SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2001
-------------
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to __________.
Commission File No. 0-23763
Quitman Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of Small Business Issuer as Specified in Its Charter)
Georgia 58-2365866
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
602 East Screven Street, Quitman, Georgia 31643
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(Address of Principal Executive Offices)
(229) 263-7538
- --------------------------------------------------------------------------------
Issuer's Telephone Number, Including Area Code
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
----------- -----------
Number of shares of Common Stock outstanding as of June 30, 2001: 507,262
Transitional Small Business Disclosure Format (check one)
YES NO X
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-1-
QUITMAN BANCORP, INC.
Contents
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Page(s)
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.............................................. 3
Item 2. Management's Discussion and Analysis or Plan of Operation......... 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................. 15
Item 2. Changes in Securities and Use of Proceeds......................... 15
Item 3. Defaults upon Senior Securities................................... 15
Item 4. Submission of Matters to a Vote of Security Holders............... 15
Item 5. Other Information................................................. 15
Item 6. Exhibits and Reports on Form 8-K.................................. 15
Signatures................................................................. 16
-2-
PART I. FINANCIAL INFORMATION
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
ASSETS
------
JUNE 30, SEPTEMBER 30,
2001 2000
----------------- ----------------
(Unaudited)
Cash and Cash Equivalents:
Cash and amounts due from depository
institutions $ 677,264 598,471
Interest-bearing deposits in other bank 1,581,194 1,064,984
Federal funds sold 110,000 0
------------- -----------
Total Cash and Cash Equivalents 2,368,458 1,663,455
Investment securities:
Available-for-sale 6,488,692 6,546,404
Loans receivable - net of allowance for loan
losses and deferred origination fees 52,929,870 49,052,004
Office properties and equipment, at cost, net of
accumulated depreciation 1,432,891 1,483,607
Real estate and other property acquired
in settlement of loans 41,000 0
Accrued interest receivable 735,474 583,330
Investment required by law-stock in Federal
Home Loan Bank, at cost 372,100 320,300
Cash value of life insurance 756,115 626,638
Other assets 133,207 193,195
------------- ------------
Total Assets $65,257,807 60,468,933
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits $54,098,814 47,336,018
Advances from Federal Home Loan Bank 4,000,000 5,000,000
Accrued interest payable 495,214 337,586
Income taxes payable 44,880 14,770
Other liabilities 157,623 156,446
------------ ----------
Total Liabilities 58,796,531 52,844,820
------------ ----------
Stockholders' Equity:
Common stock, $.10 par value, 4,000,000
shares authorized, 661,250 shares
issued and 507,262 shares outstanding 66,125 66,125
Preferred stock, no par value, 1,000,000
shares authorized, no shares issued
or outstanding 0 0
Additional paid in capital 5,410,028 6,135,412
Retained Earnings 3,060,539 3,662,836
Accumulated other comprehensive income (loss) 39,858 (72,086)
------------ -----------
8,576,550 9,792,287
Receivable from employee stock ownership plan (396,750) (449,650)
Treasury stock, 153,988 shares at cost (1,718,524) (1,718,524)
------------ -----------
Total Stockholders' Equity 6,461,276 7,624,113
------------ -----------
Total Liabilities and Stockholders' Equity $65,257,807 60,468,933
============ ===========
-3-
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- --------------------------
2001 2000 2001 2000
------------ ----------- ------------ ----------
Interest Income:
Loans receivable:
First mortgage loans $1,105,645 961,780 3,240,495 2,790,474
Consumer and other loans 110,872 82,078 307,962 228,166
Interest on FHLMC Pool 13 24 45 83
Investment securities 95,275 98,900 292,420 293,922
Interest-bearing deposits 10,373 6,428 49,126 20,474
Federal funds sold 4,424 714 9,854 2,118
---------- ---------- ---------- ----------
Total Interest Income 1,326,602 1,149,924 3,899,902 3,335,237
---------- ---------- ---------- ----------
Interest Expense:
Deposits 825,993 623,241 2,369,108 1,800,063
Interest on Federal Home Loan
Bank advances 50,875 76,661 206,292 183,078
---------- ---------- ---------- ----------
Total Interest Expense 876,868 699,902 2,575,400 1,983,141
---------- ---------- ---------- ----------
Net Interest Income 449,734 450,022 1,324,502 1,352,096
Provision for loan losses 15,000 15,154 45,000 45,154
---------- ---------- ---------- ----------
Net Interest Income After Provision for Losses 434,734 434,868 1,279,502 1,306,942
---------- ---------- ---------- ----------
Non-Interest Income:
Gain (loss) on sale of securities 0 0 (7,582) (7,387)
Late charges on loans 12,671 9,278 27,438 27,815
Service charges 42,868 26,868 110,053 73,120
Insurance commissions 1,159 2,372 6,811 7,953
Other income 11,316 7,804 41,247 19,602
Gain on sale of other real estate 0 0 0 5,911
Gain on sale of other repossession 430 0 5,500 0
Gain on sale of fixed assets 3,465 0 3,465 0
---------- ---------- ---------- ----------
Total Non-Interest Income 71,909 46,322 186,932 127,014
---------- ---------- ---------- ----------
Non-Interest Expense:
Compensation 144,543 138,924 432,100 403,818
Other personnel expenses 67,078 48,847 203,723 174,296
Occupancy expenses of premises 12,655 12,361 39,045 37,399
Furniture and equipment expenses 47,498 51,518 147,949 158,592
Federal deposit insurance 2,344 2,205 6,980 10,489
Advertising 8,315 5,405 30,078 22,775
Legal expense 3,690 3,355 28,873 21,628
Accounting and auditing 23,252 12,475 68,472 40,475
Office supplies and printing 10,221 8,879 34,698 31,279
Business occupation and other taxes 16,156 12,441 52,433 39,690
Charitable contributions 1,925 1,900 10,085 15,333
Other operating expenses 62,853 53,028 177,189 168,226
---------- ---------- ---------- ----------
Total Non-Interest Expense 400,530 351,338 1,231,625 1,124,000
---------- ---------- ---------- ----------
Income Before Income Taxes 106,113 129,852 234,809 309,956
Provision for Income Taxes 34,993 44,526 81,286 107,883
---------- ---------- ---------- ----------
Net Income $ 71,120 85,326 153,523 202,073
========== ========== ========== ==========
Earnings Per Share
Basic $ .15 .18 .33 .43
========== ========== ========== ==========
Diluted $ .15 .18 .32 .43
========== ========== ========== ==========
-4-
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE RECEIVABLE
COMMON PAID IN RETAINED INCOME FROM TREASURY
STOCK CAPITAL EARNINGS (LOSS) ESOP STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ---------- -----------
Balance, September 30, 1999 66,125 6,135,412 3,491,984 (77,699) (502,550) (1,438,272) 7,675,000
Net income 0 0 202,073 0 0 0 202,073
Dividends paid 0 0 (101,452) 0 0 0 (101,452)
Treasury stock acquired,
26,698 shares 0 0 0 0 0 (280,252) (280,252)
Other comprehensive income (loss) 0 0 0 (40,180) 0 0 (40,180)
Change in receivable from employee
stock ownership plan 0 0 0 0 52,900 0 52,900
--------- ---------- ----------- ---------- --------- ----------- ---------
Balances, June 30, 2000
(Unaudited) 66,125 6,135,412 3,592,605 (117,879) (449,650) (1,718,524) 7,508,089
========= ========== =========== ========== ========= =========== =========
Balance, September 30, 2000 66,125 6,135,412 3,662,836 (72,086) (449,650) (1,718,524) 7,624,113
Net income 0 0 153,523 0 0 0 153,523
Dividends paid 0 (725,384) (755,821) 0 0 0 (1,481,205)
Other comprehensive income (loss) 0 0 0 111,945 0 0 111,945
Change in receivable from employee
stock ownership plan 0 0 0 0 52,900 0 52,900
--------- ---------- ----------- ---------- --------- ----------- ---------
Balances, June 30, 2001
(Unaudited) $ 66,125 5,410,028 3,060,538 39,859 (396,750) (1,718,524) 6,461,276
========= ========== =========== ========== ========= =========== =========
-5-
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
NINE MONTHS ENDED JUNE 30
-----------------------------------
2001 2000
---------- ----------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
- -------------------------------------
Net income $ 153,523 202,073
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 97,563 106,623
Provision for loan losses 45,000 45,154
Amortization (Accretion) of securities 9,117 8,645
Gain on sale of foreclosed assets (5,500) (5,911)
(Gain) loss on sale of securities 7,582 7,387
Gain on sale of fixed assets (3,465) 0
Deferred income taxes (3,926) 33
Change in Assets and Liabilities:
(Increase) Decrease in accrued interest receivable (152,144) (29,750)
Increase (Decrease) in accrued interest payable 157,628 75,393
Increase (Decrease) in other liabilities 1,177 (52,886)
Increase (Decrease) in income taxes payable 30,110 6,068
(Increase) Decrease in other assets 6,247 (9,864)
----------- -----------
Net cash provided (used) by operating activities 342,912 352,965
----------- -----------
Cash Flows From Investing Activities:
- -------------------------------------
Capital expenditures (59,382) (13,536)
Purchase of available-for-sale securities (3,999,422) (873,319)
Proceeds from sale of foreclosed property 23,070 68,360
Proceeds from sale of available-for-sale securities 3,915,156 541,477
Net (increase) decrease in loans (3,981,436) (6,077,109)
Principal collected on mortgage-backed securities 294,891 81,019
Increase in cash value of life insurance (129,477) (117,403)
Purchase of stock in Federal Home Loan Bank (51,800) (33,600)
Proceeds from sale of fixed assets 16,000 0
----------- -----------
Net cash provided (used) by investing activities (3,972,400) (6,424,111)
----------- -----------
Cash Flows From Financing Activities:
- -------------------------------------
Net increase (decrease) in deposits 6,762,796 4,241,893
Proceeds from Federal Home Loan Bank advances 0 2,500,000
Principal collected on receivable from ESOP 52,900 52,900
Purchase of treasury stock 0 (280,252)
Payments on Federal Home Loan Bank advances (1,000,000) 0
Dividends paid (1,481,205) (101,152)
----------- -----------
Net cash provided (used) by financing activities 4,334,491 6,413,089
----------- -----------
Net Increase (Decrease) in cash and cash equivalents 705,003 341,943
Cash and Cash Equivalents at Beginning of Period 1,663,455 1,968,695
----------- -----------
Cash and Cash Equivalents at End of Period $2,368,458 2,310,638
========== ===========
Supplemental Disclosures of Cash Flows Information:
- ---------------------------------------------------
Cash Paid During The Period:
Interest $2,417,772 1,907,748
Income taxes 46,886 97,725
Non-Cash Investing Activities:
Increase (Decrease) in unrealized gains on available-
for-sale securities 169,614 (60,879)
-6-
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
2001 2000 2001 2000
-------- --------- ---------- --------
Net Income $71,120 85,326 153,523 202,073
------- -------- ---------- --------
Other Comprehensive Income, Net of Tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during the period (7,550) 6,310 106,941 (45,055)
Reclassification adjustment for (gains)
losses included in net income 0 0 5,004 4,875
------- -------- ---------- --------
Other Comprehensive Income (Loss) (7,550) 6,310 111,945 (40,180)
------- -------- ---------- --------
Comprehensive Income $63,570 91,636 265,468 161,893
======= ======== ========== ========
-7-
QUITMAN BANCORP, INC. AND SUBSIDIARY
Notes to Financial Statements
(Unaudited)
Note 1 - Basis of Preparation
- -----------------------------
The accompanying unaudited financial statements were prepared in
accordance with instructions for Form 10-QSB and therefore do not
include all disclosures necessary for a complete presentation of the
statements of financial condition, statements of income, statements of
comprehensive income and statements of cash flow in conformity with
generally accepted accounting principles. However, all adjustments
which are, in the opinion of management, necessary for the fair
presentation of the interim financial statements have been included.
All such adjustments are of a normal recurring nature. The statement of
income for the nine-month period ended June 30, 2001 is not necessarily
indicative of the results which may be expected for the entire year.
It is suggested that these unaudited financial statements be read in
conjunction with the audited consolidated financial statements and
notes thereto for Quitman Bancorp, Inc. and Subsidiary for the year
ended September 30, 2000.
Note 2 - Plan of Conversion
- ---------------------------
On October 14, 1997, the Bank's Board of Directors approved a plan
("Plan") to convert from a federally chartered mutual savings bank to a
federally chartered stock savings bank subject to approval by the
Bank's members. The Plan, which included formation of the holding
company, Quitman Bancorp, Inc., was subject to approval by the Office
of Thrift Supervision (OTS) and included the filing of a registration
statement with the SEC. The conversion was completed on April 2, 1998.
Actual conversion costs were accounted for as a reduction in gross
proceeds.
The Plan called for the common stock of the Bank to be purchased by the
holding company and for the common stock of the holding company to be
offered to various parties in an offering at a price of $10.00 per
share.
The stockholders of the holding company approved a proposed stock
option plan and a proposed restricted stock plan at a meeting of the
stockholders on April 13, 1999. Shares issued to directors and
employees under these plans may be from authorized but unissued shares
of common stock or they may be purchased in the open market. In the
event that options or shares are issued under these plans, such
issuances will be included in the earnings per share calculation; thus,
the interests of existing stockholders would be diluted.
The Bank may not declare or pay a cash dividend if the effect thereof
would cause its net worth to be reduced below either the amounts
required for the liquidation account discussed below or the regulatory
capital requirements imposed by federal regulations.
At the time of conversion, the Bank established a liquidation account
(which is a memorandum account that does not appear on the balance
sheet) in an amount equal to its retained income as reflected in the
latest balance sheet used in the final conversion prospectus. The
liquidation account will be maintained for the benefit of eligible
account holders who continue to maintain their deposit accounts in the
Bank after the conversion. In the event of a complete liquidation of
the Bank (and only in such an event), eligible depositors who continue
to maintain accounts shall be entitled to receive a distribution from
the
-8-
liquidation account before any liquidation may be made with respect to
common stock.
Note 3 - Stock Repurchase
- -------------------------
The Company has adopted a stock repurchase program that allows for the
repurchase, from time to time, of up to 153,988 shares of common stock.
Any shares repurchased may be used for general and other corporate
purposes, including the issuance of shares upon the exercise of stock
options. On December 9, 1999, the Company completed its stock
repurchase program, having repurchased 153,988 shares of its common
stock at a cost of $1,718,524.
Note 4 - Earnings Per Share
- ---------------------------
The following table sets forth the reconciliation of the numerators and
denominators of the basic and diluted earnings per share (EPS)
computations:
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- -----------------------
2001 2000 2001 2000
-------- ---------- --------- ---------
(a) Net income available to shareholders $71,120 85,326 153,523 202,073
------- ---------- --------- ---------
Denominator:
Weighted-average shares outstanding 507,262 507,262 507,262 513,704
Less: ESOP weighted-average shares
unallocated 39,675 44,965 41,438 46,741
-------- ---------- --------- ---------
(b) Basic EPS weighted-average shares
outstanding 467,587 462,297 465,824 466,963
Effect of dilutive securities 10,777 0 13,609 0
-------- ---------- --------- ---------
(c) Diluted EPS weighted-average shares
outstanding 478,364 462,297 479,433 466,963
======== ========== ========= =========
Basic earnings per share (a/b) $ .15 .18 .33 .43
======== ========== ========= =========
Diluted earnings per share (a/c) $ .15 .18 .32 .43
======== ========== ========= =========
-9-
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Comparison of Financial Condition at June 30, 2001 and September 30, 2000
Quitman Bancorp, Inc. (the "Company") may from time to time make written or oral
"forward-looking statements" including statements contained in the Company's
filings with the Securities and Exchange Commission (including this report on
Form 10-QSB), in its reports to stockholders and in other communications by the
Company, which are made in good faith by the Company pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in
forward-looking statements: the strength of the United States economy in general
and the strength of the local economies in which the Company conducts
operations; the effect of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Board of Governors of the
Federal Reserve System, inflation, interest rate and market and monetary
fluctuations; the timely development of and acceptance of new products and
services of the Company and the perceived overall value of these products and
services by users, including the features, pricing and quality compared to
competitors' products and services; the willingness of users to substitute
competitors' products and services for the Company's products and services; the
success of the Company in gaining regulatory approval of its products and
services, when required; the impact of changes in financial services' laws and
regulations (including laws concerning taxes, banking, securities and
insurance); technological changes, acquisitions; changes in consumer spending
and saving habits; and the success of the Company at managing the risks
described above involved in the foregoing.
The Company cautions that these important factors are not exclusive. The Company
does not undertake to update any forward-looking statement, whether written or
oral, that may be made from time to time by or on behalf of the Company.
Total assets increased by $4.8 million or 7.9% due primarily to the increase in
cash and cash equivalents and loans resulting from funds received from an
increase in deposits.
Total equity decreased by $1,162,837 as result of net income for the nine months
ended June 30, 2001, changes in other comprehensive income, reduction of a
guaranty of a loan to the Bank's employee stock ownership plan and a special
distribution of $2.92 per share, $1,481,205, to the Company's stockholders.
Non-Performing Assets and Delinquencies
Loans accounted for on a non-accrual basis increased to $267,253 at June 30,
2001 from $193,519 at September 30, 2000. The increase was the result of
seventeen loans being reclassified to performing loans and fifteen loans being
added to non-accrual, with higher average balances for the non-accrual loans.
The allowance for loan losses was $452,347 at June 30, 2001.
-10-
Comparison of the Results of Operations for the Three Months Ended June 30, 2001
and 2000
Net Income. Net income decreased by $14,206 or 16.6% from net income of $85,326
for the three months ended June 30, 2000 to net income of $71,120 for the three
months ended June 30, 2001. This decrease is primarily the result of increased
non-interest expense that was only partially offset by increased non-interest
income, primarily service charges. The special dividend payment in January 2001
of $1,481,205 reduced the amount of funds that could be invested during the
three months ended June 30, 2001 and, therefore, negatively impacted interest
income. Had this dividend not been paid, interest income and net interest income
for the three months ended June 30, 2001 would have been greater amounts. The
Company does not expect to pay any additional dividends during calendar year
2001. The annualized return on average assets decreased from .60% to .44% for
the three months ended June 30, 2000 and 2001, respectively.
Net Interest Income. Net interest income decreased $288 or .06% from $450,022
for the three months ended June 30, 2000 to $449,734 for the three months ended
June 30, 2001. Between the two periods, the cost of funds increased by 23 basis
points (100 basis points equals 1%).
Interest Income. Interest income increased $177,000 for the three months ended
June 30, 2001 compared to the same three months ended June 30, 2000. The
increase in interest income was primarily due to an increase in the average
balance of interest-earning assets. The average balance of interest-earning
assets increased by 15.03%. This increase in average interest-earning assets
added an additional $177,000 of interest income. The average yield on
interest-earning assets increased moderately to 8.68% from 8.65% for the three
months ended June 30, 2001 and 2000, respectively.
Interest Expense. Interest expense increased $177,000 from $700,000 for the
three months ended June 30, 2000 to $877,000 for the three months ended June 30,
2001. The increase in interest expense was due to an increase in average
interest-bearing liabilities of $9.8 million and an increase in the cost of
funds of 23 basis points (100 basis points equals 1%). The average balances of
deposits and advances from the Federal Home Loan bank increased by $9.8 million,
from the three months ended June 30, 2000 to the three months ended June 30,
2001. Many of the certificates of deposit originated during 2000 carry higher
rates of interest than that being offered currently. Many of these certificates
of deposit mature during the next quarter.
Non-Interest Income. Non-interest income increased by $26,000 primarily from an
increase in late charges of $3,400, service charges of $16,000, gain on sale of
fixed assets of $3,500, and miscellaneous income of $3,100.
Non-Interest Expense. Non-interest expense increased by $49,000 primarily due to
increased compensation and other personnel expense, furniture and equipment
expense and other operating expenses. Our compensation and other personnel
expense increased an aggregate of $24,000 between the periods as a result of
year-end pay raises, hiring of additional employees and contributions to the
Bank's Restricted Stock Plan approved in April of 1999. Other non-interest
expenses increased $25,000.
Although no definite plans have been made, we are exploring whether to purchase
land and construct a branch. We would likely hire experts or spend money before
we commit to purchasing land or constructing a new branch. If we decided not to
build a new branch, any money that we had spent up to that time would be a
non-interest expense and would negatively affect our income.
-11-
Non-interest expense increased as a result of staffing and equipping the bank
building opened in April 1999. These expenses have stabilized and our operations
in the building have now produced higher overall levels of loan and deposit
activity. Our ability to fully offset these increased non-interest expenses will
depend in part on our ability to continue to increase the size of the loan
portfolio without increasing the provision for loan losses and increase the
amount of deposits we hold without substantially increasing interest expense.
Our non-interest expense would further increase if we built the new branch
discussed in the prior paragraph.
Income Taxes. Income tax expense amounted to $85,326 for the three months ended
June 30, 2000 compared to $71,120 for the three months ended June 30, 2001.
Comparison of the Results of Operations for the Nine Months Ended June 30, 2001
and 2000
Net Income. Net income decreased by $48,500 or 24% from net income of $202,000
for the nine months ended June 30, 2000 to net income of $153,500 for the nine
months ended June 30, 2001. This decrease is primarily the result of increased
interest income and non-interest income that was more than offset by an increase
in interest and non-interest expense. The annualized return on average assets
decreased from .49% to .32% for the nine months ended June 30, 2000 and 2001,
respectively.
Net Interest Income. Net interest income decreased $27,500 or 2% from $1,352,000
for the nine months ended June 30, 2000 to $1,324,500 for the nine months ended
June 30, 2001. The decrease was primarily due to an increase in loans and a
moderate increase in rates, offset by an increase in interest expense.
Interest Income. Interest income increased $565,000 for the nine months ended
June 30, 2001 compared to the same nine months ended June 30, 2000. The increase
in interest income was primarily due to an increase in the average balance of
interest-earning assets. The average balance of interest-earning assets
increased by 16.2%. This increase in average interest-earning assets added an
additional $565,000 of interest income. The average yield on interest-earning
assets increased moderately to 8.79% from 8.74% for the nine months ended June
30, 2001 and 2000, respectively.
Interest Expense. Interest expense increased $592,000 from $1,983,000 for the
nine months ended June 30, 2000 to $2,575,000 for the nine months ended June 30,
2001. The increase in interest expense was due to an increase in average
interest-bearing liabilities of $8.8 million and an increase in the cost of
funds of 51 basis points (100 basis points equals 1%). The average balances of
deposits and advances from the Federal Home Loan bank increased by $8.8 million,
from the nine months ended June 30, 2000 to the nine months ended June 30, 2001.
Many of the certificates of deposit originated during 2000 carry higher rates of
interest than that being offered currently. Many of these certificates of
deposit mature during the next quarter.
Non-Interest Income. Non-interest income increased by $60,000 primarily from an
increase in service charges of $37,000 and miscellaneous income of $23,000.
Non-Interest Expense. Non-interest expense increased by $108,000 primarily due
to increased compensation and other personnel expense, furniture and equipment
expense and other operating expenses. Our compensation and other personnel
expense increased an aggregate of $58,000 between the periods as a result of
year-end pay raises, hiring of additional employees and contributions to the
Bank's Restricted Stock Plan approved in April of 1999. Other non-interest
expenses, including expenses of the Parent Company in the amount of $59,000,
increased $50,000.
Although no definite plans have been made, we are exploring whether to purchase
land and construct a branch. We would likely hire experts or spend money before
we commit to purchasing land or constructing a new branch. If we decided not to
build a new branch, any money that we had spent up to that time would be a
non-
-12-
interest expense and would negatively affect our income.
Non-interest expense has increased as a result of staffing and equipping the
bank building opened in April 1999. These expenses have stabilized and our
operations in the building have now produced higher overall levels of loan and
deposit activity. Our ability to fully offset these increased non-interest
expenses will depend in part on our ability to continue to increase the size of
the loan portfolio without increasing the provision for loan losses and increase
the amount of deposits we hold without substantially increasing interest
expense. Our non-interest expense would further increase if we built the new
branch discussed in the prior paragraph.
Income Taxes. Income tax expense amounted to $81,286 for the nine months ended
June 30, 2000 compared to $107,883 for the nine months ended June 30, 2001.
Liquidity and Capital Resources
Management monitors our risk-based capital and leverage capital ratios in order
to assess compliance with regulatory guidelines. At June 30, 2001, the Bank had
tangible capital, leverage, and total risk-based capital of 8.04%, 8.04% and
13.76%, respectively, which exceeded the OTS's minimum requirements of 1.50%,
4.00% and 8.00%, respectively.
Holders of the common stock of the Company are entitled to share ratably in
dividends, if and when, declared by the Board of Directors of the Company, out
of funds legally available therefore. Federal banking law provides that a
savings bank may, by providing prior regulatory notice, generally pay dividends
during a calendar year in an amount equal to net income for the calendar year
plus retained net income for the preceding two years. Any amount in excess of
that level requires prior regulatory approval from the Office of Thrift
Supervision (the "OTS"). The OTS may disapprove any dividend if the Bank is
undercapitalized or the dividend would render the Bank undercapitalized. The OTS
may also disapprove any dividend for, among other reasons, safety and soundness
concerns. Also, the Bank may not pay a dividend if the payment would cause its
net worth to be reduced below the amount required for the liquidation account
established at the time of the conversion of the Bank from mutual to stock form.
On December 19, 2000 the Board of Directors approved a dividend of $2.92 per
share payable January 11, 2001 to shareholders of record on December 29, 2000.
This dividend was partially paid from funds made available by dividends from the
subsidiary bank and partially paid from funds held by the Company. Approximately
$1.43 per share is deemed to be a return of capital.
On April 4, 2000 the Board of Directors approved a dividend of $.20 per share,
payable May 31, 2000 to shareholders of record on May 17, 2000. This dividend
was paid from funds made available by dividends from the subsidiary bank.
On April 20, 1999, the Board of Directors approved a dividend of $.20 per share,
payable on May 24, 1999 to shareholders of record on May 10, 1999. While the
Company paid this dividend from its cash funds, the primary source of funds
available for the payment of cash dividends by the Company are dividends from
the subsidiary bank.
We are exploring whether to purchase land and construct a branch. Although no
definite plans have been made, if a new branch is built, the land and
construction cost would total approximately $600,000. We have sufficient liquid
assets to pay for these costs.
Pursuant to FASB No. 130 the Company is required to record changes in the value
of its investment portfolio as regards unrealized gains or losses that may
result from movements in interest rates. For the quarter and nine
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months ended June 30, 2001, the savings bank showed unrealized gains (losses),
net of tax effect, totaling $(7,550) and $111,945, respectively due to a
decrease in interest rates as the National Money Market reacted to actions by
the Federal Open Market Committee. Although these gains are unrealized, they do
have a positive impact on the Company's capital. The unrealized gains, net of
applicable taxes, combined with net operating income of $153,523, a reduction
in the receivable from the Bank's Employee Stock Ownership Plan of $52,900 and
the payment of a $2.92 per share dividend yields a net decrease in the
Company's capital of $1,162,837. The book value per share of common stock
decreased from $15.03 on September 30, 2000 to $12.73 as of June 30, 2001. The
Bank's capital continues to exceed regulatory requirements and continues to be
adequate to support future asset growth.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) None.
(b) None.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
QUITMAN BANCORP, INC.
Date: August 8, 2001 By: /s/ Melvin E. Plair
--------------------------------------
Melvin E. Plair
President and Chief Executive Officer
(Principal Executive and Financial
Officer)
(Duly Authorized Officer)
Date: August 8, 2001 By: /s/ Peggy L. Forgione
--------------------------------------
Peggy L. Forgione
Vice President and Controller
(Chief Accounting Officer)
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