QCR HOLDINGS, INC._June 30, 2025

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to________

Commission file number 0-22208

QCR HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	42-1397595
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3551 7^th Street, Moline, Illinois 61265

(Address of principal executive offices, including zip code)

(309) 736-3580

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 Par Value	QCRH	The Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐		Non-accelerated filer ☐
Smaller reporting company ☐		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: As of August 1, 2025, the Registrant had outstanding 16,941,967 shares of common stock, $1.00 par value per share.

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QCR HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


			Page Number(s)
Part I	FINANCIAL INFORMATION

	Item 1	Consolidated Financial Statements (Unaudited)

		Consolidated Balance Sheets As of June 30, 2025 and December 31, 2024	4

		Consolidated Statements of Income For the Three Months Ended June 30, 2025 and 2024	5

		Consolidated Statements of Income For the Six Months Ended June 30, 2025 and 2024	6

		Consolidated Statements of Comprehensive Income For the Three and Six Months Ended June 30, 2025 and 2024	7

		Consolidated Statements of Changes in Stockholders' Equity For the Three and Six Months Ended June 30, 2025 and 2024	8

		Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2025 and 2024	9

		Notes to Consolidated Financial Statements	10

		Note 1. Summary of Significant Accounting Policies	10
		Note 2. Investment Securities	12
		Note 3. Loans/Leases Receivable	16
		Note 4. Securitizations and Variable Interest Entities	25
		Note 5. Derivatives and Hedging Activities	25
		Note 6. Income Taxes	29
		Note 7. Earnings Per Share	30
		Note 8. Fair Value	30
		Note 9. Business Segment Information	33
		Note 10. Regulatory Capital Requirements	35
		Note 11. Commitments	36
		Note 12. Subsequent Events	36

	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations

		Introduction	37
		General	37
		Critical Accounting Policies and Critical Accounting Estimates	37
		Executive Overview	37
		Strategic Financial Metrics	39
		Strategic Developments	40
		GAAP to Non-GAAP Reconciliations	41
		Net Interest Income - (Tax Equivalent Basis)	43
		Results of Operations	47
		Interest Income	47
		Interest Expense	48

Table of Contents

		Provision for Credit Losses	48
		Noninterest Income	49
		Noninterest Expense	52
		Income Taxes	54
		Financial Condition	54
		Investment Securities	55
		Loans/Leases	55
		Allowance for Credit Losses on Loans/Leases and OBS Exposures	57
		Nonperforming Assets	59
		Deposits	60
		Borrowings	61
		Stockholders' Equity	62
		Liquidity and Capital Resources	63
		Special Note Concerning Forward-Looking Statements	64

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	67

	Item 4	Controls and Procedures	69

Part II	OTHER INFORMATION

	Item 1	Legal Proceedings	70

	Item 1A	Risk Factors	70

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	70

	Item 3	Defaults Upon Senior Securities	70

	Item 4	Mine Safety Disclosures	70

	Item 5	Other Information	70

	Item 6	Exhibits	71

Signatures

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

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QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

As of June 30, 2025 and December 31, 2024


	June 30,		December 31,
	2025		2024

	(dollars in thousands)
Assets
Cash and due from banks	$	104,769	$	91,732
Federal funds sold		27,000		27,150
Interest-bearing deposits at financial institutions		118,704		143,442

Securities held to maturity, at amortized cost, net of allowance for credit losses		909,035		835,797
Securities available for sale, at fair value		271,517		281,109
Securities trading, at fair value		82,900		83,529
Total securities		1,263,452		1,200,435

Loans receivable held for sale		1,162		2,143
Loans/leases receivable held for investment		6,923,762		6,782,261
Gross loans/leases receivable		6,924,924		6,784,404
Less allowance for credit losses		(88,732)		(89,841)
Net loans/leases receivable		6,836,192		6,694,563

Bank-owned life insurance		111,097		109,575
Premises and equipment, net		181,773		159,153
Restricted investment securities		32,891		35,412
Other real estate owned, net		62		661
Goodwill		138,595		138,595
Intangibles		9,738		11,061
Derivatives		184,982		186,781
Other assets		233,076		227,470
Total assets	$	9,242,331	$	9,026,030

Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing	$	952,032	$	921,160
Interest-bearing		6,366,321		6,140,027
Total deposits		7,318,353		7,061,187

Short-term borrowings		1,350		1,800
Federal Home Loan Bank advances		225,383		285,383
Subordinated notes		233,701		233,489
Junior subordinated debentures		48,925		48,860
Derivatives		209,505		214,823
Other liabilities		154,560		183,101
Total liabilities		8,191,777		8,028,643


Stockholders' Equity:
Preferred stock, $1 par value; shares authorized 250,000 June 2025 and December 2024 - no shares issued or outstanding		—		—
Common stock, $1 par value; shares authorized 20,000,000 June 2025 - 16,934,698 shares issued and outstanding December 2024 - 16,882,045 shares issued and outstanding		16,935		16,882
Additional paid-in capital		376,571		374,975
Retained earnings		717,956		665,171
Accumulated other comprehensive loss:
Securities available for sale		(43,919)		(37,965)
Derivatives		(16,989)		(21,676)
Total stockholders' equity		1,050,554		997,387
Total liabilities and stockholders' equity	$	9,242,331	$	9,026,030

See Notes to Consolidated Financial Statements (Unaudited)

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QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended June 30, 2025 and 2024


	2025		2024

	(dollars in thousands, except share data)
Interest and dividend income:
Loans/leases, including fees:
Taxable	$	75,122	$	79,743
Nontaxable		27,747		26,051
Securities:
Taxable		4,805		4,285
Nontaxable		10,158		7,476
Interest-bearing deposits at financial institutions		1,634		1,139
Restricted investment securities		622		869
Federal funds sold		159		183
Total interest and dividend income		120,247		119,746

Interest expense:
Deposits		51,013		53,053
Short-term borrowings		15		21
Federal Home Loan Bank advances		2,853		6,239
Subordinated notes		3,599		3,582
Junior subordinated debentures		685		688
Total interest expense		58,165		63,583
Net interest income		62,082		56,163
Provision for credit losses		4,043		5,496
Net interest income after provision for credit losses		58,039		50,667

Noninterest income:
Trust fees		3,395		3,103
Investment advisory and management fees		1,254		1,214
Deposit service fees		2,187		1,986
Gains on sales of residential real estate loans, net		556		540
Gains on sales of government guaranteed portions of loans, net		40		12
Capital markets revenue		9,869		17,758
Earnings on bank-owned life insurance		998		2,964
Debit card fees		1,648		1,571
Correspondent banking fees		699		510
Loan related fee income		1,096		962
Fair value gain on derivatives and trading securities		230		51
Other		143		218
Total noninterest income		22,115		30,889

Noninterest expense:
Salaries and employee benefits		28,474		31,079
Occupancy and equipment expense		6,837		6,377
Professional and data processing fees		6,089		4,823
FDIC insurance, other insurance and regulatory fees		1,960		1,854
Loan/lease expense		407		151
Net cost of and losses on operations of other real estate		50		28
Advertising and marketing		1,746		1,565
Communication and data connectivity		274		318
Supplies		252		259
Bank service charges		720		622
Correspondent banking expense		314		363
Intangibles amortization		661		690
Payment card processing		547		706
Trust expense		413		379
Other		839		674
Total noninterest expense		49,583		49,888
Net income before income taxes		30,571		31,668
Federal and state income tax expense		1,552		2,554
Net income	$	29,019	$	29,114

Basic earnings per common share	$	1.71	$	1.73
Diluted earnings per common share	$	1.71	$	1.72

Weighted average common shares outstanding		16,928,542		16,814,814
Weighted average common and common equivalent shares outstanding		17,006,282		16,921,854

Cash dividends declared per common share	$	0.06	$	0.06

See Notes to Consolidated Financial Statements (Unaudited)

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QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Six Months Ended June 30, 2025 and 2024


	2025		2024

	(dollars in thousands, except share data)
Interest and dividend income:
Loans/leases, including fees:
Taxable	$	149,210	$	156,874
Nontaxable		54,095		50,179
Securities:
Taxable		9,393		8,546
Nontaxable		19,370		14,862
Interest-bearing deposits at financial institutions		3,438		2,339
Restricted investment securities		1,156		1,543
Federal funds sold		258		452
Total interest and dividend income		236,920		234,795

Interest expense:
Deposits		101,400		104,469
Short-term borrowings		33		44
Federal Home Loan Bank advances		4,849		10,977
Subordinated notes		7,201		7,062
Junior subordinated debentures		1,369		1,381
Total interest expense		114,852		123,933
Net interest income		122,068		110,862
Provision for credit losses		8,277		8,465
Net interest income after provision for credit losses		113,791		102,397

Noninterest income:
Trust fees		7,081		6,302
Investment advisory and management fees		2,508		2,315
Deposit service fees		4,370		4,008
Gains on sales of residential real estate loans, net		853		922
Gains on sales of government guaranteed portions of loans, net		101		36
Capital markets revenue		16,385		34,215
Earnings on bank-owned life insurance		1,522		3,832
Debit card fees		3,136		3,037
Correspondent banking fees		1,313		1,022
Loan related fee income		1,994		1,798
Fair value loss on derivatives and trading securities		(777)		(112)
Other		521		372
Total noninterest income		39,007		57,747

Noninterest expense:
Salaries and employee benefits		55,838		62,939
Occupancy and equipment expense		13,292		12,891
Professional and data processing fees		11,233		9,436
FDIC insurance, other insurance and regulatory fees		3,930		3,799
Loan/lease expense		788		529
Net cost of (income from) and losses/(gains) on operations of other real estate		41		(2)
Advertising and marketing		3,359		3,048
Communication and data connectivity		564		719
Supplies		459		534
Bank service charges		1,316		1,190
Correspondent banking expense		643		668
Intangibles amortization		1,322		1,380
Payment card processing		1,141		1,352
Trust expense		770		804
Other		1,426		1,291
Total noninterest expense		96,122		100,578
Net income before income taxes		56,676		59,566
Federal and state income tax expense		1,860		3,726
Net income	$	54,816	$	55,840

Basic earnings per common share	$	3.24	$	3.32
Diluted earnings per common share	$	3.22	$	3.30

Weighted average common shares outstanding		16,914,663		16,799,081
Weighted average common and common equivalent shares outstanding		17,010,136		16,916,264

Cash dividends declared per common share	$	0.12	$	0.12


See Notes to Consolidated Financial Statements (Unaudited)

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QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

For the Three and Six Months Ended June 30, 2025 and 2024


	Three Months Ended June 30,
	2025		2024

	(dollars in thousands)

Net income	$	29,019	$	29,114

Other comprehensive loss:

Unrealized losses on securities available for sale:
Unrealized holding losses arising during the period before tax		(4,596)		(345)
		(4,596)		(345)

Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) arising during the period before tax		2,409		(270)
Less: reclassification adjustment for caplet amortization before tax		—		(125)
		2,409		(145)

Other comprehensive loss, before tax		(2,187)		(490)
Tax benefit		(516)		(122)
Other comprehensive loss, net of tax		(1,671)		(368)

Comprehensive income	$	27,348	$	28,746


	Six Months Ended June 30,
	2025		2024

	(dollars in thousands)

Net income	$	54,816	$	55,840

Other comprehensive loss:

Unrealized losses on securities available for sale:
Unrealized holding losses arising during the period before tax		(7,897)		(3,592)
Less reclassification adjustment for impairment losses included in net income before tax		—		445
		(7,897)		(4,037)
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) arising during the period before tax		6,277		(3,874)
Less reclassification adjustment for caplet amortization before tax		—		(246)
		6,277		(3,628)

Other comprehensive loss, before tax		(1,620)		(7,665)
Tax benefit		(353)		(1,924)
Other comprehensive loss, net of tax		(1,267)		(5,741)

Comprehensive income	$	53,549	$	50,099

See Notes to Consolidated Financial Statements (Unaudited)

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QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

For the Three and Six Months Ended June 30, 2025 and 2024


							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive
	Stock		Capital		Earnings		(Loss)		Total

	(dollars in thousands)

Balance December 31, 2024	$	16,882	$	374,975	$	665,171	$	(59,641)	$	997,387
Net income		—		—		25,797		—		25,797
Other comprehensive income, net of tax		—		—		—		404		404
Common cash dividends declared, $0.06 per share		—		—		(1,015)		—		(1,015)
Stock-based compensation expense		—		1,299		—		—		1,299
Issuance of common stock under employee benefit plans		38		(1,163)		—		—		(1,125)
Balance, March 31, 2025	$	16,920	$	375,111	$	689,953	$	(59,237)	$	1,022,747
Net income		—		—		29,019		—		29,019
Other comprehensive income, net of tax		—		—		—		(1,671)		(1,671)
Common cash dividends declared, $0.06 per share		—		—		(1,016)		—		(1,016)
Stock-based compensation expense		—		622		—		—		622
Issuance of common stock under employee benefit plans		15		838		—		—		853
Balance, June 30, 2025	$	16,935	$	376,571	$	717,956	$	(60,908)	$	1,050,554


							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive
	Stock		Capital		Earnings		(Loss)		Total

	(dollars in thousands)

Balance December 31, 2023	$	16,749	$	370,814	$	554,992	$	(55,959)	$	886,596
Net income		—		—		26,726		—		26,726
Other comprehensive loss, net of tax		—		—		—		(5,373)		(5,373)
Common cash dividends declared, $0.06 per share		—		—		(1,008)		—		(1,008)
Stock-based compensation expense		—		941		—		—		941
Issuance of common stock under employee benefit plans		58		(598)		—		—		(540)
Balance, March 31, 2024	$	16,807	$	371,157	$	580,710	$	(61,332)	$	907,342
Net income		—		—		29,114		—		29,114
Other comprehensive loss, net of tax		—		—		—		(368)		(368)
Common cash dividends declared, $0.06 per share		—		—		(1,008)		—		(1,008)
Stock-based compensation expense		—		696		—		—		696
Issuance of common stock under employee benefit plans		18		525		—		—		543
Balance, June 30, 2024	$	16,825	$	372,378	$	608,816	$	(61,700)	$	936,319

See Notes to Consolidated Financial Statements (Unaudited)

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QCR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the Six Months Ended June 30, 2025 and 2024


	2025		2024

	(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	54,816	$	55,840
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		4,515		4,522
Provision for credit losses		8,277		8,465
Stock-based compensation expense		1,921		1,637
Deferred compensation expense accrued		2,982		3,113
Gains on other real estate owned, net		(31)		(173)
Amortization of premiums on securities, net		400		346
Caplet amortization		—		246
Fair value loss on derivatives and trading securities		776		112
Ineffectiveness on fair value hedges		16		1
Loans originated for sale		(39,310)		(40,768)
Proceeds on sales of loans		41,245		41,389
Gains on sales of residential real estate loans		(853)		(922)
Gains on sales of government guaranteed portions of loans		(101)		(36)
Gains on sales and disposals of premises and equipment		—		(2)
Amortization of intangibles		1,322		1,380
Accretion of acquisition fair value adjustments, net		(268)		(268)
Increase in cash value of bank-owned life insurance		(1,522)		(1,600)
Gain on bank-owned life insurance death benefits		—		(2,232)
Increase in other assets		(5,328)		(12,861)
Decrease in other liabilities		(30,181)		(29,102)
Net cash provided by provided by operating activities	$	38,676	$	29,087

CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in federal funds sold		150		27,300
Net decrease in interest-bearing deposits at financial institutions		24,738		10,807
Proceeds from sales of other real estate owned		740		1,151
Activity in securities portfolio:
Purchases		(119,930)		(65,755)
Calls, maturities and redemptions		31,081		25,607
Paydowns		17,535		8,347
Sales		—		445
Activity in restricted investment securities:
Purchases		(64)		(6,948)
Redemptions		2,585		4,271
Proceeds from the liquidation of bank-owned life insurance		—		4,085
Net increase in loans/leases originated and held for investment		(149,755)		(319,789)
Purchase of premises and equipment		(27,135)		(22,314)
Proceeds from sales of premises and equipment		—		2
Net cash used in investing activities	$	(220,055)	$	(332,791)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit accounts		257,166		250,663
Net increase (decrease) in short-term borrowings		(450)		100
Activity in Federal Home Loan Bank advances:
Net change in short-term and overnight advances		(60,000)		50,000
Payment of cash dividends on common stock		(2,028)		(2,012)
Proceeds from issuance of common stock, net		(272)		3
Net cash provided by financing activities	$	194,416	$	298,754

Net increase (decrease) in cash and due from banks		13,037		(4,950)

Cash and due from banks, beginning		91,732		97,123
Cash and due from banks, ending	$	104,769	$	92,173


	2025		2024

	(dollars in thousands)
Supplemental disclosure of cash flow information, cash payments for:
Interest	$	116,887	$	123,467
Income/franchise taxes		249		3,066

Supplemental schedule of noncash investing activities:
Change in fair value of fair value hedges		(2,058)		—
Transfers of loans to other real estate owned		110		—
Transfer of loans to held for sale for securitizations in preparation		—		243,193
Increase (decrease) in the fair value of back-to-back interest rate swap assets and liabilities		(60)		5,570
Dividends payable		1,016		1,008

See Notes to Consolidated Financial Statements (Unaudited)

Table of Contents

Part I

Item 1

QCR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 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 June 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

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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 also engages in direct financing lease contracts through m2, a wholly owned subsidiary of QCBT. 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.

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NOTE 2– INVESTMENT SECURITIES

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


			Allowance		Gross		Gross
	Amortized		for Credit		Unrealized		Unrealized		Fair
	Cost		(Losses)		Gains		(Losses)		Value

	(dollars in thousands)
June 30, 2025:
Securities HTM:
Municipal securities	$	879,663	$	(254)	$	11,203	$	(120,662)	$	769,950
Corporate securities		28,585		(8)		3,991		—		32,568
Other securities		1,050		(1)		—		(2)		1,047
	$	909,298	$	(263)	$	15,194	$	(120,664)	$	803,565

Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	16,268	$	—	$	3	$	(2,004)	$	14,267
Residential mortgage-backed and related securities		63,364		—		6		(4,506)		58,864
Municipal securities		204,038		—		—		(50,059)		153,979
Asset-backed securities		6,599		—		85		—		6,684
Corporate securities		39,373		—		33		(1,683)		37,723
	$	329,642	$	—	$	127	$	(58,252)	$	271,517


			Allowance		Gross		Gross
	Amortized		for Credit		Unrealized		Unrealized		Fair
	Cost		(Losses)		Gains		(Losses)		Value

	(dollars in thousands)
December 31, 2024:
Securities HTM:
Municipal securities	$	806,992	$	(254)	$	23,292	$	(63,164)	$	766,866
Corporate securities		28,018		(8)		4,665		—		32,675
Other securities		1,050		(1)		—		(7)		1,042
	$	836,060	$	(263)	$	27,957	$	(63,171)	$	800,583

Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	23,113	$	—	$	7	$	(2,529)	$	20,591
Residential mortgage-backed and related securities		55,641		—		3		(5,602)		50,042
Municipal securities		204,664		—		—		(40,089)		164,575
Asset-backed securities		9,053		—		171		—		9,224
Corporate securities		38,866		—		4		(2,193)		36,677
	$	331,337	$	—	$	185	$	(50,413)	$	281,109

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.

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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 June 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.


	Less than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses

	(dollars in thousands)
June 30, 2025:
Securities HTM:
Municipal securities	$	276,990	$	(48,221)	$	279,489	$	(72,441)	$	556,479	$	(120,662)
Other securities		500		(1)		548		(1)		1,048		(2)
	$	277,490	$	(48,222)	$	280,037	$	(72,442)	$	557,527	$	(120,664)

Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	62	$	(1)	$	13,643	$	(2,003)	$	13,705	$	(2,004)
Residential mortgage-backed and related securities		13,977		(152)		35,931		(4,354)		49,908		(4,506)
Municipal securities		1,400		(44)		152,579		(50,015)		153,979		(50,059)
Asset-backed securities		—		—		—		—		—		—
Corporate securities		—		—		31,503		(1,683)		31,503		(1,683)
	$	15,439	$	(197)	$	233,656	$	(58,055)	$	249,095	$	(58,252)


	Less than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses

	(dollars in thousands)
December 31, 2024:
Securities HTM:
Municipal securities	$	162,914	$	(14,382)	$	253,818	$	(48,782)	$	416,732	$	(63,164)
Other securities		500		—		543		(7)		1,043		(7)
	$	163,414	$	(14,382)	$	254,361	$	(48,789)	$	417,775	$	(63,171)

Securities AFS:
U.S. govt. sponsored agency securities	$	6,522	$	(2)	$	13,369	$	(2,527)	$	19,891	$	(2,529)
Residential mortgage-backed and related securities		1,337		(24)		48,520		(5,578)		49,857		(5,602)
Municipal securities		798		(6)		163,777		(40,083)		164,575		(40,089)
Corporate securities		—		—		35,712		(2,193)		35,712		(2,193)
	$	8,657	$	(32)	$	261,378	$	(50,381)	$	270,035	$	(50,413)

On June 30, 2025, the investment portfolio included 677 securities. Of this number, 574 securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately 15.01% of the total amortized cost of the portfolio. Of these 574 securities, there were 464 securities that were in an unrealized loss position for twelve months or more. Management has concluded unrealized losses as of June 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. For the six months ended June 30, 2024, the remaining ACL on the related AFS security was removed as the security had been sold.

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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 six months ended June 30, 2025 and 2024:


	Three Months Ended
	June 30, 2025										June 30, 2024
	Securities HTM								Securities AFS		Securities HTM						Securities AFS
	Municipal		Corporate		Other				Corporate		Municipal		Other				Corporate
	securities		securities		securities		Total		securities		securities		securities		Total		securities

	(dollars in thousands)
Allowance for credit losses:
Beginning balance	$	254	$	8	$	1	$	263	$	—	$	202	$	1	$	203	$	—
Provision		—		—		—		—		—		—		—		—		—
Balance, ending	$	254	$	8	$	1	$	263	$	—	$	202	$	1	$	203	$	—




	Six Months Ended
	June 30, 2025										June 30, 2024
	Securities HTM								Securities AFS		Securities HTM						Securities AFS
	Municipal			Corporate	Other				Corporate		Municipal		Other				Corporate
	securities			securities	securities		Total		securities		securities		securities		Total		securities

	(dollars in thousands)
Allowance for credit losses:
Beginning balance	$	254		8	$	1	$	263	$	—	$	202	$	1	$	203	$	989
Reduction due to sales		—		—		—		—		—		—		—		—		(544)
Provision for credit loss expense		—		—		—		—		—		—		—		—		(445)
Balance, ending	$	254		8	$	1	$	263	$	—	$	202	$	1	$	203	$	—

Trading securities had a fair value of $82.9 million as of June 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 six months ended June 30, 2025 was a net loss of $77 thousand. The change in market value on trading securities for the six months ended June 30, 2024 was a net gain of $253 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 six months ended June 30, 2025 and 2024.

There were no sales of securities during both the three and six months ended June 30, 2025. There were no sales of securities during the three months ended June 30, 2024. There was one security sold during the six months ended June 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:


	Three Months Ended				Six Months Ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024

		(dollars in thousands)

Proceeds from sales of securities	$	—	$	—	$	—	$	445
Gross gains from sales of securities		—		—		—		—
Gross losses from sales of securities		—		—		—		—

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The amortized cost and fair value of securities as of June 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:


	Amortized Cost		Fair Value

	(dollars in thousands)
Securities HTM:
Due in one year or less	$	359	$	357
Due after one year through five years		28,143		26,320
Due after five years		880,796		776,888
	$	909,298	$	803,565
Securities AFS:
Due in one year or less	$	—	$	—
Due after one year through five years		21,598		20,870
Due after five years		238,081		185,099
		259,679		205,969
Residential mortgage-backed and related securities		63,364		58,864
Asset-backed securities		6,599		6,684
	$	329,642	$	271,517

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 June 30, 2025:


	Amortized Cost		Fair Value

	(dollars in thousands)
Securities HTM:
Municipal securities	$	254,089	$	244,000
Corporate securities		28,585		32,567
	$	282,674	$	276,567

Securities AFS:
Municipal securities	$	203,893	$	153,844
Corporate securities		35,408		33,739
	$	239,301	$	187,583

As of June 30, 2025, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 81 issuers with fair values totaling $104.1 million and revenue bonds, issued by 163 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $819.0 million. The Company also held investments in general obligation bonds in 18 states, including 10 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 June 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 small, 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.

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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 June 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 June 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.

NOTE 3 – LOANS/LEASES RECEIVABLE

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


	June 30, 2025		December 31, 2024

	(dollars in thousands)
C&I:
C&I - revolving	$	380,029	$	387,991
C&I - other *		1,375,689		1,514,932
		1,755,718		1,902,923

CRE - owner occupied		593,675		605,993
CRE - non-owner occupied		1,036,049		1,077,852
Construction and land development		1,529,022		1,313,543
Multi-family		1,251,763		1,132,110
Direct financing leases**		12,880		17,076
1-4 family real estate***		592,253		588,179
Consumer		153,564		146,728
		6,924,924		6,784,404
Allowance for credit losses		(88,732)		(89,841)
	$	6,836,192	$	6,694,563
** Direct financing leases:
Net minimum lease payments to be received	$	13,808	$	18,506
Estimated unguaranteed residual values of leased assets		165		165
Unearned lease/residual income		(1,093)		(1,595)
		12,880		17,076
Less allowance for credit losses		(423)		(580)
	$	12,457	$	16,496

* Includes equipment financing agreements outstanding through m2, totaling $237.1 million and $303.2 million as of June 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 $1.2 million and $2.1 million as of June 30, 2025 and December 31, 2024, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans, totaled $45.7 million and $46.1 million at June 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 six months ended June 30, 2025 and 2024, respectively, are presented as follows:


	For the Three Months Ended				For the Six Months Ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
	Performing		Performing			Performing	Performing
	Loans		Loans		Loans		Loans

	(dollars in thousands)

Balance at the beginning of the period	$	(2,115)	$	(3,539)	$	(2,310)	$	(3,891)
Accretion recognized		94		268		289		620
Balance at the end of the period	$	(2,021)	$	(3,271)	$	(2,021)	$	(3,271)

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


	As of June 30, 2025
										Accruing Past
				30-59 Days			60-89 Days			Due 90 Days or			Nonaccrual
Classes of Loans/Leases	Current			Past Due			Past Due			More			Loans/Leases			Total

	(dollars in thousands)
C&I:
C&I - revolving	$	377,355		$	—		$	—		$	—		$	2,674	$		380,029
C&I - other		1,337,518			9,445			2,690			7			26,029			1,375,689
CRE - owner occupied		591,853			51			248			—			1,523			593,675
CRE - non-owner occupied		1,033,200			100			—			—			2,749			1,036,049
Construction and land development		1,524,904			—			—			—			4,118			1,529,022
Multi-family		1,249,430			—			—			—			2,333			1,251,763
Direct financing leases		12,394			342			2			—			142			12,880
1-4 family real estate		589,107			147			653			—			2,346			592,253
Consumer		152,942			20			34			—			568			153,564
	$	6,868,703		$	10,105		$	3,627		$	7		$	42,482		$	6,924,924

As a percentage of total loan/lease portfolio		99.19	%		0.15	%		0.05	%		0.00	%		0.61	%		100.00	%


	As of December 31, 2024
										Accruing Past
				30-59 Days			60-89 Days			Due 90 Days or			Nonaccrual
Classes of Loans/Leases	Current			Past Due			Past Due			More			Loans/Leases			Total

	(dollars in thousands)
C&I
C&I - revolving	$	387,767		$	30		$	—		$	—		$	194	$		387,991
C&I - other		1,474,729			13,159			2,931			2			24,111			1,514,932
CRE - owner occupied		604,550			173			454			—			816			605,993
CRE - non-owner occupied		1,074,541			85			—			—			3,226			1,077,852
Construction and land development		1,300,893			8			—			4,188			8,454			1,313,543
Multi-family		1,132,110			—			—			—			—			1,132,110
Direct financing leases		16,622			60			135			—			259			17,076
1-4 family real estate		579,943			4,910			539			80			2,707			588,179
Consumer		146,172			235			8			—			313			146,728
	$	6,717,327		$	18,660		$	4,067		$	4,270		$	40,080		$	6,784,404

As a percentage of total loan/lease portfolio		99.01	%		0.28	%		0.06	%		0.06	%		0.59	%		100.00	%

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


	As of June 30, 2025
	Accruing Past		Nonaccrual		Nonaccrual
	Due 90 Days or		Loans/Leases		Loans/Leases				Percentage of
Classes of Loans/Leases	More		with an ACL		without an ACL		Total NPLs		Total NPLs

	(dollars in thousands)
C&I:
C&I - revolving	$	—	$	2,674	$	—	$	2,674	6	%
C&I - other		7		23,983		2,046		26,036	61
CRE - owner occupied		—		1,031		492		1,523	4
CRE - non-owner occupied		—		2,749		—		2,749	6
Construction and land development		—		4,118		—		4,118	10
Multi-family		—		2,333		—		2,333	5
Direct financing leases		—		142		—		142	1
1-4 family real estate		—		2,019		327		2,346	6
Consumer		—		568		—		568	1
	$	7	$	39,617	$	2,865	$	42,489	100	%

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	As of December 31, 2024
	Accruing Past		Nonaccrual		Nonaccrual
	Due 90 Days or		Loans/Leases		Loans/Leases				Percentage of
Classes of Loans/Leases	More		with an ACL		without an ACL		Total NPLs		Total NPLs

		(dollars in thousands)
C&I:
C&I - revolving	$	—	$	193	$	1	$	194	-	%
C&I - other		2		20,849		3,262		24,113	54
CRE - owner occupied		—		816		—		816	2
CRE - non-owner occupied		—		2,686		540		3,226	7
Construction and land development		4,188		—		8,454		12,642	29
Multi-family		—		—		—		—	-
Direct financing leases		—		259		—		259	1
1-4 family real estate		80		2,366		341		2,787	6
Consumer		—		313		—		313	1
	$	4,270	$	27,482	$	12,598	$	44,350	100	%

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

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


	Three Months Ended June 30, 2025
					CRE		CRE		Construction				1-4
	C&I -		C&I -		Owner		Non-Owner		and Land		Multi-		Family
	Revolving		Other*		Occupied		Occupied		Development		Family		Real Estate		Consumer		Total

	(dollars in thousands)

Balance, beginning	$	3,952	$	31,845	$	7,141	$	11,061	$	16,760	$	12,968	$	5,095	$	1,532	$	90,354
Provision		(155)		3,972		(400)		(445)		1,161		574		(115)		75		4,667
Charge-offs		—		(6,470)		—		10		—		—		—		(30)		(6,490)
Recoveries		—		175		—		—		24		—		—		2		201
Balance, ending	$	3,797	$	29,522	$	6,741	$	10,626	$	17,945	$	13,542	$	4,980	$	1,579	$	88,732


	Six Months Ended June 30, 2025
					CRE		CRE		Construction				1-4
	C&I -		C&I -		Owner		Non-Owner		and Land		Multi-		Family
	Revolving		Other**		Occupied		Occupied		Development		Family		Real Estate		Consumer		Total

	(dollars in thousands)

Balance, beginning	$	3,856	$	34,002	$	7,147	$	11,137	$	15,099	$	12,173	$	4,934	$	1,493	$	89,841
Provision		(59)		6,071		(406)		(521)		2,763		1,369		72		121		9,410
Charge-offs		—		(11,348)		—		10		—		—		(26)		(70)		(11,434)
Recoveries		—		797		—		—		83		—		—		35		915
Balance, ending	$	3,797	$	29,522	$	6,741	$	10,626	$	17,945	$	13,542	$	4,980	$	1,579	$	88,732

* Included within the C&I – Other column are ACL on leases with a beginning balance of $485 thousand, negative provision of $33 thousand, charge-offs of $30 thousand and recoveries of $1 thousand. ACL on leases was $423 thousand as of June 30, 2025.

** Included within the C&I – Other column are ACL on leases with a beginning balance of $580 thousand, provision of $54 thousand, charge-offs of $221 thousand and recoveries of $10 thousand. ACL on leases was $423 thousand as of June 30, 2025.

Table of Contents


	Three Months Ended June 30, 2024
					CRE		CRE		Construction				1-4
	C&I -		C&I -		Owner		Non-Owner		and Land		Multi-		Family
	Revolving		Other*		Occupied		Occupied		Development		Family		Real Estate		Consumer		Total

	(dollars in thousands)

Balance, beginning	$	4,440	$	26,615	$	8,416	$	12,607	$	12,737	$	12,928	$	5,289	$	1,438	$	84,470
Change in ACL for writedown of LHFS to fair value		—		—		—		—		513		(15)		—		—		498
Provision		(741)		5,469		(363)		(231)		(1,196)		1,344		(66)		127		4,343
Charge-offs		—		(1,681)		—		—		—		—		(21)		(49)		(1,751)
Recoveries		—		141		—		—		—		—		1		4		146
Balance, ending	$	3,699	$	30,544	$	8,053	$	12,376	$	12,054	$	14,257	$	5,203	$	1,520	$	87,706


	Six Months Ended June 30, 2024
					CRE		CRE		Construction				1-4
	C&I -		C&I -		Owner		Non-Owner		and Land		Multi-		Family
	Revolving		Other**		Occupied		Occupied		Development		Family		Real Estate		Consumer		Total

	(dollars in thousands)

Balance, beginning	$	4,224	$	27,460	$	8,223	$	11,581	$	16,856	$	12,463	$	4,917	$	1,476	$	87,200
Change in ACL for writedown of LHFS to fair value		—		—		—		—		—		(2,879)		—		—		(2,879)
Provisions		(525)		7,696		(170)		795		(4,802)		4,673		309		103		8,079
Charge-offs		—		(5,219)		—		—		—		—		(24)		(68)		(5,311)
Recoveries		—		607		—		—		—		—		1		9		617
Balance, ending	$	3,699	$	30,544	$	8,053	$	12,376	$	12,054	$	14,257	$	5,203	$	1,520	$	87,706

* Included within the C&I – Other column are ACL on leases with a beginning balance of $884 thousand, provision of $106 thousand, no charge-offs and recoveries of $22 thousand. ACL on leases was $800 thousand as of June 30, 2024.

** Included within the C&I – Other column are ACL on leases with a beginning balance of $992 thousand, provision of $174 thousand, charge-offs of $89 thousand and recoveries of $71 thousand. ACL on leases was $800 thousand as of June 30, 2024.

The composition of the ACL on loans/leases by portfolio segment based on evaluation method are as follows:


	As of June 30, 2025
	Amortized Cost of Loans Receivable						Allowance for Credit Losses
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
	Credit Losses		Credit Losses		Total		Credit Losses		Credit Losses		Total

	(dollars in thousands)
C&I :
C&I - revolving	$	7,239	$	372,790	$	380,029	$	173	$	3,624	$	3,797
C&I - other*		37,109		1,351,460		1,388,569		9,730		19,792		29,522
		44,348		1,724,250		1,768,598		9,903		23,416		33,319
CRE - owner occupied		28,070		565,605		593,675		1,775		4,966		6,741
CRE - non-owner occupied		13,080		1,022,969		1,036,049		605		10,021		10,626
Construction and land development		4,689		1,524,333		1,529,022		1,677		16,268		17,945
Multi-family		2,351		1,249,412		1,251,763		116		13,426		13,542
1-4 family real estate		3,006		589,247		592,253		273		4,707		4,980
Consumer		611		152,953		153,564		52		1,527		1,579
	$	96,155	$	6,828,769	$	6,924,924	$	14,401	$	74,331	$	88,732

* Included within the C&I – other category are leases individually evaluated of $142 thousand with a related allowance for credit losses of $46 thousand and leases collectively evaluated of $12.7 million with a related allowance for credit losses of $377 thousand as of June 30, 2025.

Table of Contents


	As of December 31, 2024
	Amortized Cost of Loans Receivable						Allowance for Credit Losses
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
	Credit Losses		Credit Losses		Total		Credit Losses		Credit Losses		Total

	(dollars in thousands)
C&I :
C&I - revolving	$	3,404	$	384,587	$	387,991	$	97	$	3,759	$	3,856
C&I - other*		38,140		1,493,868		1,532,008		9,437		24,565		34,002
		41,544		1,878,455		1,919,999		9,534		28,324		37,858
CRE - owner occupied		26,822		579,171		605,993		2,136		5,011		7,147
CRE - non-owner occupied		18,163		1,059,689		1,077,852		542		10,595		11,137
Construction and land development		13,346		1,300,197		1,313,543		1,343		13,756		15,099
Multi-family		23		1,132,087		1,132,110		2		12,171		12,173
1-4 family real estate		3,463		584,716		588,179		321		4,613		4,934
Consumer		443		146,285		146,728		45		1,448		1,493
	$	103,804	$	6,680,600	$	6,784,404	$	13,923	$	75,918	$	89,841

* 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 June 30, 2025 and December 31, 2024:



	As of June 30, 2025
					Non
	Commercial		Owner-occupied		Owner-Occupied		Owner Occupied
	Assets		CRE		Real Estate		Real Estate		Securities		Equipment		Other		Total

	(dollars in thousands)
C & I:
C&I - revolving	$	7,239	$	—	$	—	$	—	$	—	$	—	$	—	$	7,239
C&I - other*		8,834		—		—		—		4,760		11,464		12,051		37,109
		16,073		—		—		—		4,760		11,464		12,051		44,348
CRE - owner occupied		—		28,024		—		46		—		—		—		28,070
CRE - non-owner occupied		—		—		13,080		—		—		—		—		13,080
Construction and land development		—		—		4,689		—		—		—		—		4,689
Multi-family		—		—		2,351		—		—		—		—		2,351
1-4 family real estate		—		—		173		2,833		—		—		—		3,006
Consumer		—		—		—		598		—		—		13		611
	$	16,073	$	28,024	$	20,293	$	3,477	$	4,760	$	11,464	$	12,064	$	96,155

* Included within the C&I – other category are leases individually evaluated of $142 thousand with primary collateral of equipment.


	As of December 31, 2024
					Non
	Commercial		Owner-occupied		Owner-Occupied		Owner Occupied
	Assets		CRE		Real Estate		Real Estate		Securities		Equipment		Other		Total

	(dollars in thousands)
C & I:
C&I - revolving	$	3,404	$	—	$	—	$	—	$	—	$	—	$	—	$	3,404
C&I - other*		3,868		—		506		—		4,760		14,197		14,809		38,140
		7,272		—		506		—		4,760		14,197		14,809		41,544
CRE - owner occupied		—		26,760		—		62		—		—		—		26,822
CRE - non-owner occupied		—		—		18,163		—		—		—		—		18,163
Construction and land development		—		—		13,346		—		—		—		—		13,346
Multi-family		—		—		23		—		—		—		—		23
1-4 family real estate		—		—		176		3,287		—		—		—		3,463
Consumer		—		—		34		394		—		—		15		443
	$	7,272	$	26,760	$	32,248	$	3,743	$	4,760	$	14,197	$	14,824	$	103,804

* 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.

Table of Contents

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 June 30, 2025:


	As of June 30, 2025
	Term Loans
	Amortized Cost Basis by Origination Year
													Revolving
													Loans
Internally Assigned													Amortized
Risk Rating	2025		2024		2023		2022		2021		Prior		Cost Basis		Total

	(dollars in thousands)
C&I - revolving
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	368,416	$	368,416
Special Mention		—		—		—		—		—		—		4,374		4,374
Substandard		—		—		—		—		—		—		7,239		7,239
Doubtful		—		—		—		—		—		—		—		—
Total C&I - revolving	$	—	$	—	$	—	$	—	$	—	$	—	$	380,029	$	380,029

C&I - other
Pass	$	164,962	$	199,240	$	309,314	$	175,454	$	68,494	$	181,683	$	—	$	1,099,147
Special Mention		2,225		4,836		745		1,717		2,782		625		—		12,930
Substandard		4,219		13,312		598		881		2,690		4,775		—		26,475
Doubtful		—		—		—		—		—		—		—		—
Total C&I - other	$	171,406	$	217,388	$	310,657	$	178,052	$	73,966	$	187,083	$	—	$	1,138,552

CRE - owner occupied
Pass	$	49,226	$	54,430	$	90,828	$	93,212	$	92,847	$	143,912	$	10,507	$	534,962
Special Mention		438		—		16,477		8,062		7,850		2,017		—		34,844
Substandard		1,619		3,262		116		488		989		17,395		—		23,869
Doubtful		—		—		—		—		—		—		—		—
Total CRE - owner occupied	$	51,283	$	57,692	$	107,421	$	101,762	$	101,686	$	163,324	$	10,507	$	593,675

CRE - non-owner occupied
Pass	$	116,524	$	175,639	$	162,016	$	232,033	$	147,754	$	151,314	$	25,608	$	1,010,888
Special Mention		4,199		1,018		—		3,154		2,437		1,273		—		12,081
Substandard		9,334		79		2,664		—		556		447		—		13,080
Doubtful		—		—		—		—		—		—		—		—
Total CRE - non-owner occupied	$	130,057	$	176,736	$	164,680	$	235,187	$	150,747	$	153,034	$	25,608	$	1,036,049

Construction and land development
Pass	$	117,815	$	515,470	$	601,234	$	187,653	$	64,585	$	296	$	35,624	$	1,522,677
Special Mention		—		1,863		—		—		73		—		—		1,936
Substandard		198		4,118		93		—		—		—		—		4,409
Doubtful		—		—		—		—		—		—		—		—
Total Construction and land development	$	118,013	$	521,451	$	601,327	$	187,653	$	64,658	$	296	$	35,624	$	1,529,022

Multi-family
Pass	$	118,667	$	131,398	$	135,527	$	311,071	$	181,782	$	370,265	$	702	$	1,249,412
Special Mention		—		—		—		—		—		—		—		—
Substandard		2,333		—		—		—		18		—		—		2,351
Doubtful		—		—		—		—		—		—		—		—
Total Multi-family	$	121,000	$	131,398	$	135,527	$	311,071	$	181,800	$	370,265	$	702	$	1,251,763

1-4 family real estate
Pass	$	60,950	$	104,407	$	107,859	$	81,690	$	101,324	$	126,315	$	4,310	$	586,855
Special Mention		1,532		172		147		—		535		7		—		2,393
Substandard		147		14		318		642		595		1,264		25		3,005
Doubtful		—		—		—		—		—		—		—		—
Total 1-4 family real estate	$	62,629	$	104,593	$	108,324	$	82,332	$	102,454	$	127,586	$	4,335	$	592,253

Consumer
Pass	$	19,334	$	5,391	$	5,363	$	4,816	$	882	$	2,456	$	114,647	$	152,889
Special Mention		—		—		—		—		—		—		63		63
Substandard		—		—		257		36		—		23		296		612
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	19,334	$	5,391	$	5,620	$	4,852	$	882	$	2,479	$	115,006	$	153,564

Total	$	673,722	$	1,214,649	$	1,433,556	$	1,100,909	$	676,193	$	1,004,067	$	571,811	$	6,674,907

Table of Contents


	As of June 30, 2025
	Term Loans
	Amortized Cost Basis by Origination Year												Revolving
													Loans
													Amortized
Delinquency Status *	2025		2024		2023		2022		2021		Prior		Cost Basis		Total

	(dollars in thousands)
C&I - other
Performing	$	2,630	$	89,692	$	80,148	$	40,733	$	11,937	$	1,799	$	—	$	226,939
Nonperforming		—		1,735		3,641		3,320		1,431		71		—		10,198
Total C&I - other	$	2,630	$	91,427	$	83,789	$	44,053	$	13,368	$	1,870	$	—	$	237,137

Direct financing leases
Performing	$	217	$	791	$	5,820	$	4,664	$	960	$	286	$	—	$	12,738
Nonperforming		—		—		70		58		13		1		—		142
Total Direct financing leases	$	217	$	791	$	5,890	$	4,722	$	973	$	287	$	—	$	12,880

Total	$	2,847	$	92,218	$	89,679	$	48,775	$	14,341	$	2,157	$	—	$	250,017

* 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 six months ended June 30, 2025:


	Three Months Ended June 30, 2025														Six Months Ended June 30, 2025
	Gross Charge-off by Origination Year														Gross Charge-off by Origination Year
Classes of Loans/Leases	2025		2024		2023		2022		2021		Prior		Total		2025		2024		2023		2022		2021		Prior		Total

	(dollars in thousands)														(dollars in thousands)
C&I:
C&I - revolving	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
C&I - other		500		2,010		1,431		2,064		435		—		6,440		500		3,367		2,671		3,728		751		110		11,127
CRE - owner occupied		—		—		—		—		—		—		—		—		—		—		—		—		—		—
CRE - non-owner occupied		—		—		—		—		—		(10)		(10)		—		—		—		—		—		(10)		(10)
Construction and land development		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Multi-family		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Direct financing leases		—		—		—		30		—		—		30		—		136		39		40		—		6		221
1-4 family real estate		—		—		—		—		—		—		—		—		3		—		23		—		—		26
Consumer		—		13		17		—		—		—		30		—		13		57		—		—		—		70
	$	500	$	2,023	$	1,448	$	2,094	$	435	$	(10)	$	6,490	$	500	$	3,519	$	2,767	$	3,791	$	751	$	106	$	11,434

Table of Contents

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


	As of December 31, 2024
	Term Loans
	Amortized Cost Basis by Origination Year
													Revolving
													Loans
Internally Assigned													Amortized
Risk Rating	2024		2023		2022		2021		2020		Prior		Cost Basis		Total

	(dollars in thousands)
C&I - revolving
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	368,318	$	368,318
Special Mention		—		—		—		—		—		—		16,369		16,369
Substandard		—		—		—		—		—		—		3,304		3,304
Doubtful		—		—		—		—		—		—		—		—
Total C&I - revolving	$	—	$	—	$	—	$	—	$	—	$	—	$	387,991	$	387,991

C&I - other
Pass	$	324,649	$	348,843	$	204,275	$	82,601	$	49,130	$	155,191	$	—	$	1,164,689
Special Mention		6,517		5,534		2,855		4,799		2,548		725		—		22,978
Substandard		17,003		538		507		1,272		—		4,780		—		24,100
Doubtful		—		—		—		—		—		—		—		—
Total C&I - other	$	348,169	$	354,915	$	207,637	$	88,672	$	51,678	$	160,696	$	—	$	1,211,767

CRE - owner occupied
Pass	$	65,054	$	104,442	$	117,215	$	102,506	$	95,349	$	69,382	$	13,327	$	567,275
Special Mention		5,589		234		739		6,964		822		1,829		—		16,177
Substandard		3,669		—		980		309		16,582		1,001		—		22,541
Doubtful		—		—		—		—		—		—		—		—
Total CRE - owner occupied	$	74,312	$	104,676	$	118,934	$	109,779	$	112,753	$	72,212	$	13,327	$	605,993

CRE - non-owner occupied
Pass	$	194,510	$	204,599	$	272,296	$	164,948	$	96,216	$	95,117	$	20,548	$	1,048,234
Special Mention		4,406		—		55		—		—		6,844		150		11,455
Substandard		80		3,652		550		—		1,916		11,965		—		18,163
Doubtful		—		—		—		—		—		—		—		—
Total CRE - non-owner occupied	$	198,996	$	208,251	$	272,901	$	164,948	$	98,132	$	113,926	$	20,698	$	1,077,852

Construction and land development
Pass	$	435,373	$	524,375	$	235,987	$	66,409	$	3,313	$	—	$	31,176	$	1,296,633
Special Mention		3,863		—		—		75		—		—		—		3,938
Substandard		4,394		124		1,082		7,372		—		—		—		12,972
Doubtful		—		—		—		—		—		—		—		—
Total Construction and land development	$	443,630	$	524,499	$	237,069	$	73,856	$	3,313	$	—	$	31,176	$	1,313,543

Multi-family
Pass	$	137,806	$	138,011	$	279,256	$	185,872	$	217,697	$	165,867	$	7,578	$	1,132,087
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		23		—		—		—		23
Doubtful		—		—		—		—		—		—		—		—
Total Multi-family	$	137,806	$	138,011	$	279,256	$	185,895	$	217,697	$	165,867	$	7,578	$	1,132,110

1-4 family real estate
Pass	$	121,918	$	115,491	$	89,073	$	108,998	$	77,540	$	64,015	$	5,106	$	582,141
Special Mention		380		146		—		547		—		1,582		—		2,655
Substandard		91		327		981		634		378		944		28		3,383
Doubtful		—		—		—		—		—		—		—		—
Total 1-4 family real estate	$	122,389	$	115,964	$	90,054	$	110,179	$	77,918	$	66,541	$	5,134	$	588,179

Consumer
Pass	$	11,513	$	13,375	$	6,082	$	1,254	$	2,435	$	1,519	$	110,042	$	146,220
Special Mention		—		—		—		—		—		—		64		64
Substandard		34		208		39		—		—		97		66		444
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	11,547	$	13,583	$	6,121	$	1,254	$	2,435	$	1,616	$	110,172	$	146,728

Total	$	1,336,849	$	1,459,899	$	1,211,972	$	734,583	$	563,926	$	580,858	$	576,076	$	6,464,163

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	As of December 31, 2024
	Term Loans
	Amortized Cost Basis by Origination Year												Revolving
													Loans
													Amortized
Delinquency Status *	2024		2023		2022		2021		2020		Prior		Cost Basis		Total

	(dollars in thousands)
C&I - other
Performing	$	109,373	$	99,204	$	57,819	$	18,853	$	4,107	$	278	$	—	$	289,634
Nonperforming		1,028		4,689		5,537		2,076		201		—		—		13,531
Total C&I - other	$	110,401		103,893		63,356		20,929		4,308		278	$	—	$	303,165

Direct financing leases
Performing	$	1,742	$	6,099	$	6,583	$	1,413	$	569	$	411	$	—	$	16,817
Nonperforming		—		103		70		39		46		1		—		259
Total Direct financing leases	$	1,742	$	6,202	$	6,653	$	1,452	$	615	$	412	$	—	$	17,076

Total	$	112,143	$	110,095	$	70,009	$	22,381	$	4,923	$	690	$	—	$	320,241

* 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 six months ended June 30, 2024:


	Three Months Ended June 30, 2024														Six Months Ended June 30, 2024
	Gross Charge-off by Origination Year														Gross Charge-off by Origination Year
Classes of Loans/Leases	2025		2024		2023		2022		2021		Prior		Total		2025		2024		2023		2022		2021		Prior		Total

	(dollars in thousands)														(dollars in thousands)
C&I:
C&I - revolving	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
C&I - other		—		206		826		570		79		—		1,681		7		884		2,859		1,092		112		176		5,130
CRE - owner occupied		—		—		—		—		—		—		—		—		—		—		—		—		—		—
CRE - non-owner occupied		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Multi-family		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Direct financing leases		—		—		—		—		—		—		—		—		—		10		24		42		13		89
1-4 family real estate		—		21		—		—		—		—		21		—		21		—		—		—		3		24
Consumer		—		1		22		11		15		—		49		—		1		41		11		15		—		68
	$	—	$	228	$	848	$	581	$	94	$	—	$	1,751	$	7	$	906	$	2,910	$	1,127	$	169	$	192	$	5,311

There were no loan and lease modifications to borrowers experiencing financial difficulty during the three and six months ended June 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 six months ended June 30, 2025 and 2024 are presented as follows:


	Three Months Ended				Six Months Ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024

	(dollars in thousands)

Balance, beginning	$	7,764	$	9,207	$	8,273	$	9,529
Provisions (credited) to expense		(624)		1,153		(1,133)		831
Balance, ending	$	7,140	$	10,360	$	7,140	$	10,360

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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.

At June 30, 2025, the Company determined it was not the primary beneficiary of the various 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 June 30, 2025 and December 31, 2024 were $82.9 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 June 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 June 30, 2025 and December 31, 2024:


	June 30, 2025		December 31, 2024

	(dollars in thousands)
Assets:
Hedged Derivatives
Cash Flow Hedges
Interest rate swaps	$	852	$	1,905
Interest rate collars		14		—
Unhedged Derivatives
Interest rate caps		—		118
Swaptions		416		998
Interest rate swaps		183,700		183,760
	$	184,982	$	186,781

Liabilities:
Hedged Derivatives
Cash Flow Hedges
Interest rate swaps	$	(23,056)	$	(30,623)
Interest rate collars		(356)		(105)
Fair Value Hedges
Interest rate swaps		(2,393)		(335)
Unhedged Derivatives
Interest rate swaps		(183,700)		(183,760)
	$	(209,505)	$	(214,823)

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.

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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:


			Balance Sheet	Notional						Fair Value as of
Hedged Item	Effective Date	Maturity Date	Location	Amount		Receive Rate		Pay Rate		June 30, 2025		December 31, 2024
(dollars in thousands)

QCR Holdings Statutory Trust V	7/7/2018	7/7/2028	Derivatives - Assets	$	10,000	6.61	%	4.54	%	$	185	$	427
Community National Statutory Trust III	9/15/2018	9/15/2028	Derivatives - Assets		3,500	6.33	%	4.75	%		86		197
Guaranty Bankshares Statutory Trust I	9/15/2018	9/15/2028	Derivatives - Assets		4,500	6.33	%	4.75	%		67		153
Community National Statutory Trust II	9/20/2018	9/20/2028	Derivatives - Assets		3,000	6.76	%	5.17	%		58		132
QCR Holdings Statutory Trust II	9/30/2018	9/30/2028	Derivatives - Assets		10,000	7.41	%	5.85	%		193		443
QCR Holdings Statutory Trust III	9/30/2018	9/30/2028	Derivatives - Assets		8,000	7.41	%	5.85	%		154		353
Guaranty Statutory Trust II	5/23/2019	2/23/2026	Derivatives - Assets		10,310	6.04	%	4.09	%		109		200
QCR Holdings Subordinated Note	3/1/2024	2/15/2028	Derivatives - Liabilities		65,000	4.36	%	4.02	%		(1,063)		(50)
				$	114,310					$	(211)	$	1,855

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:


										Fair Value as of
Hedged Item	Effective Date	Maturity Date	Location	Notional Amount		Cap Strike Rate		Floor Strike Rate		June 30, 2025		December 31, 2024
(dollars in thousands)

Loans	10/1/2022	10/1/2026	Derivatives - Assets (Liabilities)	$	50,000	4.40	%	2.44	%	$	14	$	(105)

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:

Balance Sheet

Fair Value as of

Effective Date

Maturity Date

Location

Notional Amount

Strike Rate

June 30, 2025

December 31, 2024

(dollars in thousands)

3/1/2020

3/3/2025

Derivatives - Assets

25,000

1.90

118

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:


							Fair Value as of
Effective Date	Maturity Date	Location	Notional Amount		Strike Rate		June 30, 2025		December 31, 2024
(dollars in thousands)

7/30/2024	7/30/2025	Derivatives - Assets	$	77,600	2.13	%	$	-	$	37
7/30/2024	7/30/2025	Derivatives - Assets		33,100	2.62	%		43		54
7/30/2024	7/30/2025	Derivatives - Assets		28,254	2.12	%		26		48
7/30/2024	7/30/2025	Derivatives - Assets		66,247	2.63	%		-		33
7/30/2024	1/29/2026	Derivatives - Assets		20,750	2.63	%		89		102
7/30/2024	1/29/2026	Derivatives - Assets		41,700	2.13	%		61		77
7/30/2024	1/30/2026	Derivatives - Assets		36,546	2.14	%		23		70
7/30/2024	1/30/2026	Derivatives - Assets		18,453	2.64	%		39		93
7/30/2024	7/30/2026	Derivatives - Assets		16,100	2.64	%		-		140
7/30/2024	7/30/2026	Derivatives - Assets		29,800	2.14	%		-		116
7/30/2024	7/30/2026	Derivatives - Assets		25,971	2.14	%		54		103
7/30/2024	7/30/2026	Derivatives - Assets		14,280	2.64	%		81		125
			$	408,801			$	416	$	998

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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:


			Balance Sheet							Fair Value as of
Hedged Item	Effective Date	Maturity Date	Location	Notional Amount		Receive Rate		Pay Rate		June 30, 2025		December 31, 2024
(dollars in thousands)

Loans	7/1/2021	7/1/2031	Derivatives - Liabilities	$	35,000	1.40	%	4.43	%	$	(4,098)	$	(5,445)
Loans	7/1/2021	7/1/2031	Derivatives - Liabilities		50,000	1.40	%	4.43	%		(5,855)		(7,779)
Loans	7/1/2021	7/1/2031	Derivatives - Liabilities		40,000	1.40	%	4.43	%		(4,693)		(6,233)
Loans	10/1/2022	7/1/2031	Derivatives - Liabilities		25,000	1.30	%	4.43	%		(2,950)		(3,916)
Loans	4/1/2022	4/1/2027	Derivatives - Liabilities		15,000	1.91	%	4.43	%		(440)		(720)
Loans	4/1/2022	4/1/2027	Derivatives - Liabilities		50,000	1.91	%	4.43	%		(1,466)		(2,400)
Loans	4/1/2022	4/1/2027	Derivatives - Liabilities		35,000	1.91	%	4.43	%		(1,026)		(1,680)
Loans	4/1/2022	4/1/2027	Derivatives - Liabilities		50,000	1.91	%	4.43	%		(1,465)		(2,400)
				$	300,000					$	(21,993)	$	(30,573)

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:


			Balance Sheet							Fair Value as of
Hedged Item	Effective Date	Maturity Date	Location	Notional Amount		Cap Strike Rate		Floor Strike Rate		June 30, 2025		December 31, 2024
(dollars in thousands)

Deposits	5/1/2025	11/1/2027	Derivatives - Liabilities	$	50,000	4.40	%	2.24	%	$	(77)	$	N/A
Deposits	5/1/2025	5/1/2028	Derivatives - Liabilities		50,000	4.40	%	2.34	%		(117)		N/A
Deposits	5/1/2025	11/1/2028	Derivatives - Liabilities		50,000	4.40	%	2.43	%		(162)		N/A
				$	150,000					$	(356)	$	N/A

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:



			Balance Sheet							Fair Value as of
Hedged Item	Effective Date	Maturity Date	Location	Notional Amount		Receive Rate		Pay Rate		June 30, 2025		December 31, 2024
(dollars in thousands)

Loans	7/12/2023	8/1/2025	Derivatives - Liabilities	$	15,000	4.32	%	4.60	%	$	(3)	$	(35)
Loans	7/12/2023	2/1/2026	Derivatives - Liabilities		25,000	4.32	%	4.38	%		(47)		(77)
Loans	7/12/2023	2/1/2026	Derivatives - Liabilities		15,000	4.32	%	4.38	%		(28)		(46)
Loans	7/12/2023	2/1/2026	Derivatives - Liabilities		20,000	4.32	%	4.38	%		(37)		(61)
Loans	7/12/2023	8/1/2026	Derivatives - Liabilities		30,000	4.32	%	4.21	%		(144)		(79)
Loans	7/12/2023	8/1/2026	Derivatives - Liabilities		15,000	4.32	%	4.21	%		(72)		(40)
Loans	7/12/2023	8/1/2026	Derivatives - Liabilities		20,000	4.32	%	4.21	%		(96)		(53)
Loans	7/12/2023	2/1/2027	Derivatives - Liabilities		32,500	4.32	%	4.08	%		(270)		(44)
Loans	7/12/2023	2/1/2027	Derivatives - Liabilities		15,000	4.32	%	4.08	%		(125)		(20)
Loans	7/12/2023	2/1/2027	Derivatives - Liabilities		20,000	4.32	%	4.08	%		(166)		(27)
Loans	7/12/2023	8/1/2027	Derivatives - Liabilities		32,500	4.32	%	3.98	%		(364)		14
Loans	7/12/2023	8/1/2027	Derivatives - Liabilities		15,000	4.32	%	3.98	%		(168)		6
Loans	7/12/2023	8/1/2027	Derivatives - Liabilities		25,000	4.32	%	3.98	%		(280)		11
Loans	7/12/2023	2/1/2028	Derivatives - Liabilities		30,000	4.32	%	3.90	%		(395)		77
Loans	7/12/2023	2/1/2028	Derivatives - Liabilities		15,000	4.32	%	3.90	%		(198)		39
				$	325,000					$	(2,393)	$	(335)

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 June 30, 2025 and December 31, 2024 are summarized as follows:


		As of June 30, 2025			As of December 31, 2024
	Notional Amount		Estimated Fair Value		Notional Amount		Estimated Fair Value

	(dollars in thousands)
Non-Hedging Interest Rate Derivatives Assets:
Interest rate swap contracts	$	4,339,462	$	183,700	$	4,148,306	$	183,760
Non-Hedging Interest Rate Derivatives Liabilities:		-
Interest rate swap contracts	$	4,339,462	$	183,700	$	4,148,306	$	183,760

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


	Three Months Ended June 30, 2025				Three Months Ended June 30, 2024
	Interest and		Interest		Interest and		Interest
	Dividend Income		Expense		Dividend Income		Expense

	(dollars in thousands)
Income and expense line items presented in the consolidated statements of income	$	120,247	$	58,165	$	119,746	$	63,583

The effects of cash flow hedging:
Gain (loss) on interest rate caps and collars on deposits		-		-		-		(1,039)
Gain (loss) on interest rate swaps on debt		-		(210)		-		(337)
Loss on interest rate swaps and collars on loans		(2,109)		-		(2,987)		-

The effects of fair value hedging:
Gain on interest rate swaps on loans		165		-		985		-


	Six Months Ended June 30, 2025				Six Months Ended June 30, 2024
	Interest and		Interest		Interest and		Interest
	Dividend Income		Expense		Dividend Income		Expense

	(dollars in thousands)

Income and expense line items presented in the consolidated statements of income	$	236,920	$	114,852	$	234,795	$	123,933

The effects of cash flow hedging:
Gain (loss) on interest rate caps and collars on deposits		-		(117)		-		(2,155)
Gain (loss) on interest rate swaps on debt		-		(419)		-		(673)
(Gain) loss on interest rate swaps and collars on loans		(4,192)		-		(5,961)		-

The effects of fair value hedging:
Gain on interest rate swaps on loans		335		-		1,962		-

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:


	June 30, 2025		December 31, 2024

	(dollars in thousands)

Cash	$	41,911	$	39,431
U.S. govt. sponsored agency securities		6,469		6,222
Municipal securities		140,958		151,107
Residential mortgage-backed and related securities		25,272		18,132
	$	214,610	$	214,892

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.

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NOTE 6 – 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 six months ended June 30, 2025 and 2024:


	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2025				2024				2025				2024
			% of				% of				% of				% of
			Pretax				Pretax				Pretax				Pretax
	Amount		Income		Amount		Income		Amount		Income		Amount		Income

	(dollars in thousands)								(dollars in thousands)

Computed "expected" tax expense	$	6,420	21.0	%	$	6,650	21.0	%	$	11,902	21.0	%	$	12,509	21.0	%
Tax exempt income, net		(4,633)	(15.2)			(3,986)	(12.6)			(9,023)	(15.9)			(7,761)	(13.0)
Bank-owned life insurance		(210)	(0.7)			(622)	(2.0)			(320)	(0.6)			(804)	(1.3)
State income taxes, net of federal benefit, current year		896	2.9			1,088	3.4			1,344	2.4			2,102	3.5
Tax credits		(338)	(1.1)			35	0.1			(795)	(1.4)			(51)	(0.1)
Income from tax credit equity investments		(424)	(1.4)			(497)	(1.6)			(852)	(1.5)			(1,093)	(1.8)
Excess tax benefit on stock options exercised and restricted stock awards vested		(37)	(0.1)			(54)	(0.1)			(527)	(0.9)			(524)	(0.9)
Other		(122)	(0.3)			(60)	(0.1)			131	0.2			(652)	(1.1)
Federal and state income tax expense	$	1,552	5.1	%	$	2,554	8.1	%	$	1,860	3.3	%	$	3,726	6.3	%

The effective tax rate for the first six months of 2025 was exceptionally low at 3%, down from 6% in the first six months of 2024. The decline was primarily due to a combination of the tax benefits from equity compensation in the first six months of 2025, new state tax credit investments, and lower pre-tax income from lower capital markets revenue. Given a more normalized mix of revenue, the Company expects its effective tax rate to increase 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:


	For the Three Months Ended						For the Six Months Ended
	June 30, 2025		March 31, 2025		June 30, 2024		June 30, 2025		June 30, 2024

	(dollars in thousands)						(dollars in thousands)

Tax credits recognized	$	2,587	$	2,707	$	2,115	$	5,295	$	4,319
Other tax benefits recognized		492		496		613		988		1,342
Amortization		(2,191)		(2,192)		(2,092)		(4,384)		(4,153)
Net benefit included in income tax		888		1,011		636		1,899		1,508

Other income		—		—		—		—		—
Allocated income on investments		—		—		—		—		—
Net benefit included in noninterest income		—		—		—		—		—

Net benefit included in the Consolidated Statements of Income	$	888	$	1,011	$	636	$	1,899	$	1,508

The Company did not recognize impairment losses resulting from the forfeiture or ineligibility of income tax credits or other circumstances during the three and six months ending June 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 not reflected in the income tax provision for the three and six months ended June 30, 2025, as enactment occurred after the balance sheet date. The Company is currently evaluating the impact on future periods.

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NOTE 7 - EARNINGS PER SHARE

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


		Three months ended			Six months ended
		June 30,			June 30,
		2025		2024		2025		2024

	(dollars in thousands, except share data)

Net income	$	29,019	$	29,114	$	54,816	$	55,840

Basic EPS	$	1.71	$	1.73	$	3.24	$	3.32
Diluted EPS	$	1.71	$	1.72	$	3.22	$	3.30

Weighted average common shares outstanding		16,928,542		16,814,814		16,914,663		16,799,081
Weighted average common shares issuable upon exercise of stock options and under the employee stock purchase plan		77,740		107,040		95,473		117,183
Weighted average common and common equivalent shares outstanding		17,006,282		16,921,854		17,010,136		16,916,264

NOTE 8 – 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 June 30, 2025 and December 31, 2024:


			Fair Value Measurements at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)

	(dollars in thousands)
June 30, 2025:
Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	14,267	$	—	$	14,267	$	—
Residential mortgage-backed and related securities		58,864		—		58,864		—
Municipal securities		153,979		—		153,979		—
Asset-backed securities		6,684		—		6,684		—
Corporate securities		37,723		—		37,723		—
Securities trading		82,900		—		—		82,900
Derivatives		184,982		—		184,982		—
Total assets measured at fair value	$	539,399	$	—	$	456,499	$	82,900

Derivatives	$	209,505	$	—	$	209,505	$	—
Total liabilities measured at fair value	$	209,505	$	—	$	209,505	$	—


December 31, 2024:
Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	20,591	$	—	$	20,591	$	—
Residential mortgage-backed and related securities		50,042		—		50,042		—
Municipal securities		164,575		—		164,575		—
Asset-backed securities		9,224		—		9,224		—
Corporate securities		36,677		—		36,677		—
Securities trading		83,529		—		—		83,529
Derivatives		186,781		—		186,781		—
Total assets measured at fair value	$	551,419	$	—	$	467,890	$	83,529

Derivatives	$	214,823	$	—	$	214,823	$	—
Total liabilities measured at fair value	$	214,823	$	—	$	214,823	$	—

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).

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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 June 30, 2025, the discount rates ranged from 3.23% to 6.33%.

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



	Three months ended				Six months ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024

	(dollars in thousands)

Balance at the beginning of the period	$	82,445	$	22,258	$	83,529	$	22,369
Paydowns		(40)		—		(81)		—
Premium amortization		(237)		(129)		(471)		(260)
Fair value gain (loss)		732		233		(77)		253
Balance at the end of the period	$	82,900	$	22,362	$	82,900	$	22,362

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 June 30, 2025 and December 31, 2024:


			Fair Value Measurements at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		Level 1		Level 2		Level 3

	(dollars in thousands)

June 30, 2025:
Loans/leases evaluated individually	$	55,773	$	—	$	—	$	55,773
OREO		67		—		—		67
	$	55,840	$	—	$	—	$	55,840

December 31, 2024:
Loans/leases evaluated individually	$	54,434	$	—	$	—	$	54,434
OREO		714		—		—		714
	$	55,148	$	—	$	—	$	55,148

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.

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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:


	Quantitative Information about Level Fair Value Measurements
	Fair Value		Fair Value
	June 30,		December 31,
	2025		2024		Valuation Technique	Unobservable Input	Range

	(dollars in thousands)

Loans/leases evaluated individually	$	55,773	$	54,434	Appraisal of collateral	Appraisal adjustments	-10.00	%	to	-30.00	%
OREO		67		714	Appraisal of collateral	Appraisal adjustments	0.00	%	to	-35.00	%

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 six months ended June 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:


	Fair Value	As of June 30, 2025				As of December 31, 2024
	Hierarchy	Carrying		Estimated		Carrying		Estimated
	Level	Value		Fair Value		Value		Fair Value

		(dollars in thousands)

Cash and due from banks	Level 1	$	104,769	$	104,769	$	91,732	$	91,732
Federal funds sold	Level 2		27,000		27,000		27,150		27,150
Interest-bearing deposits at financial institutions	Level 2		118,704		118,704		143,442		143,442
Investment securities:
HTM	Level 2		909,035		803,565		835,797		800,583
AFS	Level 2		271,517		271,517		281,109		281,109
Trading	Level 3		82,900		82,900		83,529		83,529
Loans/leases receivable, net	Level 3		51,642		55,773		50,402		54,434
Loans/leases receivable, net	Level 2		6,784,550		6,522,198		6,644,161		6,325,156
Derivatives	Level 2		184,982		184,982		186,781		186,781

Deposits:
Nonmaturity deposits	Level 2		6,092,401		6,092,401		5,835,362		5,835,362
Time deposits	Level 2		1,225,952		1,223,097		1,225,825		1,222,482
Short-term borrowings	Level 2		1,350		1,350		1,800		1,800
FHLB advances	Level 2		225,383		226,169		285,383		285,196
Subordinated notes	Level 2		233,701		238,668		233,489		238,873
Junior subordinated debentures	Level 2		48,925		42,416		48,860		41,638
Derivatives	Level 2		209,505		209,505		214,823		214,823

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NOTE 9 – 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 six months ended June 30, 2025 and 2024:


	Commercial Banking										Intercompany		Consolidated
	QCBT		CRBT		CSB		GB		All other		Eliminations		Total

	(dollars in thousands)
Three Months Ended June 30, 2025
Interest and dividend income	$	36,857	$	32,949	$	20,981	$	30,369	$	72	$	(981)	$	120,247
Interest expense		17,887		12,926		8,468		16,004		4,284		(1,404)		58,165
Net interest income		18,970		20,023		12,513		14,365		(4,212)		423		62,082
Provision for credit losses		2,082		1,190		152		619		—		—		4,043
Noninterest income
Capital markets revenue		16		8,553		—		1,300		—		—		9,869
Other segment revenue items		5,277		4,017		1,242		2,009		35,011		(35,310)		12,246
Total noninterest income		5,293		12,570		1,242		3,309		35,011		(35,310)		22,115
Noninterest expense
Salaries and benefits expense		7,449		8,952		4,777		7,474		(178)		—		28,474
Occupancy expense		1,603		1,770		1,217		1,795		452		—		6,837
Other segment expense items		4,064		3,606		2,383		3,158		1,710		(649)		14,272
Total noninterest expense		13,116		14,328		8,377		12,427		1,984		(649)		49,583
Income tax expense		825		1,643		65		(336)		(645)		—		1,552
Net income (loss) from continuing operations	$	8,240	$	15,432	$	5,161	$	4,964	$	29,460	$	(34,238)	$	29,019

Goodwill	$	2,791	$	14,980	$	9,888	$	110,936	$	—	$	—	$	138,595
Intangibles		—		508		600		8,630		—		—		9,738
Total assets		2,662,450		2,664,293		1,605,966		2,365,944		1,381,743		(1,438,065)		9,242,331

Three Months Ended June 30, 2024
Interest and dividend income	$	37,222	$	30,760	$	20,092	$	31,965	$	96	$	(389)	$	119,746
Interest expense		19,497		13,660		8,808		18,103		4,270		(755)		63,583
Net interest income		17,725		17,100		11,284		13,862		(4,174)		366		56,163
Provision for credit losses		3,228		2,028		47		193		—		—		5,496
Noninterest income
Capital markets revenue		—		16,014		—		1,744		—		—		17,758
Other segment revenue items		4,644		3,394		1,387		4,214		37,199		(37,707)		13,131
Total noninterest income		4,644		19,408		1,387		5,958		37,199		(37,707)		30,889
Noninterest expense
Salaries and benefits expense		7,986		8,873		4,617		6,842		2,761		—		31,079
Occupancy expense		1,451		1,558		1,178		1,747		443		—		6,377
Other segment expense items		3,725		3,524		2,216		2,586		984		(603)		12,432
Total noninterest expense		13,162		13,955		8,011		11,175		4,188		(603)		49,888
Income tax expense		423		2,788		(14)		187		(830)		—		2,554
Net income (loss) from continuing operations	$	5,556	$	17,737	$	4,627	$	8,265	$	29,667	$	(36,738)	$	29,114

Goodwill	$	3,223	$	14,980	$	9,888	$	110,936	$	—	$	—	$	139,027
Intangibles		—		755		1,148		10,538		—		—		12,441
Total assets		2,559,049		2,428,266		1,531,109		2,369,754		1,263,250		(1,279,437)		8,871,991

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	Commercial Banking										Intercompany		Consolidated
	QCBT		CRBT		CSB		GB		All other		Eliminations		Total

	(dollars in thousands)
Six Months Ended June 30, 2025
Interest and dividend income	$	72,794	$	64,881	$	40,989	$	59,712	$	159	$	(1,615)	$	236,920
Interest expense		35,200		25,392		16,570		31,566		8,570		(2,446)		114,852
Net interest income		37,594		39,489		24,419		28,146		(8,411)		831		122,068
Provision for credit losses		3,494		1,276		1,514		1,993		—		—		8,277
Noninterest income
Capital markets revenue		16		14,156		62		2,151		—		—		16,385
Other segment revenue items		10,488		6,412		2,744		3,683		66,727		(67,432)		22,622
Total noninterest income		10,504		20,568		2,806		5,834		66,727		(67,432)		39,007
Noninterest expense
Salaries and benefits expense		14,858		16,813		9,650		13,978		539		—		55,838
Occupancy expense		3,142		3,366		2,455		3,392		937		—		13,292
Other segment expense items		8,098		7,158		4,488		6,234		2,308		(1,294)		26,992
Total noninterest expense		26,098		27,337		16,593		23,604		3,784		(1,294)		96,122
Income tax expense		1,722		2,407		(181)		(752)		(1,336)		—		1,860
Net income (loss) from continuing operations	$	16,784	$	29,037	$	9,299	$	9,135	$	55,868	$	(65,307)	$	54,816

Goodwill	$	2,791	$	14,980	$	9,888	$	110,936	$	—	$	—	$	138,595
Intangibles		—		508		600		8,630		—		—		9,738
Total assets		2,662,450		2,664,293		1,605,966		2,365,944		1,381,743		(1,438,065)		9,242,331

Six Months Ended June 30, 2024
Interest and dividend income	$	72,952	$	60,529	$	39,338	$	62,508	$	160	$	(692)	$	234,795
Interest expense		38,264		26,521		16,979		35,132		8,443		(1,406)		123,933
Net interest income		34,688		34,008		22,359		27,376		(8,283)		714		110,862
Provision for credit losses		6,453		1,794		233		(15)		—		—		8,465
Noninterest income
Capital markets revenue		—		31,219		—		2,996		—		—		34,215
Other segment revenue items		9,296		6,395		2,651		6,044		70,804		(71,658)		23,532
Total noninterest income		9,296		37,614		2,651		9,040		70,804		(71,658)		57,747
Noninterest expense
Salaries and benefits expense		16,119		18,320		9,136		14,003		5,361		—		62,939
Occupancy expense		2,948		3,143		2,424		3,459		917		—		12,891
Other segment expense items		7,491		7,042		4,180		5,614		1,628		(1,207)		24,748
Total noninterest expense		26,558		28,505		15,740		23,076		7,906		(1,207)		100,578
Income tax expense		513		5,543		(39)		84		(2,375)		—		3,726
Net income (loss) from continuing operations	$	10,460	$	35,780	$	9,076	$	13,271	$	56,990	$	(69,737)	$	55,840

Goodwill	$	3,223	$	14,980	$	9,888	$	110,936	$	—	$	—	$	139,027
Intangibles		—		755		1,148		10,538		—		—		12,441
Total assets		2,559,049		2,428,266		1,531,109		2,369,754		1,263,250		(1,279,437)		8,871,991

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:


	Commercial Banking
	QCBT		CRBT		CSB		GB		Total

	(dollars in thousands)
Three Months Ended June 30, 2025
Other segment revenue items:
Equity in net income of subsidiary bank	$	8,240	$	15,432	$	5,161	$	4,964	$	33,797
Total assets:
Investment in subsidiary bank		297,789		454,519		182,701		389,152		1,324,161

Three Months Ended June 30, 2024
Other segment revenue items:
Equity in net income of subsidiary bank	$	5,557	$	17,736	$	4,627	$	8,266	$	36,186
Total assets:
Investment in subsidiary bank		268,996		386,642		161,611		367,634		1,184,883


Six Months Ended June 30, 2025
Other segment revenue items:
Equity in net income of subsidiary bank	$	16,784	$	29,037	$	9,299	$	9,135	$	64,255
Total assets:
Investment in subsidiary bank		297,789		454,519		182,701		389,152		1,324,161

Six Months Ended June 30, 2024
Other segment revenue items:
Equity in net income of subsidiary bank	$	10,460	$	35,779	$	9,076	$	13,272	$	68,587
Total assets:
Investment in subsidiary bank		268,996		386,642		161,611		367,634		1,184,883

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NOTE 10 – 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 June 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 June 30, 2025 and December 31, 2024 are presented in the following tables (dollars in thousands). As of June 30, 2025 and December 31, 2024, each of the subsidiary banks met such capital requirements to be “well capitalized.”


										For Capital Adequacy					To Be Well Capitalized
					For Capital					Purposes With Capital					Under Prompt Corrective
	Actual				Adequacy Purposes					Conservation Buffer					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio		Amount			Ratio

	( dollars in thousands)
As of June 30, 2025:
Company:
Total risk-based capital	$	1,314,474	14.26	%	$	737,507	>	8.00	%	$	967,978	>	10.50	%	$	921,884	>	10.00	%
Tier 1 risk-based capital		1,010,640	10.96			553,130	>	6.00			783,601	>	8.50			737,507	>	8.00
Tier 1 leverage		1,010,640	11.22			360,229	>	4.00			360,229	>	4.00			450,286	>	5.00
Common equity Tier 1		961,715	10.43			414,848	>	4.50			645,319	>	7.00			599,225	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	339,461	14.33	%	$	189,536	>	8.00	%	$	248,766	>	10.50	%	$	236,920	>	10.00	%
Tier 1 risk-based capital		310,380	13.10			142,152	>	6.00			201,382	>	8.50			189,536	>	8.00
Tier 1 leverage		310,380	11.70			106,093	>	4.00			106,093	>	4.00			132,617	>	5.00
Common equity Tier 1		310,380	13.10			106,614	>	4.50			165,844	>	7.00			153,998	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	481,055	15.09	%	$	255,110	>	8.00	%	$	334,832	>	10.50	%	$	318,888	>	10.00	%
Tier 1 risk-based capital		453,450	14.22			191,333	>	6.00			271,054	>	8.50			255,110	>	8.00
Tier 1 leverage		453,450	17.28			104,943	>	4.00			104,943	>	4.00			131,179	>	5.00
Common equity Tier 1		453,450	14.22			143,499	>	4.50			223,221	>	7.00			207,277	>	6.50
Community State Bank:
Total risk-based capital	$	200,559	13.06	%	$	122,888	>	8.00	%	$	161,291	>	10.50	%	$	153,611	>	10.00	%
Tier 1 risk-based capital		186,208	12.12			92,166	>	6.00			130,569	>	8.50			122,888	>	8.00
Tier 1 leverage		186,208	11.75			63,386	>	4.00			63,386	>	4.00			79,232	>	5.00
Common equity Tier 1		186,208	12.12			69,125	>	4.50			107,527	>	7.00			99,847	>	6.50
Guaranty Bank:
Total risk-based capital	$	307,790	14.70	%	$	167,529	>	8.00	%	$	219,882	>	10.50	%	$	209,411	>	10.00	%
Tier 1 risk-based capital		282,693	13.50			125,647	>	6.00			178,000	>	8.50			167,529	>	8.00
Tier 1 leverage		282,693	12.65			89,355	>	4.00			89,355	>	4.00			111,693	>	5.00
Common equity Tier 1		282,693	13.50			94,235	>	4.50			146,588	>	7.00			136,117	>	6.50

Table of Contents


										For Capital Adequacy					To Be Well Capitalized
					For Capital					Purposes With Capital					Under Prompt Corrective
	Actual				Adequacy Purposes					Conservation Buffer					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio		Amount			Ratio

	( dollars in thousands)
As of December 31, 2024:
Company:
Total risk-based capital	$	1,273,903	14.10	%	$	723,016	>	8.00	%	$	948,958	>	10.50	%	$	903,770	>	10.00	%
Tier 1 risk-based capital		955,039	10.57			542,262	>	6.00			768,204	>	8.50			723,016	>	8.00
Tier 1 leverage		955,039	10.73			356,091	>	4.00			356,091	>	4.00			445,114	>	5.00
Common equity Tier 1		906,179	10.03			406,696	>	4.50			632,639	>	7.00			587,450	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	323,221	13.65	%	$	189,365	>	8.00	%	$	248,541	>	10.50	%	$	236,706	>	10.00	%
Tier 1 risk-based capital		293,597	12.40			142,024	>	6.00			201,200	>	8.50			189,365	>	8.00
Tier 1 leverage		293,597	11.41			102,969	>	4.00			102,969	>	4.00			128,712	>	5.00
Common equity Tier 1		293,597	12.40			106,518	>	4.50			165,694	>	7.00			153,859	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	452,942	14.79	%	$	245,055	>	8.00	%	$	321,635	>	10.50	%	$	306,319	>	10.00	%
Tier 1 risk-based capital		424,253	13.85			183,792	>	6.00			260,371	>	8.50			245,055	>	8.00
Tier 1 leverage		424,253	16.40			103,449	>	4.00			103,449	>	4.00			129,312	>	5.00
Common equity Tier 1		424,253	13.85			137,844	>	4.50			214,424	>	7.00			199,108	>	6.50
Community State Bank:
Total risk-based capital	$	189,362	12.94	%	$	117,065	>	8.00	%	$	153,648	>	10.50	%	$	146,332	>	10.00	%
Tier 1 risk-based capital		176,646	12.07			87,799	>	6.00			124,382	>	8.50			117,065	>	8.00
Tier 1 leverage		176,646	11.72			60,305	>	4.00			60,305	>	4.00			75,382	>	5.00
Common equity Tier 1		176,646	12.07			65,849	>	4.50			102,432	>	7.00			95,115	>	6.50
Guaranty Bank:
Total risk-based capital	$	297,047	14.26	%	$	166,695	>	8.00	%	$	218,787	>	10.50	%	$	208,369	>	10.00	%
Tier 1 risk-based capital		272,621	13.08			125,021	>	6.00			177,113	>	8.50			166,695	>	8.00
Tier 1 leverage		272,621	12.15			89,770	>	4.00			89,770	>	4.00			112,213	>	5.00
Common equity Tier 1		272,621	13.08			93,766	>	4.50			145,858	>	7.00			135,440	>	6.50

NOTE 11 - 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 June 30, 2025, the Company had paid $23.4 million of the contract price, resulting in a remaining future commitment of approximately $17.9 million. Construction on this facility is anticipated to be completed in 2026.

NOTE 12 – SUBSEQUENT 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 (the “2030 Notice”) 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”).

Pursuant to the 2030 Notice, the Company gave holders of the 2030 Notes notice that it intends to redeem 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”).

Pursuant to the MW Notice, the Company gave MW notice that it intends to redeem 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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

This section reviews the financial condition and results of operations of the Company and its subsidiaries as of and for the three and six months ending June 30, 2025. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends. When reading this discussion, also refer to the Consolidated Financial Statements and related notes in this report. Page locations and specific sections and notes that are referred to in this discussion are listed in the table of contents.

Additionally, a comprehensive list of the acronyms and abbreviations used throughout this discussion is included in Note 1 to the Consolidated Financial Statements.

GENERAL

The Company was formed in February 1993 for the purpose of organizing QCBT. Over the past 32 years, the Company has grown to include four banking subsidiaries and a number of nonbanking subsidiaries. As of June 30, 2025, the Company had $9.3 billion in consolidated assets, including $6.8 billion in net loans/leases, and $7.3 billion in deposits. The financial results of acquired entities for the periods since their acquisition are included in this report. Further information related to acquired entities has been presented in the annual reports previously filed with the SEC corresponding to the year of each acquisition.

CRITICAL ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES

The Company's financial statements are prepared in accordance with GAAP. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance, determination of the fair value of loans acquired in business combinations, impairment of goodwill, the fair value of financial instruments, and the fair value of securities.

Based on its consideration of accounting policies that involve the most complex and subjective decisions and assessments, management has identified the following as critical accounting policies and estimates:

●

Allowance for Credit Losses on Loans and Leases and Off-Balance Sheet Exposures

●

Goodwill

A more detailed discussion of these critical accounting policies and estimates can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

EXECUTIVE OVERVIEW

The Company reported net income of $29.0 million and diluted EPS of $1.71 for the quarter ended June 30, 2025. By comparison, for the quarter ended March 31, 2025, the Company reported net income of $25.8 million and diluted EPS of $1.52. For the quarter ended June 30, 2024, the Company reported net income of $29.1 million, and diluted EPS of $1.72. For the six months ended June 30, 2025, the Company reported net income of $54.8 million and diluted EPS of $3.22. By comparison, for the six months ended June 30, 2024 the Company reported net income of $55.8 million and diluted EPS of $3.30.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

The second quarter of 2025 was also highlighted by the following results and events (see section titled “GAAP to Non-GAAP Reconciliations” for additional information):

●

Adjusted net income (non-GAAP) of $29.4 million or $1.73 per diluted share;

●

NIM (TEY) (non-GAAP) expanded 4 basis points to 3.46%;

●

Adjusted ROAA (non-GAAP) of 1.29% annualized;

●

Capital markets revenue growth of 51% on a linked-quarter basis;

●

Nonperforming assets declined $5.5 million, or 11%;

●

Tangible book value per share (non-GAAP) grew $1.64, or 13% annualized; and

●

TCE/TA ratio (non-GAAP) improved 22 basis points to 9.92%.

Following is a table that represents various net income measurements for the Company:


	For the three months ended						For the six months ended
	June 30, 2025		March 31, 2025		June 30, 2024		June 30, 2025		June 30, 2024

	(dollars in thousands)

Net income	$	29,019	$	25,797	$	29,114	$	54,816	$	55,840

Diluted earnings per common share	$	1.71	$	1.52	$	1.72	$	3.22	$	3.30

Weighted average common and common equivalent shares outstanding		17,006,282		17,013,992		16,921,854		17,010,136		16,916,264

The Company reported adjusted net income (non-GAAP) of $29.4 million, with adjusted diluted EPS (non-GAAP) of $1.73 for the three months ended June 30, 2025. See section titled “GAAP to Non-GAAP Reconciliations” for additional information. The Company reported adjusted net income (non-GAAP) of $55.4 million, with adjusted diluted EPS (non-GAAP) of $3.26 for the six months ended June 30, 2025. See section titled “GAAP to Non-GAAP Reconciliations” for additional information. Adjusted net income (non-GAAP) for the three and six months ended June 30, 2025 excludes a number of non-core or non-recurring items, after-tax, as set forth in the GAAP to Non-GAAP Reconciliation section.

Following is a table that represents the major income and expense categories for the Company:


	For the three months ended						For the six months ended
	June 30, 2025		March 31, 2025		June 30, 2024		June 30, 2025		June 30, 2024

	(dollars in thousands)

Net interest income	$	62,082	$	59,986	$	56,163	$	122,068	$	110,862
Provision for credit losses		4,043		4,234		5,496		8,277		8,465
Noninterest income		22,115		16,892		30,889		39,007		57,747
Noninterest expense		49,583		46,539		49,888		96,122		100,578
Federal and state income tax expense		1,552		308		2,554		1,860		3,726
Net income	$	29,019	$	25,797	$	29,114	$	54,816	$	55,840

Following are certain noteworthy developments in the Company's financial results for the quarter ended June 30, 2025:

●

Net interest income in the second quarter of 2025 increased 3% compared to the first quarter of 2025 and increased 11% compared to the second quarter of 2024 due to higher average earning assets and higher investment yields. Net interest income increased 10% when comparing the first six months of 2025 to the same period of the prior year. The increase was primarily due to higher average earning assets and higher investment securities yields and a decrease in the cost of interest-bearing deposits.

●

Provision for credit losses in the second quarter of 2025 decreased $191 thousand compared to the first quarter of 2025. The decrease was primarily due to lower loan growth. Provision expense decreased $1.5 million

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

compared to the second quarter of 2024. The decrease was primarily due to lower loan growth and a decrease in criticized loans. Provision expense in the first six months of 2025 decreased $188 thousand compared to the first six months of 2024. The decrease was due to a decrease in criticized loans. See the “Provision for Credit Losses” section of this report for additional details.

●

Noninterest income in the second quarter of 2025 increased $5.2 million, or 31%, compared to the first quarter of 2025. The increase was primarily due to higher capital markets revenue from swap fees as clients adjusted to the current environment. Noninterest income in the second quarter of 2025 decreased $8.8 million, or 28%, compared to the second quarter of 2024 and noninterest income decreased $18.7 million, or 32%, when comparing the first six months of 2025 to the same period of the prior year. The decreases were primarily due to a decrease in capital markets revenue. Capital markets revenue in the first six months of 2025 was affected by macroeconomic and governmental uncertainty. Despite this, sustained, long-term demand for affordable housing remains strong. The demand for low-income housing remains healthy and the economics associated with these tax credit projects continue to be favorable. The Company has a strong pipeline for this business that continues to improve as clients adapt to evolving market conditions. The Company expects its capital markets revenue will normalize to historical levels over the next four quarters and continue to be a solid source of fee income.

●

Noninterest expense in the second quarter of 2025 increased $3.0 million, or 7%, compared to the first quarter of 2025. The increase was primarily due to higher capital markets revenue and its impact on variable compensation as well as higher professional fees related to the Company’s digital transformation. Noninterest expense decreased $305 thousand, or 1%, compared to the second quarter of 2024. Noninterest expense decreased $4.5 million, or 4%, when comparing the first six months of 2025 to the same period in the prior year. These decreases were primarily due to lower capital markets revenue and its impact on variable compensation.

STRATEGIC FINANCIAL METRICS

The Company has established certain strategic financial metrics by which it manages its business and measures its performance. The goals are periodically updated to reflect changes in business developments. While the Company is determined to work prudently to achieve these metrics, there is no assurance that they will be met. Moreover, the Company's ability to achieve these metrics may be affected by the factors discussed under “Forward Looking Statements” as well as the factors detailed in the “Risk Factors” section included under Item 1A. of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2024. The Company's long-term strategic financial metrics are as follows:

●

Generate loan and lease growth of 9% per year, funded by core deposits, which excludes brokered deposits;

●

Grow fee-based income by at least 6% per year; and

●

Limit annual operating expense growth to 5% per year.

The following table shows the evaluation of the Company’s strategic financial metrics:


			Year to Date*
Strategic Financial Metric*	Key Metric	Target	June 30, 2025			March 31, 2025			June 30, 2024
Loan and lease growth organically	Loans and leases growth	> 9% annually		6.0	%		2.3	%		12.4	%
Fee income growth	Fee income growth	> 6% annually		(36.1)	%		(43.0)	%		(13.5)	%
Improve operational efficiencies and hold noninterest expense growth	Noninterest expense growth	< 5% annually		(6.3)	%		(9.3)	%		(4.4)	%

* Ratios and amounts provided for these measurements represent year-to-date actual amounts for the respective period that are then annualized for comparison to the prior year actual. The calculations provided exclude non-core noninterest income and noninterest expense.

It should be noted that these initiatives are long-term targets.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

STRATEGIC DEVELOPMENTS

The Company has taken the following actions during the second quarter of 2025 to support its corporate strategy and further the strategic financial metrics shown above:

●

The Company grew loans and leases by 8.0% annualized in the second quarter of 2025 when adding back the impact from the runoff of m2 loans and leases. The loan growth was driven by both traditional and LIHTC lending.

●

The Company acted as the correspondent bank through QCBT for 189 downstream banks with total noninterest bearing deposits of $97.3 million and total interest-bearing deposits of $933.5 million as of June 30, 2025, as correspondent banking continued to be a core line of business for the Company. By comparison, the Company acted as the correspondent bank for 188 downstream banks with total noninterest bearing deposits of $94.7 million and total interest-bearing deposits of $679.9 million as of June 30, 2024. The Company is competitively positioned with experienced staff, software systems and processes to continue growing in the four states currently served – Iowa, Wisconsin, Missouri and Illinois. This line of business provides a strong source of deposits, fee income, high-quality loan participations and bank stock loans. The Company also managed off-balance sheet liquidity held at the Federal Reserve on behalf of the downstream banks of $409.6 million as of June 30, 2025, as compared to $449.2 million as of June 30, 2024.

●

The Company continued to focus on executing interest rate swaps on select commercial loans, including LIHTC permanent loans. These interest rate swaps allow commercial borrowers to pay a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent on the pricing. Management believes that these swaps help position the Company more favorably for various interest rate environments. The Company will continue to review opportunities to execute these swaps at all of its subsidiary banks as appropriate for applicable borrowers and the Company. Levels of capital markets revenue from swap fee income are influenced by prevailing interest rates. Capital markets revenue, primarily from swap fee income, totaled $9.9 million for the second quarter of 2025 as compared to $17.8 million for the same period of the prior year. Capital markets revenue, primarily from swap fee income, totaled $16.4 million for the first six months of 2025 as compared to $34.2 million for the same period of the prior year. Capital markets revenue in the first six months of 2025 was affected by macroeconomic and governmental uncertainty. Despite this, demand for affordable housing remains strong, as discussed in the “Executive Overview” section of this report, above.

●

Over many years, the Company has been successful in expanding its wealth management client base. Trust and investment advisory and management fees continue to be a significant contributor to noninterest income. Assets under management increased by $347.7 million for the quarter ended June 30, 2025 compared to the quarter ended March 31, 2025, and increased by $372.3 million for the first six months of 2025 compared to the first six months of 2024. Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services. The majority of trust fees are determined based on the value of the investments managed. The Company expects trust and investment advisory and management fees to be negatively impacted during periods of lower market valuations and positively impacted during periods of higher market valuations. The Company has recently expanded its wealth management business into the southwest Missouri and central Iowa markets.

●

Noninterest expense for the first six months of 2025 totaled $96.1 million as compared to $100.6 million in the first six months of 2024. The decrease was primarily due to a reduction in salaries and benefits expenses related to lower variable incentive compensation.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

GAAP TO NON-GAAP RECONCILIATIONS

The following table presents certain non-GAAP financial measures related to the “TCE/TA ratio,” “adjusted net income,” “adjusted EPS,” “adjusted ROAA,” “NIM (TEY),” “adjusted NIM (TEY),” “efficiency ratio,” and “adjusted efficiency ratio.” In compliance with applicable rules of the SEC, all non-GAAP measures are reconciled to the most directly comparable GAAP measure, as follows:

●

TCE/TA ratio (non-GAAP) is reconciled to stockholders’ equity and total assets;

●

Adjusted net income, adjusted EPS and adjusted ROAA (all non-GAAP measures) are reconciled to net income;

●

NIM (TEY) (non-GAAP) and adjusted NIM (TEY) (non-GAAP) are reconciled to NIM; and

●

Efficiency ratio (non-GAAP) and adjusted efficiency ratio (non-GAAP) are reconciled to noninterest expense, net interest income and noninterest income.

The TCE/TA non-GAAP ratio has been a focus for investors, and management believes that this ratio may assist investors in analyzing the Company’s capital position without regard to the effects of intangible assets.

The following tables also include several “adjusted” non-GAAP measurements of financial performance. The Company’s management believes that these measures are important to investors as they exclude non-core or non-recurring income and expense items; therefore, they provide a better comparison for analysis and may provide a better indicator of future performance.

NIM (TEY) is a financial measure that the Company’s management utilizes to determine the tax benefit associated with certain tax-exempt loans and securities. It is standard industry practice to measure net interest margin using tax-equivalent measures. In addition, the Company calculates NIM without the impact of acquisition accounting net accretion (adjusted NIM), as accretion amounts can fluctuate widely, making comparisons difficult.

The efficiency ratio and adjusted efficiency ratio are utilized by management to compare the Company to its peers. They are standard ratios used to calculate overhead as a percentage of revenue in the banking industry and is widely utilized by investors.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.


	As of
GAAP TO NON-GAAP	June 30,			March 31,			June 30,
RECONCILIATIONS	2025			2025			2024

	(dollars in thousands, except per share data)
TCE/TA RATIO
Stockholders' equity (GAAP)	$	1,050,554		$	1,022,747		$	936,319
Less: Intangible assets		148,333			148,995			151,468
TCE (non-GAAP)	$	902,221		$	873,752		$	784,851

Total assets (GAAP)	$	9,242,331		$	9,152,779		$	8,871,991
Less: Intangible assets		148,333			148,995			151,468
TA (non-GAAP)	$	9,093,998		$	9,003,784		$	8,720,523

TCE/TA ratio (non-GAAP)		9.92	%		9.70	%		9.00	%

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued


	For the Three Months Ended									For the Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2025			2025			2024			2025			2024

	(dollars in thousands, except per share data)
ADJUSTED NET INCOME
Net income (GAAP)	$	29,019		$	25,797		$	29,114		$	54,816		$	55,840
Less non-core items (post-tax) (*):
Income:
Fair value gain (loss) on derivatives, net		(397)			(156)			(145)			(553)			(288)
Total non-core income (non-GAAP)	$	(397)		$	(156)		$	(145)		$	(553)		$	(288)


Adjusted net income (non-GAAP)	$	29,416		$	25,953		$	29,259		$	55,369		$	56,128

ADJUSTED EPS
Adjusted net income (non-GAAP) (from above)	$	29,416		$	25,953		$	29,259		$	55,369		$	56,128

Weighted average common shares outstanding		16,928,542			16,900,785			16,814,814			16,914,663			16,799,081
Weighted average common and common equivalent shares outstanding		17,006,282			17,013,992			16,921,854			17,010,136			16,916,264

Adjusted EPS (non-GAAP):
Basic	$	1.74		$	1.54		$	1.74		$	3.27		$	3.34
Diluted	$	1.73		$	1.53		$	1.73		$	3.26		$	3.32

ADJUSTED ROAA (non-GAAP)
Adjusted net income (non-GAAP) (from above)	$	29,416		$	25,953		$	29,259		$	55,369		$	56,128

Average Assets	$	9,155,473		$	9,015,439		$	8,776,002		$	9,085,843		$	8,663,429

Adjusted ROAA (non-GAAP)		1.29	%		1.15	%		1.33	%		1.22	%		1.30	%
Adjusted ROAE (non-GAAP)		11.30	%		10.20	%		12.69	%		10.76	%		12.30	%

ADJUSTED NIM (TEY)*
Net interest income (GAAP)	$	62,082		$	59,986		$	56,163		$	122,068		$	110,862
Plus: Tax equivalent adjustment		10,090			9,513			8,914			19,603			17,259
Net interest income - tax equivalent (non-GAAP)	$	72,172		$	69,499		$	65,077		$	141,671		$	128,121
Less: Acquisition accounting net accretion		84			184			268			268			631
Adjusted net interest income	$	72,088		$	69,315		$	64,809		$	141,403		$	127,490

Average earning assets	$	8,377,361		$	8,241,035		$	7,999,044		$	8,309,575		$	7,903,382

NIM (GAAP)		2.97	%		2.95	%		2.82	%		2.97	%		2.82	%
NIM (TEY) (non-GAAP)		3.46	%		3.42	%		3.27	%		3.45	%		3.26	%
Adjusted NIM (TEY) (non-GAAP)		3.45	%		3.41	%		3.26	%		3.44	%		3.24	%

EFFICIENCY RATIO
Noninterest expense (GAAP)	$	49,583		$	46,539		$	49,888		$	96,122		$	100,578

Net interest income (GAAP)	$	62,082		$	59,986		$	56,163		$	122,068		$	110,862
Noninterest income (GAAP)		22,115			16,892			30,889			39,007			57,747
Total income	$	84,197		$	76,878		$	87,052		$	161,075		$	168,609

Efficiency ratio (noninterest expense/total income) (non-GAAP)		58.89	%		60.54	%		57.31	%		59.68	%		59.65	%
Adjusted efficiency ratio (core noninterest expense/core total income) (Non-GAAP)		58.54	%		60.38	%		57.19	%		59.42	%		59.52	%

* Non-core or non-recurring items (after-tax) are calculated using an estimated effective federal tax rate of 21% with the exception of goodwill impairment which is not deductible for tax.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

NET INTEREST INCOME AND MARGIN - (TAX EQUIVALENT BASIS)

Net interest income, on a GAAP basis, increased 3% for the quarter ended June 30, 2025, compared to the same quarter of the prior year. Net interest income, on a tax equivalent basis (non-GAAP) increased 11% for the quarter ended June 30, 2025, compared to the same quarter of the prior year. Net interest income, on a GAAP basis, increased 10% for the six months ended June 30, 2025, compared to the same period of the prior year. Net interest income, on a tax equivalent basis (non-GAAP), increased 11% for the six months ended June 30, 2025, compared to the same period of the prior year. Net interest income changed primarily due to the Company’s loan and investment growth and continued expansion of loan and investment yields, which were partially offset by deposit growth with a lower cost of funds.

A comparison of yields, spread and margin as reported on the Company’s financial statements and on a tax equivalent basis is as follows:


	GAAP						Tax Equivalent Basis
	For the Three Months Ended						For the Three Months Ended
	June 30,		March 31,		June 30,		June 30,		March 31,		June 30,
	2025		2025		2024		2025		2025		2024
Average Yield on Interest-Earning Assets	5.74	%	5.66	%	5.99	%	6.24	%	6.20	%	6.46	%
Average Cost of Interest-Bearing Liabilities	3.42	%	3.44	%	3.93	%	3.42	%	3.44	%	3.93	%
Net Interest Spread	2.32	%	2.22	%	2.06	%	2.82	%	2.76	%	2.53	%
NIM (TEY) (Non-GAAP)	3.46	%	3.42	%	3.27	%	3.46	%	3.42	%	3.27	%
NIM Excluding Acquisition Accounting Net Accretion (Non-GAAP)	2.96	%	2.90	%	2.80	%	3.45	%	3.41	%	3.26	%


	GAAP					Tax Equivalent Basis
	For the Six Months Ended					For the Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2025		2024			2025		2024
Average Yield on Interest-Earning Assets	5.70	%		6.32	%	6.22	%		6.41	%
Average Cost of Interest-Bearing Liabilities	3.43	%		3.90	%	3.43	%		3.90	%
Net Interest Spread	2.27	%		2.42	%	2.79	%		2.51	%
NIM (TEY) (Non-GAAP)	3.45	%		2.82	%	2.95	%		3.26	%
NIM Excluding Acquisition Accounting Net Accretion (Non-GAAP)	2.93	%		2.97	%	3.45	%		3.24	%

Acquisition accounting net accretion can fluctuate depending on the payoff activity of acquired loans. In evaluating net interest income and NIM, it is important to understand the impact of acquisition accounting net accretion when comparing periods. The above table reports NIM with and without the acquisition accounting net accretion to allow for more appropriate comparisons. A comparison of acquisition accounting net accretion included in NIM is as follows:


		For the Three Months Ended					For the Six Months Ended
		June 30,		March 31,		June 30,	June 30,		June 30,
		2025		2025		2024	2025			2024
		(dollars in thousands)						(dollars in thousands)

Acquisition Accounting Net Accretion in NIM	$	84	$	184	$	268	$	268	$	631

The Company’s management closely monitors and manages NIM. From a profitability standpoint, an important challenge for the Company’s subsidiary banks and leasing company is focusing on quality growth in conjunction with the improvement of their NIMs. Management continually addresses this issue with pricing and other balance sheet strategies which include better loan pricing, reducing reliance on rate-sensitive funding, closely managing deposit rate changes and finding additional ways to manage cost of funds through derivatives.

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Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

The Company’s average balances, interest income/expense, and rates earned/paid on major balance sheet categories, as well as the components of change in net interest income, are presented in the following tables:


	For the Three Months Ended June 30,
	2025								2024
				Interest		Average						Interest		Average
	Average			Earned		Yield or			Average			Earned		Yield or
	Balance			or Paid		Cost			Balance			or Paid		Cost

	(dollars in thousands)
ASSETS
Interest earning assets:
Federal funds sold	$	14,285		$	159		4.40	%	$	13,065		$	183		5.54	%
Interest-bearing deposits at financial institutions		151,898			1,634		4.31	%		80,998			1,139		5.66	%
Investment securities - taxable		401,657			4,805		4.79	%		377,747			4,286		4.53	%
Investment securities - nontaxable (1)		893,753			12,872		5.76	%		704,761			9,462		5.37	%
Restricted investment securities		34,037			622		7.23	%		43,398			869		7.92	%
Gross loans/leases receivable (1) (2) (3)		6,881,731			110,245		6.43	%		6,779,075			112,719		6.69	%
Total interest earning assets		8,377,361			130,337		6.24	%		7,999,044			128,658		6.46	%

Noninterest-earning assets:
Cash and due from banks		78,264								77,663
Premises and equipment		172,919								135,156
Less allowance		(89,378)								(84,507)
Other		616,307								648,646
Total assets	$	9,155,473							$	8,776,002

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits	$	5,080,367		$	38,604		3.05	%	$	4,649,625		$	40,924		3.54	%
Time deposits		1,193,035			12,409		4.17	%		1,091,870			12,128		4.47	%
Short-term borrowings		1,420			15		4.23	%		1,622			21		5.18	%
FHLB advances		250,603			2,853		4.50	%		464,231			6,238		5.32	%
Subordinated notes		233,631			3,599		6.16	%		233,207			3,582		6.14	%
Junior subordinated debentures		48,904			685		5.54	%		48,774			688		5.58	%
Total interest-bearing liabilities		6,807,960			58,165		3.42	%		6,489,329			63,581		3.93	%

Noninterest-bearing demand deposits		945,138								945,693
Other noninterest-bearing liabilities		360,947								418,994
Total liabilities		8,114,045								7,854,016

Stockholders' equity		1,041,428								921,986
Total liabilities and stockholders' equity	$	9,155,473							$	8,776,002
Net interest income				$	72,172							$	65,077
Net interest margin							2.97	%							2.53	%
Net interest margin (TEY)(Non-GAAP)							3.46	%							2.82	%
Adjusted net interest margin (TEY)(Non-GAAP)							3.45	%							3.27	%
Cost of funds (4)							3.01	%							3.26	%

Ratio of average interest-earning assets to average interest-bearing liabilities		123.05	%							123.26	%

(1)	Interest earned and yields on nontaxable investment securities and nontaxable loans are determined on a tax equivalent basis using a 21% federal tax rate.

(2)	Loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance.

(3)	Non-accrual loans/leases are included in the average balance for gross loans/leases receivable in accordance with accounting and regulatory guidance.

(4)	Cost of funds includes the effect of noninterest-bearing demand deposits.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Analysis of Changes of Interest Income/Interest Expense

For the Three Months Ended June 30, 2025




	Inc./(Dec.)		Components
	from		of Change (1)
	Prior Period (1)		Rate		Volume

	2025 vs. 2024
	(dollars in thousands)
INTEREST INCOME
Federal funds sold	$	(24)	$	(110)	$	86
Interest-bearing deposits at financial institutions		495		(1,612)		2,107
Investment securities - taxable		519		247		272
Investment securities - nontaxable (2)		3,410		727		2,683
Restricted investment securities		(247)		(71)		(176)
Gross loans/leases receivable (2) (3)		(2,474)		(11,665)		9,191
Total change in interest income		1,679		(12,484)		14,163

INTEREST EXPENSE
Interest-bearing deposits		(2,320)		(19,659)		17,339
Time deposits		281		(3,681)		3,962
Short-term borrowings		(6)		(4)		(2)
Federal Home Loan Bank advances		(3,385)		(849)		(2,536)
Subordinated notes		17		11		6
Junior subordinated debentures		(3)		(13)		10
Total change in interest expense		(5,416)		(24,195)		18,779

Total change in net interest income	$	7,095	$	11,711	$	(4,616)

(1)	The column “Inc./(Dec.) from Prior Period” is segmented into the changes attributable to variations in volume and the changes attributable to changes in interest rates. The variations attributable to simultaneous volume and rate changes have been proportionately allocated to rate and volume.

(2)	Interest earned and yields on nontaxable investment securities and nontaxable loans are determined on a tax equivalent basis using a 21% federal tax rate.

(3)	Loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued


	For the Six Months Ended June 30,
	2025								2024
				Interest		Average						Interest		Average
	Average			Earned		Yield or			Average			Earned		Yield or
	Balance			or Paid		Cost			Balance			or Paid		Cost

	(dollars in thousands)
ASSETS
Interest earning assets:
Federal funds sold	$	11,662		$	258		4.40	%	$	16,510		$	452		5.41	%
Interest-bearing deposits at financial institutions		159,356			3,438		4.35	%		86,277			2,339		5.45	%
Investment securities - taxable		401,220			9,393		4.69	%		375,644			8,546		4.54	%
Investment securities - nontaxable (1)		868,754			24,594		5.67	%		695,365			18,813		5.41	%
Restricted investment securities		32,309			1,156		7.12	%		40,742			1,543		7.49	%
Gross loans/leases receivable (1) (2) (3)		6,836,274			217,684		6.42	%		6,688,844			220,392		6.63	%
Total interest earning assets		8,309,575			256,523		6.22	%		7,903,382			252,085		6.41	%

Noninterest-earning assets:
Cash and due from banks		78,031								77,713
Premises and equipment, net		167,617								131,567
Less allowance for estimated losses on loans/leases		(89,710)								(85,638)
Other		620,330								636,405
Total assets	$	9,085,843							$	8,663,429

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits	$	5,041,914		$	76,302		3.05	%	$	4,589,479		$	80,027		3.51	%
Time deposits		1,198,782			25,098		4.22	%		1,099,746			24,473		4.48	%
Short-term borrowings		1,629			33		4.05	%		1,688			44		5.19	%
Federal Home Loan Bank advances		214,444			4,849		4.50	%		409,725			10,977		5.30	%
Subordinated notes		233,579			7,201		6.17	%		233,154			7,062		6.06	%
Junior subordinated debentures		48,888			1,369		5.57	%		48,758			1,381		5.60	%
Total interest-bearing liabilities		6,739,236			114,852		3.43	%		6,382,550			123,964		3.90	%

Noninterest-bearing demand deposits		941,916								952,099
Other noninterest-bearing liabilities		375,167								416,101
Total liabilities		8,056,319								7,750,750

Stockholders' equity		1,029,524								912,679
Total liabilities and stockholders' equity	$	9,085,843							$	8,663,429
Net interest income				$	141,671							$	128,121
Net interest margin							2.95	%							2.82	%
Net interest margin (TEY)(Non-GAAP)							3.45	%							3.26	%
Adjusted net interest margin (TEY)(Non-GAAP)							3.44	%							3.24	%
Cost of funds (4)							3.01	%							3.31	%

Ratio of average interest earning assets to average interest-bearing liabilities		123.30	%							123.83	%

(1)

Interest earned and yields on nontaxable investment securities and nontaxable loans are determined on a tax equivalent basis using a 21% federal tax rate.

(2)

Loan/lease fees are not material and are included in interest income from loans/leases receivable in accordance with accounting and regulatory guidance.

(3)

Non-accrual loans/leases are included in the average balance for gross loans/leases receivable in accordance with accounting and regulatory guidance.

(4)

Cost of funds includes the effect of noninterest-bearing demand deposits.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued



Analysis of Changes of Interest Income/Interest Expense
For the six months ended June 30, 2025

	Inc./(Dec.)		Components
	from		of Change (1)
	Prior Period (1)		Rate		Volume

	2025 vs. 2024
	(dollars in thousands)
INTEREST INCOME
Federal funds sold	$	(194)	$	(76)	$	(118)
Interest-bearing deposits at other financial institutions		1,099		(1,321)		2,420
Investment securities - taxable		847		277		570
Investment securities - nontaxable (2)		5,781		934		4,847
Restricted investment securities		(387)		(75)		(312)
Gross loans/leases receivable (2) (3)		(2,708)		(13,125)		10,417
Total change in interest income		4,438		(13,386)		17,824

INTEREST EXPENSE
Interest-bearing demand deposits		(3,725)		(20,252)		16,527
Time deposits		625		(3,232)		3,857
Short-term borrowings		(11)		(10)		(1)
Federal Home Loan Bank advances		(6,128)		(1,474)		(4,654)
Subordinated notes		139		126		13
Junior subordinated debentures		(12)		(18)		6
Total change in interest expense		(9,112)		(24,860)		15,748

Total change in net interest income	$	13,550	$	11,474	$	2,076

The Company’s operating results are also impacted by various sources of noninterest income, including trust fees, investment advisory and management fees, deposit service fees, capital markets revenue, including swap fee income and gains on loan securitizations, gains from the sales of residential real estate loans and government guaranteed loans, earnings on BOLI and other income. Offsetting these items, the Company incurs noninterest expenses, which include salaries and employee benefits, occupancy and equipment expense, professional and data processing fees, FDIC and other insurance expense, loan/lease expense and other administrative expenses.

The Company’s operating results are also affected by economic and competitive conditions, particularly changes in interest rates, income tax rates, government policies and actions of regulatory authorities. For a discussion of the factors that could have a material impact on the operations and future prospects of the Company and its subsidiaries, see the “Risk Factors” section included under Item 1A. of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

RESULTS OF OPERATIONS

INTEREST INCOME

Interest income increased $501 thousand, comparing the second quarter of 2025 to the same period of 2024, and increased $2.1 million when comparing the first six months of 2025 to the same period of 2024. Interest income (tax equivalent non-GAAP) increased $1.7 million, comparing the second quarter of 2025 to the same period of 2024, and increased $4.4 million when comparing the first six months of 2025 to the same period of 2024. These increases in interest income were primarily due to higher loan and investment average balances and margin expansion from higher loan yields.

The Company intends to continue to grow quality loans and leases as well as its private placement tax-exempt securities portfolio to maximize yield while minimizing credit and interest rate risk.

Table of Contents

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Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

INTEREST EXPENSE

Interest expense decreased $5.4 million, comparing the second quarter of 2025 to the same period of 2024, and decreased $9.1 million, comparing the first six months of 2025 to the same period of 2024, primarily due to the lower cost of funds. The Company’s cost of funds was 3.01% for the quarter ended June 30, 2025, a decrease from 3.43% for the quarter ended June 30, 2024. The Company’s costs of funds was 3.01% for the six months ended June 30, 2025, a decrease from 3.39% for the six months ended June 30, 2024. The decrease was a result of the Federal Reserve lowering interest rates in the second half of 2024.

PROVISION FOR CREDIT LOSSES

The ACL is established through provision expense to provide an estimated ACL. The following table shows the components of the provision for credit losses for the three and six months ended June 30, 2025 and 2024:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2025		2024		2025		2024

	(dollars in thousands)				(dollars in thousands)

Provision for credit losses - loans and leases	$	4,667	$	4,343	$	9,410	$	8,079
Provision for credit losses - off-balance sheet exposures		(624)		1,153		(1,133)		831
Provision for credit losses - available for sale securities		—		—		—		(445)
Total provision for credit losses	$	4,043	$	5,496	$	8,277	$	8,465

The Company had a total provision for credit losses on loans and leases of $4.7 million for the second quarter of 2025, an increase from $4.3 million for the same period of 2024, primarily driven by loan growth and increased net charge-offs. The provision related to OBS was negative $624 thousand for the second quarter of 2025 compared to a provision related to OBS of $1.2 million for the second quarter of 2024. The decrease was due to a decreased balance in unfunded commitments. Provision for credit losses on loans and leases for the first six months of 2025 totaled $9.4 million, an increase from $8.1 million for the first six months of 2024. The increase was primarily driven by loan growth and increased net charge-offs. The provision related to OBS was negative $1.1 million for the first six months of 2025 compared to a provision related to OBS of $831 thousand for the first six months of 2024.

There was no provision related to HTM securities for the first six months of 2025 or 2024. There was no provision related to AFS securities for the first six months of 2025, compared to a negative provision of $445 thousand on AFS securities for the first six months of 2024 with the change in fair value of a debt investment in a failed bank. This was a legacy investment acquired as part of the 2022 GFED acquisition, for which an allowance equal to the entire value of the bond was established in March 2023. A partial recovery in value occurred due to favorable changes in market conditions during 2024, and the investment was then sold in 2024.

The ACL for loans and leases is established based on a number of factors, including the Company's historical loss experience, delinquencies and charge-off trends, economic and other forecasts, the local, state and national economies and risk associated with the loans/leases and securities in the portfolio, as described in more detail in the “Critical Accounting Policies and Critical Accounting Estimates” section of this report.

The Company had an ACL for loans/leases held for investment of 1.28% of total gross loans/leases held for investment at June 30, 2025, compared to 1.32% at March 31, 2025 and 1.33% at June 30, 2024. Management evaluates the allowance needed on loans acquired in previous acquisitions, factoring in the remaining discount, which was $2.0 million and $3.3 million at June 30, 2025 and June 30, 2024, respectively.

Additional discussion of the Company's allowance can be found in the “Financial Condition” section of this report.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

NONINTEREST INCOME

The following table sets forth the various categories of noninterest income for the three and six months ended June 30, 2025 and 2024:


	Three Months Ended
	June 30,		June 30,
	2025		2024		$ Change		% Change

	(dollars in thousands)

Trust fees	$	3,395	$	3,103	$	292	9.4	%
Investment advisory and management fees		1,254		1,214		40	3.3
Deposit service fees		2,187		1,986		201	10.1
Gains on sales of residential real estate loans, net		556		540		16	3.0
Gains on sales of government guaranteed portions of loans, net		40		12		28	233.3
Capital markets revenue		9,869		17,758		(7,889)	(44.4)
Earnings on bank-owned life insurance		998		2,964		(1,966)	(66.3)
Debit card fees		1,648		1,571		77	4.9
Correspondent banking fees		699		510		189	37.1
Loan related fee income		1,096		962		134	13.9
Fair value gain on derivatives and trading securities		230		51		179	351.0
Other		143		218		(75)	(34.4)
Total noninterest income	$	22,115	$	30,889	$	(8,774)	(28.4)	%


	Six Months Ended
	June 30,		June 30,
	2025		2024		$ Change		% Change

	(dollars in thousands)

Trust fees	$	7,081	$	6,302	$	779	12.4	%
Investment advisory and management fees		2,508		2,315		193	8.3
Deposit service fees		4,370		4,008		362	9.0
Gains on sales of residential real estate loans, net		853		922		(69)	(7.5)
Gains on sales of government guaranteed portions of loans, net		101		36		65	180.6
Capital markets revenue		16,385		34,215		(17,830)	(52.1)
Earnings on bank-owned life insurance		1,522		3,832		(2,310)	(60.3)
Debit card fees		3,136		3,037		99	3.3
Correspondent banking fees		1,313		1,022		291	28.5
Loan related fee income		1,994		1,798		196	10.9
Fair value loss on derivatives and trading securities		(777)		(112)		(665)	593.8
Other		521		372		149	40.1
Total noninterest income	$	39,007	$	57,747	$	(18,740)	(32.5)	%

The Company continues to be successful in expanding its wealth management client base. Trust and investment advisory and management fees continue to be a significant contributor to noninterest income. Assets under management have increased $347.7 million since March 31, 2025 and have increased by $800.5 million since June 30, 2024 due primarily to new relationships. Income is generated primarily from fees charged based on assets under administration for corporate and personal trusts and for custodial services. The majority of trust fees are determined based on the value of the investments within the fully-managed trusts. Trust fees increased 9% in the second quarter of 2025 as compared to the same period of the prior year, and increased 12% when comparing the first six months of 2025 to the first six months of 2024 due to growth in assets under management and market performance. The Company expects trust and investment advisory and management fees to be negatively impacted during periods of significantly lower market valuations and positively impacted during periods of significantly higher market valuations. During 2024, the Company expanded its wealth management business into the southwest Missouri and central Iowa markets.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Investment advisory and management fees increased 3% comparing the second quarter of 2025 to the same period of the prior year, and increased 8% when comparing the first six months of 2025 to the first six months of 2024. Similar to trust fees, fees from these services are largely determined based on the market value of the investments managed. As a result, fee income from this line of business fluctuates with market valuations.

Deposit service fees increased 10% in the second quarter of 2025 as compared to the same period of the prior year, and increased 9% when comparing the first six months of 2025 to the first six months of 2024. The Company’s total deposits increased by $553.7 million, or 8%, when comparing June 30, 2025 to June 30, 2024. The Company continues to be successful in expanding its core deposit base with a targeted focus on growing the number of net new accounts in 2025.

Gains on sales of residential real estate loans, net, increased 3% when comparing the first quarter of 2025 to the same period of the prior year, and decreased 8% when comparing the first six months of 2025 to the first six months of 2024. The decrease was due to lower volume of client residential real estate purchase activity generating lower levels of gains.

The Company has grown its capital markets revenue significantly over the past several years. The Company’s interest rate swap program consists of back-to-back interest rate swaps with two types of commercial borrowers: (1) traditional commercial loans of a certain minimum size and sophistication, and (2) LIHTC permanent loans. Most of the growth has been in the latter category as the Company has grown relationships with strong LIHTC developers with many years of experience. The LIHTC industry is strong and growing with an increased need for affordable housing. The back-to-back interest rate swaps allow commercial borrowers to pay a fixed interest rate while the Company receives a variable interest rate as well as an upfront nonrefundable fee dependent upon the pricing from an upstream counter party.

Capital markets revenue totaled $9.9 million for the second quarter of 2025, compared to $17.8 million for the second quarter of 2024. Capital markets revenue totaled $16.4 million for the first six months of 2025, compared to $34.2 million for the first six months of 2024. As discussed in the “Executive Overview” section of this report, capital markets revenue was affected by macroeconomic and governmental uncertainty. Demand for affordable housing remains strong. In the traditional commercial portfolio, the pricing is more competitive and the duration is shorter as compared to the LIHTC permanent loans. Therefore, the mix of loans with interest rate swaps continued to be heavily weighted towards LIHTC permanent loans. Future levels of swap fees are dependent upon the needs of our traditional commercial and LIHTC borrowers, and the size of the related nonrefundable swap fee may fluctuate depending on the interest rate environment.

Earnings on BOLI decreased 66%, comparing the second quarter of 2025 to the same period of the prior year, and decreased 60% when comparing the first six months of 2025 to the first six months of 2024. There were BOLI exchanges in the first six months of 2025 resulting in surrender charges of $168 thousand. In addition, there were $2.2 million of death benefit proceeds on BOLI received in the second quarter of 2024. There were no purchases of BOLI in the first six months of 2025 or 2024. Notably, a portion of the Company's BOLI is variable rate whereby returns are determined by the performance of the equity markets. Management intends to continue to review its BOLI investments to be consistent with policy and regulatory limits in conjunction with the rest of its earning assets in an effort to maximize returns while minimizing risk.

Debit card fees are the interchange fees paid on certain debit card customer transactions. Debit card fees increased 5% when comparing the second quarter of 2025 to the second quarter of 2024, and increased 3% when comparing the first six months of 2025 to the first six months of 2024. The fees can vary based on customer debit card usage, so fluctuations from period to period may occur. As an opportunity to maximize fees, the Company offers a deposit product with a higher interest rate that incentivizes debit card activity.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Correspondent banking fees increased 37% comparing the second quarter of 2025 to the same period of the prior year and increased 29% when comparing the first six months of 2025 to the first six months of 2024. The increase was primarily due to a shift of correspondent banking balances from non-interest bearing accounts to interest bearing accounts. Fees from correspondent banks generally increase when non-interest bearing account balances decrease due to lower associated earnings credits. Correspondent banking continues to be a core strategy for the Company, as this line of business provides a high level of deposits that can be used to fund loan growth as well as a steady source of fee income. The Company now serves 189 banks in Iowa, Illinois, Missouri and Wisconsin.

Loan-related fee income increased 14% comparing the second quarter of 2025 to the same period of the prior year and increased 11% when comparing the first six months of 2025 to the first six months of 2024. The increase was primarily due to loan growth.

Fair value losses on derivatives were $502 thousand and fair value gains on trading securities were $732 thousand in the second quarter of 2025, as compared to $183 thousand in losses and $234 thousand in gains, respectively, in the same period of the prior year. Fair value losses on derivatives and trading securities were $700 thousand and $77 thousand, respectively, in the first six months of 2025, as compared to losses of $365 thousand and gains of $253 thousand, respectively in the same period of the prior year. During the first quarter of 2024, the Company executed a derivative strategy utilizing swaptions with a notional value of approximately $409.0 million. The Company uses swaptions to manage interest rate risk related to the variability of interest payments due to changes in interest rates. These derivatives are unhedged and are marked-to-market, with gains or losses recorded in noninterest income which was a contributing factor in the increase in fair value losses on derivatives. See Note 5 to the Consolidated Financial Statements for additional information.

Other noninterest income decreased $75 thousand, or 341%, in the second quarter of 2025 as compared to the same period of the prior year, and increased 40% when comparing the first six months of 2025 to the first six months of 2024 due to fluctuations on the market value of the Company’s equity investments. Income on equity investments is largely determined based on the market value of the investments managed.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

NONINTEREST EXPENSE

The following tables set forth the various categories of noninterest expense for the three and six months ended June 30, 2025 and 2024:


	Three Months Ended
	June 30,		June 30,
	2025		2024		$ Change		% Change

	(dollars in thousands)

Salaries and employee benefits	$	28,474	$	31,079	$	(2,605)	(8.4)	%
Occupancy and equipment expense		6,837		6,377		460	7.2
Professional and data processing fees		6,089		4,823		1,266	26.2
FDIC insurance, other insurance and regulatory fees		1,960		1,854		106	5.7
Loan/lease expense		407		151		256	169.5
Net cost of and losses on operations of other real estate		50		28		22	78.6
Advertising and marketing		1,746		1,565		181	11.6
Communication and data connectivity		274		318		(44)	(13.8)
Supplies		252		259		(7)	(2.7)
Bank service charges		720		622		98	15.8
Correspondent banking expense		314		363		(49)	(13.5)
Intangibles amortization		661		690		(29)	(4.2)
Payment card processing		547		706		(159)	(22.5)
Trust expense		413		379		34	9.0
Other		839		674		165	24.5
Total noninterest expense	$	49,583	$	49,888	$	(305)	(0.6)	%


	Six Months Ended
	June 30,		June 30,
	2025		2024		$ Change		% Change

	(dollars in thousands)

Salaries and employee benefits	$	55,838	$	62,939	$	(7,101)	(11.3)	%
Occupancy and equipment expense		13,292		12,891		401	3.1
Professional and data processing fees		11,233		9,436		1,797	19.0
FDIC insurance, other insurance and regulatory fees		3,930		3,799		131	3.4
Loan/lease expense		788		529		259	49.0
Net (income from) cost of and (gains) losses on operations of other real estate		41		(2)		43	2,150.0
Advertising and marketing		3,359		3,048		311	10.2
Communication and data connectivity		564		719		(155)	(21.6)
Supplies		459		534		(75)	(14.0)
Bank service charges		1,316		1,190		126	10.6
Correspondent banking expense		643		668		(25)	(3.7)
Intangibles amortization		1,322		1,380		(58)	(4.2)
Payment card processing		1,141		1,352		(211)	(15.6)
Trust expense		770		804		(34)	(4.2)
Other		1,426		1,291		135	10.5
Total noninterest expense	$	96,122	$	100,578	$	(4,456)	(4.4)	%

Management places a strong emphasis on overall cost containment and is committed to improving the Company's general efficiency.

Salaries and employee benefits, which is the largest component of noninterest expense, decreased 8% when comparing the second quarter of 2025 to the same period of the prior year, and decreased 11% when comparing the first six months of 2025 to the same period of the prior year primarily due to lower capital markets revenue and its impact on variable compensation associated with performance.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Occupancy and equipment expense increased 7% comparing the second quarter of 2025 to the same period of the prior year, and increased 3% when comparing the first six months of 2025 to the same period of the prior year due primarily to higher depreciation expense with the opening of a new office in the Cedar Rapids market and an increase in service contract costs.

Professional and data processing fees increased 26% comparing the second quarter of 2025 to the same period of the prior year, and increased 19% when comparing the first six months of 2025 to the same period of the prior year. The increase was due primarily to increased CDARS and ICS expenses as well as higher professional fees related to the Company’s digital transformation. Generally, professional and data processing fees can fluctuate depending on certain one-time project costs. Management will continue to focus on minimizing such one-time costs and driving recurring costs down through contract negotiation or managed reduction in activity where costs are determined on a usage basis.

FDIC insurance, other insurance and regulatory fee expense increased 6% when comparing the second quarter of 2025 to the same period of the prior year, and increased 3% when comparing the first six months of 2025 to the same period of the prior year due primarily to asset growth.

Loan/lease expense increased 170% when comparing the second quarter of 2025 to the same quarter of the prior year and increased 49% when comparing the first six months of 2025 to the same period of the prior year due primarily to a one-time legal fee reimbursement received in the second quarter of 2024, offsetting the expenses.

Net cost of (income from) and gains/losses on operations of other real estate includes gains/losses on the sale of OREO, write-downs of OREO and all income/expenses associated with OREO. Net cost of and gains/losses on operations of other real estate for the second quarter of 2025 totaled $50 thousand, compared to net cost of and gains/losses on operations of other real estate of $28 thousand for the second quarter of 2024. Net cost of and gains/losses on operations of other real estate for the first six months of 2025 totaled $41 thousand, compared to net income from and gains/losses on operations of other real estate of $2 thousand for the first six months of 2024. There were two sales of OREO properties in the second quarter of 2025 resulting in losses of $45 thousand.

Advertising and marketing expense increased 12% comparing the second quarter of 2025 to the same period of the prior year, and increased 10% when comparing the first six months of 2025 to the same period of the prior year. The increase in expense was primarily due to an increase in sponsorships.

Communication and data connectivity expense decreased 14% comparing the second quarter of 2025 to the same period of the prior year, and decreased 22% when comparing the first six months of 2025 to the same period of the prior year. The decrease was primarily due to improvements to our data center connectivity channels and a reduction in cell phone and air card expenses as the Company continues to improve operational efficiencies.

Supplies expense decreased 3% comparing the second quarter of 2025 to the same period of the prior year, and decreased 14% when comparing the first six months of 2025 to the same period of the prior year. These decreases were primarily due to improved management of supply stock and the timing of purchases.

Bank service charges, a large portion of which includes indirect costs incurred to provide services to QCBT's correspondent banking customer portfolio, increased 16% when comparing the second quarter of 2025 to the same period of the prior year, and increased 11% when comparing the first six months of 2025 to the same period of the prior year. As transaction volumes and the number of correspondent banking clients fluctuate, the associated expenses are expected to also fluctuate.

Correspondent banking expense decreased 14% when comparing the second quarter of 2025 to the same period of the prior year, and decreased 4% when comparing the first six months of 2025 to the same period of the prior year. The decreases were primarily due to higher costs in 2024 for an upgraded safekeeping platform. These are direct costs incurred to provide services to QCBT's correspondent banking customer portfolio, including safekeeping and cash management services.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Intangibles amortization expense decreased 4% when comparing the second quarter of 2025 to the same period of the prior year, and decreased 4% when comparing the first six months of 2025 to the same period of the prior year. The amortization expense is due to the prior acquisitions. These expenses are expected to naturally decrease as intangibles become fully amortized unless there is an addition to intangible assets.

Payment card processing expense decreased 23% when comparing the second quarter of 2025 to the same period of the prior year, and decreased 16% when comparing the first six months of 2025 to the same period of the prior year due to a decreased volume of transactions.

Trust expense increased 9% when comparing the second quarter of 2025 to the same period of the prior year due to increased assets under management. Trust expense decreased 4% when comparing the first six months of 2025 to the same period of the prior year due to higher custody charges in the second quarter of 2024.

Other noninterest expense increased 25% when comparing the second quarter of 2025 to the same period of the prior year, and increased 11% when comparing the first six months of 2025 to the same period of the prior year. The increases were primarily due to increased insurance loss reserves at our QCRH Risk Management micro captive entity. Included in other noninterest expense are items such as meals and entertainment, subscriptions and sales and use tax.

INCOME TAXES

In the second quarter of 2025, the Company incurred income tax expense of $1.6 million, compared to income tax expense of $2.6 million in the same period of the prior year. During the first six months of 2025, the Company incurred income tax expense of $1.9 million, compared to income tax expense of $3.7 million in the first six months of 2024. The effective tax rate for the first six months of 2025 was exceptionally low at 3%, down from 6% in the first six months of 2024. The decline was primarily due to a combination of the tax benefits from equity compensation in the first six months of 2025, new state tax credit investments, and lower pre-tax income from lower capital markets revenue. Given a more normalized mix of revenue, the Company expects its effective tax rate to increase in the second half of 2025.

Refer to the reconciliation of the expected income tax rate to the effective tax rate that is included in Note 6 to the Consolidated Financial Statements for additional detail.

FINANCIAL CONDITION

Following is a table that represents the major categories of the Company’s balance sheet:


	As of
	June 30, 2025				March 31, 2025				December 31, 2024				June 30, 2024

	(dollars in thousands)

	Amount		%		Amount		%		Amount		%		Amount		%
Cash, federal funds sold, and interest-bearing deposits	$	250,473	3	%	$	324,710	4	%	$	262,324	3	%	$	194,435	2	%
Securities		1,263,452	14	%		1,220,717	13	%		1,200,435	13	%		1,033,199	12	%
Net loans/leases		6,836,192	74	%		6,732,813	74	%		6,694,563	74	%		6,766,680	76	%
Derivatives		184,982	2	%		180,997	2	%		186,781	2	%		194,354	2	%
Other assets		707,232	7	%		693,542	7	%		681,927	8	%		683,323	8	%
Total assets	$	9,242,331	100	%	$	9,152,779	100	%	$	9,026,030	100	%	$	8,871,991	100	%

Total deposits	$	7,318,353	79	%	$	7,337,390	80	%	$	7,061,187	79	%	$	6,764,667	76	%
Total borrowings		509,359	6	%		429,921	5	%		569,532	6	%		768,671	9	%
Derivatives		209,505	2	%		206,925	2	%		214,823	2	%		221,798	2	%
Other liabilities		154,560	2	%		155,796	2	%		183,101	2	%		180,536	2	%
Total stockholders' equity		1,050,554	11	%		1,022,747	11	%		997,387	11	%		936,319	11	%
Total liabilities and stockholders' equity	$	9,242,331	100	%	$	9,152,779	100	%	$	9,026,030	100	%	$	8,871,991	100	%

During the second quarter of 2025, the Company's total assets increased $89.6 million, or 1%, from March 31, 2025, to a total of $9.2 billion. The Company’s net loans/leases increased $103.4 million in the second quarter of 2025. Deposits decreased $19.0 million, or less than 1%, during the second quarter of 2025. Borrowings increased $79.4 million, or 18%, during the second quarter of 2025 due primarily to strong loan and investment growth increasing funding needs.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

INVESTMENT SECURITIES

The composition of the Company’s securities portfolio is managed to meet liquidity needs while prioritizing the impact on interest rate risk, maximizing return and minimizing credit risk. In recent years, the Company has continued to shift the mix of the portfolio by decreasing U.S. government sponsored agency securities, while increasing tax-exempt municipal securities. Of the latter, the large majority are private placed tax-exempt debt issuances by municipalities located in the Midwest (with some in or near the Company’s existing markets) that require a thorough underwriting process before investment and are generated by our specialty finance group.

Trading securities had a fair value of $82.9 million as of June 30, 2025 and consisted of retained beneficial interests acquired in conjunction with loan securitizations completed by the Company in 2023 and 2024. See also Note 4 to the Consolidated Financial Statements for details of these securitizations.

Following is a breakdown of the Company's securities portfolio by type, the percentage of net unrealized gains (losses) to carrying value on the total portfolio, and the portfolio duration:


	As of
	June 30, 2025					March 31, 2025					December 31, 2024					June 30, 2024
	Amount			%		Amount			%		Amount			%		Amount			%

	(dollars in thousands)

U.S. treasuries and govt. sponsored agency securities	$	14,267		1	%	$	17,487		1	%	$	20,591		2	%	$	20,101		2	%
Municipal securities		1,033,642		81	%		1,003,985		82	%		971,567		81	%		885,046		86	%
Residential mortgage-backed and related securities		58,864		5	%		43,194		4	%		50,042		4	%		54,708		5	%
Asset-backed securities		6,684		1	%		7,764		1	%		9,224		1	%		12,721		1	%
Other securities		67,358		5	%		66,105		5	%		65,745		5	%		38,464		4	%
Trading securities		82,900		7	%		82,445		7	%		83,529		7	%		22,362		2	%
	$	1,263,715		100	%	$	1,220,980		100	%	$	1,200,698		100	%	$	1,033,402		100	%

Securities as a % of total assets		13.67	%				13.34	%				13.30	%				11.65	%
Net unrealized losses as a % of Amortized Cost		(13.20)	%				(11.45)	%				(7.32)	%				(7.17)	%
Duration (in years)		5.6					5.6					5.8					6.2
Annual yield on investment securities (tax equivalent)		5.46	%				5.24	%				5.26	%				5.08	%

The Company has not invested in non-agency commercial or residential mortgage-backed securities or pooled trust preferred securities. See Note 2 to the Consolidated Financial Statements for additional information regarding the Company's investment securities.

LOANS/LEASES

Total loans/leases grew 6.2% on an annualized basis, when adding back the impact from the planned runoff of m2 Equipment Finance loans and leases during the first six months of 2025. The mix of the loan/lease classes within the Company's loan/lease portfolio is presented in the following table:


	As of
	June 30, 2025				March 31, 2025				December 31, 2024				June 30, 2024
	Amount		%		Amount		%		Amount		%		Amount		%

	(dollars in thousands)

C&I - revolving	$	380,029	5	%	$	388,479	6	%	$	387,991	6	%	$	362,115	5	%
C&I - other		1,375,689	20	%		1,444,119	21	%		1,514,932	22	%		1,463,198	21	%
CRE - owner occupied		593,675	9	%		599,488	9	%		605,993	9	%		633,596	9	%
CRE - non-owner occupied		1,036,049	15	%		1,040,281	15	%		1,077,852	16	%		1,082,457	16	%
Construction and land development		1,529,022	22	%		1,419,208	21	%		1,313,543	19	%		1,082,348	16	%
Multi-family		1,251,763	18	%		1,178,299	17	%		1,132,110	17	%		1,477,483	22	%
Direct financing leases		12,880	-	%		14,773	-	%		17,076	-	%		25,808	-	%
1-4 family real estate		592,253	9	%		592,127	9	%		588,179	9	%		583,542	9	%
Consumer		153,564	2	%		146,393	2	%		146,728	2	%		143,839	2	%
Total loans/leases	$	6,924,924	100	%	$	6,823,167	100	%	$	6,784,404	100	%	$	6,854,386	100	%
Less allowance		(88,732)				(90,354)				(89,841)				(87,706)
Net loans/leases	$	6,836,192			$	6,732,813			$	6,694,563			$	6,766,680

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

CRE loans are predominantly included within the CRE – owner occupied, CRE – non-owner occupied, construction and land development and multi-family loan classes, however, CRE loans can also be included in 1-4 family based on nature of the loan. As CRE loans have historically been the Company's largest portfolio segment, management places a strong emphasis on the underwriting and monitoring of the characteristics and composition of the Company's CRE loan portfolio. For example, management tracks the level of owner-occupied CRE loans relative to non-owner-occupied loans because owner-occupied loans are generally considered to have less risk. Additionally, the Company reviews CRE concentrations by industry in relation to risk-based capital on a quarterly basis. Approximately 45% of the CRE loan portfolio consists of LIHTC loans, all of which are performing and all of which are pass rated.

Historically, the Company structures most residential real estate loans to conform to the underwriting requirements of Freddie Mac and Fannie Mae to allow the subsidiary banks to resell the loans on the secondary market to avoid the interest rate risk associated with longer term fixed rate loans and to recognize noninterest income from the gain on sale. Loans originated for this purpose were classified as held for sale and are included in the residential real estate loans in the table above. Historically, the subsidiary banks structure most loans that will not conform to the underwriting requirements of Freddie Mac and Fannie Mae as adjustable-rate mortgages that mature or adjust in one to five years, and then retain these loans in their respective portfolios. The Company also holds 15-year fixed rate residential real estate loans originated in prior years that met certain credit guidelines. The Company has not originated any subprime, Alt-A, no documentation, or stated income residential real estate loans throughout its history.

The following is a listing of significant industries within the Company's CRE loan portfolio. These include loans in the following portfolio segments as of June 30, 2025: CRE owner occupied, CRE non-owner occupied, certain construction and land development, multifamily and certain 1-4 family real estate. Within the CRE Loan portfolio, there is a low amount of office exposure, totaling $222.6 million or 3.2% of total loans at June 30, 2025.


	As of June 30,				As of March 31,				As of December 31,				As of June 30,
	2025				2025				2024				2024
	Amount		%		Amount		%		Amount		%		Amount		%

	(dollars in thousands)

Lessors of residential buildings - LIHTC	$	2,057,244	45	%	$	1,936,708	44	%	$	1,778,488	41	%	$	1,918,245	43	%
Lessors of nonresidential buildings		701,754	15	%		683,846	15	%		679,480	16	%		628,783	14	%
Lessors of residential buildings - non LIHTC		507,213	11	%		499,645	11	%		535,671	12	%		444,631	10	%
Hotels		131,404	3	%		136,990	3	%		141,005	3	%		137,485	3	%
New housing for-sale builders		69,926	1	%		68,617	2	%		71,437	2	%		83,929	2	%
Other *		1,149,458	25	%		1,126,551	25	%		1,134,201	26	%		1,261,727	28	%
Other - LIHTC		1,442	-	%		1,447	-	%		1,452	-	%		19,468	-	%
Total CRE loans	$	4,618,441	100	%	$	4,453,804	100	%	$	4,341,734	100	%	$	4,494,268	100	%

* “Other” consists of all other industries. None of these had concentrations greater than $66.0 million, or approximately 1.4% of total CRE loans in the most recent period presented.

The following table reflects credit quality indicators and performance of the Company’s CRE loan portfolio:


	As of June 30,											As of March 31,											As of December 31,
	2025											2025											2024
	Delinquency Status*									% of		Delinquency Status*									% of		Delinquency Status*									% of
	Performing			Nonperforming			Total			CRE		Performing				Nonperforming		Total			CRE		Performing				Nonperforming		Total			CRE

	(dollars in thousands)

Pass	$	4,517,284		$	—		$	4,517,284		98	%	$	4,366,351		$	350		$	4,366,701		98	%	$	4,248,186		$	—		$	4,248,186		98	%
Special Mention		52,551			—			52,551		1	%		35,017			—			35,017		1	%		34,835			—			34,835		1	%
Substandard		37,672			10,934			48,606		1	%		42,652			9,434			52,086		1	%		41,955			16,758			58,713		1	%
Doubtful		—			—			—		0	%		—			—			—		0	%		—			—			—		0	%
	$	4,607,507		$	10,934		$	4,618,441		100	%	$	4,444,020		$	9,784		$	4,453,804		100	%	$	4,324,976		$	16,758		$	4,341,734		100	%

As a percentage of total CRE portfolio		99.76	%		0.24	%		100	%				99.78	%		0.22	%		100	%				99.61	%		0.39	%		100	%

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

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

The Company’s construction and land development loan portfolio includes the following:


	As of
	June 30, 2025				March 31, 2025				December 31, 2024				June 30, 2024
	Amount		%		Amount		%		Amount		%		Amount		%

	(dollars in thousands)

LIHTC construction	$	1,075,000	70	%	$	1,016,207	72	%	$	917,986	70	%	$	750,894	69	%
Construction (commercial)		366,303	24	%		316,916	22	%		312,288	23	%		268,435	25	%
Land development		78,530	5	%		78,550	6	%		72,644	6	%		52,787	5	%
Construction (non-commercial residential)		9,189	1	%		7,535	(0)	%		10,625	1	%		10,232	1	%
Total construction and land development	$	1,529,022	100	%	$	1,419,208	100	%	$	1,313,543	100	%	$	1,082,348	100	%

The Company's 1-4 family real estate loan portfolio includes the following:

●

Certain loans that do not meet the criteria for sale into the secondary market. These are often structured as adjustable rate mortgages with maturities ranging from three to seven years to avoid long-term interest rate risk.

●

A limited amount of 15-year, 20-year and 30-year fixed rate residential real estate loans that meet certain credit guidelines.

The remaining 1-4 family real estate loans originated by the Company were sold on the secondary market to avoid the interest rate risk associated with longer term fixed rate loans and to recognize noninterest income from the gain on sale. Loans originated for this purpose were classified as held for sale and are included in the residential real estate loans above.

Following is a listing of significant equipment types within the m2 loan and lease portfolio:


	As of June 30,				As of March 31,				As of December 31,				As of June 30,
	2025				2025				2024				2024
	Amount		%		Amount		%		Amount		%		Amount		%

	(dollars in thousands)

Trucks, Vans and Vocational Vehicles	$	57,120	23	%	$	65,197	23	%	$	81,575	23	%	$	85,537	23	%
Construction - General		20,003	8	%		22,700	8	%		25,559	7	%		25,591	7	%
Trailers		14,624	6	%		17,267	6	%		21,638	6	%		23,032	6	%
Tractor		14,082	6	%		15,849	6	%		20,353	6	%		21,280	6	%
Computer Equipment		13,883	5	%		15,052	5	%		17,765	5	%		18,623	5	%
Food Processing Equipment		12,578	5	%		13,920	5	%		14,829	4	%		15,059	4	%
Manufacturing - General		11,577	5	%		13,405	5	%		17,490	5	%		18,900	5	%
Marine - Travelifts		10,733	4	%		11,556	4	%		13,574	4	%		14,368	4	%
Freightliners		8,811	3	%		11,231	4	%		15,478	4	%		17,891	5	%
Manufacturing - CNC		6,904	3	%		7,695	3	%		8,558	2	%		9,824	3	%
Other *		79,702	32	%		91,111	31	%		116,441	34	%		113,793	32	%
Total m2 loans and leases	$	250,017	100	%	$	284,983	100	%	$	353,260	100	%	$	363,898	100	%

* “Other” consists of all other equipment types. None of these had concentrations greater than 3% of total m2 loan and lease portfolio in the most recent period presented.

See Note 3 to the Consolidated Financial Statements for additional information regarding the Company's loan and lease portfolio.

ALLOWANCE FOR CREDIT LOSSES ON LOANS/LEASES AND OFF-BALANCE SHEET EXPOSURES

The adequacy of the ACL was determined by management based on numerous factors, including the overall composition of the loan/lease portfolio, types of loans/leases, historical loss experience, loan/lease delinquencies, potential substandard and doubtful credits, economic conditions, collateral positions, government guarantees and other factors that, in management's judgment, deserved evaluation. To ensure that an adequate ACL was maintained, provisions were made based on a number of factors, including the increase in loans/leases and a detailed analysis of the loan/lease portfolio. The loan/lease portfolio is reviewed and analyzed quarterly with specific detailed reviews completed on all credits risk-rated less than “fair quality,” and carrying aggregate exposure in excess of $250 thousand. The adequacy of the allowance is monitored by the credit administration staff and reported to management and the board of directors.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Changes in the ACL for loans/leases for the three and six months ended June 30, 2025 and 2024 are presented as follows:


	Three Months Ended				Six Months Ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024

	(dollars in thousands)

Balance, beginning	$	90,354	$	84,470	$	89,841	$	87,200
Change in ACL for the transfer of loans to LHFS		—		498		—		(2,879)
Provision		4,667		4,343		9,410		8,079
Charge-offs		(6,490)		(1,751)		(11,434)		(5,311)
Recoveries		201		146		915		617
Balance, ending	$	88,732	$	87,706	$	88,732	$	87,706

Changes in the ACL for OBS exposures for the three and six months ended March 31, 2025 and 2024 are presented as follows:


	Three Months Ended				Six Months Ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024

	(dollars in thousands)

Balance, beginning	$	7,764	$	9,207	$	8,273	$	9,529
Provisions (credited) to expense		(624)		1,153		(1,133)		831
Balance, ending	$	7,140	$	10,360	$	7,140	$	10,360

The Company recorded a provision on credit losses related to OBS exposures in the second quarter of 2025 of negative $624 thousand driven by a decrease in the balance of unfunded commitments. At June 30, 2025, the allowance for OBS exposures was $7.1 million.

The Company's levels of criticized and classified loans are reported in the following table:


	As of
Internally Assigned Risk Rating *	June 30, 2025			March 31, 2025			December 31, 2024			June 30, 2024

	(dollars in thousands)

Special Mention	$	68,621		$	55,327		$	73,636		$	85,096
Substandard/Classified loans***		81,040			85,033			84,930			80,345
Doubtful/Classified loans***		—			—			—			—
Criticized Loans **	$	149,661		$	140,360		$	158,566		$	165,441


Criticized Loans as a % of Total Loans/Leases		2.16	%		2.06	%		2.34	%		2.41	%
Classified Loans as a % of Total Loans/Leases		1.17	%		1.25	%		1.25	%		1.17	%

* Amounts above include the government guaranteed portion, if any. For the calculation of ACL, the Company assigns internal risk ratings of Pass (Rating 2) for the government guaranteed portion.

** Criticized loans are defined as loans except for direct financing leases and equipment financing agreements with internally assigned risk ratings of 9, 10, or 11, regardless of performance.

*** Classified loans are defined as loans except for direct financing leases and equipment financing agreements with internally assigned risk ratings of 10 or 11, regardless of performance.

Criticized loans as a percentage of loans and leases increased 0.10% while classified loans as a percentage of loans and leases decreased 0.08% from March 31, 2025 to June 30, 2025 due to some classified loans that were upgraded and some pass credits that were downgraded. Both criticized and classified loans as a percentage of loans and leases decreased from December 31, 2024 to June 30, 2025 due to the payoff of a large credit that was also an NPA. The Company continues its strong focus on improving credit quality in an effort to limit NPLs.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

The following table summarizes the trend in allowance as a percentage of gross loans/leases and as a percentage of NPLs:


	As of
	June 30, 2025		March 31, 2025		December 31, 2024		June 30, 2024
ACL for loans/leases / Total loans/leases held for investment	1.28	%	1.32	%	1.32	%	1.33	%
ACL for loans/leases / NPLs	208.84	%	189.76	%	202.57	%	260.77	%

Although management believes that the ACL at June 30, 2025 was at a level adequate to absorb losses on existing loans/leases, there can be no assurance that such losses will not exceed the estimated amounts or that the Company will not be required to make additional provisions in the future. Unpredictable future events could adversely affect cash flows for both commercial and individual borrowers, which could cause the Company to experience increases in problem assets, delinquencies and losses on loans/leases, and require further increases in the provision for credit losses. Asset quality is a priority for the Company. The ability to grow profitably is in part dependent upon the ability to maintain that quality. The Company continually focuses efforts at its subsidiary banks and equipment financing company with the intention to improve the overall quality of the Company's loan/lease portfolio.

See Note 3 to the Consolidated Financial Statements for additional information regarding the Company's ACL.

NONPERFORMING ASSETS

The table below presents the amount of NPAs and related ratios:




	As of
	June 30, 2025			March 31, 2025			December 31, 2024			June 30, 2024

	(dollars in thousands)

Nonaccrual loans/leases (1)	$	42,482		$	47,259		$	40,080		$	33,546
Accruing loans/leases past due 90 days or more		7			356			4,270			87
Total NPLs		42,489			47,615			44,350			33,633
OREO		62			402			661			512
Other repossessed assets		113			122			543			369
Total NPAs	$	42,664		$	48,139		$	45,554		$	34,514


NPLs to total loans/leases		0.61	%		0.70	%		0.65	%		0.49	%
NPAs to total loans/leases plus repossessed property		0.62	%		0.71	%		0.67	%		0.50	%
NPAs to total assets		0.46	%		0.53	%		0.50	%		0.39	%
Nonaccrual loans/leases to total loans/leases		0.61	%		0.69	%		0.59	%		0.49	%
ACL to nonaccrual loans		208.84	%		191.19	%		224.15	%		261.45	%

(1)

Includes government guaranteed portion of loans, as applicable.

NPAs at June 30, 2025 were $42.7 million, a decrease of $5.5 million from March 31, 2025, and an increase of $8.2 million from June 30, 2024. The decrease in NPAs during the quarter was driven by payoffs and charge-offs. The ratio of NPAs to total assets was 0.46% at June 30, 2025, a decrease from 0.53% at March 31, 2025, and an increase from 0.39% at June 30, 2024.

The majority of the NPAs consist of nonaccrual loans/leases. For nonaccrual loans/leases, management has thoroughly reviewed these loans/leases and has provided specific allowances as appropriate.

OREO and other repossessed assets are carried at the lower of carrying amount or fair value less costs to sell.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

The policy of the Company is to place a loan/lease on nonaccrual status if: (a) payment in full of interest or principal is not expected; or (b) principal or interest has been in default for a period of 90 days or more unless the obligation is both in the process of collection and well secured. A loan/lease is well secured if it is secured by collateral with sufficient market value to repay principal and all accrued interest. A debt is in the process of collection if collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to current status.

The Company's lending/leasing practices remain unchanged and asset quality remains a top priority for management.

DEPOSITS

Following the robust deposit growth of $276.2 million in the first quarter of 2025, total deposits decreased by $19.0 million during the second quarter of 2025.

The table below presents the composition of the Company's deposit portfolio:


	As of
	June 30, 2025				March 31, 2025				December 31, 2024				June 30, 2024
	Amount		%		Amount		%		Amount		%		Amount		%

	(dollars in thousands)

Noninterest bearing demand deposits	$	952,032	13	%	$	963,851	13	%	$	921,160	13	%	$	956,445	14	%
Interest bearing demand deposits		5,087,783	70	%		5,119,601	70	%		4,828,216	68	%		4,644,918	69	%
Time deposits		974,341	13	%		951,606	13	%		953,496	14	%		859,593	13	%
Brokered deposits		304,197	4	%		302,332	4	%		358,315	5	%		303,711	4	%
	$	7,318,353	100	%	$	7,337,390	100	%	$	7,061,187	100	%	$	6,764,667	100	%

The Company actively participates in the ICS/CDARS program, which is a trusted resource that provides FDIC insurance coverage for clients that maintain larger deposit balances. Deposits in the ICS/CDARS program (which are included in interest-bearing deposits and time deposits in the preceding table) totaled $2.4 billion, or 32.8% of all deposits, as of June 30, 2025.

The Company’s correspondent bank deposit portfolio and funds managed consists of the following:

●

Noninterest-bearing deposits which represent correspondent banks’ operating cash used for processing transactions with the Federal Reserve,

●

Money market deposits which represent excess liquidity, and

●

EBA balances of the correspondent banks at the FRB.

The Company had total uninsured and uncollateralized deposits of $1.5 billion and $1.2 billion as of June 30, 2025 and 2024, respectively.

Management will continue to focus on growing its core deposit portfolio, including its correspondent banking business at QCBT, as well as shifting the mix from brokered and other higher cost deposits to lower cost core deposits. With the significant success achieved by QCBT in growing its correspondent banking business, QCBT has developed procedures to proactively monitor this industry concentration of deposits and loans. Other deposit-related industry concentrations and large accounts are monitored by the internal asset liability management committees.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

BORROWINGS

The subsidiary banks purchase federal funds for short-term funding needs from the FRB or from their correspondent banks. The table below presents the composition of the Company's short-term borrowings:


	As of
	June 30, 2025		March 31, 2025		December 31, 2024		June 30, 2024

	(dollars in thousands)

Federal funds purchased	$	1,350	$	2,050	$	1,800	$	1,600

The Company's federal funds purchased fluctuate based on the short-term funding needs of the Company's subsidiary banks.

As a result of their memberships in the FHLB of Des Moines, the subsidiary banks have the ability to borrow funds for short or long-term purposes under a variety of programs. The subsidiary banks can utilize FHLB advances for loan matching as a hedge against the possibility of changing interest rates and when these advances provide a less costly or more readily available source of funds than customer deposits.

The table below presents the Company's FHLB advances as of the periods indicated:


	As of
	June 30, 2025		March 31, 2025		December 31, 2024		June 30, 2024
	(dollars in thousands)

Term FHLB advances	$	145,383	$	145,383	$	145,383	$	135,000
Overnight FHLB advances		80,000		—		140,000		350,000
	$	225,383	$	145,383	$	285,383	$	485,000

The Company had no change in term FHLB advances from March 31, 2025 to June 30, 2025. The Company had an increase in overnight FHLB advances of $80.0 million from March 31, 2025 to June 30, 2025. The increase was primarily due to strong loan and investment growth resulting in higher funding needs during the second quarter of 2025. The Company had a decrease in overnight FHLB advances of $60.0 million from December 31, 2024 to June 30, 2025 due to deposit growth.

It is management's intention to reduce its reliance on wholesale funding, including FHLB advances and brokered deposits. Replacement of this funding with core deposits helps to reduce interest expense as wholesale funding tends to be higher cost. However, the Company may choose to utilize advances and/or brokered deposits to supplement funding needs, as this is a way for the Company to effectively and efficiently manage interest rate risk.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

The table below presents the maturity schedule including weighted average interest cost for the Company's combined wholesale funding portfolio (defined as FHLB advances and brokered deposits):


	June 30, 2025				December 31, 2024
			Weighted				Weighted
			Average				Average
Maturity:	Amount Due		Interest Rate		Amount Due		Interest Rate

	(dollars in thousands)
Year ending December 31:
2025	$	150,341	4.52	%	$	338,462	4.59	%
2026		127,457	4.45			53,240	4.91
2027		87,317	4.45			87,358	4.45
2028		97,581	4.29			97,639	4.29
2029		66,884	3.30			66,999	3.30
Thereafter		—	—			—	—
Total Wholesale Funding	$	529,580	4.30	%	$	643,698	4.42	%

During the first six months of 2025, wholesale funding decreased $114.1 million due to strong loan growth.

The Company renewed its revolving credit note in the second quarter of 2025. At renewal, the available amount under the line of credit increased from $50.0 million to $60.0 million for which there was no outstanding balance as of June 30, 2025. Interest on the revolving line of credit is calculated at the greater of: (a) the effective Prime Rate less 0.50% or (b) 3.00% per annum. The collateral on the revolving line of credit is 100% of the outstanding stock of the Company’s bank subsidiaries.

The Company had subordinated notes totaling $233.7 million and $233.3 million as of June 30, 2025 and 2024, respectively.

The Company had junior subordinated debentures totaling $48.9 million and $48.8 million as of June 30, 2025 and 2024, respectively.

STOCKHOLDERS' EQUITY

The table below presents the composition of the Company's stockholders' equity:


	As of
	June 30, 2025			March 31, 2025			December 31, 2024			June 30, 2024

	(dollars in thousands)

Common stock	$	16,935		$	16,920		$	16,882		$	16,825
Additional paid in capital		376,571			375,111			374,975			372,378
Retained earnings		717,956			689,953			665,171			608,816
AOCI		(60,908)			(59,237)			(59,641)			(61,700)
Total stockholders' equity	$	1,050,554		$	1,022,747		$	997,387		$	936,319

TCE / TA ratio (non-GAAP)*		9.92	%		9.70	%		9.55	%		9.00	%

* TCE/TA ratio is defined as total common stockholders' equity excluding goodwill and other intangibles divided by total assets. This ratio is a non-GAAP financial measure. See GAAP to Non-GAAP Reconciliations.

As of June 30, 2025 and 2024, no preferred stock was outstanding.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

On May 19, 2022, the board of directors of the Company approved a share repurchase program under which the Company is authorized to repurchase, from time to time as the Company deems appropriate, up to 1,500,000 shares of its outstanding common stock, or approximately 10% of the outstanding shares as of December 31, 2021. The share repurchase program does not have an expiration date. No shares were repurchased during the first six months of 2025. There were 760,915 shares of common stock remaining for repurchase under the stock repurchase program as of June 30, 2025. The stock 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 stock 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.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity measures the ability of the Company to meet maturing obligations and its existing commitments, to withstand fluctuations in deposit levels, to fund its operations, and to provide for customer credit needs. The Company monitors liquidity risk through contingency planning stress testing on a regular basis. The Company seeks to avoid an over-concentration of funding sources and to establish and maintain contingent funding facilities that can be drawn upon if normal funding sources become unavailable. One source of liquidity is cash and short-term assets, such as interest-bearing deposits in other banks and federal funds sold, which totaled $250.5 million and $194.4 million at June 30, 2025 and 2024, respectively. The Company’s on-balance sheet liquidity position can fluctuate based on short-term activity in deposits and loans.

The subsidiary banks have a variety of sources of short-term liquidity available to them, including federal funds purchased from correspondent banks, FHLB advances, wholesale structured repurchase agreements, brokered deposits, lines of credit, borrowing at the Federal Reserve Discount Window, sales of securities AFS, and loan/lease participations or sales. The Company also generates liquidity from the regular principal payments and prepayments made on its loan/lease portfolio and on the regular monthly payments on its securities portfolio.

At June 30, 2025, the subsidiary banks had 26 lines of credit totaling $1.2 billion with upstream correspondent banks, of which $764.6 million was secured and $440.8 million was unsecured. At June 30, 2025, the Company had the full $1.2 billion available under these lines of credit.

At December 31, 2024, the subsidiary banks had 27 lines of credit totaling $1.2 billion, of which $746.7 million was secured and $450.8 million was unsecured. At December 31, 2024, $1.2 billion was available under these lines of credit.

The Company has emphasized growing the number and amount of available lines of credit in an effort to strengthen this contingent source of liquidity. Additionally, the Company maintains a $60.0 million secured revolving credit note with a variable interest rate and a maturity of June 30, 2026. At June 30, 2025, the full $60.0 million was available.

As of June 30, 2025, the Company had $1.0 billion in actual correspondent banking deposits spread over 189 relationships. While the Company believes that these funds are relatively stable, there is the potential for large fluctuations that can impact liquidity. Seasonality and the liquidity needs of these correspondent banks can impact balances. Management closely monitors these fluctuations and runs stress scenarios to measure the impact on liquidity and interest rate risk with various levels of correspondent deposit run-off.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Investing activities used cash of $220.1 million during the first six months of 2025, compared to $332.8 million for the same period of 2024. The net decrease in federal funds sold was $150 thousand for the first six months of 2025, compared to a net decrease of $27.3 million for the same period of 2024. The net decrease in interest-bearing deposits at financial institutions was $24.7 million for the first six months of 2025, compared to $10.8 million for the same period of 2024. Proceeds from calls, maturities, and paydowns of securities were $48.6 million for the first six months of 2025, compared to $34.0 million for the same period of 2024. Purchases of securities used cash of $119.9 million for the first six months of 2025, compared to $65.8 million for the same period of 2024. There were no proceeds from the sale of securities for the first six months of 2025, compared to proceeds of $445 thousand for the same period of 2024. The net increase in loans/leases used cash of $149.8 million for the first six months of 2025 compared to a net increase in loans of $319.8 million for the same period of 2024.

Financing activities provided cash of $194.4 million for the first six months of 2025, compared to $298.8 million for same period of 2024. Net increases in deposits totaled $257.2 million for the first six months of 2025, compared to net increases in deposits of $250.7 million for the same period of 2024. During the first six months of 2025, the Company's short-term borrowings decreased $450 thousand, compared to an increase in short-term borrowings of $100 thousand for the same period of 2024. Net decrease in overnight advances totaled $60.0 million for the first six months of 2025 as compared to net increase of $50.0 million for the same period of 2024.

Total cash provided by operating activities was $38.7 million for the first six months of 2025, compared to net cash provided by operating activities of $29.1 million for the same period of 2024.

Throughout its history, the Company has secured additional capital through various sources, including the issuance of common and preferred stock, as well as trust preferred securities and subordinated notes.

The Company had two LIHTC securitization that closed in 2024. LIHTC securitizations may continue to be an ongoing tool in managing liquidity and capital. Refer to Note 4 of the Consolidated Financial Statements for details of these securitizations.

As of June 30, 2025 and December 31, 2024, the subsidiary banks remained “well-capitalized” in accordance with regulatory capital requirements administered by the federal banking authorities. Refer to Note 10 of the Consolidated Financial Statements for additional information regarding regulatory capital.

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This document (including information incorporated by reference) contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company's management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “bode,” “predict,” “suggest,” “project,” “appear,” “plan,” “intend,” “estimate,” “annualize,” “may,” “will,” “would,” “could,” “should,” “likely,” “might,” “potential,” “continue,” “annualized,” “target,” “outlook,” as well as the negative forms of those words or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

Table of Contents

Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, the following:

●

The strength of the local, state, national and international economies and financial markets, including effects of inflationary pressures, the threat or implementation of tariffs, trade wars and changes to immigration policy.

●

Changes in, and the interpretation and prioritization of, local, state and federal laws, regulations and governmental policies (including those concerning the Company’s general business).

●

The economic impact of any future terrorist threats and attacks, widespread disease or pandemics, acts of war or threats thereof (including the Russian invasion of Ukraine and ongoing conflicts in the Middle East), or other adverse events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events.

●

New or revised accounting policies and practices, as may be adopted by state and federal regulatory agencies, the FASB, the SEC or the PCAOB.

●

The imposition of tariffs or other governmental policies impacting the value of products produced by the Company’s commercial borrowers.

●

Increased competition in the financial services sector, including from non-bank competitors such as credit unions, fintech companies, and digital asset service providers, and the inability to attract new customers.

●

Rapid technological changes implemented by us and our third-party vendors, including the development and implementation of tools incorporating artificial intelligence.

●

Unexpected results of acquisitions, including failure to realize the anticipated benefits of the acquisitions and the possibility that transaction and integration costs may be greater than anticipated.

●

The loss of key executives and employees, talent shortages and employee turnover.

●

Changes in consumer spending.

●

Unexpected outcomes and costs of existing or new litigation or other legal proceedings and regulatory actions involving the Company.

●

The economic impact on the Company and its customers of climate change, natural disasters and exceptional weather occurrences such as tornadoes, floods and blizzards.

●

Fluctuations in the value of securities held in our securities portfolio, including as a result of changes in interest rates.

●

Credit risk and risks from concentrations (by type of borrower, geographic area, collateral and industry) within our loan portfolio and large loans to certain borrowers (including CRE loans).

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The overall health of the local and national real estate market.

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The ability to maintain an adequate level of allowance for credit losses on loans.

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The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and who may withdraw deposits to diversify their exposure.

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The ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, and may negatively impact the Company’s cost of funds.

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The level of non-performing assets on our balance sheet.

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Interruptions involving our information technology and communications systems or third-party servicers.

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Part I

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

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The occurrence of fraudulent activity, breaches or failures of our third-party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud.

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Changes in the interest rates and repayment rates of the Company’s assets.

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The effectiveness of our risk management framework.

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The ability of the Company to manage the risks associated with the foregoing.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. For a discussion of the factors that could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries, see the “Risk Factors” section included under Item 1A. of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

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Part I

Item 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company, like other financial institutions, is subject to direct and indirect market risk. Direct market risk exists from changes in interest rates. The Company's net income is dependent on its net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net interest income.

In an attempt to manage the Company's exposure to changes in interest rates, management monitors the Company's interest rate risk. Each subsidiary bank has an asset/liability management committee of the board of directors that meets quarterly to review the bank's interest rate risk position and profitability, and to make or recommend adjustments for consideration by the full board of each bank.

Internal asset/liability management teams, consisting of members of the subsidiary banks’ management, meet bi-weekly to manage the mix of assets and liabilities to maximize earnings and liquidity and minimize interest rate and other risks. Management also reviews the subsidiary banks' securities portfolios, formulates investment strategies, and oversees the timing and implementation of transactions to assure attainment of the board's objectives in an effective manner. Notwithstanding the Company's interest rate risk management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net income.

In adjusting the Company's asset/liability position, the board of directors and management attempt to manage the Company's interest rate risk while maintaining or enhancing net interest margins. At times, depending on the level of general interest rates, the relationship between long-term and short-term interest rates, market conditions and competitive factors, the board of directors and management may decide to increase the Company's interest rate risk position somewhat in order to increase its net interest margin. The Company's results of operations and net portfolio values remain vulnerable to increases in interest rates and to fluctuations in the difference between long-term and short-term interest rates.

One method used to quantify interest rate risk is a short-term earnings at risk summary, which is a detailed and dynamic simulation model used to quantify the estimated exposure of net interest income to sustained interest rate changes. This simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest sensitive assets and liabilities reflected on the Company's consolidated balance sheet. This sensitivity analysis demonstrates net interest income exposure annually over a five-year horizon, assuming no balance sheet growth, no balance sheet mix change, and various interest rate scenarios including no change in rates; 100, 200, 300, and 400 basis point upward and downward shifts; where interest-bearing assets and liabilities reprice at their earliest possible repricing date.

The model assumes parallel and pro rata shifts in interest rates over a twelve-month period for the 100, 200 and 300 basis point upward and downward shifts. For the 400 basis point upward shift, the model assumes a parallel and pro rata shift in interest rates over a twenty-four month period.

Further, in recent years, the Company added additional interest rate scenarios where interest rates experience a parallel and instantaneous shift (a “shock”) upward and downward of 100, 200, 300, and 400 basis points. The Company will run additional interest rate scenarios on an as-needed basis.

The asset/liability management committees of the subsidiary bank boards of directors have established policy limits of a 10% decline in net interest income for the 200-basis point upward and downward parallel shift. For the 300 basis point upward and downward shock, the established policy limit is a 30% decline in net interest income. The increased policy limit is appropriate as the shock scenario is extreme and unlikely and warrants a higher limit than the more realistic and traditional parallel/pro-rata shift scenarios.

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Item 3

Application of the simulation model analysis for select interest rate scenarios at the most recent quarter-end available is presented in the following table:


	NET INTEREST INCOME EXPOSURE IN YEAR 1
			As of June 30,		As of December 31,
INTEREST RATE SCENARIO	POLICY LIMIT		2025		2024

300 basis point downward parallel shock	(30.0)	%	2.5	%	4.8	%
200 basis point downward parallel shift	(10.0)	%	1.5	%	2.3	%
200 basis point upward parallel shift	(10.0)	%	(1.6)	%	(3.2)	%
300 basis point upward parallel shock	(30.0)	%	(4.8)	%	(9.2)	%

With the shift in funding from non-interest bearing and lower beta deposits to higher beta deposits, the Company’s balance sheet is now moderately liability sensitive. Notably, management is conservative with the repricing assumptions on loans and deposits. For example, management does not model any delay in loan and deposit betas despite historical experience and practice of delays in deposit betas. Additionally, management does not model mix shift or growth in its standard scenarios which can be impactful. As an alternative, management runs separate scenarios to capture the impact on delayed beta performance and various shifts in mix of loans and deposits. Finally, management models a variety of scenarios including some that stress key assumptions to help capture and isolate the impact of the management’s more conservative approach to the assumptions in the base model.

The simulation is within the board-established policy limits for all four scenarios. Additionally, for all of the various interest rate scenarios modeled and measured by management (as described above), the results at June 30, 2025 were within established risk tolerances as established by policy or by best practice (if the interest rate scenario didn't have a specific policy limit).

Interest rate risk is considered to be one of the most significant market risks affecting the Company. For that reason, the Company engages the assistance of a national consulting firm and its risk management system to monitor and control the Company's interest rate risk exposure. Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company's business activities.

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Part I

Item 4

CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act of 1934) as of June 30, 2025. Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective, as of the end of the period covered by this report, to ensure that information required to be disclosed in the reports filed and submitted under the Exchange Act was recorded, processed, summarized and reported as and when required.

Changes in Internal Control over Financial Reporting. There have been no significant changes to the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Part II

QCR HOLDINGS, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1 Legal Proceedings

There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party other than ordinary routine litigation incidental to their respective businesses.

Item 1A Risk Factors

There have been no material changes in the risk factors applicable to the Company from those disclosed in Part I, Item 1A., “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Please refer to that section of the Company’s Form 10-K for disclosures regarding the risks and uncertainties related to the Company’s business.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Item 3 Defaults Upon Senior Securities

None

Item 4 Mine Safety Disclosures

Not applicable

Item 5 Other Information

During the fiscal quarter ended June 30, 2025, none of the Company’s directors or executive officers adopted or terminated a contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule10b5-1(c) or any non-Rule 10b5-1 trading arrangement.

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Part II

QCR HOLDINGS, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 6 Exhibits



31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	Inline XBRL Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024; (ii) Consolidated Statements of Income for the three months ended June 30, 2025 and June 30, 2024; (iii) Consolidated Statements of Income for the six months ended June 30, 2025 and June 30, 2024; (iv) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2025 and June 30, 2024; (v) Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2025 and June 30, 2024; (v) Consolidated Statements of Cash Flows for the three and six months ended June 30, 2025 and June 30, 2024; and (vi) Notes to the Consolidated Financial Statements.
104	Inline XBRL cover page interactive data file pursuant to Rule 406 of Regulation S-T for the interactive data files referenced in Exhibit 101.

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SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

QCR HOLDINGS, INC.

(Registrant)



Date	August 8, 2025	/s/ Todd A. Gipple
		Todd A. Gipple
		President & Chief Executive Officer


Date	August 8, 2025	/s/ Nick W. Anderson
		Nick W. Anderson
		Chief Financial Officer


Date	August 8, 2025	/s/ Brittany N. Whitfield
		Brittany N. Whitfield
		Chief Accounting Officer