<PAGE> 1
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
---------------------------
Date of Report: July 1, 1998
F & M BANCORPORATION, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 000-14553 39-1365327
- ----------------------------- --------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number Identification No.)
ONE BANK AVENUE, KAUKAUNA, WISCONSIN 54130
- ------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(920) 766-1717
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On July 1, 1998, F&M Bancorporation, Inc. ("F&M") completed its
previously announced acquisition of BancSecurity Corporation ("BancSecurity")
pursuant to an Agreement and Plan of Merger dated as of December 1, 1997 (the
"Agreement"). Under the Agreement, BancSecurity was merged with a wholly-owned
subsidiary of F&M (the "Merger") and became a wholly-owned subsidiary of F&M.
In the Merger, F&M issued an aggregate of approximately 3,625,000 shares of
F&M's Common Stock, $1.00 par value, at a 93.6064-for-1 share conversion ratio
determined under the Agreement.
The Agreement was negotiated at arm's length between the respective
officers of F&M and BancSecurity. None of such officers were affiliated with
the other party, its affiliates, its directors and officers and their
associates. BancSecurity was also assisted in the negotiations by its
investment advisor and counsel, neither of which is affiliated with F&M. As
contemplated by the Agreement, Ronald E. Fenton, president and chief executive
officer of BancSecurity, has been elected to F&M's board of directors.
F&M is accounting for the Merger using the pooling of interests method
of accounting.
BancSecurity is a bank holding company owning all of the outstanding
shares of three Iowa bank subsidiaries--Security Bank (Marshalltown), Security
Bank Jasper-Poweshiek, and Story County Bank and Trust. BancSecurity's
subsidiary banks maintain a total of 14 full-service offices in central Iowa,
offering general commercial and retail banking services and other related
financial services. Each of these banks is state chartered and a member of the
FDIC. The banks will be renamed in the near future to reflect their
affiliation with F&M.
-2-
<PAGE> 3
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
See "Index to Financial Statements--BancSecurity Corporation"
on the following page and the BancSecurity financial statements at pages F-1
through F-27 hereof, which are incorporated herein by reference.
(b) Pro Forma Financial Information
See "Index to Financial Statements--F&M Bancorporation, Inc.
Unaudited Pro Forma Financial Information" on the following page, and the F&M
pro forma financial statements at pages F-28 through F-32 hereof, which are
incorporated herein by reference.
(c) Exhibits
See the Exhibit Index, following the signatures to this Report,
which Exhibit Index is incorporated herein by reference.
-3-
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
Page No.
BANCSECURITY CORPORATION Herein
Independent Auditor's Report ............................... F-1
Consolidated Balance Sheets at March 31, 1998
(unaudited), December 31, 1997 and 1996.................. F-2
Consolidated Statements of Income for the
three months ended March 31, 1998
and 1997 (unaudited) and for the years ended
December 31, 1997, 1996 and 1995.......................... F-3
Consolidated Statements of Comprehensive
Income for the three months ended March 31,
1998 and 1997 (unaudited) and for the years
ended December 31, 1997, 1996 and 1995.................... F-4
Consolidated Statements of Stockholders'
Equity for the three months ended March 31,
1998 and 1997 (unaudited) and for the years
ended December 31, 1997, 1996 and 1995.................... F-5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and 1997
(unaudited) and for the years ended
December 31, 1997, 1996 and 1995.......................... F-6
Notes to Financial Statements............................... F-8
F&M BANCORPORATION, INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro Forma Consolidated Balance Sheet at
March 31, 1998............................................. F-28
Pro Forma Consolidated Statements of Income
for the quarter ended March 31, 1998 and
for the years ended December 31, 1997,
1996 and 1995.............................................. F-29
Notes to Pro Forma Financial Statements...................... F-32
-4-
<PAGE> 5
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
BancSecurity Corporation
Marshalltown, Iowa
We have audited the accompanying consolidated statements of financial condition
of BancSecurity Corporation and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity and cash
flows for the years ended December 31, 1997, 1996 and 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 above present
fairly, in all material respects, the financial position of BancSecurity
Corporation and subsidiaries as of December 31, 1997 and 1996, and the results
of its operations and its cash flows for the years ended December 31, 1997, 1996
and 1995, in conformity with generally accepted accounting principles.
McGladrey & Pullen, LLP
Des Moines, Iowa
January 28, 1998
F-1
<PAGE> 6
BANCSECURITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
March 31, ----------------------------------
ASSETS 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Cash and due from banks (Note 2) $ 9,777,767 $ 13,424,804 $ 13,349,069
Federal funds sold 15,450,000 2,475,000 1,575,000
---------------------------------------------------------
CASH AND CASH EQUIVALENTS 25,227,767 15,899,804 14,924,069
Interest-bearing deposits 566,980 631,024 413,792
Securities available for sale, net (Notes 3 and 7) 112,802,768 114,222,266 114,187,558
Securities held to maturity, fair value of $62,307,081 in 1998,
$67,280,724 in 1997 and $73,603,871 in 1996 (Note 3) 58,598,675 63,943,640 70,347,779
Loans, net (Notes 4, 7 and 11) 325,673,767 329,679,868 313,800,750
Bank premises and equipment, net (Note 5) 10,960,509 10,960,146 8,005,608
Accrued income receivable 4,672,412 4,763,558 4,813,523
Other assets (Notes 8 and 9) 6,548,696 6,572,919 5,147,232
---------------------------------------------------------
$ 545,051,574 $ 546,673,225 $ 531,640,311
=========================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits (Note 3):
Noninterest-bearing demand deposits $ 35,755,293 $ 39,488,503 $ 40,302,693
Interest-bearing demand deposits 37,622,940 39,052,227 38,208,054
Savings 159,634,345 141,772,495 126,041,887
Time (Note 6) 217,358,114 226,281,440 232,358,451
---------------------------------------------------------
450,370,692 446,594,665 436,911,085
Short-term borrowed funds (Notes 3 and 7) 23,198,434 27,085,015 25,724,491
Other borrowed funds (Note 7) 7,331,107 10,097,492 9,712,276
Accrued interest payable 3,562,276 4,058,953 3,745,492
Other liabilities (Note 8) 5,808,062 6,747,365 4,509,466
---------------------------------------------------------
490,270,571 494,583,490 480,602,810
---------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 10)
STOCKHOLDERS' EQUITY (Note 12)
Common stock, $25 par value; authorized 1,000,000 shares;
issued March 31, 1998 and December 31, 1997
38,726 shares and December 31, 1996 38,791 shares 968,150 968,150 969,775
Surplus 3,975,907 3,975,907 3,982,581
Retained earnings 46,787,791 45,370,448 44,059,979
Accumulated other comprehensive income, unrealized
appreciation on securities available for sale, net 3,049,155 1,775,230 2,025,166
---------------------------------------------------------
54,781,003 52,089,735 51,037,501
---------------------------------------------------------
$ 545,051,574 $ 546,673,225 $ 531,640,311
=========================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE> 7
BANCSECURITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months For the Year
Ended March 31, Ended December 31,
-----------------------------------------------------------------------------------
1998 1997 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans, interest and fees $ 7,089,414 $ 6,649,990 $ 27,531,364 $ 26,447,963 $ 25,340,018
Securities:
Taxable 2,430,307 2,608,057 10,434,892 10,414,043 9,449,902
Tax-exempt 508,337 475,497 1,927,722 2,082,137 2,323,790
Federal funds sold 76,920 15,780 97,949 132,367 343,448
Other 54,465 92,408 306,133 375,025 367,959
-----------------------------------------------------------------------------------
10,159,443 9,841,732 40,298,060 39,451,535 37,825,117
-----------------------------------------------------------------------------------
Interest expense:
Deposits 5,083,403 4,875,238 20,119,936 19,752,247 19,165,938
Short-term borrowings 303,113 273,033 1,247,567 1,115,797 1,061,453
Other borrowings 141,734 146,027 623,551 450,729 575,576
-----------------------------------------------------------------------------------
5,528,250 5,294,298 21,991,054 21,318,773 20,802,967
-----------------------------------------------------------------------------------
NET INTEREST INCOME 4,631,193 4,547,434 18,307,006 18,132,762 17,022,150
Provision for loan losses (Note 4) 1,200 77,898 2,352,805 695,114 1,092,507
-----------------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS 4,629,993 4,469,536 15,954,201 17,437,648 15,929,643
-----------------------------------------------------------------------------------
Noninterest income:
Trust fees 130,500 113,465 538,437 510,866 464,332
Service fees 437,737 391,200 1,684,443 1,655,461 1,542,878
Commissions income 266,427 212,494 950,103 812,870 820,631
Other fees and income 129,995 240,146 772,553 476,199 535,904
Securities gains, net (Note 3) - 18,370 20,741 156,977 40,316
-----------------------------------------------------------------------------------
964,659 975,675 3,966,277 3,612,373 3,404,061
-----------------------------------------------------------------------------------
Noninterest expense:
Personnel (Note 9) 1,807,121 1,649,115 7,149,103 6,369,253 5,833,652
Equipment 191,108 208,696 1,057,708 863,385 643,714
Occupancy 194,961 171,732 750,924 646,941 609,486
Merger costs - - 2,179,550 - -
Other 865,403 814,142 4,079,937 3,704,004 3,929,166
-----------------------------------------------------------------------------------
3,058,593 2,843,685 15,217,222 11,583,583 11,016,018
-----------------------------------------------------------------------------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 2,536,059 2,601,526 4,703,256 9,466,438 8,317,686
Provision for income taxes (Note 8) 702,411 743,900 1,644,768 2,693,460 2,266,058
-----------------------------------------------------------------------------------
NET INCOME $ 1,833,648 $ 1,857,626 $ 3,058,488 $ 6,772,978 $ 6,051,628
===================================================================================
EARNINGS PER COMMON
SHARE $ 47.35 $ 47.91 $ 78.92 $ 174.43 $ 155.65
===================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 8
BANCSECURITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the Three Months For the Year
Ended March 31, Ended December 31,
-----------------------------------------------------------------------------------
1998 1997 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net income $ 1,833,648 $ 1,857,626 $ 3,058,488 $ 6,772,978 $ 6,051,628
-----------------------------------------------------------------------------------
Other comprehensive income,
before tax:
Unrealized gains on securities:
Unrealized holding gains (losses)
arising during period 2,031,780 795,632 (419,363) 2,820,594 2,383,026
Less reclassification adjustments
for gains included in net income - 18,370 20,741 156,977 40,316
-----------------------------------------------------------------------------------
Other comprehensive income (loss),
before tax 2,031,780 777,262 (398,622) 2,663,617 2,342,710
Income tax expense (credit) related
to items of other comprehensive
income 757,855 289,919 (148,686) 993,529 873,830
-----------------------------------------------------------------------------------
Other comprehensive income (loss),
net of tax 1,273,925 487,343 (249,936) 1,670,088 1,468,880
-----------------------------------------------------------------------------------
Comprehensive income $ 3,107,573 $ 2,344,969 $ 2,808,552 $ 8,443,066 $ 7,520,508
===================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 9
BANCSECURITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998 AND YEARS ENDED DECEMBER 31, 1997, 1996 AND
1995
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
Stock Surplus Earnings Income Total
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 972,750 $ 3,994,799 $ 34,174,881 $ (1,113,802) $ 38,028,628
Comprehensive income - - 6,051,628 1,468,880 7,520,508
Cash dividends declared
($34.25 per share) - - (1,331,297) - (1,331,297)
Purchase and retirement of 40 -
shares of common stock (1,000) (4,107) (33,013) - (38,120)
--------------------------------------------------------------------------------------
Balance, December 31, 1995 971,750 3,990,692 38,862,199 355,078 44,179,719
Comprehensive income - - 6,772,978 1,670,088 8,443,066
Cash dividends declared
($38.50 per share) - - (1,493,454) - (1,493,454)
Purchase and retirement of 79
shares of common stock (1,975) (8,111) (81,744) - (91,830)
--------------------------------------------------------------------------------------
Balance, December 31, 1996 969,775 3,982,581 44,059,979 2,025,166 51,037,501
Comprehensive income - - 3,058,488 (249,936) 2,808,552
Cash dividends declared
($43.00 per share) - - (1,665,218) - (1,665,218)
Purchase and retirement of 65
shares of common stock (1,625) (6,674) (82,801) - (91,100)
--------------------------------------------------------------------------------------
Balance, December 31, 1997 968,150 3,975,907 45,370,448 1,775,230 52,089,735
Comprehensive income (unaudited) - - 1,833,648 1,273,925 3,107,573
Cash dividends declared (unaudited)
($10.75 per share) - - (416,305) - (416,305)
--------------------------------------------------------------------------------------
Balance, March 31, 1998 (unaudited) $ 968,150 $ 3,975,907 $ 46,787,791 $ 3,049,155 $ 54,781,003
======================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 10
BANCSECURITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
March 31, December 31,
------------------------------------------------------------------------------------
1998 1997 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 1,833,648 $ 1,857,626 $ 3,058,488 $ 6,772,978 $ 6,051,628
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 181,260 186,086 373,560 695,672 516,228
Provision for loan losses 1,200 77,898 2,352,805 695,114 1,092,507
Deferred taxes - - (794,300) (108,328) (369,575)
Amortization (accretion), net (166,945) 17,478 (195,824) 507,035 569,179
Stock dividends received - - - - (49,000)
Securities (gains), net - (18,370) (20,741) (156,977) (40,316)
(Gain) on sale of bank premises
and equipment - - (10,904) - (5,844)
Changes in assets and liabilities:
(Increase) decrease in accrued
income receivable 91,146 62,805 49,965 (308,570) (631,392)
(Increase) in other assets (733,631) (198,632) (800,277) (1,110,107) (592,953)
Increase (decrease) in accrued
interest payable and other
liabilities 229,238 433,781 2,379,596 (598,395) 1,985,567
------------------------------------------------------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,435,916 2,418,672 6,392,368 6,388,422 8,526,029
-----------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from maturities of
securities available for sale 12,535,340 5,777,129 50,433,172 28,080,368 19,893,160
Proceeds from the sales of securities
available for sale - 550,267 550,267 757,474 -
Proceeds from maturities and calls of
securities held to maturity 2,681,337 3,218,647 9,378,666 13,116,109 17,091,574
Purchase of securities available for sale (6,258,630) (12,959,700) (51,230,950) (28,555,489) (49,045,523)
Purchase of securities held to maturity - - (2,875,100) (9,321,115) (2,448,575)
(Increase) decrease in interest-bearing
deposits, net 64,044 1,991 (217,232) (8,956) (299,144)
(Increase) decrease in loans, net 4,010,041 342,529 (17,983,028) (18,943,906) (20,795,887)
Proceeds from sale of bank premises
and equipment - - 650,740 - 9,025
Purchase of bank premises and
equipment (181,623) (628,473) (3,967,934) (2,287,826) (2,183,795)
------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED
IN) INVESTING ACTIVITIES 12,850,509 (3,697,610) (15,261,399) (17,163,341) (37,779,165)
------------------------------------------------------------------------------------
</TABLE>
(Continued)
F-6
<PAGE> 11
BANCSECURITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------------------------------------------------------------------
1998 1997 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Net increase in deposits $ 3,776,027 $ 12,371,079 $ 9,683,580 $ 8,660,612 $ 37,265,781
Net increase (decrease) in
short-term borrowings (3,886,581) (3,621,738) 1,360,524 4,793,118 2,934,735
Proceeds from borrowings from
FHLB 36,200,000 40,900,000 148,775,000 123,550,000 75,775,000
Payments of principal to FHLB (38,900,000) (44,450,000) (148,525,000) (123,225,000) (82,975,000)
Proceeds from borrowings on other
debt 168,000
Payments of principal on other debt (66,385) (32,784) (32,784) (32,784) (32,784)
Dividends paid (2,081,523) (1,493,454) (1,493,454) (1,331,297) (1,196,483)
Purchase of common stock for
retirement (27,300) (91,100) (91,830) (38,120)
----------------------------------------------------------------------------------------------
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES (4,958,462) 3,645,803 9,844,766 12,322,819 31,733,129
----------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 9,327,963 2,366,865 975,735 1,547,900 2,479,993
CASH AND CASH EQUIVALENTS
Beginning 15,899,804 14,924,069 14,924,069 13,376,169 10,896,176
----------------------------------------------------------------------------------------------
Ending $ 25,227,767 $ 17,290,934 $ 15,899,804 $ 14,924,069 $ 13,376,169
==============================================================================================
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash payments for:
Interest on deposits $ 5,572,126 $ 5,143,819 $ 19,807,373 $ 20,172,747 $ 17,731,171
Other interest 552,801 425,177 1,870,220 1,569,306 1,633,030
Income taxes -- -- 2,612,890 3,143,813 2,402,649
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE> 12
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. ORGANIZATION AND NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and nature of business: BancSecurity Corporation (the Company) is a
holding company which owns 100% of the stock of its subsidiaries, Security Bank,
Story County Bank & Trust and Security Bank Jasper-Poweshiek. The banks are
state chartered banks that conduct operations from their main offices located in
Marshalltown, Story City and Grinnell, Iowa, and eleven branch offices located
in various Central Iowa communities.
Significant accounting policies are as follow:
Accounting estimates and assumptions: The consolidated financial statements
have been prepared in conformity with generally accepted accounting
principles. In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and contingent assets and liabilities as of the date of the
financial statements for the reporting period. Actual results could differ
from those estimates.
Principles of consolidation: The consolidated financial statements include
the accounts of BancSecurity Corporation and its wholly-owned bank
subsidiaries, Security Bank, Story County Bank & Trust and Security Bank
Jasper-Poweshiek. All material intercompany balances and transactions have
been eliminated in consolidation.
Unaudited interim financial statements: The accompanying unaudited
consolidated financial statements have been prepared in accordance with the
requirements for presentation of interim financial statements and, therefore,
do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles. In the opinion of
management, all adjustments consisting only of normal recurring adjustments
that are necessary for a fair presentation for interim periods presented have
been reflected. The results of operations for interim periods are not
necessarily indicative of the results of operations for the entire year.
Cash and cash equivalents: For purposes of reporting cash flows, cash and
cash equivalents include cash on hand and noninterest-bearing deposits in
correspondent banks and federal funds sold. Generally federal funds are
purchased and sold for one day periods.
Trust assets: Assets of the trust department, other than cash on deposit, are
not included in these consolidated financial statements because they are not
assets of the Company.
Investment in debt and equity securities: The Company has investments in debt
and equity securities. Debt securities consist primarily of obligations of
the U.S. government, state governments and domestic corporations.
F-8
<PAGE> 13
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Securities available for sale: Securities classified as available for sale
are those debt and equity securities that the Company intends to hold for an
indefinite period of time, but not necessarily to maturity. Any decision to
sell a security classified as available for sale would be based on various
factors, including significant movements in interest rates, changes in
maturity mix of the Company's assets and liabilities, liquidity needs,
regulatory capital considerations, and other similar factors. Securities
available for sale are carried at fair value. Unrealized appreciation or
depreciation are reported as increases or decreases in stockholders' equity,
net of the related deferred tax effect. Realized gains or losses, determined
on the basis of the cost of specific securities sold, are included in
earnings.
Securities held to maturity: Securities classified as held to maturity are
those debt securities the Company has both the intent and ability to hold to
maturity regardless of changes in market conditions, liquidity needs or
changes in general economic conditions. These securities are carried at cost
adjusted for amortization of premium and accretion of discounts, computed by
the interest method over their contractual lives.
Loans and allowance for loan losses: The Company grants commercial, real
estate, consumer and other loans to customers throughout Central Iowa.
Although the Company has a diversified loan portfolio, a substantial portion
of their debtors' ability to honor their contracts is dependent upon their
local economic sectors. Loans are stated at the amount of unpaid principal,
reduced by an allowance for loan losses.
The allowance for loan losses is maintained at a level considered adequate to
provide for losses that can be reasonably anticipated. The allowance is
increased by provisions charged to operating expense and reduced by net
charge-offs. The Company makes continuous credit reviews of the loan
portfolio and considers current economic conditions, historical loan loss
experience, and other factors in determining the adequacy of the allowance.
While management uses the best information available to make its evaluation,
future adjustments to the allowance may be necessary if there are significant
changes in economic conditions. Impaired loans are measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. A loan is impaired when it is probable the creditor
will be unable to collect all contractual principal and interest payments due
in accordance with the terms of the loan agreement.
Loan origination fees and direct origination costs are capitalized and
recognized as an adjustment of the yield of the related loan.
Interest on loans is accrued daily on the outstanding balances. Accrual of
interest is discontinued on a loan when management believes, after
considering collection efforts and other factors, that the borrower's
financial condition is such that collection of interest is doubtful and the
loan is deemed impaired.
Bank premises and equipment: Company premises and equipment are stated at
cost less accumulated depreciation. Buildings and improvements are
depreciated primarily on an accelerated basis over estimated useful lives of
10 to 39 years. Furniture and equipment are depreciated primarily on an
accelerated basis over estimated useful lives of 5 to 15 years.
F-9
<PAGE> 14
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax bases.
Earnings per common share: The equation for computing basic earnings per
share is "income available to common stockholders/weight-average shares of
common stock outstanding."
Note 2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Company is required to maintain reserve balances in cash or on deposit with
Federal Reserve Banks. The total of those required reserve balances was
approximately $1,676,000 at December 31, 1997.
F-10
<PAGE> 15
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. SECURITIES
Debt and equity securities have been classified in the consolidated statements
of financial condition according to management's intent. The carrying amount of
securities and their approximate fair values at March 31 and December 31 are as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale securities:
March 31, 1998 (unaudited):
Obligations of U.S.
Government agencies
and corporations $ 35,954,415 $ 139,140 $ -- $ 36,093,555
Obligations of states and
political subdivisions 4,285,000 19,227 -- 4,304,227
Corporate bonds 3,548,758 -- -- 3,548,758
Mortgage-backed securities 56,827,809 390,306 104,927 57,113,188
Other (equity securities) 7,323,700 4,419,340 -- 11,743,040
---------------------------------------------------------------------------
$ 107,939,682 $ 4,968,013 $ 104,927 $ 112,802,768
===========================================================================
December 31, 1997:
Obligations of U.S.
Government agencies
and corporations $ 44,968,302 $ 116,079 $ 18,610 $ 45,065,771
Obligations of states and
political subdivisions 1,485,000 -- -- 1,485,000
Corporate bonds 3,553,103 563 387 3,553,279
Mortgage-backed securities 54,088,354 307,551 310,311 54,085,594
Other (equity securities) 7,296,200 2,736,422 -- 10,032,622
---------------------------------------------------------------------------
$ 111,390,959 $ 3,160,615 $ 329,308 $ 114,222,266
===========================================================================
December 31, 1996:
U.S. Treasury $ 1,498,008 $ 1,524 $ $ 1,499,532
Obligations of U.S.
Government agencies
and corporations 30,351,071 76,786 44,621 30,383,236
Corporate bonds 3,566,215 -- -- 3,566,215
Mortgage-backed securities 66,254,322 280,737 351,652 66,183,407
Other (equity securities) 9,288,013 3,267,155 -- 12,555,168
---------------------------------------------------------------------------
$ 110,957,629 $ 3,626,202 $ 396,273 $ 114,187,558
===========================================================================
</TABLE>
F-11
<PAGE> 16
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held-to-maturity securities:
March 31, 1998 (unaudited):
Obligations of U.S.
Government agencies
and corporations $ 1,814,551 $ 9,899 $ -- $ 1,824,450
Obligations of states and
political subdivisions 24,085,896 2,326,837 -- 26,412,733
Mortgage-backed securities 32,698,228 1,377,429 5,759 34,069,898
-------------------------------------------------------------------------
$ 58,598,675 $ 3,714,165 $ 5,759 $ 62,307,081
=========================================================================
December 31, 1997:
Obligations of U.S.
Government agencies
and corporations $ 2,082,857 $ 11,491 $ 17 $ 2,094,331
Obligations of states and
political subdivisions 27,415,586 1,967,642 1,003 29,382,225
Mortgage-backed securities 34,445,197 1,391,831 32,860 35,804,168
-------------------------------------------------------------------------
$ 63,943,640 $ 3,370,964 $ 33,880 $ 67,280,724
=========================================================================
December 31, 1996:
Obligations of U.S.
Government agencies
and corporations $ 3,084,051 $ 18,777 $ 48 $ 3,102,780
Obligations of states and
political subdivisions 26,548,977 2,269,927 29,049 28,789,855
Mortgage-backed securities 40,714,751 1,124,773 128,288 41,711,236
-------------------------------------------------------------------------
$ 70,347,779 $ 3,413,477 $ 157,385 $ 73,603,871
=========================================================================
</TABLE>
F-12
<PAGE> 17
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of securities available for sale and held to
maturity as of December 31, 1997 by contractual maturities are shown below.
Maturities may differ from contractual 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
---------------------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 3,009,682 $ 3,026,300 $ 7,749,349 $ 7,849,381
Due after one year through
five years 10,038,103 10,056,229 11,673,287 12,483,790
Due after five years through
ten years 34,474,456 34,532,039 8,848,169 9,860,119
Due after ten years 2,484,164 2,489,482 1,227,638 1,283,266
---------------------------------------------------------------------------
50,006,405 50,104,050 29,498,443 31,476,556
Mortgage-backed securities,
subject to early payoff 54,088,354 54,085,594 34,445,197 35,804,168
Other (equity securities) 7,296,200 10,032,622
---------------------------------------------------------------------------
$ 111,390,959 $ 114,222,266 $ 63,943,640 $ 67,280,724
===========================================================================
</TABLE>
Gross realized gains and gross realized losses on sales of available-for-sale
securities were $22,145 and none, respectively in 1997; $116,262 and none,
respectively in 1996; none and none, respectively in 1995.
Securities with carrying amounts of $55,273,797 and $55,897,666 at December 31,
1997 and 1996, respectively, are pledged as collateral on public deposits and
for other purposes as required by law.
Note 4. LOANS
The composition of net loans is as follows:
<TABLE>
<CAPTION>
December 31,
March 31, -------------------------------------
1998 1997 1996
---------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Commercial and industrial $ 57,205,967 $ 54,686,635 $ 54,905,227
Agricultural 22,214,644 23,730,890 21,401,221
Real estate construction 776,372 3,557,104 4,974,106
Real estate mortgage 217,255,203 218,913,314 201,154,171
Installment 34,262,852 34,801,382 35,910,599
---------------------------------------------------------
331,715,038 335,689,325 318,345,324
Less allowance for loan losses 6,041,271 6,009,457 4,544,574
---------------------------------------------------------
$ 325,673,767 $ 329,679,868 $ 313,800,750
=========================================================
</TABLE>
F-13
<PAGE> 18
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------------------------------------------------------------------
1998 1997 1997 1996 1995
-------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Balance, beginning $ 6,009,457 $ 4,544,574 $ 4,544,574 $ 4,665,961 $ 3,884,662
Provision charged
to operations 1,200 77,898 2,352,805 695,114 1,092,507
Recoveries of amounts
charged off 43,309 54,000 260,003 156,238 223,601
-------------------------------------------------------------------------------------
6,053,966 4,676,472 7,157,382 5,517,313 5,200,770
Amounts charged off 12,695 9,000 1,147,925 972,739 534,809
-------------------------------------------------------------------------------------
Balance, ending $ 6,041,271 $ 4,667,472 $ 6,009,457 $ 4,544,574 $ 4,665,961
=====================================================================================
</TABLE>
Impairment of loans having recorded investments of approximately $1,698,000 at
March 31, 1998 (unaudited) and December 31, 1997 and $3,319,000 at December 31,
1996 has been recognized in conformity with FASB Statement No. 114, as amended
by FASB Statement No. 118. Recorded investments in other impaired loans were
approximately $3,667,000 at March 31, 1998 (unaudited) and December 31, 1997 and
$4,367,000 at December 31, 1996. The average recorded investment in impaired
loans during 1997 and 1996 was approximately $6,688,000 and $7,062,000,
respectively. The total allowance for loan losses related to these loans was
approximately $1,430,000 on March 31, 1998 (unaudited) and on December 31, 1997
and $741,000 on December 31, 1996, respectively.
Note 5. BANK PREMISES AND EQUIPMENT, NET
The major classes of bank premises and equipment and the total accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
December 31,
March 31, -----------------------------
1998 1997 1996
--------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Land $ 1,376,229 $ 1,373,241 $ 1,367,658
Buildings and improvements 10,554,591 10,426,733 7,690,178
Furniture and equipment 5,585,288 5,534,510 4,948,551
--------------------------------------------------------
17,516,108 17,334,484 14,006,387
Less accumulated depreciation 6,555,599 6,374,338 6,000,779
--------------------------------------------------------
$ 10,960,509 $ 10,960,146 $ 8,005,608
========================================================
</TABLE>
F-14
<PAGE> 19
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 6. DEPOSITS
The aggregate amount of jumbo time deposits, each with a minimum denomination of
$100,000, was approximately $33,325,000 and $37,696,000 at December 31, 1997 and
1996, respectively.
At December 31, 1997, the approximate maturities of time deposits are as
follows:
<TABLE>
<S> <C>
1998 $ 166,007,000
1999 35,747,000
2000 13,178,000
2001 5,169,000
2002 and thereafter 6,180,000
-------------------
$ 226,281,000
===================
</TABLE>
Note 7. SHORT-TERM BORROWED FUNDS AND OTHER BORROWED FUNDS AT DECEMBER 31, 1997
Short-term borrowed funds of $27,085,015 and $25,724,491 at December 31, 1997
and 1996, respectively, consisted of securities sold under repurchase agreements
and treasury tax and loan accounts.
Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------------------
<S> <C> <C>
Average balance during the year $ 22,592,921 $ 23,902,600
Average interest rate during the year 4.59% 4.46%
Maximum month-end balance during the year 26,184,382 25,752,691
Mortgage-backed securities underlying the agreements at year-end:
Amortized cost $ 40,714,509 $ 39,082,602
Estimated fair value 40,989,853 39,272,726
</TABLE>
F-15
<PAGE> 20
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Mortgage-backed securities sold under repurchase agreements are held by the
Company. The agreements may be terminated by either the Company or the customers
upon written notice at any time.
Other borrowed funds at December 31, 1997 consist of the following:
The Company has notes payable to the Federal Home Loan Bank of Des Moines
(FHLB) totaling $8,000,000 at December 31, 1997. The notes are variable rate,
carrying interest rates ranging from 5.54% to 6.05% at December 31, 1997, and
include a $500,000 note due on June 26, 1998, a $5,000,000 note due on
December 30, 1998 and a $2,500,000 note due July 19, 2000 callable every 3
months.
At December 31, 1997, the Company also has lines of credit at the FHLB
totaling $6,500,000, of which $1,700,000 is outstanding. These lines of
credit and related borrowings expire in 1998. The lines of credit have
variable interest rates, 5.85% at December 31, 1997.
Pursuant to the collateral agreements with the FHLB these notes and lines of
credit are secured by $2,572,800 of stock in the FHLB and $147,661,000 of
qualifying first mortgage loans.
The Company also has unsecured notes payable to individuals totaling
$397,492. The notes bear interest from 7% to 8%. Aggregate maturities are:
1998 $66,385; 1999 $66,385; 2000 $66,385; 2001 $66,385; 2002 $66,385 and
thereafter $65,567.
Note 8. INCOME TAXES
Net deferred tax assets are included in other assets and consist of the
following components:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1997 1996
---------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for losses $ 1,872,000 $ 1,331,500
Other 530,369 363,417
---------------------------------------
2,402,369 1,694,917
---------------------------------------
Deferred tax liabilities:
Prepaid pension costs 138,891 225,739
Unrealized appreciation on securities 1,056,078 1,204,764
---------------------------------------
1,194,969 1,430,503
---------------------------------------
Net deferred tax assets $ 1,207,400 $ 264,414
=======================================
</TABLE>
F-16
<PAGE> 21
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1997 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 2,024,570 $ 2,347,694 $ 2,228,515
State 414,498 454,094 407,118
Deferred (794,300) (108,328) (369,575)
-----------------------------------------------------------
$ 1,644,768 $ 2,693,460 $ 2,266,058
===========================================================
</TABLE>
Taxes on income differ from the "expected" amounts computed by applying the
federal income tax rate of 34% to income before taxes for the following reasons:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------------
1997 1996 1995
-------------------------------------------------------------------------------------
Percent of Percent of Percent of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected"
taxes on net income $ 1,599,107 34.0% $ 3,218,589 34.0% $ 2,828,013 34.0%
State income taxes, net of
federal benefit 200,024 4.3 280,533 3.0 289,541 3.5
Tax-exempt interest and
dividends (621,488) (13.2) (642,899) (6.8) (694,301) (8.3)
Merger expenses 744,730 15.8
Low income housing
credit (96,541) (2.1) (96,541) (1.0) (90,507) (1.1)
Other (181,064) (3.8) (66,222) (0.7) (66,688) (0.9)
-------------------------------------------------------------------------------------
PROVISION FOR
INCOME TAXES $ 1,644,768 35.0% $ 2,693,460 28.5% $ 2,266,058 27.2%
=====================================================================================
</TABLE>
Income taxes payable included in other liabilities were $465,360 and $639,182 at
December 31, 1997 and 1996, respectively.
F-17
<PAGE> 22
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all of its
employees. The plan is noncontributory on the part of employees and benefits are
payable based on years of credited service. The Company's funding policy is to
contribute annually an amount that will satisfy the funding requirements of
ERISA.
The components of pension expense are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1997 1996 1995
--------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 330,325 $ 305,119 $ 218,555
Interest cost on projected benefit obligation 434,246 391,259 353,265
Actual return on plan assets (516,066) (443,051) (582,218)
Net amortization and deferral (15,669) (34,898) 164,088
--------------------------------------------------------
NET PENSION EXPENSE $ 232,836 $ 218,429 $ 153,690
========================================================
</TABLE>
The following table sets forth the plan's funded status and the amounts
recognized in the accompanying consolidated statements of financial condition:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1997 1996 1995
--------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 4,721,743 $ 4,234,972 $ 3,841,436
========================================================
Accumulated benefits $ 4,811,644 $ 4,313,329 $ 3,893,924
========================================================
Projected benefits $ (6,753,977) $ (5,867,944) $ (5,287,985)
Plan assets at fair value, primarily corporate
bonds 6,629,365 6,285,625 5,642,532
--------------------------------------------------------
PLAN ASSETS, NET OF PROJECTED
BENEFIT OBLIGATION (124,612) 417,681 354,547
Unrecognized net loss 490,363 180,928 99,250
Unrecognized prior service cost 80,982 90,598 100,214
Unrecognized net (asset) (72,279) (81,917) (91,555)
--------------------------------------------------------
PREPAID PENSION COST IN OTHER
ASSETS $ 374,454 $ 607,290 $ 462,456
========================================================
</TABLE>
F-18
<PAGE> 23
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Assumptions used by the Company in the determination of pension plan information
consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 7.50% 7.50%
Rate of increase in compensation levels 5.50 5.50 5.50
Expected long-term rate of return on plan assets 8.50 8.50 8.50
</TABLE>
On March 1, 1995, the Company adopted a 401(k) savings plan covering all
employees who have completed one year of service and are twenty-one years of age
or older. The plan allows eligible employees to contribute up to fifteen percent
of their compensation, with the Company matching a portion of each employee's
contribution. The Company's contributions were $60,170, $56,850 and $43,669 for
the years ending December 31, 1997, 1996 and 1995, respectively.
Note 10. COMMITMENTS AND CONTINGENT LIABILITIES
Financial instruments with off-balance-sheet risk: 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.
These instruments involve, to varying degrees, elements of credit risk in excess
of the amount recognized in the consolidated statements of financial condition.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument is represented by the contractual amount
of those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as they do for on-balance-sheet
instruments. Loan commitments were approximately $41,594,000 and standby letters
of credit totaled approximately $4,340,000 as of December 31, 1997.
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. 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, crops, livestock, inventory,
property and equipment, residential real estate 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. Collateral held varies
as specified above and is required in instances which the Company deems
necessary.
F-19
<PAGE> 24
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Concentrations of credit risk: The majority of the Company's loans, commitments
to extend credit and standby letters of credit have been granted to customers in
the Company's market area. The concentrations of credit by type of loan are set
forth in Note 4. The distribution of commitments to extend credit approximates
the distribution of loans outstanding.
Contingent liabilities: Management believes that the aggregate liability as to
any legal proceedings pending against the Company, incidental to the ordinary
course of business, will not be material.
Note 11. TRANSACTIONS WITH RELATED PARTIES
The Company has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families and affiliated companies in which they are
principal stockholders (commonly referred to as related parties) on the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others.
Aggregate loan transactions with these persons and firms were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
March 31, --------------------------------------
1998 1997 1996
-----------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Balance, beginning $ 5,016,935 $ 3,543,559 $ 3,669,940
New loans 2,005,453 8,764,099 7,267,418
Repayments (1,537,860) (7,290,823) (7,393,799)
-----------------------------------------------------------
Balance, ending $ 5,484,528 $ 5,016,835 $ 3,543,559
===========================================================
Maximum unpaid balance during the year $ 5,484,528 $ 5,016,835 $ 3,669,940
===========================================================
</TABLE>
Note 12. REGULATORY CAPITAL REQUIREMENTS
The Company is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory - and possible additional discretionary - actions
by regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of the Company's
assets, liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and rations (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the
Company meets all capital adequacy requirements to which it is subject.
F-20
<PAGE> 25
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
As of December 31, 1997, the most recent notification from the federal banking
regulators categorized the Company as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as adequately
capitalized the Company must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. Management
believes there are no conditions or events since that notification that have
changed the institution's category.
The Company's actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
To Be Well Capitalized
Minimum For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
----------------------------------------------------------------------------------
(000's) (000's) (000's)
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1998
(unaudited):
Total capital (to risk
weighted assets) $ 56,426 17.9% $ 25,285 8.0% $ 31,606 10.0%
Tier 1 Capital (to risk
weighted assets) 51,732 16.4 12,643 4.0 18,964 6.0
Tier 1 (Core) Capital
(to average assets) 51,732 9.6 21,666 4.0 27,082 5.0
As of December 31, 1997:
Total capital (to risk
weighted assets) $ 54,817 17.1% $ 25,644 8.0% $ 32,055 10.0%
Tier 1 Capital (to risk
weighted assets) 50,314 15.7 12,822 4.0 19,233 6.0
Tier 1 (Core) Capital
(to average assets) 50,314 9.3 21,711 4.0 27,138 5.0
As of December 31, 1996:
Total capital (to risk
weighted assets) $ 52,762 17.3% $ 24,336 8.0% $ 30,420 10.0%
Tier 1 Capital (to risk
weighted assets) 48,943 16.1 12,168 4.0 18,252 6.0
Tier 1 (Core) Capital
(to average assets) 48,943 9.2 21,214 4.0 26,518 5.0
</TABLE>
Banking regulations restrict the amount of dividends that may be paid by the
Banks and the Company without prior approval of bank supervisory authorities.
F-21
<PAGE> 26
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 13. ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition, for which it
is practicable to estimate that value. In cases where quoted market prices are
not available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in estimating the
value of its financial instruments:
Cash and due from banks: The carrying amounts reported in the consolidated
statements of financial condition for cash and due from banks approximate
their fair values.
Interest-bearing deposits: The carrying amounts reported in the consolidated
statements of financial condition for interest-bearing deposits approximate
their fair values.
Securities: Fair values of securities are based on quoted market prices,
where available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments.
Federal funds sold: The carrying amounts reported in the consolidated
statements of financial condition for federal funds sold approximate their
fair values.
Loans and accrued income receivable: The fair values for loans are estimated
using discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers with similar credit
quality. The carrying amount of accrued income receivable approximates its
fair value.
Deposit liabilities and accrued interest payable: The carrying amount
reported in the consolidated statements of financial condition for demand and
savings deposits, which represents the amount payable on demand, approximates
their fair values. Fair values for fixed-rate and variable-rate time deposits
are estimated using a discounted cash flow calculation that applies interest
rates currently being offered to a schedule of aggregated expected maturities
on time deposits. The carrying value of accrued interest payable approximates
its fair value.
Securities sold under agreements to repurchase and other borrowed funds: The
carrying amounts of borrowings under repurchase agreements and other
short-term borrowings approximate their fair values. The fair values of the
Company's long-term borrowings (other than deposits) are estimated using
discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.
F-22
<PAGE> 27
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Commitments to extend credit and standby letters of credit: The fair value of
commitments and standby letters of credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. The carrying value and fair value of commitments to extend
credit and standby letters of credit are not significant.
The approximate carrying amounts and estimated fair values are as follows at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997
----------------------------------------
Carrying Fair
Amount Value
----------------------------------------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 13,425,000 $ 13,425,000
Interest bearing deposits 631,000 631,000
Securities available for sale 114,222,000 114,222,000
Securities held to maturity 63,944,000 67,281,000
Federal funds sold 2,475,000 2,475,000
Loans, net 329,680,000 333,271,000
Accrued income receivable 4,764,000 4,764,000
Financial liabilities:
Deposits 446,595,000 446,324,000
Securities sold under repurchase agreements 22,648,000 22,648,000
Other borrowed funds 14,534,000 14,534,000
Accrued interest payable 4,059,000 4,059,000
<CAPTION>
1996
--------------------------------------
Carrying Fair
Amount Value
--------------------------------------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 13,349,000 $ 13,349,000
Interest bearing deposits 414,000 414,000
Securities available for sale 114,188,000 114,188,000
Securities held to maturity 70,348,000 73,604,000
Federal funds sold 1,575,000 1,575,000
Loans, net 313,801,000 314,610,000
Accrued income receivable 4,814,000 4,814,000
Financial liabilities:
Deposits 436,911,000 436,928,000
Securities sold under repurchase agreements 23,482,000 23,482,000
Other borrowed funds 11,954,000 11,954,000
Accrued interest payable 3,745,000 3,745,000
</TABLE>
F-23
<PAGE> 28
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 14. PENDING MERGER
In December 1997 the Company entered into a Definitive Agreement with F&M
Bancorporation, Inc. (F&M) located in Kaukauna, Wisconsin.
The Definitive Agreement provides for a 100% stock-for-stock exchange with the
Company's stockholders. F&M will issue stock with an aggregate value of $145
million, based on F&M common stock trading values between $35.80 and $40.00 per
share. The price may be greater or less if F&M stock is more than or less than
the values described. This transaction is subject to regulatory approvals,
shareholder approvals, and other customary conditions, with an estimated
completion date in the second quarter of 1998.
Note 15. RECLASSIFICATION
Certain reclassifications on the December 31, 1996 consolidated statements of
financial condition and income have been made to be consistent with the
classifications as of December 31, 1997 with no effect on retained earnings.
F-24
<PAGE> 29
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 16. PARENT COMPANY ONLY FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1998 AND DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
December 31,
March 31, -------------------------------------
ASSETS 1998 1997 1996
--------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 630 $ 860 $ 900
Interest bearing deposits 202,398 85,148 492,768
Securities available for sale, net 4,698,740 3,013,323 3,574,055
Investment in subsidiaries 53,330,255 52,055,386 48,500,126
Other assets 36,203 1,741,003 1,557,703
--------------------------------------------------------
$ 58,268,226 $ 56,895,720 $ 54,125,552
========================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Other borrowed funds $ 196,707 $ 229,492 $ 262,276
Accrued interest payable 3,880 9,255 10,247
Other liabilities 3,286,636 4,567,238 2,815,528
--------------------------------------------------------
3,487,223 4,805,985 3,088,051
--------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 968,150 968,150 969,775
Surplus 3,975,907 3,975,907 3,982,581
Retained earnings 46,787,791 45,370,448 44,059,979
Accumulated other comprehensive income 3,049,155 1,775,230 2,025,166
--------------------------------------------------------
54,781,003 52,089,735 51,037,501
--------------------------------------------------------
$ 58,268,226 $ 56,895,720 $ 54,125,552
========================================================
</TABLE>
F-25
<PAGE> 30
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 AND
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
March 31, December 31,
------------------------------------------------------------------------------------
1998 1997 1997 1996 1995
------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Income:
Equity in net income
of subsidiaries $ 1,854,500 $ 1,869,201 $ 5,318,766 $ 6,895,923 $ 6,412,472
Interest 713 4,926 22,053 48,897 36,965
Securities gains 116,262
------------------------------------------------------------------------------------
1,855,213 1,874,127 5,340,819 7,061,082 6,449,437
------------------------------------------------------------------------------------
Interest expense, other
borrowings 3,880 4,385 18,075 20,709 24,349
Operating expenses 28,540 18,101 2,303,852 367,923 558,018
------------------------------------------------------------------------------------
32,420 22,486 2,321,927 388,632 582,367
------------------------------------------------------------------------------------
INCOME BEFORE
INCOME TAXES
(CREDITS) 1,822,793 1,851,641 3,018,892 6,672,450 5,867,070
Income taxes (credits) (10,855) (5,985) (39,596) (100,528) (184,558)
------------------------------------------------------------------------------------
NET INCOME $ 1,833,648 $ 1,857,626 $ 3,058,488 $ 6,772,978 $ 6,051,628
====================================================================================
</TABLE>
F-26
<PAGE> 31
BANCSECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 AND
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------------------------------------------------------------
1998 1997 1997 1996 1995
-------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $ 1,833,648 $ 1,857,626 $ 3,058,488 $ 6,772,978 $ 6,051,628
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in undistributed net
income of subsidiaries (1,062,757) (1,872,954) (3,601,450) (5,572,521) (4,844,167)
(Gain) on the sale of
securities available for
sale (116,262)
Amortization 57,002 520,000
Decrease in other assets 1,704,800 1,546,500 25,000 74,778 1,004
Increase (decrease) in
accrued interest payable
and other liabilities (244,363) (398,071) 1,727,640 (288,948) 307,537
-------------------------------------------------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,231,328 1,133,101 1,209,678 927,027 2,036,002
-------------------------------------------------------------------------------
CASH FLOWS FROM
INVESTING ACTIVITIES
(Increase) decrease in
interest
deposits (117,250) 420,407 407,620 330,622 (759,615)
Proceeds from the sale of
securities available for
sale 189,262
-------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED
IN) INVESTING
ACTIVITIES (117,250) 420,407 407,620 519,884 (759,615)
-------------------------------------------------------------------------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Principal payments on other
borrowed funds (32,785) (32,784) (32,784) (32,784) (32,784)
Dividends paid (2,081,523) (1,493,454) (1,493,454) (1,331,297) (1,196,483)
Purchase of common stock
for retirement -- (27,300) (91,100) (91,830) (38,120)
-------------------------------------------------------------------------------
NET CASH (USED IN)
FINANCING ACTIVITIES (2,114,308) (1,553,538) (1,617,338) (1,455,911) (1,267,387)
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS (230) (30) (40) (9,000) 9,000
CASH AND CASH
EQUIVALENTS
Beginning 860 900 900 9,900 900
-------------------------------------------------------------------------------
Ending $ 630 $ 870 $ 860 $ 900 $ 9,900
===============================================================================
</TABLE>
F-27
<PAGE> 32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
F&M BANCORPORATION, INC.
AT MARCH 31, 1998
The following unaudited pro forma condensed consolidated balance sheet
combines the historical consolidated balance sheets of F&M and BancSecurity,
giving effect to the acquisition of BancSecurity, which is expected to be
accounted for using the pooling of interests method of accounting, as if it had
been effective on March 31, 1998. This information should be read in
conjunction with the historical consolidated financial statements (and notes
thereto) of F&M and BancSecurity. The pro forma financial data presented below
is not necessarily indicative of the actual financial position that would have
occurred had the acquisition been consummated on March 31, 1998, or that may
result in the future.
<TABLE>
<CAPTION>
Pro Forma
Adjustments (A) Pro Forma
F&M BancSecurity Debit Credit Consolidated
--- ------------ ----- ------ ------------
ASSETS (In thousands)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 44,088 $ 9,778 $ 53,866
Investment securities--
Held to maturity 130,074 58,599 188,673
Available for sale 182,083 113,370 295,453
Federal funds sold 18,056 15,450 33,506
Loans - net 1,239,570 325,674 1,565,244
Bank premises and equipment 33,531 10,961 44,492
Other assets 37,266 11,220 48,486
---------- -------- ----------
Total assets $1,684,668 $545,052 $2,229,720
========== ======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits $1,379,387 $450,371 $1,829,758
Short-term borrowings 62,020 23,198 85,218
Other borrowings 69,929 7,331 77,260
Other liabilities 16,615 9,371 25,986
Common stock 9,923 968 2,657 13,548
Surplus 88,262 3,976 2,657 89,581
Retained earnings 58,798 46,788 105,586
Unrealized gains (losses) 103 3,049 3,152
Treasury stock (369) 0 (369)
---------- -------- ----------
Total liabilities and
stockholders' equity $1,684,668 $545,052 $2,229,720
========== ======== ==========
</TABLE>
F-28
<PAGE> 33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
F & M BANCORPORATION, INC.
QUARTER ENDED MARCH 31, 1998
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
The following unaudited pro forma condensed consolidated statements of
income combine the historical consolidated statements of income of F&M and
BancSecurity giving effect to the acquisition of BancSecurity, which is expected
to be accounted for using the pooling of interests method of accounting, as if
it had been effective as of the beginning of the period indicated. This
information should be read in conjunction with the historical consolidated
financial statements (and notes thereto) of both F&M and BancSecurity. The pro
forma financial data presented below is not necessarily indicative of the actual
financial results which would have occurred had the acquisition been consummated
on the dates indicated, or that may result in the future.
QUARTER ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Pro Forma
F&M BancSecurity Consolidated
--- ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C>
Interest income $33,130 $10,159 $43,289
Interest expense 15,615 5,528 21,143
------- ------- -------
Net interest income 17,515 4,631 22,146
Provision for loan losses 692 1 693
------- ------- -------
Net interest income after provision
for loan losses 16,823 4,630 21,453
Non-interest income 2,467 965 3,432
Non-interest expense 11,267 3,059 14,326
------- ------- -------
Income before income taxes 8,023 2,536 10,559
Income taxes 2,525 702 3,227
------- ------- -------
Net income $ 5,498 $ 1,834 $ 7,332
======= ======= =======
Net income per share - Basic $ 0.56 $ 0.54
======= =======
Net income per share - Diluted $ 0.55 $ 0.54
======= =======
</TABLE>
F-29
<PAGE> 34
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Pro Forma
F&M BancSecurity Consolidated
--- ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C>
Interest income $122,547 $ 40,298 $162,845
Interest expense 57,845 21,991 79,836
-------- -------- --------
Net interest income 64,702 18,307 83,009
Provision for loan losses 2,826 2,353 5,179
-------- -------- --------
Net interest income after provision
for loan losses 61,876 15,954 77,830
Non-interest income 8,814 3,966 12,780
Non-interest expense 41,354 15,217 56,571
-------- -------- --------
Income before income taxes 29,336 4,703 34,039
Income taxes 9,011 1,645 10,656
-------- -------- --------
Net income $ 20,325 $ 3,058 $ 23,383
======== ======== ========
Net income per share - Basic $ 2.09 $ 1.75
======== ========
Net income per share - Diluted $ 2.08 $ 1.74
======== ========
</TABLE>
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Pro Forma
F&M BancSecurity Consolidated
--- ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C>
Interest income $ 98,909 $ 39,452 $138,361
Interest expense 45,374 21,319 66,693
-------- -------- --------
Net interest income 53,535 18,133 71,668
Provision for loan losses 2,904 695 3,599
-------- -------- --------
Net interest income after provision
for loan losses 50,631 17,438 68,069
Non-interest income 6,587 3,612 10,199
Non-interest expense 34,820 11,584 46,404
-------- -------- --------
Income before income taxes 22,398 9,466 31,864
Income taxes 6,992 2,693 9,685
-------- -------- --------
Net income $ 15,406 $ 6,773 $ 22,179
======== ======== ========
Net income per share - Basic $ 1.73 $ 1.77
======== ========
Net income per share - Diluted $ 1.73 $ 1.77
======== ========
</TABLE>
F-30
<PAGE> 35
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Pro Forma
F&M BancSecurity Consolidated
--- ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C>
Interest income $ 87,572 $ 37,825 $125,397
Interest expense 39,406 20,803 60,209
-------- -------- --------
Net interest income 48,166 17,022 65,188
Provision for loan losses 1,713 1,092 2,805
-------- -------- --------
Net interest income after provision
for loan losses 46,453 15,930 62,383
Non-interest income 5,356 3,404 8,760
Non-interest expense 31,860 11,016 42,876
-------- -------- --------
Income before income taxes 19,949 8,318 28,267
Income taxes 6,109 2,266 8,375
-------- -------- --------
Net income $ 13,840 $ 6,052 $ 19,892
======== ======== ========
Net income per share - Basic $ 1.59 $ 1.61
======== ========
Net income per share - Diluted $ 1.59 $ 1.61
======== ========
</TABLE>
F-31
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. ACCOUNTING TREATMENT.
The pro forma consolidated financial statements have been prepared
using the pooling of interests method of accounting to give effect to the
acquisition by F&M of BancSecurity. As a result of the use of the pooling of
interests method of accounting for the acquisitions, past consolidated financial
statements of F&M are being restated, and therefore the pro forma consolidated
financial statements have been restated to reflect the acquisition as if it had
occurred prior to the dates of the statements. The computations of weighted
average shares outstanding and period-end shares outstanding include the
conversions of shares of BancSecurity Common into shares of F&M Common, as
indicated below. These statements do not reflect a pending F&M acquisition, or
other 1998 or prior F&M acquisitions for which financial statements were not
restated, which are not considered to be significant, either individually or in
the aggregate.
2. PENDING ACQUISITION OF BANCSECURITY.
On December 1, 1997, the Company entered into a Merger Agreement
providing for the acquisition of BancSecurity in a merger transaction, based
upon the defined common equity value of BancSecurity and the market value of F&M
Common. Subject to certain exceptions, BancSecurity will be valued in the
aggregate at $145 million. The total number of shares of F&M Common to be issued
in the acquisition will equal the aggregate consideration divided by a defined
market value of the F&M Common, valuing F&M Common at not less than $35.80 per
share nor more than $40.00 per share. For purposes of these pro forma
statements, it is assumed that shares of F&M are valued at $40.00 per share,
that the exchange ratio will equal 93.6064 shares of F&M Common for each of the
38,726 shares of BancSecurity Common, and that, in the aggregate, 3,625,000
shares of F&M Common will be issued. See "Summary -- Comparative Unaudited Per
Share Data" and "The Merger -- Conversion of BancSecurity Common with F&M
Common."
3. EXPLANATION OF PRO FORMA ADJUSTMENTS.
A. Issuance of F&M Common in the acquisition of BancSecurity,
assuming no dissenters and a 93.6064-to-1 exchange ratio. Reflects
a transfer of $2,657,000 from Surplus to Common Stock resulting
from the greater aggregate par value of 3,625,000 shares of F&M
Common ($3,625,000) than the par value of 38,726 shares of
BancSecurity Common ($968,000).
4. EARNINGS PER SHARE.
Earnings per share are based on the weighted average number of shares
of common stock and common stock equivalents outstanding during the year. The
resulting number of shares used in computing the pro forma consolidated basic
earnings per share is 13,524,387 for the quarter ended March 31, 1998 and
13,370,459; 12,515,517; and 12,319,464 for the years ended December 31, 1997,
1996, and 1995, respectively. The number of shares used in computing the pro
forma consolidated diluted earnings per share is 13,575,240 for the quarter
ended March 31, 1998 and 13,418,484; 12,545,524; and 12,338,050 for the years
ended December 31, 1997, 1996 and 1995, respectively.
F-32
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 11, 1998 /s/ Daniel E. Voet
------------------------------
Daniel E. Voet
Chief Financial Officer
S-1
<PAGE> 38
F&M BANCORPORATION, INC.
EXHIBIT INDEX
to
FORM 8-K CURRENT REPORT
Dated as of July 1, 1998
Incorporate by
Exhibit Reference to/
Number Description Filed Herewith
- ------- ----------------- ------------------------
2.1(a) Agreement and Plan of Exhibit 2.1 to F&M's
Merger dated as of December Report on Form 10-K for
1, 1997 by and among F&M, the year ended
BancSecurity Acquisition December 31, 1997
Corporation and
BancSecurity
23.1 Consent of McGladrey & Filed Herewith
Pullen, LLP
EI-1
<PAGE> 1
[McGladrey & Pullen, LLP letterhead]
Exhibit 23.1
7/1/98 8-K
Independent Accountants' Consent
We consent to incorporation by reference in the Registration Statement on Form
S-4 (No. 333-26373), the Registration Statement on Form S-3 (No. 33-45385), and
the Registration Statements on Form S-8 (Nos. 33-81178, 33-81180, 33-81182 and
333-01937) of F&M Bancorporation, Inc. ("F&M") of our report dated January 28,
1998, relating to the consolidated balance sheets of BancSecurity Corporation
and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, statements of comprehensive income, changes in
stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997, which report is included in F&M's
Report on Form 8-K dated July 1, 1998, and to references to our firm as experts
in those Registration Statements.
/s/ McGladrey & Pullen, LLP
------------------------------
Certified Public Accountants
Des Moines, Iowa
July 11, 1998
