UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 (I.R.S. Employer
incorporation or organization) Identification No.)
400 Milwaukee Ave., Burlington, WI 53105
(Address of principal executive offices) (Zip Code)
(414) 763-3581
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. Common Stock,
$1.00 par value, 1,463,148 shares outstanding.
PART I. FINANCIAL INFORMATION
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
BURLINGTON, WISCONSIN
CONSOLIDATED BALANCE SHEET
March 31, 1995
vs
December 31, 1994
(Amounts in Thousands)
ASSETS 03/31/95 12/31/94
Cash and due from banks $6,775 $11,521
Federal funds sold 8,812 566
Total Cash and Cash Equivalents 15,587 12,087
Interest bearing deposits in banks 1,547 1,899
Investment securities - Held to Maturity 29,020 30,132
Investment securities - Available for Sale 24,503 21,655
Loans 159,403 157,773
Less:
Allowance for loan losses (2,156) (2,095)
Total Net Loans 157,247 155,678
Property and Equipment 4,637 4,707
Other Assets 4,901 4,927
TOTAL ASSETS $237,442 $231,085
LIABILITIES
Deposits
Non-interest bearing demand $24,472 $29,294
Interest bearing demand 17,993 20,082
Money market demand 34,480 37,063
Savings 25,674 27,237
Time 87,023 73,434
Total Deposits 189,642 187,110
Fed Funds Sold & Securities sold
under agreements to repurchase 14,021 13,755
Short-term borrowings 1,861 697
Long-term borrowings 7,805 6,805
Accrued interest and other liabilities 2,281 1,892
TOTAL LIABILITIES $215,610 $210,259
STOCKHOLDERS' EQUITY
Common Stock, $1.00 par value 3,000,000
shares authorized 1,468,464 shares issued $1,468 $1,468
Surplus 3,986 3,986
Retained Earnings 17,019 16,353
Net unrealized loss on available
for sale securitites (587) (927)
Subtotal 21,886 20,880
Treasury Stock (54) (54)
TOTAL STOCKHOLDERS' EQUITY $21,832 $20,826
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $237,442 $231,085
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
BURLINGTON, WISCONSIN
CONSOLIDATED STATEMENT OF INCOME
as of March 31, 1995 and 1994
(Amounts in Thousands)
Quarter-to-Date Year-to-Date
03/31/95 03/31/94 03/31/94 03/31/95
INTEREST INCOME
Interest and fees on loans $3,431 $2,845 $3,431 $2,845
Interest on deposits in banks 29 82 29 82
Interest on federal funds sold
and repurchase agreements 51 24 51 24
Interest on securities:
U.S. Government and other 698 543 698 543
Tax Exempt Securities 121 145 121 145
TOTAL INTEREST INCOME 4,330 3,639 4,330 3,639
INTEREST EXPENSE
Interest on deposits 1,667 1,450 1,667 1,450
Int. on short-term borrowings 223 102 223 102
Int. on long-term borrowings 97 82 97 82
TOTAL INTEREST EXPENSE 1,987 1,634 1,987 1,634
Net interest Income 2,343 2,005 2,343 2,005
Provision for loan losses 68 68 68 68
NET INT. INC. AFTER PROVISION
FOR LOAN LOSSES 2,275 1,937 2,275 1,937
OTHER OPERATING INCOME
Trust department income 75 75 75 75
Service charges on deposits 164 141 164 141
Invest. security gains/(losses) (11) (2) (11) (2)
Other income 83 73 83 73
TOTAL OTHER OPERATING INCOME 311 287 311 287
OTHER OPERATING EXPENSE
Employee expense 782 690 782 690
Occupancy expense 144 132 144 132
Equipment expense 132 81 132 81
Computer services 70 69 70 69
Other expense 468 412 468 412
TOTAL OTHER OPERATING EXPENSE 1,596 1,384 1,596 1,384
Income before income taxes 990 840 990 840
Income taxes 324 267 324 267
NET INCOME $666 $573 $666 $573
Earnings per share $0.46 $0.39 $0.46 $0.39
Average shares outstanding 1,463,148 1,451,898 1,463,148 1,451,898
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
BURLINGTON, WISCONSIN
Y-T-D ending March 31, 1995 and 1994
Increase (decrease) in Cash and Cash Equivalents
(Amounts in Thousands)
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $666 $573
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 124 81
Provision for loan losses 68 68
Provision for deferred taxes 0 0
Amortization and accretion of bond
premiums and discounts - net 27 44
Amortization of excess cost over equity in
underlying net assets of subsidiary 0 0
Investment securities (gains) losses 11 2
(Increase) decrease in assets:
Interest receivable (64) 49
Other assets 90 (139)
Increase (decrease) in liabilities:
Taxes payable 301 164
Interest payable 142 10
Other liabilities (54) 2
TOTAL ADJUSTMENTS 645 281
NET CASH PROVIDED FROM OPERATING ACTIVITIES $1,311 $854
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing deposits $352 $4,748
Proceeds from sale of investment securities 1,000 1,360
Proceeds from maturity of investment securities 12,420 8,910
Purchase of investment securities (14,854) (8,703)
Net (increase) decrease in loans (1,637) (4,857)
Purchase of office buildings and equipment (54) (204)
NET CASH USED IN INVESTING ACTIVITIES ($2,773) $1,254
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
BURLINGTON, WISCONSIN
Y-T-D ending March 31, 1995 and 1994
Increase (decrease) in Cash and Cash Equivalents
(Amounts in Thousands)
1995 1994
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $2,532 ($3,600)
Dividends paid 0 0
Net increase (decrease) in Short-term Borrowings 1,164 (561)
Net increase (decrease) in Long-term Borrowings 1,000 415
Net increase (decrease) in securities sold under
repurchase agreements 266 (699)
Proceeds from stock options exercised 0 0
NET CASH PROVIDED BY FINANCING ACTIVITIES $4,962 ($4,445)
Net increase (decrease) in cash and cash equivalents 3,500 (2,337)
Cash and cash equivalents at beginning of year 12,087 10,728
Cash and cash equivalents at end of quarter $15,587 $8,391
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) during the year for:
Interest $1,845 $1,630
Income taxes (received) $23 $39
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
BURLINGTON, WISCONSIN
CONSOLIDATED STATEMENT OF CHANGES
IN COMPONENTS OF STOCKHOLDERS' EQUITY
As of March 31, 1995
(Amounts in Thousands)
COMMON RETAINED AVAILABLE TREASURY
STOCK SURPLUS EARNINGS FOR SALE STOCK
SECURITIES
Balances
December 31, 1993 $1,468 $3,975 $14,519 $0 ($110)
Net income-YTD 1994 573
Cash dividend paid
$0.00 per share
Exercise of
Stock options
Change in unrealized
loss on available
for sale securities (215)
Balances
March 31, 1994 $1,468 $3,975 $15,092 ($215) ($110)
Balances
December 31, 1994 $1,468 $3,986 $16,353 ($927) ($54)
Net income-YTD 1995 666
Cash dividend paid
$0.00 per share
Exercise of
Stock options
Change in unrealized
loss on available
for sale securities 340
Balances
March 31, 1995 $1,468 $3,986 $17,019 ($587) ($54)
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
BURLINGTON, WISCONSIN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of Management, the accompanying unaudited consolidated
financial statements reflect all adjustments that are necessary to present a
fair statement of the results for the interim periods. All required
adjustments are of a normal recurring nature.
In May 1993 the FASB issued Statement No. 114, Accounting by
Creditors for Impairment of a Loan. Statement No. 114 requires that impaired
loans that are within the scope of this statement be 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. The Company adopted the statement January 1,
1995. The FASB also issued FASB Statement No. 118 which amends certain
provisions of FASB Statement No. 114 relating to income recognition and other
required disclosures of impaired loans. The Company also adopted this
statement January 1, 1995. The adoption of SFAS No. 114 and No. 118 did not
have a material impact on the Company's financial statements.
The accounting policies followed by the registrant are set forth in Note
A to the registrant's financial statements in the 1994 First Banking Center,
Inc. (the Company) annual report which is incorporated by reference herein
(see exhibit A).
Item 2
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
BURLINGTON, WISCONSIN
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of March 31, 1995
The following is a discussion of the financial condition,
changes in financial condition and results of operations of the
Company.
Financial Condition
During the first three months of 1995, the Company's
stockholders' equity increased $1,006,000 or an annualized 19.3%.
At March 31, 1995, the Company had 5,316 shares of Treasury Stock
at an average cost of $10.02 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 risk-adjusted assets. Each asset on
the balance sheet, as well as a balance sheet equivalent amount of
contingent obligations that are off-balance sheet, is assigned a
risk weighing from zero to 100 percent. The sum of the weighted
assets constitutes risk-adjusted assets. The Company's tier 1
capital (common stockholders' equity less goodwill) to risk-
adjusted assets was approximately 14.55% at March 31, 1995, well
above the 4 percent minimum required. Total capital to risk-
adjusted assets approximated 14.55%, also well above the minimum
requirement.
Asset Quality
We continue our commitment to credit quality in 1995. Net
charge-offs as a percentage of average loans for the first three
months of 1995 were .016%. At March 31, 1995, non-performing
assets were $1,032,000 or .43%. Non-performing assets consist
primarily of real estate loans.
At March 31, 1995, the allowance for possible loan losses was
$2,156,000 or 1.35% of gross loans compared with $1,942,000 or
1.39% of gross loans at March 31, 1994. Management considers the
allowance more than adequate to cover possible losses in the loan
portfolio.
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
Company measures interest-sensitive assets and liabilities, and
their relationship with each other at terms of immediate, monthly
intervals up to 12 months, 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 Company's strategy with respect to asset/liability
management is to maximize net interest income while limiting our
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.
Liquidity
The liquidity position of the Company is managed to insure
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 and money
market assets such as Interest Bearing Deposits in Banks and
Federal Funds Sold. Other sources of liquidity include deposit
growth and short and long term borrowings.
The loan to deposit ratio for the Company was 82.7% at March
31, 1995.
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.
Results of Operations for Three Months Ended March 1995 and 1994
Results of Operations Overview
In the first three months of 1995 the Company reported
earnings of $666,000 an increase of $93,000 or 16.2% over the same
period in 1994. The interest margin before allowance for loan
losses was $2,343,000 for the first three months of 1995 compared
to $2,005,000 for the three months ended March 31, 1994.
Interest Income
Interest and fees on loans was $3,431,000 for the first three
months of 1995. This represents a increase of $586,000 or 20.5% in
comparison to the same period in 1994. The increase was the result
of an increase in rates charged on loans as well as an increase in
the balance of loans.
Interest on deposits at other financial institutions decreased
$53,000 for the first three months of 1995 compared to the same
period in 1994. The decrease was the result of a decrease in
average balances.
Interest on investment securities was $819,000 for the first
three months of 1995. This represents an increase of $131,000 or
19% over the same period in 1994. Income on Federal Funds Sold
increased by $27,000 or 112.5%. The increase in investment income
is primarily due to an increase in interest rates.
Interest Expense
Interest expense increased 353,000 or 21.6% during the first
three months of 1995. The increase in interest interest expense is
due to increased Interest-Bearing Deposits as well as increased
interest rates as compared to March 31, 1994.
Allowance for Loan Losses
The Banks evaluate the adequacy of the allowance for loan
losses based on an analysis of specific problem loans, as well as
on an aggregate basis. Management reviews a calculation of the
allowance for loan losses on a monthly basis and feels that the
allowance for loan losses is adequate to provide for potential
future losses. The level of the allowance is based on management's
periodic and comprehensive evaluation of the loan portfolio,
including past loan loss experience; current and projected economic
trends; the volume, growth and composition of the loan portfolio;
and other relevant factors. Reports of examinations furnished by
State and federal banking authorities are also considered by
management in this regard.
The Banks have established the allowance for loan losses to
reduce the gross level of loans outstanding by an estimate of
uncollectible loans. As loans are deemed uncollectible, they are
charged against the allowance. A provision for loan losses is
expensed against current income on a monthly basis. This provision
acts to replenish the allowance for loan losses to accommodate
charge-offs and growth in the loan portfolio, thereby maintaining
the allowance at an adequate level.
For the first three months of 1995 provisions charged against
1995 income were $68,000 which was the same as the provision during
the same period in 1994.
Other Operating Income
Other operating income increased $24,000 or 8.3%. Service charge
income increased 16.3%. All other income increased by $10,000 or
13.7%. Trust income remain unchanged at $75,000.
Other Operating Expense
Other operating expense increased $212,000 or 15.3%. Employee
expenses increased $92,000 or 13.3%. Occupancy expense increased
$34,000 compared to the first three months of last year or 9%.
Equipment expenses increased $51,000 or 62.9%. The increase in
equipment expense is primarily due to depreciation charges associated
with the computer and item processing equipment the banks purchased
during 1994. Computer services increased $1,000 or 1.4%. All other
expenses increased $56,000 or 13.6%.
EXHIBIT A:
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting principles of First Banking Center, Inc. conform to
those generally accepted and to general practices within the banking
industry. The significant accounting policies affecting the
consolidated financial statements are summarized below to assist the
reader in understanding the financial information presented in this
report.
1. Consolidation
The consolidated financial statements of First Banking Center, Inc.
include the accounts of its wholly owned subsidiaries, First Banking
Center - Burlington and First Banking Center - Albany. First Banking
Center - Burlington includes the accounts of its wholly owned
subsidiary, First Banking Center Burlington Investment Corporation.
All significant intercompany accounts and transactions have been
eliminated in the consolidated financial statements.
2. Nature of banking activities
The consolidated income of First Banking Center, Inc. is principally
from income of the two bank subsidiaries. The subsidiary Banks grant
agribusiness, commercial and residential loans to customers primarily
in southeastern and south central Wisconsin. Although the Banks have
a diversified loan portfolio, the ability of its debtors to honor
their contracts is dependent on the economic conditions of the
counties surrounding the subsidiary Banks.
3. Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and federal funds sold.
Generally, federal funds are sold for one-day periods. Cash flows
from interest bearing deposits in banks, loans, federal funds
purchased, deposits and other short-term borrowings are reported net.
The Bank maintains amounts due from banks which, at times, may exceed
federally insured limits. The Bank has not experienced any losses in
such accounts.
4. Investment in debt and marketable equity securities
The Company accounts for debt and equity securities in accordance
with FASB Statement No. 115. This statement requires that management
determine the appropriate classification of securities at the date of
adoption and thereafter as each individual security is acquired. In
addition, the appropriateness of such classification should be
reassessed at each balance sheet date. The classifications and
related accounting policies under FASB Statement No. 115 are as
follows:
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
December 31, 1994, 1993 and 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4. Investment in debt and marketable equity securities (continued)
Available for sale securities:
Securities classified as available for sale are those
debt securities that the Company intends to hold for an
indefinite period of time, but not necessarily to
maturity. Available for sale securities also includes
equity securities. 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
Company's assets and liabilities, liquidity needs,
regulatory capital considerations, and other similar
factors. Securities available for sale are carried at
fair value. Unrealized gains or losses net of the
related deferred tax effect are reported as increases or
decreases in stockholders' equity. Realized gains or
losses, determined on the basis of the cost of specific
securities sold, are included in earnings.
Held to maturity securities:
Securities classified as held to maturity are those debt
securities the Company has both the intent and ability to
hold to maturity regardless of changes in market
conditions, liquidity needs or changes in general
economic conditions. These securities are carried at
cost adjusted for amortization of premium and accretion
of discount, computed by the interest method over their
contractual lives.
Transfers of debt securities into the held to maturity
classification (if any) from the available for sale
classification are made at fair value on the date of
transfer. The unrealized holding gain or loss on the
date of transfer is retained in the separate component of
stockholders' equity and in the carrying value of the
held to maturity securities. Such amounts are amortized
over the remaining contractual lives of the securities by
the interest method.
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
December 31, 1994, 1993 and 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4. Investment in debt and marketable equity securities (continued)
Securities held for investment:
Prior to the accounting change discussed in Note B,
securities held for investment were stated at cost
adjusted for amortization of premiums and accretion of
discounts which were recognized as adjustments to
interest income. Gains or losses on disposition were
based on the net proceeds and the adjusted carrying
amount of the securities sold, using the specific
identification method. Mutual funds were carried at the
lower of their aggregate cost or market value, determined
as of the report date. Any unrealized loss was credited
to a valuation allowance for marketable equity securities
and charged to a separate account within the equity
section.
5. Loans
Loans are stated at the amount of unpaid principal, reduced by an
allowance for loan losses. Interest on other loans is calculated by
using the simple-interest method on daily balances of the principal
amount outstanding. Accrual of interest is generally stopped when a
loan is greater than three months past due. Interest on these loans
is recognized only when actually paid by the borrower if collection
of the principal is likely to occur. 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.
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
December 31, 1994, 1993 and 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
6. 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 is an
amount that management believes will be adequate to absorb possible
losses on existing loans that may become uncollectible, based on
evaluation of the collectibility of loans and prior loan loss
experience. The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current
economic conditions that may affect the borrowers' ability to pay.
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.
7. 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 3 to 15 years for
equipment.
8. Income taxes
The Company uses the asset and liability approach to financial
accounting and reporting for income taxes. 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. The differences
relate principally to the reserve for loan losses, nonaccrual loan
income, fixed assets, deferred compensation and pension, 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.
9. 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 SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
December 31, 1994, 1993 and 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
10. Earnings per share
Earnings per share are computed based upon the weighted average
number of common and common equivalent shares outstanding during each
year. In the computation of weighted average shares outstanding 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.
Fully diluted earnings per share are computed in a similar manner
except, to reflect maximum potential dilution, the market price at
the close of the reported period is used if higher than the average
market price during the year.
11. Fair value of financial instruments
FASB Statement No. 107, Disclosures about Fair Value of Financial
Instruments, requires disclosure of fair value information about
financial instruments, both assets and liabilities, 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 107 excludes certain
financial instruments and all nonfinancial 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:
Cash and cash equivalents:
The carrying amounts reported in the balance sheet for
cash and short-term instruments approximate their fair
values.
Investment securities (including mortgage-backed securities):
Fair values for investment securities are based on quoted
market prices, where available. If quoted market prices
are not available, fair values are based on quoted market
prices of comparable instruments.
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
December 31, 1994, 1993 and 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
11. Fair value of financial instruments (continued)
Loans receivable:
For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are
based on carrying values. The fair values for fixed rate
loans are estimated using discounted cash flow analyses,
using interest rates currently being offered for loans
with similar terms to borrowers with similar credit
quality. The carrying amount of accrued interest
receivable approximates its fair value.
Off-balance-sheet instruments:
The fair value of interest rate swaps (used for hedging
purposes) is the estimated amount that the Company would
receive or pay to terminate the swap agreements at the
reporting date, taking into account current interest
rates and the current credit-worthiness of the swap
counterparties.
The fair value of commitments is estimated using the fees
currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements
and the present creditworthiness of the counterparties.
The fair value of letters of credit is based on fees
currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the
obligations with the counterparties.
Deposit liabilities:
The fair values disclosed for demand deposits equal their
carrying amounts which represents the amount payable on
demand. The carrying amounts for variable-rate, fixed
term money market accounts and certificates of deposit
approximate their fair values at the reporting date.
Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that
applies interest rates currently being offered on
certificates to a schedule of aggregated expected
maturities on time deposits.
Short-term borrowings:
The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-
term borrowings approximate their fair values.
Long-term borrowing:
The fair values for the fixed rate borrowings are
estimated using a discounted cash flow calculation that
applies interest rates currently being offered on the
borrowings to a schedule of aggregated expected
maturities on the borrowings.
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
December 31, 1994, 1993 and 1992
12. Emerging accounting standards
Impairment of loans:
The FASB has issued Statement No. 114, Accounting by
Creditors for Impairment of a Loan. Statement No. 114
requires that impaired loans that are within the scope of
this statement be 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. This statement is effective for the Company's
year ending December 31, 1995.
Accounting by creditors for impairment of a loan-income recognition
and disclosures:
The FASB has issued FASB Statement No. 118 which amends
certain provisions of FASB Statement No. 114 relating to
income recognition and other required disclosures of
impaired loans. This statement is effective for the
Company's year ending December 31, 1995.
13. Reclassifications
Certain of the 1993 and 1992 amounts have been reclassified to
conform with the 1994 presentation. These reclassifications had no
effect on net income or stockholders' equity.
PART II - OTHER INFORMATION
Item I. Legal Proceedings
none
Item II. Changes in Securities
none
Item III. Defaults Upon Senior Securities
none
Item IV. Submission of Matters to a Vote of Security Holders
none
Item V. Other Information
none
Item VI. Exhibits and Reports on Form 8-K
none
FIRST BANKING CENTER, INC. AND SUBSIDIARIES
BURLINGTON, WISCONSIN
SIGNATURES
Pursuant to the requirement 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.
December 13, 1995 ________________________________________
Date Roman Borkovec, President and Chief
Executive Officer
December 13, 1995 ________________________________________
Date James Schuster, Chief Accounting Officer