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, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from to
Commission File Number 0-25700
QCF BANCORP, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Minnesota 41-1796789
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
501 Chestnut Street, Virginia, Minnesota 55792-1147
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (218) 741-2040
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes ( X ) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at October 31, 1996
Common stock, .01 par value 1,426,200
<PAGE>
QCF BANCORP, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
Consolidated Statements of Financial Condition 3
at September 30, 1996 and June 30, 1996
Consolidated Statements of Income for the Three 4
Months Ended September 30, 1996 and 1995
Consolidated Statement of Stockholders' Equity 5
for the Three Months Ended September 30, 1996
Consolidated Statements of Cash Flows for the 6
Three Months Ended September 30, 1996 and
1995
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
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
<PAGE>
<TABLE>
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Unaudited)
<CAPTION>
Assets September 30, 1996 June 30, 1996
- ------ ------------------ -------------
<S> <C> <C>
Cash $ 589,813 379,098
Interest-bearing deposits with banks 1,828,637 4,355,895
--------- ---------
Cash and cash equivalents 2,418,450 4,734,993
Securities available for sale (amortized cost of
$31,139,217 and $33,283,046 at September 30, 30,418,131 2,221,800
1996 and June 30, 1996 respectively)
Securities held to maturity (estimated market value
$56,869,674 and $56,811,210 at September 30,
1996 and June 30, 1996 respectively) 56,860,310 56,961,040
Loans receivable, net 55,744,151 52,361,221
Federal Home Loan Bank stock, at cost 553,900 553,900
Accrued interest receivable 1,028,498 1,223,713
Premises and equipment, net 419,547 440,736
Prepaid expenses and other assets 878,077 982,620
------- -------
Total Assets $148,321,064 149,480,023
============ ===========
Liabilities and Stockholders' Equity
Deposits 81,794,225 88,832,424
Short-term borrowings 32,905,430 26,263,736
Federal Home Loan Bank advances 5,000,000 3,000,000
Accrued interest payable 1,095,313 1,013,368
Advance payments made by borrowers
for taxes and insurance 85,504 56,576
Accrued expenses and other liabilities 1,279,434 629,122
--------- -------
Total Liabilities 122,159,906 119,795,226
------------ -------------
Commitments and Contingencies
Stockholders' equity:
Serial preferred stock; authorized 1,000,000 shares;
issued and outstanding none 0 0
Common stock ($.01 par value): authorized 7,000,000 shares;
issued 1,782,750; outstanding 1,426,200 shares at 17,828 17,828
September 30, 1996 and 1,606,906 at June 30, 1996.
Additional paid-in capital
retained earnings, subject to certain restrictions 18,187,110 18,040,190
Net unrealized loss on securities available for sale (432,652) (636,750)
Unearned employee stock ownership plan shares (1,152,050) (1,183,330)
Unearned management recognition plan shares (894,706) (944,177)
Stock option trust (1,193,931) 0
Treasury stock, at cost, 356,550 shares at September 30, 1996 (5,389,792) (2.612,675)
Total Stockholders' Equity 26,161,158 29,684,797
Total Liabilities and Stockholders' Equity $148,321,064 149,480,023
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Income
(Unaudited)
Three Months Ended
September 30
1996 1995
Interest income:
Loans $1,230,837 1,077,953
Securities 1,426,456 1,571,228
Total interest income 2,657,293 2,649,181
Interest expense:
Deposits 829,624 1,046,866
Short-term borrowings 335,213 60,078
Total interest expense 1,164,837 1,106,944
Net interest income 1,492,456 1,542,237
Provision for loan losses 0 0
Net interest income after
provision for loan losses 1,492,456 1,542,237
Non-interest Income:
Fees and service charges 125,421 112,715
Other 9,906 4,384
----- -----
Total Non-interest income 135,327 117,099
Non-interest expenses:
Compensation and benefits 456,741 425,961
Occupancy 48,651 58,268
Federal deposit insurance premiums 745,790 60,000
Advertising 14,089 15,538
Other 115,592 93,996
Total non-interest expense 1,380,863 653,763
Income before income tax expenses 246,920 1,005,573
Income tax expense 100,000 406,000
Net income $ 146,920 599,573
Earnings per common share $0.11 0.36
Weighted average number of shares 1,353,826 1,654,049
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
(Unaudited)
<CAPTION>
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
----- ------- -------- -------- ------ ------ ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30 1996 $17,828 17,003,711 18,040,190 (636,750) (1,183,330) (944,177) 1,111,111 (2,612,675) 29,684,797
Net income 146,920
Purchase of treasury stock
(2,777,117)(2,777,117)
Adoption of stock option trust
(1,193,931) (1,193,931)
Amortization of management
recognition plan 49,471
Change in net unrealized loss
on securities available for sale 204,098 204,098
Earned employee stock
ownership plan shares 15,640 31,280 46,920
-------------------------------------------------------------------------------------------------------
Balance, September 30, 1996 $17,828 17,019,351 18,187,110 (432,652) (1,152,050) (894,706) (1,193,931) (5,389,792)26,161,158
======= ========== ========== ======== ========== ======== ========== ========== ==========
</TABLE>
See accompanying Notes of Consolidated Financial Statements.
<PAGE>
<TABLE>
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended
September 30
1996 1995
---- ----
Operating activities:
<S> <C> <C>
Net income $ 146,920 599,573
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 23,367 26,367
Amortization of net (discounts) premiums on securities (3,069) 2,732
Decrease in accrued interest receivable 195,215 184,903
Increase in accrued interest payable 81,945 168,275
Increase in accrued expenses and other liabilities 650,312 173,938
Amortization of unearned ESOP shares 46,920 38,220
Amortization of MRP 49,471 0
Decrease in other assets 39,771 87,742
Net cash provided by operating activities 1,230,852 1,281,750
Investing activities:
Proceeds from maturities and principal collected
on securities held to maturity 3,117,985 7,469,244
Proceeds from maturities and principal collected
on securities available for sale 1,134,487 675,968
Purchases of securities held to maturity (2,004,844) (18,980,029)
Net increase in loans (3,382,930) (1,153,691)
Net increase in real estate owned (71,290) (6,085)
Purchase of premises and equipment (2,178) (28,871)
Net cash used by investing activities (1,208,770) (12,023,464)
Financial activities:
Net decrease in deposits (7,038,199) ( 8,506,792)
Net increase in short-term borrowing 6,641,694 15,019,096
Net increase in Federal Home Loan Bank advances 2,000,000 0
Adoption of Stock Option Trust (1,193,931) 0
Purchase of Treasury Stock (2,777,117) 0
Increase in advance payments made by borrowers
for taxes and insurance 28,928 33,187
Net cash (used) provided by financing activities (2,338,625) 6,545,491
Decrease in cash and cash equivalents (2,316,543) (4,196,223)
Cash and cash equivalents at beginning of period 4,734,993 8,153,722
Cash and cash equivalents at end of period $2,418,450 $ 3,957,499
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income Taxes $ 204,807 282,667
Interest on deposits and short-term borrowings 1,082,892 938,669
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE>
QCF BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996 and 1995
(1) QCF Bancorp, Inc.
QCF Bancorp, Inc. (the "Company") was incorporated under the laws of the state
of Minnesota for the purpose of becoming the savings and loan holding company of
Queen City Federal Savings Bank ( the "Bank") in connection with the Bank's
conversion from a federally chartered mutual savings bank to a federally
chartered stock savings bank, pursuant to its Plan of Conversion. The Company
commenced on February 10, 1995, a Subscription and Community Offering of its
shares in connection with the conversion of the Bank (the "Offering"). The
Offering was closed on March 17, 1995, and final approval for the conversion was
received from the Office of Thrift Supervision on March 31,1995.
The consolidated financial statements included herein are for the Company, the
Bank and the Bank's wholly owned subsidiary, Queen City Service Corporation.
(2) Basis of Preparation
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and therefore, do not include all
disclosures necessary for a complete presentation of the consolidated statements
of financial condition, consolidated statements of income, consolidated
statement of stockholders' equity and consolidated statements of cash flows in
conformity with generally accepted accounting principles. However, all
adjustments, consisting only of normal recurring adjustments, which are, in the
opinion of management, necessary for the fair presentation of the interim
financial statements have been included. The statements of income for the three
month period ended September 30, 1996 are not necessarily indicative of the
results which may be expected for the entire year.
(3) Earnings Per Share
Earnings per share are based upon the weighted average number of common shares
and common stock equivalents, if dilutive, outstanding during the period. The
only common stock equivalents are stock options. The weighted average number of
common stock equivalents is calculated using the treasury stock method.
(4) Regulatory Capital Requirements
The Bank as a member of the Federal Home Loan Bank System is required to hold a
specified number of shares of capital stock, which is carried at cost, in the
Federal Home Loan Bank of Des Moines. In addition, the Bank is required to
maintain cash and liquid assets in an amount equal to 5% of its deposit accounts
and other obligations due within one year. The Bank has met these requirements.
Federal savings institutions are required to satisfy three capital requirements:
(i) a requirement that "tangible capital" equal or exceed 1.5% of adjusted total
assets, (ii) a requirement that "core- capital" equal or exceed 3% of adjusted
total assets, and (iii) a risk-based capital standard of 8% of "risk-adjusted"
assets. Failure to meet these requirements can initiate mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material affect on the Bank's financial statements. The Bank's capital
amounts and classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors. At September
30, 1996, and June 30, 1996, the bank met each of the three capital
requirements. As of June 30, 1996, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of Operating Results for the Quarter Ended September 30, 1996 and
September 30, 1995.
Net Income. Net income decreased by $452,653 or 75.5% from $600,000 for the
quarter ended September 30, 1995 to 147,000 for the quarter ended September 30,
1996. The Decrease in net income was primarily attributable to a special
assessment by the FDIC of 65.7 basis points or $686,000. This special assessment
is to recapitalize the SAIF and should result in lower FDIC insurance premiums
going forward.
Net Interest Income. Net interest income decreased by $50,000 or 3.2%, from
$1.54 million for the quarter ended September 30,1995 to $1.49 million for the
quarter ended September 30, 1996. The decrease in the Bank's net interest income
resulted primarily from a decrease in the Bank's ratio of average interest-
earning assets to average interest-bearing liabilities as a result of the
company's stock buyback program.
Interest Income. Interest income as $2.7 million for the quarter ended September
30, 1996. This represents an increase of $8,000 or 0.3%, from the quarter ended
September 30, 1995. The increase was due to an increase in the average yield
earned on interest-earning assets, offset by a decrease in average interest-
earning assets as a result of the company's buyback program. The increase in the
average yield on interest- earning assets primarily reflected the higher levels
of market interest rates during the three-month period ended September 30, 1996
versus the three-month period ended September 30, 1995.
Interest Expense. Interest expense increased by $58,000 or 5.2%, from $1.1
million for the quarter ended September 30, 1995 to $1.2 million for the quarter
ended September 30, 1996. The increase resulted primarily from higher cost of
funds as a result of higher levels of interest rates between the two periods.
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 $18,000 or 15.6%
from $117,000 in the first quarter of fiscal 1996 to $135,000 in the first
quarter of fiscal 1997 due primarily to increased service fees on checking
accounts.
Noninterest Expense. Total noninterest expense increased by $727,000 or 111.2%
during the quarter ended September 30, 1996. The increase was primarily due to
the special FDIC assessment of $686,000.
Income Taxes. The Bank's income tax expense decreased by $128,000 for the
quarter ended September 30, 1996 as compared to the quarter ended September 30,
1995. The decrease reflects decreased income before income taxes during this
period.
Comparison of Financial Condition at September 30, 1996 and June 30, 1996. Total
assets decreased by $1.2 million, or 0.8% from $149.5 million at June 30, 1996
to $148.3 million at September 30, 1996. The decrease was primarily due to a
decrease in stockholders' equity of $3.5 million offset by a net increase in
deposits and short-term borrowings of $1.6 million.
Deposits decreased by $7.0 million and short-term borrowings increased by $8.6
million. These changes were due to offering repurchase agreements to deposit
customers with larger balances to better collateralize their investments with
the Bank and to decrease the Bank's cost of funds.
The Bank's investment securities decreased by $1.9 million, or 2.1%, from $89.2
million at June 30, 1996 to $87.3 million at September 30, 1996. The decrease in
investment securities was primarily due to the companys stock buyback program.
The Bank's net loans receivable increased by $3.4 million, or 6.5%, from $52.4
million at June 30, 1996 to $55.7 million at September 30, 1996. The increase in
interest loans receivable reflects strong loan demand during this period. 08
<PAGE>
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.
<PAGE>
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: /s/ Daniel F. Schultz
- ----- ---------------------
Daniel F. Schultz
Vice President/Treasurer
(Principal Financial Officer)
