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 September 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 October 31, 1996
Common Stock 27,500
(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 September 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 6. Exhibit 27 -- Financial Data Schedule 11
Signatures 12<PAGE>
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, December 31,
1996 1995
(UNAUDITED)
Assets ------------- -------------
Cash and due from banks $4,546,777 $5,464,693
Federal funds sold 0 6,900,000
Investment securities
Available-for-sale, at fair value 10,301,165 9,330,453
Held-to-maturity, at cost 17,159,233 16,319,946
Total Investment Securities $27,460,398 $25,650,399
Loans
Commercial 43,823,813 41,194,193
Real estate 108,668,164 101,087,198
Installment 14,456,908 13,301,405
Other 514,615 489,238
Total Loans $167,463,500 $156,072,034
Allowance for credit losses (2,445,296) (2,319,101)
Net Loans $165,018,204 $153,752,933
Premises and equipment, net 3,009,976 3,038,274
Accrued interest receivable 1,242,995 1,121,017
Other assets 996,694 949,629
TOTAL ASSETS $202,275,044 $196,876,945
============= =============
Liabilities
Deposits
Non-interest bearing $13,589,982 $15,077,825
Interest bearing 132,202,086 129,739,944
Total Deposits $145,792,068 $144,817,769
Federal funds borrowed 520,000 0
Other borrowed funds 28,997,963 26,426,195
Accrued interest payable 934,099 898,162
Other liabilities 829,976 544,737
Total Liabilities $177,074,106 $172,686,863
------------- -------------
Stockholders' Equity
Common stock, no par value
authorized 320,000 shares; 27,500
and 27,511 outstanding respectively $10,336,295 $10,336,295
Paid in capital 37,383 37,203
Treasury stock (151,481) (139,575)
Retained earnings 15,068,028 13,959,598
Unrealized loss on securities
available-for-sale (89,287) (3,439)
Total Stockholders' Equity $25,200,938 $24,190,082
------------- -------------
TOTAL LIABILITIES AND EQUITY $202,275,044 $196,876,945
============= =============
The accompanying notes are an integral part of these financial statements.
Page 3
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Interest Income ----------- ----------- ----------- -----------
Loans including fees $3,563,706 $3,356,854 $10,415,274 $9,526,854
Investment securities
Taxable 144,736 115,296 412,048 336,599
Exempt from federal tax 317,937 331,675 920,252 981,929
Federal funds sold 24,298 34,798 142,350 57,326
----------- ----------- ----------- -----------
Total Interest Income $4,050,677 $3,838,623 $11,889,924 $10,902,708
Interest Expense ----------- ----------- ----------- -----------
Deposits $1,623,178 $1,576,373 $4,855,113 $4,412,690
Other borrowed funds 425,404 424,294 1,227,848 1,181,059
----------- ----------- ----------- -----------
Total Interest Expense $2,048,582 $2,000,667 $6,082,961 $5,593,749
----------- ----------- ----------- -----------
Net interest income $2,002,095 $1,837,956 $5,806,963 $5,308,959
Provision for Credit Losses 51,000 49,500 153,000 150,500
----------- ----------- ----------- -----------
Net after provision $1,951,095 $1,788,456 $5,653,963 $5,158,459
Noninterest Income
Service fees and commissions $141,993 $103,272 $382,212 $303,768
Other 30,540 43,867 103,243 117,488
----------- ----------- ----------- -----------
Total Noninterest Income $172,533 $147,139 $485,455 $421,256
----------- ----------- ----------- -----------
Noninterest Expense
Salaries and employee benefits $841,992 $787,756 $2,455,370 $2,300,043
Occupancy expenses 153,261 133,310 448,914 415,362
FDIC insurance assessment 500 4,410 1,500 156,328
Data processing expenses 68,894 61,081 205,612 190,708
Directors and committee fees 43,640 45,140 135,520 127,970
Other operating expenses 210,729 211,522 634,638 641,200
----------- ----------- ----------- -----------
Total Noninterest Expense $1,319,016 $1,243,219 $3,881,554 $3,831,611
----------- ----------- ----------- -----------
Income before income taxes $804,612 $692,376 $2,257,864 $1,748,104
Income tax expense 203,206 153,619 558,131 348,037
----------- ----------- ----------- -----------
NET INCOME $601,406 $538,757 $1,699,733 $1,400,067
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE (4) $21.87 $19.58 $61.80 $50.83
=========== =========== =========== ===========
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 Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities: ------------ ------------
Net Income $1,699,733 $1,400,067
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation $218,597 $205,097
Provision for credit losses 153,000 150,500
Amortization of bond premium 28,756 44,529
Accretion of bond discount (424,915) (395,801)
Loss on sale of other real estate 7,909 0
Increase in interest receivable (121,977) (274,158)
Increase in interest payable 35,937 219,833
Other, net 256,465 333,839
------------ ------------
Net cash provided by operating activities $1,930,596 $1,683,906
------------ ------------
Cash flows from investing activities:
Maturities of held-to-maturity securities $489,826 $1,060,109
Proceeds from sale of available-for-sale securities 1,556,918 961,508
Purchases of held-to-maturity securities (971,724) 0
Purchases of available-for-sale securities (2,620,350) (1,656,476)
Federal funds sold, net 6,900,000 (947,000)
Proceeds from sale of other real estate 77,091 0
Net increase in loans made to customers (11,503,270) (9,737,152)
Capital expenditures (190,300) (115,101)
------------ ------------
Net cash used by investing activities ($6,338,900) ($10,434,112)
------------ ------------
Cash flows from financing activities:
Net increase in deposits $974,298 $1,877,738
Proceeds from sale of treasury stock 10,110 0
Purchases of treasury stock (21,836) (140,170)
Dividends paid (563,953) (510,527)
Debt proceeds 25,439,768 21,549,230
Debt repayment (22,868,000) (13,768,398)
Federal funds purchased, net 520,000 0
------------ ------------
Net cash provided by financing activities $3,490,387 $9,007,873
------------ ------------
Net (decrease) increase in cash and cash equivalents (917,917) 257,667
Cash and cash equivalents, beginning 5,464,693 5,442,402
------------ ------------
CASH & CASH EQUIVALENTS, ENDING $4,546,776 $5,700,069
============ ============
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 September 30, 1996, and the results of operations and cash flows for the
nine month period ended September 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:
September 30, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ----------- ----------- -----------
Mortgage-backed securities $8,095 $3 $103 $7,995
Equity securities 2,333 0 27 2,306
----------- ----------- ----------- -----------
Total $10,428 $3 $130 $10,301
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:
September 30, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ----------- ----------- -----------
State and local governments $17,159 $1,474 $70 $18,563
----------- ----------- ----------- -----------
Total $17,159 $1,474 $70 $18,563
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 September 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 $1,354 $1,348 $102 $107
Due from one to five years 5,579 5,485 5,075 5,792
Due from five to ten years 0 0 5,989 6,500
Due after ten years 1,162 1,162 5,993 6,164
Equity securities 2,333 2,306 0 0
----------- ----------- ----------- -----------
Total $10,428 $10,301 $17,159 $18,563
=========== =========== =========== ===========
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:
September 30, September 30, December 31,
1996 1995 1995
----------- ----------- -----------
Balance, beginning of period $2,319,101 $2,079,007 $2,079,007
Provision charged to operations 153,000 150,500 200,000
Recoveries 25,693 127,245 169,107
Charge-offs (52,498) (83,228) (129,013)
----------- ----------- -----------
Balance, end of period $2,445,296 $2,273,524 $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 Ended For the Nine Month Period
September 30, Ended September 30,
1996 1995 1996 1995
----------- ---------- ------------ -----------
Weighted Average Shares 27,501 27,522 27,505 27,544
Page 7<PAGE>
DENMARK BANCSHARES, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Highlights
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
1996 1996 1996 1995 1995
(In thousands) --------- --------- --------- -------- ----------
Operating Results
Interest income $4,051 $3,936 $3,903 $3,979 $3,839
Interest expense 2,049 2,005 2,029 2,045 2,001
Net interest income 2,002 1,931 1,874 1,934 1,838
Provision for credit losses 51 51 51 49 50
Noninterest income 173 166 147 147 147
Noninterest expense 1,319 1,312 1,250 1,101 1,243
Net income 601 556 543 683 539
Per Share Data
Net income per share $21.87 $20.20 $19.73 $24.78 $19.58
(In thousands)
Financial Condition (1)
Loans $167,464 $161,789 $157,405 $156,072 $152,930
Allowance for credit losses 2,445 2,384 2,378 2,319 2,274
Investment securities 27,460 25,967 26,050 25,650 25,589
Assets 202,275 198,123 195,512 196,877 190,383
Deposits 145,792 143,219 142,973 144,818 138,878
Other borrowed funds 29,518 28,286 26,453 26,426 26,266
Stockholders' equity 25,201 24,898 24,380 24,190 23,467
Financial Ratios
Return on average equity 9.54% 8.96% 8.88% 11.43% 9.20%
Return on average assets 1.20% 1.13% 1.12% 1.42% 1.15%
Interest rate spread 3.29% 3.27% 3.19% 3.31% 3.24%
Average equity to average
assets 12.55% 12.64% 12.58% 12.39% 12.50%
Allowance for credit losses
to total loans (1) 1.46% 1.47% 1.51% 1.49% 1.49%
(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 September 30, 1996, was $601,000, or $21.87
per share, an increase of $62,000 or 12%, compared to $539,000, or $19.58 per
share, for the corresponding period in 1995. This increase was primarily the
result of an increase in net interest income and higher noninterest income,
which more than offset an increase in noninterest expense.
Net interest income for the quarter ended September 30, 1996, was
$2,002,000, an increase of $164,000 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 294 (82) 212
Interest expense 146 (98) 48
Net interest income 148 16 164
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 3.29% during the third quarter of 1996 compared to 3.24% during
the quarter ended September 30, 1995. The yield on earning assets declined by
sixteen basis points while the cost of funds declined by 21 basis points.
In the third quarter of 1996 the Company's provision for credit losses was
$51,000 compared to $49,500 for the third quarter of 1995. Net recoveries were
$11,000 in the third quarter of 1996 compared to net recoveries of $32,000
during the third quarter of 1995.
Noninterest income for the three months ended September 30, 1996, was
$173,000, an increase of $26,000 over the corresponding period in 1995. This
increase is primarily the result of an increase of $29,000 in commissions from
the sales of annuities, mutual funds, and property insurance and an increase of
$10,000 in deposit service charges. This more than offset the decline of $14,000
from gains on sales of loans.
Noninterest expense increased by $76,000 or 6% during the three months ended
September 30, 1996, over the corresponding period in 1995. Salaries and
benefits expense increased $54,000 or 7% over the corresponding period in 1995.
This increase is primarily attributed to the hiring of additional staff members
and regular salary increases. Occupancy expense increased $20,000 or 15% over
the corresponding period in 1995 as depreciation expense increased by $5,000 and
the Company incurred expenses of $12,000 to maintain the parking lots at its'
offices.
Return on average assets in the third quarter of 1996 was 1.20%, compared to
1.15% for the corresponding period in 1995. Return on average equity in the
second quarter of 1996 was 9.5%, compared to 9.2% 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 $5,400,000 between December 31, 1995, and
September 30, 1996. Federal funds sold decreased by $6,900,000 while net loans
increased by $11,300,000 during the nine months ended September 30, 1996. Total
deposits increased by $1,000,000 while other borrowed funds increased by
$3,100,000. The reduction in federal funds sold and the increase in other
borrowed funds 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 $11,400,000 between December 31, 1995, and September
30, 1996. Loan demand was strong during the second and third quarters of 1996
as total loans increased $4,400,000 during the second quarter and $5,700,000
during the third quarter. This followed an increase of $1,300,000 during the
first quarter of 1996. The allowance for credit losses increased by $126,000
during the nine month period ended September 30, 1996. The allowance equals
1.46% of total loans at September 30, 1996, compared to 1.49% at December 31,
1995. Nonaccrual loans totaled $2,900,000 at September 30, 1996, an increase of
$1,700,000 over December 31, 1995. A substantial portion 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 3.2% at September 30, 1996, compared to 1.6% at December 31, 1995.
Demand deposits decreased $1,500,000 or 10% during the first nine months of
1996. Interest bearing deposits increased by $2,500,000 or 2% between December
31, 1995, and September 30, 1996. Total deposits increased $1,000,000 or 1%
during the nine month period ended September 30, 1996. Management attributes
the decrease in demand deposits to a normal seasonal fluctuation. Demand
deposits have increased by $1,100,000 or 9% since September 30, 1995.
Other borrowed funds, including short-term federal funds borrowed, increased
by $3,100,000 or 12% during the first nine months of 1996. Additional
borrowings were needed to fund strong loan growth during the second and third
quarters of this year.
Stockholders' equity increased by $1,000,000 to $25,200,000 as of September
30, 1996. Stockholders' equity to total assets was 12.5% at September 30,
1996, compared to 12.3% at December 31, 1995. Return on average equity was
9.00% for the first nine months of 1996 compared to 8.95% for 1995.
On September 17, 1996, the Company's board of directors declared a
semiannual $11.00 per share dividend payable on January 2, 1997, to all
shareholders of record on December 10, 1996.
Page 10<PAGE>
DENMARK BANCSHARES. INC.
Part II - Other Information
Item 6. Exhibits
(a) Exhibit 27.0 Financial Data Schedule
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: October 31, 1996 /s/ Darrell R. Lemmens
Darrell R. Lemmens,
Principal Executive Officer,
Chairman of the Board,
and President
Date: October 31, 1996 /s/ Dennis J.Heim
Dennis J. Heim,
Vice President and Treasurer,
Principal Financial and
Accounting Officer
Page 12<PAGE>
[ARTICLE] 9
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] SEP-30-1996
[CASH] 4546777
[INT-BEARING-DEPOSITS] 0
[FED-FUNDS-SOLD] 0
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 10301165
[INVESTMENTS-CARRYING] 17159233
[INVESTMENTS-MARKET] 18563000
[LOANS] 167463500
[ALLOWANCE] 2445296
[TOTAL-ASSETS] 202275044
[DEPOSITS] 145792068
[SHORT-TERM] 0
[LIABILITIES-OTHER] 31282038
[LONG-TERM] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 10336295
[OTHER-SE] 14864643
[TOTAL-LIABILITIES-AND-EQUITY] 202275044
[INTEREST-LOAN] 10415274
[INTEREST-INVEST] 1474650
[INTEREST-OTHER] 0
[INTEREST-TOTAL] 11889924
[INTEREST-DEPOSIT] 4855113
[INTEREST-EXPENSE] 6082961
[INTEREST-INCOME-NET] 5806963
[LOAN-LOSSES] 153000
[SECURITIES-GAINS] 0
[EXPENSE-OTHER] 3881554
[INCOME-PRETAX] 2257864
[INCOME-PRE-EXTRAORDINARY] 2257864
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 1699733
[EPS-PRIMARY] 61.80
[EPS-DILUTED] 61.80
[YIELD-ACTUAL] 4.14
[LOANS-NON] 2900000
[LOANS-PAST] 0
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 0
[ALLOWANCE-OPEN] 2319101
[CHARGE-OFFS] 52498
[RECOVERIES] 25693
[ALLOWANCE-CLOSE] 2445296
[ALLOWANCE-DOMESTIC] 0
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 2445296
</TABLE>
