10-K: QCR Holdings Reports Record Net Income, Strong Loan Growth

QCR Holdings, Inc. announced record annual net income of $127.2 million and diluted EPS of $7.49 for 2025, driven by robust loan and core deposit growth and strategic capital management.

Summary

• Net income for the year ended December 31, 2025, reached a record $127.2 million, an increase from $113.9 million in 2024.
• Diluted earnings per share (EPS) increased to $7.49 in 2025 from $6.71 in 2024.
• Adjusted net income (non-GAAP) was $129.6 million, with adjusted diluted EPS of $7.64.
• Net interest income increased by $23.4 million, or 10.1%, to $255.2 million in 2025 compared to the prior year, primarily due to net interest margin (NIM) expansion, strong loan growth, and decreased FHLB borrowings.
• Loan growth, excluding LIHTC construction loan sales and m2 run-off, was robust at 11.7% for 2025.
• Core deposit growth was strong at 7% in 2025.
• Tangible book value (non-GAAP) per share expanded by $7.65, or 15%.
• Capital markets revenue decreased by $6.359 million, or 8.9%, to $64.7 million in 2025, primarily due to lower swap fees affected by macroeconomic uncertainty in the first half of the year.
• Noninterest expense increased by $7.9 million, or 3.8%, to $215.6 million in 2025, mainly due to higher professional and data processing fees and occupancy and equipment expenses related to digital transformation.
• Total assets increased by $549.4 million, or 6%, to $9.6 billion as of December 31, 2025.
• Total deposits grew by $353.0 million, or 5.0%, to $7.4 billion in 2025, driven by an increase in interest-bearing deposits from core clients and reduced reliance on brokered deposits.
• Nonperforming assets (NPAs) decreased by $2.2 million to $43.3 million, with the ratio of NPAs to total assets improving to 0.45% from 0.50% in 2024.
• The allowance for credit losses (ACL) on loans/leases as a percentage of gross loans/leases held for investment was 1.26% in 2025, down from 1.32% in 2024, while ACL to nonperforming loans (NPLs) increased to 213.08% from 202.57%.
• A new share repurchase program was authorized on October 20, 2025, allowing for the repurchase of up to 1,700,000 shares of common stock, approximately 10% of outstanding shares as of September 30, 2025.
• The Company discontinued offering new loans and leases through its m2 subsidiary in September 2024, with the portfolio now in run-off.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with record net income, robust loan and deposit growth, and improved asset quality. While capital markets revenue saw a slight dip and unrealized losses in the investment portfolio are noted, the overall financial health and strategic execution are positive.

Positives

• Achieved record annual net income of $127.2 million and diluted EPS of $7.49 for 2025.
• Reported record adjusted net income (non-GAAP) of $129.6 million and adjusted diluted EPS of $7.64.
• Net interest income increased by 10.1% to $255.2 million in 2025, driven by NIM expansion and strong loan growth.
• Experienced robust loan growth of 11.7% in 2025 (excluding LIHTC construction loan sale and m2 run-off).
• Achieved strong core deposit growth of 7% in 2025.
• Tangible book value per share (non-GAAP) expanded significantly by $7.65, or 15%.
• Wealth management assets under management increased by $779.7 million in 2025, totaling $7.1 billion.
• Trust fees increased 10% and investment advisory and management fees increased 13% in 2025.
• Correspondent banking fees increased 28% in 2025, providing a strong source of deposits and fee income.
• Credit quality improved, with criticized loans decreasing 12% and classified loans decreasing 24% in 2025.
• Nonperforming assets (NPAs) decreased by $2.2 million, and the ratio of NPAs to total assets improved to 0.45% from 0.50%.
• The allowance for credit losses (ACL) to nonperforming loans (NPLs) increased to 213.08% from 202.57%, indicating strong coverage.
• Cost of funds decreased to 2.97% in 2025 from 3.34% in 2024.
• All subsidiary banks remained well-capitalized, exceeding regulatory requirements.
• A new share repurchase program was authorized for up to 1,700,000 shares, demonstrating commitment to shareholder returns.
• The effective tax rate decreased to 6.4% in 2025 from 7.1% in 2024, partly due to favorable federal tax law changes.

Negatives

• Capital markets revenue decreased by $6.359 million, or 8.9%, in 2025, primarily due to lower swap fees affected by macroeconomic uncertainty in the first half of the year.
• Earnings on bank-owned life insurance (BOLI) decreased 38% in 2025, largely due to BOLI exchanges resulting in surrender charges and non-recurring death benefit proceeds from 2024.
• A loss on liability extinguishment of $2.0 million was recorded in 2025 due to the prepayment of FHLB borrowings.
• The net cost of operations for other real estate owned (OREO) was $80 thousand in 2025, a shift from net income of $21 thousand in 2024.
• Gross unrealized losses in the investment portfolio totaled $164.5 million, or 12.9% of amortized cost, as of December 31, 2025.
• The investment securities portfolio has an average duration of 5.4 years, indicating an expectation of increased unrealized losses if interest rates rise further in 2026.
• The Company's balance sheet is moderately liability sensitive, meaning its cost of funds increased more rapidly than yields on a substantial portion of its interest-earning assets during the most recent Federal Reserve rate increase cycle.

Risks

• Conditions in the financial market and economic conditions, including local markets, may adversely affect business, particularly borrowers' ability to repay loans and collateral values.
• Interest rate risks associated with the Company's business, including fluctuations in net interest spread and margin, can negatively affect net income, capital, and liquidity.
• Monetary policies and regulations of the Federal Reserve could adversely affect business, financial condition, and results of operations, especially if interest rates are maintained at levels that limit economic growth or cause a recession.
• Declines in asset values may result in impairment charges and adversely affect the value of investments, financial performance, and capital, with $164.5 million in gross unrealized losses in the investment portfolio as of December 31, 2025.
• The stock market can be volatile, and fluctuations in operating results or other factors could cause the stock price to decline.
• Secondary mortgage, government guaranteed loan, and interest rate swap market conditions could have a material impact on financial condition and results of operations, particularly due to dependence on active secondary markets and investor demand.
• Hedging strategies may not be successful in mitigating exposure to interest rate risk, potentially increasing risks and losses.
• Unexpected early termination of interest rate swap agreements may affect earnings.
• Ineffective interest rate swaps could result in volatility in operating results, including potential losses.
• Interest rate swaps expose the Company to basis, credit/counter-party, interest rate, volatility, and liquidity risks.
• Elevated levels of inflation could adversely impact business and results of operations by harming consumer purchasing power, negatively affecting business customers, increasing non-interest expense, and impacting the value of the securities portfolio if interest rates rise.
• Labor shortages and failure to attract and retain qualified employees could negatively impact business, results of operations, and financial condition, leading to increased compensation expense and turnover.
• The highly regulated environment, with extensive federal and state regulation, supervision, and examination, may materially and adversely affect the Company.
• Failure to comply with applicable laws, regulations, or policies could result in sanctions, civil monetary penalties, and/or damage to reputation.
• The Company is required to maintain capital to meet regulatory requirements; failure to do so could adversely affect financial condition, liquidity, results of operations, and regulatory compliance.
• Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact business, including affecting real property values securing loans.
• Legal, regulatory, and policy changes, including those related to geopolitical developments and changes in foreign relations, may adversely affect the operating environment.
• Evolving law impacting cannabis-related businesses in Illinois and Missouri may create additional legal, regulatory, strategic, and reputational risk.
• The Company must effectively manage its credit risk, including risks of nonpayment, uncertainties as to future collateral value, and changes in economic and industry conditions.
• A large portion of the loan/lease portfolio is invested in C&I loans (24%), which are primarily based on borrower cash flow and are sensitive to adverse economic conditions, with collateral potentially losing value.
• A significant concentration of CRE loans (67% of total loan/lease portfolio) involves risks specific to real estate values, which can fluctuate significantly.
• LIHTC construction and permanent loans rely on federal LIHTCs, and changes to these programs may have an adverse effect.
• Liquidity risks could affect operations and jeopardize business, results of operations, and financial condition if the Company is unable to raise funds through deposits, borrowings, or asset sales.
• As a bank holding company, sources of funds are limited, and the ability to receive dividends from subsidiary banks is restricted by regulations.
• The allowance for credit losses may prove to be insufficient to absorb losses in the loan/lease portfolio, particularly if economic conditions are more difficult than expected.
• Intense competition from other banks, financial institutions, and non-bank financial services providers, including digital asset service providers, could result in decreased loans and deposits or reduced spreads.
• Potential future acquisitions could be difficult to integrate, divert attention of key personnel, disrupt business, dilute stockholder value, and adversely affect financial results.
• New lines of business or new products and services may subject the Company to additional risks, with substantial uncertainties and potential for significant time and resource investment.
• The Company's reputation could be damaged by negative publicity from actual or alleged conduct in areas such as legal and regulatory compliance, lending practices, or data protection.
• The soundness of other financial institutions could adversely affect the Company due to interrelationships and credit risk exposure.
• The preparation of Consolidated Financial Statements requires estimates and judgments, which are subject to an inherent degree of uncertainty and may differ from actual results.
• The Company's information systems or those of its third-party partners may experience an interruption, failure, or breach in security and cyber-attacks, including those employing artificial intelligence or resulting from insider fraud.
• Technology-related operation interruptions may occur in connection with planned system upgrades and vendor transitions, such as core processing provider consolidations in 2026 and 2027.
• The success of the SBA lending program is dependent upon the continued availability of SBA loan programs, preferred lender status, and compliance with applicable requirements.
• The community banking strategy relies heavily on subsidiary independent management teams, and the unexpected loss of key managers may adversely affect operations.
• Competition for qualified members of the workforce is intense, and the Company may not be able to attract and retain the personnel needed.
• Enterprise risk management practices may not be effective in mitigating risk and reducing the potential for losses, especially with reliance on models and evolving business and markets.
• A continuing need for technological change exists, and the Company may not have the resources to effectively implement new technology, leading to a competitive disadvantage.
• Issues with the use of artificial intelligence in the marketplace may result in reputational harm or liability.
• A substantial amount of debt outstanding ($283.1 million at the holding company level as of December 31, 2025) could restrict operations.
• Severe weather, natural disasters, pandemics, acts of terrorism or war, or other adverse external events could significantly impact the Company's business.

Future Outlook

The Company expects capital markets revenue to remain a strong source of fee income, driven by sustained demand for affordable housing. Trust and investment advisory and management fees are anticipated to fluctuate with market valuations. The Company plans to complete construction of a new CSB facility in Ankeny, Iowa in 2026 and a new corporate headquarters and QCBT branch in Bettendorf, Iowa in 2027. Core processing provider consolidations are intended for other subsidiary banks in 2026 and 2027. The Company is closely monitoring its total consolidated assets as it approaches the $10 billion threshold, which may trigger new regulatory and compliance requirements in 2027. Favorable provisions from the One Big Beautiful Bill Act are expected to continue positively impacting the effective tax rate and cash tax payments in future periods. A revised proposal for the Basel III Endgame Proposal is anticipated, primarily affecting large, complex banking organizations, and changes to the CBLR framework are under consideration.

Management Comments

• Management believes that the allowance for credit losses as of December 31, 2025, was adequate to absorb losses inherent in the loan/lease portfolio, the HTM portfolio, and OBS exposures.
• Management believes that interest rate swaps help position the Company more favorably for various interest rate environments.
• Management intends to continue to review its BOLI investments to be consistent with policy and regulatory limits in conjunction with the rest of its earning assets in an effort to maximize returns while minimizing risk.
• Management will continue to focus on growing its core deposit portfolio, including its correspondent banking business at QCBT, as well as shifting the mix from brokered and other higher cost deposits to lower cost core deposits.
• Management believes that the facilities are of sound construction, in good operating condition, are appropriately insured, and are adequately equipped for carrying on the business of the Company.
• Management believes, as of December 31, 2025 and 2024, that the Company and the subsidiary banks met all capital adequacy requirements to which they are subject.
• In the opinion of management, the risk of recourse and the subsequent requirement of loan repurchase to the subsidiary banks is not significant, and accordingly no liabilities have been established related to such.
• In the opinion of management, no material risk of loss exists due to the financial condition of the upstream correspondent banks.
• In the opinion of management, no material risk of loss exists due to the financial condition of Goldman Sachs.

Industry Context

StockSavvy.ai notes that QCR Holdings' strong loan and deposit growth, coupled with improved credit quality metrics, positions it favorably within the competitive regional banking sector. The decrease in capital markets revenue due to macroeconomic uncertainty reflects broader market sensitivity, but the continued strong demand for affordable housing through LIHTC projects provides a resilient niche. The company's focus on digital transformation and core deposit growth aligns with industry trends towards efficiency and stable funding in a dynamic interest rate environment. The ongoing regulatory scrutiny, particularly around the $10 billion asset threshold and climate change risks, is a common theme for growing financial institutions.

Comparison to Industry Standards

• The Company's employee engagement score of 82% significantly outperforms the national benchmark of 73% for companies in the financial services industry, as reported by Culture Amp.
• The strategic financial metric for loan/lease growth of >9% annually was exceeded in 2025 with 11.7% growth (excluding specific sales/run-off), indicating strong performance relative to its own ambitious targets.
• Noninterest expense growth of 4.1% in 2025 was within the Company's strategic target of <5% annually, demonstrating effective cost containment.
• The Company's capital ratios, including a Common Equity Tier 1 (CET1) ratio of 10.52% for the consolidated entity, are well above the 'well capitalized' minimum of 6.5% set by federal banking agencies, indicating a robust capital position compared to regulatory standards.
• The nonperforming loans (NPLs) to total loans/leases ratio of 0.59% and nonperforming assets (NPAs) to total assets ratio of 0.45% suggest a strong asset quality profile, potentially outperforming some industry peers.
• The Company's reliance on net interest income as a primary revenue source is characteristic of community banks, contrasting with larger institutions that typically have more diversified noninterest income streams.

Management Changes

Corporate Governance

Legal Proceedings

• There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party other than ordinary routine litigation incidental to their respective businesses.

Related Party Transactions

• Loans are made in the normal course of business to directors, executive officers, and their related interests. These loans were made on substantially the same terms, including interest rates and collateral, as comparable transactions with non-related persons and did not involve more than the normal risk of collectability or present other unfavorable features.
• Certain limitations and reporting requirements are placed on extensions of credit by each Bank to its directors and officers, to directors and officers of the Company and its subsidiaries, to principal stockholders of the Company, and to related interests of such individuals.

Stakeholder Impact

• Shareholders: Positive impact from record net income, EPS growth, tangible book value expansion, and a new share repurchase program. Potential dilution from future equity issuances for acquisitions is a risk.
• Employees: Positive impact from the 'Happy, Healthy, Engaged Employees' initiative, competitive total rewards program, internal mobility, and professional development. Risk of labor shortages and increased competition for talent.
• Customers: Benefits from expanded wealth management services, continued focus on core deposit growth, and interest rate swap programs for commercial borrowers. Risk of increased costs due to inflation or regulatory changes.
• Communities: Continued support through banking services in the Quad Cities, Cedar Rapids, Waterloo/Cedar Falls, Des Moines/Ankeny, and Springfield communities. LIHTC lending supports affordable housing initiatives.
• Creditors: Strong capital ratios and improved asset quality indicate a healthy financial position, reducing credit risk for creditors.

Next Steps

• The annual meeting of stockholders is scheduled to be held in May 2026.
• Construction of a new CSB facility in Ankeny, Iowa, is anticipated to be completed in the second quarter of 2026.
• The Company intends to undertake core processing provider consolidations at its other subsidiary banks in 2026 and 2027.
• Construction of a new corporate headquarters including a new branch facility for QCBT in Bettendorf, Iowa, is anticipated to be completed in 2027.
• Management will continue to review opportunities to execute interest rate swaps at all of its subsidiary banks.
• Management will continue to focus on growing its core deposit portfolio and shifting the mix from brokered and other higher cost deposits to lower cost core deposits.
• The Company is closely monitoring its total consolidated assets as it nears the $10 billion total asset threshold, which may trigger new regulatory and compliance requirements.

Key Dates

Recommendation

The company demonstrates strong financial performance with record net income, robust loan and deposit growth, and improved asset quality metrics. The authorization of a new share repurchase program is a positive signal for shareholder returns. However, the decrease in capital markets revenue, significant unrealized losses in the investment portfolio due to interest rate changes, and ongoing macroeconomic uncertainties present headwinds. While the company's strategic initiatives and capital position are solid, a 'hold' recommendation is prudent to observe sustained execution in a dynamic economic and regulatory environment, particularly as it approaches the $10 billion asset threshold.

Keywords

Banking, Financial Services, Commercial Banking, Community Bank, Wealth Management, Loan Growth, Deposit Growth, Net Interest Income, Capital Markets, SEC Filing, 10-K, QCRH, Iowa, Missouri, Illinois, Wisconsin, Credit Risk, Interest Rate Risk, Cybersecurity, Regulatory Compliance, Share Repurchase, LIHTC, Commercial Real Estate, C&I Lending, SBA Loans, Fintech, Digital Transformation