QCR HOLDINGS INC

The ACL is established through provision expense to provide an estimated ACL. The following table shows the components of the provision for credit losses for the three and six months ended June 30, 2025 and 2024:

The Company had a total provision for credit losses on loans and leases of $4.7 million for the second quarter of 2025, an increase from $4.3 million for the same period of 2024, primarily driven by loan growth and increased net charge-offs. The provision related to OBS was negative $624 thousand for the second quarter of 2025 compared to a provision related to OBS of $1.2 million for the second quarter of 2024. The decrease was due to a decreased balance in unfunded commitments. Provision for credit losses on loans and leases for the first six months of 2025 totaled $9.4 million, an increase from $8.1 million for the first six months of 2024. The increase was primarily driven by loan growth and increased net charge-offs. The provision related to OBS was negative $1.1 million for the first six months of 2025 compared to a provision related to OBS of $831 thousand for the first six months of 2024.

There was no provision related to HTM securities for the first six months of 2025 or 2024. There was no provision related to AFS securities for the first six months of 2025, compared to a negative provision of $445 thousand on AFS securities for the first six months of 2024 with the change in fair value of a debt investment in a failed bank. This was a legacy investment acquired as part of the 2022 GFED acquisition, for which an allowance equal to the entire value of the bond was established in March 2023. A partial recovery in value occurred due to favorable changes in market conditions during 2024, and the investment was then sold in 2024.

The ACL for loans and leases is established based on a number of factors, including the Company's historical loss experience, delinquencies and charge-off trends, economic and other forecasts, the local, state and national economies and risk associated with the loans/leases and securities in the portfolio, as described in more detail in the “Critical Accounting Policies and Critical Accounting Estimates” section of this report.

The Company had an ACL for loans/leases held for investment of 1.28% of total gross loans/leases held for investment at June 30, 2025, compared to 1.32% at March 31, 2025 and 1.33% at June 30, 2024. Management evaluates the allowance needed on loans acquired in previous acquisitions, factoring in the remaining discount, which was $2.0 million and $3.3 million at June 30, 2025 and June 30, 2024, respectively.

Additional discussion of the Company's allowance can be found in the “Financial Condition” section of this report.

Part I

Item 2