QCRH - Earnings call transcript Q4 2017

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Operator

Greetings and welcome to the QCR Holdings, Incorporated Fourth Quarter 2017 Conference Call. Yesterday after market close, QCR distributed its fourth quarter press release and we hope that you’ve had an opportunity to review the results. If there is anyone on the call who has not received a copy, you may access it at the Company's website, www.qcrh.com. With us today from management are Doug Hultquist, President and CEO; and Todd Gipple, Executive Vice President, COO and CFO. Management will provide a brief summary of the quarter and then we will open up the call to questions from analysts.

forward-looking call, the like providing Commission. information under guidelines the that remind today begin by the of defined some management of we I and to would everyone falls the Before Securities as Exchange statements will be

part and must out projected. predictions and future forward-looking statements guidelines, of that the Company's actual I call statements differ those during the this concerning these materially results hopes, of any As point made beliefs, from could expectations, our

these obtained Additional from the in Company's on included information factors filings time-to-time or the is XX-Q and which website SEC's Company's on XX-K website. may be the

will As Doug recorded website now and the a call the Hultquist being XXXX. Company's is until on this reminder, will February at be I At QCR. turn to conference over Mr. accessible X, time, this

Douglas Hultquist

later to share provide the related to million Thank equaled well million announced to deferred of per call. Company previously I Operating would I conversion earnings quarter ask of then earnings of quarter Trust of the the our December everyone. Bank we'll due Chief and to on items recap financial the diluted I acquisition in our color today Gipple, Company’s Core morning, our to other like and for will to you XX, of the write-up reduced for earnings net us the fourth State as processor also per quarterly the you XXXX. fourth costs acquisition exclude quarter Community highlights ended the core $X.X and for Yesterday, detail the provide related to Bank Initially, non-core call CFO, Todd joining tax call and of full-year share which $X.XX. announced will cost Good these earnings Todd and results. of we XXXX. over $X.XX and turn who $X.X and more on the earnings the of asset as Guaranty will welcome and XXXX tax and Officer diluted additional reported for Company's expense some

quarter loan very core strong net strong income the were we as year. growth our interest significantly controlled Our quarter in throughout due and income improved of swap to provision A earnings other expansion well strong relatively and fee expenses. this experienced

we in QX saw the Additionally, Bank for Trust of full of benefit those acquisition closed the quarter. and Guaranty the earnings and

or diluted of full-year million EPS strong on more Our for This period increase $X.XX EPS over year and a the ago. for of approximately quite than QX. the core $X.XX $XX.X were million versus of EPS a income same in basis. year-over-year represents net an core increased Earnings $X.XX $XX.X by XX% XX% with and

on loans leases an to we loan basis demonstrate or in growth $XXX.X growth as strong continue grew and million We organic of XXXX XX.X%. annual by an very rate

revenue be to of very to in increased million XXXX an rate million management wealth in XXXX XX%. Additionally, continues $X.X $XX.X versus growth or annual strong and

XXXX. our we Company X, As acquisition I and of Bank on previously, Trust closed Guaranty October mentioned

with have strengthen Rapids’ of position in market Cedar to the our and Trust the pleased opportunity very Cedar combine people and further clients are charter our We Guaranty to community. the great & Bank Rapids existing

is QX. on a loan in some annually. I provide comment ask higher fourth additional strong more growth of very again XX% XX.X% Before to growth targeted our want few our and XXXX full-year to a annualized I We Todd to growth quarter rate results, bit the than of from on of financial did rate demonstrated our comments XX% items

the share the have from This credit to other isolated value lending. and title any subsequently amount carrying we was CRE down strong right in to a model. through estate credit Each growth to this to of indicative remain $X.X organic real was we not loan and believe competitors was our million bank QX, the commercial growth overall we QX. success our our this million as banking end at QX. of placed our of $X.X In acquired in community taking loan as In charged strong. in on other charters and continue that large as addition, that We moved much attract deterioration of was non-accrual metrics into clients issue year relationship-based in credit an market to industrial of the the of contributed portfolio significant

potential possible and and as several buyers We project have practical. and initiated work to have discussions the the working to are with sell property begun stabilize as soon

goals Our on our continued assets, focused average and the is related ROAA peer are upper and of in on long-term strategic our initiatives strategic achieving on quartile results improvements focus in return group.

by of managed significant metrics levels; quality core these peer net and management the the participate of ROAA. on loan loans Strong continue our maintain ratio least XX%. better at on XXXX, we less to forward which components consolidation growth. As continue organic generate acquirer and years XX% remain place our in in EPS. our wholesale deposits to grow initiatives, has taking to look at as key progress maintain seven continue of revenue. Five, resulted than expense gains ratio Number levels rates interest Four, swaps as the to the of will fee and non-interest sale in to our XX% further focused growth on loans at financial performance industry to significant reliance improvement and funding achievement one, income of of past to asset finally, our and grow core SBA and improve income in total lease range than annually. wealth XX% boost highlighted in USDA Six, in two two, we peer assets to ROAA, in and asset. an Three, maintain consistent carefully on the strong our on filings. seven initiatives Number have efficiency leases and we increase

continue will over it these need goal financial on quarter With to upper each for more of Todd full-year. achieve our for for to of our turn We that, to quartile now results to execute detail the and performance. on peer initiatives will the I

Todd Gipple

morning bit Thanks, providing Thanks Doug. to begin color again by on the fourth on more a wanted call joining items for impacted I the us quarter. everyone. today. Good the non-core that

acquisition acquisition reported to acquisition Trust. we $X.X First, Bank integration costs million and of in costs post and related after-tax transition compensation, the and Guaranty

to the transaction, recorded during also Trust into QX. both amounts In of Guaranty in including acquisition, million. the full charter conversion data Bank and were related third addition transaction after-tax fourth the quarter Bank accomplished closing & to Cedar Total Rapids Guaranty merger processing we and our $X.X the costs

processor would cost Second, we we acquired the in pre-tax contract $X.X That bank $XXX,XXX to incurred XXXX. after-tax at charter. long-term for a a the our Bank had terminate State Community August data processing place a the in fourth core have CSB million closing. quarter contract and in fee in resulted termination

the CSB we of core to of in the termination now Company's were in XXXX. during our part contract our pretax, we $X.X processing successful fourth existing convert platform plan processing core on data significantly million to and quarter, As renegotiation this fee late to reducing

this accounting out and acquisition accretion quarter. quarter sale points points, of stripping had net that to net in We like impacted by core result than of have million quarter. earnings net core for again per Cuts for much by caused basis compared was the $X.X Core the and X.XX% net a otherwise a million core on entire strong earnings the of acquisitions loans NIM versus income net liquidity third us growth we slightly impact Bank negatively a in the X and in of driven organic Jobs net and The of as that share. increased well interest fourth no CSB expanded Act items significant the very tax estimate fourth Guaranty margin in of Finally, government the X.XX% amount both This by deposit and $XX continued liquid Guaranty decreased in QX. more reduced quarter sheet $X.X quarter. the increase the of would and that more quarter margin our resulting basis tax during the as net was X deferred sheet combined additional Tax were Gains the between balance net interest fourth with $X.X acquisition $X.XX million sheet loan increase in income difference fourth in liquidity to QX asset these as excess a point. as the Bank’s recorded carry that strong by balance by our expense We guaranteed million in to in at balance Bank reported earnings in basis the X growth income Net modest interest quarter. addition $XX,XXX. Guaranty interest income

of under exceptionally swap $X.X fees swap million fees combined acquisition which added in million XXXX assets. accounts expense Wealth $X.X more million XXXX, now $XXX for very with trust revenue the represented to in However, expenses. revenue of RIA we revenue. quarter revenue be result brokerage and addition We $X.X year-over-year. continues billion XX% slightly in are billion strong quarter Bank’s Guaranty XXXX, million streams management billion income two assets of $XXX Bank management assets Of due were record million, have nearly the $X.X quite and non-interest at $X wealth assets, in the our grew for annual and in run from a of assets million to target. non-interest the management. or fourth Linked quarter rate than growth operations. quarter strong in revenue came relationships under $X.X custody comparisons $XXX management XXX These In for new during under this difficult in in to and management million Guaranty $X and

of We related XX-K. these in have on expect the our detail granular the acquisition impact to to results more

expecting non-interest Guaranty’s We still expenses. XX% on cost historical savings are

by basis during include pleased tax per restricted rates quarter XXXX. income XX% the and tangible core net to value a book in year-over-year impact the to asset each and per in earnings new effective quarter quarter. was will to full-year from the a growth XXXX tax do fourth XX% Overall, the resulted anticipate of a we not report our on These stock to benefit addition the tax a a to exercises vesting the contributed expense for XX% QX Cuts stock to range versus in tax corporate and in effective in to of tax We fourth by rate resulted that that of tax rate Tax XX% Act write-up Tax Act the net reduce $X.X the effective prior related range our of XX% deferred reduction rates and Jobs of both XX%. option record share prescribed historical $X.XX XXXX positive In or that our share that in increase in are million.

During deposit and XXXX, XXXX created scale. our with results us organic income. add team We create and transactions and non-interest to clients Company bank allowed M&A growth and our and these two great in that successful strong loan organic added bankers very to supplemented growth

driving dedicated per in by to initiatives the success that continued earlier We continued value will in long-term forward in XXXX. earnings book as value per look discussed this share are growth shareholder on share. Doug We result to executing strategic tangible and

Now up. back to wrap Doug it to I'll turn

Douglas Hultquist

very can the bit more into you numbers. have that a hope our questions. much, Thank We phone for lines the provided Todd. comments I open now insight

Operator

ahead. with question-and-answer begin D.A. Rulis The the now session. Instructions] first [Operator will go Jeff comes question Davidson. Please We from

Jeffrey Rulis

Good Hey. guys. morning,

Douglas Hultquist

Hey Jeff.

Jeffrey Rulis

And after yes, going see think a number. kind bit kind core I down and little of those exactly conversion quarter further I to to stepping one-time when run to you want a the merger of happen. just acquisition on rate. get So Guaranty cost touch if first of backing see expense just of is like what is to of then And to out kind just the more just costs kind the you looking that? wanted

Todd Gipple

You bet.

line numbers a a fair We K item detail more granular more these of some and will on amount basis. on have on the

That Guaranty conversion the already quarter. fourth off, late happened. in First happened

one in That right comparative prior top better on rate some the pretty scheduled of That lot non-interest quarter, give CSB. noise million for had run around you fourth late but course, included might annual in XXXX. million much Guaranty. their $XX.X reported of expenses acquisition. of of To is non-interest expenses, to You about the be that for thinking $X quarter we related on a our to is expense of around data

So Again, in merge cost we’ve did not quarter. we not until saves. yet convert the and seen late fourth them

saves start So we anticipate those yet. really roll cost in happening Those didn't in that will QX. to

integration and related little $X.X in strong also QX elevated income and to that around earnings. We million of very acquisition fee the We QX. a had costs had we quarter in on compensation reported in bit

items, in more strip you if or we So expenses. only, out were million normalized $XX.X core around those QCRH at

really was see in at there. a run Guaranty that QX, expect to per So rate rate about the a are expenses $X the XX% still QCRH quarter. save cost again, million run We

that should QX would of down I that So and cost additional down be around million fully get to about $X.X Guaranty. there QX would half save that million $X.X anticipate we be to cost of in happening in to number. post from

chop. to of everybody noise on go. get expect I lead lot a where helps of hope a So that a expenses there, lot we stronger

Jeffrey Rulis

change in that. appreciate views I here. the yes, Definitely color on then kind just And of

broad growth go. have you kind a you outlook where on of coming at just but for strong, looking been outlook I for kind that XXXX? know see just give commercial as XXXX and from? of on deposit So as you and CRE kind of Can just far guys loan expectations

Douglas Hultquist

originated. you XXXX what as were of balanced the also stronger Jeff pretty know than loans type among we in both charters, have among and balanced Yes. pretty the predicted would

that roughly the continuing side, the XX% same on the growth look at So side. rate to XX% on we're deposit and to loan

Jeffrey Rulis

step All right. that. back. Great. I’ll Thanks for

Todd Gipple

Thank you.

Operator

The Nathan go Jaffray. ahead. next Race with question comes Piper from Please

Nathan Race

Good morning. guys. Hey

Todd Gipple

morning, Good Nate.

Douglas Hultquist

Good morning, Nate.

Nathan Race

outlook around we XXXX, for core maybe margin loan nice in Todd yield the saw the expansion some just core quarter. obviously

rate expect out this of year kind on step terms the just XXXX, get deposit up we least, thoughts hikes loan hear thoughts just cost we that on two assuming dynamic more in to just kind and can So at going then the in updated your forward? competitive of other curious of in there pricing

Todd Gipple

Nate. questions, Sure, great

in we've on to experienced see maintain now pressure tight costs. very increases, will funding to able cumulatively funding really of range. beta We've Fed points with fairly been We a basis costs continue XXX thus low some far

to of have very So we're very core to acquisition offset and continue betas. pressure. by there, us outcome with with see pleased our portfolios Part very we're been the but CSB the Guaranty for going of that's good low the deposits

acquisitions. are those We about very pleased

quarter. the on we the So more our I liquid costs, a in everyone continued We certainly bit leading in were in about pressure think knows PR comments. talked funding that

quarter to deposit loan quarter, little for touch over ratio below down Our was the was a prior XX% most XX%. of

move we to we'd loan so you, continue our told deposit total to number strong that ratio see bit growth, to a loan just back Doug asset to and as So expect loan little like to up XX%. over

offset help that pressure. of will that some So funding cost

first tough little new Again, three We've seen time almost lift very we've little We loans, loans, on pricing by increases, rate been seen better our and to floating get bps the in new no in loans. course, beta rate are very of but of of loan a I in had little a it's there. volume for paid for it's loan starting mean we've to lift XXX pricing bit bit unfortunate. bit, five-year the see and

of the there. are see starting time bit We a to little traction first for

somewhat that hikes going loan additional come we're with seeing betas. optimistic to in start some that So lift to we're

is next expectation our margin range fairly So year. a tight for

would for it us to to expansion. or going be think difficult any difficult predict to just comment I on margin hold to It's margin. on be

and quarter-to-quarter been If couple our year. up, at history, you basis points what we're couple down you next today back that's five can there's for see basis from expecting points look quarter really

Nathan Race

great a tax That's that taking should it. to forward Todd. going Is it Got that relates out color. be as there benefit we FTE appreciate I reform?

Todd Gipple

around being is to did little talked range, we on comment XX% reform, XX% just tax want a our a that. to related what more rate and at about yes, color I to Well,

yield a we in that points, yield. equivalent lift XX that about tax tax basis basis points of be the somewhere and little so non-GAAP XX we to XXXX, core XXXX, we reporting earnings we a our is about new and likely equivalent share. seen would our the bottom And will again, move would tax our line drop ROA about impacted equivalent impact if have know around earnings rates per of in a additional if really around in zero, all basis $X.XX then just So But layer might yield XX at look point were tax by it's bit. for

prediction the tax So more and ROA, that's and on are yield, all per little impact necessarily numbers equivalent a And to of impact. tax color share. new looking not rate on its on based earnings a again, XXXX back XXXX those

Nathan Race

it. Got

obviously growth are broader that fees about income guidance drove strong XXXX? kind you that just income around thinking comments how growth just budgets. and then think appreciate just for transactions Any fee XX% number if in larger And the Okay. about have your in management your of terms some curious up quarter, there's may swap really overall in sequentially outlook just pie of wealth for XXXX. I overall the other so

Todd Gipple

very a were of about and think talking the we lot We our environment. swap the continue it QX clients be couple sense side to makes swaps. given Nate, There commercial ones Yes. on to them, large in rate for a

larger picked love during feel talent in income existing we've to to more into made USDA. able and has helped, We add up predict. to the and lot longer couple again acquisition more Obviously, bit million never Guaranty a with of new difficult we've and but the assets predict well. had a So are are Primarily in the also a nice it good soft, brought the there as we’d side, really XXXX. those and wealth management XXX accounts, market assets, in then some be about consistent. same also USDA those, on take been strides SBA

Nathan Race

Is we million clean layer core thinking be then it, into $X.X million the $XX clarify run so run you and perhaps second on Guaranty. about to the to the $XX.X expense right from take on if basis? your the million from way rate on that’s just Todd, And around quarter rate outlook,

Todd Gipple

range to would won't implemented quarter. million cost saves on the all $XX million little maybe starting that have in entire scale a $XX I Nate, the higher of We a QX. for in Exactly say out

that the is think So right that. to about way

Nathan Race

guys. Okay. Perfect. quarter. I appreciate all the on Congrats the color solid

Todd Gipple

Nate. you, Thank

Operator

The ahead. with Please Damon KBW. comes question go from next DelMonte

Damon DelMonte

How Good is today? morning, guys. Hey. going it

Douglas Hultquist

How you? Damon. about Great, for

Damon DelMonte

Friday. Doing great, it’s a

So that’s right. thing good a

I from you just you're it is question Todd, far the on First the said yield can What $XXX,XXX. margin. for equivalent could impact? around little look of we guidance expecting in quarter as this a kind you as was upcoming follow-up what give think quarters?

Todd Gipple

bet. You

obviously that's the accretion expecting So Damon, about at we XXXK without any CSB still have to we're that down, rolling acceleration. and a be quarter

just year-ish, mark scheduled. And the we'll is of about basis is a think to so about we and there probably But year modest, the K. more Total that's million, amount, there course, range the part this $X.X have in in more on Guaranty a in yield the of year. smaller then be is brought a color this around there on so going portfolio. and little mark total XXX XXX a more on So XXX fair mark combined that early we're and to

down the continued So sense. number. because the of Hope down that bit CSB a of little roll makes

Damon DelMonte

fee the with I million quarterly and of swap low USDA we does, This of rate? loans I know to you it But to about upper kind run and rate, think the I Thanks. $X normalized I sale on it. this $X SBA quarterly income go guess fee in addressed missed. and And of gain can if mean and then run tough yes. you the we should just stuff. of to think million it's try more asked does, the as But It kind is a income, sorry back

Todd Gipple

Yes.

combined and sales So when on on government gains number guaranteed on loans the swaps. think you about

we USDA, and that as three going swaps $X to again, million talk buckets So us. about to SBA per together. business We're continue for those at about look year

are choppy, to virtually very, a We total we large as we little deals an explain. was core million than not had I year it still great year. think think USDA this make has some and in QX. ours in harder business year. start QX for and numbers lot Damon, So Unfortunately us. that probably $X QX year come XXXX, million bit We We and for your a this guys year, no That’s had a more $X.X job had last about exceptional it $X.X then we million tougher year. of QX results to together of very had and in had and in been a choppy had

So advisory to that think range kind choppy, quarter, it's that growth per and $X then going see about that fees about year. continue we XX% remain recent combining for cliff. in business about trust very this of million to And so investment expect to $X of that million at and most

Damon DelMonte

pipelines That's of swap Okay. look how a the the quarter USDA helpful. fourth for SBA, then fee kind after first and And the the in strong income do such quarter?

Todd Gipple

news lot we pretty good when of pipeline lot willing our indicated very do have have supporting A those good Candidly not a they without still a SBA lot for Yes. still we're Well and continue the pipeline now. activity seeing activity get to the modest. to we're light clients. being pretty isn’t is we are guarantees so solid a swaps, a terms not, in will very of lumpy marketplace we SBA be They right booked. there. have of pipeline. and a transactions USDA deals banks of Doug and

look continue to our we ways two for So help transactions. those to clients with

but have completely have empty didn't it did in We of pipeline. QX, lot expectations we a the XXXX. success still in So some

Damon DelMonte

Got it.

programs you helpful. Thank extra to hitting the undertake that given just guess bottom look the that dollars with are seeing, to to be your to you initiatives tax may line? or are thought of given you have in any That's Okay. guys I types savings then going internal you. the regard And

Todd Gipple

I is that. know it, per we how happy shareholders improve earnings improve our be at about look that. ROA to our and should Damon I our going about it is, share and think happy we're

people to looking ahead now We not what do in go we x a bucket dollars needed. at We're done and technology and to expect it is that. continue to invest and and in technology. on which build invest scale just need of have in We'll invest people spend have as when continue to to we

feel banking very stated and regard in compensation a issues. So incentivized compensation. any we with best like initiatives have don't highly have we to necessarily the terms culture in have people We of

And a so it to really we benefits our to expect these keep the and just will line. that lot of expectation. see way bottom go That's

Damon DelMonte

had. the All Thinks right. that That's all color. a lot. I Appreciate

Todd Gipple

Damon. Thanks

Douglas Hultquist

Thanks Damon.

Operator

[Operator Instructions] The next question comes from Erik Zwick with Stephens Inc. Please go ahead.

Erik Zwick

Good morning, guys.

Todd Gipple

Erik. morning, Good

Douglas Hultquist

Erik. Hi

Erik Zwick

be margin, First, impact I quarter maybe the If on follow-up the understand. see that to it [X.XX%] just liquidity I think be a trying the of make kind are the you starting points. sure to would about the starting basis a the just put point keen that kind XQ or fourth of I'm X excess in closer XXXX work. from on to for [X.XX%]? just Are to to expecting negative the margin level

Todd Gipple

Yes.

starting quarter. snapping the good liquidity right reported We be away. at ended would really end happen spot. entirely a where we all the that see of don't quarter back think I didn't necessarily the that It

ease a and do in average bit to for core had loan we While to continue than bring We deposits. expect it the December did growth the quarter. a on higher

while ratio off going to our QX loan think good I to a XX% a be deposit But to loan for while. And deposit use sometimes your have point We those to always more believe so work little I we're deposits, it's number a reported and XX% put this time to grow to would for core for to Erik, as bit you we model. liquidity. immediately, are like we leaping in

Erik Zwick

you for the beta kind like those growth, then sounds Understood. to deposit all? the the quantify at That’s Are pressure And on see your to helpful. XXXX about of costs. you but is growth in able good, that outlook on continue expectations deposit

Todd Gipple

hikes looked this, had our our I now Well XXX beta we but and Oakes did we've I XX/XX/XXXX, basis at John when our the Treasurer, from for at hike deposit at XX/XX/XXXX looked and just beta points. five started we if think

has beta over actual that period. Our been XX

So we've XX on seen points of increase roughly basis cost deposits.

a consider we pretty on that solid So is be that performance beta. to

been CSB give course. a higher Now that mix. side. of little to betas has more addition Guaranty But from the you expect deposits, I a go-forward the be core of bit bit the of the I’ll benefited and color on on would

funds funding tracked sensitive. our roughly have quite a total total of maybe or typically only it XX about is that's but is XX% beta, sensitive funding. rate total of XX we So high of very our rate $XXX Those funds beta, and our about million our tightly to XX%

So that's thing. the fortunate

We of floating loans. million have around $XXX rate

of loans. about rate covered by funds So are our XX% sensitive rate very floating

a So very with close to of terms. match floating contract beta And would have the there. XXX course, those rate loans

that's in things Those So other. range why we're year. two fairly margin about tight offset working thinking a to each next

Erik Zwick

are you your of about earnings the tax code and what's Great. how organic is Thanks. due buybacks, thinking think light And just after-tax increased uses today? potential priority? a about the But one M&A, more for me. In your dividends, Certainly, changes, you of growth the today? capital for outlook as to view

Douglas Hultquist

us choice able be be M&A addition would heard fortunate markets couple to have the Midwest. that the first then we attractive that end in the our always activity to growth second in market, years after And choice look we've probably say and you’ve acquisitions last would to we've upper at undertaken. growth organic as continue Erik, is before, and also been Yes. organic other

this in and time talking and for our business at the group plans with have that. and plan point other back our to management of to invest our equity into board, senior uses continue don't we So

Erik Zwick

That’s great. Thanks questions. my taking for

Douglas Hultquist

you. Thank

Operator

The next question comes from Daniel Cardenas with Raymond James. Please go ahead.

Daniel Cardenas

Good morning, Hey. guys.

Todd Gipple

morning, Good Dan.

Douglas Hultquist

Dan. Hi

Daniel Cardenas

questions here. couple a Just

of smaller deals? is is your grow you shrinking front. are footprint, kind at go or the Is that what and downstream dramatically environment the like looking to of to on M&A Just touching some and you What you continue look briefly viable willing as candidates look like? do as pretty the pool

Douglas Hultquist

Yes.

that compared of think at population Ankeny to continue transactions work in as like million about to was Guaranty. Size $XXX I and Dan acquisition $XXX decrease. million that matter, does a does do much just you

as you but say, those So shrinking. pools continue to are look, we will candidate

Daniel Cardenas

– Okay, then the this saw growth organic related? we much that funds deposit how And was that deposit quarter, good. of public for

Todd Gipple

some picked school. we Dan, and Well significant from city funds

we about I those bid. talked call. think And not QX on public in about funds we They're think relationship. the the really more that call, because less they're as

consider are a we don't going $XXX are up we that QX. rate true million frequently. for happy had fairly think retail amount are So But And on picked but about to of be want really don't deposits. deposits. to have of those subject that not having public obviously behave that as so those to but to bid. sensitive, relationship, price deposits what about do we to all subject those I like we funds they're bid really proposal in have think to We They we're core board. fairly They QX over sensitive, indicate core and significant

providing every fees In solid servicing pretty those addition month to funding, are we accounts. seeing from some

So we of view relationship. those as more a

Douglas Hultquist

reason gone new and in of them well part QX presented in commercial that came over And took platform place Yes. those is conversion Dan, the our proposal clients. very we and our our way management process has to treasury have our with

with treasury on acquired expand commercial sophisticated we and our retail focused that. that Guaranty, to also a very CSB are and we like we've more program continuing have now while we So deposits the to support management deposits

Daniel Cardenas

average $XXX portfolio? that what's that on over you've last the the so that picked up couple on then quarters, And cost million or

Todd Gipple

XXs. low Yes. teens, Xs, Probably X in X the

funding more cheaper little deposits, certainly a but retail again, certainly. pricey than overnight than core So

Daniel Cardenas

growth? that's you these deposit your funds of that including types guidance give growth when And in

Todd Gipple

Yes.

folks some deposits tend added They're that were is wins think and those million management we're believe over. teams. treasury our come they our – are teams very conversion about not platform of Fargo than to The on We've now $XXX to couple heard clients deposit the of to growing focusing was optimistic indicated, But management because and that as say is Bank. Wells we've a certainly I U.S. platform. growth Those large and in Doug chunks. treasury in QX QX. a better better one those new going with

makes optimism behind core sense bit a Hope about growth. Dan. you to that’s pace So the with deposit that keeping

Daniel Cardenas

Yes, it does.

for is. question me last then Okay. And

how well improvements see of the side XXXX? guys kind credit in quality of of behaved some are charge-off on given in levels credit Just pretty thinking a you that we beginning the to are environment,

Todd Gipple

QX. was pretty Well about have ball result QX Doug a CRE the really year amount end really into had in any have of We had. and in at reserved have in feel charge-off crystal project. going it QX, took we one that us fully about the XXXX. his we're just good Dan, ORE substantial large of and comments that but a telling We We we charge-offs that that did the charge-offs don't to opening in moved it simply in that elevated

like So as one-time rest was terms expect charge-offs. we view that XXXX a XXXX and certainly of we pretty modest more be the much to see blip of in

Daniel Cardenas

guys. color for Excellent. quarter. Great. Thanks Good the

Todd Gipple

Thanks Dan.

Douglas Hultquist

a Thanks lot Dan.

Operator

question next comes go The Instructions] [Operator with from FIG Please Martin Partners. Brian ahead.

Brian Martin

guys. Hey

Douglas Hultquist

Hey Brian.

Brian Martin

maybe on similar, mean, just just improve really are And I mean bit a the heavier market from a most maybe would expand of of answered. bit the it your And and my things. can population? you a population about little Maybe I just there. same guess M&A, you Or now, couple that? look they Doug like talk a I referenced discussion, and has the on just commentary a horizons change to if of smaller population the I is mean been guess stuff level you is I at touched smaller still kind lighter, does it you doesn’t a here

Douglas Hultquist

the population much Pretty same Yes. pretty steady. Brian,

M&A has that and sellers some changed because our they like line much Act our We continue has pause say wealth strategy much Act larger. does should that Tax say look caused the Midwest. really commercial to we that We're Tax pretty still the because at maybe think what upper as But I bottom to standpoint. from their size ROA an cannot going communities support that's is gee, to that the potential be to so in banking can management, I be of same. they

Brian Martin

maybe guess, is I from change now, what it commentary? Okay. dialogue. less the that like sounds it’s And no in

Douglas Hultquist

sorry what I'm the Brian, was question?

Brian Martin

sounds to kind has as just outlined? been if Yes. going conversation of less than just are what it I today based say, the it you on

Douglas Hultquist

or steady. say folks or we in year paused, pretty think compare I'd and year, a of how like half but say, so, last year number to in next for numbers, less in Maybe a the I outlook would a terms our have I the of

Brian Martin

And bit expect loan a first maybe still fair on we comment to I quarter, seasonality regard way? the kind Okay. still of just build. I maybe and That's given are Thanks expect I helpful. guess Doug. but normal pipelines of that on a to the where of performance then obviously strong about guidance, mean it Is of that where little normal seasonality. kind pipeline, do today? fourth then the should in guess the some level weaker don't It you that think quarter a I you was know

Douglas Hultquist

Yes.

some accelerated just Tax of in I QX the activity commercial predictable. think with saw not our very portfolio Act, our probably seasonality but is you really

stronger don't others. we're quarter to predicting one think any than I going So be the is that

Brian Martin

SBA, comments? bit your maybe some USDA up than that you the And was seen side, guys type it’s with year. I sound not it’s SBA, USDA the mean kind going Is saw seems I to and a year activity comments, the sounds Okay. next of see it and stronger you just back maybe of mean but that Is swap said like on quarter, you sticking guess of kind million see the we like number. expect of guess $X more kind fourth to pick read like side. just on USDA that I and in to expect it And obviously much that weight SBA of the there? you do I this – curious that into

Douglas Hultquist

the as that’s on not And we of side. that's hit. SBA direction call USDA the work many earlier think care right. And We that without just downstream loans the those seeing I we’re to tried on a correspondents side, with on mentioned Todd guarantee. SBA to our the the originate number competitors

Brian Martin

benefit. Todd, the maybe Okay. tax on And just Perfect. one

there's I options the I to kind I exercised in your a that is in that does stock related options impact, mean stock sounds talked restricted particular you is a like if impact or not more the include that about exercise. to on number stock? guidance based there less think way about quarter, think of It guess bounced around?

Todd Gipple

You bet, Brian.

right. exactly You're

the benefit is from XX% X% historically in stock lumps. ATR that to to a pretty significant has about XX% Our And RSAs. additional without been is option guidance there. and benefit. impact come the QX of And tends always that

benefit So a incentive-based when That year. them take as the our should. to you be QX, of of grants of equity might people advantage and rest lot vest they the just see much then bigger happens in of

So stronger, over rate tends about by effective X% little but QX to be year number. entire our the tax a probably reduces

Brian Martin

in And helpful. think you XXXK? was Todd quarter, side more heavier That’s I what Okay. QX on on the it is this characterized about based

Todd Gipple

We more bit here in have QX. a Yes. little did

So now GAAP that that we're new experienced with accounting. for a full-year

can expect quarters. in and the you see think typically a two middle I lump QX in probably to modest QX, amounts bigger

Brian Martin

there And guys missed what? then comments do year but XXXX, by in the the you CSB waiting have on in for rationale something till guess driven Okay. maybe the guess, in is on is I just to wait that. later just that, later your the that conversion commented I I

Todd Gipple

Really not that there. in at happened negotiating schedule Brian. things successful going that CSB a the fee question until great that had a We anticipated calendar on two the conversion of right year. end were on down we and That's

we've to Those to is our that want prepare we CSB core plan So have for we get really first that started on today typically take to XX for. that the before implemented six changes have we conversion. we platform. system a convert race some to that months got And to in what

signature spring summer with upgrades few we core CSB need a processing have that bring platform, before to we implement we our Fiserv So this and on.

really than It's anything So staging I else. more hope that makes sense.

Brian Martin

it is the of a And is that, Okay. of the that go event out I XXXX into that savings numbers is come that contract of you regard will? like when that to guess or kind is cost if there with sounds renegotiating then kind

Todd Gipple

Right.

to to related did core to we experienced the and the some for help be talked converted renegotiated CSB help to pay cost that. additional the savings savings in we've that us So cost contract of platform. other certainly when us to our about going going It's would the cost getting platform really new We new technology. we some cover of technologies QX the It's expect add XXXX.

going The that pay to new core. to to any DP savings a not on for of drop increase net news basis, we're cost. see So going see good a the is we're in with We're from big on the expecting not some the the technology.

Brian Martin

the guys you have. are Doug, have that XXXX thinking would outlook if as you it. momentum that ROA – any have of the back about in as maybe I And would kind That’s that appreciate as kind expect maybe ROA how Todd XXXX thinking you tax talk about you far as about and for far things are it how outlook, can about but your just of if in or guys. me just XXXX, ranges mean the other escalation far I where going as you maybe, and you last you as Okay. you or helpful. Doug one with today? just as giving maybe look been then far or your talked reform as and

Todd Gipple

line lot reluctant a bottom of Brian, to ROA. are give on Yes. we guidance

committed to very work ROA. expand are to We continuing our

be We impact. with group to lift. so reduced comfortable What is point of peer a are from in Our points, basis XX the rate. that's to look the core to XXX XXXX, earnings basis we peer tax If upper the lifted points in the XXX goal know talking is the would were from about ROA have at going what chasing. it basis entire so to is lift quartile we group, we're see

And at looking we and your lift for translate it doing into of seen can our points a in XX dramatic else So the and effective But tax that if models you with lift RSAs. their do rate to to little lift XX% peers peers. we've we're really earnings would as that, see certainly and benefit we not already another significant. ROA, XXXXs is because basis hard modeling ROA you so everyone and the worked That's options expect not see the have tax more rate a as due reduced and to that it was what than the to us our is of outcome from But XX% maybe as most some expecting. perhaps lower X% as future. tax a then so benefit into expense up in is on go the that like our

Brian Martin

Gotcha.

that Todd. appreciate I thanks guys. and questions Okay, for the I the appreciate taking color,

Douglas Hultquist

Brian. you, Thank

Todd Gipple

Thanks of Brian. End Q&A

Operator

to the conference This any to concludes for closing turn I question-and-answer like our Doug back would remarks. session. Hultquist over

Douglas Hultquist

have in that and with your relationship I questions. of interest appreciate we all the calling appreciate the Well all in you and

got what's there So last a lot on last feeling ahead this what about noise XXXX good base, know this but we're we in and for year, quarter done and is net of a XXXX.

thank you So relationships. the for again,

Operator

The conference Thank has attending now concluded. you presentation. today's for

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QCR (QCRH) 2 Feb 182017 Q4 Earnings call transcript