QCR Holdings: Navigating the Loan Growth Maze in 2024

Alright, fellow investors, let's dive into the earnings call of QCR Holdings, Inc. for the fourth quarter and full year of 2024. Buckle up, because we're about to explore the twists and turns of loan growth, securitizations, and the ever-changing net interest margin (NIM) landscape.



First things first, QCR Holdings delivered record net income of $114 million for the full year, with adjusted net income reaching $119 million. The company experienced significant growth in net interest income, driven by strong margin expansion and robust loan growth. But wait, there's more! The wealth management business saw exceptional growth, with assets under management increasing by $1 billion or 20% from the previous year. Core deposits grew by $474 million or 8% for the year, enhancing liquidity and reducing reliance on higher-cost funding sources. The company successfully executed two additional LIHTC loan securitizations, enhancing balance sheet flexibility and capital markets revenue.

Now, let's talk loan growth. QCR Holdings achieved a net loan growth of 10% for the year, with a net growth of 4% after securitizations. Securitizations, you ask? Yes, indeed! By transforming illiquid loans into liquid securities, QCR Holdings frees up capital on its balance sheet, allowing it to reinvest in new loans or other assets. This process enhances the company's balance sheet flexibility and contributes to its capital markets revenue. In 2024, QCR Holdings generated $71 million in capital markets revenue, with $20.6 million coming from a single securitization in the fourth quarter alone.

But hold on to your hats, because the loan growth story isn't all sunshine and roses. Nonperforming assets increased by $11 million or 33% during the year, reflecting a normalizing credit environment. Criticized loan balances also increased modestly in the fourth quarter, indicating some credit quality challenges. The company recorded a provision for credit losses of $17 million for the year, which is higher than the previous year. So, while loan growth is impressive, it's essential to keep an eye on credit quality and provision for credit losses.

Now, let's shift our focus to the ever-changing NIM landscape. QCR Holdings expects a static to 5 basis point increase in NIM in the first quarter of 2025, despite a 4 basis point hit from expiring interest rate caps. The company's CFO, Todd Gipple, is confident in their ability to manage deposit costs and reprice loans to offset the impact of the expiring interest rate caps. Looking forward, the company expects to continue growing its NIM in the first quarter of 2025, driven by deposit cost management and loan repricing. The yield curve's slope will significantly impact future margins, and the company remains liability sensitive, benefiting from strong deposit betas.

In conclusion, QCR Holdings' loan growth strategy, particularly its focus on securitizations, has enhanced its balance sheet flexibility and contributed significantly to its capital markets revenue. However, it's crucial to monitor credit quality and provision for credit losses as the company navigates the loan growth maze. As for the NIM evolution, QCR Holdings is well-positioned to maintain and potentially grow its profitability in the coming quarters, thanks to its ability to manage deposit costs and reprice loans. So, keep your eyes peeled, and let's see how QCR Holdings continues to shape its loan growth strategy in 2025.