QCR Holdings, Inc. Announces Net Income of $27.8 Million for the Third Quarter of 2024
Third Quarter 2024 Highlights
Net income of $27.8 million, or $1.64 per diluted share
Adjusted net income of $30.3 million or $1.78 per diluted share (non-GAAP) resulting in an adjusted ROAA (non-GAAP) of 1.35%
Significant increase in net interest income of $3.6 million from the prior quarter, or 6%
Net interest margin expanded by 8 basis points to 3.34% adjusted NIM (TEY) (non-GAAP)
Continued strong capital markets revenue of $16.3 million
Tangible book value (non-GAAP) per share grew $2.35, or 20% annualized
TCE/TA ratio (non-GAAP) improved 24 basis points to 9.24%
MOLINE, Ill., Oct. 23, 2024 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ:QCRH) (the "Company") today announced quarterly net income of $27.8 million and diluted earnings per share ("EPS") of $1.64 for the third quarter of 2024, compared to net income of $29.1 million and diluted EPS of $1.72 for the second quarter of 2024.
Adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) for the third quarter of 2024 were $30.3 million and $1.78, respectively. For the second quarter of 2024, adjusted net income (non-GAAP) was $29.3 million and adjusted diluted EPS (non-GAAP) was $1.73. For the third quarter of 2023, adjusted net income (non-GAAP) was $25.4 million, and adjusted diluted EPS (non-GAAP) was $1.51.
For the Quarter Ended
September 30,
June 30,
September 30,
$ in millions (except per share data)
2024
2024
2023
Net Income
$
27.8
$
29.1
$
25.1
Diluted EPS
$
1.64
$
1.72
$
1.49
Adjusted Net Income (non-GAAP)*
$
30.3
$
29.3
$
25.4
Adjusted Diluted EPS (non-GAAP)*
$
1.78
$
1.73
$
1.51
*Adjusted non-GAAP measurements of financial performance exclude non-core and/or nonrecurring income and expense items that management believes are not reflective of the anticipated future operation of the Company's business. The Company believes these adjusted measurements provide a better comparison for analysis and may provide a better indicator of future performance. See GAAP to non-GAAP reconciliations.
"We produced exceptional third quarter results, highlighted by our significant growth in net interest income and margin expansion. We also had another quarter of strong capital markets and wealth management revenue," said Larry J. Helling, Chief Executive Officer. "In addition, we grew core deposits, maintained our excellent asset quality, and significantly increased our tangible book value per share."
Net Interest Income Grew 6% and Net Interest Margin Expanded 8 Basis Points
Net interest income for the third quarter of 2024 totaled $59.7 million, an increase of $3.6 million from the second quarter of 2024, driven by strong growth in loans and investments combined with margin expansion. Loan yields increased and funding costs were stable. Loan discount accretion was $463 thousand during the third quarter of 2024, an increase of $195 thousand from the prior quarter.
Net interest margin ("NIM") was 2.90% and NIM on a tax-equivalent yield ("TEY") basis (non-GAAP) was 3.37% for the third quarter, as compared to 2.82% and 3.27% for the prior quarter, respectively. Adjusted NIM TEY (non-GAAP) of 3.34% for the third quarter of 2024, represented an increase of 8 basis points from 3.26% for the second quarter of 2024.
"Our adjusted NIM, on a tax equivalent yield basis (non-GAAP), expanded by 8 basis points from the second quarter to 3.34% and exceeded the upper end of our guidance range," said Todd A. Gipple, President and Chief Financial Officer. "We are very pleased with another quarter of NIM expansion. Looking ahead, we anticipate continued growth in net interest income and are guiding to further fourth quarter adjusted NIM TEY (non-GAAP) expansion in a range of between 2 to 7 basis points."
Strong Noninterest Income Including $16.3 Million of Capital Markets Revenue
Noninterest income for the third quarter of 2024 totaled $27.2 million, a decrease from $30.9 million in the second quarter of 2024. The Company delivered $16.3 million of capital markets revenue in the quarter compared to $17.8 million in the prior quarter. Capital markets revenue was impacted by a $473 thousand loss from the execution of our third securitization during the quarter, a more modest loss than our prior guidance. Wealth management revenue was $4.5 million for the quarter, a 17% annualized increase from the second quarter. Additionally, the Company recorded $2.2 million of income from bank-owned life insurance policy proceeds in the second quarter of 2024 which did not recur during the third quarter of 2024.
"Our capital markets business delivered strong results driven by the swap fees from our low-income housing tax credit ("LIHTC") lending program. The demand for affordable housing remains strong, which supports the sustainability of our LIHTC lending program," added Mr. Gipple. "Our LIHTC lending pipelines, and the associated capital markets revenue remain robust. Additionally, our wealth management business continues to grow from new client additions and increased assets under management as we expand our market share."
During the third quarter, the Company executed a derivative strategy with a notional value of $410 million. These derivatives are designed to safeguard the Company's regulatory capital ratios against the adverse effects of a significant decline in long-term interest rates. These derivatives are unhedged and are marked-to-market, with gains or losses recorded in noninterest income and reflected as a non-core item. For the quarter, the Company recorded a $414 thousand loss on these derivatives.
Well Controlled Noninterest Expenses of $53.6 Million Impacted by m2 Equipment Finance Decision
Noninterest expense for the third quarter of 2024 totaled $53.6 million, compared to $49.9 million for the second quarter and $51.1 million for the third quarter of 2023. The linked-quarter increase was primarily due to the previously announced one-time restructuring and goodwill impairment charges related to the decision to discontinue offering new loans and leases at m2 Equipment Finance, LLC ("m2").
"Our core expenses, excluding m2 one-time charges, were $51.2 million, an increase of $1.3 million, and within our guidance range of $49 to $52 million," said Mr. Gipple. The linked quarter increase in core expenses for the quarter was primarily driven by higher incentive compensation and advertising expenses. Year-to-date core noninterest expenses remain well controlled, having increased only 2% annually. Excluding the one-time charges and other non-core items, the Company's adjusted efficiency ratio (non-GAAP) was 58.5% in the third quarter.
Strong Core Deposit Growth
During the third quarter of 2024, the Company generated strong deposit growth with core deposits increasing by $166.3 million, or 10.3% annualized, to $6.6 billion. "Year-to-date, core deposits have increased by $398.3 million, which is an annualized growth rate of 8.5%. This is a result of our dedication to expanding market share and building new relationships in our markets," added Mr. Helling.
Continued Loan Growth
During the third quarter of 2024, the Company's total loans and leases held for investment increased by $53.5 million to $6.7 billion. At quarter end, the Company held $165.9 million of LIHTC loans held for sale in anticipation of the Company's next loan securitization.
"Our year-to-date total loan growth excluding the impact of the loans securitized during the third quarter, is 10.5% annualized which was just above our guidance range. Year-to-date loan growth, net of loans securitized, was 5.8% annualized", added Mr. Helling. "With the continued strength of our markets and healthy pipeline, we are maintaining our loan growth target for the full year 2024 of 8% to 10%, prior to the loan securitizations closed in the third quarter and planned for in the fourth quarter."
Asset Quality Remains Excellent
The Company's nonperforming assets ("NPAs") to total assets ratio was 0.39% on September 30, 2024, unchanged from the prior quarter. NPAs totaled $35.7 million at the end of the third quarter of 2024, a $1.2 million increase from the prior quarter.
The Company's total criticized loans, a leading indicator of asset quality, declined by $15.3 million on a linked-quarter basis, and the ratio of criticized loans to total loans and leases as of September 30, 2024, improved to 2.20%, as compared to 2.41% as of June 30, 2024. This marks the fourth consecutive quarter of improvement, resulting in a $50 million reduction in total criticized balances.
The Company recorded a total provision for credit losses of $3.5 million during the quarter, representing a decline of $2.0 million from the prior quarter. The reduction in the provision for credit losses during the quarter was primarily due to overall credit quality improvements. Net charge-offs were $3.4 million during the third quarter of 2024, an increase of $1.8 million from the prior quarter. The increase in net charge offs primarily resulted from loans and leases at m2. The allowance for credit losses to total loans held for investment decreased to 1.30% from 1.33% as of the prior quarter.
Continued Strong Capital Levels and Outstanding Tangible Book Value Expansion
As of September 30, 2024, the Company's tangible common equity to tangible assets ratio ("TCE") (non-GAAP) increased to 9.24%. The improvement in TCE was driven by strong earnings and an increase in accumulated other comprehensive income ("AOCI"). The total risk-based capital ratio decreased to 13.87% and the common equity tier 1 ratio decreased to 9.79% due to sizable loan and investment growth partially offset by strong earnings. By comparison, these ratios were 9.00%, 14.21%, and 9.92%, respectively, as of June 30, 2024. The Company remains focused on growing its regulatory capital and targeting TCE (non-GAAP) in the top quartile of its peer group.
The Company's tangible book value per share (non-GAAP) increased significantly by $2.35, or 20% annualized, during the third quarter of 2024. AOCI increased $12.1 million during the third quarter primarily due to declining interest rates. Tangible book value per share (non-GAAP) has grown by $5.19 year-to-date, for an annualized growth rate of nearly 16%. The combination of strong earnings, a modest dividend, and improved AOCI contributed to the improvement in tangible book value per share (non-GAAP).
Conference Call DetailsThe Company will host an earnings call/webcast tomorrow, October 24, 2024, 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 October 31, 2024. The replay access information is 877-344-7529 (international 412-317-0088); access code 4892655. A webcast of the teleconference can be accessed on 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 UsQCR 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, Springfield First Community Bank, based in Springfield, Missouri, was acquired by the Company in 2018, and Guaranty Bank, also based in Springfield, Missouri, was acquired by the Company and merged with Springfield First Community Bank in 2022, with the combined entity operating under the Guaranty Bank name. Additionally, the Company serves the Waterloo/Cedar Falls, Iowa community through Community Bank & Trust, a division of Cedar Rapids Bank & Trust Company. The Company has 36 locations in Iowa, Missouri, Wisconsin and Illinois. As of September 30, 2024, the Company had $9.1 billion in assets, $6.8 billion in loans and $7.0 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," "bode", "predict," "suggest," "project", "appear," "plan," "intend," "estimate," "annualize," "may," "will," "would," "could," "should," "likely," "might," "potential," "continue," "annualized," "target," "outlook," as well as the negative forms of those words, 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 effects of inflationary pressures and supply chain constraints); (ii) the economic impact of any future terrorist threats and attacks, widespread disease or pandemics, acts of war or other threats thereof (including the ongoing conflict in the Middle East and the Russian invasion of Ukraine), 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, as may be adopted by state and federal regulatory agencies, the Financial Accounting Standards Board or the Public Company Accounting Oversight Board; (iv) changes in local, state and federal laws, regulations and governmental policies concerning the Company's general business, including as a result of the upcoming 2024 presidential election or any changes in response to failures of other banks; (vi) increased competition in the financial services sector, including from non-bank competitors such as credit unions and "fintech" companies, 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; (xi) unexpected outcomes of existing or new litigation involving the Company; (xii) the economic impact of exceptional weather occurrences such as tornadoes, floods and blizzards; (xiii) fluctuations in the value of securities held in our securities portfolio; (xiv) concentrations within our loan portfolio, large loans to certain borrowers, and large deposits from certain clients; (xv) the concentration of large deposits from certain clients who have balances above current Federal Deposit Insurance Corporation insurance limits and may withdraw deposits to diversity their exposure; (xvi) the level of non-performing assets on our balance sheets; (xvii) interruptions involving our information technology and communications systems or third-party servicers; (xviii) breaches or failures of our information security controls or cybersecurity-related incidents, (xix) changes in the interest rates and prepayment rates of the Company's assets, and (xx) the ability of the Company to manage the risks associated with the foregoing as well as anticipated. 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.
Contact:Todd A. Gipple President Chief Financial Officer (309)
QCR Holding, Inc.Consolidated Financial Highlights(Unaudited)
As of
September 30,
June 30,
March 31,
December 31,
September 30,
2024
2024
2024
2023
2023
(dollars in thousands)
CONDENSED BALANCE SHEET
Cash and due from banks
$
103,840
$
92,173
$
80,988
$
97,123
$
104,265
Federal funds sold and interest-bearing deposits
159,159
102,262
77,020
140,369
80,650
Securities, net of allowance for credit losses
1,146,046
1,033,199
1,031,861
1,005,528
896,394
Loans receivable held for sale (1)
167,047
246,124
275,344
2,594
278,893
Loans/leases receivable held for investment
6,661,755
6,608,262
6,372,992
6,540,822
6,327,414
Allowance for credit losses
(86,321
)
(87,706
)
(84,470
)
(87,200
)
(87,669
)
Intangibles
11,751
12,441
13,131
13,821
14,537
Goodwill
138,596
139,027
139,027
139,027
139,027
Derivatives
261,913
194,354
183,888
188,978
291,295
Other assets
524,779
531,855
509,768
497,832
495,251
Total assets
$
9,088,565
$
8,871,991
$
8,599,549
$
8,538,894
$
8,540,057
Total deposits
$
6,984,633
$
6,764,667
$
6,806,775
$
6,514,005
$
6,494,852
Total borrowings
660,344
768,671
489,633
718,295
712,126
Derivatives
285,769
221,798
211,677
214,098
320,220
Other liabilities
181,199
180,536
184,122
205,900
184,476
Total stockholders' equity
976,620
936,319
907,342
886,596
828,383
Total liabilities and stockholders' equity
$
9,088,565
$
8,871,991
$
8,599,549
$
8,538,894
$
8,540,057
ANALYSIS OF LOAN PORTFOLIO
Loan/lease mix: (2)
Commercial and industrial - revolving
$
387,409
$
362,115
$
326,129
$
325,243
$
299,588
Commercial and industrial - other
1,321,053
1,370,561
1,374,333
1,390,068
1,381,967
Commercial and industrial - other - LIHTC
89,028
92,637
96,276
91,710
105,601
Total commercial and industrial
1,797,490
1,825,313
1,796,738
1,807,021
1,787,156
Commercial real estate, owner occupied
622,072
633,596
621,069
607,365
610,618
Commercial real estate, non-owner occupied
1,103,694
1,082,457
1,055,089
1,008,892
955,552
Construction and land development
342,335
331,454
410,918
477,424
472,695
Construction and land development - LIHTC
913,841
750,894
738,609
943,101
921,359
Multi-family
324,090
329,239
296,245
284,721
282,541
Multi-family - LIHTC
973,682
1,148,244
1,007,321
711,422
874,439
Direct financing leases
19,241
25,808
28,089
31,164
34,401
1-4 family real estate
587,512
583,542
563,358
544,971
539,931
Consumer
144,845
143,839
130,900
127,335
127,615
Total loans/leases
$
6,828,802
$
6,854,386
$
6,648,336
$
6,543,416
$
6,606,307
Less allowance for credit losses
86,321
87,706
84,470
87,200
87,669
Net loans/leases
$
6,742,481
$
6,766,680
$
6,563,866
$
6,456,216
$
6,518,638
ANALYSIS OF SECURITIES PORTFOLIO
Securities mix:
U.S. government sponsored agency securities
$
18,621
$
20,101
$
14,442
$
14,973
$
16,002
Municipal securities
965,810
885,046
884,469
853,645
764,017
Residential mortgage-backed and related securities
53,488
54,708
56,071
59,196
57,946
Asset backed securities
10,455
12,721
14,285
15,423
16,326
Other securities
39,190
38,464
40,539
41,115
43,272
Trading securities (3)
58,685
22,362
22,258
22,368
-
Total securities
$
1,146,249
$
1,033,402
$
1,032,064
$
1,006,720
$
897,563
Less allowance for credit losses
203
203
203
1,192
1,169
Net securities
$
1,146,046
$
1,033,199
$
1,031,861
$
1,005,528
$
896,394
ANALYSIS OF DEPOSITS
Deposit mix:
Noninterest-bearing demand deposits
$
969,348
$
956,445
$
955,167
$
1,038,689
$
1,027,791
Interest-bearing demand deposits
4,715,087
4,644,918
4,714,555
4,338,390
4,416,725
Time deposits
942,847
859,593
875,491
851,950
788,692
Brokered deposits
357,351
303,711
261,562
284,976
261,644
Total deposits
$
6,984,633
$
6,764,667
$
6,806,775
$
6,514,005
$
6,494,852
ANALYSIS OF BORROWINGS
Borrowings mix:
Term FHLB advances
$
145,383
$
135,000
$
135,000
$
135,000
$
135,000
Overnight FHLB advances
230,000
350,000
70,000
300,000
295,000
Other short-term borrowings
2,750
1,600
2,700
1,500
470
Subordinated notes
233,383
233,276
233,170
233,064
232,958
Junior subordinated debentures
48,828
48,795
48,763
48,731
48,698
Total borrowings
$
660,344
$
768,671
$
489,633
$
718,295
$
712,126
(1) Loans with a fair value of $165.9 million, $243.2 million, $274.8 million and $278.0 million have been identified for securitization and are included in LHFS at September 30, 2024, June 30, 2024, March 31, 2024 and September 30, 2023, respectively.
(2) Loan categories with significant LIHTC loan balances have been broken out separately. Total LIHTC balances within the loan/lease portfolio were $2.0 billion at September 30, 2024.
(3) Trading securities consisted of retained beneficial interests acquired in conjunction with Freddie Mac securitizations completed by the Company.
QCR Holding, Inc.Consolidated Financial Highlights(Unaudited)
For the Quarter Ended
September 30,
June 30,
March 31,
December 31,
September 30,
2024
2024
2024
2023
2023
(dollars in thousands, except per share data)
INCOME STATEMENT
Interest income
$
125,420
$
119,746
$
115,049
$
112,248
$
108,568
Interest expense
65,698
63,583
60,350
56,512
53,313
Net interest income
59,722
56,163
54,699
55,736
55,255
Provision for credit losses
3,484
5,496
2,969
5,199
3,806
Net interest income after provision for credit losses
$
56,238
$
50,667
$
51,730
$
50,537
$
51,449
Trust fees
$
3,270
$
3,103
$
3,199
$
3,084
$
2,863
Investment advisory and management fees
1,229
1,214
1,101
1,052
947
Deposit service fees
2,294
1,986
2,022
2,008
2,107
Gains on sales of residential real estate loans, net
385
540
382
323
476
Gains on sales of government guaranteed portions of loans, net
-
12
24
24
-
Capital markets revenue
16,290
17,758
16,457
36,956
15,596
Earnings on bank-owned life insurance
814
2,964
868
832
1,807
Debit card fees
1,575
1,571
1,466
1,561
1,584
Correspondent banking fees
507
510
512
465
450
Loan related fee income
949
962
836
845
800
Fair value gain (loss) on derivatives and trading securities
(886
)
51
(163
)
(582
)
(336
)
Other
730
218
154
1,161
299
Total noninterest income
$
27,157
$
30,889
$
26,858
$
47,729
$
26,593
Salaries and employee benefits
$
31,637
$
31,079
$
31,860
$
41,059
$
32,098
Occupancy and equipment expense
6,168
6,377
6,514
6,789
6,228
Professional and data processing fees
4,457
4,823
4,613
4,223
4,456
Restructuring expense
1,954
-
-
-
-
FDIC insurance, other insurance and regulatory fees
1,711
1,854
1,945
2,115
1,721
Loan/lease expense
587
151
378
834
826
Net cost of (income from) and gains/losses on operations of other real estate
(42
)
28
(30
)
38
3
Advertising and marketing
2,124
1,565
1,483
1,641
1,429
Communication and data connectivity
333
318
401
449
478
Supplies
278
259
275
333
335
Bank service charges
603
622
568
761
605
Correspondent banking expense
325
363
305
300
232
Intangibles amortization
690
690
690
716
691
Goodwill impairment
432
-
-
-
-
Payment card processing
785
706
646
836
733
Trust expense
395
379
425
413
432
Other
1,128
674
617
431
814
Total noninterest expense
$
53,565
$
49,888
$
50,690
$
60,938
$
51,081
Net income before income taxes
$
29,830
$
31,668
$
27,898
$
37,328
$
26,961
Federal and state income tax expense
2,045
2,554
1,172
4,473
1,840
Net income
$
27,785
$
29,114
$
26,726
$
32,855
$
25,121
Basic EPS
$
1.65
$
1.73
$
1.59
$
1.96
$
1.50
Diluted EPS
$
1.64
$
1.72
$
1.58
$
1.95
$
1.49
Weighted average common shares outstanding
16,846,200
16,814,814
16,783,348
16,734,080
16,717,303
Weighted average common and common equivalent shares outstanding
16,982,400
16,921,854
16,910,675
16,875,952
16,847,951
QCR Holding, Inc.Consolidated Financial Highlights(Unaudited)
For the Nine Months Ended
September 30,
September 30,
2024
2023
(dollars in thousands, except per share data)
INCOME STATEMENT
Interest income
$
360,215
$
301,162
Interest expense
189,631
135,892
Net interest income
170,584
165,270
Provision for credit losses
11,949
11,340
Net interest income after provision for credit losses
