1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
-----------------------------------------------
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- --------------
Commission file number 0-25983
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First Manitowoc Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1435359
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
402 North Eighth Street, Manitowoc, Wisconsin 54220
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(Address of principal executive offices) (Zip code)
(920) 684-6611
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No | |
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of registrant's common stock, par value $1.00
per share, at April 30, 2001, was 3,468,634 shares.
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FIRST MANITOWOC BANCORP, INC.
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Financial Condition --
March 31, 2001 and December 31, 2000 1
Consolidated Statements of Income --
Three Months Ended March 31, 2001 and 2000 2
Consolidated Statements of Changes in
Stockholders' Equity
Three Months Ended March 31, 2001 and 2000 3
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 2001 and 2000 4
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
FIRST MANITOWOC BANCORP, INC.
Consolidated Statements of Financial Condition
(Unaudited)
March 31, December 31,
2001 2000
--------- ------------
(In Thousands, Except Share Data)
ASSETS
Cash and due from banks $ 16,329 $ 19,834
Federal funds sold 10,682 6,540
-------- --------
Cash and cash equivalents 27,011 26,374
Securities available for sale, at fair value 118,649 116,852
Loans 329,526 326,571
Less: Allowance for loan losses (3,888) (3,824)
-------- --------
Loans, net 325,638 322,747
Premises and equipment, net 9,719 9,491
Intangible assets, net of accumulated amortization of
$1,526,000 in 2001 and $1,319,000 in 2000 10,301 7,910
Other assets 14,624 12,036
-------- --------
Total assets $505,942 $495,410
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $ 52,610 $ 62,774
Interest-bearing deposits 332,382 331,827
-------- --------
Total deposits 384,992 394,601
Securities sold under repurchase agreements 30,461 29,952
Short-term borrowings 739 2,000
Other liabilities 7,653 6,396
Long-term borrowings 38,195 21,000
-------- --------
Total liabilities 462,040 453,949
Stockholders' equity
Common stock, $1.00 par value; authorized 3,792 3,792
10,000,000 shares; issued 3,791,814 shares
Retained earnings 39,099 37,991
Accumulated other comprehensive income 1,711 378
Treasury stock at cost -- 323,180 shares (700) (700)
-------- --------
Total stockholders' equity 43,902 41,461
-------- --------
Total liabilities and stockholders' equity $505,942 $495,410
======== ========
(See accompanying notes to Unaudited Consolidated Financial Statements.)
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ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
Consolidated Statements of Income
(Unaudited)
Three Months Ended
March 31,
--------
2001 2000
---- ----
(In Thousands, Except Share Data)
INTEREST INCOME
Loans, including fees $7,308 $ 6,682
Federal funds sold 88 80
Securities:
Taxable 1,044 773
Tax exempt 724 664
------ ------
Total interest income 9,164 8,199
INTEREST EXPENSE
Deposits 4,222 3,397
Securities sold under repurchase agreements 415 261
Borrowed funds 481 574
------ ------
Total interest expense 5,118 4,232
------ ------
NET INTEREST INCOME 4,046 3,967
Provision for loan losses 150 125
------ ------
Net interest income after provision for loan losses 3,896 3,842
OTHER INCOME
Trust service fees 132 119
Service charges on deposit accounts 285 243
Loan servicing income 118 117
Gain on sales of mortgage loans held for sale 31 13
Insurance commission income 333 0
Other 227 137
------ ------
Total other operating income 1,126 629
OTHER EXPENSE
Salaries, commissions and related benefits 1,866 1,523
Occupancy 504 390
Data processing 218 201
Postage, stationery and supplies 113 159
Amortization of other intangibles 208 112
Other 537 467
------ ------
Total other operating expense 3,446 2,852
------ ------
Income before provision for income tax 1,576 1,619
Provision for income tax 225 302
------ ------
NET INCOME $1,351 $1,317
====== ======
Earnings per share: basic and diluted $ 0.39 $ 0.38
(See accompanying notes to Unaudited Consolidated Financial Statements.)
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ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Three Months Ended March 31, 2000
(In Thousands, Except Share Data)
Accumulated
Other
Common Retained Treasury Comprehensive
Stock Earnings Stock (Loss) Income Total
------ -------- -------- ------------- -------
Balance at December 31, 1999 $3,792 $33,661 ($700) ($2,247) $34,506
Net income 0 1,317 0 0 1,317
Other comprehensive income:
Unrealized holding gain arising
during period 0 0 0 232 232
Income tax effect 0 0 0 (77) (77)
-------
Comprehensive income $ 1,472
Cash dividends ($.06 per share) 0 (225) 0 0 (225)
------ ------- ----- ------- -------
Balance at March 31, 2000 $3,792 $34,753 ($700) ($2,092) $35,753
====== ======= ===== ======= =======
Three Months Ended March 31, 2001
(In Thousands, Except Share Data)
Accumulated
Other
Common Retained Treasury Comprehensive
Stock Earnings Stock Income (Loss) Total
------ -------- -------- ------------- -------
Balance at December 31, 2000 $3,792 $37,991 ($700) $378 $41,461
Net income 0 1,351 0 0 1,351
Other comprehensive income:
Unrealized holding gain arising
during period 0 0 0 2,044 2,044
Income tax effect 0 0 0 (711) (711)
-------
Comprehensive income $2,684
Cash dividends ($.07 per share) 0 (243) 0 0 (243)
------ ------- ----- ------ -------
Balance at March 31, 2001 $3,792 $39,099 ($700) $1,711 $43,902
====== ======= ===== ====== =======
(See accompanying notes to Unaudited Consolidated Financial Statements.)
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ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
--------------------------
2001 2000
---- ----
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,351 $ 1,317
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 150 125
Depreciation of premises and equipment 237 214
Amortization of intangible assets 208 112
Amortization of securities, net (11) 5
Proceeds from sale of mortgage loans 9,895 3,619
Originations of mortgage loans held for sale (10,925) (3,590)
Gain on sales of mortgage loans held for sale 31 13
Gain on sale of fixed assets (19) --
Undistributed income of joint venture (70) (52)
Increase in other assets (3,174) (535)
Increase in other liabilities 393 162
-------- --------
Net cash provided by (used in) operating activities (1,934) 1,390
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities available for sale 13,367 7,360
Purchases of securities available for sale (13,066) (7,134)
Net increase in loans (2,042) (8,859)
Purchases of premises and equipment (58) (966)
Proceeds from sales of premises and equipment 60
Acquisition, net of cash acquired (67) --
-------- --------
Net cash used in investing activities (1,806) (9,599)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits (9,609) (16,088)
Net increase securities sold under repurchase agreements 509 710
Proceeds from advances on borrowed funds 20,000 14,000
Repayment of borrowed funds (6,280) (9,606)
Dividends paid (243) (225)
-------- --------
Net cash provided by (used in) financing activities 4,377 (11,209)
-------- --------
Net increase (decrease) in cash and cash equivalents 637 (19,418)
Cash and cash equivalents at beginning of period 26,374 40,716
-------- --------
Cash and cash equivalents at end of period $ 27,011 $ 21,298
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 5,317 $ 3,952
Income taxes 35 2
-------- --------
Supplemental schedule of noncash investing and financing activities not
described in the notes to the financial statements:
Loans receivable transferred to other real estate $ 0 $ 0
-------- -------
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Acquisition:
Cash paid for purchase of stock $ (733) $ --
Cash acquired 666 --
-------- -------
Net cash paid for acquisition (67) --
Fair value of assets acquired 563 --
Acquisition intangibles 2,582 --
Liabilities assumed 1,611 --
Notes payable to former shareholders 1,467 --
(See accompanying notes to Unaudited Consolidated Financial Statements.)
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ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements
NOTE 1: The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and with instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. In the opinion of management, these accompanying unaudited
consolidated financial statements contain all adjustments necessary to present
fairly First Manitowoc Bancorp, Inc.'s ("Corporation") financial position,
results of its operations, changes in stockholders' equity and cash flows for
the periods presented. All adjustments necessary for the fair presentation of
the consolidated financial statements are of a normal recurring nature. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the full year. This report should be read in
conjunction with the Corporation's 2000 annual report on Form 10-K.
In preparing the financial statements, 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 revenues and expenses for the period. Actual
results could differ significantly from those estimates.
NOTE 2: The consolidated financial statements include the accounts of all
subsidiaries. The Corporation is a bank holding company that engages in its
business through its sole subsidiary, First National Bank in Manitowoc ("Bank"),
a nationally chartered commercial bank. The Bank has two wholly owned
subsidiaries, FNBM Investment Corp. and Insurance Center of Manitowoc, Inc. All
material intercompany transactions and balances are eliminated. Certain items in
the prior period consolidated financial statements have been reclassified to
conform with the March 31, 2001 presentation.
In January, the Bank acquired 100% ownership in the Insurance Center of
Manitowoc, Inc. ("Insurance Center"). Insurance Center includes Gary Vincent and
Associates in Green Bay, Wisconsin. Insurance Center is an independent agency
offering commercial, personal, life, and health insurance. It is being operated
as a wholly owned subsidiary of the Bank. Insurance Center had approximately
$563,000 in assets at date of acquisition. The transaction was accounted for
under the purchase method of accounting and goodwill of approximately $2.6
million was recorded. The Corporation's financial statements reflect the
accounts and operations of Insurance Center beginning January 1, 2001. The
Corporation recorded all Insurance Center assets and liabilities at fair value
at date of acquisition.
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NOTE 3: Investment Securities
The amortized cost and fair values of investment securities available for sale
for the periods indicated are as follows:
Investment Securities
(In Thousands)
March 31, 2001
---------------------------------------------
Amortized Cost Fair Value
-------------- ----------
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies $ 13,750 $ 14,213
Obligations of states and political subdivisions 61,095 62,910
Mortgage-backed securities 37,638 37,963
Corporate notes 948 968
Other securities 2,595 2,595
-------- --------
Total $116,026 $118,649
======== ========
December 31, 2000
---------------------------------------------
Amortized Cost Fair Value
-------------- ----------
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies $ 19,431 $ 19,550
Obligations of states and political subdivisions 60,708 61,428
Mortgage-backed securities 30,609 30,349
Corporate notes 948 948
Other securities 4,577 4,577
-------- --------
Total $116,273 $116,852
======== ========
NOTE 4: Loan Portfolio
Loans are summarized as follows:
Summary of Loan Portfolio
(Dollars In Thousands)
March 31, 2001 December 31, 2000
-------------------------- --------------------------
Percent of Percent of
Amount Total Loans Amount Total Loans
-------- ----------- ------- -----------
Commercial and Agricultural $ 95,283 28.91% $ 94,886 29.05%
Commercial Real Estate 81,983 24.88% 76,478 23.42%
Residential Real Estate 128,513 39.00% 131,592 40.30%
Consumer 22,302 6.77% 22,270 6.82%
Other 1,445 .44% 1,345 .41%
-------- ------ ------- -------
Total $329,526 100.00% $326,571 100.00%
======== ======= ======== =======
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NOTE 5: Allowance for Loan Losses
Activity in the allowance for loan losses for the periods indicated is as
follows:
For the Three For the Three
Months Ended Months Ended
March 31, March 31,
2001 2000
------------ ------------
(In Thousands)
Balance at beginning of period $3,824 $3,700
Provision charged to expense 150 125
Charge-offs (97) (15)
Recoveries 11 11
------ ------
Balance at end of period $3,888 $3,821
====== ======
NOTE 6: Business Segments
The Corporation through the branch network of its subsidiaries provides a broad
range of financial services to individuals and companies in northeastern
Wisconsin. These services include demand, time, and savings deposits; commercial
and retail lending; ATM processing; trust services; and insurance services.
While the Corporation's chief decision maker monitors the revenue streams of the
various products and services, operations are managed and financial performance
is evaluated on a Corporate-wide basis. Accordingly, all of the Corporation's
operations are considered by management to be aggregated in one reportable
operating segment.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
Forward-looking statements have been made by First Manitowoc Bancorp, Inc. (the
"Corporation") in this document and in documents incorporated by reference that
are subject to risks and uncertainties. These forward-looking statements, which
are included in Management's Discussion and Analysis, describe future plans or
strategies and include the Corporation's expectations of future results of
operations. The words "believes," "expects," "anticipates" or similar
expressions identify forward-looking statements.
Shareholders should note that many factors, some of which are discussed
elsewhere in this document could affect the future financial results of the
Corporation and could cause those results to differ materially from those
expressed in forward-looking statements contained in this document. These
factors include the following:
o operating, legal and regulatory risks;
o economic, political and competitive forces affecting the
Corporation's banking, securities, asset management and credit
services businesses; and
o the risk that the Corporation's analyses of these risks and forces
could be incorrect and/or that the strategies developed to address
them could be unsuccessful.
These factors should be considered in evaluating the forward-looking statements,
and undue reliance should not be placed on such statements. The Corporation does
not undertake and specifically disclaims any obligation to update any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
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Earnings
Net Income
(Dollars In Thousands, Except Share Data)
Three Months Three Months
Ended Ended
March 31, March 31,
2001 2000
----------- -----------
Net Income $ 1,351 $ 1,317
EPS-Basic & Diluted $ .39 $ .38
Return on Average Assets 1.12% 1.15%
Return on Average Equity 13.30% 15.00%
All per share financial information has been adjusted to reflect the two for one
stock split effective June 30, 2000. Weighted average shares outstanding were
3,468,634 for the three months ended March 31, 2001 and 2000.
Net income for the three months ended March 31, 2001 was $1,351,000 compared to
$1,317,000 for the three months ended March 31, 2000, an increase of $34,000, or
2.58%. Interest income increased $965,000 primarily as a result of an increase
in loans and an increase in yields. Interest expense increased $886,000 mainly
as a result of an increase in deposits and an increase in interest rates paid on
deposits. Other income increased $497,000 as a result of an increase in service
charges on deposits and an increase in earnings by the Bank's data processing
center, which is a corporate joint venture. The largest addition to other income
resulted from the Insurance Center of Manitowoc acquisition in the form of
commission income of $333,000. Other expense increased $594,000. This is a
result of increased salaries, commissions and related benefits due to the
additional compensation for employees acquired as part of the Insurance Center
acquisition and annual merit increases in wages for employees. Occupancy expense
increased as a result of the new offices obtained in the Insurance Center
acquisition. Amortization of goodwill increased as a result of the Insurance
Center acquisition. Earnings per share for the three months ended March 31, 2001
was $0.39 compared to $0.38 for the three months ended March 31, 2000.
Return on average assets (ROA) on an annualized basis for the first quarter of
2001 was 1.12% compared to 1.15% for the first quarter in 2000. Return on
average equity (ROE) on an annualized basis for the first quarter of 2001 was
13.30% compared to 15.00% for the first quarter of 2000.
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AVERAGE BALANCES, YIELD AND RATES
For the three months For the three months
ended March 31, 2001 ended March 31, 2000
---------------------------------- -----------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ------ --------- ------- ------
(In Thousands) (In Thousands)
ASSETS
Interest earning assets:
Federal funds sold $ 3,725 $ 64 6.97% $ 3,221 $ 60 7.49%
Investment securities 120,301 2,169 7.31% 100,165 1,833 7.34%
Loans 329,436 7,411 9.12% 302,855 6,780 8.95%
------- ------ ----- -------- ------ -----
Total interest earning assets 453,462 $9,644 8.62% $406,241 $8,673 8.56%
Other assets 36,961 37,766
-------- --------
TOTAL ASSETS $490,423 $444,007
======== ========
LIABILITIES
Interest-bearing liabilities:
Interest-bearing deposits $331,940 $4,222 5.16% $294,527 $3,401 4.63%
Repurchase agreements 27,728 417 6.10% 20,221 262 5.19%
Federal funds purchased 2,330 30 5.28% 3,469 51 5.95%
Borrowings 28,923 451 6.32% 37,777 522 5.55%
------- ----- ----- -------- ------ -----
Total interest-bearing liabilities $390,921 $5,120 5.31% $355,994 $4,236 4.77%
Demand deposits $ 51,445 $ 49,371
Other liabilities 6,882 4,190
-------- --------
Total liabilities $449,248 $409,555
Stockholders' equity 41,175 34,452
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $490,423 $444,007
======== ========
Net interest income and
interest rate spread $4,524 3.31% $4,437 3.79%
Net interest income as a percent
of earning assets (annualized) 4.05% 4.38%
===== =====
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Net Interest Income and Net Interest Margin
Net interest income is the principal source of earnings for a banking company.
It represents the differences between interest and fees earned on the loan and
investment portfolios offset by the interest paid on deposits and borrowings.
The three months ended March 31, 2001 has been characterized by generally
falling interest rates. Because deposits and loans and other investments reprice
at different rates and as a result of changes in volume, the Bank's net interest
income, on a fully tax equivalent basis, increased in 2001.
Net interest margin is calculated as tax equivalent net interest income divided
by average earning assets and represents the Bank's net yield on its earning
assets. The tax equivalent adjustment was calculated using the statutory federal
income tax rate of 34%.
First Quarter 2001 Compared to First Quarter 2000:
Net interest income (on a tax equivalent basis) for the three months ended
March 31, 2001 increased by $87,000 or 1.96% compared to the three months ended
March 31, 2000. Interest income increased $971,000 primarily as a result of the
increase in loans and an increase in yields. Total average loans increased from
$302,855,000 for the first quarter of 2000 to $329,436,000 for the first quarter
of 2001 while interest yield on loans increased from 8.95% for the first quarter
of 2000 to 9.12% for the first quarter of 2001. Average investment securities
increased from $100,165,000 for the first quarter of 2000 to $120,301,000 for
the first quarter of 2001. Interest expense increased $884,000 primarily as a
result of an increase in interest bearing deposits. Total average
interest-bearing deposits increased from $294,527,000 for the first quarter of
2000 to $331,940,000 for the first quarter of 2001 while interest rates paid on
interest-bearing deposits increased from 4.63% for the first quarter of 2000 to
5.16% for the first quarter of 2001. The interest rate spread, which is the
difference between the average yield on interest earning assets and the average
rate paid on interest bearing liabilities, was 3.31% for the three months ended
March 31, 2001, a decrease of 48 basis points from the interest rate spread of
3.79% for the three months ended March 31, 2000.
Net interest margin for the three months ended March 31, 2001 was 4.05% compared
with 4.38% for the three months ended March 31, 2000.
Provision and Allowance for Loan Losses
For the three months ended March 31, 2001, the Bank charged $150,000 to expense
for the provision for loan loss compared to $125,000 for the three months ended
March 31, 2000.
Allowance for Loan Losses
(In Thousands)
------------------------------
Three Months Three Months
Ended Ended
March 31, March 31,
2001 2000
------------ ------------
Balance at beginning of period $3,824 $3,700
Charge-offs (97) (15)
Recoveries 11 11
------ ------
Net (charge-offs) recoveries (86) (4)
Provision for loan losses 150 125
------ ------
Balance at end of period $3,888 $3,821
====== ======
Ratio of net charge-offs during period to
average loans outstanding during period .03% .00%
Ratio of allowance for loan losses
to total loans 1.18% 1.24%
------ ------
The decrease in the ratio of allowance for loan losses to total loans is
primarily a result of higher charge-offs for the three months ended March 31,
2001.
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There are several factors that are included in the analysis of the adequacy of
the allowance for loan losses. Management considers loan volume trends, levels
and trends in delinquencies and non-accruals, current problem credits, national
and local economic trends and conditions, concentrations of credit by industry,
current and historical levels of charge-offs, the experience and ability of the
lending staff, and other miscellaneous factors. Management has determined the
allowance for loan losses is adequate to absorb probable loan losses in its loan
portfolio as of March 31, 2001 based on its most recent evaluation of these
factors.
The factor of loan volume trends is based on actual lending activity. The loan
volume trends factor is for estimated losses that are believed to be inherently
part of the loan portfolio but that have not yet been identified as specific
problem credits. The current problem credits factor includes the exposure
believed to exist for specifically identified problem loans determined on a
loan-by-loan basis.
A table showing the allocation of allowance for loan losses is shown below.
Allocation of Allowance for Loan Losses
(In Thousands)
March 31, December 31,
2001 2000
--------- ------------
Specific Problem Loans $ 654 $ 625
Loan Type Allocation:
Commercial & Agricultural 2,760 2,688
Commercial Real Estate 410 436
Residential Real Estate 20 25
Consumer 42 36
------ ------
3,232 3,185
Unallocated 2 14
------ ------
Total Reserve $3,888 $3,824
Specific problem loans includes the allocation of the allowance for specific
problem credits. Loan volume allocation includes the factor of loan volume
trends, with management's goal for this factor to maintain an adequate loan loss
reserve for outstanding loans less the specifically identified current problem
credits. The allocation of the allowance among the various loan types is based
on the average proportion of the loan types that make up the specific problem
loans. The unallocated portion of the allowance consists of the other factors
included in the analysis because those factors cannot be tied to specific loans
or loan categories.
The allocation and total for the allowance for loan losses is not to be
interpreted as a single year's exposure for loss nor the loss for any specified
time period.
Nonperforming Loans
It is the policy of the Bank to place a loan in non-accrual status whenever
there is substantial doubt about the ability of a borrower to pay principal or
interest on any outstanding credit. Management considers such factors as payment
history, the nature and value of collateral securing the loan and the overall
economic situation of the borrower when making a non-accrual decision.
Non-accrual loans are closely monitored by management. A non-accruing loan is
restored to current status when the prospects of future contractual payments are
no longer in doubt.
Total nonperforming loans at March 31, 2001 were $1,911,000, a decrease of
$273,000 from December 31, 2000. The following table presents nonperforming and
nonaccrual loan information as of the dates indicated.
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Nonperforming Loans
(In Thousands)
March 31, December 31,
2001 2000
--------- ------------
Nonaccrual loans $1,462 $1,765
Accruing loans past due 90 days or more 449 419
------ ------
Total nonperforming loans $1,911 $2,184
Nonperforming loans as a percent of loans .58% .67%
Ratio of the allowance for loan losses to nonperforming loans 203% 175%
Other Income
Other Income
(In Thousands)
Three Months Three Months
Ended Ended
March 31, March 31,
2001 2000
------------ ------------
Trust Service Fees $ 132 $119
Service Charges on Deposit Accounts 285 243
Loan Servicing Income 118 117
Gain on Sales of Mortgage Loans Held for Sale 31 13
Insurance commission income 333 0
Other 227 137
------ ----
Total Other Income $1,126 $629
====== ====
First Quarter 2001 Compared to First Quarter 2000:
Other income for the first quarter of 2001 was $1,126,000 compared to $629,000
for the first quarter of 2000, an increase of $497,000 or 79.0%. The Insurance
Center of Manitowoc acquisition accounted for $333,000 of this increase in the
form of commission income. Service charges on deposit accounts increased
$42,000. Earnings of the Bank's data processing center increased $18,000 in the
first quarter of 2001. An increase in the number of residential mortgage loans
and refinancings processed and sold to the FNMA secondary market accounted for
an increase of $18,000 in gains on sales of mortgage loans in the quarter ended
March 31, 2001.
Other Expense
Other Expense
(In Thousands)
Three Months Three Months
Ended Ended
March 31, March 31,
2001 2000
----------- ------------
Salaries, commissions and related benefits $1,866 $1,523
Occupancy 504 390
Data Processing 218 201
Postage, Stationery and Supplies 113 159
Amortization of intangibles 208 112
Other 537 467
------ ------
Total Other Expense $3,446 $2,852
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First Quarter 2001 Compared to First Quarter 2000:
Other expense for the first quarter of 2001 was $3,446,000 compared to
$2,852,000 for the first quarter of 2000, an increase of $594,000, or 20.8%. The
increase is a result of increased salaries, commissions and related benefits due
to the additional compensation for employees acquired in the Insurance Center
acquisition and annual merit increases for employees. Occupancy expense
increased due to the offices obtained in the Insurance Center acquisition.
Amortization of Goodwill increased as a result of the Insurance Center
acquisition. Other expenses increased primarily due to increased collection and
repossession expense, and increased marketing expense.
Income Taxes
The effective tax rate for the three months ended March 31, 2001 was 14.28%
compared to 18.65% for the three months ended March 31, 2000. The decrease in
effective tax rates in the period is a direct result of loans and securities
transferred from the Bank to the Bank's FNBM Investment Corp. subsidiary which
are not subject to state income tax.
Balance Sheet
March 31, 2001 Compared to December 31, 2000
The Corporation's total assets increased from $495.4 million at December 31,
2000 to $505.9 million at March 31, 2001. Loans increased $2.9 million, a result
of customer demand for real estate loans. Securities increased $1.8 million due
to increases in U.S. Government Agency securities.
Deposits decreased $9.6 million to $385 million at March 31, 2001 from $394.6
million at December 31, 2000, due to decreases in non-interest bearing deposits.
Long-term borrowings increased $17.2 million from $21 million at December 31,
2000 to $38.2 million at March 31, 2001. The increase in long-term borrowings
was a result of the borrowing of funds in order to fund the increase in loans
and to replace non-interest bearing deposits.
Liquidity Management
Liquidity describes the ability of the Bank to meet financial obligations that
arise out of the ordinary course of business. Liquidity is primarily needed to
meet borrowing and deposit withdrawal requirements of the customers of the Bank
and to fund current and planned expenditures. The Bank maintains its asset
liquidity position internally through cash and cash equivalents, short term
investments, the maturity distribution of the investment portfolio, loan
repayments and income from earning assets. A substantial portion of the
investment portfolio contains readily marketable securities that could be
converted to cash immediately. On the liability side of the balance sheet,
liquidity is affected by the timing of maturing liabilities and the ability to
generate new deposits or borrowings as needed. Other sources are available
through borrowings from the Federal Reserve Bank, the Federal Home Loan Bank and
from lines of credit approved at correspondent banks. Management knows of no
trend or event which will have a material impact on the Bank's ability to
maintain liquidity at adequate levels.
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Capital Resources and Adequacy
Capital
(Dollars In Thousands, Except Share Data)
March 31, December 31,
2001 2000
--------- ------------
Stockholders' Equity $43,902 $41,461
Total capital (to risk-weighted assets):
Consolidated 10.7% 11.2%
First National Bank in Manitowoc 10.3% 10.7%
Tier 1 capital (to risk-weighted assets):
Consolidated 9.5% 10.0%
First National Bank in Manitowoc 9.2% 9.6%
Tier I capital (to average assets):
Consolidated 6.6% 7.0%
First National Bank in Manitowoc 6.4% 6.8%
Dividends Per Share-This Quarter $ 0.07 $ 0.085
Dividends Per Share-Year to Date 0.07 0.280
Earnings Per Share-This Quarter $ 0.39 $ 0.35
Earnings Per Share-Year to Date 0.39 1.53
Dividend Payout Ratio-This Quarter 17.99% 24.29%
Dividend Payout Ratio-Year to Date 17.99% 18.32%
Total stockholders' equity increased $2.4 million from $41.5 million at December
31, 2000 to $43.9 million at March 31, 2001. Net income for the three month
period ending March 31, 2001 was $1.4 million.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier 1
capital to risk-weighted assets, and of Tier 1 capital to average assets.
Management believes, as of March 31, 2001 and December 31, 2000, that the Bank
meets all capital adequacy requirements to which it is subject.
As of March 31, 2001, the Bank's and the Company's ratio of Tier 1 capital to
risk-weighted assets was 9.2% and 9.5%, respectively. As of March 31, 2001, the
Bank's and the Company's ratio of total capital to risk-weighted assets was
10.3% and 10.7%, respectively. In addition to risk-based capital, banks and bank
holding companies are required to maintain a minimum amount of Tier 1 capital to
total assets, referred to as the leverage capital ratio, of at least 4%. As of
March 31, 2001, the Bank's and the Company's leverage capital ratio was 6.4% and
6.6%, respectively.
As of March 31, 2001 and December 31, 2000, the most recent notification from
the Office of the Comptroller of Currency and the Federal Deposit Insurance
Corporation categorized the Bank as well capitalized and adequately capitalized,
respectively, under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios. There are no
conditions or events since that notification that management believes have
changed the institution's category.
Recent Accounting Pronouncements
Future Accounting Change - In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments and
for hedging activities. This statement requires an entity to recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The accounting for changes in the fair value of
a derivative depends on the intended use of the derivative and the resulting
designation. This statement is effective for fiscal years beginning after June
15, 2000, as amended by SFAS No. 137. The Corporation's adoption of SFAS No. 133
on January 1, 2001, has not had a material impact on the consolidated financial
statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change to the market risk position from that
disclosed as of December 31, 2000 in the Corporation's 2000 Form 10-K Annual
Report.
FIRST MANITOWOC BANCORP, INC.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Corporation nor any of its subsidiaries is involved in any
pending legal proceedings involving amounts in which management believes are
material to the financial condition and results of operations of the
Corporation.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: None
b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the quarter ended March 31,
2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST MANITOWOC BANCORP, INC.
(Registrant)
Date: May 15, 2001 /s/ Thomas J. Bare
------------------
Thomas J. Bare
President
Date: May 15, 2001 /s/ Paul H. Wojta
-----------------
Paul H. Wojta
Senior Vice President
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