QCR HOLDINGS INC

The following table sets forth the various categories of noninterest income for the three and nine months ended September 30, 2024 and 2023:

The Company continues to be successful in expanding its wealth management client base and new assets under management. Trust fees continue to be a significant contributor to noninterest income. Assets under management have increased $343.9 million since June 30, 2024 and have increased by $1.4 billion since September 30, 2023 due to market fluctuation and new client additions. Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services. Trust fees are primarily determined based on the market value of the investments within the fully-managed trusts. Trust fees increased 14% in the third quarter of 2024 as compared to the same period of the prior year and increased 11% when comparing the first nine months of 2024 to the first nine months of 2023 due to market performance and new assets under management. The Company expects trust fees to be negatively

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impacted during periods of significantly lower market valuations and positively impacted during periods of significantly higher market valuations.

Investment advisory and management fees increased 30% comparing the third quarter of 2024 to the same period of the prior year, and increased 26% when comparing the first nine months of 2024 to the first nine months of 2023. Similar to trust fees, investment advisory and management fees are largely determined based on the market value of the investments managed. As a result, fee income from this line of business fluctuates with market valuations.

Deposit service fees increased 9% in the third quarter of 2024 as compared to the same period of the prior year, and increased 2% when comparing the first nine months of 2024 to the first nine months of 2023. During the first nine months of 2024, the Company’s total deposits increased by $470.6 million, or 7%. When comparing annualized YTD growth of total deposits, the Company continues to be successful in expanding its core deposit base with a targeted focus on growing the number of net new accounts in 2024.

Gains on sales of residential real estate loans, net, decreased 19% when comparing the third quarter of 2024 to the same period of the prior year, and increased 2% when comparing the first nine months of 2024 to the first nine months of 2023. The decrease in the third quarter of 2024 was due to lower volume of client residential real estate purchase activity generating lower levels of gains. For the nine months ended September 30, 2024, the increase in gains was due to overall higher volume of client residential real estate purchase activity from the same period in the prior year.

The Company has grown its capital markets revenue significantly over the past several years. The Company’s interest rate swap program consists of back-to-back interest rate swaps with two types of commercial borrowers: (1) traditional commercial loans of a certain minimum size and sophistication, and (2) LIHTC permanent loans. Most of the growth has been in the latter category as the Company has grown relationships with strong LIHTC developers with many years of experience. The LIHTC industry is strong and growing with an increased need for affordable housing. The back-to-back interest rate swaps allow commercial borrowers to pay a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent upon the pricing from an upstream counter party.

Capital markets revenue totaled $16.3 million for the third quarter of 2024, compared to $15.6 million for the third quarter of 2023. Capital markets revenue totaled $50.5 million for the first nine months of 2024 compared to $55.1 million for the first nine months of 2023. In the traditional commercial portfolio, the pricing is more competitive and the duration is shorter as compared to the LIHTC permanent loans. Therefore, the mix of loans with interest rate swaps continued to be heavily weighted towards LIHTC permanent loans. Future levels of swap fees are dependent upon the needs of our traditional commercial and LIHTC borrowers, and the size of the related nonrefundable swap fee may fluctuate depending on the interest rate environment.

Also included in capital markets revenue are gains/losses on loan securitizations. The Company closed on $232.4 million of LIHTC loans for securitization in the third quarter of 2024 which resulted in a loss of $473 thousand. LIHTC securitizations will likely be used in the future as a tool to provide capacity for continued LIHTC loan production.

There were no securities gains or losses for the three and nine months ended September 30, 2024 or for the three months ended September 30, 2023. Securities losses totaled $451 thousand for the nine months ended September 30, 2023. The Company sold $29.0 million of securities during the first quarter of 2023. The securities sold were part of a strategy to partially deleverage the Company’s balance sheet with an anticipated rapid earn back of the modest loss before the end of the calendar year.

Earnings on BOLI decreased 55% comparing the third quarter of 2024 to the third quarter of 2023 and increased 39% comparing the first nine months of 2024 to the first nine months of 2023. The change was due primarily to $2.2 million of death benefit proceeds on BOLI received in the second quarter of 2024. There were no purchases of BOLI in the first nine months of 2024 or 2023. Notably, a portion of the Company's BOLI is variable rate whereby returns are determined by the performance of the equity markets. Management intends to continue to review its BOLI investments to be consistent with

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policy and regulatory limits in conjunction with the rest of its earning assets in an effort to maximize returns while minimizing risk.

Debit card fees are the interchange fees paid on certain debit card customer transactions. Debit card fees remained stable comparing the third quarter of 2024 as compared to the same period of the prior year, and also comparing the first nine months of 2024 to the first nine months of 2023. The fees can vary based on customer debit card usage, so fluctuations from period to period may occur. As an opportunity to maximize fees, the Company offers a deposit product with a higher interest rate that incentivizes debit card activity.

Correspondent banking fees increased 13% comparing the third quarter of 2024 to the same period of the prior year, and increased 28% comparing the first nine months of 2024 to the first nine months of 2023. The increase was primarily due to a shift of correspondent banking balances from non-interest bearing accounts to interest bearing accounts, in light of increasing rates. Fees from correspondent banks generally increase when non-interest bearing account balances decrease due to lower associated earnings credits. Correspondent banking continues to be a core strategy for the Company, as this line of business provides a high level of deposits that can be used to fund loan growth as well as a steady source of fee income. The Company now serves 188 banks in Iowa, Illinois, Missouri and Wisconsin.

Loan-related fee income increased 19% comparing the third quarter of 2024 to the same period of the prior year, and increased 24% comparing the first nine months of 2024 to the first nine months of 2023. The increase across both periods was primarily due to the growth in our commercial credit card portfolio.

Fair value loss on derivatives and trading securities was $886 thousand in the third quarter of 2024, as compared to $336 thousand in losses in the same period of the prior year. Fair value loss on derivatives and trading securities was $998 thousand in the first nine months of 2024 as compared to $680 thousand in the first nine months of 2023. During the third quarter of 2024, the Company executed a derivative strategy with a notional value of approximately $410 million. These derivatives are unhedged and are marked-to-market, with gains or losses recorded in noninterest income which was a contributing factor in the increase in fair value losses. The Company uses unhedged cap instruments and swaptions to manage interest rate risk related to the variability of interest payments due to changes in interest rates. Fair value gains or losses will fluctuate depending on the interest rate environment. See Note 5 to the Consolidated Financial Statements for additional information.

Other noninterest income increased $431 thousand, or 144%, in the third quarter of 2024 as compared to the same period of the prior year due to improvements on the market value of the Company’s equity investments. Other noninterest income increased $446 thousand, or 68%, comparing the first nine months of 2024 to the first nine months of 2023. Included in other noninterest income is income on equity investments. Income on equity investments is largely determined based on the market value of the investments managed. As a result, income fluctuates with market valuations.

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