QCR Holdings, Inc. Announces Net Income of $1.7 Million for Second Quarter of 2010

MOLINE, Ill., July 26, 2010 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (Nasdaq:QCRH) today announced net income attributable to QCR Holdings, Inc. ("net income") of $1.7 million for the quarter ended June 30, 2010, or diluted earnings per share for common stockholders of $0.15 after preferred stock dividends of $1.0 million. By comparison, for the quarter ended March 31, 2010, the Company reported net income of $1.3 million, or diluted earnings per share of $0.06 after preferred stock dividends of $1.0 million. For the second quarter of 2009, the Company reported a net loss of $820 thousand, or diluted earnings per share of ($0.42) after preferred stock dividends of $1.1 million. For the six months ended June 30, 2010, the Company reported net income of $3.0 million compared to a net loss of $736 thousand for the same period in 2009. 

The Company's net interest income for the current quarter totaled $12.5 million, a slight decrease from the prior quarter, and an increase of 4% over the second quarter of 2009. For the six months ended June 30, 2010, the Company reported net interest income of $25.4 million which is a 6% increase over the same period of 2009. Provision for loan/lease losses totaled $1.4 million for the second quarter of 2010, a decrease of $227 thousand from the prior quarter, and a decrease of $3.5 million from the second quarter of 2009. Further, the Company's provision for loan/lease losses for the first six months of 2010 totaled $3.0 million, a reduction of $6.3 million from the same period in 2009. 

"This past week President Obama signed into law perhaps the most significant financial reform since the Great Depression," stated Douglas M. Hultquist, President and Chief Executive Officer. "While the provisions of the Act receiving the most public attention have generally been those more likely to affect larger institutions, the Act also contains many provisions which will affect smaller institutions such as ours. Many aspects of the Act are subject to future rulemaking, making it difficult to anticipate its overall financial impact on the Company at this time. However, it is possible that certain of the Act's provisions may curtail our revenue opportunities and increase our operating costs in the future. As we continue to operate in this challenging economic and regulatory environment, we will maintain our persistent focus on asset quality, liquidity, and capital. And, it will be critical to preserve our strong commitment to our relationship-based business model."

Nonperforming assets at June 30, 2010 were $46.9 million, up $4.0 million, or 9%, from $42.9 million at March 31, 2010. Nonperforming assets at the end of the quarter increased to 2.56% of total assets versus 2.34% of total assets at March 31, 2010. The large majority of the Company's nonperforming assets consist of nonaccrual loans/leases and other real estate owned. With net charge-offs of $1.5 million for the current quarter and the declining trend in provision for loan/lease losses, the Company's allowance for loan/lease losses to total loans/leases decreased from 1.85% at March 31, 2010 to 1.78% at June 30, 2010. 

Mr. Hultquist added, "Although our level of nonperforming assets remains less than many of our peers, we take little consolation and continue to place significant emphasis on improving the quality of our loan/lease portfolio and all assets. However, despite the increase in nonperforming loans/leases in the second quarter, we experienced a decrease in our allowance for estimated losses on loans/leases for the first time in several years. The increase in nonperforming loans/leases consisted of a few commercial credits. Management thoroughly reviewed these credits and identified a strong collateral position that didn't require significant additional specific reserves, or we had already specifically reserved adequate amounts in prior quarters while the loan was still performing."

During the second quarter of 2010, the Company's total assets of $1.84 billion remained relatively unchanged; however, there was some movement in the mix of assets and liabilities. The Company continued to grow its securities portfolio with an increase of $37.3 million, or 10%. Partially offsetting this growth, the Company experienced a net decrease in total loans/leases of $27.8 million, or 2%. Despite continued expansion of the Company's noninterest-bearing deposits, total deposits declined $29.0 million, or 3%, during the current quarter. 

"We continue to place a strong emphasis on quality growth within our loan/lease portfolio while maintaining our strong liquidity position," stated Todd A. Gipple, Executive Vice President, Chief Operating Officer, and Chief Financial Officer. "We originated $85.5 million of new loans/leases to new and existing customers during the current quarter; however, this was outpaced by payments and maturities as we continued to experience weakened loan/lease demand in our markets. Despite the net decline in deposits during the quarter, we believe our liquidity position remains strong with the diversity and adequacy of our various funding sources."

Successful Completion of $25.0 Million Private Placement

As previously disclosed, the Company successfully executed its private placement of $25.0 million in Series E Non-Cumulative Convertible Perpetual Preferred Stock on June 30, 2010. The private placement was fully subscribed and resulted in the exchange of $20.9 million of the Company's previously outstanding Series B and Series C Non-Cumulative Perpetual Preferred Stock and $4.1 million of new capital from cash investors. The Company's previously outstanding Series B and Series C Non-Cumulative Perpetual Preferred Stock carried stated dividend rates of 8.00% and 9.50%, respectively. All of the outstanding Series B and Series C shares were exchanged for newly issued Series E shares which carry a stated dividend rate of 7.00%. The primary goals of the transaction were:

• to provide $4.1 million of new capital to further strengthen the capital and liquidity positions of the Company,
• to reduce the preferred dividend cost in the short and long-term, and
• to provide a mechanism for a future conversion of the $25.0 million of preferred equity to common equity. 

"The Series E private placement is an important part of our long-term capital plan," stated Mr. Gipple. "We believe that the successful execution of this private placement indicates the strong confidence that our shareholders place in our Company and the relationship-based banking model that we have created in the Quad Cities, Cedar Rapids, and Rockford communities. We are committed to maintaining our very strong levels of capital, and increasing the common equity component of our capital structure, with a long-term capital plan that is focused on rewarding our common shareholders."

Rockford Bank & Trust Reports Net Income for Consecutive Quarters

Rockford Bank & Trust, a de novo bank opened in 2005, recognized net income after provision for loan losses and taxes of $285 thousand for the second quarter of 2010. This represents a slight increase in net income over the first quarter of 2010.   For the six months ended June 30, 2010, Rockford Bank & Trust reported net income of $566 thousand which compares favorably to the net loss of $1.3 million realized for the same period of 2009.

Results for the Company's primary subsidiaries for the second quarter of 2010 were as follows:

• Quad City Bank & Trust, the Company's first subsidiary bank which opened in 1994, had total consolidated assets of $1.0 billion at June 30, 2010, which was relatively unchanged from March 31, 2010. The bank's securities portfolio grew $24.3 million, or 10%, to $267.6 million at June 30, 2010. During the quarter, the bank's gross loans/leases experienced a net decline of $21.7 million, or 3%, as the economic downturn continued to weaken loan/lease demand. Despite continued expansion of the bank's noninterest-bearing deposits, the bank's total deposits decreased $26.4 million, or 4%, to $584.2 million at June 30, 2010. Partially offsetting this decline, the bank increased its short-term borrowings, including federal funds purchased and customer repurchase agreements. Quad City Bank & Trust realized year-to-date earnings of $3.1 million for the six months ended June 30, 2010, which is an increase of $638 thousand, or 26%, over the same period of 2009. 
• Cedar Rapids Bank & Trust, which opened in 2001, had total assets of $553.0 million at June 30, 2010, which was a slight decrease of 1% from March 31, 2010. During the second quarter, Cedar Rapids Bank & Trust grew its securities portfolio by 2% to $111.3 million. Offsetting this asset growth, the bank's federal funds sold position declined $12.0 million. As the economic downturn continued to weaken loan demand, Cedar Rapids Bank & Trust's loan portfolio remained nearly flat at $375.2 million. Deposits of $336.6 million reflected a decline of $6.7 million, or 2%, for the quarter. The bank realized year-to-date earnings of $1.7 million for the six months ended June 30, 2010, which nearly doubled the $888 thousand of net income from the same period of 2009. 
• Rockford Bank & Trust had total assets of $280.7 million at June 30, 2010, which was an increase of $9.3 million, or 3%, from March 31, 2010. The bank grew its securities portfolio by $10.4 million, or 30%, to $44.8 million during the second quarter. As the economic downturn continued to weaken loan demand, loans experienced a decline of $5.5 million, or 3%, during the second quarter of 2010. The bank's deposits increased $6.1 million, or 3%, to $205.1 million at June 30, 2010.    

QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company, which serves the Quad City, Cedar Rapids, and Rockford communities through its wholly owned subsidiary banks. Quad City Bank and Trust Company, which is based in Bettendorf, Iowa and commenced operations in 1994, Cedar Rapids Bank and Trust Company, which is based in Cedar Rapids, Iowa and commenced operations in 2001, and Rockford Bank and Trust Company, which is based in Rockford, Illinois and commenced operations in 2005, provide full-service commercial and consumer banking and trust and asset management services. Quad City Bank & Trust Company also engages in commercial leasing through its 80% owned subsidiary, m2 Lease Funds, LLC, based in Milwaukee, Wisconsin.

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 and national economy; (ii) the economic impact of any future terrorist threats and attacks, and the response of the United States to any such threats and attacks; (iii) changes in state and federal laws, regulations and governmental policies concerning the Company's general business; (iv) changes in interest rates and prepayment rates of the Company's assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the loss of key executives or employees; (viii) changes in consumer spending; (ix) unexpected results of our strategy to establish de novo banks in new markets; (x) unexpected outcomes of existing or new litigation involving the Company; and (xi) changes in accounting policies and practices. 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.