8-K
QCR HOLDINGS INC (QCRH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934
Date of Report (Date of earliest event Reported): October 25, 2023
QCR Holdings, Inc.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 0-22208 | 42-1397595 |
|---|---|---|
| (State or Other Jurisdiction of<br><br> Incorporation) | (Commission File Number) | (I.R.S. Employer Identification <br><br>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<br> of each class | Trading<br> Symbol(s) | Name of each exchange on<br> 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 October 25, 2023, QCR Holdings, Inc. (the “Company”) issued a press release disclosing financial results for the quarter ended September 30, 2023. 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 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| 99.1 | Press Release dated October 25, 2023. |
|---|---|
| 104 | Cover Page Interactive Data File (embedded within the Inline<br>XBRL document). |
| --- | --- |
SIGNATURES
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: October 25, 2023 | By: | /s/ Todd A. Gipple |
| Todd A. Gipple | ||
| President and Chief Financial Officer |
Exhibit 99.1
| PRESS RELEASE | FOR IMMEDIATE RELEASE |
|---|
QCRHoldings, Inc. Announces Net Income of $25.1 Million
forthe Third Quarter of 2023
Third Quarter 2023 Highlights
| · | Net income of $25.1 million, or $1.49 per diluted share |
|---|---|
| · | Adjusted net income (non-GAAP) of $25.4 million, or $1.51 per diluted share |
| --- | --- |
| · | Net interest income of $55.3 million, up 3.9% from the second quarter |
| --- | --- |
| · | NIM (TEY)(non-GAAP) of 3.31% increased by 2 basis points from the prior quarter while Adjusted NIM (TEY)(non-GAAP) of 3.28% remained static |
| --- | --- |
| · | Capital Markets Revenue of $15.6 million and $55.1 million year-to-date |
| --- | --- |
| · | Tangible book value (non-GAAP) per share increased $0.34, or 3.4% annualized |
| --- | --- |
Moline, IL, October 25, 2023 – QCR Holdings, Inc. (NASDAQ: QCRH) (the “Company”) today announced net income of $25.1 million and diluted earnings per share (“EPS”) of $1.49 for the third quarter of 2023, compared to net income of $28.4 million and diluted EPS of $1.69 for the second quarter of 2023.
Adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) for the third quarter of 2023 were $25.4 million and $1.51, respectively. For the second quarter of 2023, adjusted net income (non-GAAP) was $28.4 million and adjusted diluted EPS (non-GAAP) was $1.69. For the third quarter of 2022, adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) were $28.9 million and $1.69, respectively.
| For the<br> Quarter Ended | ||||||
|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | ||||
| $ in millions (except per share data) | 2023 | 2023 | 2022 | |||
| Net Income | $ | 25.1 | $ | 28.4 | $ | 29.3 |
| Diluted EPS | $ | 1.49 | $ | 1.69 | $ | 1.71 |
| Adjusted Net Income (non-GAAP)* | $ | 25.4 | $ | 28.4 | $ | 28.9 |
| Adjusted Diluted EPS (non-GAAP)* | $ | 1.51 | $ | 1.69 | $ | 1.69 |
*Adjusted non-GAAP measurements of financial performance excludenon-core and/or nonrecurring income and expense items that management believes are not reflective of the anticipated future operationof the Company’s business. The Company believes these measurements provide a better comparison for analysis and may provide a betterindicator of future performance. See GAAP to non-GAAP reconciliations.
“We delivered solid third quarter results, highlighted by a static net interest margin, robust loan growth and significant fee income,” said Larry J. Helling, Chief Executive Officer. “In addition, our deposit base is stable, our capital ratios are strong, and our asset quality remains sound. Our third quarter and year-to-date results demonstrate the continued strength of our franchise, our commitment to relationship banking and the successful execution of our strategic initiatives.”
Net Interest Income Grew3.9%
Net interest income for the third quarter of 2023 totaled $55.3 million, an increase of $2.1 million from the second quarter, and compared to $60.8 million for the third quarter of 2022. Acquisition-related net accretion totaled $539 thousand for the third quarter of 2023, compared to $134 thousand in the second quarter.
In the third quarter of 2023, net interest margin (“NIM”) was 2.89% and NIM on a tax-equivalent yield (“TEY”) basis (non-GAAP) was 3.31%, compared to 2.93% and 3.29% in the prior quarter, respectively. Adjusted NIM TEY (non-GAAP) of 3.28% was unchanged.
“Our adjusted tax-equivalent NIM was static on a linked-quarter basis, which was at the top end of our guidance range,” said Todd A. Gipple, President and Chief Financial Officer. “During the quarter, our loan yield expansion accelerated while 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 this stabilization of our deposit mix and believe that it will continue to benefit our net interest margin going forward.”
Noninterest Income of $26.6Million Including $15.6 Million of Capital Markets Revenue
Noninterest income for the third quarter of 2023 totaled $26.6 million, down from the very strong $32.5 million for the second quarter of 2023. The Company generated $15.6 million of capital markets revenue in the quarter, as compared to the outsized performance of $22.5 million in the prior quarter. Wealth management revenue was $3.8 million for the quarter, consistent with the prior quarter.
“Capital markets revenue was $15.6 million in the third quarter, which outperformed our annualized guidance range,” added Mr. Gipple. “Capital markets revenue from swaps continues to benefit from the strong demand for affordable housing. This source of fee income has been consistent for the past several years. Based on decades of stability in the low-income housing tax credit industry and our own experience, we believe that this business will perform well throughout various economic cycles.”
Noninterest Expenses RemainWell-Controlled
Noninterest expense for the third quarter of 2023 totaled $51.1 million, an increase of 2.8% from $49.7 million for the second quarter of 2023, compared to $47.7 million for the third quarter of 2022. The linked-quarter increase was primarily due to higher variable employee compensation related to year-to-date performance, increased professional and data processing fees and other expenses related to fixed asset disposals. These increases were partially offset by lower advertising and marketing expenses.
Continued Strong Loan Growth
During the third quarter of 2023, the Company’s total loans and leases grew $227.0 million to a total of $6.6 billion, or 14.2% on an annualized basis. “Our loan growth during the quarter was driven primarily by strength in our low-income housing tax credit lending business as well as growth in our traditional lending business. Our low-income housing tax credit clients continue to experience strong demand for their projects as the need for affordable housing far exceeds supply,” added Mr. Helling.
“While our third quarter loan growth was exceptional, we are maintaining our guidance for growth in loans held for investment for the fourth quarter to be in the range of 9 to 12% on an annualized basis as our pipeline continues to be strong,” stated Mr. Helling. “As we have previously discussed, we have two low-income housing tax credit loan securitizations scheduled to close in the fourth quarter, a tax-exempt pool of $130 million and a taxable pool totaling $135 million. Both are now scheduled for closing prior to the end of November. We plan to continue to utilize securitizations on an ongoing basis as we view this as an effective tool in managing our liquidity and capital. It will also provide ongoing capacity for continued low-income housing tax credit production and the corresponding capital markets revenue that we generate from this business,” added Mr. Helling.
2
Asset Quality Remains Strong
“Our asset quality continues to be strong as the ratio of nonperforming assets to total assets was 0.41% at quarter-end and compares favorably to our long-term historical averages. We remain optimistic about the resilience of our Midwest markets as unemployment remains below the national average and business activity has continued at a healthy pace across our footprint,” said Mr. Helling.
Nonperforming assets (“NPAs”) increased $8.5 million during the quarter to $34.7 million. “The majority of the increase in NPAs was driven by three client relationships from unrelated industries. Approximately one-third of our NPAs consist of one relationship and we believe that this credit will be resolved without a loss,” added Mr. Helling. The Company’s criticized loans and classified loans to total loans and leases on September 30, 2023 were 2.98% and 1.05%, respectively, as compared to 2.84% and 1.00% as of June 30, 2023.
The Company recorded a total provision for credit losses of $3.8 million during the quarter which included $3.3 million of provision for loans/leases primarily driven by loan growth during the quarter. As of September 30, 2023, the allowance for credit losses to total loans/leases held for investment was 1.39%.
Stable Core Deposits and Liquidity
During the third quarter of 2023, the Company’s core deposits, which exclude brokered deposits, remained relatively stable. Core deposits decreased slightly by $9.0 million, or 0.1%, after growing $339.3 million, or 23.0% on an annualized basis during the second quarter of 2023. Total uninsured and uncollateralized deposits remain low at 20.1% of total deposits as of the end of the third quarter as compared to 19.9% as of the end of the second quarter. The Company maintained approximately $3.0 billion of available liquidity sources at quarter-end, which includes $1.1 billion of immediately available liquidity.
Continued Strong Capital Levels
As of September 30, 2023, the Company’s total risk-based capital ratio was 14.40%, the common equity tier 1 ratio was 9.63% and the tangible common equity to tangible assets ratio (non-GAAP) was 8.05%. By comparison, these respective ratios were 14.69%, 9.73% and 8.28% as of June 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 $0.34, or 3.4% annualized during the third quarter. Accumulated other comprehensive income (“AOCI”) declined $19.4 million during the quarter due to a decrease in the value of the Company’s available for sale securities portfolio and certain derivatives resulting from the change in interest rates during the third quarter. While the net decline in AOCI diluted the Company’s tangible common equity, strong earnings more than offset this impact, which led to the increase in tangible book value per share (non-GAAP).
Conference Call Details
The Company will host an earnings call/webcast tomorrow, October 26, 2023, 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 November 2, 2023. The replay access information is 877-344-7529 (international 412-317-0088); access code 7582498. 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 September 30, 2023, the Company had $8.5 billion in assets, $6.6 billion in loans and $6.5 billion in deposits. For additional information, please visit the Company’s website at www.qcrh.com.
3
Special Note Concerning Forward-Looking Statements. Thisdocument contains, and future oral and written statements of the Company and its management may contain, forward-looking statements withinthe 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, expectationsand assumptions of the Company’s management and on information currently available to management, are generally identifiable bythe 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, includingforward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statementin light of new information or future events.
A number of factors, many of which are beyond the ability of theCompany to control or predict, could cause actual results to differ materially from those in its forward-looking statements. These factorsinclude, among others, the following: (i) the strength of the local, state, national and international economies(including effectsof inflationary pressures and supply chain constraints); (ii) the economic impact of any future terrorist threats and attacks, widespreaddisease or pandemics (including the COVID-19 pandemic in the United States), acts of war or other threats thereof (including the Israeli-Palestinianconflict and the Russian invasion of Ukraine), or other adverse external events that could cause economic deterioration or instabilityin credit markets, and the response of the local, state and national governments to any such adverse external events; (iii) changesin accounting policies and practices, as may be adopted by state and federal regulatory agencies, the FASB or the PCAOB; (iv) changesin local, state and federal laws, regulations and governmental policies concerning the Company’s general business and any changesin response to the recent failures of other banks; (v) changes in interest rates and prepayment rates of the Company’s assets (includingthe impact of LIBOR phase-out and the recent potential additional rate increases by the Federal Reserve); (vi) increased competitionin the financial services sector, including from non-bank competitors such as credit unions and “fintech” companies, andthe inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliableelectronic systems; (viii) unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitionsand the possibility that transaction costs may be greater than anticipated; (ix) the loss of key executives or employees; (x) changesin consumer spending; (xi) unexpected outcomes of existing or new litigation involving the Company; (xii) the economic impact of exceptionalweather 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 concentrationof large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversity theirexposure; (xvi) the level of non-performing assets on our balance sheets; (xvii) interruptions involving our information technology andcommunications systems or third-party servicers; (xviii) breaches or failures of our information security controls or cybersecurity-relatedincidents, and (xixi) the ability of the Company to manage the risks associated with the foregoing as well as anticipated. These risksand 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’sfinancial results, is included in the Company’s filings with the Securities and Exchange Commission.
Contact:
Todd A. Gipple
President and Chief Financial Officer
(309) 743-7745
tgipple@qcrh.com
4
QCR Holding, Inc.
Consolidated Financial Highlights
(Unaudited)
| As of | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||
| (dollars in thousands) | |||||||||||||||
| CONDENSED BALANCE SHEET | |||||||||||||||
| Cash and due from banks | $ | 104,265 | $ | 84,084 | $ | 64,295 | $ | 59,723 | $ | 86,282 | |||||
| Federal funds sold and interest-bearing deposits | 80,650 | 175,012 | 253,997 | 124,270 | 71,043 | ||||||||||
| Securities, net of allowance for credit losses | 896,394 | 882,888 | 877,446 | 928,102 | 879,450 | ||||||||||
| Loans receivable held for sale (1) | 278,893 | 295,057 | 140,633 | 1,480 | 3,054 | ||||||||||
| Loans/leases receivable held for investment | 6,327,414 | 6,084,263 | 6,049,389 | 6,137,391 | 6,005,556 | ||||||||||
| Allowance for credit losses | (87,669 | ) | (85,797 | ) | (86,573 | ) | (87,706 | ) | (90,489 | ) | |||||
| Intangibles | 14,537 | 15,228 | 15,993 | 16,759 | 17,546 | ||||||||||
| Goodwill | 139,027 | 139,027 | 138,474 | 137,607 | 137,607 | ||||||||||
| Derivatives | 291,295 | 170,294 | 130,350 | 177,631 | 185,037 | ||||||||||
| Other assets | 495,251 | 466,617 | 452,900 | 453,580 | 434,963 | ||||||||||
| Total assets | $ | 8,540,057 | $ | 8,226,673 | $ | 8,036,904 | $ | 7,948,837 | $ | 7,730,049 | |||||
| Total deposits | $ | 6,494,852 | $ | 6,606,720 | $ | 6,501,663 | $ | 5,984,217 | $ | 5,941,035 | |||||
| Total borrowings | 712,126 | 418,368 | 417,480 | 825,894 | 701,491 | ||||||||||
| Derivatives | 320,220 | 195,841 | 150,401 | 200,701 | 209,479 | ||||||||||
| Other liabilities | 184,476 | 183,055 | 165,866 | 165,301 | 140,972 | ||||||||||
| Total stockholders' equity | 828,383 | 822,689 | 801,494 | 772,724 | 737,072 | ||||||||||
| Total liabilities<br> and stockholders' equity | $ | 8,540,057 | $ | 8,226,673 | $ | 8,036,904 | $ | 7,948,837 | $ | 7,730,049 | |||||
| ANALYSIS OF LOAN PORTFOLIO | |||||||||||||||
| Loan/lease mix: | |||||||||||||||
| Commercial and industrial - revolving | $ | 299,588 | $ | 304,617 | $ | 307,612 | $ | 296,869 | $ | 332,996 | |||||
| Commercial and industrial - other | 1,381,967 | 1,308,853 | 1,322,384 | 1,371,590 | 1,342,949 | ||||||||||
| Commercial and<br> industrial - other - LIHTC | 105,601 | 93,700 | 97,947 | 80,103 | 73,047 | ||||||||||
| Total commercial and industrial | 1,787,156 | 1,707,170 | 1,727,943 | 1,748,562 | 1,748,992 | ||||||||||
| Commercial real estate, owner occupied | 610,618 | 609,717 | 616,922 | 629,367 | 627,558 | ||||||||||
| Commercial real estate, non-owner occupied | 938,609 | 946,427 | 978,309 | 958,825 | 919,966 | ||||||||||
| Commercial real estate, non-owner occupied<br> - LIHTC | 16,943 | 17,387 | 4,407 | 4,414 | 910 | ||||||||||
| Construction and land development | 472,695 | 437,682 | 448,261 | 448,986 | 444,016 | ||||||||||
| Construction and land development -<br> LIHTC | 921,359 | 870,084 | 759,924 | 743,075 | 705,487 | ||||||||||
| Multi-family | 282,541 | 280,418 | 229,370 | 236,043 | 218,807 | ||||||||||
| Multi-family - LIHTC | 874,439 | 820,376 | 740,500 | 727,760 | 714,311 | ||||||||||
| Direct financing leases | 34,401 | 32,937 | 35,373 | 31,889 | 33,503 | ||||||||||
| 1-4 family real estate | 529,179 | 524,629 | 521,691 | 499,529 | 486,547 | ||||||||||
| 1-4 family real estate - LIHTC | 10,752 | 10,776 | 10,800 | - | 961 | ||||||||||
| Consumer | 127,615 | 121,717 | 116,522 | 110,421 | 107,552 | ||||||||||
| Total loans/leases | $ | 6,606,307 | $ | 6,379,320 | $ | 6,190,022 | $ | 6,138,871 | $ | 6,008,610 | |||||
| Less allowance<br> for credit losses | 87,669 | 85,797 | 86,573 | 87,706 | 90,489 | ||||||||||
| Net loans/leases | $ | 6,518,638 | $ | 6,293,523 | $ | 6,103,449 | $ | 6,051,165 | $ | 5,918,121 | |||||
| ANALYSIS OF SECURITIES PORTFOLIO | |||||||||||||||
| Securities mix: | |||||||||||||||
| U.S. government sponsored agency securities | $ | 16,002 | $ | 18,942 | $ | 19,320 | $ | 16,981 | $ | 20,527 | |||||
| Municipal securities | 764,017 | 743,608 | 731,689 | 779,450 | 724,204 | ||||||||||
| Residential mortgage-backed and related<br> securities | 57,946 | 60,958 | 63,104 | 66,215 | 68,844 | ||||||||||
| Asset backed securities | 16,326 | 17,393 | 17,967 | 18,728 | 19,630 | ||||||||||
| Other securities | 43,272 | 43,156 | 46,535 | 46,908 | 46,443 | ||||||||||
| Total securities | $ | 897,563 | $ | 884,057 | $ | 878,615 | $ | 928,282 | $ | 879,648 | |||||
| Less allowance<br> for credit losses | 1,169 | 1,169 | 1,169 | 180 | 198 | ||||||||||
| Net securities | $ | 896,394 | $ | 882,888 | $ | 877,446 | $ | 928,102 | $ | 879,450 | |||||
| ANALYSIS OF DEPOSITS | |||||||||||||||
| Deposit mix: | |||||||||||||||
| Noninterest-bearing demand deposits | $ | 1,027,791 | $ | 1,101,605 | $ | 1,189,858 | $ | 1,262,981 | $ | 1,315,555 | |||||
| Interest-bearing demand deposits | 4,416,725 | 4,374,847 | 4,033,193 | 3,875,497 | 3,904,303 | ||||||||||
| Time deposits | 788,692 | 765,801 | 679,946 | 744,593 | 672,133 | ||||||||||
| Brokered deposits | 261,644 | 364,467 | 598,666 | 101,146 | 49,044 | ||||||||||
| Total deposits | $ | 6,494,852 | $ | 6,606,720 | $ | 6,501,663 | $ | 5,984,217 | $ | 5,941,035 | |||||
| ANALYSIS OF BORROWINGS | |||||||||||||||
| Borrowings mix: | |||||||||||||||
| Term FHLB advances | $ | 135,000 | $ | 135,000 | $ | 135,000 | $ | - | $ | - | |||||
| Overnight FHLB advances | 295,000 | - | - | 415,000 | 335,000 | ||||||||||
| Other short-term borrowings | 470 | 1,850 | 1,100 | 129,630 | 85,180 | ||||||||||
| Subordinated notes | 232,958 | 232,852 | 232,746 | 232,662 | 232,743 | ||||||||||
| Junior subordinated<br> debentures | 48,698 | 48,666 | 48,634 | 48,602 | 48,568 | ||||||||||
| Total borrowings | $ | 712,126 | $ | 418,368 | $ | 417,480 | $ | 825,894 | $ | 701,491 | |||||
| (1) | Loans with a fair value<br> of $278.0 million, $291.0 million and $139.2 million have been identified for securitization<br> and are included in LHFS at September 30, 2023, June 30, 2023 and March 31, 2023 respectively. | ||||||||||||||
| --- | --- |
5
QCR Holding, Inc.
Consolidated Financial Highlights
(Unaudited)
| For the<br> Quarter Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||
| (dollars in thousands, except per share<br> data) | |||||||||||||
| INCOME STATEMENT | |||||||||||||
| Interest income | $ | 108,568 | $ | 98,377 | $ | 94,217 | $ | 94,037 | $ | 79,267 | |||
| Interest expense | 53,313 | 45,172 | 37,407 | 28,819 | 18,498 | ||||||||
| Net interest income | 55,255 | 53,205 | 56,810 | 65,218 | 60,769 | ||||||||
| Provision for credit losses | 3,806 | 3,606 | 3,928 | - | - | ||||||||
| Net interest income after provision<br> for credit losses | $ | 51,449 | $ | 49,599 | $ | 52,882 | $ | 65,218 | $ | 60,769 | |||
| Trust fees | $ | 2,863 | $ | 2,844 | $ | 2,906 | $ | 2,644 | $ | 2,537 | |||
| Investment advisory and management fees | 947 | 986 | 879 | 918 | 921 | ||||||||
| Deposit service fees | 2,107 | 2,034 | 2,028 | 2,142 | 2,214 | ||||||||
| Gains on sales of residential real estate loans, net | 476 | 500 | 312 | 468 | 641 | ||||||||
| Gains on sales of government guaranteed portions of loans,<br> net | - | - | 30 | 50 | 50 | ||||||||
| Capital markets revenue | 15,596 | 22,490 | 17,023 | 11,338 | 10,545 | ||||||||
| Securities gains (losses), net | - | 12 | (463 | ) | - | - | |||||||
| Earnings on bank-owned life insurance | 1,807 | 838 | 707 | 755 | 605 | ||||||||
| Debit card fees | 1,584 | 1,589 | 1,466 | 1,500 | 1,453 | ||||||||
| Correspondent banking fees | 450 | 356 | 391 | 257 | 189 | ||||||||
| Loan related fee income | 800 | 770 | 651 | 614 | 652 | ||||||||
| Fair value gain (loss) on derivatives | (336 | ) | 83 | (427 | ) | (267 | ) | 904 | |||||
| Other | 299 | 18 | 339 | 800 | 384 | ||||||||
| Total noninterest income | $ | 26,593 | $ | 32,520 | $ | 25,842 | $ | 21,219 | $ | 21,095 | |||
| Salaries and employee benefits | $ | 32,098 | $ | 31,459 | $ | 32,003 | $ | 32,594 | $ | 29,175 | |||
| Occupancy and equipment expense | 6,228 | 6,100 | 5,914 | 6,027 | 6,033 | ||||||||
| Professional and data processing fees | 4,456 | 4,078 | 3,514 | 3,769 | 4,477 | ||||||||
| Acquisition costs | - | - | - | (424 | ) | 315 | |||||||
| Post-acquisition compensation, transition and integration<br> costs | - | - | 207 | 668 | 62 | ||||||||
| FDIC insurance, other insurance and regulatory fees | 1,721 | 1,927 | 1,374 | 1,605 | 1,497 | ||||||||
| Loan/lease expense | 826 | 652 | 556 | 411 | 390 | ||||||||
| Net cost of (income from) and gains/losses on operations of<br> other real estate | 3 | - | (67 | ) | (117 | ) | 19 | ||||||
| Advertising and marketing | 1,429 | 1,735 | 1,237 | 1,562 | 1,437 | ||||||||
| Communication and data connectivity | 478 | 471 | 665 | 587 | 639 | ||||||||
| Supplies | 335 | 281 | 305 | 337 | 289 | ||||||||
| Bank service charges | 605 | 621 | 605 | 563 | 568 | ||||||||
| Correspondent banking expense | 232 | 221 | 210 | 210 | 218 | ||||||||
| Intangibles amortization | 691 | 765 | 766 | 787 | 787 | ||||||||
| Payment card processing | 733 | 542 | 545 | 599 | 477 | ||||||||
| Trust expense | 432 | 337 | 214 | 166 | 227 | ||||||||
| Other | 814 | 538 | 737 | 353 | 1,136 | ||||||||
| Total noninterest expense | $ | 51,081 | $ | 49,727 | $ | 48,785 | $ | 49,697 | $ | 47,746 | |||
| Net income before income taxes | $ | 26,961 | $ | 32,392 | $ | 29,939 | $ | 36,740 | $ | 34,118 | |||
| Federal and state income tax expense | 1,840 | 3,967 | 2,782 | 5,834 | 4,824 | ||||||||
| Net income | $ | 25,121 | $ | 28,425 | $ | 27,157 | $ | 30,906 | $ | 29,294 | |||
| Basic EPS | $ | 1.50 | $ | 1.70 | $ | 1.62 | $ | 1.83 | $ | 1.73 | |||
| Diluted EPS | $ | 1.49 | $ | 1.69 | $ | 1.60 | $ | 1.81 | $ | 1.71 | |||
| Weighted average common shares outstanding | 16,717,303 | 16,701,950 | 16,776,289 | 16,855,973 | 16,900,968 | ||||||||
| Weighted average common and common equivalent shares outstanding | 16,847,951 | 16,799,527 | 16,942,132 | 17,047,976 | 17,110,691 |
6
QCR Holding, Inc.
Consolidated FinancialHighlights
(Unaudited)
| For the<br> Nine Months Ended | |||||
|---|---|---|---|---|---|
| September 30, | September 30, | ||||
| 2023 | 2022 | ||||
| (dollars in thousands,<br> except per share data) | |||||
| INCOME STATEMENT | |||||
| Interest income | $ | 301,162 | $ | 198,534 | |
| Interest expense | 135,892 | 32,632 | |||
| Net interest income | 165,270 | 165,902 | |||
| Provision for credit losses (1) | 11,340 | 8,284 | |||
| Net interest income after provision<br> for credit losses | $ | 153,930 | $ | 157,618 | |
| Trust fees | $ | 8,613 | $ | 7,997 | |
| Investment advisory and management fees | 2,812 | 2,940 | |||
| Deposit service fees | 6,169 | 5,992 | |||
| Gains on sales of residential real estate loans, net | 1,288 | 1,943 | |||
| Gains on sales of government guaranteed portions of loans,<br> net | 30 | 69 | |||
| Capital markets revenue | 55,109 | 29,971 | |||
| Securities losses, net | (451 | ) | - | ||
| Earnings on bank-owned life insurance | 3,352 | 1,301 | |||
| Debit card fees | 4,639 | 3,959 | |||
| Correspondent banking fees | 1,197 | 710 | |||
| Loan related fee income | 2,221 | 1,814 | |||
| Fair value gain (loss) on derivatives | (680 | ) | 2,242 | ||
| Other | 656 | 572 | |||
| Total noninterest income | $ | 84,955 | $ | 59,510 | |
| Salaries and employee benefits | $ | 95,560 | $ | 82,774 | |
| Occupancy and equipment expense | 18,242 | 15,948 | |||
| Professional and data processing fees | 12,048 | 12,513 | |||
| Acquisition costs | - | 4,139 | |||
| Post-acquisition compensation, transition and integration<br> costs | 207 | 4,858 | |||
| FDIC insurance, other insurance and regulatory fees | 5,022 | 4,201 | |||
| Loan/lease expense | 2,034 | 1,418 | |||
| Net cost of (income from) and gains/losses on operations of<br> other real estate | (64 | ) | 77 | ||
| Advertising and marketing | 4,401 | 3,396 | |||
| Communication and data connectivity | 1,614 | 1,626 | |||
| Supplies | 921 | 772 | |||
| Bank service charges | 1,831 | 1,719 | |||
| Correspondent banking expense | 663 | 630 | |||
| Intangibles amortization | 2,222 | 2,067 | |||
| Payment card processing | 1,820 | 1,365 | |||
| Trust expense | 983 | 609 | |||
| Other | 2,089 | 2,207 | |||
| Total noninterest expense | $ | 149,593 | $ | 140,319 | |
| Net income before income taxes | $ | 89,292 | $ | 76,809 | |
| Federal and state income tax expense | 8,589 | 8,649 | |||
| Net income | $ | 80,703 | $ | 68,160 | |
| Basic EPS | $ | 4.82 | $ | 4.25 | |
| Diluted EPS | $ | 4.79 | $ | 4.20 | |
| Weighted average common shares outstanding | 16,731,847 | 16,030,371 | |||
| Weighted average common and common equivalent shares outstanding | 16,863,203 | 16,243,921 | |||
| (1) | Provision<br> for credit losses for the nine months ended September 30, 2022 included $11.0 million related<br> to the acquired Guaranty Bank non-PCD loans and $1.4 million related to acquired Guaranty<br> Bank OBS exposures. | ||||
| --- | --- |
7
QCR Holding, Inc.
Consolidated FinancialHighlights
(Unaudited)
| As<br> of and for the Quarter Ended | For<br> the Nine Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September<br> 30, | June<br> 30, | March<br> 31, | December<br> 31, | September<br> 30, | September<br> 30, | September<br> 30, | |||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | |||||||||||||||
| (dollars<br> in thousands, except per share data) | |||||||||||||||||||||
| COMMON<br> SHARE DATA | |||||||||||||||||||||
| Common<br> shares outstanding | 16,731,646 | 16,713,853 | 16,713,775 | 16,795,942 | 16,885,485 | ||||||||||||||||
| Book<br> value per common share (1) | $ | 49.51 | $ | 49.22 | $ | 47.95 | $ | 46.01 | $ | 43.65 | |||||||||||
| Tangible<br> book value per common share (Non-GAAP) (2) | $ | 40.33 | $ | 39.99 | $ | 38.71 | $ | 36.82 | $ | 34.46 | |||||||||||
| Closing<br> stock price | $ | 48.52 | $ | 41.03 | $ | 43.91 | $ | 49.64 | $ | 50.94 | |||||||||||
| Market<br> capitalization | $ | 811,819 | $ | 685,769 | $ | 733,902 | $ | 833,751 | $ | 860,147 | |||||||||||
| Market<br> price / book value | 98.00 | % | 83.36 | % | 91.57 | % | 107.90 | % | 116.70 | % | |||||||||||
| Market<br> price / tangible book value | 120.30 | % | 102.59 | % | 113.43 | % | 134.83 | % | 147.81 | % | |||||||||||
| Earnings<br> per common share (basic) LTM (3) | $ | 6.66 | $ | 6.89 | $ | 6.06 | $ | 5.95 | $ | 5.86 | |||||||||||
| Price<br> earnings ratio LTM (3) | 7.29 | x | 5.96 | x | 7.24 | x | 8.35 | x | 8.70 | x | |||||||||||
| TCE<br> / TA (Non-GAAP) (4) | 8.05 | % | 8.28 | % | 8.21 | % | 7.93 | % | 7.68 | % | |||||||||||
| CONDENSED<br> STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY | |||||||||||||||||||||
| Beginning<br> balance | $ | 822,689 | $ | 801,494 | $ | 772,724 | $ | 737,072 | $ | 743,138 | |||||||||||
| Net<br> income | 25,121 | 28,425 | 27,157 | 30,906 | 29,294 | ||||||||||||||||
| Other<br> comprehensive income (loss), net of tax | (19,415 | ) | (6,336 | ) | 9,325 | 9,959 | (24,783 | ) | |||||||||||||
| Common<br> stock cash dividends declared | (1,003 | ) | (1,003 | ) | (1,010 | ) | (1,013 | ) | (1,012 | ) | |||||||||||
| Repurchase<br> and cancellation of shares of common stock as a result of a share repurchase program | - | (967 | ) | (7,719 | ) | (5,037 | ) | (10,485 | ) | ||||||||||||
| Other<br> (5) | 991 | 1,076 | 1,017 | 837 | 920 | ||||||||||||||||
| Ending<br> balance | $ | 828,383 | $ | 822,689 | $ | 801,494 | $ | 772,724 | $ | 737,072 | |||||||||||
| REGULATORY<br> CAPITAL RATIOS (6): | |||||||||||||||||||||
| Total<br> risk-based capital ratio | 14.40 | % | 14.69 | % | 14.68 | % | 14.28 | % | 14.38 | % | |||||||||||
| Tier<br> 1 risk-based capital ratio | 10.25 | % | 10.38 | % | 10.27 | % | 9.95 | % | 9.88 | % | |||||||||||
| Tier<br> 1 leverage capital ratio | 9.92 | % | 10.06 | % | 9.73 | % | 9.61 | % | 9.56 | % | |||||||||||
| Common<br> equity tier 1 ratio | 9.63 | % | 9.73 | % | 9.60 | % | 9.29 | % | 9.21 | % | |||||||||||
| KEY<br> PERFORMANCE RATIOS AND OTHER METRICS | |||||||||||||||||||||
| Return<br> on average assets (annualized) | 1.21 | % | 1.44 | % | 1.37 | % | 1.58 | % | 1.53 | % | 1.34 | % | 1.30 | % | |||||||
| Return<br> on average total equity (annualized) | 11.95 | % | 13.97 | % | 13.67 | % | 16.32 | % | 15.39 | % | 13.23 | % | 12.20 | % | |||||||
| Net<br> interest margin | 2.89 | % | 2.93 | % | 3.18 | % | 3.62 | % | 3.46 | % | 3.00 | % | 3.44 | % | |||||||
| Net<br> interest margin (TEY) (Non-GAAP)(7) | 3.31 | % | 3.29 | % | 3.52 | % | 3.93 | % | 3.71 | % | 3.37 | % | 3.66 | % | |||||||
| Efficiency<br> ratio (Non-GAAP) (8) | 62.41 | % | 58.01 | % | 59.02 | % | 57.50 | % | 58.32 | % | 59.78 | % | 62.25 | % | |||||||
| Gross<br> loans and leases / total assets | 77.36 | % | 77.54 | % | 77.02 | % | 77.23 | % | 77.73 | % | 77.36 | % | 77.73 | % | |||||||
| Gross<br> loans and leases / total deposits | 101.72 | % | 96.56 | % | 95.21 | % | 102.58 | % | 101.14 | % | 101.72 | % | 101.14 | % | |||||||
| Effective<br> tax rate | 6.82 | % | 12.25 | % | 9.29 | % | 15.88 | % | 14.14 | % | 9.62 | % | 11.26 | % | |||||||
| Full-time<br> equivalent employees (9) | 987 | 1009 | 969 | 973 | 956 | 987 | 956 | ||||||||||||||
| AVERAGE<br> BALANCES | |||||||||||||||||||||
| Assets | $ | 8,287,813 | $ | 7,924,597 | $ | 7,906,830 | $ | 7,800,229 | $ | 7,652,463 | $ | 8,041,141 | $ | 7,005,988 | |||||||
| Loans/leases | 6,476,512 | 6,219,980 | 6,165,115 | 6,043,359 | 5,916,100 | 6,288,343 | 5,456,037 | ||||||||||||||
| Deposits | 6,342,339 | 6,292,481 | 6,179,644 | 6,029,455 | 5,891,198 | 6,272,083 | 5,557,617 | ||||||||||||||
| Total<br> stockholders' equity | 837,734 | 816,882 | 794,685 | 757,419 | 761,428 | 816,591 | 744,869 | ||||||||||||||
| (1) | Includes<br> accumulated other comprehensive income (loss). | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (2) | Includes<br> accumulated other comprehensive income (loss) and excludes intangible assets. See<br> GAAP to Non-GAAP reconciliations. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (3) | LTM<br> : Last twelve months. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (4) | TCE<br> / TCA : tangible common equity / total tangible assets. See GAAP to non-GAAP reconciliations. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (5) | Includes<br> mostly common stock issued for options exercised and the employee stock purchase plan, as<br> well as stock-based compensation. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (6) | Ratios<br> for the current quarter are subject to change upon final calculation for regulatory filings<br> due after earnings release. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (7) | TEY<br> : Tax equivalent yield. See GAAP to Non-GAAP reconciliations. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (8) | See<br> GAAP to Non-GAAP reconciliations. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (9) | The<br> increase in full-time equivalent employees in the second quarter of 2023 and the subsequent<br> decline in the third quarter of 2023 includes 19 summer interns. | ||||||||||||||||||||
| --- | --- |
8
QCR Holding, Inc.
Consolidated FinancialHighlights
(Unaudited)
| ANALYSIS<br> OF NET INTEREST INCOME AND MARGIN | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For<br> the Quarter Ended | |||||||||||||||||||||
| September<br> 30, 2023 | June<br> 30, 2023 | September<br> 30, 2022 | |||||||||||||||||||
| Average<br><br><br> Balance | Interest<br><br><br> Earned or<br><br> Paid | Average<br><br><br> Yield or<br><br> Cost | Average<br><br><br> Balance | Interest<br><br><br> Earned or<br><br> Paid | Average<br><br><br> Yield or<br><br> Cost | Average<br><br><br> Balance | Interest<br><br><br> Earned or<br><br> Paid | Average<br><br><br> Yield or<br><br> Cost | |||||||||||||
| (dollars<br> in thousands) | |||||||||||||||||||||
| Fed<br> funds sold | $ | 21,526 | $ | 284 | 5.23 | % | $ | 16,976 | $ | 223 | 5.27 | % | $ | 16,224 | $ | 100 | 2.45 | % | |||
| Interest-bearing<br> deposits at financial institutions | 86,807 | 1,205 | 5.51 | % | 90,814 | 1,123 | 4.96 | % | 54,799 | 381 | 2.76 | % | |||||||||
| Investment<br> securities - taxable | 344,657 | 3,788 | 4.38 | % | 342,991 | 3,693 | 4.30 | % | 354,366 | 3,304 | 3.71 | % | |||||||||
| Investment<br> securities - nontaxable (1) | 600,693 | 6,974 | 4.64 | % | 577,494 | 6,217 | 4.31 | % | 591,730 | 6,298 | 4.26 | % | |||||||||
| Restricted<br> investment securities | 43,590 | 659 | 5.91 | % | 35,031 | 506 | 5.71 | % | 42,638 | 674 | 6.18 | % | |||||||||
| Loans<br> (1) | 6,476,512 | 103,428 | 6.34 | % | 6,219,980 | 93,159 | 6.01 | % | 5,916,100 | 72,969 | 4.89 | % | |||||||||
| Total<br> earning assets (1) | $ | 7,573,785 | $ | 116,338 | 6.10 | % | $ | 7,283,286 | $ | 104,921 | 5.78 | % | $ | 6,975,857 | $ | 83,726 | 4.76 | % | |||
| Interest-bearing<br> deposits | $ | 4,264,208 | $ | 33,563 | 3.12 | % | $ | 3,965,592 | $ | 27,227 | 2.75 | % | $ | 3,862,556 | $ | 10,889 | 1.12 | % | |||
| Time<br> deposits | 999,488 | 10,003 | 3.97 | % | 1,190,440 | 11,219 | 3.78 | % | 593,490 | 1,681 | 1.12 | % | |||||||||
| Short-term<br> borrowings | 1,514 | 20 | 5.28 | % | 1,980 | 34 | 6.82 | % | 11,376 | 84 | 2.94 | % | |||||||||
| Federal<br> Home Loan Bank advances | 425,870 | 5,724 | 5.26 | % | 211,593 | 2,653 | 4.96 | % | 418,239 | 2,584 | 2.42 | % | |||||||||
| Other<br> borrowings | - | - | 0.00 | % | - | - | 0.00 | % | 4,239 | 53 | 4.93 | % | |||||||||
| Subordinated<br> debentures | 232,890 | 3,307 | 5.68 | % | 232,782 | 3,303 | 5.68 | % | 181,177 | 2,518 | 5.56 | % | |||||||||
| Junior<br> subordinated debentures | 48,678 | 695 | 5.59 | % | 48,647 | 738 | 6.00 | % | 48,551 | 689 | 5.56 | % | |||||||||
| Total<br> interest-bearing liabilities | $ | 5,972,648 | $ | 53,312 | 3.54 | % | $ | 5,651,034 | $ | 45,174 | 3.20 | % | $ | 5,119,628 | $ | 18,498 | 1.43 | % | |||
| Net<br> interest income (1) | $ | 63,026 | $ | 59,747 | $ | 65,228 | |||||||||||||||
| Net<br> interest margin (2) | 2.89 | % | 2.93 | % | 3.46 | % | |||||||||||||||
| Net<br> interest margin (TEY) (Non-GAAP) (1) (2) (3) | 3.31 | % | 3.29 | % | 3.71 | % | |||||||||||||||
| Adjusted<br> net interest margin (TEY) (Non-GAAP) (1) (2) (3) | 3.28 | % | 3.28 | % | 3.65 | % | |||||||||||||||
| For the<br> Nine Months Ended | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| September<br> 30, 2023 | September<br> 30, 2022 | ||||||||||||||||||||
| Average<br><br> Balance | Interest<br><br> Earned or<br><br> Paid | Average<br><br> Yield or Cost | Average<br><br> Balance | Interest<br><br> Earned or<br><br> Paid | Average<br><br> Yield or Cost | ||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||
| Fed funds sold | $ | 19,267 | $ | 741 | 5.14 | % | $ | 8,937 | $ | 114 | 1.70 | % | |||||||||
| Interest-bearing deposits at financial institutions | 83,783 | 3,151 | 5.03 | % | 63,740 | 584 | 1.23 | % | |||||||||||||
| Investment securities - taxable | 340,140 | 10,847 | 4.24 | % | 331,222 | 8,792 | 3.53 | % | |||||||||||||
| Investment securities - nontaxable (1) | 599,070 | 19,892 | 4.43 | % | 558,860 | 17,494 | 4.17 | % | |||||||||||||
| Restricted investment securities | 38,817 | 1,677 | 5.70 | % | 34,071 | 1,439 | 5.57 | % | |||||||||||||
| Loans (1) | 6,288,343 | 285,136 | 6.06 | % | 5,456,037 | 180,896 | 4.43 | % | |||||||||||||
| Total earning assets (1) | $ | 7,369,420 | $ | 321,444 | 5.83 | % | $ | 6,452,867 | $ | 209,319 | 4.33 | % | |||||||||
| Interest-bearing deposits | $ | 4,099,789 | $ | 84,565 | 2.76 | % | $ | 3,629,735 | $ | 17,704 | 0.65 | % | |||||||||
| Time deposits | 1,020,421 | 27,225 | 3.57 | % | 508,067 | 3,527 | 0.93 | % | |||||||||||||
| Short-term borrowings | 3,588 | 152 | 5.66 | % | 4,945 | 87 | 2.37 | % | |||||||||||||
| Federal Home Loan Bank advances | 311,740 | 11,898 | 5.03 | % | 264,718 | 3,447 | 1.72 | % | |||||||||||||
| Other borrowings | - | - | 0.00 | % | 1,429 | 53 | 4.90 | % | |||||||||||||
| Subordinated debentures | 232,784 | 9,922 | 5.68 | % | 143,104 | 5,888 | 5.49 | % | |||||||||||||
| Junior subordinated debentures | 48,646 | 2,129 | 5.77 | % | 44,457 | 1,926 | 5.71 | % | |||||||||||||
| Total interest-bearing liabilities | $ | 5,716,968 | $ | 135,891 | 3.17 | % | $ | 4,596,455 | $ | 32,632 | 0.95 | % | |||||||||
| Net interest income (1) | $ | 185,553 | $ | 176,687 | |||||||||||||||||
| Net interest margin (2) | 3.00 | % | 3.44 | % | |||||||||||||||||
| Net interest margin (TEY) (Non-GAAP) (1) (2) (3) | 3.37 | % | 3.66 | % | |||||||||||||||||
| Adjusted net interest margin (TEY) (Non-GAAP)<br> (1) (2) (3) | 3.34 | % | 3.60 | % | |||||||||||||||||
| (1) | Includes<br> nontaxable securities and loans. Interest earned and yields on nontaxable securities<br> and loans are determined on a tax equivalent basis using a 21% tax rate. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (2) | See<br> "Select Financial Data - Subsidiaries" for a breakdown of amortization/accretion<br> included in net interest margin for each period presented. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (3) | TEY<br> : Tax equivalent yield. See GAAP to Non-GAAP reconciliations. | ||||||||||||||||||||
| --- | --- |
9
QCR Holding, Inc.
Consolidated FinancialHighlights
(Unaudited)
| As of | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||
| (dollars in thousands, except per share<br> data) | |||||||||||||||
| ROLLFORWARD OF ALLOWANCE FOR CREDIT<br> LOSSES ON LOANS/LEASES | |||||||||||||||
| Beginning balance | $ | 85,797 | $ | 86,573 | $ | 87,706 | $ | 90,489 | $ | 92,425 | |||||
| Change in ACL for writedown of LHFS to fair value (1) | 175 | (2,277 | ) | (1,709 | ) | - | - | ||||||||
| Credit loss expense | 3,260 | 3,313 | 2,458 | 1,013 | 331 | ||||||||||
| Loans/leases charged off | (1,816 | ) | (1,947 | ) | (2,275 | ) | (3,960 | ) | (2,489 | ) | |||||
| Recoveries on loans/leases previously<br> charged off | 253 | 135 | 393 | 164 | 222 | ||||||||||
| Ending balance | $ | 87,669 | $ | 85,797 | $ | 86,573 | $ | 87,706 | $ | 90,489 | |||||
| NONPERFORMING ASSETS | |||||||||||||||
| Nonaccrual loans/leases | $ | 34,568 | $ | 26,062 | $ | 22,947 | $ | 8,765 | $ | 17,511 | |||||
| Accruing loans/leases past due 90 days<br> or more | - | 83 | 15 | 5 | 3 | ||||||||||
| Total nonperforming loans/leases | 34,568 | 26,145 | 22,962 | 8,770 | 17,514 | ||||||||||
| Other real estate owned | 120 | - | 61 | 133 | 177 | ||||||||||
| Other repossessed assets | - | - | - | - | 340 | ||||||||||
| Total nonperforming<br> assets | $ | 34,688 | $ | 26,145 | $ | 23,023 | $ | 8,903 | $ | 18,031 | |||||
| ASSET QUALITY RATIOS | |||||||||||||||
| Nonperforming assets / total assets | 0.41 | % | 0.32 | % | 0.29 | % | 0.11 | % | 0.23 | % | |||||
| ACL for loans and leases / total loans/leases held for investment | 1.39 | % | 1.41 | % | 1.43 | % | 1.43 | % | 1.51 | % | |||||
| ACL for loans and leases / nonperforming loans/leases | 253.61 | % | 328.16 | % | 377.03 | % | 1000.07 | % | 516.67 | % | |||||
| Net charge-offs as a % of average loans/leases | 0.02 | % | 0.03 | % | 0.03 | % | 0.06 | % | 0.04 | % | |||||
| INTERNALLY ASSIGNED RISK RATING<br> (2) | |||||||||||||||
| Special mention (rating 6) | $ | 127,202 | $ | 116,910 | $ | 125,048 | $ | 98,333 | $ | 63,973 | |||||
| Substandard (rating 7)/Classifed loans (3) | 69,369 | 63,956 | 70,866 | 66,021 | 77,317 | ||||||||||
| Doubtful (rating 8)/Classifed loans (3) | - | - | - | - | - | ||||||||||
| Criticized loans (4) | $ | 196,571 | $ | 180,866 | $ | 195,914 | $ | 164,354 | $ | 141,290 | |||||
| Classified loans as a % of total loans/leases | 1.05 | % | 1.00 | % | 1.14 | % | 1.08 | % | 1.29 | % | |||||
| Criticized loans as a % of total loans/leases | 2.98 | % | 2.84 | % | 3.16 | % | 2.68 | % | 2.35 | % | |||||
| (1) | Certain<br> loans were identified for securitization and transferred from loans to LHFS. The fair value<br> of the loans was less than its carrying value at the date of transfer, resulting in a charge<br> to the loan ACL. | ||||||||||||||
| --- | --- | ||||||||||||||
| (2) | Amounts<br> exclude the government guaranteed portion, if any. The Company assigns internal<br> risk ratings of Pass (Rating 2) for the government guaranteed portion. | ||||||||||||||
| --- | --- | ||||||||||||||
| (3) | Classified<br> loans are defined as C&I and CRE loans with internally assigned risk ratings of 7 or<br> 8, regardless of performance. | ||||||||||||||
| --- | --- | ||||||||||||||
| (4) | Criticized<br> loans are defined as C&I and CRE loans with internally assigned risk ratings of 6, 7,<br> or 8, regardless of performance. | ||||||||||||||
| --- | --- |
10
QCR Holding, Inc.
Consolidated FinancialHighlights
(Unaudited)
| For the<br> Quarter Ended | For the<br> Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||
| SELECT FINANCIAL DATA - SUBSIDIARIES | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||
| (dollars in thousands) | |||||||||||||||
| TOTAL ASSETS | |||||||||||||||
| Quad City Bank and Trust (1) | $ | 2,433,084 | $ | 2,611,832 | $ | 2,218,166 | |||||||||
| m2 Equipment Finance, LLC | 336,180 | 322,838 | 298,640 | ||||||||||||
| Cedar Rapids Bank and Trust | 2,442,263 | 2,389,623 | 2,108,614 | ||||||||||||
| Community State Bank | 1,417,250 | 1,332,966 | 1,270,426 | ||||||||||||
| Guaranty Bank | 2,242,638 | 2,179,844 | 2,107,407 | ||||||||||||
| TOTAL DEPOSITS | |||||||||||||||
| Quad City Bank and Trust (1) | $ | 1,973,989 | $ | 2,166,249 | $ | 1,741,472 | |||||||||
| Cedar Rapids Bank and Trust | 1,722,905 | 1,791,861 | 1,627,202 | ||||||||||||
| Community State Bank | 1,132,724 | 1,073,907 | 1,036,998 | ||||||||||||
| Guaranty Bank | 1,722,861 | 1,653,299 | 1,632,107 | ||||||||||||
| TOTAL LOANS & LEASES | |||||||||||||||
| Quad City Bank and Trust (1) | $ | 2,005,770 | $ | 1,925,162 | $ | 1,806,776 | |||||||||
| m2 Equipment Finance, LLC | 341,041 | 328,479 | 300,753 | ||||||||||||
| Cedar Rapids Bank and Trust | 1,750,986 | 1,728,280 | 1,579,437 | ||||||||||||
| Community State Bank | 1,098,479 | 1,025,844 | 973,083 | ||||||||||||
| Guaranty Bank | 1,751,072 | 1,700,034 | 1,649,313 | ||||||||||||
| TOTAL LOANS & LEASES / TOTAL<br> DEPOSITS | |||||||||||||||
| Quad City Bank and Trust (1) | 102 | % | 89 | % | 104 | % | |||||||||
| Cedar Rapids Bank and Trust | 102 | % | 96 | % | 97 | % | |||||||||
| Community State Bank | 97 | % | 96 | % | 94 | % | |||||||||
| Guaranty Bank | 102 | % | 103 | % | 101 | % | |||||||||
| TOTAL LOANS & LEASES / TOTAL<br> ASSETS | |||||||||||||||
| Quad City Bank and Trust (1) | 82 | % | 74 | % | 81 | % | |||||||||
| Cedar Rapids Bank and Trust | 72 | % | 72 | % | 75 | % | |||||||||
| Community State Bank | 78 | % | 77 | % | 77 | % | |||||||||
| Guaranty Bank | 78 | % | 78 | % | 78 | % | |||||||||
| ACL ON LOANS/LEASES AS A PERCENTAGE<br> OF LOANS/LEASES | |||||||||||||||
| Quad City Bank and Trust (1) | 1.43 | % | 1.44 | % | 1.59 | % | |||||||||
| m2 Equipment Finance, LLC | 3.52 | % | 3.46 | % | 3.13 | % | |||||||||
| Cedar Rapids Bank and Trust | 1.40 | % | 1.41 | % | 1.54 | % | |||||||||
| Community State Bank | 1.22 | % | 1.27 | % | 1.45 | % | |||||||||
| Guaranty Bank | 1.20 | % | 1.22 | % | 1.42 | % | |||||||||
| RETURN ON AVERAGE ASSETS | |||||||||||||||
| Quad City Bank and Trust (1) | 0.97 | % | 0.82 | % | 1.41 | % | 1.00 | % | 1.61 | % | |||||
| Cedar Rapids Bank and Trust | 2.28 | % | 3.52 | % | 2.83 | % | 2.95 | % | 2.60 | % | |||||
| Community State Bank | 1.38 | % | 1.42 | % | 1.31 | % | 1.43 | % | 1.28 | % | |||||
| Guaranty Bank (6) | 1.23 | % | 0.97 | % | 1.76 | % | 1.07 | % | 1.06 | % | |||||
| NET INTEREST MARGIN PERCENTAGE (2) | |||||||||||||||
| Quad City Bank and Trust (1) | 3.37 | % | 3.28 | % | 3.65 | % | 3.36 | % | 3.63 | % | |||||
| Cedar Rapids Bank and Trust | 3.78 | % | 3.69 | % | 4.02 | % | 3.83 | % | 3.77 | % | |||||
| Community State Bank (3) | 3.88 | % | 3.90 | % | 3.69 | % | 3.92 | % | 3.66 | % | |||||
| Guaranty Bank (4) | 3.06 | % | 3.10 | % | 4.10 | % | 3.22 | % | 4.01 | % | |||||
| ACQUISITION-RELATED AMORTIZATION/ACCRETION INCLUDED IN<br> NET INTEREST MARGIN, NET | |||||||||||||||
| Cedar Rapids Bank and Trust | $ | - | $ | - | $ | 5 | $ | (8 | ) | $ | 60 | ||||
| Community State Bank | (1 | ) | (1 | ) | 62 | $ | 69 | 123 | |||||||
| Guaranty Bank | 572 | 168 | 1,047 | $ | 1,537 | 2,814 | |||||||||
| QCR Holdings, Inc. (5) | (32 | ) | (33 | ) | (34 | ) | $ | (97 | ) | (104 | ) | ||||
| (1) | Quad<br> City Bank and Trust amounts include m2 Equipment Finance, LLC, as this entity is wholly-owned<br> and consolidated with the Bank. m2 Equipment Finance, LLC is also presented separately<br> for certain (applicable) measurements. | ||||||||||||||
| --- | --- | ||||||||||||||
| (2) | Includes<br> nontaxable securities and loans. Interest earned and yields on nontaxable securities<br> and loans are determined on a tax equivalent basis using a 21% federal tax rate. | ||||||||||||||
| --- | --- | ||||||||||||||
| (3) | Community<br> State Bank's net interest margin percentage includes various purchase accounting adjustments. Excluding<br> those adjustments, net interest margin (Non-GAAP) would have been 3.88% for the quarter ended<br> September 30, 2023, 3.90% for the quarter ended June 30, 2023 and 3.72% for the quarter ended<br> September 30, 2022. | ||||||||||||||
| --- | --- | ||||||||||||||
| (4) | Guaranty<br> Bank's net interest margin percentage includes various purchase accounting adjustments. Excluding<br> those adjustments, net interest margin (Non-GAAP) would have been 2.97% for the quarter ended<br> September 30, 2023, 3.11% for the quarter ended June 30, 2023 and 3.91% for the quarter ended<br> September 30, 2022. | ||||||||||||||
| --- | --- | ||||||||||||||
| (5) | Relates<br> to the trust preferred securities acquired as part of the Guaranty Bank acquisition in 2017<br> and the Community National Bank acquisition in 2013. | ||||||||||||||
| --- | --- | ||||||||||||||
| (6) | Adjusted<br> ROAA excluding non-core adjustments for the Guaranty Bank acquisition (non-GAAP) would have<br> been 1.84% for the nine months ended September 30, 2022. | ||||||||||||||
| --- | --- |
11
QCR Holding, Inc.
Consolidated FinancialHighlights
(Unaudited)
| As of | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| GAAP TO NON-GAAP RECONCILIATIONS | 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||
| (dollars in thousands, except per share<br> data) | |||||||||||||||
| TANGIBLE COMMON EQUITY TO TANGIBLE<br> ASSETS RATIO (1) | |||||||||||||||
| Stockholders' equity (GAAP) | $ | 828,383 | $ | 822,689 | $ | 801,494 | $ | 772,724 | $ | 737,072 | |||||
| Less: Intangible<br> assets | 153,564 | 154,255 | 154,467 | 154,366 | 155,153 | ||||||||||
| Tangible common equity (non-GAAP) | $ | 674,819 | $ | 668,434 | $ | 647,027 | $ | 618,358 | $ | 581,919 | |||||
| Total assets (GAAP) | $ | 8,540,057 | $ | 8,226,673 | $ | 8,036,904 | $ | 7,948,837 | $ | 7,730,049 | |||||
| Less: Intangible<br> assets | 153,564 | 154,255 | 154,467 | 154,366 | 155,153 | ||||||||||
| Tangible assets (non-GAAP) | $ | 8,386,493 | $ | 8,072,418 | $ | 7,882,437 | $ | 7,794,471 | $ | 7,574,896 | |||||
| Tangible common equity to tangible assets ratio (non-GAAP) | 8.05 | % | 8.28 | % | 8.21 | % | 7.93 | % | 7.68 | % | |||||
| (1) | This<br> ratio is a non-GAAP financial measure. The Company's management believes that this measurement<br> is important to many investors in the marketplace who are interested in changes period-to-period<br> in common equity. In compliance with applicable rules of the SEC, this non-GAAP measure<br> is reconciled to stockholders' equity and total assets, which are the most directly comparable<br> GAAP financial measures. | ||||||||||||||
| --- | --- |
12
QCR Holding, Inc.
Consolidated FinancialHighlights
(Unaudited)
| GAAP<br> TO NON-GAAP RECONCILIATIONS | For<br> the Quarter Ended | For<br> the Nine Months Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September<br> 30, | June<br> 30, | March<br> 31, | December<br> 31, | September<br> 30, | September<br> 30, | September<br> 30, | |||||||||||||||
| ADJUSTED<br> NET INCOME (1) | 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||
| (dollars<br> in thousands, except per share data) | |||||||||||||||||||||
| Net<br> income (GAAP) | $ | 25,121 | $ | 28,425 | $ | 27,157 | $ | 30,906 | $ | 29,294 | $ | 80,703 | $ | 68,160 | |||||||
| Less<br> non-core items (post-tax) (2): | |||||||||||||||||||||
| Income: | |||||||||||||||||||||
| Securities<br> gains (losses), net | - | 9 | (366 | ) | - | - | (356 | ) | - | ||||||||||||
| Fair<br> value gain (loss) on derivatives, net | (265 | ) | 66 | (337 | ) | (211 | ) | 714 | (537 | ) | 1,771 | ||||||||||
| Total<br> non-core income (non-GAAP) | $ | (265 | ) | $ | 75 | $ | (703 | ) | $ | (211 | ) | $ | 714 | $ | (893 | ) | $ | 1,771 | |||
| Expense: | |||||||||||||||||||||
| Acquisition<br> costs (2) | - | - | - | (517 | ) | 321 | - | 3,715 | |||||||||||||
| Post-acquisition<br> compensation, transition and integration costs | - | - | 164 | 529 | 48 | 164 | 3,837 | ||||||||||||||
| Separation<br> agreement | - | - | - | - | - | - | - | ||||||||||||||
| CECL<br> Day 2 provision for credit losses on acquired non-PCD loans (3) | - | - | - | - | - | - | 8,651 | ||||||||||||||
| CECL<br> Day 2 provision for credit losses provision on acquired OBS exposure (3) | - | - | - | - | - | - | 1,140 | ||||||||||||||
| Total<br> non-core expense (non-GAAP) | $ | - | $ | - | $ | 164 | $ | 12 | $ | 369 | $ | 164 | $ | 17,343 | |||||||
| Adjusted<br> net income (non-GAAP) (1) | $ | 25,386 | $ | 28,350 | $ | 28,024 | $ | 31,129 | $ | 28,949 | $ | 81,760 | $ | 83,732 | |||||||
| ADJUSTED<br> EARNINGS PER COMMON SHARE (1) | |||||||||||||||||||||
| Adjusted<br> net income (non-GAAP) (from above) | $ | 25,386 | $ | 28,350 | $ | 28,024 | $ | 31,129 | $ | 28,949 | $ | 81,760 | $ | 83,732 | |||||||
| Weighted<br> average common shares outstanding | 16,717,303 | 16,701,950 | 16,776,289 | 16,855,973 | 16,900,968 | 16,731,847 | 16,030,371 | ||||||||||||||
| Weighted<br> average common and common equivalent shares outstanding | 16,847,951 | 16,799,527 | 16,942,132 | 17,047,976 | 17,110,691 | 16,863,203 | 16,243,921 | ||||||||||||||
| Adjusted<br> earnings per common share (non-GAAP): | |||||||||||||||||||||
| Basic | $ | 1.52 | $ | 1.70 | $ | 1.67 | $ | 1.85 | $ | 1.71 | $ | 4.89 | $ | 5.22 | |||||||
| Diluted | $ | 1.51 | $ | 1.69 | $ | 1.65 | $ | 1.83 | $ | 1.69 | $ | 4.85 | $ | 5.15 | |||||||
| ADJUSTED<br> RETURN ON AVERAGE ASSETS AND AVERAGE EQUITY (1) | |||||||||||||||||||||
| Adjusted<br> net income (non-GAAP) (from above) | $ | 25,386 | $ | 28,350 | $ | 28,024 | $ | 31,129 | $ | 28,949 | $ | 81,760 | $ | 83,732 | |||||||
| Average<br> Assets | $ | 8,287,813 | $ | 7,924,597 | $ | 7,906,830 | $ | 7,800,229 | $ | 7,652,463 | $ | 8,041,141 | $ | 7,005,988 | |||||||
| Adjusted<br> return on average assets (annualized) (non-GAAP) | 1.23 | % | 1.43 | % | 1.42 | % | 1.60 | % | 1.51 | % | 1.36 | % | 1.59 | % | |||||||
| Adjusted<br> return on average equity (annualized) (non-GAAP) | 12.12 | % | 13.88 | % | 14.11 | % | 16.44 | % | 15.21 | % | 13.35 | % | 14.99 | % | |||||||
| NET<br> INTEREST MARGIN (TEY) (4) | |||||||||||||||||||||
| Net<br> interest income (GAAP) | $ | 55,255 | $ | 53,205 | $ | 56,810 | $ | 65,218 | $ | 60,769 | $ | 165,270 | $ | 165,902 | |||||||
| Plus:<br> Tax equivalent adjustment (5) | 7,771 | 6,542 | 6,057 | 5,554 | 4,459 | 20,283 | 10,785 | ||||||||||||||
| Net<br> interest income - tax equivalent (Non-GAAP) | $ | 63,026 | $ | 59,747 | $ | 62,867 | $ | 70,772 | $ | 65,228 | $ | 185,553 | $ | 176,687 | |||||||
| Less:<br> Acquisition accounting net accretion | 539 | 134 | 828 | 5,688 | 1,080 | 1,501 | 2,893 | ||||||||||||||
| Adjusted<br> net interest income | $ | 62,487 | $ | 59,613 | $ | 62,039 | $ | 65,084 | $ | 64,148 | $ | 184,052 | $ | 173,794 | |||||||
| Average<br> earning assets | $ | 7,573,785 | $ | 7,283,286 | $ | 7,247,605 | $ | 7,148,578 | $ | 6,975,857 | $ | 7,369,420 | $ | 6,452,867 | |||||||
| Net<br> interest margin (GAAP) | 2.89 | % | 2.93 | % | 3.18 | % | 3.62 | % | 3.46 | % | 3.00 | % | 3.44 | % | |||||||
| Net<br> interest margin (TEY) (Non-GAAP) | 3.31 | % | 3.29 | % | 3.52 | % | 3.93 | % | 3.71 | % | 3.37 | % | 3.66 | % | |||||||
| Adjusted<br> net interest margin (TEY) (Non-GAAP) | 3.28 | % | 3.28 | % | 3.47 | % | 3.61 | % | 3.65 | % | 3.34 | % | 3.60 | % | |||||||
| EFFICIENCY<br> RATIO (6) | |||||||||||||||||||||
| Noninterest<br> expense (GAAP) | $ | 51,081 | $ | 49,727 | $ | 48,785 | $ | 49,697 | $ | 47,746 | $ | 149,593 | $ | 140,319 | |||||||
| Net<br> interest income (GAAP) | $ | 55,255 | $ | 53,205 | $ | 56,810 | $ | 65,218 | $ | 60,769 | $ | 165,270 | $ | 165,902 | |||||||
| Noninterest<br> income (GAAP) | 26,593 | 32,520 | 25,842 | 21,219 | 21,095 | 84,955 | 59,510 | ||||||||||||||
| Total<br> income | $ | 81,848 | $ | 85,725 | $ | 82,652 | $ | 86,437 | $ | 81,864 | $ | 250,225 | $ | 225,412 | |||||||
| Efficiency<br> ratio (noninterest expense/total income) (Non-GAAP) | 62.41 | % | 58.01 | % | 59.02 | % | 57.50 | % | 58.32 | % | 59.78 | % | 62.25 | % | |||||||
| (1) | Adjusted<br> net income, adjusted earnings per common share, adjusted return on average assets and average<br> equity are non-GAAP financial measures. The Company's management believes that these measurements<br> are important to investors as they exclude non-core or non-recurring income and expense items,<br> therefore, they provide a more realistic run-rate for future periods. In compliance with<br> applicable rules of the SEC, these non-GAAP measures are reconciled to net income, which<br> is the most directly comparable GAAP financial measure. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (2) | Non-core<br> or nonrecurring items (post-tax) are calculated using an estimated effective federal tax<br> rate of 21% with the exception of acquisition costs which have an estimated effective federal<br> tax rate of 13.62%. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (3) | The<br> CECL Day 2 provision for credit losses on acquired non-PCD loans and OBS exposures resulted<br> from the Guaranty Bank acquisition on April 1, 2022. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (4) | Interest<br> earned and yields on nontaxable securities and loans are determined on a tax equivalent basis<br> using a 21% effective federal tax rate. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (5) | Net<br> interest margin (TEY) is a non-GAAP financial measure. The Company's management<br> utilizes this measurement to take into account the tax benefit associated with certain loans<br> and securities. It is also standard industry practice to measure net interest<br> margin using tax-equivalent measures. In compliance with applicable rules<br> of the SEC, this non-GAAP measure is reconciled to net interest income, which is the most<br> directly comparable GAAP financial measure. In addition, the Company calculates<br> net interest margin without the impact of acquisition accounting net accretion as this can<br> fluctuate and it's difficult to provide a more realistic run-rate for future periods. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (6) | Efficiency<br> ratio is a non-GAAP measure. The Company's management utilizes this ratio to compare<br> to industry peers. The ratio is used to calculate overhead as a percentage of<br> revenue. In compliance with the applicable rules of the SEC, this non-GAAP measure is reconciled<br> to noninterest expense, net interest income and noninterest income, which are the most directly<br> comparable GAAP financial measures. | ||||||||||||||||||||
| --- | --- |
13