UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] transition report UNDER section 13 or 15(d) of the
securities exchange act of 1934
For the transition period from __________to __________
Commission file number 0-21554
DENMARK BANCSHARES, INC.
(Exact NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Wisconsin 39-1472124
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
103 East Main Street, Denmark, Wisconsin 54208-0130
(Address of principal executive offices)
(414) 863-2161
(Issuer's telephone number)
___________________________________________________________________________
(Former name, address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant (1) has filed all documents and reports required to
be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Outstanding at
Class July 25, 1996
Common Stock 27,502
(no par value)
Page 1 of 12 pages.<PAGE>
DENMARK BANCSHARES, INC.
TABLE OF CONTENTS
Quarterly Report On Form 10-QSB
For The Quarter Ended June 30, 1996
Page No.
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 11
Signatures 12<PAGE>
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, December 31,
1996 1995
(UNAUDITED)
Assets
Cash and due from banks $5,427,910 $5,464,693
Federal funds sold 2,009,000 6,900,000
Investment securities
Available-for-sale, at fair value 9,190,555 9,330,453
Held-to-maturity, at cost 16,776,412 16,319,946
Total Investment Securities $25,966,967 $25,650,399
Loans
Commercial 42,616,165 41,194,193
Real estate 104,792,989 101,087,198
Installment 13,896,551 13,301,405
Other 483,520 489,238
Total Loans $161,789,225 $156,072,034
Allowance for credit losses (2,383,530) (2,319,101)
Net Loans $159,405,695 $153,752,933
Premises and equipment, net 3,034,378 3,038,274
Accrued interest receivable 1,204,199 1,121,017
Other assets 1,074,990 949,629
TOTAL ASSETS $198,123,139 $196,876,945
Liabilities
Deposits
Non-interest bearing $13,206,890 $15,077,825
Interest bearing 130,011,787 129,739,944
Total Deposits $143,218,677 $144,817,769
Other borrowed funds 28,286,265 26,426,195
Accrued interest payable 888,093 898,162
Other liabilities 832,047 544,737
Total Liabilities $173,225,082 $172,686,863
Stockholders' Equity
Common stock, no par value
authorized 320,000 shares; 27,505
and 27,511 outstanding respectively $10,336,295 $10,336,295
Paid in capital 37,383 37,203
Treasury stock (145,821) (139,575)
Retained earnings 14,769,122 13,959,598
Unrealized loss on securities
available-for-sale (98,922) (3,439)
Total Stockholders' Equity $24,898,057 $24,190,082
TOTAL LIABILITIES AND EQUITY $198,123,139 $196,876,945
The accompanying notes are an integral part of these financial statements.
Page 3<PAGE>
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Quarter Ended For the Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Interest Income
Loans including fees $3,447,377 $3,225,275 $6,851,568 $6,170,000
Investment securities
Taxable 135,778 107,690 267,312 221,303
Exempt from federal tax 304,476 324,780 602,315 650,254
Federal funds sold 48,173 11,423 118,052 22,528
Total Interest Income $3,935,804 $3,669,168 $7,839,247 $7,064,085
Interest Expense
Deposits $1,607,791 $1,477,065 $3,231,935 $2,836,317
Other borrowed funds 397,087 419,085 802,444 756,765
Total Interest Expense $2,004,878 $1,896,150 $4,034,379 $3,593,082
Net interest income $1,930,926 $1,773,018 $3,804,868 $3,471,003
Provision for Credit Losses 51,000 49,500 102,000 101,000
Net after provision $1,879,926 $1,723,518 $3,702,868 $3,370,003
Noninterest Income
Service fees and commissions $129,218 $102,354 $240,219 $200,496
Investment security gains 0 0 0 0
Other 36,427 31,546 72,703 73,621
Total Noninterest Income $165,645 $133,900 $312,922 $274,117
Noninterest Expense
Salaries and employee benefits $806,638 $759,108 $1,613,378 $1,512,287
Occupancy expenses 148,654 149,267 295,653 282,052
FDIC insurance assessment 500 76,501 1,000 151,918
Data processing expenses 72,834 66,051 136,718 129,627
Directors and committee fees 47,500 42,100 91,880 82,830
Other operating expenses 236,049 230,568 423,909 429,678
Total Noninterest Expense $1,312,175 $1,323,595 $2,562,538 $2,588,392
Income before income taxes $733,396 $533,823 $1,453,252 $1,055,728
Income tax expense 177,757 108,613 354,925 194,418
NET INCOME $555,639 $425,210 $1,098,327 $861,310
Net Income Per Common Share (4) $20.20 $15.45 $39.93 $31.26
The accompanying notes are an integral part of these financial statements.
Page 4<PAGE>
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended
June 30, June 30,
1996 1995
Cash flows from operating activities:
Net income $1,098,327 $861,310
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation $145,731 $136,731
Provision for credit losses 102,000 101,000
Amortization of bond premium 20,501 28,638
Accretion of bond discount (272,025) (255,554)
Increase in interest receivable (83,181) (197,979)
(Decrease) Increase in interest payable (10,069) 182,516
Other, net 285,094 38,925
Net cash provided by operating activities $1,201,378 $895,587
Cash flows from investing activities:
Maturities of held-to-maturity securities $333,976 $1,046,984
Proceeds from sale of available for sale securities 1,416,453 456,620
Purchases of held-to-maturity securities (563,280) 0
Purchases of available-for-sale securities (1,399,474) (469,604)
Federal funds sold, net 4,891,000 1,534,000
Net increase in loans made to customers (5,839,762) (8,616,995)
Capital expenditures (141,835) (71,073)
Net cash used by investing activities ($1,217,922) ($6,120,068)
Cash flows from financing activities:
Net decrease in deposits ($1,599,093) ($1,044,315)
Proceeds from sale of treasury stock 10,110 9,550
Purchases of treasury stock (16,176) (134,322)
Dividends paid (275,150) (249,030)
Debt proceeds 20,916,070 14,854,230
Debt repayment (19,056,000) (8,708,398)
Net cash (used) provided by financing activities ($20,239) $4,727,715
Net decrease in cash and cash equivalents (36,783) (496,766)
Cash and cash equivalents, beginning 5,464,693 5,442,402
CASH & EQUIVALENTS, ENDING $5,427,910 $4,945,636
Supplemental schedule of noncash investing
and financing activities:
Loans transferred to other real estate $85,000 $38,938
The accompanying notes are an integral part of these financial statements.
Page 5<PAGE>
DENMARK BANCSHARES, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - FINANCIAL STATEMENTS
The consolidated financial statements included herein are unaudited. In the
opinion of management, these statements contain all adjustments necessary to
present fairly the financial position of Denmark Bancshares, Inc. (the "Company"
as of June 30, 1996, and the results of operations and cash flows for the six
month period ended June 30, 1996. These consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's latest annual report on Form 10-KSB.
NOTE 2 - INVESTMENT SECURITIES
The amortized cost and estimated fair value of securities available-for-sale
were as follows:
June 30, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
Mortgage-backed securities $7,055 $3 $117 $6,941
Equity securities 2,278 0 28 2,250
Total $9,333 $3 $145 $9,191
December 31, 1995
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
Mortgage-backed securities $7,457 $68 $41 $7,484
Equity securities 1,868 0 22 1,846
Total $9,325 $68 $63 $9,330
The amortized cost and estimated fair value of securities held-to-maturity were
as follows:
June 30, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
State and local governments $16,776 $1,314 $180 $17,910
Total $16,776 $1,314 $180 $17,910
December 31, 1995
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
State and local governments $16,320 $1,744 $29 $18,035
Total $16,320 $1,744 $29 $18,035
Page 6<PAGE>
DENMARK BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The amortized cost and estimated fair values of securities at June 30, 1996, by
maturity were as follows:
Available-for-Sale Held-to-Maturity
Estimated Estimated
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
Due in 1 year or less $1,491 $1,483 $0 $0
Due from one to five years 5,564 5,458 4,727 5,336
Due from five to ten years 0 0 6,289 6,791
Due after ten years 0 0 5,760 5,783
Equity securities 2,278 2,250 0 0
Total $9,333 $9,191 $16,776 $17,910
Mortgage-backed securities are allocated according to their expected prepayments
rather than their contractual maturities.
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for credit losses were as follows:
For the Year
For the Six Months Ended Ended
June 30, December 31,
1996 1995 1995
Balance, beginning of period $2,319,101 $2,079,007 $2,079,007
Provision charged to operations 102,000 101,000 200,000
Recoveries 14,315 69,286 169,107
Charge-offs (51,886) (57,200) (129,013)
Balance, end of period $2,383,530 $2,192,093 $2,319,101
NOTE 4 - NET INCOME PER SHARE
Net income per share was computed based on the weighted average number of common
shares outstanding during the reporting periods.
For the Quarter For the Six Month
Ended June 30, Period Ended June 30,
1996 1995 1996 1995
Weighted Average Shares 27,505 27,528 27,506 27,555
Page 7<PAGE>
DENMARK BANCSHARES, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Highlights
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
1996 1996 1995 1995 1995
(In thousands)
Operating Results
Interest income $3,936 $3,903 $3,979 $3,839 $3,669
Interest expense 2,005 2,029 2,045 2,001 1,896
Net interest income 1,931 1,874 1,934 1,838 1,773
Provision for credit losses 51 51 49 50 49
Noninterest income 166 147 147 147 134
Noninterest expense 1,312 1,250 1,101 1,243 1,324
Net income 556 543 683 539 425
Per Share Data
Net income per share $20.20 $19.73 $24.78 $19.58 $15.45
(In thousands)
Financial Condition (1)
Loans $161,789 $157,405 $156,072 $152,930 $151,778
Allowance for credit losses 2,384 2,378 2,319 2,274 2,192
Investment securities 25,967 26,050 25,650 25,589 24,794
Assets 198,123 195,512 196,877 190,383 185,379
Deposits 143,219 142,973 144,818 138,878 135,956
Other borrowed funds 28,286 26,453 26,426 26,266 24,631
Stockholders' equity 24,898 24,380 24,190 23,467 23,208
Financial Ratios
Return on average equity 8.96% 8.88% 11.43% 9.20% 7.39%
Return on average assets 1.13% 1.12% 1.42% 1.15% 0.93%
Interest rate spread 3.27% 3.19% 3.31% 3.24% 3.23%
Average equity to average
assets 12.64% 12.58% 12.39% 12.50% 12.63%
Allowance for credit losses
to total loans (1) 1.47% 1.51% 1.49% 1.49% 1.44%
(1) As of the period ending.
Page 8<PAGE>
DENMARK BANCSHARES, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net income for the quarter ended June 30, 1996, was $556,000, or $20.20 per
share, an increase of $131,000 or 31%, compared to $425,000, or $15.45 per
share, for the corresponding period in 1995. This increase was primarily the
result of an increase in net interest income, higher noninterest income and
lower noninterest expense, which more than offset an increase in income tax
expense.
Net interest income for the quarter ended June 30, 1996, was $1,931,000, an
increase of $158,000 over the corresponding period in the prior year. The
following table sets forth a summary of the changes in interest earned and
interest paid resulting from changes in volume and changes in rates:
Increase (Decrease)
Due to Change In
Average Average Total
(In thousands) Balance Rate Change
Interest income 273 (6) 267
Interest expense 169 (60) 109
Net interest income 104 54 158
This increase was primarily attributable to higher volume but was also
improved by an increase in interest rate spread. The Company's average interest
rate spread was 3.27% during the second quarter of 1996 compared to 3.23% during
the quarter ended June 30, 1995. The yield on earning assets declined by six
basis points while the cost of funds declined by ten basis points.
In the second quarter of 1996 the Company's provision for credit losses was
$51,000 compared to $49,500 for the second quarter of 1995. Net charge-offs
were $46,000 in the second quarter of 1996 compared to net recoveries of $31,000
during the second quarter of 1995.
Noninterest income for the three months ended June 30, 1996, was $166,000,
an increase of $32,000 over the corresponding period in 1995. This increase is
primarily the result of an increase of $19,000 in commissions from the sales of
annuities, mutual funds, and property insurance and an increase of $8,000 in
deposit service charges.
Noninterest expense decreased by $11,000 or 1% during the three months ended
June 30, 1996, over the corresponding period in 1995. Salaries and benefits
expense increased $48,000 or 6% over the corresponding period in 1995. This
increase is primarily attributed to regular salary increases. FDIC insurance
expense declined $76,000 during the second quarter of 1996.
Return on average assets in the second quarter of 1996 was 1.13%, compared
to .93% for the corresponding period in 1995. Return on average equity in the
second quarter of 1996 was 9.0%, compared to 7.4% for the corresponding period
in the prior year.
Page 9 <PAGE>
DENMARK BANCSHARES, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
Total assets increased by $1,200,000 between December 31, 1995, and June 30,
1996. Federal funds sold decreased by $4,900,000 while net loans increased by
$5,700,000 during the six months ended June 30, 1996. Total deposits decreased
by $1,600,000 while other borrowed funds increased by $1,900,000. The reduction
in federal funds sold and the increase in notes payable lessened the Bank's
liquidity. Management believes the Company has adequate marketable investment
securities and unused lines of credit to meet liquidity needs.
Total loans increased $5,700,000 between December 31, 1995, and June 30,
1996. Loan demand was strong during the second quarter of 1996 as total loans
increased $4,400,000 or an annualized rate of 11% compared to loan growth of
$1,300,000 during the first quarter of 1996. The allowance for credit losses
increased by $64,000 during the six month period ended June 30, 1996. The
allowance equals 1.47% of total loans at June 30, 1996, compared to 1.49% at
December 31, 1995. Nonaccrual loans totaled $2,600,000 at June 30, 1996, an
increase of $1,400,000 over December 31, 1995. Much of the increase in
nonaccrual loans is attributed to two nonperforming commercial lines.
Management considers both of these lines well collateralized. The Company's
ratio of loans more than 30 days past due (including nonaccrual loans) to total
loans was 3.1% at June 30, 1996, compared to 1.6% at December 31, 1995.
Demand deposits decreased $1,900,000 or 12% during the first six months of
1996. Interest bearing deposits increased by $300,000 or .2% between December
31, 1995, and June 30, 1996. Total deposits decreased $1,600,000 or 1% during
the six month period ended June 30, 1996. Management attributes the decrease in
demand deposits to a normal seasonal fluctuation.
Other borrowed funds increased by $1,900,000 or 7% during the first six
months of 1996. Additional borrowings were needed to fund strong loan growth
during the second quarter.
Stockholders' equity increased by $700,000 to $24,900,000 as of June 30,
1996. Stockholders' equity to total assets was 12.6% at June 30, 1996, compared
to 12.3% at December 31, 1995. Return on average equity was 8.92% for the first
six months of 1996 compared to 8.95% for 1995.
Page 10<PAGE>
DENMARK BANCSHARES. INC.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Shareholders on April 23,
1996.
(b) Directors elected at the Annual Meeting were Darrell R. Lemmens, C.
J. Stodola, and Norman F. Tauber. Directors whose term of office
continued after the meeting were Terese M. DePrey, Mark E. Looker,
B.E. Mleziva, D.V.M., James E. Renier, and Thomas F. Wall.
(c) The matters voted upon and the results of the voting were as
follows:
(1) The shareholders elected the following nominees to the Board of
Directors to serve a three year term expiring in 1999:
Nominees For Withheld
Darrell R. Lemmens 23,813 5
C. J. Stodola 23,813 5
Norman F. Tauber 23,813 5
(2) The ratification of the appointment of Williams, Young and
Associates, LLC as independent public accountants for the year
ending December 31, 1996.
For Against Abstain
23,813 1 4
Page 11<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DENMARK BANCSHARES, INC.
Date: July 25, 1996 /s/ Darrell R. Lemmens
Darrell R. Lemmens,
Principal Executive Officer,
Chairman of the Board,
and President
Date: July 25, 1996 /s/ Dennis J. Heim
Dennis J. Heim,
Vice President and Treasurer,
Principal Financial and
Accounting Officer
Page 12<PAGE>
