QCR Holdings (QCRH)

Midwest regional bank QCR Holdings (NASDAQGM:QCRH) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 4.3% year on year to $101.5 million. Its non-GAAP profit of $2.17 per share was 25.1% above analysts’ consensus estimates.

Company Overview

With roots dating back to 1993 and a name reflecting its original Quad Cities market, QCR Holdings (NASDAQGM:QCRH) operates four community banks across Iowa and Missouri, providing commercial, consumer banking, and trust services to businesses and individuals.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

QCR Holdings competes with other regional banks operating in the Midwest, including Heartland Financial USA (NASDAQ:HTLF), Old National Bancorp (NASDAQ:ONB), and First Midwest Bancorp, as well as larger national banks with regional presence like U.S. Bancorp (NYSE:USB) and Wells Fargo (NYSE:WFC).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Thankfully, QCR Holdings’s 5.5% annualized revenue growth over the last five years was decent. Its growth was slightly above the average banking company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. QCR Holdings’s recent performance shows its demand has slowed as its revenue was flat over the last two years. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, QCR Holdings reported modest year-on-year revenue growth of 4.3% but beat Wall Street’s estimates by 11.8%.

Net interest income made up 63.9% of the company’s total revenue during the last five years, meaning lending operations are QCR Holdings’s largest source of revenue.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, QCR Holdings’s efficiency ratio has increased by 6.1 percentage points, going from 54.9% to 58.2%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

In Q3, QCR Holdings’s efficiency ratio was 55.8%, falling short of analysts’ expectations by 118.2 basis points (100 basis points = 1 percentage point). This result was 2.7 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects QCR Holdings to rein in some of its expenses as it anticipates an efficiency ratio of 54.3%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

QCR Holdings’s EPS grew at an astounding 14.6% compounded annual growth rate over the last five years, higher than its 5.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For QCR Holdings, its two-year annual EPS growth of 5% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, QCR Holdings reported adjusted EPS of $2.17, up from $1.78 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects QCR Holdings’s full-year EPS of $7.36 to shrink by 1.1%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

QCR Holdings’s TBVPS grew at an incredible 12.6% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 17.6% annually over the last two years from $40.33 to $55.78 per share.

Over the next 12 months, Consensus estimates call for QCR Holdings’s TBVPS to grow by 12.3% to $62.67, top-notch growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, QCR Holdings has averaged a Tier 1 capital ratio of 10%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, QCR Holdings has averaged an ROE of 13.4%, excellent for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for QCR Holdings.

It was good to see QCR Holdings beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $71.49 immediately after reporting.

Updated: December 3, 2025 at 11:46 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own QCR Holdings, you should also grasp the company’s longer-term business quality and valuation.

QCR Holdings has a few positive attributes, but it doesn’t top our wishlist. Although its revenue growth was uninspiring over the last five years and analysts expect growth to slow over the next 12 months, its TBVPS growth was exceptional over the last five years. Investors should tread carefully with this one, however, as QCR Holdings’s worsening efficiency ratio shows the business has become less productive.

QCR Holdings’s P/B ratio based on the next 12 months is 1.3x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $90 on the company (compared to the current share price of $86.57).