m2 Lease Funds
1
2016 ANNUAL REPORT 2016...A YEAR OF EXCEPTIONAL PERFORMANCE
In March of 2016, our Strategic Leadership Team (SALT)
visited each of our markets to meet with our employees to
reinforce our Company’s mission, vision and values.
During those meetings we also reviewed our strategic
achieve them, we become exceptional. This culture of
plan and demonstrated how each of us could participate
high performance creates a strong “Community Bank”
in the achievement of our two strategic objectives:
brand in the Communities that we serve which results in
•
•
Creating a Culture of High Performance
Creating financial performance in the upper-
quartile of our peer group
our member banks becoming the bank of choice for those
clients that value a strong relationship with their bank.
In turn, our relationship-based banking model and this
focus on creating a culture of high performance has
We reinforced our message and our strategic plan with
resulted in significant improvement in our operating
a Company-wide call to action. The “rally cry” that has
performance and exceptional financial returns for our
aligned our entire organization with these objectives and
shareholders.
with each other is - Be Exceptional.
In the following pages we will discuss further the
We are creating a culture where every member of our QCR
specific strategic initiatives that we are implementing to
Holdings team, regardless of their title, their location, or
continue our strong progress in creating top-tier financial
their individual role, strives to be exceptional in all that
performance in our industry. As we execute on these
they do.
Serving the needs of our Clients and the Communities
in which we live and work in this exceptional fashion is
what we do each day. By staying true to our business
model of building strong relationships with our Clients,
understanding their unique hopes, challenges and
dreams, and bringing them the financial solutions to
initiatives, each member of our QCR Holdings team will
continue to “Be Exceptional” as we create meaningful and
lasting relationships with our clients and continue to drive
significant long-term value for our shareholders.
2
QCR HOLDINGS, INC. Strategic Leadership Team (SALT) pictured left to right: Tom Budd, Cathie Whiteside, Todd Gipple, Doug Hultquist, John Anderson, Larry Helling
(Tour Bus image created using Adobe Photoshop)
The 2016 Road Show Ended With a Pay It Forward Challenge -
FOR IMMEDIATE RELEASE - March 9, 2016
Moline, IL - QCR Holdings, Inc. and it's wholly owned subsidiaries, Quad City Bank & Trust, Cedar Rapids Bank & Trust,
Rockford Bank & Trust, Community Bank & Trust, and m2 Lease Funds, today announced a company-wide Pay It Forward
Day. This initiative was designed to inspire employees to perform unexpected acts of kindness and positively impact the
communities where over a combined 435 employees live, work, and play. Each employee was provided with the resources
to perform acts of kindness and help someone in their community during the coming months.
"Giving back to our communities is a big part of the QCR Holdings philosophy, and it's humbling to see how our employees
are embracing the spirit of Pay It Forward Day," said, Doug Hultquist, President and Chief Executive Officer of QCR Holdings.
"It's our hope that by creating a small chain of human kindness we might inspire other businesses and individuals to join
us and do the same."
Just a Few of the Many Exceptional Results of Pay It Forward Day
"Today, I went down to Kings Harvest Homeless Shelter
"I decided to match the company resources (and my kids
and passed out $5 bills to individuals that were either
did as well, tripling the original amount) then we bought
homeless or misplaced."
groceries to donate to our local food shelter."
"I went to a charitable thrift store, bought two coffee tables and two end tables. They had seen better days. I refinished them
and then re-donated them back to a different thrift store. So...Goodwill got the benefit of the original purchase, and the St.
Vincent dePaul Society got the prettied up pieces to resell."
3
2016 ANNUAL REPORT Summary of Financial Results 2012 - 2016
(IN THOUSANDS)
Net interest income
Non-interest income
Non-interest expense
2012
2013
2014
2015
2016
$57,649
$64,105
$69,071
$76,296
$94,517
18,953
26,846
21,282
24,364
31,037
(54,591)
(65,465)
(65,554)
(73,192)
(81,486)
Pre-tax pre-provision net income
22,011
25,486
24,799
27,468
44,068
Provision for loan/lease losses
(4,371)
(5,930)
(6,807)
(6,871)
(7,478)
Net income before taxes
17,640
19,556
17,992
20,597
36,590
Income taxes
Net income
(4,534)
(4,618)
(3,039)
(3,669)
(8,903)
13,106
14,938
14,953
16,928
27,687
Less: net income attributable to non controlling interests
488
-
-
-
-
Net income attributable to QCR Holdings, Inc.
$12,618
$14,938
$14,953
$16,928
$27,687
Asset Growth
(IN THOUSANDS)
Book Value vs. Fair Market Value
COMMON STOCK (IN MILLIONS)
Total Metropolitan Statistical Area Deposits
(JUNE 30, 2016) (IN THOUSANDS)
$20,000,000
$10,000,000
$5,000,000
FAIR MARKET VALUE
BOOK VALUE
$600
$300
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,
QCR HOLDINGS, INC.
TO OUR SHAREHOLDERS
2016 was an exciting and transformational year for QCR Holdings, Inc. We challenged each of our employees to "Be Exceptional”
and they grasped that challenge, as is evident in our record breaking results this year. We look much differently today than we
did a year ago and we believe it is a direct result of the culture of high performance that our employees have embraced and are
focused on each and every day. Exceptional, local, customer service and giving back, remain the bedrocks of our community
banking model. We continue to believe that the model we are proud to call “The Local Community Bank Advantage” still
differentiates us in our market places and that this model is what is fueling our success.
Without question, the highlight of 2016 was welcoming the talented staff and treasured clients of Community State Bank
(“CSB”) (Ankeny/Des Moines, Iowa) to the QCR Holdings, Inc. family on September 1st. The opportunity to team up with such
a solid organization as CSB allowed us to expand our footprint into the third fastest growing city in the U.S. We believe CSB’s
strong financial performance will significantly contribute to our strategies to enhance shareholder value.
The Company continued to successfully execute on our seven stated initiatives that we have targeted to improve profitability.
Even though the financial industry continues to increase in complexity, our commitment to keeping it simple for the customer
remains unchanged. As will be outlined in the following pages of our Annual Report, our 2016 financial results reflect record
earnings across all of our entities and we believe our commitment to the customer experience is at the core of those results.
We now have grown to nearly 600 employees whose commitment to “Be Exceptional” is proudly producing milestone earnings
and loyal customers.
We recognize that we will only be as strong as the communities we work and live in. Therefore, it is truly gratifying to watch our
team unselfishly fan out into their local non-profit organizations and lend their time and talents. Our entire work force donated
over 18,800 hours towards the betterment of their communities in 2016 – this in addition to their full-time jobs and busy family
lives. Individually and cumulatively our employees are making a difference, and we thank each of them for all they do.
2016 HIGHLIGHTS AND RESULTS
Successful Capital Raise in Conjunction with the Acquisition of Community State Bank
On May 20, 2016, QCR Holdings entered into Securities Purchase Agreements with certain existing shareholders and institutional
investors to sell 1,215,000 shares of its common stock at a price of $24.75 per share for approximate net proceeds of $29.8 million.
The net proceeds of the offering were used to help finance the purchase of Community State Bank. The offering closed on May 23,
2016. The shares were offered to institutional investors in a registered direct offering without an underwriter or placement agent,
thereby saving the Company an estimated $2 million in investment banking fees. As a result of our offering in 2015 and this offering,
QCR Holdings has grown from 19% institutional ownership at the end of 2014, to 49% at the end of 2015, to 58% at the end of 2016.
Average trading volume in QCRH stock has improved significantly (7,600 average daily trading volume in 2014 to 30,320 in 2016)
along with an exceptional increase in trading price over the last several years. Closing stock price at December 31, 2014 was $17.86,
at December 31, 2015 was $24.29, and closed at $43.30 on December 31, 2016.
On September 1, 2016 the Company completed its acquisition of Community State Bank (CSB) from Van Diest Investment Company.
CSB operates ten banking locations throughout the Des Moines metropolitan area. In the transaction, QCR Holdings acquired 100%
of the outstanding common stock of CSB for cash consideration of $80 million. As of December 31, 2016, CSB had $600 million in
assets, $430 million in loans and $514 million in deposits. The Des Moines Metropolitan Statistical Area (“MSA”) is ranked 4th in the
Top 25 MSAs in Iowa and Illinois by deposits. CSB has retained its separate bank charter and will continue on with its rich history of
premier customer service and local decision making.
5
2016 ANNUAL REPORT CONSOLIDATED EARNINGS (in thousands)
2012
2013
2014
2015
2016
Quad City Bank & Trust *
$ 10,732
$ 10,273
$ 10,451
$ 11,762
$ 15,411
Cedar Rapids Bank & Trust
Rockford Bank & Trust
Community State Bank
5,881
593
-
6,736
1,579
-
8,006
1,877
-
8,108
2,189
-
Parent Co. & Eliminations **
(4,588)
(3,650)
(5,381)
(5,131)
12,729
3,201
2,127
(5,781)
Consolidated Earnings
$ 12,618
$ 14,938
$ 14,953
$ 16,928
$ 27,687
* Includes m2 Lease Funds.
** Includes acquisition costs for the acquisition of CSB in 2016, and all acquisition costs net of the bargain purchase gain for the acquisition of CB&T in 2013.
Gains Recognized on Debt Extinguishment in January 2016
In January 2016, the Company was provided an 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 at a discount, through auction.
Balance Sheet Restructuring in January 2016
As a result of the one-time gain described above and further contributing to the financial results of 2016, management continued
execution of our strategy to repay high-cost borrowings. In January 2016, the Company executed 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 the restructuring reduced interest expense by approximately $683 thousand annually.
Significant One-time Gain Used to Restructure Balance Sheet in Third Quarter 2016
The Company also had the opportunity to sell an investment and recognize a gain of approximately $4.0 million in the third quarter
of the year. This gain was utilized to further reduce wholesale borrowings by $60 million at a blended rate of 3.24% and further
de-lever the balance sheet with the sale of $28 million in securities yielding 1.48%. The remaining funding was replaced by a mix
of core deposits and overnight borrowings. The positive impact on future earnings will be an increase in net interest income of
approximately $1.3 million annually, increasing net interest margin by approximately 10 basis points.
2016 OVERALL FINANCIAL RESULTS
2016 Was an Exceptional and Record Setting Year for QCR Holdings
The banking and financial industry continues to be complex and ever-changing, but we recognize that now more than ever, we need
to remain focused on our mission, vision and values. We intentionally set the bar high for the vision we have set to achieve, but we
believe we have the right team and strategies in place to reach that bar.
For the year ended December 31, 2016, the Company reported net income of $27.7 million, resulting in diluted earnings per share
("EPS") of $2.17. Excluding acquisition costs and other non-core items, the Company reported core net income (non-GAAP) of $29.4
million and diluted EPS of $2.31. For the same period in 2015, we reported net income of $16.9 million, or diluted EPS of $1.61, which
included several nonrecurring items, including $4.7 million of losses on extinguishments (after-tax) related to the balance sheet
restructuring that took place in the second quarter of 2015. Excluding these nonrecurring items, the Company reported core net
income (non-GAAP) of $20.9 million and diluted EPS of $1.99.
6
QCR HOLDINGS, INC. Our core return on average assets (“ROAA”) has improved significantly
from a year ago. Core ROAA (non-GAAP) has expanded to 1.03% from
0.82%, when comparing the full year of 2016 to the prior year. We
have achieved our initial target ROAA of 1.00% and will now continue
to focus on enhancing performance to allow us to rank in the upper
quartile of our peers.
For three consecutive years, we have achieved our targeted 10-12%
organic growth in total loans and leases. Organic loan and lease growth
totaled $188.4 million for 2016, or an annual growth rate of 10.5%.
This solid growth has continued to help us move our loan and lease
to total asset ratio to 73%, up from 69% in 2015 and 65% in 2014. We
believe our ability to customize solutions, grow existing relationships
and take advantage of market disruption are key components to these
successful results.
Our significant strength and expertise in generating swap fee income
and gains on the sale of government guaranteed loans led to another
banner year of related fee income. Deploying this strength across our
entity resulted in revenue totaling $4.9 million compared to $3.0 in
2015. We intend to continue our emphasis as these products provide
unique solutions for our clients. We also look forward to offering these
products in the Des Moines metro through Community State Bank.
Net interest income totaled $94.5 million for the year ended December
31, 2016, which represented an increase of 23.9% over the prior year. Net
interest income attributable to CSB totaled $10.0 million for the partial
year and included $3.2 million of net accretion related to purchase
accounting adjustments. Net interest margin increased to 4.02% in the
fourth quarter of 2016 due to the balance sheet restructuring, as well
as the addition of CSB. One-time accretion acceleration for the fourth
quarter was approximately $1.3 million and was the result of payoffs/
refinances of acquired performing loans, the prepayment of purchased
credit impaired loans and the prepayment of FHLB advances that were
acquired at a premium. Excluding the effects of this acceleration, net
interest margin would have been 3.84%. By comparison, third quarter
net interest margin was 3.70% excluding the effects of acceleration due
to the prepayment of purchased credit impaired loans.
The ratio of NPAs to total assets finished at 0.82% at December 31, 2016,
which was up from 0.74% one year ago. The Company’s allowance to
total loans and leases was 1.28% at year end, down from 1.45% at the
end of 2015.
As a result of solid earnings performance, capital ratios continue to
be strong. The Company’s total risk-based capital ratio was 11.55% at
December 31, 2016, the common equity tier 1 ratio was 9.40% and the
tangible common equity to tangible assets ratio increased to 8.04%.
A Look Back at Our
Market Capitalization
Provides an
Exceptional View
1993
$14 million capital raise
(QCR Holdings is formed)
2010
$33 million market cap
(double 1994)
2012
$65 million market cap
(double 2010)
2014
$142 million market cap
(double 2012)
2016
$568 million market cap
(quadrupled 2014)
7
2016 ANNUAL REPORT QCR Holdings, Inc. Strategic Advantages
During 2016, we continued to build on the identified niches below that have been enhancing our growth over the last several
years. We believe these niches offer variety and diversity to our business model and valuable expertise to our clients. We will
continue to invest wisely in our people, products and technology as we look for opportunities of further growth not only in these
lines of business but in our core business as well. We will also continue to collaborate and leverage opportunities across our
entire Company to maximize shareholder value at every opportunity.
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 2016, we were able to
increase the total number of banks we serve to 181 with a weighted-average balance of total noninterest bearing deposits
of $354 million for 2016. Our veteran team of bankers provide many layers of expertise in such areas as trust and investment
services, loans, and leases.
Wealth Management Division - The expertise found across our company in our Wealth Management Division is a distinguishable
competitive advantage. Being able to provide our clients with a continuum of services is crucial to deepening relationships. With
offerings in trust, investments, financial planning, and family office, we add non-interest income to our banks and provide great
opportunities for other services as well. In 2016, assets under management totaled $2.8 billion and our veteran staff added 306
new relationships. We are excited about the prospects of growing this niche in the Ankeny/Des Moines market via Community
State Bank.
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 one page lease agreement written
in plain English). m2 Lease Funds works with all of our banks and nationwide as well with leasing specialists located in Iowa,
Wisconsin, Minnesota, South Carolina, North Carolina, Florida, California, Colorado, Texas, Massachusetts, and Pennsylvania. m2
has a high yielding portfolio that averaged 5% in 2016. Income has grown at a 16% CAGR since 2006.
Living the Brand - 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 ENTITY
Quad City Bank & Trust – Under the leadership of President and CEO, John Anderson, the Company’s first subsidiary bank (1994),
recorded total consolidated assets of $1.4 billion at December 31, 2016. The bank continues to have success in adding new clients
to its Correspondent Banking and Wealth Management businesses as outlined above. Quad City Bank & Trust realized record net
income of $15.4 million for the year ended December 31, 2016, which compares to $11.8 million in 2015.
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 $12.7 million for the year ended December 31, 2016, which compares to $8.1 million in 2015. Total
assets at December 31, 2016 finished at $913 million. 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.
Rockford Bank & Trust – Led by President and CEO, Tom Budd, Rockford Bank & Trust (2005) reported record net income for 2016
of $3.2 million. By comparison, the bank reported net income of $2.2 million in 2015. Total assets finished the year at $391 million.
8
QCR HOLDINGS, INC. Community State Bank – QCR Holdings was fortunate to maintain the successful leadership of President and CEO, Ron Nagel as
it acquired CSB on September 1, 2016. Total assets at December 31, 2016 were $600 million and net income for the partial year
of ownership was $2.1 million.
QCR HOLDINGS, INC. STRATEGIES TO CONTINUE TO DRIVE SHAREHOLDER VALUE
The Company continues to focus on the following seven stated initiatives in an effort to further improve profitability
and drive increased shareholder value:
• Continue strong organic loan and lease growth to maintain loans and leases to total
assets ratio in the range of 70-75% (73% as of 12/31/16)
• Continued focus on growing core deposits to maintain reliance on wholesale funding to
less than 15% of assets (11% as of 12/31/16)
• Continue to focus on generating gains on the sale of USDA and SBA loans, and fee
income on SWAPS, as a significant and consistent component of core revenue
• Grow wealth management fee income by 10% annually
• Carefully manage noninterest expense growth
• Maintain asset quality metrics at 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 2016 we focused on the strategies listed above that we believe will position us for 2017 and beyond. The Strategic
Leadership Team (SALT) - 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. We have scheduled to do so again in March of 2017
– including Ron Nagel of CSB as our newest member of the SALT team.
Our results in 2016 certainly indicate that our team is focused on doing whatever it takes to “Be Exceptional” – no matter
their role and no matter the location of the entity where they happen to reside. The now 23 year legacy and history of our
company is proving to be an interesting and rewarding story that had humble beginnings founded in the strength of the very
best people. Our thanks go to each and every member of our Company for their passion and commitment that has led to our
exceptional 2016.
Our work is further enhanced and strengthened by talented and passionate local Board members in each of our communities.
These community leaders are often times our biggest advocates and we recognize that we would not have achieved the
successes of 2016 without their significant commitment to our Company and to each of our employees. We are a relationship
driven organization® and we thank you for being a shareholder that values relationships as much as we do.
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.
9
2016 ANNUAL REPORT QCR HOLDINGS, INC. Board of Directors
(Left to Right)
Ronald G. Peterson
Retired Executive, First State Bank of Illinois
Larry J. Helling
President and Chief Executive Officer,
Cedar Rapids Bank and Trust
John-Paul E. Besong
Retired Executive, Rockwell Collins
Patrick S. Baird
Chair of the Board, QCR Holdings, Inc.
Retired President and Chief Executive Officer, AEGON USA, LLC
Linda K. Neuman
Founder and Principal, Iowa Arbitrators
Associate Justice, Iowa Supreme Court (Retired)
James J. Brownson
President, W.E. Brownson Co.
Donna J. Sorensen, J.D.
President, Sorensen Consulting
Douglas M. Hultquist
President and Chief Executive Officer,
Co-Founder, QCR Holdings, Inc.
Marie Z. Ziegler
Vice Chair of the Board, QCR Holdings, Inc.
Retired Executive, Deere & Company
Michael L. Peterson
President and Owner, Peterson Genetics, Inc.
Mark C. Kilmer
President, The Republic Companies
George T. Ralph III
Owner, GTR Realty Advisors, LLC
Todd A. Gipple
Executive Vice President
Chief Operating Officer and Chief Financial Officer,
QCR Holdings, Inc.
10
QCR HOLDINGS, INC. QCR HOLDINGS, INC. Executive Management Team
Cynthia M. Carlson
Executive Vice President, Wealth Management Group,
Quad City Bank and Trust Company
John A. Rodriguez
Executive Vice President, Deposit Operations
and Information Services
Dana L. Nichols
Executive Vice President, Chief Credit Officer
John R. Oakes
1st Vice President, Treasurer
Michael J. Wyffels
Senior Vice President, Chief Information Officer
Thomas D. Budd
President and Chief Executive Officer,
Rockford Bank and Trust Company
Stacey J. Bentley
President and Chief Executive Officer,
Community Bank and Trust Company
(Left to Right)
John R. McEvoy
Executive Vice President,
Chief Operations Officer and Cashier,
Quad City Bank and Trust Company
Douglas M. Hultquist
President and Chief Executive Officer,
Co-Founder, QCR Holdings, Inc.
Larry J. Helling
President and Chief Executive Officer,
Cedar Rapids Bank and Trust Company
Executive Vice President, Chief Lending Officer,
QCR Holdings, Inc.
Todd A. Gipple
Executive Vice President, Chief Operating Officer
and Chief Financial Officer, QCR Holdings, Inc.
Ronald M. Nagel
President and Chief Executive Officer,
Community State Bank
Jill A. DeKeyser
Senior Vice President,
Director of Human Resources
Peter J. Benson
Executive Vice President,
Chief Legal Counsel and Trust Officer
Quad City Bank and Trust Company
John R. Engelbrecht
Chief Executive Officer, m2 Lease Funds, LLC
M. Randolph Westlund
Executive Vice President,
Chief Investment Officer
Shawna M. Graham
Senior Vice President,
Director of Risk Management
Richard W. Couch
President and Chief Operating Officer,
m2 Lease Funds, LLC
John H. Anderson
President and Chief Executive Officer,
Quad City Bank and Trust Company
Chief Deposit Officer, QCR Holdings, Inc.
Cathie S. Whiteside
Executive Vice President, Corporate Strategy,
Human Resources and Branding
11
2016 ANNUAL REPORT 2016 Company Highlights
306
WEALTH MANAGEMENT
RELATIONSHIPS ADDED HELPING
DRIVE MORE THAN $2.8 BILLION
IN TOTAL ASSETS UNDER
MANAGEMENT
18,834
TOTAL COMPANY WIDE
VOLUNTEER HOURS
10%
INCREASE IN LOANS
AND LEASES OVER 2015
$3,301,943,748
In Total Assets at December 31, 2016
$27.7 million
2016 ANNUAL
EARNINGS
30%
OF TOTAL DEPOSITS ARE
NON-INTEREST BEARING
$18.2 million
INCREASE (24%) IN NET INTEREST
INCOME OVER 2015
12
QCR HOLDINGS, INC. TOTAL DEPOSITS
(in millions)
12.31.14
12.31.15
12.31.16
Non-interest bearing demand deposits
$ 512
$ 616
$ 797
Interest bearing demand deposits
Time deposits
Brokered deposits
779
306
83
886
310
69
1,369
439
64
TOTAL DEPOSITS
$ 1,680
$ 1,881
$ 2,669
TOTAL ASSETS (in millions)
12.31.16
12.31.15
12.31.14
$3,302
$2,593
$2,525
$0
$2,500
$5,000
GROSS LOANS/LEASES (in millions)
12.31.16
12.31.15
12.31.14
$2,405
$1,798
$1,630
$1,000
$2,000
$3,000
DEPOSIT MARKET SHARE (JUNE 30, 2016)
Quad Cities
13.14%
Rank #2 of 36
Cedar Rapids
10.23%
Rank #4 of 40
Rockford
5.08%
Rank #8 of 26
Waterloo/Cedar Falls
3.84%
Rank #10 of 25
Ankeny / Des Moines
2.88%
Rank #8 of 49
QCR Holdings, Inc.
Group Operations Management Team
Todd A. Gipple
Executive Vice President, Chief Operating Officer
and Chief Financial Officer
Peggy M. Bishop
Senior Vice President, Director of Compliance
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
Erin J. German
Senior Vice President, Chief Operations Officer,
Community State Bank
Pamela J. Goodwin
1st Vice President, Loan Operations Manager
Elizabeth A. Grabin
1st 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
Anne E. Howard
Vice President, Human Resources Manager
John R. McEvoy
Executive Vice President, Chief Operations Officer and Cashier,
Quad City Bank and Trust Company
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
13
2016 ANNUAL REPORT Michael Segner
President & Chief Executive Officer, People Trust & Savings Bank - Clive, Iowa
"Thank you for your sincere approach to our relationship. The effort that you have put forth
to maintain and strengthen our relationship is very noticeable and strengthens my resolve
to maintain and enhance the relationship, just the same.
Community banks working with community banks is something that I, and our bank,
appreciates. I am truly impressed at the passion and quality in which you provide service to
us. Thank you for taking the time to meet with me and for the relationship we have."
14
QCR HOLDINGS, INC. 10,387
EMPLOYEE HOURS VOLUNTEERED IN 2016
David J. Steil
Owner, Fidlar Technologies
James D. von Maur
President, Von Maur Inc.
Marie Z. Ziegler
Anne E. Howard
Vice President, Human Resources Manager
David C. Howell
1st Vice President, Wealth Management Group
Rick J. Jennings
Retired Executive, Deere & Company
Senior Vice President, Senior Trust Officer
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.
Steven R. Geifman
SENIOR MANAGERS
John H. Anderson
President and Chief Executive Officer
Nick W. Anderson
Vice President, Chief Financial Officer
President and Managing Partner, Geifman | First Equity
Cynthia M. Carlson
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
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)
Executive Vice President, Wealth Management Group
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
Kathleen M. Francque
Senior Vice President, Correspondent Banking
Ronald G. Peterson
Therese K. Gerwe
Retired Executive, First State Bank of Illinois
Vice President, Treasury Management
Victor J. Quinn
Deborah C. Gillum
Retired Executive, Quad City Bank and Trust Company
1st Vice President, Retail Banking
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
Cathie S. Whiteside
Executive Vice President, Corporate Strategy,
Human Resources and Branding
Michael J. Wyffels
Senior Vice President, Chief Information Officer
15
2016 ANNUAL REPORTINVESTING IN THE QUAD CITIES AREA
John Anderson
President and Chief Executive Officer,
Quad City Bank & Trust
Exceptional is defined as unusually good, outstanding.
Over the past year, our Team’s rally cry has been to "Be Exceptional."
Our rally cry, coupled with our Mission, which focuses squarely on our clients - "We make financial dreams a reality,"
creates a solid foundation to achieve our stated corporate-wide Vision: QCRH will be ranked in the top quartile on
Return on Assets (ROA) of peer firms by 2020.
As we have now wrapped up 2016, we focus on the results of the aforementioned by assessing how well we
did with our Strategic Initiatives, all of which drove our ROAA to a record 1.12%, putting us well on our way to
achieving our corporate vision.
Strategic Initiatives (Quad City Bank & Trust)
2016 Results
Target loans and leases to total assets of 70 – 75%
Reduce wholesale funding to less than 15%
Increase gains on sale of USDA and SBA loans, along with SWAP income,
in 2016 to a more significant, and constant, component of core revenue
Grow Wealth Management net income by 15% annually
Eliminate identified noninterest expenses and manage annual expense growth
(1 excludes debt extinguishment charges)
Improve nonperforming assets to better than peer levels
(2 Total NPAs / Assets)
72.39 %
9.13 %
+ 4 %
- 10.54 %
+ 4 % 1
.84 % 2
16
QCR HOLDINGS, INC. With one exception, the Team has met or exceeded
our goals on these initiatives and they continue to
What Community Banking is All About
collaborate on ways to gain momentum on each
In late 2016 we received a call from one of our
one.
Over the past 23 years, QCBT has grown from
a de novo institution into a $1.4 billion bank
headquartered in Bettendorf, Iowa, a feat
unimaginable to many when we opened our doors
on a cold snowy morning in January of 1994.
Outside of all of these achievements, and at our core,
is the outstanding Team of individuals who place
client satisfaction, shareholder return, and growing
our community, as their main objectives. I am proud
to be part of this Team of incredibly focused and
talented professionals.
valued clients informing us that she, along with
five of her dear friends, were in downtown Chicago
on their annual shopping adventure. The trip is
something this group of friends has done for many
years. Unfortunately, during the course of their first
day of shopping she was notified that her QCBT
debit card had to be closed down due to potential
fraudulent activity.
To help ensure the shopping trip could go on,
our Deposit Operations Team came into the bank
after hours (on a Friday night) to work through
the details. The end result was our client’s annual
weekend was left uninterrupted as our team
worked to get the card working. This is a perfect
example of People You Can Bank On.®
“I would like to express my sincere gratitude for your
generous gift toward the Figge Art Museum’s Annual
Fund. We have experienced wonderful success in our 2016
campaign and look forward to even more success in the
future because of the support from strong organizations, like
Quad City Bank & Trust, whose leadership sets the pace for
growth and prosperity in our community.
With Quad City Bank & Trust as our partner, the Figge Art
Museum can provide a rich culture of art appreciation and
education which benefits the people in our community,
schools, businesses, and organizations serving our mission of
bringing art and people together."
Raelene Pullen
Development Director, Figge Art Museum
17
2016 ANNUAL REPORT Peter Watson, President // Mark Watson, Treasurer
Climate Engineers - Hiawatha, Iowa
"Climate Engineers has critical partners that are carefully selected based on reputation.
Quality and service are more important in our business model than price or fees.
Cedar Rapids Bank & Trust has been our business banking partner since they started in Cedar
Rapids because they are a perfect fit. Last year, they were instrumental in helping us with
a complicated real estate transaction. They took care of all the details, which allowed us to
focus on our core business. We are raving fans of Cedar Rapids Bank & Trust."
18
QCR HOLDINGS, INC. 4,150
EMPLOYEE HOURS VOLUNTEERED IN 2016
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
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.
Hillary L. Hughes, CFA
Director, Prairie Capital Advisors, Inc.
Attorney and Partner,
Redfern, Mason, Larsen and Moore, PLC
James A. Mudd, II
President and Chief Executive Officer, Mudd Advertising
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
John A. Rodriguez
Executive Vice President, Operations and Cashier
J. Mitchell McElree
Executive Vice President, Managing Director,
Specialty Finance Group
Patricia L. Ellison
Executive Vice President, Chief Credit Officer
Gary M. Becker
Senior Vice President, Commercial Banking
Kevin D. Bruns
Senior Vice President, Wealth Management
James D. Klein
Executive Vice President, Chief Lending Officer
Deborah J. Gertsen
Senior Vice President, Trust and Investments
Shelly A. Strellner
Senior Vice President, Private Banking
Timothy J. White
Senior Vice President, Business Development,
Specialty Finance Group
19
2016 ANNUAL REPORTINVESTING IN CEDAR RAPIDS, IOWA Larry Helling
President and Chief Executive Officer,
Cedar Rapids Bank & Trust
2016 will go down in the books as Cedar Rapids Bank & Trust’s most
profitable year in our 15-year history. In spite of continued uncertainty on
many fronts (economy, elections, international events, etc.), Cedar Rapids
Bank & Trust was able to finish the year with strong operating performance.
At the end of each year, I personally call a long list of
In addition, our commitment to serving and enhancing
clients to thank them for their business and solicit
our community continues to position CRBT as a market
feedback. It’s an invigorating experience as I talk with
leader. We are very proud of the communities we
old friends, new clients and long-time supporters. The
serve and that pride shows in the volunteer spirit that
consistent message that I hear is that our people are
permeates the company. We contribute volunteer
outstanding and have built long-lasting relationships.
leadership and participation in over 100 local nonprofit
When I’m asked about the secret to building CRBT over
and economic development organizations. In 2016,
the past 15 years, it’s a simple answer. It’s all about
our annual total time given by CRBT employees was
the people. Our clients recognize and value our local
4,150 hours.
in-house decision making, our staff’s expertise, our
philosophy to do the “right thing” every day, and our
team approach that supports our client’s journey from
growing their business to managing their wealth.
As we celebrate the many successes of the past year,
we continue to challenge ourselves to reach new
heights and explore innovative strategies to grow our
franchise and become the number one bank in our
market. This vigilant pursuit of non-complacency will
allow us to “Be Exceptional” and reward our employees,
our clients, our community, and ultimately, our
shareholders.
20
QCR HOLDINGS, INC. "CRBT has been our friend and partner for nearly a decade. No matter what the challenge, they have
been willing to “think outside the box” to help meet our needs. When we were looking to buy a piece
of property for our future home, CRBT structured a deal that others weren’t willing to entertain. Their
customer service is a model for all businesses. Each and every customer is treated with friendliness and
respect. Their staff is empowered to do the simple things that make common interactions special. I
often share the story with friends and family about the CRBT teller who, without knowing who we were,
offered her personal cash box for use at our charity fundraiser. I have no hesitation recommending
CRBT to my friends and family for all their personal banking needs."
Tony and Marcia Bedard // Palo, Iowa
"CRBT exudes values that are important to our firm. Like us, CRBT is committed to helping people thrive
by giving back to the community, thinking creatively and finding solutions where all parties benefit.
When we conduct business with organizations that exemplify these values, our relationship naturally
evolves into a strong partnership. Moreover, CRBT has devoted time to thoroughly understand the
structure of our company and the direction in which we are headed. As we continue to build and
grow our company by investing in our clients, colleagues, business partners and communities, we have
every confidence that CRBT is ready, willing and able to support our efforts."
Duane Smith, Chief Executive Officer // Jason Smith, President
TrueNorth Insurance & Financial Strategies
"When we decided to follow Deb Gertsen to CRBT in 2001, we had no idea it would play such a large
role in our lives. Deb introduced us to Shelly Strellner, and since then, they have both played a key
role in helping us invest, plan for our children's college education, and secure our financial future.
Now our children, both adults, are CRBT clients! From a professional standpoint, Melissa Torner and the
international team are always ready and willing to help with Pete's business needs. And as a realtor,
I know I can count on the expertise of Debby Roth and the mortgage team to flawlessly execute
transactions for my clients. I’ve come to look forward to my New Years Eve call from Larry Helling to see
how the year was with CRBT. Truly, at CRBT, everybody does know your name."
Karen & Pete Mathison // Cedar Rapids, Iowa
21
2016 ANNUAL REPORT Rick Roth, Managing Member
Roth Jewelers, L.L.C. - Waterloo, Iowa
"Community Bank & Trust is a great business partner. Their scope of services and
systems well handle all our banking needs. Banking with Community is very cost
effective and avoids much of the red tape inherent in big banks. The people of
Community Bank & Trust are proactive and always deliver an excellent customer
experience with a personal touch."
22
QCR HOLDINGS, INC. 1,001
EMPLOYEE HOURS VOLUNTEERED IN 2016
SENIOR MANAGERS
Stacey J. Bentley
President and Chief Executive Officer
Kyle M. Baker
Vice President, Retail Banking
Richard L. Jaacks
Senior Vice President,
Business Development Officer
23
2016 ANNUAL REPORTINVESTING IN THE CEDAR VALLEY Stacey Bentley
President and Chief Executive Officer,
Community Bank & Trust
Today. We have an abundance of resources to assist you since we successfully
joined forces with Cedar Rapids Bank & Trust, further helping you achieve financial
success while remaining your local bank with local decisions.
This year marked a series of educational round tables
also allowed us to acknowledge the importance of
in additional to social gatherings. We are dedicated
nonprofit organizations and the services they provide
to being a partner to your business and work; finding
throughout our community. We had the opportunity to
solutions together to ensure we support you and your
donate office furniture and supplies to 20+ nonprofit
operations.
organizations through our “Pay it Forward” campaign.
2016 led us to further demonstrate our commitment
Along with the physical renovation, we decided to
to the Cedar Valley and to you. We launched a $3.7
refresh our overall branding in the Cedar Valley with an
million renovation to our downtown Waterloo office as
updated logo and color. We have a message to tell and
part of our pledge to you to ensure we are your bank
an exciting message it is.
of choice. With the renovation, many new innovations
and enhanced technology will be accessible to
you and your business which will position both of
us well into the future. This extensive renovation
24
QCR HOLDINGS, INC. Our Message. We are able to provide the
technology of larger banks while continuing
to provide the level of customer service you
are accustomed to. Put simply, we are large
enough to accommodate but small enough to
appreciate. Our focus in 2017 is to continue our
growth – growing loans and deposits and most
of all, growing relationship banking. By joining
forces with Cedar Rapids Bank & Trust, our lending
capacity has substantially increased. We are able
to accommodate large loan requests, yet still
uniquely structure the loan to best suit your
needs. We have various products and services
that can strengthen your growth individually and
professionally. When our clients prosper, so do
we. This reflects our commitment to the success
of individuals and clients in the communities
we serve. By providing resources, education,
guidance, and products and services that save you
time and money, we are able to help you grow.
We are happy to report our Wealth Management
& Trust Department has been recognized as
one of the strongest and well known Wealth
Management & Trust Departments in the
Cedar Valley. With their 130+ combined years
of experience, the Wealth Management Team
delivers a comprehensive and fully-integrated
suite of wealth-building expertise.
2017 will mark the 20
year anniversary of our
presence in the Cedar
Valley. We knew we
needed to update our look
and freshen our brand to
mirror our progress and
help convey our message.
As we strive to "Be
Exceptional" in everything
we do, we are excited
to share with you the
launch of our new logo
representing our vision
and outlook for the future.
25
2016 ANNUAL REPORT Stephen Hogan, Owner
Rock Valley Subway, L.L.C. - Central Illinois
“Rockford Bank & Trust is my 'coffee shop'. It's a great place to start my day. The moment I walk in I'm greeted
warmly by name. They know my daily business needs and I'm treated in a friendly, courteous, respectful and
prompt manner. The culture of this bank is always happy and helpful.
When in social situations I'm pleased to share that Rockford Bank & Trust is my bank and handles my business
and personal financial needs with caring knowledge and professionalism. I highly recommend Rockford Bank
& Trust to others as I'm proud to be associated with a bank that cares for me and my community.
Rockford Bank & Trust has earned my trust by meeting my banking needs with a personal touch, which is
very important to me as a small business owner. They work with me, always having my best interest at heart,
to help my business and personal finances reach their greatest potential. "
26
QCR HOLDINGS, INC. 1,822
EMPLOYEE HOURS VOLUNTEERED IN 2016
DIRECTORS
SENIOR MANAGERS
Thomas D. Budd
President and Chief Executive Officer,
Rockford Bank and Trust Company
George T. Ralph III
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
Vice Chair of the Board
Former Chairman, Illinois Commerce Commission
Former Mayor, Rockford, Illinois
Rebecca Epperson
President, Chartwell Agency
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 Insurance Agency, Inc.
Robert J. Stenstrom
President, Stenstrom Petroleum Services Group
M. Shawn Way
President and Chief Executive Officer,
Milestone, Inc.
Thomas D. Budd
President and Chief Executive 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
Executive Vice President, Operations and Cashier
Karl R. Swanson
Executive Vice President, Chief Lending Officer
27
2016 ANNUAL REPORTINVESTING IN ROCKFORD, ILLINOIS Thomas Budd
President and Chief Executive Officer,
Rockford Bank & Trust
2016 was an excellent year as the bank
achieved significant growth in client
relationships and profitability.
We furthered our mission of making
Financial results for 2016 were highlighted
financial dreams a reality by striving
by a 46% increase over the prior year in net
to adhere to our values and create a
income. Our improvement in profitability
performance culture that seeks to “Be
was driven by strong revenue growth
Exceptional.” Our Rockford community
combined with close management of
continued its transformation with growth
expenses. We will continue efforts in 2017
in new projects at historic levels of capital
to manage our expenses and leverage
our existing capacity while studying ways
to create additional capacity through
improved processes and collaboration.
spending.
28
QCR HOLDINGS, INC. We also benefitted from improved asset quality and minimal loan losses reflecting the
improved local economy and disciplined underwriting. Our performance in 2016 placed us
well within local peer averages and our goal for 2017 will be to reach the top quartile of our
peers in profitability, asset quality and capitalization.
The Rockford region continued its trend of unprecedented levels of capital projects by
existing as well as new major employers. It is estimated that approximately $2 billion in new
projects were completed, started, or announced during 2016. These projects are diverse
in terms of industries, public and private, and, in some cases, public/private partnerships.
Industries include aerospace, healthcare, logistics, transportation and hospitality. The diversity
of these projects will contribute to balanced economic growth and workforce development
well into the future.
Our mission to make financial dreams a reality is at the heart of the role RB&T plays as a
community bank. Financial dreams come in many forms. They may range from helping one
of our “senior” clients buy a home in Florida, to an entrepreneur starting a business, to helping
a struggling company work through a challenging time. Regardless of the simplicity or
complexity, the importance is the same to the person we’re helping. We strive to treat them
all with the same level of respect and attention.
For 2017 we’re excited to continue our
growth, participate and support Rockford’s
transformation, and further establish
Rockford Bank & Trust as Rockford’s premier
community bank.
29
2016 ANNUAL REPORT Frank Levy, President
Newbury Living - Des Moines, Iowa
"Newbury has active banking relationships with about a dozen lending
institutions. Community State Bank stands out for the lengths it will go
to try to create win-win opportunities. CSB has funded several projects
for Newbury, each of which required creativity, comfort with complexity,
patience and flexibility."
30
QCR HOLDINGS, INC. 1,102
EMPLOYEE HOURS VOLUNTEERED IN 2016
DIRECTORS
Larry J. Helling
Chair of the Board, Community State Bank
President and Chief Executive Officer
Cedar Rapids Bank and Trust Company
Todd A. Gipple
Director, Community State Bank
Executive Vice President, Chief Operating Officer and
Chief Financial Officer, QCR Holdings, Inc.
Douglas M. Hultquist
Vice Chair of the Board, Community State Bank
President and Chief Executive Officer, Co-Founder,
QCR Holdings, Inc.
Ronald M. Nagel
President and Chief Executive Officer,
Community State Bank
Dana L. Nichols
Director, Community State Bank
Executive Vice President, Chief Credit Officer
QCR Holdings, Inc.
SENIOR MANAGERS
Ronald M. Nagel
President and Chief Executive Officer
Al H. Brazelton
President, CSB Insurance Group
Jennifer L. Canelos
Senior Vice President of Marketing
Jodi Corcoran
Senior Vice President, Treasury Management Officer
Erin J. German
Senior Vice President, Chief Operations Officer
Cade L. Lindaman
Vice President, Mortgage Lending
Kathy A. Nichols
Senior Vice President, Retail Banking
Ken R. Wilson
Vice President, Financial Advisor
31
2016 ANNUAL REPORTINVESTING IN OUR COMMUNITIES
Ron Nagel
President and Chief Executive Officer,
Community State Bank
We became part of the QCR Holdings, Inc. family in the 3rd quarter of 2016. When it came time to
find a new owner, we looked for an organization that identifies with and shares similar values. We
call them our "Redefining Simple" principles. Thus, the joining of our organizations made for a great
combination of customer-centric companies. CSB is a solid community bank with 10 branches
throughout the Des Moines Metro. We have a large retail deposit and commercial lending base.
We lead all of our business with the following principles:
Make it Easy for Customers to do Business with Us.
Make Exceptional Service the Rule – not the Exception.
Be Accountable.
Be Innovative and Embrace Change.
Be a Team Player.
Be Professional.
We strive to deliver on these every day for every customer regardless of financial status.
32
QCR HOLDINGS, INC. Our joining with the QCR Holdings Team will also
enhance our ability to deliver superior service.
We especially look forward to the improved scale
this partnership gives us to assist with so many
of our customers who are experiencing financial
expansion. This combination will also support
the continued technology changes that occur
in the industry at a rapid pace. CSB continues to
be the #1 bank in the Ankeny market. While we
are by far not the largest institution in the Metro
we strongly believe we are the best at meeting
customer needs.
As of January 1, 2017 we merged CSB Insurance
with TrueNorth and created a new joint venture.
Our CSB Insurance staff members were doing an
amazing job, however we felt we needed to raise
the visibility of the agency and its management
talent. Joining with TrueNorth was the
appropriate move at this time. We look forward to
even better customer support and growth with
this new partnership.
Not only do we thank
our employees for all
their hard work, we
thank our customers for
their loyalty over all of
these years.
We have been in
business for over 115
years and by joining
the QCRH Team we
are positioning the
organization well for
another 100 years.
33
2016 ANNUAL REPORT Ali Baydoun // Chad Kime // Jim Bauters
The Enterprise Group of UHY Advisors, Inc. - Farmington Hills, Michigan
"We appreciate our long and very professional relationship with m2 and its
personnel. The best testimonial is the amount of repeat business our clients
want to do with m2 as they have banks and others pounding on them; and
many times at some significant rate advantages."
34
QCR HOLDINGS, INC. 372
EMPLOYEE HOURS VOLUNTEERED IN 2016
DIRECTORS AND SENIOR MANAGERS
John R. Engelbrecht
Chair of the Board, Founder and Chief Executive Officer,
m2 Lease Funds, LLC
John H. Anderson
Director, m2 Lease Funds, LLC
President and Chief Executive Officer,
Quad City Bank and Trust Company
Patrick S. Baird
Director, m2 Lease Funds, LLC
Retired President and Chief Executive Officer, AEGON USA, LLC
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
Secretary 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
Dana L. Nichols
Director, m2 Lease Funds, LLC
Executive Vice President, Chief Credit Officer
QCR Holdings, Inc.
35
2016 ANNUAL REPORTINVESTING 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. 2016 was a
challenging year for m2 and for our industry in general.
While the national economy improved in 2016, it has been primarily driven by growth in the
consumer segment, a segment in which m2 does not participate. Commercial and industrial
lending and leasing in our niche was stagnant or actually shrank in 2016. This resulted in increased
competition from larger institutions, coming down market with lower rates and a loosening of
credit underwriting that we do not believe is suitable given the risk/reward scenario.
m2 provides higher returns and spreads and consequently provides an increased return on assets
and equity than our sister banks. To best utilize QCR Holdings' capital resources, we believe that m2
should grow to be a more significant portion of the Company’s assets. This initiative began in mid-
2013 and with our recent performance, we are on our way to reaching that goal. m2 ended the year
with assets of $213 million, a 5% increase over the preceding year.
Today m2 has thousands of leases in virtually every state. As an equipment leasing generalist,
m2 leases all varieties of equipment. Currently the largest equipment concentrations include
manufacturing, technology, marine, food processing, packaging, transportation, bakery and
construction.
36
QCR HOLDINGS, INC. We continue to believe that the m2 business model of providing quick and responsive turnarounds
in a simple and straight forward manner remains sound and for us to grow we only need to add
more “talent” to our Team. Unlike our sister banks' goals of increasing market share in their local
communities, m2 does business nationwide. m2 doesn’t have a local community to call home,
so we expanded by adding new employees nationally. We recently increased our footprint by
expanding to Texas, California, Massachusetts and Colorado. These employees join our staff
members located in Pennsylvania, Florida, Iowa, Wisconsin, Minnesota and South Carolina.
We are optimistic on the economic
outlook for 2017 and we believe
that we will benefit from increasing
capital equipment acquisitions.
We believe that we have the Team in
place to continue our steady growth
and to continue adding substantial
returns for the Company for 2017
and beyond.
37
2016 ANNUAL REPORT Year-End 2005-2016
Stock Price ( )
Tangible Book Value Per Common Share ( )
$50
$40
$30
$20
$10
$0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Total Deposits 2006 / 2016
DECEMBER 31, 2006
Total $875.5 MM
DECEMBER 31, 2016
Total $2,669.3 MM
Non Interest Bearing Demand
$124.2 MM or 14%
Interest Bearing Demand
$334.0 MM or 38%
CDs
$345.8 MM or 40%
Brokered Deposits
$71.5 MM or 8%
Non Interest Bearing Demand
$797.4 MM or 30%
Interest Bearing Demand
$1,369.2 MM or 51%
CDs
$439.2 MM or 16%
Brokered Deposits
$63.5MM or 3%
38
QCR HOLDINGS, INC. Facility Map and Locations
FACILITY
STREET ADDRESS
CITY
STATE
Quad City Bank & Trust
2118 Middle Road
Quad City Bank & Trust
4500 N Brady Street
Quad City Bank & Trust/QCRH
3551 7th Street
Quad City Bank & Trust
5405 Utica Ridge Road
Bettendorf
Davenport
Moline
Davenport
Cedar Rapids Bank & Trust
500 First Avenue NE
Cedar Rapids
Rockford Bank & Trust
308 W State Street
Quad City Bank & Trust
1700 Division Street
Rockford
Davenport
Cedar Rapids Bank & Trust
5400 Council Street NE
Cedar Rapids
m2 Lease Funds, LLC
175 N Patrick Boulevard, Suite 140
Brookfield
Rockford Bank & Trust
4571 Guilford Road
Community Bank & Trust
422 Commercial Street
Community Bank & Trust
312 W 1st Street
Community Bank & Trust
11 Tower Park Drive
Community State Bank
817 N Ankeny Boulevard
Community State Bank
200 8th Street SE
Community State Bank
1401 E Euclid Avenue
Community State Bank
6175 Merle Hay Road
Community State Bank
4811 SE 14th Street
Community State Bank
902 SE Oralabor Road
Community State Bank
3540 E 33rd Street
Rockford
Waterloo
Cedar Falls
Waterloo
Ankeny
Altoona
Des Moines
Johnston
Des Moines
Ankeny
Des Moines
Community State Bank
1025 N Hickory Boulevard
Pleasant Hill
Community State Bank
460 SE University Avenue
Community State Bank
1640 SW White Birch Circle
Waukee
Ankeny
* Former location
Iowa
Iowa
Illinois
Iowa
Iowa
Illinois
Iowa
Iowa
Wisconsin
Illinois
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
ZIP
52722
52806
61265
52807
52401
61101
52804
52402
53045
61107
50701
50613
50701
50023
50009
50316
50131
50320
50021
50317
50327
50263
50023
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 **
1984 / 2016 **
1992 / 2016 **
1997 / 2016 ** (July 1996 *)
1998 / 2016 **
1999 / 2016 ** (July 1996 *)
2000 / 2016 **
2001 / 2016 ** (July 1996 *)
2005 / 2016 ** (July 1996 *)
2006 / 2016 **
2006 / 2016 **
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)
6. Community State Bank
(10 Locations)
39
2016 ANNUAL REPORT QCR Holdings, Inc. Consolidated Financial Highlights
As of
December 31,
2016
December 31,
2015
(dollars in thousands)
CONDENSED BALANCE SHEET
Cash and due from banks
Federal funds sold and interest-bearing deposits
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
ANALYSIS OF LOAN DATA
Loan/lease mix:
Commercial and industrial loans
Commercial real estate loans
Direct financing leases
Residential real estate loans
Installment and other consumer loans
Deferred loan/lease origination costs, net of fees
Total loans/leases
Less allowance for estimated losses on loans/leases
Net loans/leases
ANALYSIS OF SECURITIES DATA
Securities mix:
U.S. government sponsored agency securities
Municipal securities
Residential mortgage-backed and related securities
Other securities
Total securities
ANALYSIS OF DEPOSIT DATA
Deposit mix:
Noninterest-bearing demand deposits
Interest-bearing demand deposits
Time deposits
Brokered deposits
Total deposits
ANALYSIS OF BORROWINGS DATA
Borrowings mix:
Term FHLB advances
Overnight FHLB advances
Wholesale structured repurchase agreements
Customer repurchase agreements
Federal funds purchased
Junior subordinated debentures
Other
Total borrowings
40
Amount
$
Amount
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
70,570
86,206
574,022
2,374,730
7,381
13,111
175,924
3,301,944
2,669,261
290,952
55,690
286,041
3,301,944
827,637
1,093,459
165,419
229,233
81,666
8,073
2,405,487
30,757
2,374,730
46,084
374,463
147,702
5,773
574,022
797,415
1,369,226
439,169
63,451
2,669,261
63,000
74,500
45,000
8,132
31,840
33,480
35,000
290,952
41,742
56,164
577,109
1,771,882
1,471
3,223
141,607
2,593,198
1,880,666
444,162
42,484
225,886
2,593,198
648,160
724,369
173,656
170,433
73,669
7,736
1,798,023
26,141
1,771,882
213,537
280,203
80,670
2,699
577,109
615,292
886,294
309,974
69,106
1,880,666
97,000
54,000
110,000
73,873
70,790
38,499
-
444,162
$
$
QCR HOLDINGS, INC.
QCR Holdings, Inc. Consolidated Financial Highlights
For the Year Ended
December 31,
2016
December 31,
2015
(dollars in thousands, except per share data)
INCOME STATEMENT
Interest income
Interest expense
Net interest income
Provision for loan/lease losses
Net interest income after provision for loan/lease losses
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
Securities gains, net
Earnings on bank-owned life insurance
Debit card fees
Correspondent banking fees
Other
Total noninterest income
Salaries and employee benefits
Occupancy and equipment expense
Professional and data processing fees
Acquisition costs
FDIC insurance, other insurance and regulatory fees
Loan/lease expense
Net cost of operation of other real estate
Advertising and marketing
Bank service charges
Losses on debt extinguishment, net
Correspondent banking expense
Other
Total noninterest expense
Net income before taxes
Income tax expense
Net income
Basic EPS
Diluted EPS
$
$
$
$
$
$
$
$
$
$
106,468
11,951
94,517
7,478
87,039
6,164
2,993
4,440
431
3,159
1,708
4,592
1,771
1,815
1,050
2,914
31,037
46,317
8,405
7,113
2,441
2,549
662
591
2,128
1,693
4,578
751
4,258
81,486
36,590
8,903
27,687
90,003
13,707
76,296
6,871
69,425
6,131
2,972
3,785
323
1,305
1,718
799
1,762
1,245
1,190
3,134
24,364
42,968
7,043
5,523
-
2,725
882
(1,092)
1,901
1,486
7,186
703
3,867
73,192
20,597
3,669
16,928
$
$
$
$
$
$
$
$
2.20
2.17
$
$
1.64
1.61
Weighted average common shares outstanding
Weighted average common and common equivalent shares outstanding
12,570,767
12,766,003
10,345,286
10,499,841
41
2016 ANNUAL REPORT
QCR Holdings, Inc. Consolidated Financial Highlights
COMMON SHARE DATA
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
Earnings per common share (basic) LTM (3)
Price earnings ratio LTM (3)
TCE / TA (4)
CONDENSED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
Beginning balance
Net income
Other comprehensive loss, net of tax
Common stock cash dividends declared
Proceeds from issuance of 1,215,000 shares of
common stock, net of costs
Proceeds from issuance of 3,680,000 shares of
common stock, net of costs
Other (5)
Ending balance
$
$
REGULATORY CAPITAL RATIOS:
Total risk-based capital ratio
Tier 1 risk-based capital ratio
Tier 1 leverage capital ratio
Common equity tier 1 ratio
KEY PERFORMANCE RATIOS AND
OTHER METRICS
Return on average assets (annualized)
Return on average total equity (annualized)
Net interest margin
Net interest margin (TEY) (Non-GAAP)(6) (8)
Efficiency ratio (Non-GAAP) (8)
Gross loans and leases / total assets
Full-time equivalent employees (7)
AVERAGE BALANCES
Assets
Loans/leases
Deposits
Total stockholders' equity
For the Year Ended
December 31,
2016
December 31,
2015
(dollars in thousands, except per share data)
13,106,845
$21.82
$20.11
$43.30
$567,526
198.41%
215.36%
$2.20
19.68 x
8.04%
225,886
27,687
(336)
(2,036)
29,829
-
5,011
286,041
11.55%
10.45%
9.10%
9.40%
0.97%
10.56%
3.53%
3.75%
64.90%
72.85%
572
11,761,083
$19.21
$18.81
$24.29
$285,677
126.47%
129.15%
$1.64
14.81 x
8.55%
$
144,079
16,928
(189)
(935)
-
63,484
2,519
225,886
$
13.11%
11.88%
9.75%
10.33%
0.66%
8.79%
3.17%
3.37%
72.71%
69.34%
406
$
2,846,699
2,042,555
2,243,624
262,075
$
2,549,921
1,707,523
1,851,582
192,489
(1) Includes accumulated other comprehensive income (loss).
(2) Includes accumulated other comprehensive income (loss) and excludes intangible assets.
(3) LTM : Last twelve months.
(4) TCE / TCA : tangible common equity / total tangible assets.
(5) Includes mostly common stock issued for options exercised and the employee stock purchase plan, as well as stock-based compensation.
(6) TEY : Tax equivalent yield.
(7) Full-time equivalent employees increased by 162 in the 3rd quarter of 2016 due to the acquisition of Community State Bank.
(8) See GAAP to Non-GAAP reconciliations in the Company's 10-K.
1
42
QCR HOLDINGS, INC.
QCR Holdings, Inc. Consolidated Financial Highlights
ANALYSIS OF NET INTEREST INCOME AND MARGIN
December 31, 2016
December 31, 2015
For the Year Ended
Average
Balance
Interest Earned
or Paid
Average Yield
or Cost
Average
Balance
Interest Earned
or Paid
Average Yield
or Cost
(dollars in thousands)
$
$
$
$
Fed funds sold
Interest-bearing deposits at financial institutions
Securities (1)
Restricted investment securities
Loans (1)
Total earning assets (1)
Interest-bearing deposits
Time deposits
Short-term borrowings
Federal Home Loan Bank advances (3)
Junior subordinated debentures
Other borrowings
Total interest-bearing liabilities
15,142
70,757
535,912
13,993
2,042,555
2,678,359
1,092,687
436,070
50,899
114,797
33,735
98,105
1,826,293
45
393
19,054
522
92,475
112,489
3,843
2,175
94
1,284
1,237
3,318
11,951
Net interest income / spread (1)
Net interest margin
Net interest margin (TEY) (Non-GAAP) (1) (2)
$
100,538
0.30%
0.56%
3.56%
3.73%
4.53%
4.20%
0.35%
0.50%
0.18%
1.12%
3.67%
3.38%
0.65%
3.55%
3.53%
3.75%
17,418
66,897
599,648
14,727
1,707,523
2,406,213
821,045
388,691
151,141
154,268
40,364
126,902
1,682,411
25
304
18,380
504
75,671
94,884
1,836
2,660
210
3,511
1,256
4,234
13,707
$
81,177
0.14%
0.45%
3.07%
3.42%
4.43%
3.94%
0.22%
0.68%
0.14%
2.28%
3.11%
3.34%
0.81%
3.13%
3.17%
3.37%
$
$
$
$
$
$
$
$
$
$
$
$
(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.
(2) TEY : Tax equivalent yield. See GAAP to Non-GAAP reconciliations in the Company's 10-K.
(3) Average cost of Federal Home Loan Bank advances for the quarter and year ending December 31, 2016 was affected by the acceleration of the premium on
advances recognized at the acquisition of CSB. $342 thousand was accelerated due to the prepayment of $15.0 million of advances in the fourth quarter of 2016.
December 31,
2016
December 31,
2015
(dollars in thousands)
ROLLFORWARD OF ALLOWANCE FOR
LOAN/LEASE LOSSES
Beginning balance
Provision charged to expense
Loans/leases charged off
Recoveries on loans/leases previously charged off
Ending balance
NONPERFORMING ASSETS (2)
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
Total nonperforming assets
ASSET QUALITY RATIOS
Nonperforming assets / total assets
Allowance / total loans/leases (1)
Allowance / nonperforming loans/leases (1)
$
$
$
$
$
$
26,141
7,478
(3,244)
382
30,757
13,919
967
6,347
21,233
5,523
202
26,958
$
$
23,074
6,871
(5,225)
1,421
26,141
10,648
3
1,054
11,705
7,151
246
19,102
0.82%
1.28%
144.85%
0.74%
1.45%
223.33%
(1) Upon acquisition and per GAAP, acquired loans are recorded at market value which eliminated the allowance and impacts these ratios.
1
43
1
2016 ANNUAL REPORT
stock listing information
The common stock of QCR Holdings, Inc. is traded on the NASDAQ Global Market under the symbol QCRH.
Independent Registered
Public Accounting Firm
RSM US LLP, Davenport, IA
Corporate Counsel
Lane & Waterman, Davenport, IA
Barack Ferrazzano Kirschbaum & Nagelberg LLP,
Chicago, IL
Internet Information
Information on our 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.bankcsb.com
www.m2lease.com
Annual Meeting of Stockholders
The Annual Meeting of the Stockholders of
QCR Holdings, Inc. will be held:
May 12, 2017 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 or calling:
Elizabeth A. Grabin
1st 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
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
COMMON STOCK
Calendar 2016
High
Low
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Calendar 2015
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Calendar 2014
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
$ 44.80
$ 30.31
32.19
28.74
24.15
High
26.41
22.96
18.05
Low
$ 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
16.96
16.99
16.99
DIVIDEND INFORMATION
Record
Date
Payment
Date
Amount
Per Share
$ .04
$ .04
$ .04
$ .04
$ .04
$ .04
$ .04
$ .04
12.23.16
01.06.17
09.16.16
10.05.16
06.17.16
07.06.16
03.18.16
04.06.16
12.18.15
01.06.16
06.19.15
07.08.15
12.19.14
01.07.15
06.20.14
07.08.14
44
QCR HOLDINGS, INC.