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 March 31, 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 May 8, 1997
Common Stock 27,482
(no par value)
<PAGE>
DENMARK BANCSHARES, INC.
TABLE OF CONTENTS
Quarterly Report On Form 10-QSB
For The Quarter Ended March 31, 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 5. Other Information 10
Item 6. Exhibit 27 -- Financial Data Schedule 11
Signatures 12<PAGE>
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, December 31,
1997 1996
(UNAUDITED)
Assets ----------- -----------
Cash and due from banks $5,190,285 $6,063,954
Federal funds sold 0 937,000
Investment securities
Available-for-sale, at fair value 11,772,889 10,952,446
Held-to-maturity, at cost 17,771,747 17,667,237
Total Investment Securities $29,544,636 $28,619,683
Loans
Commercial 45,539,313 45,899,745
Real estate 115,078,362 114,169,830
Installment 14,923,492 14,590,185
Other 610,702 554,678
Total Loans $176,151,869 $175,214,438
Allowance for credit losses (2,585,364) (2,506,728)
Net Loans $173,566,505 $172,707,710
Premises and equipment, net 2,990,964 2,960,537
Accrued interest receivable 1,290,273 1,153,231
Other assets 1,306,221 1,272,161
TOTAL ASSETS $213,888,884 $213,714,276
============ ============
Liabilities
Deposits
Non-interest bearing $12,313,613 $16,077,828
Interest bearing 134,059,777 134,338,874
Total Deposits $146,373,390 $150,416,702
Federal funds borrowed 4,261,000 0
Other borrowed funds 35,248,371 35,912,337
Accrued interest payable 864,000 929,674
Other liabilities 895,416 542,426
Total Liabilities $187,642,177 $187,801,139
------------ ------------
Stockholders' Equity
Common stock, no par value
authorized 320,000 shares; 27,483
and 27,486 outstanding respectively $10,336,295 $10,336,295
Paid in capital 37,384 37,384
Treasury stock (171,420) (167,862)
Retained earnings 16,115,817 15,747,969
Unrealized loss on securities
available-for-sale (71,369) (40,649)
Total Stockholders' Equity $26,246,707 $25,913,137
------------ ------------
TOTAL LIABILITIES AND EQUITY $213,888,884 $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 Ended
March 31, March 31,
1997 1996
Interest Income ----------- -----------
Loans including fees $3,812,905 $3,404,191
Investment securities
Taxable 198,606 131,534
Exempt from federal tax 320,660 297,839
Federal funds sold 3,855 69,879
----------- -----------
Total Interest Income $4,336,026 $3,903,443
Interest Expense ----------- -----------
Deposits $1,588,562 $1,624,144
Other borrowed funds 562,228 405,357
----------- -----------
Total Interest Expense $2,150,790 $2,029,501
----------- -----------
Net interest income $2,185,236 $1,873,942
Provision for Credit Losses 87,000 51,000
----------- -----------
Net after provision $2,098,236 $1,822,942
Noninterest Income
Service fees and commissions $142,801 $111,001
Investment security gains (113) 0
Other 38,144 36,276
----------- -----------
Total Noninterest Income $180,832 $147,277
----------- -----------
Noninterest Expense
Salaries and employee benefits $878,114 $806,740
Occupancy expenses 145,565 146,999
Data processing expenses 68,012 63,884
Directors and committee fees 44,570 44,380
Other operating expenses 204,683 188,360
----------- -----------
Total Noninterest Expense $1,340,944 $1,250,363
----------- -----------
Income before income taxes $938,124 $719,856
Income tax expense 254,222 177,168
----------- -----------
NET INCOME $683,902 $542,688
=========== ===========
NET INCOME PER COMMON SHARE (4) $24.88 $19.73
=========== ===========
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 Quarter Ended
March 31,
1997 1996
Cash flows from operating activities: ------------ ------------
Net Income $683,902 $542,688
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation $77,666 $72,866
Provision for credit losses 87,000 51,000
Amortization of bond premium 14,454 12,579
Accretion of bond discount (145,737) (132,918)
Loss on sales of investments 113 0
Increase in interest receivable (137,042) (35,302)
(Decrease) increase in interest payable (65,674) 3,702
Other, net 324,441 293,888
------------ ------------
Net cash provided by operating activities $839,123 $808,503
------------ ------------
Cash flows from investing activities:
Maturities of held-to-maturity securities $20,765 $228,811
Proceeds from sale of available-for-sale securities 445,417 889,953
Purchases of available-for-sale securities (1,309,859) (1,485,500)
Federal funds sold, net 937,000 2,557,000
Net increase in loans made to customers (945,795) (1,325,199)
Capital expenditures (108,093) (41,219)
------------ ------------
Net cash (used) provided by investing activities ($960,565) $823,846
------------ ------------
Cash flows from financing activities:
Net increase in deposits ($4,043,312) ($1,845,231)
Proceeds from sale of treasury stock 0 10,110
Purchases of treasury stock (3,559) (16,176)
Dividends paid (302,390) (275,150)
Debt proceeds 10,836,238 13,936,743
Debt repayment (11,500,204) (13,910,000)
Federal funds purchased, net 4,261,000 0
------------ ------------
Net cash used by financing activities ($752,227) ($2,099,704)
------------ ------------
Net decrease in cash and cash equivalents (873,669) (467,355)
Cash and cash equivalents, beginning 6,063,954 5,464,693
------------ ------------
CASH & CASH EQUIVALENTS, ENDING $5,190,285 $4,997,338
============ ============
Supplemental schedule of noncash investing
and financing activities:
Loans transferred to other real estate $0 $0
============ ============
The accompanying notes are an integral part of these financial statements.
Page 5<PAGE>
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 March 31, 1997, and the results of operations and cash flows
for the three month period ended March 31, 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:
March 31, 1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ----------- ---------- -----------
U.S. Government agencies $2,683 $0 $52 $2,631
Mortgage-backed securities 7,768 3 64 7,707
Equity securities 1,435 0 0 1,435
----------- ----------- ---------- -----------
Total $11,886 $3 $116 $11,773
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:
March 31, 1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ----------- ---------- -----------
State and local governments $17,772 $1,464 $19 $19,217
----------- ----------- ---------- -----------
Total $17,772 $1,464 $19 $19,217
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>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The amortized cost and estimated fair values of securities held-to-maturity
and securities available-for-sale at March 31, 1997, by maturity are shown
below:
Available-for-Sale Held-to-Maturity
Estimated Estimated
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
----------- --------- ---------- ---------
Due in 1 year or less $2,364 $2,363 $1,156 $1,190
Due from one to five years 4,203 4,120 4,651 5,344
Due from five to ten years 3,407 3,382 6,322 6,796
Due after ten years 477 473 5,643 5,887
Equity securities 1,435 1,435 0 0
----------- --------- ---------- ---------
Total $11,886 $11,773 $17,772 $19,217
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 For the
Three Months Ended Year Ended
March 31, March 31, December 31,
1997 1996 1996
---------- ---------- ----------
Balance, beginning of period $2,506,728 $2,319,101 $2,319,101
Provision charged to operations 87,000 51,000 210,000
Recoveries 9,262 9,645 33,826
Charge-offs (17,626) (1,630) (56,199)
---------- --------- ----------
Balance, end of period $2,585,364 $2,378,116 $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 Three Month
Period Ended March 31,
1997 1996
----------- -----------
Weighted Average Shares 27,484 27,508
Page 7<PAGE>
DENMARK BANCSHARES, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Highlights
1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
1997 1996 1996 1996 1996
(In thousands) -------- -------- -------- -------- --------
Operating Results
Interest income $4,336 $4,183 $4,051 $3,936 $3,903
Interest expense 2,151 2,069 2,049 2,005 2,029
Net interest income 2,185 2,114 2,002 1,931 1,874
Provision for credit losses 87 57 51 51 51
Noninterest income 181 162 173 166 147
Noninterest expense 1,341 1,193 1,319 1,312 1,250
Net income 684 680 601 556 543
Per Share Data
Net income per share $24.88 $24.72 $21.87 $20.20 $19.73
(In thousands)
Financial Condition (1)
Loans $176,152 $175,214 $167,464 $161,789 $157,405
Allowance for credit losses 2,585 2,507 2,445 2,384 2,378
Investment securities 29,545 28,620 27,460 25,967 26,050
Assets 213,889 213,715 202,275 198,123 195,512
Deposits 146,373 150,417 145,792 143,219 142,973
Other borrowed funds 35,248 35,912 29,518 28,286 26,453
Stockholders' equity 26,247 25,916 25,201 24,898 24,380
Financial Ratios
Return on average equity 10.42% 10.55% 9.54% 8.96% 8.88%
Return on average assets 1.29% 1.32% 1.20% 1.13% 1.12%
Interest rate spread 3.46% 3.40% 3.30% 3.27% 3.19%
Average equity to average
assets 12.34% 12.52% 12.55% 12.64% 12.58%
Allowance for credit losses
to total loans (1) 1.47% 1.43% 1.46% 1.47% 1.51%
(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 March 31, 1997, was $683,902, or $24.88
per share, an increase of $141,214 or 26%, compared to $542,688, or $19.73 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 March 31, 1997, was $2,185,236,
an increase of $311,294 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 $420 $12 $432
Interest expense 237 (116) 121
---- ----- ----
Net interest income $183 $128 $311
This increase was primarily attributable to higher volume but was also
improved by an increase in interest rate spread. Average earning assets during
the first quarter of 1997 increased by $18.5 million and average
interest-bearing liabilities increased by $15.5 million compared to the first
quarter of 1996. The Company's average interest rate spread was 3.46% during
the first quarter of 1997 compared to 3.19% during the quarter ended March 31,
1996. The yield on earning assets increased by nine basis points while the
cost of funds declined by eighteen basis points.
In the first quarter of 1997 the Company's provision for credit losses was
$87,000 compared to $51,000 for the first quarter of 1996. Net charge-offs
were $8,364 in the first quarter of 1997 compared to net recoveries of $8,015
during the first quarter of 1996.
Noninterest income for the three months ended March 31, 1997, was $180,832,
an increase of $33,555 over the corresponding period in 1996. This increase is
primarily the result of an increase of $26,294 in commissions from the sales of
annuities, mutual funds, and property insurance and an increase of $5,512 in
deposit service charges.
Noninterest expense increased by $90,581 or 7% during the three months ended
March 31, 1997, over the corresponding period in 1996. Salaries and benefits
expense increased $71,374 or 9% over the first quarter of 1996. This
increase is primarily attributed to the hiring of additional staff members and
regular salary increases.
Return on average assets in the first quarter of 1997 was 1.29%, compared to
1.12% for the corresponding period in 1996. Return on average equity in the
first quarter of 1997 was 10.4%, compared to 8.9% in the first quarter of 1996.
Page 9 <PAGE>
DENMARK BANCSHARES, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
Total assets increased by $174,608 between December 31, 1996, and March 31,
1997. Federal funds sold and cash and due from banks decreased by $1,810,669
during the quarter ended March 31, 1997. Investments securities increased by
$924,953 and net loans increased by $858,795 during the first quarter.
The allowance for credit losses increased by $78,636 during the quarter
ended March 31, 1997. The allowance equals 1.47% of total loans at March 31,
1997, compared to 1.43% at December 31, 1996. Nonaccrual loans totaled
$3,315,009 at March 31, 1997, an increase of $1,646 over December 31, 1996.
The Company's ratio of loans more than 30 days past due (including nonaccrual
loans) to total loans was 3.9% at March 31, 1997, compared to 2.9% at December
31, 1996. The increase in past due loans is primarily attributed to a loan of
$1.2 million that was 32 days past due and required a renewal note for the
principal. The note was renewed in April and all amounts due are paid.
Excluding this loan, the ratio of past due loans at March 31, 1997, is 3.2%.
Demand deposits decreased $3,764,215 or 23.4% during the first quarter of
1997. Interest bearing deposits decreased by $279,097 or .2% between December
31, 1996, and March 31, 1997. Total deposits decreased $4,043,312 or 2.7%
during the three month period ended March 31, 1997. Management attributes the
decrease in demand deposits to a normal seasonal fluctuation. Demand deposits
have increased by $1.2 million or 11% since March 31, 1996.
Other borrowed funds including short-term federal funds borrowed, increased
by $3,597,034 or 10% during the first three months of 1997. Additional
borrowings were needed to offset the seasonal decline of demand deposits.
Stockholders' equity increased by $333,570 during the first quarter of 1997
to $26,246,707 as of March 31, 1997. As of March 31, 1997, the Company's
leverage ratio was 12.1%, the risk-based core capital ratio was 17.4% and the
total risk based capital ratio was 18.7%. The Company and the Bank continue to
maintain capital levels well above the regulatory minimum levels.
On March 25, 1997, the Company's board of directors declared a
semiannual $11.50 per share dividend payable on July 1, 1997, to all
shareholders of record on June 10, 1997.
PART II -- OTHER INFORMATION
Item 5. Other Information
In April 1997, the Bank entered into a branch purchase agreement to acquire
the Reedsville Branch of M&I Bank Northeast. The transaction is subject to
approval by regulatory agencies. The transaction would provide the Bank
approximately $13.5 million in cash, additional loans of approximately
$2.5 million, and the fixed assets associated with the Branch, in
consideration of the assumption of almost $20 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 10
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: May 9, 1997 /s/ Darrell R. Lemmens
Darrell R. Lemmens,
Principal Executive Officer,
Chairman of the Board,
and President
Date: May 9, 1997 /s/ Dennis J. Heim
Dennis J. Heim,
Vice President and Treasurer,
Principal Financial and
Accounting Officer
Page 12<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,190,285
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,772,889
<INVESTMENTS-CARRYING> 17,771,747
<INVESTMENTS-MARKET> 19,217,000
<LOANS> 176,151,869
<ALLOWANCE> 2,585,364
<TOTAL-ASSETS> 213,888,884
<DEPOSITS> 146,373,390
<SHORT-TERM> 0
<LIABILITIES-OTHER> 41,268,787
<LONG-TERM> 0
0
0
<COMMON> 10,336,295
<OTHER-SE> 15,910,412
<TOTAL-LIABILITIES-AND-EQUITY> 213,888,884
<INTEREST-LOAN> 3,812,905
<INTEREST-INVEST> 523,121
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,336,026
<INTEREST-DEPOSIT> 1,588,562
<INTEREST-EXPENSE> 2,150,790
<INTEREST-INCOME-NET> 2,185,236
<LOAN-LOSSES> 87,000
<SECURITIES-GAINS> (113)
<EXPENSE-OTHER> 1,340,944
<INCOME-PRETAX> 938,124
<INCOME-PRE-EXTRAORDINARY> 938,124
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 683,902
<EPS-PRIMARY> 24.88
<EPS-DILUTED> 24.88
<YIELD-ACTUAL> 4.26
<LOANS-NON> 3,315,009
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,506,728
<CHARGE-OFFS> 17,626
<RECOVERIES> 9,262
<ALLOWANCE-CLOSE> 2,585,364
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,585,364
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