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Texas Capital BancsharesWe make financial dreams a reality. 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. Since the founding of our Company in 1993, we have continually focused on being the “Relationship Driven Organization®” that is the heart of our QCR Holdings, Inc. business model, a business model that provides each QCR Holdings entity with the autonomy to tailor products, services and decisions unique to the clients and communities that it serves. Further supporting our local Community Banks is a Board of Directors at each banking charter and m2 that consists of community leaders who share this drive to make a difference to our clients and the communities in which they live and work. By staying true to our business model of delivering local decisions that impact clients and communities, and delivering support services that do not directly impact clients in a centralized and efficient manner, we have allowed Quad City Bank & Trust, Cedar Rapids Bank & Trust, Rockford Bank & Trust, and Community Bank & Trust to create a strong “Community Bank” brand in their respective markets and to become the bank of choice for clients that value a strong relationship with their bank. Each member of our QCR Holdings team will continue to focus on creating meaningful and lasting relationships with our clients as we work hard to create significant long-term value for our shareholders. Each of our clients “need” something different from their banking relationship. Our local bankers in the Quad Cities, Cedar Rapids, Rockford, and Waterloo/ Cedar Falls communities are empowered to tailor products, services and decisions to the clients and communities that they serve, creating the customized “relationship based” service that drives our Company. Each member of the QCR Holdings, Inc. team has the experience and talent to build strong relationships with our clients, to understand their unique hopes, challenges and opportunities, and to bring them decisions and solutions that help them achieve their financial dreams. Serving the needs of our Clients and the Communities in which we live and work by developing strong 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. Our local bankers and our leasing subsidiary, m2 Lease Funds, 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 member Community Banks to possess the resources of a much larger financial institution. 1 2015 2015 2015 2015 A MESSAGE FROM OUR CHAIRMAN It is with a great deal of satisfaction and pride that I write my final Annual Chairman’s message to shareholders. After twenty two years as a director of Quad City Bank & Trust, nineteen years as a director of QCR Holdings, Inc., including the past nine years as Chairman, I will retire from my role as Chairman of the QCR Holdings Board at the time of the Annual Meeting in May 2016. In order to assist the new Chair in an orderly transition, I will remain on the QCR Holdings Board for one year until my complete retirement in May 2017. However, the community bank model we affectionately call QCR Holdings is much more than one individual or group of individuals. All of our constituents including you, our shareholders, all of our clients and customers, and all of our employees who serve our communities, make this company what it is today. Our Company is in great hands for the future. As I think back to the origins of QCR Holdings when Mike Bauer and Doug Hultquist asked me to be one of the original investors and to serve on the board of Quad City Bank & Trust, I have to say from the very beginning I knew that a new community bank in the Quad Cities would be a successful venture. The timing, the capital we raised from our shareholders, and most of all, the talented people we assembled to start this Company, was way beyond any successful measure. That talented management team was able to duplicate this same successful community bank concept with new opportunities and excellent timing, additional capital from you our shareholders, and above all, top notch management and employees in Cedar Rapids, Iowa and Rockford, Illinois. Our acquisition of m2 Lease Funds and Community National Bank in Waterloo, Iowa complimented our community bank financial model. Yes, the past 22 years of QCR Holdings has been by most all measures wildly successful. In fact, the balance sheet restructuring we accomplished in 2015 has paved the way for even more significant growth and success in the future. Much of our future growth will come from within our current markets but we are also searching for opportunities to expand our community bank concept to other favorable geographies. 2015 was yet another in a run of successful years in the history of QCR Holdings. None of this would have been possible without the talented management team and all the employees of QCR Holdings. I thank all of them and will cherish the many relationships I was able to develop over the years. To you, our shareholders, I express continued thanks for investing in our company. Like you, as a shareholder, I will continue to keep a watchful eye on the performance of QCR Holdings. We have had a great past together. Trust me, the best is yet to come! James J. Brownson Chairman of the Board, QCR Holdings, Inc. Summary of Financial Results 2011 - 2015 (IN THOUSANDS) Net interest income Non-interest income Non-interest expense 2011 2012 2013 2014 2015 $54,145 $57,649 $64,105 $69,071 $76,296 19,085 18,953 26,846 21,158 24,530 (52,616) (54,591) (65,465) (65,430) (73,358) Pre-tax pre-provision net income 20,614 22,011 25,486 24,799 27,468 Provision for loan/lease losses (6,616) (4,371) (5,930) (6,807) (6,871) Net income before taxes 13,998 17,640 19,556 17,992 20,597 Income taxes Net income (3,868) (4,534) (4,618) (3,039) (3,669) 10,130 13,106 14,938 14,953 16,928 Less: net income attributable to non controlling interests 438 488 - - - Net income attributable to QCR Holdings, Inc. $9,692 $12,618 $14,938 $14,953 $16,928 Book Value vs. Fair Market Value COMMON STOCK (IN MILLIONS) Total Metropolitan Statistical Area Deposits (JUNE 30, 2015) (IN THOUSANDS) $8,000,000 $5,000,000 $2,000,000 FAIR MARKET VALUE BOOK VALUE $300 $200 $100 $0 . 3 9 C E D . 3 0 C E D . 3 1 C E D . 4 1 C E D . 5 1 C E D Population (July 1, 2014) , 4 8 4 5 4 5 7 $ , , 5 2 7 3 8 4 5 $ , , 3 1 9 8 1 6 5 $ , , 0 4 6 4 1 1 3 $ , s e i t i C d a u Q 0 0 0 4 8 3 , i s d p a R r a d e C 0 0 0 6 6 2 , y e l l a V r a d e C 0 0 0 1 7 1 , d r o f k c o R 0 0 0 0 4 3 , Asset Growth (IN THOUSANDS) $350,000 $175,000 , 5 7 9 9 2 1 $ 1 1 0 2 , 0 2 1 7 2 1 $ 2 1 0 2 , 3 2 2 1 0 3 $ * 3 1 0 2 , 5 0 0 0 3 1 $ 4 1 0 2 , 0 4 2 8 6 $ 5 1 0 2 * Includes acquisition of Community National Bank 3 TO OUR SHAREHOLDERS 2015 marked a great year of change and significant progress for QCR Holdings, Inc. We look much differently today than we did a year ago. The Company successfully executed several planned initiatives aimed at improving the long-term profitability of the Company and strengthening its capital base to take advantage of future opportunities. As will be outlined in the following pages of our Annual Report, our 2015 financial results reflect record earnings across all of our entities. We continue to believe that the model we are proud to call “The Local Community Bank Advantage” still differentiates us in our market places. Throughout the year, we welcomed new clients who came to our doors seeking the exceptional, personalized service and advice that our over 400 employees work so very hard to deliver. At QCR Holdings, we believe that banking will always be a relationship business and we need to do all we can to identify how best to develop that relationship so that it can work most effectively. There is no denying that technology is reshaping banking today and we are committed to being competitive in that space. We made several technology investments in 2015 to do just that, and will continue to do so. While we recognize a hand-held device is essential in today’s world, we still maintain that nothing can replace the handshake when it comes to the placement of your valuable assets. Our model works because it is delivered locally by people that are not only talented bankers, but by bankers who are also talented in many other aspects of life. Our entire work force donated over 19,710 hours to local non-profit organizations in 2015 – lending their time and expertise to those less fortunate than themselves. Each of our communities is stronger thanks to their efforts and for that, and their excellent work in 2015, we thank each of them. 2015 HIGHLIGHTS AND RESULTS SUCCESSFUL PUBLIC COMMON STOCK OFFERING IN MAY The Company identified six strategic objectives in conjunction with the common stock offering: 1. Bolster capital ratios and bring Tangible Common Equity (TCE) more in line with industry peers 2. Restructure funding to improve net interest margin 3. 4. Significantly shorten the time period to achieve the targeted 1.0% Return on Average Assets (ROAA) Better position the Company to identify and cultivate accretive M&A opportunities 5. Attract additional institutional investors 6. Improve liquidity in the stock and potentially enhance trading performance On May 13, 2015, the Company was pleased to announce the closing of an underwritten public offering of 3,680,000 shares of its common stock at a price of $18.25 per share. The net proceeds to the Company, after deducting the underwriting discount and offering expenses, totaled $63.5 million. As a result of the successful execution of the capital raise, we have made great progress on each of the strategic objectives identified above: Capital Ratios - As of March 31, 2015, the Company’s total risk- based capital was 10.30%, the common equity tier 1 ratio was 7.24% and the tangible common equity to tangible assets ratio was 5.88%. As of December 31, 2015, these ratios improved to 13.11%, 10.33% and 8.55% respectively. Net Interest Margin - Net interest margin for the twelve months ended December 31, 2015 was 3.37% versus 3.15% at December 31, 2014. Return on Average Assets (ROAA) - Core ROAA has improved significantly from 0.48% to 0.96% for the quarters ending December 31, 2014 and December 31, 2015, respectively. M&A - We continue to actively evaluate accretive M&A opportunities. Institutional Ownership - We welcomed 42 new institutional investors with the May offering. As a result, QCR Holdings, Inc. has grown from 19% institutional ownership at the end of 2014, to 49% at the end of 2015. Liquidity in Stock - Average trading volume in QCRH stock has improved (7,600 average daily trading volume in 2014 to 31,700 in 2015). Additionally, we have seen a significant increase in stock price with the closing stock price at December 31, 2014 of $17.86 improving to $24.29 at December 31, 2015. 4 CONSOLIDATED EARNINGS (in thousands) Quad City Bank & Trust * Cedar Rapids Bank & Trust Rockford Bank & Trust Parent Co. & Eliminations ** Consolidated Earnings * Includes m2 Lease Funds. ** Includes earnings from CNB and all other acquisition related activity. 2012 $ 10,732 5,881 593 (4,588) $ 12,618 2013 $ 10,273 6,736 1,579 (3,650) 2014 $ 10,451 8,006 1,877 (5,381) 2015 $ 11,762 8,108 2,189 (5,131) $ 14,938 $ 14,953 $ 16,928 PROCEEDS FROM STOCK OFFERING USED TO RESTRUCTURE BALANCE SHEET SECOND QUARTER 2015 GAINS RECOGNIZED ON DEBT EXTINGUISHMENT IN FOURTH QUARTER 2015 AND JANUARY 2016 A key component of our improved financial results for 2015 was the careful execution of our strategy to repay high-cost borrowings. The Company used the proceeds from the common stock offering to restructure certain debt obligations and to bolster overall capital levels, including tangible common equity. Specifically, the Company repaid $15.3 million of holding company senior debt at a rate of 3.27%, and $2.7 million of subordinated debt at a rate of 6.00%. Additionally, $85.5 million of FHLB advances and wholesale structured repurchase agreements at a weighted average rate of 4.36% were prepaid at Quad City Bank & Trust and Cedar Rapids Bank & Trust. As a result of this planned restructuring, the Company incurred $6.9 million (pre-tax) in losses for debt extinguishment that were recognized in the second quarter. Of the $103.5 million in debt extinguishment, $63.5 million was funded with the proceeds from the common stock issuance. Approximately $27.7 million was funded through the maturity of low-yielding securities. Brokered CDs and overnight FHLB advances were utilized to fund the remaining $12.3 million. The weighted average rate on these new borrowings was approximately 0.90%. The actual results of the Company’s planned balance sheet restructuring significantly exceeded our initial assumptions that were presented during the capital raise. Due to the very successful capital raise and strong liquidity at Quad City Bank & Trust, only 12% of the debt extinguished was replaced with new debt. As a result, the margin improvements were better than anticipated and the earnback on the transaction is expected to be less than two years. In December 2015, the Company extinguished $2.1 million of the QCR Holdings Capital Trust II subordinated debentures and recorded a $300 thousand gain on extinguishment (pre-tax), as the Company was able to acquire the related security at a discount through auction. In January 2016, the Company was provided an additional opportunity to retire all of its $5.1 million QCR Holdings Capital Trust IV junior subordinated debentures and recorded a $1.2 million gain on extinguishment (pre-tax), as the Company was able to acquire the related security also at a discount, through auction. ADDITIONAL BALANCE SHEET RESTRUCTURING IN FOURTH QUARTER 2015 AND JANUARY 2016 As a result of the one-time gains realized by the Company and described above, management executed two additional balance sheet restructuring transactions. In the fourth quarter of 2015, additional balance sheet restructuring took place at Rockford Bank & Trust, in which $8.0 million of wholesale borrowings were prepaid at a weighted average interest rate of 3.66%. The Company incurred a $591 thousand (pre-tax) loss and the restructuring is expected to reduce interest expense by $252 thousand annually. In January 2016, the Company executed additional balance sheet restructuring at Quad City Bank & Trust and Cedar Rapids Bank & Trust, which included the repayment of $20.0 million of wholesale borrowings with a weighted average interest rate of 3.92%. The Company incurred a $1.3 million (pre-tax) loss that was recognized in the first quarter of 2016 and is expected to reduce interest expense by $683 thousand annually. 5 2015 OVERALL FINANCIAL RESULTS 2015 was a very good year for us as we reported record earnings despite continued headwinds felt from the uncertain economy and intense in-market competition. For the year ended December 31, 2015, net income attributable to QCR Holdings Inc. was $16.9 million, resulting in diluted earnings per share of $1.61. For the same period in 2014, we reported net income of $14.9 million, or diluted earnings per share of $1.72 after preferred stock dividends of $1.1 million. For the year ending December 31, 2015, the Company reported core net income (non-GAAP) of $20.9 million, with diluted core EPS of $1.99. Core net income for the year excludes a number of non-recurring items, most significantly $4.9 million of after-tax non-recurring expenses related to the prepayment of wholesale borrowings. Our core return on average assets (“ROAA”) has improved significantly from a year ago. Core ROAA was 0.96% for the fourth quarter. By comparison, core ROAA was 0.48% for the quarter ending December 31, 2014. We have nearly achieved our targeted ROAA of 1.00% and we plan to continue to improve profitability through our other stated initiatives. We have had solid success growing loans and leases in 2015, with growth of $168.0 million since December 31, 2014, resulting in a 10.3% growth rate. These results were driven by our employees’ dedication to growing loans and leases and improving the Company’s balance sheet mix, resulting in improved returns for our shareholders. This solid growth has continued to help us move our loan and lease to total asset ratio upward to 69% from 65% one year ago. We intend to keep increasing this ratio as we rotate out of securities and into loans and leases, with a goal of growing loans and leases to more than 70% of total assets. Swap fee income and gains on the sale of government guaranteed loans were strong in 2015, totaling $3.0 million. It is our intention to continue our emphasis on these types of transactions as they provide unique solutions for our clients. Our goal is to grow this line of income to a combined $4.0 million annually in 2016. In 2015 we successfully expanded net interest income to $76.3 million for the year ended December 31, 2015, which represents an increase of 10% over the prior year. Net interest margin for the twelve months ending 2015 finished at 3.37% versus 3.15% for the same period in 2014. Nonperforming loans and leases at December 31, 2015 were $11.7 million, a reduction of $8.4 million (42%) from December 31, 2014. In addition, the ratio of nonperforming assets (“NPAs”) to total assets finished 2015 at 0.74%, down from 1.31% at the end of 2014. 6 We remain committed to a strong capital position – not only with regard to total capital, but with regard to mix and cost as well. Comparing December 31, 2014 to December 31, 2015, the Company’s TCE ratio has grown from 5.52% to 8.55%; while at the same time, tangible book value has increased from $17.50 per share to $18.81 per share. Our capital plan is consistent with the requirements of the new regulatory capital guidelines that went into effect for the reporting period ending March 31, 2015 under Basel III. QCR HOLDINGS, INC. STRATEGIC ADVANTAGES During 2015, we continued to build lasting client relationships across all of our lines of business. Working to become dream makers for our clients continues to be at the core of the work that we do. We will continue to invest wisely in our people, products and technology as we look for opportunities for further growth. We will also continue to collaborate and leverage opportunities across our entire Company to maximize shareholder value at every opportunity. We continued to expand resources in the niches below: CORRESPONDENT BANKING DIVISION The Correspondent Banking Division at Quad City Bank & Trust continues to seize opportunities to deliver exceptional customer service to downstream banks in Illinois, Iowa and Wisconsin. During 2015, we were able to increase the total number of banks we serve to 172 with an average weighted balance of $343 million in total noninterest bearing deposits at December 31, 2015. This compares to an average weighted balance of $290 million at December 31, 2014. Our veteran team of bankers provides many layers of expertise in areas such as trust and investment services and loans and leases. WEALTH BUILDERS DIVISION The expertise found across our Company in our Wealth Builders Division is a significant competitive advantage. Being able to serve our clients with a continuum of services is crucial to deepening relationships. With offerings in Trust, Investments, Financial Planning, and Family Office, we create non-interest income for our banks and provide great opportunities for cross selling as well. In 2015, assets under management totaled $2.3 billion and our veteran staff added 325 new relationships. m2 LEASE FUNDS m2 Lease Funds is a wholly owned subsidiary of Quad City Bank & Trust. Leasing is an attractive option for many small and medium sized businesses and m2 prides itself on being easy to do business with (a two page lease agreement written in plain English). 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 has a high yielding portfolio that averaged 8.2% in 2015. Income has grown at a 21% CAGR since 2006. LIVING THE BRAND OUR STRATEGIC DIRECTION FOR 2016 AND BEYOND We continue to believe our people are the key differentiator in each of our markets. As such, one measure of employee performance is 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 BANK ENTITY Quad City Bank & Trust – Under the leadership of President and CEO, John Anderson, the Company’s first subsidiary bank (1994), reported total consolidated assets of $1.3 billion at December 31, 2015. The bank continues to have success in growing its Correspondent Banking and Wealth Management businesses as outlined above. Quad City Bank & Trust realized record net income of $11.8 million for the year ended December 31, 2015, which compares to $10.5 million in 2014. Cedar Rapids Bank & Trust – President and CEO Larry Helling, one of the founders of Cedar Rapids Bank & Trust (2001) led his team to record net income of $8.1 million for the year ended December 31, 2015, which was a $102 thousand increase over 2014. Total assets at December 31, 2015 finished at $867 million, up 3% or $27 million from the end of 2014. Included in the growth of revenue and assets for Cedar Rapids Bank & Trust is Community Bank & Trust, located in Waterloo and Cedar Falls. Community Bank & Trust’s three banking locations were merged with Cedar Rapids Bank & Trust in the fourth quarter of 2013. 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 President and CEO, Tom Budd, Rockford Bank & Trust (2005) reported record net income for the year ended 2015 of $2.2 million. By comparison, the bank reported net income of $1.9 million in 2014. Total assets finished the year at $367 million, which was an increase of $14 million, or 4% over 2014. In its 11th year of operation, Rockford Bank & Trust increased net interest margin from 3.31% in 2014 to 3.41% at the end of 2015. The Company continues to focus on the following stated initiatives in an effort to improve profitability and drive increased shareholder value: • • • • • • • Grow loans and leases to more than 70% of assets Continue to reduce wholesale funding to less than 15% of assets Grow gains on the sale of USDA and SBA loans, and fee income on swaps, to a more significant and consistent component of core revenue Grow wealth management net income by 15% annually Eliminate identified noninterest expenses and manage annual expense growth Return asset quality metrics to better than peer levels Participate as an acquirer in the consolidation taking place in our markets to further boost ROAA, improve efficiency ratio and increase EPS During 2015 we built on many strategies that will position us for 2016 and beyond. The Strategic Leadership Team of Doug Hultquist, Todd Gipple, John Anderson, Larry Helling, Tom Budd and Cathie Whiteside held in-person meetings with all employees (at each location) in early March 2016. At these meetings a refreshed QCR Holdings, Inc. Mission was rolled out: We make financial dreams a reality. We believe our team is focused on doing whatever it takes to “Be Exceptional” – no matter what their role and no matter the location of the entity where they happen to reside. Our thanks goes to each and every member of our Company for their passion and commitment that has led to our growth over the past 22 years. Our work is further supported by dedicated local Board members in each of our communities. These community leaders are very passionate about our vision and we recognize that we would not have achieved the successes through 2015 without their significant commitment of time and expertise. We look forward to helping our clients realize their financial dreams – it’s what we do at our Community Banks, and what we do locally. We are a Relationship Driven Organization® and truly believe we can make a difference doing just that. Douglas M. Hultquist President and Chief Executive Officer, Co-Founder, QCR Holdings, Inc. Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer, QCR Holdings, Inc. 7 QCR HOLDINGS, INC. Board of Directors Douglas M. Hultquist President and Chief Executive Officer, Co-Founder, QCR Holdings, Inc. James J. Brownson Chair of the Board, QCR Holdings, Inc. President, W.E. Brownson Co. Patrick S. Baird Vice Chair of the Board, QCR Holdings, Inc Retired President and Chief Executive Officer, AEGON USA, LLC Lindsay Y. Corby Chief Financial Officer, Byline Bank Larry J. Helling President and Chief Executive Officer, Cedar Rapids Bank and Trust John-Paul E. Besong Retired Executive, Rockwell Collins Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer, QCR Holdings, Inc. Mark C. Kilmer President, The Republic Companies 8 Linda K. Neuman Founder and Principal, Iowa Arbitrators Associate Justice, Iowa Supreme Court (Retired) Michael L. Peterson President and Owner, Peterson Genetics, Inc. Ronald G. Peterson Retired Executive, First State Bank of Illinois George T. Ralph Owner, GTR Realty Advisors, LLC Donna J. Sorensen, J.D. President, Sorensen Consulting Marie Z. Ziegler Retired Executive, Deere & Company We make financial dreams a reality. 9 QCR HOLDINGS, INC. Executive Management Team Douglas M. Hultquist Todd A. Gipple John H. Anderson President and Chief Executive Officer, Executive Vice President, President and Chief Executive Officer, Co-Founder, QCR Holdings, Inc. Chief Operating Officer and Quad City Bank and Trust Company Chief Financial Officer, QCR Holdings, Inc. Chief Deposit Officer, QCR Holdings, Inc. Peter J. Benson Executive Vice President, Chief Legal Counsel, Trust Officer Quad City Bank & Trust Company Stacey J. Bentley Thomas D. Budd President and Chief Executive Officer, President and Chief Executive Officer, Community Bank and Trust Company 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 Larry J. Helling Senior Vice President, President and Chief Executive Officer, Director of Risk Management 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 & Trust Company Dana L. Nichols Executive Vice President, Chief Credit Officer John A. Rodriguez Executive Vice President, Deposit Operations and Information Services M. Randolph Westlund Executive Vice President, Chief Investment Officer Cathie S. Whiteside Michael J. Wyffels Executive Vice President, Corporate Strategy, Senior Vice President, Human Resources & Branding Chief Information Officer Congratulations, Vic Quinn There is not enough space to elaborate on all of Vic Quinn’s accomplishments in banking and in our community. Vic is a banking icon and as such, has bestowed a remarkable impact on the lives of many clients and co-workers during his illustrious career. Vic is the epitome of a “relationship builder” and Quad City Bank & Trust and QCR Holdings, Inc. owes a great deal of its success to this humble and hard-working man. We will be forever grateful to Vic for joining Mike Bauer and me in the creation of this special place. We wish Vic the very best in his well-deserved retirement and are thrilled that he will continue to help us grow as a Director of Quad City Bank & Trust. Doug Hultquist, President and Chief Executive Officer, Co- Founder, QCR Holdings, Inc. 11 2015 Company Highlights 325 WEALTH MANAGEMENT RELATIONSHIPS ADDED HELPING DRIVE MORE THAN $2.36 BILLION IN TOTAL ASSETS UNDER MANAGEMENT 19,710 TOTAL COMPANY WIDE VOLUNTEER HOURS. AN INCREASE OF 9% OVER 2014 10% INCREASE IN LOANS AND LEASES OVER 2014 $2,593,200,000 In Total Assets at December 31, 2015 $17 million 2015 ANNUAL EARNINGS 33% OF TOTAL DEPOSITS ARE NON-INTEREST BEARING $7.2 million INCREASE (10%) IN NET INTEREST INCOME OVER 2014 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 Elizabeth A. Grabin Vice President, Controller and Director of Financial Reporting 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, Treasurer 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 Information Officer TOTAL DEPOSITS (in millions) 12.31.13 12.31.14 12.31.15 Non-interest bearing demand deposits $ 543 $ 512 $ 615 Interest bearing demand deposits Time deposits Brokered time deposits 716 327 62 792 307 69 886 310 69 TOTAL DEPOSITS $ 1,648 $ 1,680 $ 1,880 TOTAL ASSETS (in millions) 12.31.15 12.31.14 12.31.13 $2,593 $2,525 $2,395 $2,000 $2,500 $3,000 NET LOANS/LEASES (in millions) 12.31.15 12.31.14 12.31.13 $1,772 $1,607 $1,439 $1,000 $1,500 $2,000 DEPOSIT MARKET SHARE (JUNE 30, 2015) Quad Cities 12.32% Rank #2 of 38 Cedar Rapids 9.66% Rank #4 of 41 Rockford 4.63% Rank #8 of 26 Waterloo/Cedar Falls 3.84% Rank #9 of 25 13 Christopher Woods President, Three Corners Development, Inc. Orland Park, Illinois “Our principal, Robert Ferrino, and all the staff at Madison Construction and Three Corners Development feel that our friends at Quad City Bank & Trust represent the best of community banking. John Anderson and his sophisticated team of bankers, such as Beth Dunn, offer an amazing level of personal, timely service, and a community orientated approach that exactly mirrors what we look for as we consider new markets and community opportunities. Quad City Bank & Trust offers a complete suite of Trust, Treasury, Lending, and other financial products and services that will be instrumental as Mr. Ferrino expands his investments and enterprises in the Quad Cities, Western Illinois and Eastern Iowa”. 10,284 EMPLOYEE HOURS VOLUNTEERED IN 2015 DIRECTORS 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, Co- Founder, QCR Holdings, Inc. 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 Founder and Principal, Iowa Arbitrators Associate Justice, Iowa Supreme Court (Retired) Ronald G. Peterson Kathleen M. Francque Retired Executive, First State Bank of Illinois Senior Vice President, Correspondent Banking Victor J. Quinn Executive Vice President, Client Relations and Business Development, Quad City Bank and Trust Company Marc C. Slivken, D.D.S. Retired Chief Executive Officer, Kimberly Park Dental Marie Z. Ziegler Retired Executive, Deere & Company SENIOR MANAGERS John H. Anderson President and Chief Executive Officer Nick W. Anderson Vice President and Controller Cindy M. Carlson Therese K. Gerwe Vice President, Treasury Management Deborah C. Gillum 1st Vice President, Retail Banking Anne E. Howard 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, Wealth Builders Group Executive Vice President, Chief Operations Officer and Cashier Jill L. Dubin Vice President, CRA Officer Robert M. Eby Senior Vice President, Chief Credit Officer Laura L. Ekizian Executive Vice President, Chief Relationship Officer Victor J. Quinn Executive Vice President, Client Relations and Business Development Cathie S. Whiteside Executive Vice President, Corporate Strategy, Human Resources, and Branding Michael J. Wyffels Senior Vice President, Chief Information Officer 15 INVESTING IN THE QUAD CITIES AREA John Anderson President and Chief Executive Officer, Quad City Bank & Trust Living our brand by abiding by our core Mission - “We make financial dreams a reality” - was the driving force behind everything our Team executed on in 2015. By executing on this Mission, our Team of exceptional employees at Quad City Bank & Trust are taking steps to make our Vision come true - which is to be “Ranked in the top quartile Return on Assets (ROA) of our peers by 2020”. In 2015, Quad City Bank & Trust once again Additionally, through a strong commitment captured the Banner in our region of number to our Community, our Team of employees one community bank in Deposit Market Share. have personally reached out and contributed This is quite a feat to accomplish during our 23 10,284 hours to a variety of local not-for-profits. year history. How did the Team do this? They The cumulative effect of these hours helps to accomplished this goal by continuing to grow strengthen our community as we deliver our loans and leases by 13%, they grew deposits brand of People You Can Bank On®. The selfless by 15%, which in turn helped to reduce our contributions by our Team help in growing and wholesale funding by 33%. They held the line strengthening our community, for when our on non-interest expenses and increased non- community is strong, so is our bank. interest income by 25%. These accomplishments have put us on a strong path to achieve our ROA goal by our targeted time frame. 16 In previous annual messages you have heard Without a strong commitment to each of these me mention our five constituencies, and those spokes, the “wheel” which drives our success remain the same today. As a reminder they cannot move forward. I want to thank our Team are our: shareholders, clients, community, for their hard work during another challenging employees, and regulators. year. Our Team is the group that makes Quad “IN 2015, QUAD CITY BANK & TRUST ONCE AGAIN CAPTURED THE BANNER IN OUR REGION OF NUMBER ONE COMMUNITY BANK IN DEPOSIT MARKET SHARE.” City Bank & Trust great. I appreciate their dedication and willingness to do whatever it takes to put the customer first, as well as their significant contributions in our community. As you will see below, we have chosen to highlight one of the many organizations that Quad City Bank & Trust is proud to partner with. Partnering with Habitat for Humanity not only includes financial support from the bank and our employees, but also involves our Team via their hearts, hands and minds. “At Habitat for Humanity Quad Cities, we are grateful to have Quad City Bank & Trust as a community partner. Over the last decade, Quad City Bank & Trust has been a true and faithful friend of Habitat for Humanity Quad Cities, and the families we serve. Their kindness and generosity have made significant impacts in our Habitat families’ lives, as well as our community. In addition to their financial support, we are proud of the bank employees who volunteer on a regular basis. Employees have served on committees and on our board of directors, taught home ownership classes, and have helped on construction sites or served lunches. Quad City Bank & Trust employees have worked alongside and mentored our families, preparing them to become successful home owners. This year, bank employees graciously joined hands to adopt a family for Christmas, providing toys and winter clothing for the children and meaningful gifts for mom and dad. Their actions helped turn a house into a home. Habitat for Humanity Quad Cities is fortunate to have Quad City Bank & Trust in our community helping others in need. Through the efforts of the organization, they have created an unselfish culture of kindness, generosity and goodness.” Dougal Nelson Director of Development, Habitat for Humanity Quad Cities 17 Pat McGrath President, McGrath Family Of Dealerships Cedar Rapids, Iowa “I view Cedar Rapids Bank & Trust as much more than a bank! Trish Ellison and the commercial lending department have a very can do attitude, always looking for unique and creative ways to support the needs of our business. That is a trait rarely seen in the banking industry, but one that I greatly appreciate. The team at Cedar Rapids Bank & Trust takes the time to truly understand our business so that they can proactively explore ways to better serve us and contribute to our continued success. They are an important part of our McGrath team. We love Cedar Rapids Bank & Trust!” 5,806 EMPLOYEE HOURS VOLUNTEERED IN 2015 DIRECTORS David R. Mason, Sr. 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 Patrick S. Baird Retired President and Chief Executive Officer, AEGON USA, LLC Robert T. Buckley Chairman 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, Cedar River Finance Attorney and Partner, Redfern, Mason, Larsen and Moore, PLC James A. Mudd, II President and Chief Executive Officer, Mudd Advertising Randy A. Ramlo President and Chief Executive Officer, United Fire Group, Inc. Fred G. Timko Vice Chair of the Board, Cedar Rapids Bank and Trust Company President, Down to Earth Development, LLC SENIOR MANAGERS 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 Executive Vice President, Chief Credit Officer James D. Klein Executive Vice President, Chief Lending Officer Deborah J. Gertsen Senior Vice President, Trust and Investments J. Mitchell McElree Executive Vice President, Managing Director, Specialty Finance Group 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 19 INVESTING IN CEDAR RAPIDS, IOWA Larry Helling President and Chief Executive Officer, Cedar Rapids Bank & Trust Challenging our staff to go above and beyond has become the norm at Cedar Rapids Bank & Trust. As we continue to challenge ourselves to work smarter and attain a new level of success each year, I’m proud to share that our employees responded in 2015. This marked another year where Cedar Rapids Bank & Trust achieved unprecedented levels of performance. Accolades included: • USDA 2015 National Business Lender of the Year for Business & Industry program • #1 SBA bank in Iowa for the past seven years (based on dollar volume from FY09-FY15) • CRBT provided a $100,000 challenge grant for the United Way community campaign • Coolest Places to Work honoree by the Corridor Business Journal • 100% employee giving to the United Way of East Central Iowa for 15th consecutive year (I was honored to serve as Campaign Co-Chair for the 2015 campaign) Such accomplishments epitomize Cedar Rapids Bank & Trust’s commitment to our core beliefs of Balance, Trust, Excellence and Perspective. However, these core beliefs also raise the bar and challenge us to avoid becoming complacent. Amid an ever-changing environment, our team of employees will need to think differently, adapt to the new realities of the markets we serve and explore new opportunities. This mind-set, executed with our relationship-driven philosophy, will allow Cedar Rapids Bank & Trust to grow and prosper. 20 “Cedar Rapids Bank & Trust continues to be a loyal and trusted business partner. Their team takes a proactive and strategic approach to assist our needs. The customer service you receive is unparalleled and when coupled with their expertise in lending, it’s truly a “win-win” experience. CRBT is more than just a banking relationship; you’ve gained an advocate for your business.” Christopher S. Wheeler // President, Point Builders “Congratulations on another successful year. Success is indeed measured by all of us differently, but I want to congratulate you and your team on the extraordinary philanthropic support and outstanding volunteer commitment to our great community! Time, talent and treasure is an old adage, but CRB&T stands true to that old adage. From handling my mortgage loan and home construction project to helping me launch my consulting firm – you’ve been the best partner I could ask for. Also, a special shout-out to Shelly Strellner, whose expertise is unmatched!” Brenda K. Duello, CFRE // Vice President of Development & Alumni Relations, Mount Mercy University “Our relationship with CRBT transcends banking. Whether it’s the unmatched customer service they deliver, their commitment to serving as an outstanding community trustee or the warm reception we receive every time we visit the bank, their efforts never go unnoticed. Our private banker, Shelly, does everything she can to make our lives easy, including offering to come to us for a signature. We also enjoy the face-to-face visits we have with CRBT employees and always appreciate that Larry and John still stop in to say hello from time-to-time and simply thank us for our business.” David and Mindy Sorg // Cedar Rapids, Iowa 21 Robert T. Buckley CEO, Kirk Gross Company Waterloo, Iowa “I was honored to have been one of the original founders of Community Bank & Trust in 1997. Since then, we have enjoyed a great banking relationship through the best of times and challenging times. Community Bank & Trust has always offered us professional and consulting services to help our company grow. The people at Community Bank & Trust are what makes the difference. If you are looking for a business partnership, and not just a lender, I recommend Community Bank & Trust.” 1,192 EMPLOYEE HOURS VOLUNTEERED IN 2015 SENIOR MANAGERS Stacey J. Bentley President and Chief Executive Officer Shawna L. Buckley Senior Vice President, Retail Banking Richard L. Jaacks Senior Vice President, Business Development Officer 23 INVESTING IN THE CEDAR VALLEY Stacey J. Bentley President and Chief Executive Officer, Community Bank & Trust “Today, we find ourselves strengthened and positioned for growth.” The Quest for Growth. Since the 2013 acquisition by QCR Holdings and merger of our banking operations into Cedar Rapids Bank & Trust, we have solidified our presence in the Cedar Valley. To further strengthen our presence in the Cedar Valley, our future plans include investment in new building structures and a redesign of our logo. Our company is growing and we want the Cedar Valley to recognize that we have expanded our products and have joined forces with bankers that bring expertise to our clients and prospective clients. 24 Our Future. All the necessary elements for the success of our bank are in place and we are building a differentiated position in the market. It will always be the case that our success will be in direct proportion to our clients – the people with whom we partner in business with, every day. Lastly, I would be remiss if I didn’t relay these five words, “We have money to lend” so I encourage you to give us a call and let us be partners in your success. Client Focused. Community Focused. What hasn’t changed is our commitment to our clients and to our community. Changes in consumer behavior – driven most notably by the confluence of mobile networks, rapid digitization, customer analytics and cloud-based computing – are transforming the competitive landscape. We are seeing all of this in banking; and like our clients, we can’t help but be enthused by constantly evolving technology. Our focus is to provide our clients with essential financial products, services and trusted advisors. Our ultimate goal is for our clients to succeed. A Fundamental Repositioning. Community Bank & Trust strives for market leadership with clients – and employees. Without doubt, we have fundamentally changed our position in the marketplace: the opportunity before us now is equally about the experience we provide to clients and the expertise we can now deliver. Our partnership with Cedar Rapids Bank & Trust has enabled us to increase our resources, elevate our expertise and take advantage of cutting edge technology, products, and services. 25 “Knowledge is truly power. The past decade represented a banking challenge for Main Street. However, even during those times, Rockford Bank & Trust had the knowledge, tools, and power to support Equustock’s aggressive growth plan.” Claire Brant President, Equustock, LLC Rockford, Illinois “Rockford Bank & Trust took the time to understand our company and our vision. In 2009, the Rockford Bank & Trust leadership recognized Equustock’s potential and developed a banking program that has moved along with our growth and continues to meet our needs today. Through a combination of traditional and creative strategies, Rockford Bank & Trust became a true financial partner to the Equustock plan. Since we moved to Rockford Bank & Trust over 6 years ago, Equustock’s continued success has been fueled by our relationship with Tom Cwynar and the whole Rockford Bank & Trust team.” 1,923 EMPLOYEE HOURS VOLUNTEERED IN 2015 DIRECTORS SENIOR MANAGERS Todd A. Gipple Executive Vice President, Chief Operating Officer and Chief Financial Officer, QCR Holdings, Inc. Monica B. Glenny, CPA, CMA Independent Star Team Builder, Mary Kay Cosmetics James P. Hamilton President, MRV Foundation Inc. Douglas M. Hultquist President and Chief Executive Officer, Co- Founder, QCR Holdings, Inc. Dana S. Kiley, Jr. President, CoyleKiley Agency M. Shawn Way President and Chief Executive Officer, Milestone, Inc. 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 Karl R. Swanson Executive Vice President, Chief Lending Officer Thomas D. Budd President and Chief Executive Officer, Rockford Bank and Trust Company George T. Ralph Chair of the Board, Rockford Bank and Trust Company Owner, GTR Realty Advisors, LLC 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 Epperson President, Chartwell Agency 27 INVESTING IN ROCKFORD, ILLINOIS Thomas Budd President and Chief Executive Officer, Rockford Bank & Trust On January 3rd, 2015, Rockford Bank and Trust Company celebrated its 10th anniversary. Much has changed since our beginnings in 2005. Through all the changes in our national and local economy, and changes in our industry and local competitive landscape, we’re proud to have grown to become a leading community bank in the Rockford region. We’ve proven that the community bank model is valued by our community. We believe in investing in our community and investing our time and talents in our clients success. 28 “Rockford Bank & Trust is proud to have achieved record net income in 2015.” Communities like Rockford value community banks and, at times, directly rely on them to help further economic development. During 2015, RB&T partnered with four other local, community banks to provide bridge financing for a significant industrial project that had encountered a delay in funding from government sources. The collaboration among competing banks was applauded by leaders and residents alike and served as an example of the critical role community banks like RB&T play in supporting the community. During 2015, the Rockford community continued its resurgence and transformation as a number of exciting new projects were announced or completed. Several significant projects by leading Aerospace companies furthered Rockford’s national prominence as a leading employer in Aerospace related businesses. Rockford’s downtown expanded with the construction of an indoor sports center, announcement of two proposed downtown hotels, and record attendance at the downtown city market. Finally, a major expansion plan by one of the local health systems will enhance health care in the region and further Rockford’s reputation as a regional health destination. RB&T is proud to have achieved record net income in 2015. We’ve positioned ourselves as the team of choice for relationship banking and will build on our reputation in 2016 and beyond. Our focus for 2016 will be to reach for excellence in our performance for our shareholders, clients, employees, and our community. 29 Paul Britten President and CEO , Britten, Inc. Traverse City, Michigan “m2 Lease Funds has been a key financial partner of Britten Studios over the years. We lease all major equipment to maximize the availability of our operating cash flow. With m2 on our team, we won’t miss any significant opportunities to invest in the business and continue to grow.” 505 EMPLOYEE HOURS VOLUNTEERED IN 2015 DIRECTORS AND SENIOR MANAGERS John R. Engelbrecht Director, m2 Lease Funds, LLC 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 Brian L. Besler Senior Vice President, Administration 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 President and Chief Executive Officer, Wisconsin Economic Development Corporation Douglas M. Hultquist Director, m2 Lease Funds, LLC President and Chief Executive Officer, Co-Founder QCR Holdings, Inc. Christine D. Kennedy Chief Financial Officer, m2 Lease Funds, LLC William M. Tank Director, m2 Lease Funds, LLC Retired Executive, QCR Holdings, Inc. 31 INVESTING IN OUR COMMUNITIES John Engelbrecht Chief Executive Officer, m2 Lease Funds, LLC m2 was started in 1998 and became a part of the QCR Holdings family in 2005. In 2012 we observed the accomplishment of reaching $100 million in assets. Now we are observing another milestone, this time doubling the asset size of our Company in 3 ½ years and reaching $200 million in assets in 2015! This achievement could not have been accomplished without the commitment and hard work of our growing m2 Team and the QCR Holdings, Inc. Group Operations staff. m2 provides higher returns and spreads and consequently can provide a better return on assets and equity than our sister banks. To best utilize QCRH’s capital resources, we believe that m2 should grow to be 10% of the Holding Company’s assets. This initiative began in mid-2013 and with our recent performance, we are well on our way to reaching that goal. It is our plan to reach the 10% goal within 2 years. m2 ended the year with assets of $202 million; a 14% increase over the preceding year. 32 Today m2 has thousands of leases, and leases Unlike our sister bank’s goals of increasing in virtually every state. As an equipment market share in their local communities, leasing generalist, m2 leases all varieties of m2 does business nationwide; m2 doesn’t equipment. Currently the largest equipment have a local community to call home, so concentrations include manufacturing, we expand by adding new employees technology, marine, food processing, nationally. We recently increased our packaging, transportation, bakery and footprint by expanding to Atlanta, Georgia. construction. We continue to believe that the m2 business model of providing quick and responsive turnarounds in a simple and straight forward This office joins the offices we already had in Pennsylvania, Florida, Illinois, Iowa, Wisconsin, Minnesota, Iowa, North Carolina and South Carolina. manner remains sound and for us to grow we We are cautiously optimistic on the outlook only need to add more “talent” to our Team. for 2016. We believe that we have the Team in place to continue our steady growth and to continue adding substantial returns for the Holding Company for 2016 and beyond. November of 2015 was marked with deep sadness by the passing of m2 Lease Funds Chairman of the Board, Ron Orndorff. m2 Lease Funds joined the QCR Holdings, Inc. family in August of 2005 and happily for us all, Ron served as the Chairman of the m2 Board of Directors from that day forward. Ron spent most of his career in the leasing business, working 30 years for M&I Leasing Corporation and retiring as its Chairman and President. His incredible business acumen and dedication to the m2 business model were key to the success of m2 Lease Funds and also key to the dedicated employees he mentored and supported. We would like to thank Ron for being a vital part of the success of m2 Lease Funds and QCR Holdings. We would also like to express our support and sympathies to Ron’s family. Ron is survived by his loving wife of 57 years, Lois and their four children Dianne Dimond (Brad), Susan Gordon (Andrew), David and Scott (Trish) and eight grandchildren whom he adored. 33 Ronald D. Orndorff 1935-2015 Year-End 2005-2015 Stock Price ( ) Tangible Book Value Per Common Share ( ) $25 $20 $15 $10 $5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Deposits 2006 / 2015 DECEMBER 31, 2006 Total $875.5 MM DECEMBER 31, 2015 TOTAL $1,880.7 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% Non Interest Bearing Demand $615.3 MM or 33% Interest Bearing Demand $886.3 MM or 47% CD's $379.1 MM or 20% Retail: $310.0 MM or 16% Brokered: $69.1 MM or 4% 34 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 312 W. 1st Street Cedar Falls Community Bank & Trust 11 Tower Park Drive Waterloo Illinois Iowa Iowa Iowa * Former location ZIP 52722 52806 61265 52807 52401 61101 52804 52402 53045 61107 50701 50613 50701 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 Aug 1997 / May 2013 ** Aug 1997 / May 2013 ** Aug 1998 / May 2013 ** 1. Quad City Bank & Trust (5 Locations) 2. Cedar Rapids Bank & Trust (2 Locations) 3. Community Bank & Trust (3 Locations) 4. Rockford Bank & Trust (2 Locations) 5. m2 Lease Funds, LLC (1 Location) 35 QCR Holdings, Inc. Consolidated Financial Highlights As of December 31, 2015 December 31, 2014 (dollars in thousands, except share data) CONDENSED BALANCE SHEET Cash, federal funds sold, and interest-bearing deposits Amount $ 97,906 Securities Net loans/leases Core deposit intangible Goodwill Other assets Total assets Total deposits Total borrowings Other liabilities Total stockholders' equity % 4% 22% 68% 0% 0% 6% Amount $ 120,350 651,539 1,606,929 1,671 3,223 141,246 % 5% 26% 64% 0% 0% 5% 577,109 1,771,882 1,471 3,223 141,607 $ 2,593,198 100% $ 2,524,958 100% $ 1,880,666 444,162 42,484 225,886 72% 17% 2% 9% $ 1,679,668 662,558 38,653 144,079 67% 26% 1% 6% Total liabilities and stockholders' equity $ 2,593,198 100% $ 2,524,958 100% SELECTED INFORMATION FOR COMMON STOCKHOLDERS' EQUITY Common stockholders' equity (1) Common shares outstanding Book value per common share (1) Tangible book value per common share (2) Closing stock price Market capitalization Market price / book value Market price / tangible book value Tangible common equity / total tangible assets (TCE/TA) REGULATORY CAPITAL RATIOS: Total risk-based capital ratio Tier 1 risk-based capital ratio Tier 1 leverage capital ratio Common equity tier 1 ratio $ 225,886 $ 144,079 11,761,083 $ 19.21 $ 18.81 $ 24.29 $ 285,677 7,953,197 $ 18.12 $ 17.50 $ 17.86 $ 142,044 126.47% 129.15% 8.55% 13.11% 11.88% 9.75% 10.33% 98.59% 102.05% 5.52% 10.91% 9.52% 7.62% N/A CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY 2015 2014 For the year ended December 31, Beginning balance Net income Other comprehensive income (loss), net of tax Preferred and common cash dividends declared Proceeds from issuance of 3,680,000 shares of common stock, net of costs Redemption of 29,867 shares of Series F Preferred Stock (SBLF) Other (3) Ending balance $ 144,079 $ 147,577 16,928 (189) (935) 63,484 - 2,519 14,953 11,709 (1,713) - (29,824) 1,377 $ 225,886 $ 144,079 (1) Includes accumulated other comprehensive income (loss). (2) Includes accumulated other comprehensive income (loss) and excludes intangible assets. (3) Includes mostly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation. 36 QCR Holdings, Inc. Consolidated Financial Highlights For the Year Ended December 31, 2015 December 31, 2014 (dollars in thousands, except 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 Less: Preferred stock dividends $ 90,003 $ 85,965 13,707 76,296 6,871 69,425 24,530 73,358 20,597 3,669 16,894 69,071 6,807 62,264 21,158 65,430 17,992 3,039 $ 16,928 $ 14,953 - 1,082 Net income attributable to QCR Holdings, Inc. common stockholders $ 16,928 $ 13,871 Earnings per share attributable to QCR Holdings, Inc.: Basic Diluted $ 1.64 $ 1.75 $ 1.61 $ 1.72 Weighted average common shares outstanding Weighted average common and common equivalent shares outstanding 10,345,286 10,499,841 7,925,220 8,048,661 5% -19% 10% 1% 12% 16% 12% 14% 21% 13% -100% 22% -6% -6% AVERAGE BALANCES Assets Loans/leases Deposits Total stockholders' equity KEY PERFORMANCE RATIOS Return on average assets (1) Return on average total equity (1) Price earnings ratio LTM (1) 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 (1) The numerator for this ratio is "Net income". $ 2,549,921 $ 2,453,678 $ 1,707,523 $ 1,540,382 $ 1,851,584 $ 1,708,777 $ 192,489 $ 142,735 0.66% 8.79% 14.81 x 3.37% 0.74% 0.22% 1.45% 223.33% 72.76% 406 0.61% 10.48% 10.21 x 3.15% 1.31% 0.34% 1.42% 114.78% 72.52% 409 37 QCR Holdings, Inc. Consolidated Financial Highlights As of December 31, 2015 December 31, 2014 (dollars in thousands) ANALYSIS OF LOAN DATA Nonaccrual loans/leases Accruing loans/leases past due 90 days or more Troubled debt restructures - accruing Total nonperforming loans/leases Other real estate owned Other repossessed assets Amount $ 10,648 3 1,054 11,705 7,151 246 % 56% 0% 6% 62% 37% 1% Amount % $ 18,588 56% 93 1,421 20,102 12,768 155 0% 5% 61% 39% 0% Total nonperforming assets $ 19,102 100% $ 33,025 100% Loan/lease mix: Commercial and industrial loans $ 648,160 Commercial real estate loans Direct financing leases Residential real estate loans Installment and other consumer loans Deferred loan/lease origination costs, net of fees 724,369 173,656 170,433 73,669 7,736 36% 40% 10% 10% 4% 0% $ 523,927 702,140 166,032 158,633 72,607 6,664 32% 43% 10% 10% 5% 0% Total loans/leases $ 1,798,023 100% $ 1,630,003 100% Less allowance for estimated losses on loans/leases 26,141 23,074 Net loans/leases $ 1,771,882 $ 1,606,929 ANALYSIS OF SECURITIES DATA Securities mix: U.S. government sponsored agency securities $ 213,537 280,203 80,670 2,699 37% 49% 14% 0% $ 307,869 229,230 111,423 3,017 47% 35% 17% 1% $ 577,109 100% $ 651,539 100% Noninterest-bearing demand deposits $ 615,292 886,294 309,974 69,106 33% 47% 16% 4% $ 511,992 778,570 306,364 82,742 30% 47% 18% 5% $ 1,880,666 100% $ 1,679,668 100% 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 deposits Total deposits ANALYSIS OF BORROWINGS DATA Borrowings mix: FHLB advances Wholesale structured repurchase agreements Customer repurchase agreements Federal funds purchased Junior subordinated debentures $ 151,000 110,000 73,873 70,790 38,499 34% 25% 16% 16% 9% 0% 100% $ 203,500 130,000 137,252 131,100 40,424 $ 20,282 662,558 31% 19% 21% 20% 6% 3% 100% Other Total borrowings $ 0 444,162 38 QCR Holdings, Inc. Consolidated Financial Highlights ANALYSIS OF NET INTEREST INCOME AND MARGIN December 31, 2015 December 31, 2014 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 (1) Loans (1) Other $ 599,648 $ 18,380 1,707,523 99,042 75,670 833 Total earning assets (1) $ 2,406,213 $ 94,883 Deposits Borrowings $ 1,209,736 $ 4,496 472,675 9,210 Total interest-bearing liabilities $ 1,682,411 $ 13,706 Net interest income / spread (1) Net interest margin (1) $ 81,177 (dollars in thousands) 3.07% 4.43% 0.84% 3.94% 0.37% 1.95% 0.81% 3.13% 3.37% $ 688,827 $ 18,679 1,540,382 90,232 70,414 849 $ 2,319,441 $ 89,942 $ 1,133,228 $ 4,509 568,883 12,385 $ 1,702,111 $ 16,894 $ 73,048 2.71% 4.57% 0.94% 3.88% 0.40% 2.18% 0.99% 2.89% 3.15% (1) Includes nontaxable securities and loans. Interest earned and yields on nontaxable securities and loans are determined on a tax equivalent basis using a 35% tax rate for each period presented. For the Year Ended ANALYSIS OF NONINTEREST INCOME December 31, 2015 December 31, 2014 % Change (dollars in thousands) $ 6,131 $ 5,715 2,972 3,824 323 1,305 1,718 1,762 1,072 1,190 865 799 297 538 387 300 1,047 2,798 3,847 461 2,041 155 1,722 982 1,064 855 92 61 553 - - 812 $ 24,530 $ 21,158 $ 42,968 $ 40,337 7,043 5,523 2,725 882 (1,092) 1,900 936 596 1,486 7,486 703 2,202 7,386 6,192 2,895 666 603 1,985 930 579 1,291 - 636 1,930 $ 73,358 $ 65,430 7% 6% -1% -30% -36% 1008% 2% 9% 12% 1% 768% 387% -3% 100% 100% 29% 16% 7% -5% -11% -6% 32% -281% -4% 1% 3% 15% 100% 11% 14% 12% 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 Swap fee income Earnings on cash surrender value of life insurance Debit card fees Correspondent banking fees Participation service fees on commercial loan participations Securities gains, net Fee income from early termination of leases Credit card issuing fees Lawsuit award Gain on debt extinguishment Other Total noninterest income ANALYSIS OF NONINTEREST EXPENSE Salaries and employee benefits Occupancy and equipment expense Professional and data processing fees FDIC, other insurance and regulatory fees Loan/lease expense Net cost of operation of other real estate Advertising and marketing Postage and communications Stationery and supplies Bank service charges Losses on debt extinguishment Correspondent banking expense Other Total noninterest expense 39 stock listing information The common stock of QCR Holdings, Inc. is traded on the NASDAQ Global Market under the symbol QCRH. COMMON STOCK Annual Meeting of Stockholders Corporate Counsel The Annual Meeting of the Stockholders of QCR Holdings, Inc. will be held: May 13, 2016 at 8:00 am Quad City Bank & Trust 3551 7th Street Moline, IL 61265 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: Elizabeth A. Grabin Vice President, Controller and Director of Financial Reporting QCR Holdings, Inc. 3551 Seventh Street Moline, IL 61265 309.743.7724 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: American Stock Transfer & Trust Company, LLC Operations Center 6201 15th Avenue Brooklyn, NY 11219 Investor Information 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 Stockholders, investors, and analysts interested in additional information may contact: 175 N. Patrick Blvd., Suite 140 Brookfield, WI 53045 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 RSM US LLP, Davenport, IA 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 Calendar 2015 High Low 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Calendar 2014 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Calendar 2013 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter $ 24.90 $ 21.00 23.22 22.74 18.19 High 19.58 17.51 16.91 Low $ 18.20 $ 17.50 18.10 17.96 17.48 High 16.96 17.00 16.99 Low $ 18.20 $ 15.65 16.51 16.50 16.96 14.96 13.18 13.05 DIVIDEND INFORMATION Record Date Payment Date Amount Per Share 12.18.15 01.06.16 06.19.15 07.08.15 12.19.14 01.07.15 06.20.14 07.08.14 12.20.13 01.07.14 06.21.13 07.08.13 $ .04 $ .04 $ .04 $ .04 $ .04 $ .04 40
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