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, 2002
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-25983
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First Manitowoc Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-1435359
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(State or other jurisdiction of incorporation or organization) (IRS employer identification no.)
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, 2002, was 3,468,634 shares.
FIRST MANITOWOC BANCORP, INC.
TABLE OF CONTENTS
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Financial Condition -
March 31, 2002 and December 31, 2001 1
Consolidated Statements of Income -
Three Months Ended March 31, 2002 and 2001 2
Consolidated Statements of Changes in
Stockholders' Equity
Three Months Ended March 31, 2002 and 2001 3
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2002 and 2001 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
March 31, December 31,
2002 2001
---- ----
---------------------------------
(In Thousands, Except Share Data)
ASSETS
Cash and due from banks $ 13,846 $ 27,112
Federal funds sold 27,196 12,784
--------- ---------
Cash and cash equivalents 41,042 39,896
Securities available for sale, at fair value 132,089 129,387
Loans held for sale 0 211
Loans 327,313 327,440
Less: Allowance for loan losses (2,827) (2,737)
--------- ---------
Loans, net 324,486 324,914
Premises and equipment, net 9,246 9,431
Intangible assets, net of accumulated amortization of
$2,027,000 in 2002 and $1,959,000 in 2001 9,761 9,829
Other assets 13,773 13,847
--------- ---------
Total assets $ 530,397 $ 527,304
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $ 53,211 $ 60,033
Interest-bearing deposits 328,155 334,059
--------- ---------
Total deposits 381,366 394,092
Securities sold under repurchase agreements 51,236 33,108
Other liabilities 6,407 6,436
Borrowed funds 43,180 47,179
--------- ---------
Total liabilities 482,189 480,815
Stockholders' equity
Common stock, $1.00 par value; authorized
10,000,000 shares; issued 3,791,814 shares 3,792 3,792
Retained earnings 43,929 42,355
Accumulated other comprehensive income 1,187 1,042
Treasury stock at cost--323,180 shares (700) (700)
--------- ---------
Total stockholders' equity 48,208 46,489
--------- ---------
Total liabilities and stockholders' equity $ 530,397 $ 527,304
========= =========
(See accompanying notes to Unaudited Consolidated Financial Statements.)
1
ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
--------
2002 2001
---- ----
(In Thousands, Except Share Data)
INTEREST INCOME
Loans, including fees $6,142 $7,308
Federal funds sold 72 88
Securities:
Taxable 1,055 1,044
Tax exempt 747 724
------ ------
Total interest income 8,016 9,164
INTEREST EXPENSE
Deposits 2,371 4,222
Securities sold under repurchase agreements 267 415
Borrowed funds 493 481
------ ------
Total interest expense 3,131 5,118
------ ------
NET INTEREST INCOME 4,885 4,046
Provision for loan losses 225 150
------ ------
Net interest income after provision for loan losses 4,660 3,896
OTHER INCOME
Trust service fees 131 132
Service charges on deposit accounts 244 285
Loan servicing income 200 118
Gain on sales of mortgage loans held for sale 147 31
Insurance commission income 350 333
Other 170 227
------ ------
Total other income 1,242 1,126
OTHER EXPENSE
Salaries, commissions and related benefits 1,970 1,866
Occupancy 484 504
Data processing 242 218
Postage, stationery and supplies 118 113
Amortization of other intangibles 68 208
Other 631 537
------ ------
Total other expense 3,513 3,446
------ ------
Income before provision for income tax 2,389 1,576
Provision for income tax 520 225
------ ------
NET INCOME $1,869 $1,351
====== ======
Earnings per share: basic and diluted $ 0.54 $ 0.39
(See accompanying notes to Unaudited Consolidated Financial Statements.)
2
ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Three Months Ended March 31, 2001
(In Thousands, Except Share Data)
Accumulated
Other
Common Retained Treasury Comprehensive
Stock Earnings Stock (Loss) Income 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
===== ====== ====== ====== ======
Three Months Ended March 31, 2002
(In Thousands, Except Share Data)
Accumulated
Other
Common Retained Treasury Comprehensive
Stock Earnings Stock Income (Loss) Total
- ---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001 $3,792 $42,355 ($700) $1,042 $46,489
Net income 0 1,869 0 0 1,869
Other comprehensive income:
Unrealized holding gain arising
during period 0 0 0 209 209
Income tax effect 0 0 0 (64) (64)
--------
Comprehensive income $2,014
Cash dividends ($ .085 per share) 0 (295) 0 0 (295)
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2002 $3,792 $43,929 ($700) $1,187 $48,208
===== ====== ====== ===== ======
(See accompanying notes to Unaudited Consolidated Financial Statements.)
3
ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
---------
2002 2001
----------------------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,869 $ 1,351
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 225 150
Depreciation of premises and equipment 231 237
Amortization of intangible assets 68 208
Amortization (accretion) of securities, net 3 (11)
Stock dividends on FHLB stock (34) (43)
Proceeds from sale of mortgage loans 24,773 9,895
Originations of mortgage loans held for sale (24,415) (10,925)
Gain on sales of mortgage loans held for sale (147) 31
Gain on sale of fixed assets 0 (19)
Undistributed income of joint venture (83) (70)
(Increase) decrease in other assets 93 (3,131)
Increase (decrease) in other liabilities (29) 393
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 2,554 (1,934)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities available for sale 8,196 3,367
Purchases of securities available for sale (10,859) (13,066)
Net decrease (increase) in loans 193 (2,042)
Purchases of premises and equipment (46) (58)
Proceeds from sales of premises and equipment 0 60
Acquisition, net of cash acquired 0 (67)
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Net cash used in investing activities (2,516) (1,806)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (12,726) (9,609)
Net increase in securities sold under repurchase agreements 18,128 509
Proceeds from advances on borrowed funds 21,747 20,000
Repayment of borrowed funds (25,746) (6,280)
Dividends paid (295) (243)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,108 4,377
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Net increase in cash and cash equivalents 1,146 637
Cash and cash equivalents at beginning of period 39,896 26,374
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Cash and cash equivalents at end of period $ 41,042 $ 27,011
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 3,366 $ 5,317
Income taxes 7 35
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Supplemental schedule of noncash activities:
Investments reclassified as loans $ 201 $ 0
Loans transferred to foreclosed properties 0 0
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4
Acquisition:
Cash paid for purchase of stock --- $ (733)
Cash acquired --- 666
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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.)
5
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 2001 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, 2002 presentation.
In January 2001, 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.
6
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, 2002
Amortized Cost Fair Value
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies $ 12,225 $ 12,316
Obligations of states and political subdivisions 62,958 64,269
Mortgage-backed securities 51,380 51,756
Corporate notes 999 1,032
Other securities 2,716 2,716
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Total $130,278 $132,089
======== ========
December 31, 2001
Amortized Cost Fair Value
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies $ 6,067 $ 6,337
Obligations of states and political subdivisions 62,657 63,434
Mortgage-backed securities 55,153 55,667
Corporate notes 999 1,040
Other securities 2,909 2,909
-------- --------
Total $127,785 $129,387
======== ========
NOTE 4: Loan Portfolio
Loans are summarized as follows:
Summary of Loan Portfolio
(Dollars In Thousands)
March 31, 2002 December 31, 2001
Percent of Percent of
Amount Total Loans Amount Total Loans
- ------------------------------------------------------------------------------------------------------------
Commercial and Agricultural $ 87,526 26.74% $ 86,565 26.44%
Commercial Real Estate 90,350 27.60% 85,036 25.97%
Residential Real Estate 125,285 38.28% 131,362 40.12%
Consumer 22,818 6.97% 23,213 7.09%
Other 1,334 0.41% 1,264 0.38%
--------- ------- --------- -------
Total $ 327,313 100.00% $ 327,440 100.00%
========= ======= ========= =======
7
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,
2002 2001
---- ----
(In Thousands)
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Balance at beginning of period $2,737 $3,824
Provision charged to expense 225 150
Charge-offs (177) (97)
Recoveries 42 11
------ ------
Balance at end of period $2,827 $3,888
====== ======
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:
- operating, legal and regulatory risks;
- economic, political and competitive forces affecting the
Corporation's banking, securities, asset management and
credit services businesses; and
- 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.
8
EARNINGS
Net Income
(Dollars In Thousands, Except Share Data)
- --------------------------------------------------------------------------------
Three Months Three Months
Ended Ended
March 31, March 31,
2002 2001
- --------------------------------------------------------------------------------
Net Income $ 1,869 $ 1,351
EPS-Basic & Diluted $ .54 $ .39
Return on Average Assets 1.46% 1.12%
Return on Average Equity 15.84% 13.30%
- --------------------------------------------------------------------------------
Weighted average shares outstanding were 3,468,634 for the three months ended
March 31, 2002 and 2001.
Net income for the three months ended March 31, 2002 was $1,869,000 compared to
$1,351,000 for the three months ended March 31, 2001, an increase of $518,000,
or 38.3%. Interest income decreased $1,148,000 primarily as a result of a
decrease in interest yields. Interest expense decreased $1,987,000 mainly as a
result of a decrease in interest rates paid on deposits. Other income increased
$116,000 mainly as a result of an increase in loan servicing income and an
increase in gain on sale of mortgage loans held for sale. Other expense
increased $67,000. This is a result of increased salaries, commissions and
related benefits primarily due to annual merit increases in wages for employees.
Other increases in expense include data processing, software, and marketing.
Earnings per share for the three months ended March 31, 2002 was $0.54 compared
to $0.39 for the three months ended March 31, 2001.
Return on average assets (ROA) on an annualized basis for the first quarter of
2002 was 1.46% compared to 1.12% for the first quarter in 2001. Return on
average equity (ROE) on an annualized basis for the first quarter of 2002 was
15.84% compared to 13.30% for the first quarter of 2001.
9
AVERAGE BALANCES, YIELD AND RATES
For the three months For the three months
ended March 31, 2002 ended March 31, 2001
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
ASSETS (In Thousands) (In Thousands)
Interest earning assets:
Federal funds sold $ 15,862 $ 72 1.84% $ 3,725 $ 64 6.97%
Investment securities 133,241 2,190 6.67% 120,301 2,169 7.31%
Loans 327,816 6,107 7.56% 329,436 7,411 9.12%
-------- ------ ----- -------- ----- -----
Total interest earning assets 476,919 $8,369 7.12% 453,462 $9,644 8.62%
Other assets 40,940 36,961
-------- --------
TOTAL ASSETS $517,859 $490,423
======== ========
LIABILITIES
Interest-bearing liabilities:
Interest-bearing deposits $327,825 $2,371 2.93% $331,940 $4,222 5.16%
Repurchase agreements 37,554 267 2.88% 27,728 415 6.07%
Federal funds purchased 24 0 0.00% 2,330 30 5.28%
Borrowings 45,442 493 4.40% 28,923 451 6.32%
-------- ------ ----- -------- ------ -----
Total interest-bearing liabilities $410,845 $3,131 3.09% $390,921 $5,118 5.31%
Demand deposits 52,995 $ 51,445
Other liabilities 6,155 6,882
-------- --------
Total liabilities 469,995 $449,248
Stockholders' equity 47,864 41,175
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $517,859 $490,423
======== ========
Net interest income and
interest rate spread $5,238 4.03% $4,526 3.31%
Net interest income as
a percent of earning assets (annualized) 4.45% 4.05%
===== =====
10
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, 2002 has been characterized by fairly stable
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 2002.
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 2002 COMPARED TO FIRST QUARTER 2001:
Net interest income (on a tax equivalent basis) for the three months ended March
31, 2002 increased by $839,000 or 20.7% compared to the three months ended March
31, 2001. Interest income decreased $1,148,000 primarily as a result of a
decrease in yields. Total average loans decreased from $329,436,000 for the
first quarter of 2001 to $327,816,000 for the first quarter of 2002 while
interest yield on loans decreased from 9.12% for the first quarter of 2001 to
7.56% for the first quarter of 2002. Average investment securities increased
from $120,301,000 for the first quarter of 2001 to $133,241,000 for the first
quarter of 2002. Interest expense decreased $1,987,000 primarily as a result of
a decrease in interest rates paid. Total average interest-bearing deposits
decreased from $331,940,000 for the first quarter of 2001 to $327,825,000 for
the first quarter of 2002 while interest rates paid on interest-bearing deposits
decreased from 5.16% for the first quarter of 2001 to 2.93% for the first
quarter of 2002. 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 4.03% for the three months ended March 31, 2002, an
increase of 72 basis points from the interest rate spread of 3.31% for the three
months ended March 31, 2001.
Net interest margin for the three months ended March 31, 2002 was 4.45% compared
with 4.05% for the three months ended March 31, 2001.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
For the three months ended March 31, 2002, the Bank charged $225,000 to expense
for the provision for loan loss compared to $150,000 for the three months ended
March 31, 2001.
Allowance for Loan Losses
(In Thousands)
- -------------------------------------------------------------------------------------------
Three Months Three Months
Ended Ended
March 31, March 31,
2002 2001
- -------------------------------------------------------------------------------------------
Balance at beginning of period $2,737 $3,824
Charge-offs (177) (97)
Recoveries 42 11
------- -------
Net (charge-offs) recoveries (135) (86)
Provision for loan losses 225 150
------ ------
Balance at end of period $2,827 $3,888
===== =====
Ratio of net charge-offs during period to
average loans outstanding during period .04% .03%
Ratio of allowance for loan losses
to total loans .86% 1.18%
- -------------------------------------------------------------------------------------------
The decrease in the ratio of allowance for loan losses to total loans is
primarily a result of higher charge-offs in December, 2001.
11
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, 2002 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,
2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Specific Problem Loans $1,803 $ 843
Loan Type Allocation:
Commercial & Agricultural 912 1,476
Commercial Real Estate 58 103
Residential Real Estate 18 19
Consumer 8 12
------ ------
996 1,610
Unallocated 28 284
------ ------
Total Reserve $2,827 $2,737
====== ======
Ratio of allowance for loan losses to total loans .86% .84%
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, 2002 were $3,436,000, an increase of
$595,000 from December 31, 2001. The following table presents nonperforming and
nonaccrual loan information as of the dates indicated.
12
Nonperforming Loans
(In Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans $2,395 $2,312
Accruing loans past due 90 days or more 749 529
------ ------
Total nonperforming loans $3,144 $2,841
Nonperforming loans as a percent of loans .96% .87%
Ratio of the allowance for loan losses to nonperforming loans 90% 96%
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME
Other Income
(In Thousands)
- -------------------------------------------------------------------------------------------
Three Months Three Months
Ended Ended
March 31, March 31,
2002 2001
- -------------------------------------------------------------------------------------------
Trust Service Fees $ 131 $ 132
Service Charges on Deposit Accounts 244 285
Loan Servicing Income 200 118
Gain on Sales of Mortgage Loans Held for Sale 147 31
Insurance commission income 350 333
Other 170 227
------ ------
Total Other Income $1,242 $1,126
- -------------------------------------------------------------------------------------------
FIRST QUARTER 2002 COMPARED TO FIRST QUARTER 2001:
Other income for the first quarter of 2002 was $1,242,000 compared to $1,126,000
for the first quarter of 2001, an increase of $116,000 or 10.3%. Service charges
on deposit accounts decreased $41,000. An increase in the number of residential
mortgage loans and refinancings processed and sold to the FNMA secondary market
accounted for an increase of $116,000 in gains on sales of mortgage loans in the
quarter ended March 31, 2002. Loan servicing income increased $82,000 for the
first quarter of 2002.
OTHER EXPENSE
Other Expense
(In Thousands)
- -------------------------------------------------------------------------------------------
Three Months Three Months
Ended Ended
March 31, March 31,
2002 2001
- -------------------------------------------------------------------------------------------
Salaries, commissions and related benefits $1,970 $1,866
Occupancy 484 504
Data Processing 242 218
Postage, Stationery and Supplies 118 113
Amortization of intangibles 68 208
Other 631 537
------- -------
Total Other Expense $3,513 $3,446
- -------------------------------------------------------------------------------------------
13
FIRST QUARTER 2002 COMPARED TO FIRST QUARTER 2001:
Other expense for the first quarter of 2002 was $3,513,000 compared to
$3,446,000 for the first quarter of 2001, an increase of $67,000, or 1.9%. The
increase is a result of increased salaries, commissions and related benefits due
primarily to annual merit increases for employees. Other expenses increased
primarily due to increased software amortization, other real estate expense, and
increased marketing expense.
INCOME TAXES
The effective tax rate for the three months ended March 31, 2002 was 21.8%
compared to 14.3% for the three months ended March 31, 2001. The increase in
effective tax rates in the period is the result of taxable income increasing at
a greater rate than tax exempt income for the period ended March 31, 2002.
BALANCE SHEET
MARCH 31, 2002 COMPARED TO DECEMBER 31, 2001
The Corporation's total assets increased from $527.3 million at December 31,
2001 to $530.4 million at March 31, 2002. Loans decreased $0.3 million, a result
of the relatively weak economy. Securities increased $2.7 million due to
increases in U.S. Government Agency securities. Fed Funds sold increased and
cash and due from banks decreased due to conversion of interest bearing deposits
to Fed Funds.
Deposits decreased $12.7 million to $381.4 million at March 31, 2002 from $394.1
million at December 31, 2001, due to decreases in non-interest bearing deposits
and certificates of deposit. Securities sold under repurchase agreements
increased $18.1 million and borrowed funds decreased $4.0 million at March 31,
2002.
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,
2002 2001
- -----------------------------------------------------------------------------------------------------------------
Stockholders' Equity $48,208 $46,489
Total capital (to risk-weighted assets):
Consolidated 12.2% 11.6%
First National Bank in Manitowoc 11.9% 11.3%
Tier 1 capital (to risk-weighted assets):
Consolidated 11.4% 10.7%
First National Bank in Manitowoc 11.1% 10.4%
Tier I capital (to average assets):
Consolidated 7.3% 7.0%
First National Bank in Manitowoc 7.1% 6.8%
Dividends Per Share-This Quarter $ 0.085 $ 0.09
Dividends Per Share-Year to Date 0.085 0.30
Earnings Per Share-This Quarter $ 0.54 $ 0.34
Earnings Per Share-Year to Date 0.54 1.56
Dividend Payout Ratio-This Quarter 15.78% 26.47%
Dividend Payout Ratio-Year to Date 15.78% 19.26%
- ----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity increased $1.7 million from $46.5 million at December
31, 2001 to $48.2 million at March 31, 2002. Net income for the three month
period ending March 31, 2001 was $1.9 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, 2002 and December 31, 2001, that the Bank
meets all capital adequacy requirements to which it is subject.
As of March 31, 2002, the Bank's and the Corporation's ratio of Tier 1 capital
to risk-weighted assets was 11.1% and 11.4%, respectively. As of March 31, 2002,
the Bank's and the Corporation's ratio of total capital to risk-weighted assets
was 11.9% and 12.2%, 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, 2002, the Bank's and the Corporation's leverage capital
ratio was 7.1% and 7.3%, respectively.
As of March 31, 2002 and December 31, 2001, 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.
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RECENT ACCOUNTING PRONOUNCEMENTS
Future Accounting Change. In June 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS
No. 141 supersedes Accounting Principles Board (APB) Opinion No. 16, "Business
Combinations," and SFAS No. 38, "Accounting for Preacquisition Contingencies of
Purchased Enterprises." SFAS No. 141 requires the use of the purchase method of
accounting for business combinations initiated after June 30, 2001. SFAS No. 142
supersedes APB Opinion No. 17, "Intangible Assets." SFAS No. 142 addresses how
intangible assets acquired outside of a business combination should be accounted
for upon acquisition and how goodwill and other intangible assets should be
accounted for after they have been initially recognized. SFAS No. 142 eliminates
the amortization for goodwill and other intangible assets with indefinite lives.
Other intangible assets with a finite life will be amortized over their useful
life. Goodwill and other intangible assets with indefinite useful lives shall be
tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset may be impaired. SFAS No. 142 is effective
for fiscal years beginning after December 15, 2001. The Corporation adopted SFAS
No. 142 and passed step one of the goodwill impairment test on January 1, 2002.
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, 2001 in the Corporation's 2001 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,
2002.
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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 8, 2002 /s/ Thomas J. Bare
------------------
Thomas J. Bare
President
Date: May 8, 2002 /s/ Paul H. Wojta
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Paul H. Wojta
Senior Vice President
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