QCR Holdings (NASDAQ:QCRH) Inc. delivered strong third-quarter results, marked by firm loan growth, a steady net interest margin, and substantial fee income. The company's net interest income increased by 3.9% from the previous quarter, resulting in a reported net income of $25.1 million or $1.49 per diluted share. QCR Holdings also unveiled plans to securitize a portion of its low-income housing tax credit (LIHTC) loan portfolio, aiming to close two securitizations totaling $265 million in Q4.
InvestingPro data shows that QCR Holdings had a market cap of 808.47M USD and revenue of 325.32M USD in the last twelve months leading up to Q3 2023, marking a growth of 12.24%. The company's P/E ratio stands at 6.8, indicating that it is currently trading at a low earnings multiple.
Key takeaways from the earnings call include:
- QCR Holdings intends to maintain loan growth between 9% and 12% for Q4, with capital ratios in the top quartile of its peer group.
- The company reported steady fee income from LIHTC lending and capital markets and aims to keep capital markets revenue in the range of $45 million to $55 million over the next year.
- Wealth management revenue grew nearly 6% annually, boosted by 220 new clients and $577 million in assets under management (AUM).
- QCR Holdings announced the launch of a new wealth management business in Southwest Missouri and plans to expand into Des Moines next year.
- Non-performing assets (NPAs) increased by $8.6 million to $34.7 million, but the company expects most of the increase to be resolved without a loss.
- Non-interest expenses for Q3 were $51.1 million, primarily due to higher employee compensation and professional fees.
- The company expects to limit expense growth to 5% next year and aims to maintain a blended deposit rate close to the mid to upper 4s.
According to InvestingPro Tips, QCR Holdings' strong earnings should allow management to continue dividend payments, a trend that the company has maintained for 22 consecutive years. The company also trades at a low P/E ratio relative to near-term earnings growth, making it an attractive proposition for investors.
QCR Holdings discussed its wealth management strategy and expansion plans during the earnings call. The company uses its existing Quad City Bank charter for trust operations, allowing the wealth management group to focus on client acquisition and service. While revenue growth may not be immediate, the company anticipates building hundreds of millions of dollars in AUM in the Southwest Missouri market.
On the topic of loan growth, QCR Holdings expects steady growth, emphasizing that the LIHTC pipeline remains robust. The company regards LIHTC loans as high-quality assets with no past dues or issues. Plans for securitization are in place to manage loan growth and enhance operating results.
Regarding capital allocation, QCR Holdings stated it would be cautious with buybacks in the near term due to economic uncertainty, but plans to focus on building tangible common equity (TCE). Once TCE reaches the top quartile of the peer group, the company may consider being more aggressive on buybacks.
Larry Helling, a representative from an undisclosed company, discussed plans for LIHTC securitization in 2024. The company aims to manage its loan book for a 5% growth using securitization, which is expected to yield better operating results. Several securitizations are planned for next year, with more guidance anticipated after the fourth-quarter call.
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