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 December 31, 1996
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 January 31, 1997
----- -------------------------------
Common stock, .01 par value 1,426,200
1
QCF BANCORP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
Consolidated Statements of Financial Condition
at December 31, 1996 and June 30, 1996 3
Consolidated Statements of Income for the Six
Months Ended December 31, 1996 and 1995 4
Consolidated Statement of Stockholders' Equity
for the Six Months Ended December 31, 1996 5
Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 9
Item 2: Changes in Securities 9
Item 3: Defaults Upon Senior Securities 9
Item 4: Submission of Matters to a Vote of Security Holders 9
Item 5: Other Information 9
Item 6: Exhibits and Reports on Form 8-K 9
Signatures 10
2
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Unaudited)
Assets December 31, 1996 June 30, 1996
Cash $ 843,575 379,098
Interest-bearing deposits with banks 4,889,583 4,355,895
Cash and cash equivalents 5,733,158 4,734,993
Securities available for sale (amortized cost of
$28,131,201 and $33,283,046 at December 31,
1996 and June 30, 1996 respectively) 27,545,948 32,221,800
Securities held to maturity (estimated market value
$53,005,477 and $56,811,210 at December 31,
1996 and June 30, 1996 respectively) 52,947,206 56,961,040
Loans receivable, net 57,665,381 52,361,221
Federal Home Loan Bank stock, at cost 553,900 553,900
Accrued interest receivable 1,181,817 1,223,713
Premises and equipment, net 400,284 440,736
Prepaid expenses and other assets 894,388 982,620
Total Assets $146,922,082 149,480,023
Liabilities and Stockholders' Equity
Deposits 102,842,012 88,832,424
Short-term borrowings 11,475,563 26,263,736
Federal Home Loan Bank advances 4,000,000 3,000,000
Accrued interest payable 1,037,858 1,013,368
Advance payments made by borrowers
for taxes and insurance 50,907 56,576
Accrued expenses and other liabilities 755,292 629,122
Total Liabilities $120,161,632 119,795,226
Commitments and Contingencies
Stockholders' equity:
Serial preferred stock; authorized 1,000,000 shares;
issued and outstanding none 0 0
Common stock ($.01 par value): authorized 7,000,000 shares;
issued 1,782,750; outstanding 1,426,200 shares at 17,828 17,828
December 31, 1996 and 1,606,906 at June 30, 1996.
Additional paid-in capital 17,037,454 17,003,711
retained earnings, subject to certain restrictions 18,858,489 18,040,190
Net unrealized loss on securities available for sale (351,152) (636,750)
Unearned employee stock ownership plan shares (1,123,230) (1,183,330)
Unearned management recognition plan shares (845,235) (944,177)
Stock option trust, at cost, 94,494 shares at December 31,1996 (1,443,912) 0
Treasury stock, at cost, 356,550 shares at December 31, 1996 (5,389,792) (2.612,675)
Total Stockholders' Equity 26,760,450 29,684,797
Total Liabilities and Stockholders' Equity $146,922,082 149,480,023
See accompanying notes to consolidated financial statements.
3
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Income
(Unaudited)
Three Months Ended Six Months Ended
December 31 December 31
1996 1995 1996 1995
Interest income:
Loans $1,289,399 1,091,728 2,520,236 2,169,681
Securities 1,403,012 1,650,394 2,829,468 3,221,622
Total interest income 2,692,411 2,742,122 5,349,704 5,391,303
Interest expense:
Deposits 1,086,542 1,036,465 1,916,166 2,083,331
Short-term borrowings 88,784 186,040 423,997 246,118
Total interest expense 1,175,326 1,222,505 2,340,163 2,329,449
Net interest income 1,517,085 1,519,617 3,009,541 3,061,854
Provision for loan losses 0 0 0 0
Net interest income after
provision for loan losses 1,517,085 1,519,617 3,009,541 3,061,854
Non-interest Income:
Fees and service charges 124,207 97,141 249,628 209,856
Other 144,738 4,204 154,644 8,588
Total Non-interest income 268,945 101,345 404,272 218,444
Non-interest expenses:
Compensation and benefits 460,183 428,714 916,924 854,675
Occupancy 58,258 59,841 106,909 118,109
Federal deposit insurance premiums 31,200 60,000 776,990 120,000
Advertising 24,546 25,430 38,635 40,968
Other 104,464 102,336 220,056 196,332
Total non-interest expense 678,651 676,321 2,059,514 1,330,084
Income before income tax expenses 1,107,379 944,641 1,354,299 1,950,214
Income tax expense 436,000 374,000 536,000 780,000
Net income $ 671,379 570,641 818,299 1,170,214
Earnings per common share $0.53 0.34 0.63 0.71
See accompanying Notes to consolidated financial statements.
4
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
(Unaudited)
Net Unearned
Unrealized Employee Unearned
Gain (Loss) Stock Management Total
on Securities Ownership Recognition Stock Stock-
Common Paid-in Retained Available Plan Plan Option Treasury holder's
Stock Capital Earnings for Sale Shares Shares Trust Stock Equity
----- ------- -------- -------- ------ ------ ----- ----- ------
Balance, June 30 1996 $ 17,828 17,003,711 18,040,190 (636,750) (1,183,330) (944,177) (2,612,675) 29,684,797
Net Income 818,299 818,299
Purchase of treasury stock (2,777,117)(2,777,117)
Adoption of stock option trust (1,443,912) (1,443,912)
Amortization of management
recognition plan 98,942 98,942
Change in net unrealized loss
on securities available for sale 285,598 285,598
Earned employee stock
ownership plan shares 33,743 60,100 93,843
------ ------ ------
Balance, December 31, 1996$ 17,828 17,037,454 18,858,489 (351,152) (1,123,230) (845,235)(1,443,912)(5,389,792) 26,760,450
See accompanying Notes of Consolidated Financial Statements.
5
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31
1996 1995
Operating activities:
Net income $ 818,299 1,170,214
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 44,626 52,822
Amortization of net (discounts) premiums on securities (11,083) 30,631
Decrease (increase) in accrued interest receivable 41,896 (53,998)
Increase in accrued interest payable 24,490 240,098
Increase (decrease) in accrued expenses and other liabilities 126,170 (254,103)
Amortization of unearned ESOP shares 93,843 87,665
Amortization of MRP 98,942 49,478
(Increase) decrease in other assets (64,027) 103,190
Net cash provided by operating activities 1,173,156 1,425,997
Investing activities:
Proceeds from maturities and principal collected
on securities held to maturity 10,756,295 18,205,554
Proceeds from maturities and principal collected
on securities available for sale 5,146,460 1,464,033
Purchases of securities held to maturity (6,725,993) (35,579,599)
Net increase in loans (5,304,160) (2,392,402)
Net increase in real estate owned (38,136) (6,085)
- - Purchase of premises and equipment (4,174) (35,069)
------ -------
Net cash provided (used) by investing activities 3,830,292 (18,343,568)
Financial activities:
Net increase (decrease) in deposits 14,009,588 (9,825,047)
Net (decrease) increase in short-term borrowing (14,788,173) 23,292,407
Net increase in Federal Home Loan Bank advances 1,000,000 1,000,000
Adoption of Stock Option Trust (1,443,912) 0
Purchase of Treasury Stock (2,777,117) (954,377)
Increase in advance payments made by borrowers (5,669) (20,893)
for taxes and insurance
Net cash (used) provided by financing activities (4,005,283) 13,492,090
Increase (decrease) in cash and cash equivalents 998,165 (3,425,481)
Cash and cash equivalents at beginning of period 4,734,993 8,153,722
Cash and cash equivalents at end of period $5,733,158 4,728,241
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income Taxes $ 384,807 1,006,667
Interest on deposits and short-term borrowings 2,315,673 2,089,351
See accompanying notes to consolidated financial statements.
6
QCF BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 1996 and 1995
(1) QCF Bancorp, Inc.
QCF Bancorp, Inc. (the "Company") was incorporated under the laws of the
state of Minnesota for the purpose of becoming the savings and loan holding
company of Queen City Federal Savings Bank ( the "Bank") in connection with the
Bank's conversion from a federally chartered mutual savings bank to a federally
chartered stock savings bank, pursuant to its Plan of Conversion. The Company
commenced on February 10, 1995, a Subscription and Community Offering of its
shares in connection with the conversion of the Bank (the "Offering"). The
Offering was closed on March 17, 1995, and final approval for the conversion was
received from the Office of Thrift Supervision on March 31, 1995.
The consolidated financial statements included herein are for the Company,
the Bank and the Bank's wholly owned subsidiary, Queen City Service Corporation.
(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 statements of income
for the three and six month periods ended December 31, 1996 are not necessarily
indicative of the results which may be expected for the entire year.
(3) Earnings Per Share
Earnings per share are based upon the weighted average number of common
shares and common stock equivalents, if dilutive, outstanding during the period.
The only common stock equivalents are stock options. The weighted average number
of common stock equivalents is calculated using the treasury stock method.
(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 5% 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 Bank's capital amounts and classification are also subject to
qualitative judgements by the regulators about components, risk weightings, and
other factors. At December 31, 1996, and June 30, 1996, the bank met each of the
three capital requirements. As of December 31, 1996, 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.
7
Item 2. Management Discussion and Analysis of Financial Condition and Operations
Comparison of Operating Results for the Quarter & Six Months Ended 12/31/96 & 95
Net Income. Net income increased by $101,000 or 17.6% from $570,000 for the
quarter ended December 31, 1995 to $671,000 for the quarter ended December 31,
1996. The increase in net income was primarily attributable to an increase of
$168,000 in non-interest income. Net income decreased by $352,000, or 30.1%,
from $1.2 million for the six months ended December 31, 1995 to $818,000 for the
six months ended December 31, 1996. The decrease was primarily attributable to a
special assessment by the FDIC of 65.7 basis points or $686,000. This assessment
was offset in part by an increase in non-interest income of $186,000. The
increase in non-interest income was primarily attributable to reversing an over
accrual for FDIC insurance premiums.
Net Interest Income. Net interest income decreased by $3,000 or 0.2%
between the quarter ended December 31, 1995 and the quarter ended December 31,
1996. Net interest income decreased by $52,000, or 1.7%, from $3.1 million for
the six months ended December 31, 1995 to $3.0 million for the six months ended
December 31, 1996. The decrease in net interest income primarily resulted from a
decrease in the Bank's ratio of average interest-earning assets to average
interest-bearing liabilities as a result of stock repurchases.
Interest Income. Interest income decreased $50,000 from the quarter ended
December 31, 1995 to the quarter ended December 31, 1996. Interest income for
the six month period ended December 31, 1996 decreased by $42,000 as compared to
the six month period ended December 31, 1995. The decrease was due to a decrease
in average interest-earning assets as a result of stock repurchases.
Interest Expense. Interest expense decreased by $47,000 or 3.9%, from the
quarter ended December 31, 1995 to the quarter ended December 31, 1996, and
increased by $11,000 or 0.5% from the six months ended December 31, 1995 to the
six months ended December 31,1996.
Provision for Loan Losses. The Bank has not provided for loan losses during
either of the two periods due to low levels of nonperforming loans and to the
high level of the allowance for loan losses in relation to nonperforming loans
during these periods.
Noninterest Income. The Bank's non-interest income increased $168,000 from
$101,000 in the second quarter of fiscal 1996 to $269,000 in the second quarter
of fiscal 1997. Noninterest income increased by $186,000 for the six months
ended December 31, 1996. The increase in noninterest income for these periods
was primarily attributable to reversing an over accrual of FDIC insurance
premiums.
Noninterest Expense. Total noninterest expense increased by $2,000 or 0.5%
and by $729,000, or 54.8% during the quarter and six months ended December 31,
1996, respectively. The increase for the six month period was primarily due to
the special assessment of $686,000 by the FDIC.
Income Taxes. The Bank's income tax expense increased by $62,000 and
decreased by $244,000 for the quarter and six months ended December 31, 1996 as
compared to the quarter and six months ended December 31, 1995, respectively.
The changes reflect the changes in income before income taxes during these
periods.
Comparison of Financial Condition at December 31, 1996 and June 30, 1996.
Total assets decreased by $2.6 million, or 1.7% from $149.5 million at June 30,
1996 to $146.9 million at December 31, 1996. The decrease was primarily due to a
decrease in stockholders' equity of $2.9 million.
Deposits increased by $14.0 million and short-term borrowings decreased by
$14.8 million. These changes were due to offering FDIC insured savings accounts
instead of repurchase agreements to customers.
The Bank's investment securities decreased by $8.7 million, or 9.7%, from
$89.2 million at June 30, 1996 to $80.5 million at December 31, 1996. The
decrease in investment securities was primarily due to the increase in loan
demands and to the company's stock buyback program.
The Bank's net loans receivable increased by $5.3 million, or 10.1%, from
$52.4 million at June 30, 1996 to $57.7 million at December 31, 1996. The
increase in interest loans receivable reflects strong loan demand during this
period.
8
QCF BANCORP, INC.
Part II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
Not applicable.
ITEM 3. Defaults Upon Senior Securities.
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Election of Directors at the annual meeting on October 9, 1996
For Withheld
Robert L. Muhich 1,103,592 10,421
Craig W. Nordling 1,105,623 8,456
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
None.
9
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: February 7, 1997 /s/ Daniel F. Schultz
Daniel F. Schultz
Vice President/Treasurer
(Principal Financial Officer)
10