QCR HOLDINGS INC
For the period ended Dec 31, 2023. Filed Feb 29, 2024.
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FY2023 · Filed Feb 29, 2024
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Investment Securities
The composition of the Company’s securities portfolio is managed to meet liquidity needs while prioritizing the impact on interest rate risk and maximizing return, while minimizing credit risk. Over the recent years, the Company has continued to change the mix of the portfolio by decreasing U.S government sponsored agency securities, while increasing tax-exempt municipal securities. Of the latter, the large majority are privately placed tax-exempt debt issuances by municipalities located in the Midwest (with some in or near the Company’s existing markets) that require a thorough underwriting process before investment and are generated by our specialty finance group.
Trading securities had a fair value of $22.4 million as of December 31, 2023 and consisted of retained beneficial interests acquired in conjunction with the loan securitizations completed by the Company in 2023.
Following is a breakdown of the Company’s securities portfolio by type, the percentage of net unrealized gains (losses) to carrying value on the total portfolio, and the portfolio duration as of December 31, 2023 and 2022.
| | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | |
| · · 2023 · · · 2022 · | |||||||||||||
| · · Amount · % · · Amount · % · | |||||||||||||
| · · (dollars in thousands) | |||||||||||||
| | | | | | | | | | | | | | |
| U.S. treasuries and govt. sponsored agency securities | | $14,973 | 1% | | $16,981 | 2% | | ||||||
| Municipal securities | | 853,442 | 85% | | 779,270 | 84% | | ||||||
| Residential mortgage-backed and related securities | | 59,196 | 6% | | 66,215 | 7% | | ||||||
| Asset-backed securities | | | 15,423 | | 2% | | | 18,728 | | 2% | | ||
| Other securities | | 40,125 | 4% | | 46,908 | 5% | | ||||||
| Trading securities | | | 22,369 | | 2% | | | — | | - | % | | |
| | | $1,005,528 | 100% | | $928,102 | 100% | | ||||||
| | | | | | | ||||||||
| Securities as a % of total assets | | 11.78% | | | 11.68% | | | ||||||
| Net unrealized losses as a % of Amortized Cost | | (4.96)% | | | (11.26)% | | | ||||||
| Duration (in years) | | 6.2 | | | 7.7 | | | ||||||
| Annual yield on investment securities (tax equivalent) | | | 4.30% | | | | | 3.99% | | | | ||
Due to continued increases in intermediate and long-term interest rates during 2023, which directly impact the fair value of the Company’s AFS portfolio, the AFS portfolio declined $41.3 million, or 12.1%, from December 31, 2022 to December 31, 2023.
The Company has not invested in non-agency commercial or residential mortgage-backed securities or pooled trust preferred securities.
The following is a breakdown of the weighted-average yield for each range of maturities by category of debt securities that are not held at fair value:
| | | | | | | |
|---|---|---|---|---|---|---|
| | | | | | | |
| · · · · · Weighted | ||||||
| · · Amortized · · Average | ||||||
| · Cost* · Yield | ||||||
| · · (dollars in thousands) | ||||||
| Municipal securities: · · | ||||||
| Within 1 year | | $1,876 | 4.04% | |||
| After 1 but within 5 years | | 26,243 | 5.75% | |||
| After 5 but within 10 years | | 83,955 | 5.24% | |||
| After 10 years | | 570,583 | 4.45% | |||
| Total | | $682,657 | 4.60% | |||
| | | | | | | |
| Other securities: | | | ||||
| After 1 but within 5 years | | $1,050 | 4.51% | |||
| Total | | $1,050 | 4.51% | |||
| | | | | | | |
| Total HTM Securities | | $683,707 | | | | |
| | | | | | | |
- Amortized cost above excludes ACL of $203 thousand.
The weighted-average yield is calculated by dividing the total interest for each security per maturity range by the total amortized cost within that maturity range. Yields are not computed on a tax equivalent basis.
There have been no major changes within the tax-exempt portfolio.
See Note 3 to the Consolidated Financial Statements for additional information regarding the Company’s investment securities.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.