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QCRH: Second Quarter EPS Jumps 29%

Zacks Equity Research

QCRH: Second Quarter EPS Jumps 29%

Ann Heffron, CFA

QCR Holdings, Inc. (QCRH) posted second quarter diluted EPS of $0.44, up 29% from the $0.34 EPS reported last year. Compared to the year-ago quarter, second quarter results were boosted by a gain in net interest income from 7% growth in average interest-earning assets, a significantly reduced loan loss provision, and a 2.8% decline in the effective tax rate, partly offset by a modest drop in noninterest income stemming from higher losses on the sales of OREO and a rise in noninterest expense due to a 12% increase in compensation expense.

However, diluted EPS came in a nickel below our $0.49 per share estimate, as noninterest revenue and noninterest expense were modestly worse than our projections. Noninterest revenue included a combined loss of $0.3 million from the sales of securities and OREO (our estimate was a loss of $50,000), while noninterest expense was $0.1 million above our estimate, largely due to higher other noninterest expense. These items largely accounted for the $0.4 million shortfall from our pretax earnings estimate.

The Company continued to reduce problem assets, and it appears that QCRH has turned the corner regarding asset quality. Nonperforming loans fell $3.3 million, or 11%, sequentially to $27.3 million, while foreclosed assets rose $0.9 million, or 10%, to $9.2 million. As a percentage of total loans and OREO, nonperforming assets fell 21 basis points sequentially to 2.98% from 3.19% at the end of the first quarter and 19 basis points year over year from 3.17%.

At the end of the second quarter, QCRH redeemed $10.2 million of the $40.1 million in SBLF preferred stock issued to the US Treasury at the end of 2011. Importantly, this will reduce the dividend payment on the SBLF preferred by $511,000, or $0.11 per share annually, and increase diluted EPS by a like amount.

QCR Holdings, Inc. (QCRH or the Company) is a multibank holding company, which was founded in 1993 and is headquartered in Moline, Illinois, with $2.0 billion in total assets at June 30, 2012 and 10 offices. QCRH provides a broad range of business and retail lending products and investment services through three 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; and Rockford Bank and Trust Company (RB&T), based in Rockford, Illinois.

To view a free copy of our most recent research report on QCRH, visit Ann Heffron's page at Zacks Small-Cap Research .

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