QCR HOLDINGS INC

Previous wording

This section reviews the financial condition and results of operations of the Company and its subsidiaries as of and for the three and nine months ending September 30, 2024. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends. When reading this discussion, also refer to the Consolidated Financial Statements and related notes in this report. Page locations and specific sections and notes that are referred to in this discussion are listed in the table of contents.

Current wording

This section reviews the financial condition and results of operations of the Company and its subsidiaries as of and for the three months ending March 31, 2025. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends. When reading this discussion, also refer to the Consolidated Financial Statements and related notes in this report. Page locations and specific sections and notes that are referred to in this discussion are listed in the table of contents.

Previous wording

The Company was formed in February 1993 for the purpose of organizing QCBT. Over the past thirty-one years, the Company has grown to include four banking subsidiaries and a number of nonbanking subsidiaries. As of September 30, 2024, the Company had $9.1 billion in consolidated assets, including $6.8 billion in net loans/leases, and $7.0 billion in deposits. The financial results of acquired entities for the periods since their acquisition are included in this report. Further information related to acquired entities has been presented in the annual reports previously filed with the SEC corresponding to the year of each acquisition.

Current wording

The Company was formed in February 1993 for the purpose of organizing QCBT. Over the past 32 years, the Company has grown to include four banking subsidiaries and a number of nonbanking subsidiaries. As of March 31, 2025, the Company had $9.2 billion in consolidated assets, including $6.7 billion in net loans/leases, and $7.3 billion in deposits. The financial results of acquired entities for the periods since their acquisition are included in this report. Further information related to acquired entities has been presented in the annual reports previously filed with the SEC corresponding to the year of each acquisition.

Previous wording

The Company's financial statements are prepared in accordance with GAAP. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance, impairment of goodwill, the fair value of financial instruments, and the fair value of securities.

Current wording

The Company's financial statements are prepared in accordance with GAAP. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance, determination of the fair value of loans acquired in business combinations, impairment of goodwill, the fair value of financial instruments, and the fair value of securities.

Previous wording

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

Current wording

The Company reported net income of $25.8 million and diluted EPS of $1.52 for the quarter ended March 31, 2025. By comparison, for the quarter ended December 31, 2024, the Company reported net income of $30.2 million and diluted EPS of $1.77. For the quarter ended March 31, 2024, the Company reported net income of $26.7 million, and diluted EPS of $1.58.

Previous wording

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):

Current wording

The first quarter of 2025 was also highlighted by the following results and events (see section titled “GAAP to Non-GAAP Reconciliations” for additional information):

Previous wording

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.

Current wording

The Company reported adjusted net income (non-GAAP) of $26.0 million, with adjusted diluted EPS (non-GAAP) of $1.53 for the three months ended March 31, 2025. See section titled “GAAP to Non-GAAP Reconciliations” for additional information. Adjusted net income (non-GAAP) for the three months ended March 31, 2025 excludes a number of non-core or non-recurring items, after-tax, as set forth in the GAAP to Non-GAAP Reconciliation section.

Previous wording

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

Current wording

Following are certain noteworthy developments in the Company's financial results for the quarter ended March 31, 2025:

Previous wording

The Company has taken the following actions during the third quarter of 2024 to support its corporate strategy:

Current wording

The Company has taken the following actions during the first quarter of 2025 to support its corporate strategy and further the strategic financial metrics shown above:

Previous wording

The following table presents certain non-GAAP financial measures related to the “TCE/TA ratio”, “adjusted net income”, “adjusted EPS”, “adjusted ROAA”, “NIM (TEY)”, “adjusted NIM (TEY)” and “efficiency ratio.” In compliance with applicable rules of the SEC, all non-GAAP measures are reconciled to the most directly comparable GAAP measure, as follows:

Current wording

The following table presents certain non-GAAP financial measures related to the “TCE/TA ratio,” “adjusted net income,” “adjusted EPS,” “adjusted ROAA,” “NIM (TEY),” “adjusted NIM (TEY),” “efficiency ratio,” and “adjusted efficiency ratio.” In compliance with applicable rules of the SEC, all non-GAAP measures are reconciled to the most directly comparable GAAP measure, as follows:

Previous wording

The following tables also include several “adjusted” non-GAAP measurements of financial performance. The Company’s management believes that these measures are important to investors as they exclude non-recurring income and expense items; therefore, they provide a better comparison for analysis and may provide a better indicator of future performance.

Current wording

The following tables also include several “adjusted” non-GAAP measurements of financial performance. The Company’s management believes that these measures are important to investors as they exclude non-core or non-recurring income and expense items; therefore, they provide a better comparison for analysis and may provide a better indicator of future performance.

Previous wording

The adjusted efficiency ratio and efficiency ratio are utilized by management to compare the Company to its peers. It is a standard ratio used to calculate overhead as a percentage of revenue in the banking industry and is widely utilized by investors.

Current wording

The efficiency ratio and adjusted efficiency ratio are utilized by management to compare the Company to its peers. They are standard ratios used to calculate overhead as a percentage of revenue in the banking industry and is widely utilized by investors.

Previous wording

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have

Current wording

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

Previous wording

Net interest income, on a GAAP basis, increased 8% for the quarter ended September 30, 2024, compared to the same quarter of the prior year. Net interest income, on a tax equivalent basis (non-GAAP), increased 10% for the quarter ended September 30, 2024, compared to the same quarter of the prior year. The increase was driven by higher average earning assets and margin expansion.

Current wording

Net interest income, on a GAAP basis, increased 10% for the quarter ended March 31, 2025, compared to the same quarter of the prior year. Net interest income, on a tax equivalent basis (non-GAAP), increased 10% for the quarter ended March 31, 2025, compared to the same quarter of the prior year. Net interest income changed primarily due to the Company’s loan and investment growth and continued expansion of loan and investment yields, which were partially offset by deposit growth with a lower cost of funds.

Previous wording

A comparison of yields, spread and margin on a tax equivalent and GAAP basis is as follows:

Current wording

A comparison of yields, spread and margin as reported on the Company’s financial statements and on a tax equivalent basis is as follows:

Previous wording

Acquisition accounting net accretion can fluctuate mostly depending on the payoff activity of the acquired loans. In evaluating net interest income and NIM, it is important to understand the impact of acquisition accounting net accretion when comparing periods. The above table reports NIM with and without the acquisition accounting net accretion to allow for more appropriate comparisons. A comparison of acquisition accounting net accretion included in NIM is as follows:

Current wording

Acquisition accounting net accretion can fluctuate depending on the payoff activity of acquired loans. In evaluating net interest income and NIM, it is important to understand the impact of acquisition accounting net accretion when comparing periods. The above table reports NIM with and without the acquisition accounting net accretion to allow for more appropriate comparisons. A comparison of acquisition accounting net accretion included in NIM is as follows:

Previous wording

The Company’s management closely monitors and manages NIM. From a profitability standpoint, an important challenge for the Company’s subsidiary banks and leasing company is focusing on quality growth in conjunction with the improvement of their NIMs. Management continually addresses this issue with pricing and other balance sheet strategies which include better loan pricing, reducing reliance on very rate-sensitive funding, closely managing deposit rate changes and finding additional ways to manage cost of funds through derivatives.

Current wording

The Company’s management closely monitors and manages NIM. From a profitability standpoint, an important challenge for the Company’s subsidiary banks and leasing company is focusing on quality growth in conjunction with the improvement of their NIMs. Management continually addresses this issue with pricing and other balance sheet strategies which include better loan pricing, reducing reliance on rate-sensitive funding, closely managing deposit rate changes and finding additional ways to manage cost of funds through derivatives.

Previous wording

The Company’s operating results are also impacted by various sources of noninterest income, including trust fees, investment advisory and management fees, deposit service fees, capital markets revenue, gains from the sales of residential real estate loans and government guaranteed loans, earnings on BOLI and other income. Offsetting these items, the Company incurs noninterest expenses, which include salaries and employee benefits, occupancy and equipment expense, professional and data processing fees, FDIC and other insurance expense, loan/lease expense and other administrative expenses.

Current wording

The Company’s operating results are also impacted by various sources of noninterest income, including trust fees, investment advisory and management fees, deposit service fees, capital markets revenue, including swap fee income and gains on loan securitizations, gains from the sales of residential real estate loans and government guaranteed loans, earnings on BOLI and other income. Offsetting these items, the Company incurs noninterest expenses, which include salaries and employee benefits, occupancy and equipment expense, professional and data processing fees, FDIC and other insurance expense, loan/lease expense and other administrative expenses.