NEW BERLIN, Wis., Feb. 8 /PRNewswire-FirstCall/ -- Merchants &
Manufacturers Bancorporation, Inc. ("Merchants")(OTC:MMBI)
(BULLETIN BOARD: MMBI) , a $1.5 billion asset financial holding
company, today reported earnings for the fourth quarter and year
ended December 31, 2006. For the year ended December 31, 2006, net
income was $4.0 million, or $1.08 per fully diluted common share,
compared to $5.1 million, or $1.38 per fully diluted common share
for the year ended December 31, 2005. For the fourth quarter of
2006, Merchants reported net income of $23,000, or $0.01 per fully
diluted common share, compared to a loss of $(74,000), or $(0.02)
per fully diluted common share, for the fourth quarter of 2005. The
decrease in earnings for the year ended 2006 compared to the year
ended 2005 is partially attributable to non-recurring items
incurred during 2005. The year ended December 31, 2006 included
pre-tax non-recurring income of $211,000 compared to $825,000 for
the same period in 2005. Earnings were also affected by a decline
in the net interest margin to 3.36% for the year ended December 31,
2006 compared to 3.65% for the same period in the prior year.
Similarly, net interest margin was 3.32% for the quarter ended
December 31, 2006 compared to 3.56% for the same period in 2005.
The decrease in our net interest margin is due to our funding loan
growth with more expensive wholesale funding compared to the lower
cost of core deposits. Merchants' total assets increased 3.2% from
$1.46 billion at December 31, 2005, to $1.51 billion at December
31, 2006. Gross loans increased 6.4% from $1.13 billion at December
31, 2005, to $1.21 billion at December 31, 2006. Total deposits
grew 0.4% from $1.16 billion at December 31, 2005 to $1.17 billion
at December 31, 2006 primarily due to an increase in brokered
deposits. Our balance sheet growth in 2006 is due to internal
growth. Michael J. Murry, Chairman, stated, "After two years of
building a centralized environment and absorbing the cost of the
technology and human resource inherent in such an endeavor during
2004 and 2005, the first three quarters of 2006 began to show the
progress made toward increased efficiency. Despite substantial
pressure on net interest margins throughout the industry, our
second quarter earnings per share increased 32% over the first
quarter and the third quarter earnings per share increased 16% over
the second quarter. "The trend of double digit increases was
expected to continue in the fourth quarter and beyond.
Unfortunately, net interest margin decreased substantially from
what we had projected for the fourth quarter due to the difficult
yield curve environment and a decrease in loan volume during the
third quarter. In addition, a substantial provision to the loan
loss reserve had to be made at a subsidiary bank to offset
anticipated losses in 2007. This matter relates to the completion
of several real estate development projects of one long time
customer whose out-of-state projects with other financial
institutions has negatively affected the customer's projects in
Wisconsin financed by the subsidiary bank. The combined effect of
these two events reduced our projected earnings per share by $0.53
in the fourth quarter. "Despite the reduction in net interest
margin and the addition to the loan loss reserve, there were many
positive developments during 2006. Full time equivalents remained
relatively stable in 2006 even with the modest balance sheet growth
and the opening of four new branch facilities during the year. In
addition, total non interest expense ended more than $580,000 under
budget reflecting continued improvements in operational
efficiencies. Total revenues in non-bank subsidiaries that provide
insurance, investment, tax consultation and tax preparation
services increased 21.8% to more than $2.2 million in 2006. In
addition, these two subsidiaries brought in an additional $21.7
million in deposit and loan relationships to our bank subsidiaries
in 2006. "In addition to these positive developments during 2006,
we announced on January 9th, 2007 that the Board of Directors held
a series of strategic planning meetings during 2006 that resulted
in several actions being recommended and approved. Those changes
included the completion of the sale and leaseback of our holding
company facility, the pending sale of the assets of our bank in
Minnesota and the combination of Lincoln State Bank and Franklin
State Bank expected to be completed in the second quarter of 2007.
On a pre-tax basis, we estimate that the sale and leaseback of our
holding company facility will reduce expenses by $90,000 in both
2007 and 2008 while the combination of Lincoln State Bank and
Franklin State Bank will reduce expenses by $130,000 in 2007 and
$300,000 in 2008. "Furthermore, the board authorized the
implementation of the Metavante consultant recommendations which
will result in further announcements of structural changes to our
organization. We believe these strategic moves, along with other
initiatives, will improve our capital position, reduce our debt,
and position us to add assets without adding costs and therefore
realize a proper return on our investment." Net interest income was
$11.5 million for the fourth quarter of 2006 compared to $11.9
million for the fourth quarter of 2005 and $46.1 million for the
full-year 2006 compared to $47.3 million for 2005. The net interest
margin was 3.32% for the quarter ended December 31, 2006 compared
to 3.56% for the same period last year. Similarly, net interest
margin was 3.36% for the year ended December 31, 2006 compared to
3.65% for the same period in 2005. The decline in net interest
margin was due to strong loan growth which was funded with higher
cost wholesale funding instead of lower cost core deposits.
Merchants' provision for loan losses was $1.9 million and $3.1
million, respectively, for the three and twelve months ended
December 31, 2006 compared to $2.8 million and $4.0 million for the
same periods in the prior year. The ratio of allowance for loan
losses to total loans was 1.06% and 1.15% at December 31, 2006 and
2005, respectively. The ratio of allowance for loan losses to
non-performing loans was 86.9% at December 31, 2006 compared to
248.7% at December 31, 2005. The ratio of non-performing assets to
total assets equaled 1.01% at December 31, 2006 compared to 0.48%
at December 31, 2005. Non-interest income for the three and twelve
months ended December 31, 2006 was $3.4 million and $14.0 million,
respectively, compared to $3.2 million and $13.9 million for the
same periods in the prior year, an increase of 5.2% and 1.0%,
respectively. We continue to have modest increases in service
charges on deposit accounts and loan fee income that are partially
offset by continued slowing of the mortgage loan market as interest
rates continue to climb. Non-interest income for the year ended
December 31, 2006 included non-recurring income of $211,000
compared to $825,000 for the same period in 2005. Non-interest
expense for the three and twelve months ended December 31, 2006 was
$13.2 million and $51.5 million, respectively, compared to $12.7
million and $49.9 million for the same periods in the prior year,
an increase of 4.0% and 3.2%, respectively. Salaries and employee
benefits increased $547,000 for the quarter and increased $1.7
million for the year primarily due to a significant increase in the
cost of health insurance and normal pay increases. Most other
operating expenses continue to trend down as occupancy expense
decreased $177,000 year-to-date and marketing and business
development decreased $283,000 year-to-date. Effective January 1,
2006, the Corporation adopted FAS 123(R) which resulted in
additional compensation cost of $5,000 and $76,000 for the three
and twelve months ended December 31, 2006, respectively. UNAUDITED
Three Months Ended December 31, Years Ended December 31, 2006 2005
Change 2006 2005 Change (Dollars In Millions, Except Per Share
Amounts) Net Income (Loss) $0.23 $(0.74) n/m $3.996 $5.098 (21.62%)
Basic EPS $0.01 $(0.02) n/m $1.08 $1.39 (22.30%) Diluted EPS $0.01
$(0.02) n/m $1.08 $1.38 (21.74%) 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 50 offices in the communities they serve with more
than 100,000 clients and total assets of $1.5 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 Over-the-Counter Bulletin Board 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 timing and results of the
Corporation's strategic initiatives discussed in this release. 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, 2006 2005 % Change (Amounts In Thousands, Except Share and Per
Share Amounts) For the Period: Interest Income $23,758 $20,910
13.62% Interest Expense 12,233 8,966 36.44% Net Interest Income
11,525 11,944 (3.51%) Provision for Loan Losses 1,890 2,781
(32.04%) Non-Interest Income 3,411 3,242 5.21% Non-Interest Expense
13,222 12,713 4.00% Loss Before Income Taxes (176) (308) n/m Income
Taxes (199) (234) n/m Net Income (Loss) $23 $(74) n/m End of
Period: 12/31/06 12/31/05 % Change Assets $1,505,940 $1,458,948
3.22% Loans (gross) 1,206,456 1,133,667 6.42% Allowance for Loan
Losses 12,798 13,051 (1.94%) Deposits 1,165,237 1,160,163 0.44%
Shareholders' Equity 94,297 93,225 1.15% Per Share: Net Income
(basic) $0.01 $(0.02) n/m Net Income (diluted) $0.01 $(0.02) n/m
Book Value $25.64 $25.18 1.82% Dividends Declared $0.18 $0.18 0.00%
Average Shares Outstanding (basic) 3,685,441 3,701,621 Average
Shares Outstanding (diluted) 3,694,019 3,711,786 Ending Shares
Outstanding 3,677,180 3,701,621 Key Ratios: Net Interest Margin
3.32% 3.56% Return on Average Assets 0.01% (0.02%) Return on
Average Common Equity 0.10% (0.31%) Shareholders Equity to Assets
Ratio 6.26% 6.39% Tier 1 Capital to Average Assets Ratio 6.27%
6.37% Non-performing Loans/Total Loans 1.22% 0.46% Non-performing
Assets/Total Assets 1.01% 0.48% Allowance for Loan Losses/
Non-performing Loans 86.87% 248.73% UNAUDITED For the Years Ended
December 31, 2006 2005 % Change (Amounts In Thousands, Except Share
and Per Share Amounts) For the Period: Interest Income $ 91,615 $
77,543 18.15% Interest Expense 45,480 30,268 50.26% Net Interest
Income 46,135 47,275 (2.41%) Provision for Loan Losses 3,060 3,951
(22.55%) Non-Interest Income 14,046 13,914 0.95% Non-Interest
Expense 51,514 49,898 3.24% Income Before Income Taxes 5,607 7,340
(23.61%) Income Taxes 1,611 2,242 (28.14%) Net Income $3,996 $5,098
(21.62%) Per Share: Net Income (basic) $1.08 $1.39 (22.30%) Net
Income (diluted) $1.08 $1.38 (21.74%) Average Shares Outstanding
(basic) 3,692,477 3,688,248 Average Shares Outstanding (diluted)
3,705,949 3,699,412 Dividends Declared $0.72 $0.72 0.00% Key
Ratios: Net Interest Margin 3.36% 3.65% Return on Average Assets
0.27% 0.36% Return on Average Common Equity 4.15% 5.40% 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, Inc. Web site: http://www.communitybancgroup.com/
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