QCR Q1 Earnings Call Highlights

Key Points

• QCR reported its most profitable first quarter with net income of $33 million ($1.99/share), driven by solid loan and deposit growth, sharply lower noninterest expense, and opportunistic share repurchases that lifted tangible book value.
• The bank is pursuing an asset‑light LIHTC strategy, identifying a $523 million held‑for‑sale pipeline (including $207M of construction loans and a $316M Freddie Mac securitization) to free capacity and boost capital markets revenue, and it raised capital markets guidance to $60–$70 million for the next four quarters.
• NIM increased only 1 basis point in Q1, but QCR is liability‑sensitive (about $900 million more rate‑sensitive liabilities than assets) and expects 1–2 bps of NIM accretion per 25‑bp Fed cut; Q2 NIM is guided to be static to +3 bps with upside from loan repricings and higher investment yields.

QCR NASDAQ: QCRH reported what management described as the most profitable first quarter in the company’s history, citing solid loan and deposit growth, sharply lower non-interest expense, and modest net interest margin expansion. President and CEO Todd Gipple said the company maintained “excellent asset quality,” grew tangible book value per share, and continued returning capital to shareholders through “opportunistic share repurchases,” while also investing in a multi-year digital transformation.

Quarterly results and business mix

CFO Nick Anderson said QCR delivered net income of $33 million, or $1.99 per diluted share. Net interest income was $67 million, and Anderson noted it increased slightly on a linked-quarter basis when adjusted for fewer days in the first quarter.

Noninterest income totaled $23 million, including $11 million from capital markets revenue and $5 million from wealth management. Gipple said capital markets results matched expectations due to typical first-quarter seasonality and were “equal to our five-year average for Q1 production.” He added that strength in traditional banking and wealth management “partially offset the linked-quarter reduction in our capital markets revenue.”

Gipple highlighted that wealth management posted “annualized revenue growth of 14%,” driven by what he described as a relationship-based model that connects banking clients with wealth advisors. Anderson provided additional operating detail, saying the wealth team added 80 new client relationships and $177 million in new assets under management, and that while market volatility pressured AUM levels, new client growth “largely offset that impact.” Wealth management revenue increased 3% from the prior quarter, he said.

Margin, rates, and second-quarter outlook

Anderson said the company’s net interest margin (tax-equivalent yield basis) increased 1 basis point from the fourth quarter of 2025, landing below the low end of QCR’s guidance range. He attributed muted expansion to timing: robust deposit growth occurred early in the quarter (including higher-priced correspondent deposits), while loan growth came “very late in the quarter.” Average loan balances declined $109 million, which weighed on loan yield versus the prior quarter.

Anderson said the margin increase reflected “significant improvements in the cost of funds,” partly offset by lower earning asset yields. He also pointed to the bank’s liability-sensitive positioning. Since the Federal Reserve began cutting rates in 2024, QCR’s cost of funds declined 79 basis points compared to a 47-basis point decline in earning asset yields, he said.

Looking ahead, Anderson said QCR remains positioned to benefit from further rate cuts, with rate-sensitive liabilities exceeding rate-sensitive assets by about $900 million. For each 25-basis-point cut, the bank estimates 1 to 2 basis points of NIM accretion, he said, with greater upside if the yield curve steepens.

For the second quarter, QCR guided NIM TEY to be “static to an increase of 3 basis points,” assuming no additional Fed funds rate changes. Anderson said upside could come from repricing roughly $163 million of fixed-rate loans yielding 6.2% that could reset 25 to 30 basis points higher, along with continued CD repricing. He cited about $400 million of CD maturities costing 3.7% that QCR expects to retain and reprice 25 to 30 basis points lower. He also said investment yields should expand, supported by a pipeline of new municipal bonds priced above 7% on a tax-equivalent basis.

LIHTC “flywheel,” securitizations, and updated capital markets guidance

A major theme of the call was the company’s low-income housing tax credit (LIHTC) platform and how QCR uses securitizations and loan sales to manage balance sheet capacity while generating capital markets revenue. Gipple said QCR has begun partnering with private investors in LIHTC construction loan sale transactions, in addition to its LIHTC permanent loan securitizations launched in 2023.

During the quarter, the company identified $523 million in LIHTC loans for securitization and sale, with transactions planned to close in the second quarter. Anderson said this held-for-sale pipeline includes:

• $207 million of LIHTC construction loans identified for sale to a new private investor
• $316 million Freddie Mac LIHTC tax-exempt permanent loan pool securitization

Gipple described these transactions as enabling an “asset-light, capital-efficient, and revenue-heavy business in affordable housing,” saying the balance sheet capacity created can be redeployed into new originations and can help manage concentration risk, liquidity, capital, and total assets relative to the $10 billion threshold.

Gipple reaffirmed guidance for gross annualized loan growth of 10% to 15% over the final three quarters of 2026. He also raised the lower end of capital markets revenue guidance by $5 million, targeting $60 million to $70 million for the next four quarters. In response to analyst questions, Gipple emphasized that the first quarter was driven by “very typical seasonality” for LIHTC rather than rate volatility or macro headwinds, and said the upward adjustments to the guidance range reflect confidence in pipeline and execution.

Expenses, balance sheet trends, capital return, and credit

On expenses, Anderson said non-interest expense totaled $52 million in the first quarter, down from $63 million in the fourth quarter. The $11 million decrease was primarily due to a $5.5 million reduction in salaries and benefits tied to variable compensation, along with lower professional and data processing costs related to the timing of digital transformation activities and the prior quarter’s debt extinguishment loss. The company posted an adjusted core efficiency ratio of 57.7%. For the second quarter, QCR guided non-interest expense to $55 million to $58 million, reflecting continued technology investment.

On balance sheet trends, Anderson said total loans grew $145 million in the quarter (8% annualized), excluding planned runoff of the m2 equipment finance portfolio. Core deposits increased $409 million (23% annualized), while average deposits rose only $31 million versus the fourth quarter as the company managed excess liquidity off balance sheet. He said the deposit mix improved due to higher non-interest-bearing balances and lower higher-cost CDs and brokered deposits.

Asset quality remained “excellent,” Anderson said. Non-performing assets were $43 million, and the non-performing assets-to-total assets ratio was unchanged at 0.45%. Criticized loans were 2.01% of total loans and leases; Anderson said the slight increase was driven primarily by one large credit expected to be resolved favorably later in the year. Provision for credit losses was $2.5 million, down from $5.5 million, driven largely by reclassifying LIHTC construction loans to held-for-sale, which are expected to be sold at par. Responding to a question on reserves, Gipple said the company maintained its coverage ratio “static at 1.26%,” emphasizing QCR did not “soften reserves.”

Capital return was another focal point. Anderson said that between the start of the quarter and April 20, QCR returned almost $25 million to shareholders, repurchasing about 288,000 shares. Since beginning repurchases in August of the prior year, QCR has repurchased 566,000 shares for a total of $46 million returned to shareholders. Tangible book value per share increased $1.33 to “over $59,” reflecting 9% annualized growth, Anderson said.

In Q&A, Gipple said LIHTC term loan securitizations do not free regulatory capital because QCR retains B-pieces, though they do free GAAP capital. He said about 25 basis points of regulatory capital is freed up from the construction loan participation, supporting continued opportunistic buybacks. He also said M&A is “not a current priority,” though interest could increase after the digital transformation is completed, while maintaining a “very, very small” strike zone for potential partners.

About QCR NASDAQ: QCRH

QCR Holdings, Inc, headquartered in Moline, Illinois, is a bank holding company that delivers community banking services through its wholly owned subsidiary, QCR Bank. The company focuses on serving individuals, small to medium-sized businesses and municipal clients in select Midwestern markets.

QCR Bank offers a broad array of deposit and lending products, including personal and business checking and savings accounts, commercial real estate loans, equipment financing, mortgage lending and treasury management solutions.

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