QCRH - Earnings call 4 2023 | QCR Holdings, Inc.

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Operator

Greetings, and welcome to the QCR Holdings, Inc. Earnings Conference Call for the Fourth Quarter and Full year 2023. Yesterday, after market close, the company distributed its fourth 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 and CFO. Management will provide a brief summary of the financial results, and then we'll open up the call to questions from analysts.

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 a 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 this be this the will available Mr. turn will call. and for XXXX, will ahead. now time, approximately It through recorded Larry completion X to be call being starting company's January the Please website. At hour on after go the CEO. XX, this afternoon this replay Helling, over I is of accessible reminder, also

Larry Helling

year quarter robust results full our and will fourth the fourth highlighted for fee Welcome, the our the Todd and us for thank and and on quarter year. We with I will continue financial to additional overview growth. today. that factors start Thank record you XXXX follow full delivered by success. operator. call loan you, details high-level everyone, a income and with results, joining of performance our drive significant

tax maintained strong X year our full asset quality. core deposits the and completed for our first addition, grew securitizations housing of low-income loans, we credit In XXXX,

noninterest markets income. from our for sources, We interest income net on expansion our and the our in diverse capital revenue continue management overpowered year pressure fees. to the The wealth includes which benefit

also We earnings performance. our exceptional capital to with strengthen continued levels

tax in our housing enhances revenue. and successfully The lending markets to closed related credit capital. an tool also XX, the securitize continued ability low-income and our is As these first of managing X on we liquidity December capital the sustainability growth and effective loans LIHTC our loan previously the announced It securitizations. and important

XXXX Our banking differentiated is our relationship-based in result community performance model. the of outstanding

Our our speed agility This management to regional respond teams client multichartered in model experience to and that banking national enables larger a client local with outperforms results superior needs. alternatives. our and

team Our success. employees driven of dedicated has our

communities. Recruiting with culture corporate our is priority a clients strong employees company throughout and retaining engaged are us. and employees a have in top for involved We our and talented our our heavily

reputation bankers Our and our in culture attract best the markets.

receive continue annually scores, high We company. measured our which to across are engagement employee

outcomes, great local important our this addition, believe business. leads awards won to to enhance low productivity, work footprint turnover, do for places as profitability numerous higher In throughout and that improved value. our charters have We being and such shareholder

in Midwest. Finally, of operate in and most the vibrant markets some we midsized the

and low doubled have Our highly income last regional markets years, outperforming activity. drive growth, of unemployment. In industrial economies attract many technology-focused with our the which These areas steady commercial, peers. high relative we economic helps diverse mix size, educated of nearly a and our workforces, include household X

our of annual peers. over core grown our same ROAA profitability, consistent book top period. X.XX% significantly delivering the have value diluted earnings of and at growth our loans core at our in but the near share X.XX% share our in a XX% the XX% tangible rate at grown XXXX which Our in also we've XXXX, annual in compounded supported growth XX% These XX%. per pace, annual compounded is annual and have increased deposits We've total compounded results per a and the of

was for adjusting full on or EPS the a million was delivered to Total full million growth net the XX% basis. For lease share. XXXX, adjusted $XXX.X million housing X% noncore diluted adjusted and income for loan items, $X.XX. net record $X.XX our and our net income $XXX.X year securitizing prior credit and of per low-income we year After $XXX tax the year for diluted loans of was

Our full to lending our performance provided beginning year was range XX% robust business. the at exceeded from loan and growth guidance the lending driven of our solid traditional by of growth The our year. LIHTC X% loan program

growth and current our planned ongoing for pipelines strength XXXX XX% are prior securitizations. of we and loan our loan X% Given of our markets, targeting to between

XXXX. securitizations We of growth million in of our LIHTC manage the $XXX use We in are net planning next securitization to X%. our range loan loans X% to of the approximately intend to middle of annual

$XXX or $XXX total excluding number million from expand grew year. the as increased for the deposits client balances the or for to continue accounts. and million we of grew deposits, X% short-term deposits, client year existing relationships broker X% Core Our

in the activity drive have year importance grow reflects and deposits a loans. diversified past to that shareholder value. remains our years. which will focus, Growing and deposits We believe full XX our both we a of Accordingly, incented And over built are deposit core XXXX significant franchise. long-term the franchise strong bankers

in interest During capital Strong or pressure fee the the income. overpowered income year, net million by on we strong noninterest XX% markets driven grew by growth income primarily our the $XX revenue.

nonperforming year. the asset at excellent points was assets Our ratio of basis quality assets total XX of to as end the remains the

comfortable loans We held We and remain asset reserves of total business quality with our across which and to for diligently of X.XX% are represents continue investment. monitor all reserves, leases with lines. disciplined our our

have cautiously elevated about of our economic interest relative resiliency the of mindful the optimistic markets. economy, on the are remain we we that may rates While impact

economic consistent culture weather well credit prepares us to Additionally, quality uncertainty. strong our potential asset and

levels capital Our base we strong, upon are in building are focused on capital ahead. and the year our

continue allow peer to ratios and dedication the to strong service conclusion, market our our to believe work hard client for in We faster access outstanding capital target financial results. for to Holdings record delivering to our to than thank like team capital entire us dividend, and grow quartile their top continue I that securitization QCR would power modest We of and earnings the group. will peers. In our

our feel success, am together very all in that proud employees we've of accomplished Our XXXX. I and

With that, discuss call turn I more to in over to detail. Todd financial our the now will results

Todd Gipple

This contributions Thanks loans lending our annualized LIHTC us by Good Thank everyone. start today. the morning, primarily for my investment continued the I'll business. quarter. details for traditional sheet you, basis strength during fourth joining balance total in performance Larry. comments from on lending and solid driven our XX% We with grew on program in our quarter. was an held

the million. totaling loan As $XXX Larry fourth quarter mentioned, we successfully X in completed our first securitizations

consisted exempt Freddie part loans $XXX Mac-sponsored tax of of securitization and first million Series. The was M LIHTC of the

the part was securitization second $XXX The of consisted taxable Freddie LIHTC Series. loans Q Mac-sponsored million of and of

closing and Upon $XXX,XXX. securitizations of these the of loans, selling we of sale on a recognized gain net

securitization our higher funding, on the lessening our the cost strengthened our which stabilized by enhanced importantly, deposit pressure liquidity mix and ratio. More further TCE

securitization continue to growth lending strategy LIHTC Our fund our us business. to enable will of the

established In deposits for maintaining revenue within long-term from the the sustainability the add to levels. Core relatively the addition, while markets securitizations will quarter. our stable portfolio of that business received corresponding concentration this were we've capital

in and million sheets or have year-end. temporarily increasing Our the or correspondent balance typically correspondent rebounded by $XXX at falls Total declined clients position quarter since significantly, deposit deposits portfolio million XX% X% their as fourth end bank mid-January. our $XX quarter at

the our $XXX grew mentioned, provide diversification our core deposit million place has to Larry strong importance our base high we generate path funding during deposits core growth. X% us loan focus believe and on our allowed We that shareholders. As or the in to of most will our for long-term growing which deposits We value XXXX, growth. fund a on mix cost-effective

of at remained very Our deposits. uncollateralized total uninsured total and deposits low XX%

$X.X year-end, maintained which approximately company liquidity $X.X billion the includes available of at immediately addition, available of In billion liquidity. sources

or delivered Now of our net quarter. per share to record the for million We income $X.XX diluted turning income statement. $XX.X

were Our record very strong driven noninterest results revenue. income capital from markets by

of interest of a the was Our $XX.X million quarter adjusted diluted income increase net securitization per sale and or overpowered modest $XXX million $XX.X Net income we share. loans. million, as from the prior was $X.XX

a are of our pleased NIM above tax the improved was adjusted basis that which X We yield basis X.XX%, point a range. guidance midpoint linked-quarter equivalent basis on on by to

loan investment the yields experienced cost deposits increase continued of with funds of our slowing to from We expand beta shift quarter, our the in of modestly deposits outpace deposits. and cost and a our the lower noninterest beta funds. in the to higher in a our During lower of and composition increase

stabilization continued our in mix. deposit We to are see pleased

deposit securitizations help lessen stabilizing further on addition, our mix. our the funding, higher cost In pressure

the that offset continued interest and in point we increase to be next quarter. Fed investment Looking any rate continues curve a from that further our this will and the ahead, generally the inverted the average in our costs. for funding we yields in partially cycle, yield expect At anticipate a loan pause increase

in guiding adjusted basis Fed of points short-term on year. of that we the in later of a a X low first the basis range compression expansion end. We interest XXXX do high and X result, with of a to are cut on static will expect As rates points the NIM end relatively quarter TUI the begin the to

shifted to has balance moderate our with funding higher shift the asset liability-sensitive a beta position XXXX, from During funding. to sensitive sheet more more mix

at time. curve we becomes the positioned same are well yield for a scenario, a result, rates-down As particularly inverted if less the

quarter, income which our $XX.X to of Turning million increased million fourth or for the noninterest XX%. $XX.X

record quarter. Our in capital from a prior was revenue $XX $XX.X million markets quarter the million up this

million, our surged to and markets revenue For million annualized our for quarter. the revenue the capital $XX year, million of in the in $XX $XX Capital excess was fourth million quarter guidance Markets range. was late significantly $XX.X

advantage Markets in quarter in pipelines of fourth to and lending for revenue to housing. Even the benefit healthy. decrease the capital strong markets attractive demand interest the long-term quarter, lock-in in our with financing swap results remained our from strong from rates LIHTC took clients terms. Capital Our significant affordable continues late revenue fees the

capital million. $XX As markets months a our to increasing next million of $XX revenue range to the result, XX in we guidance for be are the

of management the third fourth quarter. X% we $X.X generated addition, million up In in the wealth revenue from quarter,

$X.X the management revenue was up year, or million X%. For full wealth

wealth XXX year. Our continue this client relationships new teams adding under million new management management past relationships, create $XXX to in assets and

are charter. new the our management results from market Guaranty also Missouri our at Southwest Bank in pleased early the with wealth We business

place in the team highly We our is experienced management of that have business. already wealth reach current a expanding

expenses. expenses our strong expense to were fourth our million The due quarter. for $XX.X guidance to to the year quarter full results. compensation totaled on Now increase based primarily was for quarter range. $XX.X our compensation, variable third linked above employee turning million normalized for just adjusting higher the the $XX.X After compared variable million, our Noninterest higher

range of quarter level to million million. of our during our ahead expense focus Looking our closely be XXXX. to first the $XX that $XX reflects the range anticipate on expenses we of in guidance noninterest noninterest will This managing recurring XXXX,

be turning Now to which quality, to quite asset continues strong.

provision basis $X.X NPAs of to provision The credit business. which $X.X $X.X commitments. declined unfunded leases commitments million million in and commitments the driven losses our points $XX.X in losses surge by quarter, and credit During The loans million or the for provision on provision million $XXX,XXX for total of for for by lending during quarter, increased unfunded was the XX was of LIHTC assets. included

total allowance loans X.XX%. for for held to was losses Our investment credit

of by result of of the X.XX% was reserves $XX.X continue combination basis in from our earnings, securities our million increased and tangible of by The points common We ratio The to at assets at growth in available-for-sale long-term loan securitizations the the XX given environment. We to rates. improvement portfolio tangible our interest the strong maintain value and economic in X.XX% our increase to ratio a TCE in expect end, end strong a certain AOCI. fourth to due quarter derivatives was equity in to the AOCI up September. driven increase decline quarter uncertain

well growth the total ratio risk-weighted was at points. to during XX.XX% to risk-based a increase total commitments basis growth total Our as of assets quarter decline the our quarter. unfunded in LIHTC and leases a as significant capital This loans business in due in was lending related result XX end, the of

to full or tangible XX% annualized book during pleased have for are by We the increased value per the our fourth share quarter year. $X.XX XX% and

our was tax quarter The taxable capital our quarter revenue for markets XX% during Finally, the of quarter. the we increase income. higher to compared to tax-exempt earned rate increasing the primarily in quarter, prior compared X% was the our effective as linked significantly the due to income mix

For the our tax rate year, XX%. full effective was

from We and continue bond tax-exempt to benefit our portfolios. loan

the tax has a our peer As one lowest result, in to group. of remain this our helped effective rate

rate that continue up fourth full tax results, financial context effective on your to year of to the We and quarter let's to XX% be added range XXXX. With expect for X% the full our the questions. in the year call for open

Operator

Nathan [Operator Sandler. Instructions] with from Piper Race Our first question is

Nathan Race

Todd, balance commentary, guys year. kind static you provided margin maybe that of the guidance the that margin I assets. how you're stacks the rate-sensitive in just the on assets. your sheet impact LIHTC as in today sensitivity how quarter. Appreciate first well. your securitizations of completed last for the quarter you fourth Fed some up quarter other be that of of And of thoughts curious would there rate consistent imagine the rate-sensitive thinking kind But on occur of from to curious the of the this reduces kind get But rate side the cuts some about point and for with kind at just terms

Todd Gipple

securitization first impact taking I'll And guide of bigger portfolio. moment. in lot of us in of and helped both transparent, be in mix And the the sides QX. big do here for has that's for dramatic to with get But But just slowing quarter, again, the the fourth balance to that's a we're saw static our with, here our really a candidly, rate the really, securitization Nate, cost. deposit has cuts off core expecting to a and where of benefit a shift quarter really sure. us. terms a of that we the potential NIM in in does static it's part obviously. win Sure, funding sheet, pressure the

portfolio, continue the movement. first I'll My to very deposit be was little notes actually benefited it very here candid. really quarter. So relatively static us, and say that's static, expect just And in that we

fourth feel given X give that the it's to though, pace. a think with the very hence the So is color down. And of guided our to most static we X thousands NIM us quarter a in of was impact or What -- around we items in growth December. relatively do loan the in X% another comfortable loan that, prudent margin, late growth to year up XX% we makes

growth good pricing. coming is with good So loan some

So very to on fairly deposit with get think we our better broker, is on loan mix can talked pricing look That yields. when when we we on deposits. repricing, And starting its whether at CD be repricing neutral power I core or static. we're those we about core rates replace

claw terms precision the But the comfortable liability So that. some $X a of and we change effectively present on in do really to not We'll that points sit those us a And we in high yet. relief guiding $X for better deposit X points static few results all where million X maybe funds higher and question, we we we're margin. believe and securitization. very some of degree loan now to NIM some than maybe a yield poorer NII certainly reasons, around slightly a sensitivity point We and that pricing, million new mix but results we and beta get XX annually of cut back end if basis we might will. And our get a we our expansion, we sensitive your do to don't deposits, can in to this then do basis to even of basis don't if that have can expect if see better get accretion. if of get give to cost we may with,

perspective situated later are should a come take cuts rate to from of the in sheet So advantage we year. they balance

Nathan Race

context Curious gathering you just moderate how thinking year? deposit do or X a are guidance growth core X% securitization for an largely expect likelihood then some if can for of additional this XX% the point about the year. loan to of given within you And that pace guys this loan keep just lag, the at prospects or Great. Okay. with kind growth

Todd Gipple

quarter back we focused tag some floated incredibly we growth. a would here. to tell little bit the Sure. in XX%, let you on while seen Nate, I'll right our that have ratio seasonally we with just loan of our on at inflows I core ratio end, nice are up is But quarter, deposit at loan-to-deposit on pace the our and do with Larry's and here more down of got expect deposits. core to that. growth first loan-to-deposit I deposits keep back know Larry

Larry Helling

in XXXX be certainly, Yes. dramatic with What full there emphasis things, sure for I'd incentives in staff add, our for look resetting and And a on we're make Nate, keep pace. the won't incentives middle any that we deposit in shift at but how XXXX greater we generation of staff. to is

Nathan Race

Okay. the revenue, this capital unfunded just provision XQ. then sounds strong within pretty obviously, a increase is pipeline quarter. in Great. on markets quarter strong based just in And turning the here still the really to like really, It commitments loan

So there in the would love commentary in you're of seem just obviously, to again, be was that what it asset And opportunities curious any of so like pull-through in today. here guidance, which, doesn't we updated XQ. it raised you case in across terms if seeing some was just activity, class terms hear

Larry Helling

crack Sure. I'll give a Nate, here.

yield in factors: the And variables started then revenue. And rates track and and fee swap in to ease our incredibly by an a have happened First and look were and back of stars as we fourth caused dramatically we clients all is our what they pushed if to spike quickly new XXXX. caused was those of of that as 'XX capital going, variables say, was funding were want get kind anticipated. of XXXX really on curve more talked business as and we a up that we So all our get because up in and dip "Hey, as quarter you quickly back could." they really lock-in to business stronger the inflation, want and than those -- to XXXX, XXXX, on was to and variables to closed the really there in long were our you of in labor it in "We dropped quarter, they're had ability solid of and of So end now quarter little a my inability historic all, can." fees I our pipeline, availability to they aligned historically Most then strong at as in the produce the interest lined other know, really markets which cost several materials, tick we got a fourth income in a about. strong --

in by overall confident So for seasonal variability $X here, is we're year." And guidance it know. to to the our enough at as you increase look we pipeline there our say, "Okay, were and going million

little So I'd fee quarter income the look encourage lighter the bit of you to activities space. LIHTC at swap quarter-to-quarter. in year It's a as our clients maybe their generally first of the kind back reset

that about of generally is pipeline the range. history, if produce ability you of the And so guidance our feel at perform you. quarter guidance back and good the look to may we first But annually, lower guidance our end business. about strongly feel annual our we given in to really certainly, But we've the the maybe

you. $XX makes look you $XX and million a that the about us business good $XX number giving If X-year little that million, million to we're our that over last guidance spot at averages feel is

Nathan Race

ask competitors maybe whereas as now into some liquidity competitors securitization secondary the have front don't could to seeing follow-up Are or just across options any are maybe don't guys market those more if have line of have you lean this business. this constrained product, opportunities? back more that And it. continue to the one Got pull I on you

Larry Helling

to factor And all we've here. Yes. runway us And are playing tell this it's execution. national And securitization business previously, our It the certainly a in could of continue big really gives talked is in a be as players. value lot harder a to the at speed proposition to competitors in. steady space pace of add space this our

know. I don't necessarily So

whether primary in they're and little a the lending biggest bit is space. at feathering for in the banks, are it our look total, here me a banks biggest XX competitors it's this hard surely throttle you to If but XX, gauge they're XX

Nathan Race

assumption for what Got but that Okay. for discussed kind the we the XX of ends just last revenue again, it. quarter similar one capital then the of first expenses, last I imagine the to months guidance. me. Is contemplates I And on quarter middle Todd? fair one next imagine guidance markets a

Todd Gipple

assumption to expense of that the is, be it candidly, pleased That guidance in able the kind run we're And for quarter. provide somewhere Nate. be very first to Yes, that middle noninterest the rate. guidance would of a on of

efficiency being strong up moved X% testament eye only team and have, the kind of to produce guide year-over-year. a expenses results. to keeping we And these Our able an that on and

really that why that a guiding nutshell in we're QX. So is for

Nathan Race

on Congrats Great. quarter. a Okay. great

Operator

DelMonte with next The Damon KBW. question is from

Damon Del Monte

Excellent.

on Just question expenses. a there on Nate's the follow-up at the end

a do guided think quarter reflect spot seasonally of range the Todd, fee about million million slower kind So in kind level. $XX to weaker of the income first you $XX would of

we year, higher year. outside because So fees going probably to Is growing as to through going fair? we swap presumably we're as that that be go the have through of the you're range go

Todd Gipple

of X-parter kind there. Damon, Yes.

goalposts the quarter terms our just would quarter, revenue. But million the first us $XX gave we based So we solid million. like of those within capital to percentage we here the be of What a compensation you a here And our of that QCR is $XX very million. our all in at still on midpoint $XX that about results high expense comp markets guide incentivized. expect we to as of from expect Larry say so for what described, would million in guide structure is fit $XX

results really expense up noninterest go really profitability. have terms guide that we if results expect So in to and do only of would outstanding we

comp in can of had quarter, that. the in jump quarter like for a outstanding we we just fourth like results incentive So percentage see a here high pretty

performance. we reward reward our our we us, of strong to sustain And that alignment But that's top quartile we shareholders. people good where is peer strategy after part for think

really really, we're outlier So outside the guidance would providing that only be the of to revenue already strong if range. guidance

Damon Del Monte

just I provision appreciate to here. on color. then it. that And touch Got the level

You to do the book as unfunded or allocation we incorporate traditional the some kind we of continuing you're you pretty And commitments. maybe X reserve, noted a these start loans, kind quarter reserve feel that's in provision loan going for included we unfunded X first think not to the commitments quarter, high should forward? I that. balancing and comfortable indicative mean saw this what that XXX with How the last about maybe as of this of but XXXX? -- of the quarters quarters of if

Larry Helling

Yes. Good question, Damon.

As we XXXX. points expense. provision was XX about basis in think It

about So returning on talked that longer credit provision outlook if with credit in we've we about a calls to and are too. and things normal you maybe think standpoint, probably individually, historically applies Damon, to these term,

us And fee so from a produced because quarter unfunded a for commitments you was standpoint. an what outlier, good and saw income that this was that past thing

unfunded so And few come quarters. commitments closer for next -- was normal we certainly through go to as that will certainly down back that provision the of level needed come probably and

the But replace charge-offs. as think provision of is normal, about returning credit you to term to long the and part

a X interest into be as last bit And stay is steady think provision that X expectation rates higher would come the off years. maybe I credit think as we a go we reasonable normalized more to I X, a think little a would so expense it to what environment year-over-year

Operator

Martin Janney Montgomery Scott. is question with Brian next from The

Brian Martin

guys -- for wanted I quarter just those was the of of the that follow-up I provision quarter. just the losses guess, so one Larry. referring given you commitments? loss to on just this provision kind credit -- to kind unfunded are dynamics total loan with expense? Or Great that, question, you

Larry Helling

That because was really a just -- spike last commitments. little unique unfunded quarter up was Yes. this the of in

XX the total was points in basis XXXX. provision So

and last the Our go want to lower basis our consistent you but those. our pretty That average, XX-year if at year little back a for were net number X-year than is really XX points. average, look with charge-offs

it think I time. again, more over as we so move to expect get things economic slowly normal And rate will we into as up normal normalize environment, probably environment, interest a

Brian Martin

Got you.

in you're production the of put there? kind Yes. outlook as of what the And give some far those you loan just kind this about production late the yields seeing new on Okay. just just where color year, in thinking then are? the as yields new how you And quarter. what quarter, maybe the on you're your Can

Todd Gipple

Sure, between we Brian. payoff in we bigger actually rate a Yes, and had new December delta funding saw rate previously. than

a December, really in terms outcome yield and lot So floating rate basis a static for we're of XX high very portfolio, had one yield. Fundings loans, be X.XX% rate we there and on equivalent basis the tax for X.XX%, we've good we that LIHTC new yield really would again, of that X.XX% and the a highest a of production reasons, That's from still feel had fundings on delta. the a payoff That's seen. for point more margin about here out.

very company. that. we the good certainly, our get the feel footprint pricing of And about So around to power really starting all are

job our helping So us bankers are better. great a get doing paid

Brian Martin

Got you.

potentially on the margin. first And you one, look it once at how as through the one another you helpful. Todd, one? came potentially That's that think on could thought forward mentioned midyear. the securitization some I through could help benefits. past doing and get look you we one offer roll guess I the here on there this Any to Okay. as that And think benefits about other that

Todd Gipple

a dollars to manage the hundred that sheet for efficiently for word. bit. view we an tool assets right were couple that Sure. incredibly million is high-quality probably NII more of going the balance know us We helpful of impact it really as sell We when to help off a

We actually did able as And so the overpower in going the those part the and to of assets process. improve great we away were news NII quarter. that fourth was

of the last to quarters, benefit lot being those assets. able whole said has there's over several as So Larry securitize to a

only our cost with takes of basis XX It's funds really quarter give really we of done the quarter, powerful terms that securitization, the up is. was year, points. points the in this it. quarter, basis cost of fourth It was respect pricing. new meaningful funding. what can XX But there. when example did we an our in just XX for been to margin, our it deposit in And But it In first basis an points; last symmetry -- you off in of to XX kind mix interesting and that the the of really second points; funds increased how of basis quarter, quarter, see the third pressure deposit it's it of went

powerful for a us very more a effective tool balance it's balance sheet, sheet. efficient to So an manage help

Brian Martin

And of go ahead, -- Larry. I'm the sorry. funds cost

Larry Helling

thing I'm add securitizations. I would our if learned the sorry, you're a gains is doing securitization X thinking first on sales, about we lot maybe Brian,

learned We yet. everything haven't

we don't expect the only on of probably statement securitizations. couple income So impact next modest

on and our and might the be structures XXXX timing will the continue pushing on but our out. we're learn structure a gains, to We about us right may It ironed take the securitize some us way take And after all Eventually, expense of few more that But securitizations economies pushing to a we through through the to now. there the right of be and more quarter. scaling to efficient it there. securitizations learn right get providers expense that. couple before XXXX more might sort to to because be of we're scale it get

Brian Martin

you. Got

it how appropriate? or the maybe the month relative the question fair of get funds a not of December up Does Okay. cost exiting is not quarter? look December, mixed that it's for securitization And did Todd, where to the with

Todd Gipple

No.

have didn't think on certainly it's and cost I It margin. funds of net appropriate. interest of any much really impact

X.XX% reported and was December, in in we October, November Our X.XX% and margin intra-quarter X.XX%. X.XX%

no terms saw during And that in we was funds again, almost cost point same in cycle I expect again, XX since manage we helping of of would funds. in change of basis tightening of increase in mix cost the best very quarter. outcome a us started. good of future more tell So terms you, the And the the

Brian Martin

you. Got

was here. just capital, for last on me it And Okay. one building really

understand not really your with outlook still part wondering become year? it? on Just build have? to narrative to capital continuing you're growth, the trying does this kind just bit about strong growth more buyback and of of are how to Just the that or the thinking thoughts what want given you of with how And your a utilization the --

Larry Helling

Yes, question. Brian, good

about economy yet. think too say victory the it's to 'XX, we early As here I'd over declare

be higher last forward now X to to all we're for going we we've interest a in weeks going the bit. we ago, were we're have and X minds our rates weeks. and recession going thought So a longer, to have cautious changed going for

but the hoping I'm sometimes not. world So right, they're that is

capital seems And us to so hold while. for continue a to on it prudent to for

to TCE the appropriate our quarter's sheet. the is our that road. peer and group focus get to the quarters but are arrive of a prudent And -- so it's in and to be think is quartile balance want probably into when down other our do factor to time, and do top position really there build we we And certainly buybacks, several

Operator

next from Jeff is question The D.A. with Rulis Davidson.

Jeff Rulis

words you'd the at say is guess, kind margin. it put way growth but I you've confidence of your sounds position. I expansion the maybe discussion NII Pretty as on the NII and positioned point. the fair? good on bigger safe mouth, slight Is to don't to confident color want it that if might be growing in this in than be than margin more liability-sensitive margin

Todd Gipple

is Yes, Jeff, I think that fair.

and a halt. mix us to change that confident very to funds We efficient with feel core terms really helps of and almost in more deposits that. build of has are come securitization trying cost the We a of balance mix sheet the

actually looking loan So backdrop. good NII. pretty And growth forward the margin to that a water now considering would we're providing treading result on expanded be here guide

feel we about good So that. very

Jeff Rulis

for any little in back Can And sense charge-offs bit was What up a the a picked through? net And that? a Okay. the to perspective quarter? maybe broad flowing then of get we what's credit. from comments credit

Larry Helling

I slightly broad improved you try charge-offs Jeff, -- of I'll if and to had where continue probably of underlying nobody all Certainly, now, a more is bad think we've because comments the you losses. in were first for the environment, to which feel move peel down is interest look almost a criticized our NPAs. X at it bit. and if metrics, at I as net measurements we classified rate this look couple start got And a talked any we then were to with credit toward environment normalized years going about normal

normal. I moving we're toward Now think

tendency a there's to the do might we quarter a bit natural [indiscernible] little have had So a cleanup. fourth little in

any in think don't trends normal cleanup. are just I significant So there our movement. It was

net Our charge-offs XX for the year points. were basis

the charge-offs look were XX over X net last our you basis years, If points.

what experienced over of X years. So right the top it's really last we on

our have years, XX charge-offs the XX points. Over basis been last net

everybody talking of And So to industry we'll over back kind move us time, underlying that any prudent to where normal. but in think seems I time, Over basis things expect that, of go that it I XX the that's that to number There over expect is is charge-off. our we credit time. that of about way. metrics I move points kind think point indications would quality to certainly aren't that

Jeff Rulis

Okay.

necessarily QX, chasing few net the this quarter, it maybe charge, focused. on the charge-offs segment down some was So wasn't things? a in cleanup It

Larry Helling

forward. should that trends going impact the significant nothing Yes,

Jeff Rulis

on Okay. Maybe last any of for on specific. where the the pretty geography seeing within one certain But just the segment, footprint in a line of business? or momentum some expectations year growth coming maybe and thoughts or you're kind

Larry Helling

LIHTC we've that business for with estate Jeff, unique the thing up X% surprised that business C&I about and traditional the Yes. to real me some And year. was commercial fairly lending growth. actually I'd XXXX was our outsized got this strong, normal then provided start, X%

because of it's the slow of kind the thing the was that that competitors, down activity to of but I don't business, because capital traditional constraints, me some on So liquidity constraints decided their surprised activity. strong, our because of think because

we're the to allowed it's share So markets us in in. market grab

we there thing for And where with so other worked that's XXXX set some I names by we've good tone a got that getting the a them decade banks. are some because was of that on know business because in

about tool, But because that do of kind think And as X% we So funding. was securitization it X% for we next in we continue putting comfortably again, year. in grow certainly that to can can range expect I the the without XXXX. we of our way the to look that too much on pressure

Operator

question James. Tamayo Daniel next Raymond with is The from

Daniel Tamayo

a couple Just follow-up of questions.

the you'll rate from get talked about, benefit think that on Todd. you just NII cuts that First, you

in terms much of you expecting whatever the immediacy the curious, you're any or many in that costs get -- cuts bottom when line? lag Just into the the through when rate -- how funding that of versus come actually how lag, your when in budgeting hits if there built is

Todd Gipple

claw question the in increase Danny. be of of funds, course, significant clarifying would NII the They immediate into been and ability deposits, beta of gone deposits. mix Good have have -- and would lower and We there. of Part Yes. think to higher has NIM very impact. cut. with those quickly funds terms cost of be the those noninterest-bearing we in coming cost that fairly Sure, ability out the beta shift would a of back rate

be immediately. nearly I Fed lag the So think much don't there if there starts cutting.

Daniel Tamayo

is XXXX? if there clients that due rates that, continue that how million $XX don't could very you you to a secondly, swap react then $XX million. And below up, your end year, a continue of to million the a think revenue. for lower to the obviously quarter, be curious $XX still strong kind the looking going that had get just result mean guidance, there In just to a I the rates Great. year, swap that. -- think something we in is apply rates lower across probably possibility the was with Okay. environment would quite strong at do the Or bit so on higher activity of the but about I'm that you rates, big it the XXXX was than to end your way year, a of lower annual the guidance? Obviously, year's difficult

Larry Helling

I'd say -- in factor the as clients lot rates. in had to sharp drop fourth it's lower happened quarter they wanting of mean, big the quickly curve the rates in I was a the driven that end as a Yes. yield could. long what by the Danny, in lock and so

urgency. maybe a client But bit and that part sense XXXX, of rates so lower XXXX activity because of drop a bit it normalized. inflation for XXXX than earlier in a got committed the bigger installed little there's to little got rates waiting for in of And the was in into deals of that really normal

look in So if how to over is long much of you $XX million $XX range. it's is exactly those term, to the that which. million more normalized hard But tell our

and through that to of capacity And we do think the kind we've got thick thin.

year cards from think dropping given which maybe a could is level. is curve basis clamoring so pretty me to short in XXX flurry right end throughout what end get clients we in told guidance appear drop kind interest because now. reasonable the lock have -- to yield we a an you of long curve, be of of But of deals. prospect, a we another If okay, this in rate have the point another we're doesn't bit, going the the steady here, activity the That a

Daniel Tamayo

the average And -- million, last so is -- year. years, over by $XX million so of I amount Okay. a $XXX mean the X still you're

volume capturing the some impact the rate you've guidance Or of of the years? there what you be above expecting to in still that's there last XXXX I is kind are similar over from done mean XXXX. So in for difference? couple

Larry Helling

pulled drop deals Yes. a little that that had I hadn't 'XX waited in the happened we'd bit we if of mean in from quarters rates bit, or 'XX rates into some to first the a second probably little until borrowers, that we probably. or lock

disappoint an guys. basis because so like a we that's And there. make the you that of number just sure hit on of can trying part annual don't guidance is to you to we give we it Part

interest tremendous there's tick happen I the probably down a just fees to for there's last to The X give swap developers we're But think rates. normal rates, finding think look some if think easier could of reasonable number going you And give long-term together we rational trying so you think is backlog certainly we give to the And affordable we stacks it's been just view. sense clear on it housing. hit, today. our to is the in I or probably back I'd to X for since now that why years what what guidance the capital of for I you can a and knew XX% little XX% at a need still a industry, in we put was the are

Daniel Tamayo

higher with That's stick to you to I appreciate drivers color. number, not appreciate I great. I'm a here. trying the just all understand that. trying the all

Operator

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

Nathan Race

you appreciate taking guys I follow-ups. the

step there. a Just nice are seems had guys new still management clients on up. revenue, And like one adding wealth you it

be of well. to making I a business line Missouri you how just get as then on believe So I'd growth guys curious are in to push Moines Des in also, that is trending Southwest an and update in

Todd Gipple

folks Yes. start memory, at we the gotten Nate. a We're Guaranty fast start. very couple the with pleased have very charter. of off experienced Good Missouri have Bank that in Southwest A to

serving initial and of our clients we're reasons charter. and those Quad One the existing need new of is folks. efficiently wealth City really we out can fairly the to AUM lean don't able can bringing to for have we that worry about management created structure the infrastructure back-office do recreate in Bank already on They we in that

start So good a off to there.

pursue like about that. the Des another Metro and start to continuing we're are excited Moines this We in

relationships We -- expect vast segment. some another majority our the wealth have XXX this higher million higher brand-new leverage is on profitability in front. But of that that in And trust creating AUM. year $XXX-some this very news proud management sometime to And year. that of team,

relationship So the was million in trust, ultimate $XXX to is of that close business. which

I you Nate. that, appreciate So about asking

Nathan Race

and then going think to XX%. I use going a talking that level And forward? the last Great. tax forward, X% quarter, just we're between Is good on still rate

Todd Gipple

Yes.

Proud And that be that good tax provide about than more there quarter good Our feel share. We that effective markets that lowest up to range. in have But capital bit X% taxable rate. would our really of per really guide in to only revenues The exempt. a be sudden fluctuate thing the group. feel tax again, one where outsized spike us would good still all peer XX%. earnings pretty we a helps of an very was

Nathan Race

maybe one Got you. And for last Larry. then one

M&A thoughts your on pretty latest to advantageous get are your and the curious in with your position excess capital environment. Just currency. Obviously, you guys

some less any acquisitions occurring on or or you're year So more into at point year? next just this curious if optimistic

Larry Helling

Yes.

first solid what's sure And really we've is got for got support growth our fortress been to balance us. basically making good think we've really a priority, Nate, I sheet momentum.

So we up. that appetite want for certainly, messes M&A. that anything do to Longer some term, we don't have may

trading the victory cautious continue nothing start might But last a it has we're going for probably little in to we'll over changed the of we're some on M&A XX again, discussions just or commented of certainly we for in long kind with higher, And not bit things the have to mind to strategic the term, economy think yet a be ongoing bit if think transactions. everybody their stock, that as earlier, though. start happen. fit going bit Our XX economics to days in some And I make we sense what's declaring yet might I a cautious foreseeable because, because be future, be a yet.

Operator

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

Larry Helling

safe new year. look during great We a healthy and our Thanks all forward for the speaking remains again Have call joining everyone soon. day. We hope today. to with you

Operator

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

now You disconnect. may

QCR (QCRH) 24 Jan 242023 Q4 Earnings call transcript