QCR HOLDINGS INC

For the period ended Sep 30, 2024. Filed Nov 8, 2024.

About this filing

A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Sep 30, 2024 · Filed Nov 8, 2024

QCRH$100.85-0.3%Stored close · as of Nov 6, 2026

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Executive Overview

The Company reported net income of $27.8 million and diluted EPS of $1.64 for the quarter ended September 30, 2024. By comparison, for the quarter ended June 30, 2024, the Company reported net income of $29.1 million and diluted EPS of $1.72. For the quarter ended September 30, 2023, the Company reported net income of $25.1 million, and diluted EPS of $1.49. For the nine months ended September 30, 2024, the Company reported net income of $83.6 million and diluted

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EPS of $4.94. By comparison, for the nine months ended September 30, 2023, the Company reported net income of $80.7 million and diluted EPS of $4.79.

The third quarter of 2024 was also highlighted by the following results and events (see section titled “GAAP to Non-GAAP Reconciliations” for additional information):

●	Net income of $27.8 million, or $1.64 per diluted share;

●	Adjusted net income (non-GAAP) of $30.3 million or $1.78 per diluted share, resulting in an adjusted ROAA (non-GAAP) of 1.35%;

●	Significant increase in net interest income of $3.6 million from the prior quarter;

●	Net interest margin expanded by 8 basis points to 2.90%, or 3.34% adjusted NIM (TEY)(non-GAAP);

●	Continued strong capital markets revenue of $16.3 million;

●	Tangible book value (non-GAAP) per share grew $2.35, or 20% annualized; and

●	TCE/TA ratio (non-GAAP) improved 24 basis points to 9.24%.

Following is a table that represents various net income measurements for the Company:


· · For the three months ended · · For the nine months ended ·
· September 30, 2024 · June 30, 2024 · September 30, 2023 · September 30, 2024 · September 30, 2023 ·
· · (dollars in thousands) · · · · · · ·

Net income	$27,785	$29,114	$25,121	$83,625	$80,703

Diluted earnings per common share	$1.64	$1.72	$1.49	$4.94	$4.79

Weighted average common and common equivalent shares outstanding	16,982,400	16,921,854	16,847,951	16,938,309	16,863,203

The Company reported adjusted net income (non-GAAP) of $30.3 million, with adjusted diluted EPS (non-GAAP) of $1.78 for the three months ended September 30, 2024. See section titled “GAAP to Non-GAAP Reconciliations” for additional information. Adjusted net income (non-GAAP) for the three months ended September 30, 2024 excludes non-recurring items, after-tax, as set forth in the GAAP to Non-GAAP Reconciliation section. The Company reported adjusted net income (non-GAAP) of $86.4 million, with adjusted diluted EPS (non-GAAP) of $5.10 for the nine months ended September 30, 2024. Adjusted net income (non-GAAP) for the nine months ended September 30, 2024 excludes non-recurring items, after-tax, as set forth in the GAAP to Non-GAAP Reconciliation section.

Following is a table that represents the major income and expense categories for the Company:


· · For the three months ended · · For the nine months ended ·
· September 30, 2024 · June 30, 2024 · September 30, 2023 · September 30, 2024 · September 30, 2023
· · (dollars in thousands) · · · · · · ·

Net interest income	$59,722	$56,163	$55,255	$170,584	$165,270
Provision for credit losses	3,484	5,496	3,806	11,949	11,340
Noninterest income	27,157	30,889	26,593	84,904	84,955
Noninterest expense	53,565	49,888	51,081	154,143	149,593
Federal and state income tax expense	2,045	2,554	1,840	5,771	8,589
Net income	$27,785	$29,114	$25,121	$83,625	$80,703

Following are some noteworthy changes in the Company's financial results:

●

Net interest income in the third quarter of 2024 increased 6% compared to the second quarter of 2024 due to higher loan and investment average balances, margin expansion from higher loan yields and stable funding costs, and increased 8% when compared to the third quarter of 2023 due to higher average earning assets. Loan discount

Part I

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accretion increased by $195 thousand from the prior quarter. Net interest income increased 3% when comparing the first nine months of 2024 to the same period of the prior year. The increase was primarily due to higher average earning assets.

●

Provision expense in the third quarter of 2024 decreased $2.0 million as compared to the second quarter of 2024 and decreased $322 thousand when compared to the third quarter of 2023. The decrease was primarily due to overall credit quality improvements. Provision expense in the first nine months of 2024 increased $609 thousand compared to the first nine months of 2023. The increase was due to strong loan growth and the impact of our qualitative CECL model factors. In addition, there was negative provision of $445 thousand on AFS securities for the first quarter of 2024 related to the sale of a debt investment in a failed bank. See the “Provision for Credit Losses” section of this report for additional details.

●

Noninterest income in the third quarter of 2024 decreased $3.7 million, or 12%, compared to the second quarter of 2024. The decrease in the third quarter compared to the linked quarter was primarily due to lower BOLI due to realized income of $2.2 million from BOLI policy proceeds received during the second quarter of 2024 and capital markets revenue from swap fees, offset by higher wealth management revenue. The demand for low-income housing remains healthy and the economics associated with these tax credit projects continue to be favorable. The Company has a strong pipeline for this business and expects it to continue to be a solid source of fee income in 2024. Noninterest income increased $564 thousand, or 2%, compared to the third quarter of 2023. Noninterest income decreased $51 thousand when comparing the first nine months of 2024 to the same period of the prior year. During the third quarter, the Company executed a derivative strategy with a notional value of approximately $410.0 million. These derivatives are designed to safeguard the Company’s regulatory capital against the adverse effects of a significant decline in long-term interest rates. These derivatives are unhedged and are marked-to-market, with gains or losses recorded in noninterest income and reflected as a non-core item. For the third quarter of 2024, the Company recorded a $414 thousand loss on these derivatives.

●

Noninterest expense increased $3.7 million, or 7%, in the third quarter of 2024 compared to the second quarter of 2024. Noninterest expense increased $2.5 million, or 5%, compared to the third quarter of 2023. The linked-quarter increase was primarily due to the previously announced one-time restructuring and goodwill impairment charges related to the decision to discontinue offering new loans and leases at m2. Noninterest expense increased $4.6 million, or 3%, when comparing the first nine months of 2024 to the same period in the prior year. This increase was primarily due to higher professional and data processing expense as well as restructuring and goodwill impairment expenses related due to the decision to discontinue offering new loans and leases through m2.

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