UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCAHNGE ACT 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-11132
FIRST BANKING CENTER, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1391327
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Milwaukee Ave., Burlington, WI 53105
(Address of principal executive offices) (Zip Code)
(262) 763-3581
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 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 October 31, 2000. Common stock, $1.00 par value,
1,470,272 shares outstanding.
<PAGE>
FIRST BANKING CENTER, INC AND SUBSIDIARY
INDEX
September 30, 2000
Part I Financial Information
Item 1 Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets,
September 30, 2000 and December 31, 1999
Consolidated Statements of Income
For the nine months ended September 30, 2000 and 1999
Consolidated Statements of Cash Flows, For the nine
months ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements
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 and Use of Proceeds
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
Signature
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
<TABLE>
FIRST BANKING CENTER, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and December 31, 1999
(Dollars in thousands except share data)
<CAPTION>
ASSETS 9/30/00 12/31/99
(Unaudited) (Audited)
<S> <C> <C>
Cash and due from banks $12,623 $19,123
Federal funds sold 2,121 4,242
Interest bearing deposits in banks 743 40
Available for sale securities - stated at fair value 62,546 54,952
Loans, less allowance for loan losses of $3,926 and
$3,581 in 2000 and 1999 respectively 307,528 295,143
Office buildings and equipment, net 9,733 9,429
Other assets 9,651 9,160
--------------------------------
TOTAL ASSETS $404,945 $392,089
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Demand $48,925 $51,610
Savings and NOW accounts 146,436 140,612
Time 126,101 113,922
--------------------------------
Total Deposits 321,462 306,144
Securities sold under repurchase agreements
and federal funds purchased 17,000 21,131
U S Treasury note account 100 100
Other borrowings 26,062 27,768
Other liabilities 3,824 3,529
--------------------------------
TOTAL LIABILITIES 368,448 358,672
--------------------------------
STOCKHOLDERS' EQUITY
Common Stock, $1.00 par value 3,000,000 shares authorized; 1,489,380 and
1,489,380 shares issued as of September 30, 2000
and December 31, 1999, respectively 1,489 1,489
Surplus 4,226 4,236
Retained Earnings 31,708 28,717
--------------------------------
37,423 34,442
Common stock in treasury, at cost-19,368 and 9,822 shares
for September 30, 2000 and December 31, 1999, respectively ($697) ($342)
Accumulated other comprehensive loss (229) (683)
--------------------------------
TOTAL STOCKHOLDERS' EQUITY $36,497 $33,417
--------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $404,945 $392,089
================================
"See accompanying notes to financial statements"
</TABLE>
<PAGE>
<TABLE>
FIRST BANKING CENTER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Nine months ended September 30, 2000 and
1999 (Amounts in thousands, except per
share data)
(Unaudited)
<CAPTION>
Quarter-to-Date Year-to-Date
9/30/00 9/30/99 9/30/00 9/30/99
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $7,221 $6,096 $20,436 $17,810
Interest and dividends on securities
Taxable 478 531 1,482 1,675
Tax-exempt 333 303 986 901
Interest on federal funds sold 87 32 143 101
Interest on deposits in banks 2 0 3 3
----------------------------------------------------------------
TOTAL INTEREST INCOME 8,121 6,962 23,050 20,490
----------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 3,363 2,508 9,142 7,358
Interest on federal funds purchased and securities
sold under repurchase agreements 255 361 753 989
Interest on U.S. Treasury Note Account 5 1 5 3
Interest on other borrowings 401 312 1,215 882
----------------------------------------------------------------
TOTAL INTEREST EXPENSE 4,024 3,182 11,115 9,232
----------------------------------------------------------------
NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSSES 4,097 3,780 11,935 11,258
Provision for loan losses 90 83 270 248
----------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 4,007 3,697 11,665 11,010
----------------------------------------------------------------
NON-INTEREST INCOME
Trust 100 90 325 270
Service charges on deposit accounts 341 317 988 893
Investment securities gains (losses) 0 7 (5) 7
Other income 309 298 963 844
----------------------------------------------------------------
TOTAL NON-INTEREST INCOME 750 712 2,271 2,014
----------------------------------------------------------------
NON-INTEREST EXPENSE
Salary and employee benefits 1,691 1,568 5,038 4,707
Occupancy expenses 200 195 640 607
Equipment expenses 345 367 1,034 965
Data Processing services 212 159 520 453
Goodwill amortization 26 26 78 78
Other expenses 577 585 1,823 1,695
----------------------------------------------------------------
TOTAL NON-INTEREST EXPENSE 3,051 2,900 9,133 8,505
----------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,706 1,509 4,803 4,519
Income taxes 491 421 1,338 1,351
----------------------------------------------------------------
NET INCOME $1,215 $1,088 $3,465 $3,168
================================================================
Earnings per Common Share:
Basic earnings per share $0.83 $0.73 $2.36 $2.14
Diluted earnings per share $0.82 $0.73 $2.33 $2.12
Weighted average shares outstanding 1,470 1,482 1,470 1,482
Weighted average shares outstanding-Diluted 1,485 1,495 1,485 1,495
Comprehensive Income $1,658 $899 $3,919 $2,169
"See accompanying notes to financial statements"
</TABLE>
<PAGE>
<TABLE>
FIRST BANKING CENTER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 2000 and 1999
(Dollars in thousands)
(Unaudited)
<CAPTION>
9/30/00 9/30/99
--------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,465 $3,168
--------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 653 697
Provision for loan losses 270 248
Loans originated for sale (21,507) (40,731)
Proceeds from sale of loans 23,347 47,081
Gain on sale of loans (9) (8)
Amortization and accretion of bond
premiums and discounts - net 37 (81)
Amortization of excess cost over equity in
underlying net assets of subsidiary 78 78
Loss/(Gain) on sale of investment securities 5 (7)
Increase in other assets (804) (585)
Increase in accrued expenses and other liabilities 295 77
--------------------------------
TOTAL ADJUSTMENTS 2,365 6,769
--------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,830 9,937
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase)/decrease in interest-bearing deposits (703) 59
Net decrease in federal funds sold 2,121 6,885
Activity in available for sale securities
Proceeds from sales of available for sale securities 8,669 5,788
Proceeds from maturities of available for sale securities 9,540 60,044
Purchase of available for sale securities (25,156) (66,025)
Net increase in loans (14,486) (38,772)
Purchase of office buildings and equipment (1,061) (550)
Proceeds from disposal of office building and equipment 104 16
--------------------------------
NET CASH USED IN INVESTING ACTIVITIES (20,972) (32,556)
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 15,318 6,753
Dividends paid (474) (432)
Proceeds from other borrowings 0 20,918
Payments on other borrowings (1,706) (12,412)
Net (decrease)/increase in securities sold under
repurchase agreements and federal funds purchased (4,131) 3,058
Proceeds from stock options exercised 0 17
Purchase of treasury stock (403) (239)
Proceeds from reissuance of treasury stock under
stock option plan 38 0
--------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,642 17,663
--------------------------------
Net decrease in Cash and Due From Banks (6,500) (4,956)
Cash and Due From Banks-Beginning of Period 19,123 18,013
--------------------------------
Cash and Due From Banks-End of Period $12,623 $13,057
================================
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $11,106 $9,241
Income taxes $1,000 $1,346
Supplemental schedule of non-cash investing and financing activities:
Net change in unrealized gain (loss) on available for sale securities $454 ($999)
"See accompanying notes to financial statements"
</TABLE>
<PAGE>
FIRST BANKING CENTER, INC AND SUBSIDIARY
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS
September 30, 2000
NOTE 1 - Basis of Presentation
The unaudited consolidated financial statements include the accounts of First
Banking Center, Inc. and its subsidiary (the "Company"). In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operation and cash flows for the interim periods have been made. The results of
operations for the nine months ended September 30, 2000 are not necessarily
indicative of the results to be expected for the entire fiscal year.
The unaudited interim financial statements have been prepared in conformity with
generally accepted accounting principles and industry practice. Certain
information in footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles and
industry practice has been condensed or omitted pursuant to rules and
regulations of the Securities and Exchange Commission. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's December 31, 1999 audited
financial statements.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
which affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements, as
well as the reported amounts of income and expenses during the reported periods.
Actual results could differ from those estimates.
NOTE 2 - Principles of Consolidation
The accompanying consolidated financial statements include the accounts of First
Banking Center, Inc. (the "Company"), a Wisconsin corporation, and its wholly
owned subsidiary, First Banking Center (the "Bank"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
NOTE 3 - Earnings Per Share
The following information was used in the computation of earnings per share on a
basic and diluted basis. Amounts in thousands:
Nine minths ended
September 30,
-----------------
2000 1999
-----------------
Net income, basic and diluted
Earnings $3,465 $3,168
Weighted average common shares
Outstanding 1,470 1,482
Weighted average common shares issuable
upon exercise of stock options and warrants 15 13
Weighted average commmon and common
equivalent shares outstanding 1,485 1,495
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FIRST BANKING CENTER, INC AND SUBSIDIARY
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of September 30, 2000
The following discussion provides additional analysis of the financial condition
and results of operations of the Company for the year-to-date ended September
30, 2000. This discussion focuses on the significant factors that affected the
Company's earnings so far in 2000, with comparisons to 1999. As of September 30,
2000, First Banking Center (the "Bank") was the only direct subsidiary of the
Company and its operations contributed nearly all of the revenue for the year.
The Company provides various support functions for the Bank and receives payment
from the Bank for these services. These inter-company payments are eliminated
for the purpose of these consolidated financial statements. The Bank has two
wholly owned subsidiaries, FBC Financial Services, Corp., a brokerage and
financial services subsidiary, and FBC Burlington, Inc., an investment
subsidiary located in Nevada.
Overview
As of September 30, 2000, total Company assets were $404.9 million increasing
3.3% from $392.1 million as of December 31, 1999. Total income for the first
nine months of 2000 was $ 3.5 million or $2.36 per share, increasing 9.1% from
$3.2 million or $2.14 per share for the first nine months of 1999. The
significant items resulting in the above-mentioned results are discussed below.
Balance sheet analysis
Loans
As of September 30, 2000, loans outstanding were $311.5 million for an increase
of $12.7 million or 4.3% from December 31, 1999. During this nine-month period,
Residential Real Estate loans increased $18.7 million, and Commercial Real
Estate loans increased $766 thousand or 16.9% and 0.9% respectively. At
September 30, 2000, Construction and Land Development loans were at $41.1
million or 13.2% of total loans. Residential Real Estate loans were at $129.5
million or 41.6% of total loans, Commercial loans were at $27.2 million or 8.7%
of total loans, and Commercial Real Estate loans were at $84.4 million or 27.1%
of total loans.
Allowance for Loan Losses
The allowance for possible loan losses was $3.9 million or 1.26% of gross loans
at September 30, 2000, compared with $3.6 million or 1.21% of gross loans at
December 31, 1999. Net recoveries for the nine-month period were $75 thousand or
.024% of gross loans, compared to net charge-offs of $170 thousand or .057% of
gross loans for 1999. As of September 30, 2000, loans on non-accrual status
totaled $1.4 million or .44% of gross loans compared to $1.3 million or .44% of
gross loans at December 31, 1999. The non-accrual loans consisted primarily of
$512 thousand of nonfarm nonresidential properties and $451 thousand of 1-4
family residential real estate loans. At September 30, 2000, the ratio of
non-accrual loans to the allowance for loan losses was 34.8% compared to 35.1%
at December 31, 1999.
The Bank evaluates the adequacy of the allowance for loan losses based on an
analysis of specific problem loans, as well as on an aggregate basis. Management
reviews a calculation of the allowance for loan losses on a quarterly basis and
believes that the allowance for loan losses is adequate. The allowance for loan
loss is maintained at a level management considers adequate to provide for
probable future losses. The level of the allowance is based on management's
periodic and comprehensive evaluation of the loan portfolio, including past loan
loss experience; current economic trends; underlying collateral values: the
volume, growth and composition of the loan portfolio, and other relevant
factors. Management also considers reports of examinations furnished by State
and Federal banking authorities in this regard.
<PAGE>
Investments securities - Available for Sale
The securities available-for-sale portfolio increased $7.6 million or 13.8% from
December 31, 1999 to September 30, 2000. This increase was due primarily to an
increased balance in a money market mutual fund and the purchase of commercial
paper.
Deposits and Borrowed Funds
As of September 30, 2000, total deposits were $321.5 million, which is an
increase of $15.4 million or 5% from December 31, 1999. Certificates of deposits
increased $12.2 million or 10.7% to $126.1 million. Now accounts decreased $3.9
million or 15.3% to $21.4 million. Money market savings and regular savings
deposits increased $9.7 million or 8.4% to $125.1 million. Demand Deposits
decreased $2.7 million or 5.2% to $48.9 million. Securities sold under agreement
to repurchase decreased $4.1 million or 19.5%. Federal Home Loan Borrowings
decreased $2.9 million or 10.2% since December 31, 1999.
Capital resources
During the first nine month of 2000, the Company's stockholders' equity
increased $3.1 million or 9.2%. Net income of $3.5 million was the primary
reasons for the increase in equity. Accumulated other comprehensive loss on
available for sale securities increased $454 thousand to a negative $229
thousand. As of September 30, 2000, a cash dividend of $474 thousand has been
paid.
In December 1990, the Federal Reserve Board's risk-based guidelines became
effective. Under these guidelines capital is measured against the Company's
subsidiary bank's risk-weighted assets. The Company's tier 1 capital (common
stockholders' equity less goodwill) to risk-weighted assets was 11.1% at
September 30, 2000, well above the 4% minimum required. Total capital to
risk-adjusted assets was 12.3%, also well above the 8% minimum requirement. The
leverage ratio was at 8.8% compared to the 4% minimum requirement. According to
the FDIC capital guidelines, the Bank appears to be "well capitalized."
Liquidity
Liquidity measures the ability of the Company to meet obligations and its
existing commitments, to withstand fluctuations in deposit levels, to fund its
operations, and to provide customers' credit needs. The liquidity of the Company
primarily depends upon cash flows from operating, investing, and financing
activities. Net cash provided by operating activities, consisting primarily of
net income and the net proceeds from loans sold, was $ 5.8 million for the nine
months ended September 30, 2000 compared to $9.9 million provided by operating
activities for the same period in 1999. Net cash used in investing activities,
consisting principally of loan originations, was $20.9 million for the nine
months ended September 30, 2000 and $32.5 million for the nine months ended
September 30, 1999. Net cash provided by financing activities, consisting
primarily of deposit growth and net proceeds from Federal Home Loan Bank
advances, for the nine months ended September 30, 2000 was $8.6 million and for
the same period in 1999 was $17.6 million.
Quantitative and Qualitative Disclosures About Market Risk
The Company realizes income principally from the spread between the interest
earned on loans, investments and other interest-earning assets and the interest
paid on deposits and borrowings. Loan volumes and yields, as well as the volume
of and rates on investments, deposits and borrowings, are affected by market
interest rates. Additionally, because of the terms and conditions of many of the
bank's loan and deposit accounts, a change in interest rates could also affect
the projected maturities in the loan portfolio and /or the deposit base, which
could alter the company's sensitivity of future changes in interest rates.
Accordingly, management considers interest rate risk to be a significant market
risk.
Interest rate risk management focuses on maintaining consistent growth in net
interest income within policy limits approved by the board of directors, while
taking into consideration, among other factors, the Company's overall credit,
operating income, operating cost, and capital profile. The Company's
ALM/Investment committee, which includes senior management representatives and
members of the board of directors, monitors and manages interest rate risk to
maintain an acceptable level of change to net interest income as a result of
changes in interest rates.
<PAGE>
One method used to quantify interest rate risk is the net portfolio value
("NPV") analysis. This analysis calculates the difference between the present
value of liabilities and the present values of expected cash flows from assets
and off-balance sheet contracts. The most recent NPV analysis, as of September
30, 2000, projects that net portfolio value would decrease by approximately
21.88% if interest rates would rise 200 basis points over the next year. It
projects an increase in net portfolio value of approximately 27.13% if interest
rates would drop 200 basis points. Both simulations are within board-established
policy limits.
Results of operations
Net Interest Income
Net interest income is the difference between interest income and fees on loans
and interest expense, and is the largest contributing factor to net income for
the Company. All discussions of rate are on a tax-equivalent basis, which
accounts for income earned on securities that are not fully subject to federal
taxes. Net interest income for the first nine months of 2000 was $11.9 million,
increasing 6% over the 1999 level of $11.3 million. Net interest income as a
percentage of average earning assets was 4.59% for the first nine months of 2000
versus 4.55% for the first nine months of 1999.
Total interest income increased $2.6 million as average-earning assets increased
from $344.3 million to $364.4 million or 5.8%. The yields on interest earning
asset increased from 8.13% to 8.66%.
The increase in interest income in 2000 is due primarily to an increase in
interest and fees on loans. Interest and fees on loans increased to $20.5
million or 15.1% from $17.9. The increase in loan income was the result of a
$26.6 million or 9.6% increase in average balances outstanding.
Total interest expense increased $1.9 million. This increase was due to an
increase in average interest bearing deposits of $20.5 million or 8.6% and an
increase in average Federal Home Loan Borrowings of $6.9 million or 32.8%. The
cost of all interest bearing liabilities increased from 4.27% to 4.83%.
Provision for loan losses
The Bank has established the allowance for loan losses to reduce the gross level
of loans outstanding by an estimate of uncollectible loans. As loans are deemed
uncollectible, they are charged against the allowance. A provision for loan
losses is expensed against current income on a monthly basis. This provision
acts to replenish the allowance for loan losses to accommodate charge-offs and
growth in the loan portfolio, thereby maintaining the allowance at an adequate
level.
During the first nine months of 2000 and 1999, $270 thousand and $248 thousand
respectively was charged to current earnings and added to the allowance for loan
losses.
Non-interest income
Non-interest income, during the first nine months of 2000, increased $257
thousand or 12.8% from the first nine months of 1999. This increase is due
primarily to increased income from service charges on deposit accounts, which
increased $95 thousand or 10.6%, Trust Department income which increased $55
thousand or 20.4%, and other income increased $119 thousand or 14.9%. This
increase in other income was the result of a penalty realized on a contract the
bank had with an equipment vendor.
Non-interest expense
Non-interest expense, during the first nine months of 2000, increased from $8.5
million to $9.1 million an increase of $628 thousand or 7.4%. Salaries and
benefits increased $331 thousand or 7%, equipment expense increased $69 thousand
or 7.2%, data processing services increased $67 thousand or 14.8%, occupancy
expense increased $33 thousand or 5.4%, and postage expense increased $14
thousand or 11.1%.
<PAGE>
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
a. No exhibits
b. Form 8-K, Item 4. Changes in Registrant's Certifying
Accountant, was filed with the SEC on September 29, 2000.
<PAGE>
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1943, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Banking Center, Inc.
November 02, 2000
--------------------------------------
Date Brantly Chappell
Chief Executive Officer
November 02, 2000
--------------------------------------
Date James Schuster
Chief Financial Officer
