UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 0-11132
FIRST BANKING CENTER, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1391327
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
400 Milwaukee Ave. Burlington, WI 53105
(Address of principal executive offices)(Zip Code)
(262)763-3581
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section12(g) of the Act:
Common Stock, $1.00 par value
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
-
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.[X]
As of January 31, 2000 1,478,828 shares of common stock, par value
$1.00 were outstanding and the aggregate market value of the shares (based upon
the most recent trade known to the Corporation), all of which is held by nonbank
affiliates, was approximately $52,498,394.
Documents incorporated by references: The Notice of 2000 Annual Meeting and
Proxy Statement of April 18, 2000 is incorporated by reference into Parts II and
III of the Form 10-K.
PART 1
ITEM 1: BUSINESS
First Banking Center, Inc.
First Banking Center, Inc. (the "Corporation") is a one-bank holding
company incorporated as a business corporation under the laws of the State of
Wisconsin on August 24, 1981. In April 1982, the Corporation became the sole
owner of First Bank and Trust Company, Burlington, Wisconsin, a Wisconsin
state-banking corporation. On September 1, 1984, the Corporation acquired 100%
of the capital stock of the Bank of Albany, Albany, Wisconsin a Wisconsin
state-banking corporation. On April 6, 1998, First Banking Center-Albany was
merged with First Banking Center-Burlington.
On January 1, 1985, the name of the Corporation was changed from the
First Community Bank Group, Inc. to the First Banking Center, Inc., and the name
of the subsidiary companies were changed to First Banking Center - Burlington
and First Banking Center - Albany, respectively. As of May 11, 1998 First
Banking Center-Burlington changed its name to First Banking Center (the "Bank").
The Corporation's primary business activity is the ownership and
control of First Banking Center. The Corporation's operations department also
provides administrative and operational services for the Bank.
The bank has two wholly owned subsidiaries, FBC Financial Services, Corp.,
a brokerage and financial services subsidiary, and FBC-Burlington, Inc., an
investment subsidiary located in Nevada.
First Banking Center
The Bank was organized in 1920 and is a full service commercial bank
located in the City of Burlington, Wisconsin. The Bank has branch offices
located in Albany, Burlington, Genoa City, Kenosha, Lake Geneva, Lyons, Monroe,
Pell Lake, Union Grove, Walworth, and Wind Lake, Wisconsin. The Bank offers a
wide range of services, which includes Loans, Personal Banking, Trust and
Investment Services, and Insurance and Annuity Products.
Lending
The lending area provides a wide variety of credit services to
commercial and individual consumers. Consumer lending consists
primarily of residential mortgages, residential construction loans,
installment loans, home equity loans, and student loans. Commercial
lending consists of commercial property financing, equipment and
inventory financing, and real estate development, as well as the
financing of agricultural production, farm equipment, and farmland.
Commercial lending usually involves a greater degree of credit risk
than consumer lending. This increased risk requires higher collateral
value to loan amount than may be necessary on some consumer loans. The
collateral value required on a commercial loan is determined by the
degree of risk associated with that particular loan.
Personal Banking
This area provides a wide variety of services to customers such as
savings plans, certificates of deposit, checking accounts, individual
retirement accounts, and other specialized services.
Trust and Investments
The Trust Department provides a full range of services to individuals,
corporations and charitable organizations. It provides such specific
services as investment advisory, custodial, executor, trustee and
employee benefit plans.
Insurance and Investment Products
This area provides a complete line of life insurance as well as
long-term health care, fixed and variable rate annuities, mutual funds,
securities services, and discount brokerage.
COMPETITION
The financial services industry is highly competitive. The Bank
competes with other commercial banks and with other financial institutions
including savings and loan associations, finance companies, mortgage banking
companies, insurance companies, brokerage firms, and credit unions.
SUPERVISION AND REGULATION
The Company is a bank holding company subject to the supervision of the
Board of Governors of the Federal Reserve System under the Bank Holding Company
Act of 1956, as amended. As a bank holding company, the Company is required to
file an annual report and such additional information with the Board of
Governors as the Board of Governors may require pursuant to the Act. The Board
of Governors may also make examinations of the Company and its subsidiary.
The Bank Holding Company Act requires every bank holding company to
obtain the prior approval of the Board of Governors before it may acquire
substantially all the assets of any bank, or ownership or control of any voting
shares of any bank if, after such acquisitions, it would own or control,
directly or indirectly, more than 5% of the voting shares of such bank. Under
existing federal and state laws, the Board of Governors may approve the
acquisition by the Company of the voting shares of, or substantially all the
assets of, any bank located in states specified in the Wisconsin Interstate
Banking Bill which became effective January 1, 1987.
In addition, a bank holding company is generally prohibited from itself
engaging in, or acquiring direct or indirect control of voting shares of any
company engaged in non-banking activities. One of the principal exceptions to
this prohibition is for activities found by the Board of Governors, by order or
regulation to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Some of the activities that the Board of
Governors has determined by regulation to be closely related to banking are
making or servicing loans, full payout property leasing, investment advisory
services, acting as a fiduciary, providing data processing services and
promoting community welfare projects.
A subsidiary bank of a bank holding company is subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, on investments in the stock
or other securities thereof, and on the taking of such stock or securities as
collateral for loans to any borrower. Further, under the Bank Holding Company
Act and regulations of the Board of Governors, a bank holding company and its
subsidiary is prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.
The Company is also subject to the Securities Exchange Act of 1934 and
has reporting obligation to the Securities and Exchange Commission.
The business of banking is highly regulated and there are various
requirements and restrictions in the laws of the United States and the State of
Wisconsin affecting the Company's subsidiary bank and its operations, including
the requirement to maintain reserves against deposits, restrictions on the
nature and amount of loans which may be made by the bank and restrictions
relating to investment, branching and other activities of the bank.
The Company is supervised and examined by the Federal Reserve Board.
The Company's subsidiary bank, as a state chartered institution, is subject to
the supervision of, and is regularly examined by, Wisconsin state authorities.
The Bank is also a members of the Federal Reserve Bank and as such is subject to
regulation and examination by that agency.
The Company, under Federal Reserve Board policy, is expected to act as
a source of financial strength to the subsidiary bank and to commit resources to
support the subsidiary.
GOVERNMENTAL POLICIES
The earnings of the Company's subsidiary bank as a lender and depositor
of money are affected by legislative changes and by the policies of the various
regulatory authorities including the State of Wisconsin, the United States
Government, foreign governments and international agencies. The effect of this
regulation upon the future business and earnings of the Company cannot be
predicted. Such policies include, among others, statutory maximum lending rates,
domestic monetary policies of the Board of Governors of the Federal Reserve
System, United States fiscal policies and international currency regulations and
monetary policies. Governmental and Reserve Board policies have had a
significant effect on the operating results of commercial banks in the past and
are expected to do so in the future. Management is not able to anticipate and
evaluate the future impact of such policies and practices on the growth and
profitability of the Company or its subsidiary bank.
The Gramm-Leach-Bliley Financial Services Modernization Act of 1999(the
Act) made significant changes in the laws governing financial institutions,
including changes which expand the permissible range of activities for bank
holding companies and their affiliates (including non-banking financial
activities); permit affiliations between banks, securities firms and insurance
companies; make substantial changes in the regulatory structure for financial
institutions; prohibit new unitary savings and loan holding companies; make
changes to the Community Reinvestment Act of 1977; and enact substantial new
financial privacy rules. The new financial privacy rules may impose some
additional regulatory burden on the Bank. It is too early to make specific
predictions about how the Act will otherwise impact the Corporation and its
subsidiary.
MATERIAL DEPOSIT AND LOANS
No single borrower accounted for a material portion of the loans in the
subsidiary bank.
No single depositor accounted for a material portion of deposits in the
subsidiary bank.
EMPLOYEES
The Company and its staff share a commitment to equal opportunity. All
personnel decisions are made without regard to race, color, religion, sex, age,
national origin, handicap, or veteran status. At January 31, 2000, the Company
and its subsidiary had 213 full and part-time employees.
MISCELLANEOUS
The business of the Company is not seasonal. To the best of
management's knowledge, there is no anticipated material effect upon the
Company's capital expenditures, earnings, and competitive position by reason of
any laws regulating or protecting the environment. The Company has no material
patents, trademarks, licenses, franchises or concessions. No material amounts
have been spent on research activities and no employees are engaged full time in
research activities.
NOTE: Subsections of Item I, to which no response has been made are inapplicable
to the business of the Company.
SELECTED FINANCIAL DATA
The Company, through the operations of its Bank, offers a wide range of
financial services. The following financial data provides a detailed review of
the Company's business activities.
The following information shows: the company's average assets,
liabilities and stockholder's equity; the interest earned and average yield on
interest earning assets; the interest paid and average rate on interest-bearing
liabilities; and the maturity schedules for investment and specific loans; for
the years ended December 31, 1999, 1998, and 1997. Also, where applicable,
information is presented for December 31, 1996 and 1995.
Section I, Schedule A
Average Balance Sheet
(000's Omitted)
---------------- ---------------- ----------------
1999 1998 1997
---------------- ---------------- ----------------
Cash and due from banks $ 13,800 11,379 10,645
Fed funds sold and securities purchased
under agreement to resell 2,201 3,094 5,262
Interest bearing deposits in other banks 228 795 2,544
Investment securities:
U.S. Treasury agency and other 36,730 34,233 43,333
States and political subdivisions 26,264 25,423 23,595
Unrealized Gain/(Loss) on Securities 177 724 (15)
Loans 283,151 244,578 207,519
Less allowance for loan losses (3,528) (3,295) (3,035)
---------------- ---------------- ----------------
Net loans 279,623 241,283 204,484
Goodwill 1,241 1,345 1,450
Other assets 16,846 14,704 13,181
---------------- ---------------- ----------------
Total assets $ 377,110 332,980 304,479
================ ================ ================
Interest bearing deposits:
NOW accounts $ 24,892 23,259 22,609
Savings deposits 32,568 32,218 33,527
Money Market deposit accounts 74,888 57,236 45,554
Time deposits 108,856 107,655 107,672
---------------- ---------------- ----------------
Total interest bearing deposits 241,204 220,368 209,362
Demand deposits 48,073 40,683 35,262
---------------- ---------------- ----------------
Total deposits 289,277 261,051 244,624
Short-term borrowings 801 568 547
Securities sold under agreements
to repurchase 26,210 20,853 18,912
Other liabilities 3,681 3,583 3,096
Other borrowings 23,921 16,531 9,981
---------------- ---------------- ----------------
Total liabilities 343,890 302,586 277,160
Equity capital 33,220 30,394 27,319
---------------- ---------------- ----------------
Total liabilities and capital $ 377,110 332,980 304,479
================ ================ ================
Section I, Schedule B
Three Year Summary of Interest Rates and Interest Differential
(000's Omitted)
1999 1998 1997
-------------------------------- --------------------------------- ---------------------------------
AVERAGE RELATED YIELD AVERAGE RELATED YIELD AVERAGE RELATED YIELD
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------------------------------- --------------------------------- ---------------------------------
Earning assets:
Time Deposits in banks $ 228 10 4.39% 795 43 5.41% 2,544 145 5.70%
Investments (taxable) 37,326 2,161 5.79% 34,048 2,086 6.13% 43,278 2,666 6.16%
Investments (nontax.)(a) 5,845 1,834 7.10% 26,334 1,821 6.92% 23,635 1,677 7.10%
Funds sold 2,201 105 4.77% 3,094 162 5.24% 5,262 286 5.44%
Loans (a)(b)(c) 283,151 24,358 8.60% 244,578 22,123 9.05% 207,519 18,704 9.01%
-------------------------------- --------------------------------- ---------------------------------
Total earnings assets $ 348,751 28,468 8.16% 308,849 26,235 8.49% 282,238 23,478 8.32%
================================ ================================= =================================
Interest bearing liabilities:
NOW accounts $ 24,892 432 1.74% 23,259 557 2.39% 22,609 584 2.58%
Savings deposits 32,568 746 2.29% 32,218 861 2.67% 33,527 928 2.77%
Money Market deposits 74,888 3,103 4.14% 57,236 2,538 4.43% 45,554 1,950 4.28%
Time deposits 108,856 5,689 5.23% 107,655 6,105 5.67% 107,673 6,094 5.66%
Short-term borrowings 801 45 5.62% 568 33 5.81% 548 29 5.29%
Sec'ts. sold under to
repurchase 26,210 1,255 4.79% 20,853 1,057 5.07% 18,912 990 5.23%
Other borrowings 23,921 1,316 5.50% 16,531 976 5.90% 9,981 637 6.38%
-------------------------------- --------------------------------- ---------------------------------
Total int.bearing liabilities $ 292,136 12,586 4.31% 258,320 12,127 4.69% 238,804 11,212 4.70%
================================ ================================= =================================
Interest spread 15,882 3.85% 14,108 3.80% 12,266 3.62%
=================== ===================== ====================
Interest margin 15,882 4.55% 14,108 4.57% 12,266 4.35%
=================== ===================== ====================
<FN>
<F1>
(a) The interest and average yield for nontaxable instruments are presented on
a federal taxable equivalent basis assuming a 34% tax rate.
<F2>
(b) Loans placed on nonaccrual status have been included in average balances
used to determine average rates.
<F3>
(c) Loan interest income includes net loan fees.
</FN>
Section I, Schedule C
Two Year Summary of Rate and Volume Variances
(000's Omitted)
---------------------------------------------
---------------------------------------------
$ AMOUNT VOLUME RATE (a)
OF CHANGE VARIANCE VARIANCE
---------------------------------------------
---------------------------------------------
Increase (decrease) for 1999:
Time deposits in banks $ (33) (31) (2)
Investment (taxable) 75 201 (126)
Investments (nontaxable) (b) 13 (34) 47
Funds sold (57) (47) (10)
Loans (b) (c) 2,235 3,491 (1,256)
---------------------------------------------
---------------------------------------------
Total interest income 2,233 3,580 (1,347)
---------------------------------------------
---------------------------------------------
NOW accounts (125) 39 (164)
Savings deposits (115) 9 (124)
Money Market deposit accounts 565 782 (217)
Other time deposits (416) 68 (484)
Short-term borrowings 12 14 (2)
Sec. sold under Agreement to Repurchase 198 271 (74)
Other borrowings 340 436 (96)
---------------------------------------------
---------------------------------------------
Total interest expense 459 1,619 (1,161)
---------------------------------------------
---------------------------------------------
Net change for 1999: $ 1,774 1,961 (186)
=============================================
=============================================
Increase (decrease) for 1998:
Time deposits in banks $ (102) (100) (2)
Investment (taxable) (580) (569) (11)
Investments (nontaxable) (b) 144 192 (48)
Funds sold (124) (118) (6)
Loans (b) (c) 3,419 3,339 80
---------------------------------------------
---------------------------------------------
Total interest income 2,757 2,744 13
---------------------------------------------
---------------------------------------------
NOW accounts (27) 17 (44)
Savings deposits (67) (36) (31)
Money Market deposit accounts 588 500 88
Other time deposits 11 (1) 12
Short-term borrowings 4 1 3
Sec. sold under Agreement to Repurchase 67 102 (35)
Other borrowings 339 418 (79)
---------------------------------------------
---------------------------------------------
Total interest expense 915 1,001 (86)
---------------------------------------------
---------------------------------------------
Net change for 1998: $ 1,842 1,743 99
=============================================
=============================================
<FN>
<F1>
(a) The application of the rate/volume variance has been allocated in full to
the rate variance.
<F2>
(b) The interest and average yield for nontaxable instruments are presented on
a federal tax equivalent basis assuming a 34% tax rate.
<F3>
(c) Loans placed on nonaccrual status have been included in average balances
used to determine average rates.
</FN>
Section II, Schedule A
Book Value of Investment Portfolio
(000's Omitted)
-------------------------------------------
-------------------------------------------
1999 1998 1997
-------------------------------------------
-------------------------------------------
Available for Sale:
U.S. Treasury and other U.S.
Gov't. Agencies and Corporations $ 25,812 37,400 43,212
Obligations of states and
political subdivisions 26,361 25,260 27,389
Other 2,779 2,603 4,000
Held to Maturity:
U.S. Treasury and other U.S.
Gov't. Agencies and Corporations 0 0 0
Obligations of states and 0 0 0
political subdivisions
Other 0 0 0
-------------------------------------------
-------------------------------------------
Total $ 54,952 65,263 74,601
===========================================
===========================================
<FN>
NOTE:
The aggregate book value of securities from any single issuer does not
exceed ten percent of stockholder's equity; except for, securities issued by the
U.S. Government and U.S. Government agencies and corporations.
</FN>
Section II, Schedule B
Maturity Schedule of Investments by Book Value
(000's Omitted)
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
AFTER AFTER
1 YEAR 5 YEARS
1 YEAR THROUGH THROUGH AFTER
OR LESS 5 YEARS 10 YEARS 10 YEARS TOTAL
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
December 31, 1999:
Available for Sale Securities
U.S. Treasury and U.S. Gov't agencies and corporations $ 6,042 13,032 6,695 43 25,812
Weighted average yield 5.80% 6.19% 5.83% 9.52% 6.01%
States of the U.S. and Political Subdivisions (a) 287 11,490 12,834 1,750 26,361
Weighted average yield 8.50% 7.10% 7.17% 6.93% 7.14%
Other Securities 2,779 0 0 0 2,779
Weighted average yield 7.03% 0.00% 0.00% 0.00% 7.03%
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
TOTAL AVAILABLE FOR SALE $ 9,108 24,522 19,529 1,793 54,952
============ =========== ============ ============ ============
============ =========== ============ ============ ============
Weighted Ave. Yield of Total 6.26% 6.62% 6.71% 6.99% 6.60%
============ =========== ============ ============ ============
============ =========== ============ ============ ============
<FN>
(a) The interest and average yield for nontaxable securities are presented on
a federal taxable equivalent basis assuming a 34% tax rate.
</FN>
Section III, Schedule A
Loan Summarization
(000's Omitted)
--------------- --------------- --------------- --------------- ---------------
1999 1998 1997 1996 1995
--------------- --------------- --------------- --------------- ---------------
Commercial $ 28,458 38,185 32,886 30,808 27,659
Agricultural production 14,965 9,985 6,857 6,167 5,810
Real Estate:
Construction 37,796 30,008 24,353 25,164 20,652
Commercial 83,592 67,761 52,540 40,935 37,005
Agriculture 9,705 7,754 8,177 705 733
Residential 110,793 96,139 86,015 79,129 67,729
Municipal 6,141 6,503 4,972 4,254 3,806
Consumer 7,274 8,465 8,308 7,225 6,961
--------------- --------------- --------------- --------------- ---------------
TOTAL $ 298,724 264,800 224,108 194,387 170,355
=============== =============== =============== =============== ===============
Section III, Schedule B
Loan Maturities and Sensitivity to Changes in Interest Rate
(000's Omitted)
LOAN MATURITIES AMOUNT OVER ONE YEAR WITH
---------------------------------------------- ---------------------------------------------------------
---------------------------------------------- ---------------------------------------------------------
AFTER 1 AFTER FLOATING OR
1 YEAR THROUGH FIVE PREDETERMINED ADJ. INTEREST
OR LESS 5 YEARS YEARS TOTAL RATES RATES TOTAL
---------------------------------------------- ---------------------------------------------------------
---------------------------------------------- ---------------------------------------------------------
December 31, l999:
Comm'l and agricultural $ 31,238 9,880 2,305 43,423 12,185 0 12,185
Real estate - constr. 29,444 6,554 1,798 37,796 6,631 1,721 8,352
---------- ---------- --------- ----------- ------------------ ------------------ -------------
---------- ---------- --------- ----------- ------------------ ------------------ -------------
TOTAL $ 60,682 16,434 4,103 81,219 18,816 1,721 20,537
========== ========== ========= =========== ================== ================== =============
========== ========== ========= =========== ================== ================== =============
December 31, l998:
Comm'l and agricultural $ 36,722 10,194 1,254 48,170 11,448 0 11,448
Real estate - constr. 22,634 7,335 39 30,008 5,697 1,677 7,374
---------- ---------- --------- ----------- ------------------ ------------------ -------------
---------- ---------- --------- ----------- ------------------ ------------------ -------------
TOTAL $ 59,356 17,529 1,293 78,178 17,145 1,677 18,822
========== ========== ========= =========== ================== ================== =============
Section III, Schedule C
Non-Performing Loans
(000's omitted)
1999 1998 1997 1996 1995
Nonaccrual Loans(c) $1,256 $1,517 $824 $260 $1,501
Past Due 90 days + (a)(d) 2 16 2 17 2
Restructured Loans (b) ----- ----- ----- ------ -----
<FN>
<F1>
(a) Loans are generally placed in nonaccrual status when contractually past
due 90 days or more.
<F2>
(b) There were no restructured loans for each of the presented years.
<F3>
(c) Interest which would have been recorded had the loans been on an accrual
basis, would have amounted to $31,000 in 1999, $39,000 in 1998, $21,000 in
1997, $6,000 in 1996, and $25,000 in 1995. Interest income on these loans,
which is recorded only when received, amounted to $36,000 in 1999, $20,000
in 1998, $14,000 in 1997, $6,000 in 1996, and $7,000 in 1995.
<F4>
(d) Each of the loans which are contractually past due 90 days or more as to
principal or interest payments are reviewed by management and reported to
the Loan Committee of the Board of Directors of the Bank. These loans are
then placed on a nonaccrual basis.
<F5>
Note:
As of December 31, 1999, management, to the best of its knowledge, is not
aware of any significant loans, group of loans or segments of the loan
portfolio not included above, where there are serious doubts as to the
ability of the borrowers to comply with the present loan payment terms.
</FN>
Section IV, Schedule A
Analysis of the Allowance for Loan Losses
(000's Omitted)
------------------ ------------- ------------ ------------ ------------
------------------ ------------- ------------ ------------ ------------
1999 1998 1997 1996 1995
------------------ ------------- ------------ ------------ ------------
------------------ ------------- ------------ ------------ ------------
Beginning loan loss reserve $ 3,421 3,132 2,897 2,336 2,095
Charge-offs:
Commercial 51 2 14 0 22
Agricultural production 0 0 0 0 0
Real Estate:
Construction 0 0 0 0 0
Commercial 0 0 0 0 0
Agriculture 0 0 2 0 0
Other Mortgages 42 35 3 1 214
Installment - consumer 104 51 43 33 55
Recoveries:
Commercial 6 9 0 12 19
Agricultural production 0 0 0 0 0
Real Estate:
Construction 0 0 0 0 0
Commercial 0 0 30 0 0
Agriculture 0 2 0 0 0
Other Mortgages 0 1 20 5 2
Installment - consumer 21 35 17 31 41
-------------- ------------- ------------ ------------ ------------
-------------- ------------- ------------ ------------ ------------
Net Charge-offs/(Recoveries) 170 41 (5) (14) 229
Additions charged to operations (a) 330 330 230 247 470
Additions related to
branch acquisitions 0 0 0 300 0
-------------- ------------- ------------ ------------ ------------
-------------- ------------- ------------ ------------ ------------
Balance at end of period $ 3,581 3,421 3,132 2,897 2,336
============== ============= ============ ============ ============
============== ============= ============ ============ ============
Ratio of net charge-offs/
recoveries during the period
to ave. loans outstanding
during the period 0.060% 0.017% -0.002% -0.01% 0.14%
<FN>
(a) For each year ending December 31, the determination of the additions to
loan loss reserve charged to operating expenses was based on an evaluation
of the loan portfolio, current domestic economic conditions, past loan
losses and other factors.
</FN>
Section IV, Schedule B
Allocation of the Allowance for Loan Losses
(000's Omitted)
1999 1998 1997
-------------------------------------------------------------------------------------------------------
Required % of Total Required % of Total Required % of Total
Reserve % of ALL Loans Reserve % of ALL Loans Reserve % of ALL Loans
-------------------------------------------------------------------------------------------------------
Commercial Loans (a) $ 2,470 69.0% 60.5% $ 2,262 66.1% 60.5% $ 1,083 38.7% 57.9%
Real Estate-Residential Loans 169 4.7% 37.1% 152 4.4% 36.3% 112 4.0% 38.4%
Consumer Loans 127 3.5% 2.4% 77 2.3% 3.2% 51 1.8% 3.7%
Loan Commitments 53 1.5% N/A 45 1.3% N/A 31 1.1% N/A
Unallocated 762 21.3% N/A 885 25.9% N/A 1,519 54.3% N/A
---------- ----------- ----------
Total $ 3,581 $ 3,421 $ 2,796
========== =========== ==========
<FN>
(a) Commercial Loans include commercial real estate, agricultural production
and construction loans.
</FN>
Section V, Schedule A
Three Year Summary of Average Deposits
(000's Omitted)
--------------------------- --------------------------- ---------------------------
RATE RATE RATE
1999 PAID 1998 PAID 1997 PAID
--------------------------- --------------------------- ---------------------------
Deposit in domestic bank offices:
Demand deposits $ 48,073 40,683 35,262
Now accounts 24,892 1.74% 23,259 2.39% 22,609 2.58%
Money Market deposit accounts 74,888 4.14% 57,236 4.43% 45,554 4.28%
Savings deposits 32,568 2.29% 32,218 2.67% 33,527 2.77%
Time deposits 108,856 5.23% 107,655 5.67% 107,672 5.66%
-------------- ---------- --------------- --------- --------------- ---------
Total Deposits $ 289,277 3.45% 261,051 3.85% 244,624 3.91%
============== ========== =============== ========= =============== =========
Section V, Schedule B
Maturity Schedule for Time Deposits of $100,000 or More
(000's Omitted)
OVER OVER
3 MONTHS 6 MONTHS
3 MONTHS THRU THRU OVER 12
OR LESS 6 MONTHS 12 MONTHS MONTHS
---------------- ----------------- ----------------- -------------
December 31, 1999:
Certificates of Deposit $ 11,601 4,981 8,850 3,981
Other Time Deposits 105 180 202 144
---------------- ----------------- ----------------- -------------
TOTAL $ 11,706 5,161 9,052 4,125
================ ================= ================= =============
Section VI
Three Year Summary of Return on Equity and Assets
----------------------------------------------------
----------------------------------------------------
1999 1998 1997
----------------------------------------------------
----------------------------------------------------
Return on average assets 1.10% 1.02% 0.95%
Return on average equity 12.53% 11.15% 10.56%
Dividend payout ratios on common stock 21.05% 23.70% 25.69%
Average equity to average assets 8.81% 9.13% 8.97%
Section VII
Short-term Borrowing
(000's Omitted)
Securities Sold Under Agreements
To Repurchase (a)
-----------------------------------------------------
1999 1998 1997
-----------------------------------------------------
End of Year:
Balance $21,131 $28,750 $30,286
Weighted Ave. Rate 4.66% 4.72% 5.14%
For the Year:
Maximum Amount Outstanding $35,908 $31,491 $30,286
Average Amount Outstanding $26,216 $20,880 $18,917
Weighted Ave. Rate 4.79% 5.05% 5.23%
<FN>
(a) Securities sold under repurchase agreements are borrowed on a short-term
basis by the subsidiary banks at prevailing rates for these funds. The
approximate average maturity was 5.0 months, 4.6 months, and 1.6 months
for the years 1999, 1998, and 1997, respectively.
</FN>
ITEM 2: PROPERTIES
The Company owns no properties; it currently occupies space in the
buildings that house the Lake Geneva and Kenosha branches. Since January 1, 1995
the company has been making rent payments to First Banking Center for the space
that it occupies and the equipment it uses.
First Banking Center
The Bank owns banking facilities in Albany, Burlington, Genoa City,
Kenosha, Lake Geneva, Lyons, Monroe, Pell Lake, Union Grove, Walworth, and Wind
Lake. Each of the bank's offices is well maintained and adequately meets the
needs of the bank.
ITEM 3: LEGAL PROCEEDING
Neither the Corporation nor its subsidiary is a party, nor is any of
their property, subject to any material existing or pending legal proceedings
other than ordinary routine litigation incidental to its business. No officer,
director, affiliate of the Corporation, or any of their associates is a party to
any material proceedings adverse to the Corporation or its subsidiary.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No items were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of the security holders through the
solicitation of proxies or otherwise.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's stock is not actively traded. Robert W. Baird & Co.
Incorporated and A.G. Edwards & Sons, Inc., however, do make a market in the
stock. The range and sales prices, based on information given to the Company by
Robert W. Baird & Co. Incorporated, and A.G. Edwards & Sons, Inc., and by
parties to sales, are listed below for each quarterly period during the last two
years.
1999 1998
Low High Low High
First quarter $ 30.50 $ 33.50 $ 28.00 $ 29.00
Second quarter $ 31.50 $ 34.00 $ 28.50 $ 31.00
Third quarter $ 32.50 $ 35.50 $ 28.00 $ 31.50
Fourth quarter $ 33.00 $ 35.50 $ 31.50 $ 33.00
There were 776 holders of record of the Company's $1.00 par value
common stock on December 31, 1999.
ITEM 6: SELECTED FINANCIAL DATA
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
(Dollars in thousands of except per share data)
December 31,
-------------------------------------------------------------------
-------------------------------------------------------------------
1999 1998 1997 1996 1995
Interest income $ 27,692 $ 25,474 $ 22,861 $ 20,148 $ 18,810
Interest expense 12,586 12,127 11,198 9,764 8,966
Net interest income 15,106 13,347 11,663 10,384 9,844
Provision for loan losses 330 330 230 247 470
Net interest income after
provision for loan loss 14,776 13,017 11,433 10,137 9,374
Non-interest Income 2,829 2,530 2,156 1,762 1,507
Non-interest Expense 11,583 10,772 9,590 7,770 6,670
Income before income taxes 6,022 4,775 3,999 4,129 4,211
Income taxes 1,860 1,387 1,115 1,318 1,407
Net income $ 4,162 $ 3,388 $ 2,884 $ 2,811 $ 2,804
Earnings per common share:
Basic earnings per share $ 2.80 $ 2.28 $ 1.95 $ 1.91 $ 1.92
Diluted earnings per share $ 2.78 $ 2.27 $ 1.94 $ 1.90 $ 1.91
Cash dividends per share $ 0.59 $ 0.54 $ 0.50 $ 0.46 $ 0.40
Book value per share $ 22.59 $ 21.43 $ 19.47 $ 17.78 $ 16.26
Year-end assets $ 392,089 $ 369,131 $ 327,833 $ 304,720 $ 264,379
Average assets 377,110 332,980 304,479 263,162 243,702
Year-end equity capital 33,417 31,895 28,920 26,240 23,884
Average equity capital 33,220 30,394 27,319 24,903 22,572
Return on assets 1.10% 1.02% 0.95% 1.07% 1.15%
Return on equity 12.53% 11.15% 10.56% 11.29% 12.48%
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion provides additional analysis of the financial
statements presented in the Companys annual report and should be read in
conjunction with this information. This discussion focuses on the significant
factors that affected the Companys earnings in 1999, with comparisons to 1998.
As of December 31, 1999, First Banking Center (the Bank) was the only direct
subsidiary of the Company and its operations contributed nearly all of the
revenue for the year. The Company provides various support functions for the
Bank and receives payment from the Bank for these services. These inter-company
payments are eliminated for the purpose of these consolidated financial
statements. The Bank has two wholly owned subsidiaries, FBC Financial Services,
Corp., a brokerage and financial services subsidiary, and FBC Burlington, Inc.,
an investment subsidiary located in Nevada.
Overview
As of December 31, 1999, total Company assets were $392.1 million
increasing 6.2% from $369.1 million as of December 31, 1998. Total income for
1999 was $4.2 million or $2.80 per share, increasing 23.5% from $3.4 million or
$2.28 per share in 1998. The significant items resulting in the above-mentioned
results are discussed below.
Balance sheet analysis
Loans
As of December 31, 1999, loans outstanding were $298.7 million for an
increase of $34.0 million or 12.8% from December 31, 1998. During 1999
Residential Real Estate loans increased $14.7 million, and Commercial Real
Estate loans increased $15.8 million or 15.2% and 23.4% respectively. At
December 31, 1999, Construction and Land Development loans were at $37.8 million
or 12.7% of total loans, Residential Real Estate loans were at $110.8 million or
37.1% of total loans, and Commercial loans were at $28.4 million or 9.5% of
total loans, and Commercial Real Estate loans were at $83.6 million or 28.0% of
total loans.
Allowance for Loan Losses
The allowance for possible loan losses was $3.6 million or 1.21% of
gross loans on December 31, 1999, compared with $3.4 million or 1.29% of gross
loans on December 31, 1998. Net charge-offs for 1999 were $170 thousand or
.057% of gross loans, compared to net charge-offs of $41 thousand or .015% of
gross loans for 1998. As of December 31, 1999, loans on non-accrual status
totaled $1.3 million or .44% of gross loans compared to $1.5 million or .57% of
gross loans on December 31, 1998. The non-accrual loans consisted primarily of
$963 thousand of residential real estate loans and $182 thousand of commercial
loans. On December 31, 1999, the ratio of non-accrual loans to the allowance
for loan losses was 36.1% compared to 44.1% on December 31, 1998.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the allowance for
loan losses when management believes that the collectibility of the principal is
unlikely. The allowance for loan losses is adequate to cover probable credit
losses relating to specifically identified loans, as well as probable credit
losses inherent in the balance of the loan portfolio. In accordance with FASB
Statements 5 and 114, the allowance is provided for losses that have been
incurred as of the balance sheet date. The allowance is based on past events and
current economic conditions, and does not include the effects of expected losses
on specific loans or groups of loans that are related to future events or
expected changes in economic conditions. Management reviews a calculation of the
allowance for loan losses on a quarterly basis. While management uses the best
information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic
conditions. Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. A loan is impaired when it
is probable the creditor will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan agreement.
In addition, various regulatory agencies periodically review the
allowance for loan losses. These agencies may require the bank to make additions
to the allowance for loan losses based on their judgments of collectibility
based on information available to them at the time of their examination.
During 1999 $330 thousand was charged to current earnings and added to
the allowance for loan losses.
Investments securities - Available for Sale
The securities available-for-sale portfolio decreased $10.3 million
or 15.8% during 1999. The majority of the decrease came from the maturities of
Commercial Paper and Agency Issued Remics and was used to fund loans.
Deposits and Borrowed Funds
As of December 31, 1999, total deposits were $306.1 million, which is
an increase of $23.4 million or 8.3% from December 31, 1998. Money Market and
Savings Deposits increased $17.5 million or 17.9% to $115.3 million. Demand
Deposits increased $1.6 million or 3.2% to $51.6 million. Securities sold under
agreement to repurchase and Certificates of Deposits decreased $7.6 million or
26.4%. Federal Home Loan Borrowings increased $5.6 million or 26.0% since
December 31, 1998.
Capital resources
During 1999, the Company's stockholders' equity increased $1.5 million
or 4.7%. Net income of $4.2 million was the primary reasons for the increase in
equity. The company purchased $561 thousand and reissued $219 thousand of
treasury stock, during 1999. Unrealized gain/loss on available for sale
securities decreased $1.3 million to a negative $683 thousand. Cash dividends
paid in 1999 were $876 thousand or $.59 per share.
In December 1990, the Federal Reserve Board's risk-based guidelines
became effective. Under these guidelines capital is measured against the
Company's subsidiary banks risk-weighted assets. The Company's tier 1 capital
(common stockholders' equity less goodwill) to risk-weighted assets was 10.7% at
December 31, 1999, well above the 4% minimum required. Total capital to
risk-adjusted assets was 11.9%, also well above the 8% minimum requirement. The
leverage ratio was at 8.4% compared to the 4% minimum requirement. According to
FDIC capital guidelines, the Company is considered to be "well capitalized."
Asset/liability management
The principal function of asset/liability management is to manage the
balance sheet mix, maturities, repricing characteristics and pricing components
to provide an adequate and stable net interest margin with an acceptable level
of risk over time and through interest rate cycles.
Interest-sensitive assets and liabilities are those that are subject to
repricing within a specific relevant time horizon. The Bank measures
interest-sensitive assets and liabilities, and their relationship with each
other at terms of immediate, quarterly intervals up to 1 year, and over 1 year.
Changes in net interest income, other than volume related, arise when
interest rates on assets reprice in a time frame or interest rate environment
that is different from the repricing period for liabilities. Changes in net
interest income also arise from changes in the mix of interest earning assets
and interest-bearing liabilities.
The Banks strategy with respect to asset/liability management is to
maximize net interest income while limiting its exposure to a potential downward
movement. Strategy is implemented by the Bank's management, which takes action
based upon its analysis of the Bank's present positioning, its desired future
positioning, economic forecasts, and its goals. It is the Banks desire to
maintain a cumulative GAP of positive or negative 15% of rate sensitive assets
at the 1 year time frame. The current percentage is negative 4% which compares
to negative 1% as of December 31, 1998.
Liquidity
The liquidity position of the Company is managed to ensure that
sufficient funds are available to meet customers' needs for loans and deposit
withdrawals. Liquidity to meet demand is provided by maintaining marketable
investment securities, Federal Funds Sold, as well as, maintaining a full
line of competitively priced deposit and short-term borrowing products. The Bank
is also a member of the Federal Home Loan Bank system, which provides the
Company with an additional source of liquidity. The Bank is authorized to borrow
up to 60% of the book value of its 1-4 family real estate mortgages secured by a
security agreement pledging the Banks 1-4 family real estate mortgages with a
carrying value of $110.8 million. During 1999 the Companys loan to deposit
ratio increased from 92% to 96%. This increase was due to an increase in loans
of $34.0 million or 12.8% while deposits only increased $23.4 million or 8.3%.
The additional funding for the increase in loans came from increased borrowings
from the Federal Home Loan Bank and the sales and maturities of investment
securities.
While liquidity within the banking industry continues to tighten
management is unaware of any recommendations by regulatory authorities, known
trends, events or uncertainties that will have or that are reasonably likely to
have a material effect on the Company's liquidity, capital resources, or
operations.
Results of operations
Net Interest Income
Net interest income is the difference between interest income and fees
on loans and interest expense, and is the largest contributing factor to net
income for the Company. All discussions of rate are on a tax-equivalent basis,
which accounts for income earned on securities that are not fully subject to
federal taxes. Net interest income for 1999 was $15.1 million, increasing 13.5%
over the 1998 level of $13.3 million, increasing 13.6% over the 1997 level of
$11.7 million. Net interest income as a percentage of average earning assets was
4.55% in 1999 versus 4.57% in 1998 versus 4.40% in 1997.
Total interest income increased $2.2 million from 1998 to 1999 and $2.6
million from 1997 to 1998. Average earning assets increased from $282.2 million
in 1997 to $308.8 million in 1998 to $348.8 million in 1999 or 15.14%, 9.43% and
12.92%, respectively. The yields on interest earning asset increased from 8.37%
to 8.49% from 1997 to 1998, and decreased from 8.49% to 8.16% from 1998 to 1999.
The increase in interest income in 1999 was due primarily to an
increase in interest on loans. Interest on loans increased to $23.0 million or
11.1% from $20.7 million or 10.7% from 1997 of $17.9. The increase in loan
income was the result of a $38.6 million or 15.8% increase in 1999, an increase
of $37.1 million or 17.9% in 1998 and an increase of $31.2 million or 18.0% in
1997 in average balances outstanding. An increase in residential loan activity
primarily generated the fees. This increase of loan activity was due to low home
mortgage interest rates.
Total interest expense increased $459 thousand in 1999, $1.0 million in
1998 and $1.4 million in 1997. This increase was due to an increase in average
interest bearing deposits of $20.8 million or 9.46% in 1999, an increase of
$11.0 million or 5.26% in 1998 and $39.7 million or 17.00% in 1997. An increase
in average Federal Home Loan Borrowings of $7.0 million or 42.9% in 1999 and
$6.3 million or 63.5% in 1998, also caused an increase for 1999 and 1998. The
cost of all interest bearing liabilities remained consistant at 4.69% in 1997
and 1998 and decreased to 4.31% in 1999.
Provision for loan losses
During 1999 and 1998, $330 thousand was charged to current earnings and
added to the allowance for loan losses. In 1997, $230 thousand was charged to
earnings and added to the allowance for loan losses.
Non-interest income
Non-interest income during 1999 increased $299 thousand or 11.8% from
1998, during 1998 it increased $374 thousand or 17.3% from 1997. This increase
is due primarily to increased income from service charges on deposit accounts,
which increased $215 thousand or 21.3% in 1999, $100 thousand or 10.9% in 1998
and $178 thousand or 24.0% in 1997. Trust Department income which increased
$28 thousand or 6.8% in 1999 and $73.0 thousand or 21.4% in 1998. Income from
the Companys ATM and Visa network also caused the increase by $56 thousand in
1999, $102 thousand in 1998 and $203 thousand in 1997.
Non-interest expense
Non-interest expense increased from $9.6 million to $10.8 million to
$11.6 million from 1997 to 1998 to 1999. An increase of 1.2 million or 12.3%
and $811 thousand or 7.5%, respectively. Salaries and benefits increased $414
thousand or 6.9% in 1999, $688 thousand or 12.9% in 1998 and $1.0 million or
23.0% in 1997. Equipment expense increased $202 thousand or 17.6% in 1999, $60
thousand or 5.5% in 1998 and $209 thousand or 24.0% in 1997. Data processing
services increased $142 thousand or 30.9% in 1999, $40 thousand or 9.6% in 1998
and $32 thousand or 8.2% in 1997. Occupancy expense increased $73 thousand in
1999 and 1998 and $37 thousand in 1997. Stationary and office supplies
decreased $28 thousand or 9.4% in 1999, increased $77 thousand or 31.3% in 1998
and decreased $15 thousand or 5.8% in 1997. And finally, income taxes increased
$473 thousand or 34.1% for 1999 and $272 thousand or 24.4% for 1998. They
decreased $203 thousand or 15.4% for 1997.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
FIRST BANKING CENTER, INC.
AND SUBSIDIARY
Burlington, Wisconsin
Consolidated Financial Statements
Including Independent Auditors' Report
December 31, 1999 and 1998
________________________________________________________________________________
FIRST BANKING CENTER, INC. AND SUBSIDIARY
TABLE OF CONTENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Independent Auditors' Report 21
Consolidated Balance Sheets
December 31, 1999 and 1998 22
Consolidated Statements of Income
Years Ended December 31, 1999, 1998 and 1997 23
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1999, 1998 and 1997 24
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997 25-26
Notes to Consolidated Financial Statements 27-49
FIRST BANKING CENTER, INC. AND SUBSIDIARY
INDEPENDENT AUDITORS' REPORT
Board of Directors
First Banking Center, Inc. and Subsidiary
Burlington, Wisconsin
We have audited the accompanying consolidated balance sheets of First Banking
Center, Inc. and Subsidiary as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the years ended December 31, 1999, 1998 and 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Banking
Center, Inc. and Subsidiary as of December 31, 1999 and 1998, and the results of
its operations and its cash flows for the years ended December 31, 1999, 1998
and 1997, in conformity with generally accepted accounting principles.
VIRCHOW, KRAUSE & COMPANY, LLP
Milwaukee, Wisconsin
January 13, 2000
FIRST BANKING CENTER, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
(Dollars in thousands)
1999 1998
Cash and due from banks $ 19,123 $ 18,013
Federal funds sold 4,242 6,885
Interest-bearing deposits in banks 40 66
Available for sale securities - stated at fair value 54,952 65,263
Loans, less allowance for loan losses of $3,581 and
$3,421 in 1999 and 1998, respectively 295,143 261,379
Office buildings and equipment, net 9,429 9,602
Other assets 9,160 7,923
TOTAL ASSETS $ 392,089 $ 369,131
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand $ 51,610 $ 50,056
Savings and NOW accounts 140,612 126,898
Time 113,922 105,845
Total Deposits 306,144 282,799
Securities sold under repurchase agreements 21,131 28,750
U.S. Treasury note account 100 100
Other borrowings 27,768 22,143
Accrued expenses and other liabilities 3,529 3,444
Total Liabilities 358,672 337,236
COMMITMENTS AND CONTINGENCIES (NOTE 16)
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, 3,000,000 shares authorized;
1,489,380 and 1,488,631 shares issued
as of December 31, 1999 and 1998, respectively 1,489 1,489
Surplus 4,236 4,312
Retained earnings 28,717 25,431
34,442 31,232
Common stock in treasury, at cost - 9,822 and -0- shares
for 1999 and 1998, respectively (342) -
Accumulated other comprehensive income (683) 663
Total Stockholders' Equity 33,417 31,895
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 392,089 $ 369,131
See accompanying notes to consolidated financial statements.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1999, 1998 and 1997
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
(Amounts in thousands except per share data)
1999 1998 1997
INTEREST INCOME
Interest and fees on loans $ 24,205 $ 21,981 $ 18,658
Interest on securities
Taxable 2,161 2,086 2,666
Tax-exempt 1,211 1,202 1,107
Interest on federal funds sold 105 162 285
Interest on deposits in banks 10 43 145
Total Interest Income 27,692 25,474 22,861
INTEREST EXPENSE
Interest on deposits 9,970 10,061 9,543
Interest on federal funds purchased and securities
sold under repurchase agreements 1,295 1,074 997
Interest on U.S. Treasury note account 5 16 22
Interest on other borrowings 1,316 976 636
Total Interest Expense 12,586 12,127 11,198
Net interest Income Before Provision for
Loan Losses 15,106 13,347 11,663
PROVISION FOR LOAN LOSSES 330 330 230
Net Interest Income After Provision for
Loan Losses 14,776 13,017 11,433
NONINTEREST INCOME
Trust Department income 442 414 341
Service charges on deposit accounts 1,226 1,011 911
Investment securities gains (losses) (2) (3) 2
Other income 1,163 1,108 902
Total Noninterest Income 2,829 2,530 2,156
NONINTEREST EXPENSES
Salaries and employee benefits 6,396 5,982 5,294
Occupancy expenses 788 715 642
Equipment expenses 1,347 1,145 1,085
Data Processing services 602 460 431
Other expenses 2,450 2,470 2,138
Total Noninterest Expenses 11,583 10,772 9,590
Income Before Income Taxes 6,022 4,775 3,999
Less applicable income taxes 1,860 1,387 1,115
NET INCOME $ 4,162 $ 3,388 $ 2,884
Basic earnings per share $ 2.80 $ 2.28 $ 1.95
Diluted earnings per share $ 2.78 $ 2.27 $ 1.94
Weighted average shares outstanding 1,486 1,487 1,477
See accompanying notes to consolidated financial statements.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1999, 1998 and 1997
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Common Retained Treasury Comprehensive
Stock Surplus Earnings Stock Income (Loss) Total
(Dollars in thousands except for shares)
BALANCE - December 31, 1996 $ 1,476 $ 4,091 $ 20,703 $ - $ (30) $ 26,240
Comprehensive income:
Net income - 1997 - - 2,884 - - 2,884
Change in net unrealized gains (losses)
on securities available for sale - - - - 650 650
Reclassification adjustment for gains
(losses) realized in net income - - - - 2 2
Income tax effect - - - - (254) (254)
Total comprehensive income 3,282
Cash dividends paid - $.50 per share - - (741) - - (741)
Issuance of 8,520 new shares of stock
under stock option plan 9 130 - - - 139
BALANCE - December 31, 1997 1,485 4,221 22,846 - 368 28,920
Comprehensive income:
Net income - 1998 - - 3,388 - - 3,388
Change in net unrealized gains (losses)
on securities available for sale - - - - 487 487
Reclassification adjustment for gains
(losses) realized in net income - - - - (3) (3)
Income tax effect - - - - (189) (189)
Total comprehensive income 3,683
Cash dividends paid - $.54 per share - - (803) - - (803)
Issuance of 3,933 new shares of stock
under stock option plan 4 91 - - - 95
BALANCE - December 31, 1998 1,489 4,312 25,431 - 663 31,895
Comprehensive income:
Net income - 1999 - - 4,162 - - 4,162
Change in net unrealized gains (losses)
on securities available for sale - - - - (2,205) (2,205)
Reclassification adjustment for gains
(losses) realized in net income - - - - (2) (2)
Income tax effect - - - - 861 861
Total comprehensive income 2,816
Purchase of 16,356 shares of
treasury stock - - - (561) - (561)
Cash dividends paid - $.59 per share - - (876) - - (876)
Reissuance of 6,534 shares of
treasury stock under stock option plan - (76) - 219 - 143
BALANCE - December 31, 1999 $ 1,489 $ 4,236 $ 28,717 $ (342) $ (683) $ 33,417
FIRST BANKING CENTER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999, 1998 and 1997
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,162 $ 3,388 $ 2,884
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 949 895 904
Provision for loan losses 330 330 230
Gain on sale of loans (8) (10) -
Loss on disposal of office building and equipment 1 16 5
Gain on sale of other real estate owned - (2) -
Provision for deferred taxes (19) (202) (137)
Amortization and accretion of bond
premiums and discounts - net 102 62 76
Amortization of excess cost over equity
in underlying net assets of subsidiary 104 104 104
Investment securities (gains) losses 2 3 (2)
Increase in other assets (628) (513) (583)
Increase in accrued expenses and other liabilities 85 213 564
Total adjustments 918 896 1,161
Net Cash Provided by Operating Activities 5,080 4,284 4,045
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in banks 26 754 4,049
Net (increase) decrease in federal funds sold 2,643 (6,885) 7,905
Activity in available for sale securities
Proceeds from sales of available for sale securities 6,110 6,265 4,322
Proceeds from maturities of available for sale securities 69,470 95,873 50,990
Purchase of available for sale securities (67,413) (92,410) (64,022)
Proceeds from sale of student loans 809 547 -
Net increase in loans (34,895) (41,270) (29,717)
Purchase of office buildings and equipment (899) (3,014) (1,990)
Proceeds from sale of other real estate owned - 30 -
Proceeds from disposal of office building and equipment 122 151 26
Net Cash Used in Investing Activities (24,027) (39,959) (28,437)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 23,345 29,900 18,040
Dividends paid (876) (803) (741)
Proceeds from other borrowings 8,670 16,449 2,618
Payments on other borrowings (3,045) (6,263) (150)
Net decrease in U.S. Treasury note account - (440) -
Net decrease in securities sold under
repurchase agreement (7,619) (1,536) (640)
Proceeds from stock options exercised - 95 139
Purchase of treasury stock (561) - -
Proceeds from reissuance of treasury stock under
stock option plan 143 - -
Net Cash Provided By Financing Activities 20,057 37,402 19,266
Net Increase (Decrease) in Cash and Due From Banks 1,110 1,727 (5,126)
CASH AND DUE FROM BANKS - Beginning of year 18,013 16,286 21,412
CASH AND DUE FROM BANKS- END OF YEAR $ 19,123 $ 18,013 $ 16,286
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 12,479 $ 12,044 $ 11,184
Income taxes $ 2,161 $ 1,537 $ 917
See accompanying notes to consolidated financial statements.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
A. CONSOLIDATION
The consolidated financial statements of First Banking Center, Inc. include the
accounts of its wholly owned subsidiary, First Banking Center. First Banking
Center includes the accounts of its wholly owned subsidiaries, FBC-Burlington,
Inc. and FBC Financial Services Corp. The consolidated financial statements have
been prepared in conformity with generally accepted accounting principles and
conform to general practices within the banking industry. All significant
intercompany accounts and transactions have been eliminated in the consolidated
financial statements.
B. NATURE OF BANKING ACTIVITIES
The consolidated income of First Banking Center, Inc. is principally from the
income of its wholly owned subsidiary. The subsidiary Bank grants agribusiness,
commercial, residential and consumer loans, accepts deposits and provides trust
services to customers primarily in southeastern and south central Wisconsin. The
subsidiary Bank is subject to competition from other financial institutions and
nonfinancial institutions providing financial products. Additionally the Company
and the subsidiary Bank are subject to the regulations of certain regulatory
agencies and undergo periodic examination by those regulatory agencies.
C. USE OF ESTIMATES
In preparing consolidated financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in the near
term relate to the determination of the allowance for loan losses, and the
valuation of foreclosed real estate and deferred tax assets.
D. CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents are defined as
those amounts included in the balance sheet caption "cash and due from banks."
The subsidiary Bank maintains amounts due from banks which, at times, may exceed
federally insured limits. The subsidiary Bank has not experienced any losses in
such accounts.
E. AVAILABLE FOR SALE SECURITIES
Securities classified as available for sale are those debt securities that the
subsidiary Bank intends to hold for an indefinite period of time, but not
necessarily to maturity. Any decision to sell a security classified as available
for sale would be based on various factors, including significant movements in
interest rates, changes in the maturity mix of the subsidiary Bank's assets and
liabilities, liquidity needs, regulatory capital consideration, and other
similar factors. Securities classified as available for sale are carried at fair
value. Unrealized gains or losses are reported as increases or decreases in
comprehensive income, net of the related deferred tax effect. Realized gains or
losses, determined on the basis of the cost of specific securities sold, are
included in earnings.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- --------------------------------------------------------------------------------
F. LOANS
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or payoff are reported at the amount of unpaid
principal, reduced by the allowance for loan losses. Interest income is accrued
on the unpaid principal balance. The accrual of interest income on impaired
loans is discontinued when, in the opinion of management, there is reasonable
doubt as to the borrower's ability to meet payment of interest or principal when
they become due. When interest accrual is discontinued, all unpaid accrued
interest is reversed. Cash collections on impaired loans are credited to the
loan receivable balance and no interest income is recognized on those loans
until the principal balance is current. Accrual of interest is generally resumed
when the customer is current on all principal and interest payments and has been
paying on a timely basis for a period of time.
G. MORTGAGE LOANS HELD FOR SALE
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized through a valuation allowance by charges to
income. All sales are made without recourse.
H. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. The
allowance for loan losses is adequate to cover probable credit losses relating
to specifically identified loans, as well as probable credit losses inherent in
the balance of the loan portfolio. In accordance with FASB Statements 5 and 114,
the allowance is provided for losses that have been incurred as of the balance
sheet date. The allowance is based on past events and current economic
conditions, and does not include the effects of expected losses on specific
loans or groups of loans that are related to future events or expected changes
in economic conditions. While management uses the best information available to
make its evaluation, future adjustments to the allowance may be necessary if
there are significant changes in economic conditions. Impaired loans are
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. A loan is impaired when it is probable the creditor will
be unable to collect all contractual principal and interest payments due in
accordance with the terms of the loan agreement.
In addition, various regulatory agencies periodically review the allowance for
loan losses. These agencies may require the bank to make additions to the
allowance for loan losses based on their judgments of collectibility based on
information available to them at the time of their examination.
I. OFFICE BUILDINGS AND EQUIPMENT
Depreciable assets are stated at cost less accumulated depreciation. Provisions
for depreciation are computed on straight-line and accelerated methods over the
estimated useful lives of the assets, which range from 15 to 50 years for
buildings and 2 to 12 years for equipment.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- --------------------------------------------------------------------------------
J. PROFIT-SHARING PLAN
The Company has established a trusteed contributory 401(k) profit-sharing plan
for qualified employees. The Company's policy is to fund contributions as
accrued.
K. OTHER REAL ESTATE OWNED
Other real estate owned, acquired through partial or total satisfaction of loans
is carried at the lower of cost or fair value less cost to sell. At the date of
acquisition losses are charged to the allowance for loan losses. Revenue and
expenses from operations and changes in the valuation allowance are included in
loss on foreclosed real estate.
L. INCOME TAXES
The Company files a consolidated federal income tax return and individual
subsidiary state income tax returns. Accordingly, amounts equal to tax benefits
of those companies having taxable federal losses or credits are reimbursed by
the other companies that incur federal tax liabilities.
Amounts provided for income tax expense are based on income reported for
financial statement purposes and do not necessarily represent amounts currently
payable under tax laws. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes. The differences relate principally to the reserve
for loan losses, nonaccrual loan income, deferred compensation, pension, fixed
assets and unrealized gains and losses on available for sale securities.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
M. OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business the subsidiary Bank has entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit, commitments under credit card arrangements, commercial letters of credit
and standby letters of credit. Such financial instruments are recorded in the
financial statements when they are funded or related fees are incurred or
received.
N. TRUST ASSETS AND FEES
Property held for customers in fiduciary or agency capacities is not included in
the accompanying balance sheet, since such items are not assets of the Company.
In accordance with established industry practice, income from trust fees is
reported on the cash basis. Reporting of trust fees on an accrual basis would
have no material effect on reported income.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- --------------------------------------------------------------------------------
O. EARNINGS PER SHARE
Earnings per share are computed based upon the weighted average number of common
shares outstanding during each year. In the computation of diluted earnings per
share, all dilutive stock options are assumed to be exercised at the beginning
of each year and the proceeds are used to purchase shares of the Company's
common stock at the average market price during the year.
P. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes certain
financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:
Carrying Amounts Approximate Fair Values for the Following Instruments
Cash and due from banks
Federal funds sold
Interest-bearing deposits in banks
Available for sale securities
Accrued interest receivable
Variable rate loans that reprice frequently where no significant
change in credit risk has occurred
Demand deposits
Variable rate money market accounts
Variable rate certificates of deposit
Accrued interest payable
U.S. Treasury Note account
Discounted Cash Flows
Using interest rates currently being offered on instruments with
similar terms and with similar credit quality:
All loans except variable rate loans described above
Fixed rate certificates of deposit
Other borrowings
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- --------------------------------------------------------------------------------
P. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Quoted fees currently being charged for similar instruments
Taking into account the remaining terms of the agreements and the
counterparties' credit standing:
Off-balance-sheet instruments
Guarantees
Letters of credit
Lending commitments
Since the majority of the Company's off-balance-sheet instruments consist of
nonfee-producing, variable rate commitments, the Company had determined it does
not have a distinguishable fair value.
Q. RECLASSIFICATION
Certain 1997 and 1998 amounts have been reclassified to conform with the 1999
presentation. The reclassifications have no effect on reported amounts of net
income or equity.
- --------------------------------------------------------------------------------
NOTE 2 - CASH AND DUE FROM BANKS
- --------------------------------------------------------------------------------
The Company's bank subsidiary is required to maintain vault cash and reserve
balances with Federal Reserve Banks based upon a percentage of deposits. These
requirements approximated $3,490,000 and $2,738,000 at December 31, 1999 and
1998, respectively.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 3 - AVAILABLE FOR SALE SECURITIES
- --------------------------------------------------------------------------------
Amortized costs and fair values of available for sale securities as of December 31, 1999 and 1998 are summarized as follows:
December 31, 1999
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(Dollars in in thousands)
U.S. Treasury securities $ 2,506 $ 3 $ 4 $ 2,505
Obligations of other U.S. government
agencies and corporations 18,087 - 589 17,498
Obligations of states and
political subdivisions 26,734 58 431 26,361
Commercial paper - - - -
47,327 61 1,024 46,364
Mortgage-backed securities 5,836 24 51 5,809
Mutual funds 844 - 30 814
Federal Reserve stock 451 - - 451
Federal Home Loan Bank stock 1,514 - - 1,514
$ 55,972 $ 85 $ 1,105 $ 54,952
December 31, 1998
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(Dollars in thousands)
U.S. Treasury securities $ 4,004 $ 90 $ - $ 4,094
Obligations of other U.S. government
agencies and corporations 17,658 79 4 17,733
Obligations of states and
political subdivisions 24,493 767 - 25,260
Commercial paper 6,633 - - 6,633
52,788 936 4 53,720
Mortgage-backed securities 8,821 123 4 8,940
Mutual funds 1,041 - 31 1,010
Federal Reserve stock 451 - - 451
Federal Home Loan Bank stock 1,142 - - 1,142
$ 64,243 $ 1,059 $ 39 $ 65,263
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 3 - AVAILABLE FOR SALE SECURITIES (CONTINUED)
- --------------------------------------------------------------------------------
The amortized cost and fair value of available for sale securities as of
December 31, 1999, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities in mortgage-backed securities, equity
securities, and mutual funds since the anticipated maturities are not readily
determinable. Therefore, these securities are not included in the maturity
categories in the following maturity summary listed below:
December 31, 1999
Amortized Fair
Cost Value
(Dollars in thousands)
Due in one year or less $ 5,253 $ 5,244
Due after one year through 5 years 20,005 19,841
Due after 5 years through 10 years 20,155 19,529
Due After 10 years 1,914 1,750
$ 47,327 $ 46,364
Following is a summary of the proceeds from sales of investment securities
available for sale, as well as gross gains and losses for the years ended
December 31:
1999 1998 1997
(Dollars in thousands)
Proceeds from sales of
available for sale securities $ 6,110 $ 6,265 $ 4,322
Gross gains on sales $ 8 $ 27 $ 31
Gross losses on sales (10) (30) (29)
$ (2) $ (3) $ 2
Related income taxes (benefit) $ (1) $ (1) $ 1
Available for sale securities with a carrying value of $23,076,000 and
$28,789,000 as of December 31, 1999 and 1998 respectively, were pledged as
collateral on public deposits and for other purposes as required or permitted by
law.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 4 - LOANS
- --------------------------------------------------------------------------------
Major classifications of loans are as follows:
December 31,
1999 1998
(Dollars in thousands)
Commercial $ 28,458 $ 38,185
Agricultural production 14,965 9,985
Real estate
Construction 37,796 30,008
Commercial 83,592 67,761
Agricultural 9,705 7,754
Residential 110,793 96,139
Consumer and other 7,274 8,465
Municipal loans 6,141 6,503
298,724 264,800
Less: Allowance for loan losses (3,581) (3,421)
Net Loans $ 295,143 $ 261,379
Impaired loans at December 31, 1999 and 1998 of $1,256,000 and $1,517,000,
respectively, have been recognized in conformity with FASB Statement No. 114 as
amended by FASB Statement No. 118. The average recorded amount of impaired loans
during 1999 and 1998 was $1,875,000 and $1,454,000, respectively. There was no
allowance for loan losses related to these loans at December 31, 1999 and 1998.
Interest income on impaired loans of $31,000, $20,000 and $14,000 was recognized
for cash payments received in 1999, 1998 and 1997, respectively.
Certain directors and executive officers of the Company, and their related
interests, had loans outstanding in the aggregate amounts of $927,000 and
$1,198,000 at December 31,1999 and 1998, respectively. During 1999, $663,000 of
new loans were made and repayments totaled $934,000. These loans were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other persons and
did not involve more than normal risks of collectibility or present other
unfavorable features.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------------------------------
The allowance for loan losses reflected in the accompanying consolidated
financial statements represents the allowance available to absorb loan losses.
An analysis of changes in the allowance is presented in the following
tabulation:
December 31,
1999 1998 1997
(Dollars in thousands)
BALANCE - Beginning of Year $3,421 $3,132 $2,897
Charge-offs (197) (88) (62)
Recoveries 27 47 67
Provision charged to operations 330 330 230
BALANCE - END OF YEAR $3,581 $3,421 $3,132
- --------------------------------------------------------------------------------
NOTE 6 - OFFICE BUILDINGS AND EQUIPMENT
- --------------------------------------------------------------------------------
Office buildings and equipment are stated at cost less accumulated depreciation
and are summarized as follows:
December 31,
1999 1998
(Dollars in thousands)
Land $ 1,445 $ 1,445
Buildings and improvements 8,819 8,489
Furniture and equipment 5,394 5,047
15,658 14,981
Less: Accumulated depreciation 6,229 5,379
Total Office Buildings and Equipment $ 9,429 $ 9,602
Depreciation expense as of December 31, 1999, 1998 and 1997 was $949,000,
$895,000 and $904,000, respectively.
- --------------------------------------------------------------------------------
NOTE 7 - EXCESS OF COST OVER EQUITY IN UNDERLYING NET ASSETS OF SUBSIDIARY
- --------------------------------------------------------------------------------
The excess of cost over equity in underlying net assets of the Genoa City and
Pell Lake branches of the First Banking Center at the date of the branch
acquisition amounted to $1,479,000. The amount is being amortized over a period
of fifteen years. Amortization expense amounted to $99,000, $99,000 and $99,000
for the years ended December 31, 1999, 1998 and 1997, respectively. Accumulated
amortization amounted to $313,000, $214,000 and $115,000 at December 31, 1999,
1998 and 1997, respectively.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 8 - VALUATION OF CORE DEPOSITS
- --------------------------------------------------------------------------------
The fair market value of core deposits of the Albany branch of First Banking
Center at the date of acquisition amounted to $310,000. The valuation was
determined by an independent appraisal firm. The amount, net of amortization,
has been included as part of other assets and is being amortized over the
average remaining life of the deposits. Amortization expense for the years ended
December 31, 1999, 1998 and 1997 amounted to $2,000, $3,000 and $3,000,
respectively. Accumulated amortization amounted to $309,000, $307,000 and
$304,000 at December 31, 1999, 1998 and 1997, respectively.
The fair market value of core deposits of the Genoa City and Pell Lake branches
of First Banking Center at the date of the branch acquisition amounted to
$30,000. The amount, net of amortization, has been included as part of other
assets and is being amortized over a period of ten years. Amortization expense
amounted to $3,000, $3,000 and $3,000 for the years ended December 31, 1999,
1998 and 1997, respectively. Accumulated amortization amounted to $10,000,
$7,000 and $4,000 at December 31, 1999, 1998 and 1997, respectively.
- --------------------------------------------------------------------------------
NOTE 9 - DEPOSITS AND INTEREST ON DEPOSITS
- --------------------------------------------------------------------------------
The aggregate amount of Time deposits, each with a minimum denomination of
$100,000, was approximately $30,044,000 and $21,610,000 in 1999 and 1998,
respectively.
At December 31, 1999, the scheduled maturities of Time deposits are as follows
(dollars in thousands):
2000 $ 84,264
2001 22,309
2002 3,520
2003 3,511
2004 318
$113,922
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 10 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Securities sold under agreements to repurchase generally mature within one year.
Information concerning securities sold under repurchase agreements is summarized
as follows:
1999 1998
(Dollars in thousands)
Average balance during the year $ 26,216 $20,880
Average interest rate during the year 4.79% 5.05%
Maximum month-end balance during the year $ 35,908 $31,491
Securities underlying the agreements at year-end:
Carrying value $ 23,076 $28,789
Estimated fair value $ 23,076 $28,789
Term federal funds purchased and treasury tax and loan deposits generally are
repaid within one to 120 days from the transaction date.
- --------------------------------------------------------------------------------
NOTE 11 - OTHER BORROWINGS
- --------------------------------------------------------------------------------
Other borrowings consisted of the following at December 31:
1999 1998
(Dollars in thousands)
Federal Home Loan Bank advances $ 27,168 $ 21,543
Note payable 600 600
$ 27,768 $ 22,143
The subsidiary Bank has a master contract agreement with the Federal Home Loan
Bank (FHLB) which provides for borrowing up to the maximum of 60% of the book
value of the Bank's first lien 1-4 family real estate loans, $72,365,000,at
December 31, 1999. The indebtedness is evidenced by a master contract dated
September 14, 1992. FHLB provides both fixed and floating rate advances.
Floating rates are tied to short-term market rates of interest, such as Federal
funds and Treasury Bill rates. Fixed rate advances are priced in reference to
market rates of interest at the time of the advance, namely the rates that FHLB
pays to borrowers at various maturities.
Various advances were obtained with total outstanding balances of $27,168,000
and $21,543,000 at December 31, 1999 and 1998 respectively, with applicable
interest rates ranging from 4.70% to 6.88%. Interest is payable monthly with
principal payment due at maturity.
The advances are secured by a security agreement pledging a portion of the
subsidiary Bank's real estate mortgages with a carrying value of $45,280,000.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 11 - OTHER BORROWINGS (CONTINUED)
- --------------------------------------------------------------------------------
The subsidiary bank has a note payable with a third party bank used to acquire a
permanent facility for a branch that formally occupied rented space. The note
payable bears an interest rate of 6.5% with monthly payments of interest only
through July 2001 and interest and principal payments of $8,910 through June
2008. Outstanding balance as of December 31, 1999 and 1998 was $600,000.
Future principal payments required to be made on the other borrowings are as
follows (dollars in thousands):
Years Ending December 31,
2000 $ 1,824
2001 16,097
2002 3,422
2003 2,083
2004 4,002
Thereafter 340
$ 27,768
- --------------------------------------------------------------------------------
NOTE 12 - STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
The Company has an Incentive Stock Option Plan which provides for the granting
of options for up to 300,000 shares of common stock to key officers and
employees of the Company. The exercise price of each option equals the market
price of the Company's stock on the date of grant. Options may be exercised
33.33% per year beginning one year after the date of the grant and must be
exercised within a four-year period. During 1999, the amendment to extend the
plan time period for exercising grants to ten years from grant date met final
approval at the annual stockholder meeting in April 1999.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 12 - STOCKHOLDERS' EQUITY (CONTINUED)
- --------------------------------------------------------------------------------
Activity of the Incentive Stock Option Plan is summarized in the following
table:
Weighted-
Average Weighted-
Fair Value Average
of Option Options Options Exercise
Granted Available Exercisable Outstanding Price
BALANCE - December 31, 1996 - 265,713 15,911 40,592 21.54
Granted 4.26 (23,800) 23,800 28.46
Exercise of stock option - - (8,520) 16.23
BALANCE - December 31, 1997 - 241,913 37,628 55,872 25.30
Granted 7.69 (49,350) 49,350 32.44
Exercise of stock option - - (3,913) 24.37
Canceled - 3,275 (3,275) 26.41
BALANCE - December 31, 1998 - 195,838 30,632 98,034 28.89
Granted 7.57 (83,725) 83,725 34.01
Exercise of stock option - (7,283) 19.67
Canceled 45,700 (45,700) 32.29
EXERCISABLE - DECEMBER 31, 1999 157,813 35,380 128,776 31.53
The following table summarizes information about fixed stock options outstanding
at December 31, 1999:
Options Outstanding Options Exercisable
Weighted- Weighted- Weighted-
Average Average Average
Exercise Number Remaining Exercise Number Exercise
Price Outstanding Contractual Life Price Exercisable Price
$ 22.00 8,025 1 year $ 22.00 8,025 $ 22.00
25.50 11,959 2 years 25.50 11,959 25.50
27.50-28.50 19,692 3 years 28.40 13,115 28.40
29.00-32.50 6,850 4 years 32.14 2,281 32.14
33.50-35.50 82,250 10 years 34.01 - 34.01
128,776 35,380
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 12 - STOCKHOLDERS' EQUITY (CONTINUED)
- --------------------------------------------------------------------------------
The Company applies APB Opinion 25 and related Interpretations in accounting for
the stock option plan. Accordingly, no compensation cost has been recognized.
Had compensation cost for the Company's stock option plan been determined based
upon the fair value at the grant dates for awards under the plan consistent with
the method prescribed by FASB Statement No. 123, the Company's net income and
earnings per share would have been adjusted to the pro forma amounts indicated
below:
1999 1998 1997
(Dollars in thousands except per share data)
Net income - as reported $ 4,162 $ 3,388 $ 2,884
Pro forma $ 4,136 $ 3,365 $ 2,875
Basic earnings per share - as reported $ 2.80 $ 2.28 $ 1.95
Pro forma $ 2.78 $ 2.26 $ 1.95
Diluted earnings per share - as reported $ 2.78 $ 2.27 $ 1.94
Pro forma $ 2.77 $ 2.25 $ 1.94
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997, respectively: dividend yield
of 1.7%, 1.7% and 1.8%; expected volatility of 5.3%, 5.3% and 5.4%, blended
risk-free interest rates of 5.9%, 5.0% and 5.3%; and expected lives of 10 years,
5 years and 5 years, respectively.
A reconciliation of the numerators and the denominators of earnings per share
and earnings per share assuming dilution are:
Per Share
Income Shares Amount
(Amounts in thousands except per share data)
1999
Earnings per share $ 4,162 1,486 $ 2.80
Effect of options - 10
Earnings per share - assuming dilution $ 4,162 1,495 $ 2.78
1998
Earnings per share $ 3,388 1,487 $ 2.28
Effect of options - 7
Earnings per share - assuming dilution $ 3,388 1,494 $ 2.27
1997
Earnings per share $ 2,884 1,477 $ 1.95
Effect of options - 8
Earnings per share - assuming dilution $ 2,884 1,485 $ 1.94
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 13 - INCOME TAXES
- --------------------------------------------------------------------------------
The provision for income taxes included in the accompanying consolidated
financial statements consists of the following:
December 31,
1999 1998 1997
(Dollars in thousands)
Current Taxes
Federal $1,530 $1,303 $1,022
State 349 286 230
1,879 1,589 1,252
Deferred Income Taxes (Benefit)
Federal (16) (170) (121)
State (3) (32) (16)
(19) (202) (137)
Total Provision for Income Taxes $1,860 $1,387 $1,115
The net deferred tax assets in the accompanying consolidated balance sheets
include the following amounts of deferred tax assets and liabilities:
December 31,
1999 1998
(Dollars in thousands)
Deferred Tax Assets
Allowance for loan losses $1,103 $1,040
Depreciation 28 13
Pension 223 216
Deferred compensation 348 352
Unrealized loss on available for sale securities 337 -
Other 16 67
Deferred Tax Liabilities
Unrealized gain on available for sale securities - (357)
Other (11) -
BALANCE - END OF YEAR $2,044 $1,331
Management believes it is more likely than not, that the gross deferred tax
assets will be fully realized. Therefore, no valuation allowance has been
recorded as of December 31, 1999 or 1998.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 13 - INCOME TAXES (CONTINUED)
- --------------------------------------------------------------------------------
A reconciliation of statutory Federal income taxes based upon income before
taxes, to the provision for federal and state income taxes, as summarized above,
is as follows:
1999 1998 1997
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
(Dollars in thousands)
Reconciliation of statutory
to effective taxes
Federal income taxes
at statutory rate $2,047 34.0% $ 1,623 34.0% $1,360 34.0%
Adjustments for
Tax-exempt interest on
municipal obligations (470) (7.8) (395) (8.3) (422) (10.5)
Increases in taxes resulting
from state income taxes 230 3.8 189 3.9 152 3.8
Other - net 53 0.9 (30) (0.6) 25 0.6
Effective income
taxes - operations $1,860 30.9% $ 1,387 29.0% $1,115 27.9%
- --------------------------------------------------------------------------------
NOTE 14 - PROFIT-SHARING PLAN
- --------------------------------------------------------------------------------
The Company has a 401(k) plan. Contributions were $156,000, $131,000 and
$132,000 in 1999, 1998 and 1997, respectively.
- --------------------------------------------------------------------------------
NOTE 15 - SALARY CONTINUATION AGREEMENT
- --------------------------------------------------------------------------------
The Company has entered into salary continuation agreements with various
executive officers. The agreements provide for the payment of specified amounts
upon the employee's retirement or death which is being accrued over the
anticipated remaining period of employment. Expenses recognized for future
benefits under these agreements totaled $59,000, $59,000 and $151,000 during
1999, 1998 and 1997, respectively.
Although not part of the agreement, the Company purchased paid-up life insurance
on the officers which could provide funding for the payment of benefits.
Included in other assets is $1,518,000 and $1,451,000 of related cash surrender
value as of December 31, 1999 and 1998, respectively.
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NOTE 16 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the consolidated
financial statements.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
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NOTE 16 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
- --------------------------------------------------------------------------------
The Company is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, financial guarantees
and standby letters of credit. They involve, to varying degrees, elements of
credit risk in excess of amounts recognized on the consolidated balance sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The Company uses the same credit policies in making
commitments and issuing letters of credit as they do for on-balance-sheet
instruments.
A summary of the contract or notional amount of the Company's exposure to
off-balance-sheet risk as of December 31, 1999 and 1998 is as follows:
1999 1998
(Dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit $49,006 $42,304
Credit card commitments $ - $2,460
Standby letters of credit $4,869 $3,537
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Standby letters of credit are conditional
commitments issued to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Company evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts receivable,
inventory, property and equipment, and income-producing commercial properties.
Credit card commitments are unsecured.
The Company and the subsidiary Bank do not engage in the use of interest rate
swaps, futures or option contracts as of December 31, 1999.
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NOTE 17 - CONCENTRATION OF CREDIT RISK
- --------------------------------------------------------------------------------
Practically all of the subsidiary Bank's loans, commitments, and commercial and
standby letters of credit have been granted to customers in the subsidiary
Bank's market area. Although the subsidiary Bank has a diversified loan
portfolio, the ability of their debtors to honor their contracts is dependent on
the economic conditions of the counties surrounding the subsidiary Bank. The
concentration of credit by type of loan is set forth in Note 4.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
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NOTE 18 - RETAINED EARNINGS
- --------------------------------------------------------------------------------
A source of income and funds of First Banking Center, Inc. are dividends from
its subsidiary Bank. Dividends declared by the subsidiary Bank that exceed the
retained net income for the most current year plus retained net income for the
preceding two years must be approved by Federal and State regulatory agencies.
Under this formula, dividends of approximately $6,283,000 may be paid without
prior regulatory approval. Maintenance of adequate capital at the subsidiary
Bank effectively restricts potential dividends to an amount less than
$6,283,000.
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NOTE 19 - REGULATORY CAPITAL REQUIREMENTS
- --------------------------------------------------------------------------------
The Company (on a consolidated basis) and the subsidiary Bank are subject to
various regulatory capital requirements administered by the federal and state
banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly additional discretionary, actions by regulators
that, if undertaken, could have a direct material effect on the Company's and
subsidiary Bank's financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Company and the
subsidiary Bank must meet specific capital guidelines that involve quantitative
measures of their assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk-weightings, and other factors. Prompt corrective action
provisions are not applicable to bank holding companies.
Quantitative measures established by regulation to ensure capital adequacy
requires the Company and the subsidiary Bank to maintain minimum amounts and
ratios (set forth in the table on the following page) of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined) and
Tier 1 capital (as defined) to average assets (as defined). Management believes,
as of December 31, 1999 and 1998, that the Company and the subsidiary Bank met
all capital adequacy requirements to which they are subject.
As of December 31, 1999, the most recent notification from the regulatory
agencies categorized the Company as well-capitalized under the regulatory
framework for prompt corrective action. To be categorized as well-capitalized,
an institution must maintain minimum total risk-based, Tier I risk-based, and
Tier 1 leverage ratios as set forth in the following table. There are no
conditions or events since these notifications that management believes have
changed the institution's category.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 19 - REGULATORY CAPITAL REQUIREMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Company's and the subsidiary Bank's actual capital amounts and ratios as of
December 31, 1999 and 1998 are presented in the table.
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
As of December 31, 1999:
Total capital risk
(to risk-weighted assets):
First Banking Center, Inc. $ 36,462 11.9% $ 24,516 8.0% N/A
First Banking Center $ 35,673 11.7% $ 24,458 8.0% $ 30,573 10.0%
Tier I capital
(to risk-weighted assets):
First Banking Center, Inc. $ 32,881 10.7% $ 12,258 4.0% N/A
First Banking Center $ 32,092 10.5% $ 12,229 4.0% $ 18,344 6.0%
Tier I capital
(to average assets):
First Banking Center, Inc. $ 32,881 8.4% $ 15,615 4.0% N/A
First Banking Center $ 32,092 8.2% $ 15,593 4.0% $ 19,491 5.0%
As of December 31, 1998:
Total capital risk
(to risk-weighted assets):
First Banking Center, Inc. $ 33,328 12.1% $ 22,041 8.0% N/A
First Banking Center $ 32,488 11.8% $ 22,002 8.0% $ 27,503 10.0%
Tier I capital
(to risk-weighted assets):
First Banking Center, Inc. $ 29,910 10.9% $ 11,021 4.0% N/A
First Banking Center $ 29,066 10.6% $ 11,001 4.0% $ 16,502 6.0%
Tier I capital
(to average assets):
First Banking Center, Inc. $ 29,910 8.6% $ 13,869 4.0% N/A
First Banking Center $ 29,066 8.4% $ 13,849 4.0% $ 17,311 5.0%
- --------------------------------------------------------------------------------
NOTE 20 - BUSINESS CONSOLIDATION
- --------------------------------------------------------------------------------
Effective April 6, 1998, First Banking Center - Albany was merged with First
Banking Center. This allowed the Company to deliver services more efficiently by
eliminating the duplicate costs associated with various management,
administrative and support services.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 21 - FAIR VALUE OF FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The estimated fair values of the Company's financial instruments are as follows:
1999 1998
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(Dollars in thousands)
FINANCIAL ASSETS
Cash and due from banks $ 19,123 $ 19,123 $ 18,013 $ 18,013
Federal funds sold $ 4,242 $ 4,242 $ 6,885 $ 6,885
Interest-bearing deposits
in banks $ 40 $ 40 $ 66 $ 66
Securities $ 54,952 $ 54,952 $ 65,263 $ 65,263
Net loans $295,143 $ 292,847 $261,379 $ 260,821
Accrued interest receivable $ 2,815 $ 2,815 $ 2,453 $ 2,453
FINANCIAL LIABILITIES
Deposits $306,144 $ 305,863 $282,799 $ 283,072
Repurchase agreements $ 21,131 $ 21,131 $ 28,750 $ 28,750
U.S. Treasury note account $ 100 $ 100 $ 100 $ 100
Other borrowings $ 27,768 $ 27,416 $ 22,143 $ 22,132
Accrued interest payable $ 1,290 $ 1,290 $ 1,183 $ 1,183
The estimated fair value of fee income on letters of credit at December 31, 1999
and 1998 is insignificant. Loan commitments on which the committed interest rate
is less than the current market rate are also insignificant at December 31, 1999
and 1998.
The Company assumes interest rate risk (the risk that general interest rate
levels will change) as a result of its normal operations. As a result, fair
values of the Company's financial instruments will change when interest rate
levels change and that change may be either favorable or unfavorable to the
Company. Management attempts to match maturities of assets and liabilities to
the extent believed necessary to minimize interest rate risk. However, borrowers
with fixed rate obligations are less likely to prepay in a rising rate
environment and more likely to repay in a falling rate environment. Conversely,
depositors who are receiving fixed rates are more likely to withdraw funds
before maturity in a rising rate environment and less likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities and attempts to minimize interest rate risk by adjusting terms of
new loans and deposits and by investing in securities with terms that mitigate
the Company's overall interest rate risk.
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 22 - FIRST BANKING CENTER, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
CONDENSED BALANCE SHEETS
December 31,
1999 1998
(Dollars in thousands)
ASSETS
Cash $ 169 $ 85
Interest-bearing deposits in banks 110 400
Investment in subsidiary 32,625 31,049
Loans 211 117
Other assets 529 417
TOTAL ASSETS $ 33,644 $ 32,068
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Other liabilities $ 227 $ 173
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, 3,000,000 shares
authorized; 1,489,380 and 1,488,631 shares issued
as of December 31, 1999 and 1998, respectively 1,489 1,489
Surplus 4,236 4,312
Retained earnings 28,717 25,431
34,442 31,232
Common stock in treasury at cost; 9,822 and 0 shares
for 1999 and 1998, respectively (342) -
Accumulated other comprehensive income (loss) (683) 663
Total Stockholders' Equity 33,417 31,895
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,644 $ 32,068
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 22 - FIRST BANKING CENTER, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(CONTINUED)
- --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF INCOME
December 31,
1999 1998 1997
(Dollars in thousands)
INCOME
Dividends from subsidiary $ 1,226 $ 796 $ 951
Management fees from subsidiary 3,440 3,049 2,156
Other 20 27 7
Total Income 4,686 3,872 3,114
EXPENSES
Salaries and employee benefits 2,079 1,881 1,558
Occupancy expenses 220 191 127
Equipment expense 477 346 208
Computer services 146 58 37
Other expenses 518 573 385
Total Expenses 3,440 3,049 2,315
Income Before Income Tax Benefit
and Equity in Undistributed
Net Income of Subsidiary 1,246 823 799
INCOME TAX PROVISION (BENEFIT) 6 4 (52)
Income Before Equity in
Undistributed Net Income
of Subsidiary 1,240 819 851
EQUITY IN UNDISTRIBUTED
NET INCOME OF SUBSIDIARY 2,922 2,569 2,033
NET INCOME $ 4,162 $ 3,388 $ 2,884
FIRST BANKING CENTER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
NOTE 22 - FIRST BANKING CENTER, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(CONTINUED)
- --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS
December 31,
1999 1998 1997
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $4,162 $3,388 $ 2,884
Adjustments to reconcile net income to net
cash flows provided by operating activities
Amortization of goodwill 1 1 1
(Increase) decrease in other assets (126) (202) 32
Increase in other liabilities 67 100 23
Equity in undistributed earnings (2,922) (2,569) (2,033)
Total Adjustments (2,980) (2,670) (1,977)
Net Cash Flows Provided by Operating Activities 1,182 718 907
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing 290 (269) (5)
deposits in banks
Net increase in loans (94) (27) (90)
Net Cash Flows Provided By (Used in) Investing Activities 196 (296) (95)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock options exercised - 95 139
Purchase of treasury stock (561) - -
Proceeds from reissuance of treasury stock under
stock option plan 143 - -
Dividends paid (876) (803) (741)
Net Cash Flows Used in Financing Activities (1,294) (708) (602)
Net Increase (Decrease) in Cash 84 (286) 210
CASH - Beginning of Year 85 371 161
CASH - END OF YEAR $ 169 $ 85 $ 371
Supplemental cash flow disclosures
Cash paid (received) during year for income taxes $ 8 $ 13 $ (60)
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
The Company had no disagreement with the accountants regarding any
information presented.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for herein is presented in the proxy statement
to be furnished in connection with the solicitation of proxies on behalf of the
Board of Directors of the Registrant for use at its Annual Meeting to be held on
Tuesday, April 18, 2000, is incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
The information called for herein is presented in the proxy statement
to be furnished in connection with the solicitation of proxies on behalf of the
Board of Directors of the Registrant for use at its Annual Meeting to be held on
Tuesday, April 18, 2000, is incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for herein is presented in the proxy statement
to be furnished in connection with the solicitation of proxies on behalf of the
Board of Directors of the Registrant for use at its Annual Meeting to be held on
Tuesday, April 18, 2000, is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others
None
(b) Certain business relationships
None
(c) Indebtedness of management
This information is presented on page 15, Note 4 of the Annual
Report to Shareholders, and is incorporated herein by
reference.
(d) Transactions with promoters
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FIRST BANKING CENTER, INC.
Registrant
Date____________________ By ___________________________
Brantly Chappell
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.*
- -------------------------------- -----------------------------
Brantly Chappell, James Schuster,
Chief Executive Officer, Director Chief Financial Officer
- -------------------------------- -----------------------------
Melvin Wendt, Director Richard McKinney, Director
- -------------------------------- -----------------------------
John Smith, Director John Ernster, Director
- -------------------------------- -----------------------------
David Boilini, Director Robert Fait, Director
- -------------------------------- -----------------------------
Charles Wellington, Director Keith Blumer, Director
- -------------------------------- -----------------------------
Thomas Laken, Jr., Director Daniel Jacobson, Director
*Each of the above signatures is affixed as of February 14, 2000.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
(a) Annual Report to Shareholders
(b) All proxy material in connection with the 2000 Annual Shareholders Meeting.