QCRH: Second Quarter on Target; Maintaining 2013 and 2014 EPS Estimates

Zacks Small Cap Research

Ann Heffron, CFA

QCR Holdings, Inc. (QCRH) reported 2013 second quarter diluted EPS of $0.59, including a number of nonrecurring items. Excluding these items, operating net income was $2.54 million, or $0.46 per diluted share, matching our estimate.

Click here to download a free copy of the QCRH research report: QCRH 8-27-13

We note that results included Community National Bancorporation (CNB) for about one-half of the quarter, adding $240,000 to QCRH’s bottom line, led by a net interest margin of 3.72% (which compares to a stand-alone NIM of less than 3% for QCRH).

As previously announced, the CNB acquisition was completed on May 13, 2013 for a total of $19 million, $6 million of which was in cash and $13 million in common stock, adding total assets of $277.4 million, consisting primarily of loans totaling $190.7 million and a securities portfolio of $44.5 million, which were funded by $245.6 million of deposits and no borrowings.

Compared to the year-ago quarter, the second quarter reflected an 8% gain in net interest income to $15.7 million, mostly due to the CNB acquisition. Results were also boosted by a 26% gain in noninterest income to $5.1 million, which was partly offset by noninterest expense that rose 13% to $14.8 million.

Negatively, nonperforming loans climbed during the quarter by $10.3 million, or a whopping 52%, to $30.0 million, entirely erasing the improvement that occurred during the first quarter, driven by a few specific commercial credits moving to nonaccrual status at existing banks, as well as the addition of CNB's nonperforming assets.

We are maintaining our diluted EPS estimates at $2.00 for 2013 and $2.15 for 2014. A primary driver of profitability for the combined company going forward is the opportunity for substantial cost savings, which QCRH estimates will run about $2 million annually.

QCR Holdings, Inc. (QCRH or the Company) is a multibank holding company, which was founded in 1993 and is headquartered in Moline, Illinois, with $2.4 billion in total assets at June 30, 2013 and 18 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, Iowa, and Minnesota. 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, based in Waterloo, Iowa following the May 2013 acquisition of Parent Community National Bancorporation by QCRH.
 


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