<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-25983
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First Manitowoc Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-1435359
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(State or other jurisdiction (IRS employer
of incorporation or organization) identification no.)
402 North Eighth Street, Manitowoc, Wisconsin 54220
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(Address of principal executive offices) (Zip code)
(920)684-6611
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Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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
--- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of registrant's common stock, par value $1.00
per share, at October 31, 1999, was 1,734,317 shares.
<PAGE> 2
FIRST MANITOWOC BANCORP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Financial Condition -
September 30, 1999 and December 31, 1998
Consolidated Statements of Income -
Three and Nine Months Ended September 30, 1999 and 1998
Consolidated Statements of Changes in
Stockholders' Equity and Comprehensive Income
Nine Months Ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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
Signatures
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ -----------
(In Thousands, Except Share Data)
<S> <C> <C>
ASSETS
Cash and due from banks $ 9,650 $ 15,215
Federal funds sold and repurchase agreements 104 15,623
Securities available for sale, at fair value 99,209 97,197
Loans, net of unearned income 245,553 228,917
Less: Allowance for loan losses (3,194) (3,124)
----------- -----------
Loans, net 242,359 225,793
Premises and equipment, net 5,566 4,187
Accrued interest receivable and other assets 13,789 9,813
----------- -----------
Total assets $ 370,677 $ 367,828
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $ 38,771 $ 41,374
Interest-bearing deposits 234,101 235,121
----------- -----------
Total deposits 272,872 276,495
Securities sold under repurchase agreements 23,293 24,694
Short-term borrowings 7,677 302
Accrued interest payable and other liabilities 3,534 3,945
Long-term borrowings 28,500 28,500
----------- -----------
Total liabilities 335,876 333,936
Stockholders' equity
Common stock, $1.00 par value; authorized
2,500,000 shares; issued 1,895,907 shares in 1999 and 1998 1,896 1,896
Additional paid-in capital 652 652
Retained earnings 34,289 30,869
Accumulated other comprehensive (loss) income (1,336) 1,175
Treasury stock at cost--161,590 shares in 1999 and 1998 (700) (700)
----------- -----------
Total stockholders' equity 34,801 33,892
----------- -----------
Total liabilities and stockholders' equity $ 370,677 $ 367,828
=========== ===========
</TABLE>
(See accompanying notes to Consolidated Financial Statements.)
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(In Thousands, Except Share Data)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 5,301 $ 5,377 $ 15,434 $15,922
Federal funds sold and repurchase agreements 41 135 248 369
Securities:
Taxable 736 680 2,146 2,135
Tax exempt 669 618 2,005 1,704
------- ------- -------- -------
Total interest income 6,747 6,810 19,833 20,130
INTEREST EXPENSE
Deposits 2,603 2,873 7,854 8,553
Short-term borrowings 303 294 902 878
Long-term borrowings 397 397 1,180 1,207
------- ------- -------- -------
Total interest expense 3,303 3,564 9,936 10,638
------- ------- -------- -------
NET INTEREST INCOME 3,444 3,246 9,897 9,492
Provision for loan losses 150 200 450 420
------- ------- -------- -------
Net interest income after provision for loan losses 3,294 3,046 9,447 9,072
OTHER OPERATING INCOME
Loan fees 14 44 40 137
Trust service fees 126 125 379 385
Service charges on deposit accounts 229 162 685 457
Loan servicing income 70 76 251 176
Gain on sales of mortgage loans held for sale 23 34 120 128
Other 92 84 249 259
------- ------- -------- -------
Total other operating income 554 525 1,724 1,542
OTHER OPERATING EXPENSE
Salaries and employee benefits 1,031 945 3,212 2,963
Occupancy 338 316 856 864
Data processing 181 150 511 471
Postage, stationery and supplies 86 86 284 267
Other 429 369 1,265 1,112
------- ------- -------- -------
Total other operating expense 2,065 1,866 6,128 5,677
------- ------- -------- -------
Income before income tax expense 1,783 1,705 5,043 4,937
Income tax expense 365 397 992 1,186
------- ------- -------- -------
NET INCOME $ 1,418 $ 1,308 $ 4,051 $ 3,751
======= ======= ======== =======
Earnings per share: basic and diluted $ 0.82 $ 0.75 $ 2.34 $ 2.16
</TABLE>
(See accompanying notes to Consolidated Financial Statements.)
<PAGE> 5
ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(UNAUDITED)
Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-in Retained Treasury Comprehensive
Stock Capital Earnings Stock Income Total
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<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $1,895,907 $652,208 $27,059,290 ($700,139) $ 633,901 $29,541,167
Net income 0 0 3,750,808 0 0 3,750,808
Other comprehensive income:
Unrealized holding gain rising
during period 0 0 0 0 982,729 982,729
Income tax effect 0 0 0 0 (327,763) (327,763)
-----------
Comprehensive income $ 4,405,774
Cash dividends ($ .30 per share) 0 0 (541,165) 0 0 (541,165)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1998 $1,895,907 $652,208 $30,268,933 ($700,139) $1,288,867 $33,405,776
</TABLE>
Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-in Retained Treasury Comprehensive
Stock Capital Earnings Stock (Loss) Income Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $1,895,907 $652,208 $30,869,428 ($700,139) $1,174,443 $33,891,847
Cash paid for fractional shares 0 0 (6,527) 0 0 (6,527)
Net income 0 0 4,050,597 0 0 4,050,597
Other comprehensive (loss) income:
Unrealized holding loss rising
during period 0 0 0 0 (3,835,925) (3,835,925)
Income tax effect 0 0 0 0 1,325,250 1,325,250
-----------
Comprehensive income $ 1,539,922
Cash dividends ($ .36 per share) 0 0 (624,377) 0 0 (624,377)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1999 $1,895,907 $652,208 $34,289,121 ($700,139) ($1,336,232) $34,800,865
</TABLE>
<PAGE> 6
ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1999 1998
---- ----
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,051 $ 3,751
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 450 420
Depreciation, amortization, and accretion, net 400 451
Proceeds from sale of mortgage loans held for sale 21,159 22,934
Originations of mortgage loans held for sale (21,039) (21,325)
Undistributed income of joint venture (93) (27)
Increase in accrued interest receivable and other assets (2,443) (2,658)
Increase in accrued interest payable and other liabilities 434 569
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,919 4,115
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities available for sale 36,072 24,879
Purchases of securities available for sale (42,936) (28,240)
Net increase in loans (17,098) (7,575)
Purchases of premises and equipment (1,908) (564)
Sales of premises and equipment 146 168
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Net cash used in investing activities (25,724) (11,332)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits (3,622) 5,061
Net decrease in securities sold under repurchase agreements (1,401) (967)
Proceeds from advances on borrowed funds 7,375 0
Repayments on advances from borrowed funds 0 (2,180)
Dividends paid (631) (541)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,721 1,373
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Net decrease in cash and cash equivalents (21,084) (5,844)
Cash and cash equivalents at beginning of period 30,838 27,533
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Cash and cash equivalents at end of period $ 9,754 $21,689
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Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $10,053 $10,638
Income taxes 1,233 1,206
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Supplemental schedule of noncash investing and financing activities not
described in the notes to the financial statements:
Loans receivable satisfied through foreclosure or
acquisition of deeds in lieu of foreclosure $ 169 $ 0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(See accompanying notes to Consolidated Financial Statements.)
<PAGE> 7
ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly First
Manitowoc Bancorp, Inc.'s ("Corporation") financial position, results of its
operations, changes in stockholders' equity and comprehensive income and cash
flows for the periods presented. All adjustments necessary for the fair
presentation of the consolidated financial statements are of a normal recurring
nature. The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
NOTE 2: The consolidated financial statements include the accounts of all
subsidiaries. The Corporation is a bank holding company that engages in its
business through its sole subsidiary, First National Bank in Manitowoc ("Bank"),
a nationally chartered commercial bank. The Bank has a wholly owned investment
subsidiary, FNBM Investment Corp. All material intercompany transactions and
balances are eliminated. Certain items in the prior period consolidated
financial statements have been reclassified to conform with the September 30,
1999 presentation.
NOTE 3: Investment Securities
The amortized cost and fair values of investment securities available for sale
for the periods indicated were as follows:
Investment Securities
<TABLE>
<CAPTION>
September 30, 1999
Amortized Cost Fair Value
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<S> <C> <C>
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies $ 8,274,663 $ 8,184,289
Obligations of states and political subdivisions 55,399,603 54,236,059
Mortgage-backed securities 35,033,416 34,237,352
Other securities 2,555,112 2,550,970
------------- -----------
Total $ 101,262,794 $99,208,670
============= ===========
<CAPTION>
December 31, 1998
Amortized Cost Fair Value
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<S> <C> <C>
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies $ 5,791,262 $ 5,823,657
Obligations of states and political subdivisions 53,258,501 54,862,422
Mortgage-backed securities 27,473,104 27,622,978
Commercial paper 7,200,000 7,200,000
Other securities 1,693,876 1,688,438
------------- -----------
Total $ 95,416,743 $97,197,495
============= ===========
</TABLE>
<PAGE> 8
NOTE 4: Loan Portfolio
The following table presents the composition of the Bank's loan portfolio by
significant concentration.
<TABLE>
<CAPTION>
Summary of Loan Portfolio
(In Thousands)
September 30, 1999 December 31, 1998
Percent of Percent of
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Commercial and Agricultural $ 84,542 34.43% $ 91,122 39.81%
Commercial Real Estate 57,660 23.48% 38,018 16.61%
Residential Real Estate 88,167 35.91% 85,115 37.18%
Consumer 14,264 5.81% 13,783 6.02%
Other 920 .37% 879 .38%
-------- --------- -------- ---------
Total $245,553 100.00% $228,917 100.00%
======== ========= ======== =========
</TABLE>
The increase in commercial real estate loans of $19.7 million from $38.0 million
at December 31, 1998 to $57.7 million at September 30, 1999 is a result of a
strong customer demand for commercial real estate loans.
NOTE 5: Allowance for Loan Losses
A summary of the changes in the allowance for loan losses for the periods
indicated is as follows:
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
Balance at beginning of period $3,124,109 $2,608,277
Provision charged to expense 450,000 420,000
Charge-offs (402,963) (261,008)
Recoveries 23,262 29,408
---------- ----------
Balance at end of period $3,194,408 $2,796,677
========== ==========
</TABLE>
NOTE 6: Business Segments
On January 1, 1998, the Corporation adopted SFAS No. 131, Disclosures about
Segments of a Business Enterprise and Related Information (SFAS No. 131). SFAS
No. 131 establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. SFAS No. 131 defines a
operating segment as a component of an enterprise that engages in business
activities that generate revenue and incur expense. A segment is further defined
as a component whose operating results are reviewed by the chief operating
decision maker in the determination of resource allocation and performance, and
for which discrete financial information is available.
SFAS No. 131 replaces the industry concept of SFAS No. 14 with a management
approach concept as the basis for identifying reportable segments. The
management approach is based on the way that management organizes the segments
within the enterprise for making operating decisions and assessing performance.
Consequently, the segments are evident from the structure of the enterprise's
internal organization, focusing on financial information that an enterprise's
chief operating decision maker uses to make decisions about the enterprise's
operating matters.
<PAGE> 9
The Corporation through the branch network of its subsidiaries provides a broad
range of financial services to individuals and companies in northeastern
Wisconsin. These services include demand, time, and savings deposits; commercial
and retail lending; ATM processing; and trust services. While the Corporation's
chief decision maker monitors the revenue streams of the various products and
services, operations are managed and financial performance is evaluated on a
Corporate-wide basis. Accordingly, all of the Corporation's operations are
considered by management to be aggregated in one reportable operating segment.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE
RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements have been made by First Manitowoc Bancorp, Inc. (the
"Corporation") in this document that are subject to risks and uncertainties.
These forward-looking statements, which are included in Management's Discussion
and Analysis, describe future plans or strategies and include the Corporation's
expectations of future results of operations. The words "believes," "expects,"
"anticipates" or similar expressions identify forward-looking statements.
Shareholders should note that many factors, some of which are discussed
elsewhere in this document could affect the future financial results of the
Corporation and could cause those results to differ materially from those
expressed in forward-looking statements contained in this document. These
factors include the following:
- operating, legal and regulatory risks;
- economic, political and competitive forces affecting the
Corporation's banking, securities, asset management and credit
services businesses; and
- the risk that the Corporation's analyses of these risks and
forces could be incorrect and/or that the strategies developed to
address them could be unsuccessful.
These factors should be considered in evaluating the forward-looking statements,
and undue reliance should not be placed on such statements. The Corporation does
not undertake and specifically disclaims any obligation to update any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
The purpose of this discussion is to focus on information about the
Corporation's financial condition and results of operations that are not
otherwise apparent from the consolidated financial statements included in this
report. Reference should be made to those statements presented elsewhere in this
report for an understanding of the following discussion and analysis.
<PAGE> 10
EARNINGS
Net Income
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income $1,418 $1,308 $4,051 $3,751
EPS-Basic & Diluted $ .82 $ .75 $ 2.34 $ 2.16
Return on Average Assets 1.53% 1.49% 1.46% 1.42%
Return on Average Equity 16.42% 16.09% 15.73% 15.89%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
All per share financial information has been adjusted to reflect the five for
four stock dividend declared on April 16, 1999. Weighted average shares
outstanding were 1,734,317 for the nine months ended September 30, 1999 and
1998.
Net income for the three months ended September 30, 1999 was $1,418,000 compared
to $1,308,000 for the three months ended September 30, 1998, an increase of
$110,000, or 8.4%. Interest income decreased $63,000 as a result of decreased
interest rates on loans while interest expense on deposits decreased $261,000 as
a result of decreased interest paid on deposits. Other operating income
increased $29,000 primarily as a result of increased service charges on deposit
accounts due to the assessment of service charges on negative collected balances
and collection of automated teller machine fees. Other operating expense
increased $199,000 as a result of increased salaries and employee benefits
expense due to annual merit increases in wages for employees in addition to the
salaries related to the new staff at the brand new office in New Holstein,
Wisconsin. Other operating expenses also increased due to increased regulatory
fees, increased insurance expense, and increased marketing expense related to
the new offices in Kiel and New Holstein, Wisconsin, which opened in July, 1999.
Earnings per share for the three months ended September 30, 1999 was $0.82
compared to $0.75 for the three months ended September 30, 1998.
Net income for the nine months ended September 30, 1999 was $4,051,000 compared
to $3,751,000 for the nine months ended September 30, 1998, an increase of
$300,000, or 8.0%. Interest income decreased $297,000 as a result of decreased
interest rates on loans while interest expense on deposits decreased $702,000 as
a result of decreased interest rates paid on deposits. Other operating income
increased $182,000 primarily from increases in mortgage loan servicing income
and service charges on deposits. Mortgage loans serviced for others increased
$21,100,000 from September 30, 1998 to September 30, 1999. Service charges
increased due to assessment of service charges on negative collected balances
and collection of automated teller machine fees which began late in the first
quarter of 1998. Other operating expense increased $451,000 as a result of
increased salaries and employee benefits due to annual merit increases in wages
for employees in addition to the salaries related to the new staff at the brand
new office in New Holstein, Wisconsin. Other operating expense also increased
due to increased regulatory fees, increased supplies expense, increased
insurance expense, premiums on new directors' life insurance policies, increased
software expense, and increased marketing expense related to the new offices in
Kiel and New Holstein, Wisconsin, which opened in July, 1999. Earnings per share
for the nine months ended September 30, 1999 was $2.34 compared to $2.16 for the
nine months ended September 30, 1998.
Return on average assets (ROA) on an annualized basis for the third quarter of
1999 was 1.53% compared to 1.49% for the third quarter in 1998. Return on
average equity (ROE) on an annualized basis for the third quarter of 1999 was
16.42% compared to 16.09% for the third quarter of 1998.
Return on average assets (ROA) on an annualized basis for the first nine months
of 1999 was 1.46% compared to 1.42% for the first nine months of 1998. Return on
average equity (ROE) on an annualized basis for the first nine months of 1999
was 15.73% compared to 15.89% for the first nine months of 1998.
<PAGE> 11
The following Tables 1 and 2 include Bank only financial information.
Table 1
Average Balances, Yield and Rates
<TABLE>
<CAPTION>
For the nine months For the nine months
ended September 30, 1999 ended September 30, 1998
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold $ 5,290,000 $ 247,642 6.26% $ 7,417,000 $ 368,968 6.65%
Investment securities 101,273,000 5,193,222 6.86% 89,863,000 4,725,181 7.03%
Loans 234,814,000 15,669,838 8.92% 230,143,000 16,189,825 9.41%
------------ ----------- ------------ -----------
Total interest earning assets $341,377,000 $21,110,702 8.27% $327,423,000 $21,283,974 8.69%
Other assets 19,712,000 17,073,000
------------ ------------
TOTAL ASSETS $361,089,000 $344,496,000
============ ============
LIABILITIES
Interest-bearing liabilities:
Interest-bearing deposits $233,221,000 $ 7,869,379 4.51% $227,064,000 $ 8,567,557 5.04%
Repurchase agreements 23,365,000 832,493 4.76% 21,197,000 833,300 5.26%
Federal funds purchased 1,086,000 33,890 4.17% 71,000 3,087 5.81%
Borrowings 29,530,000 1,214,906 5.50% 30,128,000 1,249,771 5.55%
------------ ----------- ------------ -----------
Total interest-bearing liabilities $287,202,000 $ 9,950,668 4.63% $278,460,000 $10,653,715 5.12%
Demand deposits 37,434,000 32,932,000
Other liabilities 3,502,000 3,685,000
------------ ------------
Total liabilities $328,138,000 $315,077,000
Stockholders' equity 32,951,000 29,419,000
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $361,089,000 $344,496,000
============ ============
Net interest income and
interest rate spread $11,160,034 3.64% $10,630,259 3.57%
Net interest income as
a percent of earning assets 4.37% 4.34%
</TABLE>
<PAGE> 12
Table 2
Average Balances, Yield and Rates
<TABLE>
<CAPTION>
For the nine months For the nine months
ended September 30, 1999 ended September 30, 1998
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold $ 2,003,000 $ 40,998 8.12% $ 7,898,000 $ 135,074 6.79%
Investment securities 100,034,000 1,752,133 6.95% 90,402,000 1,619,603 7.11%
Loans 240,480,000 5,390,475 8.89% 231,551,000 5,472,401 9.38%
------------ ---------- ------------ ----------
Total interest earning assets $342,517,000 $7,183,606 8.32% $329,851,000 $7,227,078 8.69%
Other assets 21,386,000 17,506,000
------------ ------------
TOTAL ASSETS $363,903,000 $347,357,000
============ ============
LIABILITIES
Interest-bearing liabilities:
Interest-bearing deposits $233,927,000 $2,607,295 4.42% $227,857,000 $2,878,616 5.01%
Repurchase agreements 23,607,000 279,745 4.70% 20,836,000 276,368 5.26%
Federal funds purchased 894,000 9,107 4.04% 202,000 3,072 6.03%
Borrowings 29,613,000 411,398 5.51% 29,591,000 412,673 5.53%
------------ ---------- ------------ ----------
Total interest-bearing liabilities $288,041,000 $3,307,545 4.56% $278,486,000 $3,570,729 5.09%
Demand deposits $ 39,300,000 $ 34,598,000
Other liabilities 3,591,000 3,839,000
------------ ------------
Total liabilities $330,932,000 $316,923,000
Stockholders' equity 32,971,000 30,434,000
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $363,903,000 $347,357,000
============ ============
Net interest income and
interest rate spread $3,876,061 3.77% $3,656,349 3.61%
Net interest income as
a percent of earning assets 4.49% 4.40%
</TABLE>
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income is the principal source of earnings for a banking company.
It represents the differences between interest and fees earned on the loan and
investment portfolios offset by the interest paid on deposits and borrowings.
The nine months ended September 1999 and 1998 have been characterized by
generally declining interest rates. Because deposits and loans and other
investments reprice at different rates and as a result of changes in volume, the
Bank's net interest income, on a fully tax equivalent basis, increased in 1999
and 1998.
Net interest margin is calculated as tax equivalent net interest income divided
by average earning assets and represents the Bank's net yield on its earning
assets.
<PAGE> 13
THIRD QUARTER 1999 COMPARED TO THIRD QUARTER 1998:
Net interest income (on a tax equivalent basis) for the three months ended
September 30, 1999 increased by $219,712 or 6.0% compared to the three months
ended September 30, 1998. The interest rate spread, which is the difference
between the average yield on interest earning assets and the average rate paid
on interest bearing liabilities, was 3.77% for the three months ended September
30, 1999, an increase of 16 basis points over the interest rate spread of 3.61%
for the three months ended September 30, 1998.
Net interest margin for the three months ended September 30, 1999 was 4.49%
compared with 4.40% for the three months ended September 30, 1998.
YTD THIRD QUARTER 1999 COMPARED TO YTD THIRD QUARTER 1998:
Net interest income (on a tax equivalent basis) for the nine months ended
September 30, 1999 increased by $529,775 or 5.0% compared to the nine months
ended September 30, 1998. The interest rate spread was 3.64% for the nine months
ended September 30, 1998, an increase of 7 basis points over the interest rate
spread of 3.57% for the nine months ended September 30, 1998.
Net interest margin for the nine months ended September 30, 1999 was 4.37%
compared with 4.34% for the nine months ended September 30, 1998.
The following table represents consolidated financial information.
NET INTEREST INCOME
Net Interest Income
(In Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income $6,747 $6,810 $19,833 $20,130
Interest Expense 3,303 3,564 9,936 10,638
------ ------ ------- -------
Net Interest Income $3,444 $3,246 $ 9,897 $ 9,492
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
THIRD QUARTER 1999 COMPARED TO THIRD QUARTER 1998:
Net interest income for the Corporation for the third quarter of 1999 was
$3,444,000 compared to $3,246,000 for the third quarter of 1998, an increase of
$198,000, or 6.1%. Total interest income decreased $63,000 while total interest
expense on deposits decreased $261,000, causing net interest income to increase.
Total interest income decreased as a result of decreased interest rates on loans
which decreased from 9.38% to 8.39% for the third quarter of 1998 compared to
the third quarter of 1999, respectively, despite an increase in the average loan
balance which increased from $231,551,000 to $240,480,000 for the same period.
Total interest expense on rates paid on interest bearing deposits decreased from
5.01% to 4.42% for the third quarter of 1998 compared to the third quarter of
1999, respectively, due to decreased interest paid on a larger volume of
interest bearing deposits.
YTD THIRD QUARTER 1999 COMPARED TO YTD THIRD QUARTER 1998:
Net interest income for the Corporation for the first nine months of 1999 was
$9,897,000 compared to $9,492,000 for the first nine months of 1998, an increase
of $405,000, or 4.3%. Total interest income decreased $297,000 while total
interest expense on deposits decreased $702,000, causing net interest income to
increase. Total interest income decreased as a result of decreased interest
rates on loans which decreased from 9.41% to 8.92% for the nine months ended
September 30, 1998 compared to the nine months ended September 30, 1999,
respectively, despite an increase in the average loan balance which increased
from $230,143,000 to $234,814,000 for the same period. Total interest expense on
rates paid on interest bearing deposits decreased from 5.04% to 4.51% for the
nine months ended September 30, 1998 compared to the nine months ended September
30, 1999, respectively, due to decreased interest paid on a larger volume of
interest bearing deposits.
<PAGE> 14
PROVISION AND ALLOWANCE FOR LOAN LOSSES
For the three months ended September 30, 1999, the Bank charged $150,000 to
expense for the provision for loan loss compared to $200,000 for the three
months ended September 30, 1998. For the nine months ended September 30, 1999,
the Bank charged $450,000 to expense for the provision for loan loss compared to
$420,000 for the nine months ended September 30, 1998. The increase in the
provision for loan loss for the nine months ended September 30, 1999 is the
result of the identification of a specific commercial loan totaling $474,000
that was placed on non-accrual in the first quarter of 1999. A portion of this
loan was subsequently charged-off in the third quarter of 1999 in the amount of
$300,000. This is an isolated occurrence and there are no trends in economic,
industrial, geographical or other factors responsible for the increase in the
provision for loan loss.
Allowance for Loan Losses
(In Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period $3,373 $2,712 $3,124 $2,608
Charge-offs 334 6 403 8
Recoveries 5 8 23 24
Net charge-offs (recoveries) 329 (2) 380 (16)
Provision for loan losses 150 130 450 220
------ ------ ------ ------
Balance at end of period $3,194 $2,844 $3,194 $2,844
Ratio of net charge-offs during period to
average loans outstanding during period .14% ---- .16% ----
Ratio of allowance for loan losses
to total loans 1.28% 1.22% 1.28% 1.22%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
There are several factors that are included in the analysis of the adequacy of
the allowance for loan losses. Management considers loan volume trends, levels
and trends in delinquencies and non-accruals, current problem credits, national
and local economic trends and conditions, concentrations of credit by industry,
current and historical levels of charge-offs, the experience and ability of the
lending staff, and other miscellaneous factors. Management has determined the
allowance for loan losses is adequate to absorb estimated credit losses in its
loan portfolio as of September 30, 1999 based on its most recent evaluation of
these factors.
The factor of loan volume trends is based on actual lending activity. The loan
volume trends factor is for estimated losses that are believed to be inherently
part of the loan portfolio but that have not yet been identified as specific
problem credits. The factor current problem credits includes the exposure
believed to exist for specifically identified problem loans determined on a
loan-by-loan basis.
<PAGE> 15
A table showing the allocation of allowance for loan losses is shown below.
Allocation of Allowance for Loan Losses
(In Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
September 30, December 31,
1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Specific Problem Loans $ 570 $ 516
Loan Type Allocation:
Commercial & Agricultural 2,090 2,087
Commercial Real Estate 150 127
Residential Real Estate 74 76
Consumer 53 16
------ ------
2,367 2,306
Unallocated 257 302
------ ------
Total Reserve $3,194 $3,124
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Specific problem loans includes the factor of current problem credits for the
exposure of specifically identified problem loans. Loan volume allocation
includes the factor of loan volume trends, with management's goal for this
factor to maintain an adequate loan loss reserve for outstanding loans less the
specifically identified current problem credits. The allocation of the allowance
among the various loan types is based on the average proportion of the loan
types that make up the specific problem loans. The unallocated portion of the
allowance consists of the other factors included in the analysis because those
factors cannot be identified to specific loans or loan categories.
The allocation and total for the allowance for loan losses is not to be
interpreted as a single year's exposure for loss nor the loss for any specified
time period.
NONPERFORMING LOANS
It is the policy of the Bank to place a loan in non-accrual status whenever
there is substantial doubt about the ability of a borrower to pay principal or
interest on any outstanding credit. Management considers such factors as payment
history, the nature and value of collateral securing the loan and the overall
economic situation of the borrower when making a non-accrual decision.
Non-accrual loans are closely monitored by management. A non-accruing loan is
restored to current status when the prospects of future contractual payments are
no longer in doubt.
Total nonperforming loans at September 30, 1999 were $1,602,000, an increase of
$516,000 from December 31, 1998. The increase occurred primarily due to two
commercial loans and one residential real estate loan. These are isolated
accounts and no trends in economic, industrial, geographical or other factors
are evident. The following table presents nonperforming and nonaccrual loan
information.
Nonperforming Loans
(In Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
September 30, December 31,
1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual Loans $1,515 $ 927
Accruing Loans Past Due 90 days or More 87 159
------ ------
Total Nonperforming Loans $1,602 $1,086
Nonperforming Loans as a Percent of Loans .65% .47%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 16
OTHER OPERATING INCOME
Other Operating Income
(In Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loan Fees $ 14 $ 44 $ 40 $ 137
Trust Service Fees 126 125 379 385
Service Charges on Deposit Accounts 229 162 685 457
Loan Servicing Income 70 76 251 176
Gain on Sales of Mortgage Loans Held for Sale 23 34 120 128
Other 92 84 249 259
---------------------------------------------------------
Total Other Operating Income $ 554 $ 525 $ 1,724 $1,542
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
THIRD QUARTER 1999 COMPARED TO THIRD QUARTER 1998:
Other operating income for the third quarter of 1999 was $554,000 compared to
$525,000 for the third quarter of 1998, an increase of $29,000 or 5.5%. The
increase resulted primarily from increased service charges on deposit accounts
due to the assessment of service charges on negative collected balances and
collection of automated teller machine fees. The decrease in gains on sales of
mortgage loans held for sale is a result of a decrease in the number of new
residential mortgage loans and refinancings processed and sold to the FNMA
secondary market during the third quarter of 1999. The decrease in loan fees is
a result of the strong competition for loans which has reduced loan origination
fees charged to customers.
YTD THIRD QUARTER 1999 COMPARED TO YTD THIRD QUARTER 1998:
Other operating income for the nine months ended September 30, 1999 was
$1,724,000 compared to $1,542,000 for the nine months ended September 30, 1998,
an increase of $182,000, or 11.8%. The increase resulted primarily from
increases in mortgage loan servicing income and service charges on deposits.
Mortgage loans serviced for others increased $21,100,000 from September 30, 1998
to September 30, 1999. The related mortgage servicing rights asset increased
from $316,372 at September 30, 1998 to $477,127 at September 30, 1999. Service
charges increased due to assessment of service charges on negative collected
balances and collection of automated teller machine fees which began late in the
first quarter of 1998. The decrease in loan fees is a result of the strong
competition for loans which has reduced loan origination fees charged to
customers.
OTHER OPERATING EXPENSE
Other Operating Expense
(In Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and Employee Benefits $1,031 $ 945 $3,212 $2,963
Occupancy 338 316 856 864
Data Processing 181 150 511 471
Postage, Stationery and Supplies 86 86 284 267
Other 429 369 1,265 1,112
------ ------ ------ ------
Total Other Operating Expense $2,065 $1,866 $6,128 $5,677
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
THIRD QUARTER 1999 COMPARED TO THIRD QUARTER 1998:
Other operating expense for the third quarter of 1999 was $2,065,000 compared to
$1,866,000 for the third quarter of 1998, an increase of $199,000, or 10.7%.
Salaries and employee benefits expense increased due to annual merit increases
in wages for employees in addition to the salaries related to the new staff at
the brand new office in New Holstein, Wisconsin. Other expense increased due to
increased regulatory fees, increased insurance expense, and increased marketing
expense related to the new offices in Kiel and New Holstein, Wisconsin, which
opened in July, 1999.
YTD THIRD QUARTER 1999 COMPARED TO YTD THIRD QUARTER 1998:
Other operating expense for the first nine months of 1999 was $6,128,000
compared to $5,677,000 for the first nine months of 1998, an increase of
$451,000, or 7.9%. Salaries and employee benefits expense increased due to
annual merit increases in wages for employees in addition to the impact of an
increase that hourly employees received in their wages in July 1998. This also
reflects the salaries of the new staff at the brand new office in New Holstein,
Wisconsin. Other expense increased due to increased regulatory fees, increased
supplies expense, increased insurance expense, premiums on new directors' life
insurance policies, increased software expense, and increased marketing expense
related to the new offices in Kiel and New Holstein, Wisconsin, which opened in
July, 1999.
INCOME TAXES
The effective tax rate for the three months ended September 30, 1999 was 20.47%
compared to 23.28% for the three months ended September 30, 1998. For the nine
months ended September 30, 1999, the effective tax rate was 19.67% compared to
24.02% for the nine months ended September 30, 1998. The decrease in effective
tax rates in both periods is a direct result of loans and securities transferred
from the Bank to the Bank's FNBM Investment Corp. subsidiary which are not
subject to state income tax.
BALANCE SHEET
SEPTEMBER 30, 1999 COMPARED TO DECEMBER 31, 1998
The Corporation's total assets increased from $367.8 million at December 31,
1998 to $370.7 million at September 30, 1999. This increase occurred primarily
due to a $19.4 million increase in the loan portfolio primarily funded by a
$15.5 million decrease in federal funds sold and repurchase agreements in
addition to an increase of federal funds purchased of $7.4 million. The increase
in loans is a result of a strong customer demand for commercial real estate
loans.
Deposits decreased $3.6 million to $272.9 million at September 30, 1999 from
$276.5 million at December 31, 1998. Short-term borrowings increased $7.4
million from $.3 million at December 31, 1998 to $7.7 million at September 30,
1999. The decrease in deposits was a result of strong competition for interest
bearing certificates of deposit. The increase in short-term borrowings was a
result of the borrowing of federal funds purchased in order to fund the increase
in loans, as noted above.
LIQUIDITY MANAGEMENT
Liquidity describes the ability of the Bank to meet financial obligations that
arise out of the ordinary course of business. Liquidity is primarily needed to
meet borrowing and deposit withdrawal requirements of the customers of the Bank
and to fund current and planned expenditures. The Bank maintains its asset
liquidity position internally through cash and cash equivalents, short term
investments, the maturity distribution of the investment portfolio, loan
repayments and income from earning assets. A substantial portion of the
investment portfolio contains readily marketable securities that could be
converted to cash immediately. On the liability side of the balance sheet,
liquidity is affected by the timing of maturing liabilities and the ability to
generate new deposits or borrowings as needed. Other sources are available
through borrowings from the Federal Reserve Bank, the Federal Home Loan Bank and
from lines of credit approved at correspondent banks. Management knows of no
trend or event which will have a material impact on the Bank's ability to
maintain liquidity at satisfactory levels.
<PAGE> 18
CAPITAL RESOURCES AND ADEQUACY
Capital
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
September 30, December 31,
1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stockholders' Equity $34,801 $33,892
Tier 1 Capital to Risk Weighted Assets-Period End 13.1% 12.4%
Total Capital to Risk Weighted Assets-Period End 14.4% 13.6%
Tier 1 Leverage Ratio-Period End 9.3% 8.5%
Dividends Per Share-This Quarter $ .12 $ .16
Dividends Per Share-Year to Date .36 .46
Earnings Per Share-This Quarter $ .82 $ .50
Earnings Per Share-Year to Date 2.34 2.66
Dividend Payout Ratio-This Quarter 14.6% 32.0%
Dividend Payout Ratio-Year to Date 15.4% 17.3%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Total stockholders' equity increased $909,000 from $33.9 million at December 31,
1998 to $34.8 million at September 30, 1999. Net income for the nine month
period ending September 30, 1999 of $4.1 million was offset by a net unrealized
holding loss arising during the period of $2.5 million related to the investment
securities available for sale.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier 1
capital to risk-weighted assets, and of Tier 1 capital to average assets.
Management believes, as of September 30, 1999 and December 31, 1998, that the
Bank meets all capital adequacy requirements to which it is subject.
As of September 30, 1999 and December 31, 1998, the most recent notification
from the Office of the Comptroller of Currency and the Federal Deposit Insurance
Corporation categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1
leverage ratios. There are no conditions or events since that notification that
management believes have changed the institution's category.
YEAR 2000
The Bank has followed the five phases recommended by the Federal Financial
Institutions Examination Council (FFIEC) to manage its Year 2000 project. The
phases are awareness, assessment, renovation, validation and implementation. The
Bank has fully completed all five phases.
The Bank's mainframe computer and the software that run it are year 2000
compliant; that is, they have been successfully tested by advancing the
mainframe's internal calendar to and through the year 2000. All Mission Critical
Systems have been tested and found to be compliant in the year 2000 environment.
Non-critical Systems have been found to be compliant. Testing of Non-critical
Systems is complete. The entire inventory of software has been reviewed to
assess the impact of the year 2000. The software that needed to be replaced has
been replaced and all software is now Year 2000 compliant.
In addition, the Bank has reviewed all non-information technology and equipment
systems. Non-information technology systems include all other business equipment
other than computer hardware, software and peripheral devices, such as automated
teller machines, modems and routers. Non-information technology equipment
includes security devices, time clocks, heating and air conditioning systems,
elevators, telephones and fax machines. Testing of non-information technology
and equipment systems is complete and are Year 2000 compliant.
<PAGE> 19
The Bank recognizes that its customers will be affected by the Year 2000 issues.
As a result, the Bank has contacted its significant business loan customers to
make them aware of the Year 2000 issues and to assess their readiness. The Bank
realizes that if its customers experience Year 2000 business interruptions there
may be more exposure to the Bank. Over 90% of the Bank's significant business
loan customers responded to the Year 2000 inquiries. Of those, over 92% claim to
be Year 2000 compliant. The responses were reviewed, ranked by degree of risk,
and quantified. Based on the low level of risk, no additional follow up was
deemed necessary. At this time, the Bank does not believe there is any
enforceability of any assurances from significant third parties or business loan
customers. The Bank has included the Year 2000 credit risk into its allowance
for loan losses. The Bank will continue its customer awareness efforts
throughout 1999, including utilizing the local radio and cable television media.
The Bank does not expect its Year 2000 compliance costs to be significant.
Equipment upgrades were made to take advantage of current technology in the
ordinary course of business and not solely as a result of the Year 2000 issue.
Costs related solely to Year 2000 compliance are estimated at $120,000. Year
2000 compliance costs incurred through September 30, 1999 were $103,000.
A business resumption contingency plan has been established to address worst
case scenarios should they occur with the Year 2000 issue. The worst case
scenarios would be that all communications would be lost. If communications are
lost, the Bank would function in an "off-line" standby mode which would create
documents that could be done during evening batch processing at the Bank's data
processing center. Customer balances would be available the following morning.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
and Hedging Activities (SFAS 133). SFAS 133 established accounting and reporting
standards requiring that all derivative financial instruments be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement further requires that changes in a derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges typically allows a derivative's
gains and losses to offset related results in the hedged item in the income
statement and requires that the Corporation formally document, designate and
assess the effectiveness of transactions that receive hedge accounting
treatment.
In June 1999, the FASB issued SFAS No. 137 which extended the effective date of
SFAS 133 by one year to apply to fiscal years beginning after September 15,
2000. The Corporation may implement the statement as of the beginning of any
quarter after issuance, however it cannot be applied retroactively. SFAS 133
must be applied to derivative financial instruments that were issued, acquired
or substantially modified after December 31, 1997.
In the opinion of management, the Corporation currently has no derivative
financial instruments. The adoption of SFAS Nos. 133 and 137 is not expected to
have a material effect on the Corporation's financial position, results of
operations or liquidity.
RECENT DEVELOPMENTS
On August 19, 1999, the Corporation entered into an agreement and plan of merger
with Dairy State Financial Services, Inc. ("Dairy State"), providing for the
merger of Dairy State with a wholly owned subsidiary of the Corporation.
Following the merger, Dairy State will be liquidated and Dairy State Bank,
Plymouth, Wisconsin, Dairy State's Wisconsin chartered bank subsidiary will
merge with and into First National Bank in Manitowoc, the Corporation's national
bank subsidiary. The Corporation anticipates the merger will be consummated
during the fourth quarter of 1999. Consummation of the merger is subject to
certain conditions, including, but not limited to, approval of the agreement by
Dairy State's shareholders and the receipt of all required regulatory approvals.
According to the terms of the merger agreement, as a result of the merger, Dairy
State shareholders will receive cash in the amount of $4,662.33 for each of the
2,900 shares of outstanding common stock of Dairy State or an aggregate of
$13,520,757.00. The Corporation has also entered into a voting agreement with
the holders of a majority of the outstanding shares of common stock of Dairy
State in which such shareholders agree to vote their shares in favor of the
transaction. The Corporation will account for the merger using the purchase
method of accounting.
<PAGE> 20
Based on the asset size of Dairy State, the Corporation was not required to
disclose pro forma financial statements. The Corporation filed Form 8-K on
September 7, 1999 disclosing the acquisition. As of September 30, 1999, total
assets of Dairy State Bank were $66,287,000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change to the market risk position at September 30,
1999 from that disclosed as of December 31, 1998 in the Corporation's
Registration Statement on Form 10 filed with the Securities and Exchange
Commission on May 5, 1999.
<PAGE> 21
FIRST MANITOWOC BANCORP, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Corporation nor any of its subsidiaries is involved in any
pending legal proceedings involving amounts in which management believes are
material to the financial condition and results of operations of the
Corporation.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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) Exhibits:
27.1 Financial Data Schedule
b) Reports on Form 8-K:
On September 7, 1999, the Corporation filed Form 8-K regarding a
prospective acquisition. The Corporation has entered into an agreement
and plan of merger with Dairy State Financial Services, Inc. ("Dairy
State"), providing for the merger of Dairy State with a wholly owned
subsidiary of the Corporation. Following the merger, Dairy State will
be liquidated and Dairy State Bank, Plymouth, Wisconsin, Dairy State's
Wisconsin chartered bank subsidiary, will merge with and into First
National Bank in Manitowoc, the Corporation's national bank
subsidiary.
There were no other reports on Form 8-K filed for the quarter ended
September 30, 1999.
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST MANITOWOC BANCORP, INC.
(Registrant)
Date: November 10, 1999 --------------------------------------------
Thomas J. Bare
President
Date: November 10, 1999 --------------------------------------------
Paul H. Wojta
Vice President and Cashier
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 9,649,659
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 103,831
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 99,208,670
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 248,355,827
<ALLOWANCE> 3,194,408
<TOTAL-ASSETS> 370,677,325
<DEPOSITS> 272,872,175
<SHORT-TERM> 30,970,022
<LIABILITIES-OTHER> 3,534,263
<LONG-TERM> 28,500,000
0
0
<COMMON> 1,895,907
<OTHER-SE> 32,904,958
<TOTAL-LIABILITIES-AND-EQUITY> 370,677,325
<INTEREST-LOAN> 15,434,419
<INTEREST-INVEST> 4,150,840
<INTEREST-OTHER> 247,642
<INTEREST-TOTAL> 19,832,901
<INTEREST-DEPOSIT> 7,854,889
<INTEREST-EXPENSE> 9,936,178
<INTEREST-INCOME-NET> 9,896,723
<LOAN-LOSSES> 450,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,127,526
<INCOME-PRETAX> 5,042,514
<INCOME-PRE-EXTRAORDINARY> 5,042,514
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,050,597
<EPS-BASIC> 2.34
<EPS-DILUTED> 2.34
<YIELD-ACTUAL> 4.37
<LOANS-NON> 1,515,312
<LOANS-PAST> 87,222
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,248,714
<ALLOWANCE-OPEN> 3,124,109
<CHARGE-OFFS> 402,963
<RECOVERIES> 23,262
<ALLOWANCE-CLOSE> 3,194,408
<ALLOWANCE-DOMESTIC> 2,937,408
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 257,000
</TABLE>
