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QCR Holdings, Inc. Announces Record Net Income of $8.5 Million for the Fourth Quarter of 2016 and Record Net Income of $27.7 Million for the Year

MOLINE, Ill., Feb. 01, 2017 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ:QCRH) today announced net income of $8.5 million and diluted earnings per share (“EPS”) of $0.64 for the quarter ended December 31, 2016. By comparison, for the quarter ended September 30, 2016, the Company reported net income of $6.1 million and diluted EPS of $0.46, which included $1.5 million of acquisition costs (after-tax) related to the acquisition of Community State Bank (“CSB”) in August 2016. 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 for the third quarter of 2016. For the fourth quarter of 2015, the Company reported net income of $6.8 million and diluted EPS of $0.57.

For the year ended December 31, 2016, the Company reported net income of $27.7 million and diluted EPS of $2.17. Excluding acquisition costs and other non-core items, the Company reported core net income (non-GAAP) of $29.4 million and diluted EPS of $2.31. By comparison, for the year ended December 31, 2015, the Company reported net income of $16.9 million and diluted EPS of $1.61, which included several nonrecurring items, including $4.7 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 2016 has been solid,” commented Douglas M. Hultquist, President and Chief Executive Officer, “and we continue to strategize and pursue ways to improve our profitability through our ongoing key initiatives. Our core return on average assets (non-GAAP) has improved to 1.03% from 0.82%, when comparing the full year of 2016 to the prior year. This is the result of strong organic loan growth, robust growth in core deposits, reductions in wholesale borrowings, continued margin improvements, modest operating expense growth, and strong fee income.”

Organic Loan and Lease Growth of 10.5% for Year
Swap Fee Income and Gains on the Sale of Government Guaranteed Loans Total $4.9 Million in 2016

During the fourth quarter of 2016, the Company’s total assets increased $21.0 million, or 1%, to a total of $3.30 billion, while total loans and leases grew $44.9 million, or 1.9%. Loan and lease growth was funded by deposits, which increased $74.3 million, or 2.9%, in the fourth quarter. This deposit growth also allowed the Company to further reduce borrowings.

“Organic loan and lease growth totaled $188.4 million for 2016, or an annual growth rate of 10.5%,” commented Mr. Hultquist. “For the third consecutive year, we’ve been able to achieve targeted organic growth of 10-12%, primarily through market share increases. Customers continue to appreciate the way we do business and are attracted to our relationship-based community banking model.”

“Swap fee income and gains on the sale of government guaranteed loans were strong for the year, totaling $4.9 million,” said Todd A. Gipple, Executive Vice President, Chief Operating Officer and Chief Financial Officer. “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 the Des Moines metro market through our recently acquired bank, CSB-Ankeny.”

Net Interest Margin Expanded 32 Basis Points in Fourth Quarter
Due to Q3 Balance Sheet Restructure, Acquisition Accounting and First Full Quarter including CSB

Net interest income totaled $29.3 million for the quarter ended December 31, 2016. By comparison, net interest income totaled $23.6 million and $19.9 million for the quarters ended September 30, 2016 and December 31, 2015, respectively. Net interest income totaled $94.5 million for the year ended December 31, 2016, an increase of 23.9% from the prior year. Net interest income attributable to CSB totaled $10.0 million for the partial year and included $3.2 million of net accretion related to purchase accounting adjustments.

“Net interest margin increased to 4.02% in the fourth quarter,” stated Mr. Gipple. He added, “The improvement in margin was attributable to the previously announced balance sheet restructure at the end of the third quarter, as well as the addition of CSB. One-time acceleration for the fourth quarter was approximately $1.3 million and was the result of payoffs/refinances of acquired performing loans, the prepayment of purchased credit impaired loans and the prepayment of FHLB advances that were acquired at a premium. Excluding the effects of this acceleration, net interest margin would have been 3.84%. By comparison, third quarter net interest margin was 3.70% excluding the effects of acceleration due to the prepayment of purchased credit impaired loans.”

Nonperforming Assets to Total Assets Ratio Increased in Fourth Quarter

Nonperforming assets (“NPAs”) increased $4.2 million in the current quarter. The ratio of NPAs to total assets was 0.82% at December 31, 2016, which was up from 0.69% at September 30, 2016 and up from 0.74% a year ago.

“Two large relationships primarily account for the increase in NPAs in the fourth quarter. The Company is not anticipating significant losses related to these two credits. We believe that these issues are isolated and not reflective of the overall portfolio,” stated Mr. Hultquist. He continued, “We remain committed to improving asset quality in 2017.”

The Company’s provision for loan and lease losses totaled $2.6 million for the fourth quarter of 2016, which was up $991 thousand from the prior quarter, and up $1.4 million compared to the fourth quarter of 2015. The increase in provision in the fourth quarter of 2016 was primarily attributable to CSB. As acquired loans renew, the discount associated with those loans is accelerated and the Company must re-establish a loan loss reserve. This resulted in $1.2 million of provision expense in the fourth quarter. As of December 31, 2016, the Company’s allowance to total loans and leases was 1.28%, which was up from 1.22% at September 30, 2016 and down from 1.45% at December 31, 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 ($10.1 million at December 31, 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 1.28% to 1.70%.

Capital Levels Remain Strong

The Company’s total risk-based capital ratio was 11.74%, the common equity tier 1 ratio was 9.55% and the tangible common equity to tangible assets ratio increased to 8.04%, all as of December 31, 2016. For comparison, these respective ratios were 11.30%, 9.22% and 7.92% as of September 30, 2016.

“As a result of solid earnings performance, capital ratios continue to be strong and we are growing tangible common equity at a steady pace,” stated Mr. Gipple.

Continued Focus on Seven Key Initiatives

The Company continues to focus on the following initiatives in an effort to improve profitability and drive increased shareholder value:

  • Continue strong organic loan and lease growth to maintain loans and leases to total assets ratio in the range of 70-75%
  • Continue focus on growing core deposits to maintain reliance on wholesale funding at less than 15% of assets
  • Continue to focus on generating gains on sale of USDA and SBA loans, and fee income on swaps, as a significant and consistent component of core revenue
  • Grow wealth management fee income by 10% annually
  • Carefully manage noninterest expense growth
  • Maintain asset quality metrics at better than peer levels
  • Participate as an acquirer in the consolidation taking place in our markets to further boost ROAA, improve efficiency ratio, and increase EPS

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
December 31,September 30,June 30,March 31,December 31,
2016 2016 2016 2016 2015
(dollars in thousands)
CONDENSED BALANCE SHEET
Cash and due from banks$ 70,570$ 61,213$ 49,581$ 44,931$ 41,742
Federal funds sold and interest-bearing deposits 86,206 96,047 68,432 57,229 56,164
Securities 574,022 564,930 510,959 537,317 577,109
Net loans/leases 2,374,730 2,331,774 1,894,676 1,846,428 1,771,882
Core deposit intangible 7,381 7,614 1,372 1,422 1,471
Goodwill 13,111 13,632 3,223 3,223 3,223
Other assets 175,924 205,776 155,191 150,123 141,607
Total assets$ 3,301,944 $ 3,280,986 $ 2,683,434 $ 2,640,673 $ 2,593,198
Total deposits$ 2,669,261$ 2,594,913$ 1,973,594$ 1,989,573$ 1,880,666
Total borrowings 290,952 312,104 381,874 347,901 444,162
Other liabilities 55,690 93,112 52,849 68,056 42,484
Total stockholders' equity 286,041 280,857 275,117 235,143 225,886
Total liabilities and stockholders' equity$ 3,301,944 $ 3,280,986 $ 2,683,434 $ 2,640,673 $ 2,593,198
ANALYSIS OF LOAN PORTFOLIO
Loan/lease mix:
Commercial and industrial loans$ 827,637$ 804,308$ 706,261$ 682,057$ 648,160
Commercial real estate loans 1,093,459 1,070,305 784,379 766,159 724,369
Direct financing leases 165,419 166,924 169,928 172,774 173,656
Residential real estate loans 229,233 229,081 180,482 173,096 170,433
Installment and other consumer loans 81,666 81,918 73,658 71,842 73,669
Deferred loan/lease origination costs, net of fees 8,073 8,065 8,065 7,895 7,736
Total loans/leases$ 2,405,487$ 2,360,601$ 1,922,773$ 1,873,823$ 1,798,023
Less allowance for estimated losses on loans/leases 30,757 28,827 28,097 27,395 26,141
Net loans/leases$ 2,374,730 $ 2,331,774 $ 1,894,676 $ 1,846,428 $ 1,771,882
ANALYSIS OF SECURITIES PORTFOLIO
Securities mix:
U.S. government sponsored agency securities$ 46,084$ 67,885$ 88,321$ 132,742$ 213,537
Municipal securities 374,463 360,330 302,689 285,009 280,203
Residential mortgage-backed and related securities 147,702 133,173 116,765 116,452 80,670
Other securities 5,773 3,542 3,184 3,114 2,699
Total securities$ 574,022 $ 564,930 $ 510,959 $ 537,317 $ 577,109
ANALYSIS OF DEPOSITS
Deposit mix:
Noninterest-bearing demand deposits$ 797,415$ 764,615$ 615,764$ 641,859$ 615,292
Interest-bearing demand deposits 1,369,226 1,298,781 918,036 916,455 886,294
Time deposits 439,169 420,470 337,584 331,786 309,974
Brokered deposits 63,451 111,047 102,210 99,473 69,106
Total deposits$ 2,669,261 $ 2,594,913 $ 1,973,594 $ 1,989,573 $ 1,880,666
ANALYSIS OF BORROWINGS
Borrowings mix:
Term FHLB advances$ 63,000$ 83,343$ 78,000$ 80,000$ 97,000
Overnight FHLB advances (1) 74,500 55,300 118,900 70,500 54,000
Wholesale structured repurchase agreements 45,000 45,000 100,000 100,000 110,000
Customer repurchase agreements 8,132 8,265 21,441 52,153 73,873
Federal funds purchased 31,840 51,750 30,120 11,870 70,790
Junior subordinated debentures 33,480 33,446 33,413 33,378 38,499
Other borrowings 35,000 35,000 - - -
Total borrowings$ 290,952 $ 312,104 $ 381,874 $ 347,901 $ 444,162
(1) At the most recent quarter-end, the weighted-average rate of these overnight borrowings was 0.81%.

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
For the Year Ended
December 31, December 31,
2016 2015
(dollars in thousands, except per share data)
INCOME STATEMENT
Interest income $ 106,468 $ 90,003
Interest expense 11,951 13,707
Net interest income 94,517 76,296
Provision for loan/lease losses 7,478 6,871
Net interest income after provision for loan/lease losses $ 87,039 $ 69,425
Trust department fees $ 6,164 $ 6,131
Investment advisory and management fees 2,993 2,972
Deposit service fees 4,440 3,785
Gain on sales of residential real estate loans 431 323
Gain on sales of government guaranteed portions of loans 3,159 1,305
Swap fee income 1,708 1,718
Securities gains, net 4,592 799
Earnings on bank-owned life insurance 1,771 1,762
Debit card fees 1,815 1,245
Correspondent banking fees 1,050 1,190
Other 2,914 3,133
Total noninterest income $ 31,037 $ 24,363
Salaries and employee benefits $ 46,317 $ 42,968
Occupancy and equipment expense 8,405 7,043
Professional and data processing fees 7,113 5,523
Acquisition costs 2,441 -
FDIC insurance, other insurance and regulatory fees 2,549 2,725
Loan/lease expense 662 882
Net cost of operation of other real estate 591 (1,092)
Advertising and marketing 2,128 1,901
Bank service charges 1,693 1,486
Losses on debt extinguishment, net 4,578 7,186
Correspondent banking expense 751 703
Other 4,258 3,866
Total noninterest expense $ 81,486 $ 73,191
Net income before taxes $ 36,590 $ 20,597
Income tax expense 8,903 3,669
Net income $ 27,687 $ 16,928
Basic EPS $ 2.20 $ 1.64
Diluted EPS $ 2.17 $ 1.61
Weighted average common shares outstanding 12,570,767 10,345,286
Weighted average common and common equivalent shares outstanding 12,766,003 10,499,841

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
For the Quarter Ended
December 31,September 30,June 30,March 31,December 31,
2016 2016 2016 2016 2015
(dollars in thousands, except per share data)
INCOME STATEMENT
Interest income $ 32,236 $ 26,817$ 23,913$ 23,502$ 22,910
Interest expense 2,956 3,186 2,904 2,905 3,024
Net interest income 29,280 23,631 21,009 20,597 19,886
Provision for loan/lease losses 2,599 1,608 1,198 2,073 1,177
Net interest income after provision for loan/lease losses $ 26,681 $ 22,023 $ 19,811 $ 18,524 $ 18,709
Trust department fees $ 1,558 $ 1,519$ 1,512$ 1,576$ 1,455
Investment advisory and management fees 876 766 693 658 721
Deposit service fees 1,411 1,151 947 931 410
Gain on sales of residential real estate loans 142 144 84 60 57
Gain on sales of government guaranteed portions of loans 458 219 1,604 879 405
Swap fee income 350 334 168 857 535
Securities gains, net (36) 4,252 18 358 325
Earnings on bank-owned life insurance 447 450 480 394 443
Debit card fees 688 475 344 308 333
Correspondent banking fees 249 254 245 302 275
Participation service fees on commercial loan participations 249 237 246 211 218
Other 637 622 421 288 1,035
Total noninterest income $ 7,029 $ 10,423 $ 6,762 $ 6,822 $ 6,212
Salaries and employee benefits $ 13,396 $ 11,202$ 10,917$ 10,801$ 10,258
Occupancy and equipment expense 2,630 2,086 1,885 1,827 1,535
Professional and data processing fees 2,192 1,931 1,542 1,447 840
Acquisition costs 40 2,046 355 - -
FDIC insurance, other insurance and regulatory fees 683 583 650 634 573
Loan/lease expense 242 103 154 163 281
Net cost of operation of other real estate 78 133 278 102 (4)
Advertising and marketing 760 548 433 386 532
Bank service charges 446 415 415 416 396
Losses on debt extinguishment, net 357 4,137 - 83 291
Correspondent banking expense 186 206 182 177 139
Other 1,298 1,090 933 918 1,032
Total noninterest expense $ 22,308 $ 24,480 $ 17,744 $ 16,954 $ 15,873
Net income before taxes $ 11,402 $ 7,966 $ 8,829 $ 8,392 $ 9,048
Income tax expense 2,873 1,858 2,153 2,019 2,263
Net income $ 8,529 $ 6,108 $ 6,676 $ 6,373 $ 6,785
Basic EPS $ 0.65 $ 0.47$ 0.54$ 0.54$ 0.58
Diluted EPS $ 0.64 $ 0.46$ 0.53$ 0.53$ 0.57
Weighted average common shares outstanding 13,087,592 13,066,777 12,335,077 11,793,620 11,744,495
Weighted average common and common equivalent shares outstanding 13,323,883 13,269,703 12,516,474 11,953,949 11,926,038

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
For the Quarter Ended For the Year Ended
December 31,September 30,June 30,March 31,December 31, December 31,December 31,
2016 2016 2016 2016 2015 2016 2015
(dollars in thousands, except per share data)
COMMON SHARE DATA
Common shares outstanding 13,106,845 13,075,307 13,057,368 11,814,911 11,761,083
Book value per common share (1)$21.82 $21.48 $21.07 $19.90 $19.21
Tangible book value per common share (2)$20.11 $19.74 $20.72 $19.51 $18.81
Closing stock price$43.30 $31.74 $27.19 $23.79 $24.29
Market capitalization$567,526 $415,010 $355,030 $281,077 $285,677
Market price / book value 198.41% 147.77% 129.05% 119.53% 126.47%
Market price / tangible book value 215.36% 160.79% 131.24% 121.94% 129.15%
Earnings per common share (basic) LTM (3)$2.20 $2.13 $2.21 $1.62 $1.64
Price earnings ratio LTM (3) 19.68 x 14.90 x 12.30 x 14.69 x 14.81 x
TCE / TA (4) 8.04% 7.92% 10.10% 8.74% 8.55%
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Beginning balance$ 280,857 $ 275,117 $ 235,143 $ 225,886 $ 221,115
Net income 8,529 6,108 6,676 6,373 6,785
Other comprehensive income (loss), net of tax (3,681) (361) 1,181 2,525 (2,287)
Common stock cash dividends declared (523) (521) (521) (471) (469)
Proceeds from issuance of 1,215,000 shares of common stock, net of costs - - 29,829 - -
Other (5) 859 514 2,809 830 742
Ending balance$ 286,041 $ 280,857 $ 275,117 $ 235,143 $ 225,886
REGULATORY CAPITAL RATIOS (6):
Total risk-based capital ratio 11.74% 11.30% 14.29% 12.68% 13.11%
Tier 1 risk-based capital ratio 10.62% 10.29% 13.04% 11.45% 11.88%
Tier 1 leverage capital ratio 9.10% 10.09% 11.18% 9.85% 9.75%
Common equity tier 1 ratio 9.55% 9.22% 11.72% 10.11% 10.33%
KEY PERFORMANCE RATIOS AND OTHER METRICS
Return on average assets (annualized) 1.04% 0.85% 1.01% 0.98% 1.04% 0.97% 0.66%
Return on average total equity (annualized) 12.04% 8.78% 10.46% 11.02% 12.14% 10.56% 8.79%
Net interest margin 3.80% 3.48% 3.40% 3.37% 3.20% 3.53% 3.17%
Net interest margin (TEY) (Non-GAAP)(7) 4.02% 3.71% 3.62% 3.59% 3.41% 3.75% 3.37%
Efficiency ratio (Non-GAAP) (9) 61.44% 71.89% 63.89% 61.83% 60.82% 64.90% 72.71%
Gross loans and leases / total assets 72.85% 71.95% 71.65% 70.96% 69.34% 72.85% 69.34%
Full-time equivalent employees (8) 572 572 410 406 406 572 406
AVERAGE BALANCES
Assets$ 3,277,814 $ 2,865,947 $ 2,640,678 $ 2,602,350 $ 2,611,276 $ 2,846,697 $ 2,549,921
Loans/leases 2,358,960 2,077,376 1,899,932 1,833,950 1,764,275 2,042,555 1,707,523
Deposits 2,717,923 2,243,397 2,033,116 1,980,056 1,978,737 2,243,623 1,851,584
Total stockholders' equity 283,292 278,369 255,391 231,247 223,553 262,075 192,489
(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. See GAAP to Non-GAAP reconciliations.
(8) Full-time equivalent employees increased by 162 in the 3rd quarter of 2016 due to the acquisition of Community State Bank.
(9) See GAAP to Non-GAAP reconciliations.

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
ANALYSIS OF NET INTEREST INCOME AND MARGIN
For the Quarter Ended
December 31, 2016 September 30, 2016 December 31, 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 $ 11,475$ 90.31% $ 17,685$ 130.29% $ 14,027$ 60.17%
Interest-bearing deposits at financial institutions 123,838 1670.54% 67,807 1030.60% 101,006 960.38%
Securities (1) 562,164 4,9703.52% 525,417 4,8263.65% 572,531 4,6733.24%
Restricted investment securities 12,785 1263.92% 14,877 1323.53% 13,658 1263.66%
Loans (1) 2,358,960 28,6914.84% 2,077,376 23,3304.47% 1,764,275 19,3304.35%
Total earning assets (1)$ 3,069,222$ 33,9634.40% $ 2,703,162$ 28,4044.18% $ 2,465,497$ 24,2313.90%
Interest-bearing deposits$ 1,387,319$ 9280.27% $ 1,116,325$ 7170.26% $ 890,503$ 4780.21%
Time deposits 496,855 9840.79% 422,603 7550.71% 381,109 7210.75%
Short-term borrowings 36,728 200.22% 30,208 120.16% 115,289 360.12%
Federal Home Loan Bank advances (4) 83,231 60.03% 118,564 4211.41% 105,509 5291.99%
Junior subordinated debentures 33,463 3253.86% 33,430 3063.64% 40,028 3193.16%
Other borrowings 73,816 6933.73% 116,856 9753.32% 113,776 9413.28%
Total interest-bearing liabilities$ 2,111,412$ 2,9560.56% $ 1,837,986$ 3,1860.69% $ 1,646,214$ 3,0240.73%
Net interest income / spread (1) $ 31,0073.84% $ 25,2183.49% $ 21,2073.17%
Net interest margin (2) 3.80% 3.48% 3.20%
Net interest margin (TEY) (Non-GAAP (1) (2) (3) 4.02% 3.71% 3.41%
For the Year Ended
December 31, 2016 December 31, 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 $ 15,142$ 450.30% $ 17,418$ 250.14%
Interest-bearing deposits at financial institutions 70,757 3930.56% 66,897 3040.45%
Securities (1) 535,912 19,0543.56% 599,648 18,3803.07%
Restricted investment securities 13,993 5223.73% 14,727 5043.42%
Loans (1) 2,042,555 92,4754.53% 1,707,523 75,6704.43%
Total earning assets (1)$ 2,678,359$ 112,4894.20% $ 2,406,213$ 94,8833.94%
Interest-bearing deposits$ 1,092,687$ 3,8430.35% $ 821,045$ 1,8360.22%
Time deposits 436,070 2,1750.50% 388,691 2,6600.68%
Short-term borrowings 50,899 940.18% 151,141 2100.14%
Federal Home Loan Bank advances (4) 114,797 1,2841.12% 154,268 3,5112.28%
Junior subordinated debentures 33,735 1,2373.67% 40,364 1,2563.11%
Other borrowings 98,105 3,3183.38% 126,902 4,2333.34%
Total interest-bearing liabilities$ 1,826,293$ 11,9510.65% $ 1,682,411$ 13,7060.81%
Net interest income / spread (1) $ 100,5383.55% $ 81,1773.13%
Net interest margin (2) 3.53% 3.17%
Net interest margin (TEY) (Non-GAAP) (1) (2) (3) 3.75% 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.
(2) See "Select Financial Data - Subsidiaries" for a breakdown of amortization/accretion included in net interest margin for each period presented.
(3) TEY : Tax equivalent yield. See GAAP to Non-GAAP reconciliations.
(4) Average cost of Federal Home Loan Bank advances for the quarter and year ending December 31, 2016 was affected by the acceleration of the premium on advances recognized at the acquisition of CSB. $342 thousand was accelerated due to the prepayment of $15.0 million of advances in the fourth quarter of 2016.

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
As of
December 31,September 30,June 30,March 31,December 31,
2016 2016 2016 2016 2015
(dollars in thousands, except per share data)
ROLLFORWARD OF ALLOWANCE FOR LOAN/LEASE LOSSES
Beginning balance$ 28,827 $ 28,097 $ 27,395 $ 26,141 $ 25,534
Provision charged to expense 2,599 1,608 1,198 2,073 1,177
Loans/leases charged off (755) (987) (634) (868) (1,106)
Recoveries on loans/leases previously charged off 86 109 138 49 536
Ending balance$ 30,757 $ 28,827 $ 28,097 $ 27,395 $ 26,141
NONPERFORMING ASSETS (2)
Nonaccrual loans/leases$ 13,919 $ 14,371 $ 10,737 $ 10,772 $ 10,648
Accruing loans/leases past due 90 days or more 967 392 86 47 3
Troubled debt restructures - accruing 6,347 1,825 1,753 1,157 1,054
Total nonperforming loans/leases 21,233 16,588 12,576 11,705 12,312
Other real estate owned 5,523 5,808 6,179 6,680 7,151
Other repossessed assets 202 353 154 46 246
Total nonperforming assets$ 26,958 $ 22,749 $ 18,909 $ 19,102 $ 20,646
ASSET QUALITY RATIOS
Nonperforming assets / total assets 0.82% 0.69% 0.70% 0.71% 0.74%
Allowance / total loans/leases (1) 1.28% 1.22% 1.46% 1.46% 1.45%
Allowance / nonperforming loans/leases (1) 144.85% 173.78% 223.42% 228.75% 223.33%
(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 Year Ended
December 31, September 30, December 31, December 31, December 31,
SELECT FINANCIAL DATA - SUBSIDIARIES 2016 2016 2015 2016 2015
(dollars in thousands)
TOTAL ASSETS
Quad City Bank and Trust (1) $ 1,395,785 $ 1,407,733 $ 1,336,572
m2 Lease Funds, LLC 213,159 208,080 202,685
Cedar Rapids Bank and Trust 913,056 887,593 866,872
Community State Bank - Ankeny 600,076 580,210 N/A
Rockford Bank and Trust 391,155 393,192 367,472
TOTAL DEPOSITS
Quad City Bank and Trust (1) $ 1,125,932 $ 1,110,512 $ 931,689
Cedar Rapids Bank and Trust 747,785 727,446 680,674
Community State Bank - Ankeny 513,588 481,256 N/A
Rockford Bank and Trust 311,556 294,193 272,347
TOTAL LOANS & LEASES
Quad City Bank and Trust (1) $ 1,010,443 $ 994,628 $ 887,882
m2 Lease Funds, LLC 211,045 206,800 201,119
Cedar Rapids Bank and Trust 652,212 634,929 616,615
Community State Bank - Ankeny 429,511 419,498 N/A
Rockford Bank and Trust 313,321 311,545 293,526
TOTAL LOANS & LEASES / TOTAL ASSETS
Quad City Bank and Trust (1) 72% 71% 66%
Cedar Rapids Bank and Trust 71% 72% 71%
Community State Bank - Ankeny 72% 72% N/A
Rockford Bank and Trust 80% 79% 80%
ALLOWANCE AS A PERCENTAGE OF LOANS/LEASES
Quad City Bank and Trust (1) 1.33% 1.30% 1.35%
m2 Lease Funds, LLC 1.78% 1.69% 1.87%
Cedar Rapids Bank and Trust 1.67% 1.69% 1.61%
Community State Bank - Ankeny (2) 0.34% 0.07% N/A
Rockford Bank and Trust 1.57% 1.58% 1.45%
RETURN ON AVERAGE ASSETS
Quad City Bank and Trust (1) 1.17% 1.12% 1.18% 1.12% 0.89%
Cedar Rapids Bank and Trust 1.34% 1.48% 1.42% 1.42% 0.93%
Community State Bank - Ankeny (3) 1.33% 0.39% N/A 1.10% N/A
Rockford Bank and Trust 0.90% 0.96% 0.50% 0.84% 0.61%
NET INTEREST MARGIN PERCENTAGE (4)
Quad City Bank and Trust (1) 3.71% 3.61% 3.38% 3.65% 3.32%
Cedar Rapids Bank and Trust 3.90% 3.93% 3.63% 3.87% 3.65%
Community State Bank - Ankeny 6.00% 4.99% N/A 5.74% N/A
Rockford Bank and Trust 3.35% 3.50% 3.43% 3.47% 3.41%
ACQUISITION-RELATED AMORTIZATION/ACCRETION INCLUDED IN NET
INTEREST MARGIN, NET
Cedar Rapids Bank and Trust $ 313 $ 230 $ 66 $ 673 $ 504
Community State Bank - Ankeny 2,681 473 N/A 3,154 N/A
QCR Holdings, Inc. (5) (34) (34) (34) (136) (137)
(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)Relates to the trust-preferred securities acquired as part of the Community National Bank acquisition in 2013.

QCR HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
As of
December 31, September 30, June 30, March 31, December 31,
GAAP TO NON-GAAP RECONCILIATIONS 2016 2016 2016 2016 2015
(dollars in thousands, except per share data)
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS RATIO (1)
Stockholders' equity (GAAP) $ 286,041 $ 280,857 $ 275,117 $ 235,143 $ 225,886
Less: Intangible assets 22,522 22,755 4,595 4,645 4,694
Tangible common equity (non-GAAP) $ 263,519 $ 258,102 $ 270,522 $ 230,498 $ 221,192
Total assets (GAAP) $ 3,301,944 $ 3,280,986 $ 2,683,434 $ 2,640,673 $ 2,593,198
Less: Intangible assets 22,522 22,755 4,595 4,645 4,694
Tangible assets (non-GAAP) $ 3,279,422 $ 3,258,231 $ 2,678,839 $ 2,636,028 $ 2,588,504
Tangible common equity to tangible assets ratio (non-GAAP) 8.04% 7.92% 10.10% 8.74% 8.55%
For the Quarter Ended For the Year Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
CORE NET INCOME (2) 2016 2016 2016 2016 2015 2016 2015
Net income (GAAP) $ 8,529 $ 6,108 $ 6,676 $ 6,373 $ 6,785 $ 27,687 $ 16,928
Less nonrecurring items (post-tax) (3):
Income:
Securities gains, net $ (23) $ 2,764 $ 12 $ 233 $ 211 $ 2,985 $ 519
Lawsuit award - - - - - - 252
Total nonrecurring income (non-GAAP) $ (23) $ 2,764 $ 12 $ 233 $ 211 $ 2,985 $ 771
Expense:
Losses on debt extinguishment, net $ 232 $ 2,689 $ - $ 54 $ 189 $ 2,975 $ 4,671
Acquisition costs (4) 26 1,506 231 - - 1,763 -
Other non-recurring expenses - - - - - - 513
Accrual adjustments - - - - (487) - (487)
Total nonrecurring expense (non-GAAP) $ 258 $ 4,195 $ 231 $ 54 $ (298) $ 4,738 $ 4,697
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (2) $ 8,810 $ 7,539 $ 6,895 $ 6,194 $ 6,276 $ 29,440 $ 20,854
CORE EARNINGS PER COMMON SHARE (2)
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above) $ 8,810 $ 7,539 $ 6,895 $ 6,194 $ 6,276 $ 29,440 $ 20,854
Weighted average common shares outstanding 13,087,592 13,066,777 12,335,077 11,793,620 11,744,495 12,570,767 10,345,286
Weighted average common and common equivalent shares outstanding 13,323,883 13,269,703 12,516,474 11,953,949 11,926,038 12,766,003 10,499,841
Core earnings per common share (non-GAAP):
Basic $ 0.67 $ 0.58 $ 0.56 $ 0.53 $ 0.53 $ 2.34 $ 2.02
Diluted $ 0.66 $ 0.57 $ 0.55 $ 0.52 $ 0.53 $ 2.31 $ 1.99
CORE RETURN ON AVERAGE ASSETS (2)
Core net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above) $ 8,810 $ 7,539 $ 6,895 $ 6,194 $ 6,276 $ 29,440 $ 20,854
Average Assets $ 3,277,814 $ 2,865,947 $ 2,640,678 $ 2,602,350 $ 2,611,276 $ 2,846,697 $ 2,549,921
Core return on average assets (annualized) (non-GAAP) 1.08% 1.05% 1.04% 0.95% 0.96% 1.03% 0.82%
NET INTEREST MARGIN (TEY) (6)
Net interest income (GAAP) $ 29,280 $ 23,631 $ 21,009 $ 20,597 $ 19,886 $ 94,517 $ 76,296
Plus: Tax equivalent adjustment (5) 1,727 1,587 1,364 1,342 1,321 6,021 4,881
Net interest income - tax equivalent (Non-GAAP) $ 31,007 $ 25,218 $ 22,373 $ 21,939 $ 21,207 $ 100,538 $ 81,177
Average earning assets $ 3,069,222 $ 2,703,162 $ 2,484,721 $ 2,456,328 $ 2,465,497 $ 2,678,359 $ 2,406,213
Net interest margin (GAAP) 3.80% 3.48% 3.40% 3.37% 3.20% 3.53% 3.17%
Net interest margin (TEY) (Non-GAAP) 4.02% 3.71% 3.62% 3.59% 3.41% 3.75% 3.37%
EFFICIENCY RATIO (7)
Noninterest expense (GAAP) $ 22,308 $ 24,480 $ 17,744 $ 16,954 $ 15,873 $ 81,486 $ 73,191
Net interest income (GAAP) $ 29,280 $ 23,631 $ 21,009 $ 20,597 $ 19,886 $ 94,517 $ 76,296
Noninterest income (GAAP) 7,029 10,423 6,762 6,822 6,212 31,037 24,363
Total income $ 36,309 $ 34,054 $ 27,771 $ 27,419 $ 26,098 $ 125,554 $ 100,659
Efficiency ratio (noninterest expense/total income) (Non-GAAP) 61.44% 71.89% 63.89% 61.83% 60.82% 64.90% 72.71%
(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.
(5) 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.
(6) Net interest margin (TEY) is a non-GAAP financial measure. The Company's management utilizes this measurement to take into account the tax benefit associated with certain loans and securities. It is also standard industry practice to measure net interest margin using tax-equivalent measures. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to net interest income, which is the most directly comparable GAAP financial measure.
(7) Efficiency ratio is a non-GAAP measure. The Company's management utilizes this ratio to compare to industry peers. The ratio is used to calculate overhead as a percentage of revenue. In compliance with the applicable rules of the SEC, this non-GAAP measure is reconciled to noninterest expense, net interest income and noninterest income, which are the most directly comparable GAAP financial measures.

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

Source:QCR Holdings, Inc.