SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 3l, l998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from to
Commission File Number 0-25700
QCF BANCORP, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Minnesota 41-1796789
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
501 Chestnut Street, Virginia, Minnesota 55792-1147
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (218) 741-2040
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes ( X ) No ( )
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date. Class Outstanding at April
30, 1998
Common stock, .01 par value 1,364,90l
<PAGE>
QCF BANCORP, INC
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
Consolidated Statements of Financial Condition 3
at March 31, 1998 and June 30, 1997
Consolidated Statements of Income for the Nine 4
Months Ended March 31, 1998 and 1997
Consolidated Statement of Stockholders' Equity 5
for the Nine Months Ended March 31, 1998
Consolidated Statements of Cash Flows for the 6
Nine Months Ended March 31, 1998 and
1997
Notes to Consolidated Financial Statements 7-8
Item 2: Management's Discussion and Analysis of Financial 8-9
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 10
Item 2: Changes in Securities 10
Item 3: Defaults Upon Senior Securities 10
Item 4: Submission of Matters to a Vote of Security Holders 10
Item 5: Other Information 10
Item 6: Exhibits and Reports on Form 8-K 10
Signatures 11
2
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<TABLE>
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Unaudited)
Assets March 31, 1998 June 30, 1997
<S> <C> <C>
Cash $ 564,165 747,733
Interest-bearing deposits with banks 6,090,610 7,026,683
Cash and cash equivalents 6,654,775 7,774,416
Securities available for sale (amortized cost of
$25,359,674 at June 30, 1997) 0 24,985,627
Securities held to maturity (estimated market value
$77,355,550 & $58,334,591 at March 31,
1998 and June 30, 1997 respectively) 77,898,509 58,112,799
Loans receivable, net 64,524,575 61,202,301
Federal Home Loan Bank stock, at cost 553,900 553,900
Accrued interest receivable 1,074,081 1,310,779
Premises and equipment, net 361,437 424,609
Deferred tax asset 368,000 563,300
Prepaid expenses and other assets 2,653,355 1,799,672
Total Assets $154,088,632 156,727,403
Liabilities and Stockholders' Equity
Deposits $105,238,634 103,681,490
Short-term borrowings 13,862,012 14,039,794
Federal Home Loan Bank advances 4,000,000 8,100,000
Accrued interest payable 1,052,392 1,071,313
Advance payments made by borrowers
for taxes and insurance 92,821 61,675
Accrued expenses and other liabilities 2,568,228 2,349,845
Total Liabilities 126,814,087 129,304,117
Stockholders' equity:
Serial preferred stock; authorized 1,000,000 shares;
issued and outstanding none 0 0
Common stock ($.01 par value): authorized 7,000,000 shares;
issued 1,782,750; outstanding 1,364,901 shares at
March 31, 1998 and 1,426,200 at June 30, 1997 17,828 17,828
Additional paid-in capital 16,216,428 16,665,625
Retained earnings, subject to certain restrictions 22,027,056 20,051,443
Net unrealized loss on securities available for sale 0 (222,745)
Unearned employee stock ownership plan shares (1,032,100) (1,080,710)
Unearned management recognition plan shares (573,141) (746,292)
Shares in stock option trust, at the exercise price (2,349,884) (1,872,071)
Treasury stock, at cost, 417,849 shares at March 31,1998
and 356,550 shares at June 30, 1997 (7,031,642) (5,389,792)
Total Stockholders' Equity 27,274,545 27,423,286
Total Liabilities and Stockholders' Equity $154,088,632 156,727,403
See accompanying notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Income
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
1998 1997 1998 1997
Interest income:
<S> <C> <C> <C> <C>
Loans $1,403,744 1,295,479 4,278,807 3,815,715
Securities 1,356,901 1,331,317 4,179,186 4,160,785
Total interest income 2,760,645 ,626,796 8,457,993 7,976,500
Interest expense:
Deposits 973,884 978,360 2,952,085 2,894,526
Short-term borrowings 177,052 158,920 663,099 582,917
Total interest expense 1,150,936 1,137,280 3,615,184 3,477,443
Net interest income 1,609,709 1,489,516 4,842,809 4,499,057
Provision for loan losses 0 0 0 0
Net interest income after
provision for loan losses 1,609,709 1,489,516 4,842,809 4,499,057
Non-interest Income:
Fees and service charges 104,889 117,851 361,978 367,479
Other 31,526 10,462 63,615 29,876
Gain on sale of securities 48,218 0 48,218 0
Total Non-interest income 184,633 128,313 473,811 397,355
Non-interest expenses:
Compensation and benefits 496,274 474,622 1,523,122 1,391,546
Occupancy 60,155 58,849 174,914 165,758
Federal deposit insurance premiums 16,800 16,800 50,400 658,560
Advertising 17,593 17,775 44,431 56,410
Other 128,555 106,057 340,140 326,113
Total non-interest expense 719,377 674,103 2,133,007 2,598,387
Income before income tax expenses 1,074,965 943,726 3,183,613 2,298,025
Income tax expense 393,000 370,000 1,208,000 906,000
Net income $ 681,965 573,726 1,975,613 1,392,025
Basic earnings per common share $0.65 0.50 1.85 1.17
Diluted earnings per common share $0.60 0.48 1.69 1.14
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
(Unaudited)
Net Unearned
Unrealized Employee Unearned
Gain (Loss) Stock Management Total
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 Equtiy
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 1,975,613 1,975,613
Purchase of treasury stock (1,641,850) (1,641,850)
Purchase of stock for stock
option trust (529,957) (477,813) (1,007,770)
Amortization of management 173,151 173,151
recognition plan
Change in net unrealized loss
on securities available for sale 222,745 222,745
Earned employee stock
ownership plan shares 80,760 48,610 129,370
Balance, March 31, 1998 $ 17,828 16,216,428 22,027,056 0 (1,032,100) (573,141) (2,349,884) (7,031,642) 27,274,545
See accompanying Notes of Consolidated Financial Statements.
</TABLE>
5
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<TABLE>
QCF BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31
1998 1997
Operating activities:
<S> <C> <C>
Net income $1,975,6l3 1,392,025
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 81,967 71,289
Amortization 0of net (discounts) premiums on securities (88,333) 7,589
Gain on sale of securities (48,218) 0
Decrease in accrued interest receivable 236,698 181,166
(Decrease)increase in accrued interest payable (18,921) 73,375
Increase (decrease) in accrued expenses and other liabilities 218,383 (32,744)
Amortization of unearned ESOP shares 129,370 136,581
Amortization of MRP 173,151 148,414
Increase in other assets (619,730) (114,988)
Net cash provided by operating activities 2,039,980 1,862,707
Investing activities:
Proceeds from sales of securities available for sale 285,600 0
Proceeds from maturities and principal collected
on securities held to maturity 40,690,466 17,601,280
Proceeds from maturities and principal collected
on securities available for sale 7,617,805 7,401,593
Purchases of securities held to maturity (42,883,358) (17,429,545)
Net increase in loans (3,322,274) (6,103,481)
Net increase in real estate owned (189,954) ( 8l,800)
Purchase of premises and equipment (18,795) (31,838)
Net cash provided by investing activities 2,179,490 1,356,209
Financing activities:
Net increase in deposits 1,557,144 16,113,722
Net decrease in short-term borrowing (177,782) (16,413,738)
Net (decrease) increase in Federal Home Loan Bank advances (4,100,000) 3,000,000
Purchase of stock for stock option trust (1,007,769) (1,682,677)
Purchase of treasury stock (1,641,850) (2,777,117)
Increase in advance payments made by borrowers
for taxes and insurance 31,146 31,727
Net cash used by financing activities (5,339,111) (1,728,083)
(Decrease) increase in cash and cash equivalents (1,119,641) 1,490,833
Cash and cash equivalents at beginning of period 7,774,416 4,734,993
Cash and cash equivalents at end of period $6,654,775 6,225,826
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income Taxes $ 1,386,547 873,807
Interest on deposits and short-term borrowings 3,543,587 3,404,068
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
QCF BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1998 and 1997
(1) QCF Bancorp, Inc.
The consolidated financial statements included herein are for QCF Bancorp, Inc.
(the "Company"), Queen City Federal Savings Bank (the "Bank") and the Bank's
wholly owned subsidiary, Queen City Service Corporation. These unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the footnotes thereto contained in the
Annual Report on Form l0-KSB for the year ended June 30, l997 of the Company, as
filed with the Securities and Exchange Commission. The June 30, l997 balance
sheet was derived from audited consolidated financial statements, but does not
include all disclosures required by generally accepted accounting principles.
(2) Basis of Preparation
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and therefore, do not include all
disclosures necessary for a complete presentation of the consolidated statements
of financial condition, consolidated statements of income, consolidated
statement of stockholders' equity and consolidated statements of cash flows in
conformity with generally accepted accounting principles. `However, all
adjustments, consisting only of normal recurring adjustments, which are, in the
opinion of management, necessary for the fair presentation of the interim
financial statements have been included. The statements of income for the three
and nine month periods ended March 31, 1998 are not necessarily indicative of
the results which may be expected for the entire year.
(3) Earnings Per Share
The FASB has issued Statement No. 128, Earnings per Share, which supersedes APB
Opinion No. l5. Statement No. 128 requires the presentation of earnings per
share by all entities that have common stock or potential common stock, such as
options, warrants and convertible securities, outstanding that trade in a public
market. Those entities that have only common stock outstanding are required to
present basic earnings per share amounts. (Basic per-share amounts are computed
by dividing (income from continuing operations) (income before extraordinary
item(s)) (income before cumulative effect of accounting change) (and) net income
(adjusted for (dividends declared on preferred stock) (dividends accumulated on
cumulative preferred stock)) (the numerator) by the weighted-average number of
common shares outstanding (the denominator).) All other entities are required to
present basic and diluted per-share amounts. Diluted per-share amounts assume
the conversion, exercise or issuance of all potential common stock instruments
unless the effect is to reduce the loss or increase the income per common share
from continuing operations.
The Company initially applied Statement No. l28 for the quarter and six months
ended December 3l, l997 and (as required by the Statement), has restated all per
share information for the prior periods to conform to the Statement.
Following is information about the computation of the earnings per share data
for the periods ended March 3l, l998 and l997.
7
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<TABLE>
Quarter Ended March 3l, 1998 Nine Months Ended March 3l, 1998
Net Net
Income Income
Per Per
Numerator Denominator Share Numerator Denominator Share
Basic earnings per share, income
<S> <C> <C> <C> <C> <C> <C>
available to common stockholders $ 681,965 l,047,179 $0.65 $l,975,613 l,067,836 $1.85
Effect of dilutive securities:
Stock options - 77,272 - 75,277
Management recognition plan - 20,727 - 22,568
Diluted earnings per share, income
available to common stockholders $681,965 l,l45,178 $0.60 $l,975,613 l,l65,681 $1.69
Quarter Ended March 3l, 1997 Nine Months Ended March 3l, l998
Basic earnings per share, income
available to common stockholders $573,726 1,147,852 $0.50 $1,392,025 1,185,671 $1.17
Effect of dilutive securities:
Stock options - 39,704 - 25,150
Management Recognition Plan - 14,117 - 9,738
Diluted earnings per share, income
available to common stockholders $573,726 l,201,673 $0.48 $1,392,025 l,220,559 $1.14
</TABLE>
(4) Regulatory Capital Requirements
The Bank as a member of the Federal Home Loan Bank System is required to hold a
specified number of shares of capital stock, which is carried at cost, in the
Federal Home Loan Bank of Des Moines. In addition, the Bank is required to
maintain cash and liquid assets in an amount equal to 5% of its deposit accounts
and other obligations due within one year. The Bank has met these requirements.
Federal savings institutions are required to satisfy three capital requirements:
(I) a requirement that "tangible capital" equal or exceed 1.5% of adjusted total
assets, (ii) a requirement that "core-capital" equal or exceed 3% of adjusted
total assets, and (iii) a risk-based capital standard of 8% of "risk-adjusted"
assets. Failure to meet these requirements can initiate mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material affect on the Bank's financial statements. The Bank's capital
amounts and classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors. At March 31,
1998, and June 30, 1997, the bank met each of the three capital requirements. As
of November 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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of Operating Results for the Quarter and Nine Months Ended March 31,
1998 and 1997.
8
<PAGE>
Net Income. Net income increased by $108,000 or 18.9% from $574,000 for the
quarter ended March 31, 1997 to $682,000 for the quarter ended March 31, 1998.
The increase in net income was primarily attributable to an increase of $120,000
in net interest income. Net income increased by $584,000, or 41.9%, from $l.4
million for the nine months ended March 31, 1997 to $2.0 million for the nine
months ended March 31, 1998. The increase was attributable to a special
assessment by the FDIC of 65.7 basis points or $686,000 in the nine-month period
ended March 31, 1997.
Net Interest Income. Net interest income increased by $120,000 or 8.1% between
the quarter ended March 31, 1998 and the quarter ended March 31, 1997. Net
interest income increased by $344,000, or 7.6%, from $4.5 million for the nine
months ended March 31, 1997 to $4.8 million for the nine months ended March 31,
1998. The increase in net interest income primarily resulted from an increase in
the Bank's ratio of average interest-earning assets to average interest-bearing
liabilities and a slight increase in the Bank's net interest margin.
Interest Income. Interest income increased $134,000 or 5.1% from the quarter
ended March 31, 1997 to the quarter ended March 31, 1998. Interest income for
the nine month period ended March 31, 1998 increased by $481,000 or 6.0% as
compared to the nine month period ended December 31, 1997. The increases were
due to an increase in average interest-earning assets.
Interest Expense. Interest expense increased by $14,000 or 1.2%, from the
quarter ended March 31, 1997 to the quarter ended March 31, 1998, and increased
by $138,000 or 4.0% from the nine months ended March 31, 1997 to the nine months
ended March 31, 1998. The increases were due to an increase in cost of funds.
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 $56,000 from
$128,000 in the third quarter of fiscal 1997 to $185,000 in the third quarter of
fiscal 1998. Noninterest income increased by $76,000 for the nine months ended
March 31, 1998. The increases were primarily due to gains from sale of an
investment security.
Noninterest Expense. Total noninterest expense increased by 45,000 and decreased
by $601,000, or 22.0% during the quarter and nine months ended March 31, 1998,
respectively. The decrease for the nine month period was due to the special
assessment of $686,000 by the FDIC in the first quarter of fiscal 1997.
Income Taxes. The Bank's income tax expense increased by $23,000 and by $302,000
for the quarter and nine months ended March 31, 1998 as compared to the quarter
and nine months ended March 31, 1997, respectively. The changes reflect the
changes in income before income taxes during these periods.
Comparison of Financial Condition at March 31, 1998 and June 30, 1997. Total
assets decreased by $2.6 million, or 1.7% from $156.7 million at June 30, 1997
to $154.1 million at March 31, 1998. The decrease was primarily due to a
decrease in Federal Home Loan Bank advances of $4.1 million offset by an
increase in deposits of $l.6 million.The Bank's investment securities decreased
by $5.2 million, or 6.3%, from $83.1 million at June 30, 1997 to $77.9 million
at March 31, 1998. The decrease in investment securities was primarily due to
the increase in loan demand and to the decrease in funding from Federal Home
Loan Bank advances. Securities available for sale were reclassified to
securities held to maturity during the quarter ended March 3l, l998. These
securities were reclassified as management intends to hold them until maturity.
The Bank's net loans receivable increased by $3.3 million, or 5.4%, from $61.2
million at June 30, 1997 to $64.5 million at March 31, 1998. The increase in
loans receivable reflects the loan demand during this period.
9
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QCF BANCORP, INC.
Part II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
Not applicable.
ITEM 3. Defaults Upon Senior Securities.
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
None.
10
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QCF Bancorp, Inc.
Registrant
Date: May 15, 1998 /s/ Daniel F. Schultz
Daniel F. Schultz
Vice President/Treasurer
(Principal Financial Officer)
11
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<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-END> MAR-31-1998 MAR-31-1998
<CASH> 564165 564165
<INT-BEARING-DEPOSITS> 6090610 6090610
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0
<INVESTMENTS-CARRYING> 77898509 77898509
<INVESTMENTS-MARKET> 77355550 77355550
<LOANS> 64524575 64524575
<ALLOWANCE> 1265000 1265000
<TOTAL-ASSETS> 154088632 154088632
<DEPOSITS> 105238634 105238634
<SHORT-TERM> 17862012 17862012
<LIABILITIES-OTHER> 3713441 3713441
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 17828 17828
<OTHER-SE> 27256717 27256717
<TOTAL-LIABILITIES-AND-EQUITY> 154088632 154088632
<INTEREST-LOAN> 1403744 4278807
<INTEREST-INVEST> 1356901 4179186
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 2760645 8457993
<INTEREST-DEPOSIT> 973884 2952085
<INTEREST-EXPENSE> 177052 663099
<INTEREST-INCOME-NET> 1609709 4842809
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 48218 48218
<EXPENSE-OTHER> 719377 2133007
<INCOME-PRETAX> 1074965 3183613
<INCOME-PRE-EXTRAORDINARY> 1074965 3183613
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 681965 1975613
<EPS-PRIMARY> .65 1.85
<EPS-DILUTED> .60 1.69
<YIELD-ACTUAL> 7.29 7.32
<LOANS-NON> 148000 148000
<LOANS-PAST> 1342000 1342000
<LOANS-TROUBLED> 228000 228000
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 1290000 1290000
<CHARGE-OFFS> 44000 44000
<RECOVERIES> 19000 19000
<ALLOWANCE-CLOSE> 1265000 1265000
<ALLOWANCE-DOMESTIC> 1265000 1265000
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
