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, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
EXCHANGE ACT
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)
(920) 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 November 7, 1997
Common Stock 54,877
(no par value)
<PAGE>
DENMARK BANCSHARES, INC.
TABLE OF CONTENTS
Quarterly Report On Form 10-QSB
For The Quarter Ended September 30, 1997
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
Signatures 11<PAGE>
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, December 31,
1997 1996
(UNAUDITED)
Assets ----------- -----------
Cash and due from banks $5,146,939 $6,063,954
Federal funds sold 6,117,000 937,000
Investment securities
Available-for-sale, at fair value 14,047,839 10,952,446
Held-to-maturity, at cost 17,934,998 17,667,237
Total Investment Securities $31,982,837 $28,619,683
Loans
Commercial 51,252,851 45,899,745
Real estate 125,698,905 114,169,830
Installment 16,864,923 14,590,185
Other 645,521 554,678
Total Loans $194,462,200 $175,214,438
Allowance for credit losses (2,730,124) (2,506,728)
Net Loans $191,732,076 $172,707,710
Premises and equipment, net 3,273,215 2,960,537
Accrued interest receivable 1,497,035 1,153,231
Other assets 4,218,167 1,272,161
TOTAL ASSETS $243,967,269 $213,714,276
============ ============
Liabilities
Deposits
Non-interest bearing $14,862,969 $16,077,828
Interest bearing 166,365,457 134,338,874
Total Deposits $181,228,426 $150,416,702
Securities sold under
repurchase agreements 1,806,006 0
Other borrowed funds 31,581,201 35,912,337
Accrued interest payable 1,354,563 929,674
Other liabilities 926,598 542,426
Total Liabilities $216,896,794 $187,801,139
------------ ------------
Stockholders' Equity
Common stock, no par value
authorized 320,000 shares; 54,879
and 54,972 outstanding respectively $10,336,295 $10,336,295
Paid in capital 37,384 37,384
Treasury stock (233,152) (167,862)
Retained earnings 16,964,382 15,747,969
Unrealized loss on securities
available-for-sale (34,434) (40,649)
Total Stockholders' Equity $27,070,475 $25,913,137
----------- -----------
TOTAL LIABILITIES AND EQUITY $243,967,269 $213,714,276
============ ============
The accompanying notes are an integral part of these financial statements.
Page 3
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
Interest Income ---------- ---------- ----------- -----------
Loans including fees $4,144,847 $3,563,706 $11,853,310 $10,415,274
Investment securities
Taxable 197,179 144,736 579,716 412,048
Exempt from federal tax 325,017 317,937 967,551 920,252
Federal funds sold 68,417 24,298 72,663 142,350
---------- ---------- ----------- -----------
Total Interest Income $4,735,460 $4,050,677 $13,473,240 $11,889,924
Interest Expense ---------- ---------- ----------- -----------
Deposits $1,975,113 $1,623,178 $5,219,390 $4,855,113
Other borrowed funds 533,111 425,404 1,696,174 1,227,848
---------- ---------- ----------- -----------
Total Interest Expense $2,508,224 $2,048,582 $6,915,564 $6,082,961
---------- ---------- ----------- -----------
Net interest income $2,227,236 $2,002,095 $6,557,676 $5,806,963
Provision for Credit Losses 87,000 51,000 261,000 153,000
---------- ---------- ----------- -----------
Net after provision $2,140,236 $1,951,095 $6,296,676 $5,653,963
Noninterest Income
Service fees and commissions $164,558 $141,993 $503,476 $382,212
Investment security gains 0 0 (113) 0
Other 35,311 30,540 112,731 103,243
-------- ---------- ----------- -----------
Total Noninterest Income $199,869 $172,533 $616,094 $485,455
-------- ---------- ----------- -----------
Noninterest Expense
Salaries and employee benefits $960,003 $841,992 $2,745,315 $2,455,370
Occupancy expenses 148,530 153,261 437,806 448,914
Data processing expenses 83,792 68,894 225,623 205,612
Directors and committee fees 46,120 43,640 145,430 135,520
Other operating expenses 386,108 211,229 850,261 636,138
-------- ---------- ----------- -----------
Total Noninterest Expense $1,624,553 $1,319,016 $4,404,435 $3,881,554
---------- ---------- ----------- -----------
Income before income taxes $715,552 $804,612 $2,508,335 $2,257,864
Income tax expense 169,302 203,206 646,605 558,131
--------- ---------- ----------- -----------
NET INCOME $546,250 $601,406 $1,861,730 $1,699,733
======== ========== =========== ===========
NET INCOME PER COMMON SHARE (4) $9.95 $10.93 $33.88 $30.90
======== ========== =========== ===========
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,
1997 1996
Cash flows from operating activities: ---------- ----------
Net Income $1,861,730 $1,699,733
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation $232,997 $218,597
Provision for credit losses 261,000 153,000
Amortization of intangibles 46,657 3,517
Amortization of bond premium 44,081 28,756
Accretion of bond discount (471,985) (424,915)
Loss on sale of other real estate 0 7,909
Loss on sales of investments 113 0
Increase in interest receivable (333,151) (121,977)
Increase in interest payable 210,311 35,937
Other, net 238,586 256,465
---------- ----------
Net cash provided by operating activities $2,090,339 $1,857,022
---------- ----------
Cash flows from investing activities:
Maturities of held-to-maturity securities $295,757 $489,826
Proceeds from sale of available-for-sale securities 1,548,780 1,556,918
Purchases of held-to-maturity securities (180,000) (971,724)
Purchases of available-for-sale securities (4,588,516) (2,620,350)
Federal funds sold, net (5,180,000) 6,977,091
Net increase in loans made to customers (16,975,654) (11,503,270)
Capital expenditures (238,425) (190,300)
Net cash received from acquisition of branch bank 13,786,977 0
----------- ----------
Net cash used by investing activities ($11,531,081) ($6,261,809)
----------- ----------
Cash flows from financing activities:
Net increase in deposits $11,732,581 $974,298
Proceeds from sale of treasury stock 0 10,110
Purchases of treasury stock (65,291) (21,836)
Dividends paid (618,433) (563,953)
Debt proceeds 14,233,102 25,439,768
Debt repayment (18,564,237) (22,868,000)
Securities sold under repurchase agreement 1,806,006 520,000
----------- -----------
Net cash provided by financing activities $8,523,728 $3,490,387
---------- ----------
Net decrease in cash and cash equivalents (917,014) (914,400)
Cash and cash equivalents, beginning 6,063,954 5,464,693
---------- ----------
CASH & CASH EQUIVALENTS, ENDING $5,146,940 $4,550,293
========== ==========
Supplemental schedule of noncash investing
and financing activities:
Acquisition of branch bank
Loans $2,309,712
Capital expenditures 307,250
Intangibles and other assets net of other liabilities 2,675,204
Deposits Assumed (19,079,143)
------------
Net cash received from acquisition of branch bank (13,786,977)
============
Loans transferred to other real estate $0 $85,000
======= =======
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, 1997, and the results of operations and cash
flows for the nine month period ended September 30, 1997. 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, 1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
--------- ------------ --------- -----------
U.S. Government agencies $2,723 $0 $70 $2,653
Mortgage-backed securities 7,643 31 13 7,661
Equity securities 3,734 0 0 3,734
--------- ------------ --------- -----------
Total $14,100 $31 $83 $14,048
December 31, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
--------- ------------ ---------- ----------
U.S. Government agencies $2,121 $0 $41 $2,080
Mortgage-backed securities 7,442 8 30 7,420
Equity securities 1,453 0 0 1,453
--------- ------------ --------- -----------
Total $11,016 $8 $71 $10,953
The amortized cost and estimated fair value of securities held-to-maturity
were as follows:
September 30, 1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
---------- ----------- ---------- -----------
State and local governments $17,935 $1,615 $0 $19,550
---------- ----------- ---------- -----------
Total $17,935 $1,615 $0 $19,550
December 31, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
---------- ----------- ---------- ----------
State and local governments $17,667 $1,597 $23 $19,241
---------- ----------- ---------- ----------
Total $17,667 $1,597 $23 $19,241
Page 6<PAGE>
DENMARK BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The amortized cost and estimated fair values of securities at September 30,
1997 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 $3,743 $3,674 $946 $951
Due from one to five years 1,885 1,877 649 689
Due from five to ten years 4,461 4,485 5,116 5,808
Due after ten years 277 278 7,118 7,682
Equity securities 3,734 3,734 4,106 4,420
----------- ----------- ----------- ---------
Total $14,100 $14,048 $17,935 $19,550
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 Nine Months Ended For the Year Ended
September 30, December 31,
1997 1996 1996
----------- ----------- -----------
Balance, beginning of period $2,506,728 $2,319,101 $2,319,101
Provision charged to operations 261,000 153,000 210,000
Recoveries 20,280 25,693 33,826
Charge-offs (57,884) (52,498) (56,199)
----------- ----------- -----------
Balance, end of period $2,730,124 $2,445,296 $2,506,728
=========== =========== ===========
NOTE 4 - NET INCOME PER SHARE (1)
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 Period
September 30, Ended September 30,
1997 1996 1997 1996
-------- -------- -------- --------
Weighted Average Shares (1) 54,900 55,002 54,944 55,009
(1) Restated to reflect the 2-for-1 stock split in the form of a stock dividend
paid on July 1, 1997.
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.
1997 1997 1997 1996 1996
(In thousands) --------- -------- --------- -------- ---------
Operating Results
Interest income $4,735 $4,402 $4,336 $4,183 $4,051
Interest expense 2,508 2,257 2,151 2,069 2,049
Net interest income 2,227 2,145 2,185 2,114 2,002
Provision for credit losses 87 87 87 57 51
Noninterest income 200 235 181 162 173
Noninterest expense 1,625 1,439 1,341 1,193 1,319
Net income 546 632 684 680 601
Per Share Data
Net income per share $9.95 $11.49 $12.44 $12.36 $10.93
(In thousands)
Financial Condition (1)
Loans $194,462 $183,940 $176,152 $175,214 $167,464
Allowance for credit losses 2,730 2,652 2,585 2,507 2,445
Investment securities 31,983 29,956 29,545 28,620 27,460
Assets 243,967 225,004 213,889 213,714 202,275
Deposits 181,228 157,460 146,373 150,417 145,792
Other borrowed funds 33,387 36,864 35,248 35,912 29,518
Stockholders' equity 27,070 26,930 26,247 25,913 25,201
Financial Ratios
Return on average equity 8.04% 9.47% 10.42% 10.55% 9.54%
Return on average assets 0.93% 1.16% 1.29% 1.32% 1.20%
Interest rate spread 3.17% 3.27% 3.46% 3.40% 3.30%
Average equity to average assets 11.53% 12.29% 12.34% 12.52% 12.55%
Allowance for credit losses
to total loans (1) 1.40% 1.44% 1.47% 1.43% 1.46%
(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, 1997, was $546,250, or
$9.95 per share, a decrease of $55,156 or 9%, compared to $601,406, or $10.93
per share, for the corresponding period in 1996. This decrease was primarily
the result of higher noninterest expense related to the acquisition of the
Reedsville Branch of M&I Bank Northeast.
Net interest income for the quarter ended September 30, 1997, was
$2,140,236 an increase of $225,141 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 650 35 685
Interest expense 429 31 460
--- -- ---
Net interest income 221 4 225
This increase was primarily attributable to higher volume as average
earning assets during the third quarter of 1997 increased by $32.3 million and
average interest-bearing liabilities increased by $30.9 million compared to
the third quarter of 1996. The Company's average interest rate spread was
3.17% during the third quarter of 1997 compared to 3.29% during the quarter
ended September 30, 1996. The yield on earning assets increased by two basis
points while the cost of funds increased by fourteen basis points.
In the third quarter of 1997 the Company's provision for credit losses was
$87,000 compared to $51,000 for the third quarter of 1996. Net charge-offs
were $9,075 in the third quarter of 1997 compared to net recoveries of $10,766
during the third quarter of 1996.
Noninterest income for the three months ended September 30, 1997, was
$199,869, an increase of $27,336 over the corresponding period in 1996. This
increase is primarily the result of an increase of $22,697 in commissions from
the sales of annuities, mutual funds, and property insurance and an increase
of $4,925 in appraisal fees.
Noninterest expense increased by $305,537 or 23% during the three months
ended September 30, 1997, over the corresponding period in 1996. Salaries and
benefits expense increased $118,011 or 14% over the corresponding period in
1996. This increase is primarily attributed to the hiring of additional staff
members and regular salary increases. Legal and professional fees increased
$59,958 primarily due to costs incurred to acquire the Reedsville Branch.
9
Amortization of intangibles expense increased by $36,004 as a result of the
write-down of intangible assets related to the acquisitions of the branch bank
and the insurance agency. In connection with the acquisition, the Company
recorded goodwill of $2,885,866, which is being amortized over fifteen years.
Printing and supplies expense increased $32,482 compared to the third quarter
of 1996. This increase is primarily attributable to expenses related to the
acquisition of the Reedsville Branch.
Return on average assets in the third quarter of 1997 was .93%, compared
to 1.20% for the corresponding period in 1996. Return on average equity in
the third quarter of 1997 was 8.0%, compared to 9.5% for the corresponding
period in the prior year.
Financial Condition
Total assets increased by $30,252,993 between December 31, 1996, and
September 30, 1997. Federal funds sold increased by $5,180,000 during the
nine months ended September 30, 1997. Investments securities increased by
$3,363,154 and net loans increased by $19,024,366 during the first nine
months. The acquisition of the Reedsville Branch of M&I Bank Northeast, which
was completed during the third quarter of 1997, provided the Bank
approximately $13.8 million in cash, additional loans of approximately $2.3
million, and the fixed assets of approximately $300,000 associated with the
Branch, in consideration of the assumption of approximately $19.1 million of
deposits. Other assets increased by $2,946,006 primarily as a result of the
intangible assets associated with the acquisition of the Branch.
The allowance for credit losses increased by $223,396 during the nine
months ended September 30, 1997. The allowance equals 1.40% of total loans at
September 30 1997, compared to 1.43% at December 31, 1996. Nonaccrual loans
totaled $4,128,127 at September 30 1997, an increase of $814,764 over December
31, 1996. The increase in nonaccrual loans is attributed to one commercial
loan of approximately $313,000 and several smaller loans. Management considers
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, 1997, compared to 2.9% at December 31, 1996.
Demand deposits decreased $1,214,859 or 7.6% during the first nine months
of 1997. Interest bearing deposits increased by $32,026,583 or 23.8% between
December 31, 1996, and September 30, 1997. Total deposits increased
$30,811,724 or 20.5% during the nine month period ended September 30, 1997.
The Bank assumed $19.1 million of deposit liabilities with the acquisition of
the Branch. Management attributes the decrease in demand deposits to a normal
seasonal fluctuation. The increase in interest bearing deposits includes
$5 million of certificates of deposit from a local school district. The funds
are expected to be withdrawn over the next fifteen months to fund construction
of a new school.
Other borrowed funds including securities sold under repurchase agreements
decreased by $2,525,130 or 7.0% during the first nine months of 1997. Cash
received in consideration for the assumption of deposit liabilities of the
acquired Branch was used in part to reduce other borrowed funds.
Stockholders' equity increased by $1,157,338 to $27,070,475 as of
September 30, 1997. On September 24, 1997, the Company's board of directors
declared a semiannual $6.00 per share dividend payable on January 2, 1998, to
all shareholders of record on December 9, 1997.
10<PAGE>
DENMARK BANCSHARES. INC.
Part II - Other Information
Item 6. Exhibits -- Exhibit 27 -- Financial Data Schedule
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: November 10, 1997 /s/ Darrell R. Lemmens
Darrell R. Lemmens,
Principal Executive Officer,
Chairman of the Board,
and President
Date: November 10, 1997 /s/ Dennis J. Heim
Dennis J. Heim,
Vice President and Treasurer,
Principal Financial and
Accounting Officer
Page 11<PAGE>
Page 11<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,140,825
<INT-BEARING-DEPOSITS> 6,114
<FED-FUNDS-SOLD> 6,117,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,047,839
<INVESTMENTS-CARRYING> 17,934,998
<INVESTMENTS-MARKET> 19,550,000
<LOANS> 194,462,200
<ALLOWANCE> 2,730,124
<TOTAL-ASSETS> 243,967,269
<DEPOSITS> 181,228,426
<SHORT-TERM> 0
<LIABILITIES-OTHER> 33,862,362
<LONG-TERM> 0
0
0
<COMMON> 10,336,295
<OTHER-SE> 16,734,180
<TOTAL-LIABILITIES-AND-EQUITY> 243,967,269
<INTEREST-LOAN> 11,853,310
<INTEREST-INVEST> 1,619,930
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 13,473,240
<INTEREST-DEPOSIT> 5,219,390
<INTEREST-EXPENSE> 6,915,564
<INTEREST-INCOME-NET> 6,557,676
<LOAN-LOSSES> 261,000
<SECURITIES-GAINS> (113)
<EXPENSE-OTHER> 4,404,435
<INCOME-PRETAX> 2,508,335
<INCOME-PRE-EXTRAORDINARY> 2,508,335
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,861,730
<EPS-PRIMARY> 33.88
<EPS-DILUTED> 33.88
<YIELD-ACTUAL> 3.95
<LOANS-NON> 4,128,127
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,506,728
<CHARGE-OFFS> 57,884
<RECOVERIES> 20,280
<ALLOWANCE-CLOSE> 2,730,124
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,730,124
</TABLE>
