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QH

QCR HOLDINGS INC (QCRH)·Q4 2024 Earnings Summary

Executive Summary

  • QCR Holdings delivered a strong quarter: net income of $30.2M ($1.77 diluted EPS) and adjusted net income of $32.8M ($1.93 diluted EPS), with record quarterly net interest income of $61.2M and continued NIM expansion; capital markets revenue was $20.6M, including a $1.4M securitization gain .
  • Asset quality showed normalization: NPAs rose to $45.6M (0.50% of assets), but the largest NPA (~$9.7M/$10M) was paid off in mid-January, reducing pro forma NPAs to $35.9M (0.40% of assets) shortly after quarter end .
  • Guidance points to continued momentum: adjusted NIM (TEY) expected static to +5 bps in Q1’25 despite a 4 bps headwind from expiring interest-rate caps; capital markets swap-fee revenue guided to $50–$60M over the next 12 months; Q1’25 noninterest expense guided to $52–$55M; gross loan growth guided to 8–10% (net 1–3%) for 2025 .
  • Capital and liquidity strengthened: TCE/TA improved to 9.55%, CET1 to 10.03%; $4B total liquidity, $1.7B instantly accessible; uninsured and uncollateralized deposits at 19% of total; dividend of $0.06 declared for payment Jan 3, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Net interest income hit a quarterly record ($61.2M), with adjusted NIM (TEY) expanding 6 bps to 3.40% on lower funding costs and strong deposit betas; management expects further NIM improvement in Q1’25 (static to +5 bps) .
  • Capital markets revenue was strong at $20.6M, including a $1.4M LIHTC securitization gain; wealth management revenue increased to $4.8M (~25% annualized growth) on AUM growth and new client wins .
  • Capital and liquidity improved: TCE/TA rose 31 bps to 9.55%; CET1 reached 10.03%; available liquidity ~$4B with $1.7B instantly accessible; uninsured/uncollateralized deposits at 19% of total .
    • Quote: “We were successful in significantly reducing our cost of interest-bearing deposits... Our ability to aggressively react to the recent Fed interest rate cuts has contributed meaningfully to our NIM expansion.” — Todd Gipple .

What Went Wrong

  • NPAs increased to $45.6M (0.50% of assets) due to three loans in discrete industries; criticized/classified loan ratios rose modestly Q/Q (criticized to 2.34%, classified to 1.25%) .
  • Noninterest expense remained elevated at $53.5M (higher incentive comp and digital transformation costs), though efficiency ratio improved to 58.26% and adjusted efficiency to 56.25% .
  • The Q4 securitization gain ($1.4M) underperformed internal hopes ($2M floor) due to market pricing, prompting a pivot to one larger ($350M) 2025 deal to improve execution economics .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net Interest Income ($USD Millions)$55.736 $56.163 $59.722 $61.204
Noninterest Income ($USD Millions)$47.729 $30.889 $27.157 $30.625
Total Income ($USD Millions)$103.465 $87.052 $86.879 $91.829
Diluted EPS ($)$1.95 $1.72 $1.64 $1.77
NIM (TEY) (%)3.32 3.27 3.37 3.43
Adjusted NIM (TEY) (%)3.29 3.26 3.34 3.40
Efficiency Ratio (%)58.90 57.31 61.65 58.26
ROAA (%)1.54 1.33 1.24 1.34

Segment breakdown (Q4 2024):

SubsidiaryTotal Assets ($USD Thousands)Total Deposits ($USD Thousands)Total Loans & Leases ($USD Thousands)
Quad City Bank & Trust (incl. m2)$2,588,587 $2,126,566 $2,048,926
m2 Equipment Finance, LLC$310,915 N/A $320,237
Cedar Rapids Bank & Trust$2,614,570 $1,882,487 $1,761,467
Community State Bank$1,531,559 $1,256,938 $1,159,389
Guaranty Bank$2,342,958 $1,824,139 $1,814,622

Key KPIs:

KPIQ3 2024Q4 2024
NPAs ($USD Millions)$35.689 $45.554
NPAs / Total Assets (%)0.39% 0.50%
Provision for Credit Losses ($USD Millions)$3.484 $5.149
Capital Markets Revenue ($USD Millions)$16.290 $20.552
Wealth Mgmt Revenue ($USD Millions; trust + advisory)$4.499 (3.270 + 1.229) $4.776 (3.456 + 1.320)
Core Deposits Change ($USD Millions)+$166.3 +$75.6
Uninsured & Uncollateralized Deposits (% total)21% 19%
Available Liquidity ($USD Billions)N/A~$4.0; instantly accessible ~$1.7
TCE / TA (%)9.24% 9.55%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted NIM (TEY)Q1 2025N/AStatic to +5 bps; note −4 bps headwind from expiring interest-rate caps (net +4 to +9 bps before cap) New
Capital Markets Swap FeesNext 12 monthsN/A$50–$60M New
Noninterest ExpenseQ1 2025N/A$52–$55M (+~4% YoY) New
Loan Growth (Gross)FY 2025N/A8%–10% New
Loan Growth (Net)FY 2025N/A1%–3% (incl. planned securitization and m2 runoff) New
Effective Tax RateQ1 20258%–10% (prior tone)8%–10% reaffirmed Maintained
Securitization StrategyFY 2025Multiple deals p.a.One large (~$350M) tax-exempt LIHTC deal in late 2025 Strategic pivot
DividendQ4 2024 declaredN/A$0.06 per share payable Jan 3, 2025 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
NIM trajectory & betasAdjusted NIM (TEY) +2 bps Q/Q; deposit costs moderating Adjusted NIM (TEY) +8 bps; guided further Q4 expansion Adjusted NIM (TEY) +6 bps; Q1’25 static to +5 bps despite −4 bps cap; liability sensitive balance sheet Improving with deposit beta tailwind
Capital markets & LIHTC$17.8M revenue; strong pipeline $16.3M; continued strength; derivatives to protect capital $20.6M; $1.4M securitization gain; $50–$60M 12-mo outlook Solid; pivot to larger 2025 deal
Asset qualityNPAs 0.39%; criticized down Q/Q NPAs 0.39%; criticized improved; m2 charged-offs elevated NPAs 0.50%; three loans; largest NPA paid off mid-Jan; criticized up slightly Normalizing from low base
Liquidity & depositsModest deposit decline; liquidity $3.1B; uninsured deposits 18% Core deposits +$166M; uninsured 21% Core deposits +$75.6M; liquidity ~$4B; uninsured 19% Strengthening
Interest-rate hedgingN/A$410M notional derivative strategy to protect capital Derivative loss ~$3M in Q4 offset by ~$1.5M trading gains; strategy affirmed Active risk management
m2 Equipment FinanceN/ADecision to discontinue new originations; restructuring charges Portfolio ~$340M; 40% runoff ($120M) expected in next 12 months Runoff progressing

Management Commentary

  • “We delivered our strongest results of the year in the fourth quarter, generating record full year results... highlighted by significant growth in net interest income, driven by margin expansion, and robust loan growth.” — Larry J. Helling, CEO .
  • “Our adjusted NIM on a tax equivalent yield basis improved by 6 basis points to 3.40%... We were successful in significantly reducing our cost of interest-bearing deposits in the fourth quarter by 33 basis points.” — Todd A. Gipple, President & CFO .
  • “We expect our capital markets revenue from swap fees for the next twelve months to be in a range of $50 to $60 million.” — Todd A. Gipple .
  • “We anticipate gross loan growth between 8% and 10% for the full year 2025... targeting net loan growth between 1% and 3% for the year.” — Larry J. Helling .
  • “We remain committed to growing our regulatory capital, including maintaining our CET1 ratio above 10%.” — Todd A. Gipple .

Q&A Highlights

  • Swap fee cadence: Pipeline remains robust; Q1 often lighter seasonally; guidance $50–$60M for 2025 is conservative amid higher long-term rate headwinds .
  • Margin guidance detail: Q1’25 adjusted NIM (TEY) static to +5 bps; −4 bps from expiring caps fully in Q1; potential modest continued uplift in Q2+ depends on yield-curve slope; liability sensitivity (~$600M RSL > RSA) supports NIM in a cutting cycle .
  • Funding loan growth: Focus on core deposits; goal to lower loan-to-deposit ratio into low 90s over time; securitizations support liquidity and margin .
  • Expenses: Q1’25 guided $52–$55M; expectation to remain fairly static through 2025, reflecting digital investments and incentive compensation .
  • Credit outlook: Normalization expected; NPAs/criticized levels near long-term averages; net charge-offs around ~$3M in Q4; largest NPA paid off mid-Jan .
  • Capital priorities: Emphasize organic growth; buybacks not prioritized at current stock levels; M&A not a near-term focus; build capital ratios .

Estimates Context

  • Wall Street consensus estimates (S&P Global) were not available due to provider daily limit constraints at the time of this analysis. As a result, explicit beat/miss versus consensus cannot be determined in this report. Values would otherwise be retrieved from S&P Global.

Key Takeaways for Investors

  • NIM momentum likely continues near term: adjusted NIM (TEY) expanded to 3.40%, with Q1’25 guidance static to +5 bps even after a 4 bps cap headwind, supported by liability sensitivity and strong deposit betas .
  • Capital markets revenue remains a core earnings contributor: $20.6M in Q4 and a $50–$60M 12-month swap-fee outlook; pivot to a single larger 2025 LIHTC securitization (~$350M) to enhance execution .
  • Asset quality normalization is manageable: NPAs rose to 0.50% of assets due to three credits, but early 2025 resolution reduced pro forma NPAs to 0.40%; ACL/loans held steady at ~1.32% .
  • Core funding and liquidity are robust: core deposits grew, uninsured deposits are low (19%), and liquidity is ample ($4B total; $1.7B instantly accessible), supporting flexibility and lower funding costs .
  • Operating discipline: despite higher incentive and tech investments, efficiency ratio improved to 58.26% (adjusted 56.25%); management expects expenses to hold in the $52–$55M range in Q1’25 and broadly flat thereafter .
  • Capital strength and prudence: TCE/TA advanced to 9.55%; CET1 at 10.03%; buybacks/M&A de-prioritized in favor of organic growth and capital build, a conservative stance in an uncertain macro backdrop .
  • Trading implications: near-term upside tied to NIM trajectory and swap-fee execution; watch yield-curve slope and securitization timing; credit normalization bears monitoring but appears contained given early 2025 resolutions .