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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10 - K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE
SECURITIES EXCHANGE ACT OF 1934
DECEMBER 31, 1995
For the fiscal year ended
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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.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1365327
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(State of incorporation) (I.R.S. Employer Identification No.)
ONE BANK AVENUE, KAUKAUNA, WISCONSIN 54130
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 766-1717
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK,
$1.00 PAR VALUE
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
fling requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 15, 1996, 5,955,108 shares of Common Stock were outstanding, and
the aggregate market value of the Common Stock (based upon the $26.75 closing
sale price on that date on the NASDAQ National Market System) held by
non-affiliates (excludes a total of 452,037 shares reported as beneficially
owned by directors and officers -- does not constitute an admission as to
affiliate status) was approximately $147.2 million.
DOCUMENTS INCORPORATED BY REFERENCE
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<CAPTION>
PART OF FORM 10-K INTO WHICH
DOCUMENT PORTIONS OF DOCUMENTS ARE INCORPORATED
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<S> <C>
Annual Report to Shareholders for the Parts I and II
year ended December 31, 1995
Proxy Statement for Annual Meeting of Part III
Shareholders on April 23, 1996
</TABLE>
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PART I
ITEM 1. BUSINESS.
F&M Bancorporation, Inc. ("F&M" or the "Company") was formed in
1980 to acquire the shares of Farmers and Merchants Bank of Kaukauna, Wisconsin
(now known as F&M Bank-Kaukauna). F&M has grown internally and through
acquisitions from a one-bank holding company with total assets of $37 million
at its inception to a 13-bank holding company with total assets of $943.1
million at December 31, 1995.
In February 1996, F&M acquired Monycor Bancshares, Inc.
("Monycor"), the holding company of Monycor Bank, with total consolidated
assets of $29.5 million at December 31, 1995. See "Recent Developments" below.
Giving effect to the Monycor acquisition, F&M had pro forma total assets of
$972.6 million at December 31, 1995. The acquisition of Monycor is being
accounted for using the pooling of interests method of accounting; however,
because the Monycor acquisition occurred in 1996, all financial information and
data included in this annual report on Form 10-K are prior to restatement for
that transaction unless otherwise indicated. F&M does not believe that the
restatement for the acquisition will have a material effect on its financial
condition or results of operations.
Recent Developments
Monycor Acquisition. On February 5, 1996, F&M acquired Monycor.
Monycor owned a 98.4% interest in Monycor Bank (which was subsequently renamed
"F&M Bank-Superior"). F&M Bank-Superior is a Wisconsin state bank
headquartered, with a single office, in Superior, Wisconsin, in the
northwestern corner of the state. In the Monycor transaction, Monycor merged
into a subsidiary of F&M, and outstanding shares of Monycor Common Stock were
converted into an aggregate of 157,563 shares of F&M Common Stock ("F&M
Common"), valued for purposes of the transaction at $3.6 million.
At December 31, 1995, Monycor had total assets of $29.5 million,
net loans of $18.4 million, total deposits of $26.4 million and shareholders'
equity of $1.7 million. For the fiscal year ended December 31, 1995, Monycor
had net income of $380,000. F&M is accounting for the Monycor transaction
using the pooling of interest method of accounting.
USB Acquisition. On January 9, 1995, F&M acquired Union State
Bank ("USB") which has been renamed "F&M Bank-Waushara County." F&M
Bank-Waushara County is a Wisconsin state bank headquartered in Wautoma,
Wisconsin, approximately 40 miles south-southeast of the city of Stevens Point,
and 40 miles west of the city of Oshkosh. USB has five full-service offices
located in Waushara County, Wisconsin.
In the USB transaction, F&M offered to exchange outstanding
shares of USB Common Stock for shares of F&M Common. The stock exchange offer
was accepted by holders of over 99.9% of the outstanding shares of USB's Common
Stock, and F&M issued 740,561 shares of F&M Common in the transaction, valued
for purposes of the transaction at $16.2 million. The remaining shares of
USB's Common Stock were subsequently acquired by F&M for cash.
At December 31, 1994, USB had total assets of $93.8 million,
total deposits of $83.1 million and shareholders' equity of $8.9 million. For
the fiscal year ended December 31, 1994, USB had net income of $177,000, which
included a special after tax charge of approximately $470,000 relating to the
freezing of benefits under USB's defined benefit plan, and certain additional
charges relating to the acquisition. F&M accounted for the USB transaction
using the pooling of interest method of accounting.
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Proposed Algoma Acquisition. On January 8, 1996, F&M announced
that it had entered into a letter of intent to acquire Community State Bank
("CSB"). A definitive agreement was signed on February 22, 1996. CSB is a
Wisconsin state bank, with its main office in Algoma (in Kewaunee County), with
a branch office in Forestville (in Door County), which are new markets for F&M.
In that proposed CSB acquisition, F&M has offered to acquire CSB in exchange
for shares of F&M Common. The aggregate acquisition price is expected to be
approximately $12.5 million, with the number of shares of F&M Common to be
determined based upon the market value at the time of closing.
At December 31, 1995, CSB had total assets of $53.2 million, net
loans of $19.7 million, total deposits of $44.5 million and shareholders'
equity of $8.2 million. For the year ended December 31, 1995, CSB had net
income of $629,000. The CSB acquisition is subject to regulatory approvals and
other customary contingencies. While there can be no assurances, the parties
expect that the CSB acquisition will be consummated in mid-1996. F&M does not
expect that the CSB acquisition will have a material effect upon F&M because of
the relative size of CSB as compared to F&M, and the proposed acquisition price
as compared to F&M's total equity.
Proposed Tomahawk Acquisition. On January 11, 1996, F&M entered
into a definitive agreement providing for the acquisition of Bradley Bank
("Bradley") from its holding company and minority shareholders. The agreement
in principle to acquire Bradley had been announced in September 1995. Bradley
has two full service offices in Tomahawk, Wisconsin, and the acquisition of
Bradley will enhance F&M's presence in north central Wisconsin; Bradley will be
combined with F&M Bank-Lakeland. The proposed Bradley acquisition will be for
cash. The acquisition price will be in a formula amount set forth in the
agreement, which is expected to be approximately $6.2 million.
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.
The Bradley acquisition is subject to regulatory approval and
other customary contingencies. Applications for federal and state
regulatory approvals have been filed; federal approval has been received and
state approval is expected in April 1996. While there can be no assurances,
the parties expect that the Bradley transaction will be consummated in the
second quarter of 1996. F&M management does not expect the Bradley acquisition
will have a material effect upon F&M because of the relative size of Bradley as
compared to F&M, and the proposed acquisition price as compared to F&M's total
equity.
Proposed Little Chute Acquisition. As of January 15, 1996, F&M
entered into a definitive agreement to acquire the Little Chute branch office
of TCF Bank Wisconsin. The acquisition, which will include 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. The proposed acquisition will be a
cash transaction, in which F&M purchases the fixed assets of the Little Chute
branch, and is reimbursed in cash (reduced by an agreed-upon premium) by TCF
for the assumption of deposits. F&M Bank-Kaukauna will also acquire loans
secured by deposits, if any, of the office. At December 31, 1995, the TCF
Little Chute branch office had total deposits of approximately $8.0 million.
The Little Chute acquisition is subject to regulatory approval
and other customary contingencies. Federal and state regulatory approvals
have been received. While there can be no assurances, the parties expect that
the Little Chute transaction will be consummated in the second quarter of
1996. F&M management does not expect that the Little Chute acquisition will
have a material effect upon F&M because of the relative size of the Little
Chute office as compared to F&M, and the proposed acquisition price as
compared to F&M's total equity.
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Proposed Bloomer Acquisition. During 1995, F&M announced a
proposed acquisition of Peoples State Bank of Bloomer, Wisconsin ("PSB").
Although the transaction received the approval of over 65% of PSB's
shareholders, it did not receive the statutorily required approval of at least
75% of PSB's shares. Therefore, the PSB acquisition offer expired without
completion.
Subsidiary Banks
F&M owns 14 subsidiary banks (the "Banks" or the "F&M Banks"),
all of which are Wisconsin state banks, and each of which is a member of the
Federal Reserve System. The Banks are community banks which provide a full
range of services to consumers and businesses in small and medium-sized
communities throughout Wisconsin. F&M provides the benefits of holding company
affiliation while allowing the Banks to operate with considerable autonomy.
The following table presents certain information as to the F&M
Banks. Unless otherwise indicated, each of the F&M Banks is wholly-owned by
F&M.
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NO. OF FULL TOTAL
YEAR SERVICE OFFICES ASSETS
BANK ACQUIRED (1) AT 3/31/96 AT 12/31/95
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(in millions)
<S> <C> <C> <C>
F&M Bank-Kaukauna(2) 1980 3 $104.1
F&M Bank-Appleton 1981 3 50.4
F&M Bank-Hilbert 1983 3 28.4
F&M Bank-Winnebago County 1985 3 86.8
F&M Bank-New London 1987 1 31.6
F&M Bank-Portage County 1987 3 57.7
F&M Bank-Fennimore(3) 1988 1 43.7
F&M Bank-Potosi 1988 2 30.2
F&M Bank-Lancaster(4) 1990 1 38.6
F&M Bank-Lakeland 1991 5 101.6
F&M Bank-Kiel 1991 1 41.1
F&M Bank-Northeast 1994 10 226.6
F&M Bank-Waushara County 1995 5 97.3
F&M Bank-Superior(5) 1996 1 29.5
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(1) In the case of F&M Banks resulting from mergers, represents the date
F&M first acquired any of the constituent banks in those mergers.
(2) F&M Bank-Kaukauna is 98.9% owned by F&M.
(3) F&M Bank-Fennimore is 97.3% owned by F&M.
(4) In March 1996, F&M Bank-Lancaster consolidated its two Lancaster
offices into a single office.
(5) F&M Bank-Superior is 98.4% owned by F&M.
F&M's network of community banks generally operates with significant
local autonomy, with general oversight and support from F&M. F&M believes this
autonomy allows the F&M Banks to better serve the customers in their respective
communities, and thus enhances the F&M Banks' business opportunities and
operations. After acquiring banks, F&M generally maintains local bank charters
and keeps intact existing management and boards of directors. Generally, F&M
Bank managements operate independently of F&M in selecting deposit products
developed by F&M and in making pricing and credit decisions. F&M maintains an
approval procedure for new loans above certain threshold amounts and provides
ongoing loan review and administration assistance and other services for the
F&M Banks. F&M encourages F&M Bank officers and employees to be active in
community groups and projects.
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Markets
F&M Banks provide services through a total of 42 full service offices
in 37 Wisconsin communities. In recent years, the economic and business
environment in the State of Wisconsin has been relatively strong and stable.
The communities in which the F&M Banks maintain offices range in population
from almost 100,000 to less than 500. Although many of the communities in
which the F&M Banks are located are relatively small, they generally have
diverse economies with representation from many industry groups. Twenty-one of
the F&M Banks' locations represent the only commercial bank office in their
community. Each F&M Bank branch provides complete retail banking services and
full service banking for personal, commercial and service industry customers.
F&M's largest markets are in east-central and northeast (and adjacent
areas of central) Wisconsin, particularly in and near the group of cities and
smaller communities from Oshkosh to Green Bay locally known as the "Fox River
Valley." This area includes F&M's Fox Valley and Northeast Regions, and nearby
banks. F&M's Fox Valley Region includes F&M Banks-Appleton, Hilbert, Kaukauna,
Kiel and New London. F&M's Northeast Region consists of F&M Bank-Northeast.
F&M's Banks-Portage County, Waushara County and Winnebago County round out the
market areas.
F&M Banks-Fennimore, Potosi and Lancaster are located in Grant County
in southwest Wisconsin, and make up F&M's Southwest Region. F&M's other
markets include north central Wisconsin, served by F&M Bank-Lakeland with its
five offices, and northwest Wisconsin, served by F&M Bank-Superior.
Acquisition and Expansion Strategy
The Company's strategy is to continue to grow by actively pursuing
opportunities to acquire other financial institutions and by establishing
additional branches. The Company's primary geographic area of focus for
expansion is small metropolitan areas and other communities in Wisconsin.
Although it is not currently pursuing out-of-state acquisitions, it would
consider appropriate opportunities in contiguous states should they arise. The
Company generally concentrates on acquisitions of banks with $25 million or
more in assets, although it would consider acquiring a smaller institution if
the Company would be able conveniently and economically to operate it as a
branch of a nearby Bank or other attractive factors exist.
In addition to the acquisitions described above under "Recent
Developments," in the past five years, F&M has consummated five other
acquisitions:
Pulaski Acquisition. On March 21, 1994, F&M acquired Pulaski
Bancshares, Inc. ("PBI") and its wholly-owned subsidiary Pulaski State
Bank (subsequently renamed "F&M Bank-Pulaski" and merged as part of
F&M Bank-Northeast). The PBI acquisition enhanced F&M's presence in
northeast Wisconsin. In the PBI transaction, outstanding shares of
PBI common stock, and share equivalents subject to outstanding PBI
options, were converted into shares of F&M Common. In the merger, F&M
issued a total of 867,214 shares of F&M Common, and assumed an option
which was converted into an option to purchase 14,455 shares of F&M
Common. At December 31, 1993, PBI had total assets of $79.9 million
and shareholders' equity of $9.2 million. F&M accounted for the PBI
transaction using the pooling of interests method of accounting.
First National Acquisition. On February 11, 1994, F&M acquired First
National Financial Corporation ("FNFC") and its wholly-owned
subsidiary First National Bank of Wisconsin ("Northeast Bank"), which
has been renamed "F&M Bank-Northeast" and converted to a Wisconsin
state bank. The FNFC acquisition established F&M's presence in
Wisconsin areas northeast of the Fox River Valley. In the FNFC
transaction, outstanding shares of FNFC common stock were converted
into shares of F&M Common, resulting in the issuance of 347,328 shares
of F&M Common after adjustment for fractional share interests. The
then outstanding shares of FNFC preferred stock were converted into
cash at their redemption value (plus accrued dividends), for aggregate
cash payments of $2.1 million. Also, F&M repaid certain corporate
debt of FNFC to a third party bank
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in the amount of $4.5 million, including accrued interest. At
December 31, 1993, FNFC had total assets of $106.3 million and common
shareholders' equity of $3.2 million. F&M accounted for the FNFC
transaction using the pooling of interests method of accounting.
Park Ridge. In September 1993, the Company acquired Park Ridge
Bancshares, Inc. ("Park Ridge"), a Wisconsin bank holding company and
its wholly-owned subsidiary, Bank of Park Ridge (now "F&M Bank-Portage
County"), in a stock transaction valued at $3.3 million. The
acquisition of Park Ridge allowed the Company to establish a presence
in Stevens Point and complemented two nearby offices of F&M
Bank-Amherst Junction, which was subsequently merged into F&M
Bank-Portage County. At June 30, 1993, Park Ridge had total assets of
$27.1 million and shareholders' equity of $2.2 million. The
acquisition of Park Ridge was accounted for as a pooling of interests.
Lakeland. In April 1991, the Company acquired Lakeland Financial
Corp. ("Lakeland"), a Wisconsin bank holding company which owned
approximately 96% of Lakeland State Bank (now F&M Bank-Lakeland), in a
stock and cash transaction valued at $7.6 million. The Company
subsequently acquired the remaining minority interest in that bank for
$317,000 in cash. The acquisition of Lakeland allowed the Company to
establish a significant presence in north central Wisconsin vacation
and resort areas. At March 31, 1991, Lakeland State Bank had total
assets of $73.4 million and stockholders' equity of $6.1 million. The
acquisition of Lakeland was accounted for as a purchase.
Kiel. In April 1991, the Company also acquired SBK Bancshares, Inc.
("Kiel"), a Wisconsin bank holding company which wholly-owned State
Bank of Kiel (now F&M Bank-Kiel), in a stock and cash transaction
valued at $3.8 million. The acquisition of SBK allowed the Company to
expand its presence in east central Wisconsin. At March 31, 1991,
State Bank of Kiel had total assets of $31.1 million and stockholders'
equity of $3.0 million. The acquisition of SBK was accounted for as a
purchase.
The Company's acquisition strategy also focuses on past performance of
the target, management strengths and weaknesses, location, community
demographics, relative health of the local economy, organizational structure of
the target, size of the target and consideration for the acquisition. In
evaluating these criteria, management considers the alternatives and costs
associated therewith to enter a particular market, and the impact of the
proposed acquisition on the Company's earnings and stock price.
To supplement the presence it has established in various markets, and
to expand to new markets, the Banks will from time to time open additional
branch offices, including supermarket and other non-traditional branches, in
communities which warrant additional coverage. Since 1988, the Banks have
established de novo branches in Appleton (two), Darboy, Green Bay, Kaukauna,
Minocqua and Oshkosh. The Company will also consider branch purchases, as in
the case of Little Chute.
The Company believes that its experience in making acquisitions and in
assimilating acquired institutions into the Company's system, as well as its
philosophy of permitting significant independence of the management of the
Banks, position the Company well to take advantage of future expansion
opportunities. The Company believes that its experience with, and willingness
to acquire, banks in smaller communities gives it an advantage in responding to
certain acquisition opportunities. These opportunities may be created by
management succession needs, desires to obtain assistance in responding to
increasing regulatory requirements, bank shareholder liquidity needs and
similar situations.
Since its inception, the Company has experienced substantial growth
through acquisitions of other financial institutions. F&M's strategy to
continue to make acquisitions is dependent upon its ability to identify
potential targets for acquisition and consummate transactions on terms
acceptable to F&M. Also, F&M's future success is dependent in part upon its
ability to integrate the operations of, and manage over time, acquired
financial institutions. In addition to its pending acquisitions, F&M has
acquired seven financial institutions within the past five years, including two
acquisitions in the first quarter of 1994, one in
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the first quarter of 1995, and one in the first quarter of 1996. The two 1994
acquisitions were the largest acquisitions undertaken by F&M in terms of the
consideration paid and the size of the acquired institution, respectively. The
1995 acquisition was F&M's second largest acquisition in both categories. In
addition, one acquisition announced by F&M in 1995 was not completed due to
failure of the target bank to secure the required bank shareholder approval.
Business Planning and Marketing
Company-wide plans are set each year, both for F&M and for the Banks,
and are developed after substantial input from and consultation with Bank
personnel. Progress is regularly monitored in meetings with Bank employees and
in system-wide reports. F&M also uses compensation and performance incentives
for all of its employees to help achieve the plan targets.
F&M developed "Lifestyle Banking" in 1992 for implementation by the
Banks to bolster each of their marketing efforts in the communities they serve.
Lifestyle Banking seeks to attract new customers and create broad banking
relationships with customers by focusing on their varying needs rather than
attempting to design products and services of general application or
aggressively price a particular product or service. Bank employees are trained
to recognize customer needs and take additional responsibility and initiative
in marketing the Banks' products and services to provide more individualized
customer service. Lifestyle Banking is also designed to provide a continuing
customer-level source of ideas to help the Banks better serve their customers
and communities.
Lending and Investments
The F&M Banks offer short-term and long-term loans on a secured or
unsecured basis for business or personal purposes. The F&M Banks focus their
lending activities on individuals and small businesses in their immediate
market areas. Lending has been almost exclusively within the State of
Wisconsin. The markets of the F&M Banks include a wide variety of businesses;
therefore, F&M does not believe it is unduly exposed to problems in any
particular industry group.
F&M believes that it can best serve its customers, and thereby enhance
F&M's business, operations and profitability, by maximizing local autonomy in
credit decisions. Generally, managements of the F&M Banks operate
independently of F&M in making credit decisions. F&M maintains an approval
procedure for any new loan that exceeds a specified threshold amount (varying
depending upon the F&M Bank) or loan participations exceeding $750,000. F&M
also provides continuing loan review and administrative assistance for the F&M
Banks. The foregoing are in addition to each F&M Bank's internal loan
procedures.
The F&M Banks participate in lending guaranteed by the Small Business
Administration and/or the Federal Housing Administration. For residential
customers, the F&M Banks make mortgage loans and offer a variety of programs
which are for resale in secondary mortgage markets or which are retained in the
F&M Banks' portfolios. F&M does not have any substantial business with foreign
obligors.
Real Estate Loans. Real estate loans include residential mortgages
and agricultural real estate, commercial real estate and construction loans.
On a company-wide basis, real estate lending represents F&M's largest category
of loans outstanding. At December 31, 1995, residential, commercial and
agricultural real estate loans represented approximately 67% of loans
outstanding, the majority of which consists of residential real estate first
mortgages, with real estate construction loans approximating an additional 3%
of the portfolio.
F&M originates residential mortgage loans which generally are
long-term, with either fixed or variable interest rates. F&M's general policy,
which is subject to review by management as a result of changing market and
economic conditions, and other factors, is to retain all variable interest rate
mortgage loans in its portfolio and to sell all long-term fixed interest rate
mortgage loans to the secondary market, but retaining servicing rights to some
of those loans. Variable interest rate real estate loans are generally
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repriceable on an annual basis or may be adjusted at F&M's discretion. All
commercial and agricultural real estate loans are written on an adjustable
basis, the majority of which are tied to the prime rate, or short-term fixed
rate basis. F&M believes the most significant risks relating to real estate
loans result from possible declines in value of the real estate securing loans,
as well as the borrower's ability to repay.
Commercial and Industrial Loans. Loans in this category principally
include loans to service, retail, wholesale and manufacturing businesses. At
December 31, 1995, approximately 17% of loans outstanding were in this
category. The F&M Banks provide both secured and unsecured loans and lines of
credit for the operations and expansion needs of local business. The F&M Banks
generally look to a borrower's business operations as the principal source of
repayment, but they also receive, when appropriate, mortgages on real estate,
security interests in inventory, accounts receivable and other personal
property, and/or personal guaranties. Repayment risk relating to commercial
and industrial loans generally relates to the success or failure of the
underlying business enterprise.
Agricultural Loans. There is a strong focus on the agricultural
industry in many of the communities in which F&M Banks' offices are located.
The agricultural products produced in these communities vary significantly, and
include dairy, livestock, vegetables and other cash crops. At December 31,
1995, approximately 6% of loans outstanding were made to agricultural
producers, excluding agricultural real estate lending which constitutes an
additional approximately 6% of loans. These loans are in a variety of
communities and relate to a variety of agricultural commodities, thus lessening
F&M's exposure to weaknesses in any one geographical area or type of
agricultural production. Because of the breadth and relative health of
Wisconsin's agricultural industries, F&M has not experienced significant
system-wide problems in agricultural-related loans. Credit risks relating to
agricultural loans generally depend upon varying commodity prices and crop
conditions which affect agricultural producers.
Installment and Other Consumer Loans. F&M makes installment and other
consumer loans, including automobile loans, home improvement loans and personal
lines of credit. At December 31, 1995, approximately 7% of the loans were
installment or other consumer loans. F&M believes that consumer loans often
represent the beginning of a long-term banking relationship with new customers.
Credit risks relating to installment and consumer loans include the risks
relating to the repayment capacity of the borrower involved and the
depreciation of the assets used as collateral for such loans.
Other Investments. F&M maintains a diversified portfolio of
investments, primarily consisting of U.S. Treasury securities, obligations of
U.S. government corporations and agencies, and obligations of states and their
political subdivisions. The portfolio includes limited mortgage-backed
securities. F&M attempts to balance its portfolio to meet its liquidity needs
while endeavoring to maximize investment income, and to maximize tax
advantages.
Deposits
Each of the F&M Banks offers the usual and customary range of
depository products provided by commercial banks, including checking, savings
and money market accounts, and certificates of deposit. Deposits at each F&M
Bank are insured by the Federal Deposit Insurance Corporation ("FDIC") up to
statutory limits.
Local managements of the F&M Banks are given significant latitude in
determining and pricing the depository products offered. F&M makes a general
determination of the deposit products which may be offered by the F&M Banks,
and its corporate staff regularly consults with local management in developing
new products which may be appropriate for local communities. However, local
management selects which of F&M's various products can be most successfully
offered in the various communities which its F&M Bank serves. In addition,
local management is given the flexibility to price deposit products locally, to
best compete in an F&M Bank's particular marketplace.
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Other Customer Services and Products
Other aspects of the business of the Banks include safety deposit box
services, and the sale and purchase of U.S. government securities, obligations
of U.S. government agencies, obligations of state and political subdivisions
and other similar securities. The Banks use repurchase agreements on a limited
basis, primarily with municipal customers.
Certain of the Banks have established "Investment Centers" which,
through arrangements with other service providers, offer securities brokerage
services, annuities, and mutual fund products in addition to the other banking
products and services offered by the Banks. Currently, only F&M Bank-Lancaster
offers trust services, although F&M Bank-Kaukauna has applied for trust powers.
Administration of the Banks
Although each of the Banks operates with a significant level of
independence, F&M has centralized operations for certain functions, and makes
available its corporate staff and centralized resources for other functions
upon request.
Credit-Related Services. Initial customer credit decisions are made
by the local management of each Bank. To assist local management and to
maintain system-wide credit standards, F&M has established a system-wide credit
committee to review credits to the extent lending proposals exceed threshold
amounts for the Banks, or if a Bank wishes to participate in a credit with
other Banks. See "Lending and Investments" above. In addition, F&M's
corporate staff will provide individual Banks with assistance on credit review
and collection upon request. Internal audit and compliance officers of F&M
regularly review the Banks' lending portfolios and require periodic reports
from the Banks as to outstanding credits and their quality.
Investments. To help maximize the investment return to F&M and the
Banks, F&M has centralized investment functions through commonly-managed
investment subsidiaries of each Bank. F&M has determined that this centralized
investment management strategy is more efficient and economical and creates the
possibility for more advantageous investment returns to the Banks than would be
possible with each Bank independently managing its investment portfolio.
Data Processing. After a review of its data processing needs, in
December 1992, F&M contracted with an outside provider for these services
through a combination of on-site Bank personnel and remote processing hardware
and software. Under the data processing agreement, new hardware and software
are being maintained at remote locations although F&M has the option to acquire
both the hardware and the software to perform the data processing in-house if
that is subsequently deemed in its best interests. F&M provides data
processing services to all of the Banks except F&M Banks-Woodruff, Northeast,
Waushara County and Superior through this arrangement. Management believes
that the systems which F&M Bank-Woodruff and F&M Bank-Northeast maintain are
sufficient for their current needs. F&M Banks-Waushara County and Superior
have not yet converted to the outside processor, and no specific date for
conversion has been set.
Other Operations and Services. F&M provides other services for the
benefit of the Banks such as marketing assistance, human resources services and
benefits administration, and centralized purchasing of supplies. F&M believes
that centralizing these services promotes efficiency and cost savings for the
Banks without interfering with their community-oriented management.
Competition
The F&M Banks actively compete with other financial institutions and
businesses in both attracting and retaining deposits and making loans. Direct
competitors include banks, savings and loans and credit unions. These
institutions offer direct competition in the areas of deposits and loans.
Other competitors
-8-
<PAGE> 10
include insurance companies, securities brokerage firms, trust companies and
investment management firms which also offer competition for many of the
services offered by the F&M Banks, such as discount brokerage and annuities.
F&M believes it has a competitive advantage because 21 of its 42 F&M
Bank office locations represent the only commercial bank office in their
respective communities. However, in certain of these communities, savings and
loan associations, savings banks or credit unions also maintain offices, and
there are bank offices located in other nearby communities. Competition with
other financial institutions and businesses can affect the Banks' ability to
obtain and retain customers as well as the pricing levels of their products and
services. F&M believes its focus on establishing continuing banking
relationships and on individualized customer service provides additional
competitive advantages.
F&M also faces competition in seeking institutions to acquire.
Wisconsin has recently experienced a significant consolidation of its banking
industry, and many large holding companies with greater resources than F&M
(including several out-of-state holding companies) are actively pursuing
acquisitions in Wisconsin. This competition affects the available acquisition
opportunities for F&M and can affect the costs of such acquisitions.
The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. While the
Company's community banking strategy stresses "traditional" personal service,
the Company's future success will depend in part on its ability to address the
needs of its customers by using technology to provide products and services
that will satisfy customer demands for convenience as well as to create
additional efficiencies in F&M's bank operations. Many of F&M's competitors
have substantially greater resources to invest in technological improvements.
Regulation and Supervision
The banking industry is highly regulated by both federal and state
regulatory authorities. Regulation includes, among other things, capital and
reserve requirements, dividend limitations, limitations on products and
services offered, geographical limits, consumer credit regulations, community
reinvestment requirements and restrictions on transactions with affiliated
parties. Financial institution regulation has been the subject of significant
legislation in recent years, may be the subject of further significant
legislation in the future, and is not within the control of F&M. This
regulation substantially affects the business and financial results of all
financial institutions and holding companies, including F&M and the F&M Banks.
All of the F&M Banks are incorporated under the banking laws of
Wisconsin. Each of the F&M Banks is therefore subject to supervision and
regulation by the Wisconsin Commissioner of Banking (the "Commissioner").
Effective July 1, 1996, the office of the Commissioner is being consolidated
with several other Wisconsin regulators, under the new Department of Financial
Institutions (the "Department"); the F&M Banks will therefore then be subject
to regulation by that Department, its Secretary, and its Division of Banking.
Each of the F&M Banks is a member of the Federal Reserve System, and
is therefore subject to regulation by the Federal Reserve Board. The deposits
of each of the banks are insured, up to statutory limits, by the Federal
Deposit Insurance Corporation. As a registered bank holding company under the
Bank Holding Company Act of 1956, F&M itself is subject to review and
regulation by the Federal Reserve Board. F&M, as a holding company, is also
subject to review and examination by the Commissioner (and will be subject to
the Department) under Wisconsin law.
-9-
<PAGE> 11
In addition to general requirements that banks retain specified levels
of capital and otherwise conduct their business in a safe and sound manner,
Wisconsin law requires that dividends of Wisconsin banks declared and paid
without the approval of the Commissioner (Department) be paid out of current
earnings or, no more than once within the immediate preceding two years, out of
undivided profits in the event there have been insufficient net profits. Any
other dividends require the prior written consent of the Commissioner
(Department). Each of the F&M Banks is in compliance with all applicable
capital requirements and may pay dividends to F&M.
Under federal legislation enacted in 1994, beginning in September 1995
Wisconsin bank holding companies, including F&M, have been allowed to acquire
banks and holding companies nationwide, and holding companies in all other
states will be allowed to acquire banks and holding companies in Wisconsin.
Wisconsin law generally requires the approval of the Commissioner (Department)
for all acquisitions of banks in Wisconsin, whether by Wisconsin or
out-of-state entities. Interstate bank mergers, under specified circumstances
and subject to adoption of Wisconsin legislation permitting such mergers by
Wisconsin state banks, would be permitted beginning in 1997. To date, F&M has
not actively pursued acquisitions of institutions outside of Wisconsin,
although it would consider doing so should an appropriate opportunity arise.
Wisconsin law permits establishment of full service bank branch offices
statewide.
F&M, as a member of the banking industry, is affected by general
economic conditions, particularly as those conditions affect the Wisconsin
communities served by the F&M Banks. A financial institution's earnings also
depend to a large extent upon the relationship between the cost of funds
(primarily deposits) and the yield on earning assets (loans and investments).
This relationship, known as the interest rate margin, is subject to fluctuation
and is affected by regulatory, economic and competitive factors which influence
interest rates, the volume and rate of interest on interest-earning assets and
interest-bearing liabilities, and the level of non-performing assets.
-10-
<PAGE> 12
Statistical Information
The principal sources of income for the subsidiary banks of F&M are
interest and fees on loans, interest on short-term investments and interest on
securities. The total operating income and the percentage of each to total
operating income is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
ITEM OF INCOME 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest and fees on loans
and short-term borrowings 80.8% 78.1% 73.3%
Interest on securities 13.4% 15.8% 18.7%
Non-interest income 5.8% 6.1% 8.0%
Total operating income (in thousands) $77,104 $64,699 $62,941
</TABLE>
F&M and its subsidiaries do not have any material foreign deposits, loans or
operations.
The following statistical information is offered in response to the
Securities and Exchange Commission's "Guide 3 - Statistical Disclosures by Bank
Holding Companies". Certain of that information is included in the Company's
Management's Discussion and Analysis of Results of Operations and Financial
Condition" ("MD&A") at Item 7 hereof, and is incorporated in this section by
reference thereto (rather than restating the information).
I. A. & B. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY -
INTEREST RATES AND DIFFERENTIALS
Incorporated by reference from MD&A under the caption "Results
of Operations - Net Interest Income."
I. C. INTEREST INCOME AND EXPENSE VOLUME AND RATE CHANGE
Incorporated by reference from MD&A under the caption "Results
of Operations - Net Interest Income."
II. A. INVESTMENT PORTFOLIO
Incorporated by reference from MD&A under the caption
"Financial Condition - Investment Portfolio."
II. B. RELATIVE MATURITIES & WEIGHTED AVERAGE INTEREST RATES
Incorporated by reference from MD&A under the caption
"Financial Condition - Investment Portfolio."
III. LOAN PORTFOLIO
A. TYPES OF LOANS
Incorporated by reference from MD&A under the caption
"Financial Condition - Loan Portfolio."
The Company does not have any loans known to be to foreign obligors.
The Company is not lessee under leases which, in the aggregate, are material to
it. To the extent the Company utilizes lease financing for its customers, the
leases are accounted for as loans, and included in the appropriate loan
categories.
-11-
<PAGE> 13
B. MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST
RATES
Incorporated by reference from MD&A under the caption
"Financial Condition - Loan Portfolio."
C. RISK ELEMENTS
Incorporated by reference from MD&A under the caption
"Financial Condition - Non-Performing Assets."
D. OTHER INTEREST BEARING ASSETS
None
IV. A. SUMMARY OF LOAN LOSS EXPERIENCE
Incorporated by reference from MD&A under the caption
"Financial Condition - Summary of Loan Loss Experience."
IV. B. ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
Incorporated by reference from MD&A under the caption
"Financial Condition - Allocation of Allowance for Loan Loss."
V. DEPOSITS
The Companies average balances of deposits and the average rate paid on these
deposits during the years ended December 31, 1995, 1994 and 1993 are:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------------------------------
DOLLARS IN THOUSANDS BALANCE RATE BALANCE RATE BALANCE RATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand deposits $97,162 -- $90,891 -- $80,623 --
Interest bearing demand deposits 78,039 1.95% 84,759 1.90% 91,017 2.31%
Saving deposits 196,721 2.89% 197,318 2.47% 182,693 2.72%
Time deposits 411,917 5.61% 352,391 4.53% 333,835 4.65%
- --------------------------------------------------------------------------------------------------------------
Total $783,839 $725,287 $688,168
==============================================================================================================
</TABLE>
The amount of time certificates of deposit issued in amounts of $100,000 or
more and outstanding as of December 31, 1995 is: $75,303,000. Their maturing
distribution is as follows:
<TABLE>
<S> <C>
-- three months or less $32,060,000
-- over three months and through twelve months $33,891,000
-- over one year $ 9,352,000
</TABLE>
Neither F&M or its subsidiaries have any deposits in foreign banking offices.
-12-
<PAGE> 14
VI. RETURN ON EQUITY AND ASSETS
The various ratios are included in the MD&A under the caption "Results of
Operations" and "Financial Condition - Capital Adequacy" and are incorporated
by reference thereto.
VII. SHORT-TERM BORROWINGS
The comparison of short-term borrowings as of December 31, follows:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal funds purchased and securities sold
under repurchase agreement $12,194 $19,442 $5,366
Other short-term borrowings -- 404 478
- -------------------------------------------------------------------------------------------------
Totals $12,194 $19,846 $5,844
=================================================================================================
</TABLE>
The following information relates to federal funds purchased and securities
sold under repurchase agreements for the years ended December 31:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
As of end of year:
Weighted average rate 5.65% 5.90% 3.72%
For the year:
Maximum amount outstanding $31,904 $32,509 $9,836
Average amount outstanding $15,885 $18,590 $7,880
Weighted average rate 5.81% 4.38% 3.31%
</TABLE>
-13-
<PAGE> 15
ITEM 2. PROPERTIES.
Of the Banks' 42 total offices, 41 are located in buildings which are
owned by the respective Banks and one is in a leased facility. The lease is
short-term, which the Company believes is appropriate for the particular
location. In addition, the Company owns its headquarters building in Kaukauna,
Wisconsin. In March 1996, F&M Bank-Lancaster consolidated its two offices in
Lancaster into a single office, after the expansion of the remaining office.
F&M Bank-Portage County expects to begin construction of a new main bank
building, near its current Stevens Point (Park Ridge) office, in 1996. The
bank is considering what office locations will be appropriate to retain after
the new office is opened. In addition, F&M-Northeast has acquired a site in
western Green Bay, Wisconsin, at which it intends to open a new branch office.
All of the facilities which are owned by the Company or the Banks are
designed for commercial banking operations. All facilities used by the Company
and the Banks are suitable for their current and anticipated expanded
utilization, although the Company regularly reviews whether any changes or
improvements would be advisable.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceedings other than routine
litigation which is not material to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1995.
-14-
<PAGE> 16
EXECUTIVE OFFICERS OF THE REGISTRANT
In 1993 and 1994, F&M augmented and reorganized its management
structure to provide a regional management structure, lessen dependence on any
particular individual, and to enhance its ability to provide services for the
F&M Banks and manage its substantial growth. The following table sets forth
certain information regarding the executive officers of F&M. Executive
officers are elected annually by the Board of Directors, and serve at the
discretion of the Board.
<TABLE>
<CAPTION>
AGE AT
NAME 3/31/96 POSITION(S)
- ---- ------- -----------
<S> <C> <C>
Gail E. Janssen 65 President, Chairman of the Board,
Chief Executive Officer and Director
Richard L. Grall 48 Regional Vice President-Fox Valley
John W. Johnson 42 Regional Vice President-Northeast and
Director
Douglas A. Martin 44 Regional Vice President-Southwest and
Director
Daniel E. Voet 32 Chief Financial Officer and Treasurer
Donna R. Habert 44 Vice President-Data Processing
Janet M. Lakso 53 Vice President-Administration and
Secretary
Bartholomew Salazar 32 Vice President-Investments
Linda K. Seefeldt 41 Vice President-Marketing
Peter H. Smaby 34 Vice President-Compliance/Loan Review
Darlene M. Vanden Boogart 37 Vice President-Audit
Constance M. Verbruggen 36 Vice President-Human Resources
</TABLE>
Mr. Janssen has served as President, Chairman, Chief Executive Officer
and a director of F&M since its inception. Mr. Janssen also serves as Chairman
of the Board of seven of the Banks. Mr. Janssen served as President of F&M
Bank-Kaukauna from 1977 to 1991. F&M has historically considered itself highly
dependent upon the services of Mr. Janssen, although the 1993 and 1994 changes
in management structure were intended, in part, to lessen that dependence.
In March 1996, F&M announced that Gary Lichtenberg would join F&M as
President and Chief Operating Officer on April 15, 1996. (Mr. Janssen will
remain Chairman and Chief Executive Officer.) Mr. Lichtenberg, age 52, has
served as Senior Vice President and Banking Controller of Marshall & Ilsley
Corporation since its 1994 acquisition of Valley Bancorporation. Mr.
Lichtenberg had previously served as Valley Bancorporation's Senior Vice
President, Chief Financial Officer and Secretary since 1984, and had served as
a Valley officer since 1970.
Mr. Grall became Regional Vice President-Fox Valley of F&M in August
1994. Mr. Grall has been president of F&M Bank-Appleton since 1981.
Mr. Johnson became Regional Vice President-Northeast of F&M in August
1994. Mr. Johnson was President of F&M Bank-Pulaski since 1989, and also
became President of F&M Bank-Northeast in March 1994, shortly before the merger
of the two banks. Mr. Johnson was elected to F&M's Board of Directors in April
1994, as contemplated by F&M's acquisition of PBI.
Mr. Martin became Vice President of F&M in 1992 and was named Regional
Vice President-Southwest of F&M in March 1994. Mr. Martin became Chairman of
the Board of F&M Banks-Fennimore, Lancaster and Potosi in March 1994. Mr.
Martin has been President of F&M Bank-Fennimore since 1985. Mr. Martin has
served as a director of F&M since 1990.
-15-
<PAGE> 17
Mr. Voet became Chief Financial Officer at year end 1994 and Treasurer
in 1993. Mr. Voet previously served as Corporate Accountant of F&M since 1991,
before which he was a certified public accountant in private practice.
Ms. Habert became Vice President-Data Processing of F&M in 1993.
Prior to that time, she was Assistant Vice President-Data Processing since
1989. Ms. Habert had been employed by F&M Bank-Kaukauna since 1971.
Ms. Lakso became F&M's Vice President-Administration in 1993 and
Secretary at year end 1994. Ms. Lakso was Assistant Vice President-
Administration since 1992. Ms. Lakso has served F&M since 1980 as assistant to
the President, and was first employed by F&M Bank-Kaukauna in 1970.
Mr. Salazar joined F&M as Assistant Vice President-Investments in 1992
and became Vice President-Investments in 1993. Prior to joining F&M, Mr.
Salazar was employed by First Interstate Bank of Wisconsin and its successor,
Norwest Bank Wisconsin, N.A., in a variety of positions including Manager of
Wire Transfer Operations, Manager of Float Control Operations, Investment
Portfolio Manager and as a financial analyst.
Ms. Seefeldt joined F&M as Vice President-Marketing in 1990.
Previously, she served as Marketing Director of River Valley Bancorporation, a
Wisconsin bank holding company.
Mr. Smaby became Vice President-Compliance/Loan Review in 1993. Mr.
Smaby joined F&M in 1987 as a loan review and compliance officer, and was named
Assistant Vice President-Compliance/Loan Review in 1990.
Ms. Vanden Boogart became Vice President-Audit in 1993. Ms. Vanden
Boogart began employment with F&M Bank-Kaukauna in 1976, and served F&M as
Audit Manager from 1987 to 1993.
Ms. Verbruggen joined F&M as Vice President-Human Resources in March
1995. Ms. Verbruggen was Human Resources Director at Shawano Community
Hospital from 1993 to 1995, and previously served as Human Resource Manager for
C.M.D. Corporation.
F&M and its subsidiaries employed approximately 419 persons on a
full-time equivalent basis at December 31, 1995.
* * * * *
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The discussions in this Report on Form 10-K, and the documents
incorporated herein by reference, contain 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 in Item 1
above in this Report and in the Company's Management's Discussion and Analysis
incorporated by reference in Item 7, as well as those discussed elsewhere in
this Report and the documents incorporated herein by reference.
-16-
<PAGE> 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information in response to this item is incorporated herein by
reference to "Market Information and Dividends" on page 36 in the Company's
Annual Report to Shareholders for the year ended December 31, 1995 ("1995
Annual Report").
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference to "Selected Financial Data" on page 17 in
the 1995 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Incorporated by reference to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 18 through 35 in the
1995 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated by reference to the financial statements of the Company
appearing at pages 37 through 60 of the 1995 Annual Report, and "Summary
Quarterly Financial Information" on page 35 of the 1995 Annual Report. Also
see the "Index to Financial Statements and Financial Statement Schedules" filed
as part of Item 14(a) hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information in response to this item is incorporated herein by
reference to "Election of Directors", "Executive Compensation," and "Compliance
with Section 16(a) of the Securities Exchange Act of 1934" in the Company's
Proxy Statement to be filed pursuant to Regulation 14A for its Annual Meeting
of Shareholders to be held on April 23, 1996 ("1996 Proxy Statement") and
"Executive Officers of the Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference to "Election of Directors", "Executive
Compensation" (excluding "Compensation Committee Report on Executive
Compensation" therein), and "Compensation Committee Interlocks and Insider
Participation" in the 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information in response to this item is incorporated herein by
reference to "Security Ownership of Certain Beneficial Owners and Management"
in the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference to "Transactions with the Corporation" in
the 1996 Proxy Statement.
-17-
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED:
1 and 2. Financial Statements and Financial Statement
Schedules. See the following "Index to Financial
Statements and Financial Statement Schedules," which
is incorporated herein by reference.
3. Exhibits. See Exhibit Index included as last part of
this report, which is incorporated herein by
reference.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Registrant during the
fourth quarter of 1995. However, the Registrant subsequently has filed a
report on Form 8-K, dated February 5, 1996, which relates to its acquisition of
Monycor and the expiration of its offer to acquire PSB. That Report did not
include financial statements of Monycor, because of the relative size of
Monycor as compared to F&M.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Company and
subsidiaries are included in this Form 10-K Annual Report by reference to the
indicated pages of the 1995 Annual Report:
<TABLE>
<CAPTION>
PAGE NUMBER IN
1995 ANNUAL REPORT
------------------
<S> <C>
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . 37
Consolidated Balance Sheets as of December 31, 1995 and 1994 . . . . . . . . . . . . . . . 38
Consolidated Statements of Earnings for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . 40-41
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42-43
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . 44-60
</TABLE>
-18-
<PAGE> 20
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.
F&M BANCORPORATION, INC.
Dated March 25, 1996 By: /s/ Gail E. Janssen
-------------------------------------
Gail E. Janssen, Chairman of the Board,
President and Chief Executive Officer
-----------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gail E. Janssen, Daniel E. Voet and
Janet M. Lakso, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this report, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission and any state securities
commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
-----------------
Pursuant to the requirements of the Securities Act of 1933, this
report has been signed by the following persons in the capacities and on the
dates indicated.*
SIGNATURE AND TITLE
<TABLE>
<S> <C>
/s/ Gail E. Janssen /s/ Douglas A. Martin
- ------------------------------------------------ ---------------------------------------------------
Gail E. Janssen, President and Chairman Douglas A. Martin, Director
of the Board (Chief Executive Officer)
/s/ Daniel E. Voet /s/ Duane G. Peppler
- ------------------------------------------------ ---------------------------------------------------
Daniel E. Voet, Chief Financial Officer Duane G. Peppler, Director
and Treasurer
(also, Principal Accounting Officer)
/s/ Otto L. Cox
- ------------------------------------------------ ---------------------------------------------------
Otto L. Cox, Director Robert C. Safford, Director
/s/ Paul J. Hernke
- ------------------------------------------------ ---------------------------------------------------
Paul J. Hernke, Director
Glenn L. Schilling, Director
/s/ John W. Johnson
- ------------------------------------------------ ---------------------------------------------------
John W. Johnson, Director Joseph F. Walsh, Director
</TABLE>
- ---------------
* Each of the above signatures is affixed as of March 25, 1996.
<PAGE> 21
F&M BANCORPORATION, INC.
(THE "REGISTRANT")
EXHIBIT INDEX
TO
1995 REPORT ON FORM 10-K
<TABLE>
<CAPTION>
Exhibit Incorporated Herein Filed
Number Description By Reference Herewith
- ------- ----------- ------------------- --------
<S> <C> <C> <C>
3(i) Restated Articles of Incorporation, as Exhibit 3.1 to Registrant's
amended through May 14, 1992 Report on Form 10-Q for the
quarter ended March 31, 1992
("3/31/92 10-Q")
3(ii) Bylaws, as amended through February 4, Exhibit 3.2 to Registrant's
1994 Report on Form 10-K for the
year ended December 31, 1993
("1993 10-K")
10.1** Registrant's 1993 Incentive Stock Exhibit A to Registrant's
Option Plan Proxy Statement for 1993
Annual Meeting of
Shareholders ("1993 Proxy
Statement")
10.2** Registrant's 1993 Stock Option Plan Exhibit B to 1993 Proxy
for Non-Employee Directors Statement
10.3** Registrant's Executive Bonus Plan Description thereof under
"Compensation Committee
Report on Executive
Compensation" in the
Registrant's Proxy Statement
for 1996 Annual Meeting of
Shareholders ("1996 Proxy
Statement")
10.4** Registrant's Deferred Compensation Exhibit 10.6 to Registrant's
Agreements with: Report on Form 10-K for the
year ended December 31, 1992
(a) Gail E. Janssen
(b) Duane G. Peppler
10.5** Registrant's Officers' Stock Purchase Description thereof under
Plan "Officers' Stock Purchase Plan"
in 1996 Proxy Statement
10.6 Noncompetition Agreement dated Exhibit 10.1 to the
February 11, 1994 between the Registrant's Report on Form
Registrant and Robert C. Safford 8-K dated February 11, 1994
</TABLE>
EI-1
<PAGE> 22
<TABLE>
<CAPTION>
Exhibit Incorporated Herein Filed
Number Description By Reference Herewith
- ------- ----------- ------------------- --------
<S> <C> <C> <C>
10.7** Agreement dated November 4, 1993 Exhibit 10.1 to the
between Pulaski Bank (n/k/a F&M Bank Registrant's Report on Form
Northeast) and John W. Johnson 8-K dated March 21, 1994
("3/21/94 8-K")
10.8** Option Agreement dated March 17, 1993 Exhibit 10.2 to 3/21/94 8-K
between Pulaski Bancshares, Inc. and
John W. Johnson, together with the
assumption thereof by the Registrant
dated March 21, 1994
10.9 Stock Exchange Agreement dated as of Exhibit B to the definitive
July 20, 1994, as amended October 31, Prospectus dated November 8,
1994, between the Registrant and Union 1994, filed under Rule 424
State Bank* pursuant to Registration
Statement 33-83632
10.10(a) Plan and Agreement of Merger and Exhibit 2.1 to the
Reorganization dated November 1, 1995 Registrant's Report on Form
among the Registrant, Monycor 10-Q for the quarter ended
Bancshares, Inc. and F&M Merger September 30, 1995
Corporation*
10.10(b) Amendment No. 1 thereto, dated Exhibit 2.1(b) to the
December 1, 1995 Registrant's Report on Form
8-K dated February 5, 1996
10.11 Plan and Agreement of Merger and X
Reorganization dated as of January 11,
1996 by and between F&M Bank-Lakeland
and Bradley Bank*
10.12 Plan and Agreement of Merger and X
Reorganization dated as of
February 22, 1996 by and among the
Registrant, F&M Interim Bank and
Community State Bank*
10.13 Branch Purchase Agreement dated as of X
January 15, 1996 by and between F&M
Bank-Kaukauna and TCF Bank Wisconsin
fsb*
13 Annual Report to Shareholders for the X
year ended December 31, 1995
</TABLE>
EI-2
<PAGE> 23
<TABLE>
<CAPTION>
Exhibit Incorporated Herein Filed
Number Description By Reference Herewith
- ------- ----------- ------------------- --------
<S> <C> <C> <C>
21 List of Subsidiaries X
23 Consent of Wipfli Ullrich Bertelson X
CPAs.
24 Power of Attorney (contained on the X
Signature Page)
27 Financial Data Schedule X
99 Form 11-K for F&M Retirement and (To be filed
Savings Plan by amend-
ment)
</TABLE>
- ------------------
* Excluding schedules and exhibits, which are identified in such
documents. The Registrant agrees to furnish supplementally a copy of
any omitted schedule or exhibit to the Commission upon request.
** Designates management contracts or compensatory plans or arrangements
which are filed as exhibits hereto.
EI-3
<PAGE> 1
EXHIBIT 10.11
PLAN AND AGREEMENT OF MERGER AND REORGANIZATION
Plan and Agreement of Merger and Reorganization (hereinafter referred to as
"Agreement"), made as of the 22 day of February, 1996, by and between F & M
Bancorporation, Inc., a Wisconsin corporation and Community State Bank, a
Wisconsin banking corporation.
1. Definitions.
The following definitions shall apply in this Plan and Agreement of Merger
and Reorganization:
1.1 "Agreement" shall mean this Plan and Agreement of Merger and
Reorganization.
1.2 "BANK" shall mean Community State Bank, 208 Steele Street, Algoma,
Wisconsin 54201.
1.3 "BANK Stock" shall mean BANK's voting capital stock $10.00 par value.
1.4 "BANK Shareholders" shall mean the shareholders of BANK shown in the
Schedule previously delivered to F & M.
1.5 "BANK Counsel" shall mean Godfrey & Kahn, 780 North Water Street,
Milwaukee, Wisconsin 53202-3590, Attn: James Sheriff, Esq.
1.7 "Closing Date" shall mean the date set by mutual agreement of BANK and
F & M and will not occur prior to the satisfaction or the waiver of all of the
conditions to the transaction.
1.8 "Effective Time" shall mean the date on which the Certificate of
Consolidation issued by the State of Wisconsin Commissioner of Banking or the
successor thereto (the
<PAGE> 2
"Commissioner") is recorded with the Kewaunee County Register of Deeds. The
Certificate of Consolidation shall be filed as soon as possible after the
conditions precedent to this merger have been met or waived by F & M and BANK,
but not prior to the Closing Date.
1.9 "F & M" shall mean F & M Bancorporation, Inc., One Bank Avenue,
Kaukauna, Wisconsin 54130.
1.10 "F & M Common" shall mean F & M's voting common stock, $1.00 par
value.
1.11 "F & M Per Share Price" shall mean the average closing price, as
quoted on the NASDAQ National Market System ("NASDAQ"), for F & M Common for
the fifteen (15) trading days on which F & M Common is actually traded,
immediately preceding the five (5) calendar days prior to the Closing Date of
the transaction, provided, however, that the F & M Per Share Price shall not be
less than Twenty-one and 50/100 Dollars ($21.50) or exceed Thirty-two and
50/100 Dollars ($32.50).
1.12 "F & M Counsel" shall mean McCarty, Curry, Wydeven, Peeters & Haak,
120 East Fourth Street, P.O. Box 860, Kaukauna, Wisconsin 54130-0860, Attn:
Randall A. Haak, Esq.
1.13 "Securities Counsel" shall mean Quarles & Brady, 411 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202-4497, Attn: Kenneth V. Hallett, Esq.
1.14 "Subsidiary" shall mean F & M Interim Bank, One Bank Avenue,
Kaukauna, Wisconsin 54130, a bank to be organized as a wholly-owned subsidiary
of F & M for the purpose of this transaction.
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<PAGE> 3
1.15 "Registration Statement" shall mean the Registration Statement of F &
M pursuant to which the shares of F & M Common to be issued in the merger will
be registered with the Securities and Exchange Commission ("SEC"), and which
shall include the prospectus of F & M relating to the F & M Common issuable in
the transaction and the proxy statement of BANK to its shareholders relating to
approval of the merger (the "Prospectus/Proxy Statement").
2. Preamble.
F & M is a multi-bank holding company with subsidiaries located in
Wisconsin. BANK is a Wisconsin banking corporation with its main office in
Algoma, Wisconsin and a branch in Forestville, Wisconsin. F & M and BANK, by
their respective employees and agents have had the opportunity to make such
review and investigation of the other as they deem appropriate and to negotiate
the terms and conditions of this Agreement. F & M and BANK each believe that
this transaction is in their best interests and in the best interests of their
shareholders and desire to set forth their agreement and understanding in this
Agreement.
The parties have considered the proposed merger and believe that a merger
between BANK and Subsidiary resulting in BANK becoming a subsidiary of F & M
will be in the best interest of their respective corporations and shareholders.
The merger of Subsidiary into BANK is intended to constitute a reorganization
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<PAGE> 4
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended.
In consideration of the foregoing and the terms, conditions and covenants
of this Agreement and in reliance on the warranties and representations
contained herein, the parties adopt this Plan and Agreement of Merger and
Reorganization and agree as follows:
3. Merger of Subsidiary into BANK.
3.1 Surviving Corporation. At the Effective Time of the merger, Subsidiary
shall be merged into BANK in accordance with the laws of the State of Wisconsin.
BANK shall be the surviving corporation and the separate corporate existence,
identity, and the organization of Subsidiary, except as specifically provided by
law and this Agreement, shall cease. As the surviving corporation, BANK shall
succeed to and possess all the assets, properties, powers, privileges, rights
and immunities of Subsidiary and shall be subject to all liabilities,
obligations, limitations and duties of Subsidiary as described in this
Agreement.
3.2 Subsidiary Stock Subscription. Subject to the fulfilling of the
conditions precedent to the closing of this transaction set forth below, F & M
will transfer to Subsidiary such shares of F & M Common as may be necessary to
effect the merger, as described under paragraph 3.3 below.
3.3 Exchange of BANK Stock. At the Effective Time, the shares of the BANK
Stock shall be converted into shares of F & M Common as follows:
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<PAGE> 5
(a) All BANK Shareholders will receive shares of F & M Common based
upon the Exchange Ratio. The Exchange Ratio shall be calculated by dividing the
Value Per BANK Share by the F & M Per Price Share. The Exchange Ratio shall be
multiplied by the number of shares of BANK Stock held by each BANK Shareholder
to determine the number of shares of F & M Common to be issued to that BANK
Shareholder.
(b) The Value Per BANK Share will be equal to Twelve Million Five
Hundred Thousand and 00/100 Dollars ($12,500,000.00) (the aggregate price)
divided by Forty-six Thousand (46,000) (the number of BANK Shares outstanding)
or Two Hundred Seventy-one and 74/100 Dollars ($271.74) per share subject to
adjustment under paragraph 3.4.
(c) No fractional shares of F & M Common shall be issued; all
fractional shares will be converted to cash in an amount equal to the fractional
share determined in accordance with the formula set forth above multiplied by F
& M Price Per Share.
3.4 Adjustment of Value Per BANK Share. The Value Per BANK Share is
subject to adjustment if any of the following occurs between the date of this
Agreement and the Closing Date:
(a) The BANK increases the number of outstanding shares of BANK Stock,
or is obligated to do so which obligation is enforceable by its holder
notwithstanding this Agreement or the BANK issues or agrees to issue any other
class of stock or instrument convertible into stock. The actual number of
shares of BANK Stock outstanding and any additional shares which BANK is
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<PAGE> 6
obligated to issue as of the Closing Date shall be divided into the aggregate
price to determine the Value Per BANK Share.
(b) The dividends declared by BANK between January 1, 1996 and the
Closing Date (regardless of when such dividends are payable) exceed Three
Hundred Fourteen Thousand and 00/100 Dollars ($314,000.00) or the expenses of
this transaction [as set forth in paragraph 4.3(d)] exceed the limit established
in paragraph 4.3(d), provided, however, that in the event dividends or expenses
exceed their respective limits the Exchange Ratio shall be adjusted as follows:
(i) The total amount of such excess shall be multiplied by 1.35;
(ii) The product determined under sub-paragraph (i) above shall
be deducted from Twelve Million Five Hundred Thousand and No/100 Dollars
($12,500,000.00) (the aggregate price) and any adjustment under paragraph 3.4(e)
below to determine the "revised aggregate price;"
(iii) The revised aggregate price shall be used to determine the
Exchange Ratio under paragraphs 3.3(a) and (b) above.
(iv) The excess amounts for dividends and transaction expenses
shall be separately determined and no off-set shall be made if one amount
exceeds its limitation and the other does not.
(c) The actual earnings of BANK, determined in accordance with
accepted accounting standards applicable to preparation of Reports of Condition
required to be filed with the
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<PAGE> 7
Federal Deposit Insurance Corporation, applied on a consistent basis, net of
tax effect, but without deduction for the expense of this transaction itemized
in paragraph 4.3(d) as of the end of the month prior to the month in which
closing occurs (the "Actual Earnings") shall not be less than the amounts
corresponding to such month end as shown on the attached Schedule A (the
"Minimum Earnings"), provided, however, that if the Actual Earnings are less
than the Minimum Earnings, the Exchange Ratio shall be adjusted as follows:
(i) The total amount of such difference shall be multiplied by
1.35;
(ii) The product determined under sub-paragraph (i) above shall
be deducted from Twelve Million Five Hundred Thousand and No/100 Dollars
($12,500,000.00) (the aggregate price) and any adjustment under paragraph 3.4(b)
above to determine the "revised aggregate price;"
(iii) The revised aggregate price shall be used to determine the
Exchange Ratio under paragraphs 3.3(a) and (b) above.
3.5 Articles of Incorporation. The Articles of Incorporation of BANK in
effect immediately prior to the Effective Time of the merger shall continue in
full force and effect as the Articles of Incorporation of the surviving
corporation.
3.6 Bylaws. The Bylaws of BANK in effect immediately prior to the
Effective Time of the merger, shall continue in full force and effect as the
bylaws of the surviving corporation.
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<PAGE> 8
3.7 Officers and Directors. The officers and directors of BANK at the
Effective Time of the merger shall remain as the officers and directors of the
surviving corporation, provided, however, that nothing in this paragraph shall
create any rights in favor of such officers and directors to continued status
as such following the consummation of the merger.
4. Representations and Warranties of BANK. BANK, by its duly authorized
officers, directors or other agents makes the following representations and
warranties to F & M each of which is true and correct as of the date hereof,
and shall remain true and correct to and including the Closing Date, and shall
be unaffected by any investigation heretofore or hereafter made by or any
notice to F & M:
4.1 Ownership and Authority. The current BANK Shareholders are identified
in the Schedules previously delivered to F & M, which BANK will update
periodically as necessary.
4.2 BANK Organization and Authority.
(a) BANK is duly organized, validly existing and in good standing
under the laws of the State of Wisconsin and has all requisite banking and
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted. BANK's main office is located in
Algoma, Wisconsin and its only branch office is located in Forestville,
Wisconsin. All necessary corporate approval and authorization and regulatory
approval for BANK's present operations has been given and remains in full force
and effect and in good standing.
-8-
<PAGE> 9
(b) BANK is authorized to issue Forty-six Thousand (46,000) shares of
BANK Stock, BANK's only class of stock. BANK has Forty-six Thousand (46,000)
shares of BANK Stock issued and outstanding, all of which are legally and
validly issued, fully paid and nonassessable.
(c) BANK has not issued and does not have outstanding any option,
warrant or convertible securities or other right to purchase or convert any
obligation into BANK's securities and has not agreed to issue or sell any
additional securities of any type.
(d) The execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated under it have been duly authorized
by appropriate corporate approval and will not violate any provision of BANK's
articles of incorporation or bylaws or any provisions of, or result in the
acceleration of any obligation under the mortgage, lien, lease, agreement,
instrument, court order, arbitration award, judgment or decree to which BANK is
a party, or by which BANK is bound and will not require the consent,
authorization or approval of any other public or private person or entity other
than the approval by BANK's shareholders and the appropriate federal and state
securities and banking regulatory agencies and will not violate any other
restriction of any kind or character to which BANK is subject.
(e) Algoma Investment Corporation ("AIC") is duly organized, validly
existing and in good standing under the laws of the State of Nevada and has all
requisite corporate power to
-9-
<PAGE> 10
carry on its business as now being conducted. AIC is authorized to issue One
Thousand (1000) shares of common stock, of which One Thousand (1000) shares
legally and validly issued and fully paid nonassessable. BANK is the only
shareholder of AIC. AIC has one employee in the State of Nevada.
4.3 Financial Matters.
(a) True copies of BANK's consolidated financial statements,
consisting of consolidated balance sheets, consolidated statements of operations
and consolidated statements of stockholders' equity as of the close of business
on December 31, 1995, 1994, and 1993, have been delivered by BANK to F & M
("BANK's Financial Statements"). All of BANK's Financial Statements are true
and correct in all material respects and present an accurate and complete
disclosure of the financial condition of BANK as of their respective dates, and
the earnings for the periods covered, all determined in accordance with accepted
accounting standards applicable to preparation of Reports of Condition required
to be filed with the Federal Deposit Insurance Corporation, applied on a
consistent basis.
(b) BANK and AIC have good marketable title to all of their assets,
business and properties including, without limitation, all such properties
reflected in the BANK's Financial Statements as of December 31, 1995, free and
clear of any mortgage, lien, pledge, security interest, assessment, levy,
charge, claim or other encumbrance, except for real estate and personal property
taxes for 1996 which are not yet due and the One Hundred Thousand and 00/100
Dollars ($100,000.00) portion of
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<PAGE> 11
a Five Hundred Thousand and 00/100 Dollars ($500,000.00) U.S. Treasury Note
pledged to the Federal Reserve Bank of Chicago as collateral for the BANK's
Treasury, Tax and Loan Account. AIC does not own any real property. BANK does
not have any notice of any special assessment which will be levied or assessed
against any real property owned or leased by it. All real property owned,
operated and leased by BANK is in full compliance in all material respects with
all applicable federal, state and local statutes and regulations including, but
not limited to, any building codes, safety codes, OSHA regulations,
environmental laws and regulations, the Americans with Disabilities Act, zoning
ordinances and other similar codes, ordinances, and regulations and BANK has
not received any citations, notices, charges or other complaints claiming a
violation of the foregoing nor is BANK aware of any investigation of any
alleged violation.
(c) All property and assets owned or currently in use by BANK or AIC,
or in which they have an interest (excluding interests which arise in collateral
given to secure loans made by BANK or because of a security interest granted to
BANK) or which are in their possession, are in good operating condition and
repair subject only to normal wear and tear. Schedules of all real and personal
property owned by BANK has previously been delivered by BANK to F & M. If BANK
leases any real or personal property, a separate schedule clearly identifying
such leased property will be included in the Schedules delivered by BANK to F &
M. As of the Closing Date, all such property and assets will be in the
condition represented above.
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<PAGE> 12
(d) For the period from October 1, 1995 to September 30, 1996, BANK
has projected in good faith that its ordinary earnings determined in accordance
with accepted accounting standards applicable to preparation of Reports of
Condition required to be filed with the Federal Deposit Insurance Corporation,
applied on a consistent basis, net of tax effect shall be Six Hundred Twenty-two
Thousand Four Hundred Eighty and 00/100 Dollars ($622,480.00) but without
reduction for the expenses of this transaction. The expenses of this
transaction are those incurred by BANK for legal, accounting and/or auditing or
investment banking and/or brokerage fees or expenses associated with the
acquisition of BANK by F & M and will be reasonable and customary and will not
in any event exceed One Hundred Forty-five Thousand and 00/100 Dollars
($145,000.00).
4.4 Changes Since December 31, 1995. Since December 31, 1995, with respect
to BANK there has not been:
(a) Any loss, damage, destruction or failure to maintain the tangible
assets of BANK (whether or not covered by insurance), or affecting its business
or properties, which will materially adversely affect the financial condition or
operations BANK.
(b) Any lapse, revocation, failure to maintain in full force and
effect or other event which, through the passage of time or the giving of
notice, or both could render any insurance coverage previously maintained by
BANK ineffective in whole or in part.
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<PAGE> 13
(c) Any acquisition by BANK of a capital asset at a cost in excess of
Five Thousand Dollars ($5,000.00) without prior approval of F & M, except for
the renovation of Forestville station which will not exceed Fifteen Thousand and
00/100 Dollars ($15,000.00).
(d) Any amendment to their Articles of Incorporation or Bylaws.
(e) Any change in accounting procedures, practices or methods from
those used by BANK in prior years except as may be necessary to prepare BANK's
1995 Financial Statements in accordance with generally accepted auditing
standards.
(f) Any increase in or agreement to increase salaries, wages, fringe
benefits, benefits under any plan subject to ERISA, or other compensation of any
officers, directors, employees or agents of BANK, except that for 1996, BANK may
grant wage and/or salary increases consistent with past practices which do not
exceed, in the aggregate, four percent (4%) of the wages and salaries being paid
as of December 31, 1995.
(g) Any issuance, or agreement to issue, on or before the Closing Date
or thereafter, directly or indirectly, any additional shares of BANK Stock, any
other class of stock, or other securities of BANK.
(h) Any declaration, setting aside or payment of any dividend or any
distribution in respect to BANK's stock or any redemption, purchase or other
acquisition by BANK of any stock or any other repayments to the shareholders of
BANK provided, however, that for the period from January 1, 1996, to the Closing
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<PAGE> 14
Date the dividends which are paid or are declared do not exceed in total Three
Hundred Fourteen Thousand and 00/100 Dollars ($314,000.00).
(i) Any sale, transfer, or other disposition, prior to maturity, of
any security or other earning asset (exclusive of loans and leases).
(j) Any borrowings or other indebtedness (excluding deposit
liabilities) in excess of the amounts disclosed by BANK's December 31, 1995
Financial Statements, provided, however, that BANK may periodically borrow Fed
Funds provided that the total outstanding balances of such borrowing shall not
exceed the total amount historically borrowed by BANK for similar purposes.
(k) Any mortgage, lien, pledge, security interest, assessment, levy,
charge, claim or other encumbrance made with respect to any of the properties or
assets of BANK in addition to those disclosed by BANK's December 31, 1995
Financial Statements.
(l) Any sale, transfer or other disposition of assets of BANK except
in the normal course of business and consistent with past practices, provided,
however, that BANK may not dispose of any securities prior to maturity without
the prior consent of F & M.
(m) Any material change in the manner in which business was being
conducted by BANK prior to December 31, 1995, or other material failure by BANK
to use its best efforts to maintain its present business organization (subject
to the terms of this Agreement), employees and customers.
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<PAGE> 15
(n) Any loan or commitment to make a loan by BANK with an interest
rate, repayment term, collateral or security requirements or other conditions
which are materially different from those upon which BANK made loans prior to
December 31, 1995, except to the extent such difference is in response to
competitive conditions encountered by BANK.
(o) The statements made in paragraphs 4.4(a), (b), (c), (d), (e),
(i), (k), (l), (m) and (p) are true and correct if "AIC" is substituted for
"BANK" in such paragraphs.
(p) Any other materially adverse change in BANK's prospects, financial
condition, assets, liabilities, properties or business.
4.5 Liabilities.
(a) Neither BANK nor AIC have any liabilities, whether accrued,
absolute, contingent or otherwise, which arose or relate to any transaction or
occurrence involving BANK or AIC or their respective officers, directors,
employees, agents or servants prior to the date of this Agreement which are not
disclosed by the BANK's Financial Statements described above. To the best of
its knowledge, after due and diligent inquiry, as of the date hereof, no known
circumstances, conditions, happenings, events or arrangements, contractual or
otherwise, exist which may hereafter give rise to any such liabilities of BANK
or AIC.
(b) To the best of its knowledge, all parties with whom BANK and AIC
have contractual arrangements are in compliance therewith. Neither BANK nor AIC
has declared, and is not prepared to declare, any such parties in default under
any such
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<PAGE> 16
contractual arrangements. Neither BANK nor AIC is in default in any material
respect under any contracts to which it is a party, nor has any event occurred,
which through the passage of time or the giving of notice or both, would
constitute a default under any such contract or obligation or cause the
acceleration of any obligation of BANK or result in the creation of a lien,
charge, assessment, encumbrance or other claim whatsoever upon any asset of
BANK. None of the contracts to which BANK is a party will be adversely
affected by the transaction contemplated by this Agreement.
(c) To the best of its knowledge, BANK and AIC are in compliance in
all material respects with all applicable federal, state, county and local
statutes, ordinances, regulations, decrees, orders, or other laws. Neither BANK
nor AIC has received notice of any alleged violation of any such statutes,
ordinances, regulations, decrees, orders or other laws.
(d) Except as disclosed in the Schedules previously furnished by BANK
to F & M, no legal, administrative or other proceedings, investigations or
inquiries or other claims, judgments, consent decrees, stipulations, injunctions
or restrictions are either pending or outstanding, or to the best of its
knowledge, threatened against or involving BANK or AIC or affecting their
assets, properties or business except as described in paragraph 4.3(b). BANK
does not know, or have any grounds to know, of any basis for any such
proceedings, investigations or inquiries or other claims, judgments, consent
decrees, stipulations, injunctions or restrictions.
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<PAGE> 17
(e) The assets and liabilities or potential liabilities of BANK and
AIC are fully insured (except for the deductible thereunder), except for taxes,
deposits, repurchase agreements or other similar deposit-type instruments, and
any borrowing of Fed Funds and all policies of insurance carried by BANK or AIC
are in full force and all premiums thereon have been paid in a timely manner and
are paid to date and all bonds have been acquired and maintained on all
employees, agents, officers and directors of BANK or AIC required to be bonded.
The limits of coverage, deductibles and other material provisions of such
insurance and bonds are disclosed in the Schedules previously delivered by BANK
to F & M. Said insurance and bonds, including but not limited to, general
comprehensive (commercial) public liability insurance covering personal
injuries, death and property damage, fidelity bonds and worker's compensation
insurance have been acquired and maintained for at least the past five (5)
years.
4.6 Taxes. BANK and AIC have filed all federal, state and local tax
returns and reports covering income, sales, use, real or personal property or
other taxes of any type required to be filed and have paid all taxes including
any interest, penalties and assessments which are due and required to be paid.
The taxes provided for in BANK's Financial Statements and which will be
provided for prior to the Closing Date will be adequate for the payment of any
unpaid taxes as of such dates. BANK's federal income tax return has never been
audited. Neither BANK nor AIC has waived any restrictions on the assessment or
collection of
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<PAGE> 18
taxes or consented to the extension of any statute of limitations relating to
any tax liability. BANK has not determined or been advised that BANK may be
liable for a material deficiency or other liability in respect to any state or
federal income tax returns or other tax returns previously filed by BANK or
AIC.
4.7 Contracts and Commitments. Neither BANK nor AIC have any contracts or
commitments, either oral or written, with any officer, director, shareholder,
employee, customer, depositor, supplier of goods or services or any other
entity or person which contain any terms or conditions which are not usual and
customary under the circumstances and which may have a material adverse effect
on the operations, profitability or net worth of BANK.
4.8 Reporting and Withholding on Payment of Interest. To the best of its
knowledge, BANK has fully complied with the Internal Revenue Code (the "Code"),
and all rules and regulations of the Internal Revenue Service ("IRS") issued
thereunder, with respect to the reporting of payments of interest and other
payments by it, and has complied with all provisions requiring the withholding
for income taxes on such amounts when required. BANK has instituted adequate
procedures to assure compliance with such provisions. To the best of its
knowledge, all reporting to the IRS required of BANK has been done in a timely
manner via proper medium. BANK has not been advised of any violation or
potential violation with respect to such reporting requirements.
4.9 Employees and Employee Benefits.
(a) BANK is not a party to or bound by any written or oral (i)
employment or employment-related consulting contract
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<PAGE> 19
which is not terminable at will by the BANK without penalty, (ii) plan or
agreement providing for any employee bonus, deferred compensation, pension,
profit sharing, retirement benefits, stock purchase, stock option employee
pension benefit plan or employee welfare benefit plan except as set forth in
the Schedules previously delivered by BANK to F & M as set forth in paragraphs
4.9(b) and 4.9(c) to this Agreement.
(b) All pension, profit sharing, or other employee pension benefit
plans of BANK ("the Plans") are included in the Schedules previously delivered
by BANK to F & M and are now, and will continue until the Closing Date to be,
qualified Plans under Section 401(a) of the Code, in full compliance with the
Employee Retirement Income Security Act of 1974 as amended ("ERISA"). To BANK's
best knowledge, all premiums, notices, reports and other filings required to be
delivered or filed under applicable law with respect to such Plans have been
duly and timely delivered or filed. BANK has no knowledge of any fact or
circumstance which would materially and adversely affect such Plans' qualified
status or compliance as above described, or of any "reportable event" (as such
term is defined in Section 4043(c) of ERISA) or any "prohibited transaction" (as
such term is defined in Section 406 of ERISA and Section 4975(c) of the Code)
which has occurred since the date on which said sections first became applicable
to the Plans. The Plans satisfy the minimum funding standards set forth in the
Code and ERISA. As of the Closing Date there will be no unfunded vested
liability of the Plans, except for the obligation of BANK for contributions for
the current year which
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<PAGE> 20
are not yet due and payable but for which adequate amounts are being accrued on
a monthly basis.
(c) All employee welfare benefit plans of BANK (the "Welfare Plans")
are included in the Schedules previously delivered by BANK to F & M and are now,
and will continue until the Closing Date to be, in full compliance with the Code
and the Employee Retirement Income Security Act of 1974 as amended ("ERISA").
To BANK's best knowledge, all notices, reports and other filings required to be
delivered or filed under applicable law with respect to such Welfare Plans have
been duly and timely delivered or filed. BANK has no knowledge of any fact or
circumstance which would adversely affect such Welfare Plans' compliance as
above described or any "prohibited transaction" (as such term is defined in
Section 406 of ERISA and Section 4975(c) of the Code) which has occurred since
the date on which said sections first became applicable to the Welfare Plans.
(d) No person or governmental agency has made any claim against BANK
or its directors, officers, employees or agents arising out of any statute,
ordinance or regulation alleging (i) discrimination against applicants for
employment, employees or the public, (ii) any employment practices, policies or
procedures are discriminatory or have been breached, (iii) a failure to comply
with federal and state wage and hour laws, rules or regulations, (iv) a
violation of occupational safety and health statutes, regulations or standards
or (v) that BANK has committed an unfair labor practice(s).
4.10 Environmental Matters.
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<PAGE> 21
(a) To the best knowledge of BANK, there has been no release of any
hazardous substance, as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") nor any release of oil or
hazardous substance as provided under Wis. Stats. Section 144.76, on, upon or
into the real property owned or leased to BANK or, to the best of BANK's
knowledge upon any real estate or property which secures any loan made by BANK
or which BANK has a right to acquire upon foreclosure or otherwise.
(b) To the best of BANK's knowledge, there have been no such releases
on, upon or into any real property adjoining or in the vicinity of the property
described in paragraph 4.10(a) above, which through air, soil or groundwater
migration could have come to be located upon any property owned or leased by
BANK, or which secures a loan made by BANK or may be acquired by BANK in
foreclosure.
4.11 Accuracy of All Statements. No representation or warranty by BANK in
this Agreement or otherwise, in any of BANK's Financial Statements, or in any
other statement, certificate, schedule or exhibit hereto furnished or to be
furnished by or on behalf of BANK pursuant to this Agreement, nor any document
or certificate delivered to F & M pursuant to this Agreement or in connection
with actions contemplated hereby, contains or shall contain any untrue
statement of material fact or omits or shall omit a material fact necessary to
make the statement contained therein not misleading.
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4.12 Prospectus/Proxy Statement. The parts of the Prospectus/Proxy
Statement which were provided or reviewed by the BANK with respect to BANK will
not, at the date it is first mailed or delivered to the BANK's Shareholders,
and will not, at the date or dates of the meeting of the BANK's Shareholders
called to approve the Merger, as then amended or supplemented, contain any
statements that are, at the time at which, and in light of the circumstances
under which they are made, false or misleading with respect to any material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not false or misleading.
Notwithstanding the foregoing, the BANK makes no representation or warranty
regarding and shall have no responsibility for the accuracy of any information
with respect to F & M or Subsidiary or any of their affiliates or subsidiaries
contained in the Prospectus/Proxy Statement.
4.13 Financial Adviser. Except for the services of Robert W. Baird & Co.
Incorporated ("Baird"), BANK has not engaged, consented to engage, or
authorized any financial adviser, broker, investment banker, or similar third
party to act on its behalf, directly or indirectly, in connection with the
transaction contemplated by this Agreement. Any fees or expenses payable to
Baird shall be paid by BANK.
4.14 Schedules. The Schedules previously provided by BANK to F & M as
itemized in the attached Exhibit 4.14 to this Agreement are true, complete and
accurate copies of the documents
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contained therein. BANK will promptly notify F & M of any changes, amendments,
or other modifications to the Schedules.
5. Representations and Warranties of F & M.
F & M, by its duly authorized officers, employees or other agents makes
the following representations to BANK, each of which is true and correct as of
the date hereof and shall remain true and correct to and including the Closing
Date, shall be unaffected by any investigation heretofore or hereafter made by
or any notice to BANK except as set forth herein.
5.1 Organization and Authority.
(a) F & M is a corporation duly organized, validly existing and in
good standing under the laws of the State of Wisconsin with all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted and to enter into and perform its
obligations under this Agreement, upon receiving the necessary approval from the
federal and state regulatory authorities. F & M is only qualified to do business
in the State of Wisconsin and has received approval from the Federal Reserve
Bank of Chicago to engage in business as a bank holding company.
(b) Subsidiary will be organized as a banking corporation under the
State of Wisconsin and upon organization will have all requisite banking and
corporate power and authority to enter into and perform its obligations under
this Agreement, upon receiving the approval of F & M and the federal and state
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regulatory authorities. Subsidiary will be a wholly-owned subsidiary of F & M.
(c) F & M is authorized to issue Ten Million (10,000,000) shares of F
& M Common and has Five Million Nine Hundred Fifty-five Thousand One Hundred
Eight (5,955,108) shares issued and outstanding. F & M anticipates increasing
its authorized shares to Twenty Million (20,000,000) at its annual shareholders
meeting to be held April 23, 1996, and that additional shares of F & M Common
may be issued by it prior to the Closing Date. F & M has not announced any
other acquisition which will result in the issuance of any additional shares of
F & M Common. Additional shares of F & M Common may be issued by F & M pursuant
to its dividend reinvestment plan (up to a maximum of 150,000 shares) or
pursuant to its 1993 Stock Option Plans (up to a maximum of 150,000 shares) or
pursuant to stock options previously granted to John Johnson (up to a maximum of
14,455 shares) or in connection with the acquisitions of other business entities
or their assets which are announced after the date of this Agreement. These
outstanding shares are legally and validly issued and fully paid and
nonassessable except as provided by Wis. Stats. Section 180.0622(2)(b).
5.2 Performance of this Agreement. The execution, delivery and performance
of this Agreement and the consummation of the transaction contemplated under it
have been duly authorized by appropriate corporate approval and will not violate
any provision of F & M's articles of incorporation or bylaws or any provisions
of, or result in the acceleration of any obligation under any
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mortgage, lien, lease, agreement, instrument, court order, arbitration award,
judgment or decree to which F & M is a party, or by which F & M is bound and
will not require the consent, authorization or approval of any other public or
private person or entity other than the approval by F & M as the sole
shareholder of Subsidiary and the appropriate federal and state securities and
banking regulatory agencies and will not violate any other restriction of any
kind or character to which F & M is subject except as set forth in this
Agreement.
5.3 Legality of Shares to be Issued. The shares of F & M Common to be
delivered pursuant to this Agreement, when so delivered, will have been duly
and validly authorized and issued by F & M and will be fully paid and
nonassessable, except as provided by Wis. Stats. Section 180.0622(2)(b).
5.4 Financial Statements. True copies of the audited consolidated
financial statements of F & M consisting of consolidated balance sheets,
consolidated statements of income, consolidated statements of stockholder's
equity and consolidated statements of cash flows as of the close of business on
December 31, 1994 and 1993, have been delivered by F & M to BANK (F & M's
Financial Statements). All of F & M's Financial Statements are true and
correct in all material respects and present an accurate and complete
disclosure of the financial condition of F & M as of their respective dates and
of the earnings for the periods covered, in accordance with generally accepted
accounting principles applied on a consistent basis.
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5.5 Litigation. There are no legal, administrative or other proceedings,
investigations or inquiries or other claims, judgments, consent decrees,
stipulations, injunctions or restrictions, either threatened, pending or
outstanding against or involving F & M or its properties, or business, nor does
F & M know, or have reasonable grounds to know, of any basis for any such
proceedings, investigations or inquiries, or other claims, judgments, consent
decrees, stipulations, injunctions or restrictions.
5.6 Directors, Officers and Employees of BANK. Neither F & M nor their
respective directors, officers, employees, agents, attorneys or accountants have
made or will make any representations or warranties as to any further positions
with BANK, F & M following the consummation of the transaction contemplated by
this Agreement to any director, officer or employee of BANK, except that John
Meyer will continue in his current position as president of BANK until January
1, 1997 and that Sylven A. Konkel shall be employed pursuant to a written
employment agreement with BANK for not less than twelve (12) months after the
Closing Date.
5.7 Accuracy of All Statements. No representation or warranty by F & M in
this Agreement or otherwise, nor any financial statements, statement,
certificate, schedule or exhibit hereto furnished or to be furnished by or on
behalf of F & M pursuant to this Agreement, nor any document or certificate
delivered to BANK pursuant to this Agreement or in connection with actions
contemplated hereby, contains or shall contain any
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untrue statement of material fact or omits or shall omit a material fact
necessary to make the statement contained therein not misleading.
5.8 Prospectus/Proxy Statement. The Prospectus/Proxy Statement will not,
at the date it is first mailed or delivered to the BANK's shareholders, and
will not, at the date or dates of the meeting of the BANK's Shareholders called
to approve the Merger, as then amended or supplemented, contain any statements
that are at the time at which, and in light of the circumstances under which
they are made, false or misleading with respect to any material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not false or misleading. Notwithstanding the
foregoing, F & M make no representation or warranty and shall have no
responsibility for the accuracy of any information contained in or omitted from
the Prospectus/Proxy Statement in so far as it describes the BANK.
5.9 No Broker. All negotiations relative to this Agreement and the
transaction contemplated hereby have been carried on directly by F & M with
BANK without the intervention of any broker or third party on behalf of F & M.
F & M has not engaged, consented to engage, or authorized any broker,
investment banker, or third party to act on its behalf, directly or indirectly,
in any capacity in connection with the transaction contemplated by this
Agreement.
6. Covenants of BANK.
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BANK hereby covenants and agrees as follows:
6.1 Access to Information. F & M and its authorized representatives shall
have full access during normal business hours to all properties, books,
records, contracts and documents of BANK and BANK shall furnish or cause to be
furnished to F & M and its authorized representative all information with
respect to the affairs and business of BANK as F & M may reasonably request.
6.2 Actions Prior to Closing. From and after the date of this Agreement
and until the Closing Date, BANK:
(a) Shall carry on its business diligently and substantially in the
same manner as heretofore and BANK shall not engage in or institute any unusual
or novel methods of doing business and shall use its best efforts to inform F &
M in advance before either introducing any new products or services or modifying
any existing products or services.
(b) Shall not (i) grant any increase in the rates of pay, salary or
compensation provided to its officers, directors or employees, which in
combination with all increases granted since January 1, 1996 exceed in the
aggregate four percent (4%) of the total compensation paid to the officers,
directors or employees of BANK as of December 31, 1995, and (ii) shall not
increase or decrease the benefits provided under, the contribution to, the cost
sharing allocation expense or cost to BANK of any employee fringe benefit or of
any of the benefit plans included in the Schedules described in paragraphs
4.9(b) and 4.9(c), except for normal adjustments imposed by third party
providers.
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(c) Shall not enter into any contract or commitment or engage in any
transaction which is not in the normal course of business and which is not
consistent with BANK's past business practices.
(d) Shall not create any indebtedness other than (i) short term
indebtedness incurred in the normal course of business, (ii) indebtedness
incurred pursuant to an existing contract previously disclosed to F & M or (iii)
indebtedness other than as necessary to do the acts and things contemplated by
this Agreement.
(e) Shall not declare or pay any cash dividend, stock dividend or make
any other distribution in respect of its stock, or directly or indirectly
redeem, purchase or otherwise acquire any of its own stock, or grant any stock
warrant, option options or issue directly or indirectly any shares of common or
preferred stock or any other security of any type whatsoever or in any way
dispose of any shares of its own stock or any other security, except that
dividends may be paid by the BANK prior to the Closing Date provided that the
total of all dividends paid between January 1, 1996, and the Closing Date shall
not exceed Three Hundred Fourteen Thousand and 00/100 Dollars ($314,000.00).
(f) Shall not amend its Articles of Incorporation or Bylaws or make
any changes in authorized or issued stock.
(g) Shall maintain current insurance in effect and acquire such
additional insurance as may be reasonably required by increased business and
risks, and operate, maintain and repair all property in a normal business
manner.
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(h) Shall make adequate provision for any income tax which will be due
with respect to any 1996 earnings and shall file all tax reports or returns and
pay all income, franchise, sales, use, excise or other taxes on or before the
date on which such reports, returns, or payments are due.
(i) Shall pay all liabilities in a timely manner on or before their
due dates and shall make adequate provision or accruals for all liabilities of
BANK.
(j) Shall use its best efforts (without making any commitments on
behalf of F & M) to preserve its business organization intact, to keep available
to F & M the present key officers and employees of BANK and to preserve for F &
M the present relationships of BANK with its suppliers, customers and others
having business relations with them.
(k) Shall not sell or dispose of any property or assets except in the
normal course of business, including but not limited to, selling or disposing of
any securities held by BANK prior to their normal maturity dates.
(l) Shall promptly notify F & M of any lawsuits, claims, proceedings,
regulatory actions or investigations that may be threatened, brought, asserted
or commenced against it or its officers, directors, employees or agents
involving in any way the business, properties or assets of BANK.
(m) Shall not make loans or grant credit to any customer on terms
materially more favorable than those which are available from competitive
sources. F & M and BANK understand that BANK, in order to meet market
conditions may need to offer
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terms more favorable than those currently offered but that BANK will not be a
market leader in this regard.
(n) Shall not allow BANK's primary capital to asset ratio (12 C.F.R.
Part 325 method), determined in accordance with accepted accounting standards
applicable to preparation of Reports of Condition required to be filed with the
Federal Deposit Insurance Corporation, applied on a consistent basis, to drop
below eight percent (8%).
(o) Shall remain in compliance with all agreements, commitments,
understandings, undertakings or other obligations to the Commissioner, the FDIC
or any other regulatory agency having jurisdiction over BANK.
(p) Shall cooperate fully and completely with F & M in the preparation
and filing of the Registration Statement, and shall provide to F & M such
information as may be required for use therein pertaining to BANK, or its
businesses or operations.
(q) Shall not take any action which would be reasonably likely to make
unavailable either the pooling of interest accounting treatment of the merger or
to cause the merger not to qualify as a tax-free reorganization.
6.3 Audited Financial Statements. BANK shall deliver audited financial
statements to F & M for the period ended December 31, 1995 on or before March
31, 1996.
6.4 Stock Records. Prior to the special shareholders meeting to approve
the Merger, the Board of Directors of BANK, in accordance with its bylaws,
shall take such steps as are necessary to close its stock transfer books and
establish a
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record date for such meeting after the close of the transfer books, furnish
F & M with a current shareholder list as of such record date and validly call a
special shareholders meeting.
7. Covenants of F & M. F & M hereby covenants and agrees as follows:
(a) As promptly as practicable after the execution of this Agreement,
F & M, with the cooperation of BANK, shall prepare and file with the SEC the
Registration Statement. As promptly as practicable after comments, if any, are
received from the SEC on such preliminary Registration Statement, F & M, with
the cooperation of BANK, shall file with the SEC an amendment to the
Registration Statement responding to such comments, and shall seek to have such
Registration Statement declared effective. F & M shall also use its best
efforts to qualify under the blue sky laws of the various states in which common
shareholders of BANK are located the shares of F & M Common Stock to be issued
pursuant to this transaction and shall file the NASD Listing Application in a
timely manner. F & M shall pay the expenses of preparing and delivering the
joint Prospectus/Proxy Statement for BANK's Shareholders.
(b) As promptly as practicable after the execution of this Agreement,
F & M shall take action to organize Subsidiary, to capitalize Subsidiary and to
take such other actions as may be necessary to cause Subsidiary to perform its
obligations in connection with this transaction.
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(c) As promptly as practicable after the execution of that Agreement,
F & M shall take action to obtain regulatory approval of this transaction.
(d) Shall not take any action which would be reasonably likely to
make unavailable either the pooling of interest accounting treatment of the
merger or to cause the merger not to qualify as a tax-free reorganization.
(e) F & M shall provide its proposed employment agreement with Sylven
A. Konkel as soon as reasonably practical after this Agreement is signed. This
employment agreement will provide that Sylven Konkel will remain in his current
position and will become president of BANK when John Meyer no longer holds that
office. The parties anticipate that Mr. Konkel will be nominated to a position
on the BANK's Board of Directors after becoming president.
(f) Within ten (10) days after its 1995 audited financial statements
are in final form, F & M shall deliver a copy thereof to BANK.
(g) Upon execution of this Agreement, F & M will investigate the
availability of directors and officers' liability insurance coverage under its
policy covering the directors and officers of F & M and its Subsidiaries and
will promptly notify BANK of the availability and coverage under such insurance
for BANK's directors and officers upon consummation of the acquisition.
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8. Conditions Precedent to F & M's Obligation. Each and every obligation of F
& M and Subsidiary to be performed on the Closing Date shall be subject to the
satisfaction prior thereto of the following conditions:
8.1 Truth of Representations and Warranties. The representations and
warranties made in this Agreement or given on behalf of BANK hereunder, shall
have been continuously true and correct from the date of execution of this
Agreement to the Closing Date, and shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given on and as of the Closing Date and BANK shall have
complied with all other terms, conditions and covenants of this Agreement.
8.2 Compliance with Covenants. Except as expressly set forth in paragraph
8.7, BANK shall have performed all of its obligations, and complied with all of
the covenants under this Agreement which are to be performed or complied with
by it from the date of this Agreement through and as of the Closing Date,
including the delivery of the closing documents specified in paragraph 10.3.
8.3 Absence of Suit. No action, suit or proceeding before any court or
any governmental or regulatory authority shall have been commenced or
threatened, and no investigation by any governmental or regulatory authority
shall have been commenced, against F & M, Subsidiary, or BANK, or any of the
affiliates, associates, officers, directors or employees of any of them,
seeking to restrain, prevent or change the transaction
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contemplated hereby, or questioning the validity or legality of any such
transaction, or seeking damages in connection with any of such transaction.
8.4 BANK's Director and Shareholder Authorization. The merger
contemplated by this Agreement shall have been duly and validly authorized by
BANK's directors and shareholders in accordance with the laws of the State of
Wisconsin, including but not limited to the provisions of Wis. Stats. Section
221.565.
8.5 Receipt of Approvals. All approvals, consents and/or waivers,
including any approvals required by any federal or state governmental
regulatory agency, that are necessary to effect the transactions contemplated
hereby shall have been received and all waiting periods thereunder shall have
expired.
8.6 Accuracy of Financial Statements. In the event interim financial
statements are provided to F & M by BANK, F & M and its representatives shall
be reasonably satisfied as to the accuracy of all interim balance sheets,
statements of income and other financial statements of BANK furnished to F & M
and Subsidiary for periods ended after December 31, 1995.
8.7 BANK Earnings. The Actual Earnings of BANK from October 1, 1995
through the month end prior to the month in which closing occurs, determined in
accordance with accepted accounting standards applicable to preparation of
Reports of Condition required to be filed with the Federal Deposit Insurance
Corporation, applied on a consistent basis shall not be less than the Minimum
Earnings from October 1, 1995, through the month end prior to the month in
which closing occurs.
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8.8 Legal Opinion. F & M shall have received the opinion of BANK Counsel
referred to in subparagraph 10.3(e).
8.9 Accountants' Letters. F & M and Subsidiary shall receive before the
Closing Date the accountants' letters referred to in subparagraphs 10.3(d).
8.10 Time Limit on Closing. Closing shall have taken place by October
15, 1996.
8.11 Proceedings and Instruments Satisfactory; Certificates. All
proceedings, corporate or otherwise, to be taken in connection with the
transactions contemplated by this Agreement shall have occurred and all
appropriate documents incident thereto as F & M may reasonably request shall
have been delivered to F & M. BANK shall have delivered certificates in such
detail as F & M may reasonably request as to compliance with the conditions set
forth in this Article 8.
8.12 Securities Matters. The Registration Statement shall have been
declared effective under the Securities Act of 1933 by the SEC. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall, to the knowledge
of F & M, on or prior to the Effective Time, have been initiated or threatened
by the SEC. F & M shall have received all other federal or state securities
permits exemptions, registrations or other authorizations necessary to issue
the F & M Common in exchange for the BANK Stock to consummate the merger.
8.13 Prospectus/Proxy Statement. The Prospectus/Proxy Statement will not
contain any untrue statement of a material
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fact or omit any material fact required to be stated therein or necessary to
make the statements contained therein, in the light of the circumstances under
which they were made, not misleading.
8.14 Exchange of Stock Certificates. As a condition of delivery of the
consideration required by this Agreement, the BANK Shareholders shall have
executed and delivered documents assigning their shares of BANK Stock to F & M
and/or Subsidiary containing appropriate representations regarding tax matters,
ownership, authority to act, residency and such other matters as F & M shall
request.
8.15 Affiliates of BANK. Each person who shall be deemed to be an
"affiliate" of BANK within the meaning of the Securities Act of 1933 and Rule
145 promulgated by the SEC thereunder shall have executed and delivered to F &
M an Affiliate's Undertaking, in the form attached hereto as Exhibit 8.1, dated
as of the Effective Time.
8.16 Pooling Accounting. The merger contemplated herein shall be treated
as and qualify for accounting using the pooling of interests method provided
that this condition shall be deemed waived if the disqualification is the
result of an omission by F & M.
8.17 No Change Prior to Closing Date. No material adverse change in the
business or financial condition of BANK shall occur after the execution of this
Agreement but prior to the Closing Date.
8.18 Tax Status. No information has been discovered or made known to F &
M to indicate that the IRS has challenged or
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intends to challenge the status of this transaction as a tax-free
reorganization.
8.19 Dissenters Rights. That no more than ten percent (10%) of the total
consideration paid by F & M in this transaction, determined in accordance with
the accounting rules applicable to the pooling of interests, shall be paid in
cash, including amounts paid for fractional shares and amounts paid to BANK
Shareholders who exercise their dissenters rights under Wis. Stats. Section
221.25.
9. Conditions Precedent to BANK's Obligations.
Each and every obligation of BANK to be performed on the Closing Date
shall be subject to the satisfaction prior thereto of the following conditions:
9.1 Truth of Representations and Warranties. The representations and
warranties made by F & M in this Agreement or given on their behalf hereunder,
shall be true and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on and as of
the Closing Date.
9.2 F & M's Compliance. F & M shall have performed and complied with all
of its obligations under this Agreement which are to be performed or complied
with by it prior to or as of the Closing Date, including delivery of the
closing documents.
9.3 Absence of Suit. No action, suit or proceeding before any court or
any governmental or regulatory authority shall have been commenced or be
threatened and, no investigation by any
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governmental or regulatory authority shall have been commenced, against F & M,
Subsidiary, or BANK, or any of the affiliates, associates, officers, directors,
or employees of any of them, seeking to restrain, prevent, or change the
transactions contemplated hereby, or questioning the validity or legality of
any such transactions, or seeking damages in connection with any of such
transactions.
9.4 Proceedings and Instruments Satisfactory; Certificates. All
proceedings, corporate or otherwise, to be taken by F & M in connection with
the transaction contemplated by this Agreement shall have occurred and all
appropriate documents incident thereto as BANK may reasonably request shall
have been delivered to BANK. F & M shall have delivered certificates in such
detail as BANK may reasonably request as to compliance with the conditions set
forth in this Article 9.
9.5 Receipt of Approvals. All approvals, consents and or waivers,
including any approvals required by any federal or state governmental
regulatory agency, that are necessary to effect the transactions contemplated
hereby shall have been received, and all waiting periods shall have expired
provided the failure to obtain the same was not the result of an act or
omission by BANK.
9.6 Time Limit on Closing. Closing shall have taken place by October 15,
1996.
9.7 Legal Opinion. BANK shall have received the opinion of F & M Counsel
referred to in subparagraph 10.4(d).
9.8 Prospectus/Proxy Statement. The Prospectus/Proxy Statement will not
contain any untrue statement of material fact
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or omit any material fact required to be stated therein or necessary to make
the statements contained therein, in the light of the circumstances under which
they were made, not misleading.
9.9 Tax Status. No information has been discovered or made known to BANK
to indicate that the IRS has challenged or intends to challenge the status of
this transaction as a tax-free reorganization.
9.10 Tax Opinion. BANK Shareholders shall have received an opinion
obtained by BANK at BANK's expense to the effect that the transaction
contemplated by this Agreement shall be tax-free to those BANK Shareholders who
receive F & M Common in exchange for their BANK Stock (excluding fractional or
dissenting shares), provided that if BANK fails to deliver said opinion, F & M
may, but is not required to, deliver such an opinion from legal counsel it
selects in which case this condition shall be deemed satisfied. If BANK has
not made a good faith effort to obtain this opinion from its counsel and such
opinion is provided by F & M, the expense and cost of such opinion provided
by F & M shall be multiplied by 1.35. This product shall be deducted from the
aggregate price and the Exchange Ratio shall be recalculated after making such
deduction. In connection with the rendering of the tax opinion referenced in
this section, the BANK, F & M and Subsidiary agree to execute certificates in
the form attached hereto as Exhibits 9.10 and 9.10(a).
9.11 Fairness Opinion. BANK shall have obtained a fairness opinion from
Robert W. Baird & Co., Incorporated indicating its
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opinion that the proposed transaction is fair from a financial point of view to
the BANK Shareholders.
9.12 Directors and Officers Liability Insurance. F & M shall furnish
evidence to BANK that BANK's directors and officers are covered under the
directors and officers liability insurance provided to the directors and
officers of F & M and its subsidiaries, which coverage shall include coverage
in accordance with the standard terms and conditions of such policy for claims
based upon occurrences which occurred prior to F & M acquisition of BANK. In
the event such coverage is not available, F & M may satisfy this condition by
offering separate coverage to BANK's directors and officers which is
substantially equivalent to the coverage carried by BANK as of the date of this
Agreement.
10. Closing.
10.1 Time and Place. The closing of this transaction ("Closing") shall
take place at the offices of F & M (or such other place as the parties may
agree) on the Closing Date.
10.2 Rights of BANK Shareholders After the Effective Time. After the
Effective Time and until the surrender of a stock certificate representing
shares of BANK Stock, each such outstanding certificate, which prior to the
Effective Time represented shares of BANK Stock, shall be deemed for all
purposes, subject to the further provisions of this Agreement, to evidence the
ownership of the number of full shares of F & M Common into which such shares
have been converted; provided, however, that unless and until any such
certificates representing BANK Stock shall be so surrendered, the stock
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certificate representing the shares, any dividends or other distributions of any
kind payable in respect of shares of F & M Common into which such BANK Stock has
been converted, shall be withheld by F & M. Upon the subsequent surrender and
exchange of such BANK Stock certificates, such holder of record of the
certificates formerly representing shares of BANK Stock (or such holder's
assignee) shall be paid the amount of any such cash dividends or other
distributions, without interest, which became payable under this Agreement to
holders of record of shares of F & M Common on or after the Effective Time and
prior to the surrender and exchange of the certificates. Delivery of
certificates representing shares of F & M Common to former BANK Shareholders who
have tendered their certificates for their shares of BANK Stock at or before the
Effective Time shall be made as soon as reasonably possible after the Effective
Time.
10.3 Documents to be Delivered by BANK. At the time of or prior to the
closing, BANK shall deliver the following documents:
(a) A certificate by the chairman, vice-chairman or president of BANK
(i) that the representations and warranties made by BANK as the case may be in
this Agreement are true and correct on as of the Closing Date with the same
effect as though such representations and warranties had been made on or given
on and as of the Closing Date, (ii) that BANK has performed and complied with
all of its obligations under this Agreement which are to be performed or
complied with by or prior to or on the Closing Date, and (iii) that all
Schedules and Exhibits delivered by BANK to F & M prior or as of the Closing
Date are true, correct and complete as of the Closing Date.
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(b) An Incumbency Certificate for the officers executing the documents
in connection with the transaction contemplated hereby.
(c) Copies of the Articles of Incorporation and Bylaws of BANK, duly
certified by their respective custodians as true, correct and complete copies
thereof, including any amendments as of the Closing Date.
(d) A letter from BANK's certified public accountants, prepared in
accordance with Statement on Auditing Standards 72, "Letters for Underwriters
and Certain Other Requesting Parties", addressed to F & M dated as of the
Closing Date to the effect that (i) the audited financial statements of BANK
included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Securities Exchange
Act of 1934 and related published rules and regulations, (ii) nothing came to
their attention to cause them to believe that the unaudited condensed interim
financial statements of BANK included in the Registration Statement do not
conform in all material respects with the applicable requirements of the
Securities Exchange Act of 1934 and related published rules and regulations or
that such unaudited condensed interim financial statements of BANK included in
the Registration Statement require material modifications for them to be in
conformity with generally accepted accounting principles, (iii) except as
disclosed in the letter, nothing came to their attention to cause them to
believe that as of the date not earlier than five (5) days prior to the Closing
Date, there was any change from the
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unaudited condensed interim financial statements of BANK included in the
Registration Statement in capital stock, increase in long-term debt or any
decrease in stockholders' equity of BANK or there were any decreases for the
period from the date of the unaudited condensed interim financial statements of
BANK included in the Registration Statement to the date not earlier than five
(5) days prior to the Closing Date, as compared with the corresponding period
in the preceding year, in net interest revenue or net income of BANK and that
nothing came to their attention to indicate that the condition set forth in
paragraph 8.7 had not been met. Such letter to F & M requires delivery of a
representation letter to BANK's certified public accountants consistent with
the requirements of Statement on Auditing Standards 72.
(e) A written opinion from BANK counsel dated as of the Closing Date
addressed to F & M and F & M Counsel, in form and substance substantially in the
form attached hereto as Exhibit 10.3(e)
(f) Certified copies of resolutions adopted by BANK's board of
directors to the effect that the execution, delivery and performance of this
Agreement and the transactions contemplated by it have been duly and validly
authorized in accordance with the laws of the State of Wisconsin and of the
action taken by the BANK's Shareholders to approve the merger and authorize the
acquisition of 10% or more of BANK's Stock by F & M as provided by Wis. Stats.
Section 221.565.
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(g) Such other documents of transfer, certificates or authority and
other documents as F & M may reasonably request.
10.4 Documents to be Delivered by F & M and Subsidiary. At the closing F
& M and Subsidiary shall deliver the following documents:
(a) Certificates for shares of F & M Common as determined under
Article 3 of this Agreement. Such certificates will be in the name of BANK
Shareholders entitled to the same in accordance with their interest in BANK as
of the Effective Time provided, however, that any certificates need not be
delivered until such time as the provisions of paragraph 10.2 have been complied
with by such Shareholders.
(b) An Incumbency Certificate relating to all parties executing
documents relating to any of the transactions contemplated hereby on behalf of F
& M and Subsidiary.
(c) A certificate by an officer of F & M that, to the best of such
officer's knowledge, (i) the representations and warranties made by F & M and
Subsidiary in this Agreement are true and correct as of the Closing Date, (ii)
that F & M and Subsidiary have performed and complied with all of their
obligations which are to be performed or complied with by or prior to or as of
the Closing Date and (iii) that all Schedules and Exhibits delivered by F & M to
BANK are true, correct and complete as of the Closing Date.
(d) A written opinion from counsel for F & M and Subsidiary dated as
of the Closing Date addressed to BANK and
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BANK Counsel in form and substance substantially in the form attached hereto as
Exhibit 10.4(d).
(e) A written opinion from Securities Counsel dated as of the
Effective Time addressed to F & M and BANK, reasonably satisfactory in form and
substance to F & M Counsel, to the effect that the shares of F & M Common
issuable in the transaction are the subject of an effective Registration
Statement with the SEC, and that no stop order relating to such Registration
Statement has been issued by the SEC and that, to the knowledge of such counsel,
no proceedings for that purpose shall have been initiated or threatened by the
SEC.
(f) Certified copies of the resolutions adopted by F & M's and
Subsidiary's boards of directors to the effect that the execution, delivery and
performance of this Agreement and the transactions contemplated by it have been
duly and validly authorized in accordance with the laws of the State of
Wisconsin.
11. Law Governing.
This Agreement shall be construed and interpreted according to the laws of
the State of Wisconsin.
12. Assignment.
This Agreement may not be assigned in whole or in part without the written
consent of all parties, provided, however, that Subsidiary's participation in
this transaction shall not require any further consent or authorization.
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13. Amendment and Modification.
This Agreement may only be amended or modified by a written agreement
signed by the duly authorized representatives of F & M and BANK.
14. Abandonment.
This Agreement may be terminated and the transaction provided for by this
Agreement may be abandoned at any time before the Closing Date:
(a) By mutual consent of F & M and BANK;
(b) By F & M if (i) any of the conditions provided for in Article 8 of
this Agreement have not been met and have not been waived in writing by F & M,
or (ii) the F & M Per Share Price is more than Thirty-two and 50/100 Dollars
($32.50) per share; or
(c) By BANK if (i) any of the conditions provided for in Article 9 of
this Agreement have not been met and have not been waived in writing by BANK, or
(ii) the F & M Per Share Price is less than Twenty-one and 50/100 Dollars
($21.50) per share.
(d) In the event of a breach of this Agreement, by notice from the
non-breaching party to the breaching party as set forth below.
In the event of termination and abandonment by any party as provided in
this Article, written notice shall forthwith be given to the other party
setting forth the breach of this Agreement or the default in performance which
has occurred, or the condition which has not been met. The party to whom the
notice is directed
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shall, if such party is able to effect a satisfaction or cure, have ten (10)
days after such notice is given to satisfy such condition or cure such breach
or default, provided that if such ten (10) day period is not sufficient and the
party is making a diligent effort to satisfy such condition or cure such breach
or default, the time to do so may be extended for such period as the parties
may agree not to exceed thirty (30) days provided however, that the F & M Per
Share Price shall be the higher of the price as of the date of the notice or as
of the date on which the default is satisfied or cured. The termination and/or
abandonment of this Agreement shall not alter or diminish the liability of the
party that failed to comply with the conditions of this Agreement. Each party
shall pay its own expenses incident to preparation for the consummation of this
Agreement and the transactions contemplated hereunder. In the event F & M
declares a stock dividend or stock split, the maximum and minimum F & M Per
Share set forth in subparagraphs (b) and (c), above, and in paragraph 1.11,
shall be adjusted in proportionately and based upon the stock dividend or stock
split.
15. Notices.
All notices, requests, demands, and other communications hereunder shall
be deemed to have been duly given, upon actual delivery, if delivered by hand;
or upon receipt by the addressee, if given by mail (certified mail - return
receipt requested with postage prepaid is required for notice by mail); or upon
receipt by the addressee, if by private courier; or upon receipt of the
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transmission by the addressee if by telecopy (with a copy sent by first class
mail):
(a) If to BANK, to John Meyer, Community State Bank, 208 Steele
Street, Algoma, Wisconsin 54201, FAX: 414-487-3642, with a copy to James
Sheriff, Esq., Godfrey & Kahn, 780 North Water Street, Milwaukee, Wisconsin
53202-3590, FAX: 414- 273-5198.
(b) If to F & M or Subsidiary, to Mr. Gail E. Janssen, One Bank
Avenue, Kaukauna, Wisconsin 54130, FAX: 414-766-5628, with a copy to Randall A.
Haak, Esq., McCarty, Curry, Wydeven, Peeters & Haak, P.O. Box 860, Kaukauna
Wisconsin 54130, FAX: 414-766-4756.
The place to which notice is to be given may be changed by notice given in
accordance with this Article.
16. Entire Agreement.
This Agreement with Exhibits embodies the entire agreement between the
parties hereto with respect to the transaction contemplated herein and
supersedes all prior agreements, written or oral, express or implied and all
negotiations, discussions or other matters between the parties and there have
been and are no agreements representations or warranties between the parties
other than those set forth or provided for herein.
17. Counterparts.
This Agreement may be executed in two (2) or more partially or fully
executed counterparts, each of which shall be deemed an
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original and shall bind the signatory, but all of which together shall
constitute but one and the same instrument.
18. Binding Effect.
This Agreement shall inure to the benefit of and bind the parties and
their respective heirs, beneficiaries, transferees, successors, and assigns.
19. Headings.
The headings of this Agreement are inserted for convenience only and shall
not constitute a part hereof.
20. Confidentiality. Except as necessary to take action pursuant to this
Agreement, each party agrees that all information and documents received from
the other party regarding the proposed transaction shall be held in confidence
and that all documents containing such information will be returned upon
request if the parties abandon the transaction. The parties further agree to
use such information only in connection with the proposed transaction
contemplated by this Agreement. This paragraph shall not apply to information
or documents which are, or by law must be made, publicly available. The
parties agree to not publicly disclose this Agreement or its Exhibits or any of
the provisions hereof, except as a part of regulatory filings or pursuant to
press releases and other public statements approved by F & M and BANK.
21. Further Documents.
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F & M, Subsidiary, and BANK agree to execute any and all other documents
and to take such other action or corporate proceedings as may be reasonably
necessary or desirable to carry out the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
F & M BANCORPORATION, INC. ("F & M")
By:__/s/____________________________
Gail E. Janssen, President
ATTEST:
By:__/s/____________________________
Janet M. Lakso, Secretary
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COMMUNITY STATE BANK ("BANK")
By:__/s/______________________________
James L. Slaby, Chairman of the Board
ATTEST:
By:__/s/____________________________
John Meyer, President
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EXHIBIT 10.12
PLAN AND AGREEMENT OF MERGER AND REORGANIZATION
PLAN AND AGREEMENT OF MERGER AND REORGANIZATION (HEREINAFTER REFERRED TO
AS "AGREEMENT"), MADE AS OF THE 11 DAY OF JANUARY, 1996, BY AND BETWEEN F & M
BANK-LAKELAND, A WISCONSIN BANKING CORPORATION, AND BRADLEY BANK, A WISCONSIN
BANKING CORPORATION.
1. Definitions.
The following definitions shall apply in this Plan and Agreement of Merger
and Reorganization:
1.1 "Agreement" shall mean this Plan and Agreement of Merger and
Reorganization.
1.2 "BANK" shall mean Bradley Bank, 227 West Wisconsin, P.O. Box 335,
Tomahawk, Wisconsin 54487.
1.3 "Bank Stock" shall mean BANK's voting capital stock, $10.00 par value.
1.4 "Bank Stock Formula Price" shall mean the value of Bank Stock
determined in accordance with subparagraph 3.2.
1.5 "Bank Counsel" shall mean Thomas J. Naleid, S.C., 139 North Second
Avenue, P.O. Box 339, Park Falls, Wisconsin 54552-0339, Attn: Thomas J.
Naleid, Esq.
1.6 "Bank Shareholders" shall mean the shareholders of BANK shown on the
attached Exhibit 1.6.
1.7 "Closing Date" shall be set by mutual agreement of BANK and F & M once
all conditions precedent have been met or waived.
1.8 "Effective Time" shall mean the date on which the Certificate of
Consolidation issued by the State of Wisconsin Commissioner of Banking (the
"Commissioner") is recorded with the Lincoln County Register of Deeds. The
Certificate of Consolidation shall be filed as soon as possible after the
<PAGE> 2
conditions precedent to this merger have been met or waived by F & M and BANK,
but not prior to the Closing Date.
1.9 "F & M" shall mean F & M Bank-Lakeland, Hwy. 51 and Townline Road,
Woodruff, Wisconsin 54568.
1.10 "F & M Counsel" shall mean McCarty, Curry, Wydeven, Peeters & Haak,
120 East Fourth Street, P.O. Box 860, Kaukauna, Wisconsin 54130-0860, Attn.:
Randall A. Haak, Esq.
1.11 "Proxy Statement" shall mean the document prepared by BANK to solicit
proxies from the Bank Stockholders to vote their shares in favor of the merger
contemplated by this Agreement at a special shareholders meeting to be held by
BANK.
1.12 "Valuation Date" shall mean the last day of the month prior to the
month in which closing occurs.
2. Preamble.
F & M and BANK are Wisconsin banking corporations. F & M and BANK, by
their respective employees and agents have had the opportunity to make such
review and investigation of the other as they deem appropriate and to negotiate
the terms and conditions of this Agreement. F & M and BANK each believe that
this transaction is in their best interests and in the best interests of their
shareholders and desire to set forth their agreement and understanding in this
Agreement.
The parties have considered the proposed merger and believe that a merger
between F & M and BANK will be in the best interest of their respective
corporations and shareholders. The merger of BANK into F & M is intended to
constitute a reorganization within
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the meaning of Sections 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended.
In consideration of the foregoing and the terms, conditions and covenants
of this Agreement and in reliance on the warranties and representations
contained herein, the parties adopt this Plan and Agreement of Merger and
Reorganization and agree as follows:
3. Merger of BANK into F & M.
3.1 Surviving Corporation. At the Effective Time of the merger, BANK
shall be merged into F & M in accordance with the laws of the State of
Wisconsin. F & M shall be the surviving corporation and the separate corporate
existence, identity, and organization of BANK, except as specifically provided
by law and this Agreement, shall cease. As the surviving corporation, F & M
shall succeed to and possess all the assets, properties, powers, privileges,
rights and immunities of BANK and shall be subject to all liabilities,
obligations, limitations and duties of BANK as described in this Agreement.
3.2 Exchange of Bank Stock. At the Effective Time, all Bank Shareholders
will receive cash for their shares of Bank Stock. The price per share of Bank
Stock to be paid by F & M shall be calculated as follows:
(a) Bank's Equity shall be determined as of the Valuation Date as the
sum of its capital stock, additional paid-in capital, capital surplus and
undivided profits and capital reserves (less treasury stock, if any), all
determined in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis, but shall not include any amount
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<PAGE> 4
(regardless of whether the amount increases or decreases Bank's Equity) for any
adjustment to Bank's Equity made pursuant to FASB 115.
Bank's Equity may be subject to adjustment to the extent not reflected in
the amount determined as set forth above (i) for any loans or leases which are
considered as, or have the probability of becoming, losses based upon F & M's
due diligence review of BANK; (ii) in the event BANK's reserve for loan and
lease losses is less than 1.30%, by the amount necessary to bring the reserve
to 1.30%; (iii) as a result of any change in business practices or accounting
procedures prior to the Closing Date which have the effect of inflating Bank's
Equity; (iv) as the result of a material change in the business of BANK or an
increase in its liabilities (exclusive of deposits) discovered by F & M after
the execution of this Agreement; (v) to reflect the fair market value of any
OREO held by BANK; (vi) for the amount of expenses incurred by BANK in
connection with this transaction, including, but not limited to, attorney's
fees, accounting fees, expenses of preparing the Proxy Statement and soliciting
proxies, which have not been accrued and accounted for prior to the Valuation
Date; (vii) for the amount of any adjustment to Bank's Equity made pursuant to
FASB 115; (viii) the amount of any obligation to any employee, officer,
director or shareholder which may become payable after the Closing Date at the
option of the employee, officer, director or shareholder as a result of the
transaction contemplated by this agreement; and (ix) as a result of any
unfunded or underfunded liability in any defined benefit pension
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<PAGE> 5
plan maintained by BANK, assuming the complete termination of such plan, any
costs of bringing such plan into compliance with law and any costs of
terminating such plan.
(b) Bank's Equity thus determined shall be multiplied by 1.90 to
determine the aggregate consideration for all shares of Bank Stock (the
"Price"). The Price shall be divided by the total number of issued and
outstanding shares of Bank Stock (presently 24,000), extended to three decimal
places, to determine the Bank Stock price per share ("Bank Stock Formula
Price").
(c) The Bank Stock Formula Price shall be multiplied by the number of
shares of Bank Stock held by each Bank Shareholder to determine the amount paid
to each Bank Shareholder.
(d) Notwithstanding, any of the foregoing BANK Shareholders who elect
their statutory appraisal rights in compliance with Wis. Stats. Section 221.25
shall not receive the consideration described above, but shall receive the value
of the shares to which the election was filed as of the day prior to the date on
which the BANK Shareholders vote on this transaction.
3.3 Articles of Incorporation. The Articles of Incorporation of F & M in
effect immediately prior to the Effective Time of the merger shall continue in
full force and effect as the Articles of Incorporation of the surviving
corporation.
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3.4 Bylaws. The bylaws of F & M in effect immediately prior to the
Effective Time of the merger, shall continue in full force and effect as the
bylaws of the surviving corporation.
3.5 Officers and Directors. The officers and directors of F & M at the
Effective Time of the merger shall remain as the officers and directors of the
surviving corporation.
3.6 BANK Special Shareholders Meeting. BANK shall call a special
shareholders meeting in accordance with the BANK's bylaws and as required by
law at a mutually agreeable time and place for the purpose of voting on the
merger contemplated by this Agreement. BANK shall deliver the Proxy Statement
to the Bank shareholders in a timely manner prior to this special shareholders
meeting.
4. Representations and Warranties of BANK. BANK, by its duly authorized
officers, directors, or other agents and Park Falls Agency, Inc. ("PFA"), as
BANK's controlling shareholder, jointly and severally make the following
representations and warranties to F & M, each of which is true and correct to
and including the Closing Date, shall be unaffected by any investigation
heretofore or hereafter made by or any notice to F & M and shall survive the
closing and the transactions contemplated hereby:
4.1 Ownership and Authority. The current BANK Shareholders are listed on
the attached Exhibit 1.6.
4.2 BANK Organization and Authority.
(a) BANK is duly organized, validly existing and in good standing
under the laws of the State of Wisconsin and has all requisite banking and
corporate power and authority to own,
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operate and lease its properties and to carry on its business as now being
conducted. BANK operates two offices in Tomahawk, Wisconsin. BANK has a wholly
owned subsidiary, Wisconsin River Investment Corporation ("WRIC") which is duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has all requisite power, authority and approvals to own, operate and
lease its properties and to carry on its business as now being conducted. BANK
and WRIC have received all necessary corporate approval and authorization and
regulatory approval and such approvals remain in full force and effect and in
good standing.
(b) BANK is authorized to issue Twenty-four Thousand (24,000) shares
of Bank Stock. BANK has Twenty-four Thousand (24,000) shares of Bank Stock
issued and outstanding, all of which are legally and validly issued, fully paid
and nonassessable. WRIC is authorized to issue Two Thousand Five Hundred
(2,500) shares of stock of which Two Thousand Five Hundred (2,500) shares are
issued and outstanding and fully paid and nonassessable.
(c) BANK has not issued and does not have outstanding any option,
warrant or convertible securities or other right to purchase or convert any
obligation into BANK's securities and has not agreed to issue or sell any
additional securities of any type.
(d) WRIC has not issued and does not have outstanding any option,
warrant or convertible securities or other right to purchase or convert any
obligation into WRIC's securities and has
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not agreed to issue or sell any additional securities of any type.
4.3 Financial Matters.
(a) True copies of BANK's financial statements, consisting of
balance sheets, statements of operations, statements of cash flow and statements
of shareholders' equity as of the close of business on December 31, 1994, 1993,
and 1992, and for the interim period ended September 30, 1995 (except for
statements of stockholders' equity) have been delivered by BANK to F & M ("Bank
Financial Statements"). All of Bank Financial Statements are true and correct
in all material respects and present an accurate and complete disclosure of the
financial condition of BANK as of their respective dates, and the earnings for
the periods covered, in accordance with generally accepted accounting
principles, applied on a consistent basis.
(b) BANK and WRIC have good marketable title to all of their assets,
business and properties including, without limitation, all such properties
reflected in the Bank Financial Statements as of December 31, 1994, free and
clear of any mortgage, lien, pledge, security interest, assessment, levy,
charge, claim or other encumbrance, for real estate and personal property taxes
for 1995 which are not yet due. Neither BANK nor WRIC have any notice of any
special assessment which will be levied or assessed against any real property
owned or leased by them. All real property owned, operated or leased by BANK or
WRIC is in full compliance with all applicable federal, state and local statutes
and regulations including, but not limited to, any
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<PAGE> 9
building codes, safety codes, OSHA regulations, environmental laws and
regulations, the Americans with Disabilities Act, zoning ordinances and other
similar codes, ordinances, and regulations.
(c) All property and assets of or currently in use by BANK or WRIC or
in which they have an interest or of which they are in possession are in good
operating condition and repair subject only to normal wear and tear. A schedule
of all real and personal property owned by BANK and WRIC is attached as Exhibit
4.3(c). If BANK or WRIC leases any real or personal property, a separate
schedule clearly identifying such leased property shall be attached to this
Agreement as a part of Exhibit 4.3(c).
4.4 Changes Since December 31, 1994. Since December 31, 1994, with
respect to BANK and WRIC there has not been:
(a) Any loss, damage, destruction or failure to maintain the tangible
assets of BANK or WRIC (whether or not covered by insurance), which will
adversely affect the financial condition or operations of BANK or WRIC.
(b) Any lapse, revocation, failure to maintain in full force and
effect or other event which, through the passage of time or the giving of
notice, or both could render any insurance coverage previously maintained by
BANK or WRIC ineffective in whole or in part.
(c) Any acquisition by BANK or WRIC of a capital asset at a cost in
excess of Five Thousand Dollars ($5,000.00) except as shown on Exhibit 4.4(c).
(d) Any amendment to the Articles of Incorporation or Bylaws of BANK
or WRIC.
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(e) Any change in accounting procedures, practice or methods from
those used by BANK or WRIC in preparing the Bank Financial Statements.
(f) Except for salary and/or wage increases implemented in September,
1995, any increase in or agreement to increase salaries, wages, fringe benefits,
benefits under any plan subject to ERISA or other compensation of any officers,
directors, employees or agents of BANK or WRIC.
(g) Any issuance or agreement to issue directly or indirectly any
additional shares of stock or other securities by BANK or WRIC on or before the
Closing Date or thereafter.
(h) Any declaration, setting aside or payment of any dividend or any
distribution in respect to BANK's stock or any redemption, purchase or other
acquisition by BANK of any stock of or any other repayments to the shareholders
of BANK.
(i) Any sale, transfer, or other disposition, prior to maturity, of
any security or other earning asset (exclusive of loans and leases) of BANK or
WRIC.
(j) Any borrowings from financial institutions in addition to those
disclosed by the December 31, 1994, Bank Financial Statements.
(k) Any mortgage, lien, pledge, security interest, assessment, levy,
charge, claim or other encumbrance made with respect to any of the properties or
assets of BANK or WRIC except as disclosed by the December 31, 1994, Bank
Financial Statements.
(l) Any sale, transfer or other disposition of assets of BANK or WRIC
except in the normal course of business and
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consistent with past practices, provided, however, that neither BANK nor WRIC
may dispose of any securities prior to maturity without the prior written
consent of F & M.
(m) Any material change in the manner in which business was being
conducted by BANK or WRIC prior to December 31, 1994, or other material failure
by BANK to use its best efforts to maintain its present business organization
(subject to the terms of this Agreement), employees and customers.
(n) Any loan or commitment to make a loan by BANK with an interest
rate, repayment term, collateral or security requirements or other conditions
which are materially different from those upon which BANK made loans prior to
December 31, 1994.
(o) Any other material event, transaction or condition not in the
normal course of business.
(p) Any other materially adverse change in BANK's or WRIC's prospects,
financial condition, assets, liabilities, properties or business.
(q) Any acquisition of brokered deposits by BANK.
4.5 Liabilities.
(a) Neither BANK nor WRIC has any liabilities, whether accrued,
absolute, contingent or otherwise, which arose or relate to any transaction or
occurrence involving BANK or WRIC or their respective officers, directors,
employees, agents or servants prior to the date of this Agreement which are not
disclosed by the Bank Financial Statements described above. To the best of our
knowledge, after due and diligent inquiry, as of
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the date hereof, no known circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, exist which may hereafter give rise to
any such liabilities for BANK or WRIC.
(b) To the best of our knowledge, after due and diligent inquiry, all
parties with whom BANK or WRIC have contractual arrangements are in compliance
therewith. Neither BANK nor WRIC is in default in any material respect under
any contracts to which it is a party, nor has any event occurred, which through
the passage of time or the giving of notice or both, would constitute a default
under any such contract or obligation or cause the acceleration of any
obligation of BANK or result in the creation of any lien, charge, assessment,
encumbrance or other claim whatsoever upon any asset of BANK or WRIC. None of
the contracts to which BANK or WRIC is a party will be adversely affected by the
transaction contemplated by this Agreement.
(c) To the best of our knowledge, after due and diligent inquiry, BANK
and WRIC are in compliance with all applicable federal, state, county and local
statutes, ordinances, regulations, decrees, orders, or other laws.
(d) No legal, administrative or other proceedings, investigations or
inquiries or other claims, judgments, consent decrees, stipulations, injunctions
or restrictions are either pending or outstanding, or to the best of our
knowledge after due and diligent inquiry, threatened against or involving BANK
or WRIC or affecting their assets, properties or business. After making due and
diligent inquiry, we do not know, or have any
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grounds to know, of any basis for any such proceedings, investigations or
inquiries or other claims, judgments, consent decrees, stipulations, injunctions
or restrictions.
(e) The assets and liabilities or potential liabilities of BANK and
WRIC are fully insured, except for deposits, repurchase agreements or other
similar deposit-type instruments, and except for deductibles thereunder. All
policies of insurance carried by BANK and WRIC are in full force and all
premiums thereon are paid to date and all bonds have been acquired and
maintained on all employees, agents, officers and directors of BANK and WRIC
required to be bonded. The limits of coverage of such insurance and bonds are
disclosed in the attached Exhibit 4.5(e). Said insurance and bonds including
but not limited to general comprehensive (commercial) public liability insurance
covering personal injuries, death and property damage and worker's compensation
insurance have been acquired and maintained for at least the past five (5)
years.
4.6 Taxes. BANK and WRIC have filed all federal, state and local tax
returns and reports covering income, sales, use, real or personal property or
other taxes of any type required to be filed and have paid all taxes including
any interest, penalties and assessments which are due and required to be paid.
The taxes provided for in Bank Financial Statements and which will be provided
for in any subsequent financial statements will be adequate for the payment of
any unpaid taxes as of such dates. BANK's federal income tax return has never
been audited. Neither BANK nor WRIC have waived any restrictions on the
assessment or
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collection of taxes or consented to the extension of any statute of limitations
relating to any tax liability. We have no knowledge of any possible material
deficiency or assessments in respect to state or federal income tax returns or
other tax returns filed by BANK or WRIC
4.7 Contracts and Commitments. Neither BANK nor WRIC have any contracts or
commitments, either oral or written, with any officer, director, shareholder,
employee, customer, depositor, supplier of goods or services or any other entity
or person which contain any terms or conditions which are not usual and
customary under the circumstances and which may have an adverse effect on the
operations, profitability or net worth of BANK or WRIC.
4.8 Reporting and Withholding on Payment of Interest. To the best of our
knowledge after due and diligent inquiry, BANK has fully complied with the
Internal Revenue Code (the "Code"), and all rules and regulations of the
Internal Revenue Service ("IRS") issued thereunder, with respect to the
reporting of payments of interest and other payments by it, and has complied
with all provisions requiring the withholding for income taxes on such amounts
when required. BANK has instituted adequate procedures to assure compliance
with such provisions. To the best of our knowledge after due and diligent
inquiry, all reporting to the IRS required of BANK has been done in a timely
manner via proper medium.
4.9 Employees and Employee Benefits.
(a) Neither BANK nor WRIC is a party to or bound by any written or
oral (i) employment or consulting contract which
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is not terminable at will by the BANK or WRIC as the case may be without
penalty, (ii) employee bonus, deferred compensation, pension, profit sharing,
retirement, stock purchase, stock option plan or other employee benefit or
employee welfare plan except as listed on Exhibits 4.9(b) and 4.9(c) to this
Agreement.
(b) All pension, profit sharing, or other employee pension benefit
plans of BANK ("the Plans") are described in Exhibit 4.9(b) and are now, and
will continue until the Closing Date to be, qualified Plans under Section 401(a)
of the Code, and in full compliance with the Employee Retirement Income Security
Act of 1974 as amended ("ERISA"). To our best knowledge, after due and diligent
inquiry, all premiums, notices, reports and other filings required to be
delivered or filed under applicable law with respect to such Plans have been
duly and timely delivered or filed. BANK has no knowledge of any fact or
circumstance which would adversely affect such Plans' qualified status or
compliance as above described or of any "reportable event" (as such term is
defined in Section 4043(c) of ERISA) or any "prohibited transaction" (as such
term is defined in Section 406 of ERISA and Section 4975(c) of the Code) which
has occurred since the date on which said sections first became applicable to
the Plans. The Plans satisfy the minimum funding standards set forth in the Code
and ERISA. As of the Closing Date there will be no unfunded vested liability of
the Plans.
(c) All employee welfare benefit plans of BANK (the "Welfare Plans")
are described in Exhibit 4.9(c) and are now, and will continue until the Closing
Date to be, and in full
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compliance with the Code and the Employee Retirement Income Security Act of 1974
as amended ("ERISA"). To BANK's best knowledge, all notices, reports and other
filings required to be delivered or filed under applicable law with respect to
such Welfare Plans have been duly and timely delivered or filed. BANK has no
knowledge of any fact or circumstance which would adversely affect such Welfare
Plans' compliance as above described or any "prohibited transaction" (as such
term is defined in Section 406 of ERISA and Section 4975(c) of the Code) which
has occurred since the date on which said sections first became applicable to
the Welfare Plans.
(d) No person or governmental agency has made any claim against BANK
or WRIC arising out of any statute, ordinance or regulation alleging (i)
discrimination against applicants for employment, employees or the public, (ii)
any employment practices, policies or procedures are discriminatory or have been
breached, (iii) a failure to comply with wage and hour laws, rules or
regulations, (iv) a violation of occupational safety and health statutes,
regulations or standards or (v) unfair labor practices.
4.10 Environmental Matters.
(a) There has been no release of any hazardous substance, as defined
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA") nor any release of oil or hazardous substance as provided under
Wis. Stats. Section 144.76, on, upon or into the real property owned or leased
to BANK or WRIC or, to the best of our knowledge upon any
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real estate or property which secures any loan made by BANK or which BANK has a
right to acquire upon foreclosure or otherwise.
(b) To the best of our knowledge, there has been no such releases on,
upon or into any real property adjoining or in the vicinity of real property
described in paragraph 4.10(a), above which through air, soil or ground water
migration could have come to be located upon any property owned or leased by
BANK or WRIC, or which secures a loan made by BANK or may be acquired by BANK in
foreclosure.
4.11 Accuracy of All Statements. No representation or warranty in this
Agreement or any BANK Financial Statements, statement, certificate, schedule or
exhibit hereto furnished or to be furnished by or on behalf of BANK pursuant to
this Agreement, nor any document or certificate delivered to F & M pursuant to
this Agreement or in connection with actions contemplated hereby, contains or
shall contain any untrue material fact or omits or shall omit a material fact
necessary to make the information, representation or warranty contained therein
not misleading.
4.12 No Broker. All negotiations relative to this Agreement and the
transaction contemplated hereby have been carried on directly by PFA without
the intervention of any broker or third party. Neither PFA nor BANK has
engaged, consented to engage, or authorized any broker, investment banker, or
third party to act on its behalf, directly or indirectly, in any capacity in
connection with the transaction contemplated by this Agreement.
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5. Representations and Warranties of F & M.
F & M makes the following representations to BANK, each of which is true
and correct to and including the Closing Date, shall be unaffected by any
investigation heretofore, or hereafter made by or any notice to BANK except as
set forth herein.
5.1 Organization and Authority.
F & M is a Wisconsin banking corporation, duly organized, validly
existing and in good standing under the laws of the State of Wisconsin and has
all requisite banking and corporate power and authority to own, operate and
lease its properties and to carry on its business as now being conducted.
5.2 Performance of this Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transaction
contemplated under it have been duly authorized by appropriate corporate
approval and will not violate any provision of F & M's articles of
incorporation or bylaws or any provisions of, or result in the acceleration of
any obligation under any mortgage, lien, lease, agreement, instrument, court
order, arbitration award, judgment or decree to which F & M is a party,
or by which F & M is bound and will not require the consent, authorization or
approval of any other public or private person or entity other than the
approval of the sole shareholder of F & M and the appropriate federal and state
banking regulatory agencies and will not violate any other restriction of any
kind or character to which F & M is subject except as set forth in this
Agreement.
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5.3 No Warranty or Representation as to Tax Consequences. PFA and the
Bank Shareholders expressly understand and agree that neither F & M nor its
corporate parent, nor their respective directors, officers, employees, agents,
attorneys, accountants or affiliated corporations (acting on behalf of F & M)
have made or are expected to make any warranty, representation, covenant or
agreement, expressed or implied, as to the tax consequences of the transactions
contemplated by this Agreement or the tax consequences to the BANK Shareholders
of any action in furtherance of, pursuant to or in any way related to this
Agreement. The BANK Shareholders assume any and all responsibility for any tax
consequences to them from this transaction and waive any and all claims in any
way related to the tax consequences of this transaction against F & M and its
directors, officers, employees, agents, attorneys or accountants (acting on
behalf of F & M). In the event F & M receives actual notice from the IRS
challenging the tax-free nature of this reorganization or any prior
reorganization before the Closing Date, F & M will inform BANK of such notice.
5.4 Directors, Officers and Employees of BANK. Neither F & M or its
directors, officers, employees, agents, attorneys or accountants have made or
will make any representations or warranties as to any further positions with
BANK or F & M following the consummation of the transaction contemplated by
this Agreement to any director, officer or employee of BANK.
5.5 Accuracy of All Statements. No representation or warranty by F & M in
this Agreement or otherwise, nor any
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financial statements, statement, certificate, schedule or exhibit hereto
furnished or to be furnished by or on behalf of F & M pursuant to this
Agreement, nor any document or certificate delivered to BANK pursuant to this
Agreement or in connection with actions contemplated hereby, contains or shall
contain any untrue material fact or omits or shall omit a material fact
necessary to make the representations or warranty statement contained therein
not misleading.
5.6 Proxy Statement. With respect to information provided by F & M, the
Proxy Statement will not contain any untrue statement of a material fact or
omit any material fact required to be stated therein or necessary to make the
statements contained therein, in the light of the circumstances under which
they were made, not misleading.
5.7 No Broker. All negotiations relative to this Agreement and the
transaction contemplated hereby have been carried on directly by F & M with BANK
without the intervention of any broker or third party. F & M has not engaged,
consented to engage, or authorized any broker, investment banker, or third party
to act on its behalf, directly or indirectly, in any capacity in connection with
the transaction contemplated by this Agreement.
6. Covenants of BANK and PFA.
BANK and PFA hereby covenant and agree as follows:
6.1 Access to Information. F & M and its authorized representatives shall
have full access during normal business hours to all properties, books, records,
contracts and documents
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of BANK and BANK shall furnish or cause to be furnished to F & M and its
authorized representative all information with respect to the affairs and
business of BANK as F & M may reasonably request. 6.2 Actions Prior to Closing.
From and after the date of this Agreement and until the Closing Date, BANK and
WRIC:
(a) Shall carry on their business diligently and substantially in the
same manner as heretofore; neither BANK nor WRIC shall engage in or institute
any unusual or novel methods of doing business.
(b) Shall not grant any increase in the rates of pay or other benefits
provided to its employees, nor grant any increase or make any decrease in the
benefits under any pension plan or other contract or commitment.
(c) Shall not enter into any contract or commitment or engage in any
transaction which is not in the normal course of business and which is not
consistent with BANK's past business practices.
(d) Shall not create any indebtedness other than (i) short term
indebtedness incurred in the normal course of business, (ii) indebtedness
incurred pursuant to an existing contract previously disclosed to F & M or (iii)
indebtedness necessary to do the acts and things contemplated by this Agreement.
(e) Shall not declare or pay any cash dividend, stock dividend or make
any other distribution in respect of the Bank Stock, or directly or indirectly
redeem, purchase or otherwise acquire any Bank Stock, or grant any stock warrant
or stock
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option or issue directly or indirectly any shares of common or preferred stock
or any other security of any type whatsoever or in any way dispose of any shares
of Bank Stock, stock or any other security.
(f) Shall not amend their Articles of Incorporation or Bylaws or make
any changes in authorized or issued stock.
(g) Shall maintain current insurance in effect and acquire such
additional insurance as may be reasonably required by increased business and
risks, and operate, maintain and repair all real and personal property in a
normal and prudent business manner.
(h) Shall use their best efforts (without making any commitments on
behalf of F & M) to keep their business organization intact, to keep available
to F & M the present key officers and employees of BANK and to preserve for F &
M the present relationships of BANK with its suppliers, customers and others
having business relations with them.
(i) Shall not sell or dispose of any property or assets except in the
normal course of business, including but not limited to, selling or disposing of
any securities held by BANK or WRIC prior to their normal maturity dates.
(j) Shall promptly notify F & M of any lawsuits, claims, proceedings,
regulatory actions or investigations or other investigation that may be
threatened, brought, asserted or commenced against either of them or their
officers, directors, employees or agents, or involving in any way the business,
properties or assets of BANK or WRIC.
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(k) Shall not make loans or grant credit to any customer on terms
materially more favorable than those which are available from competitive
sources.
(l) Shall not allow BANK's primary capital to asset ratio (12 C.F.R.
Part 325 method), determined in accordance with generally accepted accounting
principles applied on a consistent basis to drop below eight percent (8%).
(m) Shall remain in compliance with all agreements, commitments,
understandings, undertakings or other obligations to the Commissioner, the FDIC
or any other regulatory agency having jurisdiction over BANK or WRIC.
(n) Shall prepare the Proxy Statement so as to provide full and
adequate disclosure of all material facts and information regarding this
transaction and shall not omit any material facts or information from the Proxy
Statement necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. Said Proxy Statement
will be delivered to the Bank Shareholders prior to BANK's special shareholders'
meeting held to vote on this transaction in a timely manner as required by law
and by the BANK's bylaws.
(o) Shall not take any action to cause a temporary or other increase
not in the normal course of business in the Bank Stock Formula Price as of the
Valuation Date.
7. Covenants of F & M. F & M hereby covenants and agrees to provide such
information as BANK may reasonably request for use in preparation of the Proxy
Statement.
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<PAGE> 24
8. Conditions Precedent to F & M's Obligations. Each and every obligation of F
& M to be performed on the Closing Date shall be subject to the satisfaction
prior thereto of the following conditions:
8.1 Truth of Representations and Warranties. The representations and
warranties given in this Agreement or given on behalf of BANK or WRIC
hereunder, shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made or
given on and as of the Closing Date and BANK and WRIC shall have complied with
all other terms, conditions and covenants of this Agreement.
8.2 Compliance with Covenants. BANK shall have performed and complied
with all its obligations under this Agreement which are to be performed or
complied with by it prior to or as of the Closing Date, including the delivery
of the closing documents specified in paragraph 10.3.
8.3 Absence of Suit. No action, suit or proceeding before any court or any
governmental or regulatory authority shall have been commenced or threatened
and, no investigation by any governmental or regulatory authority shall have
been commenced, against F & M or BANK, or any of the affiliates, associates,
officers, directors or employees of any of them, seeking to restrain, prevent or
change the transactions contemplated hereby, or questioning the validity or
legality of any such transactions, or seeking damages in connection with any of
such transactions.
8.4 BANK's Director and Shareholder Authorization. The merger contemplated
by this Agreement shall have been duly and
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validly authorized by BANK's directors and shareholders in accordance with the
laws of the State of Wisconsin, including but not limited to the provisions of
Wis. Stats. Section 221.25. The BANK and PFA agree to proceed in good faith to
obtain these approvals.
8.5 Receipt of Approvals. All approvals, consents and/or waivers,
including any approvals required by any federal or state governmental
regulatory agency, that are necessary to effect the transactions contemplated
hereby shall have been received.
8.6 Accuracy of Financial Statements. F & M and its representatives shall
be reasonably satisfied as to the accuracy of all interim balance sheets,
statements of income and other financial statements of BANK furnished to F & M
for periods ended after December 31, 1994. In the event this transaction is
not closed prior to December 31, 1995, BANK shall deliver 1995 (unaudited)
financial statements to F & M as soon as practicable for the period ended
December 31, 1995 at BANK's expense.
8.7 Time Limit on Closing. Closing shall have taken place by April 15,
1996.
8.8 Legal Opinion. F & M shall have received the opinion of Bank's
Counsel referred to in subparagraph 10.3(b).
8.9 Proceedings and Instruments Satisfactory; Certificates. All
proceedings, corporate or otherwise, to be taken in connection with the
transactions contemplated by this Agreement shall have occurred and all
appropriate documents incident thereto as F & M may reasonably request shall
have been delivered to F & M. BANK shall have delivered certificates in such
detail
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as F & M may reasonably request as to comply with the conditions set forth in
this Article 8.
8.10 Appraisal Rights. The Bank Shareholders who elect their statutory
appraisal rights pursuant to Wis. Stats. Section 221.25 shall hold less than
five percent (5%) of the issued and outstanding shares of Bank Stock.
8.11 Proxy Statement. The Proxy Statement will not contain any untrue
statement of a material fact or omit any material fact required to be stated
therein or necessary to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading.
8.12 No Change Prior to Closing Date. No material adverse change in the
business or financial condition of BANK shall occur after the Valuation Date
but prior to the Closing Date.
9. Conditions Precedent to BANK's Obligations.
Each and every obligation of BANK to be performed on the Closing Date
shall be subject to the satisfaction prior thereto of the following conditions:
9.1 Truth of Representations and Warranties. The representations and
warranties made by F & M in this Agreement or given on its behalf hereunder,
shall be true and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on and as of
the Closing Date.
9.2 F & M's Compliance. F & M shall have performed and complied with all
of its obligations under this Agreement which
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are to be performed or complied with by them prior to or as of the Closing Date,
including delivery of the closing documents.
9.3 Absence of Suit. No action, suit or proceeding before any court or
any governmental or regulatory authority shall have been commenced or be
threatened and, no investigation by any governmental or regulatory authority
shall have been commenced, against F & M or BANK, or any of the affiliates,
associates, officers, directors, or employees of any of them, seeking to
restrain, prevent, or change the transactions contemplated hereby, or
questioning the validity or legality of any such transactions, or seeking
damages in connection with any of such transactions.
9.4 Proceedings and Instruments Satisfactory; Certificates. All
proceedings, corporate or otherwise, to be taken by F & M in connection with the
transaction contemplated by this Agreement shall have occurred and all
appropriate documents incident thereto as BANK may reasonably request shall have
been delivered to BANK. F & M shall have delivered certificates in such detail
as BANK may reasonably request as to compliance with the conditions set forth in
this Article 9.
9.5 F & M's Director and Shareholder Authorization. The transaction
contemplated by this Agreement shall have been duly and validly authorized by F
& M's directors and shareholders in accordance with the laws of the State of
Wisconsin. F & M covenants to proceed in good faith to obtain such approvals.
9.6 Receipt of Approvals. All approvals, consents and or waivers,
including any approvals required by any federal or state
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governmental regulatory agency, that are necessary to effect the transactions
contemplated hereby shall have been received, provided the failure to obtain the
same was not the result of an act or omission by BANK.
9.7 Time Limit on Closing. Closing shall have taken place by April 15,
1996.
9.8 Legal Opinion. BANK shall have received the opinion of F & M Counsel
referred to in subparagraph 10.4(c).
9.9 Proxy Statement. The Proxy Statement will not contain any untrue
statement of material fact or omit any material fact required to be stated
therein or necessary to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading.
10. Closing.
10.1 Time and Place. The closing of this transaction ("closing") shall
take place at the offices of F & M (or such other place as the parties may
agree) on the Closing Date.
10.2 Rights of Bank Shareholders After the Effective Time. After the
Effective Time and until the surrender of a stock certificate representing
shares of Bank Stock, each such outstanding certificate, which prior to the
Effective Time represented shares of Bank Stock, shall be deemed for all
purposes, subject to the further provisions of this Agreement, to evidence the
ownership of the cash into which such shares have been converted; provided,
however, that unless and until any such certificates representing Bank Stock
shall be so surrendered, the cash shall be withheld by F & M. Delivery of cash
to former Bank
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<PAGE> 29
Shareholders who have tendered their certificates for their shares of Bank Stock
at or before the Effective Time shall be made as soon as reasonably possible
after the Effective Time.
10.3 Documents to be Delivered by BANK. At the time of or prior to the
closing, BANK shall deliver the following documents:
(a) A certificate by the officers of BANK that the representations and
warranties made by BANK in this Agreement are true and correct on as of the
Closing Date with the same effect as though such representations and warranties
had been made on or given on and as of the Closing Date and that BANK has
performed and complied with all of its obligations under this Agreement which
are to be performed or complied with by or prior to or on the Closing Date.
(b) A written opinion from counsel for BANK dated as of the Closing
Date addressed to F & M, and McCarty, Curry, Wydeven, Peeters & Haak, reasonably
satisfactory in form and substance to counsel for F & M to the effect that:
(i) The matters set forth in subparagraphs 4.2, 4.3, 4.4(c),
4.5(d), 4.5(g) and 4.5(h) are as represented.
(ii) To the best of such counsel's knowledge, based upon such
counsel's independent investigation,the matters set forth in subparagraphs 4.6,
4.8, 4.9, 4.10(b) 4.10(c) and 4.12 are as represented.
(iii) That at a special shareholders meeting of BANK, duly called
and held, the Bank Shareholders approved this transaction and the merger of BANK
into F & M as required by law and by the BANK's Articles of Incorporation and
Bylaws.
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(iv) That a duly authorized officer, proxy or attorney-in-fact
of PFA has voted the shares of Bank Stock owned by PFA in favor of the merger
contemplated by this Agreement.
(v) Based upon the knowledge of such counsel, as a part of its
independent investigation, such counsel does not have any knowledge of any
inaccurate, false or misleading statement in, or of the omission of any material
fact or information from, the Proxy Statement.
(c) An Incumbency Certificate for the officers executing the documents
on behalf of BANK and PFA in connection with the transaction contemplated
hereby.
(d) Copies of the Articles of Incorporation and Bylaws of BANK and
WRIC, duly certified by their custodians as true, correct and complete copies
thereof, including any amendments as of the Closing Date.
(e) Certified resolutions of BANK's Board of Directors and
Shareholders approving the merger contemplated by this Agreement and certified
resolutions of PFA designating the officer, proxy or attorney-in-fact authorized
to vote the shares of Bank Stock owned by PFA in favor of the merger
contemplated by this Agreement.
(f) Such other documents of transfer, certificates or authority and
other documents as F & M may reasonably request.
10.4 Documents to be Delivered by F & M. F & M shall deliver the
following documents:
(a) Checks for the required cash payments as determined under Article
3 of this Agreement. Such checks will
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be in the name of Bank Shareholders entitled to the same in accordance with
their interest in BANK as of the Effective Time provided, however, that such
cash need not be delivered until such time as the provision of paragraph 10.2
have been complied with by such Shareholders.
(b) An Incumbency Certificate relating to all parties executing
documents relating to any of the transactions contemplated hereby on behalf of F
& M.
(c) A certificate by an executive officer of F & M that, to the best
of such officer's knowledge, (i) the representations and warranties made by F &
M in this Agreement are true and correct as of the Closing Date and (ii) that F
& M has performed and complied with all of its obligations which are to be
performed or complied with by or prior to or as of the Closing Date.
(d) A written opinion from counsel for F & M dated as of the Closing
Date addressed to BANK and Bank Counsel, reasonably satisfactory in form and
substance to BANK counsel to the effect that:
(i) The matters stated in paragraphs 5.1, and 5.2 are as
represented.
(ii) To the best of such counsel's knowledge but without making
any independent investigation or verification, the matters stated in paragraph
5.6 are as represented.
11. Law Governing.
This Agreement shall be construed and interpreted according to the laws of
the State of Wisconsin.
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12. Assignment.
This Agreement may not be assigned in whole or in part without the written
consent of the other parties.
13. Amendment and Modification.
This Agreement may only be amended or modified by a written agreement
signed by the duly authorized representatives of F & M and BANK.
14. Abandonment.
This Agreement may be terminated and the transaction provided for by this
Agreement may be abandoned at any time before the Closing Date:
(a) By mutual consent of F & M and BANK;
(b) By F & M if any of the conditions provided for in Article 8 of
this Agreement have not been met and have not been waived in writing by F & M or
if Exhibits as described in the Agreement to be provided by BANK have not been
delivered to F & M, in the form and substance reasonably satisfactory to F & M
and consistent with representations made by BANK, within at least ten (10)
working days before the Closing Date; or
(c) By BANK if any of the conditions provided for in Article 9 of this
Agreement have not been met and have not been waived in writing by BANK.
In the event of termination and abandonment by any party as provided in
this Article, written notice shall forthwith be given to the other party
setting forth the condition which has not been met or the default in
performance. The party to whom the notice is directed shall, if such party is
able to effect a satisfaction
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or cure, have ten (10) days after such notice is given to satisfy such condition
or cure such default, provided that if such ten (10) day period is not
sufficient and the party is making a diligent effort to satisfy such condition
or cure such default, the time to do so may be extended for such period as the
parties may agree not to exceed thirty (30) days provided however, that the
Valuation Date shall be established as if the default had not occurred. The
termination and/or abandonment of this Agreement shall not alter or diminish the
liability of the party that failed to comply with the conditions of this
Agreement. Each party shall pay its own expenses incident to preparation for
the consummation of this Agreement and the transactions contemplated hereunder.
15. Notices.
All notices, requests, demands, and other communications hereunder shall be
deemed to have been duly given, if delivered by hand, upon actual delivery or if
by mail, by certified mail - return receipt requested with postage prepaid or by
private courier, upon receipt by the addressee, or if by telecopy (with a copy
sent by first class mail) upon receipt of the transmission by the addressee:
(a) If to BANK, to Tim Rose, Secretary, Park Falls Agency, Inc. c/o
First National Bank of Park Falls, 110 North Second Street, P.O. Box 250, Park
Falls, Wisconsin 54552, FAX: 715-762-2416, with a copy to Thomas J. Naleid,
Esq., Thomas J. Naleid, S.C., 139 North Second Street, P.O. Box 339, Park Falls,
Wisconsin 54552-0339, FAX: 715-762-2661.
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(b) If to F & M, to Mr. Gail E. Janssen, One Bank Avenue, Kaukauna,
Wisconsin 54130, FAX: 414-766-5628, with a copy to Randall A. Haak, Esq.,
McCarty, Curry, Wydeven, Peeters & Haak, P.O. Box 860, Kaukauna Wisconsin 54130,
FAX: 414-766-4756.
The place to which notice is to be given may be changed by notice given in
accordance with this Article.
16. Entire Agreement.
This Agreement with Exhibits embodies the entire Agreement between the
parties hereto with respect to the transaction contemplated herein and
supersedes all prior agreements, written or oral, express or implied and all
negotiations, discussions or other matters between the parties and there have
been and are no agreements representations or warranties between the parties
other than those set forth or provided for herein.
17. Counterparts.
This Agreement may be executed in two (2) or more partially or fully
executed counterparts, each of which shall be deemed an original and shall bind
the signatory, but all of which together shall constitute but one and the same
instrument.
18. Binding Effect.
This Agreement shall inure to the benefit of and bind the parties and their
respective heirs, beneficiaries, transferees, successors, and assigns.
19. Headings.
The headings of this Agreement are inserted for convenience only and shall
not constitute a part hereof.
20. Further Documents.
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F & M, BANK and PFA agree to execute any and all other documents and to
take such other action or corporate proceedings as may be reasonably necessary
or desirable to carry out the terms hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
F & M BANK-LAKELAND ("F & M")
By:__/s/____________________________
Gail E. Janssen
Chairman of the Board
ATTEST:
By:__/s/____________________________
David J. McDonald
President
BRADLEY BANK ("BANK")
By:__/s/_____________________________
Tim Rose
Chairman of the Board
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ATTEST:
By:__/s/____________________________
Jonathan J. Rose
President
PARK FALLS AGENCY, INC. ("PFA")
By:__/s/_____________________________
Arnold J. Stueber, Sr.
President
ATTEST:
By:__/s/____________________________
Timothy P. Rose
Secretary
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EXHIBIT 10.13
1/11/96
BRANCH PURCHASE AGREEMENT
This Branch Purchase Agreement is made and entered into as of January 15, 1996,
by and between F & M Bank-Kaukauna, a Wisconsin banking corporation ("Buyer")
and TCF Bank Wisconsin fsb, a federal savings bank ("Seller").
PREAMBLE
Seller operates various branch locations and is willing to sell one of its
branch office(s) located at 201 E. Main Street, Little Chute, Wisconsin (the
"Little Chute Branch"), together with the real property and tangible personal
property for such branch, and to transfer related deposit accounts to Buyer.
Buyer is willing to purchase the Little Chute Branch together with its real
property and tangible personal property and assume its deposits. This Agreement
sets forth the terms and conditions of the transaction.
AGREEMENT
Therefore, in consideration of the mutual promises and conditions herein
contained, the parties hereby agree as follows:
Article 1. Terms and Definitions
In addition to the terms defined elsewhere in this Agreement, as used herein
the following terms shall have the following meanings:
Section 1.1. Account. "Account" means all savings accounts, tax and loan
accounts, regular and super NOW checking accounts, Jumbo Accounts, pledged
Accounts, certificates of deposit, money market deposit accounts, individual
retirement accounts, Keogh accounts, United States general accounts, United
States Treasury Time Deposit Open Accounts, and any other deposit accounts and
deposit liabilities normally associated with a savings association and
maintained at the Little Chute Branch plus interest accrued and unpaid thereon.
Section 1.2. Account Loan. "Account Loan" means any loan (plus interest
accrued thereon through the Effective Time) resulting from a sum advanced to a
customer on the sole security value of an Account other than a transaction
account, as defined in the Federal Reserve Act and regulations, which are
outstanding as of the Effective Time. An Account Loan is also sometimes
referred to herein as a "Share Loan". Account Loan also includes overdraft
lines of credit on accounts.
Section 1.3. Affiliate. "Affiliate" means any Person controlling, controlled
by or under common control with another Person.
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Section 1.4. Agreement. "Agreement" means this Agreement, together with all
its schedules and exhibits. Such schedules and exhibits, herein referred to as
the "Schedules" and "Exhibits", are hereby incorporated into this Agreement by
reference for all purposes, including conditions precedent for Closing and
indemnification.
Section 1.5. Assets. "Assets" means all Account Loans (if any), Personal
Property and Real Property.
Section 1.6. Branch. "Branch" means the Little Chute Branch.
Section 1.7. Claims. "Claims" means any and all pledges, liens, claims,
mortgages, security interests and encumbrances.
Section 1.8. Closing. "Closing" means the meeting at which Seller will
deliver title to the Assets and Transfer the Liabilities to Buyer against
payment therefor and assumption thereof, and at which the parties will exchange
the documents of Transfer and assumption, and instruments, provided for in
Article 7 hereof.
Section 1.9. Closing Date. "Closing Date" means the date on which the Closing
is consummated, which shall be a date mutually agreed upon within ten (10)
business days after the latest of (i) receipt of the Regulatory Approvals and
expiration of the periods referred to in Sections 7.2(b), 7.2(f), 7.3(b), and
7.3(f), and (ii) satisfaction of other conditions precedent to Closing
specified in Article 7, but in no event shall the Closing Date be later than
April 26, 1996 unless extended by mutual agreement of the parties.
Section 1.10. Contracts. "Contract" means the contracts and other agreements
that are set forth on Schedule 1.10.
Section 1.11. Damages. "Damages" means all losses, claims, damages, costs,
expenses and liabilities, joint or several, resulting from the breach of a
representation, warranty, covenant, or condition contained in this Agreement,
including but not limited to reasonable legal, accounting and other fees and
expenses incurred in connection with investigating, defending or preparing to
defend any such loss, claim, damage, costs, expense or liability. If and to
the extent a claim for indemnification under this Agreement is based upon
payments to a third party, Damages shall also include interest thereon from the
date the payments are made until the same have been reimbursed. If and to the
extent a claim for indemnification under this Agreement is not based upon
payments to a third party, Damages shall also include interest thereon from the
date on which notice of the claim is first given until the same has been
reimbursed. Such interest shall be computed at the publicly announced "Prime
Rate" of interest charged by Buyer to its customers as in effect from time to
time during the period for which interest is payable. The amount of Damages in
any particular case shall be reduced by the amount of any insurance proceeds
received or receivable by the claimant in respect of, and adjusted for the net
tax effect to the claimant considering the tax consequences of, the loss,
claim, damage, cost, expense or liability giving rise to the claim for Damages
pursuant to this indemnification.
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Section 1.12. Effective Time. "Effective Time" means the effective time of
the Transfer of the Assets and assumption of the Liabilities to and by Buyer,
which shall be the close of business on the business day preceding the Closing
Date.
Section 1.13. Jumbo Accounts. "Jumbo Accounts" means simple interest, large
denomination certificates of deposit and other Accounts, any portion of which
is not insured by the Federal Deposit Insurance Corporation.
Section 1.14. Laws. "Laws" means all federal, state and local laws, rules,
regulations, ordinances, orders, permits, decrees and other governmental
requirements.
Section 1.15. Liabilities. "Liabilities" means all Purchased Accounts (a
detailed list in computerized form of the Purchased Accounts to be delivered to
Buyer prior to closing, subject to acknowledgment by Buyer as definitive, such
list to be deemed Schedule 1.15 to this Agreement) plus interest accrued
thereon through the Effective Time.
Section 1.16. Permitted Encumbrances. "Permitted Encumbrances" means (i) all
restrictions, conditions, reservations and easements of record, except those,
if any, which would materially interfere with the use of the property as a
banking office, (ii) rights of the parties in possession, if any, (iii) real
estate taxes and assessments, both general and special, which are not yet due
and payable, (iv) those matters which would be revealed by an accurate survey
of the property, and (v) such other matters as Buyer may expressly approve in
writing.
Section 1.17 Person; Personal Property. "Person" means any natural person,
firm, corporation, partnership, association, trust or governmental body.
"Personal Property" means the furniture, furnishings, appliances, equipment,
supplies, records, documents and other tangible and intangible personal
property, situated in and on the Branch as of the date hereof and which are
owned by Seller, as set forth on Schedule 1.17 and the cash on hand as of the
Closing Date.
Section 1.18. Pledged Accounts. "Pledged Accounts" means all Accounts as of
the Effective Time that have been pledged or otherwise restricted because of a
debt owed to Seller or another creditor, which is not an Account Loan. Pledged
Accounts are not to be transferred to Buyer.
Section 1.19. Purchased Accounts. "Purchased Accounts" means the Accounts to
be purchased herein whose outstanding balances (excluding accrued and unpaid
interest), as of the Effective Time shall aggregate no more than $8,200,000 but
no less than $7,400,000, and in any event not less than the average balance of
the Purchased Accounts over the ten day period prior to the Closing Date,
unless the Buyer agrees to accept a total outstanding balance greater or lesser
than the stated amounts. There shall be excluded from the Purchased Accounts
any deposits which are not consistent with the Seller's now current practices
unless Buyer consents to their inclusion.
Section 1.20. Real Property. "Real Property" means the tract of real property
and all improvements thereon located at 201 E. Main Street, Little Chute,
Wisconsin together with all easements or rights of way appurtenant thereto, as
further described in Schedule 1.20.
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Section 1.21. Regulatory Approvals. "Regulatory Approvals" means any
certifications, authorizations, licenses, permits and other governmental
approvals (or non-disapprovals where specific approval is not required)
required to be obtained in connection with the Closing and the transactions
contemplated by this Agreement under any applicable law or regulation,
including such required approvals from the United States Department of
Treasury, Office of Thrift Supervision ("OTS"), the Federal Deposit Insurance
Corporation ("FDIC"), the Federal Reserve Bank of Chicago (the "FRB") and
agencies administering the antitrust laws or Section 7A of the Clayton Act
(commonly referred to as the "Hart-Scott- Rodino Antitrust Improvements Act",
15 U.S.C. Section 18a), or any other applicable regulatory agency or body.
Section 1.22 SAIF Fund; SAIF Fund Special Assessment. "SAIF Fund" means the
Savings Association Insurance Fund of the FDIC. "SAIF Fund Special Assessment"
means any special deposit premium assessment charged on deposits of the Little
Chute Branch with respect to recapitalization of the SAIF Fund.
Section 1.23. Taxes. "Taxes" means all federal, state and local income,
franchise, property, payroll, sales and other taxes and assessments and any
interest or penalties thereon.
Section 1.24. Transfer. "Transfer" means to sell, assign, convey, transfer
and deliver.
Article 2. Purchase and Sale of Assets/Assumption of Liabilities
Section 2.1. Sale of Assets; Assignment of Liabilities. Subject to
satisfaction of the conditions precedent set forth in Section 7.2 below, Seller
shall at Closing:
a. Transfer to Buyer by appropriate bill of sale, deed or other Transfer
documentation all of Seller's right, title and interest to the Assets as of the
Effective Time;
b. Transfer to Buyer all Liabilities as of the Effective Time; and
c. Transfer to Buyer funds in an amount equal to the outstanding amount of
the Purchased Accounts as of the Effective Time together with the accrued and
unpaid interest thereon as of the Effective Time, less the Purchase Price as
set forth in Section 3.1 hereof, and subject to the adjustments of Section 3.2.
Such funds shall be in immediately available funds by wire transfer to an
account and at a financial institution designated by Buyer with instructions
provided prior to the Closing Date. Except as expressly provided herein,
Seller's Transfer of the Assets to Buyer shall be in their "as is" condition,
with all faults. Except as expressly provided herein, SELLER DISCLAIMS ALL
WARRANTIES AS TO ASSETS, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. Buyer acknowledges that Seller has made no representations or
warranties concerning the suitability of the Assets for Buyer's intended
purposes. Buyer further acknowledges that any loans that comprise a portion of
the Assets, including the Account loans, are to be transferred to Seller
without recourse.
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Section 2.2. Assumption of Liabilities by Buyer. In consideration of, and in
full payment for, the Transfer(s) by Seller to Buyer pursuant to Section 2.1
hereof, Buyer shall, at Closing, assume the Liabilities. Any assessments made
by the FDIC or any other agency with respect to Purchased Accounts after the
Closing shall be a Liability assumed by Buyer. Any SAIF Fund Special
Assessment made with respect to Purchased Accounts and due prior to the Closing
Date shall be paid by Seller and shall not be a Liability assumed by Buyer,
except that there shall be a Purchase Price Adjustment in favor of Seller as
provided in Section 3.2 of this Agreement. If the SAIF Fund Special
Assessment is not due prior to the Closing Date, it shall be a liability
assumed by Buyer and Buyer shall pay the same (whether directly or by payment
to Seller, if the Assessment is made against Seller) and indemnify and hold
Seller harmless for such Special Assessment, subject to the Purchase Price
Adjustment in favor of Buyer set forth in Section 3.2 of this Agreement. It is
agreed that Buyer will not assume and will not discharge nor be liable for any
debts, liabilities or obligations of Seller except those expressly assumed by
Buyer pursuant to this Agreement and under the instruments to be executed at
Closing, it being expressly understood that all debts, liabilities or
obligations not covered hereby or thereby shall be and remain those of Seller.
Article 3. Consideration
Section 3.1. Purchase Price. Subject to the adjustments to be made under
Section 3.2, the total purchase price (the "Purchase Price") shall be (a) 4% of
the outstanding amount of the Purchased Accounts as of the Effective Time,
exclusive of accrued and unpaid interest thereon, plus (b) $500,000 for the
Assets.
Section 3.2. Purchase Price Adjustments. All Branch utility expenses, Real
Property Taxes, ad valorem taxes, deposit insurance premiums, to the extent
they inure to the benefit of Buyer (including premiums payable or previously
paid in connection with the insurance of the Purchase Accounts ("FDIC
Insurance")), prepaid service contracts that are included within the Contracts,
and other prepaid or subsequent by payable expenses expressly agreed to in
writing between Buyer and Seller shall be prorated on a daily basis between
Buyer and Seller as of the Effective Time to the extent then determinable, and
to the extent not determinable, within thirty (30) days of the Closing Date (or
when later known) between Buyer and Seller by cash adjustments. Buyer agrees
to reimburse Seller for the pro rata share of any prepaid FDIC Insurance
premiums applicable to the Purchased Accounts adjusted as of the Closing Date.
Buyer and Seller further agree that Seller shall be responsible for the
payment of any SAIF Fund Special Assessment with respect to the Purchased
Accounts due prior to the Closing Date but in the event of such payment prior
to the Closing Date there shall be a purchase price adjustment in favor of
Seller equal to .00205 multiplied by the closing balance of deposits multiplied
by 1.75. If the SAIF Fund Special Assessment is not due prior to the Closing
Date, there shall be a purchase price adjustment in favor of Buyer equal to the
amount of the Special Assessment multiplied by the balance of the Purchased
Accounts, reduced by the adjustment in favor of Seller set forth in the
preceding sentence.
Seller shall invoice Buyer for any adjustments to the Purchase Price
described herein if such adjustments are not made at Closing, and Buyer shall
make payment thereof within ten (10) days after receipt of the invoice. Seller
shall refund to Buyer the amount of any portion of the Purchase Price paid
under Section 3.1(a) hereof on Purchased Accounts which are withdrawn from the
Branch within 30 days after the Closing Date and
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immediately thereafter deposited with Seller. Buyer shall invoice Seller for
such refund no later than 60 days after the Closing Date.
Article 4. Representations and Warranties of Seller
Seller hereby makes the following representations and warranties to Buyer and
Seller hereby undertakes those certain obligations pertaining to Seller that
are set forth in this Section 4.
Section 4.1. Corporate Organization. Seller is a federal savings bank duly
organized and existing in good standing under the laws of the United States and
possesses full corporate power and all necessary approvals to own and operate
the Branch and to carry on its business as presently owned, operated or
conducted by it. Seller is duly qualified to do business and is in good
standing under the laws of the United States. Seller is a member in good
standing of the Federal Home Loan Bank of Iowa and Seller's Accounts are
insured by the FDIC to the fullest extent permitted under federal law. No
proceedings for the termination or revocation of such insurance are pending,
nor to Seller's knowledge, threatened and Seller is not currently under any
cease and desist order by the OTS, FDIC or other regulatory agency, nor to
Seller's knowledge is any such action threatened which would preclude Seller
from entering into or consummating this Agreement.
Section 4.2. Corporate Authority. Seller has full right, power and authority
to Transfer the Assets and Liabilities to Buyer and to otherwise fully perform
Seller's obligations under this Agreement, subject however to (i) Seller
receiving the Regulatory Approvals, and (ii) compliance by Buyer with all of
its obligations under this Agreement. Seller has full right, power and
authority to execute and deliver this Agreement and each of the documents and
instruments contemplated hereby, and the execution and delivery of this
Agreement and such documents and instruments and the consummation of the
transactions contemplated have been duly authorized and approved by all
necessary corporate action required to be taken on the part of Seller including
approval thereof by Seller's Board of Directors on October 25, 1995. This
Agreement, and each such other document and instrument, constitutes a valid and
binding obligation of Seller enforceable in accordance with its terms except as
the same may be limited by bankruptcy, insolvency, reorganization or other Laws
relating to or affecting the enforcement of creditors' rights [including,
without limitation, the avoidance powers of the FDIC pursuant to the Federal
Deposit Insurance Act] and except as courts of equity may limit certain
remedies such as specific performance.
Section 4.3. No Default Effected. The execution and delivery of this
Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby, subject to the fulfillment of the terms and compliance
with the provisions hereof and all Regulatory Approvals and landlord approvals,
will not conflict with, or result, in the breach of, or a default (or an
occurrence which, with the lapse of time or action by a third party, could
result in a breach or default) with respect to (i) any of the terms, conditions
or provisions of any Laws applicable to Seller or any Affiliate of Seller, or
of the charter or bylaws of Seller, (ii) any agreement or other instrument to
which Seller or any Affiliate of Seller is a party or is subject or by which
Seller or any Affiliate of Seller or any of their properties or assets are
bound, or (iii) any order, judgment, injunction, decree, or award of any court,
arbitrator, government agency or public official by which Seller is bound.
Section 4.4. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby
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have been carried on by Seller without the intervention of any other Person
acting on behalf of Seller or any Affiliate of Seller in such manner as to give
rise to any valid claim by an Person against Seller or Buyer for a
reimbursement of expenses or a finder's fee, brokerage commission or other
similar payment, and Seller shall pay all commissions, fees, costs and
expenses, directly or indirectly due any such Person and indemnify Buyer
against all commissions, fees, costs, expenses or other similar payments in
connection therewith.
Section 4.5. Litigation. There are no actions, causes of action, claims,
suits or proceedings, pending or threatened, against Seller or directly
affecting the Branch, whether at law, in equity or before or by a governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and there are no unresolved disputes under any written or oral
agreement, whether express or implied, to which Seller is a party or by which
it is bound that would affect any one or more of the Branch or the transactions
contemplated hereby, and Seller has no knowledge of any state of facts or the
occurrence of any event which would form the basis for any claim which would
affect any one or more of the Branch or the transactions contemplated hereby.
Section 4.6. Purchased Accounts. The Purchased Accounts of Seller are insured
by FDIC to the fullest extent permitted by federal law and no action is pending
or has been threatened by FDIC against Seller with respect to the termination
of such insurance. The Purchased Accounts (i) are in all respects genuine and
enforceable obligations of Seller and have been acquired and maintained in full
compliance with all applicable Laws, including (but not limited to) the Truth
in Savings Act and regulations promulgated thereunder; (ii) were acquired in
the ordinary course of Seller's business and without the services of a deposit
broker, and (iii) are not subject to any Claims with respect to such Accounts
that are superior to the rights of Persons shown on the records delivered to
Buyer indicating the owners of the Accounts, other than claims against such
Account owners, such as state and federal tax liens and claims for money
judgments, which may mature into claims against the respective Accounts. All
Share Loans are fully secured by a like amount on deposit in an Account, even
if the Share Loan is delinquent.
Section 4.7. Title to Assets. Seller has good and marketable title to the
Assets and complete and unrestricted power to Transfer the Assets to Buyer free
and clear of any and all Claims, subject to (i) receipt of the Regulatory
Approvals, (ii) compliance by Buyer with the conditions to Closing and (iii)
the Permitted Encumbrances. Seller has no notice of any special assessments on
the Real Property. Seller has no knowledge of any defects in, or damage to,
any Assets, reasonable wear and tear excepted, other than such as would be
plainly visible upon a due diligence inspection. The Account Loans are valid,
legally binding and enforceable in accordance with the terms of the underlying
instruments and are not, to Seller's knowledge, subject to any legal or
equitable defenses or to set off. Seller has the full right of set off as to
principal and interest against the Account securing any such loans. To the
best of Seller's knowledge and belief, the property upon which the Branch is
situated fully conforms with all applicable statutes, laws, codes, ordinances,
and restrictions including all zoning, platting, subdivision and use laws and
all building, energy and environmental codes and regulations.
Section 4.8. Contracts and Agreements. A true and complete copy of each
Contract identified in the Schedules and being assumed by Buyer has been
delivered to Buyer; and each such Contract or Lease has been listed on one of
the Schedules attached to this Agreement. Each such Contract is valid and
enforceable according to its terms
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and Seller is not in actual or, to its knowledge alleged, default thereunder
and there has been no event which, with notice or the lapse of time, or both,
would constitute a default under any such contract by Seller.
Section 4.9. Personnel. Schedule 4.9 sets forth, a true and correct list of
all employees of the Branch as of the date hereof, and a detailed listing of
all regular salary paid to each such employee at the date thereof and a
description of any and all bonus or incentive or other compensation
arrangements or commitments including benefits plans for each such employee or
for the employees as a group. Buyer agrees to keep such information in
strictest confidence and to confine knowledge of such information to those of
its officers and personnel who have a need to know such information in
connection with the performance of their duties. None of the employees of the
Branch is a party to any employment contract, formal or informal, oral or
written, or represented under any collective bargaining agreement relating to
employment with Seller.
Section 4.10. Compliance with Laws. Insofar as it may affect the transactions
contemplated by this Agreement, Seller is in compliance with all Laws
applicable to the operation of its business as presently conducted at the
Branch, specifically including, without limitation, compliance with all
interest and usury laws.
Section 4.11. Disclosure. To the best of Seller's knowledge (i) each of the
Schedules and Exhibits hereto is a true and complete list of the specific
information to be set forth thereon, and (ii) no representation or warranty by
Seller in this Agreement, nor any statement, record, exhibit, schedule or
certificate furnished or to be furnished to Buyer pursuant hereto, contains or
will contain, any untrue statement of a material fact and no such schedule or
exhibit omits a material fact required to be stated thereon. With respect to
the Schedules, Seller shall update such Schedules promptly if new events occur
prior to Closing that would mandate disclosure at the time of this Agreement's
signing had they then existed. Any item disclosed by Seller is only deemed
disclosed in connection with the specific representation to which it is
explicitly referenced.
Section 4.12. Documents and Records. All forms of certificates, passbooks,
notes in connection with Accounts, Account Loans, individual retirement account
and Keogh account trust agreements, and other agreements relating to the
Purchased Accounts have been delivered to Buyer. At or before closing, records
of all Purchased Accounts will be made available to Buyer in hard copy and
electronic data form.
Section 4.13. IRS Reporting. Seller represents that it has complied with the
requirements of the Internal Revenue Service regarding taxpayer identification
number certification, interest information reporting and backup withholding of
interest payable in connection with the Purchased Accounts, and with all
individual retirement accounts and Keogh reporting requirements.
Section 4.14 Environmental Matters. There is no legal, administrative,
arbitral or other proceeding, claim, action, cause of action or governmental
investigation pending or to the best knowledge of Seller, threatened which
seeks to impose, on Seller in connection with the Little Chute Branch any
material liability arising under any Environmental Laws. Seller is not subject
to any agreement, order, judgment, decree or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any such
liability with respect to the Real Property. Seller has no knowledge of any
Environmental Conditions present at, on, under, above, adjacent to or otherwise
affecting the Real Property.
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"Environmental Condition" shall mean any above ground storage tank,
underground storage tank, subsurface structure or container, and its associated
piping, which is present at the Real Property and which violates any
Environmental Laws; any discharge, emission or release of Hazardous Substance
located upon or related to the Real Property which violates Environmental Laws;
any event or condition that likely has occurred or exists with respect to the
Real Property which constitutes a violation of any Environmental Laws; and any
event or condition related to the Real Property which requires cleanup, remedy,
abatement or restoration of any contaminated surface water, groundwater, soil
or any natural resource under any Environmental Laws.
"Environmental Laws" means Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. 6901 et seq., the Clean Water act ("CWA"),
42 U.S.C. 7401 et seq., the Emergency Planning and Community Right to Know Act
of 1986 ("EPCRA"), 42 U.S.C. 11001 et seq., the Wisconsin Spill Law, s. 144.76
Wis. Stats., the Wisconsin Environmental Repair Statute, s. 144.442, Wis.
stats., et. seq., any other federal, state or local law or regulation, or any
federal, state or local common law as applied by any federal, state or local
court agency or tribunal, whether currently in existence or hereinafter
enacted, that governs (i) health, safety and sanitation; (ii) the protection of
the environment or human health or welfare; (iii) the presence, investigation,
correction, abatement, remedy, restoration and/or clean up of any Hazardous
Substance; (iv) the closure of a treatment, storage or disposal facility; (v)
the use, storage, treatment, generation, transportation, processing, handling,
production or disposal of any Hazardous Substance; (vi) the protection of the
environment from spilled, released, discharged, deposited or otherwise emplaced
Hazardous Substances; and/or (vii) the reimbursement or contribution for the
costs of responding to the presence of any Hazardous Substances; and the rules,
regulations, guidelines, decisions, orders and directives of federal, state and
local governmental agencies, authorities and courts with respect thereto.
Article 5. Representations and Warranties of Buyer
Buyer hereby makes the following representations and warranties to Seller and
Buyer hereby undertakes those certain obligations pertaining to Buyer that are
set forth in this Section 5:
Section 5.1. Corporate Organization. Buyer is a Wisconsin banking corporation
duly organized and existing in good standing under the laws of the State of
Wisconsin and possesses full corporate power and all necessary approvals to own
and operate its properties and to carry on its business as presently owned,
operated and conducted by it. Buyer is duly qualified to do business and is in
good standing under the laws of Wisconsin. Buyer is a member in good standing
of the Federal Reserve Bank of Chicago, Illinois and Buyer's accounts are
insured by the FDIC to the fullest extent permitted under federal law. No
proceedings for the termination or revocation of such insurance are pending, or
to Buyer's knowledge threatened and Buyer is not currently under any cease and
desist order by the Federal Reserve Board, FDIC or other regulatory agency, nor
to Buyer's knowledge is any such action threatened which would preclude Buyer
from entering into or consummating this Agreement.
Section 5.2. Corporate Authority. Buyer has full right, power and authority
to acquire the Assets and assume the Liabilities from Seller and otherwise
fully to perform Buyer's obligations under this Agreement, subject however to
Buyer receiving the Regulatory Approvals and compliance by Seller with all of
its obligations under
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this Agreement. Buyer has full right, power and authority to execute and
deliver this Agreement and each of the documents and instruments contemplated
hereby, and the execution and delivery of this Agreement and such documents and
instruments and the consummation of the transactions contemplated have been
duly authorized and approved by all necessary corporate action required to be
taken on the part of Buyer including approval thereof by Buyer's Board of
Directors no later than January 31, 1996. This Agreement, and each such other
document and instrument, constitutes a valid and binding obligation of Buyer
enforceable in accordance with its terms except as the same may be limited by
bankruptcy, insolvency, reorganization or other Laws relating to or affecting
the enforcement of creditors' rights including, without limitation, the
avoidance powers of the FDIC pursuant to the Federal Deposit Insurance Act and
except as courts of equity may limit certain remedies such as specific
performance.
Section 5.3. No Default Effected. The execution and delivery of this
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby, subject to the fulfillment of the terms and compliance
with the provisions hereof and all Regulatory Approvals and landlord approvals,
will not conflict with, or result in the breach of, or a default (or an
occurrence which, with the lapse of time or action by a third party, could
result in a breach or default) with respect to (i) any of the terms, conditions
or provisions of any Laws applicable to Buyer or any Affiliate of Buyer, or of
the charter or bylaws of Buyer, (ii) any agreement or other instrument to which
Buyer or any Affiliate of Buyer is a party or is subject or by which Buyer or
any Affiliate of Buyer or any of their properties or assets are bound, or (iii)
any order, judgment, injunction, decree, or award of any court, arbitrator,
government agency or public official by which Seller is bound.
Section 5.4. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer without the
intervention of any other Person acting on behalf of Buyer or any Affiliate of
Buyer in such manner as to give rise to any valid claim by a Person against
Seller or Buyer for a reimbursement of expenses or a finder's fee, brokerage
commission or other similar payment and Buyer shall pay all commissions, fees,
costs and expenses directly or indirectly due any such Person and indemnify
Seller against all commissions, fees, costs, expenses or other similar payments
in connection therewith.
Section 5.5. Litigation. There are no actions, causes of action, claims,
suits or proceedings, pending or threatened, against Buyer or directly
affecting the Branch, whether at law, in equity or before or by a governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and there are no unresolved disputes under any written or oral
agreement, whether express or implied, to which Buyer is a party or by which it
is bound that would affect the Branch or the transactions contemplated hereby,
and Buyer has no knowledge of any state of facts or the occurrence of any event
which could form the basis for any claim which would affect the Branch or the
transactions contemplated hereby.
Section 5.6. Compliance with Law. Insofar as it may affect the transactions
contemplated by this Agreement, Buyer is in compliance with all Laws applicable
to the operation of its business.
Article 6. Covenants
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Section 6.1. Indemnification by Buyer. Buyer agrees to indemnify and hold
Seller and its officers, directors, employees and controlling Persons harmless
from and against any and all Damages which may be sustained by Seller and its
officers, directors, employees and controlling Persons by reason of Buyer's
breach of any representation, warranty or covenant to Seller under this
Agreement. Buyer further agrees to indemnify and hold Seller and its officers,
directors, employees and controlling Persons harmless from and against any and
all Damages which may be sustained by Seller and its officers, directors,
employees and controlling Persons by reason of Buyer's actions with respect to
the Branch, the Purchased Accounts, the Assets or Liabilities transferred
hereunder, including but not limited to any claims brought by the owners of the
Accounts subsequent to the Closing and which have not been caused by any
misrepresentations or breach of warranty by Seller. Buyer's covenants shall
not be deemed to be violated by discharge of assumed obligations in accordance
with normal trade practices or by forebearing to discharge any such obligation
which Buyer is disputing in good faith and for which Buyer has provided
adequate reserves, provided Buyer indemnifies and holds Seller and its
officers, directors, employees and controlling Persons harmless in connection
with the same as set forth above.
Section 6.2. Indemnification by Seller. Seller agrees to indemnify and hold
Buyer and its officers, directors, employees, controlling Persons and
affiliated companies harmless from and against any and all Damages which may be
sustained by Buyer and its officers, directors, employees, controlling Persons,
and affiliated companies by reason of Seller's breach of any representation,
warranty or covenant to Buyer under this Agreement, including but not limited
to, any Purchased Account not set forth on Schedule 1.15 and accrued interest
thereon. Seller further agrees to indemnify and hold Buyer and its officers,
directors, employees, controlling Persons and affiliated companies harmless
from and against any and all Damages which may be sustained by Buyer and its
officers, directors, employees, controlling Persons and affiliated companies by
reason of Seller's actions with respect to the conduct of the Branch, the
Purchased Accounts, the Assets or Liabilities transferred hereunder, including
but not limited to any claims brought by the owners of the Accounts subsequent
to the Closing and which have not been caused by any misrepresentation or
breach of warranty by Buyer. Seller's covenants shall not be deemed to be
violated by discharge of obligations in accordance with normal trade practices
or by forebearing to discharge any such obligation which Seller is disputing in
good faith and for which Seller has provided adequate reserves, provided Seller
indemnifies and holds Buyer and its officers, directors, employees and
controlling Persons harmless in connection with the same as set forth above.
Section 6.3. Defense of Actions. Each party who is or may be entitled to
indemnity under the provisions of Sections 6.1 or 6.2 ("Indemnitee") shall
notify each party who is or may be required to provide indemnity under the
provisions of this Article 6 ("Indemnitor") promptly of any lawsuit or claim
against such Indemnitee which it has reasonable cause to believe would entitle
it to indemnification hereunder. Each Indemnitor shall be entitled to assume
at its expense the defense of, and to determine the terms of settlement of, any
such suit or claim, except that no term awarding relief other than money
Damages against the Indemnitee (or the officer, director, employee or Affiliate
of any Indemnitee) may be agreed to without the consent of the Indemnitee and,
as appropriate, the other Person or Persons on whom that relief is to be
imposed, and no award of money Damages against the Indemnitee shall be agreed
to without satisfactory prior arrangements between the Indemnitor and the
Indemnitee to assure the Indemnitee that the Indemnitor will have sufficient
funds available to respond to the award. If an Indemnitor so elects to assume,
and does assume, the defense of any such suit or claim, it shall not be liable
for any legal expenses subsequently incurred by any Indemnitee with respect to
such matter. If the Indemnitor does
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not assume the defense of any such suit or claim, it shall thereafter be barred
from disputing the nature and amount of the Damages ultimately incurred or
determined to have been incurred by the Indemnitee in settling or litigating
the suit or claim.
Section 6.4. Sales and Transfer Taxes. Buyer and Seller agree that no sales
tax is due on this transaction because it is not in the ordinary course of
business of either Buyer or Seller; however, in the event that a sales tax is
imposed by a regulatory authority having jurisdiction to impose such a tax, the
Buyer shall be responsible for the full and timely payment of same and shall
indemnify and hold harmless the Seller for the amount of any such taxes due,
and from any expenses, fines, penalties, fees, costs or other Damages resulting
from the imposition of such tax or for any failure to make timely payment
thereof. Buyer and Seller agree that a transfer tax is due to the State of
Wisconsin in connection with the transfer of Real Property in this transaction
and they further agree that the Seller shall be responsible for the full and
timely payment of same. Seller shall indemnify Buyer and hold Buyer harmless
for the amount of any such taxes due, and from any expenses, fines, penalties,
fees, costs or other Damages resulting from the imposition of such tax or for
any failure to make timely payment thereof.
Section 6.5. Regulatory Filings. Not later than January 31, 1996, Buyer shall
file all applications required to obtain the Regulatory Approvals from the
Wisconsin State Commissioner of Banking and from the FRB and, by such date,
each party will make all other applications or notices necessary in order to
obtain the Regulatory Approvals set forth on Schedule 6.5 hereof. Buyer agrees
to cooperate with Seller in providing advance copies of its application such
that Seller will be able to timely file any notices or applications required.
Buyer and Seller agree to pay the fees required of each of them in order to
obtain the Regulatory Approvals. Each party will use its best efforts to
assist the other party in obtaining approval of such applications, including,
but not limited to, participating in meetings and conferences as necessary to
satisfy such regulatory agencies. Schedule 6.5 identifies all Regulatory
Approvals which will be required if Buyer is to acquire and own the Assets,
assume the Liabilities, and conduct the operations and business of the Branch
in accordance with all applicable Laws and in accordance with the manner in
which such business is currently conducted. Not later than thirty (30) days
after the date of this Agreement, Buyer shall make all filings required, if
any, under Section 7A of the Clayton Act (commonly referred to as the "Hart-
Scott-Rodino Antitrust Improvements Act," 15 U.S.C. Section 18a) with respect
to the transactions contemplated by this Agreement. Buyer shall request in
such filing, if any, that the 15 day waiting period be accelerated and approval
be granted in writing on or before Closing. Seller shall assist in such filing
as may be reasonably required.
Section 6.6. [Reserved.]
Section 6.7. Seller Personnel. After the Closing, Buyer shall have no
obligation to offer employment to any employees of Seller at the Branch,
however, Buyer in its discretion may offer employment on an "at will" basis to
any employees of the Branch and will make its benefit plans available to such
employees according to their terms. Buyer will provide credit, for eligibility
purposes only, under its benefit plans for service by these employees with
Seller. Buyer will not provide such credit under its plans for vesting or
benefit accrual purposes. Nothing herein contained shall be construed as an
employment contract enforceable by any employee. Buyer and Seller agree to
make a joint announcement to the employees of the Branch simultaneous with the
filing of the applications for Regulatory Approvals announcing that it is
Buyer's intentions as to the employees located at the Branch. Seller
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shall be responsible for unemployment compensation, severance (if
applicable under Seller's policies) and other expenses relating to any
employees not offered employment by Buyer.
Section 6.8. Bulk Sales Act Indemnity Seller from the proceeds of the
Purchase Price payments by Buyer, shall promptly pay when due all its creditors
in order to avoid any claim by any such creditor against Buyer or any of the
Assets by virtue of this transaction or any bulk transfer provisions under
applicable law. Seller hereby agrees to indemnify and hold Buyer harmless from
any liability, loss or damage arising from failure of any applicable bulk
transfer law to be satisfied or from Seller's failure to perform this covenant.
Section 6.9. Publicity and Press Releases Any press releases and public
communications concerning this agreement or the transactions contemplated
hereby by either party, other than notices required by federal or state
regulation, shall require the prior approval of the other party, which shall
not be unreasonably withheld, and the parties shall cooperate in casting such
publicity in a favorable light for both parties.
Section 6.10. Expenses Each party shall pay its own expenses in connection
with the negotiation of and consummation of the transaction contemplated
hereby, including each party's applicable application fees to regulatory
authorities.
Section 6.11. Confidentiality All information pertaining to Seller obtained
by Buyer pursuant to this agreement either before or after its execution, which
is not of public record, shall be deemed confidential information and shall not
be disclosed or disseminated, directly or indirectly to any person or entity
for any reason or for any purpose whatsoever without the express written
consent of Seller. The parties further agree that the Buyer and Seller will
agree upon the timing and content of notification to customers and the public
of this agreement and the transaction contemplated hereunder.
Section 6.12. Cooperation The parties to this agreement shall use their best
efforts to cooperate with each other in taking such action that shall be
reasonably and necessary to effectuate the consummation of the transaction
contemplated hereby and in every respect contained herein, including, but not
limited to, promptly supplying information and data upon reasonable request
prior to Closing.
Article 7. Closing
Section 7.1. Closing. The Closing shall take place on the Closing Date at the
offices of Seller in Milwaukee, Wisconsin or at such other place as the parties
may agree.
Section 7.2. Conditions Precedent to Seller's Obligation to Close. The
obligation of Seller to close the transactions contemplated by this Agreement
is subject to the satisfaction (unless waived in advance in writing by Seller)
of each of the following conditions at or prior to the Closing:
a. The timely filing of applications by Buyer for Regulatory Approvals in
accordance with the terms of this Agreement;
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b. Seller shall have received all required Regulatory Approvals, regardless
of whether Seller or Buyer was required to apply for the same, without
condition or restriction, with respect to the transactions contemplated by
this Agreement [and the applicable 15/30-day waiting period under section
18(c)(6) of the Federal Deposit Insurance Act (12 U.S.C. Section
1828(c)(6)) and 12 C.F.R. Section 563.22(d)(3) shall have expired without
objection by the Office of Thrift Supervision or the United States
Attorney General;
c. No action or proceeding shall have been instituted or threatened on or
before the Closing Date pertaining to the transactions contemplated by
this Agreement;
d. Buyer shall have furnished the documents and satisfied the other
requirements contemplated in Section 7.5;
e. The representations and warranties of Buyer shall be true and correct as
of the Closing Date and Buyer shall have performed all of its covenants
and obligations under this Agreement;
f. All applicable waiting periods, if any, required by Section 7A of the
Clayton Act (commonly referred to as the "Hart-Scott-Rodino Antitrust
Improvements Act," 15 U.S.C. Section 18a) and the rules promulgated
thereunder shall have expired or have been waived and neither the Federal
Trade Commission nor the Antitrust Division of the United States
Department of Justice shall have instituted a proceeding alleging that the
transactions contemplated by this Agreement violate Section 7 of the
Clayton Act or Section 5 of the Federal Trade commission Act; and all
applicable waiting periods under the Bank Merger Act and the rules
promulgated thereunder shall have expired or have been waived; and
g. Seller shall have received an opinion of McCarty, Curry, Wydevan, Peeters
& Haak, legal counsel for Buyer, dated as of the Closing Date, in form and
substance satisfactory to Seller and its counsel, to the effect that:
1. Buyer is a Wisconsin banking corporation duly organized and
existing in good standing under the laws of the State of Wisconsin and
possesses full corporate power and all necessary approvals to own and
operate its properties and to carry on its business as presently
owned, operated and conducted by it. Buyer is duly qualified to do
business and is in good standing under the laws of the State of
Wisconsin . Buyer is a member in good standing of the Federal Reserve
Bank of Chicago, Illinois , and Buyer's accounts are insured by FDIC
to the fullest extent permitted under federal law, and to such
counsel's knowledge (i) no proceedings for the termination or
revocation of such insurance are pending, or threatened, and (ii)
Buyer is not currently under any cease and desist order;
2. The execution, delivery and performance by Buyer of this
Agreement and the documents executed in connection herewith have been
duly authorized by all necessary corporate
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action, executed and delivered by, and each is a valid and
binding obligation of, Buyer, enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization or
other Laws relating to or affecting the enforcement of creditors'
rights generally including, without limitation, the avoidance powers
of the FDIC pursuant to the Federal Deposit Insurance Act and except
that courts might award money damages rather than specific
performance;
3. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby will
not violate any Law or violate any provision of, or result in the
breach of, or accelerate or permit the acceleration of the performance
required by the terms of the respective articles or bylaws of Buyer,
or any agreement known to such counsel after reasonable inquiry to
which Buyer is a party or by which it or any of its assets may be
bound or any order, judgment or decree known to such counsel to be
binding upon Buyer, or result in the creation of any security
interest, lien, charge or encumbrance upon any of the Assets under any
agreement known to such counsel to which Buyer is a party, or
terminate or result in the termination of any such agreement; and
4. Such counsel does not know of any litigation or other
proceeding or governmental investigation pending or threatened against
or relating to Buyer which might have a material adverse effect on or
relating to the transactions contemplated by this Agreement.
Section 7.3. Conditions Precedent to Buyer's Obligation to Close. The
obligation of Buyer to close the transactions contemplated by this Agreement is
subject to the satisfaction (unless waived in advance in writing by Buyer) of
each of the following conditions at or prior to the Closing:
a. The timely filing of applications by Seller (if any are required) for
Regulatory Approvals in accordance with the terms of this Agreement;
b. Buyer shall have received all required Regulatory Approvals, regardless of
whether Buyer or Seller was required to apply for the same, including the
authorization to establish Branch at the location(s) of the Branch,
without condition or restriction, with respect to the transactions
contemplated by this Agreement and the applicable 15/30-day waiting period
under section 18(c)(6) of the Federal Deposit Insurance Act (12 U.S.C.
Section 1828(c)(6)) and 12 C.F.R. Section 563.22(d)(3) shall have
expired without objection by the Office of Thrift Supervision or the
United States Attorney General;
c. No action or proceeding shall have been instituted or threatened on or
before the Closing Date pertaining to the transactions contemplated by
this Agreement;
d. Seller shall have furnished the documents and satisfied the other
requirements contemplated in Section 7.4;
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e. The representations and warranties of Seller shall be true and correct as
of the Closing Date and Seller shall have performed all of its obligations
and covenants under this Agreement;
f. All applicable waiting periods, if any, required by Section 7A of the
Clayton Act (commonly referred to as the "Hart-Scott-Rodino Antitrust
Improvements Act," 15 U.S.C. Section 18a) and the rules promulgated
thereunder shall have expired or have been waived and neither the Federal
Trade Commission nor the Antitrust Division of the United States
Department of Justice shall have instituted a proceeding alleging that the
transactions contemplated by this Agreement violate Section 7 of the
Clayton Act or Section 5 of the Federal Trade Commission Act; all
applicable waiting periods under the Bank Merger Act and the rules
promulgated thereunder shall have expired or have been waived; and
g. Buyer shall have received an opinion of TCF Law Department, legal counsel
for Seller, dated as of the Closing Date, in form and substance
satisfactory to Buyer and its counsel, to the effect that such counsel is
of the opinion that:
1. Seller is a federal savings bank duly organized and
existing in good standing under the laws of the United States and
possesses full corporate power and all necessary approvals to own
and operate its properties and to carry on its business as presently
owned, operated and conducted by it. Seller is duly qualified to do
business and is in good standing under the laws of the United
States. Seller is a member in good standing of the Federal Home
Loan Bank of Iowa and Seller's Accounts are insured by the FDIC to
the fullest extent permitted under federal law, and to such
counsel's knowledge (i) no proceedings for the termination or
revocation of such insurance are pending, or threatened, and (ii)
Seller is not currently under any cease and desist order;
2. The execution, delivery and performance by Seller of this
Agreement and each of the bills of sale, assignments and other
documents and instruments of Transfer executed in connection
therewith have been duly authorized by all necessary corporate
action, executed and delivered by, and each is a valid and binding
obligation of, Seller, enforceable in accordance with its terms,
except as limited by bankruptcy, insolvency, reorganization or other
Laws relating to or affecting the enforcement of creditors' rights
generally [including, without limitation, the avoidance powers of
the FDIC pursuant to the Federal Deposit Insurance Act] and except
that courts might award money damages rather than specific
performance;
3. Seller has good and marketable title to the Assets subject
to no lien, conditional sale agreement, encumbrance, charge or title
imperfection except as set forth in the Schedules hereto or as set
forth in such opinions and except with respect to the Permitted
Encumbrances;
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4. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby
will not violate any Law or violate any provision of, or result in
the breach of, or accelerate or permit the acceleration of the
performance required by the terms of the respective articles or
bylaws of Seller, or any agreement known to such counsel after
reasonable inquiry to which Seller is a party or by which it or any
of its assets may be bound or any order, judgment or decree known to
such counsel to be binding upon Seller, or result in the creation of
any security interest, lien, charge or encumbrance upon any of the
Assets under any agreement known to such counsel to which Seller is
a party, or terminate or result in the termination of any such
agreement; and
5. Upon consummation of the transactions provided for in this
Agreement, Buyer will have good and marketable title to the Assets
and will be the owner of the Purchased Accounts; and
6. There is no litigation or other proceeding or governmental
investigation pending or threatened against or relating to Seller
which might have a material adverse effect on or relating to the
transactions contemplated by this Agreement.
h. Buyer shall have satisfactorily completed within 15 days after the
execution of this Agreement a due diligence review of Branch. Buyer shall
have also completed an environmental assessment of the Real Property,
reasonably acceptable to Buyer. The physical condition of the Branch and the
Assets shall have remained materially the same in all respects from the date
of such review under the preceding sentence until the Closing Date, ordinary
wear and tear excepted; and
i. Seller shall have provided in a format reasonably acceptable to Buyer, on
or before the Closing Date, a history file of all accounts (in hard copy and
microfiche format) and the reports listed on Schedule 7.3(j).
Section 7.4. Delivery at Closing by Seller. Subject to the satisfaction
(unless waived in advance by Seller in writing) of the conditions precedent as
set forth in Section 7.2, Seller shall deliver or cause to be delivered to
Buyer at or prior to Closing:
a. All bills of sale, assignments, consents and other documents
and instruments (which documents and instruments shall be reasonably
satisfactory in form and substance to legal counsel for Buyer)
necessary to Transfer to Buyer all Seller's right, title and
interest in and to the Assets and Liabilities and all Purchased
Accounts, as more fully described in Section 2.1 hereof), free and
clear of any and all Claims;
b. All other such documents, instruments of Transfer or such
other papers as Buyer may reasonably request to vest in Buyer title
to the Assets or Liabilities or to permit Buyer to succeed to the
operations, properties and business of the Branch;
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c. Certificates, executed by an authorized officer of Seller, dated as of the
Closing Date, to the effect that all of Seller's representations and
warranties hereunder are true and correct, that all of Seller's conditions
to Closing set forth in section 7.2 have been satisfied, and that all
required Regulatory Approvals for which Seller is required to apply (if
any) have been obtained;
d. Copies of all resolutions of Seller's Board of Directors relating to this
Agreement and the transactions contemplated hereby certified by the
Secretary of Seller and dated as of the Closing Date;
e. All such cash as required by Section 2.1(c) hereof;
f. A special warranty deed duly executed and acknowledged by Seller in
recordable form conveying title in fee simple to the Real Property,
subject, however, to the Permitted Encumbrances; and Standard ALTA 1970
Form B form owner's title insurance policy (or a binding commitment
therefor) issued by a title insurance company mutually acceptable to the
parties, dated as of the Closing Date, insuring that Buyer is the fee
simple owner of the Real Property subject only to Permitted Encumbrances
and the standard exceptions and exclusions included in a Standard ALTA
1970 Form B form of owner's title insurance policy, the cost of which will
be paid for by Seller;
g. Actual and physical possession of the Branch and the records or copies
thereof relating to the Assets and Liabilities covered hereby;
h. Originals or copies of the books and records relating to the Branch and to
the Assets or Liabilities including without limitation a list of all
customers and depositors of the Branch as of the Closing Date;
i. An assignment or assignments, without recourse, of all Seller's interest
in the Account Loans in form reasonably satisfactory to counsel for Buyer.
At Closing, Seller shall Transfer to Buyer at least $7,400,000 but not more
than $8,200,000 of Purchased Accounts, exclusive of interest that is accrued
and unpaid thereon.
Section 7.5. Delivery at Closing by Buyer. Subject to the satisfaction
(unless waived in advance by Buyer in writing) of the conditions precedent as
set forth in Section 7.3, Buyer shall deliver or cause to be delivered to
Seller at or prior to Closing:
a. A written undertaking in form and substance reasonably satisfactory to
Seller and its counsel, wherein Buyer will assume and agree to pay,
perform and discharge the Liabilities as further provided in Sections 2.1,
2.2, and 8.2;
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b. Certificates, executed by an authorized officer of Buyer, dated as of the
Closing Date, to the effect that the all of Buyer's representations and
warranties hereunder are true and correct, that all of Buyer's conditions
to Closing set forth in Section 7.3 have been satisfied, and that all
required Regulatory Approvals for which Buyer is required to apply have
been obtained;
c. Copies of all resolutions of Buyer's Board of Directors relating to this
Agreement and the transactions contemplated hereby certified by the
Secretary of Buyer and dated as of the Closing Date; and
d. Assurances and certifications, executed by an authorized officer of Buyer,
reasonably satisfactory in form and substance to Seller and its counsel
that all of the Purchased Accounts will be insured by FDIC to the full
extent permitted by federal law immediately after such Accounts are
transferred under this Agreement.
Section 7.6. Damage or Condemnation. If, prior to the Closing, any of the
Branch, is materially damaged, destroyed, condemned (or threatened with
condemnation), the Purchase Price determined under Section 3.1 shall be
appropriately adjusted, as agreed by the parties. If the Branch are damaged,
destroyed, condemned (or threatened with condemnation), but not materially so,
Buyer shall, without reduction in the amount contemplated by Sections 2.1 or
3.1 hereof, purchase such Branch, in which case Seller shall pay to Buyer all
casualty insurance and condemnation proceeds which have heretofore been paid
(and assign to Buyer any rights which Seller then has with respect to any
casualty insurance and condemnation proceeds which may thereafter be paid) to
Seller by reason of such damage, destruction or condemnation. The term
"materially" means to such an extent that such event would unreasonably
interfere with the conduct of business on the property for a period which
extends beyond ninety (90) days following the Closing.
Article 8. Additional Covenants and Obligations
Section 8.1. Notice to Customers and Cooperation Regarding Branch Account
Customers. Consistent with regulatory requirements, and no later than two
business days after the Closing Date, Buyer and Seller, at Buyer's expense
shall jointly prepare and deliver (or mail) to all holders of the Purchased
Accounts, a letter of notification of the transactions consummated at the
Closing, which letter shall state that Buyer has assumed the Liabilities of
Seller and that such individual Purchased Accounts shall be added to all
accounts owned by the holder at Buyer for purposes of FDIC coverage. [See FDIA
Section 8(q), 12 U.S.C. Section 1818(q)] In addition, Buyer shall at its
cost furnish each holder of a Purchased Account that has check access with MICR
encoded checks, withdrawal orders and deposit tickets or deposit advices and
drafts using the forms of Buyer and with the instructions to the depositor to
utilize such checks, withdrawal orders and deposit tickets or deposit advices
and drafts on Buyer's forms on and after the Closing Date and thereafter to
destroy any unused checks, withdrawal orders and deposit tickets or deposit
advices and drafts on Seller's forms. Further, upon renewal of the
certificates of deposit which comprise a portion of the Purchased Accounts,
Buyer shall substitute its certificates of deposit for those of Seller on an
after the Closing Date.
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At or prior to the Closing, Buyer and Seller shall make appropriate
arrangements with each other to provide for settlement by Buyer of checks,
deposits, debits, returns, and other items which are presented to Seller after
the Closing for the Purchased Accounts, and for settlement by Seller of checks,
deposits, debits, returns and other items which are presented to Buyer after
the Closing on Accounts retained by Seller.
Section 8.2. Contracts with Depositors. Buyer will timely perform, honor, and
assume all contractual deposit agreements and/or relationships between Seller
and Seller's depositors in the Branch with regard to the Account Loans and the
Purchased Accounts. All savings accounts and savings certificates of Seller
purchased by Buyer shall become savings accounts and savings certificates of
Buyer of the same amount, terms, rate and maturity.
Section 8.3. 1099s. Buyer will issue Form 1099's for 1996 calendar year on a
timely basis to all customers of the Little Chute Branch. Seller will
cooperate with Buyer in making the necessary data available from the time
period in 1996 preceding the Closing.
Section 8.4. Data Processing Agreement and Hardware. Seller will provide
Buyer in advance of the Closing all such information and access to equipment
and records as Buyer shall reasonably request in order to effectuate a
conversion of the Purchased Accounts from Seller to Buyer as of the Closing
Date. Buyer represents that Buyer has reviewed Seller's data processing
systems, that a conversion of the Purchased Accounts on the Closing Date is
feasible, and Buyer will take all actions necessary and appropriate in order to
accomplish a conversion of the Purchased Accounts on the Closing Date. Seller
shall have no obligation to furnish data processing or item processing services
after the Closing Date.
Section 8.5 Maintenance of Property. Seller shall maintain all Personal
Property and Real Property to be transferred to Buyer pending Closing in good
condition, reasonable wear and tear excepted.
Section 8.6 Books and Records. From the date hereof until the Closing Date,
Seller shall provide Buyer with reasonable access to its books and records
relative to the Branch. Subsequent to the Closing Date, Seller agrees to
cooperate with any reasonable request of Buyer for information relative to the
Branch.
Section 8.7 Return of Information if No Closing. In the event the
transactions contemplated by this Agreement are not consummated for any reason,
Buyer shall return to Seller all information obtained from Seller in connection
with such transactions and shall not disclose any information concerning the
Branch(es) or Seller to any third party, and will thereafter comply with the
provisions of Section 9.2 hereof.
Section 8.8 Personnel to be Made Available. After the Closing, each party
shall make available to the other party personnel for consultation during
normal business hours for a period of sixty (60) calendar days after the
Closing.
Section 8.9 No Use of Seller's Name by Buyer; No Partnership or Joint
Venture. Buyer agrees that after the Closing the name of the Seller shall not
be used in any manner in connection with the operation of the Branch or
otherwise by Buyer, except as provided in Sections 8.1 and 10.6 hereof. No
activity of Buyer after the Closing
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shall state or imply that Seller is in any way involved as a partner, joint
venturer or otherwise in the business of Buyer. Immediately after the Closing,
Buyer shall erect or install new signage at the Branch which does not use the
name of Seller and shall replace all brochures, postings or other materials
using Seller's name with materials reflecting the Buyer's ownership of the
Branch.
Section 8.10 Further Assurances. From time to time, Buyer or Seller, as the
case may be, shall cause to be executed and delivered to the other party hereto
all such other instruments and shall take or cause to be taken such further or
other action as may in good faith reasonably be deemed by the other party to
be necessary or desirable in order to further assure the performance by Buyer
or Seller of any of their respective obligations under this Agreement.
Section 8.11 Extensions. Either party hereto may, by written agreement,
extend the time for the performance of any of the obligations or other acts of
the other party hereto. Any term or condition of this Agreement may be waived
in writing at any time by the party entitled to the benefit thereof. Any
agreement on the part of a party for any such extension, modification or waiver
shall be validly and sufficiently given and authorized for the purpose of this
Agreement if given in writing appropriately signed in the case of Seller by
Seller and delivered to Buyer and in the case of Buyer by Buyer and deliver to
Seller.
Section 8.12 Amendment. The terms, provisions, and conditions of this
Agreement may not be changed, modified or amended in any manner except by an
instrument in writing duly executed by the parties hereto.
Article 9. Termination
Section 9.1 Termination of Agreement. Notwithstanding any other provision of
this Agreement, this Agreement and the transactions contemplated hereby may be
abandoned and terminated at any time before the Closing as follows:
a. By mutual agreement of the parties;
b. By either party if:
i. The other party shall default in any material respect in the
performance or observance of any covenant, agreement, provision, or duty
hereunder and such default shall not be remedied within thirty (30) days after
written notice from the non-defaulting party to the defaulting party;
ii. Any action or proceeding before any court or other governmental
body or agency shall have been instituted to restrain or prohibit the
consummation of this Agreement and either Buyer or Seller shall deem it
inadvisable to proceed;
iii. Any regulatory authority having jurisdiction over the
transactions contemplated hereby shall have issued to either party an
official written notice of disapproval, denial or rejection of any
application or
21
<PAGE> 22
specifying unduly burdensome conditions to approval, as reasonably determined
by either party, concerning the transaction contemplated hereby;
iv. The transactions contemplated in this Agreement have not
been consummated by March 29, 1996, provided that this right to
terminate shall not be available to any party whose failure to perform
an obligation under this Agreement has been the cause of, or has
resulted in, the failure of the sale to be consummated by the date
stated.
Notwithstanding anything in this Section to the contrary, neither party
hereto shall have the right to terminate this Agreement on account of its own
breach or any immaterial breach by the other party hereto.
Section 9.2 Responsibilities Upon Termination. Upon termination of this
Agreement, each party shall bear its own costs and expenses, and neither Buyer
nor Seller shall have any liability or obligation hereunder to the other,
except in accordance with Buyer's obligations under Section 8.8 and as follows:
a. In the event this Agreement is terminated because of a default by
either party then the other party shall have all the rights afforded to it in
law or in equity by reason of the default.
b. Buyer shall comply with Section 8.8 and shall not make any use for its
own benefit, or for the benefit of any business or entity of the Seller, or
make disclosure to any third party, of any confidential information, customer
lists, supplier information, account data, or other information pertaining to
the Branch or to any other branch operations of Seller, which was acquired
from Seller in connection with the negotiation or performance of this
Agreement, including but not limited to preparing for Closing. Buyer shall
immediately return all customer lists and lists of Purchased Accounts to
Seller. Seller will treat any confidential information obtained from Buyer in
the same manner.
Article 10. Miscellaneous
Section 10.1 Entire Agreement; No Assignment. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof; and (ii) shall not be assigned by operation of law or otherwise without
the consent of the other party.
Section 10.2 Validity. If any provision of this Agreement or the application
thereof to any Person or circumstance, is held to be invalid or unenforceable,
the remainder of this Agreement, and the application of such provision to other
Persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.
Section 10.3 Notices. All notices, requests, demands or other communications
hereunder shall be in writing and shall be given (and shall be deemed to be
duly given upon receipt) by delivery in person, by confirmed facsimile or by
registered or certified mail to the other party as follows:
22
<PAGE> 23
if to the Seller:
TCF Bank Wisconsin fsb
500 West Brown Deer Road
Milwaukee, Wisconsin 53217-1698
Attention: Timothy P. Bailey, Chief Executive Officer
if to Buyer:
F & M Bank-Kaukauna
Fourth Street Plaza, P.O. Box 920
Kaukauna, Wisconsin 54130-0920
Attention: Gail E. Janssen, Chairman of the Board
or to such other address as the Person listed above may subsequently designate.
Section 10.4 Governing Law; Arbitration. This Agreement shall be governed by
and construed in accordance with the laws of the State of Wisconsin. Any
disputes concerning this Agreement will be submitted to binding arbitration
conducted by the American Arbitration Association ("AAA") in Milwaukee,
Wisconsin.
Section 10.5 Descriptive Headings. The descriptive headings in this Agreement
are inserted for convenience and reference only and are not intended to be part
of or to affect the meaning or interpretation of the Agreement.
Section 10.6 Parties in Interest. This Agreement shall be binding upon and
will inure solely to the benefit of the parties hereto, their successors and
assigns. Nothing in this Agreement, express or implied, is intended to or will
be deemed to confer upon any other Person any rights, benefits or remedies
whatsoever under or by reason of this Agreement.
Section 10.6 Announcements. Seller and Buyer hereby agree to cooperate in
making public announcements or issuing press releases concerning this Agreement
and the transaction contemplated herein. No such public announcement or press
release shall be made or issued without the other party's prior review and
consent. Nothing contained herein shall prevent either of the parties at any
time from furnishing any information to any governmental agency or releasing
information as required by a lawful subpoena.
Section 10.7 Survival. Buyer's obligation under Section 8.8, indemnification
agreements by both parties as set forth herein, and the obligations upon
termination in Section 9.2 shall survive the Closing or termination of this
Agreement, as the case may be. All other warranties, representations and
agreements herein are extinguished as of the Closing or termination of the
Agreement.
Section 10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original.
23
<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
their behalf by duly authorized representatives as of the day and year first
above written.
F & M Bank - Kaukauna
By:
-----------------------------
Gail E. Janssen, Chairman
ATTEST:
By:
----------------------------
Title: Corporate Secretary
-------------------------
TCF Bank Wisconsin fsb
By:
-----------------------------
Timothy P. Bailey, Chief
Executive Officer
ATTEST:
By:
----------------------------
Title: Corporate Secretary
-------------------------
24
<PAGE> 25
Branch Purchase Agreement
F & M Bank and TCF Bank Wisconsin fsb
List of Schedules
Schedule No. Description
- ------------ -----------
1.10 Contracts Being Assumed
1.17 FF&E Lists for the Little Chute Branch.
1.20 Real Property for Little Chute Branch
4.9 List of Personnel at Little Chute Branch
6.5 Regulatory Approvals
7.2(j) Seller's Required Reports at Closing
25
<PAGE> 26
Branch Purchase Agreement
F & M Bank and TCF Bank Wisconsin fsb
Schedule 1.10 Contracts Being Assumed
-All other Contracts are not Assumed-
26
<PAGE> 27
Branch Purchase Agreement
F & M Bank and TCF Bank Wisconsin fsb
Schedule 1.17 Furniture Fixtures and Equipment Lists for Little Chute Branch.
- ------------------------------------------------------------------------------
Following page.
27
<PAGE> 28
Branch Purchase Agreement
F & M Bank and TCF Bank Wisconsin fsb
Schedule 4.9 List of Personnel at Little Chute Branch.
- -------------------------------------------------------
Following page.
28
<PAGE> 29
Branch Purchase Agreement
F & M Bank and TCF Bank Wisconsin fsb
Schedule 6.5 Regulatory Approvals
- ----------------------------------
Approval of the Sale and Assumption by the Wisconsin Banking Commissioner
and the Federal Reserve Bank of Chicago.
Notice to the Office of Thrift Supervision on OTS Form _______.
-No other approvals are contemplated.
29
<PAGE> 30
Branch Purchase Agreement
F & M Bank and TCF Bank Wisconsin fsb
Schedule 7.2(j) Seller's Required Reports at Closing
- -----------------------------------------------------
o Data Base Manual - List of Field Codes and Definitions
o Account Record - All fields and their current content by account
o Trial Balance by branch; listing account number and account type
o Histories of account activity (For Retention purposes)
o Account Type and their descriptions and terms
o Names and Address listing with account numbers
o List of special addresses (i.e., seasonal, alternate, interest only, etc.)
o List of holds (i.e., warning flags, lockouts, other, etc) and definitions
o List of holds currently placed on accounts by account number
o Any problems or special handling of specific accounts
o ACH accounts and types of recurring deposits and/or withdrawals
o List of Recurring Transfers and/or authorizations
o ATM cards; numbers, linkage
o ODP, LOC
o Check Volumes
30
<PAGE> 1
EXHIBIT 13
'95
ANNUAL REPORT
[PHOTO]
[PHOTO]
[PHOTO]
[F&M BANCORPORATION, INC.]
<PAGE> 2
FINANCIAL OVERVIEW
<TABLE>
<CAPTION>
1995 1994 % Change
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS
Net income applicable to common stock $11,357,354 $7,742,965 +46.68
Return on average equity 14.16% 10.26%
Return on average assets 1.25% 0.93%
- ---------------------------------------------------------------------------------
PER COMMON SHARE
Net income per share 1.96 1.33 +47.37
Dividends per share 0.60 0.48 +25.00
Book value per share 14.82 12.96 +14.35
Market price-high 27.50 23.75
-low 19.75 17.75
-at year end 26.00 22.00
- ---------------------------------------------------------------------------------
FINANCIAL CONDITION
Assets $943,126,131 $870,598,987 +8.33
Deposits 822,188,574 762,235,292 +7.87
Loans (net) 671,420,040 622,869,214 +7.79
Shareholders' equity 85,891,834 75,570,339 +13.66
- ---------------------------------------------------------------------------------
FINANCIAL MEASURES
Market vs. book value 175.44% 169.75%
Price earnings ratio 13.27 14.77
Net interest margin 4.96% 4.98%
- ---------------------------------------------------------------------------------
</TABLE>
Except as otherwise indicated, all financial information in this annual report
is restated to reflect F&M's January 1995 acquisition of Union State Bank and
other acquisitions accounted for using the pooling of interests method of
accounting.
CORPORATE PROFILE
AND MISSION
F&M Bancorporation is a multi-bank holding company located in Kaukauna,
Wisconsin. Founded in 1980, F&M has upheld a plan for steady growth by acquiring
community banks throughout Wisconsin. This growth has enabled F&M to take its
place as the fifth largest bank holding company in the state. F&M served
customers at 42 locations throughout Wisconsin and had assets of over $940
million as of December 31, 1995. It is our mission to continue our growth
through acquisition and expansion, thus enhancing service to our customers and
value to our shareholders.
OPERATING EARNINGS PER SHARE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
$ 2.00 0.87 1.16 1.39* 1.44 1.45** 1.96
1.60
1.20
0.80
0.40
0 '90 '91 '92 '93 '94 '95
</TABLE>
Earnings per share before extraordinary items and
cumulative effect of change in accounting principle.
*Excluding pre-acquisition security gain by FNFC.
**Excluding pre-acquisition expenses of USB.
DIVIDENDS PER SHARE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
$ 0.75 0.18 0.22 0.27 0.36 0.48 0.60
0.60
0.45
0.30
0.15
0 '90 '91 '92 '93 '94 '95
</TABLE>
Dividends per share are restated to reflect past stock
dividends and splits, but are not restated for acquisitions.
<PAGE> 3
F&M BANCORPORATION
1
........
TO OUR SHAREHOLDERS AND FRIENDS
In the past year, your company achieved great success. F&M Bancorporation soared
to record earnings in 1995 with a 46.68% increase over 1994. We continued our
steady growth with an 8.33% increase in total assets over last year, and
announced pending acquisitions that will bring F&M's total assets to over
$1 billion when completed. With progressive and innovative new products, we have
been able to better serve customers, providing increased convenience and easier
access. These new products have enabled your company to operate more
efficiently, giving employees more time to focus on building customer
relationships. And, our employees continue to work together to generate greater
profits for our shareholders.
FINANCIAL STRENGTH
Full-year earnings for your company were up 46.68% to $11,357,354 for 1995,
versus the $7,742,965 for 1994. On a per common share basis, 1995 earnings
increased 47.37% to $1.96, compared to the
$1.33 earned in 1994.
Return on average assets was a record 1.25% for 1995. Net income improved for
1995 because of maintaining a relatively constant interest margin and a
reduction in non-interest expense. This has resulted in an improvement in our
efficiency ratio to 56.99% for 1995, from 68.05% for 1994. The fourth quarter
efficiency ratio for 1995 was 54.23%.
This is the fourth consecutive year that we have increased the dividend by 20%
or more, and we averaged more than a 20% increase for the last five years,
which is consistent with our goal to increase dividends per share an average of
15% a year for five years. On an annualized basis, F&M Bancorporation paid
total dividends of $0.60 for 1995, a 25% increase over the $0.48 paid to
shareholders in 1994.
[PHOTO]
GAIL E. JANSSEN--CHAIRMAN AND CEO
F&M BANCORPORATION
F&M GOALS
- - Enhance value for shareholders
- - Grow internally and through acquisitions to $2 billion plus in assets
- - Achieve an average of 15% return on equity for 5 years
- - Increase earnings per share an average of 10% a year for 5 years
- - Increase dividends per share an average of 15% a year for 5 years
- - Serve customers through community oriented banks
<PAGE> 4
F&M BANCORPORATION
2
........
ASSET GROWTH
(MILLIONS)
<TABLE>
<CAPTION>
'90 '91 '92 '93 '94 '95
<S> <C> <C> <C> <C> <C>
319.2 451.3 471.3 549.0 776.8 943.1
</TABLE>
Note: These figures reflect individual bank assets as of
the end of each year. They do not reflect a restatement
for subsequent acquisitions accounted for as a pooling
of interests.
SOLID GROWTH
1995 has been a year of continued strong growth for F&M. To date, we have
completed two acquisitions since the start of 1995, and we have announced 3
others which are currently pending. Our year started off with the completion of
our acquisition of Union State Bank, now F&M Bank-Waushara County. Also, in
1995, we announced our intent to purchase Monycor Bank in Superior, Wisconsin.
The surrounding community includes residents of Superior as well as the
neighboring Duluth, Minnesota area. This acquisition was completed on February
5, 1996.
Currently pending are the acquisitions of Bradley Bank in Tomahawk, Wisconsin;
Community State Bank in Algoma and Forestville, Wisconsin; and the TCF Bank
office in Little Chute, Wisconsin. Bradley Bank, with 2 locations in Tomahawk,
will be an excellent addition to our other F&M Banks in north central
Wisconsin, as it has a vibrant industrial economy and blooming tourism.
Community State Bank will enable us to enter the markets of Door and Kewaunee
Counties. The market area surrounding both of these communities has a diverse
mix of commercial, agricultural, and recreational industries for which the bank
is able to provide quality financial assistance. F&M has a very solid presence
in the Fox Valley area, with 10 full service offices. The addition of the TCF
office in Little Chute will provide us with a solid base of customers in the
community as well as the opportunity to enhance the service we provide to
customers in the entire Fox Valley.
Our new acquisitions will bring many possibilities for growth at F&M because of
the new markets we are entering. With the help of the employees at these new
offices, we will be able to present our unique and progressive products
alongside our community banking strategy, strengthening current customer
relationships and gaining new customers as well.
COMPETITIVE STRATEGIES
Our community banking strategy and our efforts to provide innovative, convenient
products have been the key to our customer retention and relationship-building
success. Community banking and our corporate culture, Lifestyle Banking, give
attention to individual community and customer needs. F&M employees are able to
develop customer plans that work, based on the needs of each person. Local
Boards of Directors, local pricing, and other community oriented options help
our bankers to be as competitive and as helpful as possible. By remaining active
in community events and assisting with local needs, our employees show how much
we care about the communities we serve. The positive rapport we build with
everyone in the community sets the stage for current and future opportunities.
As market managers, our individual bank presidents set goals for their area,
researching the competition and the opportunities around them.
<PAGE> 5
F&M BANCORPORATION
3
........
To meet corporate goals, our bank employees create the plans they feel will
work for their markets, with help from local directors, the corporate staff,
and the rest of the F&M team.
With products like Free 'n Easy Checking and the F&M CHECK Card, customers have
the financial services they want, giving them easy access to their funds.
Convenient services, like the Anytime Line and Bank Anywhere, help our
customers get things done as they need to, whether they're traveling, at work,
or closer to home. In addition, special services like SBA Lending, for our
small business customers, and our new Investment Centers, which offer
alternative investment options, enable us to provide more for our customers
than many smaller financial institutions could. And, at the same time, we
maintain our local efforts which differentiate us from larger competitors.
Another service provided to our customers as of April, 1995, is check
safekeeping. With their checks safely stored at the bank, our customers can
relax, knowing that their documents are secure and available if the need
arises. Check safekeeping also helps our offices run more efficiently, making
it possible for us to offer convenient and competitively priced services. Other
operational efficiencies have helped us reach out to customers more as well. In
fall of 1995, our Grant County offices consolidated their operations into one
centralized location in Fennimore. This new Operations Center has already
helped our employees focus more of their time and energy on sales and customer
service, instead of backroom operations.
VISIONS AHEAD
At F&M, we try to provide all of the benefits of being big with all of the
benefits of being small. We set achievable goals which we've continued to meet
or exceed. Our performance and growth have been consistent and we have kept F&M
a financially sound organization with strong capital and a good record of
earnings; one that has grown from a single bank in 1980 to the fifth largest
bank holding company in Wisconsin. Our community banking strategy has worked
well and is the right vision for the future, keeping our focus on markets where
we know our customers and our customers know us.
It is our employees and directors who create and uphold the F&M vision of
locally driven community banking. We were sorry to lose one of our key F&M team
members this year. On February 3, 1996, David I. Hartjes passed away at age
84. Dave was President of F&M Bank in Kaukauna for sixteen years, served on the
Board of Directors for the bank, and was one of the founding directors for the
holding company in 1980. His insights to the financial services industry and
the community of Kaukauna will be missed.
F&M thrives on the abilities and insights of our employees. Each employee and
shareholder makes the difference for F&M, helping us become the best we can be.
Our current success would not have been achieved without support from you and
from our corporate and bank team of employees. I am very proud of what the
people in our organization have accomplished and I look forward to the future
and what we have yet to achieve.
Sincerely,
GAIL E. JANSSEN SIGNATURE
Gail E. Janssen
Chairman and CEO
F&M Bancorporation
<PAGE> 6
F&M BANCORPORATION
4
........
Locally driven community banking gives F&M customers the best in financial
services. Decisions that affect our customers are made locally and on an
individual basis to better help people reach their goals. And, while most
decision making stays at the local level, each office is also part of the F&M
team...with over 40 locations joined together to provide the best customer
service possible.
Now, with the strength of our offices throughout Wisconsin, F&M customers have
greater flexibility and more options than ever before. With F&M Bank, you can
Bank Anywhere. In addition to communityoriented banking, F&M offers customers
the freedom to take care of basic banking transactions at any F&M Bank office.
The new service gives customers easier access to their accounts. It enables
customers to do their banking when and where they want to...on the way home
from work, while traveling, or closer to home. It's the best of both worlds...
community banks serving individual markets and united as a strong
team to provide easy access and greater convenience to customers.
As a competitive strategy, the convenience of services like Bank Anywhere,
paired with F&M's community banking philosophy, help the company compete with
larger financial institutions. By providing services that give customers less
to worry about and more time for themselves, F&M is able to build stronger
relationships for greater long-term success.
[PHOTO]
Richard Mudler, Director for F&M Bank-Fennimore, and Steve David, Manager of
the new Southwest Operations Team in Grant County, assist F&M in operating more
efficiently and more effectively.
<PAGE> 7
[PHOTO MAN & WOMAN]
<PAGE> 8
[PHOTO WOMAN]
<PAGE> 9
F&M BANCORPORATION
7
........
Another tool that pairs convenience and efficiency is F&M's new automated phone
banking system, the Anytime Line. One step beyond Bank Anywhere, the Anytime
Line not only lets customers bank where they want to, but when they want to, as
well. Access to a personal account is at each customer's fingertips 24 hours a
day...and dialing the phone is all it takes.
The Anytime Line was first tested at F&M Bank-Lakeland, and will be in place at
our other F&M locations in April of 1996. This easy way to bank enables
customers to check balances on their accounts, transfer money, and more. While
handling basic customer questions automatically, it also offers the option to
transfer to a personal banker during banking hours. The Anytime Line is a
secure way for customers to do their banking at the time and place that best
fits their lifestyle.
Again, providing this convenient, quality service helps F&M retain customers,
as employees are able to put greater effort into strengthening customer
relationships. By taking such proactive steps and using technology to provide
new solutions to customer needs, F&M is adapting to the future. In addition to
satisfying customers quickly and efficiently, the Anytime Line enables bank
employees to spend more of their time selling bank products to new customers
and cross-selling to current customers. The Anytime Line will help F&M increase
sales while also increasing our level of efficiency.
[PHOTO]
Don Wachholtz, Director, and Nancy Blask, Executive Vice President, are two of
the progressive leaders at F&M, both serving customers of F&M Bank-Lakeland.
<PAGE> 10
F&M BANCORPORATION
8
........
Customers at F&M Bank choose from a variety of deposit products structured to
fit their needs. New deposit accounts from Free 'n Easy Checking to the
Treasury Plus Money Market Account enable customers to find the option that's
right for them. And our community banking strategy enables each bank to price
their services according to what works for their market area.
Free 'n Easy Checking offers customers a basic checking account with no monthly
service charges...providing them with the easy access they need and an
opportunity to cut back on expenses and save their money for other things. And,
with the convenience of accessing their accounts through services like the
CHECK Card, Bank Anywhere, and the Anytime Line, customers have the added
benefit of saving time, too.
Free 'n Easy Checking was introduced at all of our F&M Bank locations in April
of 1995. At the same time, we added the efficiency and customer security of
check safekeeping to most of our personal deposit accounts. Our free checking
account has helped our banks remain competitive in the marketplace, countering
the free checking offers of larger financial institutions and assisting with
customer retention. In many of our markets, F&M was the first bank to offer
such an account, often resulting in increased market share. Cross-selling
additional services along with our checking accounts and offering progressive,
innovative products like the Treasury Plus Money Market Account have helped to
increase customer retention and loyalty. These financial packages provide
customers with the best options available to achieve their goals now and in the
future.
[PHOTO]
At F&M Bank-Kiel, Jonathan Laun, Director, and Audrey Mertens, President, help
their customers by finding the financial solutions that best fit local needs.
<PAGE> 11
[PHOTO CHILD]
<PAGE> 12
[PHOTO CHILD HOLDING PICTURE]
<PAGE> 13
F&M BANCORPORATION
11
........
Loan options designed around individual needs help customers at F&M reach their
goals. Local efforts assist customers with the purchase of a new home or that
great vacation spot. They help customers provide an education for their
children, and do more for themselves and their families. Plus, since decisions
on loans are made by people who live and work in the same community they serve,
the plans that result are built from solid relationships.
Special options and accounts give customers even more choices. Automatic
payment frees customers from the worry of making loan payments on time. A line
of credit offers eligible customers the ease of writing their own loan against
their checking account...giving them the ability to spend money as they need
to, whenever they want. Home equity loans give customers extra money and extra
options for remodeling or any other needs they may have.
These special lending services also help each bank run more efficiently.
Automated features and pre-qualified loans like the line of credit give
customers more freedom to live the lifestyle they choose, and give our
employees more time to make sales and build customer relationships. And, by
cross-selling checking accounts or other services along with a loan, F&M
employees are creating multiple account relationships and generating greater
long-term profit for F&M.
[PHOTO]
Sam McMahon, Vice President of F&M Bank-Northeast, and Doug LaViolette,
Director, play a role in the local decision making that provides customers with
the best opportunities and options.
<PAGE> 14
F&M BANCORPORATION
12
........
More and more businesses are sprouting up today in Wisconsin, making an impact
on the economy in each market F&M serves. As small businesses take root and
grow, F&M Bank is there to help with all of the financial details. With our
community banking philosophy, helping small business owners is a natural for
F&M. Local decisions and community banking efforts help employees at F&M
understand and serve their customers well, always providing the personal
service that makes a difference. And, F&M also helps small businesses get a
head start through the SBA Lending Program.
Special options for small business owners and employees, like direct deposit of
payroll checks, 401K retirement plans, and employee discount packages help
provide the financial services people need, plus all the extras they want. Loans
and special business accounts help business owners achieve their goals, giving
them easy access to funds and the ability to reach new opportunities. By keeping
things simple and combining loans and deposit accounts to create the right
financial package, F&M is building effective, profitable relationships with
business customers.
Our product line continues to develop and adapt along with the ever-changing
needs of the business community. As with personal accounts, F&M will continue
to create the plans that work best for each individual business owner.
[PHOTO]
Tony Busch, SBA Lender and Vice President at F&M Bank-Appleton, and Roger
Steingraber, Director for F&M Bank-New London, help expresS customer viewpoints
and satisfy customer needs along with the rest of the Fox Valley team.
<PAGE> 15
[PHOTO TWO MEN]
<PAGE> 16
[PHOTO MAN & WOMAN]
<PAGE> 17
F&M BANCORPORATION
15
........
One more step beyond the basics of banking is the Investment Centers located at
several F&M Bank offices. As a part of the large and diverse financial services
industry, our competition has grown and expanded over the past 16 years. To
compete, so must our product line. In addition to the many deposit and
investment services offered by the bank, the Investment Centers at F&M
Bank-Kaukauna, Lakeland, and Northeast offer separate options for customers to
choose from.
For couples or individuals saving for retirement, college expenses, and other
goals, the Investment Centers offer a wealth of choices in stocks, mutual
funds, annuities, and other alternatives. With an expert right there to help,
customers have the convenience of taking care of all their financial needs
under one roof. For the bank, Investment Centers add non-interest income and
assist with customer retention. Although all Investment Center products are
offered from an outside source, their location inside the bank helps F&M
strengthen relationships with those customers who choose to invest in these
non-bank products.
F&M helps many people plan for today and for the years to come. Just the same,
the team at F&M has many goals set for the future of the company. With the help
of our local Boards of Directors and all of the employees of F&M
Bancorporation, we expect to meet these goals and set new, even higher
expectations for the future.
[PHOTO]
Troy Vanevenhoven, Investment Representative at F&M Bank- Kaukauna, and Tom
Gustman, Director for F&M Bank-Kaukauna, help create the plans that achieve
customer goals.
<PAGE> 18
[A
F&M BANCORPORATION
16
........
F&M BANK LOCATIONS
[PHOTO MAP]
- Existing Locations - 42
- Pending Locations - 5
EXISTING LOCATIONS (through March 1996)
Amherst Junction Manitowish Waters Superior
Appleton (3) Marinette (2) Suring
Boulder Junction Minocqua Townsend
Custer New London Wautoma
Darboy Oconto Wautoma Lakes
Dickeyville Omro Winneconne
Fennimore Oshkosh Wild Rose
Forest Junction Plainfield Woodruff
Green Bay Potosi
Hazelhurst Potter PLANNED LOCATIONS
Hilbert Pulaski (through March 1996)
Kaukauna (2) Redgranite Algoma
Kiel Sobieski Forestville
Lancaster Stevens Point Little Chute
Lena Suamico Tomahawk (2)
<PAGE> 19
F&M BANCORPORATION
17
........
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data of F&M
Bancorporation, Inc. (the "Company" or "F&M") and its subsidiaries for the
five years ended December 31, 1995. This information and the following
discussion and analysis should be read in conjunction with other financial
information presented elsewhere in this report. See Note (1) below regarding
accounting for business combinations.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS (1)
Interest income $72,596 $60,734 $57,902 $61,965 $63,671
Interest expense 32,209 23,762 23,704 29,054 36,116
- -------------------------------------------------------------------------------------------------------------
Net interest income 40,387 36,972 34,198 32,911 27,555
Provision for loan losses 1,599 1,318 1,289 1,630 1,084
Non-interest income 4,508 3,965 5,039 5,006 3,410
Net income before extraordinary item and
cumulative effect of change in
accounting principle (2) 11,357 7,764 8,082 7,861 5,817
Net income 11,357 7,764 8,082 8,576 6,091
Net income applicable to common stock 11,357 7,743 7,895 8,389 5,904
PERIOD END BALANCE SHEET DATA
Total assets 943,126 870,599 827,177 779,430 753,136
Net loans 671,420 622,869 532,494 476,577 462,126
Total deposits 822,189 762,235 724,801 691,571 664,561
Other borrowings 10,833 6,366 13,941 16,302 18,757
Preferred stock 0 0 2,073 2,073 2,073
PER SHARE DATA (3)
Net income per common share before
extraordinary item and cumulative effect
of change in accounting principle (2) 1.96 1.33 1.44 1.50 1.16
Net income per common share 1.96 1.33 1.44 1.64 1.20
Cash dividends (4) .60 .48 .36 .27 .22
</TABLE>
(1) Includes the results of operations of F&M Bank-Lakeland and F&M
Bank-Kiel from their respective acquisition dates in 1991. Except as
indicated, the data have been restated to reflect the Company's
acquisition of F&M Bank-Portage County in 1993, F&M Bank-Northeast
(including both the FNFC and PBI acquisitions) in 1994 and F&M
Bank-Waushara County in 1995 using the pooling of interests method of
accounting. See Note 3 of Notes to the Company's Consolidated Financial
Statements. On February 5, 1996, the Company acquired Monycor BancShares,
Inc. ("MBI") in a transaction being accounted for using the pooling of
interests method of accounting. Because the MBI acquisition occurred
after December 31, 1995, however, financial information herein is not
restated to reflect the MBI acquisition.
(2) Cumulative effect of change in accounting principle in 1992 represents
the adoption of SFAS No. 109 (Accounting for Income Taxes) by the
Company. Extraordinary items of the Company for 1991 represent
utilization of operating loss carryforwards of subsidiaries of the
Company arising prior to their acquisition by the Company. See Note 12 of
Notes to the Company's Consolidated Financial Statements.
(3) Per share information has been restated to reflect the 10% stock
dividend paid to stockholders on March 26, 1992 and the two-for-one stock
split paid to stockholders on March 19, 1993.
(4) Cash dividends per common share are not restated to reflect the
acquisitions accounted for using the pooling of interests method of
accounting.
<PAGE> 20
F&M BANCORPORATION
18
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The following discussion and analysis provides information regarding the
Company's results of operations and financial condition for the years ended
December 31, 1995, 1994 and 1993. These statements have been restated to
reflect the acquisitions of Park Ridge Bancshares, Inc. ("Park Ridge")
acquired September 24, 1993, First National Financial Corporation ("FNFC"),
acquired February 11, 1994, Pulaski Bancshares, Inc. ("PBI") acquired March
21, 1994 and Union State Bank ("USB") acquired January 9, 1995. These
transactions have been accounted for using the pooling of interests method of
accounting.
In February 1996, the Company acquired Monycor BancShares Inc. ("MBI"). The
acquisition is being accounted for using the pooling of interests method of
accounting. See Note 19 of Notes to the Company's Consolidated Financial
Statements. Because it was consummated after December 31, 1995, the MBI
acquisition is not reflected in the following discussion. Although the Company
believes that the MBI acquisition will not have a material effect upon the
Company (because of the relative size of MBI as compared to F&M), the
acquisition will result in changes in future reporting of the Company's past
results, and may affect the Company's future operations.
Also, the Company has announced three pending acquisitions: Bradley Bank
(Tomahawk, Wisconsin), Community State Bank (Algoma, Wisconsin) and the Little
Chute, Wisconsin office of TCF Bank. The Bradley and Little Chute acquisitions
will be accounted for using the purchase method of accounting. The Community
acquisition will be accounted for using the pooling of interests method of
accounting. Because of the relative size of the entities, none of the
acquisitions is expected to have a material effect upon F&M or its financial
results or condition. Although the pending acquisitions are expected to be
consummated in 1996, each remains subject to conditions precedent and there
can be no assurance of completion.
RESULTS OF OPERATIONS
In addition to the MBI acquisition noted above, 1995 was a year of continuing
growth for F&M. Net interest income in 1995 increased $3.4 million, or 9.2%,
to $40.4 million from $37.0 million in 1994 (compared with $34.2 million in
1993). Net income in 1995 increased $3.6 million, or 46.3%, to $11.4 million
from $7.8 million in 1994 (compared with $8.1 million in 1993).
Net income per common share was $1.96 in 1995 compared with $1.33 in 1994 and
$1.44 in 1993. Although the Company adopted a stock option plan in 1993, as of
December 31, 1995, fully diluted earnings per share are equal to the earnings
per share numbers mentioned above.
Return on average assets was 1.25% in 1995, compared with 0.93% in 1994 and
1.03% in 1993. Return on average common stockholders' equity was 14.16% in
1995, compared with 10.26% in 1994 and 12.09% in 1993.
Increased net interest income has been the major factor affecting the growth
in earnings over the last three years. The Company has been able to keep its
net interest margin relatively constant over this time period, while at the
same time increasing its interest earning assets.
The remainder of this section provides a more detailed explanation of factors
affecting the results of operations.
NET INCOME APPLICABLE TO COMMON STOCK
(Thousands)
<TABLE>
<CAPTION>
'90 '91 '92 '93 '94 '95
<S> <C> <C> <C> <C> <C>
$3,849 $5,630 $7,074* $7,895 $8,432** $11,357
</TABLE>
Earnings per share before extraordinary items and
cumulative effect of change in accounting principle.
*Excluding pre-acquisition security gain by FNFC.
**Excluding pre-acquisition expenses of USB.
OPERATING EARNINGS PER SHARE
<TABLE>
<CAPTION>
'90 '91 '92 '93 '94 '95
<S> <C> <C> <C> <C> <C>
0.87 1.16 1.39* 1.44 1.45** 1.96
</TABLE>
Earnings per share before extraordinary items and
cumulative effect of change in accounting principle.
*Excluding pre-acquisition security gain by FNFC.
**Excluding pre-acquisition expenses of USB.
RETURN ON AVERAGE ASSETS
<TABLE>
<CAPTION>
'92 '93 '94 '95
<S> <C> <C> <C>
0.97% 1.03% 1.01% 1.25%
</TABLE>
Return on average assets before extraordinary
items and cumulative effect of change in accounting principle.
*Excluding pre-acquisition security gain by FNFC.
**Excluding pre-acquisition expenses of USB.
<PAGE> 21
F&M BANCORPORATION
19
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
NET INTEREST INCOME
Net interest income is the most significant component of the Company's
earnings. For analytical purposes, interest earned on tax exempt assets, such
as industrial development revenue bonds and state and municipal obligations,
is adjusted in this discussion to a fully-taxable equivalent basis. This
adjustment is based upon the statutory federal corporate income tax rate, and
any interest expense which is disallowed as a deduction in connection with
carrying these tax exempt assets, and thus facilitates a meaningful comparison
between taxable and nontaxable earning assets.
Net interest income in 1995 increased $3.4 million, or 9.2%, to $40.4 million
from $37.0 million in 1994. This increase is attributable to the increase in
asset volume due to the Company's internal growth and relative stability of
the Company's net interest margin. Net interest income in 1994 increased 8.1%
from $34.2 million in 1993, also attributable to the increase in asset volume.
Changes in net interest income occur due to fluctuations in the balances
and/or mixes of interest-earning assets and interest-bearing liabilities, and
changes in their corresponding interest yields and costs. Changes in
nonperforming assets, together with interest lost and recovered on those
assets also affect comparisons of net interest income.
The following table presents the relative contribution of changes in volume
and interest rates on changes in net income for the periods indicated using
average balances.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995 VS. 1994
--------------------------------------
INCREASE (DECREASE) DUE TO (1)
--------------------------------------
VOLUME
---------
INTERNAL
GROWTH RATE NET
- ----------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest earned on:
Loans (2) $7,601 $4,098 $11,699
Taxable investment securities (534) 700 166
Non-taxable investment securities (2) 48 (132) (84)
Other interest income (73) 203 130
- ----------------------------------------------------------------------------------
Total 7,042 4,869 11,911
Interest paid on:
Savings deposits (171) 910 739
Time deposits 2,968 4,183 7,151
Short-term borrowings (128) 255 127
Other borrowings 393 38 431
- ----------------------------------------------------------------------------------
Total 3,062 5,386 8,448
- ----------------------------------------------------------------------------------
Net interest income $3,980 $ (517) $ 3,463
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994 VS. 1993
--------------------------------------
INCREASE (DECREASE) DUE TO (1)
--------------------------------------
VOLUME
---------
INTERNAL
GROWTH RATE NET
- ----------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest earned on:
Loans (2) $6,211 $(1,517) $4,694
Taxable investment securities (1,213) (681) (1,894)
Non-taxable investment securities (2) 670 (183) 487
Other interest income (372) 44 (328)
- ----------------------------------------------------------------------------------
Total 5,296 (2,337) 2,959
Interest paid on:
Savings deposits 212 (808) (596)
Time deposits 843 (409) 434
Short-term borrowings 447 55 502
Other borrowings (367) 85 (282)
- ----------------------------------------------------------------------------------
Total 1,135 (1,077) 58
- ----------------------------------------------------------------------------------
Net interest income $4,161 $(1,260) $2,901
==================================================================================
</TABLE>
(1) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
(2) The amount of interest income on nontaxable loans and investment
securities has been adjusted to its fully taxable equivalent.
<PAGE> 22
F&M BANCORPORATION
20
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
The following table presents the components of the changes in the net yield on
interest-earning assets (on a fully tax equivalent basis) for the three-year
period ended December 31, 1995. Although interest rates decreased in 1995, the
yield on interest-earning assets and interest-bearing liabilities for 1995
increased from 1994. The increase over the period is reflected in the 1995
yield on interest-earning assets which increased by 0.71%, after decreases of
0.13% and 0.96% in 1994 and 1993 respectively. The effective rate on
liabilities as a percentage of interest-earning assets increased by 0.73% in
1995 and decreased 0.19% in 1994, producing a negative impact on net interest
margin on interest-earning assets of 0.02% for 1995 and a positive impact on
net interest margin on interest-earning assets of 0.06% for 1994. In 1993, net
interest margin on interest-earning assets decreased 0.04%.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------------------
YIELD/ CHANGE YIELD/ CHANGE YIELD/ CHANGE
RATE FROM 1994 RATE FROM 1993 RATE FROM 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Yield on interest-earning assets 8.77% 0.71% 8.06% (0.13)% 8.19% (0.96)%
Effective rate on liabilities as a
percent of interest-earning assets 3.81% 0.73% 3.08% (0.19)% 3.27% (0.92)%
- -------------------------------------------------------------------------------------------------------------
Net interest margin on
interest-earning assets 4.96% (0.02)% 4.98% 0.06% 4.92% (0.04)%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Despite the relatively steady decrease in interest rates during 1995, yields
on interest-earning assets and the effective rate on liabilities as a
percentage of interest-earning assets both rose as the repricing of loans and
deposits lag the decreases in the discount rate. In the decreasing interest
rate environment, the Company had a slight decrease in its net interest margin
on interest-earning assets. The yield on interest-earning assets was
positively affected by the higher percentage of the Company's interest-earning
assets represented by loans, which tend to have higher yields than other
assets.
NET INTEREST MARGIN
[BAR GRAPH]
<TABLE>
<CAPTION>
'92 '93 '94 '95
<S> <C> <C> <C>
4.96% 4.92% 4.98% 4.96%
</TABLE>
<PAGE> 23
F&M BANCORPORATION
21
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
The following table sets forth average consolidated balance sheet data and
average yield and rate data on a tax equivalent basis for the periods
indicated.
<TABLE>
<CAPTION>
1995 1994 1993
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
(DOLLARS IN THOUSANDS) BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
Loans (1) (2) (3) $664,691 $61,848 9.30% $581,010 $50,149 8.63% $509,448 $45,455 8.92%
Taxable investment
securities 110,562 6,826 6.17% 119,792 6,661 5.56% 140,900 8,555 6.07%
Nontaxable investment
securities (2) 60,760 4,928 8.11% 60,187 5,012 8.33% 52,220 4,525 8.67%
Other investments 10,743 620 5.77% 12,422 490 3.95% 21,881 818 3.74%
-------------------- -------------------- ------------------
Total $846,756 $74,222 8.77% $773,411 $62,312 8.06% $724,449 $59,353 8.19%
Non-interest earning assets
Cash and due from banks 30,193 34,482 34,280
Premises & Equip. - net 20,342 19,222 16,776
Other assets 15,834 15,237 15,786
Less: Allowance
for loan loss (8,130) (7,372) (6,688)
-------- -------- --------
Total $904,995 $834,980 $784,603
======== ======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Interest bearing liabilities
Savings deposits $274,760 $7,206 2.62% $282,077 $6,467 2.29% $273,710 $ 7,063 2.58%
Time deposits 411,917 23,101 5.61% 352,319 15,950 4.53% 333,835 15,516 4.65%
Short-term borrowings 16,151 934 5.79% 18,864 808 4.28% 8,312 306 3.68%
Other borrowings 14,888 968 6.50% 8,811 537 6.10% 14,983 819 5.47%
-------------------- -------------------- ------------------
Total $717,716 $32,209 4.49% $662,071 $23,762 3.59% $630,840 $23,704 3.76%
Non-interest bearing liabilities
Demand deposits 97,162 90,891 80,623
Other liabilities 9,882 6,537 5,774
Stockholders' equity 80,235 75,481 67,366
-------- -------- --------
Total $904,995 $834,980 $784,603
======== ======== ========
Net interest income $42,013 $38,550 $35,649
Rate spread 4.28% 4.47% 4.43%
Net interest margin 4.96% 4.98% 4.92%
</TABLE>
(1) For the purposes of these computations, non-accruing loans are included
in the daily average loan amounts outstanding.
(2) The amount of interest income on non-taxable investment securities and
loans has been adjusted to its fully taxable equivalent.
(3) Loan fees are included in total interest income as follows:
1995-$1,137,000; 1994-$1,302,000; 1993-$1,047,000.
<PAGE> 24
F&M BANCORPORATION
22
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
The following table sets forth the mix of average interest-earning assets and
average interest-bearing liabilities.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
- ---------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loans 78.5% 75.1% 70.3%
Taxable investment securities 13.0% 15.5% 19.5%
Non-taxable investment securities 7.2% 7.8% 7.2%
Other investments 1.3% 1.6% 3.0%
- ---------------------------------------------------------------------------------------
100.0% 100.0% 100.0%
=======================================================================================
Savings deposits 38.3% 42.6% 43.4%
Time deposits 57.4% 53.2% 52.9%
Short-term borrowings 2.2% 2.9% 1.3%
Other borrowings 2.1% 1.3% 2.4%
- ---------------------------------------------------------------------------------------
100.0% 100.0% 100.0%
=======================================================================================
</TABLE>
The preceding table reflects the results of management's strategy to increase
loans as a percent of earning assets coupled with generally strong demand for
loans. Based on the current economic conditions, management has established a
range of average loans to earning assets of between 70% and 80% as the optimum
level.
As interest rates continued to decline in 1995, time deposits increased faster
than savings deposits, as depositors sought to lock in higher interest rates.
Short-term borrowing remained relatively constant. The increase in other
borrowing is due to additional utilization by the Company of Federal Home Loan
Bank financing. For more information regarding borrowing, see Notes 10 and 11
of Notes to the Company's Consolidated Financial Statements.
PROVISION FOR LOAN LOSSES
The amount charged to provision for loan losses is based on management's
evaluation of the loan portfolio. Management determines the adequacy of the
allowance for loan losses, both on a bank by bank basis and on an overall
basis for the Company, based on past loan loss experience, current economic
conditions, composition of the loan portfolio (including the historical
performance of, and the F&M subsidiary banks' evaluation of the prospects for,
each of the component loans, and the collateral value therefor) and the
potential for future loss. Management is also mindful of the expectations in
recent years of banking industry regulators for increased levels of
allowances, although no particular regulatory obligations have been imposed on
the Company in this regard.
The provision for loan losses was $1.6 million in 1995, compared with $1.3
million in 1994 and $1.3 million in 1993. The allowance for loan losses as a
percentage of gross loans outstanding was 1.27% at December 31, 1995, as
compared to 1.23% and 1.33% at December 31, 1994 and 1993, respectively. Net
charge-offs as a percentage of average loans outstanding were 0.11% in 1995,
0.12% in 1994 and 0.11% in 1993. Charge-offs in 1995 were not concentrated in
any industry or business segment.
<PAGE> 25
F&M BANCORPORATION
23
.........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
NON-INTEREST INCOME
The following table presents the major components of non-interest income.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service fees $ 2,534 $ 2,231 $ 2,156
Net securities gains 37 50 459
Other operating income 1,937 1,684 2,424
- -------------------------------------------------------------------------------
Total $ 4,508 $ 3,965 $ 5,039
===============================================================================
</TABLE>
The Company stresses the importance of growth in non-interest income as one of
its key long-term strategies. Non-interest income for 1995 increased $544,000
or 13.7% when compared to 1994. The increase in service fees during 1995 was
attributable primarily to increased services (primarily relating to checking
and other depository accounts) sold, along with an increase in the amount
charged for those services.
During 1995 and 1994, net security gains were minimal. These gains were
realized as management responded to market conditions and opportunities. For
additional detail see Note 5 of Notes to the Company's Consolidated Financial
Statements.
The increase in other operating income during 1995 was due principally to
increases in secondary market commissions, along with an increase in other
miscellaneous charges. The decreasing interest rate environment in 1995
increased the volume of mortgage refinancings as compared to 1994, and
therefore increased the Company's related secondary market commissions. The
decrease in the operating income between 1993 and 1994 reflects a reduction in
mortgage refinancing (and, therefore, secondary market commissions) resulting
from the increased interest rate environment in 1994.
NON-INTEREST EXPENSE
The following table presents the major components of non-interest expense.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and employee benefits $13,604 $14,627 $13,508
Occupancy expenses, net 3,910 3,909 3,418
Data processing 1,282 1,292 962
Goodwill amortization 398 398 376
FDIC insurance premiums 879 1,637 1,538
Other operating expenses 6,439 7,068 6,813
- -------------------------------------------------------------------------------
Total $26,512 $28,931 $26,615
===============================================================================
</TABLE>
The Company's total non-interest expense in 1995 decreased $2.4 million, or
8.4%, to $26.5 million from $28.9 million in 1994. The decrease was due to
acquisition and restructuring costs in 1994 in connection with the addition of
USB, FNFC and PBI, along with the FDIC substantially reducing the rate charged
for deposit insurance to banks effective May, 1995 and cost cutting
initiatives implemented by the Company during 1994 and 1995. The 1994 level
represents an 8.7% increase from $26.6 million in 1993, resulting primarily
from restructuring costs mentioned above, along with a new institutional
advertising campaign, increases in data processing costs due to conversions
from the Company's previous system to an outside data processor, the opening
of three new branch offices in 1994 and normal increases in salaries and
employee benefits.
The Company's 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 2.44% in 1995, 3.00% in 1994, and 2.81%
in 1993.
<PAGE> 26
F&M BANCORPORATION
24
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
Due to the sensitivity of the overhead ratio to changes in the size of the
balance sheet, management also looks at trends in the efficiency ratio to
assess the changing relationship between operating expenses and income. The
efficiency ratio measures the amount of cost expended by the Company to
generate a given level of revenues in the normal course of business. It is
computed by dividing total operating expense by net interest income on a
fully-taxable equivalent basis and non-interest income from ongoing
operations, excluding nonrecurring items. The efficiency ratio was 57.03% in
1995, 68.13% in 1994 and 66.16% in 1993. The decrease in this ratio and the
overhead ratio was the result of the factors set forth above.
EFFICIENCY RATIO
[BAR GRAPH]
<TABLE>
<CAPTION>
3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/30/95 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
69.47% 65.35% 64.76%* 62.99% 61.04% 59.89% 53.27% 54.23%
</TABLE>
*Excluding pre-acquisition expenses at USB.
INCOME TAXES
The Company's provision for income taxes in 1995 increased $2.5 million, or
85.7%, to $5.4 million from $2.9 million in 1994. The 1994 level represents a
10.1% decrease from $3.3 million in 1993. As a percentage of taxable income,
the effective tax rate was 32.3% in 1995, 27.4% in 1994 and 28.7% in 1993 of
income before taxes. The effective tax rate has increased as compared to 1994
and 1993, principally due to the fact that tax-exempt income as a percent of
total income has decreased. For more information regarding income taxes see
Note 12 of Notes to the Company's Consolidated Financial Statements.
NET INCOME
Net income applicable to common stock, in 1995 increased by $3.6 million, or
46.7% to $11.4 million from $7.7 million in 1994. This compares with a
decrease in income of $152,000, or 1.9%, for 1994 from $7.9 million in 1993.
The difference between net income and net income applicable to common stock
results from dividends paid on preferred stock of FNFC, which was redeemed as
part of F&M's acquisition of FNFC in 1994.
Return on average common stockholders' equity was 14.16% in 1995 compared with
10.26% in 1994 and 12.09% in 1993. The return on average assets was 1.25% in
1995 compared with 0.93% in 1994 and 1.03% in 1993.
Net income per common share was $1.96 in 1995 compared with $1.33 in 1994 and
$1.44 in 1993. Although the Company adopted a stock option plan in 1993, as of
December 31, 1995, fully diluted earnings per share are equal to the earnings
per share numbers mentioned above.
FINANCIAL CONDITION
In addition, 1995 was a year of growth for F&M in total assets and equity.
Year end total assets in 1995 grew to $943 million, an 8.3% increase from $871
million in 1994. Total stockholders' equity at December 31, 1995 was $86
million, a 13.7% increase from $76 million in 1994. The balance of this
section further discusses changes in the Company's assets, liabilities and
equity.
ASSET GROWTH
[BAR GRAPH]
<TABLE>
<CAPTION>
(Millions)
'80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
37.1 45.6 56.0 66.2 79.4 140.4 153.6 195.8 257.4 273.3 319.2 451.3 471.3 549.0 776.8 943.1
</TABLE>
Note: These figures reflect individual bank assets as of the end of each year.
They do not reflect a restatement for subsequent acquisitions accounted for as
a pooling of interests.
<PAGE> 27
F&M BANCORPORATION
25
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
LOAN PORTFOLIO
The following table sets forth the major categories of loans outstanding and
the percentage of total loans for each category at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------------------------------------------------
(DOLLARS IN THOUSANDS) AMOUNT % AMOUNT % AMOUNT %
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial and industrial $118,571 17.4% $105,612 16.7% $100,001 18.5%
Agricultural 40,837 6.0% 40,212 6.4% 40,108 7.4%
Real estate construction 22,374 3.3% 17,369 2.8% 17,604 3.3%
Real estate mortgage 453,292 66.7% 420,795 66.7% 339,439 62.9%
Installment and other consumer loans 44,949 6.6% 46,633 7.4% 42,497 7.9%
- ------------------------------------------------------------------------------------------------------
Total $680,023 100.0% $630,621 100.0% $539,649 100.0%
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1992 DECEMBER 31, 1991
------------------------------------------
(DOLLARS IN THOUSANDS) AMOUNT % AMOUNT %
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial and industrial $75,703 15.7% $69,910 14.9%
Agricultural 33,912 7.0% 32,822 7.0%
Real estate construction 13,778 2.9% 8,639 1.8%
Real estate mortgage 316,241 65.4% 313,075 67.0%
Installment and other consumer loans 43,358 9.0% 43,295 9.3%
- --------------------------------------------------------------------------------
Total $482,992 100.0% $467,741 100.0%
- --------------------------------------------------------------------------------
</TABLE>
LOAN PORTFOLIO COMPOSITION
December 31, 1995
[PIE CHART]
17%
Commercial and Industrial
3%
Real Estate Construction
7%
Installment and
Other Consumer
6%
Agricultural
67%
Real Estate
Mortgage
Loan growth was 7.8% in 1995 compared with 16.9% in 1994. The 1995 increase
was a result of increased sales efforts at the Company's subsidiary banks. The
1994 increase was further influenced by the Company's entry into the Green Bay
market.
During 1995 the loan mix in the Company's portfolio remained relatively
constant, with a slight trend toward commercial loans. During 1994 the Company
experienced an increase in real estate mortgages as a percentage of total
loans.
The Company maintains a diversified loan portfolio and therefore believes
there is minimal exposure to loan concentration losses. At December 31, 1995,
the Company believes that there were no loan concentrations to a multiple
number of borrowers engaged in similar activities which would cause them to be
similarly impacted by economic or other conditions. By maintaining a diversity
of types of borrowers, the Company has attempted to prevent losses due to
economic difficulties of certain industries.
<PAGE> 28
F&M BANCORPORATION
26
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
The following table sets forth the scheduled repayments of the loan portfolio
and the sensitivity of loans to interest rate changes at December 31, 1995
(excluding one to four family residential property mortgages and consumer
loans).
<TABLE>
<CAPTION>
MATURITY
------------------------------------------
OVER ONE
ONE YEAR YEAR THRU OVER
OR LESS FIVE YEARS FIVE YEARS
(IN THOUSANDS)
------------------------------------------
<S> <C> <C> <C>
Commercial and industrial $ 92,269 $23,228 $3,074
Agricultural 35,913 3,596 1,328
Real estate construction 20,020 2,337 17
- ------------------------------------------------------------------------------------
Total $148,202 $29,161 $4,419
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
INTEREST SENSITIVITY
-----------------------
AMOUNT OF LOANS DUE AFTER ONE YEAR WITH: FIXED VARIABLE
RATE RATE
-----------------------
(IN THOUSANDS)
<S> <C> <C>
Commercial and industrial $25,006 $1,296
Agricultural 4,674 250
Real estate construction 2,354 0
- --------------------------------------------------------------------
Total $32,034 $1,546
- --------------------------------------------------------------------
</TABLE>
NON-PERFORMING ASSETS
Non-performing assets are a broad measure of problem loans. 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 as of
the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1995 % 1994 % 1993 %
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans $5,698 0.84% $5,532 0.88% $4,121 0.76%
Loans past due 90 days or more 210 0.03 127 0.02 337 0.06
Restructured loans 481 0.07 25 0.00 259 0.05
- -----------------------------------------------------------------------------------------------------
Total non-performing loans 6,389 0.94 5,684 0.90 4,717 0.87
Other real estate owned 644 0.09 936 0.15 2,367 0.44
- -----------------------------------------------------------------------------------------------------
Total non-performing assets $7,033 1.03% $6,620 1.05% $7,084 1.31%
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
(DOLLARS IN THOUSANDS) 1992 % 1991 %
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Non-accrual loans $4,874 1.01% $7,057 1.51%
Loans past due 90 days or more 136 0.03 149 0.03
Restructured loans 497 0.10 768 0.17
- ---------------------------------------------------------------------------
Total non-performing loans 5,507 1.14 7,974 1.71
Other real estate owned 3,460 0.72 3,791 0.81
- ---------------------------------------------------------------------------
Total non-performing assets $8,967 1.86% $11,765 2.52%
- ---------------------------------------------------------------------------
</TABLE>
Maintaining excellent credit quality continues to be a priority for the
Company. Non-performing assets as a percentage of total loans outstanding
decreased in 1995 to 1.03% compared with 1.05% in 1994 and 1.31% in 1993. The
decrease in 1995 was due largely to the Company's continued monitoring of the
loan portfolio and collection efforts as well as the
<PAGE> 29
F&M BANCORPORATION
27
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
<TABLE>
<CAPTION>
LOAN QUALITY
'92 '93 '94 '95 '92 '93 '94 '95 '92 '93 '94 '95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.86% 1.31% 1.33% 1.33% 1.27% 1.23% 1.05% 1.03% 0.17% 0.12% 0.11% 0.11%
Non-performing assets to Net Charge offs to Allowance for loan losses
period end loans and average loans outstanding to period end loans
OREO
</TABLE>
strong Wisconsin economy; the decrease in 1994 also resulted from dispositions
of other real estate owned which had been held by FNFC.
Non-accrual loans at December 31, 1995 decreased 0.04% as a percentage of
total loans, as compared to 1994. Non-accrual loans are at a level the Company
considers manageable and at a level that compares favorably with Company
peers. Furthermore, the Company considers its allowance for loan losses
adequate to cover this level of non-accrual loans, although it regularly
reviews the various factors used in determining the provision and allowance
for loan losses.
The gross interest income that would have been recognized on non-accrual loans
in 1995 if the loans had been current in accordance with their original terms
was approximately $569,000, of which approximately $192,000 was collected and
included in the Company's income for 1995.
It is the policy of the F&M subsidiary banks to place a loan on non-accrual
status when the loan's principal and accrued interest is not expected to be
collected in full or when the loan becomes contractually past due 90 days or
more as to principal or interest and is not guaranteed by an outside source.
Loans past due 90 days or more may be retained on accrual status if they are
guaranteed by a third party and the bank believes that such guaranty will be
adequate to assure collection.
There were no particular loans as to which payments were current at December
31, 1995, which in the opinion of management, and to its best knowledge, will
not be paid according to their terms.
<PAGE> 30
F&M BANCORPORATION
28
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes loan balances at the end of each period;
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>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average balance of loans for period $664,691 $581,010 $509,448 $479,911 $444,011
- ------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at beginning of period 7,752 7,155 6,415 5,616 4,727
Allowance for loan losses of banks
acquired in purchase transactions -- -- -- -- 660
Loans charged off
Commercial and Industrial 594 446 364 493 612
Agricultural 36 30 51 11 33
Real Estate - Mortgage 31 112 53 149 117
Installments and Other Consumer Loans 264 303 287 406 279
- ------------------------------------------------------------------------------------------------------------------------
Total charge offs 925 891 755 1,059 1,041
Recoveries on loans previously charged off
Commercial and Industrial 49 70 87 85 40
Agricultural 5 7 1 10 23
Real Estate - Mortgage 37 11 11 26 29
Installment and Other Consumer Loans 86 82 107 107 94
- ------------------------------------------------------------------------------------------------------------------------
Total recoveries 177 170 206 228 186
Net loans charged off 748 721 549 831 855
Provisions for loan losses 1,599 1,318 1,289 1,630 1,084
- ------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of period $ 8,603 $ 7,752 $ 7,155 $ 6,415 $ 5,616
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net charge offs during period to
average loans outstanding 0.11% 0.12% 0.11% 0.17% 0.19%
Allowance for loan losses to total loans 1.27% 1.23% 1.33% 1.33% 1.20%
</TABLE>
<PAGE> 31
F&M BANCORPORATION
29
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
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
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------------------------------------------------
PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS
AMOUNT OF IN EACH AMOUNT OF IN EACH AMOUNT OF IN EACH
RESERVE CATEGORY RESERVE CATEGORY RESERVE CATEGORY
FOR LOAN TO TOTAL FOR LOAN TO TOTAL FOR LOAN TO TOTAL
(DOLLARS IN THOUSANDS) LOSSES LOANS LOSSES LOANS LOSSES LOANS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial,industrial, and agricultural $3,550 23.4% $3,232 23.1% $3,399 25.9%
Real estate - construction 142 3.3 109 2.8 115 3.3
Real estate - mortgage 3,197 66.7 3,093 66.7 2,575 62.9
Installment and other consumer loans 1,714 6.6 1,318 7.4 1,066 7.9
- ---------------------------------------------------------------------------------------------------------
$8,603 100.0% $7,752 100.0% $7,155 100.0%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1992 DECEMBER 31, 1991
-----------------------------------------
PERCENT PERCENT
OF LOANS OF LOANS
AMOUNT OF IN EACH AMOUNT OF IN EACH
RESERVE CATEGORY RESERVE CATEGORY
FOR LOAN TO TOTAL FOR LOAN TO TOTAL
(DOLLARS IN THOUSANDS) LOSSES LOANS LOSSES LOANS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial,industrial, and agricultural $2,924 22.7% $2,561 21.9%
Real estate - construction 116 2.9 101 1.8
Real estate - mortgage 2,412 65.4 2,111 67.0
Installment and other consumer loans 963 9.0 843 9.3
- -----------------------------------------------------------------------------------
$6,415 100.0% $5,616 100.0%
- -----------------------------------------------------------------------------------
</TABLE>
The allowance for loan losses is maintained at a level sufficient to provide
for estimated loan losses based on evaluating known and inherent risks in the
loan portfolio. 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.
For discussion of the impact of the adoption of SFAS No. 114 (Accounting by
Creditors for Impairment of a Loan) and SFAS No. 118 (Accounting by Creditors
for Impairment of a Loan--Income Recognition and Disclosures) see "Recent
Accounting Developments."
The degree of risk associated with the Company's loans is generally greater in
the commercial, industrial and agricultural categories, representing 23.4% of
total loans at December 31, 1995. Accordingly, management has allocated a
significantly larger portion of the allowance for loan losses to these types
of loans.
The ultimate recovery of all loans is susceptible to future market factors
beyond the Company's control. These factors may result in losses or recoveries
differing significantly from those provided in the financial statements.
<PAGE> 32
F&M BANCORPORATION
30
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
INVESTMENT PORTFOLIO
The following table sets forth the distribution of investment securities
(securities held to maturity and available for sale) and their percentage to
total investment securities at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------
1995 1994 1993
------------------------------------------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government corporations
and agencies $35,395 20.1% $43,019 25.0% $59,407 29.0%
Obligations of states and
political subdivisions 72,355 41.0 72,311 42.1 60,546 29.6
Debt securities issued by
foreign government 25 0.0 25 0.0 25 0.0
Mortgage-backed securities 51,128 29.0 45,165 26.3 59,014 28.9
Other securities 17,476 9.9 11,372 6.6 25,556 12.5
- -------------------------------------------------------------------------------------------------
Total investments $176,379 100.0% $171,892 100.0% $204,548 100.0%
- -------------------------------------------------------------------------------------------------
</TABLE>
During 1995, the investment portfolio make-up remained relatively consistent
with past years, with a decrease in U.S. treasuries and agencies and a slight
increase in money market mutual funds. The Company generally limits its mutual
fund holdings to money market funds.
INVESTMENT PORTFOLIO
December 31, 1995
COMPOSITION
[PIE GRAPH]
29% 20% 41% 10%
Mortgage Treasuries/ Municipals Other
Backed Agencies
QUALITY
[PIE GRAPH]
3% BAA 4% A 2% AA 81% Treasury Agency AAA 10% Non-Rated
The following tables show the relative maturities and weighted average
interest rates on a tax equivalent basis of investment securities as of
December 31, 1995. Although the maturities of the investment portfolio have
lengthened from 1994, the Company feels liquidity remains adequate.
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN BUT WITHIN AFTER
(DOLLARS IN THOUSANDS) ONE YEAR FIVE YEARS TEN YEARS TEN YEARS
- -----------------------------------------------------------------------------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other
U.S. Government
agencies and
corporations* $5,592 6.25% $34,795 5.73% $14,232 6.63% $31,904 9.50%
States and political
subdivisions (domestic) 1,349 7.96 20,112 8.25 26,581 8.72 24,313 7.94
Other bonds, notes,
and debentures 10,199 5.79 1,336 6.62 450 6.67 5,516 6.52
- -----------------------------------------------------------------------------------------
Total $17,140 6.11% $56,243 6.65% $41,263 7.98% $61,733 8.62%
- -----------------------------------------------------------------------------------------
</TABLE>
*Includes floating rate securities which reprice monthly but which mature
during the indicated time period.
<PAGE> 33
F&M BANCORPORATION
31
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
Inherent in any portfolio which includes mortgage-backed securities, there
exist both prepayment and maturity extension risk. The Company is not immune
to these same type risks. The Company's investments in these type of
securities are predominantly in straight U.S. Agency issued mortgage-backed
pass-throughs and lower risk types of real estate mortgage investments
conduits/collateralized mortgage obligations. The major categories of the
mortgage-backed security portfolio and dollar values as of December 31, 1995,
are as follows: fixed rate mortgage-backed pass-throughs-$8.8 million;
variable rate mortgage-backed pass-throughs-$4.7 million; fixed rate real
estate mortgage investment conduits/collateralized mortgage obligations-$22.3
million; and floating rate real estate mortgage investment
conduits/collateralized mortgage obligations-$15.3 million.
For more information regarding the investment portfolio, including the
breakdown between securities held to maturity and available for sale, see Note
5 of Notes to the Company's Consolidated Financial Statements.'
DEPOSITS
The following table sets forth average deposits and their percentage to total
average deposits at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------------------
AMOUNTS PERCENT AMOUNTS PERCENT AMOUNTS PERCENT
- -----------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-interest bearing demand $97,162 12.4% $90,891 12.5% 80,623 11.7%
Interest-bearing demand 78,039 10.0 84,759 11.7 91,017 13.2
Savings deposits 196,721 25.1 197,318 27.2 182,693 26.6
Time deposits 411,917 52.5 352,319 48.6 333,835 48.5
- ----------------------------------------------------------------------------------------------------
Total $783,839 100.0% $725,287 100.0% $688,168 100.0%
- ----------------------------------------------------------------------------------------------------
</TABLE>
Year-end deposits increased 7.9% in 1995 compared with an increase of 5.2% in
1994 over 1993.
The amount of time certificates of deposit issued in amounts of $100,000 or
more and outstanding as of December 31, 1995 is: 75,303,000. Their maturing
distribution is as follows:
<TABLE>
<S> <C>
--three months or less $32,060,000
--over three months and through twelve months $33,891,000
--over one year $ 9,352,000
</TABLE>
Neither F&M or its subsidiaries have any deposits in foreign banking offices.
BORROWINGS
Short-term borrowings at December 31, 1995 were $12.2 million, as compared to
$19.8 million at December 31, 1994. Short-term borrowings consist primarily of
repurchase agreements. During 1995, F&M used short-term borrowings (along with
increased deposits) to fund its increasing loan demand. Management has taken
steps to reduce short-term borrowings by increasing interest rates paid to
depositors and carefully monitoring the growth in the loan portfolio, although
continued reliance on short-term borrowings may be required if loan demand
outpaces deposit growth, therefore, short-term borrowings are expected to vary
from time to time.
Several of the Company's subsidiary banks, as members of the Federal Home Loan
Bank (FHLB), had borrowings from the FHLB as of December 31, 1995 and 1994.
These borrowings are secured by pledges of mortgage loans, and totaled $10.8
million at December 31, 1995, compared to $5.3 million at December 31, 1994.
These borrowings had original maturities of three months to seven years, with
rates at December 31, 1995 ranging from 4.60% to 7.73%.
The Company had previously maintained a credit facility with a third party
bank. During 1995 the Company repaid in full the term borrowings under the
credit facility, which were $1.0 million at December 31, 1994. This
arrangement expired on May 31, 1995.
<PAGE> 34
F&M BANCORPORATION
32
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
CAPITAL ADEQUACY
Stockholders' equity increased in 1995 by $10.3 million, to $85.9 million.
This increase was a result of net income during the year, along with the net
increase in fair values of securities available for sale of $3.2 million,
offset by dividends of $3.5 million paid to common stockholders.
EQUITY
<TABLE>
<CAPTION>
'92 '93 '94 '95
(Millions)
<S> <C> <C> <C>
58,611,148 75,593,680 78,842,322 85,982,945
</TABLE>
Numbers exclude FASB 115 adjustment.
REGULATORY CAPITAL RATIOS
<TABLE>
<CAPTION>
December 31, 1995
Leverage Ratio Tier One Risk Total Risk Based
Based Capital Ratio Capital Ratio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4.00% 5.00% 8.88% 4.00% 6.00% 11.66% 8.00% 10.00% 12.87%
Adequately Capitalized Well Capitalized F&M Bancorporation
</TABLE>
At December 31, 1995, the risk-based capital ratio for Tier 1 capital was
11.66% and the total risk-based capital ratio was 12.87%, as compared to
minimum regulatory requirements of 4.0% and 8.0%, respectively. The ratio of
average equity to average assets amounted to 8.87% at December 31, 1995
compared with 9.04% at December 31, 1994 and 8.59% at December 31, 1993. The
Company's leverage ratio at December 31, 1995 was 8.88%, as compared to a
minimum regulatory requirement of 3.0%.
At December 31, 1995, the F&M subsidiary banks in the aggregate could have
paid approximately $16,976,000 of additional dividends to the Company without
prior regulatory approval. The payment of dividends is subject to the statutes
governing Wisconsin state chartered banks. At December 31, 1995, each of the
F&M banks was in compliance with all applicable capital requirements, and
management believes that the capital structure of the F&M Banks is adequate.
The Company's common stock dividend payout ratio was 30.6% in 1995, as
compared to 30.8% in 1994 and 32.5% in 1993. These numbers include the
dividends historically paid by USB, FNFC and PBI prior to their acquisitions
by the Company; differences in dividend policies affect the comparability of
information.
F&M's acquisition of MBI was in exchange for 157,563 shares of F&M common
stock. As a result of the use of F&M stock, the MBI transaction increased F&M
capital; the acquisition did not significantly affect F&M's capital ratios.
F&M's pending acquisition of Community State Bank is also expected to be in
exchange for F&M Common Stock.
F&M's proposed acquisition of Bradley Bank will be made in exchange for
approximately $6.0 million in cash. In addition, F&M has identified capital
needs during 1996 of approximately $3.0 million for replacement and renovation
of facilities and establishment of additional branch offices. F&M expects to
meet these cash capital needs through earnings and its existing capital
resources.
LIQUIDITY AND INTEREST SENSITIVITY MANAGEMENT
As shown in the Company's Consolidated Statement of Cash Flow for 1995, cash
and cash equivalents increased by $18.8 million during 1995 to $59.0 million
at December 31, 1995. The increase primarily reflected $52.5 million in net
cash provided by financing activities plus $17.9 million in net cash provided
by operating activities offset by $51.6 million in net cash used in investing
activities. Net cash used in investing activities consisted primarily of a net
increase in loans plus necessary capital expenditures. Net cash provided by
operating activities primarily consisted of the Company's net income in 1995,
increased by adjustments for non-cash charges. Net cash provided by financing
activities principally reflected a
<PAGE> 35
F&M BANCORPORATION
33
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (CONTINUED)
net increase in deposits and other borrowings offset in part by payments on
the Company's short-term borrowings, and dividends paid.
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 marketable assets maturing within one year. At December 31,
1995, the carrying value of securities maturing within one year was $17.1
million, or 9.7% of the total investment securities portfolio. The Company
attempts, when possible, to match relative maturities of assets and
liabilities, while maintaining the desired net interest margin. Although the
percentage of earning assets represented by loans is increasing, management
believes that liquidity is adequate.
Managing interest rate risk is fundamental to banking. Banking institutions
manage the inherently different maturity and repricing characteristics of the
lending and deposit-taking lines of business to achieve a desired interest
rate sensitivity position and to limit their exposure to interest rate risk.
The Company manages its balance sheet to achieve maximum shareholder value
within the constraints of its interest rate risk discipline, the maintenance
of high credit quality, and sound leverage and liquidity positions. Both the
interest rate sensitivity and liquidity position of the Company are reviewed
regularly. The primary objective of interest rate sensitivity management is to
maintain net interest income growth while reducing exposure to the risks
inherent in interest rate movements.
A historical tool for measuring interest rate sensitivity is the gap analysis.
The following table shows the Company's approximate consolidated rate
sensitivity gap position at December 31, 1995.
<TABLE>
<CAPTION>
0-90 91-365 1-5 OVER 5
(DOLLARS IN THOUSANDS) DAYS DAYS YEARS YEARS TOTAL
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans $211,625 $282,752 $162,498 $23,148 $680,023
Investment securities 29,982 17,570 69,608 59,219 176,379
Other earnings assets 20,118 0 0 0 20,118
- --------------------------------------------------------------------------------------------------
Total rate-sensitive assets (RSA) $261,725 $300,322 $232,106 $82,367 $876,520
==================================================================================================
Savings deposits $144,216 $0 $77 $9,237 $153,530
Time deposits 132,302 195,596 109,204 41 437,143
Other non-deposit interest-bearing liabilities 20,894 133 1,200 800 23,027
- --------------------------------------------------------------------------------------------------
Total rate-sensitive liabilities (RSL) $297,412 $195,729 $110,481 $10,078 $613,700
==================================================================================================
Interest sensitivity gap $(35,687) $104,593 $121,625 $72,289 $262,820
==================================================================================================
Cumulative interest sensitivity gap $(35,687) $68,906 $190,531 $262,820
==================================================================================================
Ratio of cumulative rate sensitivity gap to RSA (13.6)% 12.3% 24.0% 30.0%
Cumulative ratio of rate sensitive assets
to rate sensitive liabilities 88.0% 114.0% 131.6% 142.8%
</TABLE>
Rate-sensitive liabilities in the preceding table exclude 50% of negotiable
order of withdrawal interest-bearing demand accounts and 70% of regular
savings accounts because management believes, based on the Company's previous
experience, that this treatment more closely approximates actual results due
to the relatively stable nature of these accounts. The F&M banks' regulators
have acknowledged these formulas for examination purposes.
Management's overall strategy is to coordinate the volume of rate-sensitive
assets and liabilities to minimize the impact of interest rate movements on
the net interest margin. The above table reflects a negative gap position for
the 90-day interval with a positive position for the longer maturities. A
negative position is favorable in a falling interest rate environment; a
positive position is favorable in a rising interest rate environment. The gap
is within the acceptable range established by management at each level of
maturity. The December 31, 1995 net interest margin indicates that the
<PAGE> 36
F&M BANCORPORATION
34
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
actual decrease in interest rates for the year resulted in a slight decrease
in the margin to 4.96% from 4.98% for 1994. Since this is a dynamic ratio,
management has the ability to influence net interest income in a positive
manner when interest rate changes do occur.
The Company's rollover policy is such that loans are written with limited
maturities if they are not in conjunction with amortized payments or otherwise
tied to a variable rate. This allows the F&M banks to restructure the terms
and interest rate of the loan to correspond with the Company's cost of funds.
RECENT ACCOUNTING DEVELOPMENTS
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 be reported at the lower of carrying amount or fair value less
cost to sell. This statement is required to be adopted by the Company
effective January 1, 1996. The adoption of SFAS No. 121 is not anticipated to
have a significant impact on the Company's financial condition or results of
operations once implemented.
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 is required to be adopted by the Company
effective January 1, 1996. The adoption of SFAS No. 122 is not anticipated to
have a significant impact on the Company's financial condition or results of
operations. The actual impact of adoption is contingent on the future levels
of mortgage loan sales.
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 is required
to be adopted as of January 1, 1996, and will not have a significant impact on
the Company's financial condition or results of operations.
<PAGE> 37
F&M BANCORPORATION
35
........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
SUMMARY QUARTERLY FINANCIAL INFORMATION
The following is a summary of the quarterly results of operations for
the years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- --------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1995
Interest income $16,857 $17,886 $18,795 $19,058
Interest expense 7,206 8,077 8,427 8,499
Net interest income 9,651 9,809 10,368 10,559
Provision for loan losses 324 286 480 509
Net income applicable to common stock 2,480 2,620 3,098 3,159
Earnings per common share .43 .45 .53 .55
1994
Interest income $14,235 $14,808 $15,506 $16,185
Interest expense 5,637 5,627 5,990 6,508
Net interest income 8,598 9,181 9,516 9,677
Provision for loan losses 199 307 331 481
Net income applicable to common stock 1,817 2,103 2,308 1,515
Earnings per common share .31 .36 .40 .26
</TABLE>
<PAGE> 38
F&M BANCORPORATION
36
........
MARKET INFORMATION AND DIVIDENDS
F&M Common Stock trades on The NASDAQ Stock Market ("NASDAQ") under the symbol
"FMBK." F&M had approximately 2,400 shareholders of record at February 29,
1996. The following table summarizes high and low prices and cash dividends
paid for F&M Common Stock for the periods indicated. The high and low prices
represent actual trade prices as reported on NASDAQ.
<TABLE>
<CAPTION>
CALENDAR CASH DIVIDENDS
PERIOD HIGH LOW PAID PER SHARE
- ------------------------------------------------
<S> <C> <C> <C> <C>
1994 1st quarter 20.50 17.75 .12
2nd quarter 23.75 19.75 .12
3rd quarter 23.25 20.75 .12
4th quarter 23.00 21.00 .12
<CAPTION>
CALENDAR CASH DIVIDENDS
PERIOD HIGH LOW PAID PER SHARE
- ------------------------------------------------
1995 1st quarter 22.00 20.50 .15
2nd quarter 22.00 19.75 .15
3rd quarter 25.00 20.38 .15
4th quarter 27.50 23.75 .15
</TABLE>
According to information provided by NASDAQ, the trading volume of F&M Common
Stock on NASDAQ was 795,367 shares during 1995 and 609,955 shares during 1994.
F&M has paid quarterly or annual cash dividends since its inception. The
holders of F&M Common Stock are entitled to receive such dividends as are
declared by the board of directors of F&M, which considers (and may change)
payment of dividends quarterly. For the first quarter of 1996, the board of
directors has declared a dividend of $.18 per share.
The ability of F&M to pay dividends is dependent upon the receipt of dividends
from F&M subsidiary banks, payment of which is subject to regulatory
restrictions. In determining cash dividends, F&M's board of directors
considers the earnings, capital requirements, debt servicing requirements,
financial ratio guidelines issued by the Federal Reserve Board and other
banking regulators, financial condition of F&M and the banks, and other
relevant factors. See Note 15 of Notes to Consolidated Financial Statements
and the discussion under "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Financial Condition--Capital Adequacy" for
restrictions on the ability of the F&M subsidiary banks to pay dividends.
TOTAL COMPOUNDED ANNUAL
RETURN OF OVER 20%
<TABLE>
<CAPTION>
11/17/80
<S> <C>
S&P 500 $10,000
</TABLE>
<TABLE>
<CAPTION>
12/31/95
<S> <C> <C>
F&M $164,403 20.3%
S&P 500 $ 79.954 14.5%
SMALL CAP BANKS $ 51,500 11.5%
</TABLE>
ANNUAL
DIVIDENDS PER SHARE
<TABLE>
'90 '91 '92 '93 '94 '95 '96
<S> <C> <C> <C> <C> <C> <C>
0.18 0.22 0.27 0.36 0.48 0.60 0.72
</TABLE>
Dividends per share are restated to reflect past stock
dividends and splits, but are not restated for acquisitions
BOOK VALUE
PER COMMON SHARE
<TABLE>
<CAPTION>
'92 '93 '94 '95 '96
<S> <C> <C> <C> <C>
10.93 11.05 12.61 13.52 14.83
</TABLE>
Book Value per common share are restated to reflect the 10% stock dividend paid
to shareholders on March 26, 1992 and the two for one stock split paid to
shareholders on March 19, 1993. Numbers exclude FASB 115 adjustment.
<PAGE> 39
F&M BANCORPATION
37
........
INDEPENDENT AUDITOR'S REPORT
Board of Directors
F&M Bancorporation, Inc.
Kaukauna, Wisconsin
We have audited the accompanying consolidated balance sheets of F&M
Bancorporation, Inc. and Subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to in the first
paragraph present fairly, in all material respects, the financial position of
F&M Bancorporation, Inc. and Subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in 1995, the
Company changed its method of accounting for impaired loans. In 1994, the
Company changed its method of accounting for investments in debt and equity
securities.
/S/ Wipfli Ullrich Bertelson
----------------------------
Certified Public Accountants
February 2, 1996
Appleton, Wisconsin
<PAGE> 40
F&M BANCORPORATION
38
........
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH AND DUE FROM BANKS $ 38,887,046 $ 35,962,434
FEDERAL FUNDS SOLD 20,118,000 4,231,000
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents 59,005,046 40,193,434
INVESTMENTS:
Interest-bearing deposits in other financial institutions 551,021 839,558
Investment securities available for sale - Stated at fair value 109,879,167 106,266,144
Investment securities held to maturity - Fair value of
$67,545,476 in 1995 and $63,067,682 in 1994 65,948,661 64,786,382
TOTAL LOANS 680,022,665 630,620,843
Allowance for credit losses (8,602,625) (7,751,629)
- --------------------------------------------------------------------------------------------------------
NET LOANS 671,420,040 622,869,214
PREMISES AND EQUIPMENT 20,490,971 19,922,867
OTHER ASSETS 15,831,225 15,721,388
- --------------------------------------------------------------------------------------------------------
TOTAL ASSETS $943,126,131 $870,598,987
========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------
DEPOSITS:
Non-interest-bearing deposits $104,735,506 $104,674,374
Interest-bearing deposits 717,453,068 657,560,918
- --------------------------------------------------------------------------------------------------------
Total deposits 822,188,574 762,235,292
SHORT-TERM BORROWINGS 12,194,134 19,846,230
OTHER BORROWINGS 10,833,244 6,366,488
OTHER LIABILITIES 11,828,482 6,370,926
- --------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 857,044,434 794,818,936
- --------------------------------------------------------------------------------------------------------
MINORITY INTEREST IN SUBSIDIARIES 189,863 209,712
- --------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 18)
STOCKHOLDERS' EQUITY:
Common stock - $1 par value:
Authorized - 10,000,000 shares
Issued - 5,836,545 shares 5,836,545 5,836,545
Capital surplus 41,813,467 41,838,442
Retained earnings 39,157,371 31,277,335
Unrealized loss on securities available for sale - Net of tax (91,111) (3,271,983)
Less - Common stock held in treasury at cost -
39,000 shares in 1995 and 5,000 shares in 1994 (824,438) (110,000)
- --------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 85,891,834 75,570,339
- --------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $943,126,131 $870,598,987
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 41
F&M BANCORPORATION
39
........
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $61,654,323 $50,028,274 $45,320,242
Interest on investment securities:
Taxable 6,826,626 6,660,923 8,555,570
Tax-exempt 3,494,926 3,554,558 3,209,175
Other interest income 619,899 490,408 817,504
- --------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 72,595,774 60,734,163 57,902,491
- --------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 30,306,628 22,416,988 22,578,801
Short-term borrowings 934,570 807,833 306,078
Other borrowings 968,040 537,575 819,237
- --------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 32,209,238 23,762,396 23,704,116
- --------------------------------------------------------------------------------------------
NET INTEREST INCOME 40,386,536 36,971,767 34,198,375
Provision for credit losses 1,599,435 1,318,050 1,288,770
- --------------------------------------------------------------------------------------------
Net interest income after provision for credit losses 38,787,101 35,653,717 32,909,605
- --------------------------------------------------------------------------------------------
OTHER INCOME:
Service fees 2,533,945 2,231,039 2,156,296
Net security gains 36,529 49,833 459,304
Other operating income 1,937,973 1,683,805 2,423,313
- --------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 4,508,447 3,964,677 5,038,913
- --------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and employee benefits 13,604,169 14,627,022 13,507,635
Net occupancy expense 3,909,449 3,909,477 3,418,384
FDIC assessment 879,156 1,636,560 1,538,399
Data processing 1,281,501 1,291,862 961,763
Goodwill amortization 398,056 397,602 376,095
Other operating expenses 6,439,273 7,068,722 6,813,199
- --------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 26,511,604 28,931,245 26,615,475
- --------------------------------------------------------------------------------------------
Income before provision for income taxes 16,783,944 10,687,149 11,333,043
Provision for income taxes 5,426,590 2,923,017 3,251,529
- --------------------------------------------------------------------------------------------
NET INCOME $11,357,354 $7,764,132 $8,081,514
============================================================================================
Net income applicable to common stock $11,357,354 $7,742,965 $7,894,927
============================================================================================
Earnings per common share $1.96 $1.33 $1.44
============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 42
F&M BANCORPORATION
40
........
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- CAPITAL
SHARES AMOUNT SURPLUS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1993 4,395,072 $4,395,072 $26,191,335
Pooling of interests - Union State Bank 740,561 740,561 4,763,439
- ----------------------------------------------------------------------------------------------
Balance, January 1, 1993, as restated 5,135,633 5,135,633 30,954,774
Net income
Cash dividends declared:
Common stock
Preferred stock
Contribution of 6,236 shares of treasury stock to
retirement and savings plan 41,033
Sale of 13,102 shares of treasury stock 74,945
Sale of 14,012 shares of common stock to
dividend reinvestment plan 14,012 14,012 220,753
Proceeds from issuance of 683,100 shares of common stock 683,100 683,100 10,491,994
Purchase of 1,301 shares of treasury common stock
- ----------------------------------------------------------------------------------------------
Balance, December 31, 1993 5,832,745 5,832,745 41,783,499
Change in accounting for investments - Adoption
of SFAS No. 115
Net income
Cash dividends declared:
Common stock
Preferred stock
Exercise of stock options 3,800 3,800 31,730
Redemption of preferred stock
Contribution of 2,092 shares of treasury stock to
retirement and savings plan 23,213
Purchase of 5,000 shares of treasury common stock
Change in unrealized loss on securities
available for sale - Net of tax
- ----------------------------------------------------------------------------------------------
Balance, December 31, 1994 5,836,545 5,836,545 41,838,442
Net income
Cash dividends declared:
Common stock
Exercise of stock options (24,975)
Purchase of 40,000 shares of treasury common stock
Change in unrealized loss on securities
available for sale - Net of tax
- ----------------------------------------------------------------------------------------------
Balance, December 31, 1995 5,836,545 $5,836,545 $41,813,467
==============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 43
F&M BANCORPORATION
41
........
<TABLE>
<CAPTION>
UNREALIZED
LOSS ON
PREFERRED STOCK SECURITIES
RETAINED TREASURY -------------------------------------------- AVAILABLE FOR
EARNINGS STOCK CLASS A CLASS B CLASS C SALE - NET OF TAX
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$17,235,799 $(147,654) $ 420,750 $ 1,236,938 $ 415,500 $
3,359,408
- -------------------------------------------------------------------------------------------------------------
20,595,207 420,750 1,236,938 415,500
8,081,514
(2,567,781)
(186,587)
54,066
94,983
(19,500)
- -------------------------------------------------------------------------------------------------------------
25,922,353 (18,105) 420,750 1,236,938 415,500
847,449
7,764,132
(2,387,983)
(21,167)
(420,750) (1,236,938) (415,500)
18,105
(110,000)
(4,119,432)
- -------------------------------------------------------------------------------------------------------------
31,277,335 (110,000) -0- -0- -0- (3,271,983)
11,357,354
(3,477,318)
131,187
(845,625)
3,180,872
- -------------------------------------------------------------------------------------------------------------
$39,157,371 $(824,438) $ -0- $ -0- $ -0- $ (91,111)
=============================================================================================================
</TABLE>
See accompanying notes to consolidate financial statements.
<PAGE> 44
F&M BANCORPORATION
42
........
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
- --------------------------------------------------------------------------------------------------------------
Net income $11,357,354 $7,764,132 $8,081,514
- --------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and net amortization 2,170,986 2,867,412 2,880,369
Provision for credit losses 1,599,435 1,318,050 1,288,770
Credit for deferred income taxes (249,974) (668,914) (366,441)
Net security gains (36,529) (49,833) (459,304)
(Gain) loss on sale of premises and
equipment and other real estate (69,296) 44,786 10,485
Provision for other real estate losses 55,481 271,501 469,032
Change in other assets (550,193) (1,139,283) 1,187,544
Change in other liabilities 3,598,832 1,327,303 (700,881)
Increase (decrease) in minority interest 3,160 9,051 (3,556)
- -------------------------------------------------------------------------------------------------------------
Total adjustments 6,521,902 3,980,073 4,306,018
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 17,879,256 11,744,205 12,387,532
- -------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease in interest-bearing deposits
in other financial institutions 288,537 1,033,717 154,380
Proceeds from sale of securities:
Available for sale 11,229,819 27,113,364
Held to maturity 1,540,731 1,930,460
Held for sale 33,995,757
Proceeds from maturities of securities:
Available for sale 27,618,004 30,219,680
Held to maturity 8,177,699 13,450,932 14,507,154
Held for sale 43,029,668
Payment for purchases of securities:
Available for sale (32,757,096) (28,280,765)
Held to maturity (14,095,195) (18,194,011) (16,940,453)
Held for sale (87,808,464)
Net increase in loans (50,357,589) (90,914,232) (55,444,614)
Capital expenditures (2,295,685) (4,070,259) (3,908,330)
Proceeds from sale of premises and equipment 16,020 280,152 30,064
Proceeds from sale of other real estate 579,640 277,016 916,066
Purchase of equity in subsidiary bank (23,009) (22,975)
- -------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (51,618,855) (67,543,675) (69,561,287)
=============================================================================================================
</TABLE>
<PAGE> 45
F&M BANCORPORATION
43
........
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits $59,953,282 $37,434,017 $33,229,928
Net increase (decrease) in short-term borrowings (7,652,096) 14,002,557 843,642
Proceeds from other borrowings 5,500,000 4,100,000 1,200,000
Principal payments on other borrowings (1,033,244) (11,674,361) (3,560,691)
Proceeds from exercise of stock options 106,212 35,530
Payment for redemption of preferred stock (2,073,188)
Purchase of shares of treasury common stock (845,625) (110,000)
Proceeds from sale of common
stock held in treasury 169,928
Sale of shares of common stock to
dividend investment plan 234,765
Proceeds from issuance of common stock 11,175,094
Dividends paid (3,477,318) (2,409,150) (2,737,863)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 52,551,211 39,305,405 40,554,803
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 18,811,612 (16,494,065) (16,618,952)
Cash and cash equivalents at beginning 40,193,434 56,687,499 73,306,451
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end $59,005,046 $40,193,434 $56,687,499
=========================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $29,926,288 $23,307,403 $24,030,949
Income taxes 5,914,449 3,613,372 4,092,959
NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans charged off $925,481 $891,340 $755,347
Loans transferred to other real estate 328,093 541,038 1,049,890
</TABLE>
During 1994 and 1993, the Company contributed 2,092 and 6,236 shares of
treasury stock, respectively, to the 401(k) retirement and savings plan.
During 1993, 1,301 shares of treasury stock were acquired by a subsidiary of
the Company in lieu of repayment of loans.
See Note 3 for details of noncash consideration paid in acquisitions which
occurred in 1995 and 1994.
See accompanying notes to consolidated financial statements.
<PAGE> 46
F&M BANCORPORATION
44
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company and its subsidiaries
conform to generally accepted accounting principles and general practices
within the banking industry. Significant accounting policies are summarized
below.
NATURE OF OPERATIONS
F&M Bancorporation, Inc. (the "Company") is a Wisconsin multibank holding
company. Its 13 subsidiary banks provide a full range of commercial and retail
banking services to customers at 45 locations throughout Wisconsin. Through
its subsidiary banks, the Company provides to its customers commercial, real
estate, agricultural, and consumer loans, as well as a variety of traditional
deposit products.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of F&M
Bancorporation, Inc. and all of its subsidiaries. All significant intercompany
balances and transactions have been eliminated.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results may differ from these estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and non-interest-bearing deposits in correspondent banks and federal
funds sold. Generally, federal funds are purchased and sold for one-day
periods.
INVESTMENT SECURITIES
The Company's investment securities are classified in two categories and
accounted for as follows in accordance with Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."
Securities available for sale - Securities available for sale consist of
investment securities not classified as securities held to maturity. These
securities are stated at fair value. Unrealized holding gains and losses,
net of tax, on securities available for sale are reported as a net amount in
a separate component of stockholders' equity until realized.
Securities held to maturity - Investment securities for which the Company
has the positive intent and ability to hold to maturity are reported at
cost, adjusted for amortization of premiums and accretion of discounts,
which are recognized in interest income using the interest method over the
period to maturity.
Gains and losses on the sale of securities available for sale are determined
using the specific-identification method.
INTEREST AND FEES ON LOANS
Interest on loans is credited to income as earned. Interest income is not
accrued on loans where management has determined collection of such interest
is doubtful. When a loan is placed on nonaccrual status, previously accrued
but unpaid interest deemed uncollectible is reversed and charged against
current income. Unamortized net loan fees are recorded as part of the balance
of outstanding loans.
ALLOWANCE FOR CREDIT LOSSES
Effective January 1, 1995, the Company adopted 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."
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
<PAGE> 47
F&M BANCORPORATION
45
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Prior to 1995, the allowance for credit losses related to these loans was
based on undiscounted cash flows, collateral value, and other information used
by management.
The Company continues to maintain a general allowance for credit losses for
loans not within the scope of SFAS No. 114. The allowance for credit losses is
maintained at a level which management believes is adequate to provide for
possible credit losses. Management periodically evaluates the adequacy of the
allowance using the Company's past loan loss experience, known and inherent
risks in the portfolio, composition of the portfolio, current economic
conditions, and other factors. This evaluation is inherently subjective since
it requires material estimates (including the amounts and timing of future
cash flows expected to be received on impaired loans) that may be susceptible
to significant change.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost. Maintenance and repair costs are
charged to expense as incurred. Gains or losses on disposition of premises and
equipment are reflected in income. Depreciation is computed principally on the
straight-line method and is based on the estimated useful lives of the assets
varying from five to fifty years on buildings and five to twenty years on
equipment.
GOODWILL
The excess of cost over the net assets of subsidiaries acquired is amortized
using the straight-line method over a 15-year period from the date of
acquisition.
OTHER REAL ESTATE
Other real estate is carried at the lower of cost or fair value, less
estimated sales costs.
INCOME TAXES
Deferred income taxes have been provided under the liability method prescribed
by SFAS No. 109. Deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and
liabilities as measured by the current enacted tax rates which will be in
effect when these differences are expected to reverse. Deferred tax expense
(benefit) is the result of changes in the deferred tax asset and liability.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, the Company has entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit, commitments under credit card arrangements, commercial letters of
credit, and standby letters of credit. Such financial instruments are recorded
in the consolidated financial statements when they become payable.
EARNINGS PER SHARE
Earnings per common share are based upon the weighted average number of common
shares outstanding. The weighted average number of shares outstanding was
5,797,107 in 1995; 5,833,046 in 1994; and 5,500,875 in 1993. The outstanding
stock options are not dilutive; therefore, fully diluted earnings per share
are not presented.
FUTURE ACCOUNTING CHANGE
The Financial Accounting Standards Board (FASB) issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," 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
<PAGE> 48
F&M BANCORPORATION
46
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 be
reported at the lower of carrying amount or fair value less cost to sell. This
statement is required to be adopted by the Company effective January 1, 1996.
The adoption of SFAS No. 121 is not anticipated to have a significant impact
on the Company's financial condition or results of operations once
implemented.
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards 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." There was no impact on net income
as a result of the adoption of SFAS No. 114 at January 1, 1995.
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." As required under the statement, the Company
adopted the provisions of the new standard at the beginning of 1994. In
accordance with SFAS No. 115, prior-period financial statements were not
restated to reflect the change in accounting principle. The impact of the
adoption of SFAS No. 115 on January 1, 1994, was an increase in the value of
investment securities of $1,373,910, an increase in deferred tax liabilities
of $526,461, and an increase in stockholders' equity of $847,449. The adoption
of SFAS No. 115 had no impact on 1994 net income.
NOTE 3 - BUSINESS COMBINATIONS
On January 9, 1995, F&M Bancorporation, Inc. acquired 100% of the outstanding
stock of Union State Bank (n/k/a F&M Bank - Waushara County) in an exchange
offer. Company stock totaling 740,561 shares was issued in exchange for 99.97%
of the outstanding shares of Union State Bank. The remaining shares of Union
State Bank stock were acquired for cash.
This transaction has been accounted for as a pooling of interests. All
financial information included in the consolidated financial statements and
notes thereto has been restated to include the results of Union State Bank.
The following summarizes the separate results of operations of the Company and
Union State Bank for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993
- ----------------------------------------------------------------
<S> <C> <C>
Net interest income:
F&M Bancorporation, Inc. $32,587,190 $29,636,030
F&M Bank - Waushara County 4,384,577 4,562,345
- ----------------------------------------------------------------
Combined and restated $36,971,767 $34,198,375
================================================================
Net income applicable to common stock:
F&M Bancorporation, Inc. $7,565,585 $6,830,034
F&M Bank - Waushara County 177,380 1,064,893
- ----------------------------------------------------------------
Combined and restated $7,742,965 $7,894,927
================================================================
Earnings per share:
F&M Bancorporation, Inc. $1.49 $1.43
================================================================
Combined and restated $1.33 $1.44
================================================================
</TABLE>
On February 11, 1994, F&M Merger Corporation ("Merger"), a wholly owned
subsidiary of the Company, acquired, through a merger, 100% of the outstanding
stock of First National Financial Corporation (FNFC), which owned 100% of
First National Bank of Wisconsin (n/k/a F&M Bank - Northeast). Company stock
totaling 347,328 shares was issued in exchange for all of the outstanding
shares of FNFC stock. As part of the transaction, the Company redeemed the
outstanding preferred stock of FNFC for cash of $2,073,188.
On March 21, 1994, Merger acquired, through a merger, 100% of the outstanding
stock of Pulaski Bancshares, Inc. ("Pulaski") which owned 100% of Pulaski
State Bank (F&M Bank - Pulaski). Company stock totaling 867,214 shares was
issued in exchange for all of the outstanding shares of Pulaski stock. On
August 31, 1994, F&M Bank - Pulaski merged its operations into F&M Bank -
Northeast.
These two transactions have been accounted for as poolings of interests. All
financial information included in the consolidated financial statements and
notes thereto has been restated to include the results of F&M Bank - Northeast.
<PAGE> 49
F&M BANCORPORATION
47
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
NOTE 4 - RESTRICTIONS ON CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the amount of $3,244,000 are restricted at
December 31, 1995, to meet the reserve requirements of the Federal Reserve
System.
NOTE 5 - INVESTMENT SECURITIES
The estimated fair value and amortized cost of investment securities are as
follows:
<TABLE>
<CAPTION>
1995
--------------------------------------------------
GROSS GROSS
ESTIMATED UNREALIZED UNREALIZED AMORTIZED
FAIR VALUE GAINS LOSSES COST
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities available for sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 35,394,858 $ 194,416 $148,468 $ 35,348,910
Obligations of states and
political subdivisions 6,405,972 8,366 50,782 6,448,388
Mortgage-related securities 51,127,634 401,649 565,088 51,291,073
Other securities 16,950,703 46,656 37,520 16,941,567
- ---------------------------------------------------------------------------------------------
Total investment securities
available for sale $109,879,167 $ 651,087 $801,858 $110,029,938
=============================================================================================
Investment securities held to maturity:
Obligations of states and
political subdivisions $ 67,545,476 $1,745,970 $149,155 $ 65,948,661
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------------------
GROSS GROSS
ESTIMATED UNREALIZED UNREALIZED AMORTIZED
FAIR VALUE GAINS LOSSES COST
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities available for sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 38,253,941 $ 23,595 $1,338,880 $ 39,569,226
Obligations of states and
political subdivisions 14,207,170 41,305 708,744 14,874,609
Mortgage-related securities 44,298,180 85,688 3,034,434 47,246,926
Other securities 9,506,853 985 259,062 9,764,930
- ---------------------------------------------------------------------------------------------
Total investment securities
available for sale $106,266,144 $151,573 $5,341,120 $111,455,691
=============================================================================================
Investment securities held to maturity:
Obligations of states and
political subdivisions $ 56,720,183 $575,594 $1,959,057 $ 58,103,646
Obligations of other U.S. government
corporations and agencies 4,469,979 3,418 298,144 4,764,705
Corporate and other securities 1,032,220 532 20,078 1,051,766
Mortgage-related securities 845,300 706 21,671 866,265
- ---------------------------------------------------------------------------------------------
Total investment securities
held to maturity $ 63,067,682 $580,250 $2,298,950 $ 64,786,382
=============================================================================================
</TABLE>
Fair values of securities are estimates based on financial methods or prices
paid for similar securities. It is possible interest rates could change
considerably resulting in a material change in the estimated fair value.
<PAGE> 50
F&M BANCORPORATION
45
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
NOTE 5 - INVESTMENT SECURITIES (CONTINUED)
The estimated fair value and amortized cost of investment securities
(available for sale and held to maturity) at December 31, 1995, by contractual
maturity, are shown below. Contractual maturities will differ from expected
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE SECURITIES HELD TO MATURITY
- ---------------------------------------------------------------------------------------------------------
ESTIMATED AMORTIZED ESTIMATED AMORTIZED
FAIR VALUE COST FAIR VALUE COST
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in three months or less $ 12,606,239 $ 12,626,249 $ 284,950 $ 248,795
Due after three months through one year 2,816,699 2,788,289 978,343 975,959
Due after one year through five years 32,479,099 32,545,138 15,737,927 15,314,951
Due after five years through ten years 5,143,289 5,091,777 26,158,086 25,286,060
Due after ten years 5,706,207 5,687,412 24,386,170 24,122,896
- ---------------------------------------------------------------------------------------------------------
58,751,533 58,738,865 67,545,476 65,948,661
Mortgage-related securities 51,127,634 51,291,073
- ---------------------------------------------------------------------------------------------------------
Total $109,879,167 $110,029,938 $67,545,476 $65,948,661
=========================================================================================================
</TABLE>
Following is a summary of the proceeds from sales of investment securities
available for sale and held for sale as well as gross gains and losses for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds from sales of investment securities
available for sale and held for sale $11,229,819 $28,654,095 $35,926,217
Gross gains on sales 61,245 183,953 529,422
Gross losses on sales 24,716 134,120 70,118
</TABLE>
Proceeds from sales of investment securities for 1994 include $1,540,731 of
proceeds from the sale of held-to-maturity securities which were held by Union
State Bank (the "Bank"). These sales were made to adjust the Bank's credit
risk policy to that of the Company's. Gross gains and gross losses on the sale
of these securities were $1,346 and $94,546, respectively.
The estimated fair value and amortized cost of investment securities pledged
to secure public deposits, short-term borrowings, and for other purposes
required by law as of December 31 follow:
<TABLE>
<CAPTION>
1995 1994
- -----------------------------------------------------------
<S> <C> <C>
Amortized cost $34,080,000 $16,908,000
Estimated fair value 33,835,000 15,889,000
</TABLE>
The obligations of states and political subdivisions are generally purchased
with the intent to hold to maturity. A significant portion of these securities
are rated by Moody's with ratings ranging from A to AAA. For those securities
not rated, market values are obtained from brokerage services utilized by the
Company. At December 31, 1995, the total carrying value of nonrated
obligations of states and political subdivisions was approximately
$16,189,000.
<PAGE> 51
F&M BANCORPORATION
49
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - LOANS
The composition of loans at December 31 follows:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Commercial, industrial, and financial $118,570,368 $105,611,790
Agricultural 40,837,106 40,211,787
Real estate:
Construction 22,373,753 17,369,196
Mortgage 453,292,146 420,794,956
Installment 44,949,292 46,633,114
- ----------------------------------------------------------------------------------
Total loans $680,022,665 $630,620,843
==================================================================================
</TABLE>
The aggregate amount of nonperforming loans was approximately $6,389,000 and
$5,684,000 at December 31, 1995 and 1994, respectively. Nonperforming loans
are those which are contractually past due 90 days or more as to interest or
principal payments, those loans on a nonaccrual status, or loans the terms of
which have been renegotiated to provide a reduction or deferral of interest or
principal. If nonaccrual and renegotiated loans had been current, or not
troubled, approximately $569,000, $634,000, and $602,000 of interest income
would have been recorded for the years ended December 31, 1995, 1994, and
1993, respectively. Interest income actually recorded on these loans was
approximately $192,000, $279,000, and $184,000 for the years ended December
31, 1995, 1994, and 1993, respectively.
At December 31, 1995, the recorded investment in loans considered to be
impaired was $4,045,000 of which $1,578,000 was on a nonaccrual basis.
Included in this amount is $3,684,000 of impaired loans for which the related
allowance for loan losses is $843,000. The average recorded investment in
impaired loans during 1995 was approximately $4,327,000. For the year ended
December 31, 1995, the Company recognized interest income on those impaired
loans of $325,000 which included $73,000 of interest income recognized using
the cash basis method of income recognition.
The subsidiary banks in the ordinary course of banking business grant loans to
the Company's executive officers and directors including their families and
firms in which they are principal owners.
Substantially all loans to executive officers and directors were made on the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with others and did not involve more than
the normal risk of collectibility or present other unfavorable features.
Activity in such loans during 1995 is summarized below:
<TABLE>
<S> <C>
Loans outstanding, December 31, 1994 $11,309,274
New loans 4,599,152
Repayment (5,464,093)
- ----------------------------------------------------------------------
Loans outstanding, December 31, 1995 $10,444,333
======================================================================
</TABLE>
An analysis of the allowance for credit losses for the years
ended December 31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $7,751,629 $7,154,555 $6,414,897
Provision for credit losses 1,599,435 1,318,050 1,288,770
Recoveries on loans 177,042 170,364 206,235
Loans charged off (925,481) (891,340) (755,347)
- ----------------------------------------------------------------------------------------------
Balance, December 31 $8,602,625 $7,751,629 $7,154,555
- ----------------------------------------------------------------------------------------------
</TABLE>
FUTURE ACCOUNTING CHANGE
The FASB issued SFAS No. 122, "Accounting for Mortgage Servicing Rights," 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 is required to be adopted by the Company
effective January 1, 1996. The adoption of SFAS No. 122 is not
<PAGE> 52
F&M BANCORPORATION
50
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - LOANS (CONTINUED)
anticipated to have a significant impact on the Company's financial condition
or results of operations. The actual impact of adoption is contingent on the
future levels of mortgage loan sales.
NOTE 7 - PREMISES AND EQUIPMENT
An analysis of premises and equipment at December 31 follows:
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 3,776,201 $ 3,525,636
Buildings and improvements 18,873,090 18,248,774
Furniture and equipment 13,911,470 13,736,531
Construction in progress 680,520 220,796
- ---------------------------------------------------------------------------------------------
Totals 37,241,281 35,731,737
Less - Accumulated depreciation and amortization (16,750,310) (15,808,870)
- ---------------------------------------------------------------------------------------------
Net book value $ 20,490,971 $ 19,922,867
=============================================================================================
</TABLE>
Depreciation and amortization of premises and equipment charged to operating
expenses amounted to $1,669,815 in 1995, $1,599,904 in 1994, and $1,495,273 in
1993.
NOTE 8 - OTHER REAL ESTATE
Included in other assets is other real estate totaling $644,131 and $936,407
at December 31, 1995 and 1994, respectively. There is no allowance for losses
on other real estate. Other real estate expenses, including depreciation,
totaled $115,270, $401,206, and $630,718 for 1995, 1994, and 1993,
respectively.
NOTE 9 - DEPOSITS
The distribution of deposits at December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Non-interest-bearing demand deposits $104,735,506 $104,674,374
Interest-bearing demand deposits 79,030,552 82,202,836
Savings deposits 134,425,745 131,608,583
Money market deposits 73,300,086 65,062,386
Time deposits 430,696,685 378,687,113
- --------------------------------------------------------------------------------------
Total deposits $822,188,574 $762,235,292
======================================================================================
</TABLE>
Time deposits of $100,000 or more were $75,303,000 and $53,802,000 at December
31, 1995 and 1994, respectively. Interest expense on time deposits of $100,000
or more was $3,792,000, $1,674,000, and $1,329,000, for the years ended
December 31, 1995, 1994, and 1993, respectively.
<PAGE> 53
F&M BANCORPORATION
51
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - SHORT-TERM BORROWINGS
The composition of short-term borrowings at December 31 follows:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Federal funds purchased and securities sold
under repurchase agreements $12,194,134 $19,442,374
Other short-term borrowings 403,856
- ------------------------------------------------------------------------------------------
Totals $12,194,134 $19,846,230
==========================================================================================
</TABLE>
The following information relates to federal funds purchased and securities
sold under repurchase agreements for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
As of year end - Weighted average rate 5.65% 5.90%
For the year:
Highest month-end balance $31,903,945 $32,508,681
Daily average balance 15,884,926 18,590,214
Weighted average rate 5.81% 4.38%
</TABLE>
NOTE 11 - OTHER BORROWINGS
Other borrowings at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank advances (a) $10,800,000 $5,300,000
Note payable, due May 31, 1995 (b) 1,000,000
Note payable to former stockholder (c) 33,244 66,488
- -----------------------------------------------------------------------------------
Totals $10,833,244 $6,366,488
===================================================================================
</TABLE>
(a) As members of the Federal Home Loan Bank (FHLB) system, individual bank
subsidiaries may utilize various borrowing alternatives, secured by
pledges of mortgage loans (totaling approximately $93,555,000) and FHLB
stock. At December 31, 1995, the subsidiaries' outstanding advances had
original maturities ranging from three months to seven years and fixed
and adjustable rates ranging from 4.60% to 7.73%. Interest is payable
monthly.
The scheduled principal maturities of these advances at December 31, 1995,
are summarized as follows:
<TABLE>
<S> <C>
1996 $8,600,000
1997 300,000
1998 200,000
1999 400,000
Thereafter 1,300,000
----------------------------------------------
$10,800,000
==============================================
</TABLE>
(b) This note was paid in 1995. The interest rate on this note at December
31, 1994, was 7.23%. The note was secured by all of the common stock of
the subsidiary banks owned by the Company.
(c) Note payable is due August 1, 1996. The note is unsecured with interest
payable at F&M Bank - Lancaster's one-year CD rate, adjusted annually.
The interest rate was 5.75% and 4.30% at December 31, 1995 and 1994,
respectively.
<PAGE> 54
F&M BANCORPORATION
52
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 - INCOME TAXES
The components of the provision for income taxes are as follows for
the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense:
Federal $4,747,593 $2,848,700 $2,881,965
State 928,971 743,231 736,005
- ----------------------------------------------------------------------------------------------------------
Total current 5,676,564 3,591,931 3,617,970
- ----------------------------------------------------------------------------------------------------------
Deferred tax credit (249,974) (668,914) (314,979)
- ----------------------------------------------------------------------------------------------------------
Tax benefit of net operating loss carryforward (51,462)
- ----------------------------------------------------------------------------------------------------------
Total provision for income taxes $5,426,590 $2,923,017 $3,251,529
==========================================================================================================
</TABLE>
Included in the total provision for income taxes is expense of approximately
$15,000, $20,000, and $184,000 for the years ended December 31, 1995, 1994,
and 1993, respectively, related to security transactions.
As of December 31, 1995 and 1994, deferred income taxes are provided for the
temporary differences between the financial reporting basis and the tax basis
of the Company's assets and liabilities. The major components of deferred tax
assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Reserve for loan losses $2,560,028 $1,961,453
Deferred compensation 212,792 246,823
Nonperforming assets 364,734 420,923
Net operating losses 835,622 897,444
Unrealized loss on securities available for sale 59,660 1,917,564
Pension 314,411 335,083
Other 130,921 156,704
- -------------------------------------------------------------------------------------
4,478,168 5,935,994
Valuation allowance (560,000) (547,000)
- -------------------------------------------------------------------------------------
Deferred tax assets 3,918,168 5,388,994
- -------------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation (1,376,292) (1,237,184)
Leases (69,256) (71,260)
- -------------------------------------------------------------------------------------
Deferred tax liabilities (1,445,548) (1,308,444)
- -------------------------------------------------------------------------------------
Net deferred tax assets $2,472,620 $4,080,550
=====================================================================================
</TABLE>
The Company and two of its subsidiaries have separate Wisconsin net operating
loss carryforwards totaling approximately $10,800,000 at December 31, 1995.
These net operating loss carryforwards begin to expire in 1996. Since the
Company and these subsidiaries are required to file separate returns for
Wisconsin and they are not expected to generate taxable income, no tax benefit
from these losses is anticipated. The valuation allowance represents the
benefit of these losses, which is not expected to be realized.
One subsidiary has a federal net operating loss carryforward of approximately
$278,000 and a tax credit carryforward of $13,024. Another subsidiary has a
Wisconsin net operating loss carryforward of approximately $3,475,000. These
carryforwards occurred prior to the acquisition of these subsidiaries and,
therefore, can only be used to offset future taxable income of these
subsidiaries. The federal carryforwards begin to expire in 2001 and the
Wisconsin carryforwards begin to expire in 2006. Based on the annual usage
limitations, it is expected these net operating losses and tax credits will be
utilized.
<PAGE> 55
F&M BANCORPORATION
53
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 - INCOME TAXES (CONTINUED)
A summary of the source of differences between income taxes at the federal
statutory rate and the provision for income taxes for the years ended December
31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------------------------------------------
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense at
statutory rate $5,706,541 34.0 $3,633,630 34.0 $3,853,234 34.0
Increase (decrease) in
taxes resulting from:
Tax-exempt interest (1,169,422) (7.0) (1,162,210) (10.9) (1,081,612) (9.5)
State income tax 645,415 3.8 405,250 3.8 403,300 3.6
Goodwill amortization 135,339 0.8 135,185 1.3 127,872 1.1
Other 108,717 0.7 (88,838) (0.8) (51,265) (0.5)
- ---------------------------------------------------------------------------------------------------------------------
Provision for income taxes $5,426,590 32.3 $2,923,017 27.4 $3,251,529 28.7
=====================================================================================================================
</TABLE>
NOTE 13 - RETIREMENT PLANS
The Company sponsors a defined contribution 401(k) retirement savings plan
covering substantially all employees. Employees are allowed to make voluntary
contributions to the plan. The Company makes a matching contribution which is
determined based on the Company's return on equity. The Company may also make
a discretionary profit-sharing contribution.
F&M Bank - Lakeland continues to maintain an Employee Stock Ownership Plan
(ESOP), which was established prior to the Company's acquisition of this bank.
The assets of this plan which include 164,882 shares of the Company stock
remain frozen and have not been transferred into the Company's 401(k)
retirement savings plan as of December 31, 1995.
F&M Bank - Waushara County sponsors a defined contribution retirement savings
plan which covers substantially all the employees of the former Union State
Bank. The contributions to this plan for 1995 were consistent with those of
the Company's 401(k) retirement savings plan discussed above. The assets of
this plan will be transferred into the Company's plan during 1996.
Retirement plan contribution expense charged to operations for all plans
(excluding the defined benefit pension plans discussed below) totaled
$881,793, $689,152, and $593,820 for 1995, 1994, and 1993, respectively.
F&M Bank - Waushara County sponsored a defined benefit plan covering
substantially all employees of the former Union State Bank. Effective August
27, 1994, the plan was frozen resulting in a plan curtailment. A net loss of
$445,551 resulted from this curtailment and is included in pension expense in
the consolidated income statement for 1994. Subsequent to the curtailment,
plan participants will not accrue any additional benefit for service. The
Bank's funding policy is to make contributions on an annual basis to the
extent allowed for tax purposes.
<PAGE> 56
F&M BANCORPORATION
54
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 - RETIREMENT PLANS (CONTINUED)
The following table sets forth F&M Bank - Waushara County's defined benefit
pension plan funded status and amounts reflected in the accompanying
consolidated balance sheets, at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation $ 2,135,808 $ 2,650,945
Nonvested benefit obligation 39,713
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $ 2,135,808 $ 2,690,658
===========================================================================================================================
Projected benefit obligation $(2,135,808) $(2,690,658)
Plan assets at fair value 1,323,182 1,847,560
- ---------------------------------------------------------------------------------------------------------------------------
Accrued pension cost recognized in the consolidated balance sheets $ (812,626) $ (843,098)
===========================================================================================================================
</TABLE>
Net pension cost included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - Benefits earned during the year $ $ 33,315 $ 50,838
Interest cost on projected benefit obligation 161,439 168,385 171,257
Net amortization and deferral (35,856) (62,077) 67,063
- ---------------------------------------------------------------------------------------------------------------------------
Total periodic pension cost 125,583 139,623 289,158
Less - Actual return on plan assets 104,890 61,261 93,281
- ---------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 20,693 $ 78,362 $ 195,877
===========================================================================================================================
</TABLE>
The following assumptions were used in determining the projected benefit
obligation:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 6.0% 6.0% 7.5%
Rates of increase in compensation levels 0.0% 0.0% 3.0%
Expected long-term rate of return on assets 7.5% 7.5% 7.5%
</TABLE>
The plan assets consist primarily of insurance investment contracts, U.S.
government securities, and short-term mutual funds.
NOTE 14 - DEFERRED COMPENSATION PLANS
The Company has entered into deferred compensation agreements with several
current and former officers and directors providing monthly benefits over
periods ranging from ten to twelve years. At December 31, 1995 and 1994, the
Company accrued liabilities of approximately $559,000 and $658,000,
respectively, representing the present value of future payments under these
agreements. The amount charged to operations under these agreements was
approximately $60,000 in 1995, $87,000 in 1994, and $108,000 in 1993.
NOTE 15 - STOCKHOLDERS' EQUITY
The preferred stock as described on the consolidated statement of
stockholders' equity was issued by FNFC, which the Company acquired February
11, 1994. As part of the acquisition, the Company redeemed the preferred stock
at par value plus accrued dividends.
Federal banking regulatory agencies have established capital adequacy rules
which take into account risk attributable to balance sheet assets and
off-balance-sheet activities. All banks and bank holding companies must meet a
minimum total risk-based capital ratio of 8%. Of the 8% required, half must be
comprised of core capital elements defined as Tier 1 capital. The federal
banking agencies also have adopted leverage capital guidelines which banking
organizations must meet. Under these guidelines, the most highly rated banking
organizations must meet a minimum leverage ratio of at least 3% Tier 1 capital
to total assets, while lower rated banking organizations must maintain a ratio
of at least 4% to 5%.
The Company's and all of its subsidiaries' risk-based capital and leverage
ratios meet or exceed the defined minimum requirements.
<PAGE> 57
F&M BANCORPORATION
55
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 - STOCKHOLDERS' EQUITY (CONTINUED)
Banking subsidiaries are restricted by banking regulations from making
dividend distributions above prescribed amounts. At December 31, 1995, the
Company's subsidiaries could have paid approximately $16,976,000 of additional
dividends to the Company without prior regulatory approval.
NOTE 16 - STOCK OPTION PLANS
During 1993, the Company established two stock option plans, one for officers
and employees (the "Executive Plan") and one for nonemployee directors (the
"Directors' Plan"). Options under the Executive Plan are granted at the
discretion of the stock option committee of the Company's Board of Directors.
Options under the Directors' Plan are granted automatically each year at a
date and in an amount specified in the Directors' Plan. Under both plans,
options to purchase shares of the Company's common stock are granted at a
price equal to the market price of the stock at the date of grant. A total of
150,000 shares were made available, upon stockholder approval, to be subject
to grant under these plans.
Following is a summary of stock option transactions for the years ended
December 31:
<TABLE>
<CAPTION>
Number of Shares
-------------------------
1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at beginning of year 37,500
Granted during the year 20,250 37,500
Exercised during the year (at prices ranging from
$20.00 to $21.25 per share) (4,500)
Canceled during the year (7,000)
- --------------------------------------------------------------------------------------
Outstanding at end of year (at prices ranging from
$20.00 to $21.50 per share) 46,250 37,500
======================================================================================
Available for grant at end of year 92,250 112,500
======================================================================================
</TABLE>
Options granted under these plans expire ten years after the grant.
In connection with the merger of Merger and Pulaski in 1994, an unexercised
option under a separate Pulaski stock option plan with an officer of Pulaski
was converted into an option for 14,455 shares of the Company's common stock
with an exercise price of $9.35 per share. During 1995 and 1994, this officer,
now an officer of the Company, exercised options for 1,500 shares and 3,800
shares, respectively. These options expire December 15, 2002.
FUTURE ACCOUNTING CHANGE
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting for
Stock-Based Compensation," 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 is required to be adopted as of January 1, 1996, and will not have a
significant impact on the Company's financial condition or results of
operations.
NOTE 17 - ADVERTISING COSTS
Advertising costs are expensed as incurred (or the first time advertising
takes place). Advertising expense for 1995 and 1994 was approximately $575,000
and $510,000, respectively.
<PAGE> 58
F&M BANCORPORATION
56
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 18 - COMMITMENTS, CONTINGENCIES, AND CREDIT RISK
Financial Instruments With Off-Balance-Sheet Risk
The Financial Accounting Standards Board has issued three statements
concerning financial instruments. SFAS No. 105 requires that certain
information be disclosed about financial instruments with off-balance-sheet
risk and financial instruments with concentrations of credit risk. SFAS No.
107 requires such entities to disclose the fair value of financial
instruments. SFAS No. 119 requires certain disclosures for derivative
financial instruments. The Company does not presently have nor has it had any
derivative type instruments requiring disclosure.
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the balance sheets.
The Company's exposure to credit loss, in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit, is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments. These
commitments at December 31, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit $48,904,000 $52,852,000
Standby letters of credit 5,087,000 4,164,000
Credit card commitments 10,686,000 10,693,000
- -------------------------------------------------------------------
$64,677,000 $67,709,000
===================================================================
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit, is
based on management's credit evaluation of the party. Collateral held varies
but may include accounts receivable; inventory; property, plant, and
equipment; and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The commitments are
structured to allow for 100% collateralization on all standby letters of
credit.
Credit card commitments are commitments on credit cards issued by the
Company's subsidiaries and serviced by other companies. These commitments are
unsecured.
COMMITMENTS
The Company has committed to purchase land and buildings in 1996 for
approximately $1,400,000.
CONTINGENCIES
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the consolidated
financial statements.
CONCENTRATION OF CREDIT RISK
The Company's subsidiary banks grant residential, commercial, agricultural,
and consumer loans throughout Wisconsin. Due to the diversity of locations,
the ability of debtors to honor their contracts is not tied to any particular
economic sector.
<PAGE> 59
F&M BANCORPORATION
57
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 19 - SUBSEQUENT EVENT
On February 5, 1996, the Company acquired 100% of the outstanding shares of
Monycor Bancshares, Inc., in exchange for 157,563 shares of Company stock by
merger of Monycor Bancshares, Inc., into Merger. Monycor Bancshares, Inc.
owned 98.4% of Monycor Bank of Superior. This acquisition will be accounted
for using the pooling-of-interests method of accounting. Financial information
presented in future reports will be restated to include Monycor Bancshares,
Inc. and its subsidiary.
Pro forma unaudited results of operations, assuming the acquisition
occurred on January 1, 1993, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income (in thousands) $41,680 $38,248 $35,436
Net income (in thousands) 11,709 8,126 8,497
Earnings per share 1.97 1.35 1.47
</TABLE>
NOTE 20 - PENDING ACQUISITIONS
On January 11, 1996, the Company signed a Plan and Agreement of Merger and
Reorganization to acquire Bradley State Bank in Tomahawk for approximately $6
million in cash. This transaction is subject to regulatory and stockholder
approval. The transaction is expected to be completed in the second quarter of
1996.
On February 22, 1996, the Company signed a Plan and Agreement of Merger and
Reorganization to acquire 100% of the outstanding shares of Community State
Bank in Algoma in exchange for Company stock. This transaction is subject to
regulatory and stockholder approval. The transaction is expected to be
completed in the fourth quarter of 1996.
NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates, methods, and assumptions are set forth below for the
Company's financial instruments:
Cash and cash equivalents - The carrying values approximate the fair value
for these assets.
Investment securities - Fair values are based on quoted market prices, where
available. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.
Interest-bearing deposits in other financial institutions are included in
this category.
Loans - Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as commercial,
residential mortgage, and other consumer. The fair value of loans is
calculated by discounting scheduled cash flows through the estimated
maturity using estimated market discount rates that reflect the credit and
interest rate risk inherent in the loan. The estimate of maturity is based
on the Company's repayment schedules for each loan classification.
The methodology in determining fair value of nonaccrual loans is to average
them into the blended interest rate at 0% interest. This has the effect of
decreasing the carrying amount below the risk-free rate amount and therefore
discounts the estimated fair value.
Impaired loans are measured at the estimated fair value of the expected
future cash flows at the loan's effective interest rate or the fair value of
the collateral for loans which are collateral dependent. Therefore, the
carrying values of impaired loans approximate the estimated fair values for
these assets.
Deposit liabilities - The fair value of deposits with no stated maturity,
such as non-interest-bearing demand deposits, savings, NOW accounts, money
market, and checking accounts, is equal to the amount payable on demand at
the reporting date. The fair value of certificates of deposit is based on
the discounted value of contractual cash flows. The discount rate reflects
the credit quality and operating expense factors of the Company.
Short-term and other borrowings - Rates currently available for debt with
similar terms and remaining maturities are used to estimate the fair value
of existing debt. The fair value of borrowed funds due on demand is the
amount payable at the reporting date.
<PAGE> 60
F&M BANCORPORATION
58
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Off-balance-sheet instruments - The fair value of commitments is estimated
using the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements, the current interest
rates, and the present creditworthiness of the counterparties. Since this
amount is immaterial, no amounts for fair value are presented.
The following table presents information for financial instruments:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT DECEMBER 31, 1994
-----------------------------------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 59,005,046 $ 59,005,046 $ 40,193,434 $ 40,193,434
Investment securities 176,378,849 177,975,664 171,892,084 170,173,384
Loans 680,022,665 630,620,843
Allowance for credit losses (8,602,625) (7,751,629)
- -------------------------------------------------------------------------------------------------------------------------
Net loans 671,420,040 696,528,268 622,869,214 619,187,689
- -------------------------------------------------------------------------------------------------------------------------
Total financial assets $906,803,935 $933,508,978 $834,954,732 $829,554,507
=========================================================================================================================
Financial liabilities:
Deposits $822,188,574 $823,616,918 $762,235,292 $749,539,643
Short-term and other borrowings 23,027,378 23,135,846 26,212,718 26,212,718
- -------------------------------------------------------------------------------------------------------------------------
Total financial liabilities $845,215,952 $846,752,764 $788,448,010 $775,752,361
=========================================================================================================================
</TABLE>
Limitations - Fair value estimates are madc point in time based
on relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of
the Company's financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance-sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial assets or liabilities include premises and equipment,
other assets, and other liabilities. In addition, the tax ramifications
related to the realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been considered in the
estimates.
NOTE 22 - RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 and 1993 consolidated
financial statements to conform to the 1995 classifications.
<PAGE> 61
F&M BANCORPORATION
59
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 23 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 2,764,419 $ 814,244
Investment securities available for sale - Stated at fair value 210,000 531,375
Investment in subsidiaries 80,945,615 72,281,454
Loans 232,000
Loans receivable from subsidiaries 300,000 1,500,000
Premises and equipment - Net 1,524,448 1,522,078
Other assets 202,748 318,498
- -----------------------------------------------------------------------------------------
TOTAL ASSETS $86,179,230 $76,967,649
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Other borrowings $ $ 1,000,000
Accrued expenses 287,396 397,310
- -----------------------------------------------------------------------------------------
Total liabilities 287,396 1,397,310
- -----------------------------------------------------------------------------------------
Total stockholders' equity 85,891,834 75,570,339
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $86,179,230 $76,967,649
=========================================================================================
</TABLE>
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends received from subsidiaries $6,225,255 $1,896,250 $2,445,723
Interest and dividends 57,248 374,026 192,390
Data processing fees 1,190,543 651,388 517,475
Management and service fees 1,850,964 1,568,032 426,162
- ------------------------------------------------------------------------------------------
Total income 9,324,010 4,489,696 3,581,750
- ------------------------------------------------------------------------------------------
Expenses:
Salaries and benefits 1,309,533 1,244,157 1,372,763
Interest 17,655 359,295 440,978
Other 1,891,972 1,677,849 769,892
- ------------------------------------------------------------------------------------------
Total expenses 3,219,160 3,281,301 2,583,633
- ------------------------------------------------------------------------------------------
Income before provision (credit) for income
taxes and equity in undistributed net
income of subsidiaries 6,104,850 1,208,395 998,117
Provision (credit) for income taxes 21,500 (247,000) (526,600)
- ------------------------------------------------------------------------------------------
Income before equity in undistributed
net income of subsidiaries 6,083,350 1,455,395 1,524,717
Equity in undistributed net income of
subsidiaries 5,274,004 6,308,737 6,556,797
- ------------------------------------------------------------------------------------------
NET INCOME $11,357,354 $7,764,132 $8,081,514
==========================================================================================
</TABLE>
<PAGE> 62
F&M BANCORPORATION
60
........
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 23 - PARENT COMPANY ONLY FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income $11,357,354 $ 7,764,132 $ 8,081,514
- -------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of investments available for sale (5,156)
Provision for depreciation and amortization 189,007 163,832 130,060
Equity in undistributed net income of subsidiaries (5,274,004) (6,308,737) (6,556,797)
Loss on sale of premises and equipment 26,869
Change in other assets 91,800 (33,227) (14,293)
Change in accrued expenses (142,740) (11,714) 52,988
- -------------------------------------------------------------------------------------------------------------
Total adjustments (5,141,093) (6,162,977) (6,388,042)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 6,216,261 1,601,155 1,693,472
- -------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital contributed to subsidiary banks (250,000)
Purchase of equity in subsidiary banks (23,009) (19,475)
Payment for purchase of securities:
Available for sale (417,312)
Held for sale (9,901,539)
Proceeds from sales and maturities of
investment securities available for sale 423,081 9,797,477
Net (increase) decrease in loans 968,000 (720,000) 320,000
Capital expenditures (167,427) (26,840) (718,021)
Proceeds from sale of premises and equipment 23,600
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 950,645 8,656,925 (10,319,035)
- -------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 11,175,094
Proceeds from exercise of stock options 106,212 35,330
Principal payments on other borrowings (1,000,000) (7,250,000) (2,500,000)
Purchase of shares of treasury common stock (845,625) (110,000)
Dividends paid (3,477,318) (2,298,775) (1,219,640)
Sale of shares of common stock to
dividend reinvestment plan 234,765
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (5,216,731) (9,623,445) 7,690,219
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,950,175 634,635 (935,344)
Cash and cash equivalents at beginning 814,244 179,609 1,114,953
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end $ 2,764,419 $ 814,244 $ 179,609
=============================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash received during the year for income taxes $ 4,858,774 $ 2,666,876 $ 2,510,482
Cash paid during the year for:
Interest 49,752 360,090 448,076
Income taxes 5,108,147 2,372,978 1,942,957
</TABLE>
<PAGE> 63
F&M BANCORPORATION
62
........
OFFICERS AND DIRECTORS
As of December 31, 1995
<TABLE>
<S> <C> <C>
F&M BANCORPORATION, INC. F&M BANK--FENNIMORE F&M BANK--KIEL
Officers
Officers Douglas A. Martin Officers
Gail E. Janssen President & Chairman Gail E. Janssen
Chairman, President & CEO Chairman
Martin J. Tollefson
Richard Grall Vice President Audrey Mertens
Regional Vice President President
Fox Valley Region Jack A. Petrick
Assistant Vice President Charles M. Thiel
John W. Johnson Senior Vice President/Ag Lender
Regional Vice President Marlene J. Patterson
Northeast Region Assistant Vice President Mildred V. Thielman
Loan Officer
Douglas A. Martin Pamela F. Kreul
Regional Vice President Cashier & Security Officer Rose Ann Werdeo
Southwest Region Cashier
Lou Ann Blackburn
Maynard A. Kunschke Assistant Vice President Mary K. Olm
Chief Financial Officer Assistant Cashier
Secretary Nancy Vogel
Administrative Credit Officer Directors
Daniel E. Voet Paul L. Berge, DVM
Vice President--Accounting Directors Gerald L. Chopp
Treasurer Thomas G. Kenney Richard Grall
James M. Larson Robert E. Hennings
Randall A. Haak Vern Lewison Gail E. Janssen
Assistant Secretary Douglas A. Martin John I. Laun
Richard Mudler Jonathan P. Laun
Donna R. Habert Directors Emeritus Audrey Mertens
Vice President--Data Processing Alice Sybil Koenecke Chris S. Roeck
John N. Kramer Charles M. Thiel
Janet M. Lakso
Vice President--Administration F&M BANK--HILBERT F&M BANK--LAKELAND
Offices--Hilbert/Potter/Forest Junction Offices--Boulder Junction/Hazelhurst/
Bart Salazar Manitowish Waters/Minocqua/Woodruff
Vice President--Investments Officers
Gail E. Janssen Officers
Linda K. Seefeldt Chairman Gail E. Janssen
Vice President--Marketing Chairman
Mark J. Hillegas
Peter H. Smaby President David J. McDonald
Vice President--Credit Administration President
Lyndoris I. Jandrey
Darlene M. Vanden Boogart Assistant Cashier Nancy Blask
Vice President--Audit Executive Vice President &
Marjorie A. Thiel Chief Financial Officer
Connie Verbruggen, SPHR Assistant Cashier
Vice President--Human Resources Margie Kain
Janine Propson Vice President & Secretary to the Board
Directors Assistant Cashier
Gene Tesch
Otto L. Cox Jerry A. Jensen Vice President & Chief Lending Officer
President & CEO Credit Officer
Affinity Health System Thomas A. Ward
Michael J. Resch Vice President--Loans
Paul J. Hernke Credit Officer
Retired, Chief Executive Officer Peg Schuenemann
Hernke Foods, Inc. Directors Assistant Vice President--Loans
Richard Grall
Gail E. Janssen Mark J. Hillegas Nellie Herrmann
Chairman Gail E. Janssen Assistant Vice President & Manager--
Walter Keller Manitowish Waters Office
F&M Bancorporation, Inc. Robert Mathes
John W. Johnson Joseph Pethan Ruth Howard
Regional Vice President Dallas G. Schwalenberg Assistant Vice President--Account Services
Northeast Region Linus Vanderloop
Rose M. Hunter
Douglas A. Martin Directors Emeritus Mortgage Loan Underwriting Officer
Regional Vice President Victor Albers
Southwest Region Bernard Fassbender Michelle Mauzer
Clyde Schley Operations Officer
Duane G. Peppler Raymond E. Winarski
Director Judy Pearson
F&M Bank--Winnebago County F&M BANK--KAUKAUNA Manager--Boulder Junction Office
Offices--Kaukauna/Darboy/
L.S. Rice Supermarket Bank Lynda Conner
Pharmacist Manager--Hazelhurst Office
President--Rice Pharmacy, Inc. Officers
Gail E. Janssen Mary Linder
Robert C. Safford Chaiman Manager--Minocqua Office
Real Estate Developer
R. E. Management, Inc. Robert F. Quasius Directors
President Gail E. Janssen
Glenn L. Schilling David J. McDonald
Retired, Vice President James W. Natrop James G. Petersen
Thilmany Pulp & Paper Company Senior Vice President Roger Pukall
Gary C. Rosholt
Joseph F. Walsh Alan D. Thiede Don G. Wachholz
Retired, President Vice President
Hartjes-Walsh Insurance Management Inc. Directors Emeritus
Rick L. Risberg Rudy Beller
F&M BANK--APPLETON Vice President William Yeschek
Offices--3 in Appleton
Mary L. Schaffer F&M BANK--LANCASTER
Officers Vice President & Controller
Gail E. Janssen Officers
Chairman Dennis Miller Douglas A. Martin
Assistant Vice President Chairman
Richard Grall
President Brent J. Walbrun Will S. Johnson
Assistant Vice President President & Trust Officer
Anthony T. Busch
Vice President Directors Patrick C. Friar
Richard Grall Senior Vice President
Otto Cox Thomas Gustman
Vice President Gail E. Janssen Carol M. Schwartz
Bob Quasius Vice President,
William Kahl Glenn L. Schilling Cashier & Assistant Trust Officer
Assistant Vice President Donald Swetz
Joseph F. Walsh Karen L. Eveland
David Baker M. L. Wians Vice President--Loans & Compliance Officer
Assistant Vice President
Directors Emeritus Marcia Foley
Kellyn Wilson Gene Haen Personal Banking Officer--Loans
Assistant Vice President David I. Hartjes
Joseph Van De Loo Karen L. Benson
Joan Anger Assistant Vice President
Operations Officer &Security Officer
Directors Sandy Wiest
Otto Cox Personal Banking Officer
Richard Grall
Paul J. Hoffman
Gail E. Janssen
</TABLE>
<PAGE> 64
F&M BANCORPORATION
63
.........
OFFICERS AND DIRECTORS
As of December 31, 1995
<TABLE>
<S> <C> <C>
Directors Directors James E. Shie
Everett Gillilan Francis Boyle Assistant Vice President &Manager--
Will S. Johnson William E. Burmeister Redgranite Office
Douglas A. Martin David Gustman
William J. Murray Gail E. Janssen Duane N. Stelter
William J. Seipp John Johnson Assistant Vice President &Manager--
John D. Walker Robert Karcz Wild Rose Office
Ben Laird
Director Emeritus Douglas LaViolette Douglas J. Eskritt
Jules F. Brown Stephen N. Peplinski Assistant Vice President &Manager--
Plainfield Office
F&M BANK--NEW LONDON F&M BANK--PORTAGE COUNTY
Offices--Amherst Junction/Custer/Stevens Point Johnathan C. Zabrowski
Officers Assistant Vice President &Manager--
Gail E. Janssen Officers Lakes Office
Chairman Gail E. Janssen
Chairman Linda L. Russell
David L. Koth Assistant Cashier--Loan Officer
President Terry Anderson
President Kevin K. Kawleski
Beverly J. Carter Assistant Cashier
Assistant Vice President Barbara E. Konkol
Vice President & Cashier Susan C. Kramer
Thomas A. Reil Assistant Cashier
Vice President & Cashier LaVerne H. Slais
Vice President Marilyn A. Brandt
Bobbye Allen Assistant Cashier
Assistant Cashier Nick S. Trzebiatowski
Vice President & Senior Loan Officer Sally J. Dutcher
Cindy Berkhahn Assistant Cashier
Loan Officer William J. Wallner
Vice President Kitty F. Davies
Directors Assistant Cashier
Richard Grall Elizabeth A. Koshnick
Ivan Gruetzmacher Assistant Vice President Jaclyn R. Lemke
David L. Koth Assistant Cashier
Gail E. Janssen Lyndel P. Soik
Harold Rieckman Assistant Vice President Jean A. Maple
Roger Steingraber Assistant Cashier
Terri M. Suski
Director Emeritus Assistant Vice President & Directors
Orville Johnson Operations Officer William N. Belter
Janet Brilowski Peder H. Culver
F&M BANK--NORTHEAST Assistant Cashier Gail E. Janssen
Offices--Green Bay/Lena/Marinette/ Ray D. Piehl
Oconto/Pulaski/Sobieski/Suamico/ Karen L. Schanock Rodney Radloff
Suring/Townsend Marketing Officer David H. Stelter
Norbert B. Walejko
Officers Directors George C. Zettelmeier
Gail E. Janssen Terry Anderson
Chairman Dr. Richard P. Boyer F&M BANK--WINNEBAGO COUNTY
Jerome Bushman Offices--Omro/Oshkosh/Winneconne
John Johnson Helen R. Godfrey
President Gail E. Janssen Officers
Barbara E. Konkol Gail E. Janssen
Robert Jossie John Migas Chairman
Senior Vice President, Alfred C. Noel
Chief Operations Officer &Cashier Ronald T. Skrenes Tim C. Huth
LaVerne H. Slais President
Jerry Lackey Donald Wolding Lawrence J. Schuster
Senior Vice President & Office Manager Louis E. Wysocki Vice President & Cashier
Thomas Lynn Directors Emeritus Mark D. Troudt
Senior Vice President & Office Manager Edith D. Kraus Vice President
Leonard Kruzitski
Sam McMahon John E. Roberts Kenneth W. Tritt
Senior Vice President & Office Manager John Walkowicz Vice President & Manager of
Winneconne Office
Richard Zonick F&M BANK--POTOSI
Senior Vice President & Office Manager Offices--Potosi/Dickeyville Lynn M. McBrair
Assistant Vice President & Manager
Greg Goetzman Officers of Oshkosh Office
Vice President, Office Manager &Loan Officer Douglas A. Martin
Chairman Doris M. Wright
Jed Keller Assistant Vice President
Vice President &Commercial Loan Officer Neil C. Pier
President Michael J. Freund
Sheila LaPlante Assistant Vice President
Vice President &Controller LuAnn D. Fecht
Executive Vice President & Cashier Sue H. Simson
Tari Novinska Assistant Cashier
Vice President, Human Resources Officer & Steven R. Trumble
Education Officer Ag & Commercial Loan Officer Susan K. Bohlssen
Assistant Cashier
James Olson Karen M. Meyer
Vice President &Loan Officer Credit Services Officer & Office Supervisor Michael H. Dunbar
Loan Officer
John Olson Directors
Vice President &Ag Loan Officer John J. Brunner Directors
Douglas A. Martin Robert A. Beiser
Rick Ripley Neil C. Pier John L. Freund
Vice President &Loan Officer Guy P. Richard Tim C. Huth
Michael D. Walsh Gail E. Janssen
Linda Bednarik Directors Emeritus Duane G. Peppler
Office Manager, Loan Officer, Security William L. Reinecke Ronald L. Wissink
Officer & CRA Officer Cyril L. Schaefer
Directors Emeritus
Mary Jo Denis F&M BANK--WAUSHARA COUNTY Roy J. Plansky
Office Manager & Loan Officer Offices--Lakes/Plainfield/Redgranite/Wautoma/ Leonard S. Rice
Arthur J. Sullivan
Andrew School Wild Rose
Office Manager &Loan Officer Officers
Pat Mroczkowski Gail E. Janssen
Marketing Officer Chairman
Dave Retlick Ray D. Piehl
Compliance Officer, Loan Review Officer President
&Bank Secrecy Officer
Alan L. Walters
Marty Carpenter Vice President
Loan Officer
Randall L. Behringer
Suzanne Johanski Cashier & Assistant Vice President
Loan Officer
Edward A. Schroeder
Deb Stachura Assistant Vice President
Loan Officer
</TABLE>
<PAGE> 65
F&M BANCORPORATION
63
........
F&M BANK LOCATIONS
<TABLE>
<S> <C> <C> <C>
F&M BANK--APPLETON F&M BANK--LAKELAND OCONTO F&M BANK--WAUSHARA COUNTY
1935 East Calumet Street Hwy. 51 & Townline Road 1035 Main Street 123 East Main Street
Appleton, WI 54915 Woodruff, WI 54568 Oconto, WI 54153 Wautoma, WI 54982
414/739-3202 715/356-3214 414/834-2323 414/787-3351
APPLETON DOWNTOWN BOULDER JUNCTION SOBIESKI PLAINFIELD
103 West College Avenue Main Street 1301 Financial Way 75 West North Street
Appleton, WI 54911 Boulder Junction, WI 54512 Sobieski, WI 54171 Plainfield, WI #54966
414/730-4660 715/385-2200 414/826-7611 715/335-6352
414/822-8020
APPLETON WEST SIDE HAZELHURST REDGRANITE
333 Nicolet Road Hwy. 51 South SUAMICO 250 Bannerman Avenue
Appleton, WI 54914 Hazelhurst, WI 54531 1721 School Lane Redgranite, WI 54970
414/730-4670 715/356-6520 Suamico, WI 54173 414/566-2337
414/434-3771
F&M BANK--FENNIMORE MANITOWISH WATERS WAUTOMA LAKES
1275 10th Street Main Street SURING Hwy. 21 & 73 East
Fennimore, WI 53809 Manitowish Waters, WI 54545 725 East Main Street Wautoma,WI 54982
608/822-3248 715/543-8302 Suring, WI 54174 414/787-7870
414/842-2131
F&M BANK--HILBERT MINOCQUA WILD ROSE
69 South 8th Street 575 Hwy. 51 TOWNSEND 460 Main Street
Hilbert, WI 54129 Minocqua, WI 54548 17953 Hwy. 32 Wild Rose, WI 54984
414/853-3551 715/356-1444 Townsend, WI 54175 414/622-3264
715/276-2265
FOREST JUNCTION F&M BANK--LANCASTER F&M BANK--WINNEBAGO COUNTY
Hwy. 10 302 South Madison F&M BANK--PORTAGE COUNTY 124 East Main Street
Forest Junction, WI 54123 Lancaster, WI 53813 31 Park Ridge Drive Omro, WI 54963
414/989-1707 608/723-2191 Stevens Point, WI 54481 414/685-2771
715/341-6691
POTTER F&M BANK--NEW LONDON OSHKOSH
202 Central Street 401 North Water Street AMHERST JUNCTION 2101 West 9th Avenue
Potter, WI 54160 New London, WI 54961 3980 Second Street Oshkosh, WI 54903
414/853-3571 414/982-4410 Amherst Junction, WI 54407 414/426-3000
715/824-3250
F&M BANK--KAUKAUNA F&M BANK--NORTHEAST WINNECONNE
Fourth Street Plaza 160 East Pulaski CUSTER 124 West Main Street
Kaukauna, WI 54130 Pulaski, WI 54162 Hwy. 10 & J Winneconne, WI 54986
414/766-8160 414/822-3225 Custer, WI 54423 414/582-4351
715/592-4119
DARBOY GREEN BAY 1996 NEW LOCATIONS
Corner of KK & N 1601 South Webster Avenue F&M BANK--POTOSI
Darboy, WI 54915 Green Bay, WI 54301 102 South Main Street BRADLEY BANK
414/739-9797 414/436-1601 Potosi, WI 53820 227 West Wisconsin Avenue
608/763-2211 Tomahawk, WI 54487
SUPERMARKET BANK LENA 715/453-2112
2400 Crooks Avenue 301 West Main Street DICKEYVILLE
Kaukauna, WI 54130 Lena, WI 54139 100 Rosalyn Avenue COMMUNITY STATE BANK
414/766-8176 414/829-5281 Dickeyville, WI 53808 208 Steele Street
608/568-7557 Algoma, WI 54201
F&M BANK--KIEL MARINETTE 414/487-5261
514 Fremont Street 1740 Stephenson Street
Kiel, WI 53042 Marinette, WI 54143 216 West Main Street
414/894-2257 715/732-7828 Forestville, WI 54213
414/856-6218
MARINETTE
2201 Roosevelt Road MONYCOR BANK
Marinette, WI 54143 1612 Belknap Street
715/732-7838 Superior, WI 54880
715/392-8202
</TABLE>
[F&M LOGO]
<TABLE>
<S> <C> <C>
CORPORATE OFFICE 1996 DIVIDEND DATES DIVIDEND REINVESTMENT PLAN
F&M Bancorporation, Inc. The Board of Directors for F&M Shareholders may acquire additional shares
One Bank Avenue, PO Box 410 Bancorporation has adopted the of F&M Bancorporation stock.
Kaukauna, WI 54130-0410 following dividend record and Information about this plan may be obtained
414/766-1717 u e-mail: payment dates for 1996: from Firstar Trust Company or F&M
[email protected] Bancorporation.
STOCK TRANSFER AGENT RECORD DATE PAYMENT DATE FINANCIAL INFORMATION
Firstar Trust Company February 16 March 1 Shareholders, analysts, or potential investors
Corporate Trust Services May 17 June 1 desiring a copy of the Annual Report on
615 East Michigan Street, August 16 September 1 Form 10-K of F&M Bancorporation, Inc., as filed
PO Box 2077 November 18 December 1 with the Securities and Exchange Commission,
Milwaukee, WI 53201-2077 may make their requests to Janet M. Lakso,
414/276-3737 or 800/637-7549 Corporate Secretary, at the address of the
Corporate office.
</TABLE>
<PAGE> 66
[F&M BANCORPORATION, INC.]
<PAGE> 1
EXHIBIT 21
1995 10-K
F&M BANCORPORATION, INC.
LIST OF SUBSIDIARIES
F&M Bank-Kaukauna*
F&M Merger Corporation
F&M Bank-Fennimore*
F&M Bank-Kiel*
F&M Bank-Lakeland*
F&M Bank-Northeast*
F&M Bank-Portage County*
F&M Bank-Potosi*
F&M Bank-Superior*
F&M Bank-Winnebago County*
BancUnion Corporation
F&M Bank-Lancaster*
F&M Bank-Appleton*
F&M Bank-Hilbert*
F&M Bank-New London*
F&M Bank-Waushara County*
Each of the above named subsidiaries is organized and existing under the
laws of the State of Wisconsin.
__________________
<PAGE> 2
*Each of these banks has a subsidiary organized and existing under the
laws of the State of Nevada which holds and manages that bank's investments.
<PAGE> 1
[Wipfli Ullrich Bertelson CPAs letterhead]
Exhibit 23
1995 10-K
Independent Accountants' Consent
We consent to incorporation by reference in the Registration Statement on Form
S-3 (No. 33-45385), and the Registration Statement on Form S-8 (Nos. 33-81178,
33-81180, and 33-81182) of F&M Bancorporation, Inc. of our report dated
February 2, 1996, relating to the consolidated balance sheets of F&M
Bancorporation, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1995, which report is incorporated by reference in the December 31, 1995 annual
report on Form 10-K of F&M Bancorporation, Inc.
/s/ WIPFLI ULLRICH BERTELSON CPAs
---------------------------------
Certified Public Accountants
Appleton, Wisconsin
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 38,887
<INT-BEARING-DEPOSITS> 551
<FED-FUNDS-SOLD> 20,118
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 109,879
<INVESTMENTS-CARRYING> 65,949
<INVESTMENTS-MARKET> 67,545
<LOANS> 680,023
<ALLOWANCE> 8,603
<TOTAL-ASSETS> 943,126
<DEPOSITS> 822,189
<SHORT-TERM> 12,194
<LIABILITIES-OTHER> 11,828
<LONG-TERM> 10,833
5,836
0
<COMMON> 0
<OTHER-SE> 80,055
<TOTAL-LIABILITIES-AND-EQUITY> 85,892
<INTEREST-LOAN> 61,654
<INTEREST-INVEST> 10,322
<INTEREST-OTHER> 620
<INTEREST-TOTAL> 72,596
<INTEREST-DEPOSIT> 30,307
<INTEREST-EXPENSE> 32,209
<INTEREST-INCOME-NET> 40,387
<LOAN-LOSSES> 1,599
<SECURITIES-GAINS> 37
<EXPENSE-OTHER> 26,512
<INCOME-PRETAX> 16,784
<INCOME-PRE-EXTRAORDINARY> 16,784
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,357
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.96
<YIELD-ACTUAL> 4.96
<LOANS-NON> 5,698
<LOANS-PAST> 210
<LOANS-TROUBLED> 481
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,752
<CHARGE-OFFS> 925
<RECOVERIES> 177
<ALLOWANCE-CLOSE> 8,603
<ALLOWANCE-DOMESTIC> 8,603
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
