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 March 31, 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 May 10, 2000
Common Stock 54,890
(no par value)
DENMARK BANCSHARES, INC.
TABLE OF CONTENTS
Quarterly Report On Form 10-Q
For The Quarter Ended March 31, 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
March 31, December 31,
2000 1999
(UNAUDITED)
Assets ------------- -------------
Cash and due from banks $6,635,044 $9,503,948
Federal funds sold 3,113,000 3,505,000
Investment securities
Available-for-sale, at fair value 20,507,316 20,500,622
Held-to-maturity, at cost 24,800,813 24,389,906
----------- -----------
Total Investment Securities $45,308,129 $44,890,528
Loans
Commercial 71,998,964 71,174,504
Real estate 170,874,866 166,033,325
Installment 18,969,044 18,552,100
Other 922,910 865,099
------------ ------------
Total Loans $262,765,784 $256,625,028
Allowance for credit losses (3,326,300) (3,282,812)
Net Loans $259,439,484 $253,342,216
Premises and equipment, net 4,507,672 4,110,927
Accrued interest receivable 1,882,721 1,664,314
Other assets 5,267,858 4,376,273
------------ ------------
TOTAL ASSETS $326,153,908 $321,393,206
============= =============
Liabilities
Deposits
Non-interest bearing $23,657,134 $26,387,194
Interest bearing 187,728,927 185,546,462
------------ ------------
Total Deposits $211,386,061 $211,933,656
Short-term borrowings 67,702,094 58,108,946
Accrued interest payable 1,435,601 1,337,566
Other liabilities 1,069,405 794,128
Long-term debt 12,096,312 17,097,536
------------ ------------
Total Liabilities $293,689,473 $289,271,832
------------- -------------
Stockholders' Equity
Common stock, no par value
authorized 320,000 shares; 54,997
and 54,907 outstanding respectively $10,336,295 $10,336,295
Paid in capital 112,374 110,984
Treasury stock (200,486) (305,426)
Retained earnings 22,511,226 22,318,876
Accumulated other comprehensive income
Unrealized losses on securities (294,974) (339,355)
----------- -----------
Total Stockholders' Equity $32,464,435 $32,121,374
----------- -----------
Total Liabilities and Equity $326,153,908 $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
March 31, March 31,
2000 1999
Interest Income ----------- -----------
Loans including fees $5,307,985 $4,673,571
Interest and dividends on investment securities
Taxable 373,280 398,228
Exempt from federal tax 387,500 329,778
Federal funds sold 13,415 52,977
----------- -----------
Total Interest Income $6,082,180 $5,454,554
Interest Expense ----------- -----------
Deposits $2,270,421 $2,166,321
Short-term borrowings 893,115 298,495
Long-term borrowings 239,026 212,717
----------- -----------
Total Interest Expense $3,402,562 $2,677,533
----------- -----------
Net interest income $2,679,618 $2,777,020
Provision for Credit Losses 82,500 78,000
----------- -----------
Net interest income after provision $2,597,118 $2,699,020
Noninterest Income
Service fees and commissions $161,214 $171,413
Other 60,637 84,903
----------- -----------
Total Noninterest Income $221,851 $256,316
----------- -----------
Noninterest Expense
Salaries and employee benefits $1,170,184 $1,096,861
Occupancy expenses 195,971 175,561
Data processing expenses 145,130 108,598
Amortization of intangibles 52,834 52,834
Other operating expenses 276,123 302,361
----------- -----------
Total Noninterest Expense $1,840,242 $1,736,215
----------- -----------
Income before income taxes $978,727 $1,219,121
Income tax expense 250,156 357,575
----------- -----------
NET INCOME $728,571 $861,546
----------- -----------
Per Share
Net income $13.26 $15.70
Dividends declared $9.75 $8.25
Weighted average shares outstanding 54,931 54,890
The accompanying notes are an integral part of these financial statements.
Page 4
DENMARK BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Quarter Ended
March 31, March 31,
2000 1999
Cash flows from operating activities: ------------ ------------
Net Income $728,571 $861,546
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation $112,877 $88,466
Provision for credit losses 82,500 78,000
Amortization of intangibles 52,834 52,834
Amortization of bond premium 1,449 8,125
Accretion of bond discount (105,622) (121,272)
Loss (gain) on sale of forclosed assets 1,193 (16,388)
Mortgage loans originated for sale (151,906) (3,668,977)
Proceeds from sale of mortgage loans 151,906 4,058,832
Increase in interest receivable (218,407) (200,950)
Increase (decrease) in interest payable 98,036 (92,795)
Other, net 343,507 459,483
------------ ------------
Net cash provided by operating activities $1,096,938 $1,506,904
------------ ------------
Cash flows from investing activities:
Maturities of held-to-maturity securities $265,000 $305,000
Maturities of available-for-sale securities 341,534 1,320,088
Purchases of held-to-maturity securities (570,000) (268,019)
Purchases of available-for-sale securities (278,598) (313,108)
Federal funds sold, net 392,000 6,454,000
Proceeds from sale of forclosed assets 148,807 216,388
Net increase in loans made to customers (7,410,575) (9,915,963)
Capital expenditures (509,622) (62,596)
------------ ------------
Net cash used by investing activities ($7,621,454) ($2,264,210)
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits ($547,595) $459,142
Proceeds from sale of treasury stock 132,160 287,712
Purchases of treasury stock (25,830) (13,500)
Dividends paid (495,045) (397,423)
Securities sold under repurchase agreements, net 655,000 0
Debt proceeds 9,918,147 2,149,669
Debt repayment (5,981,225) (1,671,131)
------------ ------------
Net cash provided by financing activities $3,655,612 $814,469
------------ ------------
Net(decrease) increase in cash and cash equivalents (2,868,904) 57,163
Cash and cash equivalents, beginning 9,503,948 7,794,995
------------ ------------
CASH & CASH EQUIVALENTS, ENDING $6,635,044 $7,852,158
============ ============
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:
March 31, 2000
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ----------- ---------- -----------
U.S. Government agencies $13,498 $0 $450 $13,048
Mortgage-backed securities 4,408 4 37 4,375
FHLB stock 2,625 0 0 2,625
Equity securities 459 0 0 459
----------- ----------- ---------- -----------
Total $20,990 $4 $487 $20,507
----------- ----------- ---------- -----------
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
----------- ----------- ---------- -----------
$21,055 $6 $560 $20,501
----------- ----------- ---------- -----------
The amortized cost and estimated fair value of securities held-to-maturity were
as follows:
March 31, 2000
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
----------- ----------- ---------- -----------
State and local governments $24,801 $620 $354 $25,067
----------- ----------- ---------- -----------
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 March 31, 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 $624 $621 $1,628 $1,675
Due from one to five years 16,601 16,125 5,638 5,909
Due from five to ten years 681 677 6,972 7,096
Due after ten years 0 0 10,563 10,387
Equity securities 3,084 3,084 0 0
--------- --------- ---------- ----------
Total $20,990 $20,507 $24,801 $25,067
--------- --------- ---------- ----------
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,
2000 1999 1999
----------- ----------- -----------
Balance, beginning of period $3,282,812 $3,058,618 $3,058,618
Provision charged to operations 82,500 78,000 312,000
Recoveries 4,189 8,627 62,523
Charge-offs (43,201) (3,427) (150,329)
----------- ----------- -----------
Balance, end of period $3,326,300 $3,141,818 $3,282,812
----------- ----------- -----------
Page 7
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.
2000 1999 1999 1999 1999
(In thousands) --------- -------- --------- --------- --------
Operating Results
Interest income $6,082 $5,842 $5,525 $5,497 $5,455
Interest expense 3,402 3,189 2,963 2,769 2,678
Net interest income 2,680 2,653 2,562 2,728 2,777
Provision for credit losses 83 78 78 78 78
Noninterest income 222 241 270 259 256
Noninterest expense 1,840 1,711 1,742 1,762 1,736
Net income 729 799 742 814 862
Per Share Data
Net income per share $13.26 $14.54 $13.48 $14.79 $15.70
(In thousands)
Financial Condition (1)
Loans $262,766 $256,625 $248,656 $237,880 $224,517
Allowance for credit losses 3,326 3,283 3,280 3,249 3,142
Investment securities 45,308 44,891 44,323 44,052 43,808
Assets 326,154 321,393 306,962 294,510 284,136
Deposits 211,386 211,934 207,006 206,736 212,509
Other borrowed funds 79,143 75,206 65,965 54,170 38,556
Stockholders' equity 32,464 32,121 31,552 31,382 30,719
Financial Ratios
Return on average equity 8.95% 9.98% 9.30% 10.43% 11.24%
Return on average assets 0.92% 1.03% 0.99% 1.13% 1.23%
Interest rate spread 2.81% 2.81% 2.83% 3.22% 3.42%
Average equity to average
assets 10.24% 10.27% 10.61% 10.80% 10.95%
Allowance for credit losses
to total loans (1) 1.27% 1.28% 1.32% 1.37% 1.40%
(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 March 31, 2000, was $728,571, or $13.26 per
share, a decrease of $132,975 or 15.4%, compared to $861,546, or $15.70 per
share, for the corresponding period in 1999. This decrease was the result of a
decrease in net interest income, higher noninterest expenses and lower
noninterest income.
Net interest income for the quarter ended March 31, 2000, was $2,679,618, a
decrease of $97,402 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 820 (192) 628
Interest expense 487 238 725
--- --- ---
Net interest income 333 430 97
=== === ==
This decrease in net interest income is primarily attributable to a decrease in
net interest spread which more than offset the additional net interest income
produced by the higher volume. The Company's average interest rate spread was
2.81% during the first quarter of 2000 compared to 3.42% during the quarter
ended March 31, 1999. The yield on earning assets decreased by seventeen basis
points while the cost of funds increased by forty-four basis points. Average
earning assets during the first quarter of 2000 increased by $37.3 million and
average interest-bearing liabilities increased by $36.7 million compared to the
first quarter of 1999.
In the first quarter of 2000 the Company's provision for credit losses was
$82,500 compared to $78,000 for the first quarter of 1999. Net charge-offs
were $39,012 in the first quarter of 2000 compared to net recoveries of $5,200
during the first quarter of 1999.
Noninterest income for the three months ended March 31, 2000, was $221,851, a
decrease of $34,465 over the corresponding period in 1999. This decrease is
primarily the result of a decrease of $17,581 from gains on the sales of other
real estate and lower appraisal fees which decreased by $12,575.
Noninterest expense increased by $104,027 or 6% during the three months ended
March 31, 2000, over the corresponding period in 1999. Salaries and benefits
expense increased $73,323 or 6.7% over the corresponding period in 1999. This
increase is primarily attributed to the hiring of additional staff members and
regular salary increases. Data processing expenses increased by $36,532. 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 first quarter were $20,238. Occupancy expenses increased by $20,410
primarily as a result of higher depreciation expense.
Return on average assets in the first quarter of 2000 was .92%, compared to
1.23% for the corresponding period in 1999. Return on average equity in the
first quarter of 2000 was 9.0%, compared to 11.2% for the corresponding period
in the prior year.
Page 9
DENMARK BANCSHARES, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
Total assets increased by $4,760,702 between December 31, 1999, and March 31,
2000. Total loans increased by $6.1 million during the first quarter.
The allowance for credit losses increased by $43,488 during the quarter ended
March 31, 2000. The allowance equals 1.27% of total loans at March 31, 2000,
compared to 1.28% at December 31, 1999. Nonaccrual loans totaled $7,771,690 at
March 31, 2000, a decrease of $63,433 over December 31, 1999. The Company's
ratio of loans more than 30 days past due (including nonaccrual loans) to total
loans was 4.3% at March 31, 2000, compared to 3.7% at December 31, 1999. As of
March 31, 2000, management has identified $13.3 million of potential problem
loans. Potential problem loans are loans that are performing but have a
greater risk of nonperformance.
The Bank owned three properties with a carrying value of $1.1 million as of
March 31, 2000. Two of the properties were sold during the second quarter
resulting in a net gain of $15,867 on the sale of other real estate. The
remaining property is a farm with a carrying value of $250,000.
Demand deposits decreased $2,730,060 or 10.3% during the first quarter of 2000.
Management attributes the decrease in demand deposits to a normal seasonal
fluctuation. Interest bearing deposits increased by $2,182,465 or 1.2% between
December 31, 1999, and March 31, 2000. The Bank continues to face strong
competition for core deposits in all of its market areas.
Stockholders' equity increased by $343,061 to $32,464,435 as of March 31, 2000.
As of March 31, 2000, the Company's leverage ratio was 9.5%, the risk-based
core capital ratio was 13.1% and the risk-based total capital ratio was 14.3%.
The Company and the Bank continue to maintain capital levels well above the
regulatory minimum levels.
On March 28, 2000, the Company's board of directors declared a semiannual $9.75
per share dividend payable on July 1, 2000, to all shareholders of record on
June 13, 2000.
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 $2.9 million during the first quarter of 2000. The major sources and uses
of cash are detailed in the accompanying Consolidated Statements of Cash Flows.
Loan repayments as well as net cash provided by operating activities amounting
to $1.1 million and an increase in borrowed funds totaling $3.9 million were
the major sources of funds during the first quarter of 2000. The net increase
in loans of $7.4 million was the major use of cash during the first three
months. The federal funds sold totaling $3.1 million and the available-for-sale
investment portfolio amounting to $20.5 million as of March 31, 2000, are
readily convertible to cash if needed for liquidity purposes.
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 $14.5 million as of March 31, 2000. Management
believes the Company's liquidity position as of March 31, 2000, is adequate
under current economic conditions.
Page 10
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.
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: May 10, 2000 /s/ Darrell R. Lemmens
Darrell R. Lemmens,
Principal Executive Officer,
Chairman of the Board,
and President
Date: May 10, 2000 /s/ Dennis J. Heim
Dennis J. Heim,
Vice President and Treasurer,
Principal Financial and
Accounting Officer
Page 12
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<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,635,044
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,113,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,507,316
<INVESTMENTS-CARRYING> 24,800,813
<INVESTMENTS-MARKET> 25,067,000
<LOANS> 262,765,784
<ALLOWANCE> 3,326,300
<TOTAL-ASSETS> 326,153,908
<DEPOSITS> 211,386,061
<SHORT-TERM> 67,702,094
<LIABILITIES-OTHER> 2,505,006
<LONG-TERM> 12,096,312
0
0
<COMMON> 10,336,295
<OTHER-SE> 22,128,140
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<INTEREST-TOTAL> 6,082,180
<INTEREST-DEPOSIT> 2,270,421
<INTEREST-EXPENSE> 3,402,562
<INTEREST-INCOME-NET> 2,679,618
<LOAN-LOSSES> 82,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,840,242
<INCOME-PRETAX> 978,727
<INCOME-PRE-EXTRAORDINARY> 728,571
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 728,571
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<LOANS-PAST> 63,998
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