QCRH - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to the QCR Holdings, Incorporated First Quarter 2019 Conference Call. Yesterday after market close, QCR distributed its first quarter press release and we hope that you have the opportunity to review the results. If there is anyone on the call who has not received a copy, you may access it on the company's website www.qcrh.com. With us today from management are Doug Hultquist, President and CEO; Larry Helling, CEO-Elect; and Todd Gipple, President-Elect, COO and CFO. Management will provide a brief summary of the quarterly results and then we will open up the call to your questions.

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

guidelines and those As expectations results during this hopes, of could and projected. actual the future differ statements call part any made from the concerning of company's Statements materially these predictions beliefs, are forward-looking.

are which on Additional the these company's website. information the factors in filings on company's included is SEC available

Additionally, refer to well supplement other The and website may the as measures. comparable the to management the are non-GAAP the financial as measures. intended but most quantitative reconciliation of measures information to press GAAP non-GAAP for on the which release to available not GAAP be substitute contains today directly discussed

a conference As At be this the I available call now will call. and for XXXX will QCR. would this approximately It through ahead. recorded over completion X the be to being starting company's Please May like Hultquist website. hour on after at the Doug X, this go afternoon this replay to turn time, is of accessible reminder, also

Doug Hultquist

for Operator. and and you, taking us gentlemen, Thank join the thank ladies to you time Welcome today.

clients to billion. miss to reporting has assets that shareholders. public you many has role. and increased ago. and fond joy Meeting more of million will and current grown my privilege serving this cap CEO most be our have bittersweet. my time, and working wonderful market company know, than earnings May more a the we $XXX President and last It Annual XXrd memories Over went As day and of is years I team, our is call as will $X than my The organized QCR, from which with I been last $XX million since a in have our XX

transition The knowing next be forward hands. I'm company will looking great life's has in your easier been However, phase. to made

over a relations highlight support and With the years. years. the the past me as our XX well-known with both many next the will been and of President. I Investor And like beyond. proven company action. leadership you and a thank call relationships shareholders matter CEO, analysts them welcome relationships the value I'm for fun will and on for and watch of I today. Holdings where for has all would It to to I be Helling Todd XX Gipple as confident so be to rewarding in the the Larry continue over QCR and built years Larry

it update I'll turn over Todd quarter. on the to for an Now, first

Todd Gipple

enjoyed QCRH, Doug. and to I've Thank KPMG to I prior XX with RSM. years you last and just you, the say both over here working want at at that much how

and retiring of company, drive culture you'll confident I one you to shareholder us Larry significant working While I'm that for guide be QCRH forward at client-centric to further CEO look as that to with come. our and decades of value. will strengthen created the long-term culture Co-Founders here the

quarter Now our results. first on to

acquisition-related excellent with pleased experience strong as to solid XXXX, continue driven to subordinated due said, loan and the robust our income issuance we impact debt. We are our excess during generally growth, including net of accretion, strong income deposit margin liquidity of our created deposit on a quarter pressure of start net we of by net recorded fee lower combination interest another factors, by and being and the our quality. the quarter to growth, That credit

for loan a income, quarter for decline better in we in robust return given main net NIM we in factor QX. and a that positioned NII stable Although our growth in are our this pressure believe linked outlook interest was our now pipeline

adjusted First net was Adjusted was million income diluted $X.XX. million income excluding adjusted acquisition-related earnings and of $XX.X and the $X.XX earnings quarter cost as $X.XX. of $XX million, and diluted was share EPS quarter we reported diluted adjusted $XX.X net per fourth EPS to when was compared

during Our annualized The driver This impacted the strong first which production estate commercial Specialty was in loan Group. seasonality. driven quarter growth new our modestly growth industrial normal loans loan and generation from was C&I within was real by main Finance X.X% was largely and by loans. commercial

maintain demand lending robust credit healthy tax of and project pipeline We particularly this in continue in municipal opportunities a to experience and area finance.

equivalent competition which for of intense roughly to We quarter yields. continues were new the impact to more loan lower the also new normalized yield the three curve and in to flat has loans the payoffs levels and first quarters continue experienced during The XXXX. be

full to our However, X% and our goal in markets growth. confidence growth had strong funded very quarter, pipeline be to and resilient loan origination disciplined than deposit underwriting strong this outlooks. efforts our very with as year strong, remain XX%. and loan our more continue net favorable economies growth our which continued gives We in We us which is

quarter. know, starting gathering increase to strong total we XX% success some been we've and a you see are in which a resulted annualized emphasizing As focus deposit deposits during in on the

while our less which goal as foundation laid continued assets. percentage for than on XX.X%, our of to in short funds declined liquidity of strong Additionally, term, some in limiting assets balance total has wholesale well funding sheet it wholesale to the growth. is deposits the excess the loan created And XX% increase our a within of

mentioned subordinated interest margin competition increase due the deposits on cost strong continued excess and liquidity nicely, our net the While put this quarter. combined grew also and of pressure I with funds the that debt offering, to to

A the the points Our in decline quarter interest was portion on a due margin X.X%, was of XX net down on for accretion reduction to quarter reported large tax in equivalent quarter. net basis the linked significant fourth acquisition-related basis a basis. the

quarter. on equivalent margin tax from basis a net basis was interest the X down adjusted our impact, this X.XX%, Excluding prior points

carried margin basis X strong liquidity our excess much excess points. to very this we due the growth. approximately significant compressed For deposit impact by The quarter our of further liquidity of adjusted

the quarter's X interest during these considering addition, expense point expense incurred would in only the end factors, margin issuance debt X which all debt, of of increased of during compressed reduced further on our came basis the last provided basis Net by interest of the basis subordinated adjusted guidance points. After X the by call. net $XX interest this to at our In X of million the on points have low middle quarter, we adjusted senior additional the savings approximately payoff the we quarter. and with of our margin

are at working NIM liquidity putting modestly loan strengthen pipelines rates are to on the several our higher pause, our looking strong via on of initiatives our We fed with excess including to we some reducing cost work deposit and relationships.

be overall of and compared environment, we margin of the swap Given we the $XX net first million $XX.X in to income million second these rate quarter combined million. our $X.X initiatives an in the to rest quarter record in fee income experienced stable expect interest when static the with fourth XXXX. Non-interest was quarter,

the quarter range million annualized million Our from swap was Specialty our of have $X million and $X.X guided is strong to upper continued when end production fee for Group driven the $XX first by we the Finance at income to.

is guidance we appropriate. As a still result, this believe

up driven basis generated X% over We strong which $X.X under income growth was assets and linked $XXX in total million management wealth also was a management AUM on quarter by bringing to in increase billion.

costs million Turning the onetime our excluding upper million $XX.X was $XX guidance. expenses. first totaled was post-acquisition and which $XX and $XX.X to other to Non-interest million at the of expenses our for XXXX quarter of million, end

We gradual with the year. for our continue in range quarter remainder be lease in to increases million $XXX,XXX earnings our going lease for this growth forward the standard the In strategic top will the invest in to and originations. reduced estimate order markets be can quarter anticipate of operations which by implemented costs post-tax of impact support XXXX. the $XX that with accounting to to that new deferred first adversely producers and our the We we in the hires million in $XX in

Our approximately our in a rate. rate tax which in in had XX%, the year-end our true-ups we at in quarter effective $XXX,XXX, for post total reduction onetime resulted of some provision tax came as tax

Going forward, to the in of XX%. be tax to we XX% rate our range expect

turning quality. asset to Now

continue We pleased to be with asset quality. our strong

in from of the and a Our quarter total by as basis million $X.X XX points the the the at our NPAs quarter, at is non-performing assets the end quarter. points assets end XX basis fourth declined result improved to of down

onetime non-performing from and loan lease The up quarter, from $X.X for fourth benefited provision a $XXX,XXX partial the favorable previous provision recovery losses the adjustment from loan. million our for quarter Our quarter. a on was

the And remarks, we portfolio. the was net I $XXX,XXX were primarily call Larry quarter. by driven now for quarter's will before Helling your in provision growth over modest closing the some loan our turn to questions. at for charge-offs take This

Larry Helling

been Thank It and thank exciting dedication but succeeding to over him, helm be will confidence want you, hard over I earnings the created as the to of Todd to legacy this work of in with His be last closely I'm years. is be take QCRH to and this shoes will meeting that honored him in years call to working continue to upon involved forward I with support look excited him I of and me. the I Doug you. thank organization. has and XX to am his for Todd. successful and miss work and all fill. XX CEO to building for to his hard

to while attract continue along executive all charters platform. our us management our scale in started to X all successfully our benefiting leverage them serve to related believe share that already empower transition, offerings grow and improve business February, their to the will organizational some business and have their the as changes best new intend some independent team. to the further the provides. and we model practices product across clients, We changes I and announced help service We successful of from with the QCRH

pursuit a deposits, stated supported businesses, our revenue managing to the and maintaining quality particularly which organic while questions. success. your asset bolster I including to expenses will fee-based so acquirer maintain growth diversifying markets tuck-ins over been strategic that, we focusing growing on like overall excellent the huge spending quality, operator, in With and in attractive to participate did the markets core long-term our to initiatives, we of streams, Springfield, continuing expanding has can our emphasizing our an carefully growth, markets will we support to turn Finally, by with existing call as take and

Operator

you. Thank

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

Drake Nylund

off NIM. that markets? stuff on CD this deposit in about talk My Jeff just you pressure your just And for Drake through back actually your starting It's are market? you cost you talk Can morning. seeing Can on what question, that. specials first in you're to like regarding you're seeing

Todd Gipple

about can really specific our we some We provide feeling couple we're good actually right indicated some we a Sure, actually deposit are couple as relationships we're that. color of deposit now some pressure rate step in products actually taking costs in looking the on a and to scripted of comments, and client at hard of pretty reduce areas.

the that, balance good our in in fed So side guidance part deposit sheet a a balance is good velocity cost good our right and and about of QX. of margin that is refreshed the the we significant 'XX. static very we're we're sheet, QX of good expect of our optimistic for about really for feeling rest the pause That's very

Drake Nylund

terms just planning after of for as in as the then planning rest you the much of can. going growth backing you still on deposits you in are on off Are general, year? And deposit

Todd A. Gipple

continue to areas, we additional the had of terms and little to management and will we successful to rates core the us going more look capability give we does in efforts. us really confidence on that's success right The a of deposits. to continue We are QX those relationships but our treasury a balance to in We're did the targeted have slow not and for to leading QX some rate in side to sheets. have add yeah, look and going liquidity reduce

in a to We us. work it's focus to remain significant a excess QX. going from fair amount expect of So do to for the put liquidity QX

have loan QX pipelines, up some off robust in growth. to very good here pretty already we're We with start a

take to off eye core the in after deposits. going not we're going ball So our

Drake Nylund

interest finally you just talk capital in expectations through Thanks. coming And that your anything plans. Are seeing you seller you markets maybe can or down?

Todd Gipple

the yet price our market rest I for candidly Right normalized now expectations a you, given M&A don't the of with significant this pricing banks. believe is have focus would not stock on time. that publicly tell sellers I at traded

be So of of we improve resetting much M&A we'll of before in take way combination see those performance just expectations to really the price some a stock and candid.

Operator

question Jaffray. The be will from go Race Piper of next Please ahead. Nathan

Nathan Race

your margin production the to core rate just and loan of around remainder appreciate or within around to I curious here over I'm weight the your Just new is X.XX% here. kind I portfolio terms going context what in that guidance the so. of from relative on yield curious back comments outlook believe? But XXXX. from of average just stability

Todd Gipple

Yes.

So seeing new with is anyone curve with starting handle, the we're helping still that. production five a loan industry in not our really

So are pay-offs those but still in compared pay an being seeing put in new on to and seeing increase portfolio, we we're an rate rates not down. loan uptick new the

amount disintermediation floating in fair on of we continue see hurt do a some So the the there. Honestly, loan. us QX rate LIBOR to traction

that everyone rate was we're that us on a upside think LIBOR do putting helping X five. down and of on basis loans in But the average so QX the floating rate I over knows points, have dropped wasn't So new actually loans. weighted

Nathan Race

I the remainder scribbling of kind you just notes quickly run XXXX? for I expenses. and prepared remarks was the around through of And during guidance Can XQ down your back apologize,

Todd Gipple

norm $XX of we are really which million QX, next end that that being see the have $XX to the guidance really Nate, in we for $XX for was range to Sure. three us of quarters. We million. at $XX the $XX high expense, million for range we provided QX the giving the to million a million was in million $XX million had core $XX

Nathan Race

could share capital the the thoughts of debt program stock's short I but along ask kind little or issuance levels on repurchase given appreciate forward, if today I then of any more with capital in point? a you and potential given bit just trading those And lines comments acquisitions I the around guess, kind mean, one up quarter, on guys going and your this just where anything sub a at I

Todd Gipple

benefit Nate, whether to the of plan. our to and that we evaluate continued for prudent shareholders stock buyback it's implement

We are basis basis. creating XX up points linked our nicely, TCE quarter TCE organically, was

very not have We happy and So we making are we're the good progress about we stock there. now certainly about the the right price. feel resulting multiples

sense shareholders. for that buyback So the will look evaluate to we continue benefit and of the at our whether makes

we're that's We per XXXX pleased book grew of very tangible of we on keeping and are in one the eye very an with value actually that we're protective TBV and share share merger the things per even with Springfield.

we buyback. focused So we're certainly continue that, evaluate but to very on will a

Operator

Terry The next be question will Stephens. from McEvoy with

Terence McEvoy

sure back you quarter? lowering something understand or the the to do getting is that that with happen customers correctly. around in of stable that to rates terms outlook? gives the you're in importantly outlook. third or looking had margin want more message conversations already Have just the should And the to Just you go with comfortable I margin successful make I to the the confidence

Todd Gipple

on not growth the doing us very as rates. a are right hope, now. expectation. had We're right in is taking that and a not is of we future we that. the QX pause, It's To fed amount QX now success And action in the it's helping deposit with we with helping said us I be earlier, clear, experience it

with funds clients We and action those rate now are of taking on those. right more all actually negotiating hard sensitive really and looking at we're

Terence McEvoy

terms Will at of quarters just slowdown just and that talked know strong few since growth of today to balance pipeline the another that the Or a the remainder year? looking then in And ability given spot really a your should the about and of bank closing the bright that growth you've had growth leverage for I be in sheet? loan quarter Springfield kind robust of ago. is

Todd Gipple

be be to a us. continue bright would expected to very Springfield for spot

and that respect the remain a with very, are strong They very asset nice there. thrilled back take with thrilled focused team on team. And to do we're talented we and step a are loan to to We very couple quarter. fund on added and generating with a couple very them respect transfers, modest already deposits they the producers to with there expectations of growth. Rob timing team to continuing more have did to that this continue but had his high talented of But have growth. very

be bright continues that so And to a for spot us.

Operator

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

Damon DelMonte

First and off, with working upcoming the you. Doug, pleasure a congrats on deserved, retirement. Well been

Doug Hultquist

Damon. you, Thank Likewise.

Damon DelMonte

Sure.

a in some from be maybe could a fair that there my after of bit the I quarter. increases guess Is assessment? Todd, wondering seasonal would first frame the I couple year So full the you quarters. to results expect question outlook just non-interest this for little next income

Todd Gipple

of We continue XX% to is We end for of X% on got that million I'm million dependent year. end into or that range. very good more to to and hit off the a start -- That in quarter start the roll high to the $X obviously business full the a of and deals or $XX get is less closed big believe the sorry, of appropriate whether the seasonal two next. three

thinking we're end Damon. So that still number, million a $XX upper good is

Damon DelMonte

little think quarter, the at that a And of least. looking you And in think, up quarter? lower we bit Todd, like a true some sort I is you occurred then then, I than, there provision said for mentioned this that what are there come during was

Todd Gipple

because that the on more I had outcome Yes, quarter actually was in actually low about good comment the really we fourth the made provision NPA normally a being quarter. fourth

with what to others we do have that your that a a clear, is of fact benefited estimate light QX. QX expected more was has the on asset little and to we continue from The been very in that really NPA might significant pretty have with quarter fourth if yes, but more good a outcome quality. So number good consistent wasn't

Damon DelMonte

And amount. market up I those deposit deposits it a decent just in quarter, like those the were looks guess on Are the more lastly broker level? then deposits this on national growth a broker or

Todd Gipple

of very really Yes level cost term the short overnight brokered more cheaper. We market significant and was actually and combat pressure. had national a continue in to a to strategy that's funds wholesale, drop wholesale

X strong rolled they wholesale, cheaper. that. better but of and CDs growth, rotated then we core had took we of some some advantage We were overnight also points of national rates out on So that basis deposit actually

Operator

The Instructions] Please Raymond comes [Operator go ahead. James. Cardenas next Daniel with question from

Daniel Cardenas

of answered, but continue been on most my QX. and just have of detail classified could I asked -- couple did you Did bit trend if maybe saw loans. that of How a little and in questions we a trends and just improvement QX? mean questions give in some good criticized there? So just look those us

Todd Gipple

actually when and one that on shape that's we had a feel it, really filed. downgrade a classified, was you'll uptick very classified about good an at appropriate credit, to looked uptick slight queue classified, in that it outcome working while hard had of a We there. some expect good what a really thought due start credit credit very in to time we're in first in But in targeted. we've that, the gets more little just the good detail But see on in

Daniel Cardenas

up here? Is that that a commercial ticked credit

Todd Gipple

Yes.

Operator

Strickland Partners. Please The next with from question be go ahead. will FIG Freddie

Freddie Strickland

Freddie for is Brian. This on

to and should what Just Group is quarters? expect. and could some that color a coming question loans if the over evolve the to Finance kind quick on contribution we you its of Specialty going provide guys How

Doug Hultquist

Larry, you take want one. Yes, to that

Larry Helling

Yes.

lead fee a they've hard and way We and fee the that more for hard working about talked that on to We've we're consistent. working income business make into us. the helped income are make that try to consistent

also we the but and that try On make consistent, the strong. hard to side, have pipeline worked is loan growth

foreseeable will So we us future to consistent to the portfolio believe that continue grow that at a in allow basis.

Freddie Strickland

core but follow I ROA may kind one kind me. guys with just about I guys And of just then if of quick up just or this 'XX looking was earnings you could you targets away where your for target? just talk, have wondering from earlier, talked you mean

Todd Gipple

Yes.

is points, but plus expect or given We're pretty basis nicely. forecast some QX income, on better (ph) now, here, the management SHG basis of much certainly that upside a trajectory see in but minus XXX currently of continue to do grow year, we that there probably get also points some eye results could income few plus keep to fee basis roughly is XXX the couple going we for or industry. just the not was fees, for and non-interest in expenses wealth right basis provision, So results continues nice in to if some mark points than headwinds minus points the to an see this

Operator

Race The Nathan a is from next question Piper with follow Jaffray. up

Nathan Race

up. follow the on you Thank

the going Just any purchase quarter. here accretion on thoughts a There accounting set the is first how decent to was run? in down

So have kind kind it what with that just but know the forth, of of kind curious on payoffs to in? just of trajectory can predict and of tough be I scheduled line? guys you so any thoughts

Todd Gipple

great up. follow Nate, Yes,

chance had have to not talk that. We a about

the So I'm really was in brought The only QX it glad up. accretion accretion. scheduled you

So we those $X.X -- of think lot had had significant pay QX credit as would we purchase that's a million you impaired and some saw I and have in most of payoffs We downs been loans. recall, drop-off. why

fair accretion a released amount in additional QX. we So of

in accretion million, schedule million static that $X.X here for about $X.X As about we $X.X there million million. QX the in roughly QX QX $X.X had is and in

million really would that's $X.X million could $X.X pay downs. roughly have accretion. here got up we or about several certainly And million the payoffs scheduled So over to expect a purchase a left discount in accretion quarters, if more $XX.X jump next

Nathan Race

And if line. the ask I more provision just on could one

think to of forward? just that in and going stabilize forward Dan's the XX% to quarter. are target trends little question, back assuming loan X% should this loans the criticized criticized growth going we you if given How going kind about guys provision increase Just of kind in kind

Todd Gipple

about classified Yes, jump in very good that to credit. the feel provisioning. anticipate I modest really don't impact again We

that this $X.X keep million significant provide that really make we would and fairly in growth. think pace us expect so expect of with I to in at million would we allows range million But that's point somewhere that million range. what asset $X degradation organic up, current $X.X quality to any don't our to that $X this jump

Operator

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

Doug Hultquist

to today. joined will Thank it's all Once for been over of it. years us thank great you that day. the again, and you a working Thank you. support all like have again miss and I'd pleasure XX with a And I you the

Operator

sir. conference And is attending today's thank you, The now concluded. Thank you presentation. for

may You disconnect. now

QCR (QCRH) 28 Apr 192019 Q1 Earnings call transcript