QCR
Annual Report 2013

Plain-text annual report

DRIVING OUR VISION WHAT IS A “COMMUNITY BANK”? Virtually every bank claims to be a “Community Bank”, and many create a definition to support their banking model. At QCR Holdings, Inc. we believe that the definition of a true Community Bank is quite clear – and that it is based on the needs of the Communities and Clients that we serve. Further, we have spent the entire 20 year history of our Company focused on being the Our local bankers are supported by a QCR Holdings Group Operations team that delivers operational services in a centralized and efficient manner. The members of the Group Operations team share the same passion for building relationships with, and exceeding the expectations of, their internal “clients” at each of our entities, allowing each of our Community Banks to possess the resources of a much larger financial institution. “Relationship Driven Organization” that is the heart Further supporting our local Community Banks is a of our QCR Holdings, Inc. business model, a business Board of Directors at each banking charter that consists model that provides each QCR Holdings entity with the of community leaders who share this drive to make a autonomy to tailor products, services and decisions difference to our Clients and the Communities in which unique to the Clients and Communities that it serves. they live and work. Each of our clients “need” something different from their By staying true to our business model of delivering local banking relationship. Our people have the experience decisions that impact Clients and Communities, and and talent to build strong relationships with our clients, delivering support services that do not directly impact to understand their unique hopes, dreams, challenges clients in a centralized and efficient manner, we have & opportunities as well as they do, and to bring them allowed Quad City Bank & Trust, Cedar Rapids Bank & decisions and solutions that help them succeed. Our local Trust, Rockford Bank & Trust, and Community Bank & bankers in the Quad Cities, Cedar Rapids, Rockford, and Trust to create a strong “Community Bank” brand in their Waterloo/Cedar Falls communities are empowered to respective markets and to become the bank of choice for tailor products, services and decisions to the Clients and clients that value a strong relationship with their bank. Communities that they serve, creating the customized “relationship based” service that drives our Company. Each member of our QCR Holdings team will continue to focus on creating meaningful and lasting relationships Serving the needs of our Clients and the Communities with our clients as we work hard to create significant in which we live and work by developing strong long-term value for our shareholders. relationships and using these relationships to help our Clients succeed and our Communities thrive, is what we do each day. That is what being a “Community Bank” is all about. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 3 A MESSAGE FROM OUR CHAIRMAN James J. Brownson AS NOTED IN PAST CHAIRMAN’S MESSAGES, SUCCESSFUL COMMUNITY BANKING IN OUR RELATIONSHIP DRIVEN ORGANIZATION WILL ALWAYS BE A CORE STRATEGY EMPLOYED IN BUILDING SHAREHOLDER VALUE AT QCR HOLDINGS. THE FINANCIAL RESULTS OVER THE PAST TWENTY YEARS CERTAINLY SPEAK TO THE SUCCESS OF OUR BUSINESS MODEL. HOWEVER, AS IN MANY THINGS IN LIFE, NUMBERS DO NOT ALWAYS TELL THE COMPLETE STORY. This past January a small group of original investors and As always, I need to especially thank the “core of the core” bank management got together for lunch at a locally owned of our Community Banking model - all of the employees restaurant here in the Quad Cities to celebrate the twenty year who make our Company what it is today. Without their anniversary of our original charter Quad City Bank and Trust commitment to living our Community Banking brand we Company. We all remembered that cold day in January 1994, would just be another bank on another corner. Thank you all when Quad City Bank & Trust opened its doors. The memories for making a difference. were plentiful, warm and happy. We apparently were overheard by other patrons in the restaurant and after lunch To all of our shareholders both old and new, I say welcome was over, one of these patrons came up to us and said “thank and thank you for investing in our Company where we truly you”. He could not help but overhear our reminiscing and as believe we can make a difference in the financial world we a retired owner of a large locally owned hardware store he call Community Banking. I just know you are going to enjoy wanted to tell us how pleased they were to do business with a the ride. bank having rock solid ties to the community, with significant local ownership, and where all decisions were made locally. On top of that, he told us we had the best possible employees delivering on that brand promise day after day after day. We of course thanked the gentleman for his very kind remarks and from that day forward I knew I wanted to bring that message to you, our shareholders. The thanks we received from the gentleman in the Quad Cities is but a mere example of compliments that are repeated daily at all of our Community Banks throughout the QCR Holdings enterprise. As Directors and employees of QCR Holdings we take great pride in those “thank yous” as we know the accumulation of all those “thank yous” builds lasting value to all of our shareholders. Fiscal year 2013 was a very successful year highlighted by the addition to our Company of our friends at Community National Bank in Waterloo. We certainly welcome all the employees and shareholders from the Waterloo/Cedar Falls area to our Company and look forward to many years of successful Community Banking with them. 20th Anniversary Celebration NASDAQ Closing Bell Ceremony, October 2, 2013 © Copyright 2013. The NASDAQ OMX Group QCR HOLDINGS, INC. 2013 ANNUAL REPORT 4 QCR Holdings, Inc. will be the premier provider of financial services to businesses and individuals for whom relationships matter, in markets where we can excel. - Our Mission Summary of Financial Results 2008 - 2013 (in thousands) Net interest income Non-interest income Non-interest expense 2008 2009 2010 2011 2012 2013 $44,623 $50,662 $49,864 $54,145 $57,649 $64,105 13,931 15,547 15,406 17,462 16,621 25,814 (42,334) (46,937) (48,549) (50,993) (52,259) (64,433) Pre-tax pre-provision net income 16,220 19,272 16,721 20,614 22,011 25,486 Provision expense (9,222) (16,976) (7,464) (6,616) (4,371) (5,930) Income before taxes 6,998 2,296 9,257 13,998 17,640 19,556 Income taxes (1,735) (247) (2,449) (3,868) (4,534) (4,618) Income from continuing operations 5,263 2,049 6,808 10,130 13,106 14,938 Income from discontinued operations 1,734 - - - - - Net income 6,997 2,049 6,808 10,130 13,106 14,938 Less: net income attributable to non controlling interests 288 277 221 438 488 - Net income attributable to QCR Holdings, Inc. $6,709 $1,772 $6,587 $9,692 $12,618 $14,938 QCR HOLDINGS, INC. 2013 ANNUAL REPORT 5 TO OUR SHAREHOLDERS, QCR Holdings had its busiest (and perhaps best) year yet in its 20 year history and we continue to believe the business model that we are proud to call “The Local Community Bank Advantage” propelled this year of record earnings. We believe “The Local Community Bank Advantage” is a key differentiator in our market places as our clients seek the exceptional, personalized local service and advice that we can provide. Our clients continue to value the opportunity to be able to sit one-on-one with their bankers and not be placed into queue at an 800 number regional call center. We could not be more proud of our 400 dedicated employees whose mission it is to be the premier provider of financial services to those whom relationships matter. At QCR Holdings, we strongly believe that the strength of our Company will depend on the strength of the communities that we serve, and to that end, our employees are actively volunteering on a daily basis to make their communities a better place in which to live and work. We not only achieved the record earnings that we will discuss below, we achieved some notable milestones as well: ACQUISITION OF COMMUNITY NATIONAL BANK In 2013, we completed our first bank acquisition, proudly welcoming the shareholders, staff and clients of Community National Bank in Waterloo/Cedar Falls, Iowa to the QCR Holdings family. On May 13, 2013 we acquired their eight banking locations and approximately $279 million in assets and $247 million in deposits. To allow us to focus on the Waterloo/Cedar Falls markets, in the fourth quarter of 2013 QCR Holdings completed the sale of the two Mason City, Iowa branches and the two Austin, MN branches of Community National. Subsequent to the sales of these branches, the Company executed a data conversion and merger of Community National Bank into Cedar Rapids Bank & Trust. In conjunction with the conversion, Community National Bank changed its name to Community Bank & Trust and now operates as a division of Cedar Rapids Bank & Trust. Our 2013 earnings were propelled by acquisition related gains of $4.1 million (bargain purchase gain of $1.8 million and the gains on the branch sales of $2.3 million), which were offset by acquisition and data conversion related costs of $2.3 million for the year. CONVERSION OF SERIES E PREFERRED STOCK TO COMMON STOCK On December 23, 2013, we completed the conversion of all 25,000 outstanding shares of our Series E Non-Cumulative Convertible Perpetual Preferred Stock (“Series E Preferred”) into shares of common stock. Holders of Series E Preferred stock received, for each share of Series E Preferred held as of December 23, 2013, the number of shares of common stock that resulted from dividing $1,000 (the issuance price per share of the Series E Preferred) by $12.15 (the conversion price per share), for an aggregate issuance of 2,057,502 shares of common stock. This was a significant accomplishment and a critical component to our long-term capital plan as it increased our tangible common equity ratio by approximately 100 basis points and eliminated annual preferred dividends totaling $1.75 million. 2013 RESULTS AND HIGHLIGHTS ANNUAL EARNINGS UP 18% FROM PRIOR YEAR Despite an unsettled backdrop of an uncertain economy and an ever-challenging regulatory environment, our teams executed on our strategic initiatives for another record year. For 2013, our annual earnings were up 18% from the prior year. For the year ended December 31, 2013, net income attributable to QCR Holdings Inc. was $14.9 million, resulting in diluted earnings per share of $2.08 after preferred stock dividends of $3.2 million. For the same period in 2012, we reported net income of $12.6 million, or diluted earnings per share of $1.85 after preferred stock dividends of $3.5 million. For 2013, we grew non-interest bearing core deposits 20%, successfully shifting the deposit mix from more brokered and other time deposits, along with wholesale funding, which in turn helped to drive down our cost of funds. Non-interest bearing deposits grew $92 million this year, this on top of 26% growth in 2012. The ratio of nonperforming assets-to-total assets was 1.28% at December 31, 2013, which improved from 1.41% at December 31, 2012. Net interest income grew 11% in 2013. For the year ended December 31, 2013, net interest income was $64.1 million, an increase of $6.5 million over the year ended December 31, 2012. We remain committed to a strong capital position – not only with regard to total capital, but with regard to mix and cost as well. We remain strongly committed to our long-term capital plan of self-generating the capital necessary to grow tangible common equity to a target range of 6.00% to 7.00% and to redeem the remaining Small Business Lending Fund (“SBLF”) preferred capital without a dilutive common equity raise. We successfully executed on this plan in the second quarter of 2012 when we partially redeemed $10.2 million of the SBLF preferred stock. We plan to use the excess capital generated from the Community Bank & Trust branch sales to continue the redemption of our remaining Small Business Lending Fund preferred capital in 2014. Tangible common equity grew from 3.56% of total tangible assets at December 31, 2010 to 3.85% at December 31, 2011 to 4.02% at December 31, 2012, and to 4.71% at December 31, 2013. QCR HOLDINGS, INC. ENTITY WIDE STRATEGIC INITIATIVES The Company has identified eight focus areas for improving shareholder value in 2014 that will guide our work: • • • • • • • • Continue to expand our Investor Relations plans Grow loans Maintain and improve our Net Interest Margin Maximize SBA/USDA gains on loan sales Grow Wealth Management income Improved liquidity in our stock Drive down efficiency ratio as we work to achieve a 1% ROAA Continue to redeem Small Business Lending Fund preferred stock QCR HOLDINGS, INC. STRATEGIC ADVANTAGES During 2013, we continued to execute on our strategy of being a relationship driven organization. With demand for loans and leases curtailed due to the economic climate, we remained focused on developing relationships with new clients and expanding relationships with existing clients. We strategically expanded resources where we identified some very profitable niches that will enhance our earnings in years to come, thereby allowing us to counter margin compression and weak loan demand. CORRESPONDENT BANKING DIVISION The Correspondent Banking Division at Quad City Bank & Trust continues to seize opportunities to deliver exceptional client service to downstream banks in Illinois, Iowa and Wisconsin. During 2013, we were able to increase non-interest bearing deposits significantly (25%) and grow non-interest income as well. We increased total correspondent banking relationships 10% and when including such services as credit cards, safekeeping and loans, we now service nearly 160 Correspondent Banks. WEALTH BUILDERS DIVISION Being able to service our clients with a continuum of services is crucial to deepening relationships. The expertise found across our Company in our Wealth Builders Division is a sizable competitive advantage. With offerings in Trust, Investments, Financial Planning, and Family Office, we add non-interest income to our banks and provide great opportunities for cross selling as well. In 2013, total assets under management eclipsed the $2 billion mark as staff welcomed over 325 new relationships. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 6 m2 LEASE FUNDS m2 Lease Funds is a wholly owned subsidiary of Quad City Bank & Trust that thinks locally but acts nationally. Leasing is an attractive option for many small and medium sized businesses and m2 prides itself on being easy to do business with (a one page lease agreement written in plain English) and delivering local, professional and personalized service. m2 Lease Funds works with all of our banks and nationwide as well. Leasing can be a favorable option to ownership and has gained good traction in this economy. m2 reported a record year of pre-tax net income in 2013 of $3.6 million and grew leases $26.1 million, or 24% over 2012. LIVING THE BRAND We continue to believe our people are the key differentiator in each of our markets. We strive to equip our employees with all of the tools that they will need to serve our clients in a customized and personal manner. As such, we measure employee performance utilizing a metric we call “Living the Brand”. “Living the Brand” means living our Brand Promise – making sure that each employee’s performance is so good that our clients (internal and external) will always experience great relationships, service and advice. It is our hope that by placing daily emphasis on our Brand Promise every client will truly see “People You Can Bank On®” in everything we do. RESULTS BY ENTITY Quad City Bank & Trust – Under the leadership of President and CEO, John Anderson, the Company’s first subsidiary bank (1994), grew total consolidated assets to $1.25 billion at December 31, 2013. The bank continues to have success in growing its Wealth Management business as assets under management reached $1.4 billion in 2013. Quad City Bank & Trust realized net income of $10.3 million for the year ended December 31, 2013, which compares to $10.7 million in 2012. Cedar Rapids Bank & Trust – President and CEO Larry Helling, one of the founders of Cedar Rapids Bank & Trust (2001), led his team to net income of $6.7 million for the year ended December 31, 2013, which is a 15% increase over the $5.9 million net income for 2012. Total assets at December 31, 2013 finished at $804.2 million, up 29% or $178.5 million from the end of 2012. The majority of net asset growth was directly attributable to the merger of Community National Bank during the fourth quarter. The bank continues to have success in generating strong noninterest income from gains on sales of the government guaranteed portion of SBA and USDA loans. Rockford Bank & Trust – Led by founder and President and CEO, Tom Budd, Rockford Bank & Trust (2005) reported record net income for the year ended 2013 of $1.6 million. By comparison, the bank reported record net income of $593 thousand for 2012. Total assets finished the year at $339.4 million, which was an increase of $25.6 million, or 8%, over 2012. The bank experienced strong improvement in asset quality in 2013 which translated over to lower credit costs and helped drive the improved earnings. QCR HOLDINGS, INC. STRATEGIC DIRECTION FOR 2014 AND BEYOND During 2013 our very talented team of employees not only worked very hard to deliver record earnings, but they also worked hard to bring Community National Bank into the QCR Holdings family. For the better part of the year, many employees performed “their regular job” and “their acquisition job “. It was no surprise, and quite a pleasure, to see our employees come together to merge QCR Holdings and Community National. We are certain we have the team in place that can execute on more acquisitions as the right opportunities present themselves. We believe our staff is geared to generate improved earnings at all entities. As a company, we are focused on doing all that we can to generate earnings per share (EPS) – prioritizing EPS over growth in assets and to achieve our goal of a consolidated 1% ROAA. We will continue to work hard to grow your investment and grow the communities in which we do business. All of our entities maintain an aggressive commitment to volunteerism as we know our companies can only be as strong as the communities in which we work and play. Our employees contributed over 15,000 volunteer hours in 2013 and we just couldn’t be more proud of their dedication, selflessness and citizenship. CONSOLIDATED EARNINGS (in thousands) Quad City Bank & Trust * $ 6,839 $ 8,838 $ 10,732 $ 10,273 2010 2011 2012 2013 Cedar Rapids Bank & Trust 3,573 5,200 5,881 6,736 Rockford Bank & Trust 811 412 593 1,579 Parent Co. & Eliminations ** (4,636) (4,758) (4,588) (3,650) Consolidated Earnings $ 6,587 $ 9,692 $ 12,618 $ 14,938 * Includes m2 Lease Funds. ** Includes earnings from CNB and all other acquisition related activity. We are also supported by remarkable local Board members in each of our communities. These community leaders generously lend their time and expertise – serving on our Boards, our committees, and advocating for us within their local communities. Their contributions are priceless and we would not have achieved the successes of 2013 without them all. We recognize specific areas where we need to make meaningful progress in 2014: earnings per share, ROAA and tangible common equity. Key to moving the needle on these metrics is maintaining our excellent staff and providing the tools they need to serve our clients. Loan demand will likely continue to be a struggle but we believe we have the team in place to deliver a local solution when demand increases. We have strategically aligned ourselves to serve as experts on SBA and USDA lending which not only provides attractive solutions for our clients, but government guarantees and fee income for our banks. We will continue to enhance liquidity and to preserve asset quality. Our process for monitoring credit quality is rigorous and will remain so. We are hopeful that our positive earnings trends continue to be reflected in our stock price. While we enjoyed continued positive momentum in 2013, we are mindful of our obligation to each and every one of you, our loyal shareholders, to do even better. We thank you for your patience and support. We are a relationship driven organization® and truly believe “The Local Community Bank Advantage” is alive and well in each of our markets. Douglas M. Hultquist President and Chief Executive Officer, QCR Holdings, Inc. Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer, QCR Holdings, Inc. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 7 QCR Holdings, Inc. Board of Directors 12 1 7 3 14 8 10 QCR HOLDINGS, INC. 2013 ANNUAL REPORT 8 9 6 11 13 2 4 5 1. Douglas M. Hultquist President and Chief Executive Officer, QCR Holdings, Inc. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. James J. Brownson Chair of the Board, QCR Holdings, Inc. President, W.E. Brownson Co. Pat S. Baird Vice Chair of the Board, QCR Holdings, Inc. Retired President and Chief Executive Officer, AEGON USA, LLC Lindsay Y. Corby Principal, BXM Holdings, Inc. Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer, QCR Holdings, Inc. Larry J. Helling President and Chief Executive Officer, Cedar Rapids Bank and Trust Company Mark C. Kilmer President, The Republic Companies John K. Lawson Retired Executive, Deere & Company Linda K. Neuman Attorney, Retired Iowa Supreme Court Michael L. Peterson President, Peterson Genetics, Inc. Ronald G. Peterson Retired Executive, First State Bank of Illinois Donna J. Sorensen, J.D. President, Sorensen Consulting John D. Whitcher Vice President and General Counsel, Viking Chemical Company 14. Marie Z. Ziegler Retired Executive, Deere & Company QCR HOLDINGS, INC. 2013 ANNUAL REPORT 9 QCR Holdings, Inc. Executive Management Team 13 16 11 6 3 5 14 17 1 QCR HOLDINGS, INC. 2013 ANNUAL REPORT 10 2 8 7 10 15 9 12 4 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Douglas M. Hultquist President and Chief Executive Officer Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer John H. Anderson President and Chief Executive Officer, Quad City Bank and Trust Company / Chief Deposit Officer, QCR Holdings, Inc. Stacey J. Bentley President and Chief Executive Officer, Community Bank and Trust Company Thomas D. Budd President and Chief Executive Officer, Rockford Bank and Trust Company Charles S. Bullock Executive Vice President, Chief Operating Officer, Rockford Bank and Trust Company Richard W. Couch President and Chief Operating Officer, m2 Lease Funds, LLC Jill A. DeKeyser Senior Vice President, Director of Human Resources John R. Engelbrecht Chief Executive Officer, m2 Lease Funds, LLC Shawna M. Graham Senior Vice President, Director of Risk Management Larry J. Helling President and Chief Executive Officer, Cedar Rapids Bank and Trust Company / Executive Vice President, Chief Lending Officer, QCR Holdings, Inc. John R. McEvoy Executive Vice President, Chief Operations Officer and Cashier, Quad City Bank and Trust Company John A. Rodriguez Executive Vice President, Deposit Operations and Information Services William M. Tank Executive Vice President, Chief Credit Officer M. Randolph Westlund Executive Vice President, Chief Investment Officer Cathie S. Whiteside Executive Vice President, Corporate Strategy, Human Resources & Branding 17. Michael J. Wyffels Senior Vice President, Chief Technology Officer QCR HOLDINGS, INC. 2013 ANNUAL REPORT 11 $14.9 MILLION 2013 RECORD EARNINGS AN 18% INCREASE OVER 2012 ASSET GROWTH (IN THOUSANDS) $350,000 $175,000 , 7 1 0 4 7 1 $ 9 0 0 2 9 8 9 6 5 $ , 0 1 0 2 BOOK VALUE VS. FAIR MARKET VALUE COMMON STOCK (IN MILLIONS) TOTAL METROPOLITAN STATISTICAL AREA (MSA) DEPOSITS (JUNE 30, 2013) (IN THOUSANDS) $8,000,000 $5,000,000 $2,000,000 FAIR MARKET VALUE BOOK VALUE , 3 2 2 1 0 3 $ $150 $120 $90 $60 $30 , 5 7 9 9 2 1 $ , 0 2 1 7 2 1 $ 1 1 0 2 2 1 0 2 3 1 0 2 . 3 9 C E D . 8 9 C E D . 3 0 C E D . 8 0 C E D . 2 1 C E D . 3 1 C E D Population (July 1, 2012) , 6 1 3 8 1 7 7 $ , , 2 8 3 9 8 2 5 $ , , 1 5 9 8 6 0 6 $ , , 8 5 6 9 5 9 2 $ , s e i t i C d a u Q 0 0 0 3 8 3 , i s d p a R r a d e C 0 0 0 2 6 2 , y e l l a V r a d e C 0 0 0 9 6 1 , d r o f k c o R 0 0 0 6 4 3 , I N O L L $6.5 M 2013 NET INTEREST INCOME INCREASED 11% OVER 2012 I 2,395,000,000 $ IN TOTAL ASSETS AT DECEMBER 31, 2013 20% INCREASE NON-INTEREST BEARING DEPOSITS FINISHED 2013 AT $543 MILLION 329 WEALTH MANAGEMENT RELATIONSHIPS ADDED WITH OVER $2.20 BILLION UNDER MANAGEMENT QCR HOLDINGS, INC. 2013 ANNUAL REPORT 12 QCR Holdings, Inc. Group Operations Management Team Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer Jill A. DeKeyser Senior Vice President, Director of Human Resources Beth L. Easterla Vice President, Deposit Operations and Electronic Banking Manager Kathleen M. Francque Senior Vice President, Correspondent Banking Pamela J. Goodwin 1st Vice President, Loan Operations Manager Shawna M. Graham Senior Vice President, Director of Risk Management R. Timothy Harding Senior Vice President, Director of Internal Audit John R. McEvoy Executive Vice President, Chief Operations Officer and Cashier John R. Oakes 1st Vice President, Controller and Director of Financial Reporting John A. Rodriguez Executive Vice President, Deposit Operations and Information Services Shellee R. Showalter Senior Vice President, Director of Investor Services and Compensation Michael J. Wyffels Senior Vice President, Chief Technology Officer TOTAL DEPOSITS (in millions) 12.31.11 12.31.12 12.31.13 Non-interest bearing demand deposits $ 357 $ 451 $ 543 Interest bearing demand deposits Time deposits Brokered time deposits 510 293 45 587 291 45 716 327 62 TOTAL DEPOSITS $ 1,205 $ 1,374 $ 1,647 TOTAL ASSETS (in millions) 12.31.13 12.31.12 12.31.11 $2,395 $2,094 $1,967 $1,500 $2,000 $2,500 NET LOANS/LEASES (in millions) 12.31.13 12.31.12 12.31.11 $1,439 $1,267 $1,182 $1,000 $1,250 $1,500 DEPOSIT MARKET SHARE (JUNE 30, 2013) Quad Cities 10.66% Rank #3 of 40 Cedar Rapids 7.90% Rank #4 of 42 Rockford 3.98% Rank #8 of 26 Waterloo/Cedar Falls 4.97% Rank #7 of 24 QCR HOLDINGS, INC. 2013 ANNUAL REPORT 13 “THE QUAD CITY BANK & TRUST TEAM PROVIDES US A STRONG BUSINESS PARTNER AND BEST IN THE REGION CUSTOMER SERVICE. I ENJOY INTERACTING WITH THE ENTIRE TEAM AND THEIR WELCOMING AND CARING CULTURE. AS A MATTER OF FACT, ALL AT GENESIS HAVE HAD A WOW EXPERIENCE AT ALL LEVELS OF THEIR ORGANIZATION. I RECENTLY CONTACTED PRESIDENT AND CEO JOHN ANDERSON WITH AN URGENT GENESIS NEED AND HE EXCEEDED MY EXPECTATIONS IN BUSINESS TERMS AND ENSURING THE PROCESS WAS SIMPLE. HE DID THIS WITH HIS WELL KNOWN SMILE THAT PERMEATES ALL OF HIS EMPLOYEES. QUAD CITY BANK AND TRUST IS PART OF OUR FAMILY IN THE QUAD CITIES.” MARK ROGERS Vice President Finance/CFO , Genesis Health System QCR HOLDINGS, INC. 2013 ANNUAL REPORT 14 INVESTING IN THE QUAD CITIES AREA EMPLOYEE HOURS VOLUNTEERED IN 2013 QCR HOLDINGS, INC. 2013 ANNUAL REPORT 15 P E O P L E Y O U C A N B A N K O N . ® JOHN ANDERSON President and Chief Executive Officer, Quad City Bank & Trust DIRECTORS SENIOR MANAGERS John H. Anderson President and Chief Executive Officer, Quad City Bank and Trust Company Mark C. Kilmer Chair of the Board, Quad City Bank and Trust Company President, The Republic Companies Michael A. Bauer Consultant, Co-Founder of QCR Holdings, Inc. Douglas M. Hultquist President and Chief Executive Officer, QCR Holdings, Inc. James J. Brownson President, W.E. Brownson Co. Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer, QCR Holdings, Inc. John H. Harris, II Retired Former President, Star Forms, Inc. and Isabel Bloom, LLC Larry J. Helling President and Chief Executive Officer, Cedar Rapids Bank and Trust Company Edwin A. Maxwell Anesthesia & Analgesia, P.C. Linda K. Neuman Vice Chair of the Board, Quad City Bank and Trust Company Attorney, Retired Iowa Supreme Court Ronald G. Peterson Retired Executive, First State Bank of Illinois Victor J. Quinn Executive Vice President, Client Relations and Business Development, Quad City Bank and Trust Company Marc C. Slivken, D.D.S. Retired CEO, Kimberly Park Dental Marie Z. Ziegler Retired Executive, Deere & Company John H. Anderson President and Chief Executive Officer Nick W. Anderson Vice President and Controller Cindy M. Carlson Executive Vice President, Wealth Builders Group Laura L. Ekizian Senior Vice President, Private Banking Kathleen M. Francque Senior Vice President, Correspondent Banking Therese K. Gerwe Vice President, Treasury Management Deborah C. Gillum 1st Vice President, Retail Banking Anne E. Howard Assistant Vice President, Human Resources Manager David C. Howell 1st Vice President, Wealth Builders Group Rick J. Jennings Senior Vice President, Senior Trust Officer Jeffrey M. Lockwood Executive Vice President, Chief Lending Officer Peter J. McAndrews 1st Vice President, Retail, Real Estate and Consumer Loans John R. McEvoy Executive Vice President, Chief Operations Officer and Cashier Victor J. Quinn Executive Vice President, Client Relations and Business Development Shellee R. Showalter Senior Vice President, Director of Investor Services and Compensation Cathie S. Whiteside Executive Vice President, Corporate Strategy and Branding Michael J. Wyffels Senior Vice President, Chief Technology Officer QCR HOLDINGS, INC. 2013 ANNUAL REPORT 16 JANUARY 2014 MARKS THE 20TH ANNIVERSARY OF QUAD CITY BANK & TRUST AND WE COULDN’T BE MORE PROUD OF WHAT WE HAVE ACCOMPLISHED IN WHAT COULD BE VIEWED AS A VERY SHORT TIME. QUAD CITY BANK & TRUST WAS FORMED WITH THE MISSION OF PROVIDING LOCALLY DELIVERED, EXCEPTIONAL CLIENT SERVICE AND ADVICE. IT IS WITHOUT QUESTION THAT OUR EMPLOYEES CONTINUE TO DELIVER ON THAT MISSION EACH AND EVERY DAY. For Quad City Bank & Trust, our work is focused around our five constituencies that we serve and how we serve them: - OUR SHAREHOLDERS - OUR COMMUNITY - OUR CLIENTS - OUR EMPLOYEES - OUR REGULATORS We have assembled a team of dedicated and exceptionally knowledgeable bankers and each and every one of our valued team members have helped drive our Community Bank success in the Quad Cities marketplace. As “People You Can Bank On®”, Quad City Bank & Trust employees not only work to build great relationships with their clients, but also within the community in which we serve. We know that rewarding our first constituency – Our Shareholders - is our principal responsibility and a key component to fulfilling that responsibility is to do our best to serve our other four constituencies. A true Community Bank works to serve the needs of its clients and the community in which it serves. Our employees work very hard to serve our second constituency – Our Community – by volunteering in over 50 different organizations. It is with tremendous pride that we showcase just a few of our team members below. These team members are filling key volunteer positions in our local non-profits – all of this in addition to their work and family responsibilities. LAURA EKIZIAN Chairperson, John Deere Classic PGA Tournament CHRIS JOHNSON Chairperson, Boys and Girls Club of the Quad Cities JEFF LOCKWOOD Chairperson, Vera French Community Mental Health Center DAVE HOWELL Chairperson, Arrowhead Ranch CINDY CARLSON Chairperson, Figge Art Museum PAUL SCHMITT Chairperson, Youth Service Bureau KEVIN WELLMAN Chairperson, Better Business Bureau TOM KING Chairperson, Habitat for Humanity Quad Cities CATHIE WHITESIDE Race Director, Quad Cities Race for the Cure SHELLEE SHOWALTER President, Junior Board of Rock Island These team members represent just a few of the many employees who spend countless hours serving our wonderful and vital community organizations. In 2013, our entire Quad Cities based team donated over 7,145 hours to the growth and well-being of our community. Simply said, I am so proud of our team. As a local Community Bank we empower our employees to do what is right for our third constituency - Our Clients. Each day our employees are charged with providing service levels for clients that exceed their expectations. We regularly strive to have our clients say to others: “You wouldn’t expect your bank to (insert exceptional client service story here) …but at Quad City Bank & Trust…” A recent: “You wouldn’t expect your bank to…” story unfolded like this: Quad City Bank & Trust Executive Vice President and Cashier, John McEvoy along with Neva Tapia and Brenda Whitney received a call from one of our clients who had forgotten to retrieve one of their children’s passport from their bank safe deposit box for an overseas trip. They did not realize this until Sunday afternoon, before a 6:00 AM flight the next day. Our dedicated team pulled together and came up with a plan to aid this family in obtaining the passport on Sunday evening. This is the type of teamwork and dedication that has been part of the fabric of our team, and what our valued clients have come to expect and why our tagline continues to be “People You Can Bank On®”. Our Employees are our fourth constituency and are the backbone of everything we do. Quad City Bank & Trust strives to be the employer of choice in the region by providing a challenging yet fun and fulfilling work environment. We pride ourselves in hiring the best people and giving them the tools needed to do their jobs well. Our fifth constituency is Our Regulators – truly our business partners in every sense of the word. We work hard every day to build our relationships with each of them to ensure that we are the best bank that we can be – not only in safety and soundness, but for profitability and for client ease of doing business with. Thank you for your support and for being a part of Community Banking history that has set the stage for all those who follow. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 17 “THERE ARE VERY FEW RECOMMENDATIONS THAT I GIVE TO FRIENDS, COLLEAGUES, AND CLIENTS WHEN ASKED. HOWEVER, WHEN IT COMES TO BANKING, CHECKING, SAVINGS AND INVESTMENTS; I STAND WITH CRBT AND ONLY CRBT.” RAY DOCHTERMAN Local 125 Business Manager, Cedar Rapids/Iowa City Building Trades President QCR HOLDINGS, INC. 2013 ANNUAL REPORT 18 INVESTING IN CEDAR RAPIDS, IOWA 4,155 EMPLOYEE HOURS VOLUNTEERED IN 2013 QCR HOLDINGS, INC. 2013 ANNUAL REPORT 19 P E O P L E Y O U C A N B A N K O N . ® DIRECTORS SENIOR MANAGERS LARRY HELLING President and Chief Executive Officer, Cedar Rapids Bank & Trust Larry J. Helling President and Chief Executive Officer Gary M. Becker Senior Vice President, Commercial Banking Kevin D. Bruns Senior Vice President, Wealth Management Patricia L. Ellison Senior Vice President, Chief Credit Officer James D. Klein Senior Vice President, Retail Banking Deborah J. Lindberg Gertsen Senior Vice President, Trust and Investments J. Mitchell McElree Executive Vice President, Managing Director, Specialty Finance Group Dana L. Nichols Executive Vice President, Chief Lending Officer John A. Rodriguez Executive Vice President, Operations and Cashier Shelly A. Strellner Senior Vice President, Private Banking Timothy J. White Senior Vice President, Business Development, Specialty Finance Group Larry J. Helling President and Chief Executive Officer, Cedar Rapids Bank and Trust Company Donna J. Sorensen, J.D. Chair of the Board, Cedar Rapids Bank and Trust Company President, Sorensen Consulting Pat S. Baird Vice Chair of the Board, Cedar Rapids Bank and Trust Company / Retired President and Chief Executive Officer, AEGON USA, LLC Robert T. Buckley Owner and Chief Executive Officer, Kirk Gross Company Patrice M. Carroll President and Chief Executive Officer, ImOn Communications Loren L. Coppock Chairman of the Board, TrueNorth Companies, LLC Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer, QCR Holdings, Inc. Ann M. Lipsky President, Smulekoff Investment Co / President, Smulekoff’s Furniture David R. Mason Sr. Attorney and Partner, Redfern, Mason, Larsen and Moore, PLC James A. Mudd, II President and Chief Executive Officer, Mudd Advertising Chuck M. Peters President and Chief Executive Officer, The Gazette Company Randy A. Ramlo President and Chief Executive Officer, United Fire Group, Inc. Fred G. Timko President, Down to Earth Development, LLC A. James Tinker President Emeritus, Mercycare Service Corporation QCR HOLDINGS, INC. 2013 ANNUAL REPORT 20 Each December, I spend the last days of the year making hundreds of phone calls to some of our best clients. My purpose is to personally thank them for the trust and confidence that they place in the staff of Cedar Rapids Bank & Trust every day. It is always a fantastic experience, as I consistently hear about the wonderful relationships that our employees have built with them and the difference it makes in their lives. There is no better way to express how Cedar Rapids Bank & Trust serves our clients and community, than to share with you a few samples of the client stories that I had the privilege of hearing. “For many years, I have relied on Gary Becker at CRBT for his years of experience and knowledge in the commercial market. Gary’s advice is instrumental before making any business decisions. I appreciate that he has a constant working knowledge of what is going on in the commercial market, as well as what is going on in Cedar Rapids as a whole and how it affects business. Gary is in the “trenches” of business in CR. He speaks with experience, not theory. It’s that type of expertise that I value, along with CRBT’s consistency, reliability, and genuine concern for my business. CRBT is my partner and they are here to help make things happen for me and my businesses! “ MIKE ROSENBERG, OWNER, ROSENBERG & ASSOCIATES “My experience with CRBT has been truly unique. The team places our relationship, and bringing value to it, as its top priority. It’s rare when I have a lending partner that not only takes the time to understand my business, but then dissects it with me in order to make it better. They want to see both my business and me on a positive trajectory. CRBT is an active ingredient in helping to achieve it. #BankWithTheBest” RAVI PATEL, PRESIDENT, HAWKEYE HOTELS “Mid 2013, I had the opportunity to meet Tim White and Ben Weber at CRBT. When looking to move Life Line forward out of a 28 year old system; I was looking for a company that could offer us a variety of options under one entity. CRBT’s advice, contacts and just really being there for me, was over the top. Life Line is a family business in a small Iowa town and I feel CRBT is already a vital piece to our business. We were very pleased to find CRBT and are excited to see how the future unfolds.” CONNIE LEICHER, PRESIDENT, LIFE LINE EMERGENCY VEHICLES, INC. The experience of our team speaks for itself. Stories such as these strengthen our vision that we not only serve as someone’s “banker,” but also as their trusted advisor who helps guide them through the good times and the bad. We would not be successful without investing in our client’s overall success. It’s all intertwined. Going the extra mile is our approach to doing business. This vision has been the key to our success in 2013 and will allow us to continue achieving new milestones in the future. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 21 “WHEN I BEGAN MY CAREER IN OUR FAMILY BUSINESS IN 1970 OUR BANKING RELATIONSHIP WAS FIRMLY ESTABLISHED WITH A LOCALLY BASED BANK. THIS WORKED WELL UNTIL THE BANK WAS SOLD AND RESOLD TO OUT OF STATE REGIONAL AND NATIONAL INSTITUTIONS; WHILE OUR RELATIONSHIPS WITH OUR LOCAL BANKING CONTACTS REMAINED SOMEWHAT IN PLACE, IT WAS APPARENT TO US THE DECISIONS WHICH AFFECTED OUR COMPANY WERE ULTIMATELY MADE BY SOMEONE IN ANOTHER STATE WHO DID NOT KNOW US. WE LIVED WITH THIS BANKING SCENARIO FOR A NUMBER OF YEARS UNTIL MAKING THE DECISION TO BANK WITH COMMUNITY BANK & TRUST. OUR RELATIONSHIP WITH COMMUNITY WAS TRANSPARENT AND PROFESSIONAL FROM THE BEGINNING, AND HAS SERVED OUR COMPANY WELL. WE APPRECIATE AND ENJOY THE PERSONAL ATTENTION FROM THE STAFF AT COMMUNITY; BANKING WITH COMMUNITY WAS A GOOD BUSINESS DECISION FOR US.” STAN POE Standard Distribution Co. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 22 INVESTING IN THE CEDAR VALLEY AREA EMPLOYEE HOURS VOLUNTEERED IN 2013 QCR HOLDINGS, INC. 2013 ANNUAL REPORT 23 P E O P L E Y O U C A N B A N K O N . ® SENIOR MANAGERS Stacey J. Bentley President and Chief Executive Officer Shawna L. Buckley Vice President, Retail Banking Administration Manager Richard L. Jaacks Executive Vice President, Commercial Lending Mitchell L. West Senior Vice President, Wealth Management and Trust STACEY J. BENTLEY President and Chief Executive Officer, Community Bank & Trust QCR HOLDINGS, INC. 2013 ANNUAL REPORT 24 Let me take this opportunity to introduce the newest member of the QCR Holdings team. Our History. Community National Bank was founded in August of 1997 in Waterloo, Iowa. By Through dedicated hours of preparation, our staff and especially our clients persevered through the many changes of 2013. This has been a very busy year focused primarily on retaining client relationships. Today, Community Bank & Trust employs 41 staff members and currently has two locations in Waterloo and one location in Cedar Falls. Committed to our customers and our community. Yes, 2013 was a busy year with many changes but what didn’t change is our commitment to our customers and our community. Since the founding of our institution, our success has always been about genuinely connecting with our customers. Whether a customer is in the lobby or accessing their account on their computer, smart phone, or a tablet 2000, we had opened four locations in the Cedar in their business, we are committed to providing the same Valley. In 2001, we expanded into the Mason City, Iowa market and again into the Austin, Minnesota market in 2004. As of July 2012, we had grown to $269 million in assets, servicing three markets, eight locations and had over 90 employees. 2013 became an epic year in our bank’s history high quality experience backed by sincere personal service. Exceptional service has defined us from the very beginning and will continue to be our top priority. The reinvestment into our communities through charitable contributions, sponsorships and volunteerism is an expression of our longstanding belief in being not just a business presence, but also an active participant in the communities we call home. In 2013, our staff volunteered over 2,000 hours to organizations throughout the Cedar Valley. as we merged into QCR Holdings in May and later had the opportunity to sell our Mason City and Austin markets, allowing us to become more The resources to make a difference. Our partnership with QCR Holdings and Cedar Rapids Bank & Trust has enabled us to increase our resources, allowing us to take advantage of the technology, products, and services to advance in today’s focused on the Cedar Valley. October proved to market. In addition, building relationships with our employees be a busy month as we deconverted our Mason City and Austin markets and Community National Bank formally merged into Cedar Rapids Bank & Trust to become Community Bank & Trust. Keeping Community in our name and adding Trust was important to us in maintaining our propels the success in building relationships with our clients, shareholders and our community. This combination is a strong foundation for growth and success and will drive tangible results. Our Future: Big Opportunities. As we look to the future, we have the team in place to make a difference in the community in which we live, work and play in. Four of our past directors now serve on either the QCR Holding, Inc. Board of Directors or the Cedar Rapids Bank & Trust Board of Directors: presence in the Cedar Valley and solidifying that Michael Peterson, Robert Buckley, Jim Mudd Jr. and David we have the premier Trust department, managing over $208 million in assets. Mason. There is an unprecedented amount of opportunity ahead for both this year and the long term, as we look for opportunities for more growth utilizing the additional resources and enhanced products and services we are now able to offer. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 25 “WHEN WE WERE FACED WITH OUR TOUGHEST ECONOMIC CONDITIONS, ROCKFORD BANK & TRUST CONTINUED TO PARTNER WITH US AND CREATED TAILORED CLIENT BASED SOLUTIONS TO PROVIDE EXCELLENT SERVICE TO BRIDGE US TO BETTER YEARS. WE HAVE JUST COMPLETED A RECORD YEAR THAT WE NEVER COULD HAVE GOTTEN TO WITHOUT THE FINANCIAL BACKING OF ROCKFORD BANK & TRUST DURING THE RECENT INCREDIBLY CHALLENGING TIMES. AT ONSITE, WE CHOOSE TO PUT PEOPLE FIRST, AND OUR EXPERIENCE INDICATES THAT IS ROCKFORD BANK & TRUST’S PHILOSOPHY IN PRACTICE AS WELL. IT IS A TRIBUTE TO THE ROCKFORD BANK & TRUST CULTURE THAT EVERY PERSON WE HAVE COME INTO CONTACT WITH HAS PROVIDED EXCEPTIONAL SERVICE WITH A CHEERFUL “CAN DO” ATTITUDE. OUR SUCCESSES ARE SWEETER AND OUR SORROWS ARE EASED BY WORKING WITH FOLKS WHO HAVE ALWAYS GOT THEIR CLIENTS BEST INTERESTS AT THE CORE OF THEIR BUSINESS PHILOSOPHY. THIS HAS BEEN OUR EXPERIENCE WITH ROCKFORD BANK & TRUST FOR OVER 7 YEARS THAT THEY HAVE BEEN OUR BANKING PARTNER.” JOY PETERSON Secretary / Treasurer, ONSITE Woodwork Corporation QCR HOLDINGS, INC. 2013 ANNUAL REPORT 26 INVESTING IN ROCKFORD, ILLINOIS 1,530 EMPLOYEE HOURS VOLUNTEERED IN 2013 QCR HOLDINGS, INC. 2013 ANNUAL REPORT 27 P E O P L E Y O U C A N B A N K O N . ® DIRECTORS SENIOR MANAGERS THOMAS BUDD President and Chief Executive Officer, Rockford Bank & Trust Thomas D. Budd President and Chief Executive Officer Charles S. Bullock Executive Vice President, Chief Operating Officer Brian J. DeBenedetto Senior Vice President and Trust Manager Lori L. Diaz Senior Vice President, Treasury Management James M. Hansberry Executive Vice President, Wealth Management Anthony A. Moczynski Senior Vice President, Chief Credit Officer Brenda S. Nayonis Senior Vice President, Operations and Cashier Dale R. Shillady Senior Vice President, Business Development Karl R. Swanson Senior Vice President, Commercial Banking Thomas D. Budd President and Chief Executive Officer, Rockford Bank and Trust Company John D. Whitcher Chair of the Board, Rockford Bank and Trust Company / Vice President and General Counsel, Viking Chemical Company Michael A. Bauer Consultant, Co-Founder of QCR Holdings, Inc. Charles E. Box Former Chairman, Illinois Commerce Commission Former Mayor, Rockford, Illinois Charles S. Bullock Executive Vice President, Chief Operating Officer, Rockford Bank and Trust Company Rebecca L. Epperson President, PR Etc. Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer, QCR Holdings, Inc. Monica B. Glenny, CPA, CMA President, Datacraft, Inc. James P. Hamilton President, MRV Foundation Inc. Douglas M. Hultquist President and Chief Executive Officer, QCR Holdings, Inc. Dana S. Kiley, Jr. Vice President, Coyle-Varland Insurance Agency, Inc. George T. Ralph Vice Chair of the Board, Rockford Bank and Trust Company / Managing Member, GTR Realty Advisors, LLC M. Shawn Way President and Chief Executive Officer, Milestone, Inc. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 28 Rockford Bank & Trust was founded on the principles of serving our four main constituencies: Shareholders, Employees, Customers, and our Community. We know that rewarding our shareholders is our primary responsibility and that we can only be successful in that regard by our success in serving the other three constituencies. Community banks have always played an important role in Poverty in Rockford strikes children as well as adults. In 2013, supporting the communities in which they operate. In addition Rockford Bank & Trust committed to a multi-year pledge to the to it being the right thing to do, supporting the community Junior League of Rockford’s “Backpack Buddies” program in is also fundamentally a good business practice. While it may which hungry children are provided meals to take home from sound cliché’, it really is true that a community bank, like many school in their backpack. I’m proud of our staff for the many other businesses, can only succeed if the community it serves hours, commitment, and sacrifices they make to support our has a stable and vibrant environment. community’s many needs. During our history, Rockford Bank & Trust has supported Finally, during 2013, the Rockford community embarked on numerous organizations through donations, sponsorships, a multi-decade initiative plan known as Transform Rockford. and volunteerism. While we attempt to support as many The initiative seeks to involve all citizens and aspects of our worthy causes as possible, we have taken a special interest in community to come together and make transformational education and the development of our community’s children. changes to our community for the long term benefit of all. Rockford’s societal and economic viability is largely dependent The community banks in Rockford will play a vital role in on our preparation of the next generation. contributing time and talents to this transformation process. In 2013, we made a multi-year commitment to sponsor Transform Rockford and making a difference in this important a computer based financial literacy program that was journey for our community. Rockford Bank & Trust is committed to fully participating in implemented in Rockford’s four public high schools. For the fall 2013 semester, over 500 high school students were enrolled in the Rockford Bank & Trust Financial Scholars program. The program is one of the most successful in the state of Illinois. In addition to financial support, a number of our officers have volunteered their time in the elementary schools through the United Way’s iRead Program and Money Smart Week programs. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 29 “QUAD CITY BANK & TRUST HAS ALWAYS BEEN THERE WHEN WE NEEDED THEM. THEY HAVE BEEN OUR BEST SUPPORTER AND BUSINESS PARTNER. WHEN WE HAD A NEED FOR A LONG TERM EQUIPMENT LEASE THEY REFERRED US TO THEIR AFFILIATE, m2 LEASE FUNDS. WE WERE VERY PLEASED TO FIND THE SAME HIGH QUALITY, PERSONAL SERVICE WITH m2 THAT WE HAD BECOME ACCUSTOMED TO FROM QUAD CITY BANK & TRUST. I WOULD RECOMMEND BOTH m2 AND QUAD CITY BANK & TRUST HIGHLY TO ANYONE THAT WANTS A SOPHISTICATED SERVICE THAT IS DELIVERED ON A VERY PERSONAL AND KNOWLEDGEABLE BASIS.” ROLAND D. PULLEY, CFO PCT Engineered Systems, LLC QCR HOLDINGS, INC. 2013 ANNUAL REPORT 30 I N V E S T I N G I N O U R C O M M U N I T I E S 290EMPLOYEE HOURS VOLUNTEERED QCR HOLDINGS, INC. 2013 ANNUAL REPORT 31 m2m2m2m2Y O U N E E D A PA R T N E R Y O U C A N T R U S T. I T TA K E S 2 JOHN ENGELBRECHT Chief Executive Officer, m2 Lease Funds, LLC DIRECTORS AND SENIOR MANAGERS John R. Engelbrecht Chief Executive Officer, m2 Lease Funds, LLC Ron D. Orndorff Chair of the Board, m2 Lease Funds, LLC Retired Chairman and President, M&I Leasing Corporation John H. Anderson Director, m2 Lease Funds, LLC President and Chief Executive Officer, Quad City Bank and Trust Company Richard W. Couch President and Chief Operating Officer, m2 Lease Funds, LLC Michael A. Hatfield Vice Chair of the Board, m2 Lease Funds, LLC Retired Senior Vice President and Secretary, M & I - Marshall & Illsley Corporation Larry J. Helling Director, m2 Lease Funds, LLC President and Chief Executive Officer, Cedar Rapids Bank and Trust Company Mark R. Hogan Director, m2 Lease Funds, LLC Senior Advisor, BMO/Harris Bank Douglas M. Hultquist Director, m2 Lease Funds, LLC President and Chief Executive Officer, QCR Holdings, Inc. Christine D. Kennedy Chief Financial Officer, m2 Lease Funds, LLC William M. Tank Director, m2 Lease Funds, LLC Executive Vice President, Chief Credit Officer, QCR Holdings, Inc. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 32 By thinking locally, but acting nationally, m2 Lease Funds continues to differentiate itself from its peers. m2 Lease Funds was started in 1998 and became a How do we grow? We believe that the m2 business part of the QCR Holdings family in 2005. Today m2 model of providing quick and responsive turnarounds has over 3,500 leases located in virtually every state. in a simple and straight forward manner remains As an equipment leasing generalist, m2 leases all sound and for us to grow we only need to add more varieties of equipment. Currently the largest equipment “talent” to our Team. Unlike our sister bank’s goals of concentrations include manufacturing, technology, increasing market share in their local communities, marine, healthcare, packaging, transportation and m2 does business nationwide. m2 doesn’t have a local software. On the surface, banking and equipment leasing may appear to be very similar. However, each requires different expertise, skill sets and strategies. Although by asset size m2 Lease Funds is the smallest QCR Holdings entity, it is a material contributor to the overall Holding Company’s earnings. m2 provides higher returns and community to call home, so we expand by adding new employees nationally. In the past six months we have added 4 new business development officers. They are located in Pennsylvania, Florida, Illinois and another individual in Iowa. They join our other business producers in Wisconsin, Minnesota, Iowa, North Carolina and South Carolina. spreads and consequently provides a better return on 2013 was a good year for m2 as net income improved assets and equity than our sister banks. To best utilize by 8% to $3.6 million and assets increased more than QCRH’s capital resources, we believe that m2 should 25%, ending the year with assets of $136 million. New grow to be 10% of the Holding Company’s assets. This equipment purchases (equipment that we lease) were initiative began in mid-2013 and we are on our way to up over 40% from the preceding year. After tax return reaching that goal. It is our plan to reach the 10% goal on equity was 14.5% and return on assets was 2.13%. within four years. We are optimistic on the outlook for 2014. The strategy for 2014 and beyond is to add, grow, contribute strong earnings and repeat. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 33 Stock Price Year-End 2003 - 2013 $25 $20 $15 $10 $5 12.31.03 12.31.04 12.30.05 12.29.06 12.31.07 12.31.08 12.31.09 12.31.10 12.30.11 12.31.12 12.31.13 Total Deposits 2006 / 2013 December 31, 2006 - Total $875.5 MM Non Interest Bearing Demand $124.2 MM or 14% Interest Bearing Demand $334.0 MM or 38% CD's $417.3 MM or 48% Retail: $345.8 MM or 40% Brokered: $71.4 MM or 8% December 31, 2013 - Total $1,647.0 MM Non Interest Bearing Demand $542.6 MM or 33% Interest Bearing Demand $715.6 MM or 43% CD's $388.8 MM or 24% Retail: $326.9 MM or 20% Brokered: $61.9 MM or 4% QCR HOLDINGS, INC. 2013 ANNUAL REPORT 34 QCR Holdings, Inc. - Facility Map FACILITY STREET ADDRESS CITY Quad City Bank & Trust 2118 Middle Road Bettendorf Quad City Bank & Trust 4500 N. Brady Street Davenport Quad City Bank & Trust 3551 7th Street Moline Quad City Bank & Trust 5405 Utica Ridge Road Davenport Cedar Rapids Bank & Trust 500 First Avenue NE, Suite 100 Cedar Rapids Rockford Bank & Trust 308 W. State Street, Suite 100 Rockford Quad City Bank & Trust 1700 Division Street Davenport Cedar Rapids Bank & Trust 5400 Council Street NE Cedar Rapids STATE Iowa Iowa Illinois Iowa Iowa Illinois Iowa Iowa m2 Lease Funds, LLC 175 N. Patrick Blvd. Suite 140 Brookfield Wisconsin Rockford Bank & Trust 4571 Guilford Road Rockford Community Bank & Trust 422 Commercial Street Waterloo Community Bank & Trust 11 Tower Park Drive Waterloo Community Bank & Trust 312 W. 1st Street Cedar Falls Illinois Iowa Iowa Iowa * Former location ZIP 52722 52806 61265 52807 52401 61101 52804 52402 53045 61107 50701 50701 50613 DATE OPENED/ ACQUIRED ** Jan 1994 July 1996 Feb 1998 Oct 2000 July 2005 (Sept 2001*) Feb 2014 (Jan 2005*) Mar 2005 June 2005 August 2005 Nov 2006 May 2013 ** May 2013 ** May 2013 ** 1. 2. 3. 4. Quad City Bank & Trust (5 Locations) Cedar Rapids Bank & Trust (2 Locations) Community Bank & Trust (3 Locations) Rockford Bank & Trust (2 Locations) 5. m2 Lease Funds, LLC (1 Location) QCR HOLDINGS, INC. 2013 ANNUAL REPORT 35 QCR Holdings, Inc. Consolidated Financial Highlights As of December 31, 2013 December 31, 2012 (dollars in thousands, except share data) CONDENSED BALANCE SHEET Cash, federal funds sold, and interest-bearing deposits Amount $ 114,431 Securities Net loans/leases Core deposit intangible Goodwill Other assets Total assets Total deposits Total borrowings Other liabilities Total stockholders' equity Total liabilities and stockholders' equity SELECTED INFORMATION FOR COMMON STOCKHOLDERS' EQUITY Common stockholders' equity * Common shares outstanding ** Book value per common share * Tangible book value per common share *** Closing stock price Market capitalization Market price / book value Market price / tangible book value Tangible common equity **** / total tangible assets (TCE/TA) TCE/TA excluding accumulated other comprehensive income REGULATORY CAPITAL RATIOS: Total risk-based capital ratio Tier 1 risk-based capital ratio Tier 1 leverage capital ratio % 5% 29% 60% 0% 0% 6% Amount $ 110,488 602,239 1,267,462 - 3,223 110,318 % 5% 29% 61% 0% 0% 5% 697,210 1,438,832 1,870 3,223 139,387 $ 2,394,953 100% $ 2,093,730 100% $ 1,646,991 563,381 37,004 147,577 68% 24% 2% 6% $ 1,374,114 547,758 31,424 140,434 66% 26% 1% 7% $ 2,394,953 100% $ 2,093,730 100% $ 117,778 $ 87,271 7,884,462 $ 14.94 $ 14.29 $ 17.03 $ 134,272 4,918,202 $ 17.74 $ 17.08 $ 13.22 $ 65,019 114.00% 119.17% 4.71% 5.29% 12.99% 11.57% 8.04% 74.50% 77.39% 4.02% 3.80% 12.71% 11.27% 8.13% CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY 2013 2012 For the year ended December 31, Beginning balance Net income Other comprehensive income (loss), net of tax Preferred and common cash dividends declared Issuance of 834,715 shares of common stock for acquisition of CNB, net Redemption of 10,223 shares of Series F Preferred Stock (SBLF) Purchase of noncontrolling interest Other ***** Ending balance $ 140,434 $ 144,433 14,938 (18,351) (3,627) 13,017 - - 1,166 13,106 (48) (3,877) - (10,223) (4,782) 1,825 $ 147,577 $ 140,434 Includes accumulated other comprehensive income. * Includes accumulated other comprehensive income **Increase is mostly the result of shares issued for conversion of Series E Preferred Stock (2,057,502 shares at $12.15/share) and acquisition of CNB (834,715 shares) ***Includes accumulated other comprehensive income and excludes intangible assets ****Tangible common equity is defined as total common stockholders' equity excluding equity of noncontrolling interests and excluding goodwill and other intangibles. This ratio is a non-GAAP financial measure. The Company's management believes that this measure is important to many investors in the marketplace who are interested in changes period to period in common equity exclusive of changes in intangible assets. Increase is mostly the result of shares issued for conversion of Series E Preferred Stock (2,057,502 shares at $12.15/share) and acquisition of CNB (834,715 shares). Includes accumulated other comprehensive income and excludes intangible assets. Tangible common equity is defined as total common stockholders’ equity excluding equity of noncontrolling interests and excluding goodwill and other intangibles. This ratio is a non-GAAP financial measure. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in changes period to period in common equity exclusive of changes in intangible assets. *****Includes mostly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation. * * ** ** *** *** **** **** ***** ***** Includes mostly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 36 QCR Holdings, Inc. Consolidated Financial Highlights For the Year Ended December 31, 2013 December 31, 2012 (dollars in thousands, except per share data) CONDENSED INCOME STATEMENT Amount Amount % Change Interest income Interest expense Net interest income Provision for loan/lease losses Net interest income after provision for loan/lease losses Noninterest income Noninterest expense Net income before taxes Income tax expense Net income $ 81,872 $ 77,376 17,767 64,105 5,930 58,175 25,814 64,433 19,556 4,618 19,727 57,649 4,371 53,278 16,621 52,259 17,640 4,534 $ 14,938 $ 13,106 Less: Net income attributable to noncontrolling interests - 488 Net income attributable to QCR Holdings, Inc. $ 14,938 $ 12,618 Less: Preferred stock dividends 3,168 3,496 Net income attributable to QCR Holdings, Inc. common stockholders $ 11,770 $ 9,122 Earnings per share attributable to QCR Holdings, Inc.: Basic Diluted $ 2.13 $ 1.88 $ 2.08 $ 1.85 Weighted average common shares outstanding Weighted average common and common equivalent shares outstanding 5,531,948 5,646,926 4,844,776 4,919,559 6% -10% 11% 36% 9% 55% 23% 11% 2% 14% -100% 18% -9% 29% 13% 12% AVERAGE BALANCES Assets Loans/leases Deposits Total stockholders' equity Common stockholders' equity KEY PERFORMANCE RATIOS Return on average assets *** Return on average common equity ** Return on average total equity *** Price earnings ratio LTM * Net interest margin (TEY) Nonperforming assets / total assets Net charge-offs / average loans/leases Allowance / total loans/leases **** Allowance / nonperforming loans **** Efficiency ratio Full-time equivalent employees ***** $ 2,330,604 $ 2,025,691 $ 1,425,364 $ 1,219,623 $ 1,594,939 $ 1,310,360 $ 145,906 $ 141,793 $ 102,525 $ 84,159 0.64% 11.48% 10.24% 8.00 x 3.03% 1.28% 0.31% 1.47% 104.70% 71.66% 400 0.62% 10.84% 8.90% 7.07 x 3.14% 1.41% 0.27% 1.55% 78.47% 70.36% 356 * LTM: Last twelve months ** The numerator for this ratio is "Net income attributable to QCR Holdings, Inc. common stockholders" *** The numerator for this ratio is "Net income attributable to QCR Holdings, Inc." **** Upon acquisition per GAAP, the acquired loans are recorded at market value which eliminated the allowance and impacts these ratios. ***** Community Bank & Trust had 41 full-time equivalent employees at December 31, 2013. * LTM: Last twelve months ** The numerator for this ratio is “Net income attributable to QCR Holdings, Inc. common stockholders” *** The numerator for this ratio is “Net income attributable to QCR Holdings, Inc.” **** Upon acquisition per GAAP, the acquired loans are recorded at market value which eliminated the allowance and impacts these ratios. ***** Community Bank & Trust had 41 full-time equivalent employees at December 31, 2013. QCR HOLDINGS, INC. 2013 ANNUAL REPORT 37 QCR Holdings, Inc. Consolidated Financial Highlights As of December 31, 2013 December 31, 2012 (dollars in thousands) ANALYSIS OF LOAN DATA Nonaccrual loans/leases Accruing loans/leases past due 90 days or more Troubled debt restructures - accruing Other real estate owned Other repossessed assets Amount $ 17,878 84 2,523 9,729 346 % 59% 0% 8% 32% 1% Amount $ 17,932 159 7,300 3,955 212 % 60% 1% 25% 13% 1% Total nonperforming assets $ 30,560 100% $ 29,558 100% Net charge-offs (calendar year-to-date) $ 4,408 $ 3,235 Loan/lease mix: Commercial and industrial loans $ 431,688 Commercial real estate loans Direct financing leases Residential real estate loans Installment and other consumer loans Deferred loan/lease origination costs, net of fees 671,753 128,901 147,356 76,034 4,548 30% 46% 9% 10% 5% 0% $ 394,244 593,979 103,686 115,582 76,720 3,176 31% 46% 8% 9% 6% 0% Total loans/leases $ 1,460,280 100% $ 1,287,387 100% Less allowance for estimated losses on loans/leases 21,448 19,925 Net loans/leases $ 1,438,832 $ 1,267,462 ANALYSIS OF SECURITIES DATA Securities mix: U.S. government sponsored agency securities $ 356,473 180,361 157,429 2,947 51% 26% 23% 0% $ 338,609 97,615 163,601 2,414 57% 16% 27% 0% $ 697,210 100% $ 602,239 100% Noninterest-bearing demand deposits $ 542,566 715,643 326,852 61,930 33% 43% 20% 4% $ 450,660 587,201 290,933 45,320 33% 43% 21% 3% $ 1,646,991 100% $ 1,374,114 100% Municipal securities Residential mortgage-backed and related securities Other securities Total securities ANALYSIS OF DEPOSIT DATA Deposit mix: Interest-bearing demand deposits Time deposits Brokered time deposits Total deposits ANALYSIS OF BORROWINGS DATA Borrowings mix: FHLB advances Wholesale structured repurchase agreements Customer repurchase agreements Federal funds purchased Junior subordinated debentures Other Total borrowings $ 12,448 563,381 $ 231,350 130,000 98,823 50,470 40,290 41% 23% 18% 9% 7% 2% 100% $ 202,350 130,000 104,943 66,140 36,085 $ 8,240 547,758 QCR HOLDINGS, INC. 2013 ANNUAL REPORT 37% 24% 19% 12% 7% 1% 100% 38 QCR Holdings, Inc. Consolidated Financial Highlights ANALYSIS OF NET INTEREST INCOME AND MARGIN December 31, 2013 December 31, 2012 For the Year Ended Average Balance Interest Earned or Paid Average Yield or Cost Average Balance Interest Earned or Paid Average Yield or Cost Securities * Loans * Other $ 700,344 $ 16,140 1,425,364 74,570 67,484 853 Total earning assets * $ 2,200,278 $ 84,477 Deposits Borrowings $ 1,076,533 $ 4,715 552,776 13,052 Total interest-bearing liabilities $ 1,629,309 $ 17,767 Net interest income / spread * Net interest margin * $ 66,710 (dollars in thousands) 2.30% 4.73% 1.14% 3.84% 0.44% 2.36% 1.09% 2.75% 3.03% $ 603,568 $ 14,268 1,219,623 73,009 64,100 891 $ 1,896,200 $ 79,259 $ 898,321 $ 6,219 545,080 13,508 $ 1,443,401 $ 19,727 $ 59,532 2.36% 5.26% 1.22% 4.18% 0.69% 2.48% 1.37% 2.81% 3.14% * Includes nontaxable securities and loans. Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 34% tax rate for each period presented. For the Year Ended ANALYSIS OF NONINTEREST INCOME December 31, 2013 December 31, 2012 % Change Trust department fees Investment advisory and management fees Deposit service fees Gain on sales of residential real estate loans Gain on sales of government guaranteed portions of loans Earnings on cash surrender value of life insurance Credit card fees, net of processing costs Subtotal Bargain purchase gain on CNB acquisition Gains on sales of certain Community National Bank branches Losses on other real estate owned, net Securities gains Other ** Total noninterest income ANALYSIS OF NONINTEREST EXPENSE Salaries and employee benefits Occupancy and equipment expense Professional and data processing fees FDIC and other insurance Loan/lease expense Advertising and marketing Postage and telephone Stationery and supplies Bank service charges Subtotal Acquisition and data conversion costs Other-than-temporary-impairment losses on securities Other Total noninterest expense ** Following is a detailed breakdown of Other Noninterest Income: Gain on sale of credit card loan portfolio Gain on sale of credit card issuing operations Gain on sale of certain nonperforming loans Gain on sale of equity interest Debit card fees Fees on interest rate swaps on commercial loans Miscellaneous TOTAL $ 4,942 $ 3,632 (dollars in thousands) 2,580 4,267 836 2,149 1,786 175 2,361 3,486 1,388 1,070 1,609 599 $ 16,735 $ 14,145 1,841 2,334 (545) 432 5,017 - - (1,333) 105 3,704 $ 25,814 $ 16,621 $ 37,510 $ 33,275 6,712 6,425 2,587 1,522 1,727 1,069 562 1,145 5,635 4,318 2,331 1,042 1,445 960 541 854 $ 59,259 $ 50,401 2,353 - 2,821 - 62 1,796 $ 64,433 $ 52,259 $ 495 $ - 355 576 - 992 105 - - 580 951 616 $ 2,494 5,017 $ 1,557 3,704 36% 9% 22% -40% 101% 11% -71% 18% 100% 100% -59% 311% 35% 55% 13% 19% 49% 11% 46% 20% 11% 4% 34% 18% 100% -100% 57% 23% 100% 100% 100% -100% 4% -83% 60% 35% QCR HOLDINGS, INC. 2013 ANNUAL REPORT 39 stock listing information The common stock of QCR Holdings, Inc. is traded on the NASDAQ Global Market under the symbol QCRH. COMMON STOCK Calendar 2013 High Low 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Calendar 2012 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Calendar 2011 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter $ 18.20 $ 15.65 16.51 16.50 16.96 High 14.96 13.18 13.05 Low $ 15.50 $ 11.40 14.98 14.50 12.45 High 12.62 10.70 8.50 Low $ 9.23 $ 8.42 9.93 9.47 8.67 8.70 7.29 7.22 DIVIDEND INFORMATION Record Date Payment Date Amount Per Share 12.20.13 06.21.13 12.22.12 06.21.12 12.26.11 06.23.11 01.07.14 07.08.13 01.07.13 07.06.12 01.06.12 07.07.11 $ .04 .04 .04 .04 .04 .04 Annual Meeting of Stockholders Corporate Counsel The Annual Meeting of the Stockholders of QCR Holdings, Inc. will be held: May 14, 2014 at 10:00 am St. Ambrose University - Rogalski Center 2100 North Ripley Street Davenport, IA 52803 Annual Report on Form 10-K Copies of the QCR Holdings, Inc. annual report on Form 10-K and exhibits filed with the Securities and Exchange Commission (SEC), are available to stockholders without charge by accessing our internet site at www.qcrh.com or by writing: John R. Oakes 1st Vice President, Controller and Director of Financial Reporting QCR Holdings, Inc. 3551 Seventh Street Moline, IL 61265 309.743.7761 The SEC maintains an internet site that contains reports, proxy, and information statements and other information about issuers that file electronically with the SEC. The address of that site is: www.sec.gov. Stock Transfer Agent Inquiries regarding stock transfer, registration, lost certificates, or changes in name and address should be directed to the stock transfer agent and registrar by writing: ist Shareholder Services 433 S. Carlton Avenue Wheaton, IL 60187 Investor Information Stockholders, investors, and analysts interested in additional information may contact: Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer QCR Holdings, Inc. 3551 Seventh Street Moline, IL 61265 309.743.7745 Independent Registered Public Accounting Firm McGladrey LLP, Davenport, IA Lane & Waterman, Davenport, IA Barack Ferrazzano Kirschbaum & Nagelberg LLP, Chicago, IL Quad City Bank & Trust Locations 2118 Middle Road Bettendorf, IA 52722 4500 N. Brady Street Davenport, IA 52806 3551 Seventh Street Moline, IL 61265 5405 Utica Ridge Road Davenport, IA 52807 1700 Division Street Davenport, IA 52804 Cedar Rapids Bank & Trust Locations 500 First Avenue NE, Suite 100 Cedar Rapids, IA 52401 5400 Council Street NE Cedar Rapids, IA 52402 Community Bank & Trust Locations 422 Commercial Street Waterloo, IA 50701 11 Tower Park Drive Waterloo, IA 50701 312 W. 1st Street Cedar Falls, IA 50613 Rockford Bank & Trust Locations 308 W. State Street, Suite 100 Rockford, IL 61101 4571 Guilford Road Rockford, IL 61107 m2 Lease Funds, LLC 175 N. Patrick Blvd., Suite 140 Brookfield, WI 53045 Internet Information Information on subsidiaries’ history, locations, products and services can be accessed on the internet at: www.qcbt.com www.crbt.com www.communitybt.com www.rkfdbank.com www.m2lease.com QCR HOLDINGS, INC. 2013 ANNUAL REPORT 40 

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