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, 1997
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, 1997
Common stock, .01 par value 1,426,200
QCF BANCORP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
Consolidated Statements of Financial Condition
at March31, 1997 and June 30, 1996 3
Consolidated Statements of Income for the Nine
Months Ended March 31, 1997 and 1996 4
Consolidated Statement of Stockholders' Equity
for the Nine Months Ended March 31, 1997 5
Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 1997 and 1996 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 March 31, 1997 June 30, 1996
Cash $ 579,803 379,098
Interest-bearing deposits with banks 5,646,023 4,355,895
Cash and cash equivalents 6,225,826 4,734,993
Securities available for sale (amortized cost of
$25,030,943 and $33,283,046 at March 31, 1997
and June 30, 1996 respectively) 25,056,716 32,221,800
Securities held to maturity (estimated market value
$57,713,073 and $56,811,210 at March 31, 1997
and June 30, 1996 respectively) 56,832,225 56,961,040
Loans receivable, net 58,464,702 52,361,221
Federal Home Loan Bank stock, at cost 553,900 553,900
Accrued interest receivable 1,042,547 1,223,713
Premises and equipment, net 401,285 440,736
Prepaid expenses and other assets 1,060,034 982,620
Total Assets $149,637,235 149,480,023
Liabilities and Stockholders' Equity
Deposits 104,946,146 88,832,424
Short-term borrowings 9,849,998 26,263,736
Federal Home Loan Bank advances 6,000,000 3,000,000
Accrued interest payable 1,086,743 1,013,368
Advance payments made by borrowers
for taxes and insurance 88,303 56,576
Accrued expenses and other liabilities 596,378 629,122
Total Liabilities $122,567,568 119,795,226
Stockholders' equity:
Serial preferred stock; authorized 1,000,000 shares;
issued and outstanding none 0 0
Common stock ($.01 par value): authorized 7,000,000 shares;
issued 1,782,750; outstanding 1,426,200 shares at 17,828 17,828
March 31, 1997 and 1,606,906 at June 30, 1996.
Additional paid-in capital 16,868,311 17,003,711
Retained earnings, subject to certain restrictions 19,432,215 18,040,190
Net unrealized loss on securities available for sale (469,105) (636,750)
Unearned employee stock ownership plan shares (1,100,050) (1,183,330)
Unearned management recognition plan shares (795,763) (944,177)
Stock option trust (1,493,977) 0
Treasury stock, at cost, 356,550 shares at March 31, 1997
and 175,844 at June 30, 1996 (5,389,792) (2.612,675)
Total Stockholders' Equity 27,069,667 29,684,797
Total Liabilities and Stockholders' Equity $ 149,637,235 149,480,023
See accompanying notes to consolidated financial statements.
3
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Income
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
1997 1996 1997 1996
Interest income:
Loans $1,295,479 1,123,299 3,815,715 3,292,980
Securities 1,331,317 1,523,038 4,160,785 4,744,660
Total interest income 2,626,796 2,646,337 7,976,500 8,037,640
Interest expense:
Deposits 978,360 1,032,095 2,894,526 3,115,426
Short-term borrowings 158,920 117,355 582,917 363,473
Total interest expense 1,137,280 1,149,450 3,477,443 3,478,899
Net interest income 1,489,516 1,496,887 4,499,057 4,558,741
Provision for loan losses 0 0 0 0
Net interest income after
provision for loan losses 1,489,516 1,496,887 4,499,057 4,558,741
Non-interest Income:
Fees and service charges 117,851 104,007 367,479 313,863
Other 10,462 11,562 165,106 20,150
Total Non-interest income 128,313 115,569 532,585 334,013
Non-interest expenses:
Compensation and benefits 474,622 426,767 1,391,546 1,281,442
Occupancy 58,849 62,272 165,758 180,381
Federal deposit insurance premiums 16,800 60,000 793,790 180,000
Advertising 17,775 22,492 56,410 63,460
Other 106,057 121,473 326,113 317,805
Total non-interest expense 674,103 693,004 2,733,617 2,023,088
Income before income tax expenses 943,726 919,452 2,298,025 2,869,666
Income tax expense 370,000 371,000 906,000 1,151,000
Net income $ 573,726 548,452 1,392,025 1,718,666
Earnings per common share $0.45 0.33 1.07 1.03
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
Additional on Securities Ownership Recognition Stock Stock-
Common Paid-in Retained Available Plan Plan Option Treasury holders'
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) 0 (2,612,675) 29,684,797
Net Income 1,392,025 1,392,025
Purchase of treasury stock (2,777,117) (2,777,117)
Purchase of stock for
stock option trust (188,700) (1,493,977) (1,682,677)
Amortization of management 148,414 148,414
recognition plan
Change in net unrealized loss
on securities available for sale 167,645 167,645
Earned employee stock
ownership plan shares 53,300 83,280 136,580
Balance, March 31, 1997 $ 17,828 16,868,311 19,432,215 (469,105) (1,100,050)(795,763) (1,493,977) (5,389,792) 27,069,667
See accompanying Notes of Consolidated Financial Statements.
5
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31
1997 1996
Operating activities:
Net income 1,392,025 1,718,666
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 71,289 80,288
FHLB stock dividend 0 (10,900)
Amortization of net premiums on securities 7,589 9,268
Decrease in accrued interest receivable 181,166 163,487
Increase in accrued interest payable 73,375 75,590
Decrease in accrued expenses and other libilities (32,744) (167,366)
Amortization of unearned ESOP shares 136,581 130,715
Amortization of MRP 148,414 97,870
(Increase) decrease in other assets (114,988) 57,983
Net cash provided by operating activities 1,862,707 2,155,601
Investing activities:
Proceeds from maturities and principal collected
on securities held to maturity 17,601,280 45,911,513
Proceeds from maturities and principal collected
on securities available for sale 7,401,593 2,798,649
Purchases of securities held to maturity 17,429,545) (49,581,971)
Net increase in loans (6,103,481) (3,973,495)
Net increase in real estate owned (81,800) (6,085)
Purchase of premises and equipment (31,838) (37,348)
Net cash provided (used) by investing activities 1,356,209 ( 4,888,737)
Financial activities:
Net increase (decrease) in deposits 16,113,722 (8,460,670)
Net (decrease) increase in short-term borrowing (16,413,738) 6,043,773
Net increase in Federal Home Loan Bank advances 3,000,000 1,000,000
Adoption of Stock Option Trust (1,682,677) 0
Purchase of Treasury Stock (2,777,117) (1,040,778)
Increase in advance payments made by borrowers
for taxes and insurance 31,727 22,297
Net cash used by financing activities (1,728,083) (2,435,378)
Increase (decrease) in cash and cash equivalents 1,490,833 (5,168,514)
Cash and cash equivalents at beginning of period 4,734,993 8,153,722
Cash and cash equivalents at end of period $6,225,826 2,985,208
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income Taxes 873,807 1,329,667
Interest on deposits and short-term borrowings 3,404,068 3,403,309
See accompanying notes to consolidated financial statements.
6
QCF BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1997 and 1996
(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 nine month periods ended March 31, 1997 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 March 31, 1997, and June 30, 1996, the bank met each of the
three capital requirements. As of March 31, 1997, 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's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of Operating Results for the Quarter and Nine Months Ended March 31,
1997 and 1996.
Net Income. Net income increased by $25,000 or 4.6% from $548,000 for the
quarter ended March 31, 1996 to $574,000 for the quarter ended March 31, 1997.
The increase in net income was primarily attributable to a decrease of $19,000
in non-interest expense. Net income decreased by $327,000, or 14.0%, from $1.7
million for the nine months ended March 31, 1996 to $1.4 million for the nine
months ended March 31, 1997. 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 $199,000. 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 $7,000 or 0.5% between the
quarter ended March 31, 1996 and the quarter ended March 31, 1997. Net interest
income decreased by $60,000, or 1.3%, from $4.6 million for the nine months
ended March 31, 1996 to $4.5 million for the nine months ended March 31, 1997.
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 $20,000 from the quarter ended March
31, 1996 to the quarter ended March 31, 1997. Interest income for the nine month
period ended March 31, 1997 decreased by $61,000 as compared to the nine month
period ended March 31, 1996. The decrease was due to a decrease in average
interest-earning assets as a result of stock repurchases.
Interest Expense. Interest expense decreased by $7,000 or 0.6%, from the quarter
ended March 31, 1996 to the quarter ended March 31, 1997, and decreased by
$1,000 from the nine months ended March 31, 1996 to the nine months ended March
31, 1997.
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 $13,000 from
$116,000 in the third quarter of fiscal 1996 to $128,000 in the third quarter of
fiscal 1997. Noninterest income increased by $199,000 for the nine months ended
March 31, 1997 versus the nine months ended March 31, 1996. The increase in
noninterest income for the nine month period was primarily attributable to
reversing an over accrual of FDIC insurance premiums.
Noninterest Expense. Total noninterest expense decreased by $19,000 or 2.7% and
increased by $71,000, or 35.1% during the quarter and nine months ended March
31, 1997, respectively, compared to the quarter and nine months ended March 31,
1996. The increase for the nine month period was primarily due to the special
assessment of $686,000 by the FDIC.
Income Taxes. The Bank's income tax expense decreased by $1,000 and by $245,000
for the quarter and nine months ended March 31, 1997 as compared to the quarter
and nine months ended March 31, 1996, respectively. The changes reflect the
changes in income before income taxes during these periods.
Comparison of Financial Condition at March 31, 1997 and June 30, 1996. Total
assets increased by $157,000, or 0.1% from $149.5 million at June 30, 1996 to
$149.6 million at March 31, 1997. Deposits increased by $16.1 million and
short-term borrowings decreased by $16.4 million. These changes were due to
offering FDIC insured savings accounts instead of repurchase agreements to
customers. The Bank's investment securities decreased by $7.3 million, or 8.2%,
from $89.2 million at June 30, 1996 to $81.9 million at March 31, 1997. 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 $6.1 million, or 11.7%, from $52.4 million at June 30,
1996 to $58.5 million at March 31, 1997. 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.
None.
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: May 8, 1997 /s/Daniel F. Schultz
Daniel F. Schultz
Vice President/Treasurer
(Principal Financial Officer)
10