QCR (US:QCRH)2021-04-29 02:40Financial Data and Key Metrics Changes - Adjusted net income for Q1 2021 was $18.6 million, with diluted adjusted earnings per share at $1.16, reflecting a 50% year-over-year increase [10][12] - Core loans grew by 14% on an annualized basis, driven by strong production in both core commercial business and Specialty Finance Group [9][19] - Net interest income for the quarter was $42 million, down $1.7 million from Q4 2020, but static when excluding acquisition-related net accretion and PPP income [22][25] Business Line Data and Key Metrics Changes - Specialty Finance Group saw strong demand, particularly in municipal and tax credit finance, contributing to the overall loan growth [11][19] - Non-interest income was $23.5 million, including $13.6 million in swap fee income, down from $32 million in Q4 2020 [26] - Wealth management income increased nearly 13% on a linked quarter basis, driven by a $457 million increase in assets under management [28] Market Data and Key Metrics Changes - Core deposits grew by just over 3% on an annualized basis, with non-interest-bearing deposits increasing by $124 million or nearly 11% from the prior quarter [13][21] - The company managed to shift excess correspondent banking deposits off-balance sheet, maintaining $2.35 billion in total deposits under management [14][100] Company Strategy and Development Direction - The company aims for organic loan growth of 8% to 10% for the full year of 2021, consistent with a long-term goal of 9% [13][18] - Management is optimistic about the local markets as the economy reopens post-pandemic, positioning for profitable growth and value creation through organic means and strategic acquisitions [18][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in asset quality, with negligible net charge-offs and only $7 million in loan deferrals at the end of the quarter [16][31] - The company anticipates potential NIM compression of 1 to 3 basis points in Q2 due to low interest rates and excess liquidity [25][72] Other Important Information - The effective tax rate for the quarter was 16.5%, lower than the previous quarter due to a higher ratio of tax-exempt revenue [32] - The company continues to build capital through strong earnings, with a tangible common equity to tangible assets ratio improving to 9.67% [32] Q&A Session Summary Question: Swap income commissions - Todd Gipple explained that around 75% of swap income at the low-end of guidance would reach the bottom line, decreasing to 65%-70% at the higher end due to incentive compensation [39] Question: Loan growth momentum - Larry Helling noted broad-based growth in core business and strong client demand, particularly in manufacturing and assembly sectors, contributing to the adjusted loan growth guidance [41][43] Question: Provision and reserves outlook - Management indicated a prudent approach to reserves, expecting modest provision expenses in the coming quarters due to strong analytics and favorable economic conditions [52][56] Question: Capital deployment and buybacks - Larry Helling stated that the first priority is to fund growth with capital, followed by M&A opportunities, with buybacks considered when prudent [60][62] Question: Margin headwinds - Todd Gipple discussed potential headwinds for NIM due to declining loan yields and excess liquidity, while also highlighting efforts to manage costs [70][72] Question: PPP forgiveness timeline - Todd Gipple anticipated that most remaining PPP fees would be recognized by the end of the calendar year, with a significant portion expected in Q2 [84] Question: Off-balance sheet deposits economics - Todd Gipple explained the management of correspondent bank deposits and the modest fees associated with managing off-balance sheet funds, emphasizing liquidity access [97][100]