QCR Holdings, Inc. Announces Record Net Income of $8.5

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	$	9	0.31	%	$	17,685	$	13	0.29	%	$	14,027	$	6	0.17	%
Interest-bearing deposits at financial institutions		123,838		167	0.54	%		67,807		103	0.60	%		101,006		96	0.38	%
Securities (1)		562,164		4,970	3.52	%		525,417		4,826	3.65	%		572,531		4,673	3.24	%
Restricted investment securities		12,785		126	3.92	%		14,877		132	3.53	%		13,658		126	3.66	%
Loans (1)		2,358,960		28,691	4.84	%		2,077,376		23,330	4.47	%		1,764,275		19,330	4.35	%
Total earning assets (1)	$	3,069,222	$	33,963	4.40	%	$	2,703,162	$	28,404	4.18	%	$	2,465,497	$	24,231	3.90	%

Interest-bearing deposits	$	1,387,319	$	928	0.27	%	$	1,116,325	$	717	0.26	%	$	890,503	$	478	0.21	%
Time deposits		496,855		984	0.79	%		422,603		755	0.71	%		381,109		721	0.75	%
Short-term borrowings		36,728		20	0.22	%		30,208		12	0.16	%		115,289		36	0.12	%
Federal Home Loan Bank advances (4)		83,231		6	0.03	%		118,564		421	1.41	%		105,509		529	1.99	%
Junior subordinated debentures		33,463		325	3.86	%		33,430		306	3.64	%		40,028		319	3.16	%
Other borrowings		73,816		693	3.73	%		116,856		975	3.32	%		113,776		941	3.28	%
Total interest-bearing liabilities	$	2,111,412	$	2,956	0.56	%	$	1,837,986	$	3,186	0.69	%	$	1,646,214	$	3,024	0.73	%

Net interest income / spread (1)			$	31,007	3.84	%			$	25,218	3.49	%			$	21,207	3.17	%
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	$	45	0.30	%	$	17,418	$	25	0.14	%
Interest-bearing deposits at financial institutions		70,757		393	0.56	%		66,897		304	0.45	%
Securities (1)		535,912		19,054	3.56	%		599,648		18,380	3.07	%
Restricted investment securities		13,993		522	3.73	%		14,727		504	3.42	%
Loans (1)		2,042,555		92,475	4.53	%		1,707,523		75,670	4.43	%
Total earning assets (1)	$	2,678,359	$	112,489	4.20	%	$	2,406,213	$	94,883	3.94	%

Interest-bearing deposits	$	1,092,687	$	3,843	0.35	%	$	821,045	$	1,836	0.22	%
Time deposits		436,070		2,175	0.50	%		388,691		2,660	0.68	%
Short-term borrowings		50,899		94	0.18	%		151,141		210	0.14	%
Federal Home Loan Bank advances (4)		114,797		1,284	1.12	%		154,268		3,511	2.28	%
Junior subordinated debentures		33,735		1,237	3.67	%		40,364		1,256	3.11	%
Other borrowings		98,105		3,318	3.38	%		126,902		4,233	3.34	%
Total interest-bearing liabilities	$	1,826,293	$	11,951	0.65	%	$	1,682,411	$	13,706	0.81	%

Net interest income / spread (1)			$	100,538	3.55	%			$	81,177	3.13	%
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.

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

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