QCR (US:QCRH)2021-05-07 18:23Part I FINANCIAL INFORMATION Item 1 Consolidated Financial Statements (Unaudited) Presents unaudited consolidated financial statements for QCR Holdings, Inc. as of March 31, 2021 Consolidated Balance Sheet Highlights (As of March 31, 2021 vs. December 31, 2020) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $5,645,147 thousand | $5,682,797 thousand | | Net Loans/Leases Receivable | $4,279,220 thousand | $4,166,753 thousand | | Total Securities | $799,825 thousand | $838,131 thousand | | Total Deposits | $4,631,782 thousand | $4,599,137 thousand | | Total Liabilities | $5,036,428 thousand | $5,089,004 thousand | | Total Stockholders' Equity | $608,719 thousand | $593,793 thousand | Consolidated Income Statement Highlights (For the Three Months Ended March 31) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net Interest Income | $41,975 thousand | $37,698 thousand | | Provision for Credit Losses | $6,713 thousand | $8,367 thousand | | Noninterest Income | $23,489 thousand | $15,196 thousand | | Net Income | $17,982 thousand | $11,228 thousand | | Diluted EPS | $1.12 | $0.70 | Note 1. Summary of Significant Accounting Policies Details accounting policies, including CECL adoption on January 1, 2021, impacting retained earnings - The Company adopted ASU 2016-13 (CECL) on January 1, 2021, using a modified retrospective approach. This resulted in an after-tax decrease to retained earnings of $937 thousand31 Impact of ASU 2016-13 Adoption on January 1, 2021 | Item | Impact (in thousands) | | :--- | :--- | | Decrease in Allowance for Credit Losses on Loans | ($8,102) | | Establishment of ACL on HTM Securities | $183 | | Establishment of ACL on OBS Credit Exposures | $9,117 | Note 2. Investment Securities Breaks down the $799.8 million investment securities portfolio, primarily municipal and mortgage-backed Investment Securities Portfolio (March 31, 2021) | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | | :--- | :--- | :--- | | Securities Held to Maturity (HTM) | $453,126 thousand | $491,347 thousand | | Securities Available for Sale (AFS) | $340,726 thousand | $346,873 thousand | | Total Securities | $793,852 thousand | $838,220 thousand | - As of March 31, 2021, 101 out of 644 securities were in an unrealized loss position, with aggregate losses representing approximately 0.4% of the portfolio's total amortized cost. Management believes these declines are temporary and does not intend to sell these securities before recovery99 Note 3. Loans/Leases Receivable Details the $4.36 billion loan and lease portfolio composition, credit quality, and COVID-19 modifications Loan Portfolio Composition (March 31, 2021) | Loan Category | Amount (in thousands) | % of Total | | :--- | :--- | :--- | | C&I (revolving & other) | $1,784,986 | 41% | | CRE (owner & non-owner occupied) | $1,071,854 | 25% | | Construction and land development | $607,798 | 14% | | Multi-family | $396,272 | 9% | | 1-4 family real estate | $368,927 | 8% | | Other (Leases, Consumer) | $131,214 | 3% | | Total Gross Loans/Leases | $4,361,051 | 100% | - Nonperforming loans (NPLs) totaled $13.9 million, or 0.32% of the total loan portfolio, as of March 31, 2021. This is a slight decrease from $13.9 million (0.33%) at year-end 2020115117 - As of March 31, 2021, 69 loan modifications totaling $6.9 million (0.16% of the total portfolio) were on deferral under the company's Loan Relief Program (LRP) in response to COVID-19141 Note 9. Regulatory Capital Requirements Outlines regulatory capital requirements, confirming the company is 'well capitalized' as of March 31, 2021 QCR Holdings, Inc. Capital Ratios (As of March 31, 2021) | Ratio | Actual | Requirement for 'Well Capitalized' | | :--- | :--- | :--- | | Total risk-based capital | 14.85% | > 10.00% | | Tier 1 risk-based capital | 11.31% | > 8.00% | | Tier 1 leverage | 10.10% | > 5.00% | | Common equity Tier 1 | 10.55% | > 6.50% | Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses Q1 2021 financial condition and operations, including COVID-19 impact and strategic developments - The company reported strong Q1 2021 results with net income of $18.0 million and diluted EPS of $1.12, a significant increase from $11.2 million and $0.70 in Q1 2020187 - The company continues to respond to the COVID-19 pandemic through its Loan Relief Program (LRP) and active participation as a lender in the Paycheck Protection Program (PPP), having processed 2,394 PPP loans for $451 million as of March 31, 2021184 Results of Operations Analyzes Q1 2021 operations, highlighting growth in net interest and noninterest income, and expense changes - Net interest income increased 11% YoY, benefiting from strong loan growth and a significant reduction in the cost of funds to 0.63% from 1.33% in Q1 2020191230 - Noninterest income surged 55% YoY, primarily driven by a 99% increase in swap fee income, which reached $13.6 million in Q1 2021191241245 - Noninterest expense increased by 18% YoY, mainly due to a 34% rise in salaries and employee benefits related to higher incentive compensation from strong financial results191254 Financial Condition Reviews Q1 2021 financial condition, including loan growth, deposit changes, asset quality, and equity - Core loans and leases (excluding PPP loans) grew at an annualized rate of 14.0% during the first quarter of 2021276 - Asset quality remains strong, with Nonperforming Assets (NPAs) representing only 0.25% of total assets at March 31, 2021297298 Key Financial Condition Ratios | Ratio | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | NPAs to Total Assets | 0.25% | 0.26% | | ACL to Gross Loans/Leases | 1.88% | 1.98% | | TCE / TA Ratio (non-GAAP) | 9.42% | 9.08% | Item 3 Quantitative and Qualitative Disclosures About Market Risk Assesses interest rate risk using a simulation model, showing asset-sensitive position within policy limits Net Interest Income Sensitivity (Year 1) | Interest Rate Scenario | Policy Limit | Exposure as of March 31, 2021 | | :--- | :--- | :--- | | 200 basis point upward shift | (10.0)% | +2.7% | | 100 basis point downward shift | (10.0)% | (0.2)% | | 300 basis point upward shock | (30.0)% | +10.5% | Item 4 Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period351 Part II OTHER INFORMATION Item 1 Legal Proceedings Reports no material pending legal proceedings beyond routine business litigation Item 1A Risk Factors No material changes to risk factors disclosed in the Annual Report on Form 10-K for December 31, 2020 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds Share repurchase program remains suspended since March 2020 due to COVID-19 uncertainties - The company's share repurchase program remains suspended as of March 31, 2021, with 699,068 shares remaining authorized for repurchase357358