QCR Holdings, Inc. Announces First Quarter Earnings and Response to COVID-19 Pandemic

Nachrichtenquelle: globenewswire
28.04.2020, 22:05  |  116   |   |   

First Quarter 2020 Highlights

  • Net income of $11.2 million, or $0.70 per diluted share
  • Adjusted net income (non-GAAP) of $12.4 million, or $0.77 per diluted share
  • NIM increased by 4bps and NIM (TEY)(non-GAAP) increased by 5bps to 3.40% and 3.56%, respectively
  • Noninterest income of $15.2 million
  • Annualized loan and lease growth of 1.6% for the quarter
  • Annualized deposit growth of 26.5% for the quarter
  • Provision expense of $8.4 million for the quarter, increasing ALLL by 16bps to 1.14%
  • Elected to defer CECL implementation as allowed by the March 27, 2020 CARES Act

COVID-19 Pandemic Response Update

  • The Company has fully implemented its Business Continuity Plan
  • All charters are providing routine banking services through online banking, drive-up windows and limited lobby access
  • We are actively responding to client needs, including offering a Loan Relief Program (“LRP”) to impacted clients:
    • As of April 24, 2020, 1,935 clients have been added to the LRP with loans totaling $439 million
  • Enrolling clients (including new clients) in the SBA Paycheck Protection Program (“PPP”):
    • As of April 24, 2020, we have received approvals from the SBA for 1,300 PPP loans totaling $333 million
  • We remain fully staffed and have implemented a number of actions to support our employees, including:
    • Alternative work practices such as working in shifts, social distancing in our facilities, adding remote work options for approximately half of our workforce, and online meeting platforms
    • Discontinued business travel and large events

MOLINE, Ill., April 28, 2020 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ: QCRH) (the “Company”) today announced net income of $11.2 million and diluted earnings per share (“EPS”) of $0.70 for the first quarter of 2020, compared to net income of $15.9 million and diluted EPS of $0.99 for the fourth quarter of 2019.  Provision expense increased $7.4 million in the first quarter of 2020, compared to the fourth quarter of 2019, as a result of increased qualitative factors in response to deteriorating economic conditions as a result of the COVID-19 pandemic.  The first quarter results included $517 thousand of disposition costs due to the sale of Rockford Bank and Trust (“RB&T”) and a $500 thousand goodwill impairment charge related to the pending sale of the Bates Companies (“Bates”). The fourth quarter of 2019 results included a $12.3 million gain on sale and $3.3 million of disposition costs due to the sale of RB&T. Additionally in the fourth quarter of 2019, there was a $3.0 million goodwill impairment charge related to Bates as a result of the decision to exit the Rockford market. The first quarter results also included $151 thousand of post-acquisition compensation, transition and integration costs, compared to $1.9 million of similar costs in the fourth quarter of 2019.

Excluding these expenses and some modest cost for early debt extinguishment, the Company reported adjusted net income (non-GAAP) of $12.4 million and adjusted diluted EPS (non-GAAP) of $0.77 for the first quarter of 2020, compared to adjusted net income (non-GAAP) of $15.4 million and adjusted diluted EPS (non-GAAP) of $0.96 for the fourth quarter of 2019. For the first quarter of 2019, net income and diluted EPS were $12.9 million and $0.81, respectively, and adjusted net income (non-GAAP) and adjusted diluted EPS (non-GAAP) were $13.0 million and $0.82, respectively.

     
  For the Quarter Ended  
  March 31, December 31, March 31,    
$ in millions (except per share data)  2020  2019  2019
   
Net Income $   11.2 $   15.9 $   12.9    
Diluted EPS $   0.70 $   0.99 $   0.81    
Adjusted Net Income (non-GAAP) $   12.4 $   15.4 $   13.0    
Adjusted Diluted EPS (non-GAAP) $   0.77 $   0.96 $   0.82    
Pre-Provision/Pre-Tax Adjusted Income (non-GAAP) $   22.8 $   20.4 $   16.6    
See GAAP to non-GAAP reconciliations            
             

“As a country, we are in the midst of an unprecedented challenge with the onset of the COVID-19 pandemic, and it remains difficult to predict the ultimate impact on our clients because the depth and duration of this pandemic are still unknown,” said Larry J. Helling, Chief Executive Officer. “However, each of our banks is well-capitalized, and is dedicated to serving our clients for as long as this crisis lasts. We believe our philosophy of putting clients first, combined with local decision-making, is the best way to serve our customers during these uncertain times. We have seasoned credit teams at all charters that have experience dealing with significant economic downturns, and all of our employees are dedicated to helping our clients weather this storm.”

“We have rolled out our Loan Relief Program that allows impacted clients to defer payments and preserve cash and liquidity,” Helling continued. “Additionally, our lending teams are actively enrolling many existing and new small-business clients in the SBA Paycheck Protection Program, which was intended to provide much needed capital and liquidity to many of our commercial and non-profit clients. As of April 24th, our banks received approvals from the SBA to fund 1,300 loans totaling $333 million. These approvals were accomplished in a very short amount of time thanks to an extraordinary effort by our staff. We are confident that we will grow our client base as a result of these efforts.”

“Though the public health crisis did impact our results in the form of lower loan growth and an increased provision for loan losses, our overall credit quality remained strong and our Company was solidly profitable through the first quarter,” Helling added. “I am proud of our first-quarter financial performance and our healthy underlying fundamentals. We remain steadfast in our focus on expanding our presence in the communities we serve across all our charters and providing best in class service through operational excellence, and we believe that we are well positioned to deal with the challenges in front of us.”

Annualized Loan and Lease Growth of 1.6% for the Quarter

During the first quarter of 2020, the Company’s total loans and leases increased slightly by $14.5 million to a total of $3.7 billion. Loan and lease growth was adversely impacted by reduced economic activity across all markets as a result of the voluntary or mandatory closures of public venues, businesses, schools and government offices due to the COVID-19 pandemic. In addition, the Company received a number of sizable loan paydowns in the beginning of the quarter, further impacting quarter-end loan balances. Core deposits (excluding brokered deposits) increased $132.6 million, or 3.5% on a linked quarter basis. At quarter-end, the percentage of wholesale funds to total assets was 10.1%, which was up from 8.8% in the fourth quarter of 2019 as the Company accessed some short-term wholesale funding out of an abundance of caution. At quarter-end, the percentage of gross loans and leases to total assets was 71%, which was down from 75% in the fourth quarter.  

“The slowdown in economic activity caused by the COVID-19 pandemic impacted our loan growth for the quarter,” added Mr. Helling. “Loan production slowed significantly in March and that trend has continued into the second quarter. We also experienced several large payoffs during the quarter, which impacted our loan growth as well. Due to the inherent difficulty in predicting the duration of the pandemic, we are withdrawing our previously announced targeted range for full-year organic loan growth.” 

Net Interest Income of $37.7 million; Adjusted NIM up 7 basis points

Linked-quarter comparisons of net interest income are impacted by the sale of RB&T on November 30, 2019 and varying levels of acquisition-related net accretion.  While the sale of RB&T reduced average earning assets by 5.3% on a linked-quarter basis, net interest income excluding RB&T and acquisition related accretion (non-GAAP) was nearly static due to a significant increase in net interest margin (“NIM”) in the first quarter of 2020.

   
  For the Quarter Ended
  March 31,   December 31,   March 31,
  2020   2019   2019
Net Interest Income - Reported $   37.7     $   39.9     $   36.9  
Net Interest Income - RB&T $   -      $   (1.8 )   $   (3.4 )
Acquisition-related Net Accretion $   (0.6 )   $   (0.9 )   $   (1.1 )
Net Interest Income Ex-RB&T / Ex-Accretion $   37.1     $   37.2     $   32.4  
                       

In the first quarter, reported NIM was 3.40% and, on a tax-equivalent yield basis (non-GAAP), NIM was 3.56%, an increase of 4 basis points and 5 basis points from the fourth quarter of 2019, respectively. Adjusted NIM (non-GAAP), excluding acquisition-related net accretion was 3.50%, up 7 basis points from the fourth quarter. The increase in Adjusted NIM (non-GAAP) during the quarter was due to an 11 basis point decline in the total cost of interest-bearing funds (due to both mix and rate), partially offset by a 3 basis point decrease in the yield on earning assets.

   
  For the Quarter Ended
  March 31, December 31, March 31,
  2020 2019 2019
NIM 3.40% 3.36% 3.25%
NIM (TEY)(non-GAAP) 3.56% 3.51% 3.40%
Adjusted NIM (TEY)(non-GAAP) 3.50% 3.43% 3.31%
See GAAP to non-GAAP reconciliations      
       

“We expanded our adjusted net interest margin again during the first quarter as we continued to drive down our deposit costs while successfully increasing core deposits during the quarter. Our average loan yields also declined during the quarter, but at a slower pace than the decrease in our funding costs, expanding our margin,” stated Todd A. Gipple, President, Chief Operating Officer and Chief Financial Officer.

Noninterest Income of $15.2 million

Noninterest income for the first quarter of 2020 totaled $15.2 million, compared to $29.8 million for the fourth quarter of 2019. The fourth quarter of 2019 results included a $12.3 million gain on the sale of RB&T. Excluding this gain, noninterest income totaled $17.5 million in the fourth quarter of 2019. The first quarter decline in noninterest income was mostly due to the sale of RB&T late in the fourth quarter of 2019. Wealth management revenue was $4.0 million for the quarter, consistent with the fourth quarter of 2019. Noninterest income increased 26.7% when compared to the first quarter of 2019.

“Our noninterest income was down modestly in the first quarter, however, we did experience another strong quarter of swap fee income, which came in at $6.8 million for the quarter, at the high end of our guidance range. Given the uncertainty surrounding the pandemic, we are withdrawing our previously announced targeted range for full-year swap fee income and gain on sale of guaranteed portions of loans,” added Mr. Gipple.

Noninterest Expenses of $31.4 million

Noninterest expense for the first quarter of 2020 totaled $31.4 million, compared to $46.3 million and $32.4 million for the fourth and first quarters of 2019, respectively. The linked quarter decrease was due to a number of factors, including a $5.7 million decline in salaries and employee benefits due to the sale of RB&T as well as reduced bonus and incentive compensation, a $2.8 million decline in disposition costs and a $2.5 million lower goodwill impairment charge. In addition, post-acquisition transition and integration costs decreased by $1.7 million due to the completion of the core conversion of Springfield First Community Bank in the fourth quarter of 2019.

Asset Quality Remains Solid

Nonperforming assets (“NPAs”) totaled $16.9 million, an increase of $3.9 million from the fourth quarter of 2019. The increase was primarily due to one lending relationship. The ratio of NPAs to total assets increased to 0.32% at March 31, 2020, compared to 0.27% at December 31, 2019 and down from 0.52% at March 31, 2019.

The Company’s provision for loan and lease losses totaled $8.4 million for the first quarter of 2020, up from $1.0 million in the prior quarter and $2.1 million in the first quarter of 2019. The linked quarter increase in the provision for loan and lease losses was primarily due to increased qualitative factors in response to deteriorating economic conditions. As of March 31, 2020, the Company’s allowance to total loans and leases was 1.14%, which was up from 0.98% at December 31, 2019 and from 1.08% at March 31, 2019.

In accordance with GAAP for acquisition accounting, loans acquired through past acquisitions were recorded at market value; therefore, there was no allowance associated with the acquired loans at the acquisition date. Management continues to evaluate the allowance needed on the acquired loans factoring in the net remaining discount ($6.3 million at March 31, 2020).

 Strong Capital Levels

As of March 31, 2020, the Company’s total risk-based capital ratio was 13.33%, the common equity tier 1 ratio was 10.14%, and the tangible common equity to tangible assets ratio was 8.76%. By comparison, these respective ratios were 13.33%, 10.18% and 9.25% as of December 31, 2019. The slight decline in these ratios was the result of asset growth associated with holding higher liquidity and cash balances along with the Company’s previously announced share repurchase program and changes in interest rate swap market valuations.

Share Repurchase Program

On February 18, 2020, the Company’s Board of Directors authorized a share repurchase program, permitting the repurchase of up to 800,000 shares of the Company’s outstanding common stock, or approximately 5% of the outstanding shares as of December 31, 2019. During the first quarter, the Company repurchased approximately 101,000 shares of common stock at an average price of $37.45 per share.  The Company ceased the repurchase of shares on March 16, 2020 as the COVID-19 pandemic began to impact our country.

Focus on Three Key Long-Term Initiatives

As part of the Company’s ongoing efforts to grow earnings and drive attractive long-term returns for shareholders, it has developed three key strategic long-term initiatives:

  • Organic loan and lease growth of 9% per year, funded by core deposits;
  • Grow fee-based income by at least 6% per year; and
  • Limit our annual operating expense growth to 5% per year.

It should be noted that these initiatives are long-term targets. Due to the impact of the COVID-19 pandemic, the Company may not be able to achieve these goals for the full year 2020.
             
Supplemental Presentation and Where to Find It

In addition to this press release, the Company has included a supplemental presentation that provides further information regarding the Company’s loan exposures. Investors, analysts and other interested persons may find this presentation on the SEC’s EDGAR filing system at www.sec.gov/edgar.shtml, or on the Company’s website at www.qcrh.com

Conference Call Details

The Company will host an earnings call/webcast tomorrow, April 29, 2020, at 10:00 a.m. Central Time. Dial-in information for the call is toll free: 888-346-9286 (international 412-317-5253). Participants should request to join the QCR Holdings, Inc. call. The event will be available for replay through May 13, 2020. The replay access information is 877-344-7529 (international 412-317-0088); access code 10142295. A webcast of the teleconference can be accessed at the Company’s News and Events page at www.qcrh.com. An archived version of the webcast will be available at the same location shortly after the live event has ended.

About Us

QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company serving the Quad Cities, Cedar Rapids, Cedar Valley, Des Moines/Ankeny, and Springfield communities through its wholly owned subsidiary banks. The banks provide full-service commercial and consumer banking and trust and wealth management services. Quad City Bank & Trust Company, based in Bettendorf, Iowa, commenced operations in 1994, Cedar Rapids Bank & Trust Company, based in Cedar Rapids, Iowa, commenced operations in 2001, Community State Bank, based in Ankeny, Iowa, was acquired by the Company in 2016, and Springfield First Community Bank, based in Springfield, Missouri, was acquired by the Company in 2018. Additionally, the Company serves the Waterloo/Cedar Falls, Iowa community through Community Bank & Trust, a division of Cedar Rapids Bank & Trust Company. Quad City Bank & Trust Company engages in commercial leasing through its wholly owned subsidiary, m2 Lease Funds, LLC, based in Milwaukee, Wisconsin, and also provides correspondent banking services. The Company has 25 locations in Illinois, Iowa, Wisconsin and Missouri. As of March 31, 2020, the Company had approximately $5.2 billion in assets, $3.7 billion in loans and $4.2 billion in deposits. For additional information, please visit the Company’s website at www.qcrh.com.

Special Note Concerning Forward-Looking Statements. This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “predict,” “suggest,” “appear,” “plan,” “intend,” “estimate,” ”annualize,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.
               
A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements. These factors include, among others, the following: (i) the strength of the local, state, national and international economies (including the impact of the 2020 presidential election and the impact of tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations); (ii) the economic impact of any future terrorist threats and attacks, widespread disease or pandemics (including the COVID-19 epidemic in the United States), or other adverse external events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events; (iii) changes in accounting policies and practices (including the new current expected credit loss (CECL) impairment standards, that will change how the Company estimates credit losses); (iv) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business; (v) changes in interest rates and prepayment rates of the Company’s assets (including the impact of LIBOR phase-out); (vi) increased competition in the financial services sector and the inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (viii) unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated; (ix) the loss of key executives or employees; (x) changes in consumer spending; and (xi) unexpected outcomes of existing or new litigation involving the Company. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

Contacts:

Todd A. Gipple
President
Chief Operating Officer
Chief Financial Officer
(309) 743-7745
tgipple@qcrh.com

Kim K. Garrett
Vice President
Corporate Communications
Investor Relations Manager
(319) 743-7006
kgarret@qcrh.com

   
QCR Holdings, Inc.
 
Consolidated Financial Highlights
 
(Unaudited)
 
                Held for Sale Held for Sale Held for Sale  
  As of     As of As of As of  
  March 31, December 31, September 30, June 30, March 31,     March 31, December 31, September 30,  
   2020  2019  2019  2019  2019      2020  2019  2019  
                       
  (dollars in thousands)            
                       
CONDENSED BALANCE SHEET                      
                       
Cash and due from banks $ 169,827 $ 76,254 $ 91,671 $ 87,919 $ 76,527     $ - $ - $ 11,031  
Federal funds sold and interest-bearing deposits   206,708   157,691   197,263   205,497   216,032       -   -   2,415  
Securities   684,571   611,341   555,409   643,803   655,749       -   -   66,009  
Net loans/leases   3,662,435   3,654,204   3,574,154   3,869,415   3,758,268       -   -   362,011  
Intangibles   14,421   14,970   15,529   16,089   16,918       -   -   -  
Goodwill   74,248   74,748   77,748   77,748   77,872       -   -   -  
Derivatives   195,973   87,827   104,388   65,922   36,375       -   -   -  
Other assets   213,134   220,049   210,673   228,459   228,921       10,758   11,966   24,081  
Assets held for sale   10,758   11,966   465,547   -   -       -   -   -  
Total assets $ 5,232,075 $ 4,909,050 $ 5,292,382 $ 5,194,852 $ 5,066,662     $ 10,758 $ 11,966 $ 465,547  
                       
Total deposits $ 4,170,478 $ 3,911,051 $ 3,802,241 $ 4,322,510 $ 4,194,220     $ - $ - $ 451,546  
Total borrowings   244,399   278,955   320,457   230,953   282,994       -   -   16,157  
Derivatives   203,744   88,436   109,242   69,556   38,229       -   -   -  
Other liabilities   71,185   90,254   70,169   67,533   62,812       3,130   5,003   2,827  
Liabilities held for sale   3,130   5,003   470,530   -   -       -   -   -  
Total stockholders' equity   539,139   535,351   519,743   504,300   488,407       -   -   -  
Total liabilities and stockholders' equity $ 5,232,075 $ 4,909,050 $ 5,292,382 $ 5,194,852 $ 5,066,662     $ 3,130 $ 5,003 $ 470,530  
                       
ANALYSIS OF LOAN PORTFOLIO                      
Loan/lease mix:                      
Commercial and industrial loans $ 1,484,979 $ 1,507,825 $ 1,469,978 $ 1,548,657 $ 1,479,247            
Commercial real estate loans   1,783,086   1,736,396   1,687,922   1,837,473   1,790,845            
Direct financing leases   83,324   87,869   92,307   101,180   108,543            
Residential real estate loans   237,742   239,904   245,667   293,479   288,502            
Installment and other consumer loans   106,728   109,352   106,540   120,947   123,087            
Deferred loan/lease origination costs, net of fees   8,809   8,859   7,856   8,783   9,208            
Total loans/leases $ 3,704,668 $ 3,690,205 $ 3,610,270 $ 3,910,519 $ 3,799,432            
Less allowance for estimated losses on loans/leases   42,233   36,001   36,116   41,104   41,164            
Net loans/leases $ 3,662,435 $ 3,654,204 $ 3,574,154 $ 3,869,415 $ 3,758,268            
                       
ANALYSIS OF SECURITIES PORTFOLIO                      
Securities mix:                      
U.S. government sponsored agency securities $ 19,457 $ 20,078 $ 21,268 $ 35,762 $ 35,843            
Municipal securities   493,664   447,853   391,329   440,853   450,376            
Residential mortgage-backed and related securities   122,853   120,587   123,880   159,228   161,692            
Asset backed securities   28,499   16,887   10,957   -   0            
Other securities   20,098   5,936   7,975   7,960   7,838            
Total securities $ 684,571 $ 611,341 $ 555,409 $ 643,803 $ 655,749            
                       
ANALYSIS OF DEPOSITS                      
Deposit mix:                      
Noninterest-bearing demand deposits $ 829,782 $ 777,224 $ 782,232 $ 795,951 $ 821,599            
Interest-bearing demand deposits   2,440,907   2,407,502   2,245,557   2,505,956   2,334,474            
Time deposits   617,979   571,343   536,352   733,135   719,286            
Brokered deposits   281,810   154,982   238,100   287,468   318,861            
Total deposits $ 4,170,478 $ 3,911,051 $ 3,802,241 $ 4,322,510 $ 4,194,220            
                       
ANALYSIS OF BORROWINGS                      
Borrowings mix:                      
Term FHLB advances $ 55,000 $ 50,000 $ 60,000 $ 46,433 $ 66,380            
Overnight FHLB advances (1)   40,000   109,300   135,800   59,300   59,800            
Wholesale structured repurchase agreements   -   -   -   -   35,000            
Customer repurchase agreements   2,377   2,193   2,421   2,181   3,056            
Federal funds purchased   10,690   11,230   16,105   17,010   12,830            
FRB borrowings   30,000   -   -   -   -            
Subordinated notes   68,455   68,394   68,334   68,274   68,215            
Junior subordinated debentures   37,877   37,838   37,797   37,755   37,713            
Total borrowings $ 244,399 $ 278,955 $ 320,457 $ 230,953 $ 282,994            
                       
(1) At the most recent quarter-end, the weighted-average rate of these overnight borrowings was 0.36%.   
                       


QCR Holdings, Inc.
 
Consolidated Financial Highlights
 
(Unaudited)
 
                 
      For the Quarter Ended  
      March 31, December 31, September 30, June 30, March 31,  
      2020 2019 2019 2019 2019  
                 
      (dollars in thousands, except per share data)  
                 
INCOME STATEMENT              
Interest income   $ 48,982 $ 52,977 $ 56,817   $ 54,181   $ 52,102  
Interest expense     11,284   13,058   16,098     16,168     15,194  
Net interest income     37,698   39,919   40,719     38,013     36,908  
Provision for loan/lease losses     8,367   979   2,012     1,941     2,134  
Net interest income after provision for loan/lease losses   $ 29,331 $ 38,940 $ 38,707   $ 36,072   $ 34,774  
                 
                 
Trust department fees   $ 2,312 $ 2,365 $ 2,340   $ 2,361   $ 2,493  
Investment advisory and management fees     1,727   1,589   1,782     1,888     1,736  
Deposit service fees     1,477   1,787   1,813     1,658     1,554  
Gain on sales of residential real estate loans     652   823   890     489     369  
Gain on sales of government guaranteed portions of loans     -   159   519     39     31  
Swap fee income     6,804   7,409   9,797     7,891     3,198  
Securities gains (losses), net     -   26   (3 )   (52 )   -  
Earnings on bank-owned life insurance     329   533   489     412     540  
Debit card fees     758   766   886     914     792  
Correspondent banking fees     215   194   189     172     216  
Gain on sale of assets and liabilities of subsidiary     -   12,286   -     -     -  
Other       922   1,868   1,204     1,293     1,064  
Total noninterest income   $ 15,196 $ 29,805 $ 19,906   $ 17,065   $ 11,993  
                 
                 
Salaries and employee benefits   $ 18,519 $ 24,220 $ 24,215   $ 22,749   $ 20,879  
Occupancy and equipment expense     4,032   4,019   3,860     3,533     3,694  
Professional and data processing fees     3,369   3,570   4,030     3,031     2,750  
Post-acquisition compensation, transition and integration costs     151   1,855   884     708     134  
Disposition costs     517   3,325   -     -     -  
FDIC insurance, other insurance and regulatory fees     683   523   542     926     964  
Loan/lease expense     228   349   221     312     214  
Net cost of (income from) and gains/losses on operations of other real estate     13   232   2,078     1,182     298  
Advertising and marketing     682   1,670   1,056     1,037     785  
Bank service charges     504   516   502     508     483  
Losses on debt extinguishment, net     147   288   148     -     -  
Correspondent banking expense     216   216   209     206     204  
Intangibles amortization     549   560   560     615     532  
Goodwill impairment     500   3,000   -     -     -  
Other       1,305   1,951   1,640     1,753     1,498  
Total noninterest expense   $ 31,415 $ 46,294 $ 39,945   $ 36,560   $ 32,435  
                 
Net income before income taxes   $ 13,112 $ 22,451 $ 18,668   $ 16,577   $ 14,332  
Federal and state income tax expense     1,884   6,560   3,573     3,073     1,414  
Net income     $ 11,228 $ 15,891 $ 15,095   $ 13,504   $ 12,918  
                 
Basic EPS     $ 0.71 $ 1.01 $ 0.96   $ 0.86   $ 0.82  
Diluted EPS   $ 0.70 $ 0.99 $ 0.94   $ 0.85   $ 0.81  
                 
                 
Weighted average common shares outstanding     15,796,796   15,772,703   15,739,430     15,714,588     15,693,345  
Weighted average common and common equivalent shares outstanding     16,011,456   16,033,043   15,976,742     15,938,377     15,922,940  
                 


QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)
             
  As of and for the Quarter Ended  
  March 31, December 31, September 30, June 30, March 31,  
    2020     2019     2019     2019     2019    
             
  (dollars in thousands, except per share data)
             
COMMON SHARE DATA            
Common shares outstanding   15,773,736     15,828,098     15,790,462     15,772,939     15,755,442    
Book value per common share (1) $ 34.18   $ 33.82   $ 32.91   $ 31.97   $ 31.00    
Tangible book value per common share (2) $ 28.56   $ 28.15   $ 27.01   $ 26.02   $ 24.98    
Closing stock price $ 27.07   $ 43.86   $ 37.98   $ 34.87   $ 33.92    
Market capitalization $ 426,995   $ 694,220   $ 599,722   $ 550,002   $ 534,425    
Market price / book value   79.20 %   129.69 %   115.40 %   109.06 %   109.42 %  
Market price / tangible book value   94.79 %   155.76 %   140.61 %   134.00 %   135.77 %  
Earnings per common share (basic) LTM (3) $ 3.54   $ 3.65   $ 3.49   $ 3.10   $ 2.99    
Price earnings ratio LTM (3)   7.65 x     12.02 x     10.88 x     11.25 x     11.34 x    
TCE / TA (4)   8.76 %   9.25 %   8.20 %   8.05 %   7.92 %  
             
             
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY    
Beginning balance $ 535,351   $ 519,743   $ 504,300   $ 488,407   $ 473,138    
Net income   11,228     15,891     15,095     13,504     12,918    
Other comprehensive income (loss), net of tax   (3,691 )   (683 )   543     2,243     2,343    
Common stock cash dividends declared   (942 )   (947 )   (944 )   (942 )   (942 )  
Proceeds from issuance of 9,400 shares of common stock as a result of the performance based targets met for Bates Companies   -     399     -     -     -    
Repurchase and cancellation of 100,932 shares of common stock as a result of a share repurchase program   (3,780 )          
Other (5)   973     948     749     1,088     950    
Ending balance $ 539,139   $ 535,351   $ 519,743   $ 504,300   $ 488,407    
             
             
REGULATORY CAPITAL RATIOS (6):            
Total risk-based capital ratio   13.33 %   13.33 %   12.22 %   12.04 %   12.26 %  
Tier 1 risk-based capital ratio   10.98 %   11.04 %   9.94 %   9.76 %   9.87 %  
Tier 1 leverage capital ratio   10.19 %   9.53 %   9.02 %   8.96 %   8.90 %  
Common equity tier 1 ratio   10.14 %   10.18 %   9.12 %   8.93 %   9.02 %  
             
             
KEY PERFORMANCE RATIOS AND OTHER METRICS            
Return on average assets (annualized)   0.91 %   1.23 %   1.16 %   1.06 %   1.04 %  
Return on average total equity (annualized)   8.23 %   11.93 %   11.70 %   10.84 %   10.71 %  
Net interest margin   3.40 %   3.36 %   3.37 %   3.25 %   3.25 %  
Net interest margin (TEY) (Non-GAAP)(7)   3.56 %   3.51 %   3.52 %   3.40 %   3.40 %  
Efficiency ratio (Non-GAAP) (8)   59.39 %   66.40 %   65.89 %   66.38 %   66.33 %  
Gross loans and leases / total assets (10)   70.95 %   75.36 %   74.80 %   75.28 %   74.99 %  
Gross loans and leases / total deposits (10)   88.83 %   94.35 %   94.95 %   90.47 %   90.59 %  
Effective tax rate   14.37 %   29.22 %   19.14 %   18.54 %   9.87 %  
Full-time equivalent employees (9)   703     697     766     773     771    
             
             
AVERAGE BALANCES            
Assets $ 4,948,311   $ 5,147,754   $ 5,217,763   $ 5,077,900   $ 4,968,502    
Loans/leases   3,686,410     3,868,435     3,962,464     3,839,674     3,759,615    
Deposits   3,954,707     4,227,572     4,302,995     4,271,391     4,110,868    
Total stockholders' equity   545,678     532,756     516,195     498,263     482,423    
             
(1) Includes accumulated other comprehensive income (loss).   
(2) Includes accumulated other comprehensive income (loss) and excludes intangible assets.   
(3) LTM : Last twelve months.   
(4) TCE / TCA : tangible common equity / total tangible assets. See GAAP to non-GAAP reconciliations.   
(5) Includes mostly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation.
(6) Ratios for the current quarter are subject to change upon final calculation for regulatory filings due after earnings release.
(7) TEY : Tax equivalent yield. See GAAP to Non-GAAP reconciliations.   
(8) See GAAP to Non-GAAP reconciliations.   
(9) Decrease due to sale of subsidiary Rockford Bank & Trust.   
(10) Excludes assets held for sale as of September 30, 2019, December 31, 2019 and March 31, 2020.   
             


QCR Holdings, Inc.  
Consolidated Financial Highlights  
(Unaudited)  
                           
ANALYSIS OF NET INTEREST INCOME AND MARGIN (4)                    
                           
    For the Quarter Ended  
    March 31, 2020   December 31, 2019   March 31, 2019  
    Average
Balance
Interest
Earned or Paid
Average
Yield or Cost
  Average
Balance
Interest
Earned or Paid
Average
Yield or Cost
  Average
Balance
Interest
Earned or Paid
Average
Yield or Cost
 
                           
    (dollars in thousands)  
                           
Fed funds sold   $ 5,324 $ 18 1.36 %   $ 2,933 $ 12 1.62 %   $ 15,736 $ 93 2.40 %  
Interest-bearing deposits at financial institutions   128,612   361 1.13 %     208,040   868 1.66 %     155,463   923 2.41 %  
Securities (1)     619,307   6,080 3.95 %     610,676   5,913 3.84 %     660,454   6,096 3.74 %  
Restricted investment securities   21,365   258 4.86 %     21,226   283 5.29 %     21,285   307 5.85 %  
Loans (1)     3,686,410   44,056 4.81 %     3,868,435   47,684 4.89 %     3,759,615   46,477 5.01 %  
Total earning assets (1) $ 4,461,018 $ 50,773 4.58 %   $ 4,711,310 $ 54,760 4.61 %   $ 4,612,553 $ 53,896 4.74 %  
                           
Interest-bearing deposits $ 2,379,635 $ 5,328 0.90 %   $ 2,520,696 $ 6,547 1.03 %   $ 2,288,109 $ 7,174 1.27 %  
Time deposits     785,135   3,879 1.99 %     865,392   4,631 2.12 %     1,012,459   5,305 2.12 %  
Short-term borrowings   19,315   64 1.33 %     19,491   87 1.77 %     14,377   71 2.00 %  
Federal Home Loan Bank advances   111,407   449 1.62 %     87,527   210 0.95 %     147,355   903 2.49 %  
Other borrowings     -   - 0.00 %     -   - 0.00 %     43,701   605 5.61 %  
Subordinated debentures   68,418   994 5.84 %     68,356   1,004 5.83 %     38,637   564 5.92 %  
Junior subordinated debentures   37,853   571 6.07 %     37,813   579 6.07 %     37,686   572 6.16 %  
Total interest-bearing liabilities $ 3,401,763 $ 11,285 1.33 %   $ 3,599,275 $ 13,058 1.44 %   $ 3,582,324 $ 15,194 1.72 %  
                           
Net interest income / spread (1)   $ 39,488 3.24 %     $ 41,702 3.17 %     $ 38,702 3.02 %  
Net interest margin (2)     3.40 %       3.36 %       3.25 %  
Net interest margin (TEY) (Non-GAAP) (1) (2) (3)     3.56 %       3.51 %       3.40 %  
Adjusted net interest margin (TEY) (Non-GAAP) (1) (2) (3)   3.50 %       3.43 %       3.31 %  
                           
(1) Includes nontaxable securities and loans. Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 21% tax rate.   
(2) See "Select Financial Data - Subsidiaries" for a breakdown of amortization/accretion included in net interest margin for each period presented.   
(3) TEY : Tax equivalent yield. See GAAP to Non-GAAP reconciliations.   
                           


QCR Holdings, Inc.  
Consolidated Financial Highlights  
(Unaudited)  
             
  As of  
  March 31, December 31, September 30, June 30, March 31,  
    2020     2019     2019     2019     2019    
             
  (dollars in thousands, except per share data)  
             
ROLLFORWARD OF ALLOWANCE FOR LOAN/LEASE LOSSES            
Beginning balance $ 36,001   $ 36,116   $ 41,104   $ 41,164   $ 39,847    
Reclassification of allowance related to held for sale loans   -     -     (6,122 )   -     -    
Provision charged to expense (2)   8,367     979     1,584     1,941     2,134    
Loans/leases charged off   (2,335 )   (1,182 )   (741 )   (2,152 )   (1,059 )  
Recoveries on loans/leases previously charged off   200     88     291     151     242    
Ending balance $ 42,233   $ 36,001   $ 36,116   $ 41,104   $ 41,164    
             
             
NONPERFORMING ASSETS            
Nonaccrual loans/leases $ 11,628   $ 7,902   $ 8,231   $ 13,148   $ 13,406    
Accruing loans/leases past due 90 days or more   1,419     33     -     58     61    
Troubled debt restructures - accruing   545     979     763     1,313     3,794    
Total nonperforming loans/leases   13,592     8,914     8,994     14,519     17,261    
Other real estate owned   3,298     4,129     4,248     8,637     9,110    
Other repossessed assets   45     41     -     -     -    
Total nonperforming assets $ 16,935   $ 13,084   $ 13,242   $ 23,156   $ 26,371    
             
             
ASSET QUALITY RATIOS            
Nonperforming assets / total assets (3)   0.32 %   0.27 %   0.27 %   0.45 %   0.52 %  
Allowance / total loans/leases (1)   1.14 %   0.98 %   1.00 %   1.05 %   1.08 %  
Allowance / nonperforming loans/leases (1)   310.72 %   403.87 %   401.56 %   283.10 %   238.48 %  
Net charge-offs as a % of average loans/leases   0.06 %   0.03 %   0.01 %   0.05 %   0.02 %  
             
(1) Upon acquisition and per GAAP, acquired loans are recorded at market value which eliminates the allowance and impacts these ratios.
(2) Excludes provision related to loans included in assets held for sale of $428 thousand for the quarter ending September 30, 2019.  
(3) Excludes assets held for sale.   


 
QCR Holdings, Inc.
Consolidated Financial Highlights
(Unaudited)
             
    For the Quarter Ended
    March 31,   December 31, March 31,
SELECT FINANCIAL DATA - SUBSIDIARIES     2020       2019       2019  
    (dollars in thousands)
             
TOTAL ASSETS            
             
Quad City Bank and Trust (1)   $ 1,914,785     $ 1,682,477     $ 1,660,374  
m2 Lease Funds, LLC     237,198       239,794       231,470  
Cedar Rapids Bank and Trust     1,719,773       1,572,324       1,446,637  
Community State Bank - Ankeny     863,903       853,834       785,076  
Springfield First Community Bank     708,736       748,753       638,542  
             
TOTAL DEPOSITS            
             
Quad City Bank and Trust (1)   $ 1,678,889     $ 1,458,587     $ 1,453,810  
Cedar Rapids Bank and Trust     1,247,989       1,248,598       1,228,232  
Community State Bank - Ankeny     743,645       735,089       673,231  
Springfield First Community Bank     524,420       531,498       445,113  
             
TOTAL LOANS & LEASES            
             
Quad City Bank and Trust (1)   $ 1,338,915     $ 1,329,667     $ 1,238,684  
m2 Lease Funds, LLC     235,144       236,735       228,356  
Cedar Rapids Bank and Trust     1,159,453       1,174,963       1,076,166  
Community State Bank - Ankeny     634,253       639,270       588,021  
Springfield First Community Bank     572,046       546,306       491,985  
             
TOTAL LOANS & LEASES / TOTAL DEPOSITS            
             
Quad City Bank and Trust (1)     80 %     91 %     85 %
Cedar Rapids Bank and Trust     93 %     94 %     88 %
Community State Bank - Ankeny     85 %     87 %     87 %
Springfield First Community Bank     109 %     103 %     111 %
             
             
TOTAL LOANS & LEASES / TOTAL ASSETS            
             
Quad City Bank and Trust (1)     70 %     79 %     75 %
Cedar Rapids Bank and Trust     67 %     75 %     74 %
Community State Bank - Ankeny     73 %     75 %     75 %
Springfield First Community Bank     81 %     73 %     77 %
             
ALLOWANCE AS A PERCENTAGE OF LOANS/LEASES            
             
Quad City Bank and Trust (1)     1.17 %     1.03 %     1.09 %
m2 Lease Funds, LLC     1.50 %     1.51 %     1.39 %
Cedar Rapids Bank and Trust (2)     1.35 %     1.14 %     1.19 %
Community State Bank - Ankeny (2)     1.21 %     1.04 %     1.07 %
Springfield First Community Bank (2)     0.56 %     0.41 %     0.30 %
             
RETURN ON AVERAGE ASSETS            
             
Quad City Bank and Trust (1)     1.33 %     1.44 %     1.19 %
Cedar Rapids Bank and Trust     1.60 %     1.82 %     1.54 %
Community State Bank - Ankeny     0.50 %     1.38 %     1.13 %
Springfield First Community Bank     1.29 %     1.44 %     1.12 %
             
NET INTEREST MARGIN PERCENTAGE (3)            
             
Quad City Bank and Trust (1)     3.68 %     3.55 %     3.24 %
Cedar Rapids Bank and Trust (5)     3.43 %     3.49 %     3.41 %
Community State Bank - Ankeny (4)     3.91 %     4.35 %     4.04 %
Springfield First Community Bank (6)     3.83 %     3.95 %     4.06 %
             
ACQUISITION-RELATED AMORTIZATION/ACCRETION INCLUDED IN NET        
INTEREST MARGIN, NET            
             
Cedar Rapids Bank and Trust   $ 49     $ 103     $ 144  
Community State Bank - Ankeny     64       94       58  
Springfield First Community Bank     552       775       910  
QCR Holdings, Inc. (7)     (40 )     (41 )     (43 )
             
(1) Quad City Bank and Trust figures include m2 Lease Funds, LLC, as this entity is wholly-owned and consolidated with the Bank. m2 Lease Funds, LLC is also presented separately for certain (applicable) measurements.
(2) Upon acquisition and per GAAP, acquired loans are recorded at market value, which eliminates the allowance and impacts this ratio.
(3) Includes nontaxable securities and loans. Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 21% tax rate.
(4) Community State Bank's net interest margin percentage includes various purchase accounting adjustments. Excluding those adjustments, net interest margin would have been 3.86% for the quarter ended March 31, 2020, 4.27% for the quarter ended December 31 2019 and 3.98% for the quarter ended March 31, 2019.
(5) Cedar Rapids Bank and Trust's net interest margin percentage includes various purchase accounting adjustments. Excluding those adjustments, net interest margin would have been 3.42% for the quarter ended March 31, 2020, 3.46% for the quarter ended December 31, 2019 and 3.38% for the quarter ended March 31, 2019.
(6) Springfield First Community Bank's net interest margin percentage includes various purchase accounting adjustments. Excluding those adjustments, net interest margin would have been 4.52% for the quarter ended March 31, 2020, 3.47% for the quarter ended December 31, 2019 and 3.32% for the quarter ended March 31, 2019.
(7) Relates to the trust preferred securities acquired as part of the Guaranty Bank acquisition in 2017 and the Community National Bank acquisition in 2013.



   
QCR Holdings, Inc.  
Consolidated Financial Highlights  
(Unaudited)  
                       
    As of  
    March 31,   December 31,   September 30,   June 30,   March 31,  
GAAP TO NON-GAAP RECONCILIATIONS     2020       2019       2019       2019       2019    
    (dollars in thousands, except per share data)  
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS RATIO (1)                      
                       
Stockholders' equity (GAAP)   $ 539,139     $ 535,351     $ 519,743     $ 504,300     $ 488,407    
Less: Intangible assets     88,669       89,717       93,277       93,837       94,790    
Tangible common equity (non-GAAP)   $ 450,470     $ 445,634     $ 426,466     $ 410,463     $ 393,617    
                       
Total assets (GAAP)   $ 5,232,075     $ 4,909,050     $ 5,292,382     $ 5,194,852     $ 5,066,662    
Less: Intangible assets     88,669       89,717       93,277       93,837       94,790    
Tangible assets (non-GAAP)   $ 5,143,406     $ 4,819,333     $ 5,199,105     $ 5,101,015     $ 4,971,872    
                       
Tangible common equity to tangible assets ratio (non-GAAP)     8.76 %     9.25 %     8.20 %     8.05 %     7.92 %  
                       
                       
    For the Quarter Ended  
    March 31,   December 31,   September 30,   June 30,   March 31,  
ADJUSTED NET INCOME (2)     2020       2019       2019       2019       2019    
                       
Net income (GAAP)   $ 11,228     $ 15,891     $ 15,095     $ 13,504     $ 12,918    
                       
Less nonrecurring items (post-tax) (3):                      
Income:                      
Securities gains(losses), net     -       21     $ (2 )   $ (41 )   $ -    
Gain on sale of assets and liabilities of subsidiary     -       8,539       -       -       -    
Total nonrecurring income (non-GAAP)   $ -     $ 8,560     $ (2 )   $ (41 )   $ -    
                       
Expense:                      
Losses on debt extinguishment, net   $ 116     $ 228     $ 117     $ -     $ -    
Goodwill impairment     500       3,000       -       -       -    
Disposition costs     408       2,627       -       -       -    
Tax expense on expected liquidation of RB&T BOLI     -       790       -       -       -    
Post-acquisition compensation, transition and integration costs   119       1,465       698       559       106    
Total nonrecurring expense (non-GAAP)   $ 1,144     $ 8,110     $ 815     $ 559     $ 106    
                                           
Adjusted net income (non-GAAP) (2)   $ 12,372     $ 15,441     $ 15,912     $ 14,104     $ 13,024    
                       
PRE-PROVISION/PRE-TAX ADJUSTED INCOME (2)                      
Net income (GAAP)   $ 11,228     $ 15,891     $ 15,095     $ 13,504     $ 12,918    
Less: Non-core income not tax-effected     -       12,313       (3 )     (52 )     -    
Plus: Non-core expense not tax-effected     1,315       9,258       1,032       708       134    
Provision expense     8,367       979       2,012       1,941       2,134    
Federal and state income tax expense     1,884       6,560       3,573       3,073       1,414    
Pre-provision/pre-tax adjusted income (non-GAAP) (2)   $ 22,794     $ 20,375     $ 21,714     $ 19,277     $ 16,600    
                       
ADJUSTED EARNINGS PER COMMON SHARE (2)                      
                       
Adjusted net income (non-GAAP) (from above)   $ 12,372     $ 15,441     $ 15,912     $ 14,104     $ 13,024    
                       
Weighted average common shares outstanding     15,796,796       15,772,703       15,739,430       15,714,588       15,693,345    
Weighted average common and common equivalent shares outstanding   16,011,456       16,033,043       15,976,742       15,938,377       15,922,940    
                       
Adjusted earnings per common share (non-GAAP):                      
Basic   $ 0.78     $ 0.98     $ 1.01     $ 0.90     $ 0.83    
Diluted   $ 0.77     $ 0.96     $ 1.00     $ 0.88     $ 0.82    
                       
ADJUSTED RETURN ON AVERAGE ASSETS (2)                      
                       
Adjusted net income (non-GAAP) (from above)   $ 12,372     $ 15,441     $ 15,912     $ 14,104     $ 13,024    
                       
Average Assets   $ 4,948,311     $ 5,147,754     $ 5,217,763     $ 5,077,900     $ 4,968,502    
                       
Adjusted return on average assets (annualized) (non-GAAP)     1.00 %     1.20 %     1.22 %     1.11 %     1.05 %  
                       
NET INTEREST MARGIN (TEY) (6)                      
                       
Net interest income (GAAP)   $ 37,698     $ 39,919     $ 40,719     $ 38,013     $ 36,908    
                       
Plus: Tax equivalent adjustment (5)     1,790       1,783       1,763       1,808       1,794    
                       
Net interest income - tax equivalent (Non-GAAP)   $ 39,488     $ 41,702     $ 42,482     $ 39,821     $ 38,702    
                       
Less: Acquisition accounting net accretion     625       931       1,268       1,076       1,069    
                       
Adjusted net interest income   $ 38,863     $ 40,771     $ 41,214     $ 38,745     $ 37,633    
                       
Average earning assets   $ 4,461,018     $ 4,711,310     $ 4,791,274     $ 4,698,021     $ 4,612,553    
                       
Net interest margin (GAAP)     3.40 %     3.36 %     3.37 %     3.25 %     3.25 %  
Net interest margin (TEY) (Non-GAAP)     3.56 %     3.51 %     3.52 %     3.40 %     3.40 %  
Adjusted net interest margin (TEY) (Non-GAAP)     3.50 %     3.43 %     3.41 %     3.31 %     3.31 %  
                       
EFFICIENCY RATIO (7)                      
                       
Noninterest expense (GAAP)   $ 31,415     $ 46,294     $ 39,945     $ 36,560     $ 32,435    
                       
Net interest income (GAAP)   $ 37,698     $ 39,919     $ 40,719     $ 38,013     $ 36,908    
Noninterest income (GAAP)     15,196       29,805       19,906       17,065       11,993    
Total income   $ 52,894     $ 69,724     $ 60,625     $ 55,078     $ 48,901    
                       
Efficiency ratio (noninterest expense/total income) (Non-GAAP)     59.39 %     66.40 %     65.89 %     66.38 %     66.33 %  
                       
(1) This ratio is a non-GAAP financial measure. The Company's management believes that this measurement is important to many investors in the marketplace who are interested in changes period-to-period in common equity. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to stockholders' equity and total assets, which are the most directly comparable GAAP financial measures.
(2) Adjusted net income, Adjusted net income attributable to QCR Holdings, Inc. common stockholders, Adjusted earnings per common share and Adjusted return on average assets are non-GAAP financial measures. The Company's management believes that these measurements are important to investors as they exclude non-recurring income and expense items, therefore, they provide a more realistic run-rate for future periods. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to net income, which is the most directly comparable GAAP financial measure.
(3) Nonrecurring items (post-tax) are calculated using an estimated effective tax rate of 21% with the exception of goodwill impairment which is not deductible for tax and gain on sale of subsidiary which has an estimated effective tax rate of 30.5%.
(4) Acquisition costs were analyzed individually for deductibility. Presented amounts are tax-effected accordingly.   
(5) Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 21%.   
(6) Net interest margin (TEY) is a non-GAAP financial measure. The Company's management utilizes this measurement to take into account the tax benefit associated with certain loans and securities. It is also standard industry practice to measure net interest margin using tax-equivalent measures. In compliance with applicable rules of the SEC, this non-GAAP measure is reconciled to net interest income, which is the most directly comparable GAAP financial measure. In addition, the Company calculates net interest margin without the impact of acquisition accounting net accretion as this can fluctuate and it's difficult to provide a more realistic run-rate for future periods.
(7) Efficiency ratio is a non-GAAP measure. The Company's management utilizes this ratio to compare to industry peers. The ratio is used to calculate overhead as a percentage of revenue. In compliance with the applicable rules of the SEC, this non-GAAP measure is reconciled to noninterest expense, net interest income and noninterest income, which are the most directly comparable GAAP financial measures.
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