-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OB1GrOTDzNrK9IoaHMDbFjYgtZHIDyeNIMFMO1ZAa8VIkouzBJ+lsyc0woirmCBd fY9ka2lvr9qCONFWuKoh+g== 0000743530-97-000053.txt : 19970515 0000743530-97-000053.hdr.sgml : 19970515 ACCESSION NUMBER: 0000743530-97-000053 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUAD CITY HOLDINGS INC CENTRAL INDEX KEY: 0000906465 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 421397595 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22208 FILM NUMBER: 97604927 BUSINESS ADDRESS: STREET 1: 2118 MIDDLE ROAD STREET 2: PO BOX 395 CITY: BETTENDORF STATE: IA ZIP: 52722 BUSINESS PHONE: 3193440600 10QSB 1 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. ----------------------------------------------------------------- (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 [ ] 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 QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) March 31, June 30, 1997 1996 ----------------------------- 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 =============================
See Notes to Consolidated Condensed Financial Statements QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended March 31, ---------------------------- 1997 1996 ---------------------------- 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 =======================
See Notes to Consolidated Condensed Financial Statements QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) Nine Months Ended March 31, --------------------------- 1997 1996 --------------------------- 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 =======================
See Notes to Consolidated Condensed Financial Statements QUAD CITY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended March 31, --------------------------- 1997 1996 --------------------------- 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) ============================
See Notes to Consolidated Condensed Financial Statements 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. 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. 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. 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. 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. 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. 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 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 EX-27 2
9 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. 1,000 9-MOS JUN-30-1997 MAR-31-1997 5,255 5,856 5,705 0 33,458 3,012 0 91,228 1,370 150,463 121,400 9,312 4,418 1,500 0 0 1,438 12,395 150,463 4,700 1,620 542 6,862 3,121 415 3,326 527 14 3,758 911 911 0 0 911 .63 .63 0 0 0 0 0 853 10 0 1,370 1,370 0 0
-----END PRIVACY-ENHANCED MESSAGE-----