News Details

Second Quarter 2021 Highlights

• Record net income of $22.3 million, or $1.39 per diluted share
• Adjusted net income (non-GAAP) of $22.5 million, or $1.40 per diluted share
• Net Interest Margin (“NIM”) increased by 2 basis points and Adjusted NIM (TEY)(non-GAAP) increased by 4 bps to 3.28% and 3.44%, respectively
• Adjusted net interest income (non-GAAP) increased $1.9 million, or 4.4%
• Annualized core loan and lease growth (non-GAAP) of 14.9% for the quarter, excluding SBA Paycheck Protection Program (“PPP”) loans
• Annualized core deposit growth of 4.9% for the quarter
• Allowance for credit losses (“ACL”) to total loans/leases of 1.85%, excluding PPP loans (non-GAAP)
• Nonperforming assets improved by 28% for the quarter and now represent only 0.17% of total assets

MOLINE, Ill., July 26, 2021 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ: QCRH) (the “Company”) today announced record net income of $22.3 million and diluted earnings per share (“EPS”) of $1.39 for the second quarter of 2021, compared to net income of $18.0 million and diluted EPS of $1.12 for the first quarter of 2021.

The Company reported adjusted net income (non-GAAP) of $22.5 million and adjusted diluted EPS (non-GAAP) of $1.40 for the second quarter of 2021, compared to adjusted net income (non-GAAP) of $18.6 million and adjusted diluted EPS (non-GAAP) of $1.16 for the first quarter of 2021. For the second quarter of 2020, net income and diluted EPS were $13.7 million and $0.86, respectively, and adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) were $14.0 million and $0.88, respectively.

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Adjusted non-GAAP measurements of financial performance exclude non-recurring 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 delivered a record quarter of net income, driven by continued strong loan growth, an expanded net interest margin, improved asset quality and careful noninterest expense management,” said Larry J. Helling, Chief Executive Officer. "We successfully deployed our liquidity with another quarter of strong loan and lease production, while maintaining disciplined underwriting. Higher average loan balances, combined with an improved net interest margin, enabled us to generate a solid increase in net interest income from the prior quarter.”

Annualized Loan and Lease Growth of 14.9% for the Quarter, excluding PPP Loans (non-GAAP)

During the second quarter of 2021, the Company’s core loans and leases, excluding PPP loans, increased $153.0 million to a total of $4.3 billion. Core loan and lease growth during the quarter was 14.9% on an annualized basis and was funded by the Company’s excess liquidity and core deposit growth. Core deposits (excluding brokered deposits) increased by $57.0 million during the quarter. The Company’s wholesale funding portfolio has been reduced to predominately subordinated debt that qualifies as regulatory capital.

“Our continued outsized loan growth for the quarter was driven by strength in both our Specialty Finance Group and our core commercial lending and leasing business,” added Helling. “Given the robust first half results, combined with our current pipeline, we are targeting continued strong organic loan growth for the full year 2021 of between 10% and 12%, which is higher than our long-term goal of 9%.”  

Net Interest Income of $43.5 million

Net interest income for the second quarter of 2021 totaled $43.5 million, compared to $42.0 million for the first quarter of 2021 and $41.0 million for the second quarter of 2020. Adjusted net interest income (non-GAAP) during the quarter was $45.7 million, an increase of $1.9 million, or 4.4%, from the prior quarter, primarily due to an increase in adjusted net interest margin combined with the strong loan/lease growth. Adjusted net interest income (non-GAAP) was $41.9 million for the second quarter of 2020. Acquisition-related net accretion totaled $291 thousand for the second quarter of 2021, down from $504 thousand in the first quarter of 2021 and $736 thousand for the second quarter of 2020.

In the second quarter, reported NIM was 3.28% and, on a tax-equivalent yield basis (non-GAAP), NIM was 3.46%, as compared to 3.26% and 3.43% in the first quarter of 2021, respectively. Adjusted NIM (non-GAAP), which excludes acquisition-related net accretion was 3.44%, up 4 basis points from the first quarter. The increase in Adjusted NIM (non-GAAP) during the quarter was due to a decline of 3 basis points in the total cost of interest-bearing funds (due to both mix and rate), and a 1 basis point increase in the yield on earning assets (adjusted for acquisition-related net accretion).

“We expanded our adjusted net interest margin again during the second quarter driven by lower deposit costs. Additionally, our average yield on interest earning assets was up slightly during the quarter. Our talented team of bankers continues to have success implementing our relationship-based model, leading to improved cost of funds and minimizing loan yield reductions in this highly competitive environment. With our strong loan and lease growth and margin expansion, net interest income grew by over 4% in the quarter when excluding the impact of acquisition accounting,” said Todd A. Gipple, President, Chief Operating Officer and Chief Financial Officer.

Noninterest Income of $19.3 million

Noninterest income for the second quarter of 2021 totaled $19.3 million, compared to $23.5 million for the first quarter of 2021. The decrease was primarily due to a $4.0 million reduction in capital markets revenue from the prior quarter as a few of the Company’s swap loans that were scheduled to close in the second quarter will now close in the third quarter. Wealth management revenue was $3.9 million for the quarter, up $146 thousand from the first quarter.

“Swap fee income/capital markets revenue totaled $9.6 million for the quarter, which was lower than our guidance. Several of our swap loans that were scheduled to close in the second quarter were temporarily delayed due to factors outside of the Company’s control. Most of those loans subsequently closed in July, where we have experienced very strong activity and as of July 23rd we have already generated $10 million in swap fees this month. The current pipeline of swap loans remains healthy and we believe this source of revenue is sustainable long-term,” added Gipple. “As a result, we expect our third quarter swap fee income/capital markets revenue will be at the upper end of our guidance range of $14 to $18 million.”

Noninterest Expenses of $35.7 million

Noninterest expense for the second quarter of 2021 totaled $35.7 million, compared to $37.2 million for the first quarter of 2021 and $33.1 million for the second quarter of 2020. The linked-quarter decline was primarily due to lower salary and benefits expense of $1.8 million, driven by lower incentive compensation and commission expense in the quarter due to the lower capital markets revenue income. Partially offsetting this decrease was a $259 thousand increase in professional and data processing fees and a $226 thousand increase in advertising and marketing expense, both returning to more normalized levels from their lower levels in the first quarter.

Asset Quality Remains Strong and NPAs Improved

Nonperforming assets (“NPAs”) totaled $10.1 million at the end of the second quarter, a decrease of $4.0 million from the first quarter of 2021. The decrease was primarily due to a reduction in nonaccrual loans as a number of loans returned to performing status or were either monetized or were charged-off during the quarter. The ratio of NPAs to total assets improved to 0.17% on June 30, 2021, compared to 0.25% on March 31, 2021, and 0.22% on June 30, 2020. In addition, the Company’s criticized loans and classified loans to total loans and leases decreased to 2.97% and 1.80%, respectively, from 3.17% and 1.95% as of March 31, 2021.

The Company did not record a provision for credit losses in the second quarter of 2021, primarily due to continued strong asset quality and a reduction in nonperforming loans. The provision for credit losses totaled $6.7 million for the first quarter of 2021. As of June 30, 2021, the ACL on total loans/leases was 1.79%, compared to 1.88% as of March 31, 2021. Excluding PPP loans of $148 million, the ACL to total loans/leases as of June 30, 2021, was 1.85% (non-GAAP).

Continued Strong Capital Levels

As of June 30, 2021, the Company’s total risk-based capital ratio was 14.77%, the common equity tier 1 ratio was 10.57% and the tangible common equity to tangible assets ratio (non-GAAP) was 9.55%. By comparison, these respective ratios were 14.85%, 10.55% and 9.42% as of March 31, 2021. During the second quarter, the Company resumed share repurchases under its existing share repurchase program and purchased and retired 100,000 shares at an average price of $48.00 per share.

Focus on Three Strategic Long-Term Initiatives

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

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

Conference Call Details

The Company will host an earnings call/webcast tomorrow, July 27, 2021, 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 August 10, 2021. The replay access information is 877-344-7529 (international 412-317-0088); access code 10158303. A webcast of the teleconference can be accessed at the Company’s News and Events page at www.qcrh.com. An archived version of the webcast will be available at the same location shortly after the live event has ended.

About Us

QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company serving the Quad Cities, Cedar Rapids, Cedar Valley, Des Moines/Ankeny and Springfield communities through its wholly-owned subsidiary banks. The banks provide full-service commercial and consumer banking and trust and wealth management services. Quad City Bank & Trust Company, based in Bettendorf, Iowa, commenced operations in 1994, Cedar Rapids Bank & Trust Company, based in Cedar Rapids, Iowa, commenced operations in 2001, Community State Bank, based in Ankeny, Iowa, was acquired by the Company in 2016, and Springfield First Community Bank, based in Springfield, Missouri, was acquired by the Company in 2018. Additionally, the Company serves the Waterloo/Cedar Falls, Iowa community through Community Bank & Trust, a division of Cedar Rapids Bank & Trust Company. Quad City Bank & Trust Company offers equipment loans and leases to businesses through its wholly-owned subsidiary, m2 Equipment Finance, LLC, based in Milwaukee, Wisconsin, and also provides correspondent banking services. The Company has 23 locations in Iowa, Missouri, Wisconsin and Illinois. As of June 30, 2021, the Company had approximately $5.8 billion in assets, $4.4 billion in loans and $4.7 billion in deposits. For additional information, please visit the Company’s website at www.qcrh.com.

Special Note Concerning Forward-Looking Statements. This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “predict,” “suggest,” “appear,” “plan,” “intend,” “estimate,” ”annualize,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.
        
A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements. These factors include, among others, the following: (i) the strength of the local, state, national and international economies (including the impact of the new presidential administration); (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, 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, the Securities Exchange Commission or the PCAOB, including FASB’s CECL impairment standards; (iv) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business; (v) changes in interest rates and prepayment rates of the Company’s assets (including the impact of LIBOR phase-out); (vi) increased competition in the financial services sector and the inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (viii) unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated; (ix) the loss of key executives or employees; (x) changes in consumer spending; (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; and (xiii) 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.