United States
Securities and Exchange Commission
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| For the quarterly period ended | June 30, 2004 |
| Commission file number | 0-18046 |
First Federal Capital Corp
| Wisconsin (State or other jurisdiction of incorporation or organization) |
39-1651288 (IRS employer identification) |
| 605 State Street La Crosse, Wisconsin (Address of principal executive office) |
54601 (Zip code) |
Registrant’s telephone number, including area code: (608) 784-8000
Not applicable
(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 such shorter period as the Registrant has been subject to such requirements), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class: Common Stock—$.10 Par Value. Outstanding as of August 6, 2004: 22,543,511.
Form 10-Q Table of Contents
1
Part I—Financial Information
Item 1—Financial Statements
Consolidated Statements of Financial Condition
June 30, 2004, and December 31, 2003
| June 30 | ||||||||
| 2004 | December 31 | |||||||
| (Unaudited) |
2003 |
|||||||
ASSETS |
||||||||
Cash and due from banks |
$ | 90,083,698 | $ | 94,535,753 | ||||
Interest-bearing deposits with banks |
12,596,108 | 6,444,374 | ||||||
Mortgage-backed and related securities: |
||||||||
Available for sale, at fair value |
370,501,921 | 386,862,372 | ||||||
Held for investment, at cost (fair value of $259,837,622 and $610,294, respectively) |
267,376,318 | 613,076 | ||||||
Loans held for sale |
18,085,165 | 16,113,217 | ||||||
Loans held for investment (net of allowance of $14,212,350 and $13,882,350, respectively) |
2,631,959,157 | 2,518,683,388 | ||||||
Federal Home Loan Bank stock |
61,486,100 | 59,634,800 | ||||||
Accrued interest receivable, net |
16,546,470 | 15,802,753 | ||||||
Office properties and equipment |
54,540,216 | 53,020,583 | ||||||
Mortgage servicing rights, net |
40,841,443 | 36,340,856 | ||||||
Goodwill |
78,063,720 | 78,168,866 | ||||||
Other intangible assets |
12,345,572 | 13,358,976 | ||||||
Other assets |
30,319,728 | 28,745,265 | ||||||
Total assets |
$ | 3,684,745,616 | $ | 3,308,324,280 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Deposit liabilities |
$ | 2,690,177,909 | $ | 2,552,837,027 | ||||
Federal Funds purchased |
— | 24,500,000 | ||||||
Federal Home Loan Bank advances |
643,200,000 | 373,075,000 | ||||||
Other borrowings |
22,083,790 | 43,624,308 | ||||||
Advance payments by borrowers for taxes and insurance |
8,407,401 | 1,484,734 | ||||||
Accrued interest payable |
2,528,726 | 2,234,905 | ||||||
Other liabilities |
33,908,656 | 33,979,161 | ||||||
Total liabilities |
3,400,306,482 | 3,031,735,135 | ||||||
Preferred stock, $.10 par value (5,000,000 shares authorized, none outstanding) |
— | — | ||||||
Common stock, $.10 par value (100,000,000 shares authorized, 22,517,493 and 22,394,773 shares
issued, respectively) |
2,251,749 | 2,239,477 | ||||||
Additional paid-in capital |
89,266,193 | 87,323,995 | ||||||
Retained earnings |
199,472,671 | 188,319,179 | ||||||
Accumulated non-owner adjustments to equity, net |
(6,551,480 | ) | (1,293,508 | ) | ||||
Total stockholders’ equity |
284,439,134 | 276,589,144 | ||||||
Total liabilities and stockholders’ equity |
$ | 3,684,745,616 | $ | 3,308,324,280 | ||||
Refer to accompanying Notes to Consolidated Financial Statements.
2
Consolidated Statements of Operations
Three months ended June 30, 2004 and 2003
| Three Months Ended June 30 |
||||||||
| 2004 | 2003 | |||||||
| (Unaudited) |
(Unaudited) |
|||||||
Interest on loans |
$ | 35,657,893 | $ | 30,791,501 | ||||
Interest on mortgage-backed and related securities |
6,068,381 | 4,619,180 | ||||||
Interest and dividends on investments |
927,415 | 1,201,817 | ||||||
Total interest income |
42,653,689 | 36,612,497 | ||||||
Interest on deposit liabilities |
10,497,041 | 12,977,324 | ||||||
Interest on FHLB advances and other borrowings |
4,050,562 | 5,136,234 | ||||||
Total interest expense |
14,547,603 | 18,113,558 | ||||||
Net interest income |
28,106,086 | 18,498,939 | ||||||
Provision for loan losses |
808,667 | 139,130 | ||||||
Net interest income after provision for loan losses |
27,297,419 | 18,359,809 | ||||||
Community banking revenue |
11,376,413 | 10,048,223 | ||||||
Mortgage banking revenue |
7,649,993 | 9,867,403 | ||||||
Other income |
684,701 | 554,773 | ||||||
Total non-interest income |
19,711,107 | 20,470,400 | ||||||
Compensation and employee benefits |
18,020,997 | 14,759,383 | ||||||
Occupancy and equipment |
3,665,386 | 3,299,953 | ||||||
Communications, postage, and office supplies |
1,782,788 | 1,675,398 | ||||||
ATM and debit card transaction costs |
1,329,745 | 1,175,517 | ||||||
Advertising and marketing |
989,373 | 997,975 | ||||||
Amortization of intangibles |
490,719 | 202,781 | ||||||
Merger-related expenses |
1,163,654 | — | ||||||
Other expenses |
2,376,276 | 2,738,800 | ||||||
Total non-interest expense |
29,818,938 | 24,849,807 | ||||||
Income before income taxes |
17,189,588 | 13,980,401 | ||||||
Income tax expense |
6,781,340 | 5,209,773 | ||||||
Net income |
$ | 10,408,248 | $ | 8,770,628 | ||||
Per share information |
||||||||
Diluted earnings per share |
$ | 0.46 | $ | 0.44 | ||||
Basic earnings per share |
0.46 | 0.44 | ||||||
Dividends paid per share |
0.15 | 0.14 | ||||||
Refer to accompanying Notes to Consolidated Financial Statements.
3
Consolidated Statements of Operations
Six months ended June 30, 2004 and 2003
| Six Months Ended June 30 |
||||||||
| 2004 | 2003 | |||||||
| (Unaudited) |
(Unaudited) |
|||||||
Interest on loans |
$ | 71,204,940 | $ | 63,217,480 | ||||
Interest on mortgage-backed and related securities |
10,988,974 | 8,097,835 | ||||||
Interest and dividends on investments |
1,920,712 | 2,455,226 | ||||||
Total interest income |
84,114,625 | 73,770,541 | ||||||
Interest on deposit liabilities |
20,867,907 | 26,633,939 | ||||||
Interest on FHLB advances and other borrowings |
7,389,119 | 10,356,465 | ||||||
Total interest expense |
28,257,026 | 36,990,404 | ||||||
Net interest income |
55,857,599 | 36,780,137 | ||||||
Provision for loan losses |
2,415,010 | 518,029 | ||||||
Net interest income after provision for loan losses |
53,442,589 | 36,262,109 | ||||||
Community banking revenue |
21,689,684 | 18,875,952 | ||||||
Mortgage banking revenue |
12,324,373 | 18,379,729 | ||||||
Other income |
1,322,952 | 1,155,697 | ||||||
Total non-interest income |
35,337,009 | 38,411,379 | ||||||
Compensation and employee benefits |
36,575,054 | 28,755,147 | ||||||
Occupancy and equipment |
7,243,786 | 6,425,033 | ||||||
Communications, postage, and office supplies |
3,536,800 | 3,523,875 | ||||||
ATM and debit card transaction costs |
2,678,805 | 2,265,144 | ||||||
Advertising and marketing |
1,769,569 | 1,677,696 | ||||||
Amortization of intangibles |
1,013,404 | 384,887 | ||||||
Merger-related expenses |
1,163,654 | — | ||||||
Other expenses |
5,116,701 | 4,943,272 | ||||||
Total non-interest expense |
59,097,773 | 47,975,054 | ||||||
Income before income taxes |
29,681,825 | 26,698,433 | ||||||
Income tax expense |
11,232,360 | 9,913,336 | ||||||
Net income |
$ | 18,449,465 | $ | 16,785,097 | ||||
Per share information |
||||||||
Diluted earnings per share |
$ | 0.81 | $ | 0.84 | ||||
Basic earnings per share |
0.82 | 0.85 | ||||||
Dividends paid per share |
0.29 | 0.27 | ||||||
Refer to accompanying Notes to Consolidated Financial Statements.
4
Consolidated Statements of Stockholders’ Equity
Three months ended June 30, 2004 and 2003
| Common | ||||||||||||||||||||||||
| Stock and | Accumulated | |||||||||||||||||||||||
| Additional | Unearned | Non-Owner | ||||||||||||||||||||||
| Paid-In | Retained | Treasury | Restricted | Adjustments | ||||||||||||||||||||
| Capital |
Earnings |
Stock |
Stock |
to Equity |
Total |
|||||||||||||||||||
Unaudited |
||||||||||||||||||||||||
Balance at March 31, 2003 |
$ | 48,599,024 | $ | 170,956,527 | ($10,180,511 | ) | ($18,333 | ) | $ | 1,903,644 | $ | 211,260,351 | ||||||||||||
Net income |
8,770,628 | 8,770,628 | ||||||||||||||||||||||
Securities valuation adjustment,
net of income taxes of $1,312,390 |
2,437,296 | 2,437,296 | ||||||||||||||||||||||
Net income and non-owner
adjustments to equity |
11,207,924 | |||||||||||||||||||||||
Dividends paid |
(2,769,048 | ) | (2,769,048 | ) | ||||||||||||||||||||
Exercise of stock options |
(1,428,333 | ) | 1,670,332 | 241,999 | ||||||||||||||||||||
Amortization of restricted stock |
179,406 | 13,750 | 193,156 | |||||||||||||||||||||
Balance at June 30, 2003 |
$ | 48,599,024 | $ | 175,709,179 | ($8,510,179 | ) | ($4,583 | ) | $ | 4,340,940 | $ | 220,134,380 | ||||||||||||
Unaudited |
||||||||||||||||||||||||
Balance at March 31, 2004 |
$ | 90,145,589 | $ | 193,508,742 | (80,400 | ) | — | $ | 522,978 | $ | 284,096,910 | |||||||||||||
Net income |
10,408,248 | 10,408,248 | ||||||||||||||||||||||
Securities valuation adjustment,
net of income taxes of ($3,809,324) |
(7,074,458 | ) | (7,074,458 | ) | ||||||||||||||||||||
Net income and non-owner
adjustments to equity |
3,333,790 | |||||||||||||||||||||||
Dividends paid |
(3,374,234 | ) | (3,374,234 | ) | ||||||||||||||||||||
Exercise of stock options |
1,372,354 | (793,321 | ) | 80,400 | 659,433 | |||||||||||||||||||
Amortization of restricted stock |
(276,764 | ) | (276,764 | ) | ||||||||||||||||||||
Balance at June 30, 2004 |
$ | 91,517,942 | $ | 199,472,671 | — | — | ($6,551,480 | ) | $ | 284,439,134 | ||||||||||||||
Refer to accompanying Notes to Consolidated Financial Statements.
5
Consolidated Statements of Stockholders’ Equity
Six months ended June 30, 2004 and 2003
| Common | ||||||||||||||||||||||||
| Stock and | Accumulated | |||||||||||||||||||||||
| Additional | Unearned | Non-Owner | ||||||||||||||||||||||
| Paid-In | Retained | Treasury | Restricted | Adjustments | ||||||||||||||||||||
| Capital |
Earnings |
Stock |
Stock |
to Equity |
Total |
|||||||||||||||||||
Unaudited |
||||||||||||||||||||||||
Balance at December 31, 2002 |
$ | 48,599,024 | $ | 165,628,148 | ($ | 10,178,374 | ) | ($ | 32,083 | ) | $ | 1,435,289 | $ | 205,452,003 | ||||||||||
Net income |
16,785,097 | 16,785,097 | ||||||||||||||||||||||
Securities valuation adjustment,
net of income taxes of $1,564,581 |
2,905,651 | 2,905,651 | ||||||||||||||||||||||
Net income and non-owner
adjustments to equity |
19,690,748 | |||||||||||||||||||||||
Dividends paid |
(5,330,973 | ) | (5,330,973 | ) | ||||||||||||||||||||
Exercise of stock options |
(1,572,383 | ) | 2,211,387 | 639,004 | ||||||||||||||||||||
Purchase of treasury stock |
(474,112 | ) | (474,112 | ) | ||||||||||||||||||||
Amortization of restricted stock |
369,210 | 27,500 | 396,710 | |||||||||||||||||||||
Other activity |
(169,920 | ) | (69,080 | ) | (239,000 | ) | ||||||||||||||||||
Balance at June 30, 2003 |
$ | 48,599,024 | $ | 175,709,179 | ($ | 8,510,179 | ) | ($ | 4,583 | ) | $ | 4,340,940 | $ | 220,134,381 | ||||||||||
Unaudited |
||||||||||||||||||||||||
Balance at December 31, 2003 |
$ | 89,563,472 | $ | 188,319,179 | — | — | ($ | 1,293,508 | ) | $ | 276,589,144 | |||||||||||||
Net income |
18,449,465 | 18,449,465 | ||||||||||||||||||||||
Securities valuation adjustment,
net of income taxes of ($2,831,216) |
(5,257,972 | ) | (5,257,972 | ) | ||||||||||||||||||||
Net income and non-owner
adjustments to equity |
13,191,493 | |||||||||||||||||||||||
Dividends paid |
(6,508,486 | ) | (6,508,486 | ) | ||||||||||||||||||||
Exercise of stock options |
1,954,470 | (755,902 | ) | 344,366 | 1,542,934 | |||||||||||||||||||
Purchase of treasury stock |
(322,866 | ) | (322,866 | ) | ||||||||||||||||||||
Amortization of restricted stock |
(31,584 | ) | (31,584 | ) | ||||||||||||||||||||
Other activity |
(21,500 | ) | (21,500 | ) | ||||||||||||||||||||
Balance at June 30, 2004 |
$ | 91,517,942 | $ | 199,472,671 | — | — | ($ | 6,551,480 | ) | $ | 284,439,134 | |||||||||||||
Refer to accompanying Notes to Consolidated Financial Statements.
6
Consolidated Statements of Cash Flows
Three months ended June 30, 2004 and 2003
| Three Months June 30 |
||||||||
| 2004 | 2003 | |||||||
| (Unaudited) |
(Unaudited) |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 10,408,248 | $ | 8,770,628 | ||||
Adjustments to reconcile net income to net cash provided (used) by operations: |
||||||||
Provision for loan and real estate losses |
749,877 | 105,619 | ||||||
Increase (decrease) in mortgage servicing rights valuation allowance |
(631,000 | ) | 1,000,000 | |||||
Net loan costs deferred |
(578,646 | ) | (1,373,016 | ) | ||||
Amortization of mortgage servicing rights |
2,566,392 | 10,739,235 | ||||||
Other amortization |
2,469,554 | 3,984,610 | ||||||
Depreciation |
1,234,577 | 974,250 | ||||||
Gains on sales of mortgage loans |
(6,024,958 | ) | (18,393,195 | ) | ||||
Increase in accrued interest receivable |
781,465 | 677,990 | ||||||
Decrease in accrued interest payable |
(148,072 | ) | (252,743 | ) | ||||
Increase (decrease) in current and deferred income taxes |
1,074,777 | (5,578,454 | ) | |||||
Other accruals and prepaids, net |
(1,505,180 | ) | (2,087,713 | ) | ||||
Net cash provided (used) by operations before loan originations and sales |
10,397,034 | (1,432,789 | ) | |||||
Loans originated for sale |
(262,685,230 | ) | (867,053,825 | ) | ||||
Sales of loans originated for sale or transferred from held for investment |
295,661,789 | 864,803,843 | ||||||
Net cash provided (used) by operations |
43,373,593 | (3,682,771 | ) | |||||
Cash flows from investing activities: |
||||||||
Decrease in interest-bearing deposits with banks |
(4,581,483 | ) | (23,188,100 | ) | ||||
Purchases of mortgage-backed and related securities available for sale |
— | (204,275,726 | ) | |||||
Principal repayments on mortgage-backed and related securities available for sale |
66,663,922 | 147,024,631 | ||||||
Principal repayments on mortgage-backed and related securities held for investment |
28,820,740 | 6,767,705 | ||||||
Loans originated for investment |
(347,721,112 | ) | (265,694,898 | ) | ||||
Loans purchased for investment |
(12,452,400 | ) | (40,253,010 | ) | ||||
Loan principal repayments |
286,990,662 | 305,633,879 | ||||||
Additions to office properties and equipment |
(1,706,268 | ) | (2,285,917 | ) | ||||
Other, net |
2,990,685 | (1,645,391 | ) | |||||
Net cash provided (used) by investing activities |
19,004,746 | (77,916,827 | ) | |||||
Cash flows from financing activities: |
||||||||
Increase in deposit liabilities |
18,105,966 | 59,930,655 | ||||||
Decrease in short-term Federal Home Loan Bank borrowings |
(7,000,000 | ) | — | |||||
Decrease in Federal Funds purchased |
(46,200,000 | ) | — | |||||
Decrease (increase) in other borrowings |
(14,778,123 | ) | 1,757,760 | |||||
Increase in advance payments by borrowers for taxes and insurance |
3,462,861 | 3,652,642 | ||||||
Dividends paid |
(3,374,234 | ) | (2,769,048 | ) | ||||
Other, net |
(8,294,075 | ) | 15,072,520 | |||||
Net cash provided (used) by financing activities |
||||||||