QCR HOLDINGS INC

The following tables set forth the various categories of noninterest expense for the three months ended March 31, 2025 and 2024:

Management places a 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 14% when comparing the first quarter of 2025 to the same period of the prior year primarily due to lower capital markets revenue and its impact on variable compensation associated with performance.

Occupancy and equipment expense remained stable comparing the first quarter of 2025 to the same period of the prior year.

Professional and data processing fees increased 12% comparing the first quarter of 2025 to the same period of the prior year. 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.

FDIC insurance, other insurance and regulatory fee expense remained stable when comparing the first quarter of 2025 to the same period of the prior year.

Loan/lease expense remained stable when comparing the first quarter of 2025 to the same quarter of the prior year.

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 and gains/losses on operations of other real estate for the first quarter of 2025 totaled $9 thousand, compared to net income from and gains/losses on operations of other real estate of $30 thousand for the first quarter of 2024.

Advertising and marketing expense increased 9% comparing the first quarter of 2025 to the same period of the prior year. The increase in expense was primarily due to an increase in sponsorships.

Part I

Item 2

Communication and data connectivity expense decreased 28% comparing the first quarter of 2025 to the same period of the prior year. 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 25% comparing the first quarter of 2025 to the same period of the prior year. This decrease is 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, increased 5% when comparing the first quarter of 2025 to the same period of the prior year. As transaction volumes and the number of correspondent banking clients fluctuate, the associated expenses are expected to also fluctuate.

Correspondent banking expense increased 8% when comparing the first quarter of 2025 to the same period of the prior year. 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.

Intangibles amortization expense decreased 4% when comparing the first quarter of 2025 to the same period of the prior year. The amortization expense is due to the prior acquisitions. These expenses are expected to naturally decrease as intangibles become fully amortized unless there is an addition to intangible assets.

Payment card processing expense decreased 8% when comparing the first quarter of 2025 to the same period of the prior year due to a decreased volume of transactions.

Trust expense decreased 16% when comparing the first quarter of 2025 to the same period of the prior year due to higher custody charges in the first quarter of 2024.

Other noninterest expense decreased 5% when comparing the first quarter of 2025 to the same period of the prior year. The decrease was primarily due to increased insurance claim loss settlement reimbursements at our QCRH Risk Management micro captive entity. Included in other noninterest expense are items such as meals and entertainment, subscriptions and sales and use tax.