QCRH - Earnings call transcript Q3 2021

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Operator

Greetings, and welcome to the QCR Holdings, Inc. Earnings Conference Call for the Third Quarter of 2021. Yesterday, after market close, the company distributed its third quarter earnings press release. 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 Larry Helling, CEO; and Todd Gipple, President, COO and CFO. brief open the from the a then results, analysts. provide will we call will summary financial of and Management to questions

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

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

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

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

recorded through company's afternoon, to Larry QCR be hour It call a this is the will of this the be available reminder, will this would I time, Mr. starting At and turn over XXXX, call. Holdings. also replay Helling being accessible for approximately the to XX, completion on conference this website. at after As like X November

Larry Helling

been leases third record a financial quality. maintaining exceeding basis competitive on Thank Despite our target an on another X%. delivered net performance. core you and fee today. very details time our the to brief excellent has exceptional Todd grew robust long-term of XX%, gentlemen, Year-to-date, loan I interest a while additional quality. you, by net XX% and join will we environment, strong margin growth annualized for credit by loan growth, with our will loans lending of our excellent and Welcome, the income, expanded annualized credit quarter income and for quarter. operator. of quarter discussion us ladies follow thank taking the results start driven We with

new banking clients ongoing attract existing to community which continue is ties priority with model. clients, and We relationship-based deepen strategic our an of

net share was $X.XX. XX% million year-over-year more income diluted second each were Third company up adjusted for up was quarter and than our the quarter basis, $XX.X a On earnings Both quarter. are and records from XX%. measures earnings the per

more The believe robust was the third long second due quarter by call. was of was term, markets last in growth carried strong to provide this over will and revenue, is source performance capital quarter, later bolstered on revenue sustainable loan call. and detail as which We the quarter's from indicated very some Todd

third in the and exceptional lease by traditional client in for Group SFG, Our we and Finance production growth our our municipal continued the in products, lending area niche our loan strong particularly experience leasing and tax growth of business. demand Within lending quarter in continue and to commercial finance. was strong driven Specialty credit

months Our that quarter balances also Group third Finance annualized the X during basis of the for quarter, by seen an had grew impressive upon X% an the mX the XX% year. Lease they annualized year. and Equipment on have first all building momentum

contributions This loan our strong lease of XXXX clients. by now growth full XX% pipeline, XX% approximately with year-to-date, our organic in the million an XX%. strong Given in grew targeting on between current quarter driven combined and and deposits, from the or growth with $XXX year growth loan production commercial was We our and our continued for lease we our basis. core growth which loan annualized funded are

income, and his dollars provide Todd our while on details reprice will margin. deposits to our both deposits. net drive in during and growing helped in in demand noninterest continued and funding interest This NIM lower cost interest-bearing also quarter reduce more overall We our the growth remarks. in

improved assets during XX% feel Our only asset nonperforming quarter, had good the quality net basis now quarter very We of and for as and loans, PPP is when our assets. minimal now XX X.XX%. about charge-offs total represent the reserve which, remains level excluding we points exceptional our current

part the of well shareholder our entire our and service Our we announced resumption per of continue time, record repurchase build price our nearly our to of shares, to performance. program Since maintain delivering like repurchasing hard year, share for XXX,XXX be able allocation our we $XX.XX an for in earnings at to I this Holdings were same team to growth the work have while, repurchased ratios capital earlier significant thank dedication QCR XXX,XXX the as stock of capital another to our capitalized, banks of and at share. their shares loans despite long-term of outstanding we X% client further and approximately shares, value. plan would excellent quarter average

summary, performance quarter's am we with Our I of pleased this are and extremely all into employees entire heart are for this the proud year. optimistic and going our the very end they've accomplished company, of the of In team year. remain our

We and continue the for we and increased capital goal our creating with the deployment markets within value further details. of shareholders. I to our growth for it pursuit now of delivering disciplined turn Todd will serve, organic over attractive returns

Todd Gipple

for Thanks you, Thank today. Larry. us everyone. joining Welcome,

will financial net additional start income. on review discussion results, items quarter I interest some with focus those As I'll is our warranted. third where I

margin. interest was net Our the exceptional or discussed to that for lease This and adjusted was Larry performance quarter. record growth quarter million a $X.X $XX.X million and the increase our loan an outstanding from due the combined with income second adjusted net X.X% interest up in

to the by we basis tax points. NIM During adjusted able were X grow equivalent quarter, our

points the assets to on earning due primarily yields. average loan yield those and higher increased X.X%, grew X assets Our basis

our lower-cost upon continue renewal are we as drive points to X lower deposits basis time In rotating costs deposits. lower addition, funding being to nonmaturity or repriced by higher-cost

a result. also basis X million impacted quarter points. These as NIM Our recorded benefited and fees PPP $X.X of positively loan our the during amounted that adjusted million fees to forgiveness origination by $XX were NIM associated from and the

Excluding static With margin. PPP our $XX our of respect outperforming guidance loans, by to expanded fees, PPP X hold interest core points, NIM basis net the for we currently our QX impact a million of in remaining in these occur the the on in would of This PPP the million result expect $X forgiveness and origination fees. recognition fourth quarter. bulk of remaining loans balances the to

limited we interest decline the for look low NIM fourth ongoing decline of As highly our environment given core forward, of anticipate competitive funding and a in costs slight quarter the room further. our we in and the a to amount rate headwinds

outperform and protect As always, we to continue proactively excess an that liquidity to guidance. work yields will in loan manage attempt hard to

do another quarter solid growth we growth, loan interest income. in of net strong expect our Given

carried fee This Now turning income. number quarter, very a million $XX.X quarter was in quarter transactions included last third second to revenue were Noninterest as on quarters. strong we over income. markets quarter including call. instead our last $XX.X markets noninterest that the XXXX scheduled million million into indicated close the for and income the million $XX capital of and the revenue Capital thus quarter's averaged quarter from swap $XX.X far X has to in third in in per

from this wealth our new performance markets relationships management to onboard specific that and quarter, beginning ongoing our sustainable continue to down assets million billion, per in were historical at client We disbursements. of was of source in products. XX With expect we $XX million volatility client gathered have $XXX strong we our million some going AUM. result, increase new believe will and given previous assets range new end a in $X.X long-term the capital new portfolio quarter the from X% and our the million we management under business, as assets, forward. the totaling to a year. in respect Year-to-date, AUM relationships, the client in the by Total range demand quarter continue As revenue our guidance $XX slightly $XXX offset client market adding representing is quarter for

by production to salary for due revenue turning performance Noninterest the increase primarily driven million quarter. million strong the quarter. earnings our The Now $XX.X of from performance-based totaled linked-quarter million, third higher was $XX.X to $X.X quarter and expenses. expense the benefits second and up for during expense

certain gain Additionally, net we a estate. these $X.X of real other was million related fixed write-down Partially a sale $X.X to of the the million assets. increases on recorded offsetting charge

of at million. the right Excluding these for more capital revenue our a markets million, core normalized of adjusting our million, noninterest $XX range items $XX and to X midpoint of onetime $XX been have million guidance would expense $XX

ahead Looking expect range. expense the continue our to to to in fourth noninterest be quarter, this we

be to excellent. Our quality overall continues asset

mentioned, both and quarter, prior were assets the the assets ratio minimal charge-offs in improved from to of net Larry and our total nonperforming NPAs the there quarter. As

and robust loan quality, respect primarily levels provision that maintain $X.X nor release due strong continued growth. continued of for I the real estate capital property, other the to excellent led This sold during not quality. loans result our a net record we losses as did With to solid strong continue reserves. a successfully to We also in did capital, and million was earnings earlier. again gain mentioned a to We credit we credit any asset quarter reduction the which nonperforming

have of we As per repurchased and during current under repurchase approximately stock share the XXX,XXX remaining quarter Larry an average at the shares mentioned, to shares available program. $XX.XX cost XXX,XXX of our

growth in our was rate XX%, taxable tax-exempt than XX% revenue. we're our range net strong sources, quarter the of third higher capital your tax context call results, XX% Operator, markets first our driven questions. that in was on question. for let's effective our expected and Our a outpaced With bit for which quarter growth primarily to for revenue the open revenue, added the financial ready by

Operator

Instructions]. [Operator

question first today Our with DelMonte Damon comes from KBW.

Damon DelMonte

doing footprint? guys just I much good the a to really is you generated loan from put this nice well your being is today. normal how division the everybody regards growth, some guess on up. Hope community bankers SFG the throughout of versus commercial with quarter, Congrats numbers

Larry Helling

Certainly, growth of tackle Todd. our sectors. all we've one, I'll really that from gotten

traditional X%, growth in from location probably growing we're Our core to X% businesses X% are depending our range, which in. on the loan

there's suppressing see and liquidity So our clients' there. still in some our growth that's historic businesses, amount But starting to we're rate tremendous of a growth. so

been is the growth range active. for there has demand high. really business to in running the leasing equipment as XX% And Our X% our is

well. that's the coming our continue well to specialty in So really the of to growth then a environment do this which remaining niches positive positioned in certainly is been real And are variance.

Damon DelMonte

of does Or And the is group, the entire area? Cedar footprint? that specialty is that out just throughout the it. like Got Rapids

Larry Helling

originated from Rapids our around we business but area, certainly in footprint. It's originate Cedar predominantly the

a think and expertise couple where it's niches effectively those finance certain mix things, we municipal specialized kinds so of transactions. tax is of And do other credit, of then to required a

Damon DelMonte

it. Got

going level respect formation real losses do feel credit Todd? loans. you're No you credit pristine. that And is What look to you color. at at the no good think would That's like at a provision PPP, and How then and your is nonperforming Okay. thoughts forward, with levels, healthy. reserve of on X.XX% the of point Do the quarter be? release start reserves? can some to ended where those which I now you we ex extremely

Todd Gipple

is and it up. growth And that reserves, loan not that into will Yes. we've and really We I really, pace quite well. growing the pristine. shape, certainly think, us know We more in Damon, putting of do releasing did good be believe them you we been

release. short we to we're not hold least, credit would would we reserve to just to expectation on our for the as say I and at it culture, the in have very comes QX, necessarily did reserves those levels. conservative Our when be reasons, And term

Operator

Our next question Sandler. from with Nathan comes Race Piper

Nathan Race

Or across cater the and the even point? at around we around this fourth right Is of release evolve, accretion of quarter I kind the that seeing that yields yields various can that holding still core appreciate PPP, defend into loan ex environment to? you you X% particularly in outlook steady. of least the how kind specialties the loan guys at kind commentary are competitive the guys

Todd Gipple

doing feel Yes. job. We teams know a We yields. yields that the able to be certainly job all fantastic doing our to hold across expect footprints expecting the fabulous a yields I Larry there. funds. don't any a with we job complement We're on all of loan loan holding and on good fine landed. cost to would and about very are where significant they've moves doing and of I

loan bit That would the guidance will little of really perhaps basis of we -- on the in think And all the a pressure go or And some outperformed I do this is that. We've year. on compliments relatively so would yields. slight of it deposit yields. funds X for a compression, loan compression. we pricing. again, when pressure on our we in to of But But on and have pace We here continued optimistic margin. keep X continued in pricing. be with the say bankers to margin points X stable form with can And would very helping for comments, that far yes, Our on we used real points. room cost our X issue a loan margin it come from slight pressure basis to expectation be guidance say come would word

Nathan Race

revenue great with segment the Changing That's color. be a the like of as personnel layering and the And next top year, in the guidance and fluctuates? about XX% we kind efficiency But that should thinking Understood. of ratio kind bit swap think gears on revenue into I quarter. of for appreciate kind particular, what's trajectory. we in little that markets capital about kind as the expense baseline costs implied the the of fourth consistent variability

Todd Gipple

Sure. bit little of color that. to try give around a I'd

pretty we in on quarter to significant it almost transparent expense outperformance capital here the were markets. noninterest So jump exclusively the the third that on was in due

you performance-based I and think $X had view it, we jump comp and if about a how should $XX in all think that, linked-quarter model a terms view in so million increase around around that of a we basis about in markets, on XX%. how it million So capital around you it should

in really or of range a be the think I that times, of XX% the on talked we that underperformance past XX%, lot and outperformance. level to it depends will

on million was this guidance. talk would million range, the the significantly which when of $XX range, $XX we've it about going markets to outperformed capital forward, in our said we simply of end likely then this we last about being scale you noninterest midpoint in the our higher XX% being expense results to time, think quarter we And the because So do. XX% would

quarter And as how that forward. that's on going outperform and pressure in true hold around to, comp our talk going When $XX to and So this terms QX, guidance, our million guidance right for be XXXX things million. here, on be new in when the going expectation or try the the a give we most on have about following expenses, in We're guidance noninterest to XX% January. our right that other number, the And into obviously the rate. range XX% range. to another markets is some year. XX% I of that's think the comp middle would a $XX in of when we're being based sometime range, capital of We'll we for result. this to result comp part, middle we we're might would significantly, view on going have here so expense in really you run some But I guidance going probably

Nathan Race

on Got for it. me last outlook. just maybe the Makes sense. topic And one capital

where above stock back guys the guys Stock's You quarter. buyback appreciated you quarter. the of in kind remained have on this obviously active buying were

appetite the capital on additional context perspective. updated buybacks an the would are an just to acquisition continued levels thoughts build M&A for absent some love next from for guys outlook repurchases. you or year, the of get share within activity what the to on obviously, And seeing there's likely So

Todd Gipple

do Sure. want one? you to that Larry, take

Larry Helling

a you to place on M&A want active, in as our position keep becomes and available. something capital we know, markets it if certainly the Yes, are execute to

we you buyback, are payer, low because, rapidly. will that we certainly, the capital On fairly will and to accumulate dividend consider we a know, as continue

and it to depends continue evaluate our market capital. feel alternative we'll of other price how uses we Certainly, about on So that.

Nathan Race

all a color. appreciate great quarter. the Congrats Okay. on I

Todd Gipple

Nate. Thanks,

Operator

D.A. Davidson. question from Jeff comes next Rulis with Our

Jeffrey Rulis

expense of so appreciate as the for that That's I swap the dynamic, tie clear I've very thanks heard as the Todd, to guide. side things, clear.

maybe here. Just activity detail -- quarter, to those and I net liquidity. a into here, you payoff strong the payoff have production? side I Larry, it maybe just wanted little loan to narrowing to wanted down jump more do linked maybe growth, talk the against of wanted mentioned the really But or I growth what some you guess was about do gross gross you levels growth, And question -- activity think to other of

Todd Gipple

healthy give in Sure loan QX, terms that. million. has million, number was about $XXX a where actually you level same around pretty number there, in in down but on some roughly it right million. thoughts linked from overall. do, was payoff Jeff. I the QX $XXX quarter of growth And QX I But our was at know color some $XXX can It Larry here

outsized upstream earlier, this And the $XXX swimming So $XXX payoffs. It's us, shared of very and Group, $XXX we of certainly those assets. in challenge some with million, growth very important to benefit part lending. quarter, continue nontraditional success core as Finance expect to to against here that. in of Specialty part million, our providing respect million and our Well, have us to to it's that's with Larry

Larry Helling

I'd Jeff, growth. certainly, in for loan to our we've long loan range time. X% history But quarter hitting the the on growth, add on Yes, our in a cylinders third all we're that, XX% on grown

And would we finance those in and rate relative niche And long supplement continue as that and core we into expect is the through expect business, Todd the ups our grow us of downs to alluded look future. so cycles a numbers we to to available specialty our to of kind part interest be forward. as to, at growth for and the

know, about there advances over traditional out the some liquidity expect lines a certainly there's companies it's the lending time. of program. to clients normal good liquidity because we made. lot of you PPP contribution feel credits of just grow our burn commercial as But certainly time, on through of we And So as that still over

Jeffrey Rulis

to are up. putting 'XX. levels. teens talked you're the historical I here. would I you pretty shocked with pretty safe then net guess I X% given about that into to you've some I'm reverting say nudging at the X% growth Well, to momentum 'XX in along guess expected in I those there's got elevated bias Yes. I'll keep you to Those upper that some in upward loan 'XX guess 'XX. payoff Is growth, think it clearly XX%?

Larry Helling

long fair, that that's kind place, predictions make period is I Yes, than world economy of a an done and time. the we've we think uncertain Jeff. of to over hate what different such are The

top the would towards maybe certainly, to So of be XX% appropriate. X% certainly end that

Jeffrey Rulis

kind on enough. comfort side swap got now it interested of income, visibility you've And a last that's just environment $XX that, that that's anything something seems income beyond a that rate in that. Is competitive it the question when Okay. really call you core that's million you'd run the thing, of out in. even like term? quarter on on quarter-to-quarter, just interest longer Fair timing but a different sounds like growing sustainable that or And competency coming look pretty stream a rate threatened? 'XX or it, Or that comment that is

Larry Helling

the the We and future. differently business. a be long businesses, we income for the the million because of -- that being believe about sustainable $XX competitors is long and that in some environments to react our They're sustainable. number our that But business pretty the some time seasonality into uprates that of a make to a in good There'll variability feel engine nature contributor solid Yes. of But just have that we run. the we certainly all in down-rates built believe environments. or

Todd Gipple

sensitive said, important the what that Jeff, really this rate. it what as that and is, million, tag actual we're We and giving. to very the averaged basis we averaged run is, guidance range, think the that years. rates. X business But guidance transactions fact, the was our the important It's that color in fairly the last around to in $XX times. our and we've Larry's we've to think market It's of the on of is close pipeline sustainable I choppy midpoint at not Larry did just that, it's year, point to as out to the the volume think

markets is it's very volume the much But bit transactions, us or go yield up, a sense. would revenue if impacted gets the get Sometimes by it's capital on we'll get, rates. rates the about edges be steeper. the pricing we each and transaction the curve not It's of more around the out so of can that revenue that for a business sustainable amount here little of if makes if

Larry Helling

other really other it's are credit add kinds the Jeff, thing The that to business, space historic whether tax-advantaged demand Yes, is I'd tax and grow. for continues in underpinnings that the in activity good. of LIHTC financing,

housing, in demand is real. the the low-income in If credit space space, you at housing, that tax look the tax-advantaged growth the that

of doing even keep really business have what as So to bigger a business. the chunk carve it's to just we out not like We grows. we're need doing

Operator

[Operator Instructions].

comes James. Our from Raymond Tamayo next with Daniel question

Daniel Tamayo

we are pace loan with Just XXs But here? given one a of have me, And that where see the up? loan been questions the my are got given keep comfortable cycle, with expect seeing, you're do here. getting? in you for from deposit you how Do answered. that that, to think growth loan-to-deposit then strong go growth you ratio high loan-to-deposit the rest ratio very you the the still Or to in continues growth

Todd Gipple

haven't we And we deposits. so about growth about glad I'm feel you Danny, yet, talked pace with keeping the things loan core very with of funding the it call on the Yes, and question. good one asked

that thing us with access And are billion wholesale bouncing would with that's, because are wholesale very funding in about it Fed. but sub-debt. TRUPS deposits sheet sheet range on core be accounts have a are balance of to really kept right to be the And billion with pleased in We part, deposits. our with it we that excess talked only left. have $X.X we in no around $X.X yet, now on are to would correspondent the off-balance funding bank we the for sitting pace haven't The balance here that and call large

core that for about just-in-time And feel us reasonable a inventory good the to really at us deposits. available having cost. gives that So we

Operator

with Montgomery. Martin question Brian next comes Our from Janney

Brian Martin

Todd, margin guess are get I maybe that just kind about being stable, little a as I there fourth mean as beyond potential there's kind about more a into little maybe fourth on thinking just earnings about just you little bit, But would on talked down next year? relatively color just for the you do you're give I you the just quarter quarter. get what down you or I puts -- bit know how And quarter? could bigger future see picture, guys thought you high thinking in the up appreciate a upside, be margin takes next level, the of of into you give but far as outlook. what and as

Todd Gipple

sensitivity. optimistic term, are RSAs X longer now, RSLs time, our Yes, more we sensitive margin at this improve at because asset to $X.X X quarters the really much are able million, margin been our income around asset Absolutely. around and, over are to our here to point. Sure. we've pivot And Right statement last we're the $X.X very about million. same

So $XXX good we on a see in about provide delta terms that tailwinds we of that our to increases. and RSLs million some very rate about feel if RSAs have could some

tightened would really defer it that rates our between our under in steep loan and in rates. takes, so delta what things hope that to the a belts that's we puts short-term view. or pressure new the question headed. we and to guidance gotten term, rates quarter much being how and terms be more same I funding continued our really we've get think But in be have that's of why with the We bit yields. another of good to reason believe we pushed we've excess hard growing might might and rates, recently. been but do Larry liquidity, curve And course, our the longer the to the a where long-term little And I Can of, And payoff be And work that's at then lot able of then might still XXXX loans at So happen we that's as might to certainly, time. take the to to And that's and balance what tighter our done more do, the and we really until funding long-term on something guidance a lately, those really advantage happening up and or might liquidity a Actually, might that's another up LIBOR then, when terms can. we SOFR sign. And might extent opportunity consider happens what of do improve what a yield pace? excess can, off sheet keep exist, like. starting the what strong outperformed we've keep the Fed it's what of get the looking rates curve cost ends continue down to the floors. with and so

So lots going on there.

with full January. in I think for year we'll have some you results color more

Brian Martin

Yes.

last just comments is you that about guess expenses kind today just rate and inflation now something just to expense have then. about running appreciate. I maybe the little Todd, of it's growth are bit kind like? historically growth thinking kind inflation of Todd. that I year, -- seem at I things, fair what more That's expenses. x look at. tougher And Does of guess how wage current next you the if is think based X So on Okay. given your guess, rate as helpful, conditions market I where been in maintain wage your was a normal the percent, expenses. to about,

Todd Gipple

X%. several outperformed then Larry But in over comments X%, got to do what noninterest that. some X% I that that I our significantly and with the we've And know And expense. is, years, on Sure. there. I expect we around has start familiar might course, of X%, think the everyone's last

growth Our noninterest to X%. expense closer has X% than in been

had And a lot success that. with so we've of

to I And it's there. maybe think Our cost But have comments there. and other on some entire would in Larry difficult, you certainly. going doing things people right get company is the more of things focused terms for

Larry Helling

increase deep our a certainly, pressure But be now, and rates we're hiring certainly around not holding same next people, there's of the the and kinds Probably see middle the X% throughout, but on more country. going we're as we're certainly pressure. to our we Brian, guidance to certainly in we're yet upward markets But the for expense doing Yes, on be which that chance -- pressure that haven't in of giving up of year, we yet. given the difficult to good that. you're seeing it's wage budgeting hire feeling right a is challenge, going kind

seeing it you're about So I think right.

Brian Martin

Yes.

certain static I would Larry, that. and mean But of of M&A. the sizes I activity targeting uptick whatnot. have I in guys And see? and know uptick you're has and it in your of of group of comment you're in Okay. conversations? here you mean within kind any kind or any Or dialogue? lot kind an then there seen consider, potentially considering -- you what just about I wait last been your been for Or Have markets one guys and just kind has been seen just I of appreciate have you Midwest. just there's me, guess a

Larry Helling

helps our markets. either M&A in the a those economic think transaction first in in environments Yes. with Des for markets, markets quality like good presence of the Certainly, those markets. management saying execute our to next efficiently already of effectively the preference Moines be that we We those Springfield that would We've in markets. and we've our got opportunity be to things. or in A the couple been consistent

to just first active. that's have discussions somebody I tell certainly it mean because priorities. been as we're But I'd say more buy, our sell. doesn't to ready ready is our employees, So

be in position can when So become we're trying a available. to those so we execute that just

Brian Martin

you. Got

And great quarter, the appreciate guys. I sense. Makes color. Okay.

Larry Helling

Thank you.

Todd Gipple

Brian. Thanks,

Operator

concludes over Larry remarks. This question-and-answer session. like for to Helling turn the closing I'd any call to our back

Larry Helling

joined call who everyone to Thanks us Have again great with forward look a our you day. on today. We speaking all soon. to

Operator

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

You may now disconnect.

QCR (QCRH) 30 Oct 212021 Q3 Earnings call transcript