QCR (QCRH) DEF 14ADefinitive proxy

QCR Holdings, Inc., a Delaware corporation (“QCR Holdings”), is the holding company for Quad City Bank and Trust Company, Cedar Rapids Bank and Trust Company, Community State Bank and Guaranty Bank. Quad City Bank and Trust is an Iowa state bank located in Bettendorf and Davenport, Iowa and in Moline, Illinois. Quad City Bank and Trust owns m2 Equipment Finance, LLC, a Wisconsin limited liability company based in Milwaukee, Wisconsin, which is engaged in the business of leasing machinery and equipment to businesses under direct financing lease contracts. Cedar Rapids Bank and Trust is an Iowa state bank located in Cedar Rapids, Cedar Falls and Waterloo, Iowa, serving the Cedar Falls and Waterloo communities through its division, Community Bank & Trust. Community State Bank is an Iowa state bank located in Ankeny, Iowa and five other cities throughout the greater Des Moines area. Guaranty Bank is a Missouri state bank located in Springfield, Missouri and the southwest Missouri markets. When we refer to our “subsidiary banks” in this proxy statement, we are collectively referring to Quad City Bank and Trust, Cedar Rapids Bank and Trust, Community State Bank and Guaranty Bank. When we refer to our “subsidiaries” in this proxy statement, we are collectively referring to our subsidiary banks, as well as our other subsidiaries.

This proxy statement is being furnished in connection with the solicitation by the Board of Directors of QCR Holdings of proxies to be voted at the annual meeting of stockholders (the “2023 Annual Meeting”) to be held virtually on Thursday, May 18, 2023, at 8:00 a.m., local time, and at any adjournments or postponements of the meeting. This proxy statement and the accompanying form of proxy are first being transmitted or delivered to stockholders of QCR Holdings on or about April 4, 2023, together with our 2022 Annual Report to stockholders.

The following, presented in question and answer format, is information regarding the meeting and the voting process.

Our directors are divided into three classes having staggered terms of three years. At the 2023 Annual Meeting, stockholders will be asked to elect four Class III directors for a term expiring in 2026. The board has considered and nominated four of the incumbent directors to serve as Class III directors of QCR Holdings.

We have no knowledge that any of the nominees will refuse to or be unable to serve, but if any of the nominees becomes unavailable for election, the holders of the proxies reserve the right to substitute another person of their choice as a nominee when voting at the meeting. Set forth below is information concerning the nominees for election and for each of the other persons whose terms of office will continue after the meeting, including age, year first elected as a director of QCR Holdings and all positions and offices held by the director with QCR Holdings. Directors are elected by a plurality of the votes of the shares present in person or by proxy and entitled to vote, and the four individuals receiving the highest number of votes cast “for” their election will be elected as Class III directors. Our board of directors unanimously recommends that you vote your shares “FOR” all of the nominees for directors.

Mr. Besong is director of United Fire Group, Inc., a company subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Prior to the merger of Guaranty Federal Bancshares with and into QCR Holdings, Mr. Griesemer served on the board of directors of Guaranty Federal Bancshares. No other nominee or continuing director has been a director of another company subject to the reporting requirements of the Exchange Act within the past five years.

Descriptions of each director’s business experience during the past five years or more, as well as their qualifications to serve on the Board of Directors, are as follows:

Generally, the Board of Directors oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the Board of Directors does not involve itself in the day-to-day operations of QCR Holdings, which is monitored by our executive officers and management. Our directors fulfill their duties and responsibilities by attending regular meetings of the full Board of Directors, which are held no less frequently than quarterly. Our directors also discuss business and other matters with Mr. Helling, our Chief Executive Officer, other key executives and our principal external advisors (legal counsel, auditors and other consultants). The Board of Directors is currently comprised of 11 directors.

Directors Bates, Besong, Cobb, Field, Griesemer, Jacobs, Kilmer, Sorensen, and Ziegler are “independent” according to the Nasdaq listing requirements, and the Board of Directors has determined that these independent directors do not have other relationships with us that prevent them from making objective, independent decisions. Directors Helling and Gipple are not “independent” because they also serve as executive officers of QCR Holdings and certain of our subsidiaries.

During 2022, the Board of Directors had an Audit Committee, a Risk Oversight Committee, a Nomination and Governance Committee, a Compensation Committee, and an Executive Committee. The current charters of these committees are available on our website at www.qcrh.com. Also posted on the website is general information regarding QCR Holdings and our common stock, many of our corporate polices (including our Corporate Governance Guidelines), and links to our filings with the Securities and Exchange Commission.

In 2022, a total of five meetings were held by the Board of Directors of QCR Holdings. All incumbent directors attended at least 75 percent of the meetings of the Board of Directors and the committees on which they served during 2022. Although we do not have a formal policy regarding director attendance at the annual meeting, we encourage our directors to attend. Last year, all of our directors attended the virtual annual meeting.

In carrying out its nominating function, the Nomination and Governance Committee has developed qualification criteria for membership on the Board of Directors. All potential nominees for election, including incumbent directors, board nominees and those stockholder nominees included in the proxy statement are reviewed for the following attributes:

The Nomination and Governance Committee also evaluates potential nominees to determine if they have any conflicts of interest that may interfere with their ability to serve as effective board members, to determine if they meet QCR Holdings’ age eligibility requirements (a person who has reached age 75 before the date of the 2023 Annual Meeting is not eligible for election to the Board of Directors) and to determine whether they are “independent” in accordance with the Nasdaq listing requirements (to ensure that at least a majority of the directors will, at all times, be independent). The Nomination and Governance Committee considers the diversity of its directors and nominees in terms of knowledge, experience, skills, expertise, and other demographics which may contribute to the Board of Directors. It has not, in the past, retained any third party to assist it in identifying candidates, but it has the authority to retain a third-party firm or professional for the purpose of identifying candidates.

The Nomination and Governance Committee identifies nominees by first evaluating the current members of the Board of Directors willing to continue in service whose term is scheduled to expire at the upcoming annual stockholder meeting to determine if those individuals satisfy the qualification criteria for continued membership on the Board of Directors. Prior to nominating an existing director for re-election to the Board of Directors, it considers and reviews the following attributes with respect to each existing director:

In August 2021, the Securities and Exchange Commission approved amendments to the listing rules of Nasdaq relating to board diversity and disclosure. The new Nasdaq listing rule requires all Nasdaq listed companies to disclose consistent, transparent diversity statistics regarding their boards of directors. The rules also require Nasdaq listed companies to have, or explain why they do not have, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an under-represented minority or LGBTQ+. Accordingly, we have surveyed members of our Board of Directors and concluded that the Board of Directors is in compliance with Nasdaq’s diversity requirement. The Board Diversity Matrix below presents the Board of Directors’ diversity statistics as prescribed by the Nasdaq rule.

We have a Code of Business Conduct and Ethics in place that applies to all of our directors and employees, and all of these individuals receive annual training. The code sets forth the standard of ethics that we expect all of our directors and employees to follow, including our Chief Executive Officer and Chief Financial Officer. The code is posted on our website at www.qcrh.com. We have satisfied and intend to continue to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding any amendment to or waiver of the code with respect to our Chief Executive Officer, Chief Financial Officer, and persons performing similar functions, by posting such information on our website.

Since January 1, 2007, we have kept the positions of Chair of the Board of Directors and Chief Executive Officer separate. While our bylaws do not require our Chair and Chief Executive Officer positions to be separate, the Board of Directors believes that having separate positions and having an independent outside director serve as Chair is the appropriate leadership structure for QCR Holdings at this time and demonstrates our commitment to good corporate governance. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chair to lead the Board of Directors in its fundamental role of providing advice to, and exercising independent oversight of,

Currently, Ms. Ziegler holds the position of Chair of the Board of Directors and Mr. Helling holds the position of Chief Executive Officer. Ms. Ziegler is “independent” according to the Nasdaq listing requirements. To further enhance the role of the independent directors on our Board of Directors and consistent with the Nasdaq listing requirements, the Board of Directors’ independent directors regularly meet without Messrs. Helling or Gipple in attendance.

While management is responsible for the day-to-day management of risks QCR Holdings faces, oversight of our risk management is central to the role of the Board of Directors. The Risk Oversight Committee is charged with the primary responsibility for overseeing risk management functions including those relating to operational (including information technology and cyber security aspects), legal/regulatory, capital, liquidity, interest rate, reputational and strategic risks, on behalf of the Board of Directors. The members of the Risk Oversight Committee discuss our risk assessment and risk management policies, provide oversight, and inquire about significant risks and exposures, if any, and the steps taken to monitor and minimize such risks. As noted on page 14 of this proxy statement, the Risk Oversight Committee is composed of independent directors. The Risk Oversight Committee makes regular reports to the full Board of Directors.

In addition, other board committees have been assigned oversight responsibility for specific areas of risk and risk management, and each committee considers risks within their areas of responsibility. The Audit Committee is responsible for monitoring our financial reporting process and system of internal controls, including controls related to risk management. The Compensation Committee is chiefly responsible for compensation-related risks. The members of the Compensation Committee discuss and review the key business and other risks we face and the relationship of those risks to certain compensation arrangements. This review is intended to comply with the Securities and Exchange Commission requirement to assess risks related to compensation plans and requirements of financial institution regulatory agencies (each as more fully described in the “Executive Compensation” section of this proxy statement). The subsidiary banks’ Loan Committees have primary responsibility for credit risk. For those subsidiary banks that have fiduciary powers, the banks’ Wealth Management Committees have primary responsibility for fiduciary risk. Each of these committees receives regular reports from management regarding such risks and reports regularly to the Risk Oversight Committee or the full Board of Directors concerning such risks.

QCR Holdings is built on relationships and integrity. We adhere to those principles in all areas of our business and in our communities and believe that meaningful Environmental, Social, and Governance (“ESG”) programs will drive shareholder value and make us a better company.

With numerous programs and activities aligned with the ESG framework, we continue to develop and enhance our long-term plan for the future. Below are some of the ways we have addressed ESG matters for the benefit of all of our stakeholders.

In order to better align the interests of our board members and management with the interests of our stockholders, our Board of Directors adopted share ownership guidelines in 2008. These share ownership guidelines were amended in February 2016 to clarify the ownership holding requirements for our executives, and later amended in November 2022 for a change to non-employee directors of QCR Holdings to better align with our peer group’s requirements.

Under these guidelines, non-employee directors of QCR Holdings are expected to achieve a share ownership level with a value equal to five times the amount of each non-employee director’s annual cash retainer (excluding compensation for committee service) within five years of initial election as a director and maintain such ownership level so long as they serve in the position of director. For 2023, based on the one-year trailing average monthly closing stock price, the amount is 3,560 shares.

We also have share ownership guidelines for our named executive officers, who are set forth on page 23 of this proxy statement. The stock ownership guidelines vary by position and for Messrs. Helling and Gipple, in light of their service as board members of QCR Holdings, the amount is 30,000 shares. For all other named executive officers, based on QCR Holdings’ one-year trailing average monthly closing stock price, the amount is 4,565 shares within three years of date of hire, which must be maintained so long as they are employed in their positions with QCR Holdings and/or a subsidiary.

Currently, each QCR Holdings director and each named executive officer holds the requisite number of shares and is in compliance with the share ownership guidelines.

In accordance with our bylaws, for proposals to be brought by a stockholder at an annual meeting, the stockholder must file a written notice of the proposal to our Corporate Secretary not less than 30 days nor more than 75 days prior to the date of the annual meeting, provided, however, that if we provide less than 40 days’ notice of the meeting, notice by the stockholder, to be timely, must be delivered no later than the close of business on the 10^th day following the day on which notice of the date on which the notice of the meeting was first mailed to stockholders. The notice must set forth: (i) a brief description of the proposal and the reasons for conducting such business at the meeting; (ii) the name and address of the proposing stockholder; (iii) the number of shares of the corporation’s common stock beneficially owned by the stockholder on the date of the notice; and (iv) any financial or other interest of the stockholder in the proposal. Stockholder proposals submitted under these procedures will not be included in our proxy statement.

Our current management officers and subsidiary bank leaders are Larry J. Helling, Todd A. Gipple, both of whom are also directors of QCR Holdings, as well as John H. Anderson, Monte C. McNew, Kurt A. Gibson, James D. Klein, and Reba K. Winter.

Mr. Helling (age 67) was appointed Chief Executive Officer of QCR Holdings in May 2019, and he previously served as President and Chief Executive Officer of Cedar Rapids Bank and Trust since 2001. Mr. Gipple (age 59) was appointed President of QCR Holdings in May 2019 and he has served as Chief Operating Officer and Chief Financial Officer since 2008. He previously served as Executive Vice President and Chief Financial Officer since 2000. Mr. Anderson (age 58) has served as Chief Executive Officer of Quad City Bank and Trust since 2007. He previously served as President since May 2020 and Senior Vice President, Business Development since 1998. Mr. McNew (age 50) was appointed Chief Executive Officer of Guaranty Bank in April 2022. He previously served as Chief Executive Officer and President of Guaranty Bank (previously known as Springfield First Community Bank) since February 2021, as President since 2018, and as Executive Vice President, Commercial Lending since 2014. Mr. Gibson (age 55) has served as President and Chief Executive Officer of Community State Bank since 2018, and he previously served as President since 2017. Mr. Klein (age 49) has served as President of Cedar Rapids Bank & Trust since 2019, and he previously served as Chief Lending Officer since 2014 and Senior Vice President, Retail Banking since 2010. Ms. Winter (age 61) has served as Executive Vice President, Chief Information Officer since 2019. Ms. Anne E. Howard (age 44) served as Senior Vice President, Director of Human Resources from 2017 until her resignation on March 8, 2023.

The following table sets forth certain information regarding our common stock beneficially owned on March 21, 2023, by each director, by each director nominee, by each named executive officer named in the summary compensation table, by persons who are the beneficial owners of more than 5% of our common stock and by all directors and executive officers of QCR Holdings as a group. Beneficial ownership has been determined for this purpose in accordance with Rule 13d-3 under the Exchange Act, under which a person is deemed to be the beneficial owner of securities if he or she has voting power or investment power in respect of such securities or has the right to acquire beneficial ownership of securities within 60 days of March 21, 2023.

This Compensation Discussion and Analysis (“CD&A”) provides information about our compensation objectives and policies for our named executive officers and explains the structure and rationale of the various compensation elements. For purposes of the CD&A and the compensation tables that follow, our named executive officers in 2022 were Larry J. Helling, Todd A. Gipple, John H. Anderson, Kurt A. Gibson, and Monte C. McNew. Our CD&A is organized as follows:

QCR Holdings, through its subsidiary banks, provides lending, deposit, and trust and other wealth management services for individuals and businesses. We offer competitive commercial and personal banking products and are committed to providing superior customer service. We place a high priority on community service and are actively involved with many civic and community projects in the communities where we conduct business. We operate in an intensely competitive and uncertain business environment. From a business perspective, not only do we compete with numerous companies in our markets for clients, but we also compete with many different types and sizes of organizations for senior leadership capable of executing our business strategies. Among other challenges, our business model requires experienced leaders with banking and operational expertise who are capable of taking on high levels of personal responsibility in an ever-evolving banking industry and economy.

QCR Holdings achieved record net income for 2022. We reported net income of $99.1 million for the year ended December 31, 2022 and diluted earnings per share (“EPS”) of $5.87. For the same period in 2021 and 2020, we reported net income of $98.9 million and $60.6 million, and diluted EPS of $6.20 and $3.80, respectively. The year ended December 31, 2022 was highlighted by several significant items, including record adjusted net income (non-GAAP) of $114.9 million, or $6.80 per diluted share, an increase of 14.8% and 8.5%, respectively, excluding one-time expenses associated with the Guaranty Bank acquisition; loan and lease growth of 14.6% for the year, excluding Paycheck Protection Program and Guaranty Bank acquired loans (non-GAAP), and nonperforming assets represented only 0.11% of total assets as of December 31, 2022.

QCR Holdings is committed to paying for performance. This commitment is reflected by the significant amount of our named executive officers’ total compensation that is provided through performance-based components. Our executive compensation program evolves and is adjusted over time to support the business goals of QCR Holdings and to promote both near- and long-term profitable growth. Total compensation for each named executive officer varies based upon corporate and, when applicable, individual performance in achieving financial and nonfinancial objectives.

At the QCR Holdings 2022 annual meeting, our stockholders approved, on an advisory basis, the executive compensation of our named executive officers as disclosed in the 2022 proxy statement, with over 98% of the shares represented by stockholders present in person or represented by proxy at the annual meeting voting “for” such approval. QCR Holdings, the board and the Compensation Committee pay careful attention to the say-on-pay vote and communications received from stockholders regarding executive compensation, and we believe the vote reflects stockholders’ support of our compensation philosophy and the manner in which we compensate our named executive officers. The Compensation Committee considered the results of the advisory vote as one of many factors in making 2022 compensation decisions and will continue to do so as it continually reviews our compensation program and practices to ensure they continue to support our business strategy and align with stockholders’ interests.

The goal of our compensation program is to attract, motivate and retain outstanding employees who provide excellent service to our clients while balancing short- and long-term performance to create sustained long-term value for our investors. Our compensation program for executives is based in large part on our business needs and challenges in creating stockholder value. To support the achievement of our business strategies and goals, we strive to:

Our executive compensation program consists of several elements, each with an objective that fits into our overall compensation program. The following overview explains the structure and rationale of the elements of compensation used for 2022.

Cash salaries are intended to be competitive with the market and reflect the individual’s experience, performance, responsibilities, and contribution to QCR Holdings. The salaries are intended to offer each executive security and to allow QCR Holdings to maintain a stable management team and environment. The Compensation Committee reviews the salaries of the named executive officers annually. The Compensation Committee uses its own judgment, as well as its independent compensation consultant’s expertise, when determining the positioning of each executive’s salary compared to the competitive marketplace and also considers internal equity with other employees.

Annual cash incentive bonuses are an important piece of total compensation for our named executive officers as they support and encourage the achievement of our business goals and strategies by tying a meaningful portion of cash compensation to financial results for the year as compared to internal and external standards. The Compensation Committee believes the named executive officers should have a significant portion of their total compensation packages contingent on annual performance, and therefore a significant portion of compensation is made available through an annual cash incentive bonus program. Maximum bonus opportunities are capped to discourage both excessive risk-taking and to avoid a focus on maximizing short-term results at the expense of long-term soundness. In addition, net income in excess of 25% of budgeted net income is required for any bonuses to be paid to our named executive officers.

Under the program, the Compensation Committee established measurable goals for each named executive officer at the beginning of 2022. These goals focus primarily on net income and other financial performance measures. Following the Compensation Committee’s review of quantitative and qualitative analyses and calculations at the beginning of 2023, the Compensation Committee determined the amount of annual bonuses for the named executive officers for 2022, based upon the attainment of goals established in early 2022.

Equity compensation is the other key element of compensation for our named executive officers. We use several types of long-term incentive awards to drive the creation of long-term value for our stockholders, to attract and retain executives capable of effectively executing our business strategies, and to structure compensation to account for the time horizons of risks. Our equity compensation practices support the achievement of many of our key compensation objectives, including:

The 2016 Equity Plan allows for accelerated vesting of outstanding awards held by participants, including our named executive officers, in certain circumstances. Unless provided otherwise in the agreements setting forth the terms of the award, vesting will accelerate upon a “change in control” of QCR Holdings (as defined in the 2016 Equity Plan) if the awards are not assumed or otherwise equitably converted into comparable awards by the acquiring company. If the awards are assumed by the acquirer and a participant’s employment is terminated without “cause” or a participant resigns for “good reason,” the participant’s awards will become vested. This is what is known as a “double trigger” approach, as compared to a “single trigger” approach which provides for vesting solely upon a change in control (without a termination of employment). We use the double trigger approach for our equity awards because we believe it provides adequate employment protection while reducing, for the stockholders’ benefit, potential transaction costs associated with the awards. In addition, the award agreements generally provide that vesting will accelerate upon the participant’s disability or death.

Under his SERP agreement, Mr. Anderson will receive a SERP benefit that varies depending upon the executive’s age at retirement, ranging from $20,000 per year following a retirement after attainment of age 55 but before attainment of age 56, to $84,000 per year following a retirement on or after attainment of 65.

These SERP benefits will generally be paid in 180 monthly installments. The SERP agreements also provide for the payment of a survivor’s benefit to the executive’s beneficiary upon the executive’s death.

Other than Mr. Gipple, the participating executives will receive their existing account balances upon a termination in connection with a change in control. Mr. Gipple will receive the greater of a guaranteed minimum amount of $1,288,000 or his then existing account balance, which was $1,193,866 as of December 31, 2022. The agreements also provide for the payment of a survivor’s benefit to the executive’s beneficiary upon the executive’s death.

Consistent with Code requirements, the SERP and non-qualified deferred compensation plan agreements are “unfunded” general contractual obligations of QCR Holdings subject to the claims of our creditors. If QCR Holdings were to become insolvent, the participants would be unsecured general creditors of QCR Holdings. The Compensation Committee believes this form of “at risk” compensation helps align the interests of plan participants with the long-term interests of QCR Holdings, its debt holders, and its stockholders.

The named executive officers participate in QCR Holdings’ broad-based employee benefit plans, such as medical, dental, disability and life insurance programs, under the same terms as other eligible employees. Each named executive officer other than Mr. McNew also receives an automobile allowance. Messrs. Anderson, Gibson, and McNew receive payments for a country club membership to foster customer relationships. In addition, QCR Holdings pays for tax planning and preparation services for Messrs. Helling and Gipple. The value of the perquisites provided by or paid for by QCR Holdings is reflected in the All Other Compensation column of the Summary Compensation Table in this proxy statement and is comparable to perquisites offered at other bank holding companies.

We have employment agreements with each of our named executive officers. We believe employment agreements help us recruit and retain executives with the experience, skills, knowledge, and background needed to achieve our business goals and strategy and also provide certain protections to QCR Holdings and our stockholders by including confidentiality, non-competition, and non-solicitation covenants. The employment agreements are discussed beginning on page 41 of this proxy statement under the heading Potential Payments upon Termination or Change in Control.

The Compensation Committee has broad discretion in overseeing our compensation program. It reviews each element of compensation for each of our named executive officers at least once each year and makes a final determination regarding any adjustments to the current compensation structure and levels after considering a number of factors. When reviewing compensation, the Compensation Committee takes into account the scope of each named executive officer’s responsibilities, performance and experience, as well as competitive compensation levels. During the annual review process, the Compensation Committee also reviews our full-year financial results against other banking organizations and reviews the structure of our compensation program relative to sound risk management.

Under its charter, the Compensation Committee has the authority to retain its own compensation consultants. Since June 2015, the Compensation Committee has retained Frederic W. Cook & Co., Inc. (“FWC”) as its compensation consultant to provide it with independent analysis and advice about executive compensation-related matters, including a review of the compensation program actions recommended by management, reviewing the chosen peer group and survey data for competitive comparisons, and advising it on best practices and ideas for board governance of executive compensation.

As requested by the Compensation Committee, select members of management facilitate the Committee’s consideration of compensation for our named executive officers by providing information for the Committee’s review. Mr. Helling provides background and recommendations with respect to each of the other named executive officers. Mr. Helling is not present for the discussion or determination of his compensation. Information considered by the Compensation Committee includes, among other items, financial results and analysis, performance evaluations, compensation provided to our named executive officers, technical and regulatory considerations, and input on program design and possible modifications.

Market pay levels and practices are one of many factors we consider in setting executive pay levels and designing the compensation program. Information on pay levels and practices is gathered for a group of publicly traded companies selected based on their business focus, scope and location of operations, size, and other considerations. The Compensation Committee reviews and evaluates the membership of the peer group on an annual basis. For 2022, FWC and management jointly presented the peer group of the 17 financial institutions listed below, which after substantial review and consideration, the Compensation Committee approved.

The companies in the peer group have a median asset size of $7.3 billion (as of June 30, 2022), ranging from approximately $5.0 billion to $19.7 billion. QCR Holdings is currently $7.4 billion in total assets as of December 31, 2022. In addition to asset size, other factors considered in selecting peers included geography, complexity of the organization and similarity of business lines, and services and products offered to those of QCR Holdings. We believe the peers selected are a diverse group of financial institutions that provide the necessary breadth to be meaningful in evaluating the named executive officers’ compensation. FWC summarized and provided the Compensation Committee with market data relating to base salaries, annual cash incentive bonuses, long term stock incentives, and total compensation. The Compensation Committee considered this information, together with other factors discussed below, in determining the compensation for our named executive officers.

Consistent with our philosophy of linking compensation to performance, the compensation for our named executive officers in 2022 was based, in part, on our business results in 2022. This section discusses the compensation actions that were taken in 2022 for our named executive officers, as detailed below.

On an annual basis, the Compensation Committee approves targets applicable to annual incentive bonus awards for our named executive officers. At the beginning of 2022, the Compensation Committee set threshold, target, and maximum award opportunities as a percentage of salary for each of our named executive officers based on that individual’s position and competitive market data for similar positions. The 2022 awards for our named executive officers were contingent primarily on performance relative to goals for net income and other financial performance measures and objectives aligned with those of QCR Holdings’ stockholders. The performance criteria were weighted to reflect QCR Holdings’ strategic objectives. The Compensation Committee also has the discretion to include individual performance goals for the named executive officers, including entity-level goals for subsidiaries within their oversight, consistent with QCR Holdings’ 2022 strategic objectives and their specific roles. For 2022 earned annual incentive bonuses, corporate goals were weighted 100%. As noted above, our named executive officers would not have been eligible to receive an annual incentive bonus had QCR Holdings’ net income not exceeded 25% of budgeted net income.

For 2022, threshold, target, and maximum annual incentive bonus levels were as follows (stated as a percentage of base salary):

For 2022, the Compensation Committee targeted equity award values between 16% and 40% of salary for each named executive officer. The table below reflects the target awards and the actual grants awarded in March 2023 based upon the executive’s performance in 2022. Actual awards were granted in the form of restricted stock units subject to a four-year vesting schedule, with equal portions vesting on each anniversary of the grant date.

Additionally, the Compensation Committee reviews talent retention on an ongoing basis and considers whether any additional incentive awards are necessary in order to ensure the retention of executives with strong performance who are key to our future success. Based on this review and consideration, in 2019, Messrs. Helling, Gipple, and Anderson received a one-time grant of performance awards in connection with entering their new employment agreements, with total fair market values, which assume maximum attainment, the probable outcome of such awards at the time of grant, summarized in the table below:

These performance awards are granted in annual tranches with several annual net income goals because this metric resonates strongly with our stockholders. The net income-based tranche of the 2022 performance shares was tied to achievement of our 2022 net income goal and is disclosed in our Summary Compensation Table and Grants of Plan Based Awards Table. Future tranches will be tied to net income goals in 2023 and onward and will be disclosed in future years. Our Compensation Committee has determined that an annual net income goal, with a multi-year service period component, is the most appropriate metric due to an uncertainty of factors influencing our business, including factors such as

As a publicly traded financial institution, QCR Holdings must comply with multiple layers of regulations when considering and implementing compensation decisions. Although these regulations do not set specific parameters within which compensation decisions must be made, they do require QCR Holdings and the Compensation Committee be mindful of the risks associated with a compensation program designed to incentivize superior performance.

The Compensation Committee believes that its regular, overall assessment of the compensation plans, program and arrangements established for the named executive officers includes a sensible, responsible approach toward balancing risks and rewarding reasonable, but not necessarily easily attainable, goals. The Compensation Committee also believes that QCR Holdings has adequate policies and procedures in place to balance and control any risk-taking that may be incentivized by the employee compensation plans. The Compensation Committee further believes that such policies and procedures will work to limit the risk that any employee would manipulate reported earnings in an effort to enhance his or her compensation.

When making decisions about executive compensation, in addition to the above, we also consider the impact of other regulatory provisions, including: Code Section 162(m) as in effect for 2022, which may limit the tax deductibility of certain compensation; Code Section 409A, regarding nonqualified deferred compensation; and Code Sections 4999 and 280G, regarding excise taxes and deduction limitations on golden parachute payments made in connection with a change in control. We also consider how various elements of compensation will impact our financial results. For example, we consider the impact of FASB ASC Topic 718, which requires us to recognize the compensation cost of grants of equity awards based upon the grant date fair value of those awards.

QCR Holdings has an insider trading policy that permits open market transactions in QCR Holdings stock beginning two trading days following the date of public disclosure of each fiscal quarter’s financial results until two weeks before the end of the next fiscal quarter. In addition, our named executive officers may purchase QCR Holdings common stock through payroll deductions under our 401(k) Plan and Employee Stock Purchase Plan. Changes to certain elections under the 401(k) Plan and Employee Stock Purchase Plan may only be made during the period when open market transactions are permitted. All of our named executive officers are currently in compliance with this policy.

The insider trading policy includes provisions that prohibit all employees and directors from entering into hedging transactions involving QCR Holdings securities. This prohibition includes the direct or indirect purchase or use of stock options, prepaid variable forward contracts, equity swaps, collars, exchange funds or any other instruments designed to hedge or offset any decrease in the market value of QCR Holdings securities. To our knowledge, none of our officers or directors has entered into a hedging transaction involving QCR Holdings stock in violation of this prohibition.

The insider trading policy also includes provisions that prohibit our directors and executive officers from pledging QCR Holdings securities without the prior approval of the Nomination and Governance Committee. To our knowledge, none of our officers or directors has pledged his or her stock in violation of this policy.

In the event of a material restatement of QCR Holdings’ financial results, other than a restatement due to changes in accounting principles or applicable law or interpretations thereof, the board will review the facts and circumstance that led to the requirement for the restatement and will take such actions, including clawback, as it deems necessary or appropriate. The board will consider whether any named executive officer received cash or equity compensation based on the original financial statements because it appeared that he achieved financial performance targets which in fact were not achieved based on the restatement. The board will also consider the accountability of any named executive officer whose acts or omissions were responsible in whole or in part for the events that led to the restatement and whether such acts or omissions constituted misconduct.

In addition, the clawback provision of the Sarbanes-Oxley Act of 2002 also applies to Messrs. Helling and Gipple. This provision provides that if QCR Holdings is required to restate its financials as a result of misconduct, Messrs. Helling and Gipple are required to reimburse QCR Holdings for bonuses or other incentive-based or equity-based compensation and profits realized in the 12 months after the financial information was first publicly issued or filed with the Securities and Exchange Commission.

In October 2022, the Securities and Exchange Commission adopted final clawback rules. In February 2023, Nasdaq released its proposed rule implementing the final clawback rules. If the Nasdaq’s proposed rule is approved by the Securities and Exchange Commission, we may need to make certain changes to our clawback policies, which will be disclosed in the proxy statement for our 2024 annual meeting of stockholders.

We believe our named executive officers and nonemployee directors should have a significant equity interest in QCR Holdings. To promote such equity ownership and further align the interests of our executives and directors with our stockholders, we maintain share retention and ownership guidelines that require our named executive officers and our directors to hold shares of common stock of QCR Holdings that are described on page 19 of this proxy statement. Until an individual’s stock ownership guideline is met, an executive’s annual incentive and the director’s fees will be paid solely in shares of QCR Holdings common stock (net of required withholding). The guidelines are subject to periodic review by the Compensation Committee and compliance is monitored on an annual basis.

The Compensation Committee has reviewed and approved the Compensation Discussion and Analysis contained in this proxy statement with management. Based on discussion with management, the Compensation Committee recommended that the board of directors approve and include the Compensation Discussion and Analysis in this proxy statement.

The table below sets forth the following information for the years ended December 31, 2022, 2021 and 2020: (i) the dollar value of base salary earned; (ii) the aggregate grant date fair value of stock awards granted; (iii) the dollar value of awards granted under non-equity incentive plans; (iv) above-market earnings on nonqualified deferred compensation and increase in pension value; (v) all other compensation; and (vi) the dollar value of total compensation.

The following table provides information on non-equity incentive plan awards and equity awards made to our named executive officers during 2022. The non-equity incentive plan awards were made under the annual cash incentive bonus program and the equity awards were made under our Equity Incentive Plan, each of which is described in our CD&A.

The following table sets forth information on outstanding equity awards held by the individuals named in the Summary Compensation Table on December 31, 2022, including the number of shares underlying exercisable and unexercisable portions of each stock option award as well as the exercise price and the expiration date of each outstanding option. The options expire 10 years from the date of grant and vest in four equal annual portions beginning one year from the date of grant. The stock awards are either restricted stock or restricted stock units. The market value of stock awards is based on our closing stock price on December 30, 2022 (the last trading day of the year), which was $49.64.

The following table sets forth information for each of the individuals named in the Summary Compensation Table regarding stock option exercises and vesting of stock awards during 2022.

The following table sets forth the present value of accumulated benefits payable to each of the individuals named in the Summary Compensation Table, including the number of years of service credited to each under the SERP determined using interest rate and mortality rate assumptions consistent with those used in our financial statements. Information regarding the SERP can be found under the heading “Non-Qualified Supplemental Executive Retirement Program” on page 27 of this proxy statement.