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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): April 28, 2020

QCR Holdings, Inc.
(Exact Name of Registrant as Specified in Charter)

(309) 736-3584
(Registrant's telephone number, including area code)

N/A
(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02. Results of Operations and Financial Condition.

On April 28, 2020, QCR Holdings, Inc. (the “Company”) issued a press release disclosing financial results for the quarter ended March 31, 2020. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto is being “furnished” and will not, except to the extent required by applicable law or regulation, be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor will any of such information or exhibits be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 7.01. Regulation FD Disclosure.

On April 28, 2020, the Company posted a presentation to the Company’s website. The presentation is available to view at www.qcrh.com, and is also attached hereto as Exhibit 99.2.

The information in Item 7.01 of this Current Report on Form 8-K and the related Exhibit 99.2 attached hereto is being “furnished” and will not, except to the extent required by applicable law or regulation, be deemed “filed” by the Company for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor will any of such information or exhibits be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

99.1     Press Release dated April 28, 2020, containing financial information for the quarter ended March 31, 2020.

99.2     Investor Presentation dated April 28, 2020.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99.1

PRESS RELEASE

FOR IMMEDIATE RELEASE

QCR Holdings, Inc. Announces First Quarter Earnings and Response to COVID-19 Pandemic

First Quarter 2020 Highlights

COVID-19 Pandemic Response Update

Moline, IL, April 28, 2020 -- QCR Holdings, Inc. (NASDAQ: QCRH) (the “Company”) today announced net income of $11.2 million and diluted earnings per share (“EPS”) of $0.70 for the first quarter of 2020, compared to net income of $15.9 million and diluted EPS of $0.99 for the fourth quarter of 2019. Provision expense increased $7.4 million in the first quarter of 2020, compared to the fourth quarter of 2019, as a result of increased qualitative factors in response to deteriorating economic conditions as a result of the COVID-19 pandemic. The first quarter results included $517 thousand of disposition costs due to the sale of Rockford Bank and Trust (“RB&T”) and a $500 thousand goodwill impairment charge related to the pending sale of the Bates Companies (“Bates”). The fourth quarter of 2019 results included a $12.3 million gain on sale and $3.3 million of disposition costs due to the sale of RB&T. Additionally in the fourth quarter of 2019, there was a $3.0 million goodwill impairment charge related to Bates as a result of the decision to exit the Rockford market. The first quarter results also included $151 thousand of post-acquisition compensation, transition and integration costs, compared to $1.9 million of similar costs in the fourth quarter of 2019.

Excluding these expenses and some modest cost for early debt extinguishment, the Company reported adjusted net income (non-GAAP) of $12.4 million and adjusted diluted EPS (non-GAAP) of $0.77 for the first quarter of 2020, compared to adjusted net income (non-GAAP) of $15.4 million and adjusted diluted EPS (non-GAAP) of $0.96 for the fourth quarter of 2019. For the first quarter of 2019, net income and diluted EPS were $12.9 million and $0.81, respectively, and adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) were $13.0 million and $0.82, respectively.

“As a country, we are in the midst of an unprecedented challenge with the onset of the COVID-19 pandemic, and it remains difficult to predict the ultimate impact on our clients because the depth and duration of this pandemic are still unknown,” said Larry J. Helling, Chief Executive Officer. “However, each of our banks is well-capitalized, and is dedicated to serving our clients for as long as this crisis lasts. We believe our philosophy of putting clients first, combined with local decision-making, is the best way to serve our customers during these uncertain times. We have seasoned credit teams at all charters that have experience dealing with significant economic downturns, and all of our employees are dedicated to helping our clients weather this storm.”

“We have rolled out our Loan Relief Program that allows impacted clients to defer payments and preserve cash and liquidity,” Helling continued. “Additionally, our lending teams are actively enrolling many existing and new small-business clients in the SBA Paycheck Protection Program, which was intended to provide much needed capital and liquidity to many of our commercial and non-profit clients. As of April 24th, our banks received approvals from the SBA to fund 1,300 loans totaling $333 million. These approvals were accomplished in a very short amount of time thanks to an extraordinary effort by our staff. We are confident that we will grow our client base as a result of these efforts.”

“Though the public health crisis did impact our results in the form of lower loan growth and an increased provision for loan losses, our overall credit quality remained strong and our Company was solidly profitable through the first quarter,” Helling added. “I am proud of our first-quarter financial performance and our healthy underlying fundamentals. We remain steadfast in our focus on expanding our presence in the communities we serve across all our charters and providing best in class service through operational excellence, and we believe that we are well positioned to deal with the challenges in front of us.”

Annualized Loan and Lease Growth of 1.6% for the Quarter

During the first quarter of 2020, the Company’s total loans and leases increased slightly by $14.5 million to a total of $3.7 billion. Loan and lease growth was adversely impacted by reduced economic activity across all markets as a result of the voluntary or mandatory closures of public venues, businesses, schools and government offices due to the COVID-19 pandemic. In addition, the Company received a number of sizable loan paydowns in the beginning of the quarter, further impacting quarter-end loan balances. Core deposits (excluding brokered deposits) increased $132.6 million, or 3.5% on a linked quarter basis. At quarter-end, the percentage of wholesale funds to total assets was 10.1%, which was up from 8.8% in the fourth quarter of 2019 as the Company accessed some short-term wholesale funding out of an abundance of caution. At quarter-end, the percentage of gross loans and leases to total assets was 71%, which was down from 75% in the fourth quarter.

“The slowdown in economic activity caused by the COVID-19 pandemic impacted our loan growth for the quarter,” added Mr. Helling. “Loan production slowed significantly in March and that trend has continued into the second quarter. We also experienced several large payoffs during the quarter, which impacted our loan growth as well. Due to the inherent difficulty in predicting the duration of the pandemic, we are withdrawing our previously announced targeted range for full-year organic loan growth.”

Net Interest Income of $37.7 million; Adjusted NIM up 7 basis points

Linked-quarter comparisons of net interest income are impacted by the sale of RB&T on November 30, 2019 and varying levels of acquisition-related net accretion. While the sale of RB&T reduced average earning assets by 5.3% on a linked-quarter basis, net interest income, excluding RB&T and acquisition-related accretion (non-GAAP), was nearly static due to a significant increase in net interest margin (“NIM”) in the first quarter of 2020.

In the first quarter, reported NIM was 3.40% and, on a tax-equivalent yield basis (non-GAAP), NIM was 3.56%, an increase of 4 basis points and 5 basis points from the fourth quarter of 2019, respectively. Adjusted NIM (non-GAAP), excluding acquisition-related net accretion was 3.50%, up 7 basis points from the fourth quarter. The increase in Adjusted NIM (non-GAAP) during the quarter was due to an 11 basis point decline in the total cost of interest-bearing funds (due to both mix and rate), partially offset by a 3 basis point decrease in the yield on earning assets.

“We expanded our adjusted net interest margin again during the first quarter as we continued to drive down our deposit costs while successfully increasing core deposits during the quarter. Our average loan yields also declined during the quarter, but at a slower pace than the decrease in our funding costs, expanding our margin,” stated Todd A. Gipple, President, Chief Operating Officer and Chief Financial Officer.

Noninterest Income of $15.2 million

Noninterest income for the first quarter of 2020 totaled $15.2 million, compared to $29.8 million for the fourth quarter of 2019. The fourth quarter of 2019 results included a $12.3 million gain on the sale of RB&T. Excluding this gain, noninterest income totaled $17.5 million in the fourth quarter of 2019. The first quarter decline in noninterest income was mostly due to the sale of RB&T late in the fourth quarter of 2019. Wealth management revenue was $4.0 million for the quarter, consistent with the fourth quarter of 2019. Noninterest income increased 26.7% when compared to the first quarter of 2019.

“Our noninterest income was down modestly in the first quarter, however, we did experience another strong quarter of swap fee income, which came in at $6.8 million for the quarter, at the high end of our guidance range. Given the uncertainty surrounding the pandemic, we are withdrawing our previously announced targeted range for full-year swap fee income and gain on sale of guaranteed portions of loans,” added Mr. Gipple.

Noninterest Expenses of $31.4 million

Noninterest expense for the first quarter of 2020 totaled $31.4 million, compared to $46.3 million and $32.4 million for the fourth and first quarters of 2019, respectively. The linked quarter decrease was due to a number of factors, including a $5.7 million decline in salaries and employee benefits due to the sale of RB&T as well as reduced bonus and incentive compensation, a $2.8 million decline in disposition costs and a $2.5 million lower goodwill impairment charge. In addition, post-acquisition transition and integration costs decreased by $1.7 million due to the completion of the core conversion of Springfield First Community Bank in the fourth quarter of 2019.

Asset Quality Remains Solid

Nonperforming assets (“NPAs”) totaled $16.9 million, an increase of $3.9 million from the fourth quarter of 2019. The increase was primarily due to one lending relationship. The ratio of NPAs to total assets increased to 0.32% at March 31, 2020, compared to 0.27% at December 31, 2019 and down from 0.52% at March 31, 2019.

The Company’s provision for loan and lease losses totaled $8.4 million for the first quarter of 2020, up from $1.0 million in the prior quarter and $2.1 million in the first quarter of 2019. The linked quarter increase in the provision for loan and lease losses was primarily due to increased qualitative factors in response to deteriorating economic conditions. As of March 31, 2020, the Company’s allowance to total loans and leases was 1.14%, which was up from 0.98% at December 31, 2019 and from 1.08% at March 31, 2019.

In accordance with GAAP for acquisition accounting, loans acquired through past acquisitions were recorded at market value; therefore, there was no allowance associated with the acquired loans at the acquisition date. Management continues to evaluate the allowance needed on the acquired loans factoring in the net remaining discount ($6.3 million at March 31, 2020).

Strong Capital Levels

As of March 31, 2020, the Company’s total risk-based capital ratio was 13.33%, the common equity tier 1 ratio was 10.14%, and the tangible common equity to tangible assets ratio was 8.76%. By comparison, these respective ratios were 13.33%, 10.18% and 9.25% as of December 31, 2019. The slight decline in these ratios was the result of asset growth associated with holding higher liquidity and cash balances along with the Company’s previously announced share repurchase program and changes in interest rate swap market valuations.

Share Repurchase Program

On February 18, 2020, the Company’s Board of Directors authorized a share repurchase program, permitting the repurchase of up to 800,000 shares of the Company’s outstanding common stock, or approximately 5% of the outstanding shares as of December 31, 2019.

During the first quarter, the Company repurchased approximately 101,000 shares of common stock at an average price of $37.45 per share. The Company ceased the repurchase of shares on March 16, 2020 as the COVID-19 pandemic began to impact our country.

Focus on Three Key Long-Term Initiatives

As part of the Company’s ongoing efforts to grow earnings and drive attractive long-term returns for shareholders, it has developed three key strategic long-term initiatives:

It should be noted that these initiatives are long-term targets. Due to the impact of the COVID-19 pandemic, the Company may not be able to achieve these goals for the full year 2020.

Supplemental Presentation and Where to Find It

In addition to this press release, the Company has included a supplemental presentation that provides further information regarding the Company’s loan exposures. Investors, analysts and other interested persons may find this presentation on the SEC’s EDGAR filing system at www.sec.gov/edgar.shtml, or on the Company’s website at www.qcrh.com

Conference Call Details

The Company will host an earnings call/webcast tomorrow, April 29, 2020, at 10:00 a.m. Central Time. Dial-in information for the call is toll free: 888-346-9286 (international 412-317-5253). Participants should request to join the QCR Holdings, Inc. call. The event will be available for replay through May 13, 2020. The replay access information is 877-344-7529 (international 412-317-0088); access code 10142295. A webcast of the teleconference can be accessed at the Company’s News and Events page at www.qcrh.com. An archived version of the webcast will be available at the same location shortly after the live event has ended.

About Us

QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company serving the Quad Cities, Cedar Rapids, Cedar Valley, Des Moines/Ankeny, and Springfield communities through its wholly owned subsidiary banks. The banks provide full-service commercial and consumer banking and trust and wealth management services. Quad City Bank & Trust Company, based in Bettendorf, Iowa, commenced operations in 1994, Cedar Rapids Bank & Trust Company, based in Cedar Rapids, Iowa, commenced operations in 2001, Community State Bank, based in Ankeny, Iowa, was acquired by the Company in 2016, and Springfield First Community Bank, based in Springfield, Missouri, was acquired by the Company in 2018. Additionally, the Company serves the Waterloo/Cedar Falls, Iowa community through Community Bank & Trust, a division of Cedar Rapids Bank & Trust Company. Quad City Bank & Trust Company engages in commercial leasing through its wholly owned subsidiary, m2 Lease Funds, LLC, based in Milwaukee, Wisconsin, and also provides correspondent banking services. The Company has 25 locations in Illinois, Iowa, Wisconsin and Missouri. As of March 31, 2020, the Company had approximately $5.2 billion in assets, $3.7 billion in loans and $4.2 billion in deposits. For additional information, please visit the Company’s website at www.qcrh.com.

Special Note Concerning Forward-Looking Statements. This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “predict,” “suggest,” “appear,” “plan,” “intend,” “estimate,” ”annualize,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements. These factors include, among others, the following: (i) the strength of the local, state, national and international economies (including the impact of the 2020 presidential election and the impact of tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations); (ii) the economic impact of any future terrorist threats and attacks, widespread disease or pandemics (including the COVID-19 epidemic in the United States), or other adverse external events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events; (iii) changes in accounting policies and practices (including the new current expected credit loss (CECL) impairment standards, that will change how the Company estimates credit losses); (iv) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business; (v) changes in interest rates and prepayment rates of the Company’s assets (including the impact of LIBOR phase-out); (vi) increased competition in the financial services sector and the inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (viii) unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated; (ix) the loss of key executives or employees; (x) changes in consumer spending; and (xi) unexpected outcomes of existing or new litigation involving the Company. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

Contacts:

Todd A. Gipple

President

Chief Operating Officer

Chief Financial Officer

(309) 743-7745

[email protected]

Kim K. Garrett

Vice President

Corporate Communications

Investor Relations Manager

(319) 743-7006

[email protected]

QCR Holdings, Inc.

Consolidated Financial Highlights

(Unaudited) 

(1) At the most recent quarter-end, the weighted-average rate of these overnight borrowings was 0.36%.

QCR Holdings, Inc.
Consolidated Financial Highlights

(Unaudited)

QCR Holdings, Inc.
Consolidated Financial Highlights

(Unaudited)