NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2026

Accounting Policies

Basis of presentation

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, 2025, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 27, 2026. 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 March 31, 2026 are not necessarily indicative of the results expected for the year ending December 31, 2026, 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	GAAP: Generally Accepted Accounting Principles
AFS: Available for sale	GB: Guaranty Bank
Allowance: Allowance for credit losses	GFED: Guaranty Federal Bancshares, Inc.
AOCI: Accumulated other comprehensive income (loss)	HTM: Held to maturity
ASC: Accounting Standards Codification	ICS: Insured Cash Sweep
ASU: Accounting Standards Update	ISDA: International Swaps and Derivatives Association
BOLI: Bank-owned life insurance	LHFS: Loans held for sale
Caps: Interest rate cap derivatives	LIHTC: Low-income housing tax credit
CDARS: Certificate of Deposit Account Registry Service	m2: m2 Equipment Finance, LLC
CECL: Current Expected Credit Losses	NIM: Net interest margin
Community National: Community National Bancorporation	NPA: Nonperforming asset
Company: QCR Holdings, Inc.	NPL: Nonperforming loan
CRBT: Cedar Rapids Bank & Trust Company	OBS: Off-balance sheet
CRE: Commercial real estate	OREO: Other real estate owned
CSB: Community State Bank	PCAOB: Public Company Accounting Oversight Board
C&I: Commercial and industrial	Provision: Provision for credit losses
EBA: Excess balance account	QCBT: Quad City Bank & Trust Company
EPS: Earnings per share	ROAA: Return on average assets
Exchange Act: Securities Exchange Act of 1934, as	ROAE: Return on average equity
amended	SEC: Securities and Exchange Commission
FASB: Financial Accounting Standards Board	SOFR: Secured Overnight Financing Rate
FDIC: Federal Deposit Insurance Corporation	SPE: Special purpose entity
Federal Reserve: Board of Governors of the Federal	Swaption: Swap option
Reserve System	TA: Tangible assets
FHLB: Federal Home Loan Bank	TCE: Tangible common equity
FRB: Federal Reserve Bank of Chicago	TEY: Tax equivalent yield
FTEs: Full-time equivalents	VIE: Variable interest entities

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

Derivatives

Derivatives: During the first quarter of 2026, the Company elected to present certain derivative assets and liabilities on a net basis when such instruments are subject to a legally enforceable master netting arrangement and the company has the intent to settle on a net basis or simultaneously, in accordance with ASC 210-20 “Balance Sheet – Offsetting”.  This election applies to all derivative instruments executed with the same counterparty under legally enforceable ISDA master netting arrangements and, where applicable, related cash collateral recognized under ASC 815. Certain derivative positions may remain presented on a gross basis even when subject to a master netting arrangement if they do not meet the balance sheet offsetting criteria as of the reporting date. Master netting arrangements give the Company the ability, in the event of default by the counterparty, to liquidate collateral and to offset receivables and payables with the same counterparty. This change affects the presentation of derivative assets and liabilities on the consolidated balance sheets but does not impact net income or total stockholders’ equity.  The reclassification of prior-period amounts was made to conform with the current-period presentation, as the derivative instruments were subject to legally enforceable master netting arrangements in prior periods and no changes occurred to the underlying contractual rights.

Netting adjustments represent amounts recorded to convert derivative assets and derivative liabilities from a gross basis to a net basis in accordance with ASC 815, consistent with the balance sheet presentation. Cash collateral receivables and payables are included in balance sheet netting when they meet the criteria for offsetting under ASC 815-10-45-5A.  The net basis represents the aggregate of our net exposure to each counterparty after considering the balance sheet netting adjustments and any cash collateral.  The Company manages derivative exposure by monitoring the credit risk associated with each counterparty using counterparty-specific credit risk limits, using master netting arrangements and obtaining collateral.

The consolidated balance sheet as of December 31, 2025 presented herein reflects a reclassification of $77.3 million between assets and liabilities to match current period balance sheet presentation.  See Note 5 of the Consolidated Financial Statements for additional information regarding the gross and net presentation of derivative instruments.

Reclassifications

Reclassifications: Certain amounts in the prior year’s Consolidated Financial Statements have been reclassified, with no effect on net income or stockholders’ equity to conform with the current period presentation.  

Recent accounting developments

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 was adopted for the year ending December 31, 2025, and newly required disclosures have been provided in Note 6 to the Consolidated Financial Statements.  The ASU did not have a material 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 material impact on the Company’s financial statements; however, it will require expanded disaggregation of certain income statement expense captions in the notes to the financial statements in 2027.

In May 2025, the FASB issued ASU 2025-03, “Business Combinations (Topic 805) and Consolidated (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity.”  Under the standard, the accounting guidance limits situations in which entities must identify the primary beneficiary as the accounting acquirer in certain business combinations and requires entities to consider the general factors in Topic 805 when a business combination involving a VIE is primarily effected through exchanging equity interests.   The ASU is effective prospectively to annual and interim reporting periods after December 15, 2026.  The standard is not expected to have a significant impact on the Company’s financial statements.

In September 2025, the FASB issued ASU 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.”  Under the standard, the accounting guidance changes the cost capitalization threshold by eliminating accounting consideration of software project development stages; cost capitalization would begin when (1) management has authorized and committed to funding the project and (2) it is “probable” the project will be completed and the software used to perform its intended function; and enhancing the guidance around the probable-to-complete threshold.  The standard also modifies the website development costs guidance.   The ASU is effective for annual and interim reporting periods after December 15, 2027 and early adoption is permitted.  The standard is not expected to have a significant impact on the Company’s financial statements.

In September 2025, the FASB issued ASU 2025-07, “Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract.”  Under the standard, the accounting guidance refines the scope of Topic 815 (derivatives) by adding a scope exception from derivative accounting for contracts that (1) are not exchange traded and (2) have underlying variables based on operations or activities specific to one of the parties to the contract.  The accounting guidance also clarifies that revenue guidance in Topic 606 applies initially to share-based noncash consideration received from a customer for the transfer of goods or services.   The ASU is effective in interim and annual periods for fiscal years beginning after December 15, 2026 and may be applied either on a prospective or modified retrospective basis.  Early adoption is permitted.  The standard is not expected to have a significant impact on the Company’s financial statements.

In November 2025, the FASB issued ASU 2025-08, “Purchased Loans.”  Under the standard, the accounting guidance expands the use of the gross-up method to certain acquired loans beyond purchased financial assets with credit deterioration (PCD assets).  The ASU is effective for interim and annual and reporting periods in fiscal years beginning after December 15, 2026, and is applied on a prospective basis.  Early adoption is permitted. The standard is not expected to have a significant impact on the Company’s financial statements.

In November 2025, the FASB issued ASU 2025-09, “Hedge Accounting Improvements.”  Under the standard, the accounting guidance is intended to more closely align financial reporting with the economics of some of an entity’s risk management activities.  The guidance is applied prospectively to all hedging relationships beginning on or after the date of adoption without dedesignation.  The ASU is effective prospectively to annual and interim reporting periods after December 15, 2026.  Early adoption is permitted. The standard is not expected to have a significant impact on the Company’s financial statements.

In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements.”  Under the standard, the accounting guidance clarifies the form and content choices for interim financial statements and accompanying notes, adds a comprehensive list of required interim disclosures, and introduces a disclosure principle that requires disclosure of events since the end of the previous annual reporting period that materially affect the entity. The guidance is not intended to significantly change interim reporting or expand or reduce interim disclosure requirements.  The ASU is effective for interim reporting periods in fiscal years beginning after December 15, 2027.  Early adoption is permitted.  The standard is not expected to have a significant impact on the Company’s financial statements.

In December 2025, the FASB issued ASU 2025-12, “Codification Improvements”  Under the standard, the accounting guidance enhances the usability of the Codification by refining accounting guidance and streamlining its application through technical corrections, making standards more consistent and easier to interpret for preparers and users.   The ASU is effective for annual and interim reporting periods beginning after December 15, 2026.  The standard is not expected to have a significant impact on the Company’s financial statements.