FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission file number 0-18342
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Bremer Financial Corporation
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(Exact name of registrant as specified in its charter)
Minnesota 41-0715583
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
445 Minnesota St., Suite 2000, St. Paul, MN 55101-2107
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(Address of principal executive offices) (Zip Code)
(651) 227-7621
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(Registrant's telephone number, including area code)
Not applicable.
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of June 30, 2000, there were 1,200,000 shares of class A common
stock and 10,800,000 shares of class B common stock outstanding.
<PAGE>
BREMER FINANCIAL CORPORATION
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
INDEX
PART I -- FINANCIAL INFORMATION Page
----
Item 1 -- Financial Statements 2
Item 2 -- Management's Discussion and Analysis 9
of Financial Condition and Results
of Operations
PART II -- OTHER INFORMATION
Item 4 -- Submission of Matters to a Vote of Security Holders
Item 5 -- Other Information 25
Item 6 -- Exhibits and Reports on Form 8-K 25
Signatures 26
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31 JUNE 30
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 1999
------------ ------------ ------------
(UNAUDITED) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 137,778 $ 145,407 $ 125,922
Interest bearing deposits 5,721 4,886 1,797
Federal funds sold 4,589 -- --
Investment securities available for sale (amortized cost
of $180,434, $188,683 and $85,206 respectively) 180,030 187,857 85,559
Mortgage-backed securities available for sale (amortized
cost of $644,633, $688,649 and $766,814 respectively) 626,745 671,985 754,243
------------ ------------ ------------
TOTAL SECURITIES AVAILABLE FOR SALE 806,775 859,842 839,802
Investment securities held to maturity (fair value of
$170,438, $170,788, and $166,935 respectively) 171,155 171,720 165,678
Mortgage-backed securities held to maturity (fair value
of $2,023, $6,769 and $16,119 respectively) 2,035 6,810 16,176
------------ ------------ ------------
TOTAL SECURITIES HELD TO MATURITY 173,190 178,530 181,854
Loans and leases 2,839,466 2,550,156 2,268,908
Reserve for credit losses (44,885) (41,895) (38,107)
Unearned discount (5,814) (7,259) (4,961)
------------ ------------ ------------
NET LOANS AND LEASES 2,788,767 2,501,002 2,225,840
Interest receivable 35,096 34,148 29,501
Premises and equipment, net 59,601 59,821 56,091
Other assets 76,592 67,849 43,937
------------ ------------ ------------
TOTAL ASSETS $ 4,088,109 $ 3,851,485 $ 3,504,744
============ ============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Noninterest bearing deposits $ 395,815 $ 406,478 $ 316,858
Interest bearing deposits 2,616,443 2,444,214 2,223,906
------------ ------------ ------------
TOTAL DEPOSITS 3,012,258 2,850,692 2,540,764
Federal funds purchased and repurchase agreements 293,912 300,737 257,182
Other short-term borrowings 200,318 125,948 184,572
Long-term debt 203,406 215,832 173,677
Accrued expenses and other liabilities 51,491 44,486 43,166
------------ ------------ ------------
TOTAL LIABILITIES 3,761,385 3,537,695 3,199,361
Minority interests 150 914 891
Redeemable preferred stock -- -- 2,019
Redeemable class A common stock, 960,000 shares
issued and outstanding 26,126 25,029 24,198
Shareholder's equity
Common stock
Class A, no par, 12,000,000 shares authorized;
240,000 shares issued and outstanding 57 57 57
Class B, no par, 10,800,000 shares authorized,
issued and outstanding 2,562 2,562 2,562
Retained earnings 307,918 294,892 282,408
Accumulated other comprehensive income (10,089) (9,664) (6,751)
------------ ------------ ------------
TOTAL SHAREHOLDER'S EQUITY 300,448 287,847 278,276
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 4,088,109 $ 3,851,485 $ 3,504,744
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INTEREST INCOME
Loans and leases, including fees $ 117,887 $ 92,566 $ 90,141
Securities
Taxable 27,456 24,607 24,348
Tax-exempt 5,532 5,185 5,479
Federal funds sold 252 229 322
Other 107 59 58
------------ ------------ ------------
Total interest income 151,234 122,646 120,348
------------ ------------ ------------
INTEREST EXPENSE
Deposits 56,766 45,653 48,734
Federal funds purchased and repurchase agreements 7,413 5,075 4,359
Other short term borrowings 4,981 3,688 5,370
Long term debt 6,870 3,489 1,413
------------ ------------ ------------
Total interest expense 76,030 57,905 59,876
------------ ------------ ------------
Net interest income 75,204 64,741 60,472
Provision for credit losses 3,786 4,705 2,462
------------ ------------ ------------
Net interest income after provision for credit losses 71,418 60,036 58,010
------------ ------------ ------------
NONINTEREST INCOME
Service charges 10,826 8,915 8,259
Insurance 4,161 4,026 3,192
Trust 4,452 3,732 3,444
Brokerage 2,915 2,314 1,802
Gain on sale of loans 1,066 2,012 2,343
Gain (loss) on sale of securities (85) 1,847 1,138
Other 2,104 2,840 3,659
------------ ------------ ------------
Total noninterest income 25,439 25,686 23,837
------------ ------------ ------------
NONINTEREST EXPENSE
Salaries and wages 28,830 26,387 24,074
Employee benefits 7,262 6,942 6,137
Occupancy 3,839 3,322 3,075
Furniture and equipment 4,785 4,390 3,650
Data processing fees 3,552 3,408 2,984
FDIC premiums and examination fees 794 633 593
Goodwill and other intangibles 1,831 1,087 845
Other 11,964 11,930 10,249
------------ ------------ ------------
Total noninterest expense 62,857 58,099 51,607
------------ ------------ ------------
INCOME BEFORE INCOME TAX EXPENSE 34,000 27,623 30,240
Income tax expense 11,921 9,001 10,380
------------ ------------ ------------
NET INCOME $ 22,079 $ 18,622 $ 19,860
============ ============ ============
Per common share amounts:
Net income-basic $ 1.84 $ 1.55 $ 1.66
Dividends paid 0.66 0.66 0.66
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INTEREST INCOME
Loans and leases, including fees $ 61,919 $ 47,123 $ 46,374
Securities
Taxable 13,660 12,599 12,120
Tax-exempt 2,753 2,555 2,739
Federal funds sold 139 98 100
Other 66 23 31
------------ ------------ ------------
Total interest income 78,537 62,398 61,364
------------ ------------ ------------
INTEREST EXPENSE
Deposits 30,027 22,682 24,710
Federal funds purchased and repurchase agreements 3,980 2,653 2,378
Other short term borrowings 2,869 2,054 2,708
Long term debt 3,392 1,987 757
------------ ------------ ------------
Total interest expense 40,268 29,376 30,553
------------ ------------ ------------
Net interest income 38,269 33,022 30,811
Provision for credit losses 1,949 3,016 1,253
------------ ------------ ------------
Net interest income after provision for credit losses 36,320 30,006 29,558
------------ ------------ ------------
NONINTEREST INCOME
Service charges 5,699 4,692 4,283
Insurance 2,007 1,999 1,507
Trust 2,238 1,874 1,702
Brokerage 1,557 1,271 1,057
Gain on sale of loans 667 920 1,231
Gain (loss) on sale of securities (137) 73 (72)
Other 1,086 1,292 2,136
------------ ------------ ------------
Total noninterest income 13,117 12,121 11,844
------------ ------------ ------------
NONINTEREST EXPENSE
Salaries and wages 14,722 13,608 12,340
Employee benefits 3,751 3,587 3,116
Occupancy 1,914 1,614 1,496
Furniture and equipment 2,388 2,268 1,853
Data processing fees 1,817 1,869 1,487
FDIC premiums and examination fees 406 323 293
Goodwill and other intangibles 968 645 432
Other 6,484 6,005 5,471
------------ ------------ ------------
Total noninterest expense 32,450 29,919 26,488
------------ ------------ ------------
INCOME BEFORE INCOME TAX EXPENSE 16,987 12,208 14,914
Income tax expense 5,925 3,812 5,055
------------ ------------ ------------
NET INCOME $ 11,062 $ 8,396 $ 9,859
============ ============ ============
Per common share amounts:
Net income-basic $ 0.92 $ 0.70 $ 0.83
Dividends paid 0.33 0.33 0.33
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER COMPRE-
---------------------- COMPREHENSIVE HENSIVE RETAINED
CLASS A CLASS B INCOME INCOME EARNINGS TOTAL
---------- ---------- ------------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 $ 57 $ 2,562 $ 4,977 $ 248,945 $ 256,541
Comprehensive income
Net income $ 41,511 41,511 41,511
Other comprehensive income
Change in net unrealized gain (loss) on securities
available for sale, net of $761 tax benefit (1,141) (1,141) (1,141)
----------
Comprehensive income $ 40,370
==========
Dividends, $1.32 per share (15,840) (15,840)
Allocation of net income in excess of dividends and change
in net unrealized gain (loss) on securities available
for sale to redeemable class A common stock 91 (2,054) (1,963)
---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1998 57 2,562 3,927 272,562 279,108
Comprehensive income
Net income 40,111 40,111 40,111
Other comprehensive income
Change in net unrealized gain (loss) on securities
available for sale, net of $9,849 tax benefit (14,774) (14,774) (14,774)
----------
Comprehensive income $ 25,337
==========
Dividends, $1.32 per share (15,840) (15,840)
Allocation of net income in excess of dividends and change
in net unrealized gain (loss) on securities available
for sale to redeemable class A common stock 1,183 (1,941) (758)
---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1999 57 2,562 (9,664) 294,892 287,847
Comprehensive income
Net income 22,079 22,079 22,079
Other comprehensive income
Change in net unrealized gain (loss) on securities
available for sale, net of $211 tax benefit (461) (461) (461)
----------
Comprehensive income $ 21,618
==========
Dividends, $.66 per share (7,920) (7,920)
Allocation of net income in excess of dividends and change
in net unrealized gain (loss) on securities available
for sale to redeemable class A common stock 36 (1,133) (1,097)
---------- ---------- ---------- ---------- ----------
BALANCE, JUNE 30, 2000 $ 57 $ 2,562 $ (10,089) $ 307,918 $ 300,448
========== ========== ========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED.
<PAGE>
BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30
----------------------------------------------
2000 1999 1998
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 22,079 $ 18,622 $ 19,860
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for credit losses 3,786 4,705 2,462
Depreciation and amortization 5,765 5,194 4,221
Minority interests in earnings of subsidiaries 21 15 595
Loss (gain) on sale of securities 85 (1,847) (1,138)
Gain on sale of other real estate owned, net (10) (86) (17)
Other assets and liabilities, net 14,900 (8,443) 7,089
Proceeds from sales of other real estate owned 240 270 497
Cash receipts related to loans originated specifically for resale 55,313 112,253 120,956
Cash payments related to loans originated specifically for resale (55,399) (112,776) (121,506)
------------ ------------ ------------
Net cash provided by operating activities 46,780 17,907 33,019
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits in other banks, net (835) (1,123) (281)
Purchases of securities available for sale (23,421) (289,305) (193,122)
Purchases of securities held to maturity (6,588) (25,007) (6,683)
Proceeds from maturities of securities available for sale 53,939 140,231 116,321
Proceeds from maturities of securities held to maturity 11,941 49,584 65,498
Proceeds from sales of securities available for sale 21,650 81,519 67,179
Loans and leases, net (291,465) (94,407) (165,222)
Acquisition of minority interests (53) -- --
Acquisitions, net of cash acquired (20,038) -- --
Acquisition of premises and equipment (3,715) (5,344) (4,504)
------------ ------------ ------------
Net cash used in investing activities (258,585) (143,852) (120,814)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Noninterest bearing deposits, net (10,663) (52,357) (40,119)
Interest bearing deposits (excluding certificates of deposit), net 93,831 33,413 38,687
Certificates of deposits, net 78,398 (10,942) 301
Federal funds purchased and sold and repurchase agreements, net (11,414) 35,763 49,920
Other short-term borrowings, net 74,370 52,778 6,530
Proceeds from issuance of long-term debt 99 68,501 41,373
Repayments of long-term debt (12,525) (11,111) (6,520)
Dividends paid to minority interests -- (29) (6,948)
Redeemable preferred stock -- (60) (60)
Dividends paid (7,920) (7,920) (7,920)
------------ ------------ ------------
Net cash provided by financing activities 204,176 108,036 75,244
------------ ------------ ------------
Net decrease in cash and due from banks (7,629) (17,909) (12,551)
Cash and due from banks
Beginning of period 145,407 143,831 135,966
------------ ------------ ------------
End of period $ 137,778 125,922 $ 123,415
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. FINANCIAL STATEMENTS. The condensed financial statements included herein
have been prepared by Bremer Financial Corporation (the "Company"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
B. GENERAL. The consolidated financial statements include the accounts of
Bremer Financial Corporation and Subsidiaries. All material intercompany
transactions and balances are eliminated in consolidation. The Company has
not changed its accounting policies from those stated for the year ended
December 31, 1999 and included in its Annual Report on Form 10-K for the
year ended December 31, 1999 filed on March 13, 2000.
C. INTERIM PERIOD ADJUSTMENTS. The consolidated financial statements
contained herein reflect all adjustments which are, in the opinion of
management, of a normal recurring nature and are necessary for a fair
statement of the financial position, results of operations, and cash flows
for the unaudited interim periods. The results of operations for the
interim periods are not necessarily indicative of the results to be
expected for the entire year.
D. EARNINGS PER SHARE CALCULATIONS. Basic earnings per common share have been
computed using 12,000,000 common shares outstanding for all periods. The
Company does not have any dilutive securities.
E. MORTGAGE-BACKED SECURITIES. Mortgage-backed securities classified as held
to maturity are valued at amortized historical cost, increased for
accretion of discounts and reduced by amortization of premiums, computed
by the constant yield method. Mortgage-backed securities classified as
available for sale are valued at current market value with the resulting
unrealized holding gains and losses excluded from earnings and reported,
net of tax, as a separate component of shareholder's equity. Gains and
losses on these securities are computed based on the adjusted cost of the
specific securities sold.
F. REDEEMABLE CLASS A COMMON STOCK. At June 30, 2000, the 960,000 class A
shares were generally redeemable at $27.21 per share. Since January 1,
2000 and through June 30, 2000, options to call 48,759.0744 shares had
been exercised and the shares subsequently purchased by the Company's ESOP
and profit sharing plan from employees and non-employee directors of the
Company and the Company's Subsidiaries. During the same period, a total of
2,676 shares changed hands directly between individuals.
G. ESTIMATES. The preparation of consolidated 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 at the date of the financial statements
and the reported amounts of income and expenses during the reported
period. Actual results may differ from those estimates.
<PAGE>
H. COMPREHENSIVE INCOME. The Company reported comprehensive income for the
second quarter of 2000 of $13.5 million, up from the $(1.6) million
reported for the second quarter of 1999. On a year-to-date basis,
comprehensive income was $21.6 million, as compared to the $7.0 million
earned in the first six months of 1999. Comprehensive income is defined as
the change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources. It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. For the Company,
comprehensive income consists of net income, as reported in the financial
statements, and other comprehensive income, which consists of the change
in unrealized gains and losses on securities available for sale.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Earnings Summary
Bremer Financial Corporation (the "Company") recorded net income of $11.1
million for the second quarter of 2000, a 31.8% increase from the $8.4 million
earned in the second quarter of 1999. On a year-to-date basis, earnings were
$22.1 million, up 18.6% from the $18.6 million earned in the first six months of
1999. Contributing positively to earnings in the first six months of 2000 was a
16.2% or $10.5 million increase in net interest income coupled with a decrease
in the provision for loan losses of 19.5% or $919 thousand. Partially offsetting
these positive increases were an 8.2% or $4.8 million increase in noninterest
expenses and a 1.0% or $247 thousand decrease in noninterest income.
Return on average assets ("ROA") was 1.10% for the second quarter of 2000,
compared to .98% reported for the same period in 1999. For the first six months
of 2000, ROA increased to 1.13% from 1.11% reported in 1999. Return on average
realized equity ("RORE") was 13.32% for the second quarter of 2000, compared to
10.94% for the same quarter of 1999. On a year-to-date basis, RORE was 13.43%
compared to 12.33% recorded for the first six months of 1999. Table I presents a
summary of the components affecting the change in year-to-date return on assets
from June 30, 1999 to June 30, 2000.
Shareholder's Equity and Dividends
Shareholder's equity and redeemable class A common stock totaled $326.6 million
at June 30, 2000, representing a book value per share of $27.21, a 7.9% increase
from $25.21 at June 30, 1999. A dividend of $.33 per share was paid during the
second quarter of 2000, remaining unchanged since the first quarter of 1998.
Table II presents various regulatory capital ratios.
Securities classified as available for sale are recorded at market value on the
Company's balance sheet, with unrealized gains or losses, net of tax, included
in shareholder's equity. The net unrealized gain or loss in shareholder's equity
had the effect of decreasing the book value per share by $.92 as of June 30,
2000 and by $.61 as of June 30, 1999.
Net Interest Income
Tax-equivalent net interest income for the second quarter of 2000 was $40.3
million, an increase of $5.5 million or 15.8% from the second quarter of 1999.
The net interest margin dropped three basis points to 4.27% in the second
quarter of 2000 from 4.30% reported in the second quarter of 1999. On a
year-to-date basis, tax-equivalent net interest income was $79.1 million, an
increase of $10.8 million or 15.8% over the $68.3 million realized in the first
six months of 1999. Table III presents the quarter-to-quarter comparison of
tax-equivalent net interest income and net interest margins.
The Company uses various tools to assess its current interest rate sensitivity
position, such as gap analysis, simulation of future net interest income, and a
valuation model which measures the sensitivity of balance sheet valuations to
changes in interest rates. In the valuation model, the market value of each
asset and liability as of the reporting date is calculated by computing the
present value of all cash flows generated. The impact on valuations is then
calculated for a 200 basis point rate shock. At June 30, 2000, the valuation
model indicates that the value of assets would decline 3.7% with a 200 basis
point increase in interest rates. After considering the impact on liabilities
and tax
<PAGE>
effects,the market value of equity impact from this 200 basis point increase in
interest rates would be a decrease of 12.5%.
Nonperforming Assets
Table VI shows the details of nonperforming assets at June 30, 2000, December
31, 1999 and June 30, 1999. Nonperforming assets, which include nonperforming
loans and leases and other real estate owned ("OREO"), were $16.0 million at
June 30, 2000. This total represents a decrease of $1.2 million from December
31, 1999 and a decrease of $1.9 million from June 30, 1999. Nonperforming assets
as a percentage of total loans, leases and OREO decreased to .56% as of June 30,
2000 from .68% as of December 31, 1999, and from .79% as of June 30, 1999, while
the level of at-risk performing loans and leases (with an internal loan review
rating of either substandard, doubtful or loss) increased $1.6 million or 1.7%
to $94.4 million at June 30, 2000 from $92.8 million at June 30, 1999.
Nonperforming loans and leases, which include nonaccrual and restructured loans
and leases, were $15.0 million at June 30, 2000, a decrease of $1.6 million and
$2.2 million from December 31, 1999 and June 30, 1999, respectively. The ratio
of nonperforming loans and leases to total loans and leases decreased to .53% at
June 30, 2000 from .65% as of December 31, 1999, and .76% at June 30, 1999. The
ratio of nonperforming assets and past due loans and leases to total loans,
leases and OREO decreased to .75% at June 30, 2000 from .86% at December 31,
1999, and from .86% reported at June 30, 1999. The ratio of classified loans and
leases to total loans and leases declined to 3.8% as of June 30, 2000 from 4.9%
as of June 30, 1999.
OREO, which includes real estate acquired in loan settlements, increased to $976
thousand at June 30, 2000 from $527 thousand at December 31, 1999 and from the
$626 thousand reported at June 30, 1999.
Reserve for Credit Losses
The reserve for credit losses increased by $6.8 million from the $38.1 million
reported on June 30, 1999, while the reserve to outstanding loans and leases
ratio decreased to 1.58% on June 30, 2000 from 1.68% reported on June 30, 1999.
Net charge-offs were $1.1 million during the fix six months of 2000 as compared
to $3.6 million for the same period in 1999. Table VII presents the activity in
the reserve for credit losses.
The Company's reserve for credit losses was 298.5% of nonperforming loans and
leases at June 30, 2000 compared to 251.5% at December 31, 1999 and 220.9% at
June 30, 1999. Management believes the current reserve is adequate to cover the
risks inherent in the portfolio, including the risk of nonperforming loans and
leases that have been identified for careful monitoring.
Noninterest Income
As presented in Table VIII, noninterest income was $13.1 million during the
second quarter of 2000 compared to $12.1 million for the second quarter of 1999,
representing a $996 thousand or 8.2% increase. On a year-to-date basis,
noninterest income was $25.4 million compared to $25.7 million in 1999, a
decrease of $247 thousand or 1.0%. Excluding a $1.8 million gain on sale of
securities recognized in the first six months of 1999, noninterest income
increased by $1.7 million or 7.1% when comparing the first six months of 1999
and 2000.
<PAGE>
Noninterest Expense
As presented in Table IX, noninterest expense increased $2.5 million or 8.5% in
the second quarter of 2000 compared to the second quarter of 1999. On a
year-to-date basis, noninterest expense was $62.9 million compared to $58.1
million in 1999, an increase of $4.8 million or 8.2%.
A common industry statistic used to measure the productivity of banking
organizations is the efficiency ratio. The efficiency ratio measures the cost
required to generate each dollar of revenue and is calculated by dividing
recurring noninterest expense by tax-equivalent net interest income and
recurring noninterest income. The Company's efficiency ratio was 58.16% for the
first six months of 2000 compared to 61.85% for the same period in 1999.
Increases in tax-equivalent net interest income and recurring noninterest income
of 15.8% and 10.0%, respectively, more than offset the 7.5% increase in
recurring noninterest expense.
Taxes
Comparing the first six months of 2000 to the first six months of 1999, the
Company's effective tax rate increased from 32.6% to 35.1%.
Balance Sheet Growth
Assets
Average total assets increased $548.9 million or 16.2% from the first six months
of 1999 to the first six months of 2000, while average earning assets increased
by $516.7 million or 16.2% when comparing the same two periods. Acquired
entities accounted for a significant portion of this increase.
Loans and Leases
In the first six months of 2000, average loans and leases increased $494.2
million or 22.8% when compared to the first six months of 1999. Average loans
and leases in the second quarter of 2000 increased $555.3 million or 25.2% from
the second quarter of 1999.
Average loan volume during 2000 compared to 1999 was driven by commercial real
estate, commercial, and residential real estate loans, which increased $168.8
million, $160.0 million, and $133.7 million, respectively. Consumer and tax
exempt loans increased $39.1 million and $12.0 million, respectively, while
agricultural loans decreased by $19.4 million. The Company is not involved in
highly-leveraged transaction lending or lending to foreign countries.
Securities
Average securities, excluding any unrealized gains or losses, increased $21.8
million or 2.1% during the first six months of 2000 from the first six months of
1999. During this same period, average taxable and average tax-exempt securities
increased by $10.8 million and $10.9 million, respectively. The average maturity
of the portfolio was 75 months at June 30, 2000, with an average yield to
maturity on the $980.0 million portfolio of 7.1%. The held to maturity
securities had unrealized gains of $1.3 million and unrealized losses of $2.0
million as of June 30, 2000. In accordance with FAS No. 115, the available for
sale investments are recorded inclusive of any unrealized gains or losses.
<PAGE>
Liabilities
Comparing the first six months of 2000 to the first six months of 1999, average
interest bearing liabilities increased $476.5 million or 17.5%, while average
deposits increased $383.3 million or 15.1%. Average short-term borrowings, which
include federal funds purchased, securities sold under agreements to repurchase,
treasury tax and loan notes, Federal Home Loan Bank advances, and an unsecured
revolving credit facility, increased $79.4 million or 22.0%. Average long-term
debt, which consists primarily of Federal Home Loan Bank advances and $65
million of privately-placed senior debt, increased $75.6 million or 55.6% due
mostly to the issuance of senior debt.
The senior debt, which consists of $46 million of five year notes with an 8.27%
coupon and $19 million of seven year notes with an 8.47% coupon, was incurred in
November 1999, and the debt proceeds were used primarily to fund acquisition
activity.
<PAGE>
BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 THREE MONTHS ENDED JUNE 30
--------------------------------- ---------------------------------
2000 1999 CHANGE 2000 1999 CHANGE
---------- ---------- ------ ---------- ---------- ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Total interest income $ 151,234 $ 122,646 23.3% $ 78,537 $ 62,398 25.9%
Net interest income 75,204 64,741 16.2 38,269 33,022 15.9
Net interest income (1) 79,122 68,310 15.8 40,259 34,779 15.8
Provision for credit losses 3,786 4,705 (19.5) 1,949 3,016 (35.4)
Noninterest income 25,439 25,686 (1.0) 13,117 12,121 8.2
Noninterest expense 62,857 58,099 8.2 32,450 29,919 8.5
Net income 22,079 18,622 18.6 11,062 8,396 31.8
Dividends 7,920 7,920 -- 3,960 3,960 --
AVERAGE BALANCES
Assets 3,937,481 3,388,598 16.2 4,039,343 3,442,559 17.3
Loans and leases 2,657,493 2,163,309 22.8 2,756,051 2,200,755 25.2
Securities 1,038,046 1,016,266 2.1 1,025,208 1,033,781 (0.8)
Deposits 2,915,307 2,532,046 15.1 2,982,788 2,535,535 17.6
Redeemable class A common stock 25,578 24,234 5.6 25,746 24,419 5.4
Shareholder's equity 294,148 278,660 5.6 296,022 280,756 5.4
PERIOD-END BALANCES
Assets 4,088,109 3,504,744 16.6
Loans and leases 2,833,652 2,263,947 25.2
Securities 979,965 1,021,657 (4.1)
Deposits 3,012,258 2,540,764 18.6
Redeemable class A common stock 26,126 24,198 8.0
Shareholder's equity 300,448 278,276 8.0
FINANCIAL RATIOS
Return on assets (2) 1.13% 1.11% -- 1.10% 0.98% --
Return on realized equity (3)(4) 13.43 12.33 -- 13.32 10.94 --
Average equity/assets (3)(4) 8.39 8.99 -- 8.27 8.94 --
Tangible equity to assets (3)(4) 7.30 8.54 -- 7.11 8.44 --
Dividend payout 35.87 42.53 -- 35.80 47.17 --
Net interest margin (1) 4.29 4.31 -- 4.27 4.30 --
Efficiency ratio 58.16 61.85 -- 58.56 62.66 --
Net charge-offs/average loans and leases 0.08 0.34 -- 0.06 0.52 --
Reserve/period-end loans and leases 1.58 1.68 -- 1.58 1.68 --
PER SHARE OF COMMON STOCK (3)
Net income-basic $ 1.84 $ 1.55 18.6% $ 0.92 $ 0.70 31.8%
Dividends paid 0.66 0.66 -- 0.33 0.33 --
Book value 27.21 25.21 7.9 27.21 25.21 7.9
Realized book value (4) 28.13 25.82 8.9 28.13 25.82 8.9
</TABLE>
(1) Tax-equivalent basis (TEB).
(2) Calculation is based on income before minority interests.
(3) Calculation is based on 12,000,000 shares, including redeemable class A
common stock.
(4) Excluding net unrealized gain (loss) on securities available for sale.
<PAGE>
TABLE I
CHANGES IN RETURN ON ASSETS
Year-to-Date
June 30
2000 vs 1999
------------
Return on assets, prior year 1.11%
----
Increases
Salaries and wages 0.10
Provision for credit losses 0.09
Employee benefits 0.04
Marketing expenses 0.02
Printing, postage, and office supplies 0.02
Service charges 0.02
Furniture and equipment 0.02
Data processing fees 0.02
----
Total increases 0.33
----
Decreases
Security gains/losses 0.11
Fees on loans/leases 0.08
Goodwill amortization 0.04
Gain on sale of other assets 0.03
Insurance commissions 0.03
Other items (net) 0.02
----
Total decreases 0.31
----
Return on assets, current period 1.13%
====
<PAGE>
TABLE II
CAPITAL RATIOS (1)
June 30 December 31 June 30 Regulatory
2000 1999 1999 Minimums
------- ----------- ------- ----------
Equity to assets (2) 8.26% 8.40% 8.84% --%
Tangible equity to assets (2) 7.12 7.40 8.37 --
Tier I capital (3) 9.78 10.42 12.22 4.00
Tier I and tier II capital (3) 11.03 11.67 13.48 8.00
Leverage ratio (3) 7.17 7.48 8.51 3.00
(1) Calculations include redeemable class A common stock.
(2) Computed in accordance with generally accepted accounting principles,
excluding the unrealized market value adjustment of securities available for
sale.
(3) Computed exclusive of the unrealized market value adjustment of securities
available for sale.
<PAGE>
TABLE III
NET INTEREST INCOME / MARGINS (TEB)
=======================================================================
Net Net
Interest Interest
(DOLLARS IN THOUSANDS) Income Margin
-----------------------------------------------------------------------
Quarter
-------
2000
Second $ 40,259 4.27%
First 38,863 4.32
1999
Fourth 39,687 4.43
Third 38,373 4.29
Second 34,779 4.30
First 33,531 4.33
1998
Fourth 34,196 4.34
Third 33,270 4.27
Second 32,686 4.31
First 31,527 4.32
1997
Fourth 32,790 4.47
Third 31,974 4.40
Second 30,570 4.45
First 28,835 4.41
<PAGE>
TABLE IV
CHANGES IN NET INTEREST INCOME (TEB)
<TABLE>
<CAPTION>
============================= =============================
Six Months Ended June 30 Three Months Ended June 30
2000 vs 1999 2000 vs 1999
============================= =============================
(DOLLARS IN THOUSANDS)
Net Net Net Net
Interest Interest Interest Interest
Income Margin Income Margin
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CHANGE IN VOLUME
Earning assets $ 20,429 $ 10,848
Interest bearing liabilities (10,159) (5,384)
------------ ------------
10,270 5,464
CHANGE IN INTEREST RATE SPREAD
Earning assets 6,488 0.35% 4,424 0.47%
Interest bearing liabilities (7,642) (0.41) (5,542) (0.59)
------------ ------------ ------------ ------------
(1,154) (0.06) (1,118) (0.12)
CHANGE IN PRODUCT MIX
Earning assets 1,534 0.08 1,094 0.12
Interest bearing liabilities (3) 0.00 34 --
------------ ------------ ------------ ------------
1,531 0.08 1,128 0.12
CHANGE DUE TO NUMBER OF DAYS
Earning assets 697 0.04 -- --
Interest bearing liabilities (319) (0.02) -- --
------------ ------------ ------------ ------------
378 0.02 -- --
OTHER CHANGES
Nonaccruing loans (29) 0.00 7 --
Yield-related loan fees (51) 0.00 (1) --
30/360 investment adjustment (131) (0.01) -- --
Free funds -- (0.05) -- (0.03)
------------ ------------ ------------ ------------
(211) (0.06) 6 (0.03)
CHANGE IN NET INTEREST INCOME 10,814 (0.02) 5,480 (0.03)
Net interest income, prior period 68,309 4.31 34,779 4.30
------------ ------------ ------------ ------------
Net interest income, current period $ 79,123 4.29% $ 40,259 4.27%
============ ============ ============ ============
</TABLE>
<PAGE>
TABLE V
CHANGES IN NET INTEREST INCOME (TEB)
<TABLE>
<CAPTION>
Six Months Ended June 30
2000 vs 1999
-------------------------------------------------
(IN THOUSANDS)
Volume Yield/Rate (1) Total
------------ -------------- ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN:
INTEREST INCOME
Loans and leases $ 15,126 $ 10,374 $ 25,500
Taxable securities 3,983 (1,134) 2,843
Tax-exempt securities 1,273 (755) 518
Interest bearing deposits -- -- --
Federal funds sold 37 (14) 23
Other earning assets 10 37 53
------------ ------------ ------------
Total 20,429 8,508 28,937
INTEREST EXPENSE
Savings deposits 1,816 3,207 5,023
Other time deposits 6,194 (105) 6,089
Short-term borrowings 1,537 2,093 3,630
Long-term debt 612 2,769 3,381
------------ ------------ ------------
Total 10,159 7,964 18,123
------------ ------------ ------------
NET INTEREST INCOME $ 10,270 $ 544 $ 10,814
============ ============ ============
</TABLE>
(1) ALL CHANGES IN NET INTEREST INCOME, OTHER THAN THOSE DUE TO VOLUME, HAVE
BEEN ALLOCATED TO YIELD/RATE.
<PAGE>
TABLE VI
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31 JUNE 30
2000 1999 1999
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans and leases $ 13,870 $ 16,608 $ 17,191
Restructured loans and leases 1,167 48 61
----------- ----------- -----------
Total nonperforming loans and leases 15,037 16,656 17,252
Other real estate owned (OREO) 976 527 626
----------- ----------- -----------
Total nonperforming assets $ 16,013 17,183 17,878
=========== =========== ===========
Past due loans and leases * $ 5,304 $ 4,753 $ 1,591
=========== =========== ===========
Nonperforming loans and leases to total loans and leases 0.53% 0.65% 0.76%
Nonperforming assets to total loans, leases and OREO 0.56 0.68 0.79
Nonperforming assets and past due loans and leases* to
total loans, leases and OREO 0.75 0.86 0.86
Reserve to nonperforming loans and leases 298.50 251.53 220.88
Reserve to total loans and leases 1.58 1.65 1.68
</TABLE>
* PAST DUE LOANS AND LEASES INCLUDE ACCRUING LOANS AND LEASES 90 DAYS OR MORE
PAST DUE.
<PAGE>
TABLE VII
RESERVE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
-----------------------------
2000 1999
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Beginning of period $ 41,895 $ 37,019
Charge-offs (1,789) (4,224)
Recoveries 699 607
------------ ------------
Net charge-offs (1,090) (3,617)
Provision for credit losses 3,786 4,705
Reserve related to acquired assets 294 --
------------ ------------
End of period $ 44,885 $ 38,107
============ ============
</TABLE>
<PAGE>
TABLE VIII
NONINTEREST INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 INCREASE/(DECREASE)
------------------------------ --------------------------
2000 1999 DOLLAR PERCENT
------------ ------------ ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service charges $ 10,826 $ 8,915 $ 1,911 21.44%
Insurance 4,161 4,026 135 3.35
Trust 4,452 3,732 720 19.29
Brokerage 2,915 2,314 601 25.97
Gain on sale of loans 1,066 2,012 (946) (47.02)
Gain on sale of other assets 72 692 (620) (89.60)
Other 2,032 2,148 (116) (5.40)
------------ ------------ ------------
Operating noninterest income 25,524 23,839 1,685 7.07
Gain (loss) on sale of securities (85) 1,847 (1,932) NM
------------ ------------ ------------
Total $ 25,439 $ 25,686 $ (247) (0.96)%
============ ============ ============
<CAPTION>
THREE MONTHS ENDED JUNE 30 INCREASE/(DECREASE)
------------------------------ --------------------------
2000 1999 DOLLAR PERCENT
------------ ------------ ------------ -----------
(IN THOUSANDS)
Service charges $ 5,699 $ 4,692 1,007 21.46%
Insurance 2,007 1,999 8 0.40
Trust 2,238 1,874 364 19.42
Brokerage 1,557 1,271 286 22.50
Gain on sale of loans 667 920 (253) (27.50)
Gain on sale of other assets 53 218 (165) (75.69)
Other 1,033 1,074 (41) (3.82)
------------ ------------ ------------
Operating noninterest income 13,254 12,048 1,206 10.01
Gain (loss) on sale of securities (137) 73 (210) NM
------------ ------------ ------------
Total $ 13,117 $ 12,121 996 8.22%
============ ============ ============
</TABLE>
<PAGE>
TABLE IX
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 INCREASE/(DECREASE)
----------------------------- -----------------------------
2000 1999 DOLLAR PERCENT
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Salaries and wages $ 28,830 $ 26,387 $ 2,443 9.26%
Employee benefits 7,262 6,942 320 4.61
Occupancy 3,839 3,322 517 15.56
Furniture and equipment 4,785 4,390 395 9.00
Printing, postage and office supplies 2,908 2,826 82 2.90
Marketing 2,296 2,261 35 1.55
Data processing fees 3,552 3,408 144 4.23
Professional fees 1,470 1,357 113 8.33
Other real estate owned 43 48 (5) (10.42)
Minority interest in earnings 21 15 6 40.00
FDIC premiums and examination fees 794 633 161 25.43
Goodwill and other intangibles 1,831 1,087 744 68.45
Other 5,226 5,423 (197) (3.63)
------------ ------------ ------------
Total $ 62,857 $ 58,099 $ 4,758 8.19%
============ ============ ============
<CAPTION>
THREE MONTHS ENDED JUNE 30 INCREASE/(DECREASE)
----------------------------- -----------------------------
2000 1999 DOLLAR PERCENT
------------ ------------ ------------ ------------
(IN THOUSANDS)
Salaries and wages $ 14,722 $ 13,608 1,114 8.19%
Employee benefits 3,751 3,587 164 4.57
Occupancy 1,914 1,614 300 18.59
Furniture and equipment 2,388 2,268 120 5.29
Printing, postage and office supplies 1,495 1,447 48 3.32
Marketing 1,194 1,161 33 2.84
Data processing fees 1,817 1,869 (52) (2.78)
Professional fees 754 713 41 5.75
Other real estate owned 23 31 (8) (25.81)
Minority interest in earnings 10 7 3 42.86
FDIC premiums and examination fees 406 323 83 25.70
Goodwill and other intangibles 968 645 323 50.08
Other 3,008 2,646 362 13.68
------------ ------------ ------------
Total $ 32,450 $ 29,919 2,531 8.46%
============ ============ ============
</TABLE>
<PAGE>
BFC CORP - EXTERNAL
AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
FOR SIX MONTHS ENDED JUNE 30, 2000 AND 1999
TAX EQUIVALENT BASIS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
June 2000 Actual - YTD June 1999 Actual - YTD
------------------------------------ ---------------------------------- ---------
Average Rate/ Average Rate/ % Change
Balance Interest Yield Balance Interest Yield Avg Bal
--------- ---------- ----- ---------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and Leases (net of unearned discount)
Commercial $ 652,292 $ 29,828 9.20% $ 492,304 $ 21,110 8.65% 32.50%
Commercial Real Estate 736,685 32,562 8.89 567,895 24,223 8.60 29.72
Agricultural 410,914 18,738 9.17 430,325 18,590 8.71 (4.51)
Residential Real Estate 511,000 22,211 8.74 377,337 16,147 8.63 35.42
Consumer 280,543 12,502 8.96 241,407 10,788 9.01 16.21
Tax Exempt 66,059 3,111 9.47 54,040 2,594 9.68 22.24
---------- ---------- ---------- ----------
TOTAL LOANS AND LEASES 2,657,493 118,952 9.00 2,163,308 93,452 8.71 22.84
Reserve for Credit Losses (43,515) (37,847) 14.98
---------- ----------
NET LOANS AND LEASES 2,613,978 2,125,461 22.98
Mortgage Backed Securities 675,400 22,279 6.63 756,974 22,821 6.08 (10.78)
Taxable Other 152,558 5,177 6.82 60,079 1,786 5.99 153.93
Tax Exempt 210,088 8,386 8.03 199,213 7,868 7.96 5.46
---------- ---------- ---------- ----------
TOTAL SECURITIES 1,038,046 35,842 6.94 1,016,266 32,475 6.44 2.14
Total Fed Funds Sold 8,272 252 6.13 10,050 229 4.59 (17.69)
Other earning assets 5,630 106 3.79 3,069 59 3.88 83.45
---------- ---------- ---------- ----------
TOTAL EARNING ASSETS 3,709,441 155,152 8.41 3,192,693 126,215 7.97 16.19
Total Cash & Due from Banks 124,603 109,110 14.20
Nonearning assets 146,952 124,642 17.90
---------- ----------
TOTAL ASSETS $3,937,481 $3,388,598 16.20
========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
Non-Interest Bearing Deposits $ 374,183 $ 312,539 19.72
Interest Bearing Deposits
Savings and NOW accounts 319,437 2,030 1.28 281,715 1,616 1.16 13.39
Money Market Checking 168,684 784 0.93 158,286 720 0.92 6.57
Money Market Savings 549,220 12,555 4.60 440,608 8,010 3.67 24.65
Savings Certificates 1,262,450 34,565 5.51 1,133,228 29,932 5.33 11.40
Certificates over $100K 241,333 6,832 5.69 205,669 5,376 5.27 17.34
---------- ---------- ---------- ----------
TOTAL INTEREST BEARING DEPOSITS 2,541,124 56,766 4.49 2,219,506 45,654 4.15 14.49
TOTAL DEPOSITS 2,915,307 2,532,045 15.14
Total Short Term Borrowings 440,151 12,393 5.66 360,800 8,763 4.90 21.99
Total Long Term Debt 211,559 6,870 6.53 135,981 3,489 5.17 55.58
---------- ---------- ---------- ----------
TOTAL INTEREST BEARING LIABILITIES 3,192,834 76,029 4.79 2,716,288 57,906 4.30 17.54
Other liabilities 50,206 53,945 (6.93)
TOTAL LIABILITIES 3,617,223 3,082,772 17.34
Minority Interest 532 898 (40.76)
Redeemable Preferred Stock 0 2,034 (100.00)
Redeemable Class A Common Stock 25,578 24,234 5.55
Shareholder's equity 294,148 278,660 5.56
---------- ----------
TOTAL LIABILITIES AND EQUITY $3,937,481 $3,388,598 16.20
========== ==========
Net Interest Income $ 79,123 $ 68,309
========== ==========
Gross Spread 3.62% 3.67%
Percent of earning assets
Interest Income 8.41 7.97
Interest Cost 4.12 3.66
-------- --------
NET INTEREST MARGIN 4.29% 4.31%
Interest bearing liabilities to earning assets 86.07% 85.08%
</TABLE>
<PAGE>
BFC CORP - EXTERNAL
AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
FOR THREE MONTHS ENDED JUNE 30, 2000 AND 1999
TAX EQUIVALENT BASIS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
June 2000 Actual - QTD June 1999 Actual - QTD
------------------------------------ ---------------------------------- ----------
Average Rate/ Average Rate/ % Change
Balance Interest Yield Balance Interest Yield Avg Bal
---------- ---------- ----- ---------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and Leases (net of unearned discount)
Commercial $ 682,475 $ 15,760 9.29% $ 511,562 $ 11,012 8.63% 33.41%
Commercial Real Estate 748,877 16,773 9.01 577,000 12,389 8.61 29.79
Agricultural 416,796 9,752 9.41 437,291 9,409 8.63 (4.69)
Residential Real Estate 547,899 12,064 8.86 380,884 8,127 8.56 43.85
Consumer 289,795 6,473 8.98 240,830 5,349 8.91 20.33
Tax Exempt 70,209 1,666 9.54 53,188 1,271 9.58 32.00
---------- ---------- ---------- ----------
TOTAL LOANS AND LEASES 2,756,051 62,488 9.12 2,200,755 47,557 8.67 25.23
Reserve for Credit Losses (44,325) (38,040) 16.52
---------- ----------
NET LOANS AND LEASES 2,711,726 2,162,715 25.39
Mortgage Backed Securities 665,013 11,052 6.68 786,806 11,834 6.03 (15.48)
Taxable Other 150,238 2,608 6.98 50,266 764 6.10 198.89
Tax Exempt 209,957 4,172 7.99 196,709 3,878 7.91 6.73
---------- ---------- ---------- ----------
TOTAL SECURITIES 1,025,208 17,832 7.00 1,033,781 16,476 6.39 (0.83)
Total Fed Funds Sold 8,038 139 6.96 8,345 98 4.71 (3.68)
Other earning assets 5,460 68 5.01 3,070 24 3.14 77.85
---------- ---------- ---------- ----------
TOTAL EARNING ASSETS 3,794,757 80,527 8.53 3,245,951 64,155 7.93 16.91
Total Cash & Due from Banks 127,418 111,363 14.42
Nonearning assets 161,493 123,285 30.99
---------- ----------
TOTAL ASSETS $4,039,343 $3,442,559 17.34
========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
Non-Interest Bearing Deposits $ 380,761 $ 317,996 19.74
Interest Bearing Deposits
Savings and NOW accounts 314,941 950 1.21 276,427 769 1.12 13.93
Money Market Checking 166,679 392 0.95 157,380 362 0.92 5.91
Money Market Savings 571,620 6,852 4.82 446,009 4,061 3.65 28.16
Savings Certificates 1,312,845 18,410 5.64 1,129,933 14,779 5.25 16.19
Certificates over $100K 235,942 3,423 5.84 207,789 2,711 5.23 13.55
---------- ---------- ---------- ----------
TOTAL INTEREST BEARING DEPOSITS 2,602,027 30,027 4.64 2,217,538 22,682 4.10 17.34
TOTAL DEPOSITS 2,982,788 2,535,534 17.64
Total Short Term Borrowings 460,966 6,849 5.97 386,741 4,707 4.88 19.19
Total Long Term Debt 209,795 3,392 6.50 161,649 1,987 4.93 29.78
---------- ---------- ---------- ----------
TOTAL INTEREST BEARING LIABILITIES 3,272,788 40,268 4.95 2,765,929 29,376 4.26 18.33
Other liabilities 63,490 50,541 25.62
TOTAL LIABILITIES 3,717,039 3,134,466 18.59
Minority Interest 535 899 (40.49)
Redeemable Preferred Stock 0 2,019 (100.00)
Redeemable Class A Common Stock 25,746 24,419 5.43
Shareholder's equity 296,022 280,756 5.44
---------- ----------
TOTAL LIABILITIES AND EQUITY $4,039,343 $3,442,559 17.34
========== ==========
Net Interest Income $ 40,259 $ 34,779
========== ==========
Gross Spread 3.59% 3.67%
Percent of earning assets
Interest Income 8.53 7.93
Interest Cost 4.27 3.63
-------- --------
NET INTEREST MARGIN 4.27% 4.30%
Interest bearing liabilities to earning assets 86.24% 85.21%
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company held its annual meeting on April 18, 2000. At the meeting,
67.04% of the outstanding shares of the Company's class A common stock was
represented in person or by proxy.
(b) The Company solicited proxies for the annual meeting pursuant to
Regulation 14 under the Securities Exchange Act of 1934. There was no
solicitation in opposition to management's solicitation.
The first matter to be voted upon was a proposal to fix the number of
directors at not less than four (4) nor more than ten (10). This proposal
was passed as follows: 803,070.0786 votes for, 10.8119 votes against and
1,456.9058 votes abstained.
The second matter voted upon was the election of directors. The nominees
consisted of all directors serving as such at the time of the annual
meeting, and all such nominees were re-elected as directors. The directors
elected were Terry M. Cummings, Stan K. Dardis, William H. Lipschultz,
Charlotte S. Johnson, Daniel C. Reardon, and Sherman Winthrop. The votes
cast were as follows: 796,900.5521 votes for all nominees, 7,137.9392
votes to withhold authority for all nominees, 326.672 votes to withhold
authority for Daniel C. Reardon, and 172.633 votes to withhold authority
for Stan K. Dardis.
The final matter voted upon was the ratification of the appointment of
Deloitte & Touche LLP as the Company's independent accountant to audit the
consolidated financial statements of the Company for the year ended
December 31, 2000. The appointment was ratified as follows: 785,987.1255
votes for, 11,564.4174 votes against, and 6,986.2534 votes abstained.
As to each matter, there were no broker non-votes.
There were no other matters submitted for a vote or voted upon at the
annual meeting.
Item 5. Other Information
(a) This Quarterly Report on Form 10-Q contains forward-looking statements
that involve inherent risks and uncertainties. Bremer Financial
Corporation cautions readers that a number of important factors could
cause actual results to differ materially from those in the
forward-looking statements. Those factors included fluctuations in
interest rates, inflation, government regulations, technology changes, and
economic conditions and competition in the geographic and business areas
in which the Company conducts its operations.
Item 6. Exhibits and Reports on Form 8-K.
(a) No exhibits are being filed as part of this Quarterly Report on Form 10-Q.
(b) No Current Reports on Form 8-K were filed during the quarter ended June
30, 2000 or during the period from June 30, 2000 to the date of this
Quarterly Report on Form 10-Q.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 11, 2000 BREMER FINANCIAL CORPORATION
By: /s/ Stan K. Dardis
-------------------------------------
Stan K. Dardis
President and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Stuart F. Bradt
-------------------------------------
Stuart F. Bradt
Controller
(Chief Accounting Officer)
