Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2023

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, 2022, included in the Company's Annual Report on Form 10-K filed with the SEC on March 1, 2023. 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, 2023 are not necessarily indicative of the results expected for the year ending December 31, 2023, 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	GFED: Guaranty Federal Bancshares, Inc.
Allowance: Allowance for credit losses	HTM: Held to maturity
AOCI: Accumulated other comprehensive income (loss)	LIBOR: London Inter-Bank Offered Rate
ASC: Accounting Standards Codification	LIHTC: Low-income housing tax credit
ASU: Accounting Standards Update	m2: m2 Equipment Finance, LLC
BOLI: Bank-owned life insurance	NIM: Net interest margin
Caps: Interest rate cap derivatives	NPA: Nonperforming asset
CECL: Current Expected Credit Losses	NPL: Nonperforming loan
Community National: Community National Bancorporation	OBS: Off-balance sheet
Company: QCR Holdings, Inc.	OREO: Other real estate owned
COVID-19: Coronavirus Disease 2019	OTTI: Other-than-temporary impairment
CRBT: Cedar Rapids Bank & Trust Company	PCAOB: Public Company Accounting Oversight Board
CRE: Commercial real estate	PCD: Purchase credit deteriorated loan
CSB: Community State Bank	PCI: Purchased credit impaired
C&I: Commercial and industrial	PPP: Paycheck Protection Program
EBA: Excess balance account	Provision: Provision for credit losses
EPS: Earnings per share	QCBT: Quad City Bank & Trust Company
Exchange Act: Securities Exchange Act of 1934, as	ROAA: Return on average assets
amended	ROAE: Return on average equity
FASB: Financial Accounting Standards Board	SEC: Securities and Exchange Commission
FDIC: Federal Deposit Insurance Corporation	SFCB: Springfield First Community Bank
Federal Reserve: Board of Governors of the Federal	SFG: Specialty Finance Group
Reserve System	TA: Tangible Assets
FHLB: Federal Home Loan Bank	TBV: Tangible book value
FRB: Federal Reserve Bank of Chicago	TCE: Tangible common equity
Guaranty: Guaranty Bank, formerly known as Springfield First	TDRs: Troubled debt restructurings
Community Bank	TEY: Tax equivalent yield

Principles of consolidation

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. The company also engages in wealth management services through its banking subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

The acquisition of GFED, the holding company of GB, headquartered in Springfield, Missouri, occurred on April 1, 2022 and on April 2, 2022, GB was merged into SFCB, the Company’s Springfield-based charter.  The combined bank changed its name to Guaranty Bank. The financial results for the periods since the acquisition/merger are included in this report.  See Note 2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional information about the acquisition and merger.

Recent accounting developments

Recent accounting developments: In March 2020, the FASB issued ASU 2020-4, “Reference Rate Reform,” which provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued.  In December 2022, in response to the postponement of the cessation date of LIBOR, the FASB issued ASU 2022-06 which defers the sunset date of the ASU 2020-4 guidance to December 31, 2024, after which entities will no longer be permitted to apply the relief.

Management has assessed the impacts of ASU 2020-04 and the related opportunities and risks involved in the LIBOR transition. Specifically, management has identified all of the financial instruments with LIBOR exposure which includes certain commercial loans, interest rate swaps, interest rate caps, and certain securities.  In all cases, management has determined a plan of transition from LIBOR to a different index.  The transition will happen prior to the expiration of published LIBOR rates on June 30, 2023.  Management expects the transition to have a minimal impact to the Company’s financial statements.

In April 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures.  Under the standard, the accounting guidance on troubled debt restructurings for creditors in ASC 310-40 is eliminated and guidance on “vintage disclosures” is amended to require disclosure of current-period gross write-offs by year of origination.  The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.  For public companies that have adopted ASC 326, the changes take effect in reporting periods beginning after December 15, 2022.  This standard was adopted on January 1, 2023 and did not have a significant impact on the Company’s financial statements.

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.