<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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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 0-14553
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F & M Bancorporation, Inc.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-1365327
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Bank Avenue, Kaukauna, Wisconsin 54130
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(Address of principal executive offices) (Zip Code)
(414) 766-1717
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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 91 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 May 10, 1996.
$1.00 par value common
5,956,108 shares
<PAGE> 2
F & M BANCORPORATION, INC.
AND SUBSIDIARIES
INDEX
-----
Page
Number
------
PART I. FINANCIAL INFORMATION:
- ----------------------------------
Item l. Financial Statements 3
Condensed Consolidated Balance Sheets
as of March 31, 1996 and December 31,
1995 (Unaudited) 4
Condensed Consolidated Statements of Earnings
for the three months ended March 31, 1996
and 1995 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1996
and 1995 (Unaudited) 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) 7
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
- --------------------------
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Matters 17
Item 6. Exhibits and Reports on Form 8-K 17
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<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed consolidated financial statements included herein have been
included by F & M Bancorporation, Inc. (the "Company") pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. This information is unaudited but includes all adjustments
(consisting only of normal recurring accruals) which, in the opinion of Company
management, are necessary for a fair presentation of the results for such
periods.
The results of operations for interim periods are not necessarily indicative of
the results of operations for the entire year. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's 1995 Annual Report.
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<PAGE> 4
F & M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 27,438,053 $ 41,007,534
Investment securities (Note B)
Held to maturity 65,757,479 72,352,431
Available for sale - stated at fair value 119,338,723 110,733,127
Federal funds sold 17,914,000 20,734,000
Loans (Note C) 718,263,653 698,793,249
Less: Allowance for loan losses (9,068,267) (8,853,493)
----------- -----------
Net loans 709,195,386 689,939,756
Bank premises and equipment, net 21,542,907 21,112,931
Other real estate 964,025 863,434
Other assets 15,848,257 15,409,673
----------- -----------
$977,998,830 $972,152,886
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 99,932,328 $106,834,385
Interest bearing 743,113,922 741,711,571
----------- -----------
Total deposits 843,046,250 848,545,956
Short-term borrowing 27,717,616 12,194,134
Other borrowings 5,333,244 11,292,494
Accrued expenses and other liabilities 12,063,790 12,299,814
----------- -----------
Total liabilities 888,160,900 884,332,398
Minority interest in subsidiaries 235,280 231,473
Shareholders' Equity
Common stock - $1 par value:
Authorized - 10,000,000 shares
Issued - 5,994,108 5,994,108 5,994,108
Capital surplus 42,526,716 42,526,716
Retained earnings 42,174,640 39,995,240
Net unrealized loss on securities available for sale (268,376) (102,611)
Less-Common stock held in treasury at cost-
39,000 shares (824,438) (824,438)
----------- ------------
Total shareholders' equity 89,602,650 87,589,015
----------- ------------
Total liabilities and shareholders' equity $977,998,830 $972,152,886
=========== ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 5
F & M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
----------- -----------
<S> <C> <C>
Interest income
Interest and fees on loans $16,480,451 $14,674,559
Interest on investment securities
Taxable 1,703,197 1,781,653
Exempt from federal tax 931,010 863,626
Other interest income 481,561 124,512
---------- ----------
Total interest income 19,596,219 17,444,350
---------- ----------
Interest expense
Interest on deposits 8,431,569 6,975,626
Interest on short-term borrowing 231,823 351,701
Interest on other borrowing 166,301 138,917
---------- ----------
Total interest expense 8,829,693 7,466,244
---------- ----------
Net interest income 10,766,526 9,978,106
Provision for loan losses 406,999 332,250
---------- ----------
Net interest income after
provision for loan losses 10,359,527 9,645,856
---------- ----------
Other income
Service charges on deposit accounts 661,312 579,710
Other operating income 662,382 558,758
Net security gain (18,482) 10,231
---------- ----------
1,305,212 1,148,699
---------- ----------
Other expenses
Salaries and employee benefits 3,740,169 3,435,776
Other operating expense 3,164,946 3,603,877
---------- ----------
6,905,115 7,039,653
--------- ----------
Income before income taxes 4,759,624 3,754,902
Income taxes 1,508,394 1,179,423
---------- ----------
NET INCOME $ 3,251,230 $ 2,575,479
========== ==========
EARNINGS PER COMMON SHARE .55 .43
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 6
F & M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1996 1995
--------- ---------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income $ 3,251,230 $ 2,575,479
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and net amortization 590,129 559,069
Provision for loan losses 406,999 332,250
Gain on sale of investment securities 18,482 (10,231)
Increase in other assets (531,276) (571,876)
Gain on sale of equipment (37,719) (114)
Increase (decrease) in other liabilities (203,438) 298,406
Provision for other real estate losses 11,560 13,805
Gain on sale of other real estate (9,526) (61,348)
Minority interest 3,807 (21,544)
----------- -----------
Net cash provided by operating activities 3,500,248 3,113,896
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investment securities
available for sale 1,039,700 7,289,322
Proceeds from maturities of investment
securities available for sale 11,666,388 11,709,501
Purchase of investment securities
available for sale (15,255,103) (21,790,784)
Proceeds from maturities of investment
securities held to maturity 1,659,179 2,470,047
Purchase of investment securities
held to maturity (1,332,875) (406,867)
Net decrease in federal funds sold 2,820,000 5,598,000
Net increase in loans (19,823,028) (21,924,262)
Capital expenditures (1,124,572) (1,219,807)
Proceeds from sale of equipment 229,612 1,425
Proceeds from sale of other real estate 58,274 421,932
Payment for purchase of other real estate --- (48,991)
----------- -----------
Net cash used in investing activities (20,062,425) (17,900,484)
----------- -----------
Cash flows from financing activities:
Net decrease in deposits (5,499,706) (2,314,010)
Net increase in short-term borrowings 15,523,482 1,445,229
Dividends paid (1,071,830) (937,416)
Purchase of common stock --- (845,625)
Net increase (decrease) in other borrowings (5,959,250) 14,489,065
----------- -----------
Net cash provided by financing activities 2,992,696 11,837,243
----------- -----------
Net decrease in cash and cash equivalents (13,569,481) (2,949,345)
Cash and cash equivalents at beginning of period 41,007,534 37,008,875
----------- -----------
Cash and cash equivalents at end of period $ 27,438,053 $ 34,059,530
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 7
F & M BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements,
which include the accounts of F&M Bancorporation, Inc. and its subsidiaries,
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. These statements have been
restated to reflect the acquisitions of Union State Bank, acquired January 9,
1995, and Monycor Bancshares, Inc., acquired February 5, 1996. These
transactions have been accounted for using the pooling of interests method of
accounting. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for fair presentation have been
included.
NOTE B - INVESTMENT SECURITIES
Carrying amounts and market values of investment securities held to
maturity at March 31, 1996 are as follows:
<TABLE>
<CAPTION>
Carrying Market
Amount Value
-------- -------
(in thousands)
<S> <C> <C>
Exempt obligations of states and political subdivisions $65,757 $67,015
======= =======
</TABLE>
NOTE C - LOANS
<TABLE>
<CAPTION>
At March 31, 1996, loans are as follows:
(in thousands)
<S> <C>
Commercial and industrial $122,759
Agricultural 42,586
Real estate construction 25,005
Real estate mortgage 471,986
Installment and other consumer 55,927
-------
718,263
Less allowance for loan losses (9,068)
-------
Net loans $709,195
=======
</TABLE>
NOTE D - EARNINGS PER SHARE OF COMMON STOCK
Earnings per share of common stock are based on weighted average number of
common shares outstanding of 5,955,108 and 5,966,664 for the three months ended
March 31, 1996 and 1995.
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<PAGE> 8
NOTE E - NON-PERFORMING ASSETS
The following table sets forth the amount of non-performing loans, other
real estate owned and non-performing assets, and each of their percentages to
total loans at March 31, 1996:
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
Non-accrual loans $6,944 0.97%
Loans past due 90 days or more 119 0.02
Restructured loans 601 0.08
------ ----
Total non-performing loans 7,664 1.07
Other real estate owned 964 0.13
------ ----
Total non-performing assets $8,628 1.20%
====== ====
</TABLE>
NOTE F - SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes loan balances at March 31, 1996; changes in
the allowance for loan losses arising from loans charged-off and recoveries on
loans previously charged-off, by loan category; and provisions for loan losses
which have been charged to expense:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Average balance of loans for period $707,634
========
Allowance for loan losses at
beginning of period 8,853
Loans charged off
Commercial and Industrial 105
Real Estate - Mortgage 10
Installments and Other Consumer Loans 150
-----
Total charge offs 265
Recoveries on loans previously
charged off
Commercial and Industrial 49
Real Estate - Mortgage 3
Installment and Other Consumer Loans 21
-----
Total recoveries 73
Net loans charged off 192
Provisions for loan
losses 407
-----
Allowance for loan losses
at end of period $9,068
======
Ratio of net charge offs
during period to average
loans outstanding (annualized) 0.11%
Allowance for loan
losses to total loans 1.26%
</TABLE>
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<PAGE> 9
NOTE G - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
The following table summarizes the allocation of allowances for loan losses
and gives a breakdown of the percentage of loans in each category at March 31,
1996:
<TABLE>
<CAPTION>
Percent
of loans
Amount of in each
reserve category
for loan to total
(in thousands) losses loans
- -----------------------------------------------------------
<S> <C> <C>
Commercial,
industrial, and
agricultural $ 3,742 23.0%
Real estate -
construction 150 3.5
Real estate - mortgage 3,370 65.7
Installment and other
consumer loans 1,806 7.8
------ -----
$9,068 100.0%
====== =====
</TABLE>
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<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The following discussion and analysis provides information regarding F & M
Bancorporation, Inc.'s (the "Company" or "F&M") results of operations for the
three months ended March 31, 1996 and 1995 and financial condition at March 31,
1996. These statements have been restated to reflect the acquisitions of Union
State Bank ("Union"), acquired January 9, 1995 and Monycor Bancshares, Inc.
("Monycor"), acquired February 5, 1996. These transactions have been accounted
for using the pooling of interests method of accounting.
Since March 31, 1996, the Company has also completed two other previously
announced acquisitions. As of April 26, 1996, the Company acquired the Little
Chute branch office of TCF Bank Wisconsin. Effective as of May 10, 1996, F&M
consummated the acquisition of Bradley Bank. Both of these acquisitions are
being accounted for using the purchase method of accounting; therefore, they
will be reflected in the Company's results of operations only from and after
the dates of acquisitions. The Company does not expect that these acquisitions
will have a material effect on it because of the relative sizes of Bradley Bank
and the Little Chute office as compared to the Company. (For further
information, see Item 5 of this report)
The Company has announced a pending acquisition which, if consummated,
would affect the Company's future operations. In March 1996, the Company
announced that it had entered into a definitive agreement to acquire Community
State Bank, Algoma, Wisconsin, a bank with total assets of approximately $55
million. The Company intends to account for the pending acquisition using the
pooling of interests method of accounting. The Company expects the Community
State Bank acquisition to be consummated in the second quarter of 1996.
RESULTS OF OPERATIONS
For the three months ended March 31, 1996, net income increased $676,000, or
26.2%, to $3.3 million from $2.6 million in the first quarter of 1995. The
annualized return on average assets was 1.34% for the first quarter of 1996
compared with 1.15% for the first quarter of 1995. Returns on average
stockholders' equity on an annualized basis for the first quarters of 1996 and
1995 were 14.75% and 13.58%, respectively.
Net Interest Income
Net interest income for the three months ended March 31, 1996 increased
$788,000, or 7.9%, to $10.8 million from $10.0 million in the first quarter of
1995. Total interest income for the first quarter of 1996 increased $2.2
million, or 12.3%, to $19.6 million from $17.4 million in the first quarter of
1995. Interest expense increased $1.4 million, or 18.3%, to $8.8 million in
the first quarter of 1996 from $7.5 million in the first quarter of 1995.
Increased net interest income for the three month period resulted primarily
from maintaining net interest margins and increased lending activity. Total
interest income increased for the three month period in 1996 compared to the
same period last year as a result of an increase in interest and fees on loans
due to increased loan activity and generally stable interest rates, while total
interest expense increased for the three month period in 1996 compared to 1995
as a result of increased levels of deposits.
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<PAGE> 11
Provision for Loan Losses
The provision for loan losses for the three months ended March 31, 1996
increased $75,000, or 22.5%, to $407,000 from $332,250 in the first quarter of
1995. The increased provision is due mainly to the increase in the loan
portfolio. Subject to its continuing review, management currently anticipates
that the provision for the remaining quarters of the year will be comparable to
the first quarter of 1996. See "Allowance for Loan Losses" for further
discussion.
Non-Interest Income
Non-interest income for the three months ended March 31, 1996 increased
$157,000, or 13.6%, to $1.3 million from $1.1 million in the first quarter of
1995. The increase was due principally to increases in service charges and
other fee income, offset by small securities losses.
Non-Interest Expense
Non-interest expense for the three months ended March 31, 1996 decreased
$135,000, or 1.9%, to $6.9 million from $7.0 million in the first quarter of
1995. The decrease was due primarily to the effect of the decrease in FDIC
insurance premiums, partially offset by additional staffing and normal
increases in salaries and employee benefits.
The overhead ratio, which is computed by subtracting non-interest income
from non-interest expense (excluding net securities transactions) and dividing
by average total assets, was 2.30% in the first quarter of 1996 compared with
2.62% in the first quarter of 1995. The decrease in this ratio in the first
quarter of 1996 was the result of the factors set forth above.
Provision for Income Taxes
The Company's provision for income taxes for the three months ended March
31, 1996 increased $329,000, or 27.9%, to $1.5 million from $1.2 million in the
first quarter of 1995. The increase in income tax provision was principally
due to increased taxable income.
Net Income
Net income for the first quarter of 1996 increased by $676,000, or 26.2% to
$3.3 million from $2.6 million in the same period for 1995.
Net income per common share was $0.55 for the first quarter of 1996
compared with $0.43 in the first quarter of 1995, an increase of 27.9%.
Although the Company adopted a stock option plan in 1993, as of March 31, 1996,
fully diluted earnings per share are equal to the stated earnings per share
numbers.
FINANCIAL CONDITION
Loan Portfolio
At March 31, 1996, total loans increased $19.5 million, or 2.8%, to $718
million from $699 million at December 31, 1995. The loan mix in the Company's
portfolio at March 31, 1996 did not change in any material respect compared
with December 31, 1995. The increase resulted primarily from steady loan
demand spread throughout the Company's subsidiary banks.
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<PAGE> 12
Non-Performing Assets
At March 31, 1996, non-performing assets amounted to $8.6 million, compared
to $7.3 million at December 31, 1995. Non-performing loans at March 31, 1996
were $7.7 million, or 1.07% of total loans, compared to $6.5 million at
December 31, 1995. Other real estate owned ("OREO") at March 31, 1996 was
$964,000 as compared to $863,000 at December 31, 1995. The ratio of
non-performing assets to total loans at March 31, 1996 was 1.20%. Management
continues to work at reducing the level of non-performing assets.
Summary of Loan Loss Experience
For the first three months of 1996, total charge-offs were $265,000 and
total recoveries were $73,000. The annualized ratio of net charge- offs to
average loans outstanding for the three months ended March 31, 1996 was
0.11%. The charge-offs were not concentrated in any particular industry.
Allowance for Loan Losses
At March 31, 1996 and December 31, 1995, the allowance for loan losses as a
percentage of total loans was 1.26% and 1.27% respectively. Management
continually reviews the loan portfolio, and other factors, to determine the
appropriate allowance. The allowance for loan losses is an amount that
management believes will be adequate to absorb possible losses on existing
loans that may become uncollectible based on evaluations of the collectibility
of loans and prior loan loss experience. In determining the additions to the
allowance charged to operating expenses, management considered historical loss
experience, changes in the nature and volume of the loan portfolio, overall
portfolio quality, and current economic conditions that may affect the
borrower's ability to pay.
Investment Portfolio
At March 31, 1996, the investment portfolio increased $2.0 million, or
1.1%, to $185 million from $183 million at December 31, 1995. At March 31,
1996 and December 31, 1995, the investment portfolio represented 18.9% and
18.8% of total assets, respectively.
Deposits
Total deposits at March 31, 1996 decreased $5.5 million, or 0.7%, to $843
million from $849 million at December 31, 1995. Interest-bearing deposits at
March 31, 1996 increased $1.4 million, or 0.2%, to $743 million from $742
million at December 31, 1995. Historically, deposits have typically increased
at year end and then gradually returned to prior levels, resulting in a typical
first quarter decrease in deposits.
Borrowings
Short-term borrowings at March 31, 1996 were $27.7 million, as compared to
$12.2 million at December 31, 1995. Short-term borrowings consist primarily of
federal funds purchased. The Company has used short-term borrowings to assist
in funding its increasing loan demand. Management has taken steps to monitor
short-term borrowings and is comfortable with the current level.
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<PAGE> 13
Several of the Company's subsidiary banks, as members of the Federal Home
Loan Bank (FHLB), had borrowings from the FHLB as of March 31, 1996. These
borrowings are secured by pledges of mortgage loans, and totaled $5.3 million
at March 31, 1996, compared to $10.8 million at December 31, 1995. These FHLB
borrowings had original maturities of three months to seven years at March 31,
1996.
CAPITAL ADEQUACY
During the three months ended March 31, 1996, stockholders' equity
increased $2.0 million due to net income of $3.3 million in the first quarter,
offset by dividends paid to stockholders and a slight decrease in equity, due
to the effect of FASB 115 resulting from the increased net unrealized loss on
securities available for sale. At March 31, 1996, the Company's risk-based
Tier 1 capital ratio was 11.81%. The total risk-based capital ratio was 13.05%
and the leverage ratio was 8.86%. All such ratios exceed regulatory minimums
of 4.0%, 8.0% and 3.0%, respectively. The average equity to average assets
ratio was 9.07% at March 31, 1996, compared with 8.50% at March 31, 1995.
F & M's common stock dividend payout ratio was 33.0% in the first three
months of 1996 as compared to 33.8% in the comparable 1995 period. These
numbers do not include the dividends historically paid by Union and Monycor
prior to their acquisitions by the Company.
At March 31, 1996, each of the Company's subsidiary banks was in compliance
with all applicable capital requirements, and management believes that the
capitalization of those banks is adequate.
During the first quarter the Company incurred capital expenditures of
approximately $3.0 million for replacement and renovation of facilities and the
purchase of a new branch location. In addition, on May 10, 1996, the Company
acquired Bradley for $6.6 million in cash. The Company's Little Chute
acquisition resulted in net cash of $6.6 million paid to F&M, in exchange for
F&M's assumption of $7.5 million in deposits and transfer to F&M of the
physical assets of the Little Chute branch. The capital expenditures are being
paid for by cash provided by operations.
LIQUIDITY
As shown in the Company's Consolidated Statements of Cash Flows for the
three months ended March 31, 1996, cash and cash equivalents decreased by $13.5
million during the period to $27.4 million at March 31, 1996. The decrease
primarily reflected $3.5 million in net cash provided by operating activities
and $3.0 million in net cash provided by financing activities, offset by $20.0
million in net cash used in investing activities. Net cash provided by
operating activities primarily consisted of the Company's net income in the
period increased by adjustments for non-cash credits. Net cash provided by
financing activities principally reflected an increase in short-term
borrowings. Net cash used in investing activities consisted primarily of net
increases in loans and investments plus necessary capital expenditures, offset
by a net decrease in federal funds sold.
-13-
<PAGE> 14
The Company manages its liquidity to provide adequate funds to support the
borrowing requirements and deposit flow of its customers. Management views
liquidity as the ability to raise cash at a reasonable cost or with a minimum
of loss and as a measure of balance sheet flexibility to react to marketplace,
regulatory and competitive changes. The primary sources of the Company's
liquidity are investment securities available for sale and other marketable
assets maturing within one year. The Company attempts, when possible, to match
relative maturities of assets and liabilities, while maintaining the desired
net interest margin. The Company can also utilize borrowing capacities if
appropriate. Although the percentage of earning assets represented by loans is
increasing, management believes that its sources of liquidity are adequate.
OTHER
SFAS No. 114 (Accounting by Creditors for Impairment of a Loan) as amended
by SFAS No. 118 (Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures) was adopted by the Company as of January 1, 1995.
In accordance with the new standard, the 1995 allowance for loan losses
includes specific allowances related to loans which have been judged to be
impaired and which fall within the scope of SFAS No. 114 (primarily commercial
loans). A loan is impaired when, based on current information, it is probable
that the Company will not collect all amounts due in accordance with the
contractual terms of the loan agreement. These specific allowances are based
on discounted cash flows of expected future payments using the loan's initial
effective interest rate or the fair value of the collateral if the loan is
collateral dependent. Since the Company evaluates the overall adequacy of the
allowance for credit losses on an ongoing basis, the adoption of SFAS No. 114
did not affect the amount of the allowance for credit losses or the existing
income recognition and charge-off policies for nonperforming loans.
SFAS No. 121 (Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of) was issued by FASB in March 1995. SFAS
No. 121 requires long-lived assets and certain intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
The statement also requires long-lived assets and certain intangibles to be
disposed of or be reported at the lower of carrying amount or fair value less
cost to sell. This statement was adopted by the Company effective January 1,
1996. The adoption of SFAS No. 121 did not have a significant impact on the
Company's financial condition or results of operations.
SFAS No. 122 (Accounting for Mortgage Servicing Rights) was issued by FASB
in May 1995. SFAS No. 122 requires accounting recognition of the rights to
service mortgage loans for others. The total cost of the mortgage loan will be
allocated between the relative fair values of the loan and the mortgage
servicing rights. The cost allocated to mortgage servicing rights will be
recognized as a separate asset and amortized over the period of estimated
servicing income. This statement was adopted by the Company effective January
1, 1996. The adoption of SFAS No. 122 did not have a significant impact on
the Company's financial condition or results of operations. Future impact of
adoption is contingent on the future levels of mortgage loan sales.
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<PAGE> 15
SFAS No. 123 (Accounting for Stock-Based Compensation) was issued by FASB
in October 1995. SFAS No. 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans. The statement
encourages a "fair value-based method" of accounting for stock-based
compensation plans. Upon adoption of SFAS No. 123, the Company will be
required to disclose in the notes to the financial statements the difference
between the "fair value method" and the "intrinsic value method" as prescribed
by APB Opinion No. 25, "Accounting for Stock Issued to Employees." The Company
will continue to account for stock-based compensation in accordance with APB
Opinion No. 25 on the Company's financial statements. SFAS No. 123 was adopted
as of January 1, 1996, and did not have a significant impact on the Company's
financial condition or results of operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.
The foregoing discussion contains forward-looking statements that involve
risks and uncertainties. The Company's actual future results could materially
differ from those discussed. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed above and in the
Company's annual report on Form 10-K for the year ended December 31, 1995
(including the Management's Discussion and Analysis incorporated by reference
therein).
-15-
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of the Company's shareholders on April 23, 1996,
pursuant to Proposal 1, management's nominees named below were elected as
directors, of the class whose term expires in 1999, by the indicated votes cast
for and withheld with respect to each nominee. Of the 4,585,951 shares of
Common Stock which were represented at the meeting, at least 98.5% of the
shares voting were voted for the election of each of management's nominees, as
follows:
Name of Nominee FOR WITHHELD
--------------- --- --------
Otto L. Cox 4,523,560 62,391
Douglas A. Martin 4,554,538 31,413
Glenn Schilling 4,553,875 32,076
There were no abstentions or broker non-votes with respect to the election of
directors. In addition to the directors elected at the meeting, the Company's
continuing directors are Paul J. Hernke, Gail E. Janssen, John W. Johnson,
Duane G. Peppler, Robert C. Safford and Joseph W. Walsh.
In addition, shareholders voted to approve two other proposals. Under
Proposal 2, shareholders authorized secured loans to officers of the Company
and its subsidiaries to foster participation in the Company's Stock Purchase
Plan. Under Proposal 3, shareholders approved an amendment to the Company's
Articles of Incorporation to increase the number of authorized shares of Common
Stock from 10,000,000 to 20,000,000. The votes on those two proposals were as
follows:
<TABLE>
<CAPTION>
BROKER
PROPOSAL FOR AGAINST ABSTAIN NON-VOTES
- -------- --- ------- ------- ---------
<S> <C> <C> <C> <C>
#2 (Stock Plan Loans) 3,185,991 628,667 271,605 499,688
#3 (Number of Shares) 4,365,989 143,869 76,093 -0-
</TABLE>
Further information concerning the matters voted upon at the 1996
Annual Meeting of Shareholders is contained in the Company's proxy statement
dated March 27, 1996 with respect to the 1996 annual meeting.
-16-
<PAGE> 17
ITEM 5. OTHER MATTERS
Effective as of May 10, 1996, F&M consummated its previously announced
acquisition of Bradley Bank ("Bradley"), from Bradley's holding company and
minority shareholders. The Bradley acquisition was made in exchange for $6.6
million in cash, by means of a merger of Bradley with F&M Bank-Lakeland.
Bradley's two full service offices in Tomahawk, Wisconsin, will
enhance F&M's presence in north central Wisconsin. At December 31, 1995,
Bradley had total assets of $36.1 million, net loans of $25.5 million, total
deposits of $32.6 million and shareholders' equity of $3.3 million. For the
year ended December 31, 1995, Bradley had net income of $505,000.
As of April 26, 1996, F&M consummated its previously announced
acquisition of the Little Chute branch office of TCF Bank Wisconsin ("TCF").
The acquisition, which included purchase of fixed assets and assumption of
deposit liabilities by F&M Bank-Kaukauna, will enhance F&M's presence in the
Fox River Valley. F&M purchased the fixed assets of the Little Chute branch
for cash, and was reimbursed in cash (reduced by an agreed-upon premium) by TCF
for the assumption of deposits. At April 26, 1996, the Little Chute branch
office had total deposits of approximately $7.5 million.
F&M management does not expect that the Bradley and Little Chute
acquisitions will have a material effect upon F&M because of the relative sizes
of Bradley and the Little Chute office as compared to F&M, and the acquisition
prices as compared to F&M's total equity. Both of the acquisitions are being
accounted for using the purchase method of accounting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index, which follows the
signature page hereof.
(b) Reports on Form 8-K:
The Registrant filed one report on Form 8-K during the first
quarter of fiscal 1996. The Report on Form 8-K, dated February 5,
1996, related to the Registrant's acquisition of Monycor Bancshares,
Inc. ("Monycor") on that date. Because of the relative size of the
Company and Monycor, the report did not include historical financial
statements of Monycor or pro forma financial statements of the
Company. It also reported the termination of the Company's proposal
to acquire Peoples State Bank of Bloomer.
-17-
<PAGE> 18
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 thereunto duly authorized.
F&M BANCORPORATION, INC.
(Registrant)
Date: May 14, 1996 /s/ Gail E. Janssen
----------------------------
Gail E. Janssen
President
Date: May 14, 1996 /s/ Daniel E. Voet
----------------------------
Daniel E. Voet
Chief Financial Officer and Treasurer
<PAGE> 19
EXHIBIT INDEX
F & M BANCORPORATION, INC.
FORM 10-Q FOR QUARTER ENDED MARCH 31, 1996
Filed
Exhibit No. Description Herewith
- ----------- ----------- --------
3(i) Company's Restated Articles of X
Incorporation, as amended
(composite as amended through
May 7, 1996)
27 Financial Data Schedule X
<PAGE> 1
EXHIBIT 3(i)
[COMPOSITE]
RESTATED
ARTICLES OF INCORPORATION
OF
F&M BANCORPORATION, INC.
[AS AMENDED THROUGH MAY 7, 1996]
F&M Bancorporation, Inc., a corporation organized under the laws of
the State of Wisconsin, hereby adopts the following Restated Articles of
Incorporation of said corporation, which amend, supersede and take the place of
its heretofore existing articles of incorporation and all amendments thereto.
Article 1. Name. The name of the corporation is: F&M
Bancorporation, Inc.
Article 2. Duration. The period of its existence shall be perpetual.
Article 3. Purpose. The corporation may engage in any lawful
activity within the purpose for which corporations may be organized under the
Wisconsin Business Corporation Law, Chapter 180, Wisconsin Statutes.
Article 4. Authorized Shares. The aggregate number of shares which
the corporation shall have authority to issue is 20,000,000, consisting of one
class only, designated as "Common Stock," having a One Dollar ($1.00) par
value.
Article 5. Preemptive Rights. No shareholder of the corporation shall
have any preemptive rights to subscribe for or to purchase or to acquire any
issue of shares, or securities convertible into such shares, or carrying a
right to subscribe to or acquire such shares, or any other securities of the
corporation.
Article 6. Requisite Affirmative Vote Requirements. The affirmative
vote of a majority of the shares entitled to vote shall be required for all
matters requiring approval of shareholders.
Article 7. Registered Office and Registered Agent. The address of the
registered office is One Bank Avenue, Kaukauna, Wisconsin 54130. The name of
the corporation's registered agent at such address is Gail E. Janssen.
Article 8. Number of Directors. The number and classes of the
directors shall be set forth in the bylaws of the Corporation.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 26,985
<INT-BEARING-DEPOSITS> 453
<FED-FUNDS-SOLD> 17,914
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 119,339
<INVESTMENTS-CARRYING> 65,757
<INVESTMENTS-MARKET> 67,015
<LOANS> 718,264
<ALLOWANCE> 9,068
<TOTAL-ASSETS> 977,999
<DEPOSITS> 843,046
<SHORT-TERM> 27,718
<LIABILITIES-OTHER> 12,064
<LONG-TERM> 5,333
0
0
<COMMON> 5,994
<OTHER-SE> 83,609
<TOTAL-LIABILITIES-AND-EQUITY> 977,999
<INTEREST-LOAN> 16,480
<INTEREST-INVEST> 2,634
<INTEREST-OTHER> 483
<INTEREST-TOTAL> 19,597
<INTEREST-DEPOSIT> 8,432
<INTEREST-EXPENSE> 8,830
<INTEREST-INCOME-NET> 10,767
<LOAN-LOSSES> 407
<SECURITIES-GAINS> (18)
<EXPENSE-OTHER> 6,905
<INCOME-PRETAX> 4,760
<INCOME-PRE-EXTRAORDINARY> 4,760
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,251
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
<YIELD-ACTUAL> 4.90
<LOANS-NON> 6,944
<LOANS-PAST> 119
<LOANS-TROUBLED> 601
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,853
<CHARGE-OFFS> 265
<RECOVERIES> 73
<ALLOWANCE-CLOSE> 407
<ALLOWANCE-DOMESTIC> 9,068
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
