QCR Holdings, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Overall Performance: Delivered strongest quarter of the year in Q4 and record full year results, exceeding guidance ranges for net interest margin, loan growth, and capital markets revenue.
• Traditional Banking: Unique multi-charter model, growing market share, with digital transformation progressing; 4 core system conversions planned, with two in 2026.
• Wealth Management: Added 500 new client relationships, $1B in new AUM, 5-year CAGR 10% for AUM and revenue; expanding in Central Iowa and Southwest Missouri.
• LIHTC Lending: Sustained demand for affordable housing, legislative actions expanded tax credits; sold $285M in construction loans, plans for securitizations and additional sales to enhance capital markets revenue.
• Financial Results: Record adjusted net income ($37M Q4, $130M full year), net interest income growth, capital markets revenue at $65M in 2025, core noninterest expenses managed, strong asset quality, and share repurchases totaling $22M in 2025.

Segment Performance

• Traditional Banking: Delivered strong organic growth, with loan growth and deposit growth. Net interest income increased due to margin expansion. Contributes significantly to overall earnings with market share growth and ongoing digital transformation.
• Wealth Management: Added nearly 500 new client relationships in 2025, bringing in over $1 billion in new assets under management. Exhibits a 5-year compound annual growth rate of 10% for both assets under management and revenue.
• LIHTC Lending Platform: Delivered exceptional performance in the second half of 2025, added 18 new developer partners. Sold $285 million of LIHTC construction loans in Q4, with upper end of capital markets revenue guidance raised to $55 million to $70 million over the next 4 quarters.

Guidance

• Raised upper end of capital markets revenue guidance to $55 million to $70 million over the next 4 quarters.
• Expect core margin expansion of 3-7 basis points in Q1 2026, assuming no further federal rate cuts.
• Guided noninterest expenses to $55 million to $58 million for Q1 2026.
• Gross loan growth guidance: 8%-10% in Q1 2026, ramping to 10%-15% for the remainder of 2026.
• Effective tax rate expected to be in the range of 8% to 10% for Q1 2026.

Risks

• Seasonality in capital markets revenue, particularly a slower Q1 historically.
• Uncertainty in timing of LIHTC securitizations and construction loan sales due to market conditions.
• Competition in traditional banking (pricing) and LIHTC space (equity provider influence affecting deal selection).

Question and Answer

Q: Good morning, and thank you for joining us today for QCR Holdings, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call.

A: Todd Gipple begins the call with an overview of performance.

Q: First question, just appreciate the guidance on the capital markets revenues, $55 million to $70 million over the next 4 quarters. Just curious, do you guys expect any seasonality kind of in the beginning part of the year?

A: Todd Gipple states Q1 is historically slow for capital markets revenue due to industry seasonality but expects rolling 12-month guidance to reflect strength.

Q: Could you just help us with some guideposts in terms of a starting point for earning assets in the first quarter, just some of the -- just given the moving pieces with the securitization in 4Q and then just the expectation of pay down some wholesale borrowings as well?

A: Todd Gipple and Nick Anderson explain earning assets starting point aligns with 12/31 balance, with loan growth ramping later in the year.

Q: Maybe starting on the LIHTC business. So you gave the updated guidance increase from last year's guidance. It would be kind of flat to down a bit if we took the midpoint from -- on a year-over-year basis. And then that would be kind of a, I guess, 2- or 3-year trend of just a little bit down on the revenue side.

A: Todd Gipple expresses optimism for LIHTC business growth despite short-term guidance considerations, emphasizing team talent and future opportunities.

Q: Nick, maybe I just missed the end of that on the tax rate. But just the tax rate over the balance of the year, just -- do you expect it to change materially off the first quarter level? Or I guess, did you suggest otherwise?

A: Nick Anderson states effective tax rate is expected to remain relatively static around 8% to 10% for the year.

Q: Revisiting the loan growth and LIHTC side, what kind of competition are you seeing in LIHTC and maybe the reasons it feels isolated? And then anything you're seeing on loan competition in general?

A: Todd Gipple discusses competition in LIHTC (equity provider influence) and traditional banking (pricing and market presence), noting opportunities to gain share.