• Net Income: $28 million, or $1.64 per diluted share; adjusted net income of $30 million, or $1.78 per diluted share.
• Net Interest Income: Increased by $3.6 million, or 6%, to $60 million.
• Adjusted ROAA: 1.35%.
• Adjusted ROAE: 12.60%.
• Loan Growth: 6% annualized year-to-date; 10.5% including securitized loans.
• Core Deposit Growth: 8.5% year-to-date annualized.
• Non-Interest Income: $27 million, with capital markets revenue of $16 million.
• Wealth Management Revenue: 17% annualized increase for the quarter; 20% year-to-date.
• Non-Interest Expenses: $54 million, including a $2.4 million one-time charge.
• Allowance for Credit Losses: 1.30% of total loans held for investment.
• Provision for Credit Losses: $3.5 million, a $2 million decrease from the prior quarter.
• Tangible Common Equity Ratio: Increased to 9.24%.
• Tangible Book Value Per Share: Increased by $2.35, representing 20% annualized growth for the quarter.
• Effective Tax Rate: 7% for the quarter.

• Warning! GuruFocus has detected 6 Warning Signs with QCRH.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• QCR Holdings Inc (NASDAQ:QCRH) reported significant growth in net interest income, with a 6% increase driven by strong loan and investment growth.
• The company achieved robust core deposit growth of 8.5% year-to-date, contributing to stable funding costs and higher margins.
• Wealth management business saw a substantial increase in assets under management, adding nearly $1 billion year-to-date, which drove a 17% annualized increase in revenue for the quarter.
• QCR Holdings Inc (NASDAQ:QCRH) maintained excellent credit quality, with a decrease in total criticized loans for the fourth consecutive quarter.
• The company successfully executed securitizations, improving liquidity and net interest margin, and plans further securitizations to sustain earnings growth.

Negative Points

• QCR Holdings Inc (NASDAQ:QCRH) incurred a one-time charge of $2.4 million due to restructuring expenses and goodwill impairment at its m2 Equipment Finance subsidiary.
• Net charge-offs increased by $1.8 million in the third quarter, primarily due to smaller loans and leases at m2.
• The company recorded a loss of $414,000 on derivatives and a $473,000 loss on securitization in the third quarter.
• Non-interest expenses increased due to higher incentive compensation and advertising expenses, reaching the upper end of the guidance range.
• The decision to discontinue new loans and leases through the Equipment Finance business may impact future revenue streams.

Q & A Highlights

Q: Can you clarify your guidance for margin expansion in the fourth quarter and how potential rate cuts might affect it? A: Todd Gipple, President and CFO, explained that the guidance for margin expansion is 2 to 7 basis points, not including any additional rate cuts. If there is a rate cut, it could add 1 to 2 basis points for every 25 basis points cut.

Q: What is the current status of your deposits that are tied to an index and reprice immediately? A: Todd Gipple noted that they have $2.2 billion of immediately repriced core deposits, which were reduced by 50 basis points following the Fed's rate cut. Additionally, $685 million of high beta deposits were reduced by 10 to 60 basis points.

Q: How do you plan to manage expenses to stay within the $49 million to $52 million range? A: Todd Gipple mentioned that they expect to benefit from reduced expenses due to the m2 decision, which will save roughly $900,000. They also anticipate that higher incentives for performance could push expenses to the higher end of the range, but they aim to keep it within the target.

Q: What is the outlook for capital markets revenue, given recent performance? A: Larry Helling, CEO, stated that while the pipeline remains strong, they are conservative in their guidance due to inherent variability. They aim for consistency and believe the outlook remains positive.

Q: How are you approaching excess capital management, and what are your priorities? A: Larry Helling explained that they are not in a rush to deploy capital and are focused on supporting growth. They may consider retiring some sub-debt next year and potentially look at buybacks later. M&A is not a priority due to their current momentum.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.