QCR Holdings, Inc. Announces Net Income of $23.6 Million for the First Quarter of 2022

First Quarter 2022 Highlights

• Net income of $23.6 million, or $1.49 per diluted share
• Adjusted net income (non-GAAP) of $24.4 million, or $1.54 per diluted share
• Net Interest Margin (“NIM”) of 3.30% and Adjusted NIM (TEY)(non-GAAP) of 3.50%
• Annualized loan and lease growth of 14.6% for the quarter, excluding SBA Paycheck Protection Program (“PPP”) loans (non-GAAP)
• Nonperforming assets improved for the quarter and represented a record low of 0.04% of total assets
• Allowance for credit losses (“ACL”) to total loans/leases of 1.55%

MOLINE, Ill., April 26, 2022 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ: QCRH) (the “Company”) today announced net income of $23.6 million and diluted earnings per share (“EPS”) of $1.49 for the first quarter of 2022, compared to net income of $27.0 million and diluted EPS of $1.71 for the fourth quarter of 2021.

Adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) for the first quarter of 2022 were $24.4 million and $1.54, respectively. For the fourth quarter of 2021, adjusted net income (non-GAAP) was $27.4 million and adjusted diluted EPS (non-GAAP) was $1.73. For the first quarter of 2021, adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) were $18.6 million and $1.16, respectively.

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 another solid quarter of net income, driven by exceptional loan growth, an expanding net interest margin, well managed expenses and continued strong credit quality,” said Larry J. Helling, Chief Executive Officer. “Building on the momentum we established last year, we generated robust lending activity again in the first quarter with annualized loan growth of 14.6%.”

“On April 1st, we successfully completed the acquisition of Guaranty Federal Bancshares, Inc and merged Guaranty Bank into Springfield First Community Bank. We’re eager to continue to grow in the vibrant southwest Missouri region and we look forward to serving our clients and our communities as one bank and one team.”

Annualized Loan and Lease Growth of 14.6% for the Quarter, excluding PPP Loans (non-GAAP)

During the first quarter of 2022, the Company’s loans and leases increased $147.7 million to a total of $4.8 billion. Excluding PPP loans (non-GAAP), loan and lease growth during the quarter was $169.6 million or 14.6% on an annualized basis, funded by overnight advances and some excess liquidity. Core deposits (excluding brokered deposits) decreased by $83.3 million during the quarter, driven by typical seasonality with our commercial client base and further rotation from time deposits to interest-bearing demand deposits.

“Our accelerated loan growth in the first quarter was driven by strength in our traditional commercial lending, leasing and Specialty Finance business,” added Helling. “This is a testament to the economic vibrancy in our markets as well as our relationship-based community banking model, emphasizing the importance of strong relationships with new and existing clients. Given our current pipeline, we are now increasing our targeted loan growth to between 10% and 12% for the full year.”

Net Interest Income of $45.7 million

Net interest income for the first quarter of 2022 totaled $45.7 million, compared to $46.5 million for the fourth quarter of 2021 and $42.0 million for the first quarter of 2021. Adjusted net interest income (non-GAAP) during the quarter was $48.5 million, a decrease of $0.7 million, or 1.4%, from the prior quarter, entirely due to lower sequential PPP loan forgiveness fees. Adjusted net interest income (non-GAAP) was $43.7 million for the first quarter of 2021. Acquisition-related net accretion totaled $118 thousand for the first quarter of 2022, up from $88 thousand in the fourth quarter of 2021 and down from $504 thousand for the first quarter of 2021.

In the first quarter, NIM was 3.30% and tax-equivalent yield (“TEY”) basis (non-GAAP) NIM was 3.50%, compared to 3.29% and 3.50% in the prior quarter, respectively. Adjusted NIM (non-GAAP), which excludes acquisition-related net accretion, was 3.50%, up 0.01% from the prior quarter. The increase in Adjusted NIM (non-GAAP) during the quarter was primarily due to a rotation of excess liquidity into higher average loan/lease balances, which grew $119.4 million. In addition, adjusted NIM also benefited from a decline of 1 basis point in the total cost of interest-bearing funds (due to both mix and rate).

“Excluding the impact of PPP fees, we expanded our NIM during the first quarter by 4 basis points, supported by a favorable mix in our interest earning assets, lower deposit costs and stable loan yields in this highly competitive lending environment,” said Todd A. Gipple, President, Chief Operating Officer and Chief Financial Officer. “With our asset sensitive balance sheet, we expect continued NIM expansion in this rising rate environment.”

Noninterest Income of $15.6 million

Noninterest income for the first quarter of 2022 totaled $15.6 million, compared to $23.0 million for the fourth quarter of 2021. The decrease was primarily due to a $6.6 million decline in capital markets revenue from swap fees due to client project delays caused by ongoing supply chain disruptions and inflationary pressures. Wealth management revenue was $4.0 million for the quarter, up slightly from the fourth quarter of 2021.

“Capital markets revenue totaled $6.4 million for the quarter, which was below our guidance due to delays in funding low-income housing tax credit projects,” added Gipple. “Capital markets revenue has averaged approximately $13 million per quarter for the last three years. Given our solid pipeline of transactions, but recognizing the project delays caused by ongoing supply chain disruptions and inflationary pressures, we are expecting this source of fee income to be in a range of $13 to $15 million per quarter for the remainder of 2022.”

Noninterest Expenses of $38.3 million

Noninterest expense for the first quarter of 2022 totaled $38.3 million, including acquisition related costs of $1.9 million, compared to $39.4 million for the fourth quarter of 2021 and $37.2 million for the first quarter of 2021. The linked-quarter decrease was due to lower salary and benefits expense of $1.2 million, the result of a decrease in variable compensation related to the lower than expected capital markets production. In addition, lower advertising and marketing expenses were partially offset by higher acquisition costs.  

Asset Quality Remains Excellent

Nonperforming assets (“NPAs”) totaled $2.7 million at the end of the first quarter, an improvement over the fourth quarter of 2021. The ratio of NPAs to total assets improved to 0.04% on March 31, 2022, compared to 0.05% on December 31, 2021, and 0.25% on March 31, 2021. In addition, the Company’s criticized loans and classified loans to total loans and leases decreased to 2.45% and 1.13%, respectively, from 2.47% and 1.14% as of December 31, 2021.

The Company recorded a $2.9 million negative provision for credit losses in the first quarter of 2022, primarily due to continued strong asset quality and a corresponding reduction in the qualitative factor related to the pandemic. As of March 31, 2022, the ACL on total loans/leases was 1.55%, compared to 1.68% as of December 31, 2021.

Continued Strong Capital Levels

As of March 31, 2022, the Company’s total risk-based capital ratio was 14.63%, the common equity tier 1 ratio was 11.38% and the tangible common equity to tangible assets ratio (non-GAAP) was 9.60%. By comparison, these respective ratios were 14.77%, 11.46% and 9.87% as of December 31, 2021. The Company’s accumulated other comprehensive income (“AOCI”) declined $27.3 million during the first quarter due to a decrease in the value of its available for sale securities portfolio and certain derivatives resulting from sharp increases in interest rates during the quarter. While AOCI and the resumption of the share repurchase program did reduce the Company’s tangible common equity, solid earnings partially offset this impact, which led to a decline of only 1.2% in tangible book value.  

The Company temporarily suspended its share repurchase program due to the Guaranty acquisition. The Company resumed its share repurchase program after Guaranty shareholder approval of the merger with the Company and purchased and retired 77,500 shares at an average price of $56.98 per share. The Company has approximately 328,000 shares remaining on its authorized repurchase program.

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:

• Generate 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 annual operating expense growth to 5% per year.
  

Conference Call Details

The Company will host an earnings call/webcast tomorrow, April 27, 2022, 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 May 4, 2022. The replay access information is 877-344-7529 (international 412-317-0088); access code 3884128. 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, 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 Milwaukee, Wisconsin, and also provides correspondent banking services. Including the Guaranty Bank acquisition, the Company now has 40 locations in Iowa, Missouri, Wisconsin and Illinois. As of March 31, 2022, the Company had approximately $6.2 billion in assets, $4.8 billion in loans and $4.8 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 effects of inflationary pressures and supply chain constraints); (ii) the economic impact of any future terrorist threats and attacks, widespread disease or pandemics (including the COVID-19 pandemic in the United States), acts of war or other threats thereof, or other adverse external events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events; (iii) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies, the FASB or the PCAOB; (iv) changes in local, state and federal laws, regulations and governmental policies concerning the Company’s general business; (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.