QCR Hldgs (NASDAQ:QCRH) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=43Kx4XV9
Summary
QCR Hldgs reported the most profitable first quarter in its history, driven by healthy loan and deposit growth, lower non-interest expenses, and margin expansion.
Strategic initiatives include ongoing digital transformation with successful system conversions and growth in LIHTC lending, enhancing capital markets revenue.
The company reaffirmed guidance for annualized loan growth of 10-15% and increased capital markets revenue guidance to $60-70 million over the next four quarters.
Operational highlights include strong traditional banking and wealth management performance, significant investments in technology, and robust share repurchase activity.
Management expressed confidence in maintaining strong financial performance, emphasizing disciplined expense management and strategic capital allocation, including share buybacks.
Full Transcript
OPERATOR
Good morning and thank you for joining us today for QCR Holdings Inc. first quarter 2026 earnings conference call. Following the close of the market yesterday, the Company issued its earnings press release for the first quarter. If anyone joining us today has not yet received a copy, it is available on the company’s website, www.qcrh.com. with us today from management are Todd Gippel, President and CEO and Nick Anderson, CFO. Management will provide a summary of the financial results and then we will open the call to questions from analysts. Before we begin, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of Forward looking Statements as defined by the Securities and Exchange Commission. As part of these guidelines, any statements made during this call concerning the Company’s hopes, beliefs, expectations and predictions of the future are forward looking statements and actual results could differ materially from those projected. Additional information on these factors is included in the Company’s SEC filings which are available on the Company’s website. Additionally, Management may refer to non-GAAP measures which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as reconciliation of the GAAP to non-GAAP measures. As a reminder, this conference call is being recorded and will be available for replay through April 30, 2026 starting this afternoon, approximately one hour after the completion of this call. It will also be accessible on the Company’s website. I will now turn the call over to Mr. Todd Gippel at QCR Holdings. Please go ahead.
Todd Gippel (President and CEO)
Good morning everyone. Thank you for joining our call today. I’d like to start with an overview of our first quarter performance and then Nick will walk us through the financial results in more detail. We are pleased to deliver the most profitable first quarter in our company’s history. This performance was driven by healthy loan and deposit growth, significantly lower non interest expense and modest margin expansion. We maintained excellent asset quality and generated meaningful growth and tangible book value per share while returning capital to our shareholders through opportunistic share repurchases. We also continue to make further investments in our digital transformation as we build a more modern scalable bank for our clients and employees. Strong performance in our traditional banking and wealth management businesses partially offset the linked quarter reduction in our capital markets revenue. Capital markets results were in line with our expectations given typical first quarter seasonality and were equal to our five year average for Q1 production. As a result, we delivered a very strong return on average assets of 1.40% and earnings per share growth of 31% compared to the same period last year, highlighting the strong earnings potential of our diverse business model. Our traditional banking business continues to deliver solid organic growth supported by healthy commercial and industrial activity and across our markets. Our multi charter model enables us to consistently gain market share with locally led community banks that build deep relationships with high value clients and communities where they live and work. Our digital transformation remains on track with the successful completion of the second of four core system conversions in early April. Modernizing our technology stack will deliver meaningful benefits for both our clients and employees, expanding our service capabilities, enhancing the client experience and driving operating leverage. Our wealth management business also delivered very strong results with annualized revenue growth of 14%. Our success in this business continues to be driven by the experience of our team and the power of our relationship driven model which connects our traditional banking clients and key professionals in each of our communities with our dedicated wealth advisors. Across our markets, we are deepening client engagement and reinforcing wealth management as a key driver of our sustained top tier financial performance. Our Low-Income Housing Tax Credit (LIHTC) lending business also continues to perform as the demand for affordable housing remains robust driven by a lack of supply and ongoing affordability challenges nationwide. We view Low-Income Housing Tax Credit (LIHTC) lending as a highly profitable, annually consistent and differentiated line of business for QCR Holdings. Anchored by our deep network of developer relationships and historically high quality assets, our platform delivers. Our Low-Income Housing Tax Credit (LIHTC) business has consistently delivered strong results demonstrating our success in navigating various interest rate cycles and and dynamic market conditions. Our strong relationships with industry leading LYTC developers combined with market demand position us well to grow this business and further strengthen our financial performance. Given the strength of our pipeline in our traditional and Low-Income Housing Tax Credit (LIHTC) lending platforms, we are reaffirming our guidance for gross annualized loan growth of 10 to 15% over over the final three quarters of 2026. We are also increasing the lower end of our capital markets revenue guidance by 5 million now targeting a range of 60 million to 70 million for the next four quarters. In combination with our Low-Income Housing Tax Credit (LIHTC) Permanent loan securitizations launched in 2023, we have also begun partnering with private investors in Low-Income Housing Tax Credit (LIHTC) Construction loan sale transactions. These transactions enable us to expand our permanent Low-Income Housing Tax Credit (LIHTC) lending capacity which will drive increased capital markets revenue. The ability to sell off these Low-Income Housing Tax Credit (LIHTC) construction loans allows our team to say yes when our developer clients would like us to provide the construction financing for their projects. In addition to the permanent financing that generates our capital markets revenue. This is allowing us to grow our market share in the affordable housing space. During the quarter we identified a total of 523 million in Low-Income Housing Tax Credit (LIHTC) loans, both construction and permanent for securitization and sale. The transactions are planned to close during the second quarter and will mark our fifth permanent loan securitization and our second construction loan sale. This is our Low-Income Housing Tax Credit (LIHTC) flywheel in action. Strong demand for affordable housing reinforced by the Federal government’s commitment to increase Low-Income Housing Tax Credit (LIHTC) tax credits, combined with our deep developer relationships and our exceptional client service positions us to capture market share from the larger competitors in this space. Litec Industries proven long term performance drives investor demand for these assets enabling us to execute Low-Income Housing Tax Credit (LIHTC) loan securitizations and sales. These transactions allow us to proactively manage concentration, risk, balance sheet growth, liquidity and capital levels while generating increased capital markets revenue. We are building an asset light capital efficient and revenue heavy business in affordable housing. While securitizations and Low-Income Housing Tax Credit (LIHTC) construction loan sales temper near term on balance sheet growth, they enhance long term profitability by creating more capacity. The balance sheet capacity created by these transactions is then rapidly redeployed into new originations allowing us to replace the earning assets quickly and expand our capital markets revenue to more than offset the foregone interest income over time. These loan sales and securitizations are also allowing us to strategically manage our total assets under the 10 billion asset threshold this year. We anticipate growing beyond 10 billion sometime in 2027 and we plan to be fully prepared for the associated organizational impacts by mid-2028. Building on the planning efforts we began in 2023, our company is executing at a high level across all three of our core lines of business. Our team has driven a 5 year earnings per share CAGR of 14% and a 5 year tangible book value per share CAGR of 12.5%. Our continued investments in talent, technology and strategic growth combined with disciplined expense management position us to sustain this top tier financial performance. I am grateful for our 1,000 teammates that take exceptional care of our clients, our communities and each other as they deliver long term value for our shareholders. I will now turn the call over to Nick to provide further details regarding our first quarter results.
Nick Anderson (Chief Financial Officer)
Thank you Todd and good morning everyone. We delivered net income of 33 million or $1.99 per diluted share for the quarter. Net interest income was $67 million and increased slightly on a linked quarter basis when adjusted for fewer days in the first quarter. Our Net Interest Margin Tax Equivalent Yield (Net Interest Margin (NIM) Tax Equivalent Yield (TEY)) increased 1 basis point from the fourth quarter of 2025 which was below the low end of our guidance range. Our robust deposit growth came early in the quarter from our correspondent business which carries higher pricing and when combined with loan growth occurring very late in the quarter, margin expansion was muted. The increase in our margin was driven by significant improvements in the cost of funds partially offset by a reduction in our earning asset yields. We continue to have a disciplined approach to deposit pricing and combined with a liability sensitive balance sheet, our cost of funds betas are more than one and a half times those of our earning assets during the current rate cutting cycle. Since the Fed began cutting rates in 2024, our cost of funds have declined by 79 basis points compared to only a 47 basis point decline in earning asset yields. While we continue to benefit from repricing lower yielding loans into higher market rates, the opportunity is naturally moderating as the rate cutting cycle matures. During the quarter, new loan origination yields exceeded those on loan payoffs by 22 basis points. However, loan growth arrived very late in the quarter and average loan balances were down 109 million, contributing to the decline in the loan yield compared to the prior quarter. While our balance sheet has moved closer to neutral since the rate cutting cycle began, we remain positioned to benefit from future rate reductions with rate sensitive liabilities exceeding rate sensitive assets by approximately 900 million, providing upside to margin in a declining rate environment. For future cuts in the fed funds rate, we estimate 1 to 2 basis points of Net Interest Margin (NIM) accretion for every 25 basis point cut in rates. If the yield curve steepens, we’d expect Net Interest Margin (NIM) expansion at the top end of that range and if the yield curve remains relatively flat, we would expect Net Interest Margin (NIM) expansion at the lower end of the range supported by our late first quarter loan growth. We are guiding second quarter Net Interest Margin (NIM) Tax Equivalent Yield (TEY) ranging from static to an increase of three basis points assuming no further fed funds rate changes. Upside in our second quarter Net Interest Margin (NIM) is supported by repricing opportunities on approximately 163 million in fixed rate loans currently yielding 6.2% which we would project to reset nearly 25 to 30 basis points higher. We also anticipate continued CD repricing during the second quarter with approximately 400 million of maturities currently costing 3.7% which we expect to retain and reprice nearly 25 to 30 basis points lower. We project investment yields to expand supported by a solid pipeline of new municipal bonds priced well above 7% on a tax equivalent basis. Additionally, we are planning to offtake approximately 523 million of Low-Income Housing Tax Credit (LIHTC) loans through the securitization and loan sale in the second quarter, which should be moderately Net Interest Margin (NIM) accretive and is reflected in our Net Interest Margin (NIM) guidance. Non interest income totaled $23 million in the first quarter, including $11 million from capital markets revenue and $5 million from wealth management. Our Low-Income Housing Tax Credit (LIHTC) lending team closed 13 projects during the quarter, including three with new developers. As we continue to expand our Low-Income Housing Tax Credit (LIHTC) platform, our wealth management team delivered strong results this …
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