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QCR Holdings, Inc. Announces Third Quarter Earnings and Successful Closing of Des Moines Acquisition

MOLINE, Ill., Oct. 27, 2016 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ:QCRH) today announced net income of $6.1 million and diluted earnings per share (“EPS”) of $0.46 for the quarter ended September 30, 2016. This included $1.5 million of acquisition costs (after-tax) related to the previously announced acquisition of Community State Bank (“CSB”). Excluding these acquisition costs and other non-core items, the Company reported core net income (non-GAAP) of $7.5 million and diluted EPS of $0.57. By comparison, for the quarter ended June 30, 2016, the Company reported net income of $6.7 million and diluted EPS of $0.53. This included $231 thousand of acquisition costs (after-tax) related to CSB. For the third quarter of 2015, the Company reported net income of $6.5 million and diluted EPS of $0.55.

For the nine months ended September 30, 2016, the Company reported net income of $19.2 million and diluted EPS of $1.52. Excluding acquisition costs and other non-core items, the Company reported core net income (non-GAAP) of $20.6 million and diluted EPS of $1.64. By comparison, for the nine months ended September 30, 2015, the Company reported net income of $10.1 million and diluted EPS of $1.01. This included several nonrecurring items, including $4.5 million of losses on debt extinguishments (after-tax) related to the balance sheet restructuring that took place in the second quarter of 2015.

“Our core operating performance for the first nine months of 2016 has been solid,” commented Douglas M. Hultquist, President and Chief Executive Officer, “and we continue to strategize and explore ways to improve our profitability through our ongoing key initiatives. Our core return on average assets (non-GAAP) has improved from 0.77% to 1.02%, when comparing the first nine months of 2015 to the same period of the current year. This is the result of solid loan growth, reductions in wholesale borrowings, continued margin improvements, and strong fee income.”

Organic Loan and Lease Growth Strong at 10.6% Annualized Year-To-Date
Swap Fee Income and Gains on the Sale of Government Guaranteed Loans Total $4.1 Million Year-To-Date

During the third quarter of 2016, the Company’s total assets increased $597.6 million, or 22%, to a total of $3.28 billion, while total loans and leases grew $437.8 million. Of the $437.8 million of loan growth, $419.5 million related to the acquisition of CSB, while the remaining $18.3 million was organic growth. The organic loan and lease growth was funded primarily by deposits, which increased $140.1 million in the third quarter, excluding the acquisition of CSB. This deposit growth also allowed the Company to further reduce borrowings.

“Loan and lease growth, excluding the effects of the acquisition, totaled $143.1 million, or an annualized rate of 10.6%, for the first nine months of the year,” commented Todd A. Gipple, Executive Vice President, Chief Operating Officer and Chief Financial Officer. “Strong loan and lease growth has helped us meet our targeted annual organic growth rate of 10-12% and continues to keep our loan and leases to asset ratio within our targeted range of 70-75%.”

“Swap fee income and gains on the sale of government guaranteed loans were strong for the first nine months of 2016, totaling $4.1 million,” said Mr. Gipple. “We plan to continue executing these types of transactions, as they provide unique and beneficial solutions for our clients. We also look forward to offering these products in our newest market, Des Moines/Ankeny.”

Net Interest Margin Expanded 9 Basis Points in Third Quarter

Net interest income totaled $23.6 million for the quarter ended September 30, 2016. By comparison, net interest income totaled $21.0 million and $20.1 million for the quarters ended June 30, 2016 and September 30, 2015, respectively. Net interest income totaled $65.2 million for the nine months ended September 30, 2016, an increase of 15.6% from the same period of the prior year. Net interest income attributable to CSB totaled $2.3 million for the partial quarter.

“Net interest margin increased nine basis points from the prior quarter to 3.71%,” stated Mr. Gipple. He added, “The improvement in margin this quarter was attributable to the addition of Community State Bank. CSB’s strong margin and solid earnings will contribute significantly to our efforts to achieve upper-quartile ROAA performance and continue to drive shareholder value. For the month of September 2016, CSB had $546.0 million in average earning assets with a net interest margin of 4.99%. CSB’s net interest margin prior to acquisition typically ranged from 3.80% to 4.00%. This has increased due to purchase accounting adjustments, primarily the accretion of the loan discount, including the acceleration of discounts related to the payoff of purchased credit impaired loans.”

Nonperforming Assets to Total Assets Ratio Flat During the Third Quarter

Nonperforming assets (“NPAs”) increased $3.8 million in the current quarter, which was due to the acquisition of CSB. The ratio of NPAs to total assets was 0.69% at September 30, 2016, which was down from 0.70% at June 30, 2016 and down from 0.80% a year ago.

“Asset quality at our newest charter, CSB, is strong and very much in line with the rest of our subsidiaries, resulting in a slight reduction of our NPAs to total assets ratio this quarter. We remain committed to further improving asset quality,” stated Mr. Hultquist.

The Company’s provision for loan and lease losses totaled $1.6 million for the third quarter of 2016, which was up $410 thousand from the prior quarter, and flat as compared to the third quarter of 2015. The increase in provision in the third quarter of 2016 is primarily attributable to the addition of CSB. As of September 30, 2016, the Company’s allowance to total loans and leases was 1.22%, which was down from 1.46% at June 30, 2016 and down from 1.45% at September 30, 2015.

In accordance with generally accepted accounting principles for acquisition accounting, the loans acquired through the acquisition of CSB were recorded at market value; therefore, there was no allowance associated with CSB’s loans at acquisition. Management continues to evaluate the allowance needed on the acquired CSB loans factoring in the net remaining discount ($12.7 million at September 30, 2016). When factoring this remaining discount into the Company’s allowance to total loans and leases calculation, the Company’s allowance as a percentage of total loans and leases increases from 1.22% to 1.76%.

Capital Levels Remain Strong

The Company’s total risk-based capital ratio was 11.45%, the common equity tier 1 ratio was 9.32% and the tangible common equity to tangible assets ratio decreased to 7.92%, all as of September 30, 2016. For comparison, these respective ratios were 14.29%, 11.72% and 10.10% as of June 30, 2016. The decrease in the Company’s capital ratios was primarily due to the acquisition of CSB.

Acquisition of Community State Bank, Headquartered in Des Moines/Ankeny, Iowa

“We are excited about adding such a talented team to the Company and are encouraged by the opportunity for strong growth in Ankeny and the entire Des Moines MSA,” stated Mr. Gipple.

As of September 30, 2016, CSB had total assets of $580.2 million, consisting primarily of loans totaling $419.5 million and a securities portfolio of $90.2 million. These assets were funded by $481.3 million of deposits and $15.3 million of borrowings. CSB reported net income for the partial quarter of $189 thousand, which included $473 thousand of after tax acquisition costs.

Preliminary purchase accounting adjustments were recorded in the third quarter and the resulting accounting marks and the net dilution to tangible book value per share were more favorable than projected when the Company announced the CSB transaction in May of 2016.

Actual dilution to tangible book value per share from the transaction, including the common stock issuance of $30.1 million in May of 2016, was only $1.03 per share, or 4.91%. This compares favorably to the $1.25 per share and 6.11% dilution that was projected.

“The terms of the transaction required CSB to retain its earnings through the closing date. Due to better than projected CSB earnings and more favorable valuation marks, our earn-back on the tangible book value dilution from the transaction should be even more rapid than the three year earn-back we cited in our transaction announcement this past May,” stated Mr. Gipple.

Significant One-Time Gain Used to Further Restructure Balance Sheet
And Strengthen Net Interest Margin

This quarter, the Company had the opportunity to sell an investment and recognize a gain of approximately $4.0 million. This gain was utilized to further reduce wholesale borrowings by $60 million at a blended rate of 3.24% and further de-lever the balance sheet with the sale of $28 million in securities yielding 1.48%. The remaining funding was replaced by a mix of core deposits and overnight borrowings. These transactions were recorded near the end of the quarter. The positive impact on future earnings will be an increase in net interest income of approximately $1.3 million annually, increasing NIM by approximately 10 basis points.

Filing of Form S-3 Shelf Registration Statement

The Company today filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission ("SEC"). When declared effective by the SEC, the registration statement will allow QCR Holdings, Inc. to offer and sell various types of securities, including common stock, preferred stock, debt securities and/or warrants, from time to time up to an aggregate amount of $100 million. The Company utilized $30.1 million of its previous shelf registration filing through the offer and sale of its common stock in the second quarter of 2016 to help fund the acquisition of CSB. This Form S-3 filing will replenish the amount available to the previous $100 million. The specific terms and prices of any securities offered pursuant to the registration statement will be determined at the time of any future offering and described in a separate prospectus supplement, which would be filed with the SEC at the time of the particular offering, if any.

About Us

QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company, which serves the Quad City, Cedar Rapids, Cedar Valley, Des Moines/Ankeny, and Rockford communities through its wholly owned subsidiary banks. Quad City Bank & Trust Company, which is based in Bettendorf, Iowa, and commenced operations in 1994, Cedar Rapids Bank & Trust Company, which is based in Cedar Rapids, Iowa, and commenced operations in 2001, Community State Bank, which is based in Ankeny, Iowa and was acquired by the Company in 2016, and Rockford Bank & Trust Company, which is based in Rockford, Illinois, and commenced operations in 2005, provide full-service commercial and consumer banking and trust and wealth management services. Quad City Bank & Trust Company also provides correspondent banking services. In addition, Quad City Bank & Trust Company engages in commercial leasing through its wholly owned subsidiary, m2 Lease Funds, LLC, based in Milwaukee, Wisconsin. Additionally, the Company serves the Waterloo/Cedar Falls, Iowa community through Community Bank & Trust, a division of Cedar Rapids Bank & Trust Company.

Special Note Concerning Forward-Looking Statements. This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “predict,” “suggest,” “appear,” “plan,” “intend,” “estimate,” ”annualize,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements. These factors include, among others, the following: (i) the strength of the local, national and international economies; (ii) the economic impact of any future terrorist threats and attacks, and the response of the United States to any such threats and attacks; (iii) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business, including the Basel III regulatory capital reforms, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations issued thereunder; (iv) changes in interest rates and prepayment rates of the Company’s assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) unexpected results of acquisitions (including the acquisition of CSB), which may include failure to realize the anticipated benefits of the acquisition and the possibility that the transaction costs may be greater than anticipated; (viii) the loss of key executives or employees; (ix) changes in consumer spending; (x) unexpected outcomes of existing or new litigation involving the Company; and (xi) changes in accounting policies and practices. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the SEC.

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
As of
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
(dollars in thousands)
CONDENSED BALANCE SHEET
Cash and due from banks $61,213 $49,581 $44,931 $41,742 $40,975
Federal funds sold and interest-bearing deposits 96,047 68,432 57,229 56,164 66,684
Securities 564,930 510,959 537,317 577,109 590,775
Net loans/leases 2,331,774 1,894,676 1,846,428 1,771,882 1,730,138
Core deposit intangible 7,614 1,372 1,422 1,471 1,521
Goodwill 13,632 3,223 3,223 3,223 3,223
Other intangible assets 1,509 - - - -
Other assets 204,267 155,191 150,123 141,607 142,539
Total assets $ 3,280,986 $ 2,683,434 $ 2,640,673 $ 2,593,198 $ 2,575,855
Total deposits $2,594,913 $1,973,594 $1,989,573 $1,880,666 $1,855,319
Total borrowings 312,104 381,874 347,901 444,162 456,091
Other liabilities 93,112 52,849 68,056 42,484 43,330
Total stockholders' equity 280,857 275,117 235,143 225,886 221,115
Total liabilities and stockholders' equity $ 3,280,986 $ 2,683,434 $ 2,640,673 $ 2,593,198 $ 2,575,855
ANALYSIS OF LOAN PORTFOLIO
Loan/lease mix:
Commercial and industrial loans $804,308 $706,261 $682,057 $648,160 $647,398
Commercial real estate loans 1,070,305 784,379 766,159 724,369 692,569
Direct financing leases 166,924 169,928 172,774 173,656 173,304
Residential real estate loans 229,081 180,482 173,096 170,433 165,061
Installment and other consumer loans 81,918 73,658 71,842 73,669 69,863
Deferred loan/lease origination costs, net of fees 8,065 8,065 7,895 7,736 7,477
Total loans/leases $2,360,601 $1,922,773 $1,873,823 $1,798,023 $1,755,672
Less allowance for estimated losses on loans/leases 28,827 28,097 27,395 26,141 25,534
Net loans/leases $ 2,331,774 $ 1,894,676 $ 1,846,428 $ 1,771,882 $ 1,730,138
ANALYSIS OF SECURITIES PORTFOLIO
Securities mix:
U.S. government sponsored agency securities $67,885 $88,321 $132,742 $213,537 $247,625
Municipal securities 360,330 302,689 285,009 280,203 265,293
Residential mortgage-backed and related securities 133,173 116,765 116,452 80,670 74,901
Other securities 3,542 3,184 3,114 2,699 2,956
Total securities $ 564,930 $ 510,959 $ 537,317 $ 577,109 $ 590,775
ANALYSIS OF DEPOSITS
Deposit mix:
Noninterest-bearing demand deposits $764,615 $615,764 $641,859 $615,292 $585,300
Interest-bearing demand deposits 1,298,781 918,036 916,455 886,294 877,642
Time deposits 420,470 337,584 331,786 309,974 302,978
Brokered deposits 111,047 102,210 99,473 69,106 89,399
Total deposits $ 2,594,913 $ 1,973,594 $ 1,989,573 $ 1,880,666 $ 1,855,319
ANALYSIS OF BORROWINGS
Borrowings mix:
Term FHLB advances $83,343 $78,000 $80,000 $97,000 $102,000
Overnight FHLB advances (1) 55,300 118,900 70,500 54,000 31,000
Wholesale structured repurchase agreements 45,000 100,000 100,000 110,000 115,000
Customer repurchase agreements 8,265 21,441 52,153 73,873 74,404
Federal funds purchased 51,750 30,120 11,870 70,790 93,160
Junior subordinated debentures 33,446 33,413 33,378 38,499 40,527
Other borrowings 35,000 - - - -
Total borrowings $ 312,104 $ 381,874 $ 347,901 $ 444,162 $ 456,091
(1) At the most recent quarter-end, the weighted-average rate of these overnight borrowings was 0.44%

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
For the Nine Months Ended
September 30, September 30,
2016 2015
(dollars in thousands, except per share data)
INCOME STATEMENT
Interest income $74,232 $67,093
Interest expense 8,995 10,683
Net interest income 65,237 56,410
Provision for loan/lease losses 4,879 5,694
Net interest income after provision for loan/lease losses $ 60,358 $ 50,716
Trust department fees $4,607 $4,676
Investment advisory and management fees 2,117 2,251
Deposit service fees 3,029 2,790
Gain on sales of residential real estate loans 289 266
Gain on sales of government guaranteed portions of loans 2,701 900
Swap fee income 1,358 1,183
Securities gains, net 4,628 473
Earnings on bank-owned life insurance 1,324 1,319
Debit card fees 1,127 912
Correspondent banking fees 801 916
Participation service fees on commercial loan participations 694 648
Fee income from early termination of leases 173 251
Credit card issuing fees 413 404
Other 747 1,162
Total noninterest income $ 24,008 $ 18,151
Salaries and employee benefits $32,921 $32,710
Occupancy and equipment expense 5,798 5,508
Professional and data processing fees 4,921 4,683
Acquisition costs 2,401 -
FDIC insurance, other insurance and regulatory fees 1,867 2,152
Loan/lease expense 420 602
Net cost of operation of other real estate 513 (1,090)
Advertising and marketing 1,367 1,368
Postage and communications 711 684
Stationery and supplies 491 424
Bank service charges 1,247 1,089
Losses on debt extinguishment, net 4,220 6,894
Correspondent banking expense 565 518
Other 1,737 1,776
Total noninterest expense $ 59,179 $ 57,318
Net income before taxes $ 25,187 $ 11,549
Income tax expense 6,030 1,406
Net income $ 19,157 $ 10,143
Basic EPS $1.55 $1.03
Diluted EPS $1.52 $1.01
Weighted average common shares outstanding 12,398,491 9,878,882
Weighted average common and common equivalent shares outstanding 12,580,042 10,024,441

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
For the Quarter Ended
September 30,June 30,March 31,December 31,September 30,
20162016201620152015
(dollars in thousands, except per share data)
INCOME STATEMENT
Interest income $26,817 $23,913 $23,502 $22,910 $23,141
Interest expense 3,186 2,904 2,905 3,024 3,004
Net interest income 23,631 21,009 20,597 19,886 20,137
Provision for loan/lease losses 1,608 1,198 2,073 1,177 1,635
Net interest income after provision for loan/lease losses $ 22,023 $ 19,811 $ 18,524 $ 18,709 $ 18,502
Trust department fees $1,519 $1,512 $1,576 $1,455 $1,532
Investment advisory and management fees 766 693 658 721 782
Deposit service fees 1,151 947 931 1,003 985
Gain on sales of residential real estate loans 144 84 60 57 85
Gain on sales of government guaranteed portions of loans 219 1,604 879 405 760
Swap fee income 334 168 857 535 63
Securities gains, net 4,252 18 358 325 57
Earnings on bank-owned life insurance 450 480 394 443 407
Debit card fees 475 344 308 290 333
Correspondent banking fees 254 245 302 275 311
Participation service fees on commercial loan participations 237 246 211 218 202
Fee income from early termination of leases 95 66 12 46 89
Credit card issuing fees 137 139 137 134 134
Lawsuit settlement - - - - 387
Other 390 216 139 271 276
Total noninterest income $ 10,423 $ 6,762 $ 6,822 $ 6,178 $ 6,403
Salaries and employee benefits $11,202 $10,917 $10,801 $10,258 $10,583
Occupancy and equipment expense 2,086 1,885 1,827 1,535 1,864
Professional and data processing fees 1,931 1,542 1,447 840 1,742
Acquisition costs 2,046 355 - - -
FDIC insurance, other insurance and regulatory fees 583 650 634 573 702
Loan/lease expense 103 154 163 281 91
Net cost of operation of other real estate 133 278 102 (4) (1,118)
Advertising and marketing 548 433 386 532 460
Postage and communications 238 257 217 252 221
Stationery and supplies 168 158 165 171 145
Bank service charges 415 415 416 396 392
Losses on debt extinguishment, net 4,137 - 83 291 -
Correspondent banking expense 206 182 177 186 177
Other 684 518 536 528 688
Total noninterest expense $ 24,480 $ 17,744 $ 16,954 $ 15,839 $ 15,947
Net income before taxes $ 7,966 $ 8,829 $ 8,392 $ 9,048 $ 8,958
Income tax expense 1,858 2,153 2,019 2,263 2,469
Net income $ 6,108 $ 6,676 $ 6,373 $ 6,785 $ 6,489
Basic EPS $0.47 $0.54 $0.54 $0.58 $0.55
Diluted EPS $0.46 $0.53 $0.53 $0.57 $0.55
Weighted average common shares outstanding 13,066,777 12,335,077 11,793,620 11,744,495 11,713,993
Weighted average common and common equivalent shares outstanding 13,269,703 12,516,474 11,953,949 11,926,038 11,875,930

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
For the Quarter Ended For the Nine Months Ended
September 30,June 30,March 31,December 31,September 30, September 30,September 30,
20162016201620152015 20162015
(dollars in thousands, except per share data)
COMMON SHARE DATA
Common shares outstanding 13,075,307 13,057,368 11,814,911 11,761,083 11,728,911
Book value per common share (1)$21.48 $21.07 $19.90 $19.21 $18.85
Tangible book value per common share (2)$19.74 $20.72 $19.51 $18.81 $18.45
Closing stock price$31.74 $27.19 $23.79 $24.29 $21.87
Market capitalization$415,010 $355,030 $281,077 $285,677 $256,511
Market price / book value 147.77% 129.05% 119.53% 126.47% 116.01%
Market price / tangible book value 160.79% 131.24% 121.94% 129.15% 118.55%
Earnings per common share (basic) LTM (3)$2.13 $2.21 $1.62 $1.64 $1.40
Price earnings ratio LTM (3)14.90 x12.30 x14.69 x14.81 x15.62 x
TCE / TA (4) 7.92% 10.10% 8.74% 8.55% 8.42%
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Beginning balance$275,117 $235,143 $225,886 $221,115 $211,697
Net income 6,108 6,676 6,373 6,785 6,489
Other comprehensive income (loss), net of tax (361) 1,181 2,525 (2,287) 2,256
Common cash dividends declared (521) (521) (471) (469) -
Proceeds from issuance of 1,215,000 shares of common stock, net of costs - 29,829 - - -
Other (5) 514 2,809 830 742 673
Ending balance$ 280,857 $ 275,117 $ 235,143 $ 225,886 $ 221,115
REGULATORY CAPITAL RATIOS (6):
Total risk-based capital ratio 11.45% 14.29% 12.68% 13.11% 13.06%
Tier 1 risk-based capital ratio 10.40% 13.04% 11.45% 11.88% 11.83%
Tier 1 leverage capital ratio 10.09% 11.18% 9.85% 9.75% 9.73%
Common equity tier 1 ratio 9.32% 11.72% 10.11% 10.33% 10.16%
KEY PERFORMANCE RATIOS AND OTHER METRICS
Return on average assets (annualized) 0.85% 1.01% 0.98% 1.04% 1.01% 0.94% 0.53%
Return on average total equity (annualized) 8.78% 10.46% 11.02% 12.14% 11.99% 10.02% 7.43%
Net interest margin (TEY) (7) 3.71% 3.62% 3.59% 3.41% 3.51% 3.65% 3.37%
Efficiency ratio 71.89% 63.89% 61.83% 61.22% 61.88% 66.31% 77.32%
Gross loans and leases / total assets 71.95% 71.65% 70.96% 69.34% 68.16% 71.95% 68.16%
Full-time equivalent employees (8) 572 410 406 406 406 572 406
AVERAGE BALANCES
Assets$2,865,947 $2,640,678 $2,602,350 $2,611,276 $2,563,739 $2,702,992 $2,529,469
Loans/leases 2,077,376 1,899,932 1,833,950 1,764,275 1,744,043 1,937,086 1,688,605
Deposits 2,243,397 2,033,116 1,980,056 1,978,737 1,881,604 2,085,524 1,809,199
Total stockholders' equity 278,369 255,391 231,247 223,553 216,453 255,002 182,134
(1) Includes accumulated other comprehensive income (loss).
(2) Includes accumulated other comprehensive income (loss) and excludes intangible assets.
(3) LTM : Last twelve months.
(4) TCE / TCA : tangible common equity / total tangible assets. See GAAP to non-GAAP reconciliations.
(5) Includes mostly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation.
(6) Ratios for the current quarter are subject to change upon final calculation for regulatory filings due after earnings release.
(7) TEY : Tax equivalent yield.
(8) Full-time equivalent employees increased by 162 in the current quarter due to the acquisition of Community State Bank.

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
ANALYSIS OF NET INTEREST INCOME AND MARGIN
For the Quarter Ended
September 30, 2016 June 30, 2016 September 30, 2015
Average
Balance
Interest
Earned or
Paid
Average Yield
or Cost
Average
Balance
Interest
Earned or Paid
Average
Yield or Cost
Average
Balance
Interest
Earned
or Paid
Average
Yield or Cost
(dollars in thousands)
Fed funds sold $17,685 $13 0.29% $14,174 $11 0.31% $22,435 $8 0.14%
Interest-bearing deposits at financial institutions 67,807 103 0.60% 50,747 62 0.49% 51,380 67 0.52%
Securities (1) 525,417 4,826 3.65% 505,697 4,573 3.64% 591,538 4,683 3.14%
Restricted investment securities 14,877 132 3.53% 14,171 134 3.80% 14,224 127 3.54%
Loans (1) 2,077,376 23,330 4.47% 1,899,932 20,497 4.34% 1,744,043 19,564 4.45%
Total earning assets (1) $2,703,162 $28,404 4.18% $2,484,721 $25,277 4.09% $2,423,620 $24,449 4.00%
Interest-bearing deposits $1,116,325 $717 0.26% $941,856 $600 0.26% $822,178 $465 0.22%
Time deposits 422,603 755 0.71% 425,216 744 0.70% 414,396 675 0.65%
Short-term borrowings 30,208 12 0.16% 50,122 18 0.14% 147,880 64 0.17%
Federal Home Loan Bank advances 118,564 421 1.41% 128,956 416 1.30% 131,343 537 1.62%
Junior subordinated debentures 33,430 306 3.64% 33,396 302 3.64% 40,510 317 3.10%
Other borrowings 116,856 975 3.32% 100,008 824 3.31% 115,017 945 3.26%
Total interest-bearing liabilities $1,837,986 $3,186 0.69% $1,679,554 $2,904 0.70% $1,671,324 $3,003 0.71%
Net interest income / spread (1) $25,218 3.49% $22,373 3.39% $21,446 3.29%
Net interest margin (1) 3.71% 3.62% 3.51%
For the Nine Months Ended
September 30, 2016 September 30, 2015
Average
Balance
Interest
Earned or Paid
Average Yield
or Cost
Average
Balance
Interest
Earned or Paid
Average
Yield or Cost
(dollars in thousands)
Fed funds sold $16,364 $36 0.29% $18,549 $18 0.13%
Interest-bearing deposits at financial institutions 53,063 226 0.57% 55,528 208 0.50%
Securities (1) 527,162 14,084 3.57% 608,687 13,725 3.01%
Restricted investment securities 14,396 396 3.67% 15,083 378 3.35%
Loans (1) 1,937,085 63,784 4.40% 1,688,605 56,452 4.47%
Total earning assets (1) $2,548,070 $78,526 4.12% $2,386,452 $70,781 3.97%
Interest-bearing deposits $994,476 $1,931 0.26% $797,892 $1,357 0.23%
Time deposits 415,808 2,175 0.70% 391,218 1,939 0.66%
Short-term borrowings 55,623 74 0.18% 163,091 181 0.15%
Federal Home Loan Bank advances 125,319 1,278 1.36% 170,520 2,983 2.34%
Junior subordinated debentures 33,825 913 3.61% 40,475 937 3.10%
Other borrowings 106,201 2,624 3.30% 131,278 3,286 3.35%
Total interest-bearing liabilities $1,731,252 $8,995 0.69% $1,694,474 $10,683 0.84%
Net interest income / spread (1) $69,531 3.43% $60,098 3.13%
Net interest margin (1) 3.65% 3.37%
(1) Includes nontaxable securities and loans. Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 35% tax rate for each period presented.

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
As of
September 30,June 30,March 31,December 31, September 30,
2016
2016
2016
2015
2015
(dollars in thousands, except per share data)
ROLLFORWARD OF ALLOWANCE FOR LOAN/LEASE LOSSES
Beginning balance $28,097 $27,395 $26,141 $25,534 $26,146
Provision charged to expense 1,608 1,198 2,073 1,177 1,635
Loans/leases charged off (987) (634) (868) (1,106) (2,476)
Recoveries on loans/leases previously charged off 109 138 49 536 229
Ending balance $ 28,827 $ 28,097 $ 27,395 $ 26,141 $ 25,534
NONPERFORMING ASSETS (2)
Nonaccrual loans/leases $14,371 $10,737 $10,772 $10,648 $11,269
Accruing loans/leases past due 90 days or more 392 86 47 3 3
Troubled debt restructures - accruing 1,825 1,753 1,157 1,054 1,040
Total nonperforming loans/leases 16,588 12,576 11,705 12,312 14,854
Other real estate owned 5,808 6,179 6,680 7,151 8,140
Other repossessed assets 353 154 46 246 194
Total nonperforming assets $ 22,749 $ 18,909 $ 19,102 $ 20,646 $ 27,103
ASSET QUALITY RATIOS
Nonperforming assets / total assets 0.69% 0.70% 0.71% 0.74% 0.80%
Allowance / total loans/leases (1) 1.22% 1.46% 1.46% 1.45% 1.45%
Allowance / nonperforming loans/leases (1) 173.78% 223.42% 228.75% 223.33% 207.39%
(1) Upon acquisition and per GAAP, acquired loans are recorded at market value which eliminated the allowance and impacts these ratios.
(2) The increase in nonperforming assets during the third quarter of 2016 was the result of the acquisition of CSB.

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
For the Quarter Ended For the Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
SELECT FINANCIAL DATA - SUBSIDIARIES 2016
2016
2015
2016
2015
(dollars in thousands)
TOTAL ASSETS
Quad City Bank and Trust (1) $1,407,733 $1,390,025 $1,328,053
m2 Lease Funds, LLC 208,080 207,334 195,712
Cedar Rapids Bank and Trust 887,593 904,367 867,064
Community State Bank - Ankeny 580,210 N/A N/A
Rockford Bank and Trust 393,192 402,157 360,348
TOTAL DEPOSITS
Quad City Bank and Trust (1) $1,110,512 $1,049,049 $919,904
Cedar Rapids Bank and Trust 727,446 690,377 685,537
Community State Bank - Ankeny 481,256 N/A N/A
Rockford Bank and Trust 294,193 296,613 254,050
TOTAL LOANS & LEASES
Quad City Bank and Trust (1) $994,628 $968,905 $853,755
m2 Lease Funds, LLC 206,800 205,883 194,911
Cedar Rapids Bank and Trust 634,929 648,727 617,215
Community State Bank - Ankeny 419,498 N/A N/A
Rockford Bank and Trust 311,545 305,141 284,703
TOTAL LOANS & LEASES / TOTAL ASSETS
Quad City Bank and Trust (1) 71% 70% 64%
Cedar Rapids Bank and Trust 72% 72% 71%
Community State Bank - Ankeny 72% N/A N/A
Rockford Bank and Trust 79% 76% 79%
ALLOWANCE AS A PERCENTAGE OF LOANS/LEASES
Quad City Bank and Trust (1) 1.30% 1.31% 1.34%
m2 Lease Funds, LLC 1.69% 1.80% 1.80%
Cedar Rapids Bank and Trust 1.69% 1.65% 1.60%
Community State Bank - Ankeny (2) 0.07% N/A N/A
Rockford Bank and Trust 1.58% 1.53% 1.49%
RETURN ON AVERAGE ASSETS
Quad City Bank and Trust (1) 1.12% 1.24% 1.23% 1.10% 0.79%
Cedar Rapids Bank and Trust 1.48% 1.46% 1.36% 1.44% 0.77%
Community State Bank - Ankeny (3) 0.39% N/A N/A 0.39% N/A
Rockford Bank and Trust 0.96% 0.80% 0.88% 0.81% 0.65%
NET INTEREST MARGIN PERCENTAGE (4)
Quad City Bank and Trust (1) 3.61% 3.66% 3.49% 3.63% 3.30%
Cedar Rapids Bank and Trust 3.93% 3.77% 3.71% 3.82% 3.66%
Community State Bank - Ankeny (5) 4.99% N/A N/A 4.99% N/A
Rockford Bank and Trust 3.50% 3.49% 3.41% 3.51% 3.41%
(1) Quad City Bank and Trust figures include m2 Lease Funds, LLC, as this entity is wholly-owned and consolidated with the Bank. m2 Lease Funds, LLC is also presented separately for certain (applicable) measurements.
(2) Upon acquisition and per GAAP, acquired loans are recorded at market value which eliminated the allowance and impacts this ratio.
(3) Community State Bank's return on average assets includes acquisition costs and various purchase accounting adjustments.
(4) Includes nontaxable securities and loans. Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 35% tax rate for each period presented.
(5) Community State Bank net interest margin includes approximately $413K of pre-tax acquisition-related amortization/accretion, net.

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
As of
September 30, June 30, March 31, December 31, September 30,
GAAP TO NON-GAAP RECONCILIATIONS 2016 2016 2016 2015 2015
(dollars in thousands, except per share data)
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS RATIO (1)
Stockholders' equity (GAAP) $ 280,857 $ 275,117 $ 235,143 $ 225,886 $ 221,115
Less: Intangible assets 22,755 4,595 4,645 4,694 4,744
Tangible common equity (non-GAAP) $ 258,102 $ 270,522 $ 230,498 $ 221,192 $ 216,371
Total assets (GAAP) $ 3,280,986 $ 2,683,434 $ 2,640,673 $ 2,593,198 $ 2,575,855
Less: Intangible assets 22,755 4,595 4,645 4,694 4,744
Tangible assets (non-GAAP) $ 3,258,231 $ 2,678,839 $ 2,636,028 $ 2,588,504 $ 2,571,111
Tangible common equity to tangible assets ratio (non-GAAP) 7.92% 10.10% 8.74% 8.55% 8.42%
For the Quarter Ended For the Nine Months Ended
September 30, June 30, March 31, December 31, September 30, September 30, September 30,
CORE NET INCOME (2) 2016 2016 2016 2015 2015 2016 2015
Net income (GAAP) $ 6,108 $ 6,676 $ 6,373 $ 6,785 $ 6,489 $ 19,157 $ 10,143
Less nonrecurring items (post-tax) (3):
Income:
Securities gains $ 2,764 $ 12 $ 233 $ 211 $ 37 $ 3,009 $ 308
Lawsuit award - - - - 252 - 252
Total nonrecurring income (non-GAAP) $ 2,764 $ 12 $ 233 $ 211 $ 289 $ 3,009 $ 560
Expense:
Losses on debt extinguishment $ 2,689 $ - $ 54 $ 189 $ - $ 2,743 $ 4,481
Acquisition costs (4) 1,506 231 - - - 1,737 -
Other non-recurring expenses - - - - - - 513
Accrual adjustments - - - (487) - - -
Total nonrecurring expense (non-GAAP) $ 4,195 $ 231 $ 54 $ (298) $ - $ 4,480 $ 4,994
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (2) $ 7,539 $ 6,895 $ 6,194 $ 6,276 $ 6,200 $ 20,628 $ 14,577
CORE EARNINGS PER COMMON SHARE (2)
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above) $ 7,539 $ 6,895 $ 6,194 $ 6,276 $ 6,200 $ 20,628 $ 14,577
Weighted average common shares outstanding 13,066,777 12,335,077 11,793,620 11,744,495 11,713,993 12,398,491 9,878,882
Weighted average common and common equivalent shares outstanding 13,269,703 12,516,474 11,953,949 11,926,038 11,875,930 12,580,042 10,024,441
Core earnings per common share (non-GAAP):
Basic $ 0.58 $ 0.56 $ 0.53 $ 0.53 $ 0.53 $ 1.66 $ 1.48
Diluted $ 0.57 $ 0.55 $ 0.52 $ 0.53 $ 0.52 $ 1.64 $ 1.45
CORE RETURN ON AVERAGE ASSETS (2)
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above) $ 7,539 $ 6,895 $ 6,194 $ 6,276 $ 6,200 $ 20,628 $ 14,577
Average Assets $ 2,865,947 $ 2,640,678 $ 2,602,350 $ 2,611,276 $ 2,563,739 $ 2,702,992 $ 2,529,469
Core return on average assets (annualized) (non-GAAP) 1.05% 1.04% 0.95% 0.96% 0.97% 1.02% 0.77%
(1) This ratio is a non-GAAP financial measure. The Company's management believes that this measurement is important to many investors in the marketplace who are interested in changes period-to-period in common equity. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to stockholders' equity and total assets, which are the most directly comparable GAAP financial measures.
(2) Core net income, core net income attributable to QCR Holdings, Inc. common stockholders, core earnings per common share and core return on average assets are non-GAAP financial measures. The Company's management believes that these measurements are important to investors as they exclude non-recurring income and expense items, therefore, they provide a more realistic run-rate for future periods. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to net income, which is the most directly comparable GAAP financial measure.
(3) Nonrecurring items (post-tax) are calculated using an estimated effective tax rate of 35%.
(4) Acquisition costs were analyzed individually for deductibility. Presented amounts are tax-effected accordingly.

Contact: Todd A. Gipple Executive Vice President Chief Operating Officer Chief Financial Officer (309) 743-7745

Source:QCR Holdings, Inc.