SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from to
Commission File Number 0-25700
QCF BANCORP, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Minnesota 41-1796789
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
501 Chestnut Street, Virginia, Minnesota 55792-1147
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (218 741-2040
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act during the preceding 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 ( )
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class Outstanding at April 30, 2000
Common stock, .01 par value 982,844
QCF BANCORP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1: Financial Statements
Consolidated Statements of Financial Condition
at March 31, 2000 and June 30, 1999 3
Consolidated Statements of Income for the Nine
Months Ended March 31, 2000 and 1999 4
Consolidated Statement of Stockholders' Equity
for the Nine Months Ended March 31, 2000 5
Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7-8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 10
Item 2: Changes in Securities 10
Item 3: Defaults Upon Senior Securities 10
Item 4: Submission of Matters to a Vote of Security Holders 10
Item 5: Other Information 10
Item 6: Exhibits and Reports on Form 8-K 10
Signatures 11
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Unaudited)
Assets March 31, 2000 June 30, 1999
------------------ ------------------
Cash $577,879 879,094
Interest-bearing deposits with banks 3,786,387 3,643,229
Cash and cash equivalents 4,364,266 4,522,323
Securities held to maturity (estimated market value
of $82,402,088 and 74,141,613 at March 31, 2000
and June 30, 1999, respectively) 84,751,226 74,871,676
Loans receivable, net 65,396,082 65,632,062
Federal Home Loan Bank stock, at cost 575,000 499,800
Accrued interest receivable 1,088,436 983,826
Premises and equipment, net 625,565 737,277
Deferred tax asset 573,000 573,000
Prepaid expenses and other assets 551,153 531,065
------------------ ------------------
Total Assets $157,924,727 148,351,029
================== ==================
Liabilities and Stockholders' Equity
Deposits 111,899,522 109,561,041
Short-term borrowings 12,756,206 14,217,535
Federal Home Loan Bank advances 11,500,000 2,000,000
Accrued interest payable 938,362 1,077,269
Advance payments made by borrowers
for taxes and insurance 82,477 71,063
Accrued expenses and other liabilities 1,501,443 1,442,808
------------------ ------------------
Total Liabilities 138,678,010 128,369,716
------------------ ------------------
Stockholders' equity:
Serial preferred stock; authorized 1,000,000 shares;
issued and outstanding none 0 0
Common stock ($.01 par value): authorized 7,000,000
shares: issued 988,294 shares at March 31, 2000
and 1,116,371 at June 30, 1999 9,883 11,164
Additional paid-in capital 10,104,043 11,236,851
Retained earnings, subject to certain restrictions 16,175,465 16,188,396
Unearned employee stock ownership plan shares (895,080) (951,550)
Unearned management recognition plan shares 0 (104,304)
Deferred compensation payable in common stock 787,467 669,830
Shares in stock option trust, at the exercise price (5,080,553) (5,411,153)
Treasury stock, at cost, 102,637 shares at March 31,
2000, and 94,857 at June 30, 1999 (1,854,508) (1,657,921)
------------------ ------------------
Total Stockholders' Equity 19,246,717 19,981,313
------------------ ------------------
Total Liabilities and Stockholders' Equity $157,924,727 148,351,029
================== ==================
3
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
2000 1999 2000 1999
-------------- -------------- -------------- -------------
Interest income:
Loans 1,427,773 1,480,182 4,206,053 4,371,179
Securities 1,417,372 1,100,549 4,090,988 3,519,435
Total interest income 2,845,144 2,580,731 8,297,041 7,890,614
Interest Expense:
Deposits 993,775 982,738 3,098,841 2,987,014
Short-term borrowings 275,563 138,306 637,725 460,949
Total interest expense 1,269,338 1,121,044 3,736,566 3,447,963
Net interest income 1,575,806 1,459,687 4,560,475 4,442,651
Provision for loan losses 15,000 0 45,000 0
-------------- -------------- -------------- -------------
Net interest income after
provision for loan losses 1,560,806 1,459,687 4,515,475 4,442,651
Non-interest income:
Fees and service charges 119,744 104,989 376,527 374,137
Other 11,627 23,601 61,477 85,933
Total non-interest income 131,371 128,590 438,004 460,070
Non-interest expense:
Compensation and benefits 515,295 499,370 1,571,608 1,545,823
Occupancy 73,227 101,366 228,833 280,786
Other 133,824 174,624 400,639 486,654
Total non-interest expense 722,346 775,360 2,201,080 2,313,263
Income before income tax expense 969,831 812,917 2,752,399 2,589,458
Income tax expense 366,000 304,000 1,043,000 976,000
Net income $603,831 508,917 1,709,399 1,613,458
============== ============== ============== =============
Basic earnings per common share $0.96 0.72 2.57 2.02
============== ============== ============== =============
Diluted earnings per common share $0.87 0.65 2.34 1.82
============== ============== ============== =============
See accompanying notes of consolidated financial statements.
4
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
(Unaudited)
Unearned
Employee Unearned
Stock Management Total
Additional Ownership Recognition Deferred Stock Stock-
Common Paid-in Retained Plan Plan Compensation Option Treasury holders
Stock Capital Earnings Shares Shares Payable Trust Stock Equity
______________________________________________________________________________________________________________________
Balance, June 30, 1999 $11,164 11,236,85 16,188,396 (951,550) (104,304) 669,830 (5,411,153) (1,657,921) 19,981,313
Net Income 1,709,399 1,709,399
Purchase of treasury stock (2,787,836) (2,787,836)
Reclassification of stock 104,304 247,350 (351,654) 0
to treasury
Retirement of treasury stock(1,281) (1,219,292) (1,722,330) 2,942,903 0
Exercise of stock options 83,250 83,250
Increase in deferred
compensation payable 117,637 117,637
Earned employee stock
ownership plan shares 86,484 56,470 142,954
___________________________________________________________________________________________________________________________
Balance, March 31, 2000 $9,883 10,104,043 16,175,465 (895,080) 0 787,467 (5,080,553) (1,854,508) 19,246,717
See accompanying notes of consolidated financial statements.
5
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31
2000 1999
Operating activities:
Net income $1,709,399 $1,613,458
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 143,290 166,706
Amortization of net premiums on securities 131,834 63,046
(Increase)decrease in accrued interest receivable (104,610) 300,828
(Decrease)increase in accrued interest payable (138,907) (100,493)
Increase(decrease) in accrued expenses and liabilities 70,049 54,678
Increase in deferred compensation payable 117,637 120,041
Amortization of unearned ESOP shares 142,955 147,935
Amortization of MRP 0 140,994
Increase in other assets (23,481) (364,800)
Net cash provided by operating activities 2,048,166 2,142,393
Investing activities:
Proceeds from maturities and principal collected
on securities held to maturity 15,611,040 51,292,963
Purchases of securities held to maturity (25,622,424) (46,577,905)
Purchases of Federal Home Loan Bank stock (75,200) 0
Net decrease(increase) in loans 235,980 (31,629)
Net decrease(increase) in real estate owned 3,393 (23,322)
Purchases of premises and equipment (31,578 (361,563)
Net cash provided by investing activities (9,878,789) 4,298,544
Financing activities:
Net increase in deposits 2,338,481 3,007,703
Net decrease in short-term borrowings (1,461,329) 371,965
Net increase(decrease) in Federal Home Loan Bank advances 9,500,000 (2,000,000)
Purchase of stock for stock option trust 0 (2,840,619)
Purchase of treasury stock (2,787,836) (6,095,597)
Proceeds from exercise of stock options 83,250 0
Net cash used by financing activities 7,672,566 (7,556,548)
(Decrease)increase in cash and cash equivalents (158,057) (1,115,611)
Cash and cash equivalents at beginning of period 4,522,323 3,958,369
Cash and cash equivalents at end of period $4,364,266 2,842,758
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Income taxes $773,000 1,374,423
Interest on deposits and short-term borrowings 3,875,473 3,548,456
See accompanying notes to consolidated financial statements.
6
QCF BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2000 and 1999
QCF Bancorp, Inc.
The consolidated financial statements included herein are for QCF Bancorp,
Inc. (the "Company"), Queen City Federal Savings Bank (the "Bank") and the
Bank's wholly owned subsidiary, Queen City Service Corporation. These unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the footnotes thereto contained in the
Annual Report on Form 10-KSB for the year ended June 30, 1999 of the Company, as
filed with the Securities and Exchange Commission. The June 30, 1999 balance
sheet was derived from audited consolidated financial statements, but does not
include all disclosures required by generally accepted accounting principles.
(2) Basis of Preparation
The accompanying unaudited consolidated 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 consolidated
statements of financial condition, consolidated statements of income,
consolidated statement of stockholders' equity and consolidated statements of
cash flows in conformity with generally accepted accounting principles. However,
all adjustments, consisting only of normal recurring adjustments, which are, in
the opinion of management, necessary for the fair presentation of the interim
financial statements have been included. The statement of income for the three
and nine months period ended March 31, 2000 are not necessarily indicative of
the results which may be expected for the entire year.
(3) Earnings Per Share
Basic per-share amounts are computed by dividing net income (the numerator)
by the weighted-average number of common shares outstanding (the denominator).
Diluted per-share amounts assume the conversion, exercise or issuance of all
potential common stock instruments unless the effect is to reduce the loss or
increase the income per common share from continuing operations.
Following is information about the computation of the earnings per share
data for the periods ended March 31, 2000 and 1999.
Quarter Ended March 31, 2000 Nine Months Ended March 31, 2000
Net Net
Income Income
Per Per
Numerator Denominator Share Numerator Denominator Share
Basic earnings per share, income
available to common stockholders $603,831 629,678 $0.96 1,709,399 664,203 $2.57
Effect of dilutive securities:
Stock options - 63,506 - 66,907
Diluted earnings per share, income
available to common stockholders $603,831 693,184 0.87 1,709,399 731,110 2.34
Quarter Ended March 31, 1999 Nine Months Ended March 31, 1999
Basic earnings per share, income
available to common stockholders $508,917 702,741 $0.72 $1,613,458 797,257 $2.02
Effect of dilutive securities:
Stock options - 67,861 - 72,897
Management recognition plan - 12,243 - 15,483
Diluted earnings per share, income
available to common stockholders $508,917 782,845 $0.65 $1,613,458 885,638 $1.82
7
(4) Regulatory Capital Requirements
The Bank as a member of the Federal Home Loan Bank System is required to
hold a specified number of shares of capital stock, which is carried at cost, in
the Federal Home Loan Bank of Des Moines. In addition, the Bank is required to
maintain cash and liquid assets in an amount equal to 4% of its deposit accounts
and other obligations due within one year. The Bank has met these requirements.
Federal savings institutions are required to satisfy three capital
requirements: (i) a requirement that "tangible capital" equal or exceed 1.5% of
adjusted total assets, (ii) a requirement that "core-capital" equal or exceed 3%
of adjusted total assets, and (iii) a risk-based capital standard of 8% of
"risk-adjusted assets. Failure to meet these requirements can initiate
mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material affect on the Bank's financial
statements. The Banks capital amounts and classification are also subject to
qualitative judgements by the regulators about components, risk weightings, and
other factors. At March 31, 2000, and June 30, 1999, the Bank met each of the
three capital requirements. As of December 31, 1999, the most recent
notification from the Federal Deposit Insurance Corporation categorized the Bank
as well capitalized under the regulatory framework for prompt corrective action.
There are no conditions or events since that notification that management
believes have changed the Bank's category.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Comparison of Operating Results for the Quarter and Nine Months Ended March
31, 2000 and 1999.
Net Income. Net income increased by $95,000 or 18.7% from $509,000 for the
quarter ended March 31, 1999 to $604,000 for the quarter ended March 31, 2000.
The increase in net income was attributable to an increase of $116,000 in net
interest income and a decrease of $53,000 in non-interest expense. Net income
increased by $96,000, or 5.9%, from $1.6 million for the nine months ended March
31, 1999 to $1.7 million for the nine months ended March 31, 2000. The increase
was primarily attributable to an increase in net interest income of $118,000 and
a decrease of $112,000 in non-interest expense.
Net Interest Income. Net interest income increased by $116,000 or 8.0%
between the quarter ended March 31, 2000 and the quarter ended March 31, 1999.
Net interest income increased by $118,000 or 2.7% from $4.4 million for the nine
months ended March 31, 1999 to $4.6 million for the nine months ended March 31,
2000. The increase in net interest income primarily resulted from an increase in
the Bank's ratio of average interest-earning assets to average interest-bearing
liabilities. The increase in average interest-earning assets was due to an
increase in investment securities primarily as a result of an increase in
borrowings from the Federal Home Loan Bank.
Interest Income. Interest income increased $264,000 or 10.2 % from the
quarter ended March 31, 1999 to the quarter ended March 31, 2000. Interest
income for the nine month period ended March 31, 2000 increased by $406,000 or
5.2% compared to the nine month period ended March 31, 1999. The increases were
due to an increase in average interest-earning assets.
Interest Expense. Interest expense increased by $148,000 or 13.2%, from the
quarter ended March 31, 1999 to the quarter ended March 31, 2000 and increased
by $289,000 or 8.4% from the nine months ended March 31, 1999 to the nine months
ended March 31, 2000. The increases were due to an increase in average
interest-bearing liabilities primarily as a result of borrowings from the
Federal Home Loan Bank.
Noninterest Income. The Bank's non-interest income increased $53,000 in the
third quarter of fiscal 1999 to the third quarter of fiscal 2000. Noninterest
income decreased by $22,000 for the nine months ended March 31, 2000. The
decrease in the nine month period is primarily due to decreases in miscellaneous
income.
Noninterest Expense. Total noninterest expense decreased by $53,000 or 6.8%
and by $112,000 or 4.8% during the quarter and nine months ended March 31, 2000,
respectively. The decreases for the quarter and for the nine-month period were
primarily due to additional expenses incurred for the conversion of the Bank's
data processing system during fiscal 1999.
Provision for Loan Losses. The Bank provided for $15,000 and $45,000 in
loan losses during the quarter ended March 31, 2000 and the nine month period
ending March 31, 2000 respectively. No provision was made for the previous year
period. The Bank had low levels of nonperforming loans and has maintained an
adequate level of allowance for loan losses in relation to total loans
8
during these periods.
Income Taxes. The Bank's income tax expense increased by $62,000 and by
$67,000 for the quarter and nine months ended March 31, 2000 as compared to the
quarter and nine months ended March 31, 1999, respectively. The changes reflect
the changes in income before income taxes during these periods.
Comparison of Financial Condition at March 31, 2000 and June 30, 1999.
Total assets increased by $9.6 million, or 6.5% from $148.4 million at June 30,
1999 to $157.9 million at March 31, 2000. The increase was primarily due to an
increase in investment securities.
Deposits increased by $2.3 million or 2.1% and short-term borrowings
decreased by $1.5 million,or 10.3%. Federal Home Loan Bank advances increased by
9.5 million.
The Bank's investment securities increased by $9.9 million or 13.2%, from
$74.9 million at June 30, 1999 to $84.8 million at March 31, 2000. The increase
in investment securities was primarily due to investing the proceeds from
Federal Home Loan Bank borrowings.
The Bank's net loans receivable remained stable during this time. Deposits
increased by $2.3 million or 2.1% and Federal Home Loan Bank advances increased
by $9.5 million.
Year 2000 (Y2K) Compliance
The Bank has not encountered any significant Y2K related problems. We
continue to monitor our commercial customers for evidence of any Y2K problems
that may affect their ability to operate and therefore repay their loans. We
also continue to monitor our vendors to ensure that they are Y2K compliant and
will have no negative impact on the Bank.
9
Part II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Change in Securities.
Not applicable.
ITEM 3. Defaults Upon Senior Securities.
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
None.
ITEM 6 Exhibits and Reports on Form 8-K.
None.
10
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QCF Bancorp, Inc.
Registrant
Date: May 12, 2000 /s/ Daniel F. Schultz
Daniel F. Schultz
Vice President/Treasurer
(Principal Financial Officer)
11