QCR (QCRH) 26 Jan 222021 Q4 Earnings call transcript

Good day, and welcome to the QCR Holdings Inc Fourth Quarter 2021 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After todays presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. CEO. Helling, Larry sir. ahead, Please go

our Thank for you, for I and you on discussion and start follow Todd with additional fourth Welcome, the time quarter. ladies details regarding brief taking a today. financial call gentlemen, year to performance. the will results thank our with operator. full the join will us

record We share. the full for fourth quarter are very and per pleased earnings with highlighted our net by financial and performance in the income year,

robust by expenses loan and Our quality. XXXX driven record fee managed were interest net carefully solid and growth margin, results expanded credit income, excellent

Our share, XX% our diluted tangible net XX% representing just nearly the grew EPS per value year to share by year-over-year growth. adjusted and income increased book $X We per by $XX XX%. and for over

strengthened experienced XXXX points our our XX demand by capitalized tangible capital with markets ratio tangible across loans. conditions PPP We to market we our basis client and on to XX% share and our loans in strengthening We charters. year-end. gain in our healthy assets economic at ratios by equity common nearly grew when improving excluding base continue from to X.XX% Additionally,

our both in is model, charter robust growth our in value which clients loans Our local deposits. and reflected

Group Our our niche generating another lending had Specialty strong Finance products. year outstanding production in

the X%, lending finished quarter. of that traditional the accelerating fourth see third growth the business loan trend in our began quarter Additionally, year strong annualized with we to

balance with carrying we excess we contributions were clients. sheet the year, growth year remain from Core with Therefore, and growth long-term the core by X% pipelines X% XXXX, deposits loan our of outlook loan we liquidity in full our We positive. year. funded correspondent our strong for XXXX Our and and organic banking remains consistent the on loan goals. XX% core grew and deposits as our near-term commercial targeting loan with for for began that healthy, the are growth between

grew X%. deposits by continued noninterest-bearing while over by those demand of composition the deposits to deposits as increased year-over-year, XX% demand nearly addition, In improve interest-bearing

Additionally, up for we the year basis interest rate our in margin points adjusted on basis despite which an was protected environment. the net challenging successfully XXXX, interest X

increasing initiatives combined more strong as constructed loan a balance significantly to growth with down income net we with favourable deposits generation both sheet deposit had cost opportunities. liquidity. core stream. drove year from strong income, on and capitalizing our repricing sheet, by utilization deposits of and revenue We interest balance another funded solid of efficient off paid contributions diversity with adds our fee-based noninterest-bearing Our We which successfully revenue interest excess and

assets We wealth management management are which grew team X particularly in more years. than past of our XXXX. X,XXX XX% relationships under group, This the over proud by added

loans, the Nonperforming significantly to a million just year metrics represents during quality is improved of had over Our we PPP record of during our course level, the improved assets $X.X remain X at X.XX%. assets. total and credit strong. extremely and asset charge-offs XX% of and good the and the year, current basis which when year year-end reserve about minimal We feel low net very points excluding

Our conditions excellent economic across improving our function of is and consistent along underwriting our credit quality disciplined a markets. with

like the Bancshares. to update anticipated call Federal to I turning Todd, over our acquisition Guaranty would Before of provide on an

service niche and enhance Bank and a team the Guaranty returns. our bankers. to values, and a accelerate vibrant improve about market exceptional growth Southwest profitable a business long talented extend teams growth lines history together of excited will markets. shareholder has X relationship position prominent making as commitment Springfield Missouri in and those is it also to share banks from this earnings support. community brand, for a natural fit. Guaranty of outstanding these us serve and effectively, including deep-rooted profitable known and more our both the base combined We client are We same into Bringing our its enable combination transaction significantly will client the our markets, banking, high-performing

this in work welcoming the Bank forward like for transaction conclusion, second delivering In early performance the to service the expect to team close quarter We earnings look dedication outstanding Holdings for I to record entire and the to Guaranty their and would thank for to client year. team. the hard QCR and

of information heart further quarter in With of proud the they are Todd fourth am employees results. to over I that, to all XXXX. have and the about will call our our accomplished Our I provide company, turn

Larry. everyone. you, today. Good morning, us Thank Thanks joining for

I our warranted. is items I financial discussion where some quarter focus fourth results, . additional those will As review on

Let's start income. with net interest

partially in excess this combination net $XX our deposits decrease quarter challenging as and that a quarter in for in lease discussed increase We million adjusted during $XX was by increased of liquidity. by during a protect million This our million quarter, loan as Core was from robust record $XX the interest million growth income loan deposit driven interest our time core the and record net environment. rate Larry non-maturity strong Our or interest growth $XXX,XXX offset X.X% the a and ability continued our the the with deposits. in funded lease strong growth a deposits, well and margin to quarter. performance up $XX.X set to third due previous

our balances We continue base. cost the CD to of improve higher rotate deposit mix intentionally and of out

point lower a and deposits X helped expand us margin from While net our have improvement. improved protect XX full interest-bearing XXXX. during third the costs the the point of actually our basis we interest quarter, for deposit cost a total These basis modest year, created

X to after majority adjusted seasonal year. points much impact to by loan strong improve X quarter, liquidity in were driven NIM growth the basis of NIM points X in lower this closer for strong elevated compressed quarter. liquidity, the able points income our NIM by basis adjusted was of the the quarter, The basis December. we for While decline our during PPP of occurring matching by excluding excess and with growth had elevated full guidance quarterly We the deposit

NIM performance very pleased throughout are with We XXXX. our

We have to on driving yields our down while cost successful holding been earning of in funds. asset

a environment, rate we expect we NIM and X rising positioned the first funds has with further to continue sheet decline of rates experience well being range modest rising for NIM down asset-sensitive. X as of are points is our in our adjusted quarter some Therefore, potential cost diminished to points. loan ability we As expected in the to basis said, do to drive our That balance near basis pressure. we compression pricing solidly

$XX revenue than the quarter, which range of the slightly income of million, generated lower swap noninterest $XX of $XX $XX.X We income lower third guidance of noninterest we was our to the million produced turning below of the fees markets from in for capital million. our quarter. near-record Now million end

over revenue million, averaging just and million our was swap year quarter full $XX within Our range. $XX guidance per

fees per the Over revenue fee sustainability our which last $XX X $XX quarters, of of in to supports $XX quarter. us million income and has range markets this confidence averaged continued reaffirmed the swap capital gives important million guidance from million, source of

are levels long-term clients rates continue rate of seeing of demand the variable in Group traditional as swap attractive lending production converting lock fixed We the commercial our loans continue of sustainable based to in as Finance expect to our we by Specialty within from well our business. swaps. their strong the through relationships on Many use

expense $XX $XX.X to to guidance and expenses. improvement due and a offsetting decrease $XX turning our $XXX,XXX marketing Now a to markets $XXX,XXX totaled for within for million increase the salary incentive-based primarily to a million decrease expense fourth a quarter in advertising increase the of $XX.X of as in in range this acquisition our Noninterest and quarter result of lower The benefits revenue. million $X.X million quarter capital and Partially million. linked costs. compared third was was

as per we by are pleased X% expenses increased below cost our year. our keeping within overall of year, For with expense control well growth year-over-year, X.X% long-term goal just the noninterest

managing direct operating upward costs. will we compensation many expenses, we some in other our in and remain While pressure other are companies, experiencing disciplined like

that believe annual growth be we However, keep will to X%. below able still we expense our

our million range in Looking ahead we level to noninterest first will anticipate $XX million. a that $XX be of the of to quarter, expense

of quality during basis ago. points X asset one XX% quite year. for be quarter Nonperforming assets, the strong. represent improved loan total to XX% The now primarily to by and assets the basis overall improvement only for X mentioned, of quarter nonaccrual the points year continues And payoff than quarter. Our the was XX due as Larry lower linked

the losses we a negative to corresponding a quality qualitative million factor provision to in strong reduction related the in the quarter, Additionally, $X.X for and asset due recorded pandemic. primarily continued credit fourth

we PPP over in losses, remaining Our September. the the basis excluding With end assets. to as strong of down respect to year-end capital end to leases, loans, levels at X.XX% loans ratio from the XXx our nonperforming X.XX% compared our the credit million common and total September. impact XX allowance X.XX% improved This $XX was of now assets to equity our to represents points tangible allowance tangible of capital, to grow at continue for

for due to effective to full was quarter fourth linked-quarter revenue year. rate XX.X% on earnings our tax-exempt basis and rate of quarter. XX.X% The a in ratio tax slightly was the for the lower Finally, the a taxable lower

tangible earnings XX% that and We XXXX per financial are $X resulted a in share. increase very performance book value per in pleased with our a increase share in

We per call strategically financially question. ready produce book quarter and results, full your that are earnings positioned to open our for up continue context questions. financial value the fourth grow share. tangible and our Operator, With let's we're strong year well on for both first to added and

Race Please will Instructions] question come first Sandler. the [Operator go with Piper ahead. Nathan from And

revenue revenue just for respond this Fed rate to color range I just expand I expect revenue guys thinking the in line is terms you to year. source of about and raises unchanged. the capital durability overall in this curious rates varied guidance interest Hoping how short-term for of environments? markets terms the of the to on . over as guess swap just this appreciate get that outlook some

of fixed Yes, basis is Nate, long-term the that of than we a loans a nature would rate here, business. great want These on quarter-to-quarter transactions. for more the question. kind little know Certainly, of as amount prefer. income you variable are It's fee clients the

Todd And things. of needed feeling uncertainty to this little is probably about put will It niche about buildings are build a headwinds two bit are how create us for business And a us and do. so may marginal yesterday get interest transactions it, that sense still I there try with some for for to the this met inflation. the and that business people and these and stack managed now facing rates deals they capital supply the chain the were business just the to right but impact any the have that on in together.

that's impact why are because So these we'd bit some by things delay the economy, the of so affected a rate of little to probably because on expect in changes that there's the more interest much this not on business. on modest be that going

we guidance still and again, yesterday just So our feel reaffirmed feel good the because confident delved we into that in XXXX. business we and about

Maybe, are to several of Fed this year, gears the thinking So the guys guidance in you the hikes Changing looking of quarters just get on some the before I short-term held gathered later the of of core higher couple But last I off, year. for presumably? the the year, raise end will this about the to maybe that margin I first year. margin responding assuming would appreciate thereafter margin to bit. the based in How couple the run gathering you're this imagine the a does little half all out deposits terms how quarter you deposit able process? or actually have just and to some rates love Todd, thinking the just a been times have first rate-sensitive respond color over back

point feeling provide would are net and so number roughly X sensitivity. annual of $X.X modeling. balance sheet between rate additional asset And We've very of for about sensitivity. that expansion. billion We RSLs, hike. million the $X an to million our million about per that's XX and with $X.X $X.X NII run margin And dollars somewhere with X We've good basis the hike, basis basis point where $XXX got of in XX points or respect roughly billion asset sits RSAs, in

balance curve Of course, of like that bullish terms with perform But inversion dollars and in and very trajectory our no hikes. that. feel NIM XX how anything or assumes percentage basis on NII we negative point will significant rate about sheet impact

gates what than rate assume the of lower I in betas and coming And 'XX? the contemplates out hikes that XXXX and due we 'XX first deposit saw few into

beta see numbers those -- betas We actually deposit and excess respect more to for the very be deposit on there It liquidity with market, all the like Certainly, on little performance the and deposit a up. would line on us conservative betas. some allow will way good are in hold to performance. to diligent relatively the us,

So as we're there opportunities well. feeling pretty good about our

And and then last step one just one I'll then maybe back.

tax it saw to at assume going forward? to a swap similar Just safe rate kind going in what kind this level revenue on be the quarterly year. we guidance 'XX the average remaining the a markets within context capital of on basis and of range Is for of within from it's

throughout in the year. would we I XX just as performed somewhere the to Yes, expect XX range

ahead. question The Raymond Daniel come Please go with next from will Tamayo James.

quarter the a bit, loan how pipeline forward thinking you're looks XXXX? quarter, going the into end about fourth certainly of or see nice in like the to year you're wanted a dig the and just what thinking how we in growth at growth the about Maybe just but little

Yes.

First the off hours, improving. last to bank XX to talking locations in presidents the appear to several pipelines be and in of our our

not on positive by some is utilization liquidity that to starting yet, credit our clients but pre-pandemic factor going levels created was other to are of through excess back The burn line that PPP. of is

some are but line elevated to so see runway And certainly starting more we there. usage,

X% growth range for XXXX. we comfortable to look as XX% So feel we with certainly guidance forward our on

of deposit growth? about asset the how deposits, the if for impact and growth And talk the thinking growth. the think deposit earning sensitivity. for just year, certainly asset overall going about relationships to then sheet how by about there, think impacted the or correspondent easier, and deposits we banking that's just base But of be you Or remixed about impact asset associated the overall you've are as growth it's budgeting overall as kind balance we may

grow to we're fund Yes, back the dip X% with core correspondent Daniel, market banking with sheet available We're to We getting going the still that able progress and to not almost out funding. to into on We amount $XXX to in deposit everything about able sheet have to to in liquidity a I'll take very XX% be growth on at million continue We feeling wholesale about and one. feel had billion loans. We to range funding around expect business good have $XXX we off-balance us like wholesale really certainly be entirely interest-bearing that tremendous and funding. that core of EBA. in deposits money of from about of correspondent year-end. $X.X million, off-balance noninterest-bearing in made

deposits stands $X.X that at has just-in-time That $X.X available again, about us. inventory right inter-quarter, billion to So of actually now. grown billion is

go-forward a our good about core So ability optimistic strong us we some to very makes with loan fund about And feel deposits. as our growth hikes. margin that result, rate with

relatively flat portfolio saying, you'd that to So has continue been expect another over then? securities year or but so, of . the guess the way I last

be my expectation. that would Yes,

with will Martin question ahead. from go next come Montgomery. Janney The Please Brian

kind then talk some relative is Kind just little leading the bit the, number. kind Finance down, going where on about and are is today? understanding, wondered, about I just you . you a the stand you talk thinking a of of what's concentrations forward. business; to just you can where little the what maybe to And business. color of of going kind how does about step Specialty I Can in percentage that it XX to give just that and of will, from that? that guys loans if just great XX a of guess, XX growth But just loan kind certainly, of bit kind

we're I'll of So yes, time. Todd take line consistently and might we've regard Certainly, numbers what the telegraphing we're good any question, let are here to X% have. long period first to a as he XX% done with Brian. insert what over thoughts --

we do. what that's to And continue so would to expect

nice that fourth grew lending so X% the quarter in And our business traditional it was see clip. to

of sure burn be the through talked as with business, we've excess the there's about accounts. Group So growth our clients' business PPP Specialty traditional some in before doing we the to runway some we grow Finance quarter the do that continued starting at we first the business That's a second From organic potential more funds and pace like. securitization we to likely a capacity have that make to event securitization.

basically and our that's asset. perfectly of securitized So kind off LIHTC the of securitize top just taken a the And we to little would portfolio, into go bit. growth it's suited portion loan a a

to expect earnings tell get about quarterly And next we so something to you call. much the we'd more when that's

We have credit Finance tax The in loans. our Group continue the a lot is concentration income Specialty business. low there grow to largest loans, certainly of runway to LIHTC housing

where just Within a the probably get of so, to that year wouldn't from grow we assets. want percentage concentration level next to a or more we lot a

in So the that's, getting lay portfolio to hence, of part why up. that we're place securitization

business So think all grow still the can you to on-balance the in sheet X% throughout we it rate XX% year. that out, then

That's as at, stands idea us portfolio the at guys or give that's where Specialty Finance that you where just just those kind the all year-end? really And growth of of seen, with balances have far are helpful, where some can as Larry. today, you

Yes.

around look be $XXX the biggest projects components, and construction. projects stabilized you be historic tax biggest That the components would the billion now. at under about million portfolio is if credit So would LIHTC lending, $X

million another that and Some a hundred would we've of mixture done couple be $XXX a million. then of municipal stuff kind the is of others direct of

of a it's our balance meaningful part sheet. So

to relative kind you is utilization, guess, of at I kind pre-pandemic just that? And just line Or mentioned levels? today that Todd, where of

line this million. last at million. around has Sure. the $XXX at improved. It $XXX end year Yes, utilization year, was it revolving of And our Brian, ended

bit maybe It's a $XXX still it million back us $XX or pre-pandemic. was of up pre-pandemic So another short million. to to $XX million levels, get

that comments. Maybe good in for X% give we've any to year. you about done accomplished comments, the just net that. has to very be Larry historically, So feel and reaffirm only this We that and And would that that again, that on is, improved. mentioned And we color Larry's loans offtake We in that. years I'd XX% detailed of what his one, other years. about feel good addition

our level new the in over of to we have very paydowns with wouldn't you significant had for $XXX actually in So quarter that further million payoffs But the down actually of fundings this loans funded. We securitization. quarter highest in loan past net had and $XXX million. history

to you a production of So liquidity market. in being solid XX% some able that. elevated about very is business all strong, number payoffs just like But wanted bit information there. give growth. our feel in of some still little are to Pipelines given seeing and things paydowns directionally taking strong, sales continue the of place markets, our X% about history Fair to loan of that

optimistic. It sounds

on that has been the -- Guaranty just me announced. So deal just the for kind And the one of maybe last was now capital. just

thinking into M&A go potential Just kind XXXX? as guess, And you you're I buybacks? additional of how about secondly,

to I'll take pending Yes, the acquisition, we've regard got kind of the about been Certainly, Because sidelines good our with first a buyback. line, feel on levels. Todd. we we've capital

plan And we increasing announced capacity the buy be determine makes about our potentially back. in We revisiting capital what to continue currently price have back to with just we capacity need buy amount because during have to of We'll to this sense. our talk quarter Board next levels. it that our to of

forward. creating we clarity go a that we'll more be on as So little

to . about kind M&A And Perfect. that. piece, of just on just the thinking you're how then

Yes.

near-term we is opportunity do the for if one. it, to right have be Our deal another certainly certainly opportunity, capital up, nothing we GFA on We And the in to before continue the a want probably while we right came attentive. certainly, very first choice the to the but digest tackle to horizon.

will The question Damon with Please go KBW. DelMonte from come next ahead.

answered, I have front. the just wanted I for continue credit of my guys. asked obviously, well questions lot to been go to you base things but a touch mean, and very So on

frame this as go release still of we mean reserve can sizable Todd, quarter. is a kind out healthy. XXX your very provision I you the which help PPP, for us had outlook is ex XXXX? through You reserve just like

you of kind like possibly to it another levels would How going we're So of feels provisioning, characterize that? reversal? low have

the Yes, further And last reserve. guess, release, pristine did quality Damon, million-ish. expectation asset really grow continuing result, QX. would here $X our for We stated, even qualitative as But just several modest we soften would had well I we . I really the quarters have year very to up had around we we be of at our pandemic. think as that and is call improvement our that in the past expectation, it that the the as a I into to factor

us well know like pretty terms there. levels. you conservative culture of and credit to reserve we all think how asset and be in of I We quality view our very

preference provision modest be charge-offs. right show loans. portfolio so our concern do a on our about we would releases modest that depends or don't of depends coming growth does in degradation either release would us we see now, And or in be gives I to no anything the to But reserves. It not of And what, level see really our style preference if say credit significant the have or any, It would on up. grow into it. really

appropriate a have either a to given it again. would those it release, do a modest release And or as would amount fairly to was into be provisioning modest factors, thought if no we result, have in QX. it be So it we growing and

add may things. I Damon, of couple just a

of all, right. you're First

years. many quality highest. of credit at one the toward group. the now, that's group we in reserve time, it's for level. very grow we'd And is one reserve, go to over peer certainly, consistent peer theme a median -- just Our into us not That's the is been kind of of as best of expect reserve the And our the a the for

range it's but to there the we'll over don't XXX plan when time. quickly, group probably But of quarter is more meeting at today. that over, get peer but look the we So in the

in bit maybe And to kind a give expectations? little Did typically more first million quarter per the I have of the that you're perspective bit in loans is but you look seasonality little then could built we I a swap know the about you some slow? didn't seasonally quarter mean fee just income up $XX on us as XQ pipeline you think at $XX the come can average, providing quarters help million through? maybe the ahead? like

to variable It's would you as more outstanding Yes. certainly third look back you we But the than if in certainly. quarter. quarter fee quarter, the prefer, know, third we had an in income

everything that third. thought some deals the happen of into the good happened the the in would year would second that third happen, quarter of probably in So and and thought deals fourth could that a went the couple we happen and happened we in last

little we that is in the expected. third basically we -- bit bigger so a And number than quarter

of stacks really right deals now projects And stopping in the and on slowing so down, cost driven the it's just not it's is probably by chain down. lots the right in capital but supply developer their slowing the getting the from organized variables is that's of way. and happening, It's probably going uncertainty

tough So other It's kind economic seasonal. to by going on. impacted It's variables not it's really predict. of exactly

really that the occupancy for has the demand performing better. is have projects never we certainly, well, So strong. are The been extraordinarily product

well has up holding So it new product for larger than is never it's now. been demand certainly and

that year number giving why telegraphed. expect the we're quarter-to-quarter So exactly give again, going to as we've you to for range, happen that we it's to total but hard tell what's

Please will go question from come Race next Piper The Nathan with Sandler. ahead.

on recognized? the in quick that's I yet PPP do Todd, quarter a then it, on have housekeeping touched and question just the Just fourth revenue. but you remaining dollar apologize you be amount to if the the

Sure, that. Nate. Happy to give

give to just was interest down 'XX the from some over released and another context, XXX million in the And And X.X. of we're there. then rest QX, interest fees. that in PPP year loans. that, the around And a of $XXX,XXX PPP income coming fees. million million in But $X.X that with our in QX, remaining you fees to QX, released from $XX was coming PPP so only ending $X.X in with total only in only little So million about $XXX about was remaining

certainly So end and the released expect to here. forgiven QX we gone of would all by be and those

will Tamayo question be Daniel with James. go from next Raymond follow-up ahead. Our a Please

assumptions than a follow time wanted done the for But if the floors that's for just to there's the this moving a you're had out. see that up the lot asset change hikes great -- deposit hikes to Obviously, multiple have incremental stronger any job thinking guys or hike for the anything on wanted of of either given those loan on first portfolio? chance if and a year, deposits expected. impact about I or or sensitivity Just beta little like you in how

million on an annual I'm guidance in bps confident in $X.X the that of X X to basis. in NIM to and NII

for basis a may with some point think variability point first, increases. that pretty get out XX little the comfortable for bit. just increases, XX But that it. wouldn't It basis we're to the first the beyond have three three we guidance first but I For be that

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

to all would with day. during thank operator. to of forward safe for today. remains you We speaking all Have look We like call you, a pandemic. of you again hope Thank the joining I healthy soon. our everyone and great

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

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