six months of 2026 to the same period of the prior year due to renegotiated debit card contracts.

Trust expense increased 10% when comparing the second quarter of 2026 to the same period of the prior year, and increased 21% when comparing the first six months of 2026 to the same period of the prior year due to increased assets under management when comparing June 30, 2026 to June 30, 2025.

Other noninterest expense increased 21% when comparing the second quarter of 2026 to the same period of the prior year, and increased 56% when comparing the first six months of 2026 to the same period of the prior year. The increases across both periods were primarily due to taxes on stock repurchases in 2026. Included in other noninterest expense are items such as meals and entertainment, subscriptions and sales and use tax.