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 March 31, 1999
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.
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(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)
(912) 263-7538
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Issuer's Telephone Number, Including Area Code
Formerly 100 West Screven Street, Quitman, Georgia 31643
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(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last
Report)
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
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Number of shares of Common Stock outstanding as of March 31, 1999: 562,063
Transitional Small Business Disclosure Format (check one)
YES NO X
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<PAGE>
QUITMAN BANCORP, INC.
Contents
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............................................14
Item 2. Changes in Securities and Use of Proceeds....................14
Item 3. Defaults upon Senior Securities..............................14
Item 4. Submission of Matters to a Vote of Security Holders..........14
Item 5. Other Information............................................14
Item 6. Exhibits and Reports on Form 8-K.............................14
Signatures............................................................16
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<PAGE>
PART I. FINANCIAL INFORMATION
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and amounts due from depository
institutions $ 189,205 168,404
Interest-bearing deposits in other banks 884,205 203,462
------------ ------------
Total Cash and Cash Equivalents 1,073,410 371,866
Investment securities:
Available-for-sale 5,924,607 5,640,709
Held-to-maturity -0- 200,000
Loans receivable - net of allowance for loan
losses and deferred origination fees 37,727,045 36,397,067
Office properties and equipment, at cost, net of
accumulated depreciation 1,378,612 681,453
Real estate and other property acquired
in settlement of loans 155,700 -0-
Accrued interest receivable 445,245 447,854
Investment required by law-stock in Federal
Home Loan Bank, at cost 286,700 239,800
Cash value of life insurance 423,070 337,813
Other assets 186,896 45,182
------------ ------------
Total Assets $ 47,601,285 44,361,744
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits $ 39,151,363 34,954,584
Accrued interest payable 287,529 275,028
Income taxes payable 100,623 24,660
Other liabilities 64,099 143,719
------------ ------------
Total Liabilities 39,603,614 35,397,991
------------ ------------
Stockholders' Equity:
Common stock, $.10 par value, 4,000,000
shares authorized, 661,250 shares
issued and 562,063 shares outstanding
March 31, 1999 (661,250 September 30, 1998) 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 6,135,412 6,135,412
Retained Earnings 3,431,773 3,256,097
Accumulated other comprehensive income (loss) (3,970) 35,119
9,629,340 9,492,753
Receivable from employee stock ownership plan (502,550) (529,000)
Treasury stock, 99,187 shares at cost (-0- September
30, 1998) (1,129,119) -0-
Total Stockholders' Equity 7,997,671 8,963,753
Total Liabilities and Stockholders' Equity $ 47,601,285 44,361,744
============ ============
</TABLE>
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<PAGE>
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------ -----------------------
1999 1998 1999 1998
---------- --------- --------- -----------
Interest Income:
Loans receivable:
<S> <C> <C> <C> <C>
First mortgage loans $ 801,461 741,700 1,590,141 1,499,330
Consumer and other loans 49,008 28,492 103,326 57,720
Interest on FHLMC Pool 45 68 95 142
Investment securities 89,017 62,830 177,898 125,558
Interest-bearing deposits 8,800 20,503 14,862 26,253
Federal funds sold 126 -0- 482 68
--------- --------- --------- ---------
Total Interest Income 948,457 853,593 1,886,804 1,709,071
--------- --------- --------- ---------
Interest Expense:
Deposits 530,856 529,440 1,050,008 1,041,331
Interest on Federal Home Loan
Bank advances 1,385 15,401 11,546 36,622
--------- --------- --------- ---------
Total Interest Expense 532,241 544,841 1,061,554 1,077,953
--------- --------- --------- ---------
Net Interest Income 416,216 308,752 825,250 631,118
Provision for loan losses -0- 9,000 10,000 18,000
--------- --------- --------- ---------
Net Interest Income After Provision for Losses 416,216 299,752 815,250 613,118
--------- --------- --------- ---------
Non-Interest Income:
Gain (loss) on sale of securities -0- -0- 1,094 18
Late charges on loans 9,763 7,421 18,725 16,175
Service charges 5,665 1,611 9,635 3,710
Insurance commissions 196 408 557 843
Other income 2,014 -0- 2,577 2,079
Gain on sale of other real estate -0- -0- -0- 3,012
--------- --------- --------- ---------
Total Non-Interest Income 17,638 9,440 32,588 25,837
--------- --------- --------- ---------
Non-Interest Expense:
Compensation 91,881 77,901 179,188 150,646
Other personnel expenses 62,573 38,250 96,819 81,278
Occupancy expenses of premises 5,471 4,936 11,566 10,430
Furniture and equipment expenses 35,057 31,055 72,845 47,259
Federal deposit insurance 5,511 5,402 10,762 10,705
Advertising 15,275 6,978 25,005 30,360
Legal expense 13,619 750 26,198 1,500
Accounting and auditing 13,250 8,825 26,550 14,389
Office supplies and printing 11,433 6,933 20,546 12,340
Business occupation and other taxes 12,730 9,006 29,655 21,052
Charitable contributions 1,103 325 7,097 29,364
Other operating expenses 33,406 35,478 68,409 63,598
--------- --------- --------- ---------
Total Non-Interest Expense 301,309 225,839 574,640 472,921
--------- --------- --------- ---------
Income Before Income Taxes 132,545 83,353 273,198 166,034
Provision for Income Taxes 45,797 27,221 97,522 62,382
--------- --------- --------- ---------
Net Income $ 86,748 56,132 175,676 103,652
========= ========= ========= =========
Earnings Per Share (Basic and Diluted) $ .16 N/A .31 N/A
========= ========= ========= =========
</TABLE>
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<PAGE>
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE RECEIVABLE
COMMON PAID IN RETAINED INCOME FROM TREASURY
STOCK CAPITAL EARNINGS (LOSS) ESOP STOCK TOTAL
----- --------- --------- ------ ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, September 30, 1997 $ -0- -0- 2,952,560 5,993 -0- -0- 2,958,553
Net income -0- -0- 103,652 -0- -0- -0- 103,652
Other comprehensive income -0- -0- -0- 10,853 -0- -0- 10,853
--------- --------- --------- ------ ------ ------- ----------
Balances, March 31, 1998,
(Unaudited) $ -0- -0- 3,056,212 16,846 -0- -0- 3,073,058
========= ========= ========== ====== ========= =========== ==========
Balances, September 30, 1998 $ 66,125 6,135,412 3,256,097 35,119 (529,000) -0- 8,963,753
Net income -0- -0- 175,676 -0- -0- -0- 175,676
Other comprehensive income (loss) -0- -0- -0- (39,089) -0- -0- (39,089)
Change in receivable from employee
stock ownership plan -0- -0- -0- -0- 26,450 -0- 26,450
Treasury stock acquired, 99,187
shares -0- -0- -0- -0- -0- (1,129,119) (1,129,119)
--------- --------- --------- ------ --------- ------------ ----------
Balances, March 31, 1999,
(Unaudited) $ 66,125 6,135,412 3,431,773 (3,970) (502,550) (1,129,119) 7,997,671
========= ========= ========== ====== ======== ========== ==========
</TABLE>
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<PAGE>
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1999 1998
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 175,676 103,652
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 42,410 35,059
Provision for loan losses 10,000 18,000
Amortization (Accretion) of securities 5,000 8,438
Gain on sale of foreclosed assets -0- (3,012)
Gain on sale of securities (1,094) -0-
Deferred income taxes (1,813) -0-
Change in Assets and Liabilities:
(Increase) Decrease in accrued interest receivable 2,609 19,313
Increase (Decrease) in accrued interest payable 12,501 8,465
Increase (Decrease) in other liabilities (94,654) (39,412)
Increase (Decrease) in income taxes payable 20,853 (24,667)
(Increase) Decrease in other assets (49,620) (187,615)
----------- -----------
Net cash provided (used) by operating activities 121,868 (61,779)
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (749,569) (176,926)
Purchase of available-for-sale securities (2,476,137) (230,102)
Proceeds from sale of foreclosed property -0- 66,927
Proceeds from maturity of held-to-maturity securities 200,000 100,000
Proceeds from maturity of available-for-sale securities 100,000 100,000
Proceeds from sale of available-for-sale securities 1,950,000 -0-
Purchase of stock in Federal Home Loan Bank (46,900) (12,100)
Net (increase) decrease in loans (1,485,678) 94,939
Principal collected on mortgage-backed securities 79,107 8,593
Increase in cash value of life insurance (85,257) (79,682)
----------- -----------
Net cash provided (used) by investing activities (2,514,434) (128,351)
----------- -----------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits 4,196,779 6,859,146
Proceeds from Federal Home Loan Bank advances 1,000,000 300,000
Principal collected on receivable from ESOP 26,450 -0-
Purchase of treasury stock (1,129,119) -0-
Payment on Federal Home Loan Bank advances (1,000,000) (1,600,000)
----------- -----------
Net cash provided (used) by financing activities 3,094,110 5,559,146
----------- -----------
Net Increase (Decrease) in cash and cash equivalents 701,544 5,369,016
Cash and Cash Equivalents at Beginning of Period 371,866 656,808
----------- -----------
Cash and Cash Equivalents at End of Period $ 1,073,410 6,025,824
=========== ===========
Supplemental Disclosures of Cash Flows Information:
Cash Paid During The Period:
Interest $ 1,049,053 1,069,488
Income taxes 89,064 90,109
Non-Cash Investing Activities:
Increase (Decrease) in unrealized gains on available-
for-sale securities (59,226) 19,531
</TABLE>
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<PAGE>
QUITMAN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $ 86,748 56,132 175,676 103,652
-------- -------- -------- --------
Other Comprehensive Income, Net of Tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during the period (27,902) 6,600 (37,995) 10,871
Reclassification adjustment for (gains)
losses included in net income -0- -0- (1,094) (18)
-------- -------- -------- --------
Other Comprehensive Income (Loss) (27,902) 6,600 (39,089) 10,853
-------- -------- -------- --------
Comprehensive Income $ 58,846 62,732 136,587 114,505
======== ======== ======== ========
</TABLE>
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<PAGE>
QUITMAN BANCORP, INC. AND SUBSIDIARY
Notes to Financial Statements
(Unaudited)
Note 1 - Basis of Preparation
- -----------------------------
The financial statements included herein for the periods ended March
31, 1999 are for Quitman Bancorp, Inc. and Subsidiary. The financial
statements included herein for the periods ended March 31, 1998 are for
Quitman Federal Savings Bank (the "Bank").
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 six month period ended March 31, 1999 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, 1998.
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
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<PAGE>
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 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 99,187 (15%) 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 March 11, 1999, the Company completed its stock
repurchase program, having repurchased 99,187 shares of its common
stock at a cost of $1,129,119.
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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------ --------------------------
1999 1998 1999 1998
---------- -------- --------- -----------
<S> <C> <C> <C> <C>
(a) Net income available to shareholders $ 86,748 N/A 175,676 N/A
---------- ------- --------- -------
Denominator:
Weighted-average shares outstanding 588,712 N/A 622,522 N/A
Less: ESOP weighted-average shares
unallocated 50,255 N/A 51,578 N/A
---------- ------- --------- -------
(b) Basic EPS weighted-average shares
outstanding 538,457 N/A 570,944 N/A
Effect of dilutive securities -0- N/A -0- N/A
(c) Diluted EPS weighted-average shares
outstanding 538,457 N/A 570,444 N/A
========== ======= ========= =======
Basic earnings per share (a/b) $ .16 N/A .31 N/A
========= ======= ============ =======
Diluted earnings per share (a/c) $ .16 N/A .31 N/A
========= ======= ============ =======
</TABLE>
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Comparison of Financial Condition at March 31, 1999 and September 30, 1998
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 to the Company.
Total assets increased by $3.2 million or 7.3% due primarily to the increase in
cash and cash equivalents, office properties and equipment and loans resulting
from funds received from capital stock issued by Quitman Bancorp, Inc., the
Bank's newly formed holding company.
Total equity decreased by $966,082 as result of net income for the six months
ended March 31, 1999, changes in the unrealized gain or loss on
available-for-sale securities, reduction of a guaranty of a loan to the Bank's
employee stock ownership plan, and purchase of 99,187 shares of treasury stock
at a cost of $1,129,119.
Non-Performing Assets and Delinquencies
Loans accounted for on a non-accrual basis increased to $360,755 at March 31,
1999 from $103,213 at September 30, 1998. The increase was the result of seven
loans being reclassified to performing loans and fourteen loans being added to
non-accrual. The allowance for loan losses was $380,000 at March 31, 1999.
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<PAGE>
Comparison of the Results of Operations for the Three Months Ended March 31,
1999 and 1998
Net Income. Net income increased by $31,000 or 55.4% from net income of $56,000
for the three months ended March 31, 1998 to net income of $87,000 for the three
months ended March 31, 1999. This increase is primarily the result of increased
interest income that was reduced by an increase in non-interest expense. The
annualized return on average assets increased from .54% to .74% for the three
months ended March 31, 1998 and 1999, respectively.
Net Interest Income. Net interest income increased $107,000 or 34.6% from
$309,000 for the three months ended March 31, 1998 to $416,000 for the three
months ended March 31, 1999. The increase was primarily due to an increase in
loans resulting from the approximately $6.2 million in net proceeds received in
April, 1998 from our initial public offering.
Interest Income. Interest income increased $42,000 for the three months ended
March 31, 1999 compared to the same three months ended March 31, 1998. 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 18.42%. This increase in average interest-earning assets
added an additional $95,000 of interest income. The average yield on
interest-earning assets decreased moderately to 8.5% from 9.1% for the three
months ended March 31, 1999 and 1998, respectively.
Interest Expense. Interest expense decreased $13,000 from $545,000 for the three
months ended March 31, 1998 to $532,000 for the three months ended March 31,
1999. The decrease in interest expense was due to an increase in
interest-bearing liabilities of $1.4 million and a slight decrease in the cost
of funds of 40 basis points (100 basis points equals 1%). The average balances
of deposits and advances from the Federal Home Loan bank increased by $1.5
million, from the three months ended March 31, 1998 to the three months ended
March 31, 1999.
Non-Interest Income. Non-interest income increased by $8,200 primarily from an
increase in late charges, $2,300 service charges, $4,100 and miscellaneous
income, $1,800.
Non-Interest Expense. Non-interest expense increased by $75,000 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 $38,000 between the periods as a result of
year-end pay raises, hiring of additional employees and contributions to the
Bank's Employee Stock Ownership Plan formed in April of 1998. Other non-interest
expenses including expenses of the Parent Company in the amount of $24,839,
increased $32,521.
As a result of our new bank building opening on April 26, 1999, we expect our
non-interest expense to increase. Also, on April 13, 1999 we implemented a
restricted stock plan and a stock option plan which will further increase our
non-interest expense.
Income Taxes. Income tax expense amounted to $27,000 for the three months ended
March 31, 1998 compared to $46,000 for the three months ended March 31, 1999.
Comparison of the Results of Operations for the Six Months Ended March 31, 1999
and 1998
Net Income. Net income increased by $72,000 or 69.2% from net income of $104,000
for the six months ended March 31, 1998 to net income of $176,000 for the same
six months of fiscal 1999. This increase is primarily the result of increased
interest income that more than offset increases in non-interest expense. The
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<PAGE>
annualized return on average assets increased from .51% to .76% for the six
months ended March 31, 1998 and 1999, respectively.
Net Interest Income. Net interest income increased $194,000 or 30.1%, from
$631,000 for the six months ended March 31, 1998 to $815,000 for the six months
ended March 31, 1999. The increase was primarily due to an increase in
residential mortgages and consumer loans and a decrease in the cost of funds.
Interest Income. Interest income increased $178,000 for the six months ended
March 31, 1999 compared to the same six months ended March 31, 1998. The
increase in interest income was primarily attributable to an increase in the
average balance of interest-earning assets. The average balance of
interest-earning assets increased by 16.42%. This increase in average
interest-earning assets added an additional $178,000 of interest income. The
average yield on interest-earning assets decreased moderately to 8.6% from 9.1%
for the six months ended March 31, 1999 and 1998, respectively.
Interest Expense. Interest expense decreased $16,000 from $1,078,000 for the six
months ended March 31, 1998 to $1,062,000 for the six months ended March 31,
1999. The decrease in interest expense was attributable to an increase in
interest-bearing liabilities of $.6 million and a decrease in the cost of funds
of 40 basis points (100 basis points equals 1%). The average balances of
deposits and advances from the Federal Home Loan Bank increased by $.6 million
from the six months ended March 31, 1998 to the six months ended March 31, 1999.
Non-Interest Income. Non-interest income increased by $6,800 primarily from an
increase in service charges on deposit accounts of $7,900, late charges of
$2,500 and partially offset by a decrease in gain in sale of other real estate
of $3,000.
Non-Interest Expense. Non-interest expense increased by $101,000 primarily due
to increased compensation and other personnel expense, and expense of the parent
company, which did not exist during the six months ended March 31, 1998. Our
compensation and other personnel expense increased an aggregate of $44,000
between the periods as a result of year-end pay raises, our hiring of additional
employees and contributions to the Bank's Employee Stock Ownership Plan created
in April of 1998. The Parent Company's operating expenses for the six months
ended March 31, 1999 were $48,000.
Income Taxes. Income tax expense amounted to $62,000 for the six months ended
March 31, 1998 compared to $98,000 for the six months ended March 31, 1999.
Liquidity and Capital Resources
Management monitors our risk-based capital and leverage capital ratios in order
to asses compliance with regulatory guidelines. At March 31, 1999, the Bank had
tangible capital, leverage, and total risk-based capital of 12.94%, 12.94% and
20.12%, respectively, which exceeded the OTS's minimum requirements of 1.50%,
3.00% and 8.00%, respectively.
We are taking necessary steps to be certain our data processing equipment and
software will properly function on January 1, 2000, the date that computer
problems are expected to develop worldwide on computer systems that incorrectly
identify the year 2000 and incorrectly compute interest, payment or delinquency.
Accurate data processing is essential to our operations.
We have examined our computers to determine whether they will properly function
on January 1, 2000 and do not believe that we will experience material costs to
upgrade our computers. We have ordered and installed an upgrade to our computer
system that is intended to solve the Year 2000 Computer software issue.
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<PAGE>
We installed this upgrade during the first calendar quarter of 1998. Testing of
this software through December 31, 2000 has been completed.
There was no malfunction of the software during testing. If a malfunction of the
software is discovered, we plan to implement "manual processing" until our
software becomes Y2K compliant. We have ordered packages of all forms required
to handle loans, deposits and operations. Detailed plans for the manual
operation of Quitman Federal Savings bank are in progress.
Non-information technology such as: heating, air conditioning and door locks
have been tested. These areas will not be impacted.
We have made contact with our Commercial Borrowers regarding the Year 2000
issue, advising them of the potential problem. As the majority of our loan
portfolio is 1 to 4 family dwellings, we do not feel our commercial borrowers
will be an issue.
Our new bank building is near completion. The estimated cost of the new facility
and land is $960,000. 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 costs could total approximately $600,000. We have
sufficient liquid assets to pay for these costs. These costs will partially
offset by the sale of our existing office. We also have sufficient capital
resources to install an ATM machine, and are planning to offer that service in
the future.
- 13 -
<PAGE>
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
---------------------------------------------------
Our annual meeting of the stockholders was held on January 27,
1999. At the meeting, six directors were elected for terms to
expire in 2000, 2001 and 2002 and the selection of independent
auditors was approved. We have a total of six directors.
The results of voting are shown for each matter considered.
Director Election:
Nominee Votes For Votes Withheld Broker Non-Votes
2000 Term Expiration:
Claude R. Butler 443,895 7,092 -0-
Walter B. Holwell 443,895 7,092 -0-
2001 Term Expiration:
Daniel M. Mitchell 443,895 7,092 -0-
John W. Romine 443,895 7,092 -0-
2002 Term Expiration:
Robert L. Cunningham, III 443,895 7,092 -0-
Melvin E. Plair 443,895 7,092 -0-
Auditor Ratification:
Votes For 439,745
Votes Against 300
Abstentions 4,942
Broker Non-Votes -0-
We held a special meeting of stockholders on April 13, 1999.
At the meeting, a stock option plan and a restricted stock
plan were approved by stockholders.
The results of voting are shown for each matter considered.
- 14 -
<PAGE>
1999 Stock Option Plan:
Votes For 358,693
Votes Against 60,694
Abstentions 4,967
Broker Non-Votes 10,350
1999 Restricted Stock Plan:
Votes For 369,143
Votes Against 60,594
Abstentions 4,967
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) None.
(b) None.
- 15 -
<PAGE>
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: May 11, 1999 By: /s/Melvin E. Plair
------------------------------------
Melvin E. Plair
President and Chief Executive Officer
(Principal Executive and Financial
Officer)
(Duly Authorized Officer)
Date: May 11, 1999 By: /s/Peggy L. Forgione
------------------------------------
Peggy L. Forgione
Vice President and Controller
(Chief Accounting Officer)
- 16 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 189
<INT-BEARING-DEPOSITS> 884
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,925
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 38,107
<ALLOWANCE> 380
<TOTAL-ASSETS> 47,601
<DEPOSITS> 39,151
<SHORT-TERM> 0
<LIABILITIES-OTHER> 452
<LONG-TERM> 0
0
0
<COMMON> 66
<OTHER-SE> 7,932
<TOTAL-LIABILITIES-AND-EQUITY> 47,601
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<INTEREST-INVEST> 178
<INTEREST-OTHER> 15
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<INTEREST-DEPOSIT> 1,050
<INTEREST-EXPENSE> 12
<INTEREST-INCOME-NET> 825
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<EXPENSE-OTHER> 575
<INCOME-PRETAX> 273
<INCOME-PRE-EXTRAORDINARY> 176
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<EPS-PRIMARY> .31
<EPS-DILUTED> .31
<YIELD-ACTUAL> 2.79
<LOANS-NON> 361
<LOANS-PAST> 787
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 380
<CHARGE-OFFS> 0
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<ALLOWANCE-CLOSE> 380
<ALLOWANCE-DOMESTIC> 380
<ALLOWANCE-FOREIGN> 0
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