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QH

QCR HOLDINGS INC (QCRH)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered solid earnings with diluted EPS of $1.71 and adjusted EPS of $1.73, driven by NIM expansion (TEY +4 bps to 3.46%) and stronger capital markets revenue; EPS beat Wall Street by $0.14 (1.73 vs 1.59*) while “revenue” (SPGI definition) missed by ~$14.6M (actual $80.15M* vs $94.78M*) .
  • Management reaffirmed capital markets revenue at $50–$60M over the next four quarters and guided Q3 capital markets revenue to $13–$16M; Q3 NIM (TEY) is guided to flat to +4 bps, with Q3 noninterest expense guided higher to $52–$55M to support the digital transformation and expected activity .
  • Asset quality remained excellent: NPAs fell 11% QoQ to 0.46% of assets; higher net charge-offs were tied to previously fully reserved credits; TCE/TA rose 22 bps to 9.92%, CET1 to 10.43%, supporting optionality for buybacks later this year as regulatory and GAAP capital re-align with the next securitization .
  • Strategic catalysts: LIHTC pipeline normalizing (two late-Q2 deals slipped into July), planned ~$350M LIHTC securitization in early 2026 with sale of the B piece to lift CET1 (~40 bps), and calling/replacing $70M of sub-debt in September at a “low 7%” fixed rate .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and NII growth: “NIM TEY increased four basis points… at the top of our guidance range,” with Q2 net interest income up to $62.1M; management expects Q3 NIM TEY to be static to +4 bps assuming no Fed cuts .
  • Capital markets recovery: Q2 capital markets revenue rose 51% QoQ to $9.9M; guidance reaffirmed at $50–$60M over the next four quarters and Q3 guided to $13–$16M as pipeline strengthens (LIHTC normalization underway) .
  • Credit metrics and capital: NPAs declined $5.5M QoQ to 0.46% of assets; TCE/TA improved 22 bps to 9.92%, CET1 rose to 10.43%, and total RBC to 14.26% on solid earnings .

What Went Wrong

  • Operating costs ticked up sequentially: Noninterest expense rose to $49.6M (largely variable comp and data/professional tied to digital transformation); Q3 expense guidance increased to $52–$55M .
  • SPGI “revenue” misses versus consensus: Despite solid fundamentals, SPGI-defined revenue was below consensus in each of the last three quarters (see tables), even as EPS beat; this creates a mixed headline vs estimates [GetEstimates]*.
  • Criticized loans increased 10 bps QoQ to 2.16% of loans due to one ag-related borrower downgrade (well-collateralized at ~1.4x, expected to exit), and net charge-offs rose, reflecting charge-offs of previously reserved m2 Equipment Finance credits .

Financial Results

Headline vs. Estimates (SPGI-based)

MetricQ4 2024Q1 2025Q2 2025
Diluted EPS (Actual, $)$1.77 $1.52 $1.71
Consensus EPS Mean ($)*1.7625*1.512*1.59*
EPS Surprise ($)*+0.17*+0.02*+0.14*
Revenue (SPGI Actual, $M)*$86.68*$72.64*$80.15*
Revenue Consensus ($M)*$99.99*$94.26*$94.78*
Revenue Surprise ($M)*-$13.20*-$21.62*-$14.63*
# EPS Estimates*4*5*5*
# Revenue Estimates*3*4*3*

Values with asterisks retrieved from S&P Global.

Company P&L (GAAP)

MetricQ4 2024Q1 2025Q2 2025
Net Interest Income ($M)$61.20 $59.99 $62.08
Noninterest Income ($M)$30.63 $16.89 $22.12
Total Income ($M)$91.83 $76.88 $84.20
Provision for Credit Losses ($M)$5.15 $4.23 $4.04
Noninterest Expense ($M)$53.50 $46.54 $49.58
Net Income ($M)$30.23 $25.80 $29.02
Diluted EPS ($)$1.77 $1.52 $1.71
Adjusted Diluted EPS ($)$1.93 $1.53 $1.73

Operating Metrics & KPIs

MetricQ4 2024Q1 2025Q2 2025
NIM (TEY) %3.43% 3.42% 3.46%
NIM %2.95% 2.95% 2.97%
Efficiency Ratio %58.26% 60.54% 58.89%
ROAA % (annualized)1.34% 1.14% 1.27%
Capital Markets Revenue ($M)$20.55 $6.52 $9.87
Wealth Mgmt Revenue ($M)$4.78 $4.94 $4.65
Loans HFI (Period End, $B)$6.78 $6.82 $6.92
Deposits (Period End, $B)$7.06 $7.34 $7.32
TCE/TA %9.55% 9.70% 9.92%
NPAs / Total Assets %0.50% 0.53% 0.46%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIM (TEY)Q3 2025Q2 guide: static to +4 bps (from Q1 call) Static to +4 bps, assuming no Fed cuts Maintained
Capital Markets RevenueNext 4 quarters$50–$60M (reiterated prior) Reaffirmed $50–$60M Maintained
Capital Markets RevenueQ3 2025—$13–$16M New
Noninterest ExpenseQ3 2025Q2 guide $50–$53M $52–$55M (includes digital transformation costs) Raised
Gross Loan GrowthH2 2025— (Q1 suspended full-year; Q4 had FY gross 8–10%) 8–10% (gross) in H2 New/Refined
Effective Tax RateQ3 20256–8% for Q2 guide 6–8% for Q3 Maintained
Subordinated DebtSept 2025—Call/replace $70M in Sept at “low 7%” fixed; retain Tier 2 New
DividendQ2 2025Prior $0.06/share (Feb)$0.06/share payable July 3, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
NIM trajectory & rate sensitivityAdjusted NIM (TEY) +6 bps in Q4; guided Q1 to static to +5 bps Q2 NIM (TEY) +4 bps to 3.46%; guide Q3 static to +4 bps; 25 bps Fed cut adds ~2–3 bps NIM and $1.2–$2.0M NII Improving/slightly up
LIHTC & capital marketsStrong Q4; Q1 slowdown on macro, guided normalization ahead Q2 revenue +51% QoQ; two late-Q2 deals slipped into July; reaffirm $50–$60M/next 4 qtrs; Q3 $13–$16M Normalizing upward
Digital transformationInvestments cited in Q4/Q1 Consumer online banking migrated; core unification targeted H1’27 for efficiency gains Progressing
Deposits & fundingQ4 reduced deposit costs; Q1 core deposits +$332M (20% annualized) Q2 avg deposits +$72M QoQ; CDs $350M maturing Q3 with ~30 bps lower rates expected Improving funding mix/cost
Credit quality & m2 runoffQ4 NPAs rose on 3 loans; Q1 NPAs improved via payoff Q2 NPAs down 11% QoQ; m2 charge-offs from previously reserved credits; criticized up due to one ag loan (well-collateralized) Strong/stable
Capital optimizationCapital building in Q4 Plan to call/replace $70M sub-debt; early-2026 ~$350M securitization with B-piece sale to lift CET1; buyback optionality under evaluation Proactive/constructive

Management Commentary

  • “We delivered strong second quarter results highlighted by a significant increase in net interest income… as well as improved capital markets revenue, and disciplined noninterest expense management.” — Todd Gipple, CEO .
  • “Our NIM TEY increased four basis points… Looking ahead, we anticipate continued margin expansion and are guiding to an increase in third quarter NIM TEY in a range from static to an increase of four basis points, assuming no Federal Reserve rate cuts.” — Nick Anderson, CFO .
  • “Given the strengthened pipeline, we are reaffirming our guidance for Capital Markets revenue to be in a range of $50 to $60 million for the next four quarters… expect capital markets revenue for the third quarter to be… $13 to $16 million.” — Todd Gipple .
  • “We are nearly halfway through our digital transformation… preparing for the core system conversion… fully implemented in the first half of 2027, positioning us for improved operating leverage.” — Todd Gipple .

Q&A Highlights

  • Margin trajectory and rate sensitivity: Q3 NIM (TEY) guided flat to +4 bps; a 25 bps cut implies ~2–3 bps margin expansion and ~$1.2–$2.0M NII, with CD repricing tailwinds (Q3 ~$350M maturing at 4.30%, ~30 bps down) .
  • LIHTC securitization strategy: Next deal targeted for early 2026 at ~$350M “floor,” selling A and B tranches; expected at least breakeven P&L on execution and ~40 bps CET1 lift; prefer fewer, larger transactions for better economics .
  • Wealth management momentum: Double-digit (≈10%) growth expected; 234 new relationships and ~$0.5B new AUM in 1H; AUM at ~$6.7B and growing .
  • Capital deployment: With TCE at 9.92% and CET1 at 10.43%, optionality for buybacks is improving as GAAP and regulatory capital re-align post next securitization; evaluating dividends vs buybacks in 2H .
  • Credit details: m2 Equipment Finance charge-offs reflected previously reserved NPAs; criticized loans up due to one ag-related credit (1.4x collateral) expected to exit; m2 portfolio runoff projected ~$32M in Q3 and ~$28M in Q4 .

Estimates Context

  • Q2 EPS beat: $1.73 vs $1.59 consensus (+$0.14); Q1 beat by $0.02; Q4 beat by $0.17, showing consistent EPS outperformance despite revenue misses under SPGI’s definition [GetEstimates]*.
  • Q2 revenue (SPGI): $80.15M actual vs $94.78M consensus (−$14.63M); similar misses in Q1 and Q4 suggest continued definitional differences vs company-reported “total income” (NII + noninterest income). Estimates may need to better reflect mix (NIM expansion, LIHTC revenue cadence, tax rate normalization) [GetEstimates]* .

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • EPS quality and consistency are strong: earnings leverage from NIM expansion, disciplined expenses, and growing capital markets revenue offset SPGI revenue headline misses [GetEstimates]*.
  • Near-term catalysts: Q3 capital markets revenue normalization ($13–$16M) and static-to-up NIM TEY should support sequential EPS resilience .
  • Capital actions de-risk and add flexibility: calling $70M sub-debt (low-7% fixed) and an early-2026 securitization with B-piece sale should lift CET1 and reopen buyback optionality .
  • Credit remains a support: NPAs down to 0.46% of assets; m2 runoff and charge-offs largely from previously reserved credits; criticized uptick tied to one well-collateralized ag credit .
  • Watch expense trajectory: Q3 noninterest expense guide to $52–$55M reflects digital transformation and higher activity; monitor execution vs guide .
  • Strategic mix: LIHTC durability, wealth management growth, and digital platform modernization underpin medium-term operating leverage .
  • Risk checks: Funding cost path (CD repricing tailwinds), macro/legislative impacts on affordable housing timing, and crossing $10B asset “Durbin” impact (~$3M interchange headwind) are on management’s radar with partial offsets identified .