QCRH: Second Quarter Beat Our EPS Estimate by a Penny; Raising 2014 and 2015 Estimates

Zacks Small Cap Research

By Ann Heffron, CFA, CPA

NASDAQ:QCRH


Compared to the year-ago quarter, QCR Holdings, Inc.’s (QCRH) second quarter net earnings after preferred stock dividends rose 12% to $3.6 million from $3.2 million.

Click here to download a free copy of the QCRH research report: QCRH 8-15-14

Results are better than they first appear as last year’s second quarter included one-time items adding $1.4 million to earnings. These consisted of a $1.8 million bargain purchase gain on the CNB acquisition, partly offset by $0.4 million in acquisition and data conversion costs.

On a diluted per share basis, EPS decreased $0.09, or 14%, to $0.45 from $0.59, reflecting a 46% increase in average diluted shares due to the CNB acquisition in last year’s second quarter and the conversion of the Series E preferred stock in the fourth quarter, which added almost 100 basis points to the tangible common equity ratio and eliminated $1.75 million in annual preferred dividends. 

QCRH’s 2014 second quarter diluted EPS of $0.45 was a penny better than our $0.44 estimate. There were a number of positives in the quarter that beat our expectations, including a higher net interest margin, stronger loan growth, a lower loan loss provision, and more restrained growth in compensation costs.

On the other side of the ledger, asset quality weakened a bit, noncompensation expenses were greater than we had anticipated, and the effective tax rate was higher.

Also noteworthy was the redemption of the remaining $14.9 million of Series F preferred stock on the last day of the quarter, about two quarters before the yearend date we had been expecting. As a result, QCRH eliminated all remaining future preferred stock dividend payments, which will add about $0.7 million, or $0.08 per diluted share, to the Company’s bottom line in 2014. 

We are raising our 2014 EPS estimate by $0.13 to $1.83 from $1.70 and increasing our 2015 EPS estimate by $0.08 to $1.93 from $1.85.

QCR Holdings, Inc. (QCRH or the Company) is a multibank holding company, which was founded in 1993 and is headquartered in Moline, Illinois, with $2.5 billion in total assets at June 30, 2014 and 14 offices. QCRH provides a broad range of business and retail lending products and investment services through four wholly owned, full-service banking subsidiaries that are located in Illinois and Iowa. These subsidiaries include Quad City Bank and Trust Company (QCBT), based in Bettendorf, Iowa; Cedar Rapids Bank and Trust Company (CRBT), based in Cedar Rapids, Iowa; Rockford Bank and Trust Company (RB&T), based in Rockford, Illinois; and Community National Bank (CNB), based in Waterloo, Iowa following the May 2013 acquisition of Parent Community National Bancorporation by QCRH.

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