UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO 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 registrant 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
(Registrant's telephone number, including area code)
___________________________________________________________________________
(Former name, address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1)has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 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 CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class August 1, 2000
Common Stock 54,865
(no par value)
DENMARK BANCSHARES, INC.
TABLE OF CONTENTS
Quarterly Report On Form 10-Q
For The Quarter Ended June 30, 2000
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
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
Part II. Other Information
Item 6. Exhibit 27 -- Financial Data Schedule N/A
Signatures 12
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, December 31,
2000 1999
(UNAUDITED)
Assets ------------- -------------
Cash and due from banks $9,435,955 $9,503,948
Federal funds sold 7,750,000 3,505,000
Investment securities
Available-for-sale, at fair value 20,132,916 20,500,622
Held-to-maturity, at cost 25,366,042 24,389,906
Total Investment Securities $45,498,958 $44,890,528
Loans
Commercial 72,786,534 71,174,504
Real estate 177,997,054 166,033,325
Installment 19,009,326 18,552,100
Other 984,204 865,099
Total Loans $270,777,118 $256,625,028
Allowance for credit losses (3,359,179) (3,282,812)
Net Loans $267,417,939 $253,342,216
Premises and equipment, net 4,639,972 4,110,927
Accrued interest receivable 1,833,279 1,664,314
Other assets 4,156,857 4,376,273
TOTAL ASSETS $340,732,960 $321,393,206
============= =============
Liabilities
Deposits
Non-interest bearing $28,995,953 $26,387,194
Interest bearing 195,025,957 185,546,462
Total Deposits $224,021,910 $211,933,656
Short-term borrowings 53,999,529 58,108,946
Accrued interest payable 1,516,160 1,337,566
Other liabilities 1,122,997 794,128
Long-term debt 27,095,062 17,097,536
Total Liabilities $307,755,658 $289,271,832
------------- -------------
Stockholders' Equity
Common stock, no par value
authorized 320,000 shares; 54,870
and 54,907 outstanding respectively $10,336,295 $10,336,295
Paid in capital 112,374 110,984
Treasury stock (355,104) (305,426)
Retained earnings 23,176,729 22,318,876
Accumulated other comprehensive income
Unrealized losses on securities (292,992) (339,355)
Total Stockholders' Equity $32,977,302 $32,121,374
------------- -------------
TOTAL LIABILITIES AND EQUITY $340,732,960 $321,393,206
============ ============
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 Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2,000 1,999
Interest Income ---------- ----------- ----------- ----------
Loans including fees $5,534,635 $4,819,328 $10,842,620 $9,492,899
Interest and dividends on
investment securities
Taxable 329,881 336,017 703,161 734,245
Exempt from federal tax 391,741 339,382 779,241 669,160
Federal funds sold 64,174 1,960 77,589 54,936
---------- ---------- ----------- -----------
Total Interest Income $6,320,431 $5,496,687 $12,402,611 $10,951,240
Interest Expense ---------- ---------- ----------- -----------
Deposits $2,466,756 $2,102,549 $4,737,177 $4,268,870
Short-term borrowings 837,954 451,321 1,731,069 749,816
Long-term borrowings 394,187 215,034 633,213 427,751
---------- ---------- ---------- ----------
Total Interest Expense $3,698,897 $2,768,904 $7,101,459 $5,446,437
---------- ---------- ---------- ----------
Net interest income $2,621,534 $2,727,783 $5,301,152 $5,504,803
Provision for Credit Losses 82,500 78,000 165,000 156,000
---------- ---------- ---------- ----------
Net interest income after
provision $2,539,034 $2,649,783 $5,136,152 $5,348,803
Noninterest Income
Service fees and commissions $216,024 $198,801 $377,238 $370,214
Investment security gains (losses) 0 (7,072) 0 (7,072)
Other 75,913 66,788 136,550 151,691
---------- --------- ----------- -----------
Total Noninterest Income $291,937 $258,517 $513,788 $514,833
---------- --------- ----------- -----------
Noninterest Expense
Salaries and employee benefits $1,185,528 $1,110,221 $2,355,712 $2,207,082
Occupancy expenses 196,280 163,476 392,251 339,037
Data processing expenses 145,764 109,299 290,894 217,897
Amortization of intangibles 52,834 52,834 105,668 105,668
Other operating expenses 365,307 325,686 641,430 628,047
---------- ---------- ---------- -----------
Total Noninterest Expense $1,945,713 $1,761,516 $3,785,955 $3,497,731
---------- ---------- ---------- -----------
Income before income taxes $885,258 $1,146,784 $1,863,985 $2,365,905
Income tax expense 220,799 332,753 470,955 690,328
---------- ---------- ---------- -----------
NET INCOME $664,459 $814,031 $1,393,030 $1,675,577
---------- ---------- ---------- -----------
Per Share
Net income $12.10 $14.79 $25.36 $30.48
Dividends declared $0.00 $0.00 $9.75 $8.25
Weighted average shares outstanding 54,922 55,051 54,926 54,971
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended
June 30, June 30,
2000 1999
Cash flows from operating activities: ------------ ------------
Net Income $1,393,030 $1,675,577
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation $211,255 $176,931
Provision for credit losses 165,000 156,000
Amortization of intangibles 105,668 105,668
Amortization of bond premium 6,598 15,116
Accretion of bond discount (213,477) (240,845)
Loss (gain) on sale of assets (14,674) (9,316)
Mortgage loans originated for sale (474,177) (5,340,170)
Proceeds from sale of mortgage loans 474,177 5,730,026
Increase in interest receivable (168,965) (270,660)
Increase (decrease) in interest payable 178,595 (84,122)
Other, net 373,951 270,385
------------ ------------
Net cash provided by operating activities $2,036,981 $2,184,590
------------ ------------
Cash flows from investing activities:
Maturities of held-to-maturity securities $269,000 $314,500
Maturities of available-for-sale securities 795,246 3,610,329
Purchases of held-to-maturity securities (1,035,000) (2,272,762)
Purchases of available-for-sale securities (355,901) (927,001)
Federal funds sold, net (4,245,000) 8,417,000
Proceeds from sale of foreclosed assets 1,245,481 216,388
Net increase in loans made to customers (15,471,529) (23,249,266)
Capital expenditures (740,300) (401,075)
------------ ------------
Net cash used by investing activities ($19,538,003) ($14,291,887)
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits $12,088,254 ($5,313,795)
Proceeds from sale of treasury stock 132,160 287,712
Purchases of treasury stock (180,448) (51,718)
Dividends paid (495,045) (397,423)
Securities sold under repurchase agreements, net 665,642 0
Debt proceeds 11,704,940 16,804,728
Debt repayment (6,482,474) (1,897,285)
------------ ------------
Net cash provided by financing activities $17,433,029 $9,432,219
------------ ------------
Net decrease in cash and cash equivalents (67,993) (2,675,078)
Cash and cash equivalents, beginning 9,503,948 7,794,995
------------ ------------
CASH & CASH EQUIVALENTS, ENDING $9,435,955 $5,119,917
============ ============
Supplemental schedule of noncash investing
and financing activities:
Loans transferred to foreclosed properties $1,230,807 $0
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
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"), the results of operations and cash flows for the periods presented.
All adjustments necessary for the fair presentation of the financial statements
are of a recurring nature. 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-K.
NOTE 2 - INVESTMENT SECURITIES
The amortized cost and estimated fair value of securities available-for-sale
were as follows:
June 30, 2000
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ----------- ---------- -----------
U.S. Government agencies $13,498 $0 $449 $13,049
Mortgage-backed securities 3,952 6 36 3,922
FHLB stock 2,667 0 0 2,667
Equity securities 495 0 0 495
----------- ----------- ---------- -----------
Total $20,612 $6 $485 $20,133
December 31, 1999
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ----------- ---------- -----------
U.S. Government agencies $13,498 $0 $515 $12,983
Mortgage-backed securities 4,751 6 45 4,712
FHLB stock 2,410 0 0 2,410
Equity securities 396 0 0 396
----------- ----------- ---------- -----------
Total $20,612 $6 $485 $20,133
The amortized cost and estimated fair value of securities held-to-maturity at
June 30, 2000, and December 31, 1999, were as follows:
June 30, 2000
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ------------ --------- -----------
State and local governments $25,366 $594 $274 $25,686
December 31, 1999
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ----------- ---------- -----------
State and local governments $24,390 $671 $436 $24,625
<PAGE> 6
DENMARK BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The amortized cost and estimated fair values of securities at June 30, 2000, 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 $368 $366 $2,206 $2,256
Due from one to five years 16,515 16,038 5,135 5,340
Due from five to ten years 438 438 6,985 7,132
Due after ten years 129 129 11,040 10,958
Equity securities 3,162 3,162 0 0
----------- ---------- ----------- ----------
Total $20,612 $20,133 $25,366 $25,686
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, June 30, December 31,
2000 1999 1999
----------- ----------- -----------
Balance, beginning of period $3,282,812 $3,058,618 $3,058,618
Provision charged to operations 165,000 156,000 312,000
Recoveries 7,418 39,330 62,523
Charge-offs (96,051) (4,954) (150,329)
----------- ----------- -----------
Balance, end of period $3,359,179 $3,248,994 $3,282,812
<PAGE> 7
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.
2000 2000 1999 1999 1999
(In thousands) --------- -------- --------- -------- ---------
Operating Results
Interest income $6,320 $6,082 $5,842 $5,525 $5,497
Interest expense 3,699 3,402 3,189 2,963 2,769
Net interest income 2,621 2,680 2,653 2,562 2,728
Provision for credit losses 82 83 78 78 78
Noninterest income 292 222 241 270 259
Noninterest expense 1,946 1,840 1,711 1,742 1,762
Net income 664 729 799 742 814
Per Share Data
Net income per share $12.10 $13.26 $14.54 $13.48 $14.79
(In thousands)
Financial Condition (1)
Loans $270,777 $262,766 $256,625 $248,656 $237,880
Allowance for credit losses 3,359 3,326 3,283 3,280 3,249
Investment securities 45,499 45,308 44,891 44,323 44,052
Assets 340,733 326,154 321,393 306,962 294,510
Deposits 224,022 211,386 211,934 207,006 206,736
Other borrowed funds 81,095 79,798 75,206 65,965 54,170
Stockholders' equity 32,977 32,464 32,121 31,552 31,382
Financial Ratios
Return on average equity 8.08% 8.95% 9.98% 9.30% 10.43%
Return on average assets 0.80% 0.92% 1.03% 0.99% 1.13%
Interest rate spread 2.56% 2.81% 2.81% 2.83% 3.22%
Average equity to average assets 9.95% 10.24% 10.27% 10.61% 10.80%
Allowance for credit losses
to total loans (1) 1.24% 1.27% 1.28% 1.32% 1.37%
(1) As of the period ending.
<PAGE> 8
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, 2000, was $664,459, or $12.10 per
share, a decrease of $149,572 or 18%, compared to $814,031, or $14.79 per
share, for the corresponding period in 1999. This decrease was primarily the
result of an increase in noninterest expenses of $184,197 and a decrease in net
interest income which fell by $106,249. These changes more than offset the
lower provision for income taxes amounting to $111,954 and higher noninterest
income which rose by $33,420.
Net interest income for the quarter ended June 30, 2000, was $2,621,534, a
decrease of $106,249 or 4% compared to 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 778 45 823
Interest expense 498 431 929
-------- ------- ------
Net interest income 280 (386) (106)
This decrease was primarily attributable to the higher cost of funds which more
than offset additional net interest income generated by increased volume. The
Company's average interest rate spread was 2.56% during the second quarter of
2000 compared to 3.22% during the quarter ended June 30, 1999. The yield on
earning assets increased by four basis points while the cost of funds increased
by seventy basis points. Management does not expect the net interest spread to
improve during the third quarter. As the Federal Reserve raised short term
interest rates six times during the past year the Company's interest bearing
liabilities repriced faster than did the earning assets. Average earning
assets increased by $39.8 million and average interest-bearing liabilities
increased by $38.4 million during the second quarter of 2000 compared to the
second quarter of 1999.
In the second quarter of 2000 the Company's provision for credit losses was
$82,500 compared to $78,000 for the second quarter of 1999. Net charge-offs
were $49,622 in the second quarter of 2000 compared to net recoveries of
$29,117 during the second quarter of 1999.
Noninterest income increased by $33,420 during the second quarter of 2000.
This increase was primarily the result of an increase in gains from the sale
of other real estate which were $15,925 higher than the corresponding period in
the prior year.
Noninterest expense increased by $184,197 or 10% during the three months ended
June 30, 2000, over the corresponding period in 1999. Salaries and benefits
expense increased $75,307 or 7% over the corresponding period in 1999.
Salaries and wages increased by $46,644 primarily as a result of regular salary
increases. Group health insurance expenses increased by $24,882. Data
processing expenses increased by $36,465. The Bank contracted with a local
technology company to design and develop a comprehensive plan for network
security. Total expenditures for these services during the second quarter were
$12,500. Occupancy expenses increased by $32,804 as depreciation expense
increased by $9,912 and real estate tax expense increased by $9,977. The
increase in real estate tax expense is primarily the result of $7,967 of real
estate taxes paid on other real estate.
Return on average assets was .80% during the second quarter compared to 1.13%
for the corresponding period in 1999. Return on average equity in the second
quarter of 2000 was 8.08%, compared to 10.4% for the corresponding period in
the prior year.
<PAGE> 9
Financial Condition
Total assets increased by $19,339,754 between December 31, 1999, and June 30,
2000. Total loans increased by $14,152,090 or 5.5% during the first six months
of 2000. Federal funds sold increased by $4,245,000 during the six months
ended June 30, 2000.
The allowance for credit losses increased by $76,367 during the six month
period ended June 30, 2000. The allowance equals 1.24% of total loans at June
30, 2000, compared to 1.28% at December 31, 1999.
Nonaccrual loans totaled $9,176,082 at June 30, 2000, an increase of $1,340,959
over December 31, 1999. The increase in nonaccrual loans is primarily the
result of loans to two borrowers experiencing financial difficulties. Loans
totaling $735,000 to a commercial borrower and its two individual owners
personally, secured by mortgages on commercial buildings and residential
properties, and also secured by personal property, became nonearning assets
during the second quarter. Loans totaling $485,000 to a single borrower also
became nonaccrual during the second quarter. Of this amount, $239,000 is
secured by a farm property and $246,000 is secured by a tavern with apartment
rentals. Management considers these loans marginally collateralized with some
loss exposure possible.
The Company's ratio of loans more than 30 days past due (including nonaccrual
loans) to total loans was 4.9% at June 30, 2000, compared to 3.7% at December
31, 1999. As of June 30, 2000, management has identified $15.5 million of
potential problem loans. Potential problem loans are loans that are performing
but have a greater risk of nonperformance.
Demand deposits increased $2,608,759 or 9.9% during the first six months of
2000. Interest bearing deposits increased by $9,479,495 or 5.0% between
December 31, 1999, and June 30, 2000.
Other borrowed funds increased by $5,888,109 or 9.3% during the first six
months of 2000. The Company utilized other borrowings to fund loan growth.
Stockholders' equity increased by $855,928 to $32,977,302 as of June 30, 2000.
As of June 30, 2000, the Company's leverage ratio was 9.7%, the risk-based core
capital ratio was 13.0% and the risk-based total capital ratio was 14.2%. The
Company and the Bank continue to maintain capital levels well above the
regulatory minimum levels.
Liquidity
Liquidity refers to the ability of the Company to generate adequate amounts of
cash to meet the Company's needs for cash. Cash and cash equivalents decreased
by $67,993 during the first six months of 2000. Loan repayments as well as net
cash provided by operating activities amounting to $2.0 million, the increase
in deposits of $12.1 million and the net increase of $5.9 million in other
borrowed funds, as shown in the Consolidated Statement of Cash Flows, were the
major sources of funds during the first six months of 2000. The net increase
in loans of $15.5 million and the net increase in federal funds sold of $4.2
million were the major uses of cash during the first six months. The federal
funds sold totaling $7.8 million and the available-for-sale investment
portfolio amounting to $20.1 million as of June 30, 2000, are readily
convertible to cash if needed for liquidity purposes.
<PAGE> 10
In addition to on-balance sheet sources of funds the Company also has
off-balance sheet sources available to meet liquidity needs. The Company has
unused lines of credit of $14.0 million as of June 30, 2000. The Company has
commitments to extend credit of $27.7 million as of June 30, 2000. Management
believes the Company's liquidity position as of June 30, 2000, is adequate
under current economic conditions.
During July 2000, the Bank offered for one week a 7.50% twelve month fixed rate
certificate of deposit. The special rate promotion, which generated
approximately $15 million in new deposits, was offered in conjunction with the
grand opening of the recently remodeled Bellevue facility.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Management believes that the Company's primary market risk position has not
materially changed from that disclosed in the Company's 1999 Form 10-K Annual
Report.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Shareholders on
April 25, 2000.
(b) Directors elected at the Annual Meeting were Edward Q.
Opichka, D.D.S. 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 2003:
Nominees For Withheld
------ --------
Edward Q. Opichka, D.D.S. 46,925 0
Thomas F. Wall 46,925 0
(2) The ratification of the appointment of Williams, Young
and Associates, LLC as independent public accountants
for the year ending December 31, 2000.
For Against Abstain
------ ------- -------
46,829 0 96
Part II - Other Information
Item 6. Exhibits
(a) Exhibit 27.0 Financial Data Schedule
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DENMARK BANCSHARES, INC.
Date: August 8, 2000 /s/ Darrell R. Lemmens
Darrell R. Lemmens,
Principal Executive Officer,
Chairman of the Board,
and President
Date: August 8, 2000 /s/ Dennis J. Heim
Dennis J. Heim,
Vice President and Treasurer,
Principal Financial and
Accounting Officer
<PAGE> 12
