UNITED STATES 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 June 30, 2004
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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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.)
Yes [X] No [ ]
The number of shares outstanding of registrant's common stock, par value $1.00
per share, at July 31, 2004, was 6,937,268 shares.
FIRST MANITOWOC BANCORP, INC.
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Financial Condition -
June 30, 2004 and December 31, 2003 1
Consolidated Statements of Income -
Three and Six Months Ended June 30, 2004 and 2003 2
Consolidated Statements of Changes in
Stockholders' Equity
Six Months Ended June 30, 2004 and 2003 3
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2004 and 2003 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
Exhibits 23
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
June 30, December 31,
2004 2003
--------- ---------
(In Thousands, Except Share Data)
ASSETS
Cash and due from banks $ 12,422 $ 16,355
Interest-bearing deposits 13,098 7,979
Federal funds sold 12,191 11,433
--------- ---------
Cash and cash equivalents 37,711 35,767
Securities available for sale, at fair value 151,624 138,275
Other investments (at cost) 5,197 5,052
Loans, net 375,539 367,126
Premises and equipment 8,856 8,608
Goodwill 8,968 8,968
Intangible assets 1,671 2,117
Cash surrender value of life insurance 11,480 11,244
Other assets 6,122 4,796
--------- ---------
Total Assets $ 607,168 $ 581,953
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 436,458 $ 428,284
Securities sold under repurchase agreements 60,067 55,359
Borrowed funds 42,313 31,910
Other liabilities 6,824 6,177
--------- ---------
Total liabilities 545,662 521,730
--------- ---------
Shareholders' equity:
Common stock, $1.00 par value; authorized
10,000,000 shares; issued 7,583,628 shares 7,584 7,584
Retained earnings 53,767 50,560
Accumulated other comprehensive income 855 2,779
Treasury stock at cost--646,360 shares (700) (700)
--------- ---------
Total shareholders' equity 61,506 60,223
--------- ---------
Total Liabilities and Shareholders' Equity $ 607,168 $ 581,953
========= =========
(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 Six Months Ended
June 30, June 30,
------- -------
2004 2003 2004 2003
-------- -------- -------- --------
(In Thousands, Except Share Data)
Interest/Dividend income:
Loans, including fees $ 5,272 $ 5,453 $ 10,448 $ 11,050
Federal funds sold 39 94 82 198
Securities:
Taxable 567 414 1,116 1,042
Tax exempt 799 786 1,602 1,552
Other 70 44 155 84
-------- -------- -------- --------
Total interest/dividend income 6,747 6,791 13,403 13,926
-------- -------- -------- --------
Interest expense:
Deposits 1,563 1,872 3,058 3,867
Securities sold under repurchase agreements 265 317 524 645
Borrowed funds 272 344 609 688
-------- -------- -------- --------
Total interest expense 2,100 2,533 4,191 5,200
-------- -------- -------- --------
Net interest income 4,647 4,258 9,212 8,726
Provision for loan losses 100 450 200 650
-------- -------- -------- --------
Net interest income after provision for loan losses 4,547 3,808 9,012 8,076
-------- -------- -------- --------
Other income:
Trust service fees 157 147 314 281
Service charges 430 371 762 720
Insurance Center commissions 609 439 1,101 849
Loan servicing income (loss) (412) 219 (36) 424
Income on equity investment 101 85 199 171
Gain on sales of mortgage loans 100 537 160 958
Gain on sales of securities 55 0 55 0
Other 221 295 758 576
-------- -------- -------- --------
Total other income 1,261 2,093 3,313 3,979
-------- -------- -------- --------
Other expenses:
Salaries, commissions, and employee benefits 2,091 1,994 4,308 4,192
Occupancy 417 236 855 477
Data processing 264 257 528 525
Postage, stationery and supplies 124 140 250 296
Advertising 84 96 195 156
Outside service fees 127 98 365 226
Amortization of intangibles 69 69 137 137
Other 359 529 626 1,102
-------- -------- -------- --------
Total other expenses 3,535 3,419 7,264 7,111
-------- -------- -------- --------
Income before provision for income taxes 2,273 2,482 5,061 4,944
Provision for income taxes 450 532 1,091 1,093
-------- -------- -------- --------
Net income $ 1,823 $ 1,950 $ 3,970 $ 3,851
======== ======== ======== ========
Earnings per share: basic and diluted $ 0.26 $ 0.29 $ 0.57 $ 0.56
======== ======== ======== ========
(See accompanying notes to Unaudited Consolidated Financial Statements.)
2
ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
Six Months Ended June 30, 2003
(Dollars In Thousands, Except Share Data)
Accumulated
Other
Common Retained Comprehensive Treasury
Stock Earnings Income (Loss) Stock Total
----- -------- ------------- ----- -----
Balance at December 31, 2002 $7,584 $44,387 $3,013 ($700) $54,284
Comprehensive income:
Net income --- 3,851 --- --- 3,851
Other comprehensive income --- --- 1,032 --- 1,032
-------
Total comprehensive income $ 4,883
Cash dividends ($0.10 per share) --- (694) --- --- (694)
------ ------- ------ ----- -------
BALANCE AT JUNE 30, 2003 $7,584 $47,544 $4,045 ($700) $58,473
===== ====== ===== ====== ======
Six Months Ended June 30, 2004
(Dollars In Thousands, Except Share Data)
Accumulated
Other
Common Retained Comprehensive Treasury
Stock Earnings Income (Loss) Stock Total
----- -------- ------------- ----- -----
Balance at December 31, 2003 $7,584 $50,560 $2,779 ($700) $ 60,223
Comprehensive income:
Net income --- 3,970 --- --- 3,970
Other comprehensive income --- --- (1,924) --- (1,924)
-------
Total comprehensive income 2,046
Cash dividends ($0.11 per share) --- (763) --- --- (763)
------ ------- ------- ----- -------
BALANCE AT JUNE 30, 2004 $7,584 $53,767 $ 855 ($700) $61,506
===== ====== ====== ====== ======
(See accompanying notes to Unaudited Consolidated Financial Statements.)
3
ITEM 1. FINANCIAL STATEMENTS CONTINUED:
FIRST MANITOWOC BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
-----------------------
2004 2003
-------- --------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,970 $ 3,851
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 200 650
Depreciation of premises and equipment 387 399
Amortization of intangible assets 137 137
Gain on sale of AFS securities (55) 0
Amortization of securities, net 398 572
Stock dividends on FHLB stock (145) (106)
Proceeds from sale of mortgage loans 34,385 76,893
Originations of mortgage loans held for sale (34,224) (75,935)
Gain on sales of mortgage loans held for sale (160) (958)
Gain on sale of fixed assets 0 (38)
Undistributed income of joint venture (199) (171)
(Increase) decrease in other assets (7) 123
Increase in other liabilities 648 383
-------- --------
Net cash provided by operating activities 5,335 5,800
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities available for sale 59,359 37,152
Purchases of securities available for sale (76,021) (31,533)
Net increase in loans (8,616) (10,980)
Purchases of premises and equipment (635) (421)
Proceeds from sales of premises and equipment 0 38
Bank Owned Life Insurance policies 0 (5,000)
-------- --------
Net cash used in investing activities (25,913) (10,744)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 8,174 3,170
Net increase (decrease) in securities sold under repurchase agreements 4,708 (314)
Proceeds from advances on borrowed funds 27,000 21,747
Repayment of borrowed funds (16,597) (22,510)
Dividends paid (763) (694)
-------- --------
Net cash provided by financing activities 22,522 1,399
-------- --------
Net increase (decrease) in cash and cash equivalents 1,944 (3,545)
Cash and cash equivalents at beginning of period 35,767 56,089
-------- --------
Cash and cash equivalents at end of period $ 37,711 $ 52,544
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 4,178 $ 5,200
Income taxes 1,135 677
(See accompanying notes to Unaudited Consolidated Financial Statements.)
4
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 (the "Corporation's") financial position,
results of operations, changes in shareholders' 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 2003 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.
("Insurance Center"). All material intercompany transactions and balances are
eliminated. Investment in United Financial Services, Inc., the Bank's 49.8%
owned subsidiary, is accounted for under the equity method. Certain items in the
prior period consolidated financial statements have been reclassified to conform
with the June 30, 2004 presentation.
5
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
(Dollars In Thousands)
June 30, 2004
-------------
Amortized Cost Fair Value
-------------- ----------
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies $ 3,001 $ 2,952
Obligations of states and political subdivisions 72,245 74,691
Mortgage-backed securities 74,218 73,079
Corporate notes 901 902
-------- --------
Total $150,365 $151,624
======== ========
December 31, 2003
-----------------
Amortized Cost Fair Value
-------------- ----------
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies $ 13,663 $ 13,593
Obligations of states and political subdivisions 70,357 74,743
Mortgage-backed securities 49,924 49,836
Corporate notes 100 103
-------- --------
Total $134,044 $138,275
======== ========
NOTE 4: Loan Portfolio
Loans are summarized as follows:
Summary of Loan Portfolio
(Dollars In Thousands)
June 30, 2004 December 31, 2003
------------- -----------------
Percent of Percent of
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
Commercial and Agricultural $ 116,560 30.74% $ 110,884 29.88%
Commercial Real Estate 108,162 28.52% 109,469 29.49%
Residential Real Estate 133,676 35.25% 129,212 34.82%
Consumer 18,192 4.80% 18,301 4.93%
Other 2,604 0.69% 3,259 0.88%
--------- -------- --------- --------
Total $ 379,194 100.00% $ 371,125 100.00%
======== ========
Less: Allowance for Loan Loss (3,655) (3,999)
--------- ---------
Net Loans $ 375,539 $ 367,126
========= =========
6
NOTE 5: Allowance for Loan Losses
Activity in the allowance for loan losses for the periods indicated is as
follows:
For the Six For the Six
Months Ended Months Ended
June 30, June 30,
2004 2003
------- -------
(Dollars In Thousands)
Balance at beginning of period - December 31, 2003 and 2002 $ 3,999 $ 3,384
Provision charged to expense 200 650
Charge-offs (599) (231)
Recoveries 55 57
------- -------
Balance at end of period $ 3,655 $ 3,860
======= =======
NOTE 6: Business Segments
The Corporation, through the Bank and the Bank's branch network, 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.
Operations are managed and financial performance of these services 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.
NOTE 7: Per Share Computations
Weighted average shares outstanding were 6,937,268 for the three and six months
ended June 30, 2004 and 2003.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our Consolidated
Condensed Financial Statements and accompanying Notes thereto included elsewhere
herein and with our 2003 Annual Report on Form 10-K filed with the Commission on
March 12, 2004.
THE CORPORATION
First Manitowoc Bancorp, Inc. (the "Corporation") is a Wisconsin corporation and
registered bank holding company. The Corporation engages in its business through
its sole subsidiary, First National Bank in Manitowoc (the "Bank"), a national
banking association. The Bank has a wholly owned investment subsidiary, FNBM
Investment Corp. and a wholly-owned insurance subsidiary, Insurance Center of
Manitowoc, Inc. (the "Insurance Center"). The Insurance Center also operates an
office known as Gary Vincent and Associates in Green Bay, Wisconsin. The
Insurance Center is an independent agency offering commercial, personal, life
and health insurance. The Bank owns 49.8% of the outstanding common stock of
United Financial Services, Inc. ("UFS"). UFS provides data processing services
to owner banks Baylake Bank of Sturgeon Bay and the Bank in addition to 52 other
banks located in Wisconsin.
The Corporation's and the Bank's main office is located at 402 North Eighth
Street, Manitowoc, Manitowoc County, Wisconsin. The Bank has thirteen full
service branch offices located in Francis Creek, St. Nazianz, Two Rivers,
Mishicot, Manitowoc, Kiel, Newton, New Holstein, Plymouth, Bellevue, and
Ashwaubenon, Wisconsin. The Bank has one limited service drive through and mini
lobby facility at 4712 Expo Drive in Manitowoc. The Corporation's home page on
the Internet is www.bankfirstnational.com. The Corporation's SEC filings are
available through our website. The Corporation's web site content is for
information purposes only, and it should not be relied upon for investment
purposes, nor is it incorporated by reference into this Form 10-Q.
7
FORWARD-LOOKING INFORMATION
Forward-looking statements have been made by 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 of Financial Condition and Results of
Operations, describe future plans or strategies and include the Corporation's
expectations of future results of operations. Statements containing certain
terms including, but not limited to, the words "believes," "expects,"
"anticipates" or similar expressions constitute 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;
- 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;
- general market rates;
- general economic conditions;
- changes by the Federal government in monetary and fiscal
policies; and
- changes in composition of our loan portfolio.
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.
CRITICAL ACCOUNTING POLICIES
In preparing the consolidated 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.
Estimates that are particularly susceptible to significant change include the
determination of the allowance for loan losses and mortgage servicing rights
valuation.
The consolidated financial statements of the Corporation are prepared in
conformity with accounting principles generally accepted in the United States of
America and follow general practices within the industries in which it operates.
This preparation requires management to make estimates, assumptions, and
judgments that affect the amounts reported in the financial statements and
accompanying notes. These estimates, assumptions, and judgments are based on
information available as of the date of the financial statements; accordingly,
as this information changes, actual results could differ from the estimates,
assumptions, and judgments reflected in the financial statements. Certain
policies inherently have a greater reliance on the use of estimates,
assumptions, and judgments and, as such, have a greater possibility of producing
results that could be materially different than originally reported. Management
believes the following policies are both important to the portrayal of the
Corporation's financial condition and results and require subjective or complex
judgments and, therefore, management considers the following to be critical
accounting policies.
Allowance for Loan Losses: Management's evaluation process used to determine the
adequacy of the allowance for loan losses is subject to the use of estimates,
assumptions, and judgments including management's ongoing review and grading of
the loan portfolio, consideration of past loan loss experience, trends in past
due and nonperforming loans, risk characteristics of the various classifications
of loans, existing economic conditions, the fair value of underlying collateral,
and other qualitative and quantitative factors which could affect probable
credit losses. Because current economic conditions can change and future events
are inherently difficult to predict, the anticipated amount of estimated loan
losses, and therefore the adequacy of the allowance, could change significantly.
As an integral part of their examination process, various regulatory agencies
also review the allowance for loan losses. Such agencies may require that
certain loan balances be charged off when their credit evaluations differ from
those of management, based on their judgments about information available to
them at the time of their examination. The Corporation believes the allowance
for loan losses is adequate and properly recorded in the financial statements.
See section "Allowance for Loan Losses."
8
Mortgage Servicing Rights Valuation: The fair value of the Corporation's
mortgage servicing rights asset is important to the presentation of the
consolidated financial statements in that mortgage servicing rights are subject
to a fair value-based impairment standard. Mortgage servicing rights do not
trade in an active open market with readily observable prices. As such, like
other participants in the mortgage banking business, the Corporation relies on
an internal estimated cash flow model to establish the fair value of its
mortgage servicing rights. While the Corporation believes that the values
produced by its internal model are indicative of the fair value of its mortgage
servicing rights portfolio, these values can change significantly depending upon
the then current interest rate environment, estimated prepayment speeds of the
underlying mortgages serviced, and other economic conditions. The proceeds that
might be received should the Corporation actually consider a sale of the
mortgage servicing rights portfolio could differ from the amounts reported at
any point in time. The Corporation believes the mortgage servicing rights asset
is properly recorded in the financial statements.
EARNINGS
Net Income
(Dollars In Thousands, Except Share Data)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
--------- --------- --------- ---------
Net Income $ 1,823 $ 1,950 $ 3,970 $ 3,851
Earnings Per Share -Basic & Diluted $ 0.26 $ 0.29 $ 0.57 $ 0.56
Return on Average Assets 1.23% 1.38% 1.35% 1.37%
Return on Average Equity 11.77% 13.73% 13.09% 13.81%
Weighted average shares outstanding were 6,937,268 for the six months ended June
30, 2004 and 2003.
Net income for the three months ended June 30, 2004 was $1,823,000 compared to
$1,950,000 for the three months ended June 30, 2003, a decrease of $127,000, or
6.5%. Interest income decreased $44,000 primarily as a result of a decrease in
interest yields. Interest expense decreased $433,000 mainly as a result of a
decrease in interest rates paid on deposits. Other income decreased $832,000. A
further discussion of other income is located on page 14 in this report. Service
charge income increased $59,000 while Insurance Center commissions increased
$170,000. Securities were sold for a gain of $55,000. Loan servicing income
decreased due to rate trends over the past six months. Gain on sales of mortgage
loans decreased $437,000 over last year. As interest rates increase, the number
of loans sold to the FNMA market has decreased dramatically. Other expenses
increased $116,000. Earnings per share for the three months ended June 30, 2004
was $0.26 compared to $0.29 for the three months ended June 30, 2003.
Net income for the six months ended June 30, 2004 was $3,970,000 compared to
$3,851,000 for the six months ended June 30, 2003, an increase of $119,000 or
3.09%. Interest income decreased $523,000. Interest expense decreased
$1,009,000. Other income decreased $666,000. Other expense increased $153,000.
Earnings per share for the six months ended June 30, 2004 was $0.57 compared to
$0.56 for the six months ended June 30, 2003.
9
Table 1
Table 1 displays the average balances and average rates paid on all major
deposit classifications for the periods indicated.
AVERAGE BALANCES, YIELD AND RATES
For the Three Months For the Three Months
Ended June 30, 2004 Ended June 30, 2003
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
(Dollars In Thousands) (Dollars In Thousands)
ASSETS
Interest-earning assets:
Federal funds sold $ 14,559 $ 39 1.07% $ 30,472 $ 94 1.23%
Investment securities 157,968 1,954 4.92% 140,252 1,739 4.93%
Loans 378,220 5,404 5.68% 350,176 5,584 6.34%
-------- ------ ---- -------- ------ ----
Total interest-earning assets 550,747 7,397 5.33% 520,900 $7,417 5.65%
Other assets 44,518 43,639
-------- --------
Total Assets $595,265 $564,539
======== ========
LIABILITIES
Interest-bearing liabilities:
Interest-bearing deposits $360,913 $1,562 1.72% $352,751 $1,871 2.11%
Repurchase agreements 53,008 264 1.98% 49,087 316 2.56%
Borrowings 41,283 266 2.56% 36,314 346 3.79%
-------- ------ ---- -------- ------ ----
Total interest-bearing liabilities 455,204 2,092 1.83% $438,152 $2,533 2.30%
Demand deposits 71,161 62,567
Other liabilities 6,934 7,019
-------- --------
Total Liabilities 533,299 507,738
SHAREHOLDERS' EQUITY 61,967 56,801
-------- --------
Total Liabilities and
Shareholders' Equity $595,265 $564,539
======== ========
Net interest income and
interest rate spread $5,305 3.50% $4,884 3.35%
Net interest income as
a percent of earning assets (annualized) 3.82% 3.72%
==== ====
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%.
10
TABLE 1 (continued)
AVERAGE BALANCES, YIELD AND RATES
For the Six Months For the Six Months
Ended June 30, 2004 Ended June 30, 2003
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
(Dollars In Thousands) (Dollars In Thousands)
ASSETS
Interest-earning assets:
Federal funds sold $ 16,369 $ 82 1.00% $ 33,358 $ 198 1.19%
Investment securities 146,068 3,908 5.37% 133,096 3,662 5.52%
Loans 373,999 10,714 5.75% 346,518 11,307 6.54%
-------- ------- ---- -------- ------ ----
Total interest-earning assets 536,436 14,704 5.50% 512,972 $15,167 5.93%
Other assets 52,852 49,600
-------- --------
Total Assets $589,288 $562,572
======== ========
LIABILITIES
Interest-bearing liabilities:
Interest-bearing deposits $357,399 $ 3,071 1.72% $351,971 $3,867 2.20%
Repurchase agreements 53,245 525 1.98% 50,515 645 2.56%
Federal funds purchased 21 0 0.00% 0 0 0.00%
Borrowings 41,210 595 2.90% 36,373 688 3.79%
-------- ------- ---- -------- ------ ----
Total interest-bearing liabilities 451,875 4,191 1.85% $438,859 5,200 2.38%
Demand deposits 69,093 61,174
Other liabilities 7,686 6,772
-------- --------
Total Liabilities 528,654 506,805
SHAREHOLDERS' EQUITY 60,634 55,767
-------- --------
Total Liabilities and
Shareholders' Equity $589,288 $562,572
======== ========
Net interest income and
interest rate spread $ 10,513 3.64% $ 9,967 3.55%
Net interest income as
a percent of earning assets (annualized) 3.93% 3.90%
==== ====
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%.
11
Table 1A sets forth the effects of changing rates and volumes on net interest
income of the Corporation for the periods indicated.
RATE AND VOLUME VARIANCE ANALYSIS
BASED ON AVERAGE BALANCES
(In thousands)
TABLE 1A
2004 compared to 2003
---------------------
Increase(Decrease) in Net Interest Income
Net Due to Due to
Interest earning assets: Change Rate Volume
------ ---- ------
Federal funds sold $ (116) $ (77) (39)
Investment securities:
US Treasury securities and obligations of US
government agencies $ 108 $ (168) 276
Tax exempt obligations of States
and political subdivisions $ 75 $ (226) 301
All other investment securities $ 63 $ 44 19
------- ------- -------
Total investment securities $ 246 $ (350) 596
Loans net of unearned income:
Commercial loans $ 47 $(1,166) 1,213
Mortgage loans $ (518) $ (995) 477
Installment loans $ (113) $ (109) (4)
Other loans $ (9) $ (8) (1)
------- ------- -------
Total loans $ (593) $(2,278) 1,685
TOTAL INTEREST EARNING ASSETS $ (463) $(2,705) 2,242
Interest bearing liabilities:
Savings deposits $ (12) $ (7) 4
Market Plus accounts $ (50) $ (69) 19
Super NOW accounts $ (53) $ (52) (1)
Money market deposit accounts $ (11) $ (11) (0)
Certificates of deposit and IRA deposits $ (694) $ (735) 41
Repurchase agreements $ (120) $ (180) 60
Federal funds purchased $ (0) $ (0) --
Borrowings $ (93) $ (244) 151
------- ------- -------
TOTAL INTEREST BEARING LIABILITIES $(1,009) $(1,284) 274
Net Change in Net Interest Income $ 546 $(1,421) 1,967
12
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 six months ended June 30, 2004 has been characterized by fairly stable
interest rates.
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%.
SECOND QUARTER 2004 COMPARED TO SECOND QUARTER 2003: (SEE TABLE 1)
Net interest income (on a tax equivalent basis) for the three months ended June
30, 2004 increased by $421,000 or 8.6% compared to the three months ended June
30, 2003. Interest income decreased $20,000 primarily as a result of a decrease
in yields. Total average loans increased from $350,176,000 for the second
quarter of 2003 to $378,220,000 for the second quarter of 2004 while interest
yield on loans decreased from 6.34% for the second quarter of 2003 to 5.68% for
the second quarter of 2004. Average investment securities increased from
$140,252,000 for the second quarter of 2003 to $157,968,000 for the second
quarter of 2004. Interest expense decreased $441,000 primarily as a result of a
decrease in interest rates paid. Total average interest-bearing deposits
increased from $352,751,000 for the second quarter of 2003 to $360,913,000 for
the second quarter of 2004 while interest rates paid on interest-bearing
deposits decreased from 2.11% for the second quarter of 2003 to 1.72% for the
second quarter of 2004. 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 3.50% for the three months ended June 30,
2004, an increase of 15 basis points from the interest rate spread of 3.35% for
the three months ended June 30, 2003.
Net interest margin for the three months ended June 30, 2004 was 3.82% compared
with 3.72% for the three months ended June 30, 2003.
YTD 2004 COMPARED TO YTD 2003: (SEE TABLE 1)
Net interest income (on a tax equivalent basis) for the six months ended June
30, 2004 increased by $559,000 or 5.61% compared to the six months ended June
30, 2003. Interest income decreased $546,000 as a result of a decrease in yields
which was offset by an increase in volume. Total average loans increased to
$373,999,000 for the first six months of 2004 from $346,518,000 for the first
six months of 2003. Total average investment securities increased to
$146,068,000 for the first six months of 2004 from $133,096,000 for the first
six months of 2003. Interest yields fell on both loans and investment securities
for the six months ended June 30, 2004. Interest expense decreased $1,009,000
due to a decrease in interest rates paid. Total average interest bearing
deposits increased to $357,399,000 for the first six months of 2004 from
$351,971,000 for the first six months of 2003, while interest rates paid on
those deposits decreased to 1.72% in the first half of 2004 from 2.20% in the
first half of 2003. The interest rate spread was 3.64% for the six months ended
June 30, 2004, an increase of 9 basis points from the interest rate spread of
3.55% for the six months ended June 30, 2003.
Net interest margin for the six months ended June 30, 2004 was 3.93% compared
with 3.90% for the six months ended June 30, 2003.
13
PROVISION AND ALLOWANCE FOR LOAN LOSSES
For the six months ended June 30, 2004, the Bank charged $200,000 to expense for
the provision for loan loss compared to $650,000 for the six months ended June
30, 2003.
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 June 30, 2004 based on its most recent evaluation of these
factors.
The loan volume trend factor is based on actual lending activity. The factor is
used for calculating 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.
The following table shows the allocation of allowance for loan losses.
Allocation of Allowance for Loan Losses
(Dollars In Thousands)
June 30, December 31,
2004 2003
------ ------
Specific Problem Loans $1,862 $2,262
Loan Type Allocation:
Commercial & Agricultural 737 950
Commercial Real Estate 107 87
Residential Real Estate 129 53
Consumer 220 221
------ ------
1,193 1,311
Unallocated 600 426
------ ------
Total Reserve $3,655 $3,999
====== ======
Ratio of allowance for loan losses to total loans 0.96% 1.08%
Specific problem loans includes the allocation of the allowance for specific
problem credits. Loan type 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. Local economic concerns continue to affect the Bank's customers.
These concerns are reflected in the changes shown in the allocation of allowance
for loan losses. The ratio dropped slightly in the current period because of an
overall improvement in loan quality.
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.
14
Total nonperforming loans at June 30, 2004 were $2,221,000 a decrease of
$1,057,000 from December 31, 2003. The following table presents nonperforming
and nonaccrual loan information as of the dates indicated.
Nonperforming Loans
(Dollars In Thousands)
June 30, December 31,
2004 2003
------ ------
Nonaccrual loans $2,221 $3,272
Accruing loans past due 90 days or more 0 6
------ ------
Total nonperforming loans $2,221 $3,278
Nonperforming loans as a percent of loans 0.59% 0.88%
Ratio of the allowance for loan losses to nonperforming loans 165.00% 122.00%
OTHER INCOME
Other Income
(Dollars In Thousands)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
------- ------- ------- -------
Trust service fees $ 157 $ 147 $ 314 $ 281
Service charges 430 371 762 720
Insurance Center commissions 609 439 1,101 849
Loan servicing income (412) 219 (36) 424
Income on equity investment 101 85 199 171
Gain on sales of mortgage loans 100 537 160 958
Gain on sales of securities 55 0 55 0
Other 221 295 758 576
------- ------- ------- -------
Total other income $ 1,261 $ 2,093 $ 3,313 $ 3,979
SECOND QUARTER 2004 COMPARED TO SECOND QUARTER 2003:
Other income for the second quarter of 2004 was $1,261,000 compared to
$2,093,000 for the second quarter of 2003, a decrease of $832,000 or 39.8%.
Insurance Center commissions increased $170,000 due to increased volume.
Mortgage servicing rights experienced a tremendous decrease during the quarter.
Near record low interest rates early in the quarter caused a surge in
refinancings. As a result, a significant drop in the average life calculation
used to determine the value of mortgage servicing rights occurred. Gain on sales
of mortgage loans decreased $437,000 or 81.4%. In 2003, mortgage loan volume and
refinancings processed and sold to the FNMA secondary market were significant.
As interest rates have increased over the quarter, the bank has seen a decrease
in the number of loan applications.
YTD 2004 COMPARED TO YTD 2003:
Total other income for the six months ended June 30, 2004 was $3,313,000
compared to $3,979,000 for the six months ended June 30, 2003, a decrease of
$666,000 or 16.7%. Insurance Center commissions increased $252,000 or 29.7% over
last year, a result of increased volume. Mortgage servicing rights income
decreased due to changes in the rate trends and average life calculations over
the past six months. Gain on sales of mortgage loans decreased $798,000 as
compared to 2003. Rate changes in the market affected the volume of loans sold
to the FNMA secondary market. Other miscellaneous income saw an increase of
$182,000 or 31.6% primarily due to the Insurance Center receiving significant
contingency commission income as a result of lower than expected insurance
claims.
15
OTHER EXPENSES
The following table shows other expenses.
Other Expenses
(Dollars In Thousands)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
------ ------ ------ ------
Salaries, commissions, and employee benefits $2,091 $1,994 $4,308 $4,192
Occupancy 417 236 855 477
Data processing 264 257 528 525
Postage, stationery and supplies 124 140 250 296
Advertising 84 96 195 156
Outside service fees 127 98 365 226
Amortization of intangibles 69 69 137 137
Other 359 529 626 1,102
------ ------ ------ ------
Total other expenses $3,535 $3,419 $7,264 $7,111
SECOND QUARTER 2004 COMPARED TO SECOND QUARTER 2003:
Other expenses for the second quarter of 2004 were $3,535,000 compared to
$3,419,000 for the second quarter of 2003, an increase of $116,000, or 3.4%.
Occupancy expense increased $181,000. This increase includes additional expenses
associated with the opening of the new branch location on Expo Drive. Outside
service fees include a pollution abatement accrual.
YTD 2004 COMPARED TO YTD 2003:
Other expenses for the first six months of 2004 were $7,264,000 compared to
$7,111,000 for the first six months of 2003, an increase of $153,000 or 2.2%.
Occupancy expenses increased in relation to a new branch opening in May of 2004.
Outside service fees include a $115,000 expense for Sarbanes-Oxley internal
control documentation requirements.
INCOME TAXES
The effective tax rate for the six months ended June 30, 2004 was 21.8% compared
to 22.2% for the six months ended June 30, 2003. The decrease in effective tax
rates in the period is the result of more tax exempt income as a percentage of
total income.
FNBM is incorporated in the State of Nevada, which does not currently impose a
corporate income tax. Although the earnings of FNBM are not currently subject to
taxation in the State of Wisconsin, from time-to-time legislation is proposed
which, if adopted, would require consolidated income tax returns for entities
headquartered in the state and result in taxation of FNBM's earnings. To date,
none of these legislative proposals have been adopted. In addition, from
time-to-time the Wisconsin Department of Revenue ("WDR") attempts to impose
income tax on out-of-state investment subsidiaries like FNBM. Indeed, in 2003
the WDR began examinations of a number of financial institutions, including the
Bank, specifically aimed at their relationships with their investment
subsidiaries. Management believes the WDR may take the position that the income
of FNBM is taxable in Wisconsin. Management believes the Bank, as well as FNBM,
have complied with the tax rules relating to the income of out-of-state
subsidiaries. The WDR has indicated that it may repudiate these rulings and
management is uncertain at this time whether the WDR exam will result in an
assessment. The Bank will vigorously oppose an assessment, if any.
16
BALANCE SHEET
JUNE 30, 2004 COMPARED TO DECEMBER 31, 2003
Assets
The Corporation's total assets increased from $582.0 million at December 31,
2003 to $607.2 million at June 30, 2004. Loans increased $8.4 million, a result
of increases in commercial loans and mortgage loans. Securities increased $13.3
million to $151.6 million.
Liabilities
Deposits increased $8.2 million to $436.5 million at June 30, 2004 from $428.3
million at December 31, 2003. Securities increased $4.6 million while borrowed
funds increased $10.4 million.
Off-Balance Sheet Arrangements
The Corporation has become a party to financial instruments with off-balance
sheet risk in the normal course of its business in order to meet the financing
needs of its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to extend credit
and standby letters of credit. Off-balance sheet financial instruments involve,
to varying degrees, elements of credit and interest rate risk in excess of the
amounts recognized in the Statement of Financial Condition. In the event of
non-performance by the other party to a financial instrument, the Corporation's
exposure to credit loss is represented by the contractual amount of the
instrument. The Corporation uses the same credit policies in granting
commitments and letters of credit as it does for on-balance sheet financial
instruments.
Off-balance-sheet financial instruments whose contract amounts represent credit
and/or interest rate risk are as follows:
Notional Amount
---------------
June 30, December 31,
2004 2003
---- ----
(Dollars In Thousands)
Commitments to extend credit $83,101 $75,134
Credit card arrangements 5,816 2,510
Standby letters of credit 5,846 5,826
Commitments to extend credit and credit card arrangements are agreements to lend
to a customer as long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. A portion of the
commitments are expected to be drawn upon, thus representing future cash
requirements. The Corporation evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained upon extension of credit
is based on management's credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable; inventory; property, plant, and
equipment; real estate; and stocks and bonds.
Standby letters of credit are conditional commitments issued by the Corporation
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Corporation holds collateral
supporting those commitments for which collateral is deemed necessary. Because
these instruments have fixed maturity dates and because many of them expire
without being drawn upon, they do not generally present any significant
liquidity risk to the Corporation.
17
The Corporation has no investments in nor is a party to transactions involving
derivative instruments, except mortgage-related securities which represent
minimal risk to the Corporation.
Like many Wisconsin financial institutions, the Corporation has a non-Wisconsin
subsidiary that holds and manages investment assets which have not been subject
to Wisconsin tax. The Wisconsin Department of Revenue has instituted an audit
program specifically aimed at out-of-state bank subsidiaries and has indicated
that it may withdraw favorable rulings previously issued in connection with such
subsidiaries. As a result of these developments, the Department may take the
position that the income of the out-of-state subsidiaries is taxable in
Wisconsin, which will likely be challenged by financial institutions in the
state. If the Department is successful in its efforts, it would result in a
negative impact on the earnings of the Corporation.
LIQUIDITY MANAGEMENT
Liquidity describes the ability of the Corporation to generate adequate amounts
of cash 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.
CAPITAL RESOURCES AND ADEQUACY
The Corporation's actual capital amounts and ratios at December 31, 2003 and
June 30, 2004 are presented below:
Capital
(Dollars In Thousands, Except Share Data)
June 30, December 31,
2004 2003
----------- -----------
Shareholders' Equity $ 61,506 $ 60,223
Total capital (to risk-weighted assets):
Consolidated 13.3% 13.3%
First National Bank in Manitowoc 13.1% 13.1%
Tier 1 capital (to risk-weighted assets):
Consolidated 12.5% 12.3%
First National Bank in Manitowoc 12.2% 12.0%
Tier I capital (to average assets):
Consolidated 8.8% 8.6%
First National Bank in Manitowoc 8.6% 8.4%
Dividends Per Share-This Quarter $ 0.055 $ 0.050
Dividends Per Share-Year to Date 0.110 0.210
Earnings Per Share-This Quarter $ 0.260 $ 0.270
Earnings Per Share-Year to Date 0.570 0.560
Dividend Payout Ratio-This Quarter 19.75% 18.52%
Dividend Payout Ratio-Year to Date 19.22% 19.09%
Total shareholders' equity increased $1.3 million from $60.2 million at December
31, 2003 to $61.5 million at June 30, 2004. Net income for the six month period
ending June 30, 2004 was $4.0 million.
18
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 June 30, 2004 and December 31, 2003, that the Bank
meets all capital adequacy requirements to which it is subject.
As of June 30, 2004, the Bank's and the Corporation's ratio of Tier 1 capital to
risk-weighted assets was 12.2% and 12.5%, respectively. As of June 30, 2004, the
Bank's and the Corporation's ratio of total capital to risk-weighted assets was
13.1% and 13.3%, 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
June 30, 2004, the Bank's and the Corporation's leverage capital ratio was 8.6%
and 8.8%, respectively.
As of June 30, 2004 and December 31, 2003, 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 such notifications that management believes have
changed the institution's category.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2003, the FASB issued SFAS No. 132 (revised 2003), "Employers'
Disclosures about Pensions and Other Postretirement Benefits - an amendment of
FASB Statement No. 87, 88 and 106," which was effective for the fourth quarter
of 2003. This Statement revises employers' disclosures about pension plans and
other postretirement benefit plans and these disclosures are included in Note 14
to the Corporation's December 31, 2003 Consolidated Financial Statements
included in the Corporation's Annual Report on Form 10-K.
On March 9, 2004, the SEC issued Staff Accounting Bulletin No. 105-Application
of Accounting Principles to Loan Commitments ("SAB 105"). SAB 105 summarizes the
views of the SEC staff regarding the application of generally accepted
accounting principles to loan commitments accounted for as derivative
instruments. The SEC staff believes that in recognizing a loan commitment,
entities should not consider expected future cash flows related to the
associated servicing of the loan until the servicing asset has been
contractually separated from the underlying loan by sale or securitization of
the loan with the servicing retained. The provisions of SAB 105 are applicable
to all loan commitments accounted for as derivatives and entered into subsequent
to March 31, 2004. The adoption of SAB 105 will not have a material impact on
the Corporation's consolidated results of operations or financial position, as
the Corporation's current accounting treatment for such loan commitments is
consistent with the provisions of SAB 105.
FINANCIAL STATEMENT DISCLOSURES
Commitments to sell residential mortgage loans to FNMA and commitments to fund
such loans to individual borrowers represent the Corporation's mortgage
derivatives, the fair value of which is not material at this time. Commitments
outstanding at June 30, 2004 were $5,348,650.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation's management is aware of no material change to the market risk
position from that disclosed as of December 31, 2003 in the Corporation's 2003
Annual Report on Form 10-K.
19
ITEM 4. CONTROLS AND PROCEDURES
The Corporation maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in our periodic filings with
the SEC is recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management. The Corporation's senior management, with
the participation of the Corporation's chief executive officer and chief
financial officer, evaluated the effectiveness of the Corporation's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities and Exchange Act of 1934 [the "Act"]) as of June 30, 2004. Based on
this evaluation, the Corporation's chief executive officer and chief financial
officer concluded that, as of June 30, 2004, the disclosure controls and
procedures were (1) designed to ensure that material information relating to the
Corporation, including the Bank and the Bank's wholly owned subsidiaries, is
made known to the Corporation's chief executive officer and chief financial
officer by others within those entities, particularly during the period in which
this report was being prepared and (2) effective, in that they provide
reasonable assurance that information required to be disclosed in the reports
that the Corporation files or submits under the Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.
For the quarter ended June 30, 2004, the Corporation did not make any
significant changes in, nor take any corrective actions regarding, its internal
controls or other factors that could significantly affect these controls
subsequent to the date of their evaluation.
FIRST MANITOWOC BANCORP, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Corporation is involved in various legal matters arising in the normal
course of its business. While the ultimate outcome of these various legal
matters cannot be predicted with certainty, it is the opinion of management in
consultation with legal counsel, that the resolution of these legal actions will
not have a material effect on the Corporation's consolidated financial condition
or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Corporation's Annual Meeting of Shareholders was held on April 19,
2004.
b) Not Applicable.
c) The only matter voted upon was the election of three directors for terms
expiring in 2007. The results are as follows:
Election of Directors For Against or Withheld
--------------------- --- -------------------
John C. Miller 4,765,317 326,819
John E. Nordstrom 4,756,289 335,847
John J. Zimmer 4,767,177 324,959
20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit Number Exhibit Descriptions
-------------- --------------------
(3)(1) Articles of Incorporation of First Manitowoc Bancorp,
Inc., incorporated by reference to Exhibit (3)(1) to
the issuer's registration statement on Form 10 filed
with the SEC on May 5, 1999. Amendment filed as
Exhibit (3)(2) to the issuer's quarterly report on
Form 10-Q, filed with the SEC on August 14, 2000.
(3)(2) Amended and Restated Bylaws of First Manitowoc
Bancorp, Inc., incorporated by reference to Exhibit
(3)(2) to the issuer's Annual Report on Form 10-K,
filed with the SEC on March 18, 2003.
31.1 Certification of Thomas J. Bare pursuant to Rule
13a-14(a) or 15(d)-14(a)
31.2 Certification of Paul H. Wojta pursuant to Rule
13a-14(a) or 15(d)-14(a)
32.1 Section 1350 Certification of Thomas J. Bare
32.2 Section 1350 Certification of Paul H. Wojta
b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the quarter ended June 30,
2004.
21
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: August 10, 2004 /s/ Thomas J. Bare
------------------
Thomas J. Bare
Chief Executive Officer
Date: August 10, 2004 /s/ Paul H. Wojta
-----------------
Paul H. Wojta
Chief Financial Officer
22