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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Strategic Developments
The Company took the following actions in 2023 to support our corporate strategy and further the strategic financial metrics shown above:
| ● | The Company grew loans and leases in 2023 by 6.6%, or 10.9% when excluding the $264.7 million in loan securitizations completed in the fourth quarter. The loan growth was driven by both LIHTC and our traditional lending and leasing businesses. |
| ● | The Company completed two LIHTC loan securitizations in the fourth quarter of 2023, with a total outstanding principal balance of $264.7 million and a total carrying value on these loans of $261.9 million. The first securitization consisted of $128.6 million of tax exempt LIHTC loans through a Freddie Mac sponsored M series transaction. The second securitization consisted of $133.3 million of taxable LIHTC loans through a Freddie Mac sponsored Q series transaction. The Company recorded a net gain on the transactions of $664 thousand reported in capital markets revenue on the consolidated statements of income. The Company plans to continue to utilize securitizations as a liquidity and management tool, and to provide additional capacity to produce LIHTC loans and the related capital markets revenue. |
| ● | Correspondent banking continues to be a core line of business for the Company. The Company is competitively positioned with experienced staff, software systems and processes to continue growing in the four states it currently serves – Iowa, Wisconsin, Missouri and Illinois. The Company acts as the correspondent bank for 182 downstream banks with total noninterest bearing deposits of $88.5 million and total interest-bearing deposits of $242.3 million as of December 31, 2023. This line of business provides a strong source of noninterest bearing and interest-bearing deposits, fee income, high-quality loan participations and bank stock loans. The Company also manages off-balance sheet liquidity held at the Federal Reserve on behalf of the downstream banks, which totaled $214.9 million as of December 31, 2023 as compared to $339.5 million as of December 31, 2022. |
| ● | The Company is focused on executing interest rate swaps on select commercial loans, including LIHTC permanent loans. The interest rate swaps help the commercial borrowers obtain a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent on the pricing. Management believes that these swaps help position the Company more favorably for rising rate |
environments. The Company will continue to review opportunities to execute these swaps at all of its subsidiary banks, as the circumstances are appropriate for the borrower and the Company. Levels of capital markets revenue from swap fee income are influenced by prevailing interest rates. Capital markets revenue, primarily from swap fee income totaled $91.4 million in 2023 as compared to $41.3 million in 2022. Capital markets revenue from swap fees averaged $23.0 million per quarter for the year 2023 and $10.3 million per quarter for the year 2022.
| ● | Over many years, the Company has been successful in expanding its wealth management client base. Trust and investment advisory and management fees continue to be a significant contributor to noninterest income. Assets under management increased by $700.7 million in 2023. There were 340 new relationships added in 2023 totaling $762.9 million of new assets under management. Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services. The majority of the trust fees are determined based on the value of the investments within the fully-managed trusts. Similar to trust fees, investment advisory and management fees are largely determined based on the value of the investments managed. The Company expects trust and investment advisory and management fees to be negatively impacted during periods of lower market valuations and positively impacted during periods of higher market valuations. The Company has expanded its wealth management client base into the Springfield, Missouri market. |
| ● | Noninterest expense in 2023 totaled $210.5 million as compared to $190.0 million in 2022. The increase was primarily due to twelve months of GFED operating expenses reflected in the Company’s 2023 results as compared to nine months of such operating expenses reflected in the Company’s 2022 results, as well as increased variable incentive compensation due to the impact of record capital markets performance in 2023. |
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