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Section 1: 8-K (FORM 8-K)

 

 

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)

 

Delaware 0-22208 42-1397595
(State or Other Jurisdiction of
Incorporation)
(Commission File Number) (I.R.S. Employer Identification
Number)

 

3551 Seventh Street, Moline, Illinois 61265
(Address of Principal Executive Offices) (Zip Code)

 

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

 

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

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $1.00 Par Value QCRH The Nasdaq Global Market

 

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.

 

  QCR Holdings, Inc.
     
     
Date: April 28, 2020 By:  /s/ Todd A. Gipple        
    Todd A. Gipple
    President, Chief Operating Officer and Chief Financial Officer

 

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

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

·Net income of $11.2 million, or $0.70 per diluted share
·Adjusted net income (non-GAAP) of $12.4 million, or $0.77 per diluted share
·NIM increased by 4bps and NIM (TEY)(non-GAAP) increased by 5bps to 3.40% and 3.56%, respectively
·Noninterest income of $15.2 million
·Annualized loan and lease growth of 1.6% for the quarter
·Annualized deposit growth of 26.5% for the quarter
·Provision expense of $8.4 million for the quarter, increasing ALLL by 16bps to 1.14%
·Elected to defer CECL implementation as allowed by the March 27, 2020 CARES Act

 

COVID-19 Pandemic Response Update

·The Company has fully implemented its Business Continuity Plan
·All charters are providing routine banking services through online banking, drive-up windows and limited lobby access
·We are actively responding to client needs, including offering a Loan Relief Program (“LRP”) to impacted clients:
oAs of April 24, 2020, 1,935 clients have been added to the LRP with loans totaling $439 million
·Enrolling clients (including new clients) in the SBA Paycheck Protection Program (“PPP”):
oAs of April 24, 2020, we have received approvals from the SBA for 1,300 PPP loans totaling $333 million
·We remain fully staffed and have implemented a number of actions to support our employees, including:
oAlternative work practices such as working in shifts, social distancing in our facilities, adding remote work options for approximately half of our workforce, and online meeting platforms
oDiscontinued business travel and large events

 

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.

 

   For the Quarter Ended 
   March 31,   December 31,   March 31, 
$ in millions (except per share data)  2020   2019   2019 
Net Income  $11.2   $15.9   $12.9 
Diluted EPS  $0.70   $0.99   $0.81 
Adjusted Net Income (non-GAAP)  $12.4   $15.4   $13.0 
Adjusted Diluted EPS (non-GAAP)  $0.77   $0.96   $0.82 
Pre-Provision/Pre-Tax Adjusted Income (non-GAAP)  $22.8   $20.4   $16.6 
See GAAP to non-GAAP reconciliations               

 

“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.

 

   For the Quarter Ended 
   March 31,   December 31,   March 31, 
   2020   2019   2019 
Net Interest Income - Reported  $37.7   $39.9   $36.9 
Net Interest Income - RB&T  $-   $(1.8)  $(3.4)
Acquisition-related Net Accretion  $(0.6)  $(0.9)  $(1.1)
Net Interest Income Ex-RB&T / Ex-Accretion  $37.1   $37.2   $32.4 

 

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.

 

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   For the Quarter Ended 
   March 31,   December 31,   March 31, 
   2020   2019   2019 
NIM   3.40%   3.36%   3.25%
NIM (TEY)(non-GAAP)   3.56%   3.51%   3.40%
Adjusted NIM (TEY)(non-GAAP)   3.50%   3.43%   3.31%
See GAAP to non-GAAP reconciliations               

 

“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.

 

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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:

 

·Organic loan and lease growth of 9% per year, funded by core deposits;
·Grow fee-based income by at least 6% per year; and
·Limit our annual operating expense growth to 5% per year.

 

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.

 

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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]

 

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QCR Holdings, Inc.

Consolidated Financial Highlights

(Unaudited) 

 

                       Held for Sale   Held for Sale   Held for Sale 
   As of   As of   As of   As of 
   March 31,   December 31,   September 30,   June 30,   March 31,   March 31,   December 31,   September 30, 
   2020   2019   2019   2019   2019   2020   2019   2019 
       (dollars in thousands)             
CONDENSED BALANCE SHEET                                        
Cash and due from banks  $169,827   $76,254   $91,671   $87,919   $76,527   $-   $-   $11,031 
Federal funds sold and interest-bearing deposits   206,708    157,691    197,263    205,497    216,032    -    -    2,415 
Securities   684,571    611,341    555,409    643,803    655,749    -    -    66,009 
Net loans/leases   3,662,435    3,654,204    3,574,154    3,869,415    3,758,268    -    -    362,011 
Intangibles   14,421    14,970    15,529    16,089    16,918    -    -    - 
Goodwill   74,248    74,748    77,748    77,748    77,872    -    -    - 
Derivatives   195,973    87,827    104,388    65,922    36,375    -    -    - 
Other assets   213,134    220,049    210,673    228,459    228,921    10,758    11,966    24,081 
Assets held for sale   10,758    11,966    465,547    -    -    -    -    - 
Total assets  $5,232,075   $4,909,050   $5,292,382   $5,194,852   $5,066,662   $10,758   $11,966   $465,547 
Total deposits  $4,170,478   $3,911,051   $3,802,241   $4,322,510   $4,194,220   $-   $-   $451,546 
Total borrowings   244,399    278,955    320,457    230,953    282,994    -    -    16,157 
Derivatives   203,744    88,436    109,242    69,556    38,229    -    -    - 
Other liabilities   71,185    90,254    70,169    67,533    62,812    3,130    5,003    2,827 
Liabilities held for sale   3,130    5,003    470,530    -    -    -    -    - 
Total stockholders' equity   539,139    535,351    519,743    504,300    488,407    -    -    - 
Total liabilities and stockholders' equity  $5,232,075   $4,909,050   $5,292,382   $5,194,852   $5,066,662   $3,130   $5,003   $470,530 
ANALYSIS OF LOAN PORTFOLIO                                        
Loan/lease mix:                                        
Commercial and industrial loans  $1,484,979   $1,507,825   $1,469,978   $1,548,657   $1,479,247                
Commercial real estate loans   1,783,086    1,736,396    1,687,922    1,837,473    1,790,845                
Direct financing leases   83,324    87,869    92,307    101,180    108,543                
Residential real estate loans   237,742    239,904    245,667    293,479    288,502                
Installment and other consumer loans   106,728    109,352    106,540    120,947    123,087                
Deferred loan/lease origination costs, net of fees   8,809    8,859    7,856    8,783    9,208                
Total loans/leases  $3,704,668   $3,690,205   $3,610,270   $3,910,519   $3,799,432                
Less allowance for estimated losses on loans/leases   42,233    36,001    36,116    41,104    41,164                
Net loans/leases  $3,662,435   $3,654,204   $3,574,154   $3,869,415   $3,758,268                
ANALYSIS OF SECURITIES PORTFOLIO                                        
Securities mix:                                        
U.S. government sponsored agency securities  $19,457   $20,078   $21,268   $35,762   $35,843                
Municipal securities   493,664    447,853    391,329    440,853    450,376                
Residential mortgage-backed and related securities   122,853    120,587    123,880    159,228    161,692                
Asset backed securities   28,499    16,887    10,957    -    0                
Other securities   20,098    5,936    7,975    7,960    7,838                
Total securities  $684,571   $611,341   $555,409   $643,803   $655,749                
ANALYSIS OF DEPOSITS                                        
Deposit mix:                                        
Noninterest-bearing demand deposits  $829,782   $777,224   $782,232   $795,951   $821,599                
Interest-bearing demand deposits   2,440,907    2,407,502    2,245,557    2,505,956    2,334,474                
Time deposits   617,979    571,343    536,352    733,135    719,286                
Brokered deposits   281,810    154,982    238,100    287,468    318,861                
Total deposits  $4,170,478   $3,911,051   $3,802,241   $4,322,510   $4,194,220                
ANALYSIS OF BORROWINGS                                        
Borrowings mix:                                        
Term FHLB advances  $55,000   $50,000   $60,000   $46,433   $66,380                
Overnight FHLB advances (1)   40,000    109,300    135,800    59,300    59,800                
Wholesale structured repurchase agreements   -    -    -    -    35,000                
Customer repurchase agreements   2,377    2,193    2,421    2,181    3,056                
Federal funds purchased   10,690    11,230    16,105    17,010    12,830                
FRB borrowings   30,000    -    -    -    -                
Subordinated notes   68,455    68,394    68,334    68,274    68,215                
Junior subordinated debentures   37,877    37,838    37,797    37,755    37,713                
Total borrowings  $244,399   $278,955   $320,457   $230,953   $282,994                

 

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

 

6

 

QCR Holdings, Inc.
Consolidated Financial Highlights

(Unaudited)

 

   For the Quarter Ended 
   March 31,   December 31,   September 30,   June 30,   March 31, 
   2020   2019   2019   2019   2019 
       (dollars in thousands, except per share data)     
INCOME STATEMENT                         
Interest income  $48,982   $52,977   $56,817   $54,181   $52,102 
Interest expense   11,284    13,058    16,098    16,168    15,194 
Net interest income   37,698    39,919    40,719    38,013    36,908 
Provision for loan/lease losses   8,367    979    2,012    1,941    2,134 
Net interest income after provision for loan/lease losses  $29,331   $38,940   $38,707   $36,072   $34,774 
Trust department fees  $2,312   $2,365   $2,340   $2,361   $2,493 
Investment advisory and management fees   1,727    1,589    1,782    1,888    1,736 
Deposit service fees   1,477    1,787    1,813    1,658    1,554 
Gain on sales of residential real estate loans   652    823    890    489    369 
Gain on sales of government guaranteed portions of loans   -    159    519    39    31 
Swap fee income   6,804    7,409    9,797    7,891    3,198 
Securities gains (losses), net   -    26    (3)   (52)   - 
Earnings on bank-owned life insurance   329    533    489    412    540 
Debit card fees   758    766    886    914    792 
Correspondent banking fees   215    194    189    172    216 
Gain on sale of assets and liabilities of subsidiary   -    12,286    -    -    - 
Other   922    1,868    1,204    1,293    1,064 
Total noninterest income  $15,196   $29,805   $19,906   $17,065   $11,993 
Salaries and employee benefits  $18,519   $24,220   $24,215   $22,749   $20,879 
Occupancy and equipment expense   4,032    4,019    3,860    3,533    3,694 
Professional and data processing fees   3,369    3,570    4,030    3,031    2,750 
Post-acquisition compensation, transition and integration costs   151    1,855    884    708    134 
Disposition costs   517    3,325    -    -    - 
FDIC insurance, other insurance and regulatory fees   683    523    542    926    964 
Loan/lease expense   228    349    221    312    214 
Net cost of (income from) and gains/losses on operations of other real estate   13    232    2,078    1,182    298 
Advertising and marketing   682    1,670    1,056    1,037    785 
Bank service charges   504    516    502    508    483 
Losses on debt extinguishment, net   147    288    148    -    - 
Correspondent banking expense   216    216    209    206    204 
Intangibles amortization   549    560    560    615    532 
Goodwill impairment   500    3,000    -    -    - 
Other   1,305    1,951    1,640    1,753    1,498 
Total noninterest expense  $31,415   $46,294   $39,945   $36,560   $32,435 
Net income before income taxes  $13,112   $22,451   $18,668   $16,577   $14,332 
Federal and state income tax expense   1,884    6,560    3,573    3,073    1,414 
Net income  $11,228   $15,891   $15,095   $13,504   $12,918 
Basic EPS  $0.71   $1.01   $0.96   $0.86   $0.82 
Diluted EPS  $0.70   $0.99   $0.94   $0.85   $0.81 
Weighted average common shares outstanding   15,796,796    15,772,703    15,739,430    15,714,588    15,693,345 
Weighted average common and common equivalent shares outstanding   16,011,456    16,033,043    15,976,742    15,938,377    15,922,940 

 

7

 

QCR Holdings, Inc.
Consolidated Financial Highlights

(Unaudited)

 

   As of and for the Quarter Ended 
   March 31,   December 31,   September 30,   June 30,   March 31, 
   2020   2019   2019   2019   2019 
   (dollars in thousands, except per share data) 
COMMON SHARE DATA                         
Common shares outstanding   15,773,736    15,828,098    15,790,462    15,772,939    15,755,442 
Book value per common share (1)  $34.18   $33.82   $32.91   $31.97   $31.00 
Tangible book value per common share (2)  $28.56   $28.15   $27.01   $26.02   $24.98 
Closing stock price  $27.07   $43.86   $37.98   $34.87   $33.92 
Market capitalization  $426,995   $694,220   $599,722   $550,002   $534,425 
Market price / book value   79.20%   129.69%   115.40%   109.06%   109.42%
Market price / tangible book value   94.79%   155.76%   140.61%   134.00%   135.77%
Earnings per common share (basic) LTM (3)  $3.54   $3.65   $3.49   $3.10   $2.99 
Price earnings ratio LTM (3)   7.65 x    12.02 x    10.88 x     11.25 x     11.34 x 
TCE / TA (4)   8.76%   9.25%   8.20%   8.05%   7.92%
                          
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY                     
Beginning balance  $535,351   $519,743   $504,300   $488,407   $473,138 
Net income   11,228    15,891    15,095    13,504    12,918 
Other comprehensive income (loss), net of tax   (3,691)   (683)   543    2,243    2,343 
Common stock cash dividends declared   (942)   (947)   (944)   (942)   (942)
Proceeds from issuance of 9,400 shares of common stock as a result of the performance based targets met for Bates Companies   -    399    -    -    - 
Repurchase and cancellation of 100,932 shares of common stock as a result of a share repurchase program   (3,780)                    
Other (5)   973    948    749    1,088    950 
Ending balance  $539,139   $535,351   $519,743   $504,300   $488,407 
                          
REGULATORY CAPITAL RATIOS (6):                         
Total risk-based capital ratio   13.33%   13.33%   12.22%   12.04%   12.26%
Tier 1 risk-based capital ratio   10.98%   11.04%   9.94%   9.76%   9.87%
Tier 1 leverage capital ratio   10.19%   9.53%   9.02%   8.96%   8.90%
Common equity tier 1 ratio   10.14%   10.18%   9.12%   8.93%   9.02%
                          
KEY PERFORMANCE RATIOS AND OTHER METRICS                      
Return on average assets (annualized)   0.91%   1.23%   1.16%   1.06%   1.04%
Return on average total equity (annualized)   8.23%   11.93%   11.70%   10.84%   10.71%
Net interest margin   3.40%   3.36%   3.37%   3.25%   3.25%
Net interest margin (TEY) (Non-GAAP)(7)   3.56%   3.51%   3.52%   3.40%   3.40%
Efficiency ratio (Non-GAAP) (8)   59.39%   66.40%   65.89%   66.38%   66.33%
Gross loans and leases / total assets (10)   70.95%   75.36%   74.80%   75.28%   74.99%
Gross loans and leases / total deposits (10)   88.83%   94.35%   94.95%   90.47%   90.59%
Effective tax rate   14.37%   29.22%   19.14%   18.54%   9.87%
Full-time equivalent employees (9)   703    697    766    773    771 
                          
AVERAGE BALANCES                         
Assets  $4,948,311   $5,147,754   $5,217,763   $5,077,900   $4,968,502 
Loans/leases   3,686,410    3,868,435    3,962,464    3,839,674    3,759,615 
Deposits   3,954,707    4,227,572    4,302,995    4,271,391    4,110,868 
Total stockholders' equity   545,678    532,756    516,195    498,263    482,423 

 

  (1) Includes accumulated other comprehensive income (loss).
  (2) Includes accumulated other comprehensive income (loss) and excludes intangible assets.
  (3) LTM : Last twelve months.
  (4) TCE / TCA : tangible common equity / total tangible assets.  See GAAP to non-GAAP reconciliations.
  (5) Includes mostly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation.
  (6) Ratios for the current quarter are subject to change upon final calculation for regulatory filings due after earnings release.
  (7) TEY : Tax equivalent yield.  See GAAP to Non-GAAP reconciliations.
  (8) See GAAP to Non-GAAP reconciliations.
  (9) Decrease due to sale of subsidiary Rockford Bank & Trust.
  (10) Excludes assets held for sale as of September 30, 2019, Deccember 31, 2019 and March 31, 2020.

 

8

 

 

QCR Holdings, Inc.
Consolidated Financial Highlights

(Unaudited)

 

ANALYSIS OF NET INTEREST INCOME AND MARGIN (4)                        
                                     
   For the Quarter Ended 
   March 31, 2020   December 31, 2019   March 31, 2019 
   Average
Balance
   Interest
Earned or
Paid
   Average
Yield or
Cost
   Average
Balance
   Interest
Earned or
Paid
   Average
Yield or
Cost
   Average
Balance
   Interest
Earned or
Paid
   Average
Yield or
Cost
 
   (dollars in thousands) 
Fed funds sold  $5,324   $18    1.36%  $2,933   $12    1.62%  $15,736   $93    2.40%
Interest-bearing deposits at financial institutions   128,612    361    1.13%   208,040    868    1.66%   155,463    923    2.41%
Securities (1)   619,307    6,080    3.95%   610,676    5,913    3.84%   660,454    6,096    3.74%
Restricted investment securities   21,365    258    4.86%   21,226    283    5.29%   21,285    307    5.85%
Loans (1)   3,686,410    44,056    4.81%   3,868,435    47,684    4.89%   3,759,615    46,477    5.01%
Total earning assets (1)  $4,461,018   $50,773    4.58%  $4,711,310   $54,760    4.61%  $4,612,553   $53,896    4.74%
                                              
Interest-bearing deposits  $2,379,635   $5,328    0.90%  $2,520,696   $6,547    1.03%  $2,288,109   $7,174    1.27%
Time deposits   785,135    3,879    1.99%   865,392    4,631    2.12%   1,012,459    5,305    2.12%
Short-term borrowings   19,315    64    1.33%   19,491    87    1.77%   14,377    71    2.00%
Federal Home Loan Bank advances   111,407    449    1.62%   87,527    210    0.95%   147,355    903    2.49%
Other borrowings   -    -    0.00%   -    -    0.00%   43,701    605    5.61%
Subordinated debentures   68,418    994    5.84%   68,356    1,004    5.83%   38,637    564    5.92%
Junior subordinated debentures   37,853    571    6.07%   37,813    579    6.07%   37,686    572    6.16%
Total interest-bearing liabilities  $3,401,763   $11,285    1.33%  $3,599,275   $13,058    1.44%  $3,582,324   $15,194    1.72%
                                              
Net interest income / spread (1)       $39,488    3.24%       $41,702    3.17%       $38,702    3.02%
Net interest margin (2)             3.40%             3.36%             3.25%
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)             3.56%             3.51%             3.40%
Adjusted net interest margin (TEY) (Non-GAAP) (1) (2) (3)             3.50%             3.43%             3.31%

 

(1)Includes nontaxable securities and loans.  Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 21% tax rate.
(2)See "Select Financial Data - Subsidiaries" for a breakdown of amortization/accretion included in net interest margin for each period presented.
(3)TEY : Tax equivalent yield.  See GAAP to Non-GAAP reconciliations.

 

9

 

 

QCR Holdings, Inc.
Consolidated Financial Highlights

(Unaudited)

 

   As of 
   March 31,   December 31,   September 30,   June 30,   March 31, 
   2020   2019   2019   2019   2019 
   (dollars in thousands, except per share data) 
                     
ROLLFORWARD OF ALLOWANCE FOR LOAN/LEASE LOSSES                         
Beginning balance  $36,001   $36,116   $41,104   $41,164   $39,847 
Reclassification of allowance related to held for sale loans   -    -    (6,122)   -    - 
Provision charged to expense (2)   8,367    979    1,584    1,941    2,134 
Loans/leases charged off   (2,335)   (1,182)   (741)   (2,152)   (1,059)
Recoveries on loans/leases previously charged off   200    88    291    151    242 
Ending balance  $42,233   $36,001   $36,116   $41,104   $41,164 
                          
NONPERFORMING ASSETS                         
Nonaccrual loans/leases  $11,628   $7,902   $8,231   $13,148   $13,406 
Accruing loans/leases past due 90 days or more   1,419    33    -    58    61 
Troubled debt restructures - accruing   545    979    763    1,313    3,794 
Total nonperforming loans/leases   13,592    8,914    8,994    14,519    17,261 
Other real estate owned   3,298    4,129    4,248    8,637    9,110 
Other repossessed assets   45    41    -    -    - 
Total nonperforming assets  $16,935   $13,084   $13,242   $23,156   $26,371 
                          
ASSET QUALITY RATIOS                         
Nonperforming assets / total assets (3)   0.32%   0.27%   0.27%   0.45%   0.52%
Allowance / total loans/leases (1)   1.14%   0.98%   1.00%   1.05%   1.08%
Allowance / nonperforming loans/leases (1)   310.72%   403.87%   401.56%   283.10%   238.48%
Net charge-offs as a % of average loans/leases   0.06%   0.03%   0.01%   0.05%   0.02%

 

(1) Upon acquisition and per GAAP, acquired loans are recorded at market value which eliminates the allowance and impacts these ratios.  
(2) Excludes provision related to loans included in assets held for sale of $428 thousand for the quarter ending September 30, 2019.
(3) Excludes assets held for sale.          

 

10

 

 

QCR Holdings, Inc.
Consolidated Financial Highlights

(Unaudited)

 

   For the Quarter Ended 
   March 31,   December 31,   March 31, 
SELECT FINANCIAL DATA - SUBSIDIARIES  2020   2019   2019 
   (dollars in thousands) 
             
TOTAL ASSETS               
Quad City Bank and Trust (1)  $1,914,785   $1,682,477   $1,660,374 
m2 Lease Funds, LLC   237,198    239,794    231,470 
Cedar Rapids Bank and Trust   1,719,773    1,572,324    1,446,637 
Community State Bank - Ankeny   863,903    853,834    785,076 
Springfield First Community Bank   708,736    748,753    638,542 
                
TOTAL DEPOSITS               
Quad City Bank and Trust (1)  $1,678,889   $1,458,587   $1,453,810 
Cedar Rapids Bank and Trust   1,247,989    1,248,598    1,228,232 
Community State Bank - Ankeny   743,645    735,089    673,231 
Springfield First Community Bank   524,420    531,498    445,113 
                
TOTAL LOANS & LEASES               
Quad City Bank and Trust (1)  $1,338,915   $1,329,667   $1,238,684 
m2 Lease Funds, LLC   235,144    236,735    228,356 
Cedar Rapids Bank and Trust   1,159,453    1,174,963    1,076,166 
Community State Bank - Ankeny   634,253    639,270    588,021 
Springfield First Community Bank   572,046    546,306    491,985 
                
TOTAL LOANS & LEASES / TOTAL DEPOSITS               
Quad City Bank and Trust (1)   80%   91%   85%
Cedar Rapids Bank and Trust   93%   94%   88%
Community State Bank - Ankeny   85%   87%   87%
Springfield First Community Bank   109%   103%   111%
                
TOTAL LOANS & LEASES / TOTAL ASSETS               
Quad City Bank and Trust (1)   70%   79%   75%
Cedar Rapids Bank and Trust   67%   75%   74%
Community State Bank - Ankeny   73%   75%   75%
Springfield First Community Bank   81%   73%   77%
                
ALLOWANCE AS A PERCENTAGE OF LOANS/LEASES               
Quad City Bank and Trust (1)   1.17%   1.03%   1.09%
m2 Lease Funds, LLC   1.50%   1.51%   1.39%
Cedar Rapids Bank and Trust (2)   1.35%   1.14%   1.19%
Community State Bank - Ankeny (2)   1.21%   1.04%   1.07%
Springfield First Community Bank (2)   0.56%   0.41%   0.30%
                
RETURN ON AVERAGE ASSETS               
Quad City Bank and Trust (1)   1.33%   1.44%   1.19%
Cedar Rapids Bank and Trust   1.60%   1.82%   1.54%
Community State Bank - Ankeny   0.50%   1.38%   1.13%
Springfield First Community Bank   1.29%   1.44%   1.12%
                
NET INTEREST MARGIN PERCENTAGE (3)               
Quad City Bank and Trust (1)   3.68%   3.55%   3.24%
Cedar Rapids Bank and Trust (5)   3.43%   3.49%   3.41%
Community State Bank - Ankeny (4)   3.91%   4.35%   4.04%
Springfield First Community Bank (6)   3.83%   3.95%   4.06%
                
ACQUISITION-RELATED AMORTIZATION/ACCRETION INCLUDED IN NET               
INTEREST MARGIN, NET               
Cedar Rapids Bank and Trust  $49   $103   $144 
Community State Bank - Ankeny   64    94    58 
Springfield First Community Bank   552    775    910 
QCR Holdings, Inc. (7)   (40)   (41)   (43)

 

(1) Quad City Bank and Trust figures include m2 Lease Funds, LLC, as this entity is wholly-owned and consolidated with the Bank.  m2 Lease Funds, LLC  is also presented separately for certain (applicable) measurements.
(2) Upon acquisition and per GAAP, acquired loans are recorded at market value, which eliminates the allowance and impacts this ratio.  
(3) Includes nontaxable securities and loans.  Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 21% tax rate. 
(4) Community State Bank's net interest margin percentage includes various purchase accounting adjustments.  Excluding those adjustments, net interest margin would have been 3.86% for the quarter ended March 31, 2020, 4.27% for the quarter ended December 301 2019 and 3.98% for the quarter ended March 31, 2019.
(5) Cedar Rapids Bank and Trust's net interest margin percentage includes various purchase accounting adjustments.  Excluding those adjustments, net interest margin would have been 3.42% for the quarter ended March 31, 2020, 3.46% for the quarter ended December 31, 2019 and 3.38% for the quarter ended March 31, 2019.
(6) Springfield First Community Bank's net interest margin percentage includes various purchase accounting adjustments.  Excluding those adjustments, net interest margin would have been 4.52% for the quarter ended March 31, 2020, 3.47% for the quarter ended December 31, 2019 and 3.32% for the quarter ended March 31, 2019.
(7) Relates to the trust preferred securities acquired as part of the Guaranty Bank acquisition in 2017 and the Community National Bank acquisition in 2013.

 

11

 

 

QCR Holdings, Inc.
Consolidated Financial Highlights

(Unaudited)

 

   As of 
   March 31,   December 31,   September 30,   June 30,   March 31, 
GAAP TO NON-GAAP RECONCILIATIONS  2020   2019   2019   2019   2019 
   (dollars in thousands, except per share data) 
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS RATIO (1)                         
Stockholders' equity (GAAP)  $539,139   $535,351   $519,743   $504,300   $488,407 
Less: Intangible assets   88,669    89,717    93,277    93,837    94,790 
Tangible common equity (non-GAAP)  $450,470   $445,634   $426,466   $410,463   $393,617 
                          
Total assets (GAAP)  $5,232,075   $4,909,050   $5,292,382   $5,194,852   $5,066,662 
Less: Intangible assets   88,669    89,717    93,277    93,837    94,790 
Tangible assets (non-GAAP)  $5,143,406   $4,819,333   $5,199,105   $5,101,015   $4,971,872 
                          
Tangible common equity to tangible assets ratio (non-GAAP)   8.76%   9.25%   8.20%   8.05%   7.92%

 

   For the Quarter Ended 
   March 31,   December 31,   September 30,   June 30,   March 31, 
ADJUSTED NET INCOME (2)  2020   2019   2019   2019   2019 
Net income (GAAP)  $11,228   $15,891   $15,095   $13,504   $12,918 
Less nonrecurring items (post-tax) (3):                         
Income:                         
Securities gains(losses), net   -    21   $(2)  $(41)  $- 
Gain on sale of assets and liabilities of subsidiary   -    8,539    -    -    - 
Total nonrecurring income (non-GAAP)  $-   $8,560   $(2)  $(41)  $- 
                          
Expense:                         
Losses on debt extinguishment, net  $116   $228   $117   $-   $- 
Goodwill impairment   500    3,000    -    -    - 
Disposition costs   408    2,627    -    -    - 
Tax expense on expected liquidation of RB&T BOLI   -    790    -    -    - 
Post-acquisition compensation, transition and integration costs   119    1,465    698    559    106 
Total nonrecurring expense (non-GAAP)  $1,144   $8,110   $815   $559   $106 
Adjusted net income  (non-GAAP) (2)  $12,372   $15,441   $15,912   $14,104   $13,024 
                          
PRE-PROVISION/PRE-TAX ADJUSTED INCOME (2)                         
Net income (GAAP)  $11,228   $15,891   $15,095   $13,504   $12,918 
Less: Non-core income not tax-effected   -    12,313    (3)   (52)   - 
Plus: Non-core expense not tax-effected   1,315    9,258    1,032    708    134 
Provision expense   8,367    979    2,012    1,941    2,134 
Federal and state income tax expense   1,884    6,560    3,573    3,073    1,414 
Pre-provision/pre-tax adjusted income  (non-GAAP) (2)  $22,794   $20,375   $21,714   $19,277   $16,600 
                          
ADJUSTED EARNINGS PER COMMON SHARE (2)                         
Adjusted net income (non-GAAP) (from above)  $12,372   $15,441   $15,912   $14,104   $13,024 
Weighted average common shares outstanding   15,796,796    15,772,703    15,739,430    15,714,588    15,693,345 
Weighted average common and common equivalent shares outstanding   16,011,456    16,033,043    15,976,742    15,938,377    15,922,940 
Adjusted earnings per common share (non-GAAP):                         
Basic  $0.78   $0.98   $1.01   $0.90   $0.83 
Diluted  $0.77   $0.96   $1.00   $0.88   $0.82 
                          
ADJUSTED RETURN ON AVERAGE ASSETS (2)                         
Adjusted net income (non-GAAP) (from above)  $12,372   $15,441   $15,912   $14,104   $13,024 
Average Assets  $4,948,311   $5,147,754   $5,217,763   $5,077,900   $4,968,502 
Adjusted return on average assets (annualized) (non-GAAP)   1.00%   1.20%   1.22%   1.11%   1.05%
                          
NET INTEREST MARGIN (TEY) (6)                         
Net interest income (GAAP)  $37,698   $39,919   $40,719   $38,013   $36,908 
Plus: Tax equivalent adjustment (5)   1,790    1,783    1,763    1,808    1,794 
Net interest income - tax equivalent (Non-GAAP)  $39,488   $41,702   $42,482   $39,821   $38,702 
Less:  Acquisition accounting net accretion   625    931    1,268    1,076    1,069 
Adjusted net interest income  $38,863   $40,771   $41,214   $38,745   $37,633 
Average earning assets  $4,461,018   $4,711,310   $4,791,274   $4,698,021   $4,612,553 
Net interest margin (GAAP)   3.40%   3.36%   3.37%   3.25%   3.25%
Net interest margin (TEY) (Non-GAAP)   3.56%   3.51%   3.52%   3.40%   3.40%
Adjusted net interest margin (TEY) (Non-GAAP)   3.50%   3.43%   3.41%   3.31%   3.31%
                          
EFFICIENCY RATIO (7)                         
Noninterest expense (GAAP)  $31,415   $46,294   $39,945   $36,560   $32,435 
Net interest income (GAAP)  $37,698   $39,919   $40,719   $38,013   $36,908 
Noninterest income (GAAP)   15,196    29,805    19,906    17,065    11,993 
Total income  $52,894   $69,724   $60,625   $55,078   $48,901 
Efficiency ratio (noninterest expense/total income) (Non-GAAP)   59.39%   66.40%   65.89%   66.38%   66.33%

 

 (1) This ratio is a non-GAAP financial measure.  The Company's management believes that this measurement is important to many investors in the marketplace who are interested in changes  period-to-period in common equity.  In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to stockholders' equity and total assets, which are the most directly comparable GAAP financial measures.
 (2) Adjusted net income, Adjusted net income attributable to QCR Holdings, Inc. common stockholders, Adjusted earnings per common share and Adjusted return on average assets are  non-GAAP financial measures.  The Company's management believes that these measurements are important to investors as they exclude non-recurring income and expense items,  therefore, they provide a more realistic run-rate for future periods. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to net income, which is  the most directly comparable GAAP financial measure.
 (3) Nonrecurring items (post-tax) are calculated using an estimated effective tax rate of 21% with the exception of goodwill impairment which is not deductible for tax and gain on sale of subsidiary which  has an estimated effective tax rate of 30.5%.
 (4) Acquisition costs were analyzed individually for deductibility.Presented amounts are tax-effected accordingly.
 (5) Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 21%.
 (6) Net interest margin (TEY) is a non-GAAP financial measure.  The Company's management utilizes this measurement to take into account the tax benefit associated with certain loans  and securities.  It is also standard industry practice to measure net interest margin using tax-equivalent measures.   In compliance with applicable rules of the SEC, this non-GAAP  measure is reconciled to net interest income, which is the most directly comparable GAAP financial measure.  In addition, the Company calculates net interest margin without the  impact of acquisition accounting net accretion as this can fluctuate and it's difficult to provide a more realistic run-rate for future periods.
 (7) Efficiency ratio is a non-GAAP measure.  The Company's management utilizes this ratio to compare to industry peers.  The ratio is used to calculate overhead as a percentage of revenue. In compliance with the applicable rules of the SEC, this non-GAAP measure is reconciled to noninterest expense, net interest income and noninterest income, which are the most directly comparable GAAP financial measures. 

 

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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit 99.2

 

April 28, 2020 COVID - 19 - Related Disclosures

 

Forward - Looking Statements This document contains, and future oral and written statements of QCR Holdings (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 financ ial 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 availa ble 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. Additiona lly , 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 beyon d t he 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 tr ade agreements, trade wars and other changes in trade regulations); (ii) the economic impact of any future terrorist threats and attacks, wid esp read 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 local, state and national governments to any suc h a dverse external events; (iii) changes in accounting policies and practices (including the new current expected credit loss (CECL) im pai rment 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 sys tems; (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 sp ending; 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 fin ancial results, is included in the Company’s filings with the Securities and Exchange Commission. 2

 

Our COVID - 19 Response • QCRH has fully implemented its Business Continuity Plan • All locations remain open with standard banking services offered through online/mobile banking, drive - up access and limited lobby access • Keeping our employees and clients safe through alternative work practices: • Working in shifts to limit potential exposures • Practicing social distancing in our facilities • Introduced a voluntary Work from Home (WFH) program • Leveraging audio and video conferencing technology • Paused business travel, large events and in - person meetings 3

 

Supporting our Clients | QCRH Loan Relief Program The QCRH Loan Relief Program (LRP) offers immediate payment relief to consumer and small business loan clients. • Offers 3 months of loan payment deferrals • Improves cash flow for clients without penalty LRP participation as of April 24: • Total number of loans and leases approved: 1,935 • Total dollar amount approved: $439MM •As a percentage of March 31, 2020 total loan portfolio: 12% 4

 

Paycheck Protection Program (PPP) QCRH has experienced robust client participation in the Paycheck Protection Program (PPP). As of April 24, 2020: • Total number of PPP loans: 1,300 • Total dollar amount: $333MM Our focus on providing superior service has led to opportunities to attract new, highly desired clients utilizing the Paycheck Protection Program within our existing markets. As of April 24, 2020: • Number of new client loans: 176 • Total of new client loans: $51MM 5

 

Primary Industry Concentration Overview With the volatile market conditions due to the COVID - 19 Pandemic, we are providing additional information about our commercial loan portfolio as of Dec. 31, 2019 as it relates to the following primary industries : Industry Amount Percent of Total Loans Hotels $67MM 1.81% Restaurants $47MM 1.27% Entertainment $21MM 0.57% Aviation $0MM 0% Energy $0MM 0% 6

 

Hotel Exposure • As of Dec. 31, 2019, QCRH hotel exposure is $67MM or 1.81% of total loans • 32 total loans • 10 national upscale/luxury loans , $29MM or 0.78%; 3 with conference centers • 21 national midscale/economy loans, $ 30MM or 0.81% • 1 independent hotel loan, $8MM or 0.22% • Two facilities are under construction and not experiencing delays at this time • Majority of hotels are top franchises and experienced operators 88% Primary Market Contiguous States (IA, IL, MO) 12 % (MN, NE, SD, WI) 7

 

Restaurant Exposure • As of Dec. 31, 2019 , QCRH restaurant exposure is $47MM or 1.27% of total loans • 88 total restaurant loans • 35 full - service restaurants, $19MM or 0.51% in total loans, 20 are franchises • 53 limited - service restaurants, $28MM or 0.76% in total loans, 43 are franchises • Locations mainly in Iowa, Illinois and Missouri • Many currently operating via drive - through and carryout 8

 

Entertainment Exposure • As of Dec. 31, 2019 , QCRH entertainment exposure is $21MM or 0.57% of total loans • 19 fitness and recreation centers, $9MM or 0.24% of total loans • 7 golf courses, $7MM or 0.19% of total loans • 5 bowling centers, $ 5MM or 0.14% of total loans 9

 

Secondary Industry Concentration | Retail Below is additional information about our secondary industry concentration related to our retail exposure, as of Dec. 31, 2019 . Retail Amount Percent of Total Loans Non - owner Occupied CRE $171MM 4.63% Owner Occupied CRE $32MM 0.87% C&I Retail $12MM 0.33% 10

 

Secondary Industry Concentration | Retail CRE Non - Owner Occupied 90 Multi - tenant properties with exposure of $127MM or 3.44% of total loans 46 Single - tenant properties with exposure of $44MM or 1.2% of total loans Tenant Type Number Amount Percent of Total Loans Mixed 49 $80MM 2.17% National 14 $26MM 0.70% Independent 20 $18MM 0.49% Regional 7 $3MM 0.08% Tenant Type Number Amount Percent of Total Loans National 17 $21MM 0.57% Independent 24 $15MM 0.41% Regional 5 $8MM 0.22% 11

 

0.00 200,000,000.00 400,000,000.00 600,000,000.00 800,000,000.00 1,000,000,000.00 1,200,000,000.00 1,400,000,000.00 1,600,000,000.00 1,800,000,000.00 Total Drawn on lines QCRH Line of Credit Usage - Revolving LOCs Total Lines of Credit Total Amount Drawn Credit line utilization trends • Line usage is stable and consistent with seasonal norms 56% 55% 56% 57% 55% 12

 

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