QCR Holdings (QCRH) Q3 2026 earnings review
QCR Holdings earns more on its loans, but revenue falls
QCR Holdings earned more on its loans and held costs down, but fee income fell short of last year's record. Profit per share reached $2.21 because buybacks shrank the share count, while total revenue slipped from a year ago. Chief executive Todd Gipple said several affordable-housing deals moved into the fourth quarter.
| Revenue (interest income plus fees) | $99.2M $101.5M a year ago |
|---|---|
| Profit per share, diluted | $2.21 $2.16 a year ago, a record |
| Net interest margin, tax-equivalent | 3.58% 3.55% last quarter; the plan was flat |
| Fourth-quarter fee outlook (capital markets) | $18–20M $24.5M earned a year ago |
⚖️ Verdict: 🟢 Bullish
The story got better because the bank now earns more on each dollar it lends, after two misses on its margin targets, and its weak loans are the fewest since 2019. The bad news: deposits left in September, so the bank borrowed $361 million to fill the hole. The beat on interest income says the plan was cautious, not that the worry is over.
The question now is whether the bank can grow loans without wholesale borrowings. Either the September deposit outflow reversed, as finance chief Nick Anderson says, and borrowings fall by year-end; or the bank keeps buying funding and the margin stops widening. The December borrowings balance will tell.
🐂 Bull Case
The Bank Earns More on Its Loans Without Growing Them
QCR Holdings sold or securitized $730 million of affordable-housing loans over the past year, so its loan book matches a year ago. Chief executive Todd Gipple wants fees from those sales while "operating with a smaller balance sheet and deploying capital more efficiently".
Interest income still grew, because the bank paid less for its funding. Net interest income, the gap between loan earnings and deposit costs, rose 6% from a year ago. The margin widened after the company had planned for no change.
- Net interest income: $68.7 million, up 6% from a year ago
- Last four quarters: up $24.3 million, or 10%, on flat loans
- Margin: 3.58% against 3.55% in June
- Interest paid on deposits: 2.64%, down from 3.07% a year ago
One good quarter does not settle the margin worry. The bank missed its own margin targets in the two prior quarters, and finance chief Nick Anderson again plans for a flat fourth-quarter margin.
What to watch: the fourth-quarter tax-equivalent margin against the flat plan, due in January. A second reading at or above 3.58% would show the bank can hold its margin while recycling loans into fees.
Bad Loans Are the Fewest Since 2019
Last quarter QCR Holdings reserved against one troubled property loan, and its share of weak loans ticked up. This quarter that share fell to 1.67%, which the company calls "the lowest percentage since 2019".
The improvement came from "a combination of loan payoffs, credit upgrades, and charge-offs across several criticized borrower relationships", the company said. Net loan losses of $3.1 million were the lowest this year, helped by the shrinking m2 lease book.
The weak-loan share has improved for two quarters in a row, so this is a trend. But the provision barely moved, at $4.5 million, so the bank still adds reserves at the pace of a growing book.
What to watch: the owner-occupied property allowance in the quarterly filing. A fall would confirm the problem loan was worked out, not written down.
Costs Grew Half as Fast as Revenue This Year
QCR Holdings aims to keep annual expense growth under 5%. Nine months in, revenue rose 9.3% while noninterest expense, the cost of staff, branches and systems, rose 4.8%, so the rule held.
Third-quarter expense of $54.7 million was 3% below a year ago, when heavy bonus accruals inflated the base. Pay held at 33.1% of revenue, but occupancy costs rose 0.7 percentage points of revenue on the core-system conversion.
By our math, the fourth-quarter range of $54 to $57 million leaves full-year expense within 1% of last year. The catch is that bonuses track fee income, so the range assumes fees land inside their own.
What to watch: fourth-quarter salaries and benefits in January. A figure near last year's $36.9 million would mean the bonus pool is back.
🐻 Bear Case
Deposits Left and Borrowings Replaced Them
QCR Holdings credits its wider margin to "disciplined funding costs and higher average noninterest-bearing deposits". The quarter-end balance sheet says otherwise. Deposits fell $214 million, and the bank filled the gap with $361 million of borrowings, mostly overnight.
Loans now equal 99.9% of deposits, up from 94.8% in June. Finance chief Nick Anderson blamed timing: "those deposits have since returned to our balance sheet along with additional deposit growth shortly after the quarter ended".
- Borrowings: 12.4% of all funding, the highest share in five quarters
- Interest-bearing demand deposits: down $210 million from June
- Noninterest-bearing deposits: $1.02 billion, up for a fourth straight quarter
- Overnight Federal Home Loan Bank advances: $623 million, up from $258 million
This matters because overnight advances cost 3.83% while interest-bearing deposits cost 2.64%, so each borrowed dollar narrows the margin the bank just widened. Anderson also expects "continued competition for deposits and changes in our funding mix are expected to largely offset that benefit" from higher rates.
What to watch: total borrowings at December 31. A figure near $1 billion would mean the bank now funds loan growth in the wholesale market, not with deposits.
Fee Income Trails Last Year and the Outlook Says So
QCR Holdings earns capital markets revenue, fees from arranging interest-rate swaps on affordable-housing loans, when it originates them. The loans behind those fees reached $2.35 billion, or 33% of all loans, this quarter.
The fees did not keep pace. Capital markets revenue of $16.9 million was 29% below last year's $23.8 million, and it pulled total revenue below a year ago. Gipple said "While several transactions expected to close in the third quarter shifted into the fourth quarter", the business performs over time.
The outlook confirms a lower level rather than a delay, because the fourth-quarter range of $18 to $20 million sits below last year's $24.5 million. By our math, the four-quarter range then leaves about $15 million a quarter for early 2027. Affordable-housing loans drove 80% of this quarter's loan growth, so the concentration grows while the fees shrink.
What to watch: fourth-quarter capital markets revenue against the $18 to $20 million range. A figure below it would be the first miss on this fee line in two years.
Record Profit per Share Owes to Fewer Shares
QCR Holdings called $2.21 of diluted earnings per share a record. Net income of $36.4 million was slightly below a year ago. The per-share record exists because the diluted share count fell 3.3% and the tax rate slipped.
The bank keeps buying its own shares, at rising prices and in smaller amounts. It spent $9.5 million at about $100.62 a share by our math, which the company calls "at an attractive multiple relative to TBV".
Capital weakened at the same time, because higher rates cut the bond portfolio's value by $23.8 million after tax. The buyback now competes with a thinner cushion.
What to watch: the fourth-quarter repurchase amount and average price. A smaller amount at a higher price would confirm the programme is running out of cheap shares.
Risks this quarter didn't answer
Four standing concerns got no new information in the press release. Each could move the case once the quarterly filing or the call supplies the number.
- Affordable-housing loan sales: in August the company planned a restart in early 2027 under a new structure; the release does not mention it.
- The $10 billion asset line: assets reached $9.8 billion, $205 million short, and the loan outlook implies $180 to $270 million of growth by our math.
- The owner-occupied commercial property loan behind last quarter's reserve build: the filing's allowance table will show whether that reserve has been used or released.
- Retained securitization interests: trading securities of $116 million hold the first-loss pieces of past loan sales; the release gives no mark.
👓 Other Themes
The Fed Raised Rates in September
The Federal Reserve raised its benchmark rate in September. Finance chief Nick Anderson expects the move to be "slightly accretive to NIM in the near-term" because loans reprice before deposits. He still plans for a flat fourth-quarter margin, as deposit competition absorbs the gain. Higher rates also cut the bond portfolio's value this quarter.
Three of Four Core System Conversions Done
QCR Holdings completed its third core banking system conversion in early October, part of a project to move its four bank charters onto one system. The work lifted occupancy and equipment expense to $8.2 million this quarter from $7.3 million. One conversion remains, planned for April 2027, and the company expects the cost savings to show mainly from 2028.
💲 Other KPIs
Up 12% from a year ago but 3% below last quarter by our math, which the company describes as consistent. Wealth management revenue combines trust fees and investment advisory fees. Growth has run between 10% and 12% in four of the last five quarters, and the company credits new client relationships and market gains.
Up 11% from a year ago but only 0.7% from June, the smallest quarterly gain in the last four. Tangible book value is equity per share after removing goodwill. Higher market rates cut the value of the bond portfolio this quarter, which absorbed most of the quarter's profit at the equity line.
Up 9% from a year ago and 2% from June, slower than the 6% jump last quarter. Municipal bonds make up $1.14 billion of the total and yield 6.35% on a tax-equivalent basis, above the 6.06% loan yield, so the bank keeps adding bonds while it sells loans.
🔮 Guidance
Unchanged. The plan calls for loans to grow at a 10% to 15% yearly pace in the fourth quarter, above the 10.8% pace of the third. By our math that adds $180 to $270 million of loans and takes total assets, now $9.8 billion, close to the $10 billion mark that brings extra regulatory cost.
New. Finance chief Nick Anderson plans for a flat margin, assuming no further Federal Reserve move, because deposit competition should offset the lift from September's rate rise. The record on this line runs one way for two of the last four quarters: a miss, a miss, then this quarter's gain of three hundredths of a point against a flat plan.
New. The range sits above this quarter's $16.9 million because deals that slipped from the third quarter should close, Gipple said. It also sits below the $24.5 million the bank earned a year ago, so by our math fourth-quarter fee income would fall about 22% from a year ago even at the midpoint.
Unchanged. The window now runs from the fourth quarter of 2026 to the third quarter of 2027. After the $18 to $20 million the company expects in the fourth quarter, by our math the range leaves $40 to $52 million for the first three quarters of 2027, about $15 million a quarter, roughly the average of the last three quarters.
Unchanged. The company reaffirmed the range and keeps its target of annual expense growth below 5%. By our math the range puts full-year 2026 expense between 0.7% below and 0.7% above last year's $215.6 million, a comfortable margin under the ceiling. The condition is that fee income and loan growth land inside their own ranges, since bonuses track them.
New. The rate stays low because much of the bank's income comes from tax-exempt municipal bonds and affordable-housing loans. This quarter's 8.9% sat inside the same band, and a mix with more taxable fee income would push the rate toward the top.
❓ Key Questions
Is the early-2027 restart of affordable-housing loan sales still on?
The release says nothing about the new whole-loan sale structure promised for early 2027. Without sales, the fee engine has no capital recycling and total assets drift toward the $10 billion line.
Will total assets cross $10 billion by year-end?
Assets are $9.8 billion and the loan outlook implies $180 to $270 million of growth by our math. Crossing early would start the clock on Durbin interchange losses and higher regulatory cost.
How much of the extra borrowing has already reversed?
Anderson said the correspondent deposits came back after quarter-end. The amount matters because overnight advances cost more than a point above deposits and would eat the margin gain.
What happened to the property loan reserved for in June?
That credit took a $5.9 million reserve build last quarter. Criticized loans fell this quarter, but the release does not say whether that loan was paid off, upgraded or charged off.
At what price does the buyback stop making sense?
The bank paid about $100.62 a share this quarter, 1.63 times tangible book value by our math, and called it attractive. The amount bought has fallen for two quarters; management should say where the line is.