QCR Holdings QCRH Form 10-Q filing Q3 FY2025

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​

Throughout this Quarterly Report on Form 10-Q, we use certain acronyms and abbreviations, as defined in Note 1 to the Consolidated Financial Statements.

​

​

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

As of September 30, 2025 and December 31, 2024

​

​

See Notes to Consolidated Financial Statements (Unaudited)

​

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended September 30, 2025 and 2024

​

​

See Notes to Consolidated Financial Statements (Unaudited)

​

​

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Nine Months Ended September 30, 2025 and 2024

​

​

​

​

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

For the Three and Nine Months Ended September 30, 2025 and 2024

​

​

See Notes to Consolidated Financial Statements (Unaudited)

​

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED**)**

For the Three and Nine Months Ended September 30, 2025 and 2024

​

​

​

See Notes to Consolidated Financial Statements (Unaudited)

​

QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the Nine Months Ended September 30, 2025 and 2024

​

​

See Notes to Consolidated Financial Statements (Unaudited)

​

Part I

Item 1

QCR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2025

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation: The interim unaudited Consolidated Financial Statements contained herein should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes to the Consolidated Financial Statements for the fiscal year ended December 31, 2024, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 28, 2025. Accordingly, footnote disclosures, which would substantially duplicate the disclosures contained in the audited Consolidated Financial Statements, have been omitted.

The financial information of the Company included herein has been prepared in accordance with GAAP for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. Any differences appearing between the numbers presented in financial statements and management's discussion and analysis are due to rounding. The results of the interim period ended September 30, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025, or for any other period.

The acronyms and abbreviations identified below are used throughout this Quarterly Report on Form 10-Q. It may be helpful to refer back to this page as you read this report.

​ ​

ACL: Allowance for credit losses FTEs: Full-time equivalents

AFS: Available for sale GAAP: Generally Accepted Accounting Principles

Allowance: Allowance for credit losses GB: Guaranty Bank

AOCI: Accumulated other comprehensive income (loss) GFED: Guaranty Federal Bancshares, Inc.

ASC: Accounting Standards Codification HTM: Held to maturity

ASU: Accounting Standards Update ICS: Insured Cash Sweep

BOLI: Bank-owned life insurance LIHTC: Low-income housing tax credit

Caps: Interest rate cap derivatives m2: m2 Equipment Finance, LLC

CDARS: Certificate of Deposit Account Registry Service NIM: Net interest margin

CECL: Current Expected Credit Losses NPA: Nonperforming asset

Community National: Community National Bancorporation NPL: Nonperforming loan

Company: QCR Holdings, Inc. OBS: Off-balance sheet

CRBT: Cedar Rapids Bank & Trust Company OREO: Other real estate owned

CRE: Commercial real estate PCAOB: Public Company Accounting Oversight Board

CSB: Community State Bank Provision: Provision for credit losses

C&I: Commercial and industrial QCBT: Quad City Bank & Trust Company

EBA: Excess balance account ROAA: Return on average assets

EPS: Earnings per share ROAE: Return on average equity

Exchange Act: Securities Exchange Act of 1934, as SEC: Securities and Exchange Commission

amended SOFR: Secured Overnight Financing Rate

FASB: Financial Accounting Standards Board SPE: Special purpose entity

FDIC: Federal Deposit Insurance Corporation Swaption: Swap option

Federal Reserve: Board of Governors of the Federal TA: Tangible assets

Reserve System TCE: Tangible common equity

FHLB: Federal Home Loan Bank TEY: Tax equivalent yield

FRB: Federal Reserve Bank of Chicago VIE: Variable interest entities

​

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries which include the accounts of four commercial banks: QCBT, CRBT, CSB and GB. All four banks are state-chartered commercial banks and all are members of the Federal Reserve system. The Company has historically engaged in direct financing lease contracts through m2, a wholly owned subsidiary of QCBT. Since the third quarter of 2024, m2 has discontinued offering new loans and leases. Additionally, the Company also engages in wealth management services through its banking subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Recent accounting developments:

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” Under the standard, the accounting guidance enhances the transparency and decision usefulness of income tax disclosures. Investors, lenders, creditors and other allocators of capital information will be able to use the expanded disclosures to better assess how an entity’s operations and related tax risks and tax planning and operation opportunities affect its tax rate and prospects for future cash flows. The ASU is effective for public business entities for annual periods beginning after December 15, 2024. The standard is not expected to have a significant impact on the Company’s financial statements.

In March 2024, the FASB issued ASU 2024-01, “Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards.” Under the standard, the accounting guidance improves GAAP by adding an illustrative example to demonstrate how an entity should apply the scope guidance of “Topic 718, Compensation - Stock Compensation” for profits interest and similar awards. The illustrative examples will benefit investors and other allocators of capital by providing them with more consistent information. The ASU is effective for public business entities for annual periods beginning after December 15, 2024, and interim periods within those annual periods. The standard was adopted on January 1, 2025 and did not have a significant impact on the Company’s financial statements.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses.” Under the standard, the accounting guidance improves disclosures about a public business entity’s expenses, and provides more detailed information about the types of expenses in commonly presented expense captions. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The standard is not expected to have a significant impact on the Company’s financial statements.

​

NOTE 2– INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of September 30, 2025 and December 31, 2024 are summarized as follows:

​

​

​

The Company's HTM municipal securities consist largely of private issues of municipal debt. The large majority of the municipalities are located within the Midwest. The municipal debt investments are underwritten using specific guidelines with ongoing monitoring.

​

The Company's residential mortgage-backed and related securities portfolio consists entirely of government sponsored or government guaranteed securities. The Company has not invested in private mortgage-backed securities or pooled trust preferred securities.

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2025, and December 31, 2024, are summarized in the tables below. Securities AFS, for which an allowance for credit losses has been provided, are not included in these disclosures as there are no unrealized losses remaining after consideration of the ACL.

​

​

​

As of September 30, 2025, the investment portfolio included 680 securities. Of this number, 518 securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately 13.3% of the total amortized cost of the portfolio. Of these 518 securities, there were 451 securities that were in an unrealized loss position for twelve months or more. Management has concluded unrealized losses as of September 30, 2025 were temporary due to the changing interest rate environment.

​

During 2023, the Company’s impairment evaluation determined that one publicly traded debt security experienced a decline in fair value due to credit quality, rather than market factors. As a result, the Company recognized a credit loss expense of $989 thousand in the first quarter of 2023 and established an ACL on the related AFS security. In 2024, the remaining ACL on the related AFS security was removed as the security had been sold.

​

The following table presents the activity in the allowance for credit losses for held to maturity and available for sale securities by major security type for the three and nine months ended September 30, 2025 and 2024:

​

​

Trading securities had a fair value of $83.2 million as of September 30, 2025 and $83.5 million as of December 31, 2024 and consist of retained beneficial interests acquired in conjunction with Freddie Mac securitizations completed by the Company in 2023 and 2024. The change in fair value on trading securities for the nine months ended September 30, 2025 was a net gain of $530 thousand. The change in market value on trading securities for the nine months ended September 30, 2024 was a net gain of $53 thousand. See also Note 4 to the Consolidated Financial Statements for details of these securitizations.

There were no transfers of securities between classifications during both the nine months ended September 30, 2025 and 2024.

There were no sales of securities during both the three and nine months ended September 30, 2025. There were no sales of securities during the three months ended September 30, 2024. There was one security sold during the nine months ended September 30, 2024 which was identified as AFS. Information on proceeds received, as well as the gains and losses from the sale of securities, are as follows:

​

​

The amortized cost and fair value of securities as of September 30, 2025 by contractual maturity are shown below. Expected maturities of residential mortgage-backed and related securities and asset-backed securities may differ from contractual maturities because the residential mortgages underlying the securities may be prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following table:

​

​

Portions of the U.S. government sponsored agency securities and municipal securities contain call options, which, at the discretion of the issuer, terminate the security at par and at predetermined dates prior to the stated maturity, summarized as follows as of September 30, 2025:

​

​

As of September 30, 2025, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 80 issuers with fair values totaling $106.0 million and revenue bonds, issued by 162 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $875.6 million. The Company also held investments in general obligation bonds in 18 states, including 9 states in which the aggregate fair value exceeded $5.0 million, and in revenue bonds in 31 states, including 14 states in which the aggregate fair value exceeded $5.0 million.

As of December 31, 2024, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 79 issuers with fair values totaling $103.5 million and revenue bonds, issued by 165 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $828.0 million. The Company held investments in general obligation bonds in 18 states, including nine states in which the aggregate fair value exceeded $5.0 million, and in revenue bonds in 31 states, including 13 states in which the aggregate fair value exceeded $5.0 million.

The Company monitors the investments and concentration closely. Both general obligation and revenue bonds are diversified across many issuers. As of September 30, 2025 and December 31, 2024, the Company did not hold general obligation bonds of any single issuer, that in aggregate exceed 10% of the Company’s stockholders’ equity. Of the general obligation and revenue bonds in the Company's portfolio, the majority are unrated bonds that represent private issuances. All unrated bonds were underwritten according to the Company’s loan underwriting standards and have an average loan risk rating of 2, indicating very high quality. Additionally, many of these bonds are funding essential municipal services such as water, sewer, education, and medical facilities.

The Company's municipal securities are owned by the four charters, whose investment policies set forth limits for various subcategories within the municipal securities portfolio. The investments of each charter are monitored individually, and as of September 30, 2025, all were within policy limitations approved by the Company’s board of directors. Policy limits are calculated as a percentage of each charter's total risk-based capital.

As of September 30, 2025, the Company's standard monitoring of its municipal securities portfolio had not uncovered any facts or circumstances resulting in significantly different credit ratings than those assigned by a nationally recognized statistical rating organization, or in the case of unrated bonds, the rating assigned using the credit underwriting standards.

​

The following table summarizes the fair value of investment securities pledged and held under derivatives, public deposits, short-term borrowings and other borrowings as of September 30, 2025 and December 31, 2024:

​

• Municipal securities with an amortized cost of $200.3 million were pledged on secured borrowings as of September 30, 2025.

​

​

NOTE 3 – LOANS/LEASES RECEIVABLE

The composition of the loan/lease portfolio as of September 30, 2025 and December 31, 2024 is presented as follows:

​

• Includes equipment financing agreements outstanding through m2, totaling $206.9 million and $303.2 million as of September 30, 2025 and December 31, 2024, respectively.

** Management performs an evaluation of the estimated unguaranteed residual values of leased assets on an annual basis, at a minimum. The evaluation consists of discussions with reputable and current vendors, which is combined with management's expertise and understanding of the current states of particular industries to determine informal valuations of the equipment. As necessary and where available, management will utilize valuations by independent appraisers. The majority of leases with residual values contain a lease options rider, which requires the lessee to pay the residual value directly, finance the payment of the residual value, or extend the lease term to pay the residual value. In these cases, the residual value is protected and the risk of loss is minimal.

*** Includes residential real estate loans held for sale totaling $1.5 million and $2.1 million as of September 30, 2025 and December 31, 2024, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans, totaled $32.2 million and $30.9 million at September 30, 2025 and December 31, 2024, respectively, and was included in Other Assets on the consolidated balance sheets.

​

Changes in accretable discounts on acquired loans for the three and nine months ended September 30, 2025 and 2024, respectively, are presented as follows:

​

​

​

The aging of the loan/lease portfolio by classes of loans/leases as of September 30, 2025 and December 31, 2024 is presented as follows:

​

​

​

NPLs by classes of loans/leases as of September 30, 2025 and December 31, 2024 are presented as follows:

​

​

​

​

The Company did not recognize any interest income on nonaccrual loans during the nine months ended September 30, 2025 and 2024.

Changes in the ACL on loans/leases by portfolio segment for the three and nine months ended September 30, 2025 and 2024, respectively, are presented as follows:

​

​

• Included within the C&I – Other column are ACL on leases with a beginning balance of $423 thousand, negative provision of $41 thousand, charge-offs of $12 thousand and recoveries of $9 thousand. ACL on leases was $379 thousand as of September 30, 2025.

** Included within the C&I – Other column are ACL on leases with a beginning balance of $580 thousand, provision of $13 thousand, charge-offs of $233 thousand and recoveries of $19 thousand. ACL on leases was $379 thousand as of September 30, 2025.

​

​

• Included within the C&I – Other column are ACL on leases with a beginning balance of $800 thousand, negative provision of $21 thousand, charge-offs of $104 thousand and recoveries of $17 thousand. ACL on leases was $692 thousand as of September 30, 2024.

** Included within the C&I – Other column are ACL on leases with a beginning balance of $992 thousand, provision of $195 thousand, charge-offs of $193 thousand and recoveries of $88 thousand. ACL on leases was $692 thousand as of September 30, 2024.

​

The composition of the ACL on loans/leases by portfolio segment based on evaluation method as of September 30, 2025 and December 31, 2024 are as follows:

​

​

• Included within the C&I – other category are leases individually evaluated of $412 thousand with a related allowance for credit losses of $62 thousand and leases collectively evaluated of $10.7 million with a related allowance for credit losses of $317 thousand as of September 30, 2025.

​

• Included within the C&I – other category are leases individually evaluated of $259 thousand with a related allowance for credit losses of $93 thousand and leases collectively evaluated of $16.8 million with a related allowance for credit losses of $487 thousand as of December 31, 2024.

The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses as of September 30, 2025 and December 31, 2024:

​

• Included within the C&I – other category are leases individually evaluated of $412 thousand with primary collateral of equipment.

​

• Included within the C&I – other category are leases individually evaluated of $259 thousand with primary collateral of equipment.

For all loans except direct financing leases and equipment financing agreements, the Company’s credit quality indicator consists of internally assigned risk ratings. Each such loan is assigned a risk rating upon origination. The risk rating is reviewed every 15 months, at a minimum, and on an as-needed basis depending on the specific circumstances of the loan.

​

For certain C&I loans (including equipment financing agreements and direct financing leases), the Company’s credit quality indicator is performance determined by delinquency status. Delinquency status is updated daily by the Company’s loan system.

The following tables show the credit quality indicator of loans by class of receivable and year of origination as of September 30, 2025:

​

​

​

• Performing = loans/leases accruing and less than 90 days past due. Nonperforming = loans/leases on nonaccrual and accruing loans/leases that are greater than or equal to 90 days past due.

The following table shows the gross charge-offs of loans and leases by class of receivable and year of origination for the three and nine months ended September 30, 2025:

​

​

The following tables show the credit quality indicator of loans by class of receivable and year of origination as of December 31, 2024:

​

​

​

• Performing = loans/leases accruing and less than 90 days past due. Nonperforming = loans/leases on nonaccrual and accruing loans/leases that are greater than or equal to 90 days past due.

​

The following table shows the gross charge-offs of loans and leases by class of receivable and year of origination for the three and nine months ended September 30, 2024:

​

​

There were no loan and lease modifications to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2025. Any loan and lease modifications to borrowers experiencing financial difficulty during 2024 were deemed immaterial.

​

Changes in the ACL for OBS exposures for the three and nine months ended September 30, 2025 and 2024 are presented as follows:

​

​

​

NOTE 4 – SECURITIZATIONS AND VARIABLE INTEREST ENTITIES

​

In prior years, the Company completed four different Freddie Mac sponsored securitizations. The Company retained beneficial interests from each securitization which are classified as trading securities on the consolidated balance sheets. Details related to the securitizations and related VIEs can be found in Note 4 to the Consolidated Financial Statements included under Item 8 of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

​

In August 2025, the Company securitized $200.3 million of HTM municipal securities. The securitization was comprised of Class A Certificates of $134.2 million and Class B Certificates of $66.1 million. The Class A Certificates were sold to third party investors, and the Class B Certificates were retained by the Company. The Class B Certificates provide the first loss support and are subordinate to the Class A Certificates. In order to execute this transaction, the Company created a new bankruptcy-remote special purpose entity (a “Sponsor SPE”), through which the transaction was executed, and which is consolidated by the Company. Based on the structure of the transaction, the Company retains effective control of the $200.3 million of HTM municipal securities and accounts for the transaction as a secured borrowing. The full $200.3 million of HTM municipal securities will remain on the balance sheet denoted as collateralizing the borrowing and the $134.2 million of the Class A Certificates sold to third party investors is accounted for as a secured term borrowing and classified with other borrowings on the Company’s consolidated balance sheet.

​

At September 30, 2025, the Company determined it was not the primary beneficiary of the various external VIEs involved in these securitizations primarily because the Company did not have the power to direct the activities that most significantly impact the VIEs. Evaluation and assessment of VIEs for consolidation is performed on an ongoing basis by management. Any changes in facts and circumstances occurring since the previous primary beneficiary determination will be considered as part of this ongoing assessment.

​

The Company’s total assets related to the VIEs as of September 30, 2025 and December 31, 2024 were $83.2 million and $83.5 million, respectively and there were no liabilities recorded. The Company’s maximum exposure to loss associated with these VIEs consists of the capital invested plus any unfunded equity commitments that are binding. As of September 30, 2025, the Company’s maximum exposure to loss related to the VIEs was $85.5 million.

​

NOTE 5 – DERIVATIVES AND HEDGING ACTIVITIES

Derivatives are summarized as follows as of September 30, 2025 and December 31, 2024:

​

​

The Company uses interest rate swap, cap, collar and swaption instruments to manage interest rate risk related to the variability of interest payments due to changes in interest rates.

Changes in fair values of derivative financial instruments accounted for as cash flow hedges, to the extent that they are included in the assessment of effectiveness, are recorded as a component of AOCI. Changes in fair values of derivative financial instruments accounted for as fair value hedges, to the extent that they are included in the assessment of effectiveness, are recorded as a component of interest income/expense.

The Company has entered into interest rate swaps to hedge against the risk of rising rates on one of its variable rate subordinated notes and its variable rate trust preferred securities. All of the interest rate swaps are designated as cash flow hedges in accordance with ASC 815. The details of the interest rate swaps are as follows:

​

​

The Company uses interest rate collars in an effort to manage future interest rate exposure on variable rate loans. The collar hedging strategy stabilizes interest rate fluctuations by setting both a floor and a cap. The collar is designated as a cash flow hedge in accordance with ASC 815. The details of the interest rate collar is as follows:

​

​

For derivative instruments that are designated as unhedged, the change in fair value of the derivative instrument is recognized into current earnings. The details of the unhedged interest rate caps are as follows:

​

​

During the third quarter of 2024, the Company executed a derivative strategy more commonly known as a swaption. The swaptions are designed to hedge the Company’s regulatory capital ratios against the adverse effects of a significant decline in long-term interest rates. The swaptions are designated as unhedged in accordance with ASC 815, therefore the change in fair value of the derivative instrument is recognized into current earnings. An initial premium of $4.5 million was paid upfront for the swaptions. The details of the swaptions are as follows:

​

​

The Company has entered into interest rate swaps to hedge against the risk of declining interest rates on floating rate loans. The interest rate swaps are designated as cash flow hedges in accordance with ASC 815. The details of the interest rate swaps are as follows:

​

​

The Company uses interest rate collars in an effort to manage future interest rate exposure on variable rate deposits. The collar hedging strategy stabilizes interest rate fluctuations by setting both a floor and a cap. The collars are designated as a cash flow hedge in accordance with ASC 815. The details of the interest rate collars are as follows:

​

​

The Company has entered into interest rate swaps to hedge against the risk of rising rates on loans. The interest rate swaps are designated as fair value hedges in accordance with ASC 815. The details of the interest rate swaps are as follows:

​

​

The Company has also entered into interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Company enters into an interest rate swap with a customer while at the same time entering into an equal and offsetting interest rate swap with an upstream counterparty. Additionally, the Company receives an upfront, non-refundable fee from the upstream counterparty, dependent upon the pricing that is recognized upon receipt from the counterparty. Because the Company acts as an intermediary for the customer, changes in the fair value of the underlying derivative contracts, for the most part, offset each other and do not significantly impact the Company’s results of operations.

Interest rate swaps that were not designated as hedging instruments as of September 30, 2025 and December 31, 2024 are summarized as follows:

​

​

The effect of cash flow hedging and fair value accounting on the consolidated statements of income for the three and nine months ended September 30, 2025 and 2024 are as follows:

​

​

​

The Company’s hedged interest rate swaps and non-hedged interest rate swaps are collateralized with cash and investment securities with carrying values as follows, as of the dates presented:

​

​

The Company may be exposed to credit risk in the event of non-performance by the counterparties to its interest rate derivative agreements. The Company assesses the credit risk of its financial institution counterparties by monitoring publicly available credit ratings and financial information. Additionally, the Company manages financial institution counterparty credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, and uses ISDA master agreements, central clearing mechanisms and counterparty limits. The agreements contain bilateral collateral agreements with the amount of collateral to be posted generally governed by the settlement value of outstanding swaps. The Company manages the risk of default by its borrower/customer counterparties through its normal loan underwriting and credit monitoring policies and procedures. The Company underwrites the combination of the base loan amount and potential swap exposure and focuses on high quality borrowers with strong collateral values. The majority of the Company’s swapped loan portfolio consists of loans on projects, with loan-to-values, including the potential swap exposure, below 65%. The Company does not currently anticipate any losses from failure of interest rate derivative counterparties to honor their obligations.

​

NOTE 6 – OTHER BORROWINGS

​

In August 2025, the Company pledged a portion of its HTM municipal securities in exchange for term borrowings through a repurchase agreement. The repurchase agreements are reported as secured borrowings, as the Company maintains effective control of the financed assets. The secured borrowing has a fixed rate of 4.0% until the remarketing date of July 1, 2028. The table below sets forth information regarding the Company’s repurchase agreements accounted for as secured other borrowings on the Company's consolidated balance sheets for September 30, 2025 and December 31, 2024.

​

​

Refer to Note 2 to the Consolidated Financial Statements for collateral pledged and held under our repurchase agreements.

​

​

​

NOTE 7 – SUBORDINATED NOTES

​

2025 Issuance of Subordinated Notes

​

On September 15, 2025, the Company completed private placements of $70.0 million in aggregate principal amount subordinated notes. The private placements were issued in two tranches consisting of $50.0 million in aggregate principal amount of 6.875% Fixed-to-Floating Rate Subordinated Notes due September 2035 (the “2035 Notes”) and $20.0 million in aggregate principal amount of 7.225% Fixed-to-Floating Subordinated Notes due September 2037 (the “2037 Notes”).

​

The 2035 Notes will bear interest at a fixed rate of 6.875% per year from, and including, September 15, 2025 to, but excluding, September 15, 2030. From, and including, September 15, 2030 to, but excluding, the stated maturity date of September 15, 2035 (or earlier redemption date) the interest rate will reset quarterly to a floating rate, which is expected to be the then current three-month term SOFR plus 350 basis points. The 2035 Notes are redeemable, in whole or in part, at the Company’s option on or after September 15, 2030, or earlier upon the occurrence of certain events.

​

The 2037 Notes will bear interest at a fixed rate of 7.225% per year from, and including, September 15, 2025 to, but excluding, September 15, 2032. From, and including, September 15, 2032 to, but excluding, the stated maturity date of September 15, 2037 (or earlier redemption date) the interest rate will reset quarterly to a floating rate, which is expected to be the then current three-month term SOFR plus 375 basis points. The 2037 Notes are redeemable, in whole or in part, at the Company’s option on or after September 15, 2032, or earlier upon the occurrence of certain events.

​

Redemption of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030

​

On July 25, 2025, the Company issued a notice of full redemption pursuant to that certain Additional Paying Agent and Co-Registrar Agreement, dated as of September 22, 2020, between GFED, as original issuer, and Wilmington Trust, National Association, as paying agent and co-registrar (“Wilmington”), as supplemented by that certain First Supplemental to Additional Paying Agent and Co-Registrar Agreement and Note, dated as of April 1, 2022, by and between Wilmington, the Company, as successor issuer, and GFED, governing the Company’s 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “2030 Notes”).

​

The Company redeemed all $20.0 million of the outstanding 2030 Notes on September 30, 2025 (the “2030 Note Redemption Date”) at a redemption price equal to 100% of the aggregate principal amount of the 2030 Notes, plus accrued and unpaid interest thereon to, but excluding the 2030 Note Redemption Date, in an aggregate amount of $20.5 million.

​

Redemption of 5.125% Fixed-to-Floating Rate Subordinated Notes due 2030

​

On July 25, 2025, the Company issued a notice of full redemption (the “MW Notice”) under that certain Subordinated Note Purchase Agreement, dated as of September 14, 2020, by and between the Company and Modern Woodmen of America (“MW”), governing the Company’s 5.125% Fixed-to-Floating Subordinated Note due 2030 (“the MW Note”).

​

The Company redeemed all $50.0 million of the outstanding MW Note on September 15, 2025 (the “MW Note Redemption Date”) at a redemption price equal to 100% of the aggregate principal amount of the MW Note, plus accrued and unpaid interest thereon to, but excluding, the MW Note Redemption Date, in an aggregate amount of $50.6 million.

​

NOTE 8 – INCOME TAXES

​

A reconciliation of the expected federal income tax expense to the income tax expense included in the consolidated statements of income is as follows for the three and nine months ended September 30, 2025 and 2024:

​

​

The effective tax rate for the first nine months of 2025 was at 6%, down from 7% in the first nine months of 2024. The decline was primarily due to a combination of new state tax credit investments and lower pre-tax income from lower capital markets revenue. Given a more normalized mix of revenue, the Company’s effective tax rate increased in the third quarter of 2025.

​

Effective January 1, 2024, the Company made an election under ASU 2023-02 to account for its tax credit investments using the proportional amortization method under newly adopted accounting guidance. Under the proportional amortization method, the Company applies a practical expedient for its tax credit investments and amortizes the initial cost of the qualifying investments in proportion to the income tax credits received in the current period as compared to the total income tax credits expected to be received over the life of the investment.

​

The following table summarizes the impact to the Consolidated Statements of Income relative to the Company’s tax credit programs for which it has elected to apply the proportional amortization method of accounting:

​

​

The Company did not recognize impairment losses resulting from the forfeiture or ineligibility of income tax credits or other circumstances during the three and nine months ending September 30, 2025 and 2024.

​

On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act”, into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes were reflected in the income tax provision for the three and nine months ended September 30, 2025. The restoration of immediate expensing for research and development and 100% bonus depreciation resulted in adjustment to the Company’s deferred tax assets and liabilities. The Company expects these provisions to continue to favorably impact its effective tax rate and cash tax payments in future periods.

​

NOTE 9 - EARNINGS PER SHARE

​

The following information was used in the computation of EPS on a basic and diluted basis:

​

​

​

NOTE 10 – FAIR VALUE

​

Accounting guidance on fair value measurement uses a hierarchy intended to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy includes three levels and is based upon the valuation techniques used to measure assets and liabilities. The three levels are as follows:

• Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in markets;
• Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and
• Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Assets and liabilities measured at fair value on a recurring basis comprise the following at September 30, 2025 and December 31, 2024:

​

​

The securities AFS portfolio consists of securities whereby the Company obtains fair values from an independent pricing service. The fair values are determined by pricing models that consider observable market data, such as interest rate volatilities, SOFR yield curve, credit spreads and prices from market makers and live trading systems (Level 2 inputs).

Trading securities consist of retained beneficial interests from securitizations and are classified as a Level 3 in the fair value hierarchy. Fair values are estimated using the discounted cash flow method, including discount rates which are deemed to be significant unobservable inputs. As of September 30, 2025, the discount rates ranged from 3.22% to 6.23%.

Changes in fair value of trading securities for the three and nine months ended September 30, 2025 and 2024, respectively, are presented as follows:

​

​

Interest rate caps, swaps, collars and swaptions are used for the purpose of hedging interest rate risk on various financial assets and liabilities, further described in Note 5 to the Consolidated Financial Statements. The fair values are determined by pricing models that consider observable market data for derivative instruments with similar structures (Level 2 inputs).

Certain financial assets are measured at fair value on a non-recurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Assets measured at fair value on a non-recurring basis comprised the following at September 30, 2025 and December 31, 2024:

​

​

Loans/leases evaluated individually are valued at the lower of cost or fair value and are classified as Level 3 in the fair value hierarchy. Fair value is measured based on the value of the collateral securing these loans/leases. Collateral may be comprised of real estate and/or business assets, including equipment, inventory and/or accounts receivable, and is determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values are discounted based on management's historical knowledge, changes in market conditions from the time of valuation, and/or management's expertise and knowledge of the client and client's business.

OREO in the table above consists of property acquired through foreclosures and settlement of loans. Property acquired is carried at the estimated fair value of the property, less disposal costs, and is classified as a Level 3 in the fair value hierarchy. The estimated fair value of the property acquired is generally determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values are discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the property.

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

​

​

For the loans/leases evaluated individually and OREO, the Company records carrying value at fair value less disposal or selling costs. The amounts reported in the tables above are fair values before the adjustment for disposal or selling costs.

There have been no changes in valuation techniques used for any assets or liabilities measured at fair value during the three and nine months ended September 30, 2025 and 2024.

The following table presents the carrying values and estimated fair values of financial assets and liabilities carried on the Company's consolidated balance sheets, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis:

​

​

​

NOTE 11 – BUSINESS SEGMENT INFORMATION

Selected financial and descriptive information is required to be disclosed for reportable operating segments, applying a “management perspective” as the basis for identifying reportable segments. The management perspective is determined by the view that management takes of the segments within the Company when making operating decisions, allocating resources, and measuring performance. The segments of the Company have been defined by the structure of the Company’s internal organization, focusing on the financial information that the Company’s operating decision-makers routinely use to make decisions about operating matters. The chief operating decision maker consists of the Chief Executive Officer and President of the Company. The chief operating decision maker reviews financial reports that detail the interest income, interest expense, provision for credit losses, noninterest income, salaries and benefits expense, occupancy expense, other noninterest expenses, income tax expense and net income from continuing operations and compares the actual results to the amounts budgeted and the reason for variances. The results of this review allow the Company’s chief operating decision maker to make operating decisions and allocate resources. Capital markets revenue is considered a significant source of noninterest income. Salaries and benefits expense and occupancy expense are considered significant noninterest expenses.

The Company’s Commercial Banking business is geographically divided by markets into the operating segments which are the four subsidiary banks wholly owned by the Company: QCBT, CRBT, CSB, and GB. Each of these operating segments offers similar products and services, but is managed separately due to different pricing, product demand, and consumer markets. Each offers commercial, consumer, and mortgage loans and deposit services.

The Company's All Other segment includes the corporate operations of the parent and operations of all other consolidated subsidiaries and/or defined operating segments that fall below the segment reporting thresholds.

Selected financial information on the Company's business segments is presented as follows as of and for the three and nine months ended September 30, 2025 and 2024:

​

​

​

Intercompany eliminations included in the selected financial information on the Company’s business segments consist of equity in net income of each subsidiary bank and investment in each subsidiary bank as follows:

​

​

​

NOTE 12 – REGULATORY CAPITAL REQUIREMENTS

The Company (on a consolidated basis) and the subsidiary banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and the subsidiary banks' financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the subsidiary banks must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain OBS items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the subsidiary banks to maintain minimum amounts and ratios (set forth in the following table) of total common equity Tier 1, Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets, each as defined by regulation. Management believes, as of September 30, 2025 and December 31, 2024, that the Company and the subsidiary banks met all capital adequacy requirements to which they are subject.

Under the regulatory framework for prompt corrective action, to be categorized as “well capitalized,” an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage and common equity Tier 1 ratios as set forth in the following tables. The Company and the subsidiary banks’ actual capital amounts and ratios as of September 30, 2025 and December 31, 2024 are presented in the following tables (dollars in thousands). As of September 30, 2025 and December 31, 2024, each of the subsidiary banks met such capital requirements to be “well capitalized.”

​

​

​

​

NOTE 13 - COMMITMENTS

​

The Company entered into a construction contract in 2024 for the construction of a new CSB facility in Ankeny, Iowa. The Company will pay the contractor a contract price of approximately $41.3 million, subject to certain agreed upon additions and deductions. As of September 30, 2025, the Company had paid $28.7 million of the contract price, resulting in a remaining future commitment of approximately $12.6 million. Construction on this facility is anticipated to be completed in 2026.

​

The Company entered into a construction contract in 2025 for the construction of a new Company/QCBT facility in Bettendorf, Iowa. The Company will pay the contractor a contract price of approximately $66.5 million, subject to certain agreed upon additions and deductions. As of September 30, 2025, the Company had paid $2.7 million of the contract price, resulting in a remaining future commitment of approximately $63.8 million. Construction on this facility is anticipated to be completed in 2027.

​

​

NOTE 14 – SUBSEQUENT EVENT

​

On October 20, 2025, the Company’s board of directors authorized a new share repurchase program under which the Company is authorized to repurchase of up to 1,700,000 shares of its common stock, or approximately 10% of the outstanding shares as of September 30, 2025. The share repurchase program does not obligate the Company to repurchase any shares of its common stock, and other than repurchases that have been completed to date, there is no assurance that the Company will do so. Under the share repurchase program, the Company may repurchase shares of common stock from time to time in open market or privately negotiated transactions. The number, timing and price of shares repurchased will depend on a number of factors, including business and market conditions, regulatory requirements, availability of funds, and other factors, including opportunities to deploy the Company's capital. The Company may, in its discretion, begin, suspend or terminate repurchases at any time prior to the program’s expiration, without any prior notice. This program replaces the Company’s prior repurchase program announced on May 19, 2022, which has been terminated.

​

​

​

Part I