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 September 30, 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 October 31, 1997
Common stock, .01 par value 1,383,803
QCF BANCORP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1: Financial Statements
Consolidated Statements of Financial Condition
at September 30, 1997 and June 30, 1997 3
Consolidated Statements of Income for the Three
Months Ended September 30, 1997 and 1996 4
Consolidated Statement of Stockholders' Equity
for the Three Months Ended September 30, 1997 5
Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 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 September 30, 1997 June 30, 1997
Cash $ 661,045 747,733
Interest-bearing deposits with banks 6,331,580 7,026,683
Cash and cash equivalents 6,992,625 7,774,416
Securities available for sale (amortized cost of
$21,025,586 and $25,359,674 at September 30, 20,836,041 24,985,627
1997 and June 30, 1997 respectively)
Securities held to maturity (estimated market value of
$61,821,872 and $58,334,591 at September 30,
1997 and June 30, 1997 respectively) 61,521,389 58,112,799
Loans receivable, net 63,673,151 61,202,301
Federal Home Loan Bank stock, at cost 553,900 553,900
Accrued interest receivable 1,183,519 1,310,779
Premises and equipment, net 411,987 424,609
Deferred tax asset 443,818 563,300
Prepaid expenses and other assets 2,575,355 1,799,672
Total Assets $158,191,785 156,727,403
Liabilities and Stockholders' Equity
Deposits 104,548,734 103,681,490
Short-term borrowings 14,253,413 14,039,794
Federal Home Loan Bank advances 7,000,000 8,100,000
Accrued interest payable 1,156,754 1,071,313
Advance payments made by borrowers
for taxes and insurance 92,525 61,675
Accrued expenses and other liabilities 5,120,189 2,349,845
Total Liabilities 132,171,615 129,304,117
Stockholders' equity:
Serial preferred stock; authorized 1,000,000 shares;
issued and outstanding none 0 0
Common stock ($.01 par value): authorized 7,000,000 shares;
issued 1,782,750; outstanding 1,381,683 shares at 17,828 17,828
September 30, 1997 and 1,426,200 at June 30, 1997.
Additional paid-in capital 16,160,964 16,665,625
Retained earnings, subject to certain restrictions 20,691,252 20,051,443
Net unrealized loss on securities available for sale (113,728) (222,745)
Unearned employee stock ownership plan shares (1,063,030) (1,080,710)
Unearned management recognition plan shares (696,821) (746,292)
Shares in stock option trust, at the exercise price (2,473,566) (1,872,071)
Treasury stock, at cost, 398,948 shares at September 30, 1997 (6,502,729) (5.389,792)
and 356,550 at June 30, 1997
Total Stockholders' Equity 26,020,170 27,423,286
Total Liabilities and Stockholders' Equity $158,191,785 156,727,403
See accompanying notes to consolidated financial statements.
3
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Income
(Unaudited)
Three Months Ended
September 30
1997 1996
Interest income:
Loans $1,411,779 1,230,837
Securities 1,417,692 1,426,456
Total interest income 2,829,471 2,657,293
Interest expense:
Deposits 91,397 829,624
Short-term borrowings 238,017 335,213
Total interest expense 1,229,414 1,164,837
Net interest income 1,600,057 1,492,456
Provision for loan losses 0 0
Net interest income after
provision for loan losses 1,600,057 1,492,456
Non-interest Income:
Fees and service charges 128,336 125,421
Other 12,536 9,906
Total Non-interest income 140,872 135,327
Non-interest expense:
Compensation and benefits 496,197 456,741
Occupancy 57,882 48,65
Federal deposit insurance premiums 16,800 45,790
Advertising 13,445 14,089
Other 94,796 115,592
Total non-interest expense 679,120 1,380,863
Income before income tax expenses 1,061,809 246,920
Income tax expense 422,000 100,000
Net income $ 639,809 146,920
Earnings per common share $ 0.52 0.11
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, 1997 $ 17,828 16,665,625 20,051,443 (222,745) (1,080,710) (746,292) (1,872,071) (5,389,792) 27,423,286
Net Income 639,809 639,809
Purchase of treasury stock (1,112,937)(1,112,937)
Purchase of stock for (529,956) (601,495) (1,131,451)
stock option trust
Amortization of management 49,471 49,471
recognition plan
Change in net unrealized loss
on securities available for sale 109,017 109,017
Earned employee stock
ownership plan shares 25,295 17,680 42,975
Balance, September 30, 1997 $ 17,828 16,160,964 20,691,252 (113,728) (1,063,030) (696,821)(2,473,566) (6,502,729) 26,020,170
See accompanying Notes of Consolidated Financial Statements.
5
QCF BANCORP,INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30
1997 1996
Operating activities:
Net income $ 639,809 146,920
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 26,926 23,367
Amortization of net discounts on securities (23,041) (3,069)
Decrease in accrued interest receivable 127,260 195,215
(Increase) in accrued interest payable 85,441 81,945
Increase in accrued expenses and other liabilities 2,770,344 650,312
Amortization of unearned ESOP shares 42,975 46,920
Amortization of MRP 49,471 49,471
(Increase) decrease in other assets (560,397) 39,771
Net cash provided by operating activities 3,158,788 1,230,852
Investing activities:
Proceeds from maturities and principal collected
on securities held to maturity 7,685,750 3,117,985
Proceeds from maturities and principal collected
on securities available for sale 4,316,942 1,134,487
Purchases of securities held to maturity (11,054,156) (2,004,844)
Net increase in loans (2,470,850) (3,382,930)
Net increase in real estate owned (115,63) (71,290)
Purchase of premises and equipment (14,304) (2,178)
Net cash used by investing activities (1,652,254) (1,208,770)
Financing activities:
Net increase (decrease) in deposits 867,244 (7,038,199)
Net increase in short-term borrowing 213,618 6,641,694
Net(decrease increase in Federal Home Bank advances (1,100,000) 2,000,000
Purchase of stock for stock option trust (1,131,451) (1,193,931)
Purchase of treasury stock (1,168,587) (2,777,117)
Increase in advance payments made by borrowers
for taxes and insurance 30,850 28,928
Net cash used by financing activities (2,288,325) (2,338,625)
Decrease in cash and cash equivalents (781,791) (2,316,543)
Cash and cash equivalents at beginning of period 7,774,416 4,734,993
Cash and cash equivalents at end of period $ 6,992,625 2,418,450
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income Taxes $ 533,547 204,807
Interest on deposits and short-term borrowings 1,143,973 1,082,892
See accompanying notes to consolidated financial statements.
6
QCF BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 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 statement of income for the three
month period ended September 30, 1997 is 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 September 30, 1997, and June 30, 1997, the bank met each of
the three capital requirements. As of June 30, 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 Ended September 30, 1997
and September 30, 1996.
Net Income. Net income increased by $493,000 from $147,000 for the quarter
ended September 30, 1996 to $640,000 for the quarter ended September 30, 1997.
The increase in net income was primarily attributable to a special assessment by
the FDIC of 65.7 basis points or $686,000 ($408,000 net of taxes) for the
quarter ended September 30, 1996. This special assessment was to recapitalize
the SAIF.
Net Interest Income. Net interest income increased by $108,000 or 7.2%,
from $1.5 million for the quarter ended September 30, 1996 to $1.6 million for
the quarter ended September 30, 1997. The increase in the Bank's net interest
income resulted from a slight increase both in the Bank's ratio of average
interest-earning assets to average interest-bearing liabilities and in its net
interest margin.
Interest Income. Interest income was $2.8 million for the quarter ended
September 30, 1997. This represents an increase of $172,000 or 6.5%, from the
quarter ended September 30, 1996. The increase was due to an increase in the
average yield earned on interest-earning assets and by an increase in average
interest-earning assets. The increase in the average yield on interest-earning
assets primarily reflected a higher balance of loans with higher interest rates
during the three-month period ended September 30, 1997 versus the three-month
period ended September 30, 1996.
Interest Expense. Interest expense increased by $65,000 or 5.5%, from $1.16
million for the quarter ended September 30, 1996 to $1.23 million for the
quarter ended September 30, 1997. The increase resulted primarily from higher
average interest-bearing liabilities for the quarter ended September 30, 1997
versus September 30, 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 $6,000 or 4.1%
from $135,000 in the first quarter of fiscal 1997 to $141,000 in the first
quarter of fiscal 1998 due primarily to increased loan fees.
Noninterest Expense. Total noninterest expense decreased by $702,000 or
50.8% during the quarter ended September 30, 1997. The decrease was primarily
due to the special FDIC assessment of $686,000 for the quarter ended September
30, 1996.
Income Taxes. The Bank's income tax expense increased by $322,000 for the
quarter ended September 30, 1997 as compared to the quarter ended September 30,
1996. The increase reflects increased income before income taxes during this
period.
Comparison of Financial Condition at September 30, 1997 and June 30, 1997.
Total assets increased by $1.4 million, or 0.9% from $156.7 million at June 30,
1997 to $158.1 million at September 30, 1997. The increase was primarily due to
an increase in deposits and short-term borrowings of $1.1 million.
Deposits increased by $900,000 or 0.8% and short-term borrowings increased
by $200,000,or 1.5%.
The Bank's investment securities decreased by $700,000 or 0.9%, from $83.1
million at June 30, 1997 to $82.4 million at September 30, 1997. The decrease in
investment securities was primarily due to the company's stock buyback program
and increased funding for loans.
The Bank's net loans receivable increased by $2.5 million, or 4.0%, from
$61.2 million at June 30, 1997 to $63.7 million at September 30, 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.
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: November 7, 1997 /s/ Daniel F. Schultz
Daniel F. Schultz
Vice President/Treasurer
(Principal Financial Officer)
10