NEW BERLIN, Wis., Feb. 7 /PRNewswire-FirstCall/ -- Merchants &
Manufacturers Bancorporation, Inc. ("Merchants"), a $1.46 billion
asset financial holding company, today reported earnings for the
fourth quarter and year ended December 31, 2005. For the fourth
quarter of 2005, Merchants reported net income of $1.4 million, or
$0.39 per fully diluted common share, compared to a loss of
$(811,000), or $(0.22) per fully diluted common share, for the
fourth quarter of 2004. For the year ended December 31, 2005, net
income was $6.6 million, or $1.79 per fully diluted common share,
compared to $4.0 million, or $1.15 per fully diluted common share
for the year ended December 31, 2004. The year-to-date income
statement comparisons are impacted by Merchants' acquisition of
Random Lake Bancorp Limited ("Random") and its subsidiary Wisconsin
State Bank ("WSB") on August 12, 2004. The increase in earnings for
the quarter and year ended 2005 compared to the quarter and year
ended 2004 is partially attributable to non-recurring items
incurred during 2004. For the three and twelve months ended
December 31, 2004 Merchants recorded pre-tax non-recurring expenses
of $2.4 million and $3.2 million, respectively, related to
centralization and data processing conversions, Sarbanes-Oxley
compliance activities, and established a tax reserve for settlement
with the Wisconsin Department of Revenue. Earnings were also
affected by a decline in the net interest margin of 3.56% for the
quarter ended December 31, 2005 compared to 3.77% for the same
period last year. Similarly, net interest margin was 3.65% for the
year ended December 31, 2005 compared to 3.76% for the same period
in 2004. In 2005 the yields on interest bearing liabilities have
increased more than the yields on interest earning assets, thus
resulting in a decline in the net interest margin. Merchants' total
assets increased 7.7% from $1.36 billion at December 31, 2004, to
$1.46 billion at December 31, 2005. Gross loans increased 9.1% from
$1.0 billion at December 31, 2004, to $1.1 billion at December 31,
2005. Total deposits grew 12.3% from $1.0 billion at December 31,
2004 to $1.2 billion at December 31, 2005. Core deposits, net of
brokered deposits, increased 5.75% in 2005. Our balance sheet
growth in 2005 is due to internal growth. Michael J. Murry,
Chairman, stated, "2004 was a year of significant change and
transition for our organization. We took steps to reduce the risk
inherent in a larger organization and invested heavily in building
an operational platform that will allow for future expansion.
During 2005 we began to realize the advantages and efficiencies of
the operational platform we created. While this transition has not
been easy, we are making progress and will continue our evolution
in 2006. 2006 will bring accelerated growth in efficiencies due to
the steps taken in 2004 and 2005. In addition, we will rededicate
our efforts in the area of customer service, the only advantage we
hold over our competitors. Despite the operational changes, we
continued to internally grow the balance sheet in 2005. Loan growth
was significant but was funded primarily with wholesale funding.
Thus, like many banks, we incurred net interest margin pressure
that partially negated our earnings growth. Core deposit growth
will be a focus for 2006 in order to stabilize our net interest
margin. One of the areas we continue to lag in is non-interest
income. Although we made significant progress in this area in 2005,
more work remains to be done." Net interest income was $11.9
million for the fourth quarter of 2005 compared to $11.6 million
for the fourth quarter of 2004 and $47.3 million for the full-year
2005 compared to $42.4 million for 2004. The increase is due to the
revenue resulting from the acquisition of WSB, as well as the
increase in loans funded by the growth in deposits. WSB generated
net-interest income of $3.6 million during the year ended December
31, 2005 compared to $1.5 million for the same period in 2004. The
net interest margin was 3.56% for the quarter ended December 31,
2005 compared to 3.77% for the same period last year. Similarly,
net interest margin was 3.65% for the year ended December 31, 2005
compared to 3.76% for the same period in 2004. The decline in net
interest margin was due to strong loan growth which was funded with
limited deposit growth as well as higher cost wholesale funding. In
addition, our net interest margin has been under pressure as we
have seen our deposit base shift from lower paying variable rate
deposit accounts into higher fixed rate instruments such as
certificate of deposits. While we will continue to focus on
generating low cost core deposits to fund future loan growth, we
continue to believe our balance sheet is positioned to take
advantage of increasing interest rates over the long run.
Merchants' provision for loan losses was $390,000 and $1.6 million,
respectively, for the three and twelve months ended December 31,
2005 compared to $461,000 and $1.8 million for the same periods in
the prior year. The ratio of allowance for loan losses to total
loans was 0.94% and 1.02% at December 31, 2005 and 2004,
respectively. The ratio of allowance for loan losses to
non-performing loans was 203.2% at December 31, 2005 compared to
119.7% at December 31, 2004. The ratio of non-performing assets to
total assets equaled 0.48% at December 31, 2005 compared to 0.75%
at December 31, 2004. Non-interest income for the three and twelve
months ended December 31, 2005 was $3.2 million and $13.9 million,
respectively, compared to $3.0 million and $11.5 million for the
same periods in the prior year, an increase of 8.8% and 20.6%,
respectively. Service charges on deposit accounts increased $13,000
to $1.1 million and $663,000 to $4.2 million for the three and
twelve months ended December 31, 2005, respectively. Service
charges on loans increased $196,000 to $827,000 and $1.2 million to
$3.4 million for the three and twelve months ended December 31,
2005, respectively. Gains on sales of mortgage loans were $65,000
and $366,000 for the three and twelve months ended December 31,
2005, respectively, compared to $130,000 and $494,000 for the same
periods in the prior year. The gains on the sale of both assets and
securities amounted to $286,000 for the twelve month period ended
December 31, 2005 compared to $349,000 for the same period in the
prior year. Other fee income for the year ended December 31, 2005
included non-recurring fee income of $540,000 related to the sale
of Pulse EFT Association to Discover Financial Services, as well as
additional income related to the acquisition of WSB. WSB generated
non-interest income of $769,000 during the year ended December 31,
2005 compared to $282,000 for the year ended December 31, 2004.
Non-interest expense for the three and twelve months ended December
31, 2005 was $12.7 million and $49.9 million, respectively,
compared to $14.6 million and $45.8 million for the same periods in
the prior year, a decrease of 12.8% and an increase of 8.9%,
respectively. Salaries and employee benefits decreased $77,000 for
the quarter and increased $3.5 million for the year, occupancy
expense decreased $149,000 for the quarter and increased $732,000
for the year and data processing fees decreased $114,000 for the
quarter and increased $1.2 million for the year. Non-interest
expense for the three and twelve months ended December 31, 2004
included pre-tax non- recurring expenses of $2.4 million and $3.2
million, respectively, related to centralization and data
processing conversions, Sarbanes-Oxley expense, for settlement with
the Wisconsin Department of Revenue. The growth in non- interest
expense for the year is partially affected by the acquisition of
WSB which added expenses of $3.3 million for the year ended
December 31, 2005 compared to $1.3 million for the year ended
December 31, 2004. UNAUDITED Three Months Ended Years Ended
December 31, December 31, 2005 2004 Change 2005 2004 Change
(Dollars In Millions, Except Per Share Amounts) Net Income (Loss)
$1.435 $(0.811) n/m $6.607 $4.002 65.09% Basic EPS $ 0.39 $( 0.22)
n/m $ 1.80 $ 1.16 55.17% Diluted EPS $ 0.39 $( 0.22) n/m $ 1.79 $
1.15 55.65% Merchants & Manufacturers Bancorporation, Inc. is a
financial holding company headquartered in New Berlin, Wisconsin, a
suburb of Milwaukee. Through our Community Financial Group network,
we operate seven banks in Wisconsin (Community Bank Financial,
Fortress Bank, Franklin State Bank, Grafton State Bank, Lincoln
State Bank, The Reedsburg Bank and Wisconsin State Bank), one bank
in Minnesota (Fortress Bank Minnesota) and one bank in Iowa
(Fortress Bank Cresco). Our banks are separately chartered with
each having its own name, management team, board of directors and
community commitment. Together, our banks operate 45 offices in the
communities they serve with more than 100,000 clients and total
assets of $1.4 billion. In addition to traditional banking
services, our Community Financial Group network also provides our
clients with a full range of financial services including
investment and insurance products, residential mortgage services,
private banking capabilities and tax consultation and tax
preparation services. Merchants' shares trade on the
"bulletin-board" section of the NASDAQ Stock Market under the
symbol "MMBI." Certain statements contained in this press release
constitute or may constitute forward-looking statements about
Merchants which we believe are covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. This release contains
forward-looking statements concerning the Corporation's prospects
that are based on the current expectations and beliefs of
management. When used in written documents, the words anticipate,
believe, estimate, expect, objective and similar expressions are
intended to identify forward-looking statements. The statements
contained herein and such future statements involve or may involve
certain assumptions, risks and uncertainties, many of which are
beyond the Corporation's control, that could cause the
Corporation's actual results and performance to differ materially
from what is expected. In addition to the assumptions and other
factors referenced specifically in connection with such statements,
the following factors could impact the business and financial
prospects of the Corporation: general economic conditions;
legislative and regulatory initiatives; monetary and fiscal
policies of the federal government; deposit flows;
disintermediation; the cost of funds; general market rates of
interest; interest rates or investment returns on competing
investments; demand for loan products; demand for financial
services; changes in accounting policies or guidelines; and changes
in the quality or composition of the Corporation's loan and
investment portfolio; and the result of the Corporation's
discussions with the WDR. Such uncertainties and other risk factors
are discussed further in the Corporation's filings with the
Securities and Exchange Commission. The Corporation undertakes no
obligation to make any revisions to forward-looking statements
contained in this release or to update them to reflect events or
circumstances occurring after the date of this release. UNAUDITED
At or for the Three Months Ended December 31, 2005 2004 % Change
(Amounts In Thousands, Except Share and Per Share Amounts) For the
Period: Interest Income $20,910 $17,167 21.80% Interest Expense
8,966 5,585 60.54% Net Interest Income 11,944 11,582 3.13%
Provision for Loan Losses 390 461 (15.40%) Non-Interest Income
3,242 2,979 8.83% Non-Interest Expense 12,713 14,574 (12.77%)
Income (Loss) Before Income Taxes 2,083 (474) n/m Income Taxes 648
337 92.28% Net Income (Loss) $1,435 $(811) n/m End of Period:
12/31/05 12/31/04 % Change Assets $1,461,339 $1,357,065 7.68% Loans
(gross) 1,133,667 1,038.681 9.14% Allowance for Loan Losses 10,660
10,622 0.36% Deposits 1,160,163 1,033,046 12.31% Shareholders'
Equity 94,734 91,739 3.26% Per Share: Net Income (basic) $0.39
($0.22) (14.55%) Net Income (diluted) $0.39 ($0.22) (14.55%) Book
Value $25.59 $24.97 2.50% Dividends Declared $0.18 $0.18 0.00%
Average Shares Outstanding (basic) 3,701,621 3,671,547 Average
Shares Outstanding (diluted) 3,711,786 3,676,075 Ending Shares
Outstanding 3,701,621 3,674,054 Key Ratios: Net Interest Margin
3.56% 3.77% Return on Average Assets 0.39% (0.24%) Return on
Average Common Equity 6.06% (3.44%) Shareholders Equity to Assets
Ratio 6.48% 6.76% Tier 1 Capital to Average Assets Ratio 6.47%
6.62% Non-performing Loans/Total Loans 0.46% 0.85% Non-performing
Assets/Total Assets 0.48% 0.75% Allowance for Loan Losses/
Non-performing Loans 203.16% 119.74% UNAUDITED For the Years Ended
December 31, 2005 2004 % Change (Amounts In Thousands, Except Share
and Per Share Amounts) For the Period: Interest Income $77,543
$61,988 25.09% Interest Expense 30,268 19,633 54.17% Net Interest
Income 47,275 42,355 11.62% Provision for Loan Losses 1,560 1,793
(12.99%) Non-Interest Income 13,914 11,537 20.60% Non-Interest
Expense 49,898 45,839 8.85% Income Before Income Taxes 9,731 6,260
55.45% Income Taxes 3,124 2,258 38.35% Net Income $6,607 $4,002
65.09% Per Share: Net Income (basic) $1.80 $1.16 55.17% Net Income
(diluted) $1.79 $1.15 55.65% Average Shares Outstanding (basic)
3,688,248 3,464,766 Average Shares Outstanding (diluted) 3,699,412
3,477,777 Dividends Declared $0.72 $0.72 0.00% Key Ratios: Net
Interest Margin 3.65% 3.76% Return on Average Assets 0.47% 0.33%
Return on Average Common Equity 7.00% 4.69% First Call Analyst:
FCMN Contact: DATASOURCE: Merchants & Manufacturers
Bancorporation, Inc. CONTACT: Michael J. Murry, Chairman of the
Board of Directors, +1-414-425-5334, or Frederick R. Klug,
Executive Vice President and Chief Financial Officer,
+1-262-827-5632, both of Merchants & Manufacturers
Bancorporation Web site: http://www.communitybancgroup.com/
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