U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ 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
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to _______________________
Commission file number 0-22208
Quad City Holdings, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 42-1397595
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2118 Middle Road, Bettendorf, IA 52722
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(319) 344-0600
---------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(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 past 90 days Yes [ x ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,437,824 as of May 8, 1997 .
Transitional Small Business Disclosure Format (check one): Yes [ x ] No [ ]
<PAGE>
QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES
INDEX
Page
Number
Part I FINANCIAL INFORMATION
Item 1 Consolidated Condensed Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets,
March 31, 1997 & June 30, 1996
Consolidated Condensed Statements of Income,
For the Three Months Ended March 31, 1997 and 1996
Consolidated Condensed Statements of Income,
For the Nine Months Ended March 31, 1997 and 1996
Consolidated Condensed Statement of Cash Flows,
For the Nine Months Ended March 31, 1997 and 1996
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
March 31, June 30,
1997 1996
-----------------------------
<S> <C> <C>
ASSETS
Cash and due from banks ............................................... $ 5,255,000 $ 6,615,407
Federal funds sold .................................................... 5,705,000 2,728,000
Certificates of deposit at financial institutions ..................... 5,855,917 5,472,012
Securities held to maturity, at amortized cost ........................ 3,011,578 3,156,601
Securities available for sale, at fair value .......................... 33,458,297 31,032,652
-----------------------------
Total securities .................................................. 36,469,875 34,189,253
-----------------------------
Loans receivable ...................................................... 91,227,659 56,809,720
Less: Allowance for estimated losses on loans ......................... (1,370,475) (852,500)
-----------------------------
Net loans receivable .............................................. 89,857,184 55,957,220
-----------------------------
Premises and equipment, net ........................................... 5,222,081 4,531,038
Accrued interest receivable ........................................... 1,192,958 1,121,268
Other assets .......................................................... 904,764 860,779
-----------------------------
Total assets .................................................. $150,462,779 $111,474,977
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing ................................................ $ 19,627,503 $ 15,730,265
Interest-bearing ................................................... 101,772,187 77,187,853
-----------------------------
Total deposits ................................................... 121,399,690 92,918,118
-----------------------------
Federal funds purchased ............................................... 0 1,190,000
Federal Home Loan Bank advances ....................................... 9,311,552 3,411,470
Other borrowings ...................................................... 1,500,000 1,000,000
Other liabilities ..................................................... 4,418,305 1,286,783
-----------------------------
Total liabilities ............................................. 136,629,547 99,806,371
-----------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value; shares authorized 250,000; shares issued
and outstanding March 1997, 10; June 1996, none ..................... 10 0
Common stock, $1 par value; shares authorized 2,500,000; shares issued
and outstanding 1,437,824 ........................................... 1,437,824 1,437,824
Additional paid-in capital ............................................ 12,764,406 11,764,416
Retained earnings (deficit) ........................................... (136,912) (1,048,165)
-----------------------------
14,065,328 12,154,075
Unrealized (losses) on securities available for sale, net ............. (232,096) (485,469)
-----------------------------
Total stockholders' equity .................................... 13,833,232 11,668,606
-----------------------------
Total liabilities and stockholders' equity .................... $150,462,779 $111,474,977
=============================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
Three Months Ended March 31,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans ............................. $1,794,407 $1,017,040
Interest and dividends on securities ................... 556,770 461,859
Interest on federal funds sold ......................... 80,248 116,854
Other interest ......................................... 106,884 95,240
-----------------------
Total interest income ............................. 2,538,309 1,690,993
-----------------------
Interest expense:
Interest on deposits .................................. 1,142,614 878,491
Interest on other borrowings .......................... 182,849 18,976
-----------------------
Total interest expense ............................ 1,325,463 897,467
-----------------------
Net interest income ............................... 1,212,846 793,526
Provision for loan losses .................................. 222,775 113,835
-----------------------
Net interest income after provision for loan losses 990,071 679,691
-----------------------
Other income:
Merchant credit card, net of processing fees ........... 406,718 232,893
Trust department ....................................... 194,480 96,623
Deposit service fees ................................... 50,385 38,559
Investment securities gains, net ....................... 14,248 0
Other .................................................. 85,930 35,350
-----------------------
Total other income ................................ 751,761 403,425
-----------------------
Other expenses:
Salaries and benefits .................................. 792,267 488,065
Professional and data processing fees .................. 102,837 66,544
Advertising and marketing .............................. 24,151 31,622
Occupancy and equipment expense ........................ 173,534 72,417
Stationery and supplies ................................ 40,504 22,052
Provision for merchant credit card losses .............. 26,122 39,232
Insurance .............................................. 28,164 16,952
Postage and telephone .................................. 42,024 27,766
Other .................................................. 162,407 122,987
-----------------------
Total other expenses .............................. 1,392,010 887,637
-----------------------
Net income ........................................ $ 349,822 $ 195,479
=======================
Income per common share: .................................... $ 0.24 $ 0.14
=======================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
Nine Months Ended March 31,
---------------------------
1997 1996
---------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans ............................. $4,700,354 $2,759,098
Interest and dividends on securities ................... 1,620,207 1,301,496
Interest on federal funds sold ......................... 232,542 339,885
Other interest ......................................... 309,083 267,206
-----------------------
Total interest income ............................. 6,862,186 4,667,685
-----------------------
Interest expense:
Interest on deposits .................................. 3,121,028 2,439,761
Interest on other borrowings .......................... 414,962 67,569
-----------------------
Total interest expense ............................ 3,535,990 2,507,330
-----------------------
Net interest income ............................... 3,326,196 2,160,355
Provision for loan losses .................................. 526,500 367,935
-----------------------
Net interest income after provision for loan losses 2,799,696 1,792,420
-----------------------
Other income:
Merchant credit card, net of processing fees ........... 1,096,775 677,292
Trust department ....................................... 445,613 247,191
Deposit service fees ................................... 139,499 100,041
Investment securities gains, net ....................... 14,248 7,279
Other .................................................. 173,049 111,698
-----------------------
Total other income ................................ 1,869,184 1,143,501
-----------------------
Other expenses:
Salaries and benefits .................................. 2,004,360 1,352,846
Professional and data processing fees .................. 307,727 186,203
Advertising and marketing .............................. 75,981 94,086
Occupancy and equipment expense ........................ 476,082 218,949
Stationery and supplies ................................ 133,994 74,752
Provision for merchant credit card losses .............. 137,317 83,420
Insurance .............................................. 79,282 79,636
Postage and telephone .................................. 124,641 85,682
Other .................................................. 418,243 306,247
-----------------------
Total other expenses .............................. 3,757,627 2,481,821
-----------------------
Net income ........................................ $ 911,253 $ 454,100
=======================
Income per common share: .................................... $ 0.63 $ 0.32
=======================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
Nine Months Ended March 31,
---------------------------
1997 1996
---------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................ $ 911,253 $ 454,100
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ........................................................ 246,243 100,907
Provision for loan losses ........................................... 526,500 367,935
Amortization of premiums (accretion of discounts) on securities, net (24,044) (13,891)
Realized gain on securities available for sale ...................... (14,248) (7,279)
(Increase) in accrued interest receivable ........................... (71,690) (201,336)
(Increase) in other assets .......................................... (43,985) (1,036,349)
Increase in other liabilities ....................................... 3,131,522 242,732
---------------------------
Net cash provided by (used in) operating activities .............. $ 4,661,551 $ (93,181)
---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold ......................... (2,977,000) 8,230,000
Net (increase) in certificates of deposits at financial institutions .. (383,905) (1,862,958)
Net loans originated .................................................. (34,426,464) (17,740,574)
Purchase of securities held to maturity ............................... 0 (2,723,782)
Purchase of securities available for sale ............................. (4,884,260) (15,261,546)
Proceeds from maturity of securities .................................. 2,000,000 4,000,000
Proceeds from calls/paydowns on securities ............................ 862,603 4,412,830
Proceeds from sale of securities available for sale ................... 32,700 51,446
Purchase of premises and equipment .................................... (937,286) (1,621,622)
----------------------------
Net cash (used in) investing activities .......................... $(40,713,612) $(22,516,206)
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in time certificates of deposit accounts ................. 10,879,516 9,831,595
Net increase in non-time deposit accounts ............................. 17,602,056 18,883,309
Proceeds from issuance of preferred stock ............................. 1,000,000 0
Net (decrease) in federal funds purchased ............................. (1,190,000) (7,211,072)
Net increase in Federal Home Loan Bank advances ....................... 5,900,082 0
Net increase in other borrowings ...................................... 500,000 2,065,000
----------------------------
Net cash provided by financing activities ........................ 34,691,654 $ 23,568,832
----------------------------
Net increase (decrease) in cash and due from banks ............... (1,360,407) 959,445
Cash and due from banks, beginning ............................... 6,615,407 3,830,270
----------------------------
Cash and due from banks, ending .................................. $ 5,255,000 $ 4,789,715
============================
Supplemental disclosure of cash flow information, cash payments for:
Interest .............................................................. $ 3,386,596 $ 2,419,389
============================
Supplemental schedule of noncash investing activities:
Change in unrealized gains/losses on securities available for sale, net $ 253,373 $ (243,257)
============================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
Part I
Item 1
QUAD CITY HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include information or footnotes necessary for a fair presentation
of financial position, results of operations and changes in financial condition
in conformity with generally accepted accounting principles. However, all
adjustments that are, in the opinion of management, necessary for a fair
presentation have been included. Results for the three and nine months ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 1997.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The accompanying consolidated condensed financial statements include the
accounts of Quad City Holdings, Inc. (the "Company") and its wholly owned
subsidiaries, Quad City Bank and Trust Company (the "Bank") and Quad City
Bancard, Inc. ("Bancard"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
NOTE 3 - INITIAL PUBLIC OFFERING
The Company was incorporated in February of 1993, and its primary operating
subsidiary, the Bank, commenced operations during the first calendar quarter of
1994. On October 6, 1993, the Company went effective with its initial public
offering. 1.2 million shares of common stock were issued in the offering. In
November of 1993, the underwriter exercised its over-allotment option and
acquired 162,824 additional shares of common stock. 75,000 shares were issued in
a private placement in April of 1993 resulting in the total issued shares of
1,437,824.
<PAGE>
Part I
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Quad City Holdings. Inc. (the "Company") was formed in February of 1993 under
the laws of the state of Delaware for the purpose of becoming the bank holding
company of Quad City Bank and Trust Company (the "Bank").
The Bank was capitalized on October 13, 1993 and commenced operations on January
7, 1994. The Bank was organized as an Iowa-chartered commercial bank that is a
member of the Federal Reserve System with depository accounts insured by the
Federal Deposit Insurance Corporation. The Bank provides full-service commercial
and consumer banking services in Bettendorf and Davenport, Iowa and adjacent
communities.
Quad City Bancard, Inc. ("Bancard") was capitalized on April 3, 1995, as a
Delaware corporation which provides merchant credit card processing services.
This operation had previously been a division of the Bank since July 1994.
Bancard has contracted with an independent sales organization which markets
credit card services to merchants throughout the country. Currently,
approximately 9,500 merchants process transactions with Bancard.
The Company has a fiscal year end of June 30.
FINANCIAL CONDITION
Total assets of the Company increased by $38,987,802 or 34.97% to $150,462,779
at March 31, 1997 from $111,474,977 at June 30, 1996. The growth was primarily
reflected in an increase in loans made to customers.
Cash and due from banks decreased by $1,360,407 or 20.56% to $5,255,000 at March
31, 1997 from $6,615,407 at June 30, 1996 and represented both cash maintained
at the Bank, as well as funds deposited in other banks in the form of demand
deposits.
Federal funds sold are inter-bank funds with daily liquidity. At March 31, 1997,
the Company had invested $5,705,000 in such funds. This amount increased by
$2,977,000, or 109.13%, from $2,728,000 at June 30, 1996.
Certificates of deposit at financial institutions increased by $383,905 or 7.02%
to $5,855,917 at March 31, 1997 from $5,472,012 at June 30, 1996. This increase
was due to increased deposits in other banks in the form of certificates of
deposit.
Securities increased by $2,280,622 or 6.67% to $36,469,875 at March 31, 1997
from $34,189,253 at June 30, 1996. The increase was the result of a number of
transactions in the security portfolio. Six securities, classified as available
for sale, were purchased during the period for $4,884,260; the net of the
amortization of premium and the accretion of discounts was $24,044; and the
decrease in unrealized loss on securities available for sale was $253,373. The
increase was offset by proceeds from the maturity of two securities for
$2,000,000 and the call of a security and paydown of mortgage backed securities
of $862,603. Two investments, a common stock and a mutual fund, classified as
available for sale, were sold for $32,700, which resulted in a gain of $14,248.
Part I Item 2
Loans receivable increased by $34,417,939 or 60.58% to $91,227,659 at March 31,
1997 from $56,809,720 at June 30, 1996. The increase was the result of the
origination of $63,776,020 of commercial business, consumer and real estate
loans, less loan repayments of $29,358,081.
The allowance for estimated losses on loans at March 31, 1997 was $1,370,475,
representing approximately 1.5% of gross loans outstanding. Similarly, the
allowance for estimated losses on loans at June 30, 1996 was approximately 1.5%
of gross loans outstanding, or $852,500. Although management believes that the
allowance for estimated losses on loans at March 31, 1997 was at a level
adequate to absorb losses on existing loans, there can be no assurance that such
losses will not exceed the estimated amounts or that the Company will not be
required to make additional contributions to its provision for loan losses in
the future.
Premises and equipment increased by $691,043 or 15.25% to $5,222,081 at March
31, 1997 from $4,531,038 at June 30, 1996. The increase resulted from the
purchase of additional furniture, fixtures and equipment for the Bank and
Bancard, and the site construction costs for the new Davenport banking location,
offset by depreciation expense.
<PAGE>
Accrued interest receivable on loans, securities and interest-bearing cash
accounts increased by $71,690 or 6.39% to $1,192,958 at March 31, 1997 from
$1,121,268 at June 30, 1996.
Other assets increased by $43,985 or 5.11% to $904,764 at March 31, 1997 from
$860,779 at June 30, 1996. Other assets consisted primarily of miscellaneous
receivables, prepaid expenses and accrued trust department income.
Deposits increased by $28,481,572 or 30.65% to $121,399,690 at March 31, 1997
from $92,918,118 at June 30, 1996. The increase resulted from a $3,897,238
increase in noninterest-bearing accounts and a $24,584,334 increase in
interest-bearing accounts.
The Company had no federal funds purchased at March 31, 1997, as compared to
$1,190,000 at June 30, 1996. The decrease was attributable to the reduction in
funds received from correspondent banking customers to be reinvested in
overnight deposits "as principal".
Federal Home Loan Bank ("FHLB") advances increased by $5,900,082 or 172.95% to
$9,311,552 at March 31, 1997 from $3,411,470 at June 30, 1996. The Bank is a
member of the FHLB of Des Moines. As a result of its membership in the FHLB, the
Bank has the ability to borrow funds for short- or long-term purposes under a
variety of programs. The increase in FHLB advances is primarily due to the Bank
borrowing funds for a longer-term to match against commercial real estate loans.
Other borrowings increased by $500,000 or 50.00% to $1,500,000 at March 31, 1997
from $1,000,000 at June 30, 1996. Other borrowings consisted of the amount
outstanding on a $1,500,000 revolving credit note, which is secured by all the
outstanding stock of the Bank. The borrowed funds were utilized to provide
additional capital to the Bank to maintain its required leverage ratio.
Other liabilities increased by $3,131,522 or 243.36% to $4,418,305 at March 31,
1997 from $1,286,783 at June 30, 1996. Other liabilities was comprised of unpaid
amounts for various products and services, and accrued but unpaid interest on
deposits. The increase was primarily due to the timing of Bancard's receipt of
funds from Visa and Mastercard and the distribution of those funds to merchants.
This situation at quarter-end increased Bancard's accounts payable to
$3,208,470.
In anticipation of continued asset growth, the Company has privately placed
shares of its preferred stock with institutional investors. It is management's
intention to raise proceeds of approximately $7.5 million with the preferred
stock. Subscriptions were signed during October and November 1996 for $5.5
million. On December 27, 1996, 10 shares of $1.00 par value preferred stock were
issued to a subscriber for a consideration of $1,000,000.
Common stock of $1,437,824 at both March 31, 1997 and June 30, 1996 represented
1,437,824 shares at $1.00 par value of the Company's common stock.
Additional paid-in-capital increased by $999,990 or 8.50% to $12,764,406 at
March 31, 1997 from $11,764,416 at June 30, 1996. The increase consisted of the
proceeds above par from the preferred stock placement.
The accumulated deficit at June 30, 1996 of $1,048,165 was comprised of
pre-opening expense, start-up expenses for the Bank, consisting primarily of
salaries, marketing and advertising fees, supplies and forms and the net loss
incurred. The accumulated deficit decreased by $911,253 to $136,912 at March 31,
1997 to reflect the net income for the nine months.
Unrealized losses on securities available for sale decreased by $253,373 to
$232,096 at March 31, 1997 from $485,469 at June 30, 1996. The decrease was
attributable to the increase in fair value of securities identified as available
for sale for the nine month period.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Net income for the three month period ended March 31, 1997 of $349,822 was up
78.96% as compared to net income of $195,479 for the same period in 1996.
Interest income increased by $847,316 from $1,690,993 for the three month period
ended March 31, 1996 to $2,538,309 for the three month period ended March 31,
1997. The rise in interest income was primarily attributable to a greater
average outstanding balance in loans receivable.
<PAGE>
Interest expense increased by $427,996 from $897,467 for the three month period
ended March 31, 1996 to $1,325,463 for the three month period ended March 31,
1997. The increase in interest expense was primarily attributable to greater
average outstanding balances in interest bearing liabilities.
The Company had an allowance for estimated losses on loans of approximately 1.5%
of gross loans outstanding at both March 31, 1997 and 1996. The provision for
loan losses increased by $108,940 from $113,835 for the three month period ended
March 31, 1996 to $222,775 for the three month period ended March 31, 1997 in
response to the 60% increase in loans receivable during the fiscal quarter. In
the future, the Company plans to adjust the provision based on a risk weighting
policy.
Other income increased by $348,336 from $403,425 for the three month period
ended March 31, 1996 to $751,761 for the three month period ended March 31,
1997. In both 1997 and 1996, other income consisted of income from the merchant
credit card operation, income from the trust department, income from depository
service fees, and other miscellaneous fees. In 1997, other income also included
the gains received on the sale of investment securities. The increase in other
income was primarily due to the addition of new customers and increased volume
of merchant credit card processing services at Bancard and the addition of new
clients in the trust department at the Bank.
The main components of other expenses were primarily salaries and benefits,
occupancy and equipment expenses, and professional and data processing fees for
both periods. Other expenses for the three months ended March 31, 1997 were
$1,392,010 as compared to $887,637 for the same period in 1996. The $504,373
increase was primarily due to higher overhead expenses on the increased volume
of business in the last fiscal year.
NINE MONTHS ENDED MARCH 31, 1997 AND 1996
Net income for the nine month period ended March 31, 1997 more than doubled to
$911,253 as compared to a net income of $454,100 for the same period in 1996.
Interest income increased by $2,194,501 from $4,667,685 for the nine month
period ended March 31, 1996 to $6,862,186 for the nine month period ended March
31, 1997. The rise in interest income was primarily attributable to a greater
average outstanding balance in loans receivable.
Interest expense increased by $1,028,660 from $2,507,330 for the nine month
period ended March 31, 1996 to $3,535,990 for the nine month period ended March
31, 1997. The increase in interest expense was primarily attributable to greater
average outstanding balances in interest bearing liabilities.
The Company had an allowance for estimated losses on loans of approximately 1.5%
of gross loans outstanding at both March 31, 1997 and 1996. The provision for
loan losses increased by $158,565 from $367,935 for the nine month period ended
March 31, 1996 to $526,500 for the nine month period ended March 31, 1997. The
increase in the provision was made as a result of the increase in the total loan
portfolio, as well as the restoration of a loan charge off. In the future, the
Company plans to adjust the provision based on a risk weighting policy.
Other income increased by $725,683 from $1,143,501 for the nine month period
ended March 31, 1996 to $1,869,184 for the nine month period ended March 31,
1997. In both 1997 and 1996, other income consisted of income from the merchant
credit card operation, income from the trust department, income from depository
service fees, other miscellaneous fees and the gains received on the sale of
investment securities. The increase in other income was primarily due to the
addition of new customers and increased volume of merchant credit card
processing services at Bancard and the addition of new clients in the trust
department at the Bank.
The main components of other expenses were primarily salaries and benefits,
occupancy and equipment expenses, and professional and data processing fees for
both periods. Other expenses for the nine months ended March 31, 1997 were
$3,757,627 as compared to $2,481,821 for the same period in 1996. The $1,275,806
increase was primarily due to higher overhead expenses on the increased volume
of business in the last fiscal year.
<PAGE>
OTHER DEVELOPMENTS
The Bank opened the permanent Davenport facility on July 1, 1996. The newly
constructed building is located on North Brady Street. The Bank owns one half of
the two story commercial office structure that is separated by an atrium. The
Bank occupies all 6,000 square feet of its first floor and utilizes the basement
for storage and item processing. Approximately 3,400 square feet of its second
floor has been leased to a professional services firm. The remaining 2,300
square feet will be utilized by the residential real estate department of the
Bank.
In October 1996, the management of the Company announced its intentions to lease
space in the historic Velie Mansion in Moline. Bancard plans to relocate its
operations to the third floor of the 30,000 square foot building in mid 1997.
Subject to regulatory approval, a full-service banking facility will begin
operations on the east side of the first floor of the building in late 1997 or
early 1998. A Permit to Organize an Illinois State Bank has been granted to the
Company by the Illinois Commissioner of Banks.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" and Statement No. 127 "Deferral of the Effective Date of Certain
Provisions of Statement No. 125". Statement No. 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. Under that approach,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes liabilities
when extinguished. Statement No. 125 provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. The provisions of Statement No. 125 applicable to
servicing of financial assets are effective for servicing of financial assets
occurring after December 31, 1996. Adoption of these provisions of the Statement
had no effect on the Company's financial statements. The provisions of Statement
No. 125 applicable to transfers of financial assets and extinguishments of
liabilities are effective for transfers and extinguishments occurring after
December 31, 1997. Management believes that adoption of these provisions of the
Statement will not have a material effect on the Company's financial statements.
The Financial Accounting Standards Board has issued Statement No. 128 "Earnings
per Share" which becomes effective for financial statements issued for periods
ending after December 15, 1997. This Statement establishes standards for
computing and presenting earnings per share (EPS) and applies to entities with
publicly held stock or potential common stock. This Statement simplifies the
standards for computing earnings per share previously found in APB Opinion No.
15, "Earnings per Share", and makes them comparable to international EPS
standards. It replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
Management believes that adoption of this Statement will not have a material
effect on the Company's financial statements.
The Financial Accounting Standards Board has issued Statement No. 129
"Disclosures of Information about Capital Structure" which becomes effective for
financial statements for periods ending after December 15, 1997. This Statement
establishes standards for disclosing information about an entity's capital
structure. It applies to all entities. Management believes that adoption of this
Statement will not have a material effect on the Company's financial statements.
RECENT REGULATORY DEVELOPMENTS
Various bills have been introduced in the Congress that would allow bank holding
companies to engage in a wider range of nonbanking activities, including greater
authority to engage in securities and insurance activities. While the scope of
permissible nonbanking activities and the conditions under which the new powers
could be exercised varies among the bills, the expanded powers generally would
be available to a bank holding company only if the bank holding company and its
bank subsidiaries remain well-capitalized and well-managed. The bills also
impose various restrictions on transactions between the depository institution
subsidiaries of bank holding companies and their nonbank affiliates. These
restrictions are intended to protect the depository institutions from the risks
of the new nonbanking activities permitted to such affiliates.
<PAGE>
At this time, the Company is unable to predict whether any of the pending bills
will be enacted, and therefore, is unable to predict the impact such legislation
may have on the operations of the Company and the Bank.
Additionally, the Illinois legislature is considering legislation that would
prohibit out-of-state banks from acquiring an Illinois bank unless the Illinois
bank has been in existence and continuously operated for a period of at least
five years. The enactment of such legislation could effect the manner in which
the Company establishes a full-service banking operation in Illinois.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995 report contains certain forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended. The Company intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Reform Act of 1995, and is
including this statement for purposes of these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
future plans, strategies and expectations of the Company, are generally
identifiable by the use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project" or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations and future prospects of the Company and the subsidiaries include, but
are not limited to, changes in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Company's market area and accounting principles, policies and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. Further
information concerning the Company and its business, including additional
factors that could materially affect the Company's financial results, is
included in the Company's filings with the Securities and Exchange Commission.
<PAGE>
Part II
QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 Legal Proceedings - None
Item 2 Changes in Securities - None
Item 3 Defaults Upon Senior Securities - None
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
<PAGE>
Part II
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
QUAD CITY HOLDINGS, INC.
(Registrant)
By: /s/ Douglas M. Hultquist
-------------------------------
Douglas M. Hultquist, President
Date: May 8, 1997 /s/ Michael A. Bauer
---------------------------
Michael A. Bauer, Chairman
Date: May 8, 1997 /s/ Douglas M. Hultquist
--------------------------------
Douglas M. Hultquist, President
Principal Executive, Financial &
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATIN EXTRACTED FROM THE MARCH 31,
1997 FORM 10-QSB OF QUAD CITY HOLDINGS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
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