UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
QCR HOLDINGS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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1
March 22, 2006
Dear Fellow Stockholder:
On behalf of the board of directors and management of QCR Holdings, Inc., we
cordially invite you to attend the annual meeting of stockholders of QCR
Holdings, Inc. to be held at 10:00 a.m. on May 3, 2006, at The MARK of the Quad
Cities located at 1201 River Drive, Moline, Illinois. The accompanying notice of
annual meeting of stockholders and proxy statement discuss the business to be
conducted at the meeting. We have also enclosed copies of our 2005 Annual Report
to Stockholders for your review. At the meeting, we will report on our
operations and the outlook for the year ahead.
The annual meeting will be held for the purposes of electing three persons to
serve as Class I directors and transacting such other business as may properly
come before the meeting. We recommend that you vote your shares for the director
nominees.
We encourage you to attend the meeting in person. Regardless of whether you plan
to attend the meeting, please COMPLETE, DATE, SIGN and RETURN THE ENCLOSED PROXY
CARD in the enclosed envelope or vote by telephone or internet by following the
preprinted instructions on the enclosed proxy card. This will assure that your
shares are represented at the meeting.
We look forward to seeing you and visiting with you at the meeting.
Very truly yours,
/s/ Michael A. Bauer /s/ Douglas M. Hultquist
Michael A. Bauer Douglas M. Hultquist
Chairman of the Board President
3551-7th Street, Suite 204 - Moline, IL 61265
Phone (309) 736-3580 - Fax (309) 736-3149
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NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2006
To the stockholders of QCR HOLDINGS, INC.:
The annual meeting of stockholders of QCR Holdings, Inc., a Delaware
corporation, will be held at The MARK of the Quad Cities, 1201 River Drive,
Moline, Illinois on Wednesday, May 3, 2006, at 10:00 a.m., local time, for the
following purposes:
1. to elect three Class I directors for a term of three years and
2. to transact such other business as may properly be brought before the
meeting and any adjournments or postponements of the meeting.
The board of directors has fixed the close of business on March 15, 2006, as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the meeting. In the event there is an insufficient number of votes for
a quorum or to approve any of the proposals at the time of the annual meeting,
the meeting may be adjourned or postponed in order to permit the further
solicitation of proxies.
By order of the Board of Directors
/s/ Todd A. Gipple
Todd A. Gipple
Executive Vice President,
Chief Financial Officer and
Secretary
Moline, Illinois
March 22, 2006
3551-7th Street, Suite 204 - Moline, IL 61265
Phone (309) 736-3580 - Fax (309) 736-3149
3
PROXY STATEMENT
QCR Holdings, Inc., a Delaware corporation, is the holding company for Quad City
Bank and Trust Company, Cedar Rapids Bank and Trust Company and Rockford Bank
and Trust Company. Quad City Bank & Trust is an Iowa banking association located
in Bettendorf, Iowa, with banking locations in Bettendorf and Davenport, Iowa
and in Moline, Illinois. In August 2005, Quad City Bank & Trust acquired 80% of
the equity interests of M2 Lease Funds, LLC, a Wisconsin limited liability
company based in Milwaukee that is engaged in the business of leasing machinery
and equipment to businesses under direct financing lease contracts. Cedar Rapids
Bank & Trust is also an Iowa banking association located in Cedar Rapids, Iowa.
Rockford Bank & Trust is an Illinois state bank located in Rockford, Illinois.
Quad City Bancard, Inc. is our wholly owned subsidiary, which functions as a
credit card center that provides cardholder and merchant credit card processing
services. We also own all of the common stock of five business trust
subsidiaries that we created to issue trust preferred securities. When we refer
to our subsidiaries in this proxy statement, we are collectively referring to
Quad City Bank & Trust, Cedar Rapids Bank & Trust, Rockford Bank & Trust, Quad
City Bancard and the business trusts.
This proxy statement is furnished in connection with the solicitation by the
board of directors of QCR Holdings of proxies to be voted at the annual meeting
of stockholders to be held at The MARK of the Quad Cities, 1201 River Drive,
Moline, Illinois, on May 3, 2006, at 10:00 a.m., local time, and at any
adjournments or postponements of the meeting. We have enclosed our 2005 annual
report, which includes consolidated financial statements of QCR Holdings and our
subsidiaries. This proxy statement and related materials are first being mailed
to stockholders of QCR Holdings on or about March 22, 2006.
The following is information regarding the meeting and the voting process, and
is presented in a question and answer format.
Why am I receiving this proxy statement and proxy card?
You are receiving a proxy statement and proxy card from us because on March 15,
2006, the record date for the annual meeting, you owned shares of QCR Holdings
common stock. This proxy statement describes the matters that will be presented
for consideration by the stockholders at the annual meeting. It also gives you
information concerning those matters to assist you in making an informed
decision.
When you sign the enclosed proxy card, you appoint the proxy holder as your
representative at the meeting. The proxy holder will vote your shares as you
have instructed in the proxy card, thereby ensuring that your shares will be
voted whether or not you attend the meeting. Even if you plan to attend the
meeting, you should complete, sign and return your proxy card in advance of the
meeting just in case your plans change.
If you have signed and returned the proxy card and an issue comes up for a vote
at the meeting that is not identified on the card, the proxy holder will vote
your shares, pursuant to your proxy, in accordance with his or her judgment.
What matters will be voted on at the meeting?
You are being asked to vote on the election of three Class I directors for a
term expiring in 2009. This matter is more fully described in this proxy
statement.
If I am the record holder of my shares, how do I vote?
You may vote by mail, by telephone, by internet or in person at the meeting. To
vote by mail, complete and sign the enclosed proxy card and mail it in the
enclosed pre-addressed envelope. No postage is required if mailed in the United
States. If you mark your proxy card to indicate how you want your shares voted,
your shares will be voted as you instruct.
If you sign and return your proxy card but do not mark the card to provide
voting instructions, the shares represented by your proxy card will be voted
"for" all nominees named in this proxy statement.
Although you may vote by mail, we ask that you vote instead by internet or
telephone, which saves us postage and processing costs. You may vote by
telephone by calling the toll-free number specified on your proxy card or by
accessing the internet website specified on your proxy card and by following the
preprinted instructions on the proxy card. Votes submitted by telephone or
internet must be received by midnight CST on Tuesday, May 2, 2006. The giving of
a proxy by either of these means will not affect your right to vote in person if
you decide to attend the meeting.
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If you want to vote in person, please come to the meeting. We will distribute
written ballots to anyone who wants to vote at the meeting. Please note,
however, that if your shares are held in the name of a broker or other fiduciary
(or in what is usually referred to as "street name"), you will need to arrange
to obtain a legal proxy from that person or entity in order to vote in person at
the meeting. Even if you plan to attend the meeting, you should complete, sign
and return your proxy card in advance of the meeting just in case your plans
change.
If I hold shares in the name of a broker or fiduciary, who votes my shares?
If you received this proxy statement from your broker or other fiduciary, your
broker or fiduciary should have given you instructions for directing how that
person or entity should vote your shares. It will then be your broker or
fiduciary's responsibility to vote your shares for you in the manner you direct.
Please complete, execute and return the proxy card in the envelope provided by
your broker.
Under the rules of various national and regional securities exchanges, brokers
and other fiduciaries may generally vote on routine matters, such as the
election of directors but cannot vote on non-routine matters, such as the
adoption or amendment of a stock incentive plan or an amendment to our
Certificate of Incorporation, unless they have received voting instructions from
the person for whom they are holding shares. If there is a non-routine matter
presented to stockholders at a meeting and your broker or fiduciary does not
receive instructions from you on how to vote on that matter, your broker or
fiduciary will return the proxy card to us, indicating that he or she does not
have the authority to vote on that matter. This is generally referred to as a
"broker non-vote" and may affect the outcome of the voting on those matters. We
encourage you to provide directions to your broker or fiduciary as to how you
want your shares voted on all matters to be brought before the meeting. You
should do this by carefully following the instructions your broker or fiduciary
gives you concerning its procedures. This ensures that your shares will be voted
at the meeting.
A number of banks and brokerage firms participate in a program that also permits
stockholders to direct their vote by telephone or internet. If your shares are
held in an account at such a bank or brokerage firm, you may vote your shares by
telephone or internet by following the instructions on their enclosed voting
form. Votes made by telephone or internet through such a program must be
received by 11:59 p.m. EST on Tuesday, May 2, 2006. Voting your shares in this
manner will not affect your right to vote in person if you decide to attend the
meeting, however, you must first request a legal proxy either on the internet or
the enclosed proxy card. Requesting a legal proxy prior to the deadline stated
above will automatically cancel any voting directions you have previously given
by internet or by telephone with respect to your shares.
The internet and telephone proxy procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their proxy instructions
and to confirm that those instructions have been properly recorded. Stockholders
authorizing proxies or directing the voting of shares by internet should
understand that there may be costs associated with electronic access, such as
usage charges from internet access providers and telephone companies. These
costs, if any, will be borne by the stockholder.
What does it mean if I receive more than one proxy card?
It means that you have multiple holdings reflected in our stock transfer records
and/or in accounts with brokers. Please sign and return ALL proxy forms to
ensure that all your shares are voted. If you received more than one proxy card
but only one copy of the proxy statement and annual and transitional reports,
you may request additional copies from us at any time.
What if I change my mind after I return my proxy?
If you hold your shares in your own name, you may revoke your proxy and change
your vote at any time before the polls close at the meeting. You may do this by:
o signing another proxy with a later date and returning that proxy to
us;
o timely submitting another proxy via the telephone or internet;
o sending notice to us that you are revoking your proxy; or
o voting in person at the meeting.
If you hold your shares in the name of your broker or through a fiduciary and
desire to revoke your proxy, you will need to contact that person or entity to
revoke your proxy.
How many votes do we need to hold the annual meeting?
A majority of the shares that are outstanding and entitled to vote as of the
record date must be present in person or by proxy at the meeting in order to
hold the meeting and conduct business.
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Shares are counted as present at the meeting if the stockholder either:
o is present in person at the meeting; or
o has properly submitted a signed proxy card or other proxy.
On March 15, 2006, the record date, there were 4,537,711 shares of common stock
outstanding. Therefore, at least 2,268,856 shares need to be present in person
or by proxy at the annual meeting in order to hold the meeting and conduct
business.
What happens if a nominee is unable to stand for re-election?
The board may, by resolution, provide for a lesser number of directors or
designate a substitute nominee. In the latter case, shares represented by
proxies may be voted for a substitute nominee. Proxies cannot be voted for more
than the number of nominees presented for election at the meeting. The board has
no reason to believe any nominee will be unable to stand for re-election.
What options do I have in voting on each of the proposals?
You may vote "for" or "withhold authority to vote for" each nominee for
director. You may vote "for," "against" or "abstain" on any other proposal that
may properly be brought before the meeting.
How many votes may I cast?
Generally, you are entitled to cast one vote for each share of stock you owned
on the record date. The proxy card included with this proxy statement indicates
the number of shares owned by an account attributable to you.
How many votes are needed for each proposal?
Our directors are elected by a plurality and the three individuals receiving the
highest number of votes cast "for" their election will be elected as Class I
directors of QCR Holdings. Broker non-votes and abstentions will not be counted
in tabulating the vote on the election of directors, but will count for purposes
of determining whether or not a quorum is present on the matter.
The approval of all other proposals must receive the affirmative vote of a
majority of the shares present in person or by proxy at the meeting and entitled
to vote. Broker non-votes and abstentions will not be counted in tabulating the
vote on such proposals, but will count for purposes of determining whether or
not a quorum is present on the matter.
Where do I find the voting results of the meeting?
If available, we will announce voting results at the meeting. The voting results
will also be disclosed in our Form 10-Q for the quarter ending June 30, 2006.
Who bears the cost of soliciting proxies?
We will bear the cost of soliciting proxies. In addition to solicitations by
mail, officers, directors or employees of QCR Holdings or of our subsidiaries
may solicit proxies in person or by telephone. These persons will not receive
any special or additional compensation for soliciting proxies. We may reimburse
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses for forwarding proxy and solicitation
materials to stockholders.
ELECTION OF DIRECTORS
Our directors are divided into three classes having staggered terms of three
years. Stockholders will be entitled to elect three Class I directors for a term
expiring in 2009. Due to age eligibility requirements, current Class I director
Henry Royer is not eligible to stand for reelection to the board of directors,
and as a result his directorship will end at the 2006 annual meeting. In
connection with Mr. Royer not standing for reelection as a director, the board
has considered and nominated John A. Rife, a current director of Cedar Rapids
Bank & Trust, to serve as a new Class I director of QCR Holdings. The board has
also nominated current directors, Michael A. Bauer and James J. Brownson to
serve as Class I directors.
Other than as described above, we have no knowledge that any of the nominees
will refuse or be unable to serve, but if any of the nominees becomes
unavailable for election, the holders of the proxies reserve the right to
substitute another person of their choice as a nominee when voting at the
meeting. Set forth below is information concerning the nominees for election and
for each of the other persons whose terms of office will continue after the
meeting, including age, year first elected a director and business experience
during the previous five years. The nominees, if elected at the annual meeting
of stockholders, will serve as Class I directors for three-year terms expiring
in 2009.
6
Stockholder Vote Necessary to Elect the Nominees for Class I Directors.
Directors are elected by a plurality and the three individuals receiving the
highest number of votes cast for their election will be elected as Class I
directors. Our board of directors unanimously recommends that stockholders vote
FOR all of the nominees for directors.
NOMINEES
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Name Director
(Age) Since Positions with QCR Holdings and subsidiaries
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CLASS I
(Term Expires 2009)
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Michael A. Bauer* 1993 Chairman of the Board and Director of QCR Holdings; President, Chief
(Age 57) Executive Officer and Director of Quad City Bank & Trust; Director of
Cedar Rapids Bank & Trust; Director of Rockford Bank & Trust;
Chairman of the Board and Director of Quad City Bancard; Director of
M2 Lease Funds, LLC
James J. Brownson 1997 Director of QCR Holdings; Secretary and Director of Quad City Bank & Trust
(Age 60)
John A. Rife -- Nominee for Director of QCR Holdings;Director of Cedar Rapids Bank & Trust
(Age 63)
CLASS II
(Term Expires 2007)
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Larry J. Helling 2001 Director of QCR Holdings; President, Chief Executive Officer and
(Age 50) Director of Cedar Rapids Bank & Trust; Director of Quad City Bank &
Trust; Director of M2 Lease Funds, LLC
Douglas M. Hultquist 1993 President, Chief Executive Officer and Director of QCR Holdings;
(Age 50) Chairman of the Board and Director of Quad City Bank & Trust;
Director of Cedar Rapids Bank & Trust; Director of Rockford Bank &
Trust; President, Chief Executive Officer and Director of Quad City
Bancard; Director of M2 Lease Funds, LLC
Mark C. Kilmer 2004 Director of QCR Holdings; Director of Quad City Bank & Trust
(Age 47)
CLASS III
(Term Expires 2008)
------------------------------
Patrick S. Baird 2002 Director of QCR Holdings; Director of Cedar Rapids Bank & Trust
(Age 52)
John K. Lawson 2000 Director of QCR Holdings; Director of Quad City Bank & Trust
(Age 66)
Ronald G. Peterson 1993 Director of QCR Holdings; Director of Quad City Bank & Trust
(Age 62)
* Mr. Bauer has indicated to the Executive Committee that he intends to
retire in approximately three years at the age of 60. His retirement
plans and the related succession planning are further discussed on
page 16 of the Proxy Statement.
All of our continuing directors and nominees will hold office for the terms
indicated, or until their earlier death, resignation, removal or
disqualification, and until their respective successors are duly elected and
qualified. All of our executive officers hold office for a term of one year.
There are no arrangements or understandings between any of the directors,
executive officers or any other person pursuant to which any of our directors or
executive officers have been selected for their respective positions. Mr. Rife
is also a director of United Fire & Casualty Company, a company registered under
the Securities Exchange Act.
The business experience of each of the nominees and continuing directors for the
past five years is as follows:
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Patrick S. Baird is President and Chief Executive Officer of AEGON USA, Inc.,
the U.S. subsidiary of the AEGON Insurance Group, a leading multinational
insurance organization. Baird joined the AEGON USA companies in 1976. He was
appointed to his current position in March 2002, having previously served as
executive vice president and chief operating officer, chief financial officer
and director of Tax. Baird is member of the Financial Services Roundtable and
currently serves on the boards of the Institute for Legal Reform, the ACLI,
Kirkwood Community College Foundation, Priority One, an economic development
division of the Cedar Rapids Area Chamber of Commerce and Waypoint (formerly
YWCA).
Michael A. Bauer is President and Chief Executive Officer of Quad City Bank &
Trust. Prior to co-founding QCR Holdings, he was employed from 1971 to 1992 by
Davenport Bank and Trust Company located in Davenport, Iowa with assets of
approximately $1.8 billion, as of December 31, 1992. In January 1992 he was
named President and Chief Operating Officer, while from 1989 to 1992 he served
as Senior Vice President in charge of all lending. Mr. Bauer currently serves as
a director of St. Ambrose University, Genesis Medical Center, Kahl Home for the
Aged, Davenport ONE, Friendly House Foundation and the Finance Council of the
Diocese of Davenport. Along with Mr. Hultquist, Mr. Bauer received the 1998
Ernst & Young "Entrepreneur of the Year" award for the Iowa and Nebraska region
and was inducted into the Quad Cities Area Junior Achievement Business Hall of
Fame in 2003.
James J. Brownson is President and Chief Executive Officer of W.E. Brownson Co.,
a manufacturers' representative agency located in Davenport, Iowa involved in
the sale of custom engineered products to OEM manufacturers in the Midwest, and
has been in that position since 1978. Mr. Brownson began his career in 1967 as a
member of the audit staff at Arthur Young & Co., in Chicago, Illinois. From 1969
until 1978, Mr. Brownson was employed by Davenport Bank and Trust Company, where
he left as Senior Vice President and Cashier. He is a past member of the
National Sales Representative Council of Crane Plastics, Columbus, Ohio, and
Dayton Rogers Manufacturing Co., Minneapolis, Minnesota. Mr. Brownson has served
on the board of directors of the United Way of the Quad Cities, Junior
Achievement of the Quad Cities, St. Ambrose University Alumni Association and
United Cerebral Palsy of the Quad Cities. Mr. Brownson has been a director and
the Secretary of Quad City Bank & Trust since October 1993.
Larry J. Helling is President and Chief Executive Officer of Cedar Rapids Bank &
Trust. He was previously the Executive Vice President and Regional Commercial
Banking Manager of Firstar Bank in Cedar Rapids with a focus on the Cedar Rapids
metropolitan area and the Eastern Iowa region. Prior to his six years with
Firstar, Mr. Helling spent twelve years with Omaha National Bank. Mr. Helling is
a graduate of the Cedar Rapids' Leadership for Five Seasons program and
currently serves on the board of directors of the United Way of East Central
Iowa, the board of trustees of Big Brothers/Big Sisters and the board of
trustees of Junior Achievement. He is President of the Rotary Club of Cedar
Rapids and President-elect of the Entrepreneurial Development Center. In
addition, he is actively involved in numerous school and church related
activities, in addition to various committees within the community.
Douglas M. Hultquist is President and Chief Executive Officer of QCR Holdings.
He is a certified public accountant and previously served as a tax partner with
two major accounting firms. He began his career with KPMG Peat Marwick in 1977
and was named a partner in 1987. In 1991, the Quad Cities office of KPMG Peat
Marwick merged with McGladrey & Pullen. Mr. Hultquist served as a tax partner in
the Illinois Quad Cities office of McGladrey & Pullen from 1991 until
co-founding QCR Holdings in 1993. During his public accounting career, Mr.
Hultquist specialized in bank taxation and mergers and acquisitions. Mr.
Hultquist served on the board of directors of the PGA TOUR John Deere Classic
and was its Chairman for the July 2001 tournament. Mr. Hultquist serves on the
board of Illinois Casualty Company, the board of Illinois Bankers Association,
and is Chairman of the Augustana College Board of Trustees, as well as serving
on its Planned Giving Council. He also serves on the board of the TPC at Deere
Run and as Finance Chairman of the William Butterworth Memorial Trust. Mr.
Hultquist is a member of the Unified Growth Strategy-Policy Committee of the
Illinois Quad City Chamber of Commerce. He is also a member of the American
Institute of CPAs and the Iowa Society of CPAs. Along with Mr. Bauer, Mr.
Hultquist received the 1998 Ernst & Young "Entrepreneur of the Year" award for
the Iowa and Nebraska region and was inducted into the Quad Cities Area Junior
Achievement Business Hall of Fame in 2003.
8
Mark C. Kilmer is President of The Republic Companies, a 90-year old
family-owned group of businesses headquartered in Davenport, Iowa involved in
the wholesale equipment and supplies distribution of electrical, refrigeration,
heating, air-conditioning and sign support systems. Prior to joining Republic in
1984, Mr. Kilmer worked in the Management Information Systems Department of
Standard Oil of California (Chevron) in San Francisco. Mr. Kilmer currently
serves as the Chairman of the Board of Genesis Medical Center, and is also a
board member of The Genesis Health System. He serves on the board of directors
of IMARK Group, Inc., a national member-owned purchasing cooperative of electric
supplies and equipment distributors. He is the two-term past Chairman of the PGA
TOUR John Deere Classic and the past Chairman of the Scott County YMCA's board
of directors. Mr. Kilmer has served on the board of directors of The Genesis
Heart Institute, St. Luke's Hospital, Rejuvenate Davenport, The Vera French
Foundation and Trinity Lutheran Church and was a four-time Project Business
consultant for Junior Achievement. Mr. Kilmer has been a director of Quad City
Bank & Trust since February 1996.
John K. Lawson began his career with Deere & Company in 1958 as an engineering
co-op trainee and retired in 2002. He received his mechanical engineering degree
in 1962, and by the mid 1960's, he was assigned to the Deere & Company European
Office in Heidelberg, Germany. His responsibilities included working with the
manufacturing engineering operations in eight European and African countries. He
returned to the United States in 1968, and held positions in several
manufacturing operations, including General Manager, Dubuque and Davenport. In
1985, Mr. Lawson was named Vice President, Manufacturing, Agricultural Equipment
Division. In 1992, he became President, Lawn and Grounds Care Division. In his
final position with Deere & Company as Senior Vice President, Technology and
Engineerin' for Deere & Company, Mr. Lawson was responsible for the company's
engineering, business computer systems, quality, supply management and
communications areas. He serves on the board of directors of the Iowa State
University Foundation, Junior Achievement of the Heartland Foundation, Moline
Foundation Finance Committee and the Trinity Healthcare Foundation. Mr. Lawson
also serves as a board member for Muscatine Foods, Inc., located in Muscatine,
Iowa. Mr. Lawson has been director of Quad City Bank & Trust since July 1997.
Ronald G. Peterson is President and Chief Executive Officer of the First State
Bank of Western Illinois, located in La Harpe, Illinois, and has served in that
position since 1982. Mr. Peterson is also President of that bank's holding
company, Lamoine Bancorp, Inc. He currently serves as President of the LaHarpe
Educational Foundation, Treasurer of the Western Illinois University Foundation,
a Co-Chairman of the McDonough District Hospital Development Council and is a
member of the Strategic Planning Committee for the Illinois Bankers Association
and a member of the Macomb Rotary Club. In 2005, Mr. Peterson was named Banker
of the Year by the Illinois Bankers Association. Mr. Peterson has been a
director of Quad City Bank & Trust since October 1993.
John A. Rife is President and Chief Executive Officer of United Fire Group. He
provides leadership for the company's 650 employees, establishing corporate
goals, maintaining policies and procedures, and directing the overall
performance of the company. He joined United Fire in 1976 as a marketing
representative for the life insurance subsidiary, United Life Insurance Company.
Over the next eight years, he was named assistant vice president and marketing
manager and vice president of marketing for United Life. He was named president
of United Life in 1984, president of United Fire & Casualty Company in 1997, and
president of American Indemnity Companies in 1999. He was appointed Chief
Executive Officer of the company in 2000. Mr. Rife holds a B.A. degree from the
University of Iowa and the Chartered Life Underwriter professional insurance
designation from American College. He serves on the boards of directors of
United Fire & Casualty Company and its subsidiaries. He also serves on the
boards of trustees of United Way of East Central Iowa, Mercy Medical Center and
Priority One, an economic development division of the Cedar Rapids Area Chamber
of Commerce. Mr. Rife has been a director of Cedar Rapids Bank & Trust since
2001.
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
General. Currently, there are nine members of the board of directors of QCR
Holdings. Generally, the board oversees our business and monitors the
performance of our management. In accordance with our corporate governance
procedures, the board does not involve itself in the day-to-day operations of
QCR Holdings, which is monitored by our executive officers and management. Our
directors fulfill their duties and responsibilities by attending regular
meetings of the full board, which are held at a minimum of quarterly.
Additionally, the Executive Committee, which is comprised of directors who are
deemed to be "independent" pursuant to the listing requirements of the Nasdaq
Stock Market, Inc., also meets at least quarterly and has the authority to carry
out many of the oversight functions of the full board. Our directors also
discuss business and other matters with Mr. Hultquist, our Chief Executive
Officer, other key executives and our principal external advisers (legal
counsel, auditors and other consultants).
9
Incumbent directors Baird, Brownson, Kilmer, Lawson, Peterson and Royer are
deemed to be "independent" as that term is defined by Nasdaq. Additionally, Mr.
Rife, who has been nominated by the board to serve as a Class I director, also
satisfied the independence standards of Nasdaq. Directors Bauer, Helling and
Hultquist are not considered to be "independent" because they also serve as
executive officers or either QCR Holdings or one of our subsidiaries. The board
of directors has established an Audit Committee, an Executive Committee, a
Compensation and Benefits Committee and a Technology Committee. The current
charters of the Audit and the Executive Committee are available on our website
at www.qcrh.com, as well as on our banking subsidiaries' websites at
www.qcbt.com, www.crbt.com and www.rkfdbank.com. Also posted on the websites is
general information regarding QCR Holdings and our common stock, many of our
corporate polices and links to our filings with the Securities and Exchange
Commission.
A total of six regularly scheduled and special meetings were held by the board
of directors of QCR Holdings in 2005. In 2005, all directors attended at least
75 percent of the meetings of the board and the committees on which they served
during the period they served on the board. Although we do not have a formal
policy regarding director attendance at the annual meeting, we encourage and
expect all of our directors to attend. Last year, eight directors were present
at the annual meeting.
Audit Committee. The Audit Committee consists of directors Baird, Brownson,
Lawson and Royer, a current class I director. At the end of Mr. Royer's term as
a director, it is expected that Mr. Kilmer will be replacing Mr. Royer as an
Audit Committee member. Each of the members and Mr. Kilmer are considered
"independent" according to the Nasdaq listing requirements and the regulations
of the Securities and Exchange Commission. The board of directors has determined
that Mr. Baird qualifies as an "Audit Committee Financial Expert" under the
regulations of the Securities and Exchange Commission. The board based this
decision on Mr. Baird's educational and professional experience.
The functions performed by the Audit Committee include, but are not limited to,
the following:
o selecting our independent auditors and pre-approving all engagements
and fee arrangements;
o reviewing the independence of the independent auditors;
o reviewing actions by management on recommendations of the independent
auditors and internal auditors;
o meeting with management, the internal auditors and the independent
auditors to review the effectiveness of our system of internal control
and internal audit procedures;
o reviewing our earnings releases and reports filed with the Securities
and Exchange Commission; and
o reviewing reports of bank regulatory agencies and monitoring
management's compliance with recommendations contained in those
reports.
To promote independence of the audit function, the Audit Committee consults
separately and jointly with the independent auditors, the internal auditors and
management. Th% Audit Committee has adopted a written charter, which sets forth
the committee's duties and responsibilities. Our current charter was attached to
our 2004 proxy statement and is available on our website at www.qcrh.com, as
well as on our banking subsidiaries' websites at www.qcbt.com, www.crbt.com and
www.rkfdbank.com. The Audit Committee met four times in 2005.
Executive Committee. The Executive Committee is comprised of directors Baird,
Brownson, Kilmer, Lawson, Peterson and Royer, each of whom is considered
"independent" according to the Nasdaq listing requirements, an "outside"
director under Section 162(m) of the Internal Revenue Code of 1986 and a
"non-employee" director pursuant to Section 16 under the Securities Exchange Act
of 1934. At the end of Mr. Royer's term as a director, it is expected that Mr.
Rife will replace Mr. Royer as an Executive Committee member. Mr. Brownson
serves as Chairman of the Executive Committee. The committee is charged with
overseeing our corporate governance programs, board policies, committee
structure and membership reviewing and recommending the nominees for election to
the board of directors, and reviewing and establishing the salaries and
compensation of our executive officers. In carrying out the nominating function,
the committee is charged with identifying and nominating individuals to be
presented to our stockholders for election or re-election to the board of
directors. The committee is further charged with the responsibility of working
with management to develop and maintain a companywide succession plan to ensure
the success of leadership succession at QCR Holdings and our subsidiaries. The
committee also reviews and monitors our policies, procedures and structure as
they relate to corporate governance. The committee's responsibilities and
functions are further described in its charter, which is available on our
website at www.qcrh.com, as well as our banking subsidiaries' websites at
www.qcbt.com, www.crbt.com and www.rkfdbank.com. The Executive Committee met
five times during 2005.
10
Compensation and Benefits Committee. The Compensation and Benefits Committee
consists of directors Bauer, Hultquist, Helling, and Lawson, as well as John D.
Whitcher, director of Rockford Bank & Trust and Joyce E. Bawden, John H. Harris,
Cathie S. Whiteside, directors of Quad City Bank & Trust. The Compensation and
Benefits Committee has authority to perform policy reviews and to oversee and
direct the compensation and personnel functions of the employees, with the
exception of our executive officers. The Compensation and Benefits Committee met
three times during 2005.
Technology Committee. The Technology Committee consists of directors Bauer,
Helling and Hultquist, Ann M. Lipsky, director of Cedar Rapids Bank & Trust and
John H. Harris and Cathie S. Whiteside, directors of Quad City Bank & Trust. The
Technology Committee reviews the technology plans of QCR Holdings and our
subsidiaries for the future. The Technology Committee met four times during
2005.
Independent Director Sessions. Consistent with the Nasdaq listing requirements,
the independent directors regularly have the opportunity to meet without Messrs.
Bauer, Helling or Hultquist in attendance. In 2003, the board of directors
created the position of a lead independent director and appointed Mr. Brownson
to serve in this position. The lead independent director assists the board in
assuring effective corporate governance and serves as chairperson of the
independent director sessions.
Code of Business Conduct and Ethics. We have a code of business conduct and
ethics in place that applies to all of our directors and employees. The code
sets forth the standard of ethics that we expect all of our directors and
employees to follow, including our Chief Executive Officer and Chief Financial
Officer. The code is posted on our website at www.qcrh.com, as well as on our
banking subsidiaries' websites at www.qcbt.com, www.crbt.com and
www.rkfdbank.com. We recently amended the code to more specifically address the
procedures for dealing with potential conflicts of interest. We have satisfied
and intend to continue to satisfy the disclosure requirements under Item 5.05 of
Form 8-K regarding any amendment to or waiver of the code with respect to our
Chief Executive Officer and Chief Financial Officer, and persons performing
similar functions, by posting such information on our websites.
Director Nominations and Qualifications. In carrying out its nominating
function, the Executive Committee evaluates all potential nominees for election,
including incumbent directors, board nominees and those stockholder nominees
included in the proxy statement, in the same manner. Generally, the committee
believes that, at a minimum, directors should possess certain qualities,
including the highest personal and professional ethics and integrity, a
sufficient educational and professional background, demonstrated leadership
skills, sound judgment, a strong sense of service to the communities which we
serve and an ability to meet the standards and duties set forth in our code of
business conduct and ethics. The committee also evaluates potential nominees to
determine if they have any conflicts of interest that may interfere with their
ability to serve as effective board members, to determine if they meet QCR
Holdings' age eligibility requirements (a person who has reached age 72 before
the date of the annual meeting is not eligible for election to the board) and to
determine whether they are "independent" in accordance with Nasdaq requirements
(to ensure that at least a majority of the directors will, at all times, be
independent). The committee has not, in the past, retained any third party to
assist it in identifying candidates, but it has the authority to retain a third
party firm or professional for the purpose of identifying candidates.
Due to age eligibility requirements, Mr. Royer is not eligible to stand for
reelection to the board of directors, and as a result, his directorship will end
at the 2006 annual meeting. In connection with Mr. Royer not standing for
reelection as a director and as part of the search for potential director
candidates, Messrs. Bauer, Helling and Hultquist considered the experience,
qualifications and skills of the directors of QCR Holdings' subsidiaries and
recommended to the Executive Committee that John Rife, currently a director of
Cedar Rapids Bank & Trust, be nominated as a director of QCR Holdings. Using the
criteria described above and based on Mr. Rife's experience, credentials and
skills, the Executive Committee determined that it would recommend that Mr. Rife
be nominated as a Class I director. The Executive Committee reviewed the
nominations, considered QCR Holdings' succession plan in connection with the
nomination of Michael Bauer and determined that Messrs. Bauer, Brownson,
incumbent directors and Mr. Rife, would stand as our nominees for election as
Class I directors. The board did not receive any stockholder nominations for
director for the 2006 annual meeting.
Stockholder Communication with the Board, Nomination and Proposal Procedures.
General Communications with the Board. Stockholders may contact QCR Holdings'
board of directors by contacting Todd A. Gipple, Corporate Secretary, at QCR
Holdings, Inc., 3551-7th Street, Suite 204, Moline, Illinois 61265 or (309)
743-7745. All comments will be forwarded directly to the Chairman of the Board
as well as the lead independent director, Mr. Brownson.
11
Nominations of Directors. In order for a stockholder nominee to be considered by
the Executive Committee to be its nominee and included in our proxy statement,
the nominating stockholder must file a written notice of the proposed director
nomination with our Corporate Secretary, at the above address, at least 120 days
prior to the anniversary of the date the previous year's proxy statement was
mailed to stockholders. Nominations must include the full name and address of
the proposed nominee and a brief description of the proposed nominee's business
experience for at least the previous five years. All submissions must be
accompanied by the written consent of the proposed nominee to be named as a
nominee and to serve as a director if elected. The committee may request
additional information in order to make a determination as to whether to
nominate the person for director.
In accordance with our bylaws, a stockholder may otherwise nominate a director
for election at an annual meeting of stockholders by delivering written notice
of the nomination to our Corporate Secretary, at the above address, not less
than 30 days nor more than 75 days prior to the date of the annual meeting,
provided, however, that if less than 40 days' notice of the meeting is given,
notice by the stockholder, to be timely, must be delivered no later than 10 days
from the date on which notice of the meeting was mailed. The stockholder's
notice of intention to nominate a director must include (i) the name and address
of record of the nominating stockholder; (ii) a representation that the
stockholder is a record holder entitled to vote at the meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) the name, age, business and residence addresses,
and principal occupation or employment of each nominee; (iv) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (v) any other
information regarding each proposed nominee as would be required to comply with
the rules and regulations set forth by the Securities and Exchange Commission;
and (vi) the consent of each nominee to serve as a director of the corporation
if so elected. We may request additional information after receiving the
notification for the purpose of determining the proposed nominee's eligibility
to serve as a director. Persons nominated for election to the board pursuant to
this paragraph will not be included in our proxy statement.
Other Stockholder Proposals. To be considered for inclusion in our proxy
statement and form of proxy for our 2007 annual meeting of stockholders,
stockholder proposals must be received by our Corporate Secretary, at the above
address, no later than November 22, 2006, and must otherwise comply with the
notice and other provisions of our bylaws, as well as Securities and Exchange
Commission rules and regulations.
For proposals to be otherwise brought by a stockholder at an annual meeting, the
stockholder must file a written notice of the proposal to our Corporate
Secretary not less than 30 days nor more than 75 days prior to the date of the
annual meeting, provided, however, that if less than 40 days' notice of the
meeting is given, notice by the stockholder, to be timely, must be delivered no
later than 10 days from the date on which notice of the meeting was mailed. The
notice must set forth: (i) a brief description of the proposal and the reasons
for conducting such business at the meeting; (ii) the name and address of the
proposing stockholder; (iii) the number of shares of the corporation's common
stock beneficially owned by the stockholder on the date of the notice; and (iv)
any financial or other interest of the stockholder in the proposal. Stockholder
proposals brought under this paragraph will not be included in our proxy
statement.
12
Director Compensation. The director fees approved for 2006 and the fees paid for
2005 are set forth in the chart on the following page. In addition, in both
January 2006 and 2005 each non-employee director was awarded stock options to
purchase 300 shares of QCR Holdings common stock. Directors who are also
employees of either QCR Holdings or one of our subsidiaries will not receive any
board fees in 2006 or 2005. However, their 2005 and 2006 base salaries have been
increased to reflect this change of policy.
2006 2005
------------------
QCR Holdings
Quarterly Retainer ..................................... $2,500 $2,500
Additional Quarterly Retainer
- Audit Committee Chairman ........................... 1,500 1,500
- Executive Committee Chairman ....................... 1,500 1,500
- Compensation and Benefits Committee Chairman ....... 250 250
- Technology Committee Chairman ...................... 250 250
Attendance at Board Meeting ............................ 200 200
Attendance at Audit Committee Meeting .................. 400 400
Attendance at all other Committee Meetings ............. 300 300
Quad City Bank & Trust
Quarterly Retainer ..................................... 1,600 1,600
Additional Quarterly Retainer
- Loan Committee Chairman ............................ 500 500
- Trust Committee Chairman ........................... 250 250
- Asset/Liability Management Committee Chairman ...... 250 250
- Board Affairs Committee Chairman ................... 250 250
Attendance at Board Meeting ............................ 100 100
Attendance at Committee Meeting ........................ 250 250
Cedar Rapids Bank & Trust
Quarterly Retainer ..................................... 1,600 1,600
Additional Quarterly Retainer
- Loan Committee Chairman ............................ 500 500
- Trust Committee Chairman ........................... 250 250
- Asset/Liability Management Committee Chairman ...... 250 250
Attendance at Board Meeting ............................ 100 100
Attendance at Committee Meeting ........................ 250 250
Rockford Bank & Trust
Attendance at Board Meeting ............................ 500 500
Quarterly Retainer
- Loan Committee Chairman ............................ 500 500
- Asset/Liability Management Committee Chairman ...... 250 250
Attendance at Committee Meeting ........................ 250 250
Quad City Bancard, Inc.
Attendance at Board Meeting ............................ 300 300
M2 Lease Funds, LLC
Attendance at Board Meeting ............................ 500 500
Pursuant to the QCR Holdings, Inc. 1997 Deferred Income Plan, a director may
elect to defer the fees and cash compensation payable by us for the director's
service until either the termination of such director's service on the board or
the age specified in the director's deferral election. During 2005, all but
three directors deferred 100% of his or her director fees pursuant to the plan,
and the total expense for the deferred fees with respect to all participating
directors was $292,350 for 2005.
13
EXECUTIVE COMPENSATION
The goal of our executive compensation program is to attract, motivate and
retain highly qualified executives and maintain a stable management team and
environment. In accordance with these goals, we have divided executive
compensation into two basic components - salary and bonus - to ensure that
compensation is related to an individual executive's performance. When setting
an executive's compensation, these components are intended to work together to
compensate the executive for his or her services and reward the executive based
upon his or her ability to meet performance objectives and based upon our
overall performance during the year. We also believe it is important to
encourage executive officers to become long-term stockholders by participating
in our long-term incentive programs, including our 401(k)/Profit Sharing Plan,
Employee Stock Purchase Plan and other deferred compensation arrangements, each
of which allows participants to acquire shares of our common stock. We review
all aspects of our compensation program and its application to individual
executive officers on an annual basis to ensure that it continues to achieve our
goals and objectives and to ensure that our compensation packages remain
competitive.
The following table sets forth information concerning the compensation paid or
granted to QCR Holdings' Chief Executive Officer and the other executive
officers who had an aggregate salary and bonus which exceeded $100,000 for the
year ended December 31, 2005.
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation
Awards
----------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (g) (i)
Securities
Other Annual Underlying All Other
Name and Calendar Salary Bonus Compensation Options/ Compensation
Principal Position Year ($)(1) ($) ($)(2) SARs(#) ($)
----------------------------------------------------------------------------------------------------------------------
Douglas M. Hultquist 2005 $215,000 $94,893 --- 5,000 $27,150(6)
President and Chief 2004 $175,000 $82,396 $22,200(4) --- $26,978(7)
Executive Officer of QCR 2003 $175,000 $94,792 $57,556(5) --- $27,046(8)
Holdings, Chairman of
Quad City Bank & Trust
----------------------------------------------------------------------------------------------------------------------
Michael A. Bauer 2005 $215,000 $94,893 --- 5,000 $33,725(6)
Chairman of QCR 2004 $175,000 $82,396 $22,300(4) --- $33,149(7)
Holdings, President and 2003 $175,000 $94,792 $69,881(5) --- $32,046(8)
Chief Executive Officer
of Quad City Bank & Trust
----------------------------------------------------------------------------------------------------------------------
Larry J. Helling 2005 $195,000 $64,868 $19,627(3) 2,000 $23,853(6)
President and Chief 2004 $167,000 $94,189 $21,300(4) --- $23,807(7)
Executive Officer of 2003 $163,000 $75,790 $14,500(5) --- $23,801(8)
Cedar Rapids Bank & Trust
----------------------------------------------------------------------------------------------------------------------
Todd A. Gipple 2005 $175,000 $37,236 --- 4,500 $21,367(6)
Executive Vice President 2004 $140,500 $62,015 $ 8,900(4) 2,250 $19,996(7)
and Chief Financial 2003 $132,600 $38,675 --- 2,250 $20,333(8)
Officer of QCR Holdings
----------------------------------------------------------------------------------------------------------------------
(1) Includes amounts deferred under the QCR Holdings, Inc. 401(k)/Profit
Sharing Plan (the "401(k) Plan") and the deferred compensation
agreements.
(2) Represents amount of tax benefit rights paid on behalf of Messrs.
Helling, Hultquist and Bauer in connection with their exercise of
stock options, as well as director fees paid on behalf of Messrs.
Hultquist, Bauer, Helling and Gipple to the 1997 Deferred Income Plan.
(3) During the 2005 calendar year, the amount represents tax benefit
rights paid on behalf of Mr. Helling in connection with his exercise
of stock options.
(4) During the 2004 calendar year, the amount represents contributions
made to the 1997 Deferred Income Plan on behalf of Messrs. Hultquist,
Bauer, Helling and Gipple.
14
(5) During the 2003 calendar year, the amount includes contributions made
to the 1997 Deferred Income Plan as follows: Mr. Hultquist - $15,800;
Mr. Bauer - $15,600 and Mr. Helling - $14,500. The amount also
includes tax benefit rights paid on behalf of Mr. Hultquist - $41,756
and Mr. Bauer - $54,281 in connection with their exercise of stock
options.
(6) During the 2005 calendar year, each individual had contributions made
to the 401(k) Plan for his benefit as follows: Messrs. Hultquist,
Bauer, Helling and Gipple - $10,899. In addition, each received term
life insurance which had a per person premium cost as follows: Mr.
Hultquist - $1,251; Mr. Bauer - $2,826; Mr. Helling - $954 and Mr.
Gipple - $468. In addition, pursuant to the deferred compensation
agreements entered into between QCR Holdings and each of Messrs.
Hultquist, Bauer, Helling and Gipple, QCR Holdings contributed
deferred compensation as follows: Mr. Hultquist - $15,000, Mr. Bauer -
$20,000, Mr. Helling - $12,000 and Mr. Gipple - $10,000.
(7) During the 2004 calendar year, each individual had contributions made
to the 401(k) Plan for his benefit as follows: Messrs. Hultquist,
Bauer and Helling - $11,062 and Mr. Gipple - $9,668. In addition, each
received term life insurance which had a per person premium cost as
follows: Mr. Hultquist - $916; Mr. Bauer - $2,087; Mr. Helling - $745
and Mr. Gipple - $328. In addition, pursuant to the deferred
compensation agreements entered into between QCR Holdings and each of
Messrs. Hultquist, Bauer, Helling and Gipple, QCR Holdings contributed
deferred compensation as follows: Mr. Hultquist - $15,000; Mr. Bauer -
$20,000; Mr. Helling - $12,000 and Mr. Gipple - $10,000.
(8) During the 2003 calendar year, each individual had contributions made
to the 401(k) Plan for his benefit as follows: Messrs. Hultquist and
Bauer - $10,996; Mr. Helling - $10,823 and Mr. Gipple - $9,537. In
addition, each received term life insurance which had a per person
premium cost as follows: Messrs. Hultquist and Bauer - $1,050; Mr.
Helling - $978 and Mr. Gipple - $796. In addition, pursuant to the
deferred compensation agreements entered into between QCR Holdings and
each of Messrs. Hultquist, Bauer, Helling and Gipple, QCR Holdings
contributed deferred compensation as follows: Mr. Hultquist - $15,000;
Mr. Bauer - $20,000; Mr. Helling - $12,000 and Mr. Gipple - $10,000.
The following table sets forth certain information concerning the number and
value of stock options granted in 2005 to the individuals named in the Summary
Compensation Table.
OPTION GRANTS IN 2005
----------------------------------------------------------------------------------------------------------------------
Individual Grants
----------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Options % of Total Exercise or Grant Date
Granted Options Granted to Base Price Expiration Present Value
Name (#)(1) Employees in Year ($/Sh) Date ($) (2)
----------------------------------------------------------------------------------------------------------------------
Douglas M. Hultquist 5,000 14.5% $21.00 January 28, 2015 $44,650
----------------------------------------------------------------------------------------------------------------------
Michael A. Bauer 5,000 14.5% $21.00 January 28, 2015 $44,650
----------------------------------------------------------------------------------------------------------------------
Larry J. Helling 2,000 5.8% $21.00 January 28, 2015 $17,860
----------------------------------------------------------------------------------------------------------------------
1,500 4.3% $22.00 January 5, 2015 $14,280
Todd A. Gipple 3,000 8.7% $21.00 January 28, 2015 $26,790
----------------------------------------------------------------------------------------------------------------------
(1) Options vest in five equal annual portions beginning one year from the
date of grant.
(2) The Black-Scholes valuation model was used to determine the grant date
present values. Significant assumptions include: risk-free interest
rate, 4.42% and 4.27%; expected option life, 10 years; expected
volatility 24.81% and 24.71% and expected dividends, .36% and .38%.
The ultimate value of the options will depend on the future market
price of our common stock, which cannot be forecast with reasonable
accuracy. The actual value, if any, an executive may realize upon the
exercise of an option will depend on the excess of the market value of
our common stock, on the date the option is exercised, over the
exercise price of the option.
15
The following table sets forth certain information concerning the number of
stock options at December 31, 2005 held by the individuals named in the Summary
Compensation Table.
--------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES IN 2005
AND YEAR END OPTION/SAR VALUES
--------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Underlying in-the-money
Unexercised Options/SARs
Options/SARs at at
December 31, 2005 (#) December 31, 2005 ($)
--------------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
--------------------------------------------------------------------------------------------------------------------
Douglas M. Hultquist --- --- 29,625 6,500 $260,254 $19,200
--------------------------------------------------------------------------------------------------------------------
Michael A. Bauer --- --- 28,875 6,500 $252,314 $19,200
--------------------------------------------------------------------------------------------------------------------
Larry J. Helling 7,200 $98,136 9,120 7,430 $115,836 $68,964
--------------------------------------------------------------------------------------------------------------------
Todd A. Gipple --- --- 19,089 9,824 $211,303 $40,152
--------------------------------------------------------------------------------------------------------------------
Succession Plan
Mr. Bauer has indicated to our Executive Committee that he intends to retire in
approximately three years at age 60. The Executive Committee has requested that
Mr. Bauer and Mr. Hultquist assist them with succession planning. This
succession plan addresses the ongoing needs of QCR Holdings and recognizes Mr.
Bauer's contribution to the organization. The Committee believes that the
succession plan will further our interests by ensuring a smooth management
transition, promoting the continued success and financial performance of QCR
Holdings and outlining the continuing relationship with Mr. Bauer. Mr. Bauer
will gradually reduce his executive management duties with us over the next
three years and play a role beyond the May 2009 retirement date.
Mr. Bauer will remain as a director of QCR Holdings until the end of his term in
2009, if reelected, and may continue, beyond that time, to serve on one or more
subsidiary boards.
As part of the succession plan, Mr. Bauer will enter into amended agreements
that reflect his employment relationship with us, as more fully described below.
As part of our desire to recognize Mr. Bauer's long-standing contribution and to
reward his continued contribution during the transition period, the board of
directors approved certain amendments to Mr. Bauer's compensation arrangements
to provide additional retirement benefits and additional performance-based bonus
incentives based on the success of the overall transition. These arrangements
are further described in the following sections of this Proxy Statement.
Future arrangements contemplated under the succession plan include our plan to
enter into a separate consulting agreement with Mr. Bauer that would take effect
upon his retirement from the board of directors in May of 2009. The consulting
agreement will provide for fees of up to $2,000 per month, based on customer
retention formulas or other fee schedules set by the Executive Committee. Upon
Mr. Bauer's retirement from the board of directors of QCR Holdings, we plan to
establish and fund a charitable foundation to be administered by Mr. Bauer for
the benefit of the local community. Mr. Bauer may earn additional fees of $1,500
per month for services rendered on behalf of the foundation.
16
Employment and Deferred Compensation Agreements
Employment and Deferred Compensation Agreements with Douglas M. Hultquist. On
January 1, 2004, we entered into an employment agreement with Douglas M.
Hultquist. The agreement has a three-year term and in the absence of notice from
either party to the contrary, the employment term extends for an additional one
year on the anniversary of the agreement. Pursuant to the agreement, Mr.
Hultquist will receive a minimum salary of $175,000. The agreement includes
provisions for the increase of compensation on an annual basis, performance
bonuses, membership in various local clubs, an automobile allowance and
participation in our benefit plans. The agreement also provides term life
insurance coverage of two times Mr. Hultquist's base salary and average annual
bonus as of the date of the agreement, which may be provided through a group
term carve-out plan. The agreement furthers provides for severance compensation
equal to one year of salary plus average annual bonus in the event Mr. Hultquist
is terminated without cause and three times the sum of salary and average annual
bonus if he is terminated within one year following a change in control or if he
voluntarily terminates employment within six months of a change in control.
Mr. Hultquist also entered into a new deferred compensation agreement with us on
January 1, 2004. Under the agreement, he may defer all or a portion of his
salary or bonus and we will match the deferral up to $15,000 annually. Full
benefits under the agreements will be payable to Mr. Hultquist when he reaches
65 years of age.
Employment and Deferred Compensation Agreements with Michael A. Bauer. On March
21, 2006, we entered into an amended and restated employment agreement with Mr.
Bauer as part of our succession plan, as described above. The agreement has a
three-year term ending on the date of the 2009 annual meeting of stockholders.
Pursuant to the agreement, Mr. Bauer will receive a minimum salary of $220,500
through his retirement in May 2009. The agreement includes provisions for the
possible increase of compensation on an annual basis, performance bonuses,
membership in various local clubs, an automobile allowance and participation in
our benefit plans. With respect to performance bonuses, the agreement
specifically provides for an additional transition incentive bonus arrangement
with an opportunity to earn up to $80,000 annually based on overall assistance
with the transition contemplated by the succession plan. The payment of the
transitional incentive bonus may be credited to Mr. Bauer's deferred income
account, with such election to defer made in accordance with applicable laws.
The agreement also provides term life insurance coverage of two times Mr.
Bauer's base salary and average annual bonus as of the date of the agreement,
which may be provided through a group term carve-out plan. The agreement further
provides for severance compensation equal to one year of salary plus average
annual bonus in the event Mr. Bauer is terminated without cause and three times
the sum of salary and average annual bonus if he is terminated within one year
following a change in control or if he voluntarily terminates employment within
six months of a change in control.
In connection with the succession plan, Mr. Bauer also entered into an amended
and restated deferred compensation agreement with us on March 21, 2006. Under
the agreement, Mr. Bauer may defer compensation with us matching the deferral up
to $20,000 annually and we may make discretionary contributions to Mr. Bauer's
deferred income account at any time. Additionally, the employment agreement
provides for us to make a one-time contribution of $40,000 to the deferred
compensation plan upon the execution of Mr. Bauer's amended and restated
employment agreement. Benefits under the deferred compensation agreement will be
payable to Mr. Bauer per the terms of the agreement.
Employment and Deferred Compensation Agreements with Todd A. Gipple and Larry J.
Helling. On January 1, 2004, we also entered into new employment agreements with
Todd A. Gipple and Larry J. Helling. Mr. Gipple's employment agreement provides
that Mr. Gipple is to receive a minimum salary of $140,500. The agreement
includes a provision for the increase in compensation on an annual basis,
performance bonuses, membership in a Quad Cities country club, a monthly
automobile allowance and participation in our benefit plans. Mr. Gipple's
agreement also provides term life insurance coverage of two times the sum of his
base salary and average annual bonus as of the date of the agreement, which may
be provided through a group term carve-out plan. The agreement further provides
that he is entitled to a payment equal to the sum of one-half of his
then-current annual salary plus one-half of his average annual bonus if he is
terminated without cause and two times the sum of his annual salary and average
annual bonus if he is terminated within one year following a change in control
or if he voluntarily terminates employment within six months of a change in
control. Mr. Gipple also entered into a deferred compensation agreement with us
on January 1, 2004 under which he may defer all or a portion of his salary or
bonus and we will match the deferral up to $10,000 annually.
17
Mr. Helling's employment agreement provides that Mr. Helling is to receive a
base annual salary of $167,000. The agreement includes a provision for the
increase in compensation on an annual basis, performance bonuses, a monthly
automobile allowance, membership in various country clubs and participation in
our benefit plans. Mr. Helling's agreement also provides term life insurance
coverage of two times the sum of his base salary and average annual bonus as of
the date of the agreement, which may be provided through a group term carve-out
plan. The agreement further provides for a severance payment equal to six months
of his salary in the event of a termination without cause and two times his
annual salary in the event he is terminated within one year following a change
in control or if he voluntarily terminates employment within six months of a
change in control.
Additionally, Mr. Helling's agreement allows him to participate in the Cedar
Rapids Short-term Cash Incentive Compensation Program and the Cedar Rapids
Long-term Deferred Incentive Compensation Program (as described under the
heading "Other Incentive Plans" beginning on page 19 of this proxy statement).
Under the agreement, Mr. Helling will be allocated a total of 40% of amounts
paid pursuant to the incentive programs. Mr. Helling also entered into a
deferred compensation agreement with us on January 1, 2004 under which he may
defer all or a portion of his salary or bonus and we will match the deferrals up
to $12,000 annually.
All Employment and Deferred Compensation Agreements. Amounts deferred by each of
the officers under the respective deferred compensation agreements earn interest
at The Wall Street Journal prime rate, subject to a minimum of 6% and a maximum
of 12%, with such amounts differing depending on the executive. Upon retirement,
the executives will receive the deferral balance in 180 equal monthly
installments.
Additionally, all of the employment agreements are terminable at any time by
either our board of directors or the respective officer. We may terminate these
agreements at any time for cause without incurring any post-termination
obligation to the terminated officer. If the officers are terminated without
cause or upon a change in control, we must make severance payments as described
in the previous sections. If the termination without cause or change in control
provisions were triggered as of the date of this proxy statement, we would owe
the executives the following, approximate, pre-tax amounts: Mr. Bauer - $311,194
for termination without cause and $933,581 for change in control; Mr. Hultquist
- $311,194 for termination without cause and $933,581 for change in control; Mr.
Gipple - $112,238 for termination without cause and $448,951 for change in
control; Mr. Helling - $100,000 for termination without cause and $400,000 for
change in control. This is in addition to any other payments we may owe the
executives pursuant to the incentive stock plan, the deferred income plan, the
deferred compensation agreement or pursuant to any other plan or benefit then
due the officer.
Each of the employment agreements also contains a non-compete provision, which
provides that each officer is prohibited from competing with us or our
subsidiaries within a 60-mile radius of any of our offices for a period of two
years following the termination of the agreement.
Non-qualified Supplemental Executive Retirement Program
In April 2004, the boards of directors of Quad City Bank & Trust and Cedar
Rapids Bank & Trust each adopted a Non-Qualified Supplemental Executive
Retirement Agreement ("SERP") for executive officers. The SERP will provide
supplemental retirement income to certain key executive officers of Quad City
Bank & Trust and Cedar Rapids Bank & Trust. Pursuant to the plan, a
participating executive will receive a supplemental retirement benefit in an
annual pre-tax amount equal to 2 1/2% for each year of full-time service until
the executive reaches age 65 (not to exceed 40 years), multiplied by the
executive's average annual base salary plus cash bonus for the three most
recently completed plan years, subject to a maximum of 70%.
The supplemental retirement benefit will be reduced by any contributions plus
earnings thereon made by us to the credit of the executive pursuant to QCR
Holdings 401(k) or other deferred compensation plans. The supplemental
retirement benefit payable under the plans will generally be made in monthly
installments for a period of 180 months. If an executive retires after reaching
age 55 (but before reaching age 65) and has at least 10 years of service, we
will pay a supplemental early retirement benefit to the executive. The SERP also
provides for the payment of a survivor's benefit payable to a participating
executive's beneficiary upon the executive's death.
Pursuant to the existing SERP arrangements, assuming the participating
executives retire on or after reaching age 65 and based on the participants'
salary and cash bonus paid for 2005, we will owe the following projected annual
amounts: Mr. Hultquist - $220,779; Mr. Gipple - $278,477; Mr. Helling -
$129,765. These amounts are for illustrative purposes only and do not reflect
the reduction in payments as described above and do not reflect any annual
increases in the executives' salaries.
18
In 2005, we accrued an additional expense of $176,313, allocated as follows: Mr.
Bauer - $75,914; Mr. Hultquist - $56,064; Mr. Gipple - $16,430; Mr. Helling -
$27,905. As of December 31, 2005, our aggregate liability related to the SERP
was $310,313, allocated as follows: Mr. Bauer - $133,270; Mr. Hultquist -
$98,285; Mr. Gipple - $29,839; Mr. Helling - $48,919.
As part of the succession plan discussed above, the SERP was amended on March
21, 2006 with respect to Mr. Bauer to provide a fixed benefit of $117,000 per
year commencing upon attainment of age 60.
401(k)/Profit Sharing Plan
We sponsor a qualified, tax-exempt profit sharing plan qualifying under Section
401(k) of the Internal Revenue Code. All employees are eligible to participate
in the plan. Pursuant to the plan, we match 100% of the first 3% of employee
contributions and 50% of the next 3% of employee contributions, up to a maximum
of 4.5% of an employee's compensation. Additionally, at our discretion, we may
make additional contributions to the plan, which are allocated to the accounts
of participants based on relative compensation.
The total contributions under the 401(k) plan by our named executive officers
are reflected in the Summary Compensation Table on page 14 of this proxy
statement.
Stock Option and Equity Incentive Plans
1993 Stock Option Plan. In 1993, QCR Holdings adopted a stock option plan for
the benefit of directors, officers, and employees of QCR Holdings and its
subsidiaries. The plan was approved by stockholders and provided for the
issuance of incentive stock options and nonqualified stock options. All of the
options under the plan have been granted, and on June 30, 2003, the plan
expired.
1997 Stock Incentive Plan. In 1997, we adopted the QCR Holdings, Inc. Stock
Incentive Plan for the benefit of our directors, officers and employees. The
plan was approved by stockholders and provided for the issuance of incentive
stock options, nonqualified stock options, restricted stock, tax benefit rights
and stock appreciation rights. All of the awards available for issuance under
the plan have been issued, although options remain outstanding.
2004 Stock Incentive Plan. In 2004, we adopted the QCR Holdings, Inc. Stock
Incentive Plan for the benefit of our directors, officers and employees.
Stockholders approved the 2004 plan and authorized 225,000 shares for issuance
under the plan. This plan provides for the issuance of incentive stock options,
nonqualified stock options, restricted stock, tax benefit rights and stock
appreciation rights. As of December 31, 2005, there are 170,312 remaining
options available for grant under this plan.
In 2005, we awarded stock options to purchase an aggregate of 26,000 shares of
QCR Holdings common stock to seven employees and an aggregate of 8,400 shares of
QCR Holdings common stock to twenty-two directors of QCR Holdings and our
subsidiaries. The stock options awarded to the named executive officers during
2005 are included in the tables above.
Stock Purchase Plan. In 2002, we adopted and stockholders approved the QCR
Holdings, Inc. Employee Stock Purchase Plan. The plan is intended to qualify as
an employee stock purchase plan under Section 423 of the Internal Revenue Code.
The plan allows employees of QCR Holdings and our subsidiaries to purchase
shares of common stock available under the plan. The purchase price is currently
90% of the lesser of the fair market value at the date of the grant or the
investment date. The investment date is the date common stock is purchased after
the end of each calendar quarter during an offering period. The maximum dollar
amount any one participant can elect to contribute in an offering period is
$5,000 and the maximum percentage that any one participant can elect to
contribute is 5% of his or her compensation. During 2005, 10,516 shares were
granted and 10,584 were purchased under the plan.
Other Incentive Plans
Certain designated officers of Cedar Rapids Bank & Trust, including Mr. Helling,
are also eligible to receive cash compensation pursuant to the Cedar Rapids
Short-Term Cash Incentive Compensation Program and the Cedar Rapids Long-Term
Deferred Incentive Compensation Program.
Short-Term Cash Incentive Compensation Program. Under the Short-Term Cash
Incentive Compensation Program, we will pay eligible officers of Cedar Rapids
Bank & Trust, based on a fixed percentage allocation, an aggregate target
incentive amount, provided specific performance targets are met. Based on the
performance targets attained for the year 2005, we paid an aggregate total of
$37,500 pursuant to the program, of which Mr. Helling received $15,000.
19
Long-Term Deferred Incentive Compensation Program. Under the Long-Term Deferred
Incentive Compensation Program, with respect to years ending December 31, 2006
through December 31, 2011, we will contribute up to an aggregate maximum of
$300,000 to a deferred compensation plan for the benefit of eligible officers of
Cedar Rapids Bank & Trust, based on a fixed percentage allocation. Contributions
will only be made under the program if specified levels for return on equity and
ending total assets are attained. The program also provides for the acceleration
of certain future year contributions to the plan in the event of a change in
control. For example, if a change in control had occurred as of December 31,
2005, the aggregate contributions would be $636,506, which equals the present
value of future estimated contributions made for the years 2006 through 2011.
Deferred Income Plan
1997 Deferred Income Plan. In 1997, we adopted and stockholders approved the QCR
Holdings, Inc. 1997 Deferred Income Plan to enable directors and selected key
officers of QCR Holdings and its related companies, to elect to defer a portion
of the fees and cash compensation payable to them for their service as directors
or employees. As of December 31, 2005, there were 2,646 shares of common stock
remaining under the plan.
2005 Deferred Income Plan. In 2005, we adopted and stockholders approved the QCR
Holdings, Inc. 2005 Deferred Income Plan to enable directors and selected key
officers of QCR Holdings and its related companies, to elect to defer a portion
of the fees and cash compensation payable to them for their service as directors
or employees. There are 100,000 shares authorized for issuance under the plan.
Compensation Committee Interlocks and Insider Participation
During 2005, the Executive Committee, which sets the salaries and compensation
for our executive officers, was comprised solely of independent directors:
Messrs. Baird, Brownson, Kilmer, Lawson, Peterson and Royer. The Compensation
and Benefits Committee, which sets the salaries and compensation of all
employees who are not executive officers, consisted of Messrs. Bauer, Hultquist,
Helling, Lawson and Harris, Ms. Bawden and Whiteside, as well as Arthur L.
Christoffersen, former director of Cedar Rapids Bank & Trust, who recently
passed away. Messrs. Bauer, Hultquist and Helling are executive officers and do
not participate in any decisions involving their own compensation.
Executive Committee Report on Executive Compensation
The report of the Executive Committee below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent QCR Holdings specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
General. The Executive Committee is comprised of six directors of QCR Holdings.
Each of the members is considered "independent" by the board according to the
Nasdaq listing requirements, an "outside" director pursuant to Section 162(m) of
the Internal Revenue Code and a "non-employee" director pursuant to Section 16
of the Securities Exchange Act of 1934. The committee's intention is to provide
a total compensation program that supports our long-term business strategy and
performance culture and creates a commonality of interest among our
stockholders. The Executive Committee is responsible for the oversight of
executive compensation and reviews the compensation program of QCR Holdings on
an ongoing basis.
The overall philosophy used by the Executive Committee when making decisions is
as follows:
o to provide incentives for executive officers to work toward achieving
successful short-term and long-term goals and objectives;
o to provide significant reward for achievement of superior performance,
as well as significant risk to penalize substandard performance;
o to create opportunity and incentive for executives to be long-term
stockholders;
o to link executive compensation rewards to increases in stockholder
value, as measured by favorable long-term results and continued
strengthening of our financial condition;
o to provide flexibility to recognize, differentiate and reward
individual performance; and
o to facilitate stock ownership through granting of stock options.
20
For each executive officer, the Executive Committee was responsible for the
establishment of base salary and bonuses paid, as well as an award level for the
annual incentive compensation program, each of which is subject to the approval
of the non-employee directors. The Executive Committee was also responsible for
the administration of the stock programs for the executive officers, as well as
recommendations regarding other executive benefits and plans, subject to the
same approval process.
In reviewing an executive's compensation, the Executive Committee considers and
evaluates all components of the executive officer's total compensation package.
This involves reviewing the executive's salary, bonus, incentive stock awards,
perquisites, participation in our 401(k)/Profit Sharing Plan, deferred
compensation plans, the supplemental retirement plan, payments due upon
retirement or a change of control, if any, and all other payments and awards
that the executive officer earns.
This year, the Committee also considered and evaluated the components of QCR
Holdings' succession plan, which includes the above discussion regarding Mr.
Bauer's future retirement. The Committee reviewed and approved each component of
the transition arrangements and determined that they are in the best interests
of QCR Holdings and its stockholders and promote the goals of ensuring the
continued success and financial performance of QCR Holdings and its
subsidiaries.
Salary and Bonus. The Executive Committee reviews each executive's base salary
on an annual basis. It is the Executive Committee's policy that the base
salaries of our executives should offer each executive security and allow us to
attract qualified executives and maintain a stable management team and
environment. The Executive Committee targets base salaries at levels comparable
to those of comparable positions within the market place. In January 2004, we
entered into new employment contracts with each of our executive officers. In
March 2006, we amended Mr. Bauer's employment agreement as part of QCR Holdings'
succession plan, as described above in this Proxy Statement. The base salary
provided in the agreements may be increased to reflect the executive officer's
performance, as well as our overall financial performance. Additionally, base
salaries are determined by examining, among other things, the executive's level
of responsibility, prior experience, length of time with us as an employee,
breadth of knowledge and internal performance objectives. An executive's current
salary in relation to the executive's salary range and the median salary
practices of the market place are also considered. All of the factors described
herein are considered on a subjective basis in the aggregate, and none of the
factors is accorded a specific weight.
Annual adjustments to an executive's base salary are driven by corporate and
individual performance. Corporate performance, measured primarily in terms of
earnings per share, return on equity and enhancement of total assets, impacts an
executive's base salary. In addition, the Executive Committee will also measure
individual performance. When measuring individual performance, the Executive
Committee considers the individual's efforts in achieving established financial
and business objectives, managing and developing employees and enhancing
long-term relationships with customers.
Each executive's annual cash bonus is also driven by corporate and individual
performance. Specifically, each executive has measurable goals determined by the
Executive Committee regarding earnings per share, return on equity, asset
growth, and other financial performance measures.
Annually, the Executive Committee evaluates four primary areas of performance in
determining the Chief Executive Officer's level of compensation. These areas
are:
o our long-range strategic planning and implementation;
o our financial performance;
o our compliance with regulatory requirements and relations with
regulatory agencies; and
o the individual's effectiveness of managing relationships with
employees, stockholders and the board of directors.
Long-Term Incentive Programs. Our current long-term incentive plans are intended
to promote equity ownership in QCR Holdings by the directors and selected
officers and employees, to increase their proprietary interest in our success
and to encourage them to remain with us as directors and employees. They also
promote tax efficiency and replacement of benefit opportunities lost to
regulatory limits. We have established the QCR Holdings, Inc. 401(k)/Profit
Sharing Plan, the QCR Holdings, Inc. Employee Stock Purchase Plan, the QCR
Holdings, Inc. 1997 Deferred Income Plan, and the QCR Holdings, Inc. 2005
Deferred Income Plan, each of which allows participants to acquire shares of our
common stock.
21
We have also granted stock options through the QCR Holdings, Inc. 1993 Stock
Option Plan, the 1997 Stock Incentive Plan and the 2004 Stock Incentive Plan. We
use stock options in our compensation program to reinforce our long-term
perspective and to retain valued executives. Pursuant to the 1997 and 2004 Stock
Incentive Plans, we have also granted tax benefit rights and stock appreciation
rights to certain participants at the same time as options were awarded. Options
granted to our executive officers are shown in the table on page 15.
During 2005, we closely monitored the regulatory developments under Internal
Revenue Code Section 409A, which was enacted as part of the American Jobs
Creation Act of 2004 (the "Act") and deals with specific tax rules for
non-qualified deferred compensation plans. We intend to amend and restate its
non-qualified deferred compensation plans prior to the expiration of the
transition period on December 31, 2006 in order to ensure its plans are in full
compliance with the Act.
Chief Executive Officer's Compensation. The base salary paid to Mr. Hultquist,
as President and Chief Executive Officer, during 2005 was also based in part
upon the Executive Committee's satisfaction level with our profitability, asset
growth and risk management. The primary evaluation criteria are considered to be
essential to our long-term viability. The Executive Committee considered Mr.
Hultquist's personal performance as President and Chief Executive Officer, his
previous years' salaries and the salary levels of other similarly situated
financial institutions, his participation in employee benefit plans and the
perquisites he receives in setting his base salary at $215,000 for 2005. Mr.
Hultquist also received a bonus in the amount of $94,893 for 2005. His bonus was
based on our 2005 financial performance as compared to measurable goals for
earnings per share, return on equity, asset growth, asset quality, and other
subjective factors determined by the Executive Committee. Mr. Hultquist also
received $27,148 in other compensation that is primarily attributable to our
matching contribution pursuant to the 401(k) plan and contributions pursuant to
his deferred compensation arrangement.
Compliance with Section 162(m) of the Internal Revenue Code of 1986. Section
162(m) of the Internal Revenue Code limits the deductibility of annual
compensation in excess of $1.0 million paid to our Chief Executive Officer and
any of the four other highest paid officers, to the extent they are listed
officers on the last day of any given tax year. However, compensation is exempt
from this limit if it qualifies as "performance based compensation." Performance
based compensation generally includes only payments that are contingent on
achievement of performance objectives, and excludes fixed or guaranteed
payments. We believe performance based compensation is an important tool to
provide incentive to senior executives, matching their compensation levels to
our performance. Accordingly, performance based compensation comprises a
significant portion of the compensation package for our senior executives. This
also has the effect of preserving the deduction that might otherwise be affected
by the $1.0 million limit.
Although we will consider deductibility under Section 162(m) with respect to the
compensation arrangements for executive officers, deductibility will not be the
sole factor used in determining appropriate levels or methods of compensation.
Since our objectives may not always be consistent with the requirements for full
deductibility, we may enter into compensation arrangements under which payments
would not be deductible under Section 162(m).
Conclusion. The Executive Committee believes these executive compensation
policies and programs effectively serve the interests of stockholders and QCR
Holdings. The Executive Committee believes these policies motivate executives to
contribute to our overall future success, thereby enhancing the value of QCR
Holdings for the benefit of all stockholders.
Executive Committee:
Patrick S. Baird
James J. Brownson
Mark C. Kilmer
John K. Lawson
Ronald G. Peterson
Henry Royer
22
Stockholder Return Performance Presentation
The incorporation by reference of this proxy statement into any document filed
with the Securities and Exchange Commission by QCR Holdings shall not be deemed
to include the following performance graph and related information unless such
graph and related information are specifically stated to be incorporated by
reference into such document.
The following graph indicates, for the period commencing December 31, 2000, a
comparison of cumulative total returns for QCR Holdings, the Nasdaq Stock Market
(US Companies) and the SNL Midwest Bank Index prepared by SNL Securities,
Charlottesville, Virginia. The graph below was prepared at our request by SNL
Securities.
[OMITTED PERFORMANCE GRAPH]
The following are the data points utilized in the omitted graph.
Period Ending
----------------------------------------------------------------------
Index 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
-------------------------------------------------------------------------------------------------------------
QCR Holdings, Inc. ................ $ 100.00 $ 109.33 $ 167.42 $ 278.70 $ 314.81 $ 296.50
NASDAQ Composite .................. 100.00 79.18 54.44 82.09 89.59 91.54
SNL NASDAQ Bank Index ............. 100.00 108.85 111.95 144.51 165.62 160.57
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding our common stock
beneficially owned on December 31, 2005, by each director, by each executive
officer named in the summary compensation table, by persons who are the
beneficial owners of more than 5% of our common stock and by all directors and
executive officers of QCR Holdings as a group. Beneficial ownership has been
determined for this purpose in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), under which a person is
deemed to be the beneficial owner of securities if he or she has or shares
voting power or investment power in respect of such securities or has the right
to acquire beneficial ownership of securities within 60 days of December 31,
2005.
Name of Individual and Amount and Nature of Percent
Number of Persons in Group Beneficial Ownership(1) of Class
-----------------------------------------------------------------------------------------------------
Directors and Nominees
Patrick S. Baird 38,312(2) *
Michael A. Bauer 55,211(3) 1.2%
James J. Brownson 35,028(4) *
Larry J. Helling 46,223(5) 1.0%
Douglas M. Hultquist 58,849(6) 1.3%
Mark C. Kilmer 28,207(7) *
John K. Lawson 14,693(8) *
Ronald G. Peterson 15,851(9) *
John A. Rife 6,929(10) *
Henry Royer 11,708(11) *
Other Named Executive Officer
Todd A. Gipple 45,670(12) 1.0%
5% Stockholder
Banc Funds** 370,053(13) 8.2%
All directors and executive officers
as a group (20 persons) 461,327(14) 10.1%
* Less than 1%.
** Banc Funds, 200 South LaSalle Street, Suite 1680, Chicago, Illinois 60604
(1) Amounts reported include shares held directly, including certain shares
subject to options, as well as shares held in retirement accounts, by
certain members of the named individuals' families or held by trusts of
which the named individual is a trustee or substantial beneficiary.
Inclusion of shares shall not constitute an admission of beneficial
ownership or voting and sole investment power over included shares. The
nature of beneficial ownership for shares listed in this table is sole
voting and investment power, except as set forth in the following
footnotes.
23
(2) Includes 420 shares subject to options which are presently exercisable
and over which Mr. Baird has no voting and sole investment power. Also
includes 34,483 shares held jointly by Mr. Baird and his spouse and 3,409
shares held in a trust, over which he has shared voting and investment
power. Excludes 1,080 option shares not presently exercisable.
(3) Includes 10,181 shares held jointly by Mr. Bauer and his spouse, includes
1,704 shares held by Mr. Bauer's children, 6,862 shares held in an IRA
account, 8,675 shares held in a trust, 7,290 shares held in the 401(k)
Plan and 18 shares held by his spouse, all of which he has shared voting
and investment power. Excludes 5,000 option shares not presently
exercisable.
(4) Includes 3,326 shares subject to options which are presently exercisable
and over which Mr. Brownson has no voting and sole investment power. Also
includes 3,465 shares held jointly by Mr. Brownson and his spouse, 2,025
shares held by his spouse, 9,517 shares held in a trust, and 16,695
shares held in an IRA account, all of which he has shared voting and
investment power. Excludes 5,199 option shares not presently exercisable.
(5) Includes 7,320 shares subject to options which are presently exercisable
and over which shares Mr. Helling has no voting and sole investment
power. Also includes 32,250 shares held in an IRA account, 3,981 shares
held in a trust and 2,404 shares held in the 401(k) Plan, all of which he
has shared voting and investment power. Excludes 5,630 option shares not
presently exercisable.
(6) Includes 9,337 shares held by his spouse or for the benefit of his
children, 4,050 shares held in an IRA account, 23,220 shares held in two
trusts and 6,166 shares in the 401(k) Plan, all of which Mr. Hultquist
has shared voting and investment power. Excludes 5,000 option shares not
presently exercisable.
(7) Includes 825 shares subject to options which are presently exercisable
and over which Mr. Kilmer has no voting and sole investment power. Also
includes 5,384 shares held by his spouse or children, 6,173 shares held
in a trust and 3,375 shares held in an IRA account, all of which he has
shared voting and investment power. Excludes 900 option shares not
presently exercisable.
(8) Includes 1,230 shares subject to options which are presently exercisable
and over which Mr. Lawson has no voting and sole investment power. Also
includes 8,250 shares held in trust, over which shares he has shared
voting and investment power. Excludes 1,170 option shares not presently
exercisable.
(9) Includes 2,550 shares subject to options which are presently exercisable
and over which Mr. Peterson has no voting and sole investment power. Also
includes 9,926 shares held in a trust, over which shares he has shared
voting and investment power. Excludes 1,200 option shares not presently
exercisable.
(10) Includes 210 shares subject to options which are presently exercisable
and over which Mr. Rife has no voting and sole investment power. Also
includes 4,619 shares held jointly by Mr. Rife and his spouse and 2,100
shares held in a trust, over which he has shared voting and investment
power. Excludes 540 option shares not presently exercisable.
(11) Includes 420 shares subject to options which are presently exercisable
and over which Mr. Royer has no voting and sole investment power.
Includes 6,750 shares held in an IRA account and 4,538 shares held in a
trust, over all of which Mr. Royer has shared voting and investment
power. Excludes 1,080 option shares not presently exercisable.
(12) Includes 16,089 shares subject to options which are presently exercisable
and over which Mr. Gipple has no voting and sole investment power. Also
includes 14,722 shares held in an IRA account, 2,800 shares held by his
children and spouse, 1,870 shares held in the 401(k) Plan, and 636 shares
held in a trust, over which he has shared voting and investment power.
Excludes 9,074 option shares not presently exercisable.
(13) Includes shares held by Banc Fund V L.P., Banc Fund VI L.P. and Banc Fund
VII L.P. as reported in a Schedule 13G/A filed on January 27, 2006.
(14) Excludes 40,141 option shares not presently exercisable.
24
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
directors, executive officers and persons who own more than 10% of our common
stock file reports of ownership and changes in ownership with the Securities and
Exchange Commission and with the exchange on which the shares of common stock
are traded. These persons are also required to furnish us with copies of all
Section 16(a) forms they file. Based solely on our review of the copies of such
forms furnished to us, and, if appropriate, representations made to us by any
reporting person concerning whether a Form 5 was required to be filed for 2005,
we are not aware of any failures to comply with the filing requirements of
Section 16(a) during 2005 with the exception of one Form 4 filing by Mr. Kilmer
reporting the acquisition of 300 shares and the exercise of 450 shares and one
Form 4 filing by Mr. Bauer reporting the sale of 425 shares.
TRANSACTIONS WITH MANAGEMENT
Our directors and officers and their associates were customers of and had
transactions with QCR Holdings and our subsidiaries during 2005. Additional
transactions are expected to take place in the future. All outstanding loans,
commitments to loan, and certificates of deposit and depository relationships,
in the opinion of management, were made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present other
unfavorable features.
AUDIT COMMITTEE REPORT
The incorporation by reference of this proxy statement into any document filed
with the Securities and Exchange Commission by QCR Holdings shall not be deemed
to include the following report and related information unless such report is
specifically stated to be incorporated by reference into such document.
The Audit Committee assists the board of directors in carrying out its oversight
responsibilities for our financial reporting process, audit process and internal
controls. The Audit Committee also reviews the audited financial statements and
recommends to the board that they be included in our annual report on Form 10-K.
The committee is comprised solely of independent directors.
The Audit Committee has reviewed and discussed our audited financial statements
for the year ended December 31, 2005 with our management and McGladrey & Pullen,
LLP, our independent registered public accounting firm, including their
attestation report on management's assessment of the effectiveness of the
internal control over financial reporting. The committee has also discussed with
McGladrey & Pullen, LLP the matters required to be discussed by SAS 61
(Codification for Statements on Auditing Standards) as well as having received
and discussed the written disclosures and the letter from McGladrey & Pullen,
LLP required by Independence Standards Board Statement No. 1 (Independence
Discussions with Audit Committees). Based on the review and discussions with
management and McGladrey & Pullen, LLP, the committee has recommended to the
board that the audited financial statements be included in our annual report on
Form 10-K for the year ending December 31, 2005 for filing with the Securities
and Exchange Commission.
Audit Committee:
Patrick S. Baird
James J. Brownson
John K. Lawson
Henry Royer
25
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Representatives of McGladrey & Pullen, LLP, our independent registered public
accounting firm, are expected to be present at the meeting and will be given the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
Following is a summary of fees for professional services by McGladrey & Pullen,
LLP and RSM McGladrey, Inc. (an affiliate of McGladrey & Pullen, LLP).
Accountant Fees
Audit Fees. The aggregate amount of fees billed by McGladrey & Pullen, LLP in
connection with the audit of our annual financial statements and Quad City
Bank's internal control attestation for years 2005 and 2004 and for its required
reviews of our unaudited interim financial statements included in our Form
10-Q's filed during 2005 and 2004, as well as assistance with other SEC filings,
were $220,583 and $145,692, respectively. The increased level of audit fees was
primarily the result of our growth in total assets, combined with the first
audit of our internal control over financial reporting.
Audit Related Fees. The aggregate amount of audit related fees billed by
McGladrey & Pullen, LLP for 2005 and 2004 were $36,596 and $14,681,
respectively. The majority of these services were related to research and
consultations concerning financial accounting and internal control reporting
matters.
Tax Fees. The aggregate amount of tax related services billed by RSM McGladrey,
Inc. for 2004 was $756 for professional services rendered for sales tax advice.
We did not incur any fees for tax related services by RSM McGladrey, Inc. for
2005.
The Audit Committee, after consideration of the matter, does not believe that
the rendering of these services by McGladrey & Pullen, LLP and RSM McGladrey,
Inc. to be incompatible with maintaining McGladrey & Pullen, LLP's independence
as our principal accountant.
Audit Committee Approval Policy
Among other things, the Audit Committee is responsible for appointing, setting
compensation for and overseeing the work of the independent auditor. The Audit
Committee's policy is to approve, on a case-by-case basis, all audit and
permissible non-audit services provided by any audit, tax consulting or general
business consulting firm. The Audit Committee does have a policy of
pre-approving any of these services.
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REPORT ON FORM 10-K
We will furnish without charge to each person whose proxy is solicited, and to
each person representing that he or she is a beneficial owner of our common
stock as of the record date for the meeting, upon written request, copies of our
annual report on Form 10-K as filed with the Securities and Exchange Commission,
together with the financial statements and schedules thereto. Such written
request should be sent to Ms. Shellee R. Showalter, QCR Holdings, Inc., 3551 -
7th Street, Suite 204, Moline, Illinois 61265.
By order of the Board of Directors
/s/ Michael A. Bauer /s/ Douglas M. Hultquist
Michael A. Bauer Douglas M. Hultquist
Chairman President
Moline, Illinois
March 22, 2006
ALL STOCKHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY
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