<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 1998
or
[ ] 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 0-21292
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1413328
- ------------------------------------------------ ----------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification Number)
14100 West National Avenue, PO Box 511160
New Berlin, Wisconsin 53151-1160
- --------------------------------------------------------------------------------
(Address of principal executive office)
(414) 827-6713
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code:
- --------------------------------------------------------------------------------
(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
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, par value $1.00 per share 1,364,698 (split adjusted) Shares
- ---------------------------------------- ---------------------------------
Class Outstanding at May 1, 1998
<PAGE> 2
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
FORM 10-Q
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition as
of March 31, 1998 and December 31, 1997 3
Unaudited Consolidated Statements of Income for the Three
Months ended March 31, 1998 and 1997 4
Unaudited Consolidated Statements of Cash Flows for the
Three Months ended March 31, 1998 and 1997 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk 14
PART II. OTHER INFORMATION
Items 1-6 16
Signatures 17
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ---------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 12,393 $ 10,694
Interest-bearing deposits at other banks 1,052 821
Federal funds sold 12,168 3,843
--------- ---------
Cash and cash equivalents 25,613 15,358
Securities available-for-sale at fair value:
Investment securities 12,568 12,649
Mortgage-related securities 33,156 28,169
Loans receivable 222,059 227,178
Accrued interest receivable 1,656 1,553
Federal Home Loan Bank stock 1,050 1,050
Premises and equipment 8,937 8,891
Other assets 2,289 1,830
--------- ---------
Total assets $ 307,228 $ 296,678
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 274,610 $ 264,669
Borrowings 1,250 1,500
Accrued interest payable 362 332
Advance payments by borrowers for taxes and insurance 444 179
Other liabilities 643 502
--------- ---------
Total liabilities 277,309 267,182
Stockholders' equity
Common stock $1.00 par value; 1,500,000 authorized;
shares issued: 1,365,449--1998; 1,355,850--1997; shares
outstanding: 1,362,403--1998; 1,355,460--1997 1,365 1,356
Additional paid in capital 10,846 10,556
Net unrealized gain on securities available-for-sale 62 19
Retained earnings 17,742 17,574
Treasury stock, at cost (3,046 shares--1998; 390
shares--1997) (96) (9)
--------- ---------
Total stockholders' equity 29,919 29,496
--------- ---------
Total liabilities and stockholders' equity $ 307,228 $ 296,678
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE> 4
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1998 1997
------------ ------------
<S> <C> <C>
Interest income:
Loans, including fees $ 4,837 $ 4,141
Investment securities:
Taxable 195 243
Exempt from federal income taxes 11 0
Mortgage-related securities 479 380
Other 109 182
--------- ----------
Total interest income 5,631 4,946
Interest expense:
Deposits 2,487 2,057
Borrowings 25 111
--------- ----------
Total interest expense 2,512 2,168
Net interest income 3,119 2,778
Provision for loan losses 75 48
--------- ----------
Net interest income after provision for
loan losses 3,044 2,730
Noninterest income:
Service charges on deposit accounts 187 166
Service charges on loans 22 15
Net gain on securities sales 0 43
Other 241 172
--------- ----------
450 396
Noninterest expenses:
Salaries and employee benefits 1,806 1,620
Premises and equipment 421 332
Data processing fees 157 150
Federal deposit insurance premiums 19 18
Other 562 505
--------- ----------
2,965 2,625
Income before income taxes 529 501
Income taxes 180 196
--------- ----------
Net income $ 349 $ 305
========= ==========
Basic earnings per share $ 0.26 $ 0.24
--------- ----------
Diluted earnings per share $ 0.25 $ 0.23
========= ==========
Dividends per share $ 0.13 $ 0.13
========= ==========
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE> 5
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
------------ --------------
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 349 $ 305
Adjustments to reconcile net income to cash
provided by operating activities
Provision for loan losses 75 48
Provision for depreciation 135 119
Net amortization of investments securities premiums and discounts 24 43
Net realized investment security gains 0 (43)
Increase in accrued interest receivable (103) (76)
Increase (decrease) in accrued interest payable 30 (10)
Other (233) 78
------------ ----------
Net cash provided by operating activities 277 464
INVESTING ACTIVITIES
Purchase of securities available-for-sale (6,163) (486)
Proceeds from sales of securities available-for-sale 0 1,310
Proceeds from redemptions and maturities of securities available-for-sale 1,299 7,803
Net decrease (increase) in loans 5,044 (4,962)
Purchase of premises and equipment (182) (659)
------------ ----------
Net cash (used) by investing activities (2) 3,006
FINANCING ACTIVITIES
Net increase in deposits 9,940 7,554
Net decrease in borrowings (250) (1,950)
Increase in advance payments by borrowers for taxes and insurance 259 405
Payment of cash dividends to stockholders (181) (172)
Purchase of treasury stock (158) (134)
Proceeds from sale of treasury stock 71 65
Proceeds from issuing additional common stock 299 0
------------ ----------
Net cash provided by financing activities 9,980 5,768
Increase in cash and cash equivalents 10,255 9,238
Cash and cash equivalents at beginning of period 15,358 22,272
------------ ----------
Cash and cash equivalents at end of period $ 25,613 $ 31,510
============ ==========
Supplemental cash flow information:
Interest paid $ 2,481 $ 2,171
Income taxes paid 257 185
</TABLE>
See notes to unaudited consolidated financial statements
5
<PAGE> 6
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
Notes to Unaudited Consolidated Financial Statements
March 31, 1998
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Merchants and Manufacturers Bancorporation, Inc. (the Corporation)
and its wholly owned subsidiaries, Lincoln State Bank, Franklin State Bank,
Lincoln Community Bank (collectively, the Banks), Achieve Mortgage Corporation
and M&M Services, Inc. Lincoln State Bank also includes the accounts of its
wholly owned subsidiary, M&M Lincoln Investment Corporation. Lincoln Community
Bank also includes the accounts of its wholly owned subsidiary, Lincoln
Investment Management Corporation. All significant intercompany balances and
transactions have been eliminated.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31, 1998
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Corporation's Form
10-K for the year ended December 31, 1997.
This 10-Q contains various forward-looking statements concerning the Company's
prospects that are based on the current expectations and beliefs of management.
Forward-looking statements may also be made by the Corporation from time to time
in other reports and documents as well as oral presentations. When used in
written documents or oral statements, the words anticipate, believe, estimate,
expect, objective and similar expressions are intended to identify
forward-looking statements. The statements contained herein and such future
statements involve or may involve certain assumptions, risks and uncertainties,
many of which are beyond the Corporation's control, that could cause the
Corporation's actual results and performance to differ materially from what is
expected. In addition to the assumptions and other factors referenced
specifically in connection with such statements, the following factors could
impact the business and financial prospects of the Corporation: general economic
conditions; legislative and regulatory initiatives; monetary and fiscal policies
of the federal government; deposit flows; disintermidiation; the cost of funds;
general market rates of interest; interest rates or investment returns on
competing investments; demand for loan products; demand for financial services;
changes in accounting policies or guidelines; and changes in the quality or
composition of the Corporation's loan and investment portfolio.
NOTE B -- EARNINGS PER SHARE INFORMATION
On March 27, 1998 the Board of Directors of the Corporation declared a
three-for-two stock split, in the form of a 50% common stock dividend, that was
distributed on April 10, 1998 to shareholders of record on April 1, 1998. All
share data have been adjusted to reflect the effect of the three-for-two split
in the March 31, 1998 financial statements, and all prior periods presented.
6
<PAGE> 7
Basic earnings per share for the three months ended March 31, 1998, and 1997
have been determined by dividing net income for the respective periods by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
----------------------------------------------------------------------
<S> <C> <C>
Net income $ 349,204 $ 305,098
Weighted average shares
outstanding 1,358,152 1,293,880
----------------------------------------------------------------------
Earnings per share
$ 0.26 $ 0.24
================= ============
</TABLE>
Statement of Financial Accounting Standard No. 128, Earnings Per Share, was
issued in February 1997 and is effective for interim and annual periods ending
after December 15, 1997. Statement 128 replaces the presentation of primary
earnings per share ("EPS") with a presentation of basic EPS. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the period. Basic
EPS will typically be higher than primary EPS. Statement No. 128 also requires
presentation of diluted EPS which is computed similarly to fully diluted EPS
under existing accounting rules.
Earnings per share data for the three months ended March 31, 1998 and 1997 as
calculated in accordance with Statement 128 are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
-------------------------------------------------------------
<S> <C> <C>
Basic earnings per
share $ 0.26 $ 0.24
Diluted earnings per
share $ 0.25 $ 0.23
</TABLE>
7
<PAGE> 8
NOTE C -- LOANS RECEIVABLE
Loans are comprised of the following categories:
<TABLE>
<CAPTION>
March 31
1998 1997
------------------------
(In Thousands)
<S> <C> <C>
Commercial business loans $ 53,818 $ 48,033
Commercial real estate 82,720 60,488
Real estate mortgages 75,922 76,557
Installments 10,848 10,623
Other 975 1,059
------------------------
Total loans 224,283 196,760
Unearned income (54) (74)
Allowance for loan losses (2,170) (1,982)
------------------------
Loans, net $ 222,059 $ 194,704
========================
</TABLE>
The following table presents changes in the allowance for loan losses:
<TABLE>
<CAPTION>
March 31
1998 1997 1996
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance at January 1 $ 2,093 $ 1,939 $ 1,533
Provisions 75 48 36
Charge-offs (1) (5) (68)
Recoveries 3 0 0
---------------------------------
Balance at March 31 $ 2,170 $ 1,982 $ 1,501
=================================
</TABLE>
NOTE D -- STOCKHOLDERS' EQUITY
Under federal law and regulations, the Corporation is required to meet certain
capital requirements. The Banks are required to meet leverage and risk-based
capital requirements. The leverage ratio, in general, is stockholders' equity as
a percentage of total assets. The risk-based capital ratio, in general, is
stockholders' equity plus general loan loss allowances (within certain
limitations) as a percentage of risk adjusted assets.
8
<PAGE> 9
As of March 31, 1998, the most recent notification from Federal Deposit
Insurance Corporation categorized the Banks as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Banks must maintain minimum total risk-based, Tier I risk-based
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the banks'
category.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------------ -------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
------------------------ -------------------- ------------------------
AS OF MARCH 31, 1998 (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk-
Weighted Assets):
Lincoln State Bank $12,771 10.05% $10,164 >8.00% $12,705 >10.00%
Lincoln Community 11,963 18.18% 5,263 >8.00% 6,579 >10.00%
Franklin State Bank 3,635 10.64% 2,734 >8.00% 3,417 >10.00%
Tier 1 Capital (to Risk-
Weighted Assets):
Lincoln State Bank 11,663 9.18% 5,082 >4.00% 7,623 >6.00%
Lincoln Community 11,237 17.08% 2,632 >4.00% 3,947 >6.00%
Franklin State Bank 3,299 9.65% 1,367 >4.00% 2,050 >6.00%
Tier 1 Capital (to Average
Assets):
Lincoln State Bank 11,663 7.45% 6,260 >4.00% 7,825 >5.00%
Lincoln Community 11,237 11.57% 3,886 >4.00% 4,857 >5.00%
Franklin State Bank 3,299 7.69% 1,715 >4.00% 2,144 >5.00%
</TABLE>
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
At March 31, 1998, the Corporation's consolidated total assets were $307.2
million as compared to $296.7 million at December 31, 1997. This increase was
due to a $9.9 million increase in total deposits, which was used to fund
short-term investments and mortgage-related securities.
Investment securities available-for-sale decreased $81,000 from December 31,
1997 to March 31, 1998. Maturing investment securities in this category caused
the decrease.
Mortgage-related securities available-for-sale increased $5.0 million, or 17.7%
from $28.2 million at December 31, 1997, to $33.2 million at March 31, 1998. The
funds generated by new deposit accounts were used to purchase securities of this
type.
Loans receivable decreased $5.1 million, or 2.3%, from $227.2 million at
December 31, 1997 compared to $222.1 million at March 31, 1998. This reduction
is unusual since the Corporation's loans have annually grown 19.7% in 1997 and
16.0% in 1996. The first quarter decrease in loans was primarily due to loan
pay-offs made on two commercial loan relationships. Currently, loans receivable
consists mainly of mortgages secured by residential properties located in the
Corporation's primary market area and commercial loans secured by business
assets, real estate, and guarantees. At March 31, 1998 the Corporation has not
designated any loans held for sale.
Stockholders' equity at March 31, 1998 was $29.9 million compared to $29.5
million at December 31, 1997, an increase of $423,000. The change in
stockholders' equity consists of net income of $349,000, $299,000 from the
issuance of additional common stock, less the net purchase of treasury stock of
$87,000, payments of dividends to shareholders of $181,000 and the $43,000 net
increase in the market value of securities categorized as available for sale.
The Banks continue to exceed their regulatory capital requirements.
Nonperforming Assets and Allowance for Losses
Generally a loan is classified as nonaccrual and the accrual of interest on such
loan is discontinued when the contractual payment of principal or interest has
become 90 days past due or management has serious doubts about further
collectibility of principal or interest. Generally, loans are restored to
accrual status when the obligation is brought current, has performed in
accordance with the contractual terms for a reasonable period of time and the
ultimate collectibility of the total contractual principal and interest is no
longer in doubt.
10
<PAGE> 11
Nonperforming assets are summarized, for the dates indicated, as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- -----------
(dollars in thousands)
<S> <C> <C>
Non-accrual loans:
Mortgage loans
One-to-four family $ 451 $ 383
Commercial real estate 0 82
--------- ----------
Total mortgage loans 451 465
Commercial business 206 177
Consumer and other 84 57
--------- ----------
Total non-accrual loans 741 699
Other real estate owned 0 0
--------- ----------
Total nonperforming assets $ 741 $ 699
========= ==========
RATIOS:
Non-accrual loans to total loans 0.33% 0.30%
Nonperforming assets to total assets 0.24 0.24
Loan loss allowance to non-accrual loans 292.84 299.42
Loan loss allowance to total loans 0.95 0.91
</TABLE>
Nonperforming assets increased by $42,000 from $699,000 at December 31, 1997 to
$741,000 at March 31, 1998, an increase of 6.0%. Management believes that losses
will be minimal on the remaining balances, due to the collateral position in
each situation.
Results of Operations
Net interest income for the three months ended March 31, 1998 was $3.12 million,
an increase of 12.3% from the $2.78 million reported for the same period in
1997. The increased volume of interest-earning assets accounted for the higher
net interest income. The additional volume was partially offset by the reduced
net interest spread. The higher average cost of new deposits generated caused
the weighted average rate paid on deposits and borrowings to increase from 3.65%
at March 31, 1997 to 3.73% at March 31, 1998. The weighted average yield on
interest-earning assets increased from 8.00% at March 31, 1997 to 8.03% at March
31, 1998.
` 11
<PAGE> 12
The following table sets forth the weighted average yield earned on the
Corporation's consolidated loan and investment portfolios, the weighted average
interest paid on deposits and borrowings, the net spread between yield earned
and rates paid and the net interest margin during the three months ended March
31, 1998 and 1997.
<TABLE>
<CAPTION>
For the
Three Months Ended
March 31,
1998 1997
----------------------------------
<S> <C> <C>
Weighted average yield on
interest-earning assets 8.03% 8.00%
Weighted average rate paid on
deposit and borrowings 3.73 3.65
----------------------------------
Net interest spread 4.30% 4.35%
==================================
Net interest margin (net interest
income divided by average
earning assets) 4.45% 4.54%
==================================
</TABLE>
The provision for loan losses for the three month period ended March 31, 1998
was $75,000 compared to $48,000 for the three months ended March 31, 1997, a
increase of $27,000, or 56.3%. The higher provision is primarily due to
increases in the loan portfolio and not any anticipated loan losses. In fact,
the Corporation's ratio of nonperforming loans to total loans is well below its
peer group average. The Corporation uses a risk-based assessment of its loan
portfolio to determine the level of the loan loss allowance. This procedure is
based on internal reviews intended to determine the adequacy of the loan loss
allowance in view of presently known factors. However, changes in economic
conditions in the future financial conditions of borrowers cannot be predicted
and may result in increased future provisions to the loan loss allowance.
Total noninterest income for the three months ended March 31, 1998 was $450,000
compared to $396,000 for the three months ended March 31, 1997, an increase of
$54,000, or 13.6%. The increase is due to fees collected on new products and
services, additional service charges on loans and fees collected on transactions
performed at company-owned ATM machines.
Noninterest expense for the three months ended March 31, 1998 was $2.97 million
compared to $2.63 million for the three months ended March 31, 1997, an increase
of $340,000, or 13.0%. Salaries and employee benefits increased $186,000 or
11.5% from $1.62 million for the three-month period ended March 31, 1997
compared to $1.81 million for the three-month period 1998. Employee bonus
payments, higher benefit costs and changes in personnel accounted for the
change. Premises and equipment expense increased $89,000 or 26.8% from $332,000
for the three month period ended March 31, 1997 compared to $421,000 for the
three month period ended March 31, 1998. The increase in occupancy expense can
be attributed to maintenance and repairs made on the Corporation's properties.
Other expenses increased $57,000 in the first quarter of 1998. This can be
attributed to the growth in operating expenses such as office supplies, legal
fees, accounting fees and check losses.
12
<PAGE> 13
Income before taxes for the three month period ended March 31, 1998 was $529,000
compared to $501,000 for the three months ended March 31, 1997, an increase of
$28,000 or 5.6%. Income tax expense for the three months ended March 31, 1998
decreased $16,000 over the 1997 first quarter tax expense. The effective tax
rate for the three months ended March 31, 1998 was 34.0% compared to 39.1% for
the three months ended March 31, 1997. The decrease in the tax rate can be
attributed to the purchase of tax-exempt investment securities held by the
Corporation and a reallocation of expenses throughout the Corporation's
subsidiaries. On an after tax basis, the Corporation reported net income of
$349,000 for the three month period ended March 31, 1998 compared to $305,000
for the same period in 1997.
Liquidity and Capital Resources
Liquidity management involves the ability to meet the cash flow requirements of
customers who may be either depositors wanting to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs. The Corporation had liquid assets of $25.6 million and $15.4 million at
March 31, 1998 and December 31, 1997, respectively.
Management believes liquidity and capital levels are adequate at March 31, 1998.
For a discussion of regulatory requirements, see Note D to the Unaudited
Consolidated Financial Statements.
Asset/Liability Management
Financial institutions are subject to interest rate risk to the extent their
interest-bearing liabilities (primarily deposits) mature or reprice at different
times and on a different basis than their interest-earning assets (consisting
primarily of loans and securities). Interest rate sensitivity management seeks
to match maturities on assets and liabilities and avoid fluctuating net interest
margins while enhancing net interest income during periods of changing interest
rates. The difference between the amount of interest-earning assets maturing or
repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within the same time period is referred to as
an interest rate gap. A gap is considered positive when the amount of interest
rate sensitive assets exceeds the amount of interest rate sensitive liabilities.
A gap is considered negative when the amount of interest rate sensitive
liabilities exceeds the amount of interest rate sensitive assets. During periods
of rising interest rates, a negative gap tends to adversely affect net interest
income while a positive gap tends to result in an increase in net interest
income. During a period of falling interest rates, a negative gap tends to
result in an increase in net interest income while a positive gap tends to
adversely affect net interest income.
In the following table, assumptions regarding prepayment and withdrawal rates
are based upon the Corporation's historical experience, and management believes
such assumptions are reasonable.
13
<PAGE> 14
The following table shows the interest rate sensitivity gap for four different
time intervals as of March 31, 1998.
<TABLE>
<CAPTION>
AMOUNTS MATURING OR REPRICING AS OF MARCH 31, 1998
---------------------------------------------------------------------------
WITHIN SIX TO TWELVE ONE TO FIVE OVER
SIX MONTHS MONTHS YEARS FIVE YEARS TOTAL
---------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Fixed-rate mortgage loans $ 32,073 $ 19,696 $ 56,598 $ 5,584 $ 113,951
Adjustable-rate mortgage loans 18,752 8,889 15,858 0 43,499
--------------------------------------------------------------------------
Total mortgage loans 50,825 28,585 72,456 5,584 157,450
Commercial business loans 27,328 4,021 22,468 0 53,817
Consumer loans 6,031 1,833 4,328 170 12,362
Tax-exempt loans 0 600 0 0 600
Mortgage-related securities 18,326 0 7,287 7,543 33,156
Fixed rate investment securities and other 3,907 3,649 1,067 0 8,623
Variable rate investment securities and
other 17,165 1,050 0 0 18,215
--------------------------------------------------------------------------
Total interest-earning assets $ 123,582 $ 39,738 $ 107,606 $ 13,297 $ 284,223
==========================================================================
Interest-bearing liabilities:
Deposits
Time deposits $ 102,771 $ 31,533 $ 12,241 $ 4 $ 146,549
NOW accounts 1,615 1,615 16,147 7,535 26,912
Savings accounts 3,489 3,489 34,885 16,277 58,140
Money market accounts 435 435 4,347 2,029 7,246
Advance payments for taxes and insurance 222 222 0 0 444
Borrowings 1,250 0 0 0 1,250
--------------------------------------------------------------------------
Total interest-bearing liabilities $ 109,782 $ 37,294 $ 67,620 $ 25,845 $ 240,541
==========================================================================
Interest-earning assets less
interest-bearing
liabilities $ 13,800 $ 2,444 $ 39,986 ($12,548) $ 43,682
==========================================================================
Cumulative interest rate sensitivity gap $ 13,800 $ 16,244 $ 56,230 $ 43,682
============================================================
Cumulative interest rate sensitivity gap
as a percentage of total assets 4.49% 5.29% 18.30% 14.22%
============================================================
</TABLE>
At March 31, 1998, the Corporation's ratio of cumulative interest-rate sensitive
gap as a percentage of total assets was 4.49% for six months and 5.29% for
one-year maturities. Therefore, the Corporation is positively gapped and may
benefit from rising interest rates.
Certain shortcomings are inherent in the method of analysis presented in the
above schedule. For example, although certain assets and liabilities may have
similar maturities or periods of repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable rate mortgage loans,
have features that restrict changes in interest rates, on a short term basis
over the life of the asset. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in calculating the schedule.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable
14
<PAGE> 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As of March 31, 1998 there were no material pending legal
proceedings, other than ordinary routine litigation incidental to
the business of the Corporation, to which the Corporation or any
of its subsidiaries was a party or to which any of their property
was subject.
Item 2. Changes in Securities - NONE
Item 3 Defaults upon Senior Securities - NONE
Item 4 Submission of Matters to Vote of Security Holders - NONE
Item 5 Other Information - NONE
Item 6 Exhibits and Reports on Form 8-K
The Corporation did not file any reports on Form 8-K during the
three months ended March 31, 1998. Required exhibits are
incorporated by reference to previously filed Securities Act
registration statements.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed by on its behalf by the
undersigned thereunto duly authorized.
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
-------------------------------------
(Registrant)
Date March 8, 1998 /s/ Michael J. Murry
-------------------------- -------------------------------------
Michael J. Murry
Chief Executive Officer & Chairman
of the Board of Directors
Date March 8, 1998 /s/ James C. Mroczkowski
-------------------------------------
James C. Mroczkowski
Vice President & Chief Financial
Officer
Principal Financial Officer
16
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