QCR HOLDINGS INC

The following tables set forth the various categories of noninterest expenses for the years ended December 31, 2024 and 2023.

Management places strong emphasis on overall cost containment and is committed to improving the Company’s general efficiency.

Salaries and employee benefits, which is the largest component of noninterest expense, decreased 6% in 2024 as compared to 2023. This decrease was primarily related to lower variable incentive compensation and fewer FTEs with the announced changes at m2 and more open positions.

Occupancy and equipment expense increased 2% in 2024 as compared to 2023. This increase was due to higher IT service contracts expense and depreciation.

Professional and data processing fees increased 19% in 2024 as compared to 2023. The increase was due primarily to increased CDARS and ICS expenses as well as increased data processing expenses. 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.

Restructuring expenses totaled $2.0 million in 2024 due to the decision to discontinue offering new loans and leases through m2. The charges consisted primarily of severance and retention compensation as well as vendor contract termination fees. There were no restructuring expenses in 2023.

There were no post-acquisition compensation, transition and integration costs in 2024. Post-acquisition compensation, transition and integration costs totaled $207 thousand in 2023. These costs were comprised primarily of personnel costs, IT integration and conversion costs related to the acquisition of GFED in 2022.

FDIC insurance, other insurance and regulatory fee expense increased 4% in 2024. The increase in expense was due to an increase in the asset growth and higher FDIC insurance rates.

Loan/lease expense decreased 43% in 2024 as compared to 2023. The decrease was due primarily to lower legal expense on loan workouts and higher recoveries of legal expenses incurred on loan workouts. Generally, loan/lease expense has a direct relationship with the level of NPLs; however, it may deviate depending upon the individual NPLs. NPLs have increased 35% since December 31, 2023.

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 operations totaled $21 thousand for 2024 as compared to $26 thousand for 2023.

Advertising and marketing expense increased 17% in 2024 as compared to 2023. The increase in expense was primarily due to increased marketing of our deposit products.

Communication and data connectivity expense decreased 32% in 2024 as compared to 2023. 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 decreased 15% in 2024 as compared to 2023. The decrease was primarily due to improved management of supply stock and 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 6% in 2024 as compared to 2023. The decrease was due primarily to the Company incurring, in the fourth quarter of 2023, a bank service charge related to collateral held at the FHLB.

Correspondent banking expense increased 37% in 2024 as compared to 2023. The increase in correspondent expenses includes planned costs for an upgraded safekeeping platform. These are direct costs incurred to provide services to QCBT’s correspondent banking customer portfolio, including safekeeping and cash management services.

Intangible amortization expense decreased 6% in 2024 as compared to 2023. The amortization expense is due to prior acquisitions. These expenses will naturally decrease as intangibles become fully amortized unless there is an addition to intangible assets.

Goodwill impairment expense totaled $432 thousand in 2024 due to the decision to discontinue offering new loans and leases through m2. There was no goodwill impairment in 2023.

Payment card processing expense remained stable in 2024 as compared to 2023.

Trust expense increased 13% in 2024 as compared to 2023. The increase was due to an increase in assets under management of $1.1 billion in 2024.

Other noninterest expense increased 18% in 2024 as compared to 2023. The increase was due primarily to increased insurance claim loss reserves at our QCRH Risk Management, Inc. micro captive entity. Also included in other noninterest expense are other items such as meals and entertainment, subscriptions and sales and use tax.