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, 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)
(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 August 12, 1997
Common Stock 54,881
(no par value)
<PAGE>
DENMARK BANCSHARES, INC.
TABLE OF CONTENTS
Quarterly Report On Form 10-QSB
For The Quarter Ended June 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 4. Submission of Matters to Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibit 27 -- Financial Data Schedule
Signatures 12<PAGE>
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, December 31,
1997 1996
(UNAUDITED)
Assets ----------- -----------
Cash and due from banks $7,913,339 $6,063,954
Federal funds sold 140,000 937,000
Investment securities
Available-for-sale, at fair value 12,159,850 10,952,446
Held-to-maturity, at cost 17,796,376 17,667,237
Total Investment Securities $29,956,226 $28,619,683
Loans
Commercial 48,932,773 45,899,745
Real estate 119,435,602 114,169,830
Installment 14,827,020 14,590,185
Other 744,329 554,678
Total Loans $183,939,724 $175,214,438
Allowance for credit losses (2,652,200) (2,506,728)
Net Loans $181,287,524 $172,707,710
Premises and equipment, net 2,980,813 2,960,537
Accrued interest receivable 1,375,514 1,153,231
Other assets 1,350,852 1,272,161
TOTAL ASSETS $225,004,268 $213,714,276
============ ============
Liabilities
Deposits
Non-interest bearing $14,532,418 $16,077,828
Interest bearing 142,927,345 134,338,874
Total Deposits $157,459,763 $150,416,702
Securities sold under
repurchase agreements 2,000,000 0
Other borrowed funds 36,863,911 35,912,337
Accrued interest payable 1,011,376 929,674
Other liabilities 739,643 542,426
Total Liabilities $198,074,693 $187,801,139
------------ ------------
Stockholders' Equity
Common stock, no par value
authorized 320,000 shares; 27,480
and 27,486 outstanding respectively $10,336,295 $10,336,295
Paid in capital 37,384 37,384
Treasury stock (174,212) (167,862)
Retained earnings 16,747,406 15,747,969
Unrealized loss on securities
available-for-sale (17,298) (40,649)
Total Stockholders' Equity $26,929,575 $25,913,137
----------- -----------
TOTAL LIABILITIES AND EQUITY $225,004,268 $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 Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Interest Income ----------- ----------- ---------- -----------
Loans including fees $3,895,558 $3,447,377 $7,708,463 $6,851,568
Investment securities
Taxable 183,931 135,778 382,537 267,312
Exempt from federal tax 321,874 304,476 642,534 602,315
Federal funds sold 391 48,173 4,246 118,052
----------- ----------- ---------- -----------
Total Interest Income $4,401,754 $3,935,804 $8,737,780 $7,839,247
Interest Expense ----------- ----------- ---------- -----------
Deposits $1,655,715 $1,607,791 $3,244,277 $3,231,935
Other borrowed funds 600,835 397,087 1,163,063 802,444
----------- ----------- ---------- -----------
Total Interest Expense $2,256,550 $2,004,878 $4,407,340 $4,034,379
----------- ----------- ---------- -----------
Net interest income $2,145,204 $1,930,926 $4,330,440 $3,804,868
Provision for Credit Losses 87,000 51,000 174,000 102,000
----------- ----------- ---------- -----------
Net after provision $2,058,204 $1,879,926 $4,156,440 $3,702,868
Noninterest Income
Service fees and commissions $196,117 $129,218 $338,918 $240,219
Investment security gains 0 0 (113) 0
Other 39,276 36,427 77,420 72,703
----------- ----------- ---------- -----------
Total Noninterest Income $235,393 $165,645 $416,225 $312,922
----------- ----------- ---------- -----------
Noninterest Expense
Salaries and employee benefits $907,198 $806,638 $1,785,312 $1,613,378
Occupancy expenses 142,211 148,654 289,276 295,653
Data processing expenses 73,819 72,834 141,831 136,718
Directors and committee fees 54,740 47,500 99,310 91,880
Other operating expenses 260,970 236,549 464,153 424,909
----------- ----------- ---------- -----------
Total Noninterest Expense $1,438,938 $1,312,175 $2,779,882 $2,562,538
----------- ----------- ---------- -----------
Income before income taxes $854,659 $733,396 $1,792,783 $1,453,252
Income tax expense 223,081 177,757 477,303 354,925
----------- ----------- ---------- -----------
NET INCOME $631,578 $555,639 $1,315,480 $1,098,327
=========== =========== ========== ===========
NET INCOME PER COMMON SHARE (4) $22.98 $20.20 $47.87 $39.93
=========== =========== ========== ===========
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,
1997 1996
Cash flows from operating activities: ------------ -----------
Net Income $1,315,480 $1,098,327
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation $155,331 $145,731
Provision for credit losses 174,000 102,000
Amortization of bond premium 29,788 20,501
Accretion of bond discount (310,334) (272,025)
Loss on sales of investments 113 0
Increase in interest receivable (222,283) (83,181)
Increase (decrease) in interest payable 81,702 (10,069)
Other, net 93,473 285,094
----------- -----------
Net cash provided by operating activities $1,317,270 $1,286,378
----------- -----------
Cash flows from investing activities:
Maturities of held-to-maturity securities $123,618 $333,976
Proceeds from sale of available-for-sale securities 1,328,083 1,416,453
Purchases of held-to-maturity securities 0 (563,280)
Purchases of available-for-sale securities (2,473,059) (1,399,474)
Federal funds sold, net 797,000 4,891,000
Net increase in loans made to customers (8,753,815) (5,839,762)
Capital expenditures (175,607) (141,835)
----------- -----------
Net cash used investing activities ($9,153,780) ($1,302,922)
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits $7,043,061 ($1,599,093)
Proceeds from sale of treasury stock 0 10,110
Purchases of treasury stock (6,350) (16,176)
Dividends paid (302,390) (275,150)
Debt proceeds 12,689,715 20,916,070
Debt repayment (11,738,141) (19,056,000)
Securities sold under repurchase agreements 2,000,000 0
----------- ------------
Net cash (provided) used by financing activities $9,685,895 ($20,239)
----------- ------------
Net increase (decrease) in cash and cash equivalents 1,849,385 (36,783)
Cash and cash equivalents, beginning 6,063,954 5,464,693
----------- ------------
CASH & CASH EQUIVALENTS, ENDING $7,913,339 $5,427,910
============ ============
Supplemental schedule of noncash investing
and financing activities:
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 June 30, 1997, and the results of operations and cash flows
for the six month period ended June 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:
June 30, 1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
------------ ---------- ----------- ----------
U.S. Government agencies $2,703 $0 $1 $2,702
Mortgage-backed securities 8,236 6 33 8,209
Equity securities 1,249 0 0 1,249
---------------------- ----------------------
Total $12,188 $6 $34 $12,160
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:
June 30, 1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- --------- ----------- ---------
State and local governments $17,796 $1,554 $0 $19,350
----------- -------- ----------- --------
Total $17,796 $1,554 $0 $19,350
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 June 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 $2,624 $2,626 $1,053 $1,073
Due from one to five years 3,462 3,445 5,759 6,507
Due from five to ten years 3,478 3,464 6,608 7,068
Due after ten years 1,375 1,376 4,376 4,702
Equity securities 1,249 1,249 0 0
----------- --------- ----------- ---------
Total $12,188 $12,160 $17,796 $19,350
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 Six Months Ended For the Year Ended
June 30, December 31,
1997 1996 1996
----------- ----------- -----------
Balance, beginning of period $2,506,728 $2,319,101 $2,319,101
Provision charged to operations 174,000 102,000 210,000
Recoveries 14,155 14,315 33,826
Charge-offs (42,683) (51,886) (56,199)
----------- ----------- -----------
Balance, end of period $2,652,200 $2,383,530 $2,506,728
=========== =========== ===========
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,
1997 1996 1997 1996
-------- -------- -------- --------
Weighted Average Shares 27,482 27,505 27,483 27,506
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.
1997 1997 1996 1996 1996
(In thousands) -------- -------- -------- -------- --------
Operating Results
Interest income $4,402 $4,336 $4,183 $4,051 $3,936
Interest expense 2,257 2,151 2,069 2,049 2,005
Net interest income 2,145 2,185 2,114 2,002 1,931
Provision for credit losses 87 87 57 51 51
Noninterest income 235 181 162 173 166
Noninterest expense 1,439 1,341 1,193 1,319 1,312
Net income 632 684 680 601 556
Per Share Data
Net income per share $22.98 $24.88 $24.72 $21.87 $20.20
(In thousands)
Financial Condition (1)
Loans $183,940 $176,152 $175,214 $167,464 $161,789
Allowance for credit losses 2,652 2,585 2,507 2,445 2,384
Investment securities 29,956 29,545 28,620 27,460 25,967
Assets 225,004 213,889 213,715 202,275 198,123
Deposits 157,460 146,373 150,417 145,792 143,219
Other borrowed funds 36,864 35,248 35,912 29,518 28,286
Stockholders' equity 26,930 26,247 25,916 25,201 24,898
Financial Ratios
Return on average equity 9.47% 10.42% 10.55% 9.54% 8.96%
Return on average assets 1.16% 1.29% 1.32% 1.20% 1.13%
Interest rate spread 3.27% 3.46% 3.40% 3.30% 3.27%
Average equity to average
assets 12.29% 12.34% 12.52% 12.55% 12.64%
Allowance for credit losses
to total loans (1) 1.44% 1.47% 1.43% 1.46% 1.47%
(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, 1997, was $631,578, or $22.98
per share, an increase of $75,939 or 14%, compared to $555,639, or $20.20 per
share, for the corresponding period in 1996. This increase was primarily the
result of an increase in net interest income, and higher noninterest income,
which more than offset increases in the provision for loan losses and
noninterest expense.
Net interest income for the quarter ended June 30, 1997, was $2,145,204,
an increase of $214,278 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 452 14 466
Interest expense 256 (4) 252
--- --- ---
Net interest income 196 18 214
This increase was primarily attributable to higher volume as the interest
rate spread was basically unchanged. Average earning assets during the second
quarter of 1997 increased by $20.6 million and average interest-bearing
liabilities increased by $17.3 million compared to the second quarter of 1996.
The Company's average interest rate spread was 3.27% during the second quarter
of 1997 compared to 3.27% during the quarter ended June 30, 1996.
In the second quarter of 1997 the Company's provision for credit losses was
$87,000 compared to $51,000 for the second quarter of 1996. Net charge-offs
were $36,893 in the second quarter of 1997 compared to net charge-offs of
$45,587 during the second quarter of 1996.
Nonninterest income for the three months ended June 30, 1997, was $235,393, an
increase of $69,748 over the corresponding period in 1996. This increase is
primarily the result of an increase of $66,255 in commissions from the sales of
annuities, mutual funds, and property insurance.
Noninterest expense increased by $126,763 or 10% during the three months ended
June 30, 1997, over the corresponding period in 1996. Salaries and benefits
expense increased $100,561 or 12% over the corresponding period in 1996. This
increase is primarily attributed to the hiring of additional staff members and
regular salary increases. Printing and supplies expense increased $13,077
compared to the second quarter of 1996. This increase is primarily attributable
to expenses related to the acquisition of the Reedsville Branch.
Return on average assets in the second quarter of 1997 was 1.16%, compared
to 1.13% for the corresponding period in 1996. Return on average equity in the
second quarter of 1997 was 9.5%, compared to 9.0% for the corresponding period
in the prior year.<PAGE>
DENMARK BANCSHARES, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
Total assets increased by $11,289,992 between December 31, 1996, and June
30, 1997. Federal funds sold and cash and due from banks increased by
$1,052,385 during the six months ended June 30, 1997. Investment securities
increased by $1,336,543 and net loans increased by $8,579,814 during the first
six months.
The allowance for credit losses increased by $145,472 during the six month
period ended June 30 1997. The allowance equals 1.44% of total loans at
June 30 1997, compared to 1.43% at December 31, 1996. Nonaccrual loans
totaled $3,377,583 at June 30 1997, an increase of $64,220 over December 31,
1996. The Company's ratio of loans more than 30 days past due (including
nonaccrual loans) to total loans was 2.8% at June 30, 1997, compared to 2.9%
at December 31, 1996.
Demand deposits decreased $1,545,410 or 9.6% during the first six months of
1997. Interest bearing deposits increased by $8,588,471 or 6.4% between
December 31, 1996, and June 30, 1997. Total deposits increased $7,043,061 or
4.7% during the six month period ended June 30, 1997. Management attributes
the decrease in demand deposits to a normal seasonal fluctuation. The
increase in interest bearing deposits includes $5 million of certificates of
deposits from a local school district. The funds are expected to be withdrawn
over the next sixteen months to fund construction of a new school.
Other borrowed funds including securities sold under repurchase agreements
increased by $2,951,574 or 8.2% during the first six months of 1997. Additional
borrowings were needed to offset the seasonal decline of demand deposits and
to fund loan growth.
Stockholders' equity increased by $1,016,438 to $26,929,575 as of June 30,
1997. On March 25, 1997, the Company's board of directors declared a 2-for-1
stock split in the form of a stock dividend at the rate of one share of Common
Stock for each share issued, payable on July 1, 1997, to all shareholders of
record on June 17, 1997.
Page 10
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 22,
1997.
(b) Directors elected at the Annual Meeting were James E. Renier, and
Thomas F. Wall. Directors whose term of office continued after
the meeting were Terese M. DePrey, Darrell R. Lemmens, Mark E.
Looker, B.E. Mleziva, D.V.M., C.J. Stodola, and Norman F. Tauber.
(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 2000:
Nominees For Withheld
James E. Renier 24,054 7
Thomas F. Wall 24,054 7
(2) The ratification of the appointment of Williams, Young and
Associates, LLC as independent public accountants for the year
ending December 31, 1997.
For Against Abstain
24,057 1 3
Item 5. Other Information
In August 1997, the Bank purchased the Reedsville Branch of M&I Bank
Northeast. The transaction provided the Bank approximately $13.5 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 $19.3 million of deposits. The acquisition of
Reedsville extends the geographic market of the Company in rural Manitowoc
County and provides liquidity to the Bank.
Page 11
Page 10<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: August 12, 1997 /s/ Darrell R. Lemmens
Darrell R. Lemmens,
Principal Executive Officer,
Chairman of the Board,
and President
Date: August 12, 1997 /s/ Dennis J. Heim
Dennis J. Heim,
Vice President and Treasurer,
Principal Financial and
Accounting Officer
Page 12<PAGE>
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