QCR HOLDINGS INC Q1 FY2025 earnings call

• Margin expansion, robust deposit growth, and disciplined expense management were highlights of the quarter.
• Strong growth in the wealth management business was noted, with annualized revenue growth of 14%.
• Continued loan growth while maintaining excellent asset quality and strengthening capital levels.
• LIHTC lending is a core strategic priority with a strong pipeline of high-quality loans, contributing significantly to capital markets revenue.
• Capital levels are strong, with focus on increasing regulatory capital, and the company has seen growth in capital ratios during the quarter.
• Larry Helling announced his retirement from the role of CEO and board member at the next shareholder meeting on May 22, with Todd Gipple set to succeed him.

For the first quarter of 2025, QCR Holdings reported net income and adjusted net income of $26 million. Reported earnings per diluted share were $1.52 and $1.53 on an adjusted basis. The adjusted net interest margin on a tax-equivalent basis increased one basis point compared to the previous quarter. Annualized loan growth was 4% in the first quarter when adding back the impact of the planned runoff of M2 equipment finance loans. Total annualized core deposit growth was at a robust 20%. Non-interest income for the first quarter was $17 million, including $7 million generated from capital markets revenue. The wealth management business generated annualized revenue growth of 14% for the quarter, driven by growth in new client accounts and assets under management.

• Suspended full-year loan growth guidance, providing guidance for the second quarter of 2025 with an annualized growth rate projection of 4% to 6%.
• No defined timeline for the next securitization, but intends to continue utilizing securitizations for flexibility, liquidity, and growth management.
• Expect non-interest expenses for the second quarter to be in the range of $50 million to $53 million.
• Expect the effective tax rate for the second quarter to be in the range of 6% to 8%.

• Macro-economic uncertainty affected the LIHTC lending business, causing project delays and lower capital markets revenue in the first quarter.
• Tariff uncertainty poses potential risks to clients with import concentrations, although only a few clients are identified as high risk with limited credit exposure.
• Uncertainty regarding the timing of the next securitization and its impact on the balance sheet and growth.

Q: On the loan growth outlook, why was the guidance revised and thoughts on LIHTC business returning to track?

A: Larry Helling stated the revised guidance is due to macro-economic uncertainties and client psychology affected by events in Washington, but expects loan growth in the second quarter to reach 4%-6% comfortably and longer-term growth if uncertainties calm. Todd Gipple mentioned expectation of lower provision expense with muted loan growth.

Q: Regarding fee income, expectations for non-capital markets revenue and fair value loss?

A: Todd Gipple said wealth management is expected to grow close to double digits and other revenue sources to grow at 6% or better. Fair value loss related to derivatives was a modest adjustment, with more detail available later.

Q: On securitizations and LIHTC business, impact on timing if LIHTC business reaccelerates?

A: Todd Gipple said securitizations would be considered to manage concentration limits and capital balance sheet, with a planned large securitization of around $350 million to free up regulatory capital and enhance CET1.

Q: On buybacks and charge offs?

A: Larry Helling said they are deliberate on buybacks with capacity in authorized buyback, and charge offs are in a range considered normal with uncertain macro-economic conditions affecting outlook.