QCR Holdings, Inc. Announces Record Net Income for the Fourth Quarter and Full Year 2018

January 24, 2019

Fourth Quarter 2018 Highlights

Net income of $13.3 million, or $0.84 per diluted share
Adjusted net income (non-GAAP) of $14.5 million, or $0.91 per diluted share
Annualized organic loan and lease growth of 8.7% for the quarter and 9.8% for the year
Annualized organic deposit growth of 19.8% for the quarter and 8.3% for the year
Record noninterest income of $15.3 million for the quarter and $41.5 million for the year
Nonperforming assets down $13.6 million, or 32.8% from prior quarter
Acquisition of the Bates Companies completed on October 1, 2018

MOLINE, Ill., Jan. 24, 2019 (GLOBE NEWSWIRE) — QCR Holdings, Inc. (NASDAQ: QCRH) (the “Company”) today announced net income of $13.3 million and diluted earnings per share (“EPS”) of $0.84 for the fourth quarter of 2018, compared to net income of $8.8 million and diluted EPS of $0.55 for the third quarter of 2018. The fourth quarter results included $1.2 million of acquisition and post-acquisition compensation, transition and integration costs (after-tax), compared to $1.6 million of similar costs in the third quarter of 2018. Excluding these adjustments, the Company reported adjusted net income (non-GAAP) of $14.5 million and adjusted diluted EPS of $0.91 for the fourth quarter of 2018, compared to adjusted net income (non-GAAP) of $10.4 million and adjusted diluted EPS of $0.65 for the third quarter of 2018. For the fourth quarter of 2017, GAAP net income and adjusted net income (non-GAAP) were the same at $9.9 million and $0.70 per diluted share.

For the year ended December 31, 2018, the Company reported net income of $43.1 million, and diluted EPS of $2.86. Adjusting for acquisition and post-acquisition compensation, transition and integration costs, the Company reported adjusted net income (non-GAAP) of $46.4 million and adjusted diluted EPS of $3.08. By comparison, for the year ended December 31, 2017, the Company reported net income of $35.7 million and diluted EPS of $2.61, and adjusted net income (non-GAAP) of $36.3 million and adjusted diluted EPS of $2.66.

On October 1, 2018, the Company completed its previously announced acquisition of Bates Financial Advisors, Inc., Bates Financial Services, Inc., Bates Securities, Inc., and Bates Financial Group, Inc. (the “Bates Companies”). The Bates Companies are headquartered in Rockford, Illinois and added approximately $700 million in assets under management, as of September 30, 2018.

“We are pleased with our financial performance in 2018, delivering record net income, which translated into a 16% increase in adjusted earnings per share,” said Doug Hultquist, President and CEO of the Company. “Our strong financial results were driven by increases in both loans and deposits and significantly higher noninterest income. And while our net interest margin was adversely impacted by the flattening of the yield curve over the course of 2018, we were able to grow adjusted net interest income by 19% from 2017. We also were pleased to have completed our merger with Springfield Bancshares, an excellent strategic and cultural fit for our company, and the acquisition of the Bates Companies, a nice addition to our wealth management business.”

Mr. Hultquist continued, “We finished the year with strong momentum in the fourth quarter, delivering solid loan and lease production, successfully attracting new deposits and generating record fee income. We were also successful in reducing our nonperforming assets by 33%, as we monetized a number of positions during the quarter. Looking to 2019, we remain optimistic, as we continue to make the investments that we believe will lead to improved profitability and enhanced shareholder value in the years to come.”

Annualized Organic Loan and Lease Growth of 8.7% for the Quarter
and 9.8% for the Year

During the fourth quarter of 2018, the Company’s total assets increased $157.0 million, to a total of $4.9 billion, while total loans and leases grew $79.4 million, or a 2.2% increase, compared to the third quarter of 2018. Loan and lease growth was funded by an increase in core deposits. Core deposits (excluding brokered deposits) increased $187.0 million, or 5.3% on a linked quarter basis. At quarter-end, the percentage of wholesale funds to total assets was 13.8%, which is a solid decline from 15.9% from the third quarter. Additionally, at quarter-end, the percentage of gross loans and leases to total assets was 75%, a slight decline from the third quarter, as a result of an increase in liquidity due to the strong growth in core deposits.

“Our loan growth for the quarter was driven by strong loan production, with particular strength in commercial and industrial and owner occupied commercial real estate loans,” added Mr. Hultquist. “However, we continue to experience an elevated level of payoffs, driven by a combination of factors, including business clients experiencing healthy cash flows, clients selling their companies, or real estate developer clients selling their completed projects. Because of the trends that we are experiencing in paydowns, combined with a general sense of caution among a number of our clients, we are adjusting our goal for organic loan growth in 2019 to between 8% and 10%.”

Net Interest Income of $39.6 million

Net interest income for the fourth quarter of 2018 totaled $39.6 million, compared to $38.3 million for the third quarter of 2018 and $31.8 million for the fourth quarter of 2017. The increase in net interest income was due to an increase in average loan balances of $87.2 million, or a 2.4% increase, on a linked quarter basis. Acquisition-related net accretion totaled $2.6 million (pre-tax) for the fourth quarter of 2018, compared to $1.7 million in the third quarter of 2018 and $0.7 million for the fourth quarter of 2017. Adjusted net interest income (non-GAAP) was $38.7 million for the fourth quarter of 2018, compared to $38.2 million for the third quarter of 2018, or an increase of 1.4% on a linked quarter basis.

Net interest income totaled $142.4 million for the year ended December 31, 2018, compared to $116.1 million for the year ended December 31, 2017.

In the fourth quarter, reported net interest margin was 3.48%, and on a tax-equivalent yield basis, net interest margin was 3.63%. This represented an increase in net interest margin and tax-equivalent net interest margin from the third quarter of two basis points and three basis points, respectively. Net interest margin, excluding acquisition-related net accretion was 3.40% in the fourth quarter, for a decline of five basis points from the third quarter of 2018. This decline in adjusted net interest margin was due to increases in the Company’s cost of funds (due to both mix and rate) and excess liquidity due to the strong deposit growth in the quarter, and was partially offset by higher yields on the Company’s loans.

	For the Quarter Ended			For the Year Ended
	Dec. 31,	Sept. 30,	Dec. 31,	Dec. 31,	Dec. 31,
	2018	2018	2017	2018	2017
NIM	3.48%	3.46%	3.41%	3.46%	3.50%
NIM (TEY)(non-GAAP)⁽¹⁾	3.63%	3.60%	3.69%	3.62%	3.78%
Adjusted NIM (TEY)(non-GAAP)⁽¹⁾	3.40%	3.45%	3.61%	3.48%	3.64%
(1) See GAAP to non-GAAP reconciliations.

“Competition for new deposits remains strong, and as a result, our overall cost of funds, excluding acquisition amortization, increased by thirteen basis points during the quarter,” stated Todd A. Gipple, Executive Vice President, Chief Operating Officer and Chief Financial Officer. “Excluding the impact of acquisition-related accretion, our adjusted loan yields on a tax-equivalent basis increased by eleven basis points during the fourth quarter.”

Record Noninterest Income of $15.3 million
Led by Swap Fee Income of $7.1 million

Noninterest income for the fourth quarter of 2018 totaled $15.3 million, compared to $8.8 million for the third quarter of 2018. The significant increase was primarily due to $6.0 million in higher swap fee income and a $0.6 million increase in wealth management revenue primarily due to the acquisition of the Bates Companies. Wealth management revenue was $3.9 million for the quarter, a 19.0% increase from the third quarter of 2018. Noninterest income increased 57.3% when comparing the current quarter to the fourth quarter of 2017.

Noninterest income totaled $41.5 million for the year ended December 31, 2018, compared to $30.5 million for the year ended December 31, 2017.

“Noninterest income was up over 73% from the third quarter of 2018, driven primarily by significantly higher swap fee income, which is correlated to our strong production from our Specialty Finance Group in the area of tax credit lending where our clients are locking in long-term fixed rate financing,” added Mr. Gipple. “Additionally, we are pleased with our full year wealth management revenue growth of over 20%, despite a down market for equities, which reflects our success in attracting new assets under management. For 2018, swap fee income and gain on sale of loans combined for over $11 million, well in excess of our annual target of $4 million.”

Noninterest Expenses of $36.4 million

Noninterest expenses for the fourth quarter of 2018 totaled $36.4 million, compared to $30.5 million and $31.4 million for the third quarter of 2018 and fourth quarter of 2017, respectively. The linked quarter increase was due to a number of factors, including a $2.5 million increase in net costs of operations of other real estate. The Company reduced the carrying value of an OREO property by $2.0 million and also sold an OREO property at a loss of $424 thousand. There was also a $1.4 million increase in incentives and commissions, driven by the higher swap fee income. Salaries were $1.1 million higher than the third quarter of 2018 as a result of the Bates Companies acquisition and company-wide headcount additions in both business development and operational support. Additionally, there was a $1.2 million increase in professional and data processing fees.

Asset Quality Improvement

Nonperforming assets (“NPAs”) totaled $27.9 million, a decrease of $13.6 million from the third quarter of 2018, primarily due to a combination of factors, including $4.9 million in net charge-offs on loans, a $3.5 million paydown on a large nonaccrual loan, a $1.3 million reduction in OREO from a sale (including a $0.4 million loss on sale), and a $2.0 million write-down of an OREO property that the Company is actively marketing for sale. The lower NPAs resulted in the ratio of NPAs to total assets improving to 0.56% at December 31, 2018, down from 0.87% at September 30, 2018 and down from 0.81% at December 31, 2017.

The Company’s provision for loan and lease losses totaled $1.6 million for the fourth quarter of 2018, which was down $4.6 million from the prior quarter and down $0.6 million compared to the fourth quarter of 2017. The linked quarter decrease in the provision for loan and lease losses was primarily due to a more favorable outcome than expected on a large credit that was partially charged off. As of December 31, 2018, the Company’s allowance to total loans and leases was 1.07%, which was down from 1.18% at September 30, 2018 and down from 1.16% at December 31, 2017.

In accordance with generally accepted accounting principles for acquisition accounting, the loans acquired through past acquisitions were recorded at market value; therefore, there was no allowance associated with the acquired loans at the acquisition date. Management continues to evaluate the allowance needed on the acquired loans factoring in the net remaining discount ($11.6 million at December 31, 2018).

Capital Levels

As of December 31, 2018, the Company’s total risk-based capital ratio was 10.72%, the common equity Tier 1 ratio was 8.89%, and the tangible common equity to tangible assets ratio was 7.78%. By comparison, these respective ratios were 10.87%, 8.92% and 7.82% as of September 30, 2018. The decline in capital ratios from September 30, 2018 to December 31, 2018 was the result of the Bates Companies transaction, including the related purchase accounting adjustments, as well as balance sheet growth during the quarter.

Continued Focus on Seven Key Initiatives

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

Strong organic loan and lease growth in order to maintain loans and leases to total assets ratio in the range of 73% – 78%
Grow core deposits to maintain reliance on wholesale funding at less than 15% of assets
Generate gains on sale of government guaranteed loans, and fee income on interest rate swaps, as a significant and consistent component of core revenue
Grow wealth management net 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 industry to further boost return on average assets, improve efficiency ratio, and increase EPS

Conference Call Details

The Company will host an earnings call/webcast tomorrow, January 25, 2019, at 10:00 a.m. central time. Dial-in information for the call is toll-free 888-346-9286 (international 412-317-5253). Participants should request to join the QCR Holdings, Inc. call. The event will be available for digital replay through February 8, 2019. The replay access information is toll-free 877-344-7529 (international 412-317-0088); access code 10127800. A webcast of the teleconference can be accessed at the Company’s News and Events page at www.qcrh.com. An archived version of the webcast will be available at the same location shortly after the live event has ended.

About Us

QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company serving the Quad Cities, Cedar Rapids, Cedar Valley, Des Moines/Ankeny, Springfield and Rockford communities through its wholly owned subsidiary banks which provide full-service commercial and consumer banking and trust and wealth management services. Quad City Bank & Trust Company, based in Bettendorf, Iowa, commenced operations in 1994, Cedar Rapids Bank & Trust Company, based in Cedar Rapids, Iowa, commenced operations in 2001, Community State Bank, based in Ankeny, Iowa, was acquired by the Company in 2016, and Rockford Bank & Trust Company, based in Rockford, Illinois, commenced operations in 2005. In 2018, the Company acquired the Bates Companies, a wealth management firm. 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. In July 2018, QCR Holdings completed a merger with Springfield Bancshares, Inc., the holding company of Springfield First Community Bank of Springfield, Missouri. With this addition of Springfield First Community Bank, the Company has 27 locations in Illinois, Iowa, Wisconsin and Missouri. As of December 31, 2018, QCR Holdings had approximately $4.9 billion in assets, $3.7 billion in loans and $4.0 billion in deposits. For additional information, please visit our website at www.qcrh.com.

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, state, 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; (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, 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 Securities and Exchange Commission.

Contacts:

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

Christopher J. Lindell
Executive Vice President
Corporate Communications
(319) 743-7006
[email protected]


QCR HOLDINGS, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
	As of
	December 31,		September 30,		June 30,		March 31,		December 31,
	2018		2018		2018		2018		2017

	(dollars in thousands)
CONDENSED BALANCE SHEET

Cash and due from banks	$	85,523	$	73,407	$	69,069	$	61,846	$	75,722
Federal funds sold and interest-bearing deposits		159,596		129,660		51,667		59,557		85,962
Securities		662,969		650,745		657,997		640,906		652,382
Net loans/leases		3,692,907		3,610,309		3,077,247		3,018,370		2,930,130
Intangibles		17,450		16,137		8,470		8,774		9,079
Goodwill		77,832		73,618		28,091		28,334		28,334
Other assets		253,433		238,856		214,342		208,527		201,056
Total assets	$	4,949,710	$	4,792,732	$	4,106,883	$	4,026,314	$	3,982,665

Total deposits	$	3,977,030	$	3,788,277	$	3,298,276	$	3,280,001	$	3,266,655
Total borrowings		404,969		483,635		380,392		334,802		309,479
Other liabilities		94,573		63,433		58,627		51,083		53,244
Total stockholders’ equity		473,138		457,387		369,588		360,428		353,287
Total liabilities and stockholders’ equity	$	4,949,710	$	4,792,732	$	4,106,883	$	4,026,314	$	3,982,665

ANALYSIS OF LOAN PORTFOLIO
Loan/lease mix:
Commercial and industrial loans	$	1,429,410	$	1,380,543	$	1,273,000	$	1,201,086	$	1,134,516
Commercial real estate loans		1,766,111		1,727,326		1,349,319		1,357,703		1,303,492
Direct financing leases		117,968		126,752		133,197		137,615		141,448
Residential real estate loans		302,979		309,288		257,434		254,484		258,646
Installment and other consumer loans		107,162		100,191		92,952		95,912		118,611
Deferred loan/lease origination costs, net of fees		9,124		9,286		8,890		8,103		7,773
Total loans/leases	$	3,732,754	$	3,653,386	$	3,114,792	$	3,054,903	$	2,964,486
Less allowance for estimated losses on loans/leases		39,847		43,077		37,545		36,533		34,356
Net loans/leases	$	3,692,907	$	3,610,309	$	3,077,247	$	3,018,370	$	2,930,130

ANALYSIS OF SECURITIES PORTFOLIO
Securities mix:
U.S. government sponsored agency securities	$	36,411	$	36,492	$	35,667	$	36,868	$	38,097
Municipal securities		459,409		453,275		458,510		438,736		445,049
Residential mortgage-backed and related securities		159,249		155,733		158,534		157,333		163,301
Other securities		7,900		5,245		5,286		7,969		5,935
Total securities	$	662,969	$	650,745	$	657,997	$	640,906	$	652,382

ANALYSIS OF DEPOSITS
Deposit mix:
Noninterest-bearing demand deposits	$	791,101	$	802,090	$	746,822	$	784,815	$	789,548
Interest-bearing demand deposits		2,204,206		2,094,814		1,865,382		1,789,019		1,855,893
Time deposits		704,903		615,323		519,999		496,644		516,058
Brokered deposits		276,820		276,050		166,073		209,523		105,156
Total deposits	$	3,977,030	$	3,788,277	$	3,298,276	$	3,280,001	$	3,266,655

ANALYSIS OF BORROWINGS
Borrowings mix:
Term FHLB advances	$	76,327	$	63,399	$	46,600	$	56,600	$	56,600
Overnight FHLB advances (1)		190,165		295,730		207,500		159,745		135,400
Wholesale structured repurchase agreements		35,000		35,000		35,000		35,000		35,000
Customer repurchase agreements		2,084		3,049		2,186		3,820		7,003
Federal funds purchased		26,690		8,670		15,400		13,040		6,990
Junior subordinated debentures		37,670		37,626		37,581		37,534		37,486
Other borrowings		37,033		40,161		36,125		29,063		31,000
Total borrowings	$	404,969	$	483,635	$	380,392	$	334,802	$	309,479

(1) At the most recent quarter-end, the weighted-average rate of these overnight borrowings was 2.63%.


QCR HOLDINGS, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

	For the Quarter Ended
	December 31,			September 30,			June 30,			March 31,		December 31,
	2018			2018			2018			2018		2017

	(dollars in thousands, except per share data)
INCOME STATEMENT
Interest income	$	52,703		$	49,831		$	40,799		$	39,546	$	37,878
Interest expense		13,110			11,517			8,714			7,143		6,085
Net interest income		39,593			38,314			32,085			32,403		31,793
Provision for loan/lease losses		1,611			6,206			2,301			2,540		2,255
Net interest income after provision for loan/lease losses	$	37,982		$	32,108		$	29,784		$	29,863	$	29,538


Trust department fees	$	2,216		$	2,196		$	2,058		$	2,237	$	2,034
Investment advisory and management fees		1,657			1,059			1,058			952		1,071
Deposit service fees		1,623			1,656			1,610			1,531		1,622
Gain on sales of residential real estate loans		361			337			102			101		101
Gain on sales of government guaranteed portions of loans		–			46			–			358		34
Swap fee income		7,069			1,110			1,649			959		2,460
Securities gains (losses), net		–			–			–			–		(63	)
Earnings on bank-owned life insurance		341			474			399			418		445
Debit card fees		807			846			844			766		741
Correspondent banking fees		179			195			213			265		231
Other		1,026			890			979			954		1,038
Total noninterest income	$	15,279		$	8,809		$	8,912		$	8,541	$	9,714


Salaries and employee benefits	$	19,779		$	17,433		$	15,804		$	15,978	$	16,060
Occupancy and equipment expense		3,367			3,318			3,133			3,066		3,221
Professional and data processing fees		3,577			2,396			2,771			2,708		3,382
Acquisition costs		(4	)		1,292			414			93		661
Post-acquisition transition and integration costs		1,427			494			165			–		3,787
FDIC insurance, other insurance and regulatory fees		1,065			933			840			756		795
Loan/lease expense		624			369			260			291		352
Net cost of (income from) operation of other real estate		2,477			(50	)		(70	)		132		120
Advertising and marketing		1,122			984			753			693		778
Bank service charges		469			462			466			441		439
Correspondent banking expense		207			205			204			205		203
CDI amortization		540			542			305			305		308
Other		1,760			2,122			1,325			1,195		1,245
Total noninterest expense	$	36,410		$	30,500		$	26,370		$	25,863	$	31,351

Net income before taxes	$	16,851		$	10,417		$	12,326		$	12,541	$	7,901
Income tax expense (benefit)		3,535			1,608			1,881			1,991		(2,001	)
Net income	$	13,316		$	8,809		$	10,445		$	10,550	$	9,902

Basic EPS	$	0.85		$	0.56		$	0.75		$	0.76	$	0.72
Diluted EPS	$	0.84		$	0.55		$	0.73		$	0.74	$	0.70

Weighted average common shares outstanding		15,641,401			15,625,123			13,919,565			13,888,661		13,845,497
Weighted average common and common equivalent shares outstanding		15,898,591			15,922,324			14,232,423			14,205,584		14,193,191


QCR HOLDINGS, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
		For the Year Ended
		December 31,		December 31,
		2018		2017

	(dollars in thousands, except per share data)
INCOME STATEMENT
Interest income		$	182,879	$	135,517
Interest expense			40,484		19,452
Net interest income			142,395		116,065
Provision for loan/lease losses			12,658		8,470
Net interest income after provision for loan/lease losses		$	129,737	$	107,595

Trust department fees		$	8,707	$	7,188
Investment advisory and management fees			4,726		3,870
Deposit service fees			6,420		5,919
Gain on sales of residential real estate loans			901		409
Gain on sales of government guaranteed portions of loans			405		1,164
Swap fee income			10,787		3,095
Securities gains (losses), net			–		(88	)
Earnings on bank-owned life insurance			1,632		1,802
Debit card fees			3,263		2,942
Correspondent banking fees			852		916
Other			3,848		3,265
Total noninterest income		$	41,541	$	30,482

Salaries and employee benefits		$	68,994	$	55,722
Occupancy and equipment expense			12,884		10,938
Professional and data processing fees			11,452		10,757
Acquisition costs			1,795		1,069
Post-acquisition compensation, transition and integration costs			2,086		4,310
FDIC insurance, other insurance and regulatory fees			3,594		2,752
Loan/lease expense			1,544		1,164
Net cost of operation of other real estate			2,489		2
Advertising and marketing			3,552		2,625
Bank service charges			1,838		1,771
Correspondent banking expense			821		807
CDI amortization			1,692		1,001
Other			6,402		4,506
Total noninterest expense		$	119,143	$	97,424

Net income before taxes		$	52,135	$	40,653
Income tax expense			9,015		4,946
Net income		$	43,120	$	35,707

Basic EPS		$	2.92	$	2.68
Diluted EPS		$	2.86	$	2.61

Weighted average common shares outstanding			14,768,687		13,325,128
Weighted average common and common equivalent shares outstanding			15,064,730		13,680,472


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,
	2018			2018			2018			2018			2017			2018				2017

	(dollars in thousands, except per share data)

COMMON SHARE DATA
Common shares outstanding		15,718,208			15,673,760			13,973,940			13,936,957			13,918,168
Book value per common share (1)	$	30.10		$	29.18		$	26.45		$	25.86		$	25.38
Tangible book value per common share (2)	$	24.04		$	23.46		$	23.83		$	23.20		$	22.70
Closing stock price	$	32.09		$	40.85		$	47.45		$	44.85		$	42.85
Market capitalization	$	504,397		$	640,273		$	663,063		$	625,073		$	596,393
Market price / book value		106.61	%		139.98	%		179.41	%		173.43	%		168.81	%
Market price / tangible book value		133.49	%		174.16	%		199.10	%		193.33	%		188.81	%
Earnings per common share (basic) LTM (3)	$	2.92		$	2.79		$	2.83		$	2.74		$	2.69
Price earnings ratio LTM (3)		10.98	x		14.64	x		16.77	x		16.37	x		15.93	x
TCE / TA (4)		7.78	%		7.82	%		8.18	%		8.10	%		8.01	%


CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Beginning balance	$	457,387		$	369,588		$	360,428		$	353,287		$	313,039
Net income		13,316			8,809			10,445			10,550			9,902
Other comprehensive income (loss), net of tax		1,943			(612	)		(1,335	)		(3,201	)		(295	)
Common stock cash dividends declared		(939	)		(938	)		(836	)		(834	)		(693	)
Proceeds from issuance of 678,670 shares of common stock, net of costs, as a result of the acquisition of Guaranty Bank & Trust		–			–			–			–			30,741
Proceeds from issuance of 1,689,561 shares of common stock, net of costs, as a result of the acquisition of Springfield First Community Bank		–			80,063			–			–			–
Proceeds from issuance of 23,501 shares of common stock, net of costs, as a result of the acquisition of Bates Companies		1,000
Other (5)		431			477			886			626			593
Ending balance	$	473,138		$	457,387		$	369,588		$	360,428		$	353,287


REGULATORY CAPITAL RATIOS (6):
Total risk-based capital ratio		10.72	%		10.87	%		11.23	%		11.25	%		11.15	%
Tier 1 risk-based capital ratio		9.78	%		9.83	%		10.19	%		10.21	%		10.14	%
Tier 1 leverage capital ratio		8.76	%		8.87	%		9.22	%		9.08	%		8.98	%
Common equity tier 1 ratio		8.89	%		8.92	%		9.16	%		9.14	%		9.10	%


KEY PERFORMANCE RATIOS AND OTHER METRICS
Return on average assets (annualized)		1.10	%		0.75	%		1.03	%		1.06	%		1.01	%		0.98	%		1.01	%
Return on average total equity (annualized)		11.42	%		8.08	%		11.45	%		11.84	%		11.67	%		10.62	%		11.51	%
Net interest margin		3.48	%		3.46	%		3.37	%		3.50	%		3.41	%		3.46	%		3.50	%
Net interest margin (TEY) (Non-GAAP)(7)		3.63	%		3.60	%		3.52	%		3.64	%		3.69	%		3.62	%		3.78	%
Efficiency ratio (Non-GAAP) (8) (12)		66.35	%		64.72	%		64.32	%		63.17	%		75.53	%		64.77	%		66.48	%
Gross loans and leases / total assets		75.41	%		76.23	%		75.84	%		75.87	%		74.43	%		75.41	%		74.43	%
Gross loans and leases / total deposits		93.86	%		96.44	%		94.44	%		93.14	%		90.75	%		93.86	%		90.75	%
Effective tax rate (11)		20.98	%		15.44	%		15.26	%		15.88	%		-25.33	%		17.29	%		12.17	%
Tax benefit related to stock options exercised and restricted stock awards vested (9)		83			9			200			133			406			425			1,220
Full-time equivalent employees (10)		755			728			666			639			641			755			641


AVERAGE BALANCES
Assets	$	4,842,232		$	4,677,875		$	4,053,684		$	3,994,691		$	3,923,337		$	4,392,121		$	3,519,848
Loans/leases		3,699,885			3,612,648			3,077,517			3,019,376			2,930,711			3,352,357			2,611,888
Deposits		3,986,236			3,840,077			3,343,003			3,239,562			3,256,481			3,602,221			2,916,577
Total stockholders’ equity		466,271			436,065			365,031			356,525			339,468			405,973			310,210

(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) See GAAP to Non-GAAP reconciliations.
(9) ASC 2016-09 became effective on January 1, 2017 and affects the accounting for stock compensation. This amount reflects the tax benefit recognized as a result of this new standard.
(10) Full-time equivalent employees increased in the 4th quarter of 2018 due to the acquisition of the Bates Companies and several new positions created to build scale.
Full-time equivalent employees increased in the 3rd quarter of 2018 due to the acquisition of SFC Bank.
Full-time equivalent employees increased in the 2nd quarter of 2018 due primarily to the addition of summer interns and several new positions created to build scale.
Full-time equivalent employees increased in the 4th quarter of 2017 due to the acquisition of Guaranty Bank & Trust, as well as the filling of open positions throughout the Company.
(11) The effective tax rate for the fourth quarter of 2017 and the full year were impacted by a $2.9 million tax benefit recorded as a result of the Tax Act.
(12) The efficiency ratio was unusually high in the fourth quarter of 2017 due to one-time acquisition costs and post-acquisition transition and integration costs totaling $4.4 million.


QCR HOLDINGS, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

ANALYSIS OF NET INTEREST INCOME AND MARGIN

	For the Quarter Ended
	December 31, 2018						September 30, 2018						December 31, 2017
	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	$	20,426	$	115	2.23	%	$	23,199	$	105	1.80	%	$	20,509	$	45	0.87	%
Interest-bearing deposits at financial institutions		98,875		517	2.07	%		61,815		323	2.07	%		94,404		314	1.32	%
Securities (1)		671,613		6,231	3.68	%		667,142		5,973	3.55	%		635,389		6,111	3.82	%
Restricted investment securities		22,478		318	5.61	%		22,683		330	5.77	%		18,180		196	4.28	%
Loans (1)		3,699,885		47,273	5.07	%		3,612,648		44,648	4.90	%		2,930,711		33,797	4.58	%
Total earning assets (1)	$	4,513,277	$	54,454	4.79	%	$	4,387,487	$	51,379	4.65	%	$	3,699,193	$	40,463	4.34	%

Interest-bearing deposits	$	2,211,148	$	6,110	1.10	%	$	2,214,480	$	5,432	0.97	%	$	1,903,983	$	2,787	0.58	%
Time deposits		956,754		4,433	1.84	%		825,020		3,290	1.58	%		546,376		1,445	1.05	%
Short-term borrowings		20,129		98	1.93	%		21,407		78	1.45	%		31,120		38	0.48	%
Federal Home Loan Bank advances		190,232		974	2.03	%		209,111		1,273	2.42	%		143,171		616	1.71	%
Other borrowings		72,264		970	5.33	%		74,503		925	4.93	%		74,199		775	4.14	%
Junior subordinated debentures		37,644		525	5.53	%		37,600		519	5.48	%		35,531		424	4.73	%
Total interest-bearing liabilities	$	3,488,171	$	13,110	1.49	%	$	3,382,121	$	11,517	1.35	%	$	2,734,380	$	6,085	0.88	%

Net interest income / spread (1)			$	41,344	3.30	%			$	39,862	3.30	%			$	34,378	3.46	%
Net interest margin (2)					3.48	%					3.46	%					3.41	%
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)					3.63	%					3.60	%					3.69	%


	For the Year Ended
	December 31, 2018						December 31, 2017
	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	$	20,472	$	338	1.65	%	$	17,577	$	149	0.85	%
Interest-bearing deposits at financial institutions		66,275		1,267	1.91	%		78,842		874	1.11	%
Securities (1)		659,017		23,621	3.58	%		590,761		22,460	3.80	%
Restricted investment securities		22,023		1,093	4.96	%		15,768		631	4.00	%
Loans (1)		3,352,357		163,197	4.87	%		2,611,888		120,618	4.62	%
Total earning assets (1)	$	4,120,144	$	189,516	4.60	%	$	3,314,836	$	144,732	4.37	%

Interest-bearing deposits	$	2,043,314	$	18,651	0.91	%	$	1,622,723	$	7,992	0.49	%
Time deposits		766,020		12,024	1.57	%		528,834		5,020	0.95	%
Short-term borrowings		19,458		271	1.39	%		22,596		114	0.50	%
Federal Home Loan Bank advances		202,715		4,193	2.07	%		120,206		1,981	1.65	%
Other borrowings		69,623		3,346	4.81	%		73,394		2,879	3.92	%
Junior subordinated debentures		37,578		1,999	5.32	%		34,030		1,466	4.31	%
Total interest-bearing liabilities	$	3,138,708	$	40,484	1.29	%	$	2,401,783	$	19,452	0.81	%

Net interest income / spread (1)			$	149,032	3.31	%			$	125,280	3.56	%
Net interest margin (2)					3.46	%					3.50	%
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)					3.62	%					3.78	%


(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 prior to March 31, 2018 and 21% for periods including and after March 31, 2018.
(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.


QCR HOLDINGS, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

	As of
	December 31,			September 30,			June 30,			March 31,			December 31,
	2018			2018			2018			2018			2017

	(dollars in thousands, except per share data)
ROLLFORWARD OF ALLOWANCE FOR LOAN/LEASE LOSSES
Beginning balance	$	43,077		$	37,545		$	36,533		$	34,356		$	34,982
Provision charged to expense		1,611			6,206			2,301			2,540			2,255
Loans/leases charged off		(4,967	)		(991	)		(1,525	)		(436	)		(2,979	)
Recoveries on loans/leases previously charged off		126			317			236			73			98
Ending balance	$	39,847		$	43,077		$	37,545		$	36,533		$	34,356


NONPERFORMING ASSETS
Nonaccrual loans/leases	$	14,260		$	23,576		$	12,554		$	12,759		$	11,441
Accruing loans/leases past due 90 days or more		632			1,410			20			41			89
Troubled debt restructures – accruing		3,659			4,240			1,327			5,276			7,113
Total nonperforming loans/leases		18,551			29,226			13,901			18,076			18,643
Other real estate owned		9,378			12,204			12,750			12,750			13,558
Other repossessed assets		8			150			150			200			80
Total nonperforming assets	$	27,937		$	41,580		$	26,801		$	31,026		$	32,281


ASSET QUALITY RATIOS
Nonperforming assets / total assets		0.56	%		0.87	%		0.65	%		0.77	%		0.81	%
Allowance / total loans/leases (1)		1.07	%		1.18	%		1.21	%		1.20	%		1.16	%
Allowance / nonperforming loans/leases (1)		214.80	%		147.39	%		270.09	%		202.11	%		184.28	%
Net charge-offs as a % of average loans/leases		0.13	%		0.02	%		0.04	%		0.01	%		0.10	%

(1) Upon acquisition and per GAAP, acquired loans are recorded at market value which eliminated the allowance and impacts these ratios.


	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	2018			2018			2017			2018			2017

		(dollars in thousands)

	TOTAL ASSETS

	Quad City Bank and Trust (1)	$	1,623,369		$	1,579,327		$	1,541,778
	m2 Lease Funds, LLC		231,662			235,214			218,035
	Cedar Rapids Bank and Trust		1,379,222			1,354,294			1,307,377
	Community State Bank – Ankeny		785,364			734,536			670,516
	Springfield First Community Bank		632,849			623,520			N/A
	Rockford Bank and Trust		509,622			484,059			461,651

	TOTAL DEPOSITS

	Quad City Bank and Trust (1)	$	1,308,085		$	1,288,387		$	1,272,111
	Cedar Rapids Bank and Trust		1,167,552			1,086,908			1,060,139
	Community State Bank – Ankeny		627,127			586,929			570,620
	Springfield First Community Bank		449,983			439,669			N/A
	Rockford Bank and Trust		431,110			401,565			382,002

	TOTAL LOANS & LEASES

	Quad City Bank and Trust (1)	$	1,233,117		$	1,195,380		$	1,136,753
	m2 Lease Funds, LLC		228,646			232,846			215,236
	Cedar Rapids Bank and Trust		1,037,469			1,046,053			973,971
	Community State Bank – Ankeny		582,453			538,723			489,075
	Springfield First Community Bank		475,801			480,969			N/A
	Rockford Bank and Trust		403,914			392,262			364,686

	TOTAL LOANS & LEASES / TOTAL DEPOSITS

	Quad City Bank and Trust (1)		94%			93%			89%
	Cedar Rapids Bank and Trust		89%			96%			92%
	Community State Bank – Ankeny		93%			92%			86%
	Springfield First Community Bank		106%			109%			N/A
	Rockford Bank and Trust		94%			98%			95%


	TOTAL LOANS & LEASES / TOTAL ASSETS

	Quad City Bank and Trust (1)		76%			76%			74%
	Cedar Rapids Bank and Trust		75%			77%			74%
	Community State Bank – Ankeny		74%			73%			73%
	Springfield First Community Bank		75%			77%			N/A
	Rockford Bank and Trust		79%			81%			79%

	ALLOWANCE AS A PERCENTAGE OF LOANS/LEASES

	Quad City Bank and Trust (1)		1.09%			1.11%			1.11%
	m2 Lease Funds, LLC		1.49%			1.50%			1.54%
	Cedar Rapids Bank and Trust (2)		1.19%			1.26%			1.22%
	Community State Bank – Ankeny (2)		1.05%			1.01%			0.89%
	Springfield First Community Bank		0.21%			0.10%			N/A
	Rockford Bank and Trust		1.72%			2.71%			1.51%

	RETURN ON AVERAGE ASSETS

	Quad City Bank and Trust (1)		1.22%			1.36%			2.82%			1.31%			1.65%
	Cedar Rapids Bank and Trust		1.78%			1.47%			0.71%			1.54%			1.12%
	Community State Bank – Ankeny		0.94%			1.43%			0.96%			1.18%			1.14%
	Springfield First Community Bank		1.74%			1.51%			N/A			1.64%			N/A
	Rockford Bank and Trust		1.29%			(2.04)%			0.26%			0.15%			0.64%

	NET INTEREST MARGIN PERCENTAGE (3)

	Quad City Bank and Trust (1)		3.20%			3.38%			3.49%			3.38%			3.61%
	Cedar Rapids Bank and Trust (5)		3.60%			3.53%			3.80%			3.59%			3.74%
	Community State Bank – Ankeny (4)		4.73%			4.40%			4.71%			4.48%			4.91%
	Springfield First Community Bank (6)		4.68%			4.36%			N/A			4.55%			N/A
	Rockford Bank and Trust		2.87%			3.06%			3.32%			3.08%			3.37%

	ACQUISITION-RELATED AMORTIZATION/ACCRETION INCLUDED IN NET
	INTEREST MARGIN, NET

	Cedar Rapids Bank and Trust	$	740		$	158		$	221		$	1,350		$	200
	Community State Bank – Ankeny		415			445			575			1,746			4,723
	Springfield First Community Bank		1,498			1,116			N/A			2,614			N/A
	QCR Holdings, Inc. (7)		(44	)		(45	)		(51	)		(183	)		(149	)

(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)	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 prior to March 31, 2018 and 21% for periods including and after March 31, 2018.
(4)	Community State Bank’s net interest margin percentage includes various purchase accounting adjustments. Excluding those adjustments, net interest margin would have been 4.00% for the quarter ended December 31, 2018, 4.11% for the quarter ended September 30, 2018 and 4.33% for the quarter ended December 31, 2017.
(5)	Cedar Rapids Bank and Trust’s net interest margin percentage includes various purchase accounting adjustments. Excluding those adjustments, net interest margin would have been 3.36% for the quarter ended December 31, 2018, 3.48% for the quarter ended September 30, 2018 and 3.71% for the quarter ended December 31, 2017.
(6)	Springfield First Community Bank’s net interest margin percentage includes various purchase accounting adjustments. Excluding those adjustments, net interest margin would have been 3.52% for the quarter ended December 31, 2018 and 3.45% for the quarter ended September 30, 2018.
(7)	Relates to the trust preferred securities acquired as part of the Guaranty Bank acquisition in 2017 and 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	2018			2018			2018			2018			2017

	(dollars in thousands, except per share data)
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS RATIO (1)

Stockholders’ equity (GAAP)	$	473,138		$	457,387		$	369,588		$	360,428		$	353,287
Less: Intangible assets		95,282			89,755			36,561			37,108			37,413
Tangible common equity (non-GAAP)	$	377,856		$	367,632		$	333,027		$	323,320		$	315,874

Total assets (GAAP)	$	4,949,710		$	4,792,732		$	4,106,883		$	4,026,314		$	3,982,665
Less: Intangible assets		95,282			89,755			36,561			37,108			37,413
Tangible assets (non-GAAP)	$	4,854,428		$	4,702,977		$	4,070,322		$	3,989,206		$	3,945,252

Tangible common equity to tangible assets ratio (non-GAAP)		7.78	%		7.82	%		8.18	%		8.10	%		8.01	%


	For the Quarter Ended															For the Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
ADJUSTED NET INCOME (2)	2018			2018			2018			2018			2017			2018			2017

Net income (GAAP)	$	13,316		$	8,809		$	10,445		$	10,550		$	9,902		$	43,120		$	35,707

Less nonrecurring items (post-tax) (3):
Income:
Securities gains, net	$	–		$	–		$	–		$	–		$	(41	)	$	–		$	(57	)
Total nonrecurring income (non-GAAP)	$	–		$	–		$	–		$	–		$	(41	)	$	–		$	(57	)

Expense:
Acquisition costs (4)		29			1,216			327			73			430			1,645			695
Post-acquisition compensation, transition and integration costs		1,127			390			130			–			2,462			1,647			2,802
Total nonrecurring expense (non-GAAP)	$	1,156		$	1,606		$	457		$	73		$	2,892		$	3,292		$	3,497

Adjustment of tax expense related to the Tax Act	$	–		$	–		$	–		$	–		$	2,919		$	–		$	2,919

Adjusted net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (2)	$	14,472		$	10,415		$	10,902		$	10,623		$	9,916		$	46,412		$	36,342

ADJUSTED EARNINGS PER COMMON SHARE (2)

Adjusted net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above)	$	14,472		$	10,415		$	10,902		$	10,623		$	9,916		$	46,412		$	36,342

Weighted average common shares outstanding		15,641,401			15,625,123			13,919,565			13,888,661			13,845,497			14,768,687			13,325,128
Weighted average common and common equivalent shares outstanding		15,898,591			15,922,324			14,232,423			14,205,584			14,193,191			15,064,730			13,680,472

Adjusted earnings per common share (non-GAAP):
Basic	$	0.93		$	0.67		$	0.78		$	0.76		$	0.72		$	3.14		$	2.73
Diluted	$	0.91		$	0.65		$	0.77		$	0.75		$	0.70		$	3.08		$	2.66

ADJUSTED RETURN ON AVERAGE ASSETS (2)

Adjusted net income attributable to QCR Holdings, Inc. common stockholders (non-GAAP) (from above)	$	14,472		$	10,415		$	10,902		$	10,623		$	9,916		$	46,412		$	36,342

Average Assets	$	4,842,232		$	4,677,875		$	4,053,684		$	3,994,691		$	3,923,337		$	4,392,121		$	3,519,848

Adjusted return on average assets (annualized) (non-GAAP)		1.20	%		0.89	%		1.08	%		1.06	%		1.01	%		1.06	%		1.03	%

ADJUSTED NET INTEREST MARGIN (TEY) (6)

Net interest income (GAAP)	$	39,593		$	38,314		$	32,085		$	32,403		$	31,793		$	142,395		$	116,065

Plus: Tax equivalent adjustment (5)		1,751			1,548			1,462			1,353			2,585			6,637			9,215

Net interest income – tax equivalent (Non-GAAP)	$	41,344		$	39,862		$	33,547		$	33,756		$	34,378		$	149,032		$	125,280

Less: Acquisition accounting net accretion		2,609			1,674			548			699			745			5,527			4,774

Adjusted net interest income	$	38,735		$	38,188		$	32,999		$	33,057		$	33,633		$	143,505		$	120,506

Average earning assets	$	4,513,277		$	4,387,487		$	3,820,333		$	3,759,475		$	3,699,193		$	4,120,144		$	3,314,836

Net interest margin (GAAP)		3.48	%		3.46	%		3.37	%		3.50	%		3.41	%		3.46	%		3.50	%
Net interest margin (TEY) (Non-GAAP)		3.63	%		3.60	%		3.52	%		3.64	%		3.69	%		3.62	%		3.78	%
Adjusted net interest margin (TEY) (Non-GAAP)		3.40	%		3.45	%		3.46	%		3.57	%		3.61	%		3.48	%		3.64	%

EFFICIENCY RATIO (7)

Noninterest expense (GAAP)	$	36,410		$	30,500		$	26,370		$	25,863		$	31,351		$	119,143		$	97,424

Net interest income (GAAP)	$	39,593		$	38,314		$	32,085		$	32,403		$	31,793		$	142,395		$	116,065
Noninterest income (GAAP)		15,279			8,809			8,912			8,541			9,714			41,541			30,482
Total income	$	54,872		$	47,123		$	40,997		$	40,944		$	41,507		$	183,936		$	146,547

Efficiency ratio (noninterest expense/total income) (Non-GAAP)		66.35	%		64.72	%		64.32	%		63.17	%		75.53	%		64.77	%		66.48	%

(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.
good(2) Adjusted net income, adjusted net income attributable to QCR Holdings, Inc. common stockholders, adjusted earnings per common share and adjusted 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% for periods prior to March 31, 2018 and 21% for periods including and after March 31, 2018.
(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 prior to March 31, 2018 and 21% for periods including and after March 31, 2018.
(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. In addition, the Company calculates net interest margin without the impact of acquisition accounting net accretion as this can fluctuate and it’s difficult to provide a more realistic run-rate for future periods.
(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.

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