QCR HOLDINGS INC

The following tables set forth the various categories of noninterest expense for the three and six months ended June 30, 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 8% when comparing the second quarter of 2025 to the same period of the prior year, and decreased 11% when comparing the first six months 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.

Part I

Item 2

Occupancy and equipment expense increased 7% comparing the second quarter of 2025 to the same period of the prior year, and increased 3% when comparing the first six months of 2025 to the same period of the prior year due primarily to higher depreciation expense with the opening of a new office in the Cedar Rapids market and an increase in service contract costs.

Professional and data processing fees increased 26% comparing the second quarter of 2025 to the same period of the prior year, and increased 19% when comparing the first six months of 2025 to the same period of the prior year. The increase was due primarily to increased CDARS and ICS expenses as well as higher professional fees related to the Company’s digital transformation. 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 increased 6% when comparing the second quarter of 2025 to the same period of the prior year, and increased 3% when comparing the first six months of 2025 to the same period of the prior year due primarily to asset growth.

Loan/lease expense increased 170% when comparing the second quarter of 2025 to the same quarter of the prior year and increased 49% when comparing the first six months of 2025 to the same period of the prior year due primarily to a one-time legal fee reimbursement received in the second quarter of 2024, offsetting the expenses.

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 cost of and gains/losses on operations of other real estate for the second quarter of 2025 totaled $50 thousand, compared to net cost of and gains/losses on operations of other real estate of $28 thousand for the second quarter of 2024. Net cost of and gains/losses on operations of other real estate for the first six months of 2025 totaled $41 thousand, compared to net income from and gains/losses on operations of other real estate of $2 thousand for the first six months of 2024. There were two sales of OREO properties in the second quarter of 2025 resulting in losses of $45 thousand.

Advertising and marketing expense increased 12% comparing the second quarter of 2025 to the same period of the prior year, and increased 10% when comparing the first six months of 2025 to the same period of the prior year. The increase in expense was primarily due to an increase in sponsorships.

Communication and data connectivity expense decreased 14% comparing the second quarter of 2025 to the same period of the prior year, and decreased 22% when comparing the first six months 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 3% comparing the second quarter of 2025 to the same period of the prior year, and decreased 14% when comparing the first six months of 2025 to the same period of the prior year. These decreases were 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 16% when comparing the second quarter of 2025 to the same period of the prior year, and increased 11% when comparing the first six months 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 decreased 14% when comparing the second quarter of 2025 to the same period of the prior year, and decreased 4% when comparing the first six months of 2025 to the same period of the prior year. The decreases were primarily due to higher costs in 2024 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.

Part I

Item 2

Intangibles amortization expense decreased 4% when comparing the second quarter of 2025 to the same period of the prior year, and decreased 4% when comparing the first six months 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 23% when comparing the second quarter of 2025 to the same period of the prior year, and decreased 16% when comparing the first six months of 2025 to the same period of the prior year due to a decreased volume of transactions.

Trust expense increased 9% when comparing the second quarter of 2025 to the same period of the prior year due to increased assets under management. Trust expense decreased 4% when comparing the first six months of 2025 to the same period of the prior year due to higher custody charges in the second quarter of 2024.

Other noninterest expense increased 25% when comparing the second quarter of 2025 to the same period of the prior year, and increased 11% when comparing the first six months of 2025 to the same period of the prior year. The increases were primarily due to increased insurance loss reserves 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.