QCR (QCRH) Q3 Earnings call transcript Oct 24, 2024

In the recent earnings call for QCR Holdings, Inc., executives presented a robust financial performance for the third quarter of 2024. Highlighted by significant growth in net interest income and margin expansion, the company demonstrated a strong commitment to capital markets and wealth management, which further underscores its strategic focus on growth and long-term sustainability.

Financial Highlights and Strategic Initiatives

QCR Holdings reported exceptional financial results for the third quarter, with a significant increase in net interest income and margin expansion. The company's core deposit growth and stable cost of funds contributed to a substantial increase in tangible book value. Net income for the quarter was $28 million or $1.64 per diluted share, while net income on an adjusted basis was $30 million or $1.78 per diluted share. This performance reflects the company's ability to navigate market conditions effectively and capitalize on strategic initiatives.

A key strategic initiative for QCR Holdings is its focus on the low-income housing tax credit lending program and its conventional commercial lending business, which have been the primary drivers of loan growth. The company has funded this growth through a combination of deposit growth and liquidity provided from loan securitizations. Total year-to-date annualized core deposit growth has been a robust 8.5%, which is above the company's annual target range of 8% to 10%. This growth is a testament to the company's ability to attract and retain depositors, enabling it to sustain loan growth while maintaining a stable cost of funds.

Strategic Focus on Wealth Management and Capital Markets

QCR Holdings has also demonstrated a strategic focus on wealth management and capital markets. The company's wealth management business has shown outstanding growth in assets under management, with nearly $1 billion added year-to-date, representing a 18% increase. This growth is driven by significant new client volume and favorable market conditions. Additionally, the company's capital markets revenue has been robust, driven primarily by its LIHTC lending and swap fees, which are fueled by the steady demand for affordable housing.

Managing Operational Expenses and Asset Quality

QCR Holdings has been diligent in managing its operational expenses, with year-to-date noninterest expenses increasing only 2% annually after adjusting for one-time items. The company has also taken steps to improve profitability and increase liquidity by discontinuing its equipment finance business. This decision underscores the company's focus on its core banking franchise and its ability to generate higher risk-adjusted returns.

Asset quality remains excellent, with nonperforming assets as a percent of total assets remaining static when compared to the prior quarter. Total classified loans and criticized loans have also declined for the fourth consecutive quarter, indicating a strong credit trend. The company's allowance for credit losses as a percent of total loans held for investment was 1.30% for the quarter, which is below the industry average. This strong credit performance further underscores the company's ability to manage risk effectively.

Looking Ahead: Continued Growth and Strategic Focus

Looking ahead, QCR Holdings is well-positioned for continued growth, with a strong focus on expanding its loan and investment balances, maintaining stable deposit costs, and controlling core expenses. The company's strategic initiatives, including its low-income housing tax credit lending program and capital markets revenue, are expected to drive continued growth and sustainability.

The company's commitment to industry-leading results and outstanding client service is evident in its strong financial performance and strategic focus on growth. QCR Holdings' ability to navigate market conditions effectively and capitalize on strategic initiatives underscores its resilience and commitment to creating shareholder value. As the company continues to execute on its strategic initiatives, it is well-positioned for continued success in the evolving financial landscape.