Companies: 10,793     total market cap: $139.181 T
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QCR Holdings
QCRH
#5251
Rank
$1.54 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$91.94
Share price
1.84%
Change (1 day)
42.37%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. QCR Holdings
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2024 Q2

QCR Holdings - 10-Q quarterly report FY2024 Q2


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Table of Contents

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to________

Commission file number 0-22208

QCR HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware

42-1397595

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

​

3551 7th Street, Moline, Illinois 61265

(Address of principal executive offices, including zip code)

(309) 736-3580

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

​

​

​

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 Par Value

QCRH

The Nasdaq Global Market

​

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒      No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒      No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

​

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐      No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: As of August 1, 2024, the Registrant had outstanding 16,841,923 shares of common stock, $1.00 par value per share.

​

​

Table of Contents

QCR HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

​

​

​

​

​

​

​

​

​

​

​

    

Page
Number(s)

Part I

    

FINANCIAL INFORMATION

​

​

​

​

​

​

​

​

​

​

​

Item 1

    

Consolidated Financial Statements (Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

Consolidated Balance Sheets
As of June 30, 2024 and December 31, 2023

​

4

​

​

​

​

​

​

​

​

​

​

​

Consolidated Statements of Income
For the Three Months Ended June 30, 2024 and 2023

​

5

​

​

​

​

​

​

​

​

​

​

​

Consolidated Statements of Income

​

​

​

​

​

​

For the Six Months Ended June 30, 2024 and 2023

​

6

​

​

​

​

​

​

​

​

​

​

​

Consolidated Statements of Comprehensive Income
For the Three and Six Months Ended June 30, 2024 and 2023

​

7

​

​

​

​

​

​

​

​

​

​

​

Consolidated Statements of Changes in Stockholders' Equity
For the Three and Six Months Ended June 30, 2024 and 2023

​

8

​

​

​

​

​

​

​

​

​

​

​

Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2024 and 2023

​

9

​

​

​

​

​

​

​

​

​

​

​

Notes to Consolidated Financial Statements

​

10

​

​

​

​

​

​

​

​

​

​

​

Note 1. Summary of Significant Accounting Policies

​

10

​

​

​

​

Note 2. Investment Securities

​

13

​

​

​

​

Note 3. Loans/Leases Receivable

​

16

​

​

​

​

Note 4. Securitizations and Variable Interest Entities

​

25

​

​

​

​

Note 5. Derivatives and Hedging Activities

​

26

​

​

​

​

Note 6. Income Taxes

​

29

​

​

​

​

Note 7. Earnings Per Share

​

30

​

​

​

​

Note 8. Fair Value

​

30

​

​

​

​

Note 9. Business Segment Information

​

32

​

​

​

​

Note 10. Regulatory Capital Requirements

​

33

​

​

​

​

Note 11. Commitments

​

34

​

​

​

​

​

​

​

​

​

Item 2

​

Management's Discussion and Analysis of Financial Condition and Results of Operations

​

​

​

​

​

​

​

​

​

​

​

​

​

Introduction

​

35

​

​

​

​

General

​

35

​

​

​

​

Critical Accounting Policies and Critical Accounting Estimates

​

35

​

​

​

​

Executive Overview

​

35

​

​

​

​

Strategic Financial Metrics

​

37

​

​

​

​

Strategic Developments

​

38

​

​

​

​

GAAP to Non-GAAP Reconciliations

​

39

​

​

​

​

Net Interest Income - (Tax Equivalent Basis)

​

41

​

​

​

​

Results of Operations

​

45

​

​

​

​

Interest Income

​

45

​

​

​

​

Interest Expense

​

46

​

​

​

​

Provision for Credit Losses

​

46

2

Table of Contents

​

​

​

​

Noninterest Income

​

47

​

​

​

​

Noninterest Expense

​

50

​

​

​

​

Income Taxes

​

52

​

​

​

​

Financial Condition

​

52

​

​

​

​

Investment Securities

​

53

​

​

​

​

Loans/Leases

​

54

​

​

​

​

Allowance for Credit Losses on Loans/Leases and OBS Exposures

​

56

​

​

​

​

Nonperforming Assets

​

57

​

​

​

​

Deposits

​

58

​

​

​

​

Borrowings

​

59

​

​

​

​

Stockholders' Equity

​

60

​

​

​

​

Liquidity and Capital Resources

​

61

​

​

​

​

Special Note Concerning Forward-Looking Statements

​

62

​

​

​

​

​

​

​

​

​

Item 3

    

Quantitative and Qualitative Disclosures About Market Risk

​

64

​

​

​

​

​

​

​

​

​

Item 4

​

Controls and Procedures

​

66

​

​

​

​

​

​

​

Part II

    

OTHER INFORMATION

​

​

​

​

​

​

​

​

​

​

​

Item 1

​

Legal Proceedings

​

67

​

​

​

​

​

​

​

​

​

Item 1A

​

Risk Factors

​

67

​

​

​

​

​

​

​

​

​

Item 2

​

Unregistered Sales of Equity Securities and Use of Proceeds

​

67

​

​

​

​

​

​

​

​

​

Item 3

​

Defaults Upon Senior Securities

​

67

​

​

​

​

​

​

​

​

​

Item 4

​

Mine Safety Disclosures

​

67

​

​

​

​

​

​

​

​

​

Item 5

​

Other Information

​

67

​

​

​

​

​

​

​

​

​

Item 6

​

Exhibits

​

68

​

​

​

​

​

​

​

Signatures

​

​

Throughout this Quarterly Report on Form 10-Q, we use certain acronyms and abbreviations, as defined in Note 1 to the Consolidated Financial Statements.

​

​

3

Table of Contents

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

As of June 30, 2024 and December 31, 2023

​

​

​

​

​

​

​

​

​

June 30,

​

December 31,

​

​

2024

​

2023

​

​

(dollars in thousands)

Assets

​

​

​

​

​

​

Cash and due from banks

​

$

92,173

​

$

97,123

Federal funds sold

​

 

8,150

​

 

35,450

Interest-bearing deposits at financial institutions

​

 

94,112

​

 

104,919

​

​

​

​

​

​

​

Securities held to maturity, at amortized cost, net of allowance for credit losses

​

 

720,625

​

 

683,504

Securities available for sale, at fair value

​

 

290,212

​

 

299,655

Securities trading, at fair value

​

 

22,362

​

 

22,369

Total securities

​

​

1,033,199

​

 

1,005,528

​

​

​

​

​

​

​

Loans receivable held for sale

​

 

246,124

​

 

2,594

Loans/leases receivable held for investment

​

 

6,608,262

​

 

6,540,822

Gross loans/leases receivable

​

 

6,854,386

​

 

6,543,416

Less allowance for credit losses

​

 

(87,706)

​

 

(87,200)

Net loans/leases receivable

​

 

6,766,680

​

 

6,456,216

​

​

 

  

​

 

  

Bank-owned life insurance

​

 

107,965

​

 

108,222

Premises and equipment, net

​

 

141,069

​

 

123,277

Restricted investment securities

​

 

44,325

​

 

41,648

Other real estate owned, net

​

 

369

​

 

1,347

Goodwill

​

 

139,027

​

 

139,027

Intangibles

​

 

12,441

​

 

13,821

Derivatives

​

​

194,354

​

​

187,341

Other assets

​

 

238,127

​

 

224,975

Total assets

​

$

8,871,991

​

$

8,538,894

​

​

 

  

​

 

  

Liabilities and Stockholders' Equity

​

 

  

​

 

  

Liabilities:

​

 

  

​

 

  

Deposits:

​

 

  

​

 

  

Noninterest-bearing

​

$

956,445

​

$

1,038,689

Interest-bearing

​

 

5,808,222

​

 

5,475,316

Total deposits

​

 

6,764,667

​

 

6,514,005

​

​

 

  

​

 

  

Short-term borrowings

​

 

1,600

​

 

1,500

Federal Home Loan Bank advances

​

 

485,000

​

 

435,000

Subordinated notes

​

​

233,276

​

​

233,064

Junior subordinated debentures

​

 

48,795

​

 

48,731

Derivatives

​

​

221,798

​

​

215,735

Other liabilities

​

 

180,536

​

 

204,263

Total liabilities

​

 

7,935,672

​

 

7,652,298

​

​

 

  

​

 

  

​

​

 

  

​

 

  

Stockholders' Equity:

​

 

  

​

 

  

Preferred stock, $1 par value; shares authorized 250,000 June 2024 and December 2023 - no shares issued or outstanding

​

 

—

​

 

—

Common stock, $1 par value; shares authorized 20,000,000 June 2024 - 16,824,985 shares issued and outstanding December 2023 - 16,749,254 shares issued and outstanding

​

 

16,825

​

 

16,749

Additional paid-in capital

​

 

372,378

​

 

370,814

Retained earnings

​

 

608,816

​

 

554,992

Accumulated other comprehensive loss:

​

 

​

​

 

​

Securities available for sale

​

 

(39,014)

​

 

(35,980)

Derivatives

​

​

(22,686)

​

​

(19,979)

Total stockholders' equity

​

 

936,319

​

 

886,596

Total liabilities and stockholders' equity

​

$

8,871,991

​

$

8,538,894

​

​

​

​

​

​

​

​

See Notes to Consolidated Financial Statements (Unaudited)

​

4

Table of Contents

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended June 30, 2024 and 2023

​

​

​

​

​

​

​

​

​

​

    

2024

    

2023

​

​

​

(dollars in thousands, except share data)

​

Interest and dividend income:

​

​

​

​

​

​

​

Loans/leases, including fees:

​

​

​

​

​

​

​

Taxable

​

$

79,743

​

$

68,419

​

Nontaxable

​

​

26,051

​

​

19,545

​

Securities:

​

​

​

​

​

​

​

Taxable

​

 

4,285

​

 

3,693

​

Nontaxable

​

 

7,476

​

 

4,868

​

Interest-bearing deposits at financial institutions

​

 

1,139

​

 

1,124

​

Restricted investment securities

​

 

869

​

 

505

​

Federal funds sold

​

 

183

​

 

223

​

Total interest and dividend income

​

 

119,746

​

 

98,377

​

​

​

​

​

​

​

​

​

Interest expense:

​

​

​

​

​

​

​

Deposits

​

 

53,053

​

 

38,445

​

Short-term borrowings

​

 

21

​

 

33

​

Federal Home Loan Bank advances

​

 

6,239

​

 

2,653

​

Subordinated notes

​

​

3,582

​

​

3,304

​

Junior subordinated debentures

​

 

688

​

 

737

​

Total interest expense

​

 

63,583

​

 

45,172

​

Net interest income

​

 

56,163

​

 

53,205

​

Provision for credit losses

​

 

5,496

​

 

3,606

​

Net interest income after provision for credit losses

​

 

50,667

​

 

49,599

​

​

​

​

​

​

​

​

​

Noninterest income:

​

​

​

​

​

​

​

Trust fees

​

 

3,103

​

 

2,844

​

Investment advisory and management fees

​

 

1,214

​

 

986

​

Deposit service fees

​

 

1,986

​

 

2,034

​

Gains on sales of residential real estate loans, net

​

 

540

​

 

500

​

Gains on sales of government guaranteed portions of loans, net

​

 

12

​

 

—

​

Capital markets revenue

​

 

17,758

​

 

22,490

​

Securities gains, net

​

 

—

​

 

12

​

Earnings on bank-owned life insurance

​

 

2,964

​

 

838

​

Debit card fees

​

 

1,571

​

 

1,589

​

Correspondent banking fees

​

 

510

​

 

356

​

Loan related fee income

​

​

962

​

​

770

​

Fair value gain on derivatives and trading securities

​

​

51

​

​

83

​

Other

​

 

218

​

 

18

​

Total noninterest income

​

 

30,889

​

 

32,520

​

​

​

​

​

​

​

​

​

Noninterest expense:

​

​

​

​

​

​

​

Salaries and employee benefits

​

 

31,079

​

 

31,459

​

Occupancy and equipment expense

​

 

6,377

​

 

6,100

​

Professional and data processing fees

​

 

4,823

​

 

4,078

​

FDIC insurance, other insurance and regulatory fees

​

 

1,854

​

 

1,927

​

Loan/lease expense

​

 

151

​

 

652

​

Net cost of and gains/losses on operations of other real estate

​

 

28

​

 

—

​

Advertising and marketing

​

 

1,565

​

 

1,735

​

Communication and data connectivity

​

​

318

​

​

471

​

Supplies

​

​

259

​

​

281

​

Bank service charges

​

 

622

​

 

621

​

Correspondent banking expense

​

 

363

​

 

221

​

Intangibles amortization

​

 

690

​

 

765

​

Payment card processing

​

​

706

​

​

542

​

Trust expense

​

​

379

​

​

337

​

Other

​

 

674

​

 

538

​

Total noninterest expense

​

 

49,888

​

 

49,727

​

Net income before income taxes

​

 

31,668

​

 

32,392

​

Federal and state income tax expense

​

 

2,554

​

 

3,967

​

Net income

​

$

29,114

​

$

28,425

​

​

​

​

​

​

​

​

​

Basic earnings per common share

​

$

1.73

​

$

1.70

​

Diluted earnings per common share

​

$

1.72

​

$

1.69

​

​

​

​

​

​

​

​

​

Weighted average common shares outstanding

​

 

16,814,814

​

 

16,701,950

​

Weighted average common and common equivalent shares outstanding

​

 

16,921,854

​

 

16,799,527

​

​

​

​

​

​

​

​

​

Cash dividends declared per common share

​

$

0.06

​

$

0.06

​

​

​

​

​

​

​

​

​

​

See Notes to Consolidated Financial Statements (Unaudited)

​

5

Table of Contents

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Six Months Ended June 30, 2024 and 2023

​

​

​

​

​

​

​

​

​

​

    

2024

    

2023

    

​

​

(dollars in thousands, except share data)

​

Interest and dividend income:

​

​

​

​

​

​

​

Loans/leases, including fees:

​

​

​

​

​

​

​

Taxable

​

$

156,874

​

$

135,053

​

Nontaxable

​

​

50,179

​

​

36,857

​

Securities:

​

​

​

​

​

​

​

Taxable

​

 

8,546

​

 

7,059

​

Nontaxable

​

 

14,862

​

 

10,205

​

Interest-bearing deposits at financial institutions

​

 

2,339

​

 

1,945

​

Restricted investment securities

​

 

1,543

​

 

1,018

​

Federal funds sold

​

 

452

​

 

457

​

Total interest and dividend income

​

 

234,795

​

 

192,594

​

​

​

​

​

​

​

​

​

Interest expense:

​

​

​

​

​

​

​

Deposits

​

 

104,469

​

 

68,225

​

Short-term borrowings

​

 

44

​

 

132

​

Federal Home Loan Bank advances

​

 

10,977

​

 

6,174

​

Subordinated notes

​

​

7,062

​

​

6,615

​

Junior subordinated debentures

​

 

1,381

​

 

1,433

​

Total interest expense

​

 

123,933

​

 

82,579

​

Net interest income

​

 

110,862

​

 

110,015

​

Provision for credit losses

​

 

8,465

​

 

7,534

​

Net interest income after provision for credit losses

​

 

102,397

​

 

102,481

​

​

​

​

​

​

​

​

​

Noninterest income:

​

​

​

​

​

​

​

Trust fees

​

 

6,302

​

 

5,750

​

Investment advisory and management fees

​

 

2,315

​

 

1,865

​

Deposit service fees

​

 

4,008

​

 

4,062

​

Gains on sales of residential real estate loans, net

​

 

922

​

 

812

​

Gains on sales of government guaranteed portions of loans, net

​

 

36

​

 

30

​

Capital markets revenue

​

 

34,215

​

 

39,513

​

Securities losses, net

​

 

—

​

 

(451)

​

Earnings on bank-owned life insurance

​

 

3,832

​

 

1,545

​

Debit card fees

​

 

3,037

​

 

3,055

​

Correspondent banking fees

​

 

1,022

​

 

747

​

Loan related fee income

​

​

1,798

​

​

1,421

​

Fair value loss on derivatives and trading securities

​

​

(112)

​

​

(344)

​

Other

​

 

372

​

 

357

​

Total noninterest income

​

 

57,747

​

 

58,362

​

​

​

​

​

​

​

​

​

Noninterest expense:

​

​

​

​

​

​

​

Salaries and employee benefits

​

 

62,939

​

 

63,462

​

Occupancy and equipment expense

​

 

12,891

​

 

12,014

​

Professional and data processing fees

​

 

9,436

​

 

7,592

​

Post-acquisition compensation, transition and integration costs

​

 

—

​

 

207

​

FDIC insurance, other insurance and regulatory fees

​

 

3,799

​

 

3,301

​

Loan/lease expense

​

 

529

​

 

1,208

​

Net cost of (income from) and gains/losses on operations of other real estate

​

 

(2)

​

 

(67)

​

Advertising and marketing

​

 

3,048

​

 

2,972

​

Communication and data connectivity

​

​

719

​

​

1,136

​

Supplies

​

​

534

​

​

586

​

Bank service charges

​

 

1,190

​

 

1,226

​

Correspondent banking expense

​

​

668

​

​

431

​

Intangibles amortization

​

​

1,380

​

​

1,531

​

Payment card processing

​

​

1,352

​

​

1,087

​

Trust expense

​

​

804

​

​

551

​

Other

​

 

1,291

​

 

1,275

​

Total noninterest expense

​

 

100,578

​

 

98,512

​

Net income before income taxes

​

 

59,566

​

 

62,331

​

Federal and state income tax expense

​

 

3,726

​

 

6,749

​

Net income

​

$

55,840

​

$

55,582

​

​

​

​

​

​

​

​

​

Basic earnings per common share

​

$

3.32

​

$

3.32

​

Diluted earnings per common share

​

$

3.30

​

$

3.29

​

​

​

​

​

​

​

​

​

Weighted average common shares outstanding

​

 

16,799,081

​

 

16,739,120

​

Weighted average common and common equivalent shares outstanding

​

 

16,916,264

​

 

16,870,830

​

​

​

​

​

​

​

​

​

Cash dividends declared per common share

​

$

0.12

​

$

0.12

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

See Notes to Consolidated Financial Statements (Unaudited)

​

​

​

​

​

​

​

​

​

​

6

Table of Contents

​

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Three and Six Months Ended June 30, 2024 and 2023

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 

    

​

    

2024

    

2023

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

Net income

​

$

29,114

​

$

28,425

​

​

​

​

​

​

​

​

​

Other comprehensive loss:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized losses on securities available for sale:

​

​

​

​

​

​

​

Unrealized holding losses arising during the period before tax

​

​

(345)

​

 

(3,128)

​

Less: reclassification adjustment for sales losses included in net income before tax

​

​

—

​

​

12

​

​

​

 

(345)

​

 

(3,140)

​

​

​

​

​

​

​

​

​

Unrealized losses on derivatives:

​

​

​

​

​

​

​

Unrealized holding losses arising during the period before tax

​

 

(270)

​

 

(5,579)

​

Less: reclassification adjustment for caplet amortization before tax

​

​

(125)

​

​

(213)

​

​

​

 

(145)

​

 

(5,366)

​

​

​

​

​

​

​

​

​

Other comprehensive loss, before tax

​

 

(490)

​

 

(8,506)

​

Tax benefit

​

 

(122)

​

 

(2,170)

​

Other comprehensive loss, net of tax

​

 

(368)

​

 

(6,336)

​

​

​

​

​

​

​

​

​

Comprehensive income

​

$

28,746

​

$

22,089

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 

​

​

    

2024

    

2023

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

Net income

​

$

55,840

​

$

55,582

​

​

​

​

​

​

​

​

​

Other comprehensive income (loss):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized gains (losses) on securities available for sale:

​

​

​

​

​

​

​

Unrealized holding gains (losses) arising during the period before tax

​

 

(3,592)

​

 

4,264

​

Less reclassification adjusted for impairment losses included in net income before tax

​

​

445

​

​

(989)

​

Less reclassification adjustment for sales losses included in net income before tax

​

 

—

​

 

(451)

​

​

​

 

(4,037)

​

 

5,704

​

Unrealized losses on derivatives:

​

​

​

​

​

​

​

Unrealized holding losses arising during the period before tax

​

 

(3,874)

​

 

(2,133)

​

Less reclassification adjustment for caplet amortization before tax

​

 

(246)

​

 

(414)

​

​

​

 

(3,628)

​

 

(1,719)

​

​

​

​

​

​

​

​

​

Other comprehensive income (loss), before tax

​

 

(7,665)

​

 

3,985

​

Tax expense (benefit)

​

 

(1,924)

​

 

996

​

Other comprehensive income (loss), net of tax

​

 

(5,741)

​

 

2,989

​

​

​

​

​

​

​

​

​

Comprehensive income

​

$

50,099

​

$

58,571

​

​

​

​

​

​

​

​

​

​

See Notes to Consolidated Financial Statements (Unaudited)

​

7

Table of Contents

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

Three and Six Months Ended June 30, 2024 and 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Accumulated

​

​

​

​

​

​

​

​

Additional

​

​

​

​

Other

​

​

​

​

​

Common

​

Paid-In

​

Retained

​

Comprehensive

​

​

​

​

    

Stock

    

Capital

    

Earnings

    

(Loss)

    

Total

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance December 31, 2023

​

$

16,749

​

$

370,814

​

$

554,992

​

$

(55,959)

​

$

886,596

Net income

​

 

—

​

 

—

​

 

26,726

​

 

—

​

 

26,726

Other comprehensive loss, net of tax

​

 

—

​

 

—

​

 

—

​

 

(5,373)

​

 

(5,373)

Common cash dividends declared, $0.06 per share

​

 

—

​

 

—

​

 

(1,008)

​

 

—

​

 

(1,008)

Stock-based compensation expense

​

 

—

​

 

941

​

 

—

​

 

—

​

 

941

Issuance of common stock under employee benefit plans

​

 

58

​

 

(598)

​

 

—

​

 

—

​

 

(540)

Balance, March 31, 2024

​

$

16,807

​

$

371,157

​

$

580,710

​

$

(61,332)

​

$

907,342

Net income

​

 

—

​

 

—

​

 

29,114

​

 

—

​

 

29,114

Other comprehensive loss, net of tax

​

 

—

​

 

—

​

 

—

​

 

(368)

​

 

(368)

Common cash dividends declared, $0.06 per share

​

 

—

​

 

—

​

 

(1,008)

​

 

—

​

 

(1,008)

Stock-based compensation expense

​

​

—

​

 

696

​

 

—

​

 

—

​

 

696

Issuance of common stock under employee benefit plans

​

 

18

​

 

525

​

 

—

​

 

—

​

 

543

Balance, June 30, 2024

​

$

16,825

​

$

372,378

​

$

608,816

​

$

(61,700)

​

$

936,319

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Accumulated

​

​

​

​

​

​

​

​

Additional

​

​

​

​

Other

​

​

​

​

​

Common

​

Paid-In

​

Retained

​

Comprehensive

​

​

​

​

    

Stock

    

Capital

    

Earnings

    

(Loss)

    

Total

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance December 31, 2022

​

$

16,796

​

$

370,712

​

$

450,114

​

$

(64,898)

​

$

772,724

Net income

​

 

—

​

 

—

​

 

27,157

​

 

—

​

 

27,157

Other comprehensive income, net of tax

​

 

—

​

 

—

​

 

—

​

 

9,325

​

 

9,325

Common cash dividends declared, $0.06 per share

​

 

—

​

 

—

​

 

(1,010)

​

 

—

​

 

(1,010)

Repurchase and cancellation of 152,500 shares of common stock

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as a result of a share repurchase program

​

​

(153)

​

​

(3,356)

​

​

(4,210)

​

​

—

​

​

(7,719)

Stock-based compensation expense

​

 

—

​

 

953

​

 

—

​

 

—

​

 

953

Issuance of common stock under employee benefit plans

​

 

71

​

 

(7)

​

 

—

​

 

—

​

 

64

Balance, March 31, 2023

​

$

16,714

​

$

368,302

​

$

472,051

​

$

(55,573)

​

$

801,494

Net income

​

 

—

​

 

—

​

 

28,425

​

 

—

​

 

28,425

Other comprehensive loss, net of tax

​

 

—

​

 

—

​

 

—

​

 

(6,336)

​

 

(6,336)

Common cash dividends declared, $0.06 per share

​

 

—

​

 

—

​

 

(1,003)

​

 

—

​

 

(1,003)

Repurchase and cancellation of 22,500 shares of common stock

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

as a result of a share repurchase program

​

​

(23)

​

​

(495)

​

​

(449)

​

​

—

​

​

(967)

Stock-based compensation expense

​

 

—

​

 

673

​

 

—

​

 

—

​

 

673

Issuance of common stock under employee benefit plans

​

 

23

​

 

380

​

 

—

​

 

—

​

 

403

Balance, June 30, 2023

​

$

16,714

​

$

368,860

​

$

499,024

​

$

(61,909)

​

$

822,689

​

See Notes to Consolidated Financial Statements (Unaudited)

​

8

Table of Contents

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended June 30, 2024 and 2023

​

​

​

​

​

​

​

​

​

    

2024

    

2023

​

​

​

(dollars in thousands)

​

CASH FLOWS FROM OPERATING ACTIVITIES

 

​

  

 

​

  

​

Net income

​

$

55,840

​

$

55,582

​

Adjustments to reconcile net income to net cash provided by operating activities:

​

 

  

​

 

  

​

Depreciation

​

 

4,522

​

 

4,039

​

Provision for credit losses

​

 

8,465

​

 

7,534

​

Stock-based compensation expense

​

 

1,637

​

 

1,626

​

Deferred compensation expense accrued

​

 

3,113

​

 

2,674

​

Gains on other real estate owned, net

​

 

(173)

​

 

(89)

​

Amortization of premiums on securities, net

​

 

346

​

 

736

​

Caplet amortization

​

​

246

​

​

414

​

Fair value loss on derivatives and trading securities

​

​

112

​

​

344

​

Ineffectiveness on fair value hedges

​

​

1

​

​

—

​

Securities losses, net

​

 

—

​

 

451

​

Loans originated for sale

​

 

(40,768)

​

 

(36,241)

​

Proceeds on sales of loans

​

 

41,389

​

 

34,556

​

Gains on sales of residential real estate loans

​

 

(922)

​

 

(812)

​

Gains on sales of government guaranteed portions of loans

​

 

(36)

​

 

(30)

​

(Gains) losses on sales and disposals of premises and equipment

​

​

(2)

​

​

26

​

Amortization of intangibles

​

 

1,380

​

 

1,531

​

Accretion of acquisition fair value adjustments, net

​

 

(268)

​

 

(962)

​

Increase in cash value of bank-owned life insurance

​

 

(1,600)

​

 

(1,545)

​

Gain on bank-owned life insurance death benefits

​

​

(2,232)

​

​

—

​

Increase in other assets

​

 

(12,861)

​

 

(23,883)

​

Decrease (increase) in other liabilities

​

​

(29,102)

​

​

14,506

​

Net cash provided by operating activities

​

$

29,087

​

$

60,457

​

​

​

​

​

​

​

​

​

CASH FLOWS FROM INVESTING ACTIVITIES

​

 

  

​

 

  

​

Net decrease in federal funds sold

​

 

27,300

​

 

48,145

​

Net (increase) decrease in interest-bearing deposits at financial institutions

​

 

10,807

​

 

(98,887)

​

Proceeds from sales of other real estate owned

​

 

1,151

​

 

283

​

Activity in securities portfolio:

​

 

​

​

 

​

​

Purchases

​

 

(65,755)

​

 

(60,387)

​

Calls, maturities and redemptions

​

 

25,607

​

 

69,754

​

Paydowns

​

 

8,347

​

 

8,410

​

Sales

​

 

445

​

 

30,556

​

Activity in restricted investment securities:

​

 

  

​

 

  

​

Purchases

​

 

(6,948)

​

 

(3,177)

​

Redemptions

​

 

4,271

​

 

13,690

​

Proceeds from the liquidation of bank-owned life insurance

​

​

4,085

​

​

—

​

Net increase in loans/leases originated and held for investment

​

 

(319,789)

​

 

(244,679)

​

Purchase of premises and equipment

​

 

(22,314)

​

 

(4,730)

​

Proceeds from sales of premises and equipment

​

​

2

​

​

445

​

Net cash used in investing activities

​

$

(332,791)

​

$

(240,577)

​

​

​

​

​

​

​

​

​

CASH FLOWS FROM FINANCING ACTIVITIES

​

 

  

​

 

  

​

Net increase in deposit accounts

​

 

250,663

​

 

622,503

​

Net increase (decrease) in short-term borrowings

​

 

100

​

 

(127,780)

​

Activity in Federal Home Loan Bank advances:

​

 

  

​

 

  

​

Term advances

​

 

—

​

 

135,000

​

Net change in short-term and overnight advances

​

 

50,000

​

 

(415,000)

​

Payment of cash dividends on common stock

​

 

(2,012)

​

 

(2,023)

​

Proceeds from issuance of common stock, net

​

​

3

​

​

467

​

Repurchase and cancellation of shares

​

​

—

​

​

(8,686)

​

Net cash provided by financing activities

​

$

298,754

​

$

204,481

​

​

​

​

​

​

​

​

​

Net increase (decrease) in cash and due from banks

​

 

(4,950)

​

 

24,361

​

​

​

​

​

​

​

​

​

Cash and due from banks, beginning

​

 

97,123

​

 

59,723

​

Cash and due from banks, ending

​

$

92,173

​

$

84,084

​

​

​

​

​

​

​

​

​

​

​

​

    

2024

    

2023

​

​

​

(dollars in thousands)

​

Supplemental disclosure of cash flow information, cash payments for:

​

 

  

​

 

  

​

Interest

​

$

123,467

​

$

78,966

​

Income/franchise taxes

​

 

3,066

​

 

1,031

​

​

​

 

  

​

 

​

​

Supplemental schedule of noncash investing activities:

​

 

  

​

 

​

​

Change in accumulated other comprehensive income (loss), unrealized gains (losses) on securities available for sale and derivative instruments, net

​

 

(5,741)

​

 

2,989

​

Transfers of loans to other real estate owned

​

 

—

​

 

61

​

Transfer of loans to held for sale for securitizations in preparation

​

​

243,193

​

​

291,050

​

Increase (decrease) in the fair value of back-to-back interest rate swap assets and liabilities

​

 

5,570

​

 

(7,442)

​

Dividends payable

​

 

1,008

​

 

1,003

​

Measurement period adjustment to goodwill

​

 

—

​

 

1,420

​

See Notes to Consolidated Financial Statements (Unaudited)

​

​

9

Table of Contents

Part I

Item 1

QCR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2024

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation:  The interim unaudited Consolidated Financial Statements contained herein should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes to the consolidated financial statements for the fiscal year ended December 31, 2023, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 29, 2024. Accordingly, footnote disclosures, which would substantially duplicate the disclosures contained in the audited Consolidated Financial Statements, have been omitted.

The financial information of the Company included herein has been prepared in accordance with GAAP for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. Any differences appearing between the numbers presented in financial statements and management's discussion and analysis are due to rounding. The results of the interim period ended June 30, 2024 are not necessarily indicative of the results expected for the year ending December 31, 2024, or for any other period.

The acronyms and abbreviations identified below are used throughout this Quarterly Report on Form 10-Q. It may be helpful to refer back to this page as you read this report.

​

​

​

​

ACL: Allowance for credit losses

GAAP: Generally Accepted Accounting Principles

AFS: Available for sale

GB: Guaranty Bank

Allowance: Allowance for credit losses

GDP: Gross domestic product

AOCI: Accumulated other comprehensive income (loss)

GFED: Guaranty Federal Bancshares, Inc.

ASC: Accounting Standards Codification

HTM: Held to maturity

ASU: Accounting Standards Update

ICS: Insured Cash Sweep

BOLI: Bank-owned life insurance

LIBOR: London Inter-Bank Offered Rate

Caps: Interest rate cap derivatives

LIHTC: Low-income housing tax credit

CDARS: Certificate of Deposit Account Registry Service

m2: m2 Equipment Finance, LLC

CECL: Current Expected Credit Losses

NIM: Net interest margin

Community National: Community National Bancorporation

NPA: Nonperforming asset

Company: QCR Holdings, Inc.

NPL: Nonperforming loan

CRBT: Cedar Rapids Bank & Trust Company

OBS: Off-balance sheet

CRE: Commercial real estate

OREO: Other real estate owned

CSB: Community State Bank

OTTI: Other-than-temporary impairment

C&I: Commercial and industrial

PCAOB: Public Company Accounting Oversight Board

EBA: Excess balance account

Provision: Provision for credit losses

EPS: Earnings per share

QCBT: Quad City Bank & Trust Company

Exchange Act: Securities Exchange Act of 1934, as

ROAA: Return on average assets

amended

ROAE: Return on average equity

FASB: Financial Accounting Standards Board

SEC: Securities and Exchange Commission

FDIC: Federal Deposit Insurance Corporation

SOFR: Secured Overnight Financing rate

Federal Reserve: Board of Governors of the Federal

TA: Tangible assets

Reserve System

TCE: Tangible common equity

FHLB: Federal Home Loan Bank

TEY: Tax equivalent yield

FRB: Federal Reserve Bank of Chicago

VIE: Variable interest entities

​

​

​

​

​

​

​

10

Table of Contents

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries which include the accounts of four commercial banks:  QCBT, CRBT, CSB and GB. All four banks are state-chartered commercial banks and all are members of the Federal Reserve system. The Company also engages in direct financing lease contracts through m2, a wholly owned subsidiary of QCBT. Additionally, the Company also engages in wealth management services through its banking subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Credit quality indicators: During the first quarter of 2024, the Company revised the risk rating scale used for credit quality monitoring. The previous risk rating scale and associated definitions are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024. With the exception of leases and equipment financing agreements, all loans are now risk rated utilizing the following internal risk rating scale:

1.Highest Quality (pass) – loans of the highest quality with no credit risk, including those fully secured by bank certificates of deposit and U.S. government securities.
2.Superior Quality (pass) – loans with very strong credit quality. Borrowers have exceptionally strong earnings, liquidity, capital, cash flow coverage, and management ability. Includes loans secured by high quality, marketable securities, certificates of deposit from other institutions, and cash value of life insurance. Also includes loans supported by U.S. government, state, or municipal guarantees.
3.Good Quality (pass) – loans with good credit quality. Established borrowers with good financial condition, including earnings, liquidity, capital and cash flow coverage. Financial performance is above industry average. Management is capable and is very experienced. Collateral coverage, if applicable, is good. Includes loans secured by personal assets and business assets including equipment, accounts receivable, inventory, and real estate.
4.Moderate Quality (pass) – loans with moderate credit quality. Established borrowers with good financial condition, including earnings, liquidity, capital and cash flow coverage. Financial performance should be above industry averages. Management is capable and has more than adequate experience. Collateral coverage, if applicable, is more than adequate. Includes loans secured by personal assets and business assets including equipment, accounts receivable, inventory, and real estate.
5.Satisfactory Quality (pass) – loans with satisfactory credit quality. Established borrowers with satisfactory financial condition, including earnings, liquidity, capital, and cash flow coverage. Performance should at or above industry averages. Management is capable with adequate experience. Collateral coverage, if applicable, is adequate. Includes loans secured by personal assets and business assets including equipment, accounts receivable, inventory, and real estate.
6.Fair Quality (pass) – loans with acceptable credit quality. The primary repayment source is adequate; however, management’s ability to maintain consistent profitability is unproven or uncertain. Borrowers exhibit acceptable leverage and liquidity. May include new businesses with inexperienced management, performance at industry averages, or borrowers operating in highly cyclical or deteriorating industries.
7.Low Quality (pass) – loans with low credit quality. The primary repayment source remains adequate; however, management’s ability to maintain consistent profitability remains unproven or uncertain. Borrowers exhibit moderate leverage and limited liquidity. May include new businesses with inexperienced management, performance below industry averages, or borrowers operating in highly cyclical or deteriorating industries.
8.Early Warning (pass) – loans where the borrowers have generally performed as agreed, however unfavorable financial trends exist or are anticipated. Earnings may be erratic, with marginal cash flow or declining sales. Borrowers reflect leveraged financial condition and/or marginal liquidity. Management may be new, and a track record of performance has yet to be developed. Financial information may be incomplete, and reliance on secondary repayment sources may be increasing.

11

Table of Contents

9.Special Mention – loans where the borrowers exhibit credit weaknesses or unfavorable financial trends requiring close monitoring. Weaknesses and adverse trends are more pronounced than Early Warning loans, and if left uncorrected, may jeopardize repayment according to the contractual terms. Currently, no loss of principal or interest is expected. Borrowers in this category have deteriorated to the point that it would be difficult to refinance with another lender. Special Mention should be assigned to borrowers in turnaround situations. This rating is intended as a transitional rating; therefore, it is generally not assigned to a borrower for a period of more than one year.
10.Substandard – loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if applicable. These loans have a well-defined weakness or weaknesses which jeopardize repayment according to the contractual terms. There is distinct loss potential if the weaknesses are not corrected. Includes loans with insufficient cash flow coverage which are collateral dependent, other real estate owned, and repossessed assets.
11.Doubtful – loans which have all the weaknesses inherent in a Substandard loan, with the added characteristic that existing weaknesses make full principal collection, based on current facts, conditions, and values, highly doubtful. The possibility of loss is extremely high, but because of pending factors, recognition of a loss is deferred until a more exact status can be determined. All doubtful loans will be placed on non-accrual, with all payments, including interest, applied to principal reduction.

The credit quality indicator for leases and equipment financing agreements remains unchanged at performing and nonperforming status.

Recent accounting developments: In March 2020, the FASB issued ASU 2020-4, “Reference Rate Reform,” which provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued.  In December 2022, in response to the postponement of the cessation date of LIBOR, the FASB issued ASU 2022-06 which defers the sunset date of the ASU 2020-4 guidance to December 31, 2024, after which entities will no longer be permitted to apply the relief.

Management has assessed the impacts of ASU 2020-04 and the related opportunities and risks involved in the LIBOR transition. Specifically, management identified all of the financial instruments with LIBOR exposure, which include certain commercial loans, interest rate swaps, interest rate caps, and certain securities and in all cases, determined a plan of transition from LIBOR to a different index.  This transition occurred prior to the expiration of published LIBOR rates on June 30, 2023 and did not have a significant impact on the Company’s financial statements.

In March 2023, the FASB issued ASU 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a Consensus of the Emerging Issues Task Force).” Under the standard, the accounting guidance expands use of the proportional amortization method of accounting to equity investments in tax credit programs beyond those in LIHTC programs.  The ASU also prescribes specific information reporting entities must disclose about tax credit investments each period. The ASU is effective for reporting periods beginning after December 31, 2023, for public business entities, with all other entities having an extra year to adopt.  Entities will have the option of applying the ASU using either a modified retrospective or retrospective adoption approach.  For some changes related to existing LIHTC investments, prospective application is permitted. The standard was adopted on January 1, 2024 and did not have a significant impact on the Company’s financial statements.

​

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.”  Under the standard, the accounting guidance expands the disclosures for reportable segments made by public entities to disclose significant expenses for reportable segments in both interim and annual reporting periods to enable investors to develop more decision-useful financial analyses. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.  The standard is not expected to have a significant impact on the Company’s financial statements.

12

Table of Contents

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.”  Under the standard, the accounting guidance enhances the transparency and decision usefulness of income tax disclosures.  Investors, lenders, creditors and other allocators of capital information will be able to use the expanded disclosures to better assess how an entity’s operations and related tax risks and tax planning and operation opportunities affect its tax rate and prospects for future cash flows.  The ASU is effective for public business entities for annual periods beginning after December 15, 2024.  The standard is not expected to have a significant impact on the Company’s financial statements.

In March 2024, the FASB issued ASU 2024-01, “Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards.” Under the standard, the accounting guidance improves GAAP by adding an illustrative example to demonstrate how an entity should apply the scope guidance of “Topic 718, Compensation -  Stock Compensation” for profits interest and similar awards.  The illustrative examples will benefit investors and other allocators of capital by providing them with more consistent information. The ASU is effective for public business entities for annual periods beginning after December 15, 2024, and interim periods within those annual periods.  The standard is not expected to have an impact on the Company’s financial statements.

NOTE 2– INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of June 30, 2024 and December 31, 2023 are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Allowance

 

Gross

​

Gross

​

​

​

​

​

​

Amortized

​

for Credit

 

Unrealized

​

Unrealized

​

Fair

​

​

    

Cost

    

(Losses)

 

Gains

    

(Losses)

    

Value

    

​

​

(dollars in thousands)

​

June 30, 2024:

 

​

  

 

​

  

​

​

  

 

​

  

 

​

  

 

Securities HTM:

 

​

  

 

​

  

​

​

  

 

​

  

 

​

  

 

Municipal securities

​

$

719,778

​

$

(202)

​

$

24,827

​

$

(48,989)

​

$

695,414

​

Other securities

​

 

1,050

​

 

(1)

​

 

—

​

 

(16)

​

 

1,033

​

​

​

$

720,828

​

$

(203)

​

$

24,827

​

$

(49,005)

​

$

696,447

​

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

Securities AFS:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

U.S. govt. sponsored agency securities

​

$

22,717

​

$

—

​

$

11

​

$

(2,627)

​

$

20,101

​

Residential mortgage-backed and related securities

​

 

60,950

​

 

—

​

 

1

​

 

(6,243)

​

 

54,708

​

Municipal securities

​

 

205,340

​

 

—

​

 

—

​

 

(40,072)

​

 

165,268

​

Asset-backed securities

​

​

12,516

​

​

—

​

​

205

​

​

—

​

​

12,721

​

Other securities

​

 

40,715

​

 

—

​

 

12

​

 

(3,313)

​

 

37,414

​

​

​

$

342,238

​

$

—

​

$

229

​

$

(52,255)

​

$

290,212

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Allowance

​

Gross

​

Gross

​

​

​

​

​

Amortized

​

for Credit

​

Unrealized

​

Unrealized

​

Fair

​

​

    

Cost

​

(Losses)

​

Gains

    

(Losses)

​

Value

​

​

​

(dollars in thousands)

​

December 31, 2023:

 

​

  

 

​

  

​

​

  

 

​

  

​

​

​

 

Securities HTM:

 

​

  

 

​

  

​

​

  

 

​

  

​

​

​

 

Municipal securities

​

$

682,657

​

$

(202)

​

$

33,385

​

$

(36,639)

​

$

679,201

​

Other securities

​

 

1,050

​

 

(1)

​

 

44

​

 

(15)

​

 

1,078

​

​

​

$

683,707

​

$

(203)

​

$

33,429

​

$

(36,654)

​

$

680,279

​

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

Securities AFS:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

U.S. govt. sponsored agency securities

​

$

17,399

​

$

—

​

$

12

​

$

(2,438)

​

$

14,973

​

Residential mortgage-backed and related securities

​

 

65,168

​

 

—

​

 

—

​

 

(5,972)

​

 

59,196

​

Municipal securities

​

 

206,566

​

 

—

​

 

11

​

 

(35,590)

​

 

170,987

​

Asset-backed securities

​

​

15,261

​

​

—

​

​

167

​

​

(5)

​

​

15,423

​

Other securities

​

 

44,239

​

 

(989)

​

 

—

​

 

(4,174)

​

 

39,076

​

​

​

$

348,633

​

$

(989)

​

$

190

​

$

(48,179)

​

$

299,655

​

​

The Company's HTM municipal securities consist largely of private issues of municipal debt. The large majority of the municipalities are located within the Midwest. The municipal debt investments are underwritten using specific guidelines with ongoing monitoring.

​

The Company's residential mortgage-backed and related securities portfolio consists entirely of government sponsored or government guaranteed securities. The Company has not invested in private mortgage-backed securities or pooled trust preferred securities.

13

Table of Contents

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2024 and December 31, 2023, are summarized in the tables below. Securities AFS, for which an allowance for credit losses has been provided, are not included in these disclosures as there are no unrealized losses remaining after consideration of the ACL.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Less than 12 Months

​

12 Months or More

​

Total

​

​

​

​

Gross

​

​

​

Gross

​

​

​

Gross

​

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

​

​

(dollars in thousands)

June 30, 2024:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Securities HTM:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Municipal securities

​

$

101,617

​

$

(3,262)

​

$

267,081

​

$

(45,727)

​

$

368,698

​

$

(48,989)

Other securities

​

​

500

​

​

(1)

​

​

534

​

​

(15)

​

​

1,034

​

​

(16)

​

​

$

102,117

​

$

(3,263)

​

$

267,615

​

$

(45,742)

​

$

369,732

​

$

(49,005)

​

​

 

  

​

 

​

​

 

  

​

 

  

​

 

  

​

 

  

Securities AFS:

​

 

  

​

 

​

​

 

  

​

 

  

​

 

  

​

 

  

U.S. govt. sponsored agency securities

​

$

5,760

​

$

(4)

​

$

13,507

​

$

(2,623)

​

$

19,267

​

$

(2,627)

Residential mortgage-backed and related securities

​

 

74

​

 

(1)

​

 

54,502

​

 

(6,242)

​

 

54,576

​

 

(6,243)

Municipal securities

​

 

809

​

 

(1)

​

 

164,459

​

 

(40,071)

​

 

165,268

​

 

(40,072)

Asset-backed securities

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Other securities

​

 

2,674

​

 

(327)

​

 

33,770

​

 

(2,986)

​

 

36,444

​

 

(3,313)

​

​

$

9,317

​

$

(333)

​

$

266,238

​

$

(51,922)

​

$

275,555

​

$

(52,255)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Less than 12 Months

​

12 Months or More

​

Total

​

​

​

​

Gross

​

​

​

Gross

​

​

​

Gross

​

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

​

​

(dollars in thousands)

December 31, 2023:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Securities HTM:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Municipal securities

​

$

1,320

​

$

(11)

​

$

289,891

​

$

(36,628)

​

$

291,211

​

$

(36,639)

Other securities

​

 

535

​

 

(15)

​

 

—

​

 

—

​

 

535

​

 

(15)

​

​

$

1,855

​

$

(26)

​

$

289,891

​

$

(36,628)

​

$

291,746

​

$

(36,654)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Securities AFS:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

U.S. govt. sponsored agency securities

​

$

—

​

$

—

​

$

14,018

​

$

(2,438)

​

$

14,018

​

$

(2,438)

Residential mortgage-backed and related securities

​

 

—

​

 

—

​

 

59,118

​

 

(5,972)

​

 

59,118

​

 

(5,972)

Municipal securities

​

 

283

​

 

(2)

​

 

169,876

​

 

(35,588)

​

 

170,159

​

 

(35,590)

Asset-backed securities

​

​

—

​

​

—

​

​

3,804

​

​

(5)

​

​

3,804

​

​

(5)

Other securities

​

​

3,805

​

​

(393)

​

​

35,271

​

​

(3,781)

​

​

39,076

​

​

(4,174)

​

​

$

4,088

​

$

(395)

​

$

282,087

​

$

(47,784)

​

$

286,175

​

$

(48,179)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At June 30, 2024, the investment portfolio included 647 securities. Of this number, 553 securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately 9.5% of the total amortized cost of the portfolio. Of these 553 securities, there were 464 securities that had an unrealized loss for twelve months or more due to the current rate environment.  

​

For the six months ended June 30, 2023, the Company’s impairment evaluation determined that one publicly traded debt security experienced a decline in fair value due to credit quality, rather than market factors. As a result, the Company recognized a credit loss expense of $989 thousand in the first quarter and established an ACL on the related AFS security. For the six months ended June 30, 2024, the remaining ACL on the related AFS security was removed as the security had been sold.  

​

The following table presents the activity in the allowance for credit losses for held to maturity and available for sale securities by major security type for the three and six months ended June 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

​

​

June 30, 2024

​

June 30, 2023

​

June 30, 2024

​

June 30, 2023

​

​

​

​

Securities HTM

​

Securities AFS

​

Securities HTM

​

Securities AFS

​

Securities HTM

​

​

Securities AFS

​

Securities HTM

​

Securities AFS

​

​

​

​

Municipal

​

Other

​

​

​

Corporate

​

Municipal

​

Corporate

​

Municipal

​

Other

​

​

​

​

Corporate

​

Municipal

​

Other

​

​

​

    

securities

    

securities

    

Total

​

securities

​

securities

​

securities

​

securities

​

Securities

​

Total

​

​

securities

​

securities

    

securities

    

​

​

 

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beginning balance

​

$

202

​

$

1

​

$

203

​

$

—

​

$

180

​

$

989

​

$

202

​

$

1

​

$

203

​

$

989

​

$

180

​

$

—

​

​

Reduction due to sales

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

(544)

​

​

—

​

​

—

​

​

Provision for credit loss expense

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

(445)

​

​

—

​

​

989

​

​

Balance, ending

​

$

202

​

$

1

​

$

203

​

$

—

​

$

180

​

$

989

​

$

202

​

$

1

​

$

203

​

$

—

​

$

180

​

$

989

​

​

​

Trading securities had a fair value of $22.4 million as of June 30, 2024 and December 31, 2023, respectively and consist of retained beneficial interests acquired in conjunction with Freddie Mac securitizations completed by the Company in 2023. The change in fair value on trading securities for the three months ended June 30, 2024 was a net gain of $234 thousand. The change in market value on trading securities for the six months ended June 30, 2024 was a net gain of $253 thousand. See also Note 4 to the Consolidated Financial Statements for details of these securitizations.

14

Table of Contents

There were no transfers of securities between classifications for the three and six months ended June 30, 2024 or 2023.

​

All sales of securities for the three and six months ended June 30, 2024 and 2023 were securities identified as AFS.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

    

Six Months Ended

    

​

​

​

​

​

June 30, 2024

​

June 30, 2023

​

June 30, 2024

​

June 30, 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Proceeds from sales of securities

​

​

​

​

$

—

​

$

1,940

​

$

445

​

$

30,568

​

Gross gains from sales of securities

​

​

​

​

 

—

​

 

12

​

 

—

​

 

56

​

Gross losses from sales of securities

​

​

​

​

 

—

​

 

—

​

 

—

​

 

(507)

​

​

The amortized cost and fair value of securities as of June 30, 2024 by contractual maturity are shown below. Expected maturities of residential mortgage-backed and related securities and asset-backed securities may differ from contractual maturities because the residential mortgages underlying the securities may be prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following table:

​

​

​

​

​

​

​

​

​

    

Amortized Cost

    

Fair Value

​

​

(dollars in thousands)

Securities HTM:

 

​

  

 

​

  

Due in one year or less

​

$

1,912

​

$

1,893

Due after one year through five years

​

 

21,605

​

 

22,436

Due after five years

​

 

697,311

​

 

672,118

​

​

$

720,828

​

$

696,447

Securities AFS:

​

 

  

​

 

  

Due in one year or less

​

$

6,298

​

$

6,293

Due after one year through five years

​

 

19,044

​

 

17,849

Due after five years

​

 

243,430

​

 

198,641

​

​

​

268,772

​

​

222,783

Residential mortgage-backed and related securities

​

​

60,950

​

​

54,708

Asset-backed securities

​

 

12,516

​

 

12,721

​

​

$

342,238

​

$

290,212

​

Portions of the U.S. government sponsored agency securities and municipal securities as of June 30, 2024, contain call options, which, at the discretion of the issuer, terminate the security at par and at predetermined dates prior to the stated maturity, summarized as follows:

​

​

​

​

​

​

​

​

​

    

Amortized Cost

    

Fair Value

​

​

(dollars in thousands)

Securities HTM:

 

​

  

 

​

  

Municipal securities

​

$

249,059

​

$

246,233

​

​

 

  

​

 

  

Securities AFS:

​

 

  

​

 

  

Municipal securities

​

​

204,660

​

​

164,606

Other securities

​

 

39,757

​

 

36,444

​

​

$

244,417

​

$

201,050

​

As of June 30, 2024, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 79 issuers with fair values totaling $94.2 million and revenue bonds, issued by 163 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $766.5 million. The Company also held investments in general obligation bonds in 18 states, including eight states in which the aggregate fair value exceeded $5.0 million, and in revenue bonds in 31 states, including 14 states in which the aggregate fair value exceeded $5.0 million.

As of December 31, 2023, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 82 issuers with fair values totaling $99.4 million and revenue bonds, issued by 169 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $750.8 million. The Company also held investments in general obligation bonds in 18 states, including eight states in which the aggregate fair value exceeded $5.0 million, and in revenue bonds in 31 states, including 15 states in which the aggregate fair value exceeded $5.0 million.

15

Table of Contents

Both general obligation and revenue bonds are diversified across many issuers. As of June 30, 2024 and as of December 31, 2023, the Company held revenue bonds of two issuers, both located in Ohio, of which the aggregate book or market value exceeded 5% of the Company’s stockholders’ equity. The issuers’ financial conditions are strong and the sources of repayment are diversified. The Company monitors the investments and concentration closely. Of the general obligation and revenue bonds in the Company's portfolio, the majority are unrated bonds that represent small, private issuances. All unrated bonds were underwritten according to the Company’s loan underwriting standards and have an average loan risk rating of 2, indicating Superior Quality. Additionally, many of these bonds are funding essential municipal services such as water, sewer, education, and medical facilities.

The Company's municipal securities are owned by the four charters, whose investment policies set forth limits for various subcategories within the municipal securities portfolio. The investments of each charter are monitored individually, and as of June 30, 2024, all were within policy limitations approved by the Company’s board of directors. Policy limits are calculated as a percentage of each charter's total risk-based capital.

As of June 30, 2024, the Company's standard monitoring of its municipal securities portfolio had not uncovered any facts or circumstances resulting in significantly different credit ratings than those assigned by a nationally recognized statistical rating organization, or in the case of unrated bonds, the rating assigned using the credit underwriting standards.

​

NOTE 3 – LOANS/LEASES RECEIVABLE

The composition of the loan/lease portfolio as of June 30, 2024 and December 31, 2023 is presented as follows:

​

​

​

​

​

​

​

​

​

    

June 30, 2024

​

December 31, 2023

​

​

(dollars in thousands)

C&I:

​

​

​

​

​

​

C&I - revolving

​

$

362,115

​

$

325,243

C&I - other */**

​

​

1,463,198

​

​

1,481,778

​

​

​

1,825,313

​

​

1,807,021

​

​

 

  

​

 

  

CRE - owner occupied

​

 

633,596

​

 

607,365

CRE - non-owner occupied

​

 

1,082,457

​

​

1,008,892

Construction and land development**

​

 

1,082,348

​

 

1,420,525

Multi-family**

​

​

1,477,483

​

​

996,143

Direct financing leases***

​

 

25,808

​

 

31,164

1-4 family real estate****

​

​

583,542

​

​

544,971

Consumer

​

 

143,839

​

 

127,335

​

​

 

6,854,386

​

 

6,543,416

Allowance for credit losses

​

 

(87,706)

​

 

(87,200)

​

​

$

6,766,680

​

$

6,456,216

*** Direct financing leases:

​

 

  

​

 

  

Net minimum lease payments to be received

​

$

28,823

​

$

34,966

Estimated unguaranteed residual values of leased assets

​

 

165

​

 

165

Unearned lease/residual income

​

 

(3,180)

​

 

(3,967)

​

​

 

25,808

​

 

31,164

Plus deferred lease origination costs, net of fees

​

 

39

​

 

75

​

​

 

25,847

​

 

31,239

Less allowance for credit losses

​

 

(800)

​

 

(992)

​

​

$

25,047

​

$

30,247

​

​

​

​

​

​

​

​

*      Includes equipment financing agreements outstanding at m2, totaling $338.1 million and $319.5 million as of June 30, 2024 and December 31, 2023, respectively.

**     As of June 30, 2024, there were multi-family loans held for sale in preparation for securitization totaling $243.2 million.  There were no loans held for sale in preparation for securitization at December 31, 2023.

***   Management performs an evaluation of the estimated unguaranteed residual values of leased assets on an annual basis, at a minimum. The evaluation consists of discussions with reputable and current vendors, which is combined with management's expertise and understanding of the current states of particular industries to determine informal valuations of the equipment. As necessary and where available, management will utilize valuations by independent appraisers. The majority of leases with residual values contain a lease options rider, which requires the lessee to pay the residual value directly, finance the payment of the residual value, or extend the lease term to pay the residual value. In these cases, the residual value is protected and the risk of loss is minimal.

**** Includes residential real estate held for sale totaling $2.9 million and $2.6 million as of June 30, 2024 and December 31, 2023, respectively.

​

16

Table of Contents

Accrued interest on loans, which is excluded from the amortized cost of loans, totaled $36.5 million and $31.8 million at June 30, 2024 and December 31, 2023, respectively, and was included in other assets on the consolidated balance sheets.

​

Changes in net accretable discounts on acquired loans for the three and six months ended June 30, 2024 and 2023, respectively, are presented as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

For the Six Months Ended

​

​

​

June 30, 2024

​

June 30, 2023

​

June 30, 2024

​

June 30, 2023

​

​

​

Performing

​

Performing

​

​

Performing

​

Performing

​

​

​

Loans

    

Loans

​

Loans

    

Loans

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance at the beginning of the period

$

(3,539)

​

$

(5,239)

​

$

(3,891)

​

$

(6,088)

​

​

Accretion recognized

 

268

​

 

135

​

 

620

​

 

984

​

​

Balance at the end of the period

$

(3,271)

​

$

(5,104)

​

$

(3,271)

​

$

(5,104)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The aging of the loan/lease portfolio by classes of loans/leases as of June 30, 2024 and December 31, 2023 is presented as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 2024

 

​

​

​

​

​

​

​

​

Accruing Past

​

​

​

​

 

​

​

​

​

30-59 Days

​

60-89 Days

​

Due 90 Days or

​

Nonaccrual

​

​

 

Classes of Loans/Leases

    

Current

    

Past Due

    

Past Due

    

More

    

Loans/Leases

    

Total

 

​

​

(dollars in thousands)

​

C&I:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - revolving

​

$

361,717

​

$

—

​

$

398

​

$

—

​

$

—

$

​

362,115

​

C&I - other

​

​

1,440,829

​

​

5,034

​

​

4,121

​

​

—

​

​

13,214

​

​

1,463,198

​

CRE - owner occupied

​

 

631,321

​

​

65

​

​

—

​

​

—

​

​

2,210

​

 

633,596

​

CRE - non-owner occupied

​

 

1,077,874

​

​

123

​

​

—

​

​

—

​

​

4,460

​

 

1,082,457

​

Construction and land development

​

​

1,065,387

​

​

13,953

​

​

649

​

​

—

​

​

2,359

​

​

1,082,348

​

Multi-family

​

 

1,468,961

​

​

350

​

​

—

​

​

—

​

​

8,172

​

 

1,477,483

​

Direct financing leases

​

 

24,705

​

​

310

​

​

264

​

​

—

​

​

529

​

 

25,808

​

1-4 family real estate

​

 

580,831

​

​

359

​

​

78

​

​

87

​

​

2,187

​

 

583,542

​

Consumer

​

 

143,198

​

​

69

​

​

157

​

​

—

​

​

415

​

 

143,839

​

​

​

$

6,794,823

​

$

20,263

​

$

5,667

​

$

87

​

$

33,546

​

$

6,854,386

​

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

As a percentage of total loan/lease portfolio

​

 

99.13

%  

 

0.30

%  

 

0.08

%  

 

0.00

%  

 

0.49

%  

 

100.00

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of December 31, 2023

 

​

​

​

​

​

​

​

​

Accruing Past

​

​

​

​

 

​

​

​

​

30-59 Days

​

60-89 Days

​

Due 90 Days or

​

Nonaccrual

​

​

 

Classes of Loans/Leases

    

Current

    

Past Due

    

Past Due

    

More

    

Loans/Leases

    

Total

 

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - revolving

​

$

325,243

​

$

—

​

$

—

​

$

—

​

$

—

​

$

325,243

​

C&I - other

​

 

1,459,818

​

 

4,848

​

 

5,603

​

 

1

​

 

11,508

​

 

1,481,778

​

CRE - owner occupied

​

 

604,602

​

 

—

​

 

83

​

 

—

​

 

2,680

​

 

607,365

​

CRE - non-owner occupied

​

 

1,003,267

​

 

631

​

 

—

​

 

—

​

 

4,994

​

 

1,008,892

​

Construction and land development

​

 

1,418,016

​

 

—

​

 

—

​

 

—

​

 

2,509

​

 

1,420,525

​

Multi-family

​

​

987,971

​

​

—

​

​

—

​

​

—

​

​

8,172

​

​

996,143

​

Direct financing leases

​

 

30,501

​

 

186

​

 

188

​

 

—

​

 

289

​

 

31,164

​

1-4 family real estate

​

 

538,229

​

 

3,883

​

 

534

​

 

85

​

 

2,240

​

 

544,971

​

Consumer

​

 

126,868

​

 

103

​

 

3

​

 

—

​

 

361

​

 

127,335

​

​

​

$

6,494,515

​

$

9,651

​

$

6,411

​

$

86

​

$

32,753

​

$

6,543,416

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As a percentage of total loan/lease portfolio

​

 

99.25

%  

 

0.15

%  

 

0.10

%  

 

0.00

%  

 

0.50

%  

 

100.00

%

​

17

Table of Contents

NPLs by classes of loans/leases as of June 30, 2024 and December 31, 2023 are presented as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 2024

​

​

​

Accruing Past

​

Nonaccrual

​

Nonaccrual

​

​

​

​

​

​

​

​

Due 90 Days or

​

Loans/Leases

​

Loans/Leases

​

​

​

​

Percentage of

​

Classes of Loans/Leases

    

More

    

with an ACL

    

without an ACL

    

Total NPLs

    

Total NPLs

 

​

 

(dollars in thousands)

​

C&I:

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

C&I - revolving

​

$

—

​

$

—

​

$

—

​

$

—

 

-

%

C&I - other

​

​

—

​

​

10,923

​

​

2,291

​

​

13,214

​

39

​

CRE - owner occupied

​

 

—

​

​

1,927

​

​

283

​

​

2,210

 

7

​

CRE - non-owner occupied

​

 

—

​

​

1,784

​

​

2,676

​

​

4,460

 

13

​

Construction and land development

​

​

—

​

​

2,359

​

​

—

​

​

2,359

​

7

​

Multi-family

​

 

—

​

​

—

​

​

8,172

​

​

8,172

 

24

​

Direct financing leases

​

 

—

​

​

473

​

​

56

​

​

529

 

2

​

1-4 family real estate

​

 

87

​

​

1,817

​

​

370

​

​

2,274

 

7

​

Consumer

​

 

—

​

​

415

​

​

—

​

​

415

 

1

​

​

​

$

87

​

$

19,698

​

$

13,848

​

$

33,633

 

100

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of December 31, 2023

 

​

​

Accruing Past

​

Nonaccrual

​

Nonaccrual

​

​

​

​

 

​

​

Due 90 Days or

​

Loans/Leases

​

Loans/Leases

​

​

​

Percentage of

 

Classes of Loans/Leases

    

More

    

with an ACL

    

without an ACL

    

Total NPLs

    

Total NPLs

 

​

 

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - revolving

​

$

—

​

$

—

​

$

—

​

$

—

 

-

%

C&I - other

​

​

1

​

​

8,865

​

​

2,643

​

​

11,509

​

35

​

CRE - owner occupied

​

 

—

​

 

530

​

 

2,150

​

 

2,680

 

8

​

CRE - non-owner occupied

​

 

—

​

 

1,213

​

 

3,781

​

 

4,994

 

15

​

Construction and land development

​

 

—

​

 

2,509

​

 

—

​

 

2,509

 

8

​

Multi-family

​

 

—

​

 

—

​

 

8,172

​

 

8,172

 

25

​

Direct financing leases

​

 

—

​

 

206

​

 

83

​

 

289

 

1

​

1-4 family real estate

​

 

85

​

 

1,866

​

 

374

​

 

2,325

 

7

​

Consumer

​

 

—

​

 

361

​

 

—

​

 

361

 

1

​

​

​

$

86

​

$

15,550

​

$

17,203

​

$

32,839

​

100

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

18

Table of Contents

The Company did not recognize any interest income on nonaccrual loans during the three and six months ended June 30, 2024 and 2023.

Changes in the ACL on loans/leases by portfolio segment for the three and six months ended June 30, 2024 and 2023, respectively, are presented as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 2024

​

​

​

​

​

​

CRE

​

CRE

​

Construction

​

​

​

​

1-4

​

​

​

​

​

​

​

C&I -

​

C&I -

​

Owner

​

Non-Owner

​

and Land

​

Multi-

​

Family

​

​

​

​

​

​

​

​

    

Revolving

​

Other*

​

Occupied

​

Occupied

​

Development

​

Family

​

Real Estate

    

Consumer

    

​

Total

​

 

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning

​

$

4,440

​

$

26,615

​

$

8,416

​

$

12,607

​

$

12,737

​

$

12,928

​

$

5,289

​

$

1,438

​

​

$

84,470

Change in ACL for writedown of LHFS to fair value

​

​

—

​

​

—

​

​

—

​

​

—

​

​

513

​

​

(15)

​

​

—

​

​

—

​

​

​

498

Provision

​

 

(741)

​

 

5,469

​

 

(363)

​

 

(231)

​

 

(1,196)

​

 

1,344

​

 

(66)

​

 

127

​

​

 

4,343

Charge-offs

​

 

—

​

 

(1,681)

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(21)

​

 

(49)

​

​

 

(1,751)

Recoveries

​

 

—

​

 

141

​

 

—

​

 

—

​

 

—

​

 

—

​

 

1

​

 

4

​

​

 

146

Balance, ending

​

$

3,699

​

$

30,544

​

$

8,053

​

$

12,376

​

$

12,054

​

$

14,257

​

$

5,203

​

$

1,520

​

​

$

87,706

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2024

​

​

​

​

​

​

CRE

​

CRE

​

Construction

​

​

​

​

1-4

​

​

​

​

​

​

    

C&I -

​

C&I -

​

Owner

​

Non-Owner

​

and Land

​

Multi-

​

Family

​

​

​

​

​

​

​

​

 

Revolving

​

Other**

​

Occupied

​

Occupied

​

Development

​

Family

​

Real Estate

    

Consumer

    

​

Total

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning

​

$

4,224

​

$

27,460

​

$

8,223

​

$

11,581

​

$

16,856

​

$

12,463

​

$

4,917

​

$

1,476

​

​

$

87,200

Change in ACL for writedown of LHFS to fair value

​

​

—

​

 

—

​

 

—

​

​

—

​

​

—

​

​

(2,879)

​

​

—

​

​

—

​

​

​

(2,879)

Provision

​

 

(525)

​

 

7,696

​

 

(170)

​

 

795

​

 

(4,802)

​

 

4,673

​

 

309

​

 

103

​

​

 

8,079

Charge-offs

​

 

—

​

 

(5,219)

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(24)

​

 

(68)

​

​

 

(5,311)

Recoveries

​

 

—

​

 

607

​

 

—

​

 

—

​

 

—

​

 

—

​

 

1

​

 

9

​

​

 

617

Balance, ending

​

$

3,699

​

$

30,544

​

$

8,053

​

$

12,376

​

$

12,054

​

$

14,257

​

$

5,203

​

$

1,520

​

​

$

87,706

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

*   Included within the C&I – Other column are ACL on leases with a beginning balance of $884 thousand, negative provision of $106 thousand, no charge-offs and recoveries of $22 thousand. ACL on leases was $800 thousand as of June 30, 2024.

** Included within the C&I – Other column are ACL on leases with a beginning balance of $992 thousand, provision of $174 thousand, charge-offs of $89 thousand and recoveries of $71 thousand.  ACL on leases was $800 thousand as of June 30, 2024.

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 2023

​

​

​

​

​

​

​

CRE

​

CRE

​

Construction

​

​

​

​

1-4

​

​

​

​

​

​

​

    

C&I -

​

C&I -

​

Owner

​

Non-Owner

​

and Land

​

Multi-

​

Family

​

​

​

​

​

​

​

​

​

​

Revolving

​

Other*

​

Occupied

​

Occupied

​

Development

​

Family

​

Real Estate

​

Consumer

    

​

Total

    

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning

​

$

4,637

​

$

26,637

​

$

9,089

​

$

12,632

​

$

15,245

​

$

11,621

​

$

5,270

​

$

1,442

​

​

$

86,573

​

Change in ACL for writedown of LHFS to fair value

​

​

—

​

 

(5)

​

 

—

​

​

—

​

​

207

​

​

(2,479)

​

​

—

​

​

—

​

​

​

(2,277)

​

Provision

​

​

(536)

​

​

2,318

​

​

(358)

​

​

(664)

​

​

436

​

​

2,087

​

​

(57)

​

​

87

​

​

 

3,313

​

Charge-offs

​

 

—

​

 

(1,920)

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(27)

​

​

 

(1,947)

​

Recoveries

​

 

—

​

 

132

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

3

​

​

 

135

​

Balance, ending

​

$

4,101

​

$

27,162

​

$

8,731

​

$

11,968

​

$

15,888

​

$

11,229

​

$

5,213

​

$

1,505

​

​

$

85,797

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2023

​

​

​

​

​

​

​

​

CRE

​

CRE

​

Construction

​

​

​

​

1-4

​

​

​

​

​

​

​

​

    

C&I -

​

C&I -

​

Owner

​

Non-Owner

​

and Land

​

Multi-

​

Family

​

​

​

​

​

​

​

​

​

Revolving

​

Other**

​

Occupied

​

Occupied

​

Development

​

Family

​

Real Estate

​

Consumer

    

​

Total

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning

​

$

4,457

​

$

27,753

​

$

9,965

​

$

11,749

​

$

14,262

​

$

13,186

​

$

4,963

​

$

1,371

​

​

$

87,706

Change in ACL for writedown of LHFS to fair value

​

​

—

​

 

(5)

​

 

—

​

​

—

​

​

(147)

​

​

(3,834)

​

​

—

​

​

—

​

​

​

(3,986)

Provision

​

​

(356)

​

​

2,875

​

​

(1,026)

​

​

214

​

​

1,785

​

​

1,877

​

​

245

​

​

157

​

​

 

5,771

Charge-offs

​

 

—

​

 

(3,975)

​

 

(208)

​

 

—

​

 

(12)

​

 

—

​

 

—

​

 

(27)

​

​

 

(4,222)

Recoveries

​

 

—

​

 

514

​

 

—

​

 

5

​

 

—

​

 

—

​

 

5

​

 

4

​

​

 

528

Balance, ending

​

$

4,101

​

$

27,162

​

$

8,731

​

$

11,968

​

$

15,888

​

$

11,229

​

$

5,213

​

$

1,505

​

​

$

85,797

​

*    Included within the C&I – Other column are ACL on leases with a beginning balance of $1.1 million, negative provision of $10 thousand, charge-offs of $49 thousand and recoveries of $12 thousand. ACL on leases was $1.0 million as of June 30, 2023.

19

Table of Contents

**  Included within the C& I – Other column are ACL on leases with a beginning balance of $970 thousand, provision of $59 thousand, charge-offs of $53 thousand and recoveries of $30 thousand.  ACL on leases was $1.0 million as of June 30, 2023.

​

The composition of the ACL on loans/leases by portfolio segment based on evaluation method are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 2024

​

​

​

Amortized Cost of Loans Receivable

​

Allowance for Credit Losses

​

​

​

Individually

​

Collectively

​

​

​

​

Individually

​

Collectively

​

​

​

​

​

​

Evaluated for

​

Evaluated for

​

​

​

​

Evaluated for

​

Evaluated for

​

​

​

​

​

    

Credit Losses

    

Credit Losses

​

Total

​

Credit Losses

    

Credit Losses

​

Total

​

​

​

(dollars in thousands)

C&I :

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - revolving

​

$

3,875

​

$

358,240

​

$

362,115

​

$

10

​

$

3,689

​

$

3,699

​

C&I - other*

​

 

25,648

​

 

1,463,358

​

 

1,489,006

​

 

6,398

​

 

24,146

​

 

30,544

​

​

​

 

29,523

​

 

1,821,598

​

 

1,851,121

​

 

6,408

​

 

27,835

​

 

34,243

​

CRE - owner occupied

​

 

27,495

​

 

606,101

​

 

633,596

​

 

2,371

​

 

5,682

​

 

8,053

​

CRE - non-owner occupied

​

 

21,751

​

 

1,060,706

​

 

1,082,457

​

 

1,075

​

 

11,301

​

 

12,376

​

Construction and land development

​

 

6,758

​

 

1,075,590

​

 

1,082,348

​

 

790

​

 

11,264

​

 

12,054

​

Multi-family

​

​

8,201

​

​

1,469,282

​

​

1,477,483

​

​

4

​

​

14,253

​

​

14,257

​

1-4 family real estate

​

 

3,039

​

 

580,503

​

 

583,542

​

 

280

​

 

4,923

​

 

5,203

​

Consumer

​

 

547

​

 

143,292

​

 

143,839

​

 

67

​

 

1,453

​

 

1,520

​

​

​

$

97,314

​

$

6,757,072

​

$

6,854,386

​

$

10,995

​

$

76,711

​

$

87,706

​

​

*   Included within the C&I – Other category are leases individually evaluated of $529 thousand with a related allowance for credit losses of $171 thousand and leases collectively evaluated of $25.3 million with a related allowance for credit losses of $629 thousand as of June 30, 2024.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of December 31, 2023

​

​

​

Amortized Cost of Loans Receivable

​

Allowance for Credit Losses

​

​

​

Individually

​

Collectively

​

​

​

​

Individually

​

Collectively

​

​

​

​

​

​

Evaluated for

​

Evaluated for

​

​

​

​

Evaluated for

​

Evaluated for

​

​

​

​

​

    

Credit Losses

    

Credit Losses

​

Total

​

Credit Losses

    

Credit Losses

​

Total

​

​

​

(dollars in thousands)

C&I :

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - revolving

​

$

4,680

​

$

320,563

​

$

325,243

​

$

632

​

$

3,592

​

$

4,224

​

C&I - other*

​

 

20,133

​

 

1,492,809

​

 

1,512,942

​

 

3,642

​

 

23,818

​

 

27,460

​

​

​

 

24,813

​

 

1,813,372

​

 

1,838,185

​

 

4,274

​

 

27,410

​

 

31,684

​

CRE - owner occupied

​

 

22,709

​

 

584,656

​

 

607,365

​

 

2,426

​

 

5,797

​

 

8,223

​

CRE - non-owner occupied

​

 

21,886

​

 

987,006

​

 

1,008,892

​

 

661

​

 

10,920

​

 

11,581

​

Construction and land development

​

 

2,726

​

 

1,417,799

​

 

1,420,525

​

 

809

​

 

16,047

​

 

16,856

​

Multi-family

​

​

8,206

​

​

987,937

​

​

996,143

​

​

3

​

​

12,460

​

​

12,463

​

1-4 family real estate

​

 

3,128

​

 

541,843

​

 

544,971

​

 

289

​

 

4,628

​

 

4,917

​

Consumer

​

 

508

​

 

126,827

​

 

127,335

​

 

56

​

 

1,420

​

 

1,476

​

​

​

$

83,976

​

$

6,459,440

​

$

6,543,416

​

$

8,518

​

$

78,682

​

$

87,200

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

*   Included within the C&I – Other category are leases individually evaluated of $289 thousand with a related allowance for credit losses of $68 thousand and leases collectively evaluated of $30.9 million with a related allowance for credit losses of $924 thousand as of December 31, 2023.

The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses as of June 30, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 2024

​

​

​

​

​

​

​

​

​

Non

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

Owner-occupied

​

Owner-Occupied

​

Owner Occupied

​

​

​

​

​

​

​

​

​

​

​

    

Assets

    

CRE

    

Real Estate

​

Real Estate

​

Securities

​

Equipment

​

Other

​

Total

​

​

​

(dollars in thousands)

C & I:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - revolving

​

$

3,875

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

3,875

​

C&I - other*

​

 

5,919

​

 

—

​

 

—

​

 

—

​

 

5,177

​

 

12,176

​

 

2,376

​

 

25,648

​

​

​

 

9,794

​

 

—

​

 

—

​

 

—

​

 

5,177

​

 

12,176

​

 

2,376

​

 

29,523

​

CRE - owner occupied

​

 

—

​

 

27,432

​

 

—

​

 

63

​

 

—

​

 

—

​

 

—

​

 

27,495

​

CRE - non-owner occupied

​

 

—

​

 

—

​

 

21,751

​

 

—

​

 

—

​

 

—

​

 

—

​

 

21,751

​

Construction and land development

​

 

—

​

 

—

​

 

6,758

​

 

—

​

 

—

​

 

—

​

 

—

​

 

6,758

​

Multi-family

​

​

—

​

​

—

​

​

8,201

​

​

—

​

​

—

​

​

—

​

​

—

​

​

8,201

​

1-4 family real estate

​

 

—

​

 

—

​

 

185

​

 

2,854

​

 

—

​

 

—

​

 

—

​

 

3,039

​

Consumer

​

 

—

​

 

—

​

 

119

​

 

410

​

 

—

​

 

—

​

 

18

​

 

547

​

​

​

$

9,794

​

$

27,432

​

$

37,014

​

$

3,327

​

$

5,177

​

$

12,176

​

$

2,394

​

$

97,314

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

*   Included within the C&I – Other category are leases individually evaluated of $529 thousand with primary collateral of equipment as of June 30, 2024.

​

20

Table of Contents

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of December 31, 2023

​

​

​

​

​

​

​

​

​

Non

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

Owner-occupied

​

Owner-Occupied

​

Owner Occupied

​

​

​

​

​

​

​

​

​

​

​

    

Assets

    

CRE

    

Real Estate

​

Real Estate

​

Securities

​

Equipment

​

Other

​

Total

​

​

​

(dollars in thousands)

C & I:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - revolving

​

$

4,680

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

4,680

​

C&I - other*

​

 

871

​

 

—

​

 

—

​

 

—

​

 

5,191

​

 

13,249

​

 

822

​

 

20,133

​

​

​

 

5,551

​

 

—

​

 

—

​

 

—

​

 

5,191

​

 

13,249

​

 

822

​

 

24,813

​

CRE - owner occupied

​

 

—

​

 

22,644

​

 

—

​

 

65

​

 

—

​

 

—

​

 

—

​

 

22,709

​

CRE - non-owner occupied

​

 

—

​

 

—

​

 

21,886

​

 

—

​

 

—

​

 

—

​

 

—

​

 

21,886

​

Construction and land development

​

 

—

​

 

150

​

 

2,576

​

 

—

​

 

—

​

 

—

​

 

—

​

 

2,726

​

Multi-family

​

​

—

​

​

—

​

​

8,206

​

​

—

​

​

—

​

​

—

​

​

—

​

​

8,206

​

1-4 family real estate

​

 

—

​

 

—

​

 

189

​

 

2,939

​

 

—

​

 

—

​

 

—

​

 

3,128

​

Consumer

​

 

—

​

 

—

​

 

119

​

 

365

​

 

—

​

 

—

​

 

24

​

 

508

​

​

​

$

5,551

​

$

22,794

​

$

32,976

​

$

3,369

​

$

5,191

​

$

13,249

​

$

846

​

$

83,976

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

*   Included within the C&I – Other category are leases individually evaluated of $289 thousand with primary collateral of equipment as of December 31, 2023.

For all loans except direct financing leases and equipment financing agreements, the Company’s credit quality indicator consists of internally assigned risk ratings.  Each such loan is assigned a risk rating upon origination. The risk rating is reviewed every 15 months, at a minimum, and on an as-needed basis depending on the specific circumstances of the loan.

​

For certain C&I loans (including equipment financing agreements and direct financing leases), the Company’s credit quality indicator is performance determined by delinquency status.  Delinquency status is updated daily by the Company’s loan system. For years prior to 2024, certain C&I loans (including equipment financing agreements and direct financing leases), certain construction and land development, certain 1-4 family real estate loans, and certain consumer loans, the Company’s credit quality indicator is performance determined by delinquency status.  Delinquency status is updated daily by the Company’s loan system.

21

Table of Contents

The following tables show the credit quality indicator of loans by class of receivable and year of origination as of June 30, 2024:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 2024

​

​

Term Loans

 

​

​

​

​

​

​

​

Amortized Cost Basis by Origination Year

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Revolving

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

Internally Assigned

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

​

Risk Rating

    

2024

    

2023

    

2022

    

2021

    

2020

​

Prior

​

Cost Basis

​

Total

​

​

(dollars in thousands)

C&I - revolving

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

42,413

​

$

28,875

​

$

500

​

$

—

​

$

11

​

$

—

​

$

262,354

​

$

334,153

Special Mention

​

 

—

​

​

80

​

​

1,115

​

​

—

​

​

—

​

​

—

​

​

22,892

​

 

24,087

Substandard

​

 

2,749

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

1,126

​

 

3,875

Doubtful

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

 

—

Total C&I - revolving

​

$

45,162

​

$

28,955

​

$

1,615

​

$

—

​

$

11

​

$

—

​

$

286,372

​

$

362,115

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - other

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

177,001

​

$

313,812

​

$

253,330

​

$

88,465

​

$

55,368

​

$

161,254

​

$

37,192

​

$

1,086,422

Special Mention

​

 

5,892

​

​

5,914

​

​

3,624

​

​

4,859

​

​

2,950

​

​

1,117

​

​

357

​

 

24,713

Substandard

​

 

2,345

​

​

13

​

​

5,124

​

​

278

​

​

175

​

​

5,661

​

​

377

​

 

13,973

Doubtful

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

 

—

Total C&I - other

​

$

185,238

​

$

319,739

​

$

262,078

​

$

93,602

​

$

58,493

​

$

168,032

​

$

37,926

​

$

1,125,108

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

CRE - owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

36,647

​

$

101,075

​

$

118,873

​

$

125,020

​

$

99,720

​

$

81,650

​

$

27,004

​

$

589,989

Special Mention

​

 

3,774

​

​

73

​

​

—

​

​

10,182

​

​

4,299

​

​

1,782

​

​

1,211

​

 

21,321

Substandard

​

 

2,172

​

​

292

​

​

534

​

​

328

​

​

16,769

​

​

2,191

​

​

—

​

 

22,286

Doubtful

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

 

—

Total CRE - owner occupied

​

$

42,593

​

$

101,440

​

$

119,407

​

$

135,530

​

$

120,788

​

$

85,623

​

$

28,215

​

$

633,596

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

CRE - non-owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

63,524

​

$

206,697

​

$

315,786

​

$

169,580

​

$

119,775

​

$

136,806

​

$

36,921

​

$

1,049,089

Special Mention

​

 

4,354

​

​

158

​

​

57

​

​

—

​

​

—

​

​

6,898

​

​

150

​

 

11,617

Substandard

​

 

—

​

​

4,335

​

​

1,200

​

​

—

​

​

1,953

​

​

14,263

​

​

—

​

 

21,751

Doubtful

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

 

—

Total CRE - non-owner occupied

​

$

67,878

​

$

211,190

​

$

317,043

​

$

169,580

​

$

121,728

​

$

157,967

​

$

37,071

​

$

1,082,457

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

219,952

​

$

446,423

​

$

261,550

​

$

101,730

​

$

14,207

​

$

70

​

$

28,518

​

$

1,072,450

Special Mention

​

 

—

​

​

649

​

​

—

​

​

—

​

​

—

​

​

—

​

​

2,491

​

 

3,140

Substandard

​

 

4,188

​

​

—

​

​

1,367

​

​

1,203

​

​

—

​

​

—

​

​

—

​

 

6,758

Doubtful

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

 

—

Total Construction and land development

​

$

224,140

​

$

447,072

​

$

262,917

​

$

102,933

​

$

14,207

​

$

70

​

$

31,009

​

$

1,082,348

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Multi-family

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

100,632

​

$

203,713

​

$

335,693

​

$

279,294

​

$

350,772

​

$

185,529

​

$

13,649

​

$

1,469,282

Special Mention

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

 

—

Substandard

​

 

—

​

​

—

​

​

—

​

​

8,201

​

​

—

​

​

—

​

​

—

​

 

8,201

Doubtful

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

 

—

Total Multi-family

​

$

100,632

​

$

203,713

​

$

335,693

​

$

287,495

​

$

350,772

​

$

185,529

​

$

13,649

​

$

1,477,483

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1-4 family real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

67,157

​

$

129,189

​

$

95,117

​

$

116,564

​

$

83,206

​

$

72,864

​

$

16,347

​

$

580,444

Special Mention

​

 

—

​

​

—

​

​

—

​

​

57

​

​

—

​

​

9

​

​

78

​

 

144

Substandard

​

 

—

​

​

279

​

​

772

​

​

613

​

​

234

​

​

940

​

​

116

​

 

2,954

Doubtful

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

 

—

Total 1-4 family real estate

​

$

67,157

​

$

129,468

​

$

95,889

​

$

117,234

​

$

83,440

​

$

73,813

​

$

16,541

​

$

583,542

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

8,469

​

$

20,330

​

$

7,694

​

$

1,924

​

$

2,647

​

$

2,081

​

$

100,073

​

$

143,218

Special Mention

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

74

​

 

74

Substandard

​

 

—

​

​

174

​

​

160

​

​

33

​

​

—

​

​

115

​

​

65

​

 

547

Doubtful

​

 

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

 

—

Total Consumer

​

$

8,469

​

$

20,504

​

$

7,854

​

$

1,957

​

$

2,647

​

$

2,196

​

$

100,212

​

$

143,839

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total

​

$

741,269

​

$

1,462,081

​

$

1,402,496

​

$

908,331

​

$

752,086

​

$

673,230

​

$

550,995

​

$

6,490,488

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

22

Table of Contents

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 2024

​

​

Term Loans

​

 

​

​

​

​

​

​

Amortized Cost Basis by Origination Year

​

Revolving

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

​

​

Delinquency Status *

    

2024

    

2023

    

2022

    

2021

    

2020

    

Prior

​

Cost Basis

​

Total

​

 

(dollars in thousands)

C&I - other

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

89,027

$

​

120,871

$

​

80,150

$

​

27,989

$

​

7,982

$

​

971

​

$

—

​

$

326,990

Nonperforming

​

 

—

​

​

3,056

​

​

5,099

​

​

2,640

​

​

280

​

​

25

​

 

—

​

 

11,100

Total C&I - other

​

$

89,027

​

$

123,927

​

$

85,249

​

$

30,629

​

$

8,262

​

$

996

​

$

—

​

$

338,090

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Direct financing leases

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

1,102

$

​

11,281

$

​

8,690

$

​

1,980

$

​

1,259

$

​

967

​

$

—

​

$

25,279

Nonperforming

​

 

—

​

​

78

​

​

284

​

​

38

​

​

121

​

​

8

​

 

—

​

 

529

Total Direct financing leases

​

$

1,102

​

$

11,359

​

$

8,974

​

$

2,018

​

$

1,380

​

$

975

​

$

—

​

$

25,808

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total

​

$

90,129

​

$

135,286

​

$

94,223

​

$

32,647

​

$

9,642

​

$

1,971

​

$

—

​

$

363,898

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

* Performing = loans/leases accruing and less than 90 days past due. Nonperforming = loans/leases on nonaccrual and accruing loans/leases that are greater than or equal to 90 days past due.

The following table shows the gross charge-offs of loans and leases by class of receivable and year of origination for the three and six months ended June 30, 2024:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 2024

​

Six Months Ended June 30, 2024

​

​

Gross Charge-off by Origination Year

​

Gross Charge-off by Origination Year

Classes of Loans/Leases

    

2024

    

2023

    

2022

    

2021

    

2020

​

Prior

​

Total

​

2024

    

2023

    

2022

    

2021

    

2020

​

Prior

​

Total

​

​

(dollars in thousands)

​

(dollars in thousands)

C&I:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - revolving

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

C&I - other

​

​

—

​

​

206

​

​

826

​

​

570

​

​

79

​

​

—

​

​

1,681

​

​

7

​

​

884

​

​

2,859

​

​

1,092

​

​

112

​

​

176

​

​

5,130

CRE - owner occupied

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

CRE - non-owner occupied

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Construction and land development

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Multi-family

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Direct financing leases

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

10

​

​

24

​

​

42

​

​

13

​

​

89

1-4 family real estate

​

​

—

​

​

21

​

​

—

​

​

—

​

​

—

​

​

—

​

​

21

​

​

—

​

​

21

​

​

—

​

​

—

​

​

—

​

​

3

​

​

24

Consumer

​

​

—

​

​

1

​

​

22

​

​

11

​

​

15

​

​

—

​

​

49

​

​

—

​

​

1

​

​

41

​

​

11

​

​

15

​

​

—

​

​

68

​

​

$

—

​

$

228

​

$

848

​

$

581

​

$

94

​

$

—

​

$

1,751

​

$

7

​

$

906

​

$

2,910

​

$

1,127

​

$

169

​

$

192

​

$

5,311

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

23

Table of Contents

The following tables show the credit quality indicator of loans by class of receivable and year of origination as of December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of December 31, 2023

​

​

Term Loans

​

​

Amortized Cost Basis by Origination Year

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Revolving

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

Internally Assigned

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

​

Risk Rating

    

2023

    

2022

    

2021

    

2020

    

2019

​

Prior

​

Cost Basis

​

Total

​

​

(dollars in thousands)

C&I - revolving

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

294,449

​

$

294,449

Special Mention

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

26,289

​

 

26,289

Substandard

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

4,505

​

 

4,505

Doubtful

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Total C&I - revolving

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

325,243

​

$

325,243

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - other

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

430,764

​

$

301,225

​

$

128,057

​

$

68,882

​

$

62,149

​

$

132,171

​

$

—

​

$

1,123,248

Special Mention

​

 

11,617

​

 

8,777

​

 

5,572

​

 

3,088

​

 

1,024

​

 

386

​

 

—

​

 

30,464

Substandard

​

 

14

​

 

81

​

 

625

​

 

443

​

 

2,108

​

 

5,320

​

 

—

​

 

8,591

Doubtful

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Total C&I - other

​

$

442,395

​

$

310,083

​

$

134,254

​

$

72,413

​

$

65,281

​

$

137,877

​

$

—

​

$

1,162,303

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

CRE - owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

90,708

​

$

124,388

​

$

139,598

​

$

109,483

​

$

28,702

​

$

58,214

​

$

12,959

​

$

564,052

Special Mention

​

 

5,091

​

 

711

​

 

8,689

​

 

5,567

​

 

466

​

 

1,828

​

 

—

​

 

22,352

Substandard

​

 

1,955

​

 

564

​

 

24

​

 

15,978

​

 

1,312

​

 

1,128

​

 

—

​

 

20,961

Doubtful

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Total CRE - owner occupied

​

$

97,754

​

$

125,663

​

$

148,311

​

$

131,028

​

$

30,480

​

$

61,170

​

$

12,959

​

$

607,365

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

CRE - non-owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

200,214

​

$

276,055

​

$

195,013

​

$

119,428

​

$

72,136

​

$

78,346

​

$

7,406

​

$

948,598

Special Mention

​

 

16,842

​

 

58

​

 

223

​

 

12,057

​

 

2,359

​

 

6,719

​

 

150

​

 

38,408

Substandard

​

 

3,805

​

 

1,200

​

 

—

​

 

1,989

​

 

14,892

​

 

—

​

 

—

​

 

21,886

Doubtful

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Total CRE - non-owner occupied

​

$

220,861

​

$

277,313

​

$

195,236

​

$

133,474

​

$

89,387

​

$

85,065

​

$

7,556

​

$

1,008,892

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

467,045

​

$

485,376

​

$

271,881

​

$

151,091

​

$

1,911

​

$

4,137

​

$

30,304

​

$

1,411,745

Special Mention

​

 

6,054

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

6,054

Substandard

​

 

—

​

 

1,517

​

 

1,209

​

 

—

​

 

—

​

 

—

​

 

—

​

 

2,726

Doubtful

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Total Construction and land development

​

$

473,099

​

$

486,893

​

$

273,090

​

$

151,091

​

$

1,911

​

$

4,137

​

$

30,304

​

$

1,420,525

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Multi-family

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

180,971

​

$

195,939

​

$

170,893

​

$

239,410

​

$

102,070

​

$

96,897

​

$

162

​

$

986,342

Special Mention

​

 

1,595

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

1,595

Substandard

​

 

—

​

 

—

​

 

8,206

​

 

—

​

 

—

​

 

—

​

 

—

​

 

8,206

Doubtful

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Total Multi-family

​

$

182,566

​

$

195,939

​

$

179,099

​

$

239,410

​

$

102,070

​

$

96,897

​

$

162

​

$

996,143

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1-4 family real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

133,923

​

$

103,460

​

$

130,724

​

$

89,642

​

$

25,914

​

$

54,850

​

$

3,329

​

$

541,842

Special Mention

​

 

28

​

 

—

​

 

59

​

 

—

​

 

—

​

 

—

​

 

—

​

 

87

Substandard

​

 

144

​

 

215

​

 

815

​

 

637

​

 

519

​

 

712

​

 

—

​

 

3,042

Doubtful

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Total 1-4 family real estate

​

$

134,095

​

$

103,675

​

$

131,598

​

$

90,279

​

$

26,433

​

$

55,562

​

$

3,329

​

$

544,971

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

17,722

​

$

9,405

​

$

2,573

​

$

3,024

​

$

622

​

$

1,842

​

$

91,580

​

$

126,768

Special Mention

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

59

​

 

59

Substandard

​

 

175

​

 

119

​

 

12

​

 

12

​

 

—

​

 

133

​

 

57

​

 

508

Doubtful

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Total Consumer

​

$

17,897

​

$

9,524

​

$

2,585

​

$

3,036

​

$

622

​

$

1,975

​

$

91,696

​

$

127,335

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total

​

$

1,568,667

​

$

1,509,090

​

$

1,064,173

​

$

820,731

​

$

316,184

​

$

442,683

​

$

471,249

​

$

6,192,777

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

24

Table of Contents

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of December 31, 2023

​

​

Term Loans

​

 

​

​

​

​

​

​

Amortized Cost Basis by Origination Year

​

Revolving

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

​

Delinquency Status *

    

2023

    

2022

    

2021

    

2020

    

2019

    

Prior

    

Cost Basis

    

Total

​

 

(dollars in thousands)

C&I - other

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

149,216

​

$

103,804

​

$

40,003

​

$

12,590

​

$

2,539

​

$

132

​

$

—

​

$

308,284

Nonperforming

​

 

1,533

​

 

6,138

​

 

3,049

​

 

373

​

 

92

​

 

6

​

 

—

​

 

11,191

Total C&I - other

​

$

150,749

​

$

109,942

​

$

43,052

​

$

12,963

​

$

2,631

​

$

138

​

$

—

​

$

319,475

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Direct financing leases

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

12,217

​

$

11,170

​

$

3,005

​

$

2,631

​

$

1,561

​

$

291

​

$

—

​

$

30,875

Nonperforming

​

 

—

​

 

50

​

 

43

​

 

176

​

 

20

​

 

—

​

 

—

​

 

289

Total Direct financing leases

​

$

12,217

​

$

11,220

​

$

3,048

​

$

2,807

​

$

1,581

​

$

291

​

$

—

​

$

31,164

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total

​

$

162,966

​

$

121,162

​

$

46,100

​

$

15,770

​

$

4,212

​

$

429

​

$

—

​

$

350,639

​

* Performing = loans/leases accruing and less than 90 days past due. Nonperforming = loans/leases on nonaccrual and accruing loans/leases that are greater than or equal to 90 days past due.

​

There were no loan and lease modifications to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024. Any loan and lease modifications to borrowers experiencing financial difficulty during 2023 were immaterial.

​

Changes in the ACL for OBS exposures for the three and six months ended June 30, 2024 and 2023 are presented as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

June 30, 2024

    

June 30, 2023

    

June 30, 2024

    

June 30, 2023

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning

$

9,207

​

$

6,033

​

$

9,529

​

$

5,552

Provisions to expense

 

1,153

​

 

293

​

 

831

​

 

774

Balance, ending

$

10,360

​

$

6,326

​

$

10,360

​

$

6,326

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NOTE 4. SECURITIZATIONS AND VARIABLE INTEREST ENTITIES

​

Freddie Mac M and Q Series Securitizations

​

In 2023, the Company completed two Freddie Mac sponsored securitizations.  The Company retained beneficial interests which are classified as trading securities on the consolidated balance sheets. Details related to the securitizations and related VIEs can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

​

At June 30, 2024, the Company determined it was not the primary beneficiary of these VIEs, primarily because the Company did not have the power to direct the activities that most significantly impact the VIEs. Evaluation and assessment of VIEs for consolidation is performed on an ongoing basis by management. Any changes in facts and circumstances occurring since the previous primary beneficiary determination will be considered as part of this ongoing assessment.

​

As of both June 30, 2024, and December 31, 2023, the Company’s total assets related to the VIEs were $22.4 million and there were no liabilities recorded. The Company’s maximum exposure to loss associated with these VIEs consists of the capital invested plus any unfunded equity commitments that are binding. As of June 30, 2024, the maximum exposure to loss was $31.8 million.

​

25

Table of Contents

NOTE 5 – DERIVATIVES AND HEDGING ACTIVITIES

Derivatives are summarized as follows as of June 30, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

    

June 30, 2024

    

December 31, 2023

​

​

(dollars in thousands)

Assets:

​

​

​

​

​

​

Hedged Derivatives

​

​

​

​

​

​

Cash Flow Hedges

​

​

​

​

​

​

Interest rate caps

​

$

1,783

​

$

2,847

Interest rate swaps

​

 

2,680

​

 

1,689

Fair Value Hedges

​

​

​

​

​

​

Interest rate swaps

​

​

1,881

​

​

—

Unhedged Derivatives

​

​

​

​

​

​

Interest rate caps

​

​

586

​

​

951

Interest rate swaps

​

 

187,424

​

 

181,854

​

​

$

194,354

​

$

187,341

​

​

​

​

​

​

​

Liabilities:

​

​

​

​

​

​

Hedged Derivatives

​

​

​

​

​

​

Cash Flow Hedges

​

​

​

​

​

​

Interest rate swaps

​

​

(33,906)

​

​

(30,407)

Interest rate collars

​

​

(468)

​

​

(166)

Fair Value Hedges

​

​

​

​

​

​

Interest rate swaps

​

​

—

​

​

(3,308)

Unhedged Derivatives

​

​

​

​

​

​

Interest rate swaps

​

​

(187,424)

​

​

(181,854)

​

​

$

(221,798)

​

$

(215,735)

​

​

​

​

​

​

​

​

The Company uses interest rate swap, cap and collar instruments to manage interest rate risk related to the variability of interest payments due to changes in interest rates.  

The Company has entered into interest rate caps to hedge against the risk of rising interest rates on liabilities.  The liabilities consist of $300.0 million of deposits and the benchmark rates hedged vary at 1-month SOFR, 3-month SOFR and the Prime Rate. The interest rate caps are designated as cash flow hedges in accordance with ASC 815.  An initial premium of $3.5 million was paid upfront for the caps executed.  The details of the interest rate caps are as follows:  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance Sheet

​

​

​

​

​

​

Fair Value as of

​

​

Hedged Item

​

Effective Date

​

Maturity Date

​

Location

​

Notional Amount

​

Strike Rate

​

June 30, 2024

​

​

December 31, 2023

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits

​

1/1/2020

​

1/1/2024

​

Derivatives - Assets

​

$

25,000

​

1.75

%  

​

$

-

​

​

$

(79)

​

​

Deposits

​

1/1/2020

​

1/1/2024

​

Derivatives - Assets

​

​

50,000

​

1.57

%  

​

​

-

​

​

​

-

​

​

Deposits

​

1/1/2020

​

1/1/2024

​

Derivatives - Assets

​

​

25,000

​

1.80

%  

​

​

-

​

​

​

-

​

​

Deposits

​

1/1/2020

​

1/1/2025

​

Derivatives - Assets

​

​

25,000

​

1.75

%  

​

​

443

​

​

​

672

​

​

Deposits

​

1/1/2020

​

1/1/2025

​

Derivatives - Assets

​

​

50,000

​

1.57

%  

​

​

893

​

​

​

1,503

​

​

Deposits

​

1/1/2020

​

1/1/2025

​

Derivatives - Assets

​

​

25,000

​

1.80

%  

​

​

447

​

​

​

751

​

​

​

​

​

​

​

​

​

​

$

200,000

​

​

​

​

$

1,783

​

​

$

2,847

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company has entered into interest rate swaps to hedge against the risk of rising rates on one of its variable rate subordinated notes and its variable rate trust preferred securities. All of the interest rate swaps are designated as cash flow hedges in accordance with ASC 815.  The details of the interest rate swaps are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance Sheet

​

​

​

​

​

​

​

​

​

​

​

Fair Value as of

Hedged Item

​

Effective Date

​

Maturity Date

​

Location

​

Notional Amount

​

Receive Rate

​

​

Pay Rate

​

June 30, 2024

​

December 31, 2023

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

QCR Holdings Statutory Trust V

 

7/7/2018

​

7/7/2028

​

Derivatives - Assets

 

$

10,000

​

7.14

%  

​

 

4.54

%  

​

$

509

​

$

335

Community National Statutory Trust III

 

9/15/2018

​

9/15/2028

​

Derivatives - Assets

 

​

3,500

​

7.34

%  

​

 

4.75

%  

​

​

182

​

​

118

Guaranty Bankshares Statutory Trust I

 

9/15/2018

​

9/15/2028

​

Derivatives - Assets

​

​

4,500

​

7.34

%

​

​

4.75

%

​

​

234

​

​

152

Community National Statutory Trust II

 

9/20/2018

​

9/20/2028

​

Derivatives - Assets

 

​

3,000

​

7.76

%  

​

 

5.17

%  

​

​

156

​

​

101

QCR Holdings Statutory Trust II

 

9/30/2018

​

9/30/2028

​

Derivatives - Assets

 

​

10,000

​

8.44

%  

​

 

5.85

%  

​

​

522

​

​

341

QCR Holdings Statutory Trust III

 

9/30/2018

​

9/30/2028

​

Derivatives - Assets

 

​

8,000

​

8.44

%  

​

 

5.85

%  

​

​

418

​

​

272

Guaranty Statutory Trust II*

 

5/23/2019

​

2/23/2026

​

Derivatives - Assets

 

​

10,310

​

7.03

%  

​

 

4.09

%  

​

​

407

​

​

370

QCR Holdings Subordinated Note

 

3/1/2024

​

2/15/2028

​

Derivatives - Assets

 

​

65,000

​

5.34

%  

​

 

4.02

%  

​

​

252

​

​

-

​

 

  

​

​

​

​

 

$

114,310

​

​

​

​

​

​

​

​

$

2,680

​

$

1,689

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

* Acquired on April 1, 2022 with GFED acquisition.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

26

Table of Contents

The Company has entered into interest rate swaps to hedge against the risk of declining interest rates on floating rate loans.    The interest rate swaps are designated as cash flow hedges in accordance with ASC 815.  The details of the interest rate swaps are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance Sheet

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value as of

Hedged Item

  

Effective Date

  

Maturity Date

  

Location

  

Notional Amount

 

 

Receive Rate

​

 

 

Pay Rate

​

 

June 30, 2024

  

December 31, 2023

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

 

7/1/2021

​

7/1/2031

​

Derivatives - Liabilities

 

$

35,000

​

​

1.40

%  

​

 

5.45

%  

​

$

(5,623)

​

$

(5,004)

Loans

 

7/1/2021

​

7/1/2031

​

Derivatives - Liabilities

 

​

50,000

​

​

1.40

%  

​

 

5.45

%  

​

​

(8,033)

​

​

(7,149)

Loans

 

7/1/2021

​

7/1/2031

​

Derivatives - Liabilities

 

​

40,000

​

​

1.40

%  

​

 

5.45

%  

​

​

(6,436)

​

​

(5,730)

Loans

 

10/1/2022

​

7/1/2031

​

Derivatives - Liabilities

 

​

25,000

​

​

1.30

%  

​

 

5.45

%  

​

​

(4,047)

​

​

(3,696)

Loans

 

4/1/2022

​

4/1/2027

​

Derivatives - Liabilities

 

​

15,000

​

​

1.91

%  

​

 

5.45

%  

​

​

(977)

​

​

(868)

Loans

 

4/1/2022

​

4/1/2027

​

Derivatives - Liabilities

 

​

50,000

​

​

1.91

%  

​

 

5.45

%  

​

​

(3,256)

​

​

(2,892)

Loans

 

4/1/2022

​

4/1/2027

​

Derivatives - Liabilities

 

​

35,000

​

​

1.91

%  

​

 

5.45

%  

​

​

(2,279)

​

​

(2,024)

Loans

​

4/1/2022

​

4/1/2027

​

Derivatives - Liabilities

​

​

50,000

​

​

1.91

%

​

​

5.45

%

​

​

(3,255)

​

​

(3,044)

​

 

  

​

​

​

​

 

$

300,000

​

​

​

​

​

​

​

​

​

$

(33,906)

​

$

(30,407)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company uses interest rate collars in an effort to manage future interest rate exposure on variable rate loans.  The collar hedging strategy stabilizes interest rate fluctuations by setting both a floor and a cap.  The collar is designated as a cash flow hedge in accordance with ASC 815. The details of the interest rate collar is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value as of

Hedged Item

​

Effective Date

​

Maturity Date

​

Location

​

Notional Amount

​

Cap Strike Rate

​

​

Floor Strike Rate

​

June 30, 2024

​

December 31, 2023

Loans

 

10/1/2022

​

10/1/2026

​

Derivatives - Liabilities

 

$

50,000

​

4.40

%  

 

2.44

%  

​

$

(468)

​

$

(166)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company has entered into interest rate swaps to hedge against the risk of rising rates on loans.  The interest rate swaps are designated as fair value hedges in accordance with ASC 815. The details of the interest rate swaps are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance Sheet

​

​

​

​

​

​

​

​

​

​

​

Fair Value as of

Hedged Item

​

Effective Date

​

Maturity Date

​

Location

​

Notional Amount

​

Receive Rate

​

​

​

Pay Rate

​

​

June 30, 2024

​

December 31, 2023

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

7/12/2023

​

8/1/2025

​

Derivatives - Assets

​

​

15,000

​

5.33

%  

​

​

4.60

%  

​

​

46

​

​

(69)

Loans

 

7/12/2023

​

2/1/2026

​

Derivatives - Assets

 

$

25,000

​

5.33

%  

​

 

4.38

%  

​

$

104

​

$

(195)

Loans

 

7/12/2023

​

2/1/2026

​

Derivatives - Assets

 

​

15,000

​

5.33

%  

​

 

4.38

%  

​

​

62

​

​

(117)

Loans

​

7/12/2023

​

2/1/2026

​

Derivatives - Assets

​

​

20,000

​

5.33

%  

​

​

4.38

%  

​

​

83

​

​

(140)

Loans

 

7/12/2023

​

8/1/2026

​

Derivatives - Assets

 

​

30,000

​

5.33

%  

​

 

4.21

%  

​

​

151

​

​

(293)

Loans

 

7/12/2023

​

8/1/2026

​

Derivatives - Assets

 

​

15,000

​

5.33

%  

​

 

4.21

%  

​

​

76

​

​

(146)

Loans

​

7/12/2023

​

8/1/2026

​

Derivatives - Assets

​

​

20,000

​

5.33

%  

​

​

4.21

%  

​

​

101

​

​

(176)

Loans

 

7/12/2023

​

2/1/2027

​

Derivatives - Assets

 

​

32,500

​

5.33

%  

​

 

4.08

%  

​

​

194

​

​

(364)

Loans

​

7/12/2023

​

2/1/2027

​

Derivatives - Assets

​

​

15,000

​

5.33

%  

​

​

4.08

%  

​

​

90

​

​

(168)

Loans

​

7/12/2023

​

2/1/2027

​

Derivatives - Assets

​

​

20,000

​

5.33

%  

​

​

4.08

%  

​

​

119

​

​

(202)

Loans

 

7/12/2023

​

8/1/2027

​

Derivatives - Assets

 

​

32,500

​

5.33

%  

​

 

3.98

%  

​

​

225

​

​

(397)

Loans

​

7/12/2023

​

8/1/2027

​

Derivatives - Assets

​

​

15,000

​

5.33

%  

​

​

3.98

%  

​

​

104

​

​

(183)

Loans

​

7/12/2023

​

8/1/2027

​

Derivatives - Assets

​

​

25,000

​

5.33

%  

​

​

3.98

%  

​

​

172

​

​

(276)

Loans

 

7/12/2023

​

2/1/2028

​

Derivatives - Assets

 

​

30,000

​

5.33

%  

​

 

3.90

%  

​

​

236

​

​

(388)

Loans

​

7/12/2023

​

2/1/2028

​

Derivatives - Assets

​

​

15,000

​

5.33

%  

​

​

3.90

%  

​

​

118

​

​

(194)

​

​

​

​

​

​

​

​

$

325,000

​

​

​

​

​

​

​

​

$

1,881

​

$

(3,308)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Changes in fair values of derivative financial instruments accounted for as cash flow hedges, to the extent that they are included in the assessment of effectiveness, are recorded as a component of AOCI.  Changes in fair values of derivative financial instruments accounted for as fair value hedges, to the extent that they are included in the assessment of effectiveness, are recorded as a component of other assets or other liabilities.

For derivative instruments that are designated as unhedged, the change in fair value of the derivative instrument is recognized into current earnings. The details of the unhedged interest rate caps are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance Sheet

​

​

​

​

​

​

​

Fair Value as of

​

​

Effective Date

​

Maturity Date

​

Location

​

Notional Amount

​

Strike Rate

​

​

June 30, 2024

​

​

December 31, 2023

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2/1/2020

​

2/1/2024

​

Derivatives - Assets

​

$

25,000

​

1.90

%  

​

$

-

​

​

$

79

​

​

3/1/2020

​

3/3/2025

​

Derivatives - Assets

​

​

25,000

​

1.90

%  

​

​

586

​

​

​

872

​

​

​

​

​

​

​

​

$

50,000

​

​

​

​

$

586

​

​

$

951

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company has also entered into interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Company enters into an interest rate swap with a customer while at the same time entering into an equal and offsetting interest rate swap with an upstream counterparty. Additionally, the Company receives an upfront, non-refundable fee from the upstream counterparty, dependent upon the pricing that is

27

Table of Contents

recognized upon receipt from the counterparty.  Because the Company acts as an intermediary for the customer, changes in the fair value of the underlying derivative contracts, for the most part, offset each other and do not significantly impact the Company’s results of operations.

Interest rate swaps that are not designated as hedging instruments are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 2024

​

December 31, 2023

​

​

​

Notional Amount

​

Estimated Fair Value

​

Notional Amount

​

Estimated Fair Value

​

​

​

(dollars in thousands)

Non-Hedging Interest Rate Derivatives Assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest rate swap contracts

​

​

$

3,731,140

​

$

187,424

​

$

3,308,024

​

$

181,854

Non-Hedging Interest Rate Derivatives Liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest rate swap contracts

​

​

$

3,731,140

​

$

187,424

​

$

3,308,024

​

$

181,854

​

The effect of cash flow hedging and fair value accounting on the consolidated statements of income for the three and six months ended June 30, 2024 and 2023 are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 2024

​

Three Months Ended June 30, 2023

​

​

Interest and

​

Interest

​

​

Interest and

​

Interest

​

​

​

Dividend Income

​

Expense

​

​

Dividend Income

​

Expense

​

​

​

(dollars in thousands)

Income and expense line items presented in the consolidated statements of income

​

$

119,746

​

$

63,583

​

​

$

98,377

​

$

45,172

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The effects of cash flow hedging:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gain (loss) on interest rate caps on deposits

​

​

-

​

​

(1,039)

​

​

​

-

​

​

(1,875)

​

Gain (loss) on interest rate swaps on junior subordinated debentures

​

​

-

​

​

(337)

​

​

​

-

​

​

(275)

​

Gain (loss) on interest rate swaps and collars on loans

​

​

(2,987)

​

​

-

​

​

​

(2,207)

​

​

-

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The effects of fair value hedging:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gain on interest rate swaps on loans

​

​

985

​

​

-

​

​

​

-

​

​

-

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2024

​

​

Six Months Ended June 30, 2023

​

​

​

Interest and

​

Interest

​

​

Interest and

​

Interest

​

​

​

Dividend Income

​

Expense

​

​

Dividend Income

​

Expense

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Income and expense line items presented in the consolidated statements of income

​

$

234,795

​

$

123,933

​

​

$

192,594

​

$

82,579

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The effects of cash flow hedging:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gain (loss) on interest rate caps on deposits

​

​

-

​

​

(2,155)

​

​

​

-

​

​

(3,456)

​

Gain (loss) on interest rate swaps on junior subordinated debentures

​

​

-

​

​

(673)

​

​

​

-

​

​

(502)

​

Gain (loss) on interest rate swaps and collars on loans

​

​

(5,961)

​

​

-

​

​

​

(4,262)

​

​

-

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The effects of fair value hedging:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gain on interest rate swaps on loans

​

​

1,962

​

​

-

​

​

​

-

​

​

-

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company’s hedged interest rate swaps and non-hedged interest rate swaps are collateralized with cash and investment securities with carrying values as follows:

​

​

​

​

​

​

​

​

​

    

June 30, 2024

​

December 31, 2023

​

​

(dollars in thousands)

​

​

​

​

​

​

​

Cash

​

$

34,960

​

$

51,680

U.S govt. sponsored agency securities

​

​

6,262

​

​

6,413

Municipal securities

​

​

63,824

​

​

68,651

Residential mortgage-backed and related securities

​

 

21,268

​

 

23,358

​

​

$

126,314

​

$

150,102

​

​

​

​

​

​

​

​

The Company may be exposed to credit risk in the event of non-performance by the counterparties to its interest rate derivative agreements.  The Company assesses the credit risk of its financial institution counterparties by monitoring publicly available credit ratings and financial information.  Additionally, the Company manages financial institution counterparty credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, and uses ISDA master agreements, central clearing mechanisms and counterparty limits.  The agreements contain bilateral collateral agreements with the amount of collateral to be posted generally governed by the settlement value of outstanding swaps. The Company manages the risk of default by its borrower/customer counterparties through its normal loan underwriting and credit monitoring policies and procedures. The Company underwrites the combination of the base loan amount and potential swap exposure and focuses on high quality borrowers with strong collateral values. The majority of the Company’s swapped loan portfolio consists of loans on projects, with loan-to-values, including the potential swap exposure, below 65%.  The Company does not currently anticipate any losses from failure of interest rate derivative counterparties to honor their obligations.

​

28

Table of Contents

NOTE 6 – INCOME TAXES

​

A reconciliation of the expected federal income tax expense to the income tax expense included in the consolidated statements of income is as follows for the three and six months ended June 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended June 30, 

​

​

For the Six Months Ended June 30, 

​

​

​

​

2024

​

2023

​

​

2024

​

2023

​

​

​

​

​

​

​

% of

​

​

​

​

% of

​

​

​

​

​

% of

​

​

​

​

% of

​

​

​

​

​

​

​

Pretax

​

​

​

​

Pretax

​

​

​

​

​

Pretax

​

​

​

​

Pretax

​

​

​

    

Amount

    

Income

    

Amount

    

Income

    

​

Amount

    

Income

    

Amount

    

Income

​

 

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Computed "expected" tax expense

​

$

6,650

 

21.0

%  

$

6,802

 

21.0

%  

​

$

12,509

 

21.0

%  

$

13,090

 

21.0

%

​

Tax exempt income, net

​

 

(3,986)

 

(12.6)

​

 

(3,182)

 

(9.8)

​

​

 

(7,761)

 

(13.0)

​

 

(6,398)

 

(10.3)

​

​

Bank-owned life insurance

​

 

(622)

 

(2.0)

​

 

(176)

 

(0.5)

​

​

 

(804)

 

(1.3)

​

 

(324)

 

(0.5)

​

​

State income taxes, net of federal benefit, current year

​

 

1,088

 

3.4

​

 

1,239

 

3.8

​

​

 

2,102

 

3.5

​

 

2,428

 

3.9

​

​

Tax credits

​

 

35

 

0.1

​

 

(32)

 

(0.1)

​

​

 

(51)

 

(0.1)

​

 

(209)

 

(0.3)

​

​

Income from tax credit equity investments

​

​

(497)

​

(1.6)

​

​

(478)

​

(1.5)

​

​

​

(1,093)

​

(1.8)

​

​

(891)

​

(1.4)

​

​

Excess tax benefit on stock options exercised and restricted stock awards vested

​

 

(54)

 

(0.1)

​

 

(46)

 

(0.1)

​

​

 

(524)

 

(0.9)

​

 

(444)

 

(0.7)

​

​

Other

​

 

(60)

 

(0.1)

​

 

(160)

 

(0.6)

​

​

 

(652)

 

(1.1)

​

 

(503)

 

(0.9)

​

​

Federal and state income tax expense

​

$

2,554

 

8.1

%  

$

3,967

 

12.2

%  

​

$

3,726

 

6.3

%  

$

6,749

 

10.8

%

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

​

​

Effective January 1, 2024, the Company made an election under ASU 2023-02 to account for its LIHTC investments using the proportional amortization method under newly adopted accounting guidance.  Under the proportional amortization method, the Company applies a practical expedient for its LIHTC investments and amortizes the initial cost of the qualifying investments in proportion to the income tax credits received in the current period as compared to the total income tax credits expected to be received over the life of the investment.  For LIHTC investments, the Company amortized the initial cost of qualifying investments in proportion to the income tax credits and other income tax benefits received in the current period.

​

The following table summarizes the impact to the Consolidated Statements of Operations relative to the Company’s tax credit programs for which it has elected to apply the proportional amortization method of accounting:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

For the Six Months Ended

​

​

​

June 30, 2024

​

March 31, 2024

​

June 30, 2023

​

June 30, 2024

​

June 30, 2023

​

​

​

(dollars in thousands)

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax credits recognized

​

$

2,115

​

$

2,204

​

$

1,784

​

$

4,319

​

$

2,905

​

Other tax benefits recognized

​

 

613

​

 

729

​

 

514

​

 

1,342

​

 

1,022

​

Amortization

​

 

(2,092)

​

 

(2,061)

​

 

(1,616)

​

 

(4,153)

​

 

(2,581)

​

Net benefit included in income tax

​

 

636

​

 

872

​

 

682

​

 

1,508

​

 

1,346

​

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

Other income

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

Allocated income on investments

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

Net benefit included in noninterest income

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

Net benefit included in the Consolidated Statements of Operations

​

$

636

​

$

872

​

$

682

​

$

1,508

​

$

1,346

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

The Company did not recognize impairment losses resulting from the forfeiture or ineligibility of income tax credits or other circumstances during the three and six months ending June 30, 2024 and 2023.

​

29

Table of Contents

NOTE 7 - EARNINGS PER SHARE

​

The following information was used in the computation of EPS on a basic and diluted basis:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three months ended

​

Six months ended

​

​

​

​

​

June 30, 

​

June 30, 

​

​

​

​

​

2024

    

​

2023

    

​

2024

    

​

2023

​

​

​

​

(dollars in thousands, except share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

$

29,114

​

$

28,425

​

$

55,840

​

$

55,582

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic EPS

​

$

1.73

​

$

1.70

​

$

3.32

​

$

3.32

​

​

Diluted EPS

​

$

1.72

​

$

1.69

​

$

3.30

​

$

3.29

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Weighted average common shares outstanding

​

 

16,814,814

​

 

16,701,950

​

 

16,799,081

​

 

16,739,120

​

​

Weighted average common shares issuable upon exercise of stock options

​

​

​

​

​

​

​

​

​

​

​

​

​

​

and under the employee stock purchase plan

​

 

107,040

​

 

97,577

​

 

117,183

​

 

131,710

​

​

Weighted average common and common equivalent shares outstanding

​

 

16,921,854

​

 

16,799,527

​

 

16,916,264

​

 

16,870,830

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NOTE 8 – FAIR VALUE

​

Accounting guidance on fair value measurement uses a hierarchy intended to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy includes three levels and is based upon the valuation techniques used to measure assets and liabilities. The three levels are as follows:

●Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in markets;
●Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and
●Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Assets and liabilities measured at fair value on a recurring basis comprise the following at June 30, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurements at Reporting Date Using

​

​

​

​

​

Quoted Prices

​

Significant

​

​

​

​

​

​

​

​

in Active

​

Other

​

Significant

​

​

​

​

​

Markets for

​

Observable

​

Unobservable

​

​

​

​

​

Identical Assets

​

Inputs

​

Inputs

​

    

Fair Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

​

​

(dollars in thousands)

June 30, 2024:

 

​

  

 

​

  

 

​

  

 

​

  

Securities AFS:

 

​

  

 

​

  

 

​

  

 

​

  

U.S. treasuries and govt. sponsored agency securities

​

$

20,101

​

$

—

​

$

20,101

​

$

—

Residential mortgage-backed and related securities

​

 

54,708

​

 

—

​

 

54,708

​

 

—

Municipal securities

​

 

165,268

​

 

—

​

 

165,268

​

 

—

Asset-backed securities

​

​

12,721

​

​

—

​

​

12,721

​

​

—

Other securities

​

 

37,414

​

 

—

​

 

37,414

​

 

—

Securities trading

​

​

22,362

​

​

—

​

​

—

​

​

22,362

Derivatives

​

 

194,354

​

 

—

​

 

194,354

​

 

—

Total assets measured at fair value

​

$

506,928

​

$

—

​

$

484,566

​

$

22,362

​

​

 

  

​

 

  

​

 

  

​

 

  

Derivatives

​

$

221,798

​

$

—

​

$

221,798

​

$

—

Total liabilities measured at fair value

​

$

221,798

​

$

—

​

$

221,798

​

$

—

​

​

 

  

​

 

  

​

 

  

​

 

  

​

​

 

  

​

 

  

​

 

  

​

 

  

December 31, 2023:

​

 

  

​

 

  

​

 

  

​

 

  

Securities AFS:

​

 

  

​

 

  

​

 

  

​

 

  

U.S. govt. sponsored agency securities

​

$

14,973

​

$

—

​

$

14,973

​

$

—

Residential mortgage-backed and related securities

​

 

59,196

​

 

—

​

 

59,196

​

 

—

Municipal securities

​

 

170,987

​

 

—

​

 

170,987

​

 

—

Asset-backed securities

​

​

15,423

​

​

—

​

​

15,423

​

​

—

Other securities

​

 

39,076

​

 

—

​

 

39,076

​

 

—

Securities trading

​

​

22,369

​

​

—

​

​

—

​

​

22,369

Derivatives

​

 

187,341

​

 

—

​

 

187,341

​

 

—

Total assets measured at fair value

​

$

509,365

​

$

—

​

$

486,996

​

$

22,369

​

​

 

  

​

 

  

​

 

  

​

 

  

Derivatives

​

$

215,735

​

$

—

​

$

215,735

​

$

—

Total liabilities measured at fair value

​

$

215,735

​

$

—

​

$

215,735

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

30

Table of Contents

The securities AFS portfolio consists of securities whereby the Company obtains fair values from an independent pricing service. The fair values are determined by pricing models that consider observable market data, such as interest rate volatilities, SOFR yield curve, credit spreads and prices from market makers and live trading systems (Level 2 inputs).

Trading securities consist of retained beneficial interests from securitizations and are classified as a Level 3 in the fair value hierarchy.  Fair values are estimated using the discounted cash flow method, including discount rates which are deemed to be significant unobservable inputs. As of June 30, 2024, the discount rates ranged from 5.85% to 7.62%.

Interest rate caps, swaps and collars are used for the purpose of hedging interest rate risk on various financial assets and liabilities, further described in Note 4 to the Consolidated Financial Statements. Interest rate swaps are also executed for select commercial customers.  The fair values are determined by pricing models that consider observable market data for derivative instruments with similar structures (Level 2 inputs).

Certain financial assets are measured at fair value on a non-recurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when a loan/lease is collaterally dependent).

Assets measured at fair value on a non-recurring basis comprised the following at June 30, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Fair Value Measurements at Reporting Date Using

​

​

​

​

​

Quoted Prices

​

Significant

​

​

​

​

​

​

​

​

in Active

​

Other

​

Significant

​

​

​

​

​

Markets for

​

Observable

​

Unobservable

​

​

​

​

​

Identical Assets

​

Inputs

​

Inputs

​

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 2024:

 

​

  

 

​

  

 

​

  

 

​

  

Loans/leases evaluated individually

​

$

33,910

​

$

—

​

$

—

​

$

33,910

Loans receivable held for sale in preparation for securitization

​

​

243,193

​

​

—

​

​

—

​

​

243,193

OREO

​

​

399

​

​

—

​

​

—

​

​

399

Other repossessed assets

​

 

576

​

 

—

​

 

—

​

 

576

​

​

$

278,078

​

$

—

​

$

—

​

$

278,078

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023:

​

 

  

​

 

  

​

 

  

​

 

  

Loans/leases evaluated individually

​

$

33,656

​

$

—

​

$

—

​

$

33,656

OREO

​

 

1,455

​

 

—

​

 

—

​

 

1,455

​

​

$

35,111

​

$

—

​

$

—

​

$

35,111

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans/leases evaluated individually are valued at the lower of cost or fair value and are classified as Level 3 in the fair value hierarchy. Fair value is measured based on the value of the collateral securing these loans/leases. Collateral may be comprised of real estate and/or business assets, including equipment, inventory and/or accounts receivable, and is determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values are discounted based on management's historical knowledge, changes in market conditions from the time of valuation, and/or management's expertise and knowledge of the client and client's business.

Loans receivable held for sale in preparation for securitization are valued at the lower of cost or fair value in the aggregate by type and are classified as Level 3 in the fair value hierarchy.  Fair value is estimated considering the loans have a floating interest rate with a spread that is commensurate with current market pricing, in addition to factoring in a discount for credit risk.

OREO in the table above consists of property acquired through foreclosures and settlement of loans.  Property acquired is carried at the estimated fair value of the property, less disposal costs, and is classified as a Level 3 in the fair value hierarchy.  The estimated fair value of the property acquired is generally determined based on appraisals by qualified licensed appraisers hired by the Company.  Appraised and reported values are discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the property.

Other repossessed assets in the table above consists of equipment acquired through repossession and settlement of loans.  Property acquired is carried at the estimated fair value of the property, less disposal costs, and is classified as a Level 3 in

31

Table of Contents

the fair value hierarchy.  The estimated fair value of the property acquired is generally determined based on current average auction prices database used by a national auction company hired by the Company.  

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quantitative Information about Level Fair Value Measurements

 

​

​

Fair Value

​

Fair Value

​

​

​

​

​

​

​

​

​

​

 

​

​

June 30, 

​

December 31, 

​

​

​

​

​

​

​

​

​

​

 

​

    

2024

    

2023

    

Valuation Technique

    

Unobservable Input

    

Range

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans/leases evaluated individually

​

$

33,910

​

$

33,656

​

Appraisal of collateral

​

Appraisal adjustments

​

-10.00

%

to

​

-30.00

%

Loans receivable held for sale in preparation for securitization

​

​

243,193

​

​

—

​

Market prices for similar loans

​

Market price adjustments

​

​

​

n/a

​

​

​

OREO

​

​

399

​

​

1,455

​

Appraisal of collateral

​

Appraisal adjustments

​

0.00

%  

to

 

-35.00

%

Other repossessed assets

​

 

576

​

 

—

 

Average auction prices

 

Market price adjustments

 

​

​

n/a

​

​

​

​

For the loans/leases evaluated individually and OREO, the Company records carrying value at fair value less disposal or selling costs. The amounts reported in the tables above are fair values before the adjustment for disposal or selling costs.

For loans receivable held for sale in preparation for securitization, the Company records carrying value at fair value factoring in a discount for credit risk.

There have been no changes in valuation techniques used for any assets or liabilities measured at fair value during the three and six months ended June 30, 2024 and 2023.

The following table presents the carrying values and estimated fair values of financial assets and liabilities carried on the Company's consolidated balance sheets, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value

​

As of June 30, 2024

​

As of December 31, 2023

​

​

Hierarchy

​

Carrying

​

Estimated

​

Carrying

​

Estimated

​

    

Level

    

Value

    

Fair Value

    

Value

    

Fair Value

​

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from banks

 

Level 1

​

$

92,173

​

$

92,173

​

$

97,123

​

$

97,123

Federal funds sold

 

Level 2

​

 

8,150

​

 

8,150

​

 

35,450

​

 

35,450

Interest-bearing deposits at financial institutions

 

Level 2

​

 

94,112

​

 

94,112

​

 

104,919

​

 

104,919

Investment securities:

 

  

​

 

​

​

 

​

​

 

​

​

 

​

HTM

 

Level 2

​

 

720,625

​

 

696,447

​

 

683,504

​

 

680,279

AFS

 

Level 2

​

 

290,212

​

 

290,212

​

 

299,655

​

 

299,655

Trading

​

Level 3

​

​

22,362

​

​

22,362

​

​

22,369

​

​

22,369

Loans/leases receivable, net

 

Level 3

​

 

31,398

​

 

33,910

​

 

31,163

​

 

33,656

Loans/leases receivable, net

 

Level 2

​

 

6,735,282

​

 

6,468,550

​

 

6,425,053

​

 

6,125,433

Derivatives

 

Level 2

​

 

194,354

​

 

194,354

​

 

187,341

​

 

187,341

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits:

 

  

​

 

​

​

 

​

​

 

​

​

 

​

Nonmaturity deposits

 

Level 2

​

 

5,688,913

​

 

5,688,913

​

 

5,504,323

​

 

5,504,323

Time deposits

 

Level 2

​

 

1,075,754

​

 

1,071,579

​

 

1,009,682

​

 

996,746

Short-term borrowings

 

Level 2

​

 

1,600

​

 

1,600

​

 

1,500

​

 

1,500

FHLB advances

 

Level 2

​

 

485,000

​

 

485,231

​

 

435,000

​

 

437,178

Subordinated notes

​

Level 2

​

​

233,276

​

​

239,136

​

​

233,064

​

​

240,235

Junior subordinated debentures

 

Level 2

​

 

48,795

​

 

40,718

​

 

48,731

​

 

40,397

Derivatives

 

Level 2

​

 

221,798

​

 

221,798

​

 

215,735

​

 

215,735

​

​

​

​

NOTE 9 – BUSINESS SEGMENT INFORMATION

Selected financial and descriptive information is required to be disclosed for reportable operating segments, applying a “management perspective” as the basis for identifying reportable segments. The management perspective is determined by the view that management takes of the segments within the Company when making operating decisions, allocating resources, and measuring performance. The segments of the Company have been defined by the structure of the Company's internal organization, focusing on the financial information that the Company's operating decision-makers routinely use to make decisions about operating matters.

The Company’s Commercial Banking business is geographically divided by markets into the operating segments which are the four subsidiary banks wholly owned by the Company:  QCBT, CRBT, CSB, and GB. Each of these operating segments offers similar products and services, but is managed separately due to different pricing, product demand, and consumer markets. Each offers commercial, consumer, and mortgage loans and deposit services.

32

Table of Contents

The Company's All Other segment includes the corporate operations of the parent and operations of all other consolidated subsidiaries and/or defined operating segments that fall below the segment reporting thresholds.  

Selected financial information on the Company's business segments is presented as follows as of and for the three and six months ended June 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial Banking

​

​

​

Intercompany

​

Consolidated

​

    

QCBT

    

CRBT

    

CSB

    

GB

    

All other

    

Eliminations

    

Total

​

​

(dollars in thousands)

Three Months Ended June 30, 2024

​

​

  

​

​

  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total revenue

​

$

41,866

​

$

50,167

​

$

21,480

​

$

37,924

​

$

37,295

​

$

(38,097)

​

$

150,635

Net interest income

​

 

17,725

​

 

17,100

​

 

11,284

​

 

13,862

​

 

(4,174)

​

 

366

​

 

56,163

Provision for credit losses

​

 

3,228

​

 

2,028

​

 

47

​

 

193

​

 

—

​

 

—

​

 

5,496

Net income (loss) from continuing operations

​

 

5,557

​

 

17,736

​

 

4,627

​

 

8,266

​

 

29,667

​

 

(36,739)

​

 

29,114

Goodwill

​

 

3,223

​

 

14,980

​

 

9,888

​

 

110,936

​

 

—

​

 

—

​

 

139,027

Intangibles

​

 

—

​

 

755

​

 

1,148

​

 

10,538

​

 

—

​

 

—

​

 

12,441

Total assets

​

 

2,559,049

​

 

2,428,266

​

 

1,531,109

​

 

2,369,754

​

 

1,263,250

​

 

(1,279,437)

​

 

8,871,991

​

​

 

  

​

 

  

​

 

  

​

 

​

​

 

​

​

 

  

​

 

​

Three Months Ended June 30, 2023

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

​

Total revenue

​

$

35,375

​

$

51,303

​

$

17,333

​

$

28,324

​

$

34,925

​

$

(36,363)

​

$

130,897

Net interest income

​

 

16,403

​

 

16,223

​

 

10,657

​

 

13,601

​

 

(3,989)

​

 

310

​

 

53,205

Provision for credit losses

​

 

3,620

​

 

480

​

 

198

​

 

(692)

​

 

—

​

 

—

​

 

3,606

Net income (loss) from continuing operations

​

 

4,816

​

 

19,353

​

 

4,613

​

 

5,156

​

 

28,945

​

 

(34,458)

​

 

28,425

Goodwill

​

 

3,223

​

 

14,980

​

 

9,888

​

 

110,936

​

 

—

​

 

—

​

 

139,027

Intangibles

​

 

—

​

 

991

​

 

1,729

​

 

12,508

​

 

—

​

 

—

​

 

15,228

Total assets

​

 

2,611,832

​

 

2,389,623

​

 

1,332,966

​

 

2,179,844

​

 

1,143,683

​

 

(1,431,275)

​

 

8,226,673

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2024

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

​

Total revenue

​

$

82,248

​

$

98,142

​

$

41,989

​

$

71,549

​

$

70,964

​

$

(72,350)

​

$

292,542

Net interest income

​

 

34,688

​

 

34,008

​

 

22,359

​

 

27,376

​

 

(8,283)

​

 

714

​

 

110,862

Provision for credit losses

​

 

6,453

​

 

1,794

​

 

233

​

 

(15)

​

 

—

​

 

—

​

 

8,465

Net income (loss) from continuing operations

​

 

10,460

​

 

35,779

​

 

9,076

​

 

13,272

​

 

56,990

​

 

(69,737)

​

 

55,840

Goodwill

​

 

3,223

​

 

14,980

​

 

9,888

​

 

110,936

​

 

—

​

 

—

​

 

139,027

Intangibles

​

 

—

​

 

755

​

 

1,148

​

 

10,538

​

 

—

​

 

—

​

 

12,441

Total assets

​

 

2,559,049

​

 

2,428,266

​

 

1,531,109

​

 

2,369,754

​

 

1,263,250

​

 

(1,279,437)

​

 

8,871,991

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2023

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

​

Total revenue

​

$

68,499

​

$

94,426

​

$

33,901

​

$

55,945

​

$

69,594

​

$

(71,409)

​

$

250,956

Net interest income

​

 

33,391

​

 

33,402

​

 

21,547

​

 

28,973

​

 

(7,952)

​

 

654

​

 

110,015

Provision for credit losses

​

 

5,193

​

 

1,996

​

 

690

​

 

(345)

​

 

—

​

 

—

​

 

7,534

Net income (loss) from continuing operations

​

 

11,854

​

 

35,753

​

 

9,373

​

 

10,543

​

 

56,625

​

 

(68,566)

​

 

55,582

Goodwill

​

 

3,223

​

 

14,980

​

 

9,888

​

 

110,936

​

 

—

​

 

—

​

 

139,027

Intangibles

​

 

—

​

 

991

​

 

1,729

​

 

12,508

​

 

—

​

 

—

​

 

15,228

Total assets

​

 

2,611,832

​

 

2,389,623

​

 

1,332,966

​

 

2,179,844

​

 

1,143,683

​

 

(1,431,275)

​

 

8,226,673

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NOTE 10 – REGULATORY CAPITAL REQUIREMENTS

The Company (on a consolidated basis) and the subsidiary banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and the subsidiary banks' financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the subsidiary banks must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain OBS items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the subsidiary banks to maintain minimum amounts and ratios (set forth in the following table) of total common equity Tier 1, Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets, each as defined by regulation.  Management believes, as of June 30, 2024 and December 31, 2023, that the Company and the subsidiary banks met all capital adequacy requirements to which they are subject.

Under the regulatory framework for prompt corrective action, to be categorized as “well capitalized,” an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage and common equity Tier 1 ratios as set forth in the following tables. The Company and the subsidiary banks’ actual capital amounts and ratios as of June 30, 2024 and

33

Table of Contents

December 31, 2023 are presented in the following tables (dollars in thousands).  As of June 30, 2024 and December 31, 2023, each of the subsidiary banks met such capital requirements to be “well capitalized.”

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For Capital Adequacy

​

To Be Well Capitalized

 

​

​

​

​

​

​

​

For Capital

​

Purposes With Capital

​

Under Prompt Corrective

 

​

​

Actual

​

Adequacy Purposes

​

Conservation Buffer

​

Action Provisions

 

​

    

Amount

    

Ratio

    

Amount

​

Ratio

    

Amount

​

Ratio

    

Amount

​

Ratio

​

​

​

( dollars in thousands)

​

As of June 30, 2024:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total risk-based capital

​

$

1,215,780

​

14.21

%  

$

684,345

> 

8.00

%  

$

855,431

> 

10.50

%  

$

898,203

> 

10.00

%

Tier 1 risk-based capital

​

 

897,236

 

10.49

​

 

513,259

> 

6.00

​

 

684,345

> 

8.50

​

 

727,116

> 

8.00

​

Tier 1 leverage

​

 

897,236

 

10.40

​

 

345,057

> 

4.00

​

 

431,321

> 

4.00

​

 

345,057

> 

5.00

​

Common equity Tier 1

​

 

848,441

 

9.92

​

 

384,944

> 

4.50

​

 

556,030

> 

7.00

​

 

598,802

> 

6.50

​

Quad City Bank & Trust:

​

 

​

 

​

​

 

​

  

​

​

 

​

  

​

​

 

​

  

​

​

Total risk-based capital

​

$

311,392

​

12.91

%  

$

192,968

> 

8.00

%  

$

241,210

> 

10.50

%  

$

253,271

> 

10.00

%

Tier 1 risk-based capital

​

 

281,205

 

11.66

​

 

144,726

> 

6.00

​

 

192,968

> 

8.50

​

 

205,029

> 

8.00

​

Tier 1 leverage

​

 

281,205

 

11.11

​

 

101,245

> 

4.00

​

 

126,557

> 

4.00

​

 

101,245

> 

5.00

​

Common equity Tier 1

​

 

281,205

 

11.66

​

 

108,545

> 

4.50

​

 

156,787

> 

7.00

​

 

168,847

> 

6.50

​

Cedar Rapids Bank & Trust:

​

 

​

​

​

​

 

​

  

​

​

 

​

  

​

​

 

​

  

​

​

Total risk-based capital

​

$

417,981

​

15.87

%  

$

210,700

> 

8.00

%  

$

263,375

> 

10.50

%  

$

276,544

> 

10.00

%

Tier 1 risk-based capital

​

 

390,482

 

14.83

​

 

158,025

> 

6.00

​

 

210,700

> 

8.50

​

 

223,869

> 

8.00

​

Tier 1 leverage

​

 

390,482

 

16.22

​

 

96,312

> 

4.00

​

 

120,390

> 

4.00

​

 

96,312

> 

5.00

​

Common equity Tier 1

​

 

390,482

 

14.83

​

 

118,519

> 

4.50

​

 

171,194

> 

7.00

​

 

184,362

> 

6.50

​

Community State Bank:

​

 

​

​

​

​

 

​

  

​

​

 

​

  

​

​

 

​

  

​

​

Total risk-based capital

​

$

179,959

​

12.61

%  

$

114,161

> 

8.00

%  

$

142,701

> 

10.50

%  

$

149,836

> 

10.00

%

Tier 1 risk-based capital

​

 

165,686

 

11.61

​

 

85,621

> 

6.00

​

 

114,161

> 

8.50

​

 

121,296

> 

8.00

​

Tier 1 leverage

​

 

165,686

 

11.30

​

 

58,666

> 

4.00

​

 

73,332

> 

4.00

​

 

58,666

> 

5.00

​

Common equity Tier 1

​

 

165,686

 

11.61

​

 

64,216

> 

4.50

​

 

92,756

> 

7.00

​

 

99,891

> 

6.50

​

Guaranty Bank:

​

 

​

​

​

​

 

​

  

​

​

 

​

  

​

​

 

​

  

​

​

Total risk-based capital

​

$

282,164

​

13.26

%  

$

170,291

> 

8.00

%  

$

212,864

> 

10.50

%  

$

223,508

> 

10.00

%

Tier 1 risk-based capital

​

 

258,749

 

12.16

​

 

127,719

> 

6.00

​

 

170,291

> 

8.50

​

 

180,935

> 

8.00

​

Tier 1 leverage

​

 

258,749

 

11.54

​

 

89,674

> 

4.00

​

 

112,092

> 

4.00

​

 

89,674

> 

5.00

​

Common equity Tier 1

​

 

258,749

 

12.16

​

 

95,789

> 

4.50

​

 

138,362

> 

7.00

​

 

149,005

> 

6.50

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For Capital Adequacy

​

To Be Well Capitalized

 

​

​

​

​

​

​

​

For Capital

​

Purposes With Capital

​

Under Prompt Corrective

 

​

​

Actual

​

Adequacy Purposes

​

Conservation Buffer

​

Action Provisions

 

​

    

Amount

    

Ratio

    

Amount

​

Ratio

    

Amount

​

Ratio

    

Amount

​

Ratio

 

​

​

( dollars in thousands)

​

As of December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total risk-based capital

​

$

1,171,047

​

14.29

%  

$

655,461

> 

8.00

%  

$

860,293

> 

10.50

%  

$

819,327

> 

10.00

%

Tier 1 risk-based capital

​

 

841,052

 

10.27

​

 

491,596

> 

6.00

​

 

696,428

> 

8.50

​

 

655,461

> 

8.00

​

Tier 1 leverage

​

 

841,052

 

10.03

​

 

335,420

> 

4.00

​

 

335,420

> 

4.00

​

 

419,275

> 

5.00

​

Common equity Tier 1

​

 

792,321

 

9.67

​

 

368,697

> 

4.50

​

 

573,529

> 

7.00

​

 

532,562

> 

6.50

​

Quad City Bank & Trust:

​

 

​

 

​

​

 

​

  

​

​

 

​

  

​

​

 

​

  

​

​

Total risk-based capital

​

$

300,413

​

12.67

%  

$

189,707

> 

8.00

%  

$

248,990

> 

10.50

%  

$

237,133

> 

10.00

%

Tier 1 risk-based capital

​

 

270,744

 

11.42

​

 

142,280

> 

6.00

​

 

201,563

> 

8.50

​

 

189,707

> 

8.00

​

Tier 1 leverage

​

 

270,744

 

11.23

​

 

96,425

> 

4.00

​

 

96,425

> 

4.00

​

 

120,531

> 

5.00

​

Common equity Tier 1

​

 

270,744

 

11.42

​

 

106,710

> 

4.50

​

 

165,993

> 

7.00

​

 

154,137

> 

6.50

​

Cedar Rapids Bank & Trust:

​

 

​

​

​

​

 

​

  

​

​

 

​

  

​

​

 

​

  

​

​

Total risk-based capital

​

$

381,514

​

15.60

%  

$

195,687

> 

8.00

%  

$

256,840

> 

10.50

%  

$

244,609

> 

10.00

%

Tier 1 risk-based capital

​

 

354,940

 

14.51

​

 

146,766

> 

6.00

​

 

207,918

> 

8.50

​

 

195,687

> 

8.00

​

Tier 1 leverage

​

 

354,940

 

14.77

​

 

96,093

> 

4.00

​

 

96,093

> 

4.00

​

 

120,116

> 

5.00

​

Common equity Tier 1

​

 

354,940

 

14.51

​

 

110,074

> 

4.50

​

 

171,227

> 

7.00

​

 

158,996

> 

6.50

​

Community State Bank:

​

 

​

​

​

​

 

​

  

​

​

 

​

  

​

​

 

​

  

​

​

Total risk-based capital

​

$

171,747

​

13.22

%  

$

103,903

> 

8.00

%  

$

136,372

> 

10.50

%  

$

129,878

> 

10.00

%

Tier 1 risk-based capital

​

 

156,629

 

12.06

​

 

77,927

> 

6.00

​

 

110,397

> 

8.50

​

 

103,903

> 

8.00

​

Tier 1 leverage

​

 

156,629

 

11.19

​

 

56,005

> 

4.00

​

 

56,005

> 

4.00

​

 

70,007

> 

5.00

​

Common equity Tier 1

​

 

156,629

 

12.06

​

 

58,445

> 

4.50

​

 

90,915

> 

7.00

​

 

84,421

> 

6.50

​

Guaranty Bank:

​

 

​

​

​

​

 

​

  

​

​

 

​

  

​

​

 

​

  

​

​

Total risk-based capital

​

$

267,822

​

12.68

%  

$

168,967

> 

8.00

%  

$

221,770

> 

10.50

%  

$

211,209

> 

10.00

%

Tier 1 risk-based capital

​

 

244,506

 

11.58

​

 

126,726

> 

6.00

​

 

179,528

> 

8.50

​

 

168,967

> 

8.00

​

Tier 1 leverage

​

 

244,506

 

11.41

​

 

85,688

> 

4.00

​

 

85,688

> 

4.00

​

 

107,110

> 

5.00

​

Common equity Tier 1

​

 

244,506

 

11.58

​

 

95,044

> 

4.50

​

 

147,847

> 

7.00

​

 

137,286

> 

6.50

​

​

​

​

NOTE 11 - COMMITMENTS

​

The Company entered into a construction contract in 2023 for the construction of a new CRBT facility in Cedar Rapids, Iowa.  The Company will pay the contractor a contract price of approximately $17.0 million, subject to additions and deductions as provided in the contract documents. As of June 30, 2024, the Company has paid $10.4 million of the contract price, resulting in a remaining future commitment of $6.6 million. Construction is anticipated to be completed in the fourth quarter of 2024.  

​

The Company entered into a construction contract in 2024 for the construction of a new CSB facility in Ankeny, Iowa.  The Company will pay the contractor a contract price of approximately $41.3 million, subject to certain agreed upon additions and deductions. As of June 30, 2024, the Company has not been obligated to make any payments under the terms of the contract. Construction is anticipated to be completed in 2026.  

​

​

34

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

This section reviews the financial condition and results of operations of the Company and its subsidiaries as of and for the three and six months ending June 30, 2024. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends. When reading this discussion, also refer to the Consolidated Financial Statements and related notes in this report. Page locations and specific sections and notes that are referred to in this discussion are listed in the table of contents.

Additionally, a comprehensive list of the acronyms and abbreviations used throughout this discussion is included in Note 1 to the Consolidated Financial Statements.

GENERAL

The Company was formed in February 1993 for the purpose of organizing QCBT.  Over the past thirty-one years, the Company has grown to include four banking subsidiaries and a number of nonbanking subsidiaries.  As of June 30, 2024, the Company had $8.9 billion in consolidated assets, including $6.8 billion in net loans/leases, and $6.8 billion in deposits.  The financial results of acquired entities for the periods since their acquisition are included in this report.  Further information related to acquired entities has been presented in the annual reports previously filed with the SEC corresponding to the year of each acquisition.  

CRITICAL ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES

The Company's financial statements are prepared in accordance with GAAP. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance, impairment of goodwill, the fair value of financial instruments, and the fair value of securities.

Based on its consideration of accounting policies that involve the most complex and subjective decisions and assessments, management has identified the following as critical accounting policies and estimates:

●Goodwill
●Allowance for Credit Losses on Loans and Leases and Off-Balance Sheet Exposures
●Fair Value of Loans Acquired in Business Combinations
●Fair Value of Financial Instruments
●Fair Value of Securities

A more detailed discussion of these critical accounting policies and estimates can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

EXECUTIVE OVERVIEW

The Company reported net income of $29.1 million and diluted EPS of $1.72 for the quarter ended June 30, 2024. By comparison, for the quarter ended March 31, 2024, the Company reported net income of $26.7 million and diluted EPS of $1.58.  For the quarter ended June 30, 2023, the Company reported net income of $28.4 million, and diluted EPS of $1.69.  For the six months ended June 30, 2024, the Company reported net income of $55.8 million and diluted EPS of $3.30.  By

35

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

comparison, for the six months ended June 30, 2023, the Company reported net income of $55.6 million and diluted EPS of $3.29.  

The second quarter of 2024 was also highlighted by the following results and events (see section titled “GAAP to Non-GAAP Reconciliations” for additional information):

●Net interest income up $1.5 million, or 3%, from the prior quarter, an 11% annualized growth rate;
●Adjusted NIM (TEY)(non-GAAP) expanded by 2 basis points from the prior quarter;
●Noninterest income up $4.0 million, or 15% from the prior quarter;
●Continued strong capital markets revenue of $17.8 million;
●Well-controlled noninterest expenses of $49.9 million, down $0.8 million, or nearly 2% from the prior quarter; and
●Tangible book value (non-GAAP) per share growth of $1.72, or 15% annualized.

Following is a table that represents various net income measurements for the Company:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the three months ended

​

For the six months ended

​

​

    

June 30, 2024

    

March 31, 2024

    

June 30, 2023

    

June 30, 2024

    

June 30, 2023

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

$

29,114

​

$

26,726

​

$

28,425

​

$

55,840

​

$

55,582

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Diluted earnings per common share

​

$

1.72

​

$

1.58

​

$

1.69

​

$

3.30

​

$

3.29

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Weighted average common and common equivalent shares outstanding

​

 

16,921,854

​

 

16,910,675

​

 

16,799,527

​

 

16,916,264

​

 

16,870,830

​

The Company reported adjusted net income (non-GAAP) of $29.3 million, with adjusted diluted EPS (non-GAAP) of $1.73 for the three months ended June 30, 2024.  See section titled “GAAP to Non-GAAP Reconciliations” for additional information.  Adjusted net income (non-GAAP) for the three months ended June 30, 2024 excludes a non-recurring item, after-tax, as set forth in the GAAP to Non-GAAP Reconciliation section. The Company reported adjusted net income (non-GAAP) of $56.1 million, with adjusted diluted EPS (non-GAAP) of $3.32 for the six months ended June 30, 2024.  Adjusted net income (non-GAAP) for the six months ended June 30, 2024 excludes a non-recurring item, after-tax, as set forth in the GAAP to Non-GAAP Reconciliation section.  

Following is a table that represents the major income and expense categories for the Company:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the three months ended

​

For the six months ended

​

​

    

June 30, 2024

    

March 31, 2024

    

June 30, 2023

    

June 30, 2024

    

June 30, 2023

 

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net interest income

​

$

56,163

​

$

54,699

​

$

53,205

​

$

110,862

​

$

110,015

​

Provision for credit losses

​

 

5,496

​

 

2,969

​

 

3,606

​

 

8,465

​

 

7,534

​

Noninterest income

​

 

30,889

​

 

26,858

​

 

32,520

​

 

57,747

​

 

58,362

​

Noninterest expense

​

 

49,888

​

 

50,690

​

 

49,727

​

 

100,578

​

 

98,512

​

Federal and state income tax expense

​

 

2,554

​

 

1,172

​

 

3,967

​

 

3,726

​

 

6,749

​

Net income

​

$

29,114

​

$

26,726

​

$

28,425

​

$

55,840

​

$

55,582

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Following are some noteworthy changes in the Company's financial results:

●Net interest income in the second quarter of 2024 increased 3% compared to the first quarter of 2024 due to expanded margin and strong loan growth, and increased 6% when compared to the second quarter of 2023 due to higher average earning assets. Loan discount accretion decreased by $95 thousand from the prior quarter.   Net interest income increased 1% when comparing the first six months of 2024 to the same period of the prior year.  The increase was primarily due to higher average earning assets.

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Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

●Provision expense in the second quarter of 2024 increased $2.5 million as compared to the first quarter of 2024 and increased $1.9 million when compared to the second quarter of 2023. Provision expense in the first six months of 2024 increased $931 thousand compared to the first six months of 2023. The increase across both periods was due to strong loan growth and the impact of declining GDP on our CECL model factors. In addition, there was negative provision of $445 thousand on AFS securities for the first quarter of 2024 related to the sale of a debt investment in a failed bank. See the “Provision for Credit Losses” section of this report for additional details.

​

●Noninterest income in the second quarter of 2024 increased $4.0 million, or 15%, compared to the first quarter of 2024. The increase in the second quarter compared to the linked quarter was primarily due to higher capital markets revenue from swap fees as strong demand for affordable housing established by our tax credit lending clients has continued.  The demand for low-income housing remains healthy and the economics associated with these tax credit projects continue to be favorable.  The Company has a strong pipeline for this business and expects it to continue to be a solid source of fee income in 2024. Additionally, the Company realized income of $2.2 million from BOLI policy proceeds received during the second quarter of 2024. Noninterest income decreased $1.6 million, or 5%, compared to the second quarter of 2023. Noninterest income decreased $615 thousand, or 1%, when comparing the first six months of 2024 to the same period of the prior year.
●Noninterest expense decreased $802 thousand, or 2%, in the second quarter of 2024 compared to the first quarter of 2024. This decrease in the second quarter compared to the linked quarter was primarily due to lower salaries and employee benefits and lower loan/lease expense, partially offset by higher professional and data processing expense. Noninterest expense remained stable compared to the second quarter of 2023.  Noninterest expense increased $2.1 million, or 2%, when comparing the first six months of 2024 to the same period in the prior year. This increase was primarily due to higher professional and data processing expense.

STRATEGIC FINANCIAL METRICS

The Company has established certain strategic financial metrics by which it manages its business and measures its performance. The goals are periodically updated to reflect changes in business developments. While the Company is determined to work prudently to achieve these metrics, there is no assurance that they will be met. Moreover, the Company's ability to achieve these metrics may be affected by the factors discussed under “Forward Looking Statements” as well as the factors detailed in the “Risk Factors” section included under Item 1A. of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2023. The Company's long-term strategic financial metrics are as follows:

●Generate loan and lease growth of 9% per year, funded by core deposits;
●Grow fee-based income by at least 6% per year; and
●Limit our annual operating expense growth to 5% per year.

The following table shows the evaluation of the Company’s strategic financial metrics:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Year to Date*

Strategic Financial Metric*

    

Key Metric

    

Target

June 30, 2024

March 31, 2024

June 30, 2023

Loan and lease growth organically

 

Loans and leases growth

 

> 9% annually

​

​

12.4

%  

​

​

6.4

%  

​

​

12.2

%

Fee income growth

 

Fee income growth

 

> 6% annually

​

​

(13.5)

%  

​

​

(20.3)

%  

​

​

54.2

%

Improve operational efficiencies and hold noninterest expense growth

​

Noninterest expense growth

 

< 5% annually

​

​

(4.4)

%  

​

​

(3.6)

%  

​

​

8.8

%

​

* Ratios and amounts provided for these measurements represent year-to-date actual amounts for the respective period that are then annualized for comparison to the prior year actual. The calculations provided exclude non-core noninterest income and noninterest expense.

​

It should be noted that these initiatives are long-term targets.  

​

37

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

STRATEGIC DEVELOPMENTS

The Company has taken the following actions during the second quarter of 2024 to support its corporate strategy:

●The Company grew loans and leases in the second quarter of 2024 by 12.4% on an annualized basis, driven by both LIHTC and our traditional lending and leasing businesses.
●During the second quarter, the Company designated $243.2 million of LIHTC loans as loans held for sale in anticipation of the Company’s next loan securitization. The Company plans to continue to utilize securitizations as a liquidity and management tool, and to provide additional capacity to produce LIHTC loans and the related capital markets revenue.

​

●Correspondent banking has continued to be a core line of business for the Company. The Company is competitively positioned with experienced staff, software systems and processes to continue growing in the four states currently served – Iowa, Wisconsin, Missouri and Illinois. The Company acted as the correspondent bank for 188 downstream banks with total noninterest bearing deposits of $94.7 million and total interest-bearing deposits of $679.9 million as of June 30, 2024. By comparison, the Company acted as the correspondent bank for 181 downstream banks with total noninterest bearing deposits of $108.3 million and total interest-bearing deposits of $386.0 million as of June 30, 2023. This line of business provides a strong source of deposits, fee income, high-quality loan participations and bank stock loans.  The Company also manages off-balance sheet liquidity held at the Federal Reserve on behalf of the downstream banks of $449.2 million as of June 30, 2024, as compared to $363.7 million as of June 30, 2023.
●The Company is focused on executing interest rate swaps on select commercial loans, including LIHTC permanent loans. These interest rate swaps allow commercial borrowers to pay a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent on the pricing. Management believes that these swaps help position the Company more favorably for rising rate environments.  The Company will continue to review opportunities to execute these swaps at all of its subsidiary banks as appropriate for applicable borrowers and the Company. Levels of capital markets revenue from swap fee income are influenced by prevailing interest rates.  Capital markets revenue, primarily from swap fee income, totaled $17.8 million for the second quarter of 2024 as compared to $22.5 million for the same period of the prior year. Capital markets revenue, primarily from swap fee income, totaled $34.2 million for the first six months of 2024 as compared to $39.5 million for the same period of the prior year.
●Over many years, the Company has been successful in expanding its wealth management client base. Trust and investment advisory and management fees continue to be a significant contributor to noninterest income. Assets under management increased by $61.2 million for the quarter ended June 30, 2024 compared to the quarter ended March 31, 2024, and increased by $628.0 million for the first six months of 2024 compared to the first six months of 2023.  There were 113 new relationships added in the second quarter of 2024, totaling $203.4 million of new assets under management. Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services. The majority of trust fees are determined based on the value of the investments managed. The Company expects trust and investment advisory and management fees to be negatively impacted during periods of lower market valuations and positively impacted during periods of higher market valuations. The Company has recently expanded its wealth management client base into the Springfield, Missouri market and the Des Moines, Iowa metropolitan market.
●Noninterest expense for the first six months of 2024 totaled $100.6 million as compared to $98.5 million in the first six months of 2023. The increase was primarily due to increased professional and data processing fees due to information technology investment growth.

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Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

GAAP TO NON-GAAP RECONCILIATIONS

The following table presents certain non-GAAP financial measures related to the “TCE/TA ratio”, “adjusted net income”, “adjusted EPS”, “adjusted ROAA”, “NIM (TEY)”, “adjusted NIM (TEY)” and “efficiency ratio”. In compliance with applicable rules of the SEC, all non-GAAP measures are reconciled to the most directly comparable GAAP measure, as follows:

●TCE/TA ratio (non-GAAP) is reconciled to stockholders’ equity and total assets;
●Adjusted net income, adjusted EPS and adjusted ROAA (all non-GAAP measures) are reconciled to net income;
●NIM (TEY) (non-GAAP) and adjusted NIM (TEY) (non-GAAP) are reconciled to NIM; and
●Efficiency ratio (non-GAAP) is reconciled to noninterest expense, net interest income and noninterest income.

The TCE/TA non-GAAP ratio has been a focus for investors and management believes that this ratio may assist investors in analyzing the Company’s capital position without regard to the effects of intangible assets.

The following tables also include several “adjusted” non-GAAP measurements of financial performance. The Company’s management believes that these measures are important to investors as they exclude non-recurring income and expense items; therefore, they provide a better comparison for analysis and may provide a better indicator of future performance.

NIM (TEY) is a financial measure that the Company’s management utilizes to determine the tax benefit associated with certain tax-exempt loans and securities. It is standard industry practice to measure net interest margin using tax-equivalent measures. In addition, the Company calculates NIM without the impact of acquisition accounting net accretion (adjusted NIM), as accretion amounts can fluctuate widely, making comparisons difficult.

The efficiency ratio is a ratio that management utilizes to compare the Company to its peers. It is a standard ratio used to calculate overhead as a percentage of revenue in the banking industry and is widely utilized by investors.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

​

​

​

​

​

GAAP TO NON-GAAP

    

June 30, 

    

March 31, 

    

June 30, 

​

​

​

​

​

​

RECONCILIATIONS

​

2024

​

2024

​

2023

​

​

​

​

​

​

​

 

(dollars in thousands, except per share data)

​

​

​

​

​

​

TCE/TA RATIO

 

​

​

​

​

  

 

​

​

​

​

​

​

​

​

Stockholders' equity (GAAP)

​

$

936,319

​

$

907,342

​

$

822,689

​

​

​

​

​

​

Less: Intangible assets

​

 

151,468

​

 

152,158

​

 

154,255

​

​

​

​

​

​

TCE (non-GAAP)

​

$

784,851

​

$

755,184

​

$

668,434

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total assets (GAAP)

​

$

8,871,991

​

$

8,599,549

​

$

8,226,673

​

​

​

​

​

​

Less: Intangible assets

​

 

151,468

​

 

152,158

​

 

154,255

​

​

​

​

​

​

TA (non-GAAP)

​

$

8,720,523

​

$

8,447,391

​

$

8,072,418

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

TCE/TA ratio (non-GAAP)

​

 

9.00

%  

 

8.94

%

 

8.28

%

​

​

​

​

​

​

39

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Quarter Ended

​

​

​

For the Six Months Ended

​

​

​

June 30, 

    

March 31, 

    

June 30, 

    

​

​

June 30, 

​

June 30, 

​

​

    

2024

    

2024

    

2023

​

    

​

2024

​

2023

​

​

​

(dollars in thousands, except per share data)

​

ADJUSTED NET INCOME

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income (GAAP)

​

$

29,114

​

$

26,726

​

$

28,425

​

​

​

$

55,840

​

$

55,582

​

Less non-core items (post-tax) (*):

​

 

  

​

 

  

​

 

  

​

​

​

 

  

​

 

​

​

Income:

​

 

  

​

 

  

​

 

  

​

​

​

 

  

​

 

  

​

Securities gains (losses), net

​

$

—

​

$

—

​

$

9

​

​

​

$

—

​

$

(356)

​

Fair value gain (loss) on derivatives, net

​

​

(145)

​

​

(144)

​

​

66

​

​

​

​

(288)

​

​

(272)

​

Total non-core income (non-GAAP)

​

$

(145)

​

$

(144)

​

$

75

​

​

​

$

(288)

​

$

(628)

​

Expense:

​

 

  

​

 

  

​

 

  

​

​

​

 

  

​

 

  

​

Post-acquisition compensation, transition and integration costs

​

​

—

​

​

—

​

​

—

​

​

​

​

—

​

​

164

​

Total non-core expense (non-GAAP)

​

$

—

​

$

—

​

$

—

​

​

​

$

—

​

$

164

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Adjusted net income (non-GAAP)

​

$

29,259

​

$

26,870

​

$

28,350

​

​

​

$

56,128

​

$

56,374

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

ADJUSTED EPS

​

 

  

​

 

  

​

 

  

​

​

​

 

  

​

 

  

​

Adjusted net income (non-GAAP) (from above)

​

$

29,259

​

$

26,870

​

$

28,350

​

​

​

$

56,128

​

$

56,374

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Weighted average common shares outstanding

​

 

16,814,814

​

 

16,783,348

​

 

16,701,950

​

​

​

 

16,799,081

​

 

16,739,120

​

Weighted average common and common equivalent shares outstanding

​

 

16,921,854

​

 

16,910,675

​

 

16,799,527

​

​

​

 

16,916,264

​

 

16,870,830

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Adjusted EPS (non-GAAP):

​

 

  

​

 

  

​

 

  

​

​

​

 

  

​

 

  

​

Basic

​

$

1.74

​

$

1.60

​

$

1.70

​

​

​

$

3.34

​

$

3.37

​

Diluted

​

$

1.73

​

$

1.59

​

$

1.69

​

​

​

$

3.32

​

$

3.34

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

ADJUSTED ROAA (non-GAAP)

​

 

  

​

 

  

​

 

  

​

​

​

 

  

​

 

  

​

Adjusted net income (non-GAAP) (from above)

​

$

29,259

​

$

26,870

​

$

28,350

​

​

​

$

56,128

​

$

56,374

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Average Assets

​

$

8,776,002

​

$

8,550,855

​

$

7,924,597

​

​

​

$

8,663,429

​

$

7,915,763

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Adjusted ROAA (non-GAAP)

​

 

1.33

%  

 

1.26

%  

 

1.43

%  

​

​

 

1.30

%  

 

1.42

%

Adjusted ROAE (non-GAAP)

​

​

12.69

%

​

11.89

%

​

13.88

%

​

​

​

12.30

%

​

13.99

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

ADJUSTED NIM (TEY)*

​

​

​

​

 

​

​

 

​

​

​

​

 

​

​

 

​

​

Net interest income (GAAP)

​

$

56,163

​

$

54,699

​

$

53,205

​

​

​

$

110,862

​

$

110,015

​

Plus: Tax equivalent adjustment

​

 

8,914

​

 

8,377

​

 

6,542

​

​

​

 

17,259

​

 

12,601

​

Net interest income - tax equivalent (non-GAAP)

​

$

65,077

​

$

63,076

​

$

59,747

​

​

​

$

128,121

​

$

122,616

​

Less: Acquisition accounting net accretion

​

​

268

​

​

363

​

​

134

​

​

​

​

631

​

​

962

​

Adjusted net interest income

​

​

64,809

​

​

62,713

​

​

59,613

​

​

​

​

127,490

​

​

121,654

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Average earning assets

​

$

7,999,044

​

$

7,807,720

​

$

7,283,286

​

​

​

$

7,903,382

​

$

7,265,544

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NIM (GAAP)

​

 

2.82

%  

 

2.82

%  

 

2.93

%  

​

​

 

2.82

%  

 

3.05

%

NIM (TEY) (non-GAAP)

​

 

3.27

%  

 

3.25

%  

 

3.29

%  

​

​

 

3.26

%  

 

3.40

%

Adjusted NIM (TEY) (non-GAAP)

​

​

3.26

%  

​

3.24

%  

​

3.28

%  

​

​

​

3.24

%  

​

3.38

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

EFFICIENCY RATIO

​

 

  

​

 

  

​

 

  

​

​

​

 

  

​

 

  

​

Noninterest expense (GAAP)

​

$

49,888

​

$

50,690

​

$

49,727

​

​

​

$

100,578

​

$

98,512

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net interest income (GAAP)

​

$

56,163

​

$

54,699

​

$

53,205

​

​

​

$

110,862

​

$

110,015

​

Noninterest income (GAAP)

​

 

30,889

​

 

26,858

​

 

32,520

​

​

​

 

57,747

​

 

58,362

​

Total income

​

$

87,052

​

$

81,557

​

$

85,725

​

​

​

$

168,609

​

$

168,377

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Efficiency ratio (noninterest expense/total income) (non-GAAP)

​

 

57.31

%  

 

62.15

%  

 

58.01

%  

​

​

 

59.65

%  

 

58.51

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

*     Non-core or non-recurring items (after-tax) are calculated using an estimated effective federal tax rate of 21%.

​

40

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

NET INTEREST INCOME AND MARGIN- (TAX EQUIVALENT BASIS)

Net interest income, on a GAAP basis, increased 6% for the quarter ended June 30, 2024, compared to the same quarter of the prior year.  Net interest income, on a tax equivalent basis (non-GAAP), increased 9% for the quarter ended June 30, 2024, compared to the same quarter of the prior year. The increase was driven by higher average earning assets.  

A comparison of yields, spread and margin on a tax equivalent and GAAP basis is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

GAAP

​

Tax Equivalent Basis

​

​

For the Three Months Ended

​

For the Three Months Ended

​

​

June 30, 

​

March 31, 

​

June 30, 

​

June 30, 

​

March 31, 

​

June 30, 

​

​

2024

​

2024

​

2023

​

2024

​

2024

​

2023

Average Yield on Interest-Earning Assets

​

5.99

%  

​

5.89

%  

​

5.40

%  

​

6.46

%  

​

6.35

%  

​

5.78

%

Average Cost of Interest-Bearing Liabilities

​

3.93

%  

​

3.86

%  

​

3.20

%  

​

3.93

%  

​

3.86

%  

​

3.20

%

Net Interest Spread

​

2.06

%  

​

2.03

%  

​

2.21

%  

​

2.53

%  

​

2.49

%  

​

2.58

%

NIM (TEY) (Non-GAAP)

​

3.27

%  

​

3.25

%  

​

3.29

%  

​

3.27

%  

​

3.25

%  

​

3.29

%

NIM Excluding Acquisition Accounting Net Accretion (Non-GAAP)

​

2.80

%  

​

2.78

%  

​

2.91

%  

​

3.26

%  

​

3.24

%  

​

3.28

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

GAAP

​

Tax Equivalent Basis

​

​

For the Six Months Ended

​

For the Six Months Ended

​

​

June 30,

​

June 30,

​

June 30,

June 30,

​

​

2024

​

2023

​

2024

2023

Average Yield on Interest-Earning Assets

​

6.32

%  

​

5.81

%  

​

6.41

%  

​

5.69

%

Average Cost of Interest-Bearing Liabilities

​

3.90

%  

​

3.45

%  

​

3.90

%  

​

2.97

%

Net Interest Spread

​

2.42

%  

​

2.36

%  

​

2.51

%  

​

2.72

%

NIM (TEY) (Non-GAAP)

​

2.82

%  

​

3.49

%  

​

3.26

%  

​

3.40

%

NIM Excluding Acquisition Accounting Net Accretion (Non-GAAP)

​

2.97

%  

​

3.29

%  

​

3.24

%  

​

3.38

%

​

Acquisition accounting net accretion can fluctuate mostly depending on the payoff activity of the acquired loans.  In evaluating net interest income and NIM, it is important to understand the impact of acquisition accounting net accretion when comparing periods. The above table reports NIM with and without the acquisition accounting net accretion to allow for more appropriate comparisons.  A comparison of acquisition accounting net accretion included in NIM is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

For the Six Months Ended

​

​

June 30, 

​

​

March 31, 

​

​

June 30, 

​

June 30,

​

June 30,

​

    

2024

    

​

2024

    

​

2023

​

2024

    

​

2023

​

​

(dollars in thousands)

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Acquisition Accounting Net Accretion in NIM

$

268

​

$

363

​

$

134

​

$

631

​

$

962

​

The Company’s management closely monitors and manages NIM.  From a profitability standpoint, an important challenge for the Company’s subsidiary banks and leasing company is focusing on quality growth in conjunction with the improvement of their NIMs.  Management continually addresses this issue with pricing and other balance sheet strategies which include better loan pricing, reducing reliance on very rate-sensitive funding, closely managing deposit rate changes and finding additional ways to manage cost of funds through derivatives.

​

41

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

The Company’s average balances, interest income/expense, and rates earned/paid on major balance sheet categories, as well as the components of change in net interest income, are presented in the following tables:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended June 30,

​

​

​

​

​

2024

​

​

2023

​

​

​

​

​

​

​

​

Interest

​

Average

​

​

​

​

​

Interest

​

Average

​

​

​

​

​

Average

​

Earned

​

Yield or

​

​

Average

​

Earned

​

Yield or

​

​

​

​

    

Balance

    

or Paid

    

Cost

    

​

Balance

    

or Paid

    

Cost

​

​

​

​

​

(dollars in thousands)

​

​

​

ASSETS

 

​

  

 

​

  

 

​

  

 

​

​

  

 

​

  

 

​

  

 

​

​

Interest earning assets:

 

​

  

 

​

  

 

​

  

 

​

​

  

 

​

  

 

​

  

 

​

​

Federal funds sold

​

$

13,065

​

$

183

 

​

5.54

%  

​

$

16,976

​

$

223

 

​

5.27

%

​

​

Interest-bearing deposits at financial institutions

​

 

80,998

​

 

1,139

 

​

5.66

%  

​

 

90,814

​

 

1,123

 

​

4.96

%

​

​

Investment securities - taxable

​

 

377,747

​

 

4,286

 

​

4.53

%  

​

 

342,991

​

 

3,693

 

​

4.30

%

​

​

Investment securities - nontaxable (1)

​

​

704,761

​

​

9,462

​

​

5.37

%

​

​

577,494

​

​

6,217

​

​

4.31

%

​

​

Restricted investment securities

​

 

43,398

​

 

869

 

​

7.92

%  

​

 

35,031

​

 

506

 

​

5.71

%

​

​

Gross loans/leases receivable (1) (2) (3)

​

 

6,779,075

​

 

112,719

 

​

6.69

%  

​

 

6,219,980

​

 

93,159

 

​

6.01

%

​

​

Total interest earning assets

​

​

7,999,044

​

​

128,658

 

​

6.46

%  

​

​

7,283,286

​

​

104,921

 

​

5.78

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest-earning assets:

​

​

  

​

 

  

 

​

  

​

​

​

  

​

 

  

 

​

  

​

​

​

Cash and due from banks

​

​

77,663

​

​

​

​

​

​

​

​

​

70,799

​

​

​

​

​

​

​

​

​

Premises and equipment

​

 

135,156

​

​

​

​

​

​

​

​

 

118,363

​

​

​

​

​

​

​

​

​

Less allowance

​

 

(84,507)

​

​

​

​

​

​

​

​

 

(86,841)

​

​

​

​

​

​

​

​

​

Other

​

 

648,646

​

​

​

​

​

​

​

​

 

538,990

​

​

​

​

​

​

​

​

​

Total assets

​

$

8,776,002

​

​

​

​

​

​

​

​

$

7,924,597

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LIABILITIES AND STOCKHOLDERS' EQUITY

​

 

  

​

 

  

​

 

  

​

​

 

  

​

 

  

​

 

  

​

​

​

Interest-bearing liabilities:

​

 

  

​

 

  

​

 

  

​

​

 

  

​

 

  

​

 

  

​

​

​

Interest-bearing deposits

​

$

4,649,625

​

 

40,924

​

 

3.54

%  

​

$

3,965,592

​

 

27,227

​

 

2.75

%

​

​

Time deposits

​

 

1,091,870

​

 

12,128

​

 

4.47

%  

​

 

1,190,440

​

 

11,219

​

 

3.78

%

​

​

Short-term borrowings

​

 

1,622

​

 

21

​

 

5.18

%  

​

 

1,980

​

 

34

​

 

6.82

%

​

​

FHLB advances

​

 

464,231

​

 

6,238

​

 

5.32

%  

​

 

211,593

​

 

2,653

​

 

4.96

%

​

​

Subordinated notes

​

​

233,207

​

​

3,582

​

​

6.14

%  

​

​

232,782

​

​

3,303

​

​

5.68

%

​

​

Junior subordinated debentures

​

 

48,774

​

 

688

​

 

5.58

%  

​

 

48,647

​

 

738

​

 

6.00

%

​

​

Total interest-bearing liabilities

​

​

6,489,329

​

​

63,581

​

 

3.93

%  

​

​

5,651,034

​

​

45,174

​

 

3.20

%

​

​

Effect of noninterest bearing liabilities

​

​

​

​

​

​

​

​

(0.50)

%  

​

​

​

​

​

​

​

​

(0.53)

%

​

​

Cost of funds

​

​

​

​

​

​

​

​

3.43

%  

​

​

​

​

​

​

​

​

2.67

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest-bearing demand deposits

​

​

945,693

​

​

​

​

​

​

​

​

​

1,136,449

​

​

​

​

​

​

​

​

​

Other noninterest-bearing liabilities

​

​

418,994

​

​

​

​

​

​

​

​

​

320,232

​

​

​

​

​

​

​

​

​

Total liabilities

​

​

7,854,016

​

​

​

​

​

​

​

​

​

7,107,715

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Stockholders' equity

​

 

921,986

​

​

​

​

​

​

​

​

 

816,882

​

​

​

​

​

​

​

​

​

Total liabilities and stockholders' equity

​

$

8,776,002

​

​

​

​

​

​

​

​

$

7,924,597

​

​

​

​

​

​

​

​

​

Net interest income

​

​

​

​

$

65,077

​

​

​

​

​

​

​

​

$

59,747

​

​

​

​

​

​

Net interest spread

​

 

​

​

 

​

​

 

2.53

%  

​

 

​

​

 

​

​

 

2.58

%

​

​

Net interest margin

​

 

​

​

 

​

​

 

2.82

%  

​

 

​

​

 

​

​

 

2.93

%

​

​

Net interest margin (TEY)(Non-GAAP)

​

 

​

​

 

​

​

 

3.27

%  

​

 

​

​

 

​

​

 

3.29

%

​

​

Adjusted net interest margin (TEY)(Non-GAAP)

​

​

​

​

​

​

​

​

3.26

%  

​

​

​

​

​

​

​

​

3.28

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ratio of average interest-earning assets to average interest-bearing liabilities

​

 

123.26

%  

 

​

​

 

​

​

​

 

128.88

%  

 

​

​

 

​

​

​

​

​

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

​

​

​

​

(1)Interest earned and yields on nontaxable investment securities and nontaxable loans are determined on a tax equivalent basis using a 21% federal tax rate.
(2)Loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance.
(3)Non-accrual loans/leases are included in the average balance for gross loans/leases receivable in accordance with accounting and regulatory guidance.

42

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

Analysis of Changes of Interest Income/Interest Expense

For the Three Months Ended June 30, 2024

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Inc./(Dec.)

​

Components

​

​

​

from

​

of Change (1)

​

​

    

Prior Period (1)

    

Rate

    

Volume

 

​

​

2024 vs. 2023

​

​

​

(dollars in thousands)

​

INTEREST INCOME

 

​

  

 

​

  

 

​

  

​

Federal funds sold

​

$

(40)

​

$

68

​

$

(108)

​

Interest-bearing deposits at financial institutions

​

 

16

​

 

561

​

 

(545)

​

Investment securities - taxable

​

 

593

​

 

205

​

 

388

​

Investment securities - nontaxable (2)

​

​

3,245

​

​

1,711

​

​

1,534

​

Restricted investment securities

​

 

363

​

 

224

​

 

139

​

Gross loans/leases receivable (2) (3)

​

 

19,560

​

 

10,900

​

 

8,660

​

Total change in interest income

​

​

23,737

​

​

13,669

​

​

10,068

​

​

​

​

​

​

​

​

​

​

​

​

INTEREST EXPENSE

​

​

​

​

​

  

​

​

  

​

Interest-bearing deposits

​

​

13,697

​

​

8,558

​

​

5,139

​

Time deposits

​

​

909

​

​

5,752

​

​

(4,843)

​

Short-term borrowings

​

​

(13)

​

​

(7)

​

​

(6)

​

Federal Home Loan Bank advances

​

​

3,585

​

​

206

​

​

3,379

​

Subordinated notes

​

​

279

​

​

273

​

​

6

​

Junior subordinated debentures

​

​

(50)

​

​

(64)

​

​

14

​

Total change in interest expense

​

​

18,407

​

​

14,718

​

​

3,689

​

​

​

​

​

​

​

​

​

​

​

​

Total change in net interest income

​

$

5,330

​

$

(1,049)

​

$

6,379

​

​

​

​

​

​

​

​

​

​

​

​

​

(1)The column “Inc./(Dec.) from Prior Period” is segmented into the changes attributable to variations in volume and the changes attributable to changes in interest rates. The variations attributable to simultaneous volume and rate changes have been proportionately allocated to rate and volume.
(2)Interest earned and yields on nontaxable investment securities and nontaxable loans are determined on a tax equivalent basis using a 21% federal tax rate.
(3)Loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance.

​

43

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Six Months Ended June 30,

​

​

​

2024

​

​

2023

​

​

​

​

​

​

Interest

​

Average

​

​

​

​

​

Interest

​

Average

​

​

​

Average

​

Earned

​

Yield or

​

​

Average

​

Earned

​

Yield or

​

​

    

Balance

    

or Paid

    

Cost

    

​

Balance

    

or Paid

    

Cost

    

​

​

(dollars in thousands)

​

ASSETS

 

​

  

 

​

  

 

​

  

 

​

​

  

 

​

  

 

​

  

 

Interest earning assets:

 

​

  

 

​

  

 

​

  

 

​

​

  

 

​

  

 

​

  

 

Federal funds sold

​

$

16,510

​

$

452

 

​

5.41

%  

​

$

18,119

​

$

457

 

​

5.09

%  

Interest-bearing deposits at financial institutions

​

 

86,277

​

 

2,339

 

​

5.45

%  

​

 

82,246

​

 

1,945

 

​

4.77

%  

Investment securities - taxable

​

 

375,644

​

 

8,546

 

​

4.54

%  

​

 

337,844

​

 

7,059

 

​

4.17

%  

Investment securities - nontaxable (1)

​

 

695,365

​

 

18,813

 

​

5.41

%  

​

 

598,244

​

 

13,009

 

​

4.35

%  

Restricted investment securities

​

 

40,742

​

 

1,543

 

​

7.49

%  

​

 

36,391

​

 

1,018

 

​

5.56

%  

Gross loans/leases receivable (1) (2) (3)

​

 

6,688,844

​

 

220,392

 

​

6.63

%  

​

 

6,192,700

​

 

181,707

 

​

5.92

%  

Total interest earning assets

​

​

7,903,382

​

 

252,085

 

​

6.41

%  

​

​

7,265,544

​

 

205,195

 

​

5.69

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest-earning assets:

​

​

  

​

 

  

 

​

  

​

​

​

  

​

 

  

 

​

  

​

Cash and due from banks

​

​

77,713

​

​

​

​

​

​

​

​

​

71,056

​

​

​

​

​

​

​

Premises and equipment, net

​

 

131,567

​

​

​

​

​

​

​

​

 

118,231

​

​

​

​

​

​

​

Less allowance for estimated losses on loans/leases

​

 

(85,638)

​

​

​

​

​

​

​

​

 

(87,380)

​

​

​

​

​

​

​

Other

​

 

636,405

​

​

​

​

​

​

​

​

 

548,312

​

​

​

​

​

​

​

Total assets

​

$

8,663,429

​

​

​

​

​

​

​

​

$

7,915,763

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LIABILITIES AND STOCKHOLDERS' EQUITY

​

 

  

​

 

  

​

 

  

​

​

 

  

​

 

  

​

 

  

​

Interest-bearing liabilities:

​

 

  

​

 

  

​

 

  

​

​

 

  

​

 

  

​

 

  

​

Interest-bearing demand deposits

​

$

4,589,479

​

 

80,027

​

 

3..51

%  

​

$

4,016,217

​

 

51,003

​

 

2.56

%  

Time deposits

​

 

1,099,746

​

 

24,473

​

 

4.48

%  

​

 

1,031,062

​

 

17,222

​

 

3.37

%  

Short-term borrowings

​

 

1,688

​

 

44

​

 

5.19

%  

​

 

4,642

​

 

132

​

 

5.75

%  

Federal Home Loan Bank advances

​

 

409,725

​

 

10,977

​

 

5.30

%  

​

 

253,729

​

 

6,174

​

 

4.84

%  

Subordinated notes

​

​

233,154

​

​

7,062

​

​

6.06

%  

​

​

232,731

​

​

6,615

​

​

5.68

%

Junior subordinated debentures

​

 

48,758

​

 

1,381

​

 

5.60

%  

​

 

48,630

​

 

1,433

​

 

5.66

%  

Total interest-bearing liabilities

​

​

6,382,550

​

 

123,964

​

 

3.90

%  

​

​

5,587,011

​

 

82,579

​

 

2.97

%  

Effect of noninterest bearing liabilities

​

​

​

​

​

​

​

​

(0.51)

%  

​

​

​

​

​

​

​

​

(0.52)

%  

Cost of funds

​

​

​

​

​

​

​

​

3.39

%  

​

​

​

​

​

​

​

​

2.45

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest-bearing demand deposits

​

​

952,099

​

​

​

​

​

​

​

​

​

1,189,095

​

​

​

​

​

​

​

Other noninterest-bearing liabilities

​

​

416,101

​

​

​

​

​

​

​

​

​

333,812

​

​

​

​

​

​

​

Total liabilities

​

​

7,750,750

​

​

​

​

​

​

​

​

​

7,109,918

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Stockholders' equity

​

 

912,679

​

​

​

​

​

​

​

​

 

805,845

​

​

​

​

​

​

​

Total liabilities and stockholders' equity

​

$

8,663,429

​

​

​

​

​

​

​

​

$

7,915,763

​

​

​

​

​

​

​

Net interest income

​

​

​

​

$

128,121

​

​

​

​

​

​

​

​

$

122,616

​

​

​

​

Net interest spread

​

 

​

​

 

​

​

 

2.51

%  

​

 

​

​

 

​

​

 

2.72

%  

Net interest margin

​

 

​

​

 

​

​

 

2.82

%  

​

 

​

​

 

​

​

 

3.05

%  

Net interest margin (TEY)(Non-GAAP)

​

 

​

​

 

​

​

 

3.26

%  

​

 

​

​

 

​

​

 

3.40

%  

Adjusted net interest margin (TEY)(Non-GAAP)

​

​

​

​

​

​

​

​

3.24

%  

​

​

​

​

​

​

​

​

3.38

%

Ratio of average interest earning assets to average interest-bearing liabilities

​

 

123.83

%  

 

​

​

 

​

​

​

 

130.04

%  

 

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

(1)Interest earned and yields on nontaxable investment securities and nontaxable loans are determined on a tax equivalent basis using a 21% federal tax rate.
(2)Loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance.
(3)Non-accrual loans/leases are included in the average balance for gross loans/leases receivable in accordance with accounting and regulatory guidance.

​

44

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Analysis of Changes of Interest Income/Interest Expense

For the six months ended June 30, 2024

​

​

​

​

​

​

​

​

​

​

​

​

Inc./(Dec.)

​

Components

​

​

from

​

of Change (1)

​

    

Prior Period (1)

    

Rate

    

Volume

​

​

2024 vs. 2023

​

​

(dollars in thousands)

INTEREST INCOME

 

​

  

 

​

  

 

​

  

Federal funds sold

​

$

(5)

​

$

66

​

$

(71)

Interest-bearing deposits at other financial institutions

​

 

394

​

 

293

​

 

101

Investment securities - taxable

​

 

1,487

​

 

658

​

 

829

Investment securities - nontaxable (2)

​

​

5,804

​

​

3,483

​

​

2,321

Restricted investment securities

​

 

525

​

 

390

​

 

135

Gross loans/leases receivable (2) (3)

​

 

38,685

​

 

23,192

​

 

15,493

Total change in interest income

​

​

46,890

​

​

28,082

​

​

18,808

​

​

​

​

​

​

​

​

​

​

INTEREST EXPENSE

​

​

  

​

​

  

​

​

  

Interest-bearing demand deposits

​

​

29,024

​

​

20,961

​

​

8,063

Time deposits

​

​

7,251

​

​

6,031

​

​

1,220

Short-term borrowings

​

​

(88)

​

​

(12)

​

​

(76)

Federal Home Loan Bank advances

​

​

4,803

​

​

643

​

​

4,160

Subordinated notes

​

​

447

​

​

435

​

​

12

Junior subordinated debentures

​

​

(52)

​

​

(64)

​

​

12

Total change in interest expense

​

​

41,385

​

​

27,994

​

​

13,391

​

​

​

​

​

​

​

​

​

​

Total change in net interest income

​

$

5,505

​

$

88

​

$

5,417

​

​

​

​

​

​

​

​

​

​

(1)The column “Inc./(Dec.) from Prior Period” is segmented into the changes attributable to variations in volume and the changes attributable to changes in interest rates. The variations attributable to simultaneous volume and rate changes have been proportionately allocated to rate and volume.
(2)Interest earned and yields on nontaxable investment securities and nontaxable loans are determined on a tax equivalent basis using a 21% federal tax rate.
(3)Loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance.

The Company’s operating results are also impacted by various sources of noninterest income, including trust department fees, investment advisory and management fees, deposit service fees, capital markets revenue, gains from the sales of residential real estate loans and government guaranteed loans, earnings on BOLI and other income.  Offsetting these items, the Company incurs noninterest expenses, which include salaries and employee benefits, occupancy and equipment expense, professional and data processing fees, FDIC and other insurance expense, loan/lease expense and other administrative expenses.

The Company’s operating results are also affected by economic and competitive conditions, particularly changes in interest rates, income tax rates, government policies and actions of regulatory authorities.

RESULTS OF OPERATIONS

INTEREST INCOME

Interest income increased $21.4 million, comparing the second quarter of 2024 to the same period of 2023, and increased $42.2 million when comparing the first six months of 2024 to the same period of 2023.  Interest income (tax equivalent non-GAAP) increased $23.7 million, comparing the second quarter of 2024 to the same period of 2023, and increased $46.9 million when comparing the first six months of 2024 to the same period of 2023. This increase in interest income across both periods was primarily due to continued loan growth with increased interest rates.

The Company intends to continue to grow quality loans and leases as well as its private placement tax-exempt securities portfolio to maximize yield while minimizing credit and interest rate risk.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

INTEREST EXPENSE

Interest expense increased $18.4 million, comparing the second quarter of 2024 to the same period of 2023, and increased $41.4 million, comparing the first six months of 2024 to the same period of 2023. The increase across both periods was due to the higher cost of funds as well as an increase in FHLB advances. The Company’s cost of funds was 3.43% for the quarter ended June 30, 2024, an increase from 2.67% for the quarter ended June 30, 2023. The Company’s cost of funds was 3.39% for the six months ended June 30, 2024, an increase from 2.45% for the six months ended June 30, 2023.

PROVISION FOR CREDIT LOSSES

The ACL is established through provision expense to provide an estimated ACL. The following table shows the components of the provision for credit losses for the three and six months ended June 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

​

June 30, 

​

June 30, 

​

June 30, 

​

June 30, 

​

​

    

2024

    

2023

​

2024

    

2023

​

​

​

(dollars in thousands)

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Provision for credit losses - loans and leases

​

$

4,343

​

$

3,313

​

$

8,079

​

$

5,771

​

Provision for credit losses - off-balance sheet exposures

​

​

1,153

​

​

293

​

​

831

​

​

774

​

Provision for credit losses - available for sale securities

​

 

—

​

 

—

​

 

(445)

​

 

989

​

Total provision for credit losses

​

$

5,496

​

$

3,606

​

$

8,465

​

$

7,534

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company had a total provision for credit losses on loans and leases of $4.3 million for the second quarter of 2024, which an increase from $3.3 million for the same period of 2023, primarily driven by loan growth during the quarter and the impact of declining GDP on CECL model factors.  The provision related to OBS was $1.2 million for the second quarter of 2024 compared to $293 thousand for the second quarter of 2023. The increase was due to the impact of declining GDP on CECL model factors. There was no provision related to HTM securities for the second quarter of 2024 or 2023.  

​

Provision for loans and leases for the first six months of 2024 totaled $8.1 million, an increase from $5.8 million for the first six months of 2023.  The increase in provision on loans and leases was primarily driven by loan growth. The provision related to OBS was $831 thousand for the first six months of 2024 compared to a provision related to OBS of $774 thousand for the first six months of 2023.  The increase was due to the impact of declining GDP on CECL model factors.  There was no provision related to HTM securities for the first six months of 2024 or 2023. There was a negative provision of $445 thousand on AFS securities for the first six months of 2024 as the results of the change in fair value of a debt investment in a failed bank.  This was a legacy investment acquired as part of the 2022 GFED acquisition in which an allowance was established for the entire balance of the bond in March 2023 and due to favorable changes in market conditions during 2024, partially recovered in value and was then sold during the first quarter of 2024.

​

The ACL for loans and leases is established based on a number of factors, including the Company's historical loss experience, delinquencies and charge-off trends, economic and other forecasts, the local, state and national economies and risk associated with the loans/leases and securities in the portfolio, as described in more detail in the “Critical Accounting Policies and Critical Accounting Estimates” section of this discussion.

​

The Company had an ACL for loans/leases held for investment of 1.33% of total gross loans/leases held for investment at June 30, 2024, compared to 1.33% at March 31, 2024 and 1.41% at June 30, 2023.  Management has evaluated the allowance needed on the loans acquired prior to the adoption of ASU 2016-13 on January 1, 2021, factoring in the remaining discount, which was $3.3 million and $5.1 million at June 30, 2024 and June 30, 2023, respectively.

Additional discussion of the Company's allowance can be found in the “Financial Condition” section of this Report.

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​

NONINTEREST INCOME

The following table sets forth the various categories of noninterest income for the three and six months ended June 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

​

​

​

 

​

​

​

June 30, 

​

June 30, 

​

​

​

​

​

 

​

​

    

2024

    

2023

    

$ Change

    

% Change

 

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Trust fees

​

$

3,103

​

$

2,844

​

$

259

​

9.1

%

​

Investment advisory and management fees

​

 

1,214

​

 

986

​

 

228

​

23.1

​

​

Deposit service fees

​

 

1,986

​

 

2,034

​

 

(48)

​

(2.4)

​

​

Gains on sales of residential real estate loans, net

​

 

540

​

 

500

​

 

40

​

8.0

​

​

Gains on sales of government guaranteed portions of loans, net

​

 

12

​

 

—

​

 

12

​

100.0

​

​

Capital markets revenue

​

 

17,758

​

 

22,490

​

 

(4,732)

​

(21.0)

​

​

Securities gains, net

​

 

—

​

 

12

​

 

(12)

​

(100.0)

​

​

Earnings on bank-owned life insurance

​

 

2,964

​

 

838

​

 

2,126

​

253.7

​

​

Debit card fees

​

 

1,571

​

 

1,589

​

 

(18)

​

(1.1)

​

​

Correspondent banking fees

​

 

510

​

 

356

​

 

154

​

43.3

​

​

Loan related fee income

​

​

962

​

​

770

​

​

192

​

24.9

​

​

Fair value gain on derivatives and trading securities

​

​

51

​

​

83

​

​

(32)

​

(38.6)

​

​

Other

​

 

218

​

 

18

​

 

200

​

1,111.1

​

​

Total noninterest income

​

$

30,889

​

$

32,520

​

$

(1,631)

​

(5.0)

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended

​

​

​

​

​

 

​

​

​

June 30, 

​

June 30, 

​

​

​

​

​

 

​

​

    

2024

    

2023

    

$ Change

​

% Change

 

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Trust fees

​

$

6,302

​

$

5,750

​

$

552

​

9.6

%

​

Investment advisory and management fees

​

 

2,315

​

 

1,865

​

 

450

​

24.1

​

​

Deposit service fees

​

 

4,008

​

 

4,062

​

 

(54)

​

(1.3)

​

​

Gains on sales of residential real estate loans, net

​

 

922

​

 

812

​

 

110

​

13.5

​

​

Gains on sales of government guaranteed portions of loans, net

​

 

36

​

 

30

​

 

6

​

20.0

​

​

Capital markets revenue

​

 

34,215

​

 

39,513

​

 

(5,298)

​

(13.4)

​

​

Securities losses, net

​

 

—

​

 

(451)

​

 

451

​

100.0

​

​

Earnings on bank-owned life insurance

​

 

3,832

​

 

1,545

​

 

2,287

​

148.0

​

​

Debit card fees

​

 

3,037

​

 

3,055

​

 

(18)

​

(0.6)

​

​

Correspondent banking fees

​

 

1,022

​

 

747

​

 

275

​

36.8

​

​

Loan related fee income

​

​

1,798

​

​

1,421

​

​

377

​

26.5

​

​

Fair value loss on derivatives and trading securities

​

​

(112)

​

​

(344)

​

​

232

​

(67.4)

​

​

Other

​

 

372

​

 

357

​

 

15

​

4.2

​

​

Total noninterest income

​

$

57,747

​

$

58,362

​

$

(615)

​

(1.1)

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company continues to be successful in expanding its wealth management client base and new assets under management. Trust fees continue to be a significant contributor to noninterest income. Assets under management have increased $61.2 million since March 31, 2024 and have increased by $628.0 million since June 30, 2023 due to market fluctuation and new client additions.  Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services. Trust fees are primarily determined based on the market value of the investments within the fully-managed trusts. Trust fees increased 9% in the second quarter of 2024 as compared to the same period of the prior year and increased 10% when comparing the first six months of 2024 to the first six months of 2023 due to market performance and new assets under management.  The Company expects trust fees to be negatively impacted during periods of significantly lower market valuations and positively impacted during periods of significantly higher market valuations.

Investment advisory and management fees increased 23% comparing the first quarter of 2024 to the same period of the prior year, and increased 24% when comparing the first six months of 2024 to the first six months of 2023. Similar to trust

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​

fees, investment advisory and management fees are largely determined based on the market value of the investments managed. As a result, fee income from this line of business fluctuates with market valuations.

Deposit service fees decreased 2% in the second quarter of 2024 as compared to the same period of the prior year, and decreased 1% when comparing the first six months of 2024 to the first six months of 2023. During the second quarter of 2024, the Company’s total deposits decreased modestly by $42.1 million, or less than 1%. When comparing annualized YTD growth of total deposits, the Company continues to be successful in expanding its core deposit base with a targeted focus on growing the number of net new accounts in 2024.

Gains on sales of residential real estate loans, net, increased 8% when comparing the second quarter of 2024 to the same period of the prior year, and increased 14% when comparing the first six months of 2024 to the first six months of 2023. The increases across both periods were due to increased volume of client residential real estate purchase activity generating higher levels of gains.

The Company has grown its capital markets revenue significantly over the past several years.  The Company’s interest rate swap program consists of back-to-back interest rate swaps with two types of commercial borrowers: (1) traditional commercial loans of a certain minimum size and sophistication, and (2) LIHTC permanent loans.  Most of the growth has been in the latter category as the Company has grown relationships with strong LIHTC developers with many years of experience.  The LIHTC industry is strong and growing with an increased need for affordable housing.  The back-to-back interest rate swaps allow commercial borrowers to pay a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent upon the pricing from an upstream counter party.

Capital markets revenue totaled $17.8 million for the second quarter of 2024, compared to $22.5 million for the second quarter of 2023. Capital markets revenue totaled $34.2 million for the first six months of 2024 compared to $39.5 million for the first six months of 2023. In the traditional commercial portfolio, the pricing is more competitive and the duration is shorter as compared to the LIHTC permanent loans.  Therefore, the mix of loans with interest rate swaps continued to be heavily weighted towards LIHTC permanent loans. Future levels of swap fees are dependent upon the needs of our traditional commercial and LIHTC borrowers, and the size of the related nonrefundable swap fee may fluctuate depending on the interest rate environment.

Also included in capital markets revenue are gains on loan securitizations. The Company has identified $243.2 million of LIHTC loans for securitization that are planned to close in the third quarter of 2024. LIHTC securitizations will continue in the future as a tool to provide capacity for continued LIHTC loan production.

There were no securities gains or losses for the three and six months ended June 30, 2024.  Securities gains totaled $12 thousand for the three months ended June 30, 2023 and securities losses totaled $451 thousand for the six months ended June 30, 2023.  The Company sold $29 million of securities during the first quarter of 2023.  The securities sold were part of a strategy to partially deleverage the Company’s balance sheet with an anticipated rapid earn back of the modest loss before the end of the calendar year.

Earnings on BOLI increased 254% comparing the second quarter of 2024 to the second quarter of 2023 and increased 148% comparing the first six months of 2024 to the first six months of 2023. The increase was due primarily to $2.2 million of death benefit proceeds on BOLI received in the second quarter of 2024. There were no purchases of BOLI in the first six months of 2024 or 2023. Notably, a portion of the Company's BOLI is variable rate whereby returns are determined by the performance of the equity markets.  Management intends to continue to review its BOLI investments to be consistent with policy and regulatory limits in conjunction with the rest of its earning assets in an effort to maximize returns while minimizing risk.

Debit card fees are the interchange fees paid on certain debit card customer transactions. Debit card fees remained stable comparing the second quarter of 2024 as compared to the same period of the prior year, and also comparing the first six months of 2024 to the first six months of 2023. The fees can vary based on customer debit card usage, so fluctuations from

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

period to period may occur. As an opportunity to maximize fees, the Company offers a deposit product with a higher interest rate that incentivizes debit card activity.

Correspondent banking fees increased 43% comparing the second quarter of 2024 to the same period of the prior year, and increased 37% comparing the first six months of 2024 to the first six months of 2023. The increase was primarily due to a shift of correspondent banking balances from non-interest bearing accounts to interest bearing accounts, in light of increasing rates. Fees from correspondent banks generally increase when non-interest bearing account balances decrease due to lower associated earnings credits. Correspondent banking continues to be a core strategy for the Company, as this line of business provides a high level of deposits that can be used to fund loan growth as well as a steady source of fee income. The Company now serves approximately 188 banks in Iowa, Illinois, Missouri and Wisconsin.  

Loan-related fee income increased 25% comparing the second quarter of 2024 to the same period of the prior year, and increased 27% comparing the first six months of 2024 to the first six months of 2023.  The increase across both periods was primarily due to the growth in our commercial credit card portfolio.

Fair value gain on derivatives and trading securities was $51 thousand in the second quarter of 2024, as compared to $83 thousand in gains in the same period of the prior year.  Fair value loss on derivatives and trading securities was $112 thousand in the first six months of 2024 as compared to $344 thousand in the first six months of 2023.  The Company uses unhedged cap instruments to manage interest rate risk related to the variability of interest payments due to changes in interest rates. Fair value gains or losses will fluctuate depending on the interest rate environment.  See Note 5 to the Consolidated Financial Statements for additional information.

Other noninterest income increased $200 thousand, or 1,111%, in the second quarter of 2024 as compared to the same period of the prior year.  Other noninterest income increased 4% comparing the first six months of 2024 to the first six months of 2023. Included in other noninterest income is income on equity investments.  Income on equity investments is largely determined based on the market value of the investments managed. As a result, income fluctuates with market valuations.

​

49

Table of Contents

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Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

NONINTEREST EXPENSE

The following tables set forth the various categories of noninterest expense for the three and six months ended June 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

​

​

​

 

​

​

​

June 30, 

​

June 30, 

​

​

​

​

​

 

​

​

    

2024

    

2023

    

$ Change

    

% Change

 

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Salaries and employee benefits

​

$

31,079

​

$

31,459

​

$

(380)

 

(1.2)

%

​

Occupancy and equipment expense

​

 

6,377

​

 

6,100

​

 

277

 

4.5

​

​

Professional and data processing fees

​

 

4,823

​

 

4,078

​

 

745

 

18.3

​

​

FDIC insurance, other insurance and regulatory fees

​

 

1,854

​

 

1,927

​

 

(73)

 

(3.8)

​

​

Loan/lease expense

​

 

151

​

 

652

​

 

(501)

 

(76.8)

​

​

Net cost of and gains/losses on operations of real estate

​

 

28

​

 

—

​

 

28

 

100.0

​

​

Advertising and marketing

​

 

1,565

​

 

1,735

​

 

(170)

 

(9.8)

​

​

Communication and data connectivity

​

​

318

​

​

471

​

​

(153)

 

(32.5)

​

​

Supplies

​

​

259

​

​

281

​

​

(22)

 

(7.8)

​

​

Bank service charges

​

 

622

​

 

621

​

 

1

 

0.2

​

​

Correspondent banking expense

​

 

363

​

 

221

​

 

142

 

64.3

​

​

Intangibles amortization

​

 

690

​

 

765

​

 

(75)

 

(9.8)

​

​

Payment card processing

​

​

706

​

​

542

​

​

164

 

30.3

​

​

Trust expense

​

​

379

​

​

337

​

​

42

 

12.5

​

​

Other

​

 

674

​

 

538

​

 

136

 

25.3

​

​

Total noninterest expense

​

$

49,888

​

$

49,727

​

$

161

​

0.3

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended

​

​

​

​

​

 

​

​

​

June 30, 

​

June 30, 

​

​

​

​

​

 

​

​

    

2024

    

2023

    

$ Change

    

% Change

 

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Salaries and employee benefits

 

$

62,939

 

$

63,462

 

$

(523)

 

(0.8)

%

​

Occupancy and equipment expense

 

 

12,891

 

 

12,014

 

 

877

 

7.3

​

​

Professional and data processing fees

 

 

9,436

 

 

7,592

 

 

1,844

 

24.3

​

​

Post-acquisition compensation, transition and integration costs

 

 

—

 

 

207

 

 

(207)

 

(100.0)

​

​

FDIC insurance, other insurance and regulatory fees

 

 

3,799

 

 

3,301

 

 

498

 

15.1

​

​

Loan/lease expense

 

 

529

 

 

1,208

 

 

(679)

 

(56.2)

​

​

Net cost of (income from) and gains/losses on operations of other real estate

 

 

(2)

 

 

(67)

 

 

65

 

(97.0)

​

​

Advertising and marketing

 

 

3,048

 

 

2,972

 

 

76

 

2.6

​

​

Communication and data connectivity

​

​

719

​

​

1,136

​

​

(417)

 

(36.7)

​

​

Supplies

​

​

534

​

​

586

​

​

(52)

 

(8.9)

​

​

Bank service charges

 

 

1,190

 

 

1,226

 

 

(36)

 

(2.9)

​

​

Correspondent banking expense

 

 

668

 

 

431

 

 

237

 

55.0

​

​

Intangibles amortization

 

 

1,380

 

 

1,531

 

 

(151)

 

(9.9)

​

​

Payment card processing

​

​

1,352

​

​

1,087

​

​

265

 

24.4

​

​

Trust expense

​

​

804

​

​

551

​

​

253

 

45.9

​

​

Other

 

 

1,291

 

 

1,275

 

 

16

 

1.3

​

​

Total noninterest expense

 

$

100,578

 

$

98,512

 

$

2,066

 

2.1

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Management places a strong emphasis on overall cost containment and is committed to improving the Company's general efficiency.

Salaries and employee benefits, which is the largest component of noninterest expense, declined 1% when comparing the second quarter of 2024 to the same period of the prior year. Salary and employee benefits decreased 1% when comparing the first six months of 2024 to the first six months of 2023.    

Occupancy and equipment expense increased 5% comparing the second quarter of 2024 to the same period of the prior year, and increased 7% comparing the first six months of 2024 to the first six months of 2023. The increase was due to higher IT service contracts expense and depreciation.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

Professional and data processing fees increased 18% comparing the second quarter of 2024 to the same period of the prior year, and increased 24% comparing the first six months of 2024 to the first six months of 2023. The increase was due primarily to increased CDARS and ICS expenses as well as increased data processing expenses. Generally, professional and data processing fees can fluctuate depending on certain one-time project costs.  Management will continue to focus on minimizing such one-time costs and driving recurring costs down through contract negotiation or managed reduction in activity where costs are determined on a usage basis.

There were no post-acquisition compensation, transition and integration costs in 2024, whereas such costs totaled $207 thousand in the first six months of 2023. These costs were comprised primarily of IT integration and data conversion costs related to the acquisition of GFED.

FDIC insurance, other insurance and regulatory fee expense decreased 4%, when comparing the second quarter of 2024 to the same period of the prior year, and increased 15% when comparing the first six months of 2024 to the first six months of 2023.  The increase in expense for the first six months of 2024 was due to asset growth and higher FDIC insurance rates.

Loan/lease expense decreased 77% when comparing the second quarter of 2024 to the same quarter of the prior year, and decreased 56% comparing the first six months of 2024 to the first six months of 2023. The decrease was due primarily to lower legal expense on loan workouts and higher recoveries of legal expenses incurred on loan workouts.  Generally, loan/lease expense has a direct relationship with the level of NPLs; however, it may deviate depending upon the individual NPLs as NPLs have increased 29% since June 30, 2023.

Net cost of (income from) and gains/losses on operations of other real estate includes gains/losses on the sale of OREO, write-downs of OREO and all income/expenses associated with OREO. Net cost of and gains/losses on operations of other real estate for the second quarter of 2024 totaled $28 thousand.  There was no net income from and gains/losses on operations of other real estate for the second quarter of 2023.  Net income from and gain/losses on operations of other real estate totaled $2 thousand for the first six months of 2024, compared to net income from and gains/losses on operations of other real estate of $67 thousand for the first six months of 2023.

Advertising and marketing expense decreased 10% comparing the second quarter of 2024 to the same period of the prior year, and increased 3% comparing the first six months of 2024 to the first six months of 2023. The decrease in expense compared to the linked quarter was primarily due to a reduction in brochure marketing as well as sponsorships. The increase in expense for the first six months of 2024 was primarily due to the increased marketing of our deposit products.

Communication and data connectivity expense decreased 33% comparing the second quarter of 2024 to the same period of the prior year, and decreased 37% comparing the first six months of 2024 to the first six months of 2023.  The decrease was primarily due to improvements to our data center connectivity channels and a reduction in cell phone and air card expenses as the Company continues to improve operational efficiencies.    

Supplies expense decreased 8% comparing the second quarter of 2024 to the same period of the prior year, and decreased 9% comparing the first six months of 2024 to the first six months of 2023. This decrease is primarily due to the timing of purchases.

Bank service charges, a large portion of which includes indirect costs incurred to provide services to QCBT's correspondent banking customer portfolio, remained stable when comparing the second quarter of 2024 to the same period of the prior year, and decreased 3% comparing the first six months of 2024 to the first six months of 2023.  As transaction volumes and the number of correspondent banking clients fluctuate, the associated expenses are expected to also fluctuate.

Correspondent banking expense increased 64% when comparing the second quarter of 2024 to the same period of the prior year, and increased 55% comparing the first six months of 2024 to the first six months of 2023.  The increase in correspondent expenses includes planned monthly costs for an upgraded safekeeping platform. These are direct costs

51

Table of Contents

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Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

incurred to provide services to QCBT's correspondent banking customer portfolio, including safekeeping and cash management services.

Intangibles amortization expense decreased 10% when comparing the second quarter of 2024 to the same period of the prior year, and decreased 10% comparing the first six months of 2024 to the first six months of 2023. The amortization expense is due to the prior acquisitions.  These expenses will naturally decrease as intangibles become fully amortized unless there is an addition to intangible assets.

Payment card processing expense increased 30% when comparing the second quarter of 2024 to the same period of the prior year, and increased 24% comparing the first six months of 2024 to the first six months of 2023 due to an increased volume of transactions.

Trust expense increased 13% when comparing the second quarter of 2024 to the same period of the prior year, and increased 46% comparing the first six months of 2024 to the first six months of 2023. The increase was due to the planned system conversions of the trust and tax accounting platforms that occurred during the third quarter of 2023.

Other noninterest expense increased 25% when comparing the second quarter of 2024 to the same period of the prior year, and remained stable comparing the first six months of 2024 to the first six months of 2023.  The increase was primarily due to increased insurance claim loss reserves at our QCRH Risk Management entity. Included in other noninterest expense are items such as meals and entertainment, subscriptions and sales and use tax.

INCOME TAXES

In the second quarter of 2024, the Company incurred income tax expense of $2.6 million, compared to income tax expense of $4.0 million in the same period of the prior year. During the first six months of 2024, the Company incurred income tax expense of $3.7 million, compared to income tax expense of $6.7 million in the first six months of 2023. The Company continues to benefit from increased tax exempt income due to strong growth in tax-exempt loan and bond portfolios.  As a result, this has helped drive the Company’s effective tax rate lower for both the three and six months periods ended June 30, 2024. Refer to the reconciliation of the expected income tax rate to the effective tax rate that is included in Note 6 to the Consolidated Financial Statements for additional detail.

​

FINANCIAL CONDITION

Following is a table that represents the major categories of the Company’s balance sheet:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

​

​

​

June 30, 2024

​

​

March 31, 2024

​

​

December 31, 2023

 

​

June 30, 2023

​

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

    

    

Amount

    

%

    

​

Cash, federal funds sold, and interest-bearing deposits

​

$

194,435

 

2

%  

​

$

158,008

 

2

%  

​

$

237,492

 

3

%  

​

$

259,096

 

3

%  

​

Securities

​

​

1,033,199

 

12

%  

​

​

1,031,861

 

12

%  

​

​

1,005,528

 

12

%  

​

​

882,888

 

11

%  

​

Net loans/leases

​

​

6,766,680

 

76

%  

​

​

6,563,866

 

76

%  

​

​

6,456,216

 

75

%  

​

​

6,293,523

 

77

%  

​

Derivatives

​

​

194,354

​

2

%  

​

​

183,888

​

2

%  

​

​

187,341

​

2

%  

​

​

170,294

​

2

%  

​

Other assets

​

​

683,323

​

8

%  

​

​

661,926

​

8

%  

​

​

652,317

​

8

%  

​

​

620,872

​

7

%

​

Total assets

​

$

8,871,991

 

100

%  

​

$

8,599,549

 

100

%  

​

$

8,538,894

 

100

%  

​

$

8,226,673

 

100

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total deposits

​

$

6,764,667

 

76

%  

​

$

6,806,775

 

79

%  

​

$

6,514,005

 

77

%  

​

$

6,606,720

 

81

%  

​

Total borrowings

​

​

768,671

 

9

%  

​

​

489,633

 

6

%  

​

​

718,295

 

8

%  

​

​

418,368

 

5

%  

​

Derivatives

​

​

221,798

​

2

%  

​

​

211,677

​

2

%  

​

​

215,735

​

3

%  

​

​

195,841

​

2

%  

​

Other liabilities

​

​

180,536

 

2

%  

​

​

184,122

 

2

%  

​

​

204,263

 

2

%  

​

​

183,055

 

2

%  

​

Total stockholders' equity

​

​

936,319

 

11

%  

​

​

907,342

 

11

%  

​

​

886,596

 

10

%  

​

​

822,689

 

10

%  

​

Total liabilities and stockholders' equity

​

$

8,871,991

 

100

%  

​

$

8,599,549

 

100

%  

​

$

8,538,894

 

100

%  

​

$

8,226,673

 

100

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

52

Table of Contents

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Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

During the second quarter of 2024, the Company's total assets increased $272.4 million, or 3%, from March 31, 2024, to a total of $8.9 billion. The Company’s net loans/leases increased $202.8 million in the second quarter of 2024. The increase in net loans/leases was driven primarily by strength in our LIHTC lending business.  The Company also experienced improved loan demand from its traditional commercial lending/leasing businesses. Deposits decreased modestly at $42.1 million, or 1%, during the second quarter of 2024.  Borrowings increased $279.0 million, or 57%, during the second quarter of 2024 due primarily to funding needs for strong loan growth.

INVESTMENT SECURITIES

The composition of the Company’s securities portfolio is managed to meet liquidity needs while prioritizing the impact on interest rate risk, maximizing return and minimizing credit risk. Over the years, the Company has further invested in tax-exempt municipal securities made up of 89% general obligation bonds and 11% revenue bonds. The majority are privately placed tax-exempt debt issuances by municipalities located in the Midwest (with some in or near the Company's existing markets) and diversified across many issuers. The Company monitors the investments and concentration closely. Of the general obligation and revenue bonds in the Company's portfolio, the majority are unrated bonds that represent small, private issuances that require a thorough underwriting process before investment and are generated by our specialty finance group.

​

Trading securities had a fair value of $22.4 million as of June 30, 2024 and consisted of retained beneficial interests acquired in conjunction with loan securitizations completed by the Company in 2023. The change in market value on trading securities for the three and six months ended June 30, 2024 was a net gain of $234 thousand and $253 thousand, respectively. See also Note 4 to the Consolidated Financial Statements for details of these securitizations.

​

Following is a breakdown of the Company's securities portfolio by type, the percentage of net unrealized gains (losses) to carrying value on the total portfolio, and the portfolio duration:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

​

​

​

June 30, 2024

​

March 31, 2024

​

​

December 31, 2023

 

​

June 30, 2023

 

​

    

Amount

    

%  

    

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

​

​

​

(dollars in thousands)

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. govt. sponsored agency securities

​

$

20,101

 

2

%  

$

14,442

 

1

%  

​

$

14,973

 

1

%  

​

$

18,942

 

2

%

Municipal securities

​

 

885,046

 

86

%  

 

884,469

 

86

%  

​

 

853,442

 

85

%  

​

 

743,608

 

84

%

Residential mortgage-backed and related securities

​

 

54,708

 

5

%  

 

56,071

 

6

%  

​

 

59,196

 

6

%  

​

 

60,957

 

7

%

Asset-backed securities

​

​

12,721

​

1

%

​

14,285

​

1

%

​

​

15,423

​

2

%

​

​

17,393

​

2

%

Other securities

​

 

38,464

 

4

%  

 

40,539

 

4

%  

​

 

40,125

 

4

%  

​

 

42,168

 

5

%

Trading securities

​

 

22,362

 

2

%  

 

22,258

 

2

%  

​

 

22,369

 

2

%  

​

 

—

 

-

%

​

​

$

1,033,402

 

100

%  

$

1,032,064

 

100

%  

​

$

1,005,528

 

100

%  

​

$

883,068

 

100

%

​

​

 

  

 

  

​

 

  

 

  

​

​

 

  

 

  

​

​

 

  

 

  

​

Securities as a % of total assets

​

 

11.65

%  

  

​

 

12.00

%  

  

​

​

 

11.78

%  

  

​

​

 

10.73

%  

  

​

Net unrealized losses as a % of Amortized Cost

​

 

(7.17)

%  

  

​

 

(6.98)

%  

  

​

​

 

(4.96)

%  

  

​

​

 

(9.81)

%  

  

​

Duration (in years)

​

 

6.2

​

  

​

 

6.2

​

  

​

​

 

6.2

​

  

​

​

 

5.7

​

​

​

Annual yield on investment securities (tax equivalent)

​

​

5.08

%  

​

​

​

5.14

%  

​

​

​

​

4.30

%  

​

​

​

​

4.31

%  

​

​

​

The Company has not invested in non-agency commercial or residential mortgage-backed securities or pooled trust preferred securities. See Note 2 to the Consolidated Financial Statements for additional information regarding the Company's investment securities.

​

53

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

LOANS/LEASES

Total loans/leases grew 9.5% on an annualized basis during the first six months of 2024.  The mix of the loan/lease classes within the Company's loan/lease portfolio is presented in the following table:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

​

​

​

​

June 30, 2024

​

​

March 31, 2024

​

​

December 31, 2023

​

​

June 30, 2023

​

​

​

    

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

​

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

C&I - revolving

​

$

362,115

 

5

%  

​

$

326,129

 

5

%  

​

$

325,243

 

5

%  

​

$

304,617

 

5

%

​

C&I - other

​

​

1,463,198

​

21

%  

​

​

1,470,609

​

22

​

​

​

1,481,778

​

23

​

​

​

1,402,553

​

21

​

​

CRE - owner occupied

​

​

633,596

​

9

%  

​

​

621,069

​

9

​

​

​

607,365

​

9

​

​

​

609,717

​

10

​

​

CRE - non-owner occupied

​

​

1,082,457

​

16

%  

​

​

1,055,089

​

16

​

​

​

1,008,892

​

15

​

​

​

963,814

​

15

​

​

Construction and land development

​

​

1,082,348

​

16

%  

​

​

1,149,527

​

17

​

​

​

1,420,525

​

22

​

​

​

1,307,766

​

21

​

​

Multi-family

​

 

1,477,483

 

22

%  

​

 

1,303,566

 

20

​

​

 

996,143

 

15

​

​

 

1,100,794

 

17

​

​

Direct financing leases

​

 

25,808

 

0

%  

​

 

28,089

 

-

​

​

 

31,164

 

1

​

​

 

32,937

 

1

​

​

1-4 family real estate

​

 

583,542

 

9

%  

​

 

563,358

 

9

​

​

 

544,971

 

8

​

​

 

535,405

 

8

​

​

Consumer

​

 

143,839

 

2

%  

​

 

130,900

 

2

​

​

 

127,335

 

2

​

​

 

121,717

 

2

​

​

Total loans/leases

​

$

6,854,386

 

100

%  

​

$

6,648,336

 

100

%  

​

$

6,543,416

 

100

%  

​

$

6,379,320

 

100

%

​

Less allowance

​

 

(87,706)

 

​

​

​

 

(84,470)

 

  

​

​

 

(87,200)

 

  

​

​

​

(85,797)

 

  

​

​

Net loans/leases

​

$

6,766,680

​

​

​

​

$

6,563,866

​

​

​

​

$

6,456,216

​

​

​

​

$

6,293,523

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

CRE loans are predominantly included within the CRE – owner occupied, CRE – non-owner occupied, construction and land development and multi-family loan classes, however, CRE loans can also be included in 1-4 family based on nature of the loan. As CRE loans have historically been the Company's largest portfolio segment, management places a strong emphasis on the underwriting and monitoring of the characteristics and composition of the Company's CRE loan portfolio. For example, management tracks the level of owner-occupied CRE loans relative to non-owner-occupied loans because owner-occupied loans are generally considered to have less risk. Additionally, the Company reviews CRE concentrations by industry in relation to risk-based capital on a quarterly basis.  Approximately 43% of the CRE loan portfolio consists of LIHTC loans, all of which are performing and Pass rated.

​

The following is a listing of significant industries within the Company's CRE loan portfolio.  These include loans in the following portfolio segments as of June 30, 2024:  CRE owner occupied, CRE non-owner occupied, certain construction and land development, multifamily and certain 1-4 family real estate. Within the CRE Loan portfolio, there is a low amount of office exposure, totaling $202.9 million or 3.0% of total loans at June 30, 2024.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 

​

​

As of March 31,

 

​

As of December 31, 

 

​

As of June 30, 

 

​

​

2024

​

​

2024

​

​

2023

​

​

2023

​

​

    

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

 

​

​

(dollars in thousands)

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Lessors of residential buildings - LIHTC

​

$

1,918,245

 

43

%  

​

$

1,765,908

 

41

%  

​

$

1,650,340

 

40

%  

​

$

—

 

0

%

Lessors of residential buildings

​

​

444,631

​

10

%  

​

​

443,136

​

10

​

​

​

442,913

​

10

%  

​

​

2,091,510

​

50

%

Lessors of nonresidential buildings

​

​

628,783

 

14

%  

​

​

623,629

 

14

%  

​

​

633,098

 

15

%  

​

​

591,128

 

14

%

Hotels

​

 

137,485

 

3

%  

​

 

135,975

 

3

%  

​

 

135,915

 

3

%  

​

 

131,832

 

3

%

New housing for-sale builders

​

​

83,929

​

2

%  

​

​

85,295

​

2

%  

​

​

84,451

​

2

%  

​

​

76,592

​

2

%

New multifamily housing construction

​

​

67,040

​

1

%  

​

​

72,729

​

2

%

​

​

83,310

​

2

%

​

​

80,338

​

2

%

Other - LIHTC

​

​

19,468

​

0

%  

​

​

18,094

​

0

%

​

​

17,951

​

0

%  

​

​

—

​

0

%  

Other *

​

 

1,194,687

 

27

%  

​

 

1,197,027

 

28

%  

​

 

1,184,897

 

28

%  

​

 

1,211,059

 

29

%

Total CRE loans

​

$

4,494,268

​

100

%

​

$

4,341,793

​

100

%

​

$

4,232,875

​

100

%

​

$

4,182,459

​

100

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

*     “Other” consists of all other industries. None of these had concentrations greater than $59.5 million, or approximately 1.3% of total CRE loans in the most recent period presented.

​

54

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

The following table reflects credit quality indicators and performance of the Company’s CRE loan portfolio:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 

​

​

As of March 31,

​

​

As of December 31, 

​

​

​

2024

​

​

2024

​

​

2023

​

​

​

Delinquency Status*

​

​

​

​

% of

​

​

Delinquency Status*

​

​

​

​

% of

​

​

Delinquency Status*

​

​

​

​

% of

​

​

​

Performing

​

Nonperforming

​

Total

​

CRE

​

​

Performing

​

​

Nonperforming

​

Total

​

CRE

​

​

​

Performing

​

​

Nonperforming

​

​

Total

​

CRE

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

4,392,741

​

$

—

​

$

4,392,741

​

98

%  

​

$

4,226,863

​

$

—

​

$

4,226,863

​

98

%  

​

$

4,104,394

​

$

—

​

$

4,104,394

​

97

%  

Special Mention

​

​

36,855

​

​

—

​

​

36,855

​

1

%  

​

​

62,032

​

​

—

​

​

62,032

​

1

%  

​

​

72,517

​

​

—

​

​

72,517

​

2

%  

Substandard

​

​

47,353

​

​

17,319

​

​

64,672

​

1

%  

​

​

37,839

​

​

15,059

​

​

52,898

​

1

%  

​

​

37,488

​

​

18,476

​

​

55,964

​

1

%  

Doubtful

​

 

—

​

 

—

​

 

—

​

0

%  

​

 

—

​

 

—

​

 

—

​

0

%  

​

 

—

​

 

—

​

 

—

​

0

%  

​

​

$

4,476,949

​

$

17,319

​

$

4,494,268

​

100

%  

​

$

4,326,734

​

$

15,059

​

$

4,341,793

​

100

%  

​

$

4,214,399

​

$

18,476

​

$

4,232,875

​

100

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As a percentage of total CRE portfolio

​

​

99.61

%  

​

0.39

%  

​

100

%  

​

​

​

​

99.65

%

​

0.35

%  

​

100

%  

​

​

​

​

99.56

%  

​

0.44

%  

​

100

%  

​

​

*     Performing = CRE loans accruing and less than 90 days past due. Nonperforming = CRE loans on nonaccrual and accruing CRE loans that are greater than or equal to 90 days past due.

The Company’s construction and land development loan portfolio includes the following:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

​

​

June 30, 2024

​

​

March 31, 2024

​

​

December 31, 2023

​

​

June 30, 2023

​

​

Amount

​

%

​

​

Amount

​

%

​

​

Amount

​

%

​

​

Amount

​

%

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LIHTC construction

$

750,894

 

69

%  

​

$

738,608

 

64

%  

​

$

943,101

 

66

%  

​

$

870,084

 

67

%

Construction (commercial)

​

268,435

​

25

%  

​

​

341,077

​

30

​

​

​

405,146

​

29

%  

​

​

359,202

​

27

%  

Land development

​

52,787

​

5

%  

​

​

58,675

​

5

​

​

​

59,659

​

4

%  

​

​

61,973

​

5

%  

Construction (residential)

​

10,232

​

1

%  

​

​

11,167

​

1

​

​

​

12,619

​

1

%  

​

​

16,507

​

1

%  

Total construction and land development

$

1,082,348

​

100

%

​

$

1,149,527

​

100

%

​

$

1,420,525

​

100

%

​

$

1,307,766

​

100

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company's 1-4 family real estate loan portfolio includes the following:

●Certain loans that do not meet the criteria for sale into the secondary market. These are often structured as adjustable rate mortgages with maturities ranging from three to seven years to avoid long-term interest rate risk.
●A limited amount of 15-year, 20-year and 30-year fixed rate residential real estate loans that meet certain credit guidelines.

The remaining 1-4 family real estate loans originated by the Company were sold on the secondary market to avoid the interest rate risk associated with longer term fixed rate loans. Loans originated for this purpose were classified as held for sale and are included in the residential real estate loans above. The Company has not originated any subprime, Alt-A, no documentation, or stated income residential real estate loans throughout its history.

Following is a listing of significant equipment types within the m2 loan and lease portfolio:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 

​

​

As of March 31, 

​

​

As of December 31, 

​

​

As of June 30, 

​

​

2024

​

​

2024

​

​

2023

​

​

2023

​

​

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

 

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Trucks, Vans and Vocational Vehicles

$

85,537

 

23

%  

​

$

85,670

 

24

%

​

$

70,821

 

24

%  

​

$

74,534

 

23

%

Construction - General

​

25,591

 

7

%  

​

​

22,468

 

6

%

​

​

16,256

 

5

%  

​

​

17,882

 

5

%

Trailers

​

23,032

 

6

%  

​

​

24,207

 

7

%

​

​

23,186

 

8

%  

​

​

25,406

 

8

%

Tractor

​

21,280

​

6

%  

​

​

21,416

​

6

%

​

​

17,740

​

6

%  

​

​

20,410

​

6

%

Manufacturing - General

​

18,900

 

5

%  

​

​

18,384

 

5

%

​

​

17,493

 

6

%  

​

​

18,263

 

6

%

Computer Equipment

​

18,623

​

5

%  

​

​

13,411

​

4

%

​

​

7,736

​

3

%  

​

​

9,388

​

3

%

Freightliners

​

17,891

​

5

%  

​

​

20,127

​

6

%

​

​

26,433

​

9

%  

​

​

27,171

​

8

%

Food Processing Equipment

​

15,059

 

4

%  

​

​

13,774

 

4

%

​

​

14,304

 

5

%  

​

​

13,838

 

4

%

Marine - Travelifts

​

14,368

 

4

%  

​

​

15,137

 

4

%

​

​

14,653

 

5

%  

​

​

13,375

 

4

%

Aesthetic Equipment

​

11,486

​

3

%  

​

​

12,057

​

3

%

​

​

8,311

​

3

%  

​

​

9,684

​

3

%

Other *

​

112,131

 

32

%  

​

​

108,165

 

31

%

​

​

83,382

 

26

%  

​

​

98,527

 

30

%

Total m2 loans and leases

$

363,898

 

100

%  

​

$

354,816

 

100

%

​

$

300,315

 

100

%  

​

$

328,478

 

100

%

​

*     “Other” consists of all other equipment types. None of these had concentrations greater than 3% of total m2 loan and lease portfolio in the most recent period presented.

See Note 3 to the Consolidated Financial Statements for additional information regarding the Company's loan and lease portfolio.

55

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

ALLOWANCE FOR CREDIT LOSSES ON LOANS/LEASES AND OFF-BALANCE SHEET EXPOSURES

The adequacy of the ACL was determined by management based on numerous factors, including the overall composition of the loan/lease portfolio, types of loans/leases, historical loss experience, loan/lease delinquencies, potential substandard and doubtful credits, economic conditions, collateral positions, government guarantees and other factors that, in management's judgment, deserved evaluation. To ensure that an adequate ACL was maintained, provisions were made based on a number of factors, including the increase in loans/leases and a detailed analysis of the loan/lease portfolio. The loan/lease portfolio is reviewed and analyzed quarterly with specific detailed reviews completed on all credits risk-rated less than “special mention,” as described in Note 1 to the Consolidated Financial Statements, and carrying aggregate exposure in excess of $250 thousand. The adequacy of the allowance is monitored by the credit administration staff and reported to management and the board of directors.

Changes in the ACL for loans/leases for the three and six months ended June 30, 2024 and 2023 are presented as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

June 30, 2024

    

June 30, 2023

    

June 30, 2024

    

June 30, 2023

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning

$

84,470

​

$

86,573

​

$

87,200

​

$

87,706

Change in ACL for the transfer of loans to LHFS

​

498

​

​

(2,277)

​

​

(2,879)

​

​

(3,986)

Provision

 

4,343

​

 

3,313

​

 

8,079

​

 

5,771

Charge-offs

 

(1,751)

​

 

(1,947)

​

 

(5,311)

​

 

(4,222)

Recoveries

 

146

​

 

135

​

 

617

​

 

528

Balance, ending

$

87,706

​

$

85,797

​

$

87,706

​

$

85,797

​

​

​

​

​

​

​

​

​

​

​

​

​

Changes in the ACL for OBS exposures for the three and six months ended June 30, 2024 and 2023 are presented as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

June 30, 2024

​

June 30, 2023

​

June 30, 2024

​

June 30, 2023

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, beginning

$

9,207

​

$

6,033

​

$

9,529

​

$

5,552

​

Provisions to expense

​

1,153

​

​

293

​

​

831

​

​

774

​

Balance, ending

$

10,360

​

$

6,326

​

$

10,360

​

$

6,326

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The increase in provision on OBS exposures in the second quarter and the first six months of 2024 as compared to the same periods of the prior year was driven by a decrease in the GDP factor. At June 30, 2024, the allowance for OBS exposures was $10.4 million.

​

The Company's levels of criticized and classified loans are reported in the following table:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

​

​

Internally Assigned Risk Rating *

    

June 30, 2024

    

March 31, 2024

    

December 31, 2023

    

June 30, 2023

​

 

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Special Mention

 

$

85,096

 

$

111,729

 

$

125,308

​

$

116,910

​

​

Substandard/Classified loans***

 

​

80,345

 

​

70,841

 

​

70,425

​

​

63,956

​

​

Doubtful/Classified loans***

 

​

—

 

​

—

 

​

—

​

​

—

​

​

Criticized Loans **

 

$

165,441

 

$

182,570

 

$

195,733

​

$

180,866

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Criticized Loans as a % of Total Loans/Leases

​

​

2.41

%

​

2.75

%

​

2.99

%

​

2.84

%

​

Classified Loans as a % of Total Loans/Leases

​

​

1.17

%

​

1.07

%

​

1.08

%

​

1.00

%

​

​

*      Amounts above include the government guaranteed portion, if any. For the calculation of ACL, the Company assigns internal risk ratings of Pass (Rating 2) for the government guaranteed portion.

**    Criticized loans are defined as loans except for direct financing leases and equipment financing agreements with internally assigned risk ratings of 9, 10, or 11, regardless of performance.

***  Classified loans are defined as loans except for direct financing leases and equipment financing agreements with internally assigned risk ratings of 10 or 11, regardless of performance.

​

56

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

Criticized loans and classified loans as a percentage of loans and leases decreased from March 31, 2024 to June 30, 2024 due to certain larger loans which were paid off or upgraded. The Company continues its strong focus on maintaining credit quality in an effort to limit NPLs.

​

The following table summarizes the trend in allowance as a percentage of gross loans/leases and as a percentage of NPLs:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

​

​

​

    

June 30, 2024

    

March 31, 2024

    

December 31, 2023

    

​

June 30, 2023

​

​

ACL for loans/leases / Total loans/leases held for investment

 

1.33

%  

1.33

%  

1.33

%  

​

1.41

%

​

ACL for loans/leases / NPLs

 

260.77

%  

285.55

%  

265.54

%  

​

328.16

%

​

Although management believes that the ACL at June 30, 2024 was at a level adequate to absorb losses on existing loans/leases, there can be no assurance that such losses will not exceed the estimated amounts or that the Company will not be required to make additional provisions in the future. Unpredictable future events could adversely affect cash flows for both commercial and individual borrowers, which could cause the Company to experience increases in problem assets, delinquencies and losses on loans/leases, and require further increases in the provision for credit losses.  Asset quality is a priority for the Company and its subsidiaries. The ability to grow profitably is in part dependent upon the ability to maintain that quality. The Company continually focuses efforts at its subsidiary banks and equipment financing company with the intention to improve the overall quality of the Company's loan/lease portfolio.

See Note 3 to the Consolidated Financial Statements for additional information regarding the Company's ACL.

NONPERFORMING ASSETS

The table below presents the amount of NPAs and related ratios:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of June 30, 

​

As of March 31, 

​

As of December 31, 

​

As of June 30, 

​

​

​

    

2024

    

2024

    

2023

    

2023

​

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Nonaccrual loans/leases (1)

​

$

33,546

​

$

29,439

​

$

32,753

​

$

26,062

​

​

Accruing loans/leases past due 90 days or more

​

 

87

​

 

142

​

 

86

​

 

83

​

​

Total NPLs

​

 

33,633

​

 

29,581

​

 

32,839

​

 

26,145

​

​

Other repossessed assets

​

 

512

​

 

962

​

 

—

​

 

—

​

​

OREO

​

 

369

​

 

784

​

 

1,347

​

 

—

​

​

Total NPAs

​

$

34,514

​

$

31,327

​

$

34,186

​

$

26,145

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NPLs to total loans/leases

    

 

0.49

%  

 

0.44

%  

 

0.50

%  

​

0.41

%  

​

NPAs to total loans/leases plus repossessed property

​

 

0.50

%  

 

0.47

%  

 

0.52

%  

​

0.41

%  

​

NPAs to total assets

​

 

0.39

%  

 

0.36

%  

 

0.40

%  

​

0.32

%  

​

Nonaccrual loans/leases to total loans/leases

​

​

0.49

%

​

0.44

%

​

0.50

%

​

0.41

%  

​

ACL to nonaccrual loans

​

 

261.45

%  

 

286.93

%  

 

266.24

%  

​

329.20

%  

​

​

(1)Includes government guaranteed portion of loans, as applicable.

​

NPAs at June 30, 2024 were $34.5 million, an increase of  $3.2 million from March 31, 2024, and an increase of $8.6 million from June 30, 2023.  The increase in NPAs during the quarter was driven by two client relationships. The ratio of NPAs to total assets was 0.39% at June 30, 2024, an increase from 0.36% at March 31, 2024, and an increase from 0.32% at June 30, 2023.

The majority of the NPAs consist of nonaccrual loans/leases. For nonaccrual loans/leases, management has thoroughly reviewed these loans/leases and has provided specific allowances as appropriate.

OREO and other repossessed assets are carried at the lower of carrying amount or fair value less costs to sell.

57

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

The policy of the Company is to place a loan/lease on nonaccrual status if: (a) payment in full of interest or principal is not expected; or (b) principal or interest has been in default for a period of 90 days or more unless the obligation is both in the process of collection and well secured.  A loan/lease is well secured if it is secured by collateral with sufficient market value to repay principal and all accrued interest. A debt is in the process of collection if collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to current status.

The Company's lending/leasing practices remain unchanged and asset quality remains a priority for management.

DEPOSITS

Deposits decreased modestly by $42.1 million during the second quarter of 2024, primarily due to a decrease in interest-bearing demand deposits.

The table below presents the composition of the Company's deposit portfolio:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

 

​

​

​

June 30, 2024

    

​

March 31, 2024

 

​

December 31, 2023

 

​

June 30, 2023

 

​

​

    

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

    

​

Amount

    

%

​

​

​

​

(dollars in thousands)

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest bearing demand deposits

​

$

956,445

 

14

%  

​

$

955,167

 

14

%  

​

$

1,038,689

 

16

%  

​

$

1,101,605

 

17

%

​

Interest bearing demand deposits

​

 

4,644,918

 

69

%  

​

 

4,714,555

 

69

%  

​

 

4,338,390

 

67

%  

​

 

4,374,847

 

65

%

​

Time deposits

​

 

859,593

 

13

%  

​

 

875,491

 

13

%  

​

 

851,950

 

13

%  

​

 

765,801

 

12

%

​

Brokered deposits

​

 

303,711

 

4

%  

​

 

261,562

 

4

%  

​

 

284,976

 

4

%  

​

 

364,467

 

6

%

​

​

​

$

6,764,667

 

100

%  

​

$

6,806,775

 

100

%  

​

$

6,514,005

 

100

%  

​

$

6,606,720

 

100

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company actively participates in the ICS/CDARS program, which is a trusted resource that provides FDIC insurance coverage for clients that maintain larger deposit balances.  Deposits in the ICS/CDARS program (which are included in interest-bearing deposits and time deposits in the preceding table) totaled $2.3 billion, or 34.3% of all deposits, as of June 30, 2024.

The Company’s correspondent bank deposit portfolio and funds managed consists of the following:

●Noninterest-bearing deposits which represent correspondent banks’ operating cash used for processing transactions with the Federal Reserve,
●Money market deposits which represent excess liquidity, and
●EBA balances of the correspondent banks at the FRB.

​

The Company had total uninsured and uncollateralized deposits of $1.2 billion and $1.3 billion as of June 30, 2024 and 2023, or 18% and 20% of total deposits, respectively.

Management will continue to focus on growing its core deposit portfolio, including its correspondent banking business at QCBT, as well as shifting the mix from brokered and other higher cost deposits to lower cost core deposits. With the significant success achieved by QCBT in growing its correspondent banking business, QCBT has developed procedures to proactively monitor this industry concentration of deposits and loans. Other deposit-related industry concentrations and large accounts are monitored by the internal asset liability management committees.

58

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

BORROWINGS

The subsidiary banks purchase federal funds for short-term funding needs from the FRB or from their correspondent banks. The table below presents the composition of the Company's short-term borrowings:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

​

​

    

June 30, 2024

    

March 31, 2024

​

December 31, 2023

    

June 30, 2023

 

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Federal funds purchased

​

$

1,600

​

$

2,700

​

$

1,500

​

$

1,850

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Company's federal funds purchased fluctuate based on the short-term funding needs of the Company's subsidiary banks.  

As a result of their memberships in the FHLB of Des Moines, the subsidiary banks have the ability to borrow funds for short or long-term purposes under a variety of programs. The subsidiary banks can utilize FHLB advances for loan matching as a hedge against the possibility of changing interest rates and when these advances provide a less costly or more readily available source of funds than customer deposits.  

The table below presents the Company's FHLB advances as of the periods indicated:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

​

    

June 30, 2024

​

March 31, 2024

​

December 31, 2023

    

June 30, 2023

​

 

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

Term FHLB advances

 

$

135,000

​

$

135,000

​

$

135,000

 

$

135,000

Overnight FHLB advances

​

​

350,000

​

​

70,000

​

​

300,000

 

​

—

​

​

$

485,000

​

$

205,000

​

$

435,000

 

$

135,000

​

 

​

​

​

​

​

​

​

​

​

​

​

The Company had no change in term FHLB advances from March 31, 2024 to June 30, 2024.  The Company had an increase in overnight FHLB advances of $280.0 million from March 31, 2024 to June 30, 2024.  The increase was primarily due to funding needs to support the strong loan growth during the second quarter of 2024.

It is management's intention to reduce its reliance on wholesale funding, including FHLB advances and brokered deposits. Replacement of this funding with core deposits helps to reduce interest expense as wholesale funding tends to be higher cost. However, the Company may choose to utilize advances and/or brokered deposits to supplement funding needs, as this is a way for the Company to effectively and efficiently manage interest rate risk.

59

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

The table below presents the maturity schedule including weighted average interest cost for the Company's combined wholesale funding portfolio (defined as FHLB advances and brokered deposits):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 2024

​

​

​

December 31, 2023

 

​

​

​

​

 

Weighted

​

​

​

​

​

 

Weighted

​

​

​

​

​

 

Average

​

​

​

​

​

 

Average

​

Maturity:

    

Amount Due

    

Interest Rate

    

​

​

Amount Due

    

Interest Rate

 

​

​

(dollars in thousands)

Year ending December 31:

​

​

​

​

​

​

​

​

​

​

​

​

​

2024

​

$

487,607

​

5.50

%  

​

​

$

584,976

​

5.45

%

2025

​

 

6,142

​

4.75

​

​

​

 

—

​

—

​

2026

​

​

53,233

​

4.91

​

​

​

​

45,000

​

5.01

​

2027

​

​

87,520

​

4.45

​

​

​

​

45,000

​

4.82

​

2028

​

 

97,616

​

4.29

​

​

​

 

45,000

​

4.64

​

Thereafter

​

​

56,593

​

3.90

​

​

​

​

—

​

—

​

Total Wholesale Funding

 

$

788,711

​

5.07

%  

​

​

$

719,976

​

5.33

%

​

 

​

​

​

​

​

​

​

​

​

​

​

​

During the first six months of 2024, wholesale funding increased $68.7 million due to funding needs as a result of strong loan growth.

The Company renewed its revolving credit note in the second quarter of 2024.  At renewal, the available amount under the line of credit remained unchanged at $50.0 million for which there was no outstanding balance as of June 30, 2024.  Interest on the revolving line of credit is calculated at the greater of: (a) the effective Prime Rate less 0.50% or (b) 3.00% per annum.  The collateral on the revolving line of credit is 100% of the outstanding stock of the Company’s bank subsidiaries.  

The Company had subordinated notes totaling $233.3 million and $232.9 million as of June 30, 2024 and 2023, respectively.  

The Company had junior subordinated debentures totaling $48.8 million and $48.7 million as of June 30, 2024 and 2023, respectively.

STOCKHOLDERS' EQUITY

The table below presents the composition of the Company's stockholders' equity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of

 

​

​

    

June 30, 2024

    

March 31, 2024

    

December 31, 2023

    

​

June 30, 2023

 

​

​

​

(dollars in thousands)

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Common stock

​

$

16,825

​

$

16,807

​

$

16,749

​

​

$

16,714

​

​

Additional paid in capital

​

 

372,378

​

 

371,157

​

 

370,814

​

​

 

368,860

​

​

Retained earnings

​

 

608,816

​

 

580,711

​

 

554,992

​

​

 

499,024

​

​

AOCI

​

 

(61,700)

​

 

(61,333)

​

 

(55,959)

​

​

 

(61,909)

​

​

Total stockholders' equity

​

$

936,319

​

$

907,342

​

$

886,596

​

​

$

822,689

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

TCE / TA ratio (non-GAAP)*

​

 

9.00

%  

 

8.94

%  

 

8.75

%  

​

 

8.28

%

​

​

*     TCE/TA ratio is defined as total common stockholders' equity excluding goodwill and other intangibles divided by total assets. This ratio is a non-GAAP financial measure. See GAAP to Non-GAAP Reconciliations.

As of June 30, 2024 and 2023, no preferred stock was outstanding.

​

60

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

On May 19, 2022, the board of directors of the Company approved a share repurchase program under which the Company is authorized to repurchase, from time to time as the Company deems appropriate, up to 1,500,000 shares of its outstanding common stock, or approximately 10% of the outstanding shares as of December 31, 2021.  No shares were repurchased during the first six months of 2024.  There were 760,915 shares of common stock remaining for repurchase as of June 30, 2024. The stock repurchase program does not obligate the Company to repurchase any shares of its common stock, and other than repurchases that have been completed to date, there is no assurance that the Company will do so. Under the stock repurchase program, the Company may repurchase shares of common stock from time to time in open market or privately negotiated transactions. The number, timing and price of shares repurchased will depend on a number of factors, including business and market conditions, regulatory requirements, availability of funds,  and other factors, including opportunities to deploy the Company's capital. The Company may, in its discretion, begin, suspend or terminate repurchases at any time prior to the program’s expiration, without any prior notice.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity measures the ability of the Company to meet maturing obligations and its existing commitments, to withstand fluctuations in deposit levels, to fund its operations, and to provide for customer credit needs. The Company monitors liquidity risk through contingency planning stress testing on a regular basis. The Company seeks to avoid an over-concentration of funding sources and to establish and maintain contingent funding facilities that can be drawn upon if normal funding sources become unavailable. One source of liquidity is cash and short-term assets, such as interest-bearing deposits in other banks and federal funds sold, which totaled $194.4 million and $259.1 million at June 30, 2024 and 2023, respectively. The Company’s on-balance sheet liquidity position can fluctuate based on short-term activity in deposits and loans.

The subsidiary banks have a variety of sources of short-term liquidity available to them, including federal funds purchased from correspondent banks, FHLB advances, wholesale structured repurchase agreements, brokered deposits, lines of credit, borrowing at the Federal Reserve Discount Window, sales of securities AFS, and loan/lease participations or sales. The Company also generates liquidity from the regular principal payments and prepayments made on its loan/lease portfolio and on the regular monthly payments on its securities portfolio.

At June 30, 2024, the subsidiary banks had 27 lines of credit totaling $713.0 million with upstream correspondent banks, of which $252.2 million was secured and $460.8 million was unsecured. At June 30, 2024, the Company had the full $713.0 million available.

At December 31, 2023, the subsidiary banks had 25 lines of credit totaling $699.3 million with upstream correspondent banks, of which $248.5 million was secured and $470.8 million was unsecured. At December 31, 2023, $699.3 million was available.

The Company has emphasized growing the number and amount of lines of credit in an effort to strengthen this contingent source of liquidity.  Additionally, the Company maintains a $50.0 million secured revolving credit note with a variable interest rate and a maturity of June 30, 2025.  At June 30, 2024, the full $50.0 million was available.  

As of June 30, 2024, the Company had $774.6 million in actual correspondent banking deposits spread over 188 relationships. While the Company believes that these funds are relatively stable, there is the potential for large fluctuations that can impact liquidity. Seasonality and the liquidity needs of these correspondent banks can impact balances. Management closely monitors these fluctuations and runs stress scenarios to measure the impact on liquidity and interest rate risk with various levels of correspondent deposit run-off.

​

61

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

Investing activities used cash of $332.8 million during the first six months of 2024, compared to $240.6 million for the same period of 2023. The net decrease in federal funds sold was $27.3 million for the first six months of 2024, compared to a net decrease of $48.1 million for the same period of 2023. The net decrease in interest-bearing deposits at financial institutions was $10.8 million for the first six months of 2024, compared to a net increase of $98.9 million for the same period of 2023. Proceeds from calls, maturities, and paydowns of securities were $34.0 million for the first six months of 2024, compared to $78.2 million for the same period of 2023. Purchases of securities used cash of $65.8 million for the first six months of 2024, compared to $60.4 million for the same period of 2023. Proceeds from sales of securities were $445 thousand for the first six months of 2024, compared to $30.6 million for the same period of 2023. The net increase in loans/leases used cash of $319.8 million for the first six months of 2024 compared to a net increase in loans of $244.7 million for the same period of 2023.

Financing activities provided cash of $298.8 million for the first six months of 2024, compared to $204.5 million for same period of 2023.  Net increases in deposits totaled $250.7 million for the first six months of 2024, compared to net increases in deposits of $622.5 million for the same period of 2023. During the first six months of 2024, the Company's short-term borrowings increased $100 thousand, compared to a decrease in short-term borrowings of $127.8 million for the same period of 2023. There were no long-term FHLB advances during the first six months of 2024 compared to $135.0 million for the same period of 2023. There were no maturities and principal payments on FHLB term advances in the first six months of 2024 and 2023. Net increase in overnight advances totaled $50.0 million for the first six months of 2024 as compared to net decrease of $415.0 million for the same period of 2023. There were no repurchase and cancellation of shares in the first six months of 2024, as compared to $8.7 million for the same period of 2023.

Total cash provided by operating activities was $29.1 million for the first six months of 2024, compared to $60.5 million for the same period of 2023.

Throughout its history, the Company has secured additional capital through various sources, including the issuance of common and preferred stock, as well as trust preferred securities and subordinated notes.

The Company had two LIHTC securitizations that closed in 2023. LIHTC securitizations will continue to be an ongoing tool in managing liquidity and capital.

As of June 30, 2024 and December 31, 2023, the subsidiary banks remained “well-capitalized” in accordance with regulatory capital requirements administered by the federal banking authorities. Refer to Note 10 of the Consolidated Financial Statements for additional information regarding regulatory capital.

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This document (including information incorporated by reference) contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company's management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “bode,” “predict,” “suggest,”  “project,” “appear,” “plan,” “intend,” “estimate,” “annualize,” “may,” “will,” “would,” “could,” “should,” “likely,” “might,” “potential,” “continue,” “target,” “outlook,” as well as the negative forms of those words or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

​

62

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

​

The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors that could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, the following:

●The strength of local, state, national and international economies (including effects of inflationary pressures and supply chain constraints).
●The economic impact of any future terrorist threats and attacks, widespread disease or pandemics, acts of war or threats thereof (including the ongoing Israeli-Palestinian conflict and Russian invasion of Ukraine) or other adverse external events that could cause economic deterioration or instability in credit markets, and the response of local, state and national governments to any such adverse external events.
●Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies, the FASB or the PCAOB.
●Changes in local, state and federal laws, regulations and governmental policies concerning the Company’s general business, including as a result of the upcoming 2024 presidential election or any changes in response to failures of other banks.
●Changes in the interest rates and prepayment rates for the Company’s assets (including the impact of sustained, elevated interest rates).
●Competition in the financial services sector, including from non-bank competitors such as credit unions and “fintech” companies, and the inability to attract new customers.
●Changes in technology and the ability to develop and maintain secure and reliable electronic systems.
●Unexpected results of acquisitions which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated.
●The loss of key executives or employees.
●Changes in consumer spending.
●Unexpected outcomes of existing or new litigation involving the Company.
●The economic impact of exceptional weather occurrences such as tornadoes, floods and blizzards.
●Fluctuations in the value of securities held in our securities portfolio.
●Concentrations within our securities portfolio, large loans to certain borrowers (including CRE loans), and large deposits from certain clients.
●The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure.
●The level of non-performing assets on our balance sheets.
●Interruptions involving our information technology and communications systems or third-party servicers.
●Breaches or failures of our information security controls or cybersecurity-related incidents.
●The ability of the Company to manage the risks associated with the foregoing as well as anticipated.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. For a discussion of the factors that could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries, see the “Risk Factors” section included under Item 1A of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

​

​

63

Table of Contents

Part I

Item 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company, like other financial institutions, is subject to direct and indirect market risk. Direct market risk exists from changes in interest rates. The Company's net income is dependent on its net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net interest income.

In an attempt to manage the Company's exposure to changes in interest rates, management monitors the Company's interest rate risk. Each subsidiary bank has an asset/liability management committee of the board of directors that meets quarterly to review the bank's interest rate risk position and profitability, and to make or recommend adjustments for consideration by the full board of each bank.

Internal asset/liability management teams, consisting of members of the subsidiary banks’ management, meet bi-weekly to manage the mix of assets and liabilities to maximize earnings and liquidity and minimize interest rate and other risks. Management also reviews the subsidiary banks' securities portfolios, formulates investment strategies, and oversees the timing and implementation of transactions to assure attainment of the board's objectives in an effective manner. Notwithstanding the Company's interest rate risk management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net income.

In adjusting the Company's asset/liability position, the board of directors and management attempt to manage the Company's interest rate risk while maintaining or enhancing net interest margins. At times, depending on the level of general interest rates, the relationship between long-term and short-term interest rates, market conditions and competitive factors, the board of directors and management may decide to increase the Company's interest rate risk position somewhat in order to increase its net interest margin. The Company's results of operations and net portfolio values remain vulnerable to increases in interest rates and to fluctuations in the difference between long-term and short-term interest rates.

One method used to quantify interest rate risk is a short-term earnings at risk summary, which is a detailed and dynamic simulation model used to quantify the estimated exposure of net interest income to sustained interest rate changes. This simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest sensitive assets and liabilities reflected on the Company's consolidated balance sheet. This sensitivity analysis demonstrates net interest income exposure annually over a five-year horizon, assuming no balance sheet growth, no balance sheet mix change, and various interest rate scenarios including no change in rates; 100, 200, 300, and 400 basis point upward and downward shifts; where interest-bearing assets and liabilities reprice at their earliest possible repricing date.

The model assumes parallel and pro rata shifts in interest rates over a twelve-month period for the 100, 200 and 300 basis point upward and downward shifts. For the 400 basis point upward shift, the model assumes a parallel and pro rata shift in interest rates over a twenty-four month period.

Further, in recent years, the Company added additional interest rate scenarios where interest rates experience a parallel and instantaneous shift (a “shock”) upward and downward of 100, 200, 300, and 400 basis points. The Company will run additional interest rate scenarios on an as-needed basis.

The asset/liability management committees of the subsidiary bank boards of directors have established policy limits of a 10% decline in net interest income for the 200-basis point upward and downward parallel shift. For the 300 basis point upward and downward shock, the established policy limit is a 30% decline in net interest income.  The increased policy limit is appropriate as the shock scenario is extreme and unlikely and warrants a higher limit than the more realistic and traditional parallel/pro-rata shift scenarios.

64

Table of Contents

Part I

Item 3

Application of the simulation model analysis for select interest rate scenarios at the most recent quarter-end available is presented in the following table:  

​

​

​

​

​

​

​

​

​

​

NET INTEREST INCOME EXPOSURE in YEAR 1

​

    

​

    

As of June 30, 

    

As of December 31, 

    

INTEREST RATE SCENARIO

​

POLICY LIMIT

 

2024

 

2023

 

​

​

​

​

​

​

​

​

300 basis point downward parallel shock

​

(30.0)

%

2.6

%

2.1

%

200 basis point downward parallel shift

​

(10.0)

%

2.2

%

1.4

%

200 basis point upward parallel shift

 

(10.0)

%  

(3.2)

%  

(2.3)

%  

300 basis point upward parallel shock

 

(30.0)

%  

(8.4)

%  

(8.0)

%  

With the shift in funding from non-interest bearing and lower beta deposits to higher beta deposits, the Company’s balance sheet is now moderately liability sensitive. Notably, management is conservative with the repricing assumptions on loans and deposits.  For example, management does not model any delay in loan and deposit betas despite historical experience and practice of delays in deposit betas.  Additionally, management does not model mix shift or growth in its standard scenarios which can be impactful.  As an alternative, management runs separate scenarios to capture the impact on delayed beta performance and various shifts in mix of loans and deposits. Finally, management models a variety of scenarios including some that stress key assumptions to help capture and isolate the impact of the management’s more conservative approach to the assumptions in the base model.

The simulation is within the board-established policy limits for all four scenarios. Additionally, for all of the various interest rate scenarios modeled and measured by management (as described above), the results at June 30, 2024 were within established risk tolerances as established by policy or by best practice (if the interest rate scenario didn't have a specific policy limit).

Interest rate risk is considered to be one of the most significant market risks affecting the Company. For that reason, the Company engages the assistance of a national consulting firm and its risk management system to monitor and control the Company's interest rate risk exposure.  Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company's business activities.

​

​

65

Table of Contents

Part I

Item 4

CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act of 1934) as of June 30, 2024. Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective, as of the end of the period covered by this report, to ensure that information required to be disclosed in the reports filed and submitted under the Exchange Act was recorded, processed, summarized and reported as and when required.

Changes in Internal Control over Financial Reporting. There have been no significant changes to the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

​

​

66

Table of Contents

Part II

QCR HOLDINGS, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1           Legal Proceedings

There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party other than ordinary routine litigation incidental to their respective businesses.

Item 1A        Risk Factors

There have been no material changes in the risk factors applicable to the Company from those disclosed in Part I, Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.  Please refer to that section of the Company’s Form 10-K for disclosures regarding the risks and uncertainties related to the Company’s business.

Item 2           Unregistered Sales of Equity Securities and Use of Proceeds

On May 19, 2022, the board of directors of the Company approved a share repurchase program under which the Company is authorized to repurchase, from time to time as the Company deems appropriate, up to 1,500,000 shares of its outstanding common stock, or approximately 10% of the outstanding shares as of December 31, 2021. The repurchase program does not have an expiration date. There were no shares repurchased under the share repurchase program during the second quarter of 2024.

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Item 3           Defaults Upon Senior Securities

None

Item 4           Mine Safety Disclosures

Not applicable

Item 5           Other Information

During the fiscal quarter ended June 30, 2024, none of the Company’s directors or executive officers adopted or terminated a contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule10b5-1(c) or any non-Rule 10b5-1 trading arrangement.  

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67

Table of Contents

Part II

QCR HOLDINGS, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 6           Exhibits

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10.1

Addendum to Employment Agreement, dated May 20, 2024, between QCR Holdings, Inc., Quad City Bank and Trust Company, and John H. Anderson, filed as Exhibit 10.1 to the Company’s Form 8-K filed May 20, 2024 and incorporated herein by reference.

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10.2

QCR Holdings, Inc. 2024 Equity Incentive Plan, filed as Appendix A to the Company’s Definitive Proxy Statement dated April 4, 2024 and incorporated herein by reference.

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10.3

Form of QCR Holdings, Inc. 2024 Equity Incentive Plan Nonqualified Stock Option Award Agreement, filed as Exhibit 4.5 to the Company’s Form S-8 filed May 17, 2024 and incorporated herein by reference.

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10.4

Form of QCR Holdings, Inc. 2024 Equity Incentive Plan Restricted Stock Award Agreement, filed as Exhibit 4.6 to the Company’s Form S-8 filed May 17, 2024 and incorporated herein by reference.

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10.5

Form of QCR Holdings, Inc. 2024 Equity Incentive Plan Restricted Stock Unit Award Agreement, filed as Exhibit 4.7 to the Company’s Form S-8 filed May 17, 2024 and incorporated herein by reference.

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31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).

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31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).

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32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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101

Inline XBRL Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023; (ii) Consolidated Statements of Income for the three and six months ended June 30, 2024 and June 30, 2023; (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and June 30, 2023; (iv) Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2024 and June 30, 2023; (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and June 30, 2023; and (vi) Notes to the Consolidated Financial Statements.

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104

Inline XBRL cover page interactive data file pursuant to Rule 406 of Regulation S-T for the interactive data files referenced in Exhibit 101.

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68

Table of Contents

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

QCR HOLDINGS, INC.

(Registrant)

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Date

August 8, 2024

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/s/ Larry J. Helling

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Larry J. Helling

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Chief Executive Officer

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Date

August 8, 2024

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/s/ Todd A. Gipple

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Todd A. Gipple

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President

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Chief Financial Officer

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Date

August 8, 2024

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/s/ Nick W. Anderson

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Nick W. Anderson

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Chief Accounting Officer

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(Principal Accounting Officer)

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69

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