QCR Holdings, Inc. Announces Record Net Income of $32.9 Million for the Fourth Quarter and Record Net Income of $113.6 Million for the Full Year 2023

Fourth Quarter Highlights

• Record fourth quarter net income of $32.9 million, or $1.95 per diluted share
• Record Capital Markets Revenue of $37.0 million
• Improved NIM, which increased by 1 basis point from the prior quarter
• Significant increase in tangible book value (non-GAAP) per share of $3.48, or 35% annualized
• TCE/TA ratio (non-GAAP) improved by 70 basis points to 8.75%
• Completion of first two securitizations of $265 million of low-income housing tax credit loans

Full Year Highlights

• Record annual net income of $113.6 million, or $6.73 per diluted share
• Record adjusted net income (non-GAAP) of $115.1 million, or $6.82 per diluted share
• Record Capital Markets Revenue of $92.1 million, an increase of $50.8 million, or 123%
• Loan and lease growth of 11% prior to loan securitizations
• Deposit growth of 9%
• Tangible book value (non-GAAP) per share increased $6.99, or 19%
• Increased TCE/TA ratio (non-GAAP) by 82 basis points to 8.75%
  

MOLINE, Ill., Jan. 23, 2024 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ: QCRH) (the “Company”) today announced record quarterly net income of $32.9 million and diluted earnings per share (“EPS”) of $1.95 for the fourth quarter of 2023, compared to net income of $25.1 million and diluted EPS of $1.49 for the third quarter of 2023. For the full year, the Company reported net income of $113.6 million, or $6.73 per diluted share.

Adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) for the fourth quarter of 2023 were $33.3 million and $1.97, respectively. 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 fourth quarter of 2022, net income and diluted EPS were $30.9 million and $1.81, respectively, and adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) were $31.1 million and $1.83, respectively.

*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 measurements provide a better comparison for analysis and may provide a better indicator of future performance. See GAAP to non-GAAP reconciliations.

“We are pleased to deliver record fourth quarter and full year results highlighted by significant fee income and robust loan growth,” said Larry J. Helling, Chief Executive Officer. “In addition, we completed our first two securitizations of low-income housing tax credit loans, grew core deposits by 6%, and maintained our strong asset quality.”

“We enter 2024 with a solid deposit and loan pipeline, a strong balance sheet, excellent credit quality and well-managed expenses. We remain focused on building our franchise through relationship banking and executing on our differentiated business model, all with the view of delivering attractive returns to our shareholders,” said Mr. Helling.

Net Interest Income Grew to $55.7 Million and NIM Expanded

Net interest income for the fourth quarter of 2023 totaled $55.7 million, an increase of $0.5 million from the third quarter. Acquisition-related net accretion totaled $673 thousand for the fourth quarter of 2023, compared to $539 thousand in the third quarter. Net interest income was $65.2 million for the fourth quarter of 2022.

In the fourth quarter of 2023, net interest margin (“NIM”) was 2.90% and NIM on a tax-equivalent yield (“TEY”) basis (non-GAAP) was 3.32%, up from 2.89% and 3.31% in the prior quarter, respectively. Adjusted NIM TEY (non-GAAP) of 3.29%, was also up from 3.28% in the third quarter.

“Our adjusted NIM on a tax equivalent yield basis improved by one basis point on a linked-quarter basis to 3.29% and was above the midpoint of our guidance range,” said Todd A. Gipple, President and Chief Financial Officer. “During the quarter, our loan and investment yields continued to expand and we experienced a more modest increase in our cost of funds with a slowing in the shift of the composition of our deposits from noninterest and lower beta deposits to higher beta deposits. We are pleased to see continued stabilization in our deposit mix and the expansion of our NIM.”

Noninterest Income of $47.7 Million, Including a Record $37.0 Million of Capital Markets Revenue

Noninterest income for the fourth quarter of 2023 totaled $47.7 million, up significantly from $26.6 million for the third quarter of 2023. The Company generated a record $37.0 million of capital markets revenue in the quarter, up from $15.6 million in the prior quarter. Wealth management revenue was $4.1 million for the quarter, up from $3.8 million in the prior quarter.

“Capital markets revenue surged late in the fourth quarter and was $37 million for the quarter, achieving a total of $92 million to close out the year,” added Mr. Gipple. “Our clients took advantage of the significant decrease in long-term interest rates late in the quarter to lock-in attractive long-term financing terms. Capital markets revenue from swap fees continues to benefit from the strong demand for affordable housing. Even with the strong results in the fourth quarter, our LIHTC lending and capital markets revenue pipelines remain healthy. As a result, we are increasing our capital markets revenue guidance for the next twelve months to be in a range of $50 to $60 million.”

Noninterest Expenses of $60.9 Million Impacted by Strong Capital Markets Outperformance

Noninterest expense for the fourth quarter of 2023 totaled $60.9 million, compared to $51.1 million for the third quarter of 2023 and $49.7 million for the fourth quarter of 2022. The linked-quarter increase was primarily due to higher incentive-based compensation related to our record fourth quarter and full year performance.

Continued Strong Loan Growth

During the fourth quarter of 2023, the Company’s loans and leases held for investment grew $213.4 million to a total of $6.5 billion, or 13% on an annualized basis. For the full year, total loans and leases grew $669.5 million, or 11%, when excluding the $265 million in loan securitizations that we completed in the fourth quarter.

“Our strong performance is a testament to our differentiated relationship-based community banking model as well as the underlying economic resiliency across our markets,” added Mr. Helling. “Given our current pipeline and the ongoing strength of our markets, we are targeting loan growth for the full year 2024 between 8% and 10%, prior to the loan securitizations that we have planned for 2024.”

Asset Quality Remains Excellent

Nonperforming assets (“NPAs”) totaled $34.2 million at the end of the fourth quarter, a slight improvement from $34.7 million at the end of the third quarter. The ratio of NPAs to total assets improved to 0.40% on December 31, 2023, compared to 0.41% on September 30, 2023. In addition, the Company’s criticized loans and classified loans to total loans and leases on December 31, 2023 also improved to 2.93% and 1.03%, respectively, as compared to 2.98% and 1.05% as of September 30, 2023.

The Company recorded a total provision for credit losses of $5.2 million during the quarter which included $2.5 million of provision for loans and leases and $2.7 million of provision for unfunded commitments. The provision for credit losses on unfunded commitments was driven by the surge in commitments in our LIHTC lending business. As of December 31, 2023, the allowance for credit losses to total loans/leases held for investment was 1.33%.

Stable Core Deposits and Increased Liquidity

During the fourth quarter of 2023, the Company’s core deposits, which exclude brokered deposits, decreased slightly by $4.2 million in the fourth quarter, but grew by $346.0 million, or 6%, for the full year. Our Correspondent Bank deposit portfolio typically falls temporarily in the fourth quarter as our clients position their balance sheets at year-end. Total Correspondent Bank deposits declined 9% at quarter-end and have since rebounded, increasing $188 million, or 35%, by mid-January.

Total uninsured and uncollateralized deposits remain very low at 18% of total deposits as of the end of the fourth quarter, as compared to 20% as of the end of the third quarter. The Company maintained approximately $3.1 billion of available liquidity sources at year-end, which includes $1.2 billion of immediately available liquidity.

Continued Strong Capital Levels

As of December 31, 2023, the Company’s total risk-based capital ratio was 14.15%, the common equity tier 1 ratio was 9.57% and the tangible common equity to tangible assets ratio (non-GAAP) was 8.75%. By comparison, these respective ratios were 14.48%, 9.68% and 8.05% as of September 30, 2023. The Company remains focused on growing capital and targeting capital levels in the top quartile of the Company’s peer group.

The Company’s tangible book value per share (non-GAAP) increased by $3.48, or 35% annualized during the fourth quarter. Accumulated other comprehensive income (“AOCI”) increased $25.4 million during the quarter due to an increase in the value of the Company’s available for sale securities portfolio and certain derivatives resulting from the change in long-term interest rates during the quarter. In addition, the combination of strong earnings and a modest dividend contributed to the improvement in tangible book value per share (non-GAAP).

Conference Call Details

The Company will host an earnings call/webcast tomorrow, January 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 January 31, 2024. The replay access information is 877-344-7529 (international 412-317-0088); access code 1087284. 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 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, 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 on April 1, 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. Quad City Bank & Trust Company offers equipment loans and leases to businesses through its wholly owned subsidiary, m2 Equipment Finance, LLC, based in Brookfield, Wisconsin, and also provides correspondent banking services. The Company has 36 locations in Iowa, Missouri, Wisconsin and Illinois. As of December 31, 2023, the Company had $8.5 billion in assets, $6.5 billion in loans and $6.5 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 (including the COVID-19 pandemic in the United States), acts of war or other threats thereof (including the Israeli-Palestinian conflict 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 FASB or the PCAOB; (iv) changes in local, state and federal laws, regulations and governmental policies concerning the Company’s general business and any changes in response to the recent failures of other banks; (v) changes in interest rates and prepayment rates of the Company’s assets (including the impact of LIBOR phase-out and the recent potential additional rate increases by the Federal Reserve); (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 FDIC 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, and (xix) 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) 743-7745
tgipple@qcrh.com