Quad City Holdings, Inc.

                                Velie Plantation
                                 3551 7th Street

                                    Suite 204
                             Moline, Illinois 61265





                             Notice to Stockholders

Recently  you received a copy of Quad City  Holdings,  Inc.'s  annual  report to
stockholders  which also  included a copy of Quad City's  Annual  Report on Form
10-K that was to be filed with the Securities and Exchange  Commission.  We want
to tell you about a development  that occurred  after the date of the mailing of
the annual report to stockholders, but immediately prior to the actual filing of
the Form 10-K with the Securities and Exchange Commission.  The copy of the Form
10-K that you received stated in Item 3 that Quad City is not aware of any legal
proceedings  against it or its subsidiaries.  Due to a very recent  development,
that statement is no longer  correct.  Following is the statement that Quad City
has added to Item 3 of the Form 10-K that has now been filed with the Securities
and Exchange Commission. Accordingly, the annual report to stockholders that you
received is amended and supplemented by the following statement:

                  Bancard  is  the  holder  of  an  account  receivable  in  the
         approximate amount of $1,500,000 owing from PMT Services, Inc. ("PMT").
         PMT is a subsidiary of Nova Corporation  (trading symbol NIS on the New
         York Stock  Exchange).  This  receivable  arises  pursuant to Bancard's
         provision of electronic credit card sales  authorization and settlement
         services to PMT  pursuant to a written  contract  that  includes  PMT's
         obligation  to  indemnify  Bancard  for credit card  chargeback  losses
         arising from those  services.  PMT has failed to timely pay Bancard for
         monthly invoices,  including service charges and substantial chargeback
         losses,  for the period of May, 2000 through  September,  2000. Bancard
         intends  to  vigorously  pursue  collection  of  this  receivable.   On
         September  25,  2000,  PMT  filed a  lawsuit  in  federal  court in Los
         Angeles,  California,  against  Bancard  and Quad  City.  This  lawsuit
         alleges  tortious  acts and breaches of contract by Bancard,  Quad City
         and others and seeks  recovery  from  Bancard and Quad City of not less
         than  $3,600,000 of alleged  actual  damages,  plus  punitive  damages.
         Bancard  and  Quad  City  first  received  a copy of the  complaint  on
         September 27, 2000 and,  accordingly,  have not had an  opportunity  to
         fully evaluate the  allegations  contained in the  complaint.  However,
         based on a preliminary  evaluation of the  complaint,  Bancard and Quad
         City  believe  the  allegations  to be  without  merit  and  intend  to
         vigorously defend the suit.

We apologize for any inconvenience or confusion this may have caused.




                                                              September 29, 2000