FIRST MANITOWOC BANCORP INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
ANNUAL REPORT
PURSUANT TO
SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE
FISCAL YEAR ENDED
DECEMBER 31, 2002
COMMISSION FILE NUMBER 0-25983

FIRST MANITOWOC BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

WISCONSIN
(State or other jurisdiction of 39-1435359
incorporation or organization) (IRS Employer Identification No.)

402 NORTH EIGHTH STREET
MANITOWOC, WISCONSIN 54221-0010
(Address of principal executive offices) (Zip Code)

(920) 684-6611
(Registrant's telephone number, including area code)

Securities registered under Section 12(b) of the Act:

None

Securities registered under Section 12(g) of the Act:

COMMON STOCK, PAR VALUE $1.00
(Title of Class)

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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

The aggregate market value of registrant's common stock, par value $1.00
per share, held by non-affiliates (excludes a total of 637,278 shares reported
as beneficially owned by directors and executive officers or held in the
registrant's profit sharing 401(k) plan; does not constitute an admission as to
affiliate status), as of June 30, 2002, was approximately $82,109,324.

As of February 28, 2003, 6,937,268 shares of registrant's common stock, par
value $1.00 per share were outstanding,

DOCUMENTS INCORPORATED BY REFERENCE

Portions of First Manitowoc Bancorp, Inc.'s Definitive Proxy Statement for
the 2003 Annual Meeting of Shareholders are incorporated by reference into Part
III of this Form 10-K.

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2002 FORM 10-K
TABLE OF CONTENTS

PART I
ITEM 1
BUSINESS

GENERAL

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. Insurance Center of Manitowoc, Inc. 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 Corporation acquired the Bank through the merger of the Bank into an
interim national banking association formed as a Corporation subsidiary for the
purpose of the merger, pursuant to a Plan of Reorganization and Agreement to
Merge (the "Plan") proposed by Bank management and approved by the Bank's
shareholders in 1982. Pursuant to the Plan, each outstanding share of Bank
common stock was exchanged for three shares of the Corporation's common stock.
The Bank's charter was not affected by the merger. Currently, the Corporation
has outstanding 6,937,268 shares of common stock, par value $1.00 per share
("Shares"). Shares were held by 605 holders of record on February 28, 2003.

As of December 31, 2002, the Corporation had assets of approximately $565.8
million, net loans of approximately $340.7 million, and deposits of $416.1
million. For additional financial information, see the Consolidated Financial
Statements and Notes beginning at Item 8 of this Form 10-K.

The Corporation's and the Bank's main office is located at 402 North Eighth
Street, Manitowoc, Manitowoc County, Wisconsin. The Bank has twelve full service
branch offices located in Francis Creek, St. Nazianz, Two Rivers, Mishicot,
Manitowoc, Kiel, Newton, New Holstein, Plymouth, Bellevue, and Ashwaubenon,
Wisconsin. The Corporation's home page on the Internet is
www.bankfirstnational.com. 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-K.

Throughout this Form 10-K information from parts of other documents filed
with the Securities and Exchange Commission ("SEC") is incorporated by
reference. The SEC allows us to disclose important information by referring to
it in this manner, and you should review this information.

We make our annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and proxy statement for our annual shareholders'
meeting, as well as any amendments to those reports filed pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, available
free of charge through our web site as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the SEC. Our SEC
reports can be accessed through the "About; First Manitowoc Bancorp, Inc." link
of our web site, namely www.bankfirstnational.com/bancorp. The SEC also
maintains a web site at www.sec.gov that contains reports, proxy statements and
other information regarding SEC registrants.

BANKING PRODUCTS AND SERVICES

The Bank has been doing business in Wisconsin since 1894 and is engaged in
both the commercial and consumer banking business. The Bank provides a wide
range of personal banking services designed to meet the needs of local
consumers. Among the services provided are checking accounts, savings and time
accounts, safe deposit boxes, and installment and other personal loans,
especially residential mortgages, as well as home equity loans, automobile and
other consumer financing. As a convenience to its customers, the Bank offers
Saturday banking hours; drive-thru teller windows; "Telebanc," a telephone
banking service; and 24-hour automated teller machines. Additionally, the Bank
offers an Internet web site, which includes on-line banking.

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The Bank is also engaged in the financing of commerce and industry by
providing credit and deposit services for small to medium sized businesses and
for the agricultural community in the Bank's market area. The Bank offers many
forms of commercial lending, including lines of credit, revolving credit, term
loans, accounts receivable financing, and commercial real estate mortgage
lending and other forms of secured financing. A full range of commercial banking
services is offered, including the acceptance of checking and savings deposits.

Additional types of real estate loans, brokerage services, credit cards and
related services are also offered through correspondent banks or other third
parties.

The Bank offers a full range of trust services that include trust under
agreement, testamentary trust, guardianships and conservatorships, probate
estates, estate planning, and financial planning.

Insurance products, including commercial, personal, life, and health
insurance, are offered through Insurance Center of Manitowoc, Inc.

To attract new business and retain existing customers, the Bank relies on
local promotional activity, personal contact by its officers, staff and
directors, referrals by current customers, extended banking hours, and
personalized service.

DEPOSIT ACTIVITIES

From December 31, 2001 to December 31, 2002, deposits increased $22.0
million or 5.6% to $416.1 million. From December 31, 2000 to December 31, 2001,
deposits decreased $0.5 million or 0.1% to $394.1 million.

No material portion of the Bank's deposits has been obtained from an
individual or a few individuals (including federal, state and local governments
and agencies) the loss of any one or more of which would have a materially
adverse effect on the Bank.

LENDING ACTIVITIES

The Bank has experienced growth in the number and dollar amount of loans as
a result of relatively low interest rates and general marketing efforts. Loans
sold and serviced for others are not included in these growth numbers. Loan
portfolio growth from December 31, 2001 to December 31, 2002 was $16.7 million
or 5.1%. In 2002, the amount of loans sold and serviced for others increased by
$42.6 million compared to 2001. The loan portfolio reflected $0.9 million or
0.3% growth in 2001. In 2001, the Bank increased the amount of loans sold and
serviced for others by $35.3 million. No material portion of the Bank's loans is
concentrated within a single industry or group of related industries.

BANK SUBSIDIARY CORPORATIONS

The Bank owns 49.8% of the outstanding common stock of United Financial
Services, Inc. United Financial Services, Inc., located in Grafton, Wisconsin,
provides data processing services to owner banks Baylake Bank and First National
Bank in Manitowoc and to 51 other banks located in Wisconsin.

The Bank owns 100% of the outstanding common stock of FNBM Investment Corp.
FNBM Investment Corp., located in Las Vegas, Nevada, holds and manages a portion
of the bank's investment and loan portfolios.

The Bank owns 100% of the outstanding common stock of the Insurance Center
of Manitowoc, Inc., an independent agency offering commercial, personal, life
and health insurance.

SEASONALITY

The management of the Bank does not believe that the deposits or business
of the Bank in general are seasonal in nature. The deposits may, however, vary
with local and national economic conditions but not enough to have a material
effect on planning and policy making.

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FOREIGN OPERATIONS

The Bank does not engage in operations in foreign countries.

EMPLOYEES

As of February 28, 2003, the Corporation employed 208 individuals, 83 of
whom worked part-time.

COMPETITION

The Bank offers many personalized services and attracts customers by being
responsive and sensitive to the needs of the community. The Bank relies on
goodwill and referrals from satisfied customers as well as traditional media
advertising to attract new customers. To enhance a positive image in the
community, the Bank supports and participates in many local events, such as the
Manitowoc County Fair, Manitowoc County Airport Day, First National Bank
Maritime Bay Bike Classic, Two Rivers Ethnic Festival and French Creek Days.
Employees, officers, and directors represent the Bank on many boards and local
civic and charitable organizations.

The primary factors in competing for deposits are interest rates,
personalized services, the quality and range of financial services, convenience
of office locations and office hours. Competition for deposits comes primarily
from other commercial banks, savings associations, credit unions, money market
funds and other investment alternatives. The primary factors in competing for
loans are interest rates, loan origination fees, the quality and range of
lending services and personalized services. Competition for loans comes
primarily from other commercial banks, savings associations, mortgage banking
firms, credit unions and other financial intermediaries. Competition in the
Bank's market area is expected to continue for the foreseeable future.

SUPERVISION AND REGULATION

General. The Corporation and the Bank are extensively regulated under
federal and state law. Generally, these laws and regulations are intended to
protect depositors, not shareholders. The following is a summary description of
certain provisions of certain laws which affect the regulation of bank holding
companies and banks. The discussion is qualified in its entirety by reference to
applicable laws and regulation. Changes in such laws and regulations may have a
material effect on the business and prospects of the Corporation and the Bank.

Federal Bank Holding Company Regulation and Structure. The Corporation is a
bank holding company within the meaning of the BHCA, as amended, and as such, it
is subject to regulation, supervision, and examination by the Federal Reserve
Board ("FRB"). The Corporation is required to file annual and quarterly reports
with the FRB and to provide the FRB with such additional information as the FRB
may require. The FRB may conduct examinations of the Corporation and its
subsidiaries.

With certain limited exceptions, the Corporation is required to obtain
prior approval from the FRB before acquiring direct or indirect ownership or
control of more than 5% of any voting securities or substantially all of the
assets of a bank or bank holding company, or before merging or consolidating
with another bank holding company. Additionally, with certain exceptions, any
person proposing to acquire control through direct or indirect ownership of 25%
or more of any voting securities of the Corporation is required to give 60 days'
written notice of the acquisition to the FRB, which may prohibit the
transaction, and to publish notice to the public.

Generally, a bank holding company may not engage in any activities other
than banking, managing or controlling its bank and other authorized
subsidiaries, and providing services to these subsidiaries. With prior approval
of the FRB, the Corporation may acquire more than 5% of the assets or
outstanding shares of a company engaging in non-bank activities determined by
the FRB to be closely related to the business of banking or of managing or
controlling banks. The FRB provides expedited procedures for expansion into
approved categories of non-bank activities.

4

Subsidiary banks of a bank holding company are subject to certain
quantitative and qualitative restrictions on extensions of credit to the bank
holding company or its subsidiaries, on investments in their securities and on
the use of their securities as collateral for loans to any borrower. These
regulations and restrictions may limit the Corporation's ability to obtain funds
from the Bank for its cash needs, including funds for the payment of dividends,
interest and operating expenses. Further, subject to certain exceptions, a bank
holding company and its subsidiaries are prohibited from engaging in certain
tie-in arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services. For example, the Bank may not generally
require a customer to obtain other services from itself or the Corporation, and
may not require that a customer promise not to obtain other services from a
competitor as a condition to an extension of credit to the customer.

Under FRB policy, a bank holding company is expected to act as a source of
financial strength to its subsidiary banks and to make capital injections into a
troubled subsidiary bank, and the FRB may charge the bank holding company with
engaging in unsafe and unsound practices for failure to commit resources to a
subsidiary bank when required. A required capital injection may be called for at
a time when the holding company does not have the resources to provide it.

Federal Bank Regulation. The Corporation's banking subsidiary is a
federally-chartered national bank regulated by the Office of Comptroller of
Currency ("OCC"). The OCC may prohibit the institutions over which it has
supervisory authority from engaging in activities or investments that the agency
believes constitutes unsafe or unsound banking practices. Federal banking
regulators have extensive enforcement authority over the institutions they
regulate to prohibit or correct activities which violate law, regulation or a
regulatory agreement or which are deemed to constitute unsafe or unsound
practices. Enforcement actions may include the appointment of a conservator or
receiver, the issuance of a cease and desist order, the termination of deposit
insurance, the imposition of civil money penalties on the institution, its
directors, officers, employees and institution-affiliated parties, the issuance
of directives to increase capital, the issuance of formal and informal
agreements, the removal of or restrictions on directors, officers, employees and
institution-affiliated parties, and the enforcement of any such mechanisms
through restraining orders or other court actions.

The Bank is subject to certain restrictions on extensions of credit to
executive officers, directors, principal shareholders or any related interest of
such persons which generally require that such credit extensions be made on
substantially the same terms as are available to third persons dealing with the
Bank and not involve more than the normal risk of repayment. Other laws tie the
maximum amount which may be loaned to any one customer and its related interests
to capital levels.

Under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), each federal banking agency is required to prescribe, by regulation,
non-capital safety and soundness standards for institutions under its authority.
The federal banking agencies, including the OCC, have adopted standards covering
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth, and
compensation, fees and benefits. An institution which fails to meet those
standards may be required by the agency to develop a plan acceptable to the
agency, specifying the steps that the institution will take to meet the
standards. Failure to submit or implement such a plan may subject the
institution to regulatory sanctions. The Corporation, on behalf of the Bank,
believes that it meets substantially all standards which have been adopted.
FDICIA also imposed new capital standards on insured depository institutions.

Before establishing new branch offices, the Bank must meet certain minimum
capital stock and surplus requirements and the Bank must obtain OCC approval.

Deposit Insurance. As a FDIC member institution, the Bank's deposits are
insured to a maximum of $100,000 per depositor through the Bank Insurance Fund
("BIF"), administered by the FDIC. The Bank pays a quarterly deposit insurance
premium assessment to the FDIC. The insurance premium assessment is based upon
the FDIC's maintains risk-based assessment system by which institutions are
assigned to one of three categories based on their capitalization and one of
three subcategories based on examination ratings and other supervisory
information. An institution's assessment rate depends on the "supervisory
rating" it receives
5

from the FDIC ("A," "B," or "C") and on their regulatory capital level ("well
capitalized," "adequately capitalized," or "undercapitalized"). Assessment rates
for insured institutions are determined semiannually by the FDIC and currently
range from zero basis points for the healthiest institutions to 27 basis points
for the riskiest. The FDIC has authority to increase insurance assessments and
is required under federal law to establish assessment rates that will maintain
the insurance fund's ratio of reserves to insured deposits at $1.25 per $100.
The Bank was classified as "well capitalized" at December 31, 2002.

Capital Requirements. The federal banking regulators have adopted certain
risk-based capital guidelines to assist in the assessment of the capital
adequacy of a banking organization's operations for both transactions reported
on the balance sheet as assets and transactions, such as letters of credit,
which are recorded as off balance sheet items. Under these guidelines, nominal
dollar amounts of assets and credit equivalent amounts of off balance sheet
items are multiplied by one of several risk adjustment percentages, which range
from 0% for assets with low credit risk, such as certain U.S. Treasury
securities, to 100% for assets with relatively high credit risk, such as
business loans.

A banking organization's risk-based capital ratios are obtained by dividing
its qualifying capital by its total risk-adjusted assets. The regulators measure
risk-adjusted assets, which include off balance sheet items, against both total
qualifying capital (the sum of Tier 1 capital and limited amounts of Tier 2
capital) and Tier 1 capital. "Tier 1," or core capital, includes common equity,
less goodwill and other intangibles, subject to certain exceptions. "Tier 2," or
supplementary capital, includes the allowance for loan and lease losses, subject
to certain limitations. Banks and bank holding companies subject to the
risk-based capital guidelines are required to maintain a ratio of Tier 1 capital
to risk-weighted assets of at least 4.0% and a ratio of total capital to
risk-weighted assets of at least 8.0%. The appropriate regulatory authority may
set higher capital requirements when particular circumstances warrant. As of
December 31, 2002, the Bank's and the Corporation's ratio of Tier 1 to
risk-weighted assets was 11.1% and 11.4%, respectively. As of December 31, 2002,
the Bank's and the Corporation's ratio of total capital to risk-weighted assets
was 12.0% and 12.3%, 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 average assets, referred to as the leverage capital ratio, of
at least 4.0%. As of December 31, 2002, the Bank's and the Corporation's
leverage capital ratio was 7.5% and 7.7%, respectively.

Federal banking agencies include in their evaluations of a bank's capital
adequacy an assessment of the Bank's interest rate risk ("IRR") exposure. The
standards for measuring the adequacy and effectiveness of a banking
organization's interest rate risk management includes a measurement of board of
director and senior management oversight, and a determination of whether a
banking organization's procedures for comprehensive risk management are
appropriate to the circumstances of the specific banking organization. The Bank
has internal IRR models that are used to measure and monitor IRR.

Failure to meet applicable capital guidelines could subject a banking
organization to a variety of enforcement actions, including limitations on its
ability to pay dividends, the issuance by the applicable regulatory authority of
a capital directive to increase capital and, in the case of depository
institutions, the termination of deposit insurance by the FDIC. In addition,
future changes in regulations or practices could further reduce the amount of
capital recognized for purposes of capital adequacy. Such a change could affect
the ability of the Bank to grow and could restrict the amount of profits, if
any, available for the payment of dividends to the Corporation.

Monetary Policy. The earnings of a bank holding company are affected by the
policies of regulatory authorities, including the FRB, in connection with the
FRB's regulation of the money supply. Various methods employed by the FRB are
open market operations in United States Government securities, changes in the
discount rate on member bank borrowing and changes in reserve requirements
against member bank deposits. These methods are used in varying combinations to
influence overall growth and distribution of bank loans, investments and
deposits, and their use may also affect interest rates charged on loans or paid
on deposits. Because of ongoing change in the national economy and in the money
markets, as well as the effect of monetary and fiscal policies of the Federal
Reserve System and Federal government, prediction cannot be

6

made as to future changes in interest rates, loan demand, deposit levels or the
effect on the earnings of the Corporation.

Anti-Terrorism Act. On October 6, 2002 the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act (the "Patriot Act") was signed into law. While not primarily
banking legislation, the Patriot Act contained provisions requiring financial
institutions to adopt a variety of policies aimed at preventing
money-laundering. The OCC is the primary regulator for purposes of insuring
compliance by the Bank with Patriot Act requirements and certain of those
requirements will not become effective until adoption of implementing
regulations by the OCC. Management of the Bank does not believe that compliance
with the Patriot Act and its implementing regulations will have a significant
impact on the Bank's business.

ITEM 2
PROPERTIES

The Corporation owns real property at two branch locations at:

1509 Washington Street, Two Rivers, Wisconsin 54241 ("Two Rivers Branch
Office"); and

2915 Custer Street, Manitowoc, Wisconsin 54220 ("Custer Street Branch
Office").

The Bank owns real property at the location of its main office at 402 North
Eighth Street, Manitowoc, Wisconsin 54220; and at nine of its branch locations
at:

106 South Packer Drive, Francis Creek, Wisconsin 54214 ("Francis Creek
Branch Office");

109 South Fourth Avenue, St. Nazianz, Wisconsin 54232 ("St. Nazianz
Branch Office");

110 Baugniet Street, Mishicot, Wisconsin 54228 ("Mishicot Branch
Office");

108 Fremont Street, Kiel, Wisconsin 53042 ("Kiel Branch Office");

5724 CTH U, Newton, Wisconsin 53063 ("Newton Branch Office");

2210 Calumet Drive, New Holstein, Wisconsin 53061 ("New Holstein Branch
Office");

2323 Eastern Avenue, Plymouth, Wisconsin 53073 ("Plymouth East Branch
Office");

300 East Mill Street, Plymouth, Wisconsin 53073 ("Plymouth West Branch
Office"); and

2747 Manitowoc Road, Green Bay, Wisconsin 54311 ("Bellevue Branch
Office").

The Bank leases real property at one branch location:

2865 South Ridge Road, Green Bay, Wisconsin, 54304 ("Ashwaubenon Branch
Office").

Insurance Center of Manitowoc, Inc. owns real property located at:

4712 Expo Drive, Manitowoc, Wisconsin 54220 ("Insurance Center of
Manitowoc, Inc. Office").

Insurance Center of Manitowoc, Inc. leases real property at:

425 South Adams Street, Green Bay, Wisconsin, 54301 ("Gary G. Vincent &
Associates, Inc. Office").

There are no encumbrances on any of these properties.

ITEM 3
LEGAL PROCEEDINGS

The Corporation is involved in various legal actions arising in the normal
course of its business. While the ultimate outcome of these various legal
proceedings cannot be predicted with certainty, it is the opinion of management
and through 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.

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ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

PART II

ITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS

MARKET INFORMATION

There is no established public trading market for the Corporation's Shares.
Accordingly, there is no comprehensive record of trades or the prices of any
such trades. The following tables reflect stock prices for Corporation Shares to
the extent such information is made known and available to management of the
Corporation, and the dividends declared with respect thereto during the
preceding two years.

All market information shown above has been restated for stock dividends
and stock splits.

CASH DIVIDENDS

All cash dividends shown above have been restated for stock dividends and
stock splits.

HOLDERS

As of February 28, 2003 there were approximately 605 holders of record of
the Corporation's Shares.

DIVIDENDS

The Corporation declared and paid cash dividends per share totaling $0.183
per share or $1,265,000 during fiscal 2002, and $0.150 per share or $1,041,000
during fiscal 2001. The Corporation currently expects that comparable cash
dividends will continue in the future.

The holders of the Corporation's Shares will be entitled to dividends,
when, as, and if declared by the Corporation's Board of Directors, subject to
the restrictions imposed by Wisconsin law. The only statutory limitation
applicable to the Corporation is that dividends may not be paid if the
Corporation is insolvent or if the dividend would cause the Corporation to
become insolvent. There are no contractual restrictions that

8

currently limit the Corporation's ability to pay dividends or that the
Corporation reasonably believes are likely to limit materially the future
payment of dividends on the Corporation's Shares. Currently, its only source of
income is from the dividends paid by the Bank to the Corporation. Therefore, the
dividend restrictions applicable to national banks will impact the Corporation's
ability to pay dividends.

Under the National Bank Act, dividends may be paid only out of retained
earnings as defined in the statute. The approval of the OCC is required if the
dividends for any year exceed the net profits, as defined, for that year plus
the retained net profits for the preceding two years. In addition, unless a
national bank's capital surplus equals or exceeds the stated capital for its
common stock, no dividends may be declared unless the bank makes transfers from
retained earnings to capital surplus.

9

ITEM 6
SELECTED FINANCIAL DATA
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

The following selected financial data should be read in conjunction with
the Corporation's Consolidated Financial Statements and the related notes and
with the Corporation's Management's Discussion and Analysis of Financial
Condition and Results of Operations, provided elsewhere herein.

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* Per share data for 1998 through 2002 is restated to reflect the 25% stock
dividend (five-for-four stock split) effective April 16, 1999, and the
two-for-one stock splits effective June 30, 2000 and October 18, 2002.

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SUMMARY QUARTERLY FINANCIAL INFORMATION

- -------------------------
* Per share data has been adjusted to reflect the two-for-one stock split
effective October 18, 2002.

FORWARD-LOOKING STATEMENTS

The discussions in this Report on Form 10-K and the documents incorporated
herein by reference which are not statements of historical fact (including
statements in the future tense and those which include terms such as "believe,"
"will," "expect," and "anticipate") contain forward-looking statements that
involve risks and uncertainties. The Corporation's actual future results could
materially differ from those discussed. Factors that might cause actual results
to differ from the results discussed in forward-looking statements include, but
are not limited to:

- General economic conditions, either nationally or the state in which the
Corporation does business;

- Legislation or regulatory changes which adversely affect the businesses
in which the Corporation is engaged;

- Changes in the interest rate environment which increase or decrease
interest rate margins;

- Changes in securities markets with respect to the market value of
financial assets and the level of volatility in certain markets such as
foreign exchange;

- Significant increases in competition in the banking and financial
services industry resulting from industry consolidation, regulatory
changes and other factors, as well as actions taken by particular
competitors;

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- Changes in consumer spending, borrowing and savings habits;

- Technological changes;

- Acquisitions and unanticipated occurrences which delay or reduce the
expected benefits of acquisitions;

- The Corporation's ability to increase market share and control expenses;

- The effect of compliance with legislation or regulatory changes;

- The effect of changes in accounting policies and practices;

- The costs and effects of unanticipated litigation and of unexpected or
adverse outcomes in such litigation; and

- The factors discussed in Item 1 in this report and in the Management's
Discussion and Analysis in Item 7, as well as those discussed elsewhere
in this report and the documents incorporated herein by reference.

All forward-looking statements contained in this report are based upon
information presently available and the Corporation assumes no obligation to
update any forward-looking statements.

ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Balance Sheet Analysis

December 31, 2002 compared to December 31, 2001

For the twelve-month periods ended December 31, 2001 and December 31, 2002,
total assets increased $38.5 million or 7.3%. Investment securities increased
$9.0 million, while net loans increased $16.0 million. Total deposits increased
$22.0 million.

Liquidity Management

Liquidity management describes the ability of the Bank to access funding
sources at a minimum cost to meet fluctuating deposit, withdrawal, and loan
demand needs and to fund current and planned expenditures. The Bank maintains
its asset liquidity position internally through short-term investments, the
maturity distribution of the investment portfolio, loan repayments and income
from interest earning assets. A substantial portion of the investment portfolio
contains readily marketable securities that could be converted to cash
immediately. Refer to Note 3 in the Consolidated Financial Statements for a
table showing the maturity distribution of the Bank's securities portfolio and
the related estimated fair value. 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 that will have a material impact on the Bank's ability to
maintain liquidity at satisfactory levels.

Capital Resources and Adequacy

Total shareholders' equity increased $7.8 million or 16.8% in 2002 to $54.3
million at the end of the year from $46.5 million at December 31, 2001. Net
income of $7.1 million and an increase of $2.0 million in accumulated other
comprehensive income less $1.3 million dividends paid primarily contributed to
this increase.

One measure of capital adequacy is the leverage ratio which is calculated
by dividing average total assets for the most recent quarter into Tier 1
capital. The regulatory minimum for this ratio is 4.0%. The Bank's leverage
ratio for the years ended December 31, 2002, 2001, and 2000 was 7.5%, 6.8%, and
6.8%, respectively.

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Another measure of capital adequacy is the risk-based capital ratio or the
ratio of total capital to risk-adjusted assets. Total capital is composed of
both core capital (Tier 1) and supplemental capital (Tier 2) including
adjustments for off balance sheet items such as letters of credit and taking
into account the different degrees of risk among various assets. Regulators
require a minimum total risk-based capital ratio of 8.0%. The Bank's ratio at
December 31, 2002, and for each of the two preceding years was 12.0%, 11.3%, and
10.7%, respectively. According to FDIC capital guidelines, the Bank is
considered to be "well capitalized" as of December 31, 2002.

Management knows of no other trend or event which will have a material
impact on capital. Please also refer to Note 15 in the Consolidated Financial
Statements for additional discussion of regulatory matters.

The following discussion is designed to provide a better understanding of
the results of operations of the Corporation and should be read in conjunction
with the Consolidated Financial Statements and Notes.

Results of Operations Overview for fiscal years 2002, 2001 and 2000

The Corporation reported $7,089,000 in net income for 2002 or $1.02 per
share compared to 2001 net income of $5,405,000 or $0.78 per share, and
$5,301,000 or $0.77 per share for 2000. Earnings for the year represent a record
level of performance for the Corporation, exceeding the previous record of
$5,405,000 achieved in 2001. The improvement was primarily attributed to growth
in net interest income and other operating income, the Corporation's major
income components. Return on average assets was 1.33%, 1.07% and 1.12% in 2002,
2001 and 2000, respectively. Return on average equity was 13.97% for 2002,
12.07% for 2001, and 14.15% for 2000.

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 and interest-bearing deposits offset by the
interest paid on deposits and borrowings. Interest rates fell during 2002 and
2001. Because deposits, loans and investments reprice at different rates and as
a result of changes in volume, the Bank's net interest income, on a fully
tax-equivalent basis, increased in both 2002 and 2001.

Net interest income (on a tax equivalent basis) for 2002 increased by
$1,132,000 or 5.8% compared to the year ended December 31, 2001, while 2001 net
interest income increased by $1,668,000 or 9.3% from the previous year ended
December 31, 2000. The smaller rate of increase for 2002 is the result of the
relatively small increase in loans and a significant decrease in interest rates
during 2002. Interest rate spread is the difference between the average yield on
interest earning assets and the average rate paid on interest bearing
liabilities (deposits). Interest rate spread for the years ended December 31,
2002, 2001 and 2000 was 3.76%, 3.55%, and 3.51%, respectively. See the Table 1
titled "Average Balances, Yields and Rates" for additional information.

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. For 2002, the net interest margin was 4.20% compared to 4.21% in
2001. The net interest margin for 2000 was 4.21%. These changes are the result
of repricing as previously discussed and illustrated in Table 2 "Rate and Volume
Variance Analysis Based on Average Balances."

Management and the Board of Directors of the Bank monitor interest rates on
a regular basis to assess the Bank's competitive position and to maintain a
reasonable and profitable interest rate spread. The Bank also considers the
maturity distribution of loans, investments, and deposits and its effect on net
interest income as interest rates rise and fall over time.

Tables 1 and 2 do not include financial data for the Corporation as they
include only Bank financial information. In Table 1, nonaccrual loans have been
included in the average balances, loan fees are included in interest income and
the yield on tax exempt loans and securities is computed on a tax-equivalent
basis using a tax rate of 34%.

13

AVERAGE BALANCES, YIELD AND RATES

TABLE 1

14

RATE AND VOLUME VARIANCE ANALYSIS
BASED ON AVERAGE BALANCES

TABLE 2

Provision and Allowance for Loan Losses

For the year ended December 31, 2002, the Bank recorded net charge-offs of
$1,303,000 compared to net charge-offs of $4,087,000 in 2001 and $941,000 in
2000. The large increase in net charge-offs in 2001 is primarily the result of
one commercial loan charge-off in the amount of $2,073,000. Internal loan
review, in particular, has been effective in identifying problem credits and in
achieving timely recognition of potential and actual losses within the loan
portfolio.

Gross charge-offs amounted to $1,578,000 in 2002, $4,134,000 in 2001, and
$996,000 in 2000, the majority of which were commercial loans. Loans charged off
are subject to ongoing review and effort is made to maximize recovery of
principal, interest and related expenses. Recoveries were $275,000 in 2002,
$47,000 in 2001, and $55,000 in 2000.

The allowance for loan losses is maintained at a level believed adequate by
management to absorb estimated loan losses. 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
nonaccruals, 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.

15

The factor of loan volume trends is based on actual lending activity. The
loan volume trends factor is for estimated losses that are believed to be
inherently part of the loan portfolio but that have not yet been identified as
specific problem credits. The current problem credits factor includes the
exposure believed to exist for specifically identified problem loans determined
on a loan-by-loan basis.

The allowance for loan losses of $3,384,000 as of December 31, 2002
amounted to 0.98% of the outstanding loan portfolio. As of December 31, 2001,
the $2,737,000 allowance for loan losses was 0.84% of gross loans, and the
allowance for loan losses of $3,824,000 as of December 31, 2000 represented
1.17% of gross loans. Analysis by internal loan review supports the adequacy of
the allowance. Management has determined that the allowance for loan losses is
adequate to absorb probable loan losses as of December 31, 2002. See Note 4 in
the Consolidated Financial Statements.

The allocation of the allowance for loan losses is shown in the following
table.

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

TABLE 3

Specific problem loans include the allocation of the allowance for specific
problem credits. Loan volume allocation includes the factor of loan volume
trends, with management's goal for this factor to maintain an adequate loan loss
reserve for outstanding loans less the specifically identified current problem
credits. The allocation of the allowance among the various loan types is based
on the average proportion of the loan types that make up the specific problem
loans. The unallocated portion of the allowance consists of the other factors
included in the analysis because those factors cannot be tied to specific loans
or loan categories.

The allocation and total for the allowance for loan losses is not to be
interpreted as a single year's exposure for loss nor the loss for any specified
time period.

16

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

TABLE 4

The increase in the allowance for loan losses from $2,737,000 at December
31, 2001 to $3,384,000 at December 31, 2002 is primarily due to an increase in
the provision for loan losses because of slow economic activity and higher
current problem loans. The higher than normal recoveries of loans previously
charged off also is a factor in the increased allowance for loan losses.
Management's analysis of the allowance for loan losses at December 31, 2002
indicates that the balance is adequate.

Other Income

Other income increased $1,241,000, or 23.2%, from 2001 to 2002. The growth
resulted primarily from an increase in Trust service fees, an increase in loan
servicing income, and increases in gain on sales of mortgage loans held for
sale. Increases in gain on sales of mortgage loans resulted from the lower
interest rate environment that increased loan demand and related fee income.

Other income increased $2,633,000, or 97.1%, from 2000 to 2001. The growth
resulted primarily from $1,497,000 of insurance commission income from the
Insurance Center acquisition, an increase in loan servicing income, and
increases in gain on sales of mortgage loans held for sale.

Other Expense

Other expense increased by $1,087,000, or 8.1%, from 2001 to 2002. This
change was primarily a result of increases in salaries and employee benefits due
to annual merit increases for employees. Other accounts with significantly
higher expenses included data processing, occupancy expense, insurance
commissions, software amortization, legal and professional fees, marketing, and
telephone expenses.

Other expenses increased by $2,027,000, or 17.7%, from 2000 to 2001. This
change was primarily a result of increases in salaries and employee benefits due
to additional salaries, commissions, and related benefits for

17

employees acquired in the Insurance Center acquisition, and annual merit
increases for employees. Occupancy expense increased due to offices obtained in
the Insurance Center acquisition. Amortization of goodwill increased as a result
of the Insurance Center acquisition.

Income Taxes

The effective tax rates for the Corporation were 20.58%, 14.59%, and
14.53%, for 2002, 2001, and 2000 respectively. The effective tax rate remained
consistent from 2000 to 2001. The increase in the effective tax rate for 2002 is
a result of higher taxable income in 2002. The primary reason for higher taxable
income is that the percent of non-taxable municipal interest income is much less
as a percent of total income than in past years dropping from 17% of pretax net
income in 2001 to 11% in 2002. See Note 13 in the Consolidated Financial
Statements.

Securities

Securities available for sale are held for an indefinite period of time and
may be sold in response to changing market and interest rate conditions as part
of the asset/liability management strategy. Securities available for sale are
carried at fair value, with unrealized holding gains and losses, net of the
related tax effect, reported as a separate component of accumulated other
comprehensive income. Securities held to maturity are those that management has
both the positive intent and ability to hold to maturity, and are reported at
amortized cost. The Bank does not own trading or held to maturity securities.

Total securities amounted to $135.7 million and $126.8 million as of
December 31, 2002 and 2001, respectively. The higher level of investments in
securities resulted primarily from the increase in available funds derived from
increases in deposits and securities sold under repurchase agreements.

The Bank manages its investment portfolios within policies that seek to
achieve desired levels of liquidity, manage interest rate sensitivity risk, meet
earnings objectives, and provide required collateral support for deposit
activities. The Bank had no concentrations of securities from any single issues
that exceeded 10% of shareholders' equity. Table 5 exhibits the distribution, by
type, of the investment portfolio as of December 31.

SECURITIES AVAILABLE FOR SALE

TABLE 5

18

The following table presents the maturity by type of the investment
portfolio for the year ended December 31, 2002.

INVESTMENT PORTFOLIO ANALYSIS

TABLE 6

Loan Portfolio

The Bank is actively engaged in originating loans to customers in
Manitowoc, Calumet, Sheboygan and Brown counties. The Bank has policies and
procedures designed to mitigate credit risk and to maintain the quality of the
loan portfolio. These policies include underwriting standards for new credits as
well as the continuous monitoring and reporting of asset quality and the
adequacy of the allowance for loan losses. These polices, coupled with
continuous training efforts, have provided effective checks and balances for the
risk associated with the lending process. Lending authority is based on the
level of risk, size of the loan and the experience of the lending officer.

Bank underwriting procedures are based on a process which evaluates the
management, repayment ability, collateral support, credit history, and overall
financial strength of prospective and current customers from a relationship
oriented perspective. Residential mortgage loans are predominantly underwritten
to general Federal National Mortgage Association (FNMA) guidelines.

The Bank extends the following types of credit: commercial loans,
agricultural loans, real estate loans and consumer loans.

Commercial loans are often secured with first liens on accounts receivable,
inventory and/or equipment. Commercial loans generally have loan to value ratios
of 80% or less. Agricultural loans are collateralized with first liens on crops,
farm products, farm personal property and/or real estate. Agricultural loans
generally have loan to value ratios of 70% or less, except for agricultural real
estate loans which have loan to value ratios of 80% or less. Real estate loans
include commercial real estate loans and residential real estate loans. Real
estate loans are collateralized with first mortgages. Commercial real estate
loans generally have loan to value ratios of 80% or less while residential real
estate loans have loan to value ratios of 90% or less. Consumer loans include
loans to individuals for personal, family or household purposes. Consumer loans
may be secured with first lien positions or be unsecured depending upon the
credit quality. The Bank will make subordinate loans in any category if the
borrower's financial position justifies it. The Bank is not involved in credit
risk insurance.

Bank management assesses the loan portfolio mix at least annually as part
of its planning and budget process. While there are no predetermined fixed
targets for various loan types established in the loan policy, general
guidelines are established annually for new loan activity based on loan
portfolio mix and credit needs in the Bank's main markets.

19

The risks associated with the Bank's loan categories are as follows:

Commercial and Agricultural. Credit risk is considered moderate. Past due
loans are below industry averages. The portfolio is fairly diversified with no
significant concentrations within one industry. Agricultural loans represent
approximately 5% of total loans.

Real Estate. Credit risk is considered low, with delinquency ratios and
non-performing loans at low levels.

Consumer. Credit risk is considered moderate, with delinquency ratios and
non-performing loans at low levels.

No loan customer exceeds the legal lending limit among the loan categories.
The Bank's legal and internal lending limit as of December 31, 2002 was
$8,472,000.

Extensions of credit used predominantly for business or agricultural
purposes are classified as commercial and agricultural loans. Commercial loans
include lines of credit for seasonal requirements of businesses, short-term
loans payable within 12 months for one time specific purposes and term loans
with maturities greater than 12 months for capital assets and fixed assets which
are amortized and repaid from cash flow. Agricultural loans include short-term
farm operating loans, intermediate-term farm personal property loans and
long-term agricultural real estate loans. Agricultural real estate loans
generally are written for one to two year terms with amortizations exceeding
five years. Commercial term loans for capital assets and fixed assets and
commercial real estate loans that have maturities of more than five years are
generally arranged through government assisted financing programs such as Small
Business Administration (SBA).

The increase in commercial loans and commercial real estate loans resulted
mainly from the general credit needs within the Bank's primary markets. The Bank
also made it a priority to sell residential mortgage loans to the FNMA secondary
market and term commercial real estate loans to the SBA secondary market.

Table 7 "Summary of Loan Portfolio" presents the composition of the Bank's
loan portfolio by significant concentration.

SUMMARY OF LOAN PORTFOLIO

TABLE 7

20

MATURITIES OF LOAN PORTFOLIO

TABLE 8

The Bank's policy is to make the majority of its loan commitments in the
market area it serves. This tends to reduce risk because management is familiar
with the credit histories of loan applicants and has an in-depth knowledge of
the risk to which a given credit or is subject. The Bank had no foreign loans in
its portfolio as of December 31, 2002.

It is the policy of the Bank to place a loan on nonaccrual 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 nonaccrual decision. Nonaccrual
loans are closely monitored by management. A nonaccrual loan is restored to
current status when the prospects of future contractual payments are no longer
in doubt. Nonaccrual loans at December 31, 2002 and 2001 were $1,801,000 and
$2,312,000, respectively. The fluctuation in the level of nonaccrual loans over
the past five years is attributed mainly to isolated credit deterioration in a
few larger account relationships. These included commercial loans, agricultural
loans and residential real estate loans. However, no trend in economic,
industrial, geographical or other factors could be identified to account for the
fluctuations in the level of nonaccrual loans. Accruing loans 90 days or more
past due include loans that are both well secured and in the process of
collection.

RISK ELEMENTS OF LOAN PORTFOLIO

TABLE 9

Total nonperforming loans at December 31, 2002 were $1,803,000, a decrease
of $1,038,000 from $2,841,000 at December 31, 2001.

21

Management maintains a listing of potential problem loans. The decision of
management to place loans in this category does not necessarily indicate that
the Bank expects losses to occur, but that management recognizes that a higher
degree of risk is associated with these performing loans. The loans that have
been reported as potential problem loans are not concentrated in a particular
industry, but rather cover a diverse range of businesses. Management does not
presently expect significant losses from credits in the potential problem loan
category.

Deposits

Deposit liabilities increased $22.0 million from $394.1 million at December
31, 2001 to $416.1 million at December 31, 2002. The Bank continues to
experience strong competition from other commercial banks, credit unions, the
stock market and mutual funds. There are no predetermined divisions in the
asset/liability policy for the mix of deposits. Table 1 displays the average
balances and average rates paid on all major deposits classifications for 2002,
2001 and 2000.

The following table represents maturities of time deposits in denominations
of $100,000 or more for the years ended December 31, 2002 and 2001.

MATURITY OF TIME DEPOSITS $100,000 OR MORE

TABLE 10

Borrowings

FHLB advances decreased from $45.0 million at December 31, 2001 to $35.0
million at December 31, 2002, a decrease of $10.0 million or 22.2%. FHLB
advances are subject to a prepayment penalty if they are repaid prior to
maturity. FHLB advances are callable either six months or one year after
origination and quarterly thereafter. Promissory notes to former shareholders of
the Insurance Center at 9% maturing July 1, 2008 totaled $405,000 at December
31, 2002, and promissory notes to former shareholders of the Insurance Center at
prime plus 1% were $733,000 at December 31, 2002. These promissory notes
decreased by $788,000 or 40.9% from December 31, 2001 to December 31, 2002.

ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Corporation's primary exposure to market risk relates to changes in
interest rates, exchange rates, commodity prices, and other relevant market rate
or price risk through our banking operations. The Bank monitors interest rate
factors on a monthly basis to assess interest rate risk of the portfolio of
assets and liabilities. Maturity terms of assets are matched to the maturity
terms of liabilities to the extent possible. The maturity structure of the
municipal securities, however, is long term to optimize tax advantages and yield
returns within an acceptable level of market risk. In addition, based on prior
experience, the average life of the mortgage backed securities has been shorter
than the scheduled maturities. There are no interest rate caps or floors on
variable rate instruments that could affect the cash flows on those instruments.
Variable rate loans, investments and deposits reprice immediately because they
are related to changes in the prime rate of interest.

22

Fixed rate commercial loans reprice at least annually. Fixed rate real estate
loans are scheduled for 1 to 2 year terms with balloon payments. Loans do not
have prepayment penalty clauses. The following table also assumes all loans and
deposits will be renewed under the same terms. Interest rates on those renewals
are based on anticipated rates at the date of renewal. There is a 20% prepayment
assumption for the entire loan portfolio based on historical trends. The
following table shows the expected cash flows and yields for interest earning
assets and interest bearing liabilities.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

TABLE 11

- -------------------------
(V) Variable repricing terms
(F) Fixed repricing terms

23

ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
First Manitowoc Bancorp, Inc.
Manitowoc, Wisconsin

We have audited the accompanying consolidated balance sheets of First
Manitowoc Bancorp, Inc. and Subsidiaries as of December 31, 2002 and 2001, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 2002.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Manitowoc Bancorp, Inc. and Subsidiaries at December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.

Wipfli Ullrich Bertelson LLP
January 31, 2003
Green Bay, Wisconsin

24

FIRST MANITOWOC BANCORP, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001

See accompanying notes to consolidated financial statements.

25

FIRST MANITOWOC BANCORP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

See accompanying notes to consolidated financial statements.

26

FIRST MANITOWOC BANCORP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

See accompanying notes to consolidated financial statements.

27

FIRST MANITOWOC BANCORP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See accompanying notes to consolidated financial statements.

28

FIRST MANITOWOC BANCORP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of First Manitowoc Bancorp, Inc. and
Subsidiaries (the "Corporation") conform to generally accepted accounting
principles and general practices within the financial institution industry.
Significant accounting and reporting policies are summarized below.

Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of First Manitowoc Bancorp, Inc., its wholly
owned subsidiary, First National Bank in Manitowoc (the "Bank"), and the Bank's
wholly owned subsidiaries, FNBM Investment Corp. and Insurance Center of
Manitowoc, Inc. (the "Insurance Center"). All significant intercompany balances
and transactions have been eliminated. Investment in the Bank's 49.8% owned
subsidiary is accounted for on the equity method.

On January 1, 2001, the Bank acquired 100% ownership in the Insurance
Center. The Insurance Center includes Gary Vincent and Associates in Green Bay,
Wisconsin. The Insurance Center is an independent agency offering commercial,
personal, life, and health insurance. It is being operated as a wholly owned
subsidiary of the Bank. The Insurance Center had approximately $563,000 in
assets at date of acquisition. The transaction was accounted for under the
purchase method of accounting and goodwill of approximately $2.6 million was
recorded.

The Corporation's consolidated financial statements reflect the accounts
and operations of the Insurance Center beginning January 1, 2001. The
Corporation recorded all Insurance Center assets and liabilities at fair value
at date of acquisition.

Business -- The Corporation provides a full range of financial services to
individual and corporate customers in Northeastern Wisconsin through First
National Bank in Manitowoc. The Corporation is subject to competition from other
traditional and nontraditional financial institutions and is also subject to the
regulations of certain federal agencies and undergoes periodic examinations by
those regulatory authorities.

Use of Estimates in Preparation of Financial Statements -- The preparation
of the accompanying consolidated financial statements of First Manitowoc
Bancorp, Inc. and Subsidiaries in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that directly
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results may differ from those estimates.

Cash and Cash Equivalents -- For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, due from banks, interest-bearing
deposits, and federal funds sold. Generally, federal funds are purchased and
sold for one-day periods.

The Bank is required to maintain non-interest-bearing deposits on hand or
with the Federal Reserve Bank. At December 31, 2002, those required reserves of
$1,216,000 were satisfied by currency and coin holdings.

In the normal course of business, the Bank maintains cash and due from bank
balances with correspondent banks. Accounts at each institution are insured by
the Federal Deposit Insurance Corporation up to $100,000. Total uninsured
balances at December 31, 2002, were approximately $1,944,000.

Investment Securities -- The Company's securities are classified and
accounted for as securities available for sale. Available-for-sale securities
are stated at fair value with the unrealized gains and losses, net of tax,
reported as accumulated other comprehensive income (loss) within shareholders'
equity until realized. Interest and dividends are included in interest income
from securities as earned. Premiums are recognized in interest income using the
interest method over the period to the call date. Discounts are recognized in
interest income using the interest method over the period to maturity. Realized
gains and losses and declines in value

29

judged to be other than temporary are included in net gains and losses from
sales of investment and mortgage-related securities. The cost of securities sold
is based on the specific-identification method.

Fair values of many securities are estimates based on financial methods or
prices paid for similar securities. It is possible interest rates could change
considerably resulting in a material change in the estimated fair value.

Other Investments -- Other investments are carried at cost and consist of
Federal Home Loan Bank stock, Federal Reserve stock, Bankers Bancorporation
stock, and preferred stock in a community development project. Other investments
are evaluated for impairment on an annual basis.

Loans Held for Sale -- Loans held for sale consist of the current
origination of certain fixed-rate mortgage loans which are recorded at the lower
of aggregate cost or fair value. A gain or loss is recognized at the time of the
sale reflecting the present value of the difference between the contractual
interest rate of the loans sold and the yield to the investor, adjusted for the
initial value of mortgage servicing rights.

Loans and Related Interest Income -- Loans are carried at their unpaid
principal balance. Interest on loans is calculated by using the simple interest
method on daily balances of the principal amount outstanding and is recognized
in the period earned.

Interest on loans is accrued and credited to income as earned. Accrual of
interest is generally discontinued either when reasonable doubt exists as to the
full, timely collection of interest or principal or generally when a loan
becomes contractually past due by 90 days or more with respect to interest or
principal. At that time, any accrued but uncollected interest is reversed and
additional income is recorded only to the extent that payments are received and
the collection of principal is reasonably assured. Loans are restored to accrual
status when the obligation is brought current, has performed in accordance with
the contractual terms for a reasonable period of time, and the ultimate
collectibility of the total contractual principal and interest is reasonably
assured.

Loan Fees and Related Costs -- Loan-origination fees are credited to income
when received and the related loan-origination costs are expensed as incurred.
Capitalization of the fees net of the related costs would not have a material
effect on the consolidated financial statements.

Allowance for Loan Losses -- The allowance for loan losses is provided for
based on past experience and prevailing market conditions. Management's
evaluation of loss considers various factors including, but not limited to,
general economic conditions, loan portfolio composition, and prior loss
experience. This evaluation is inherently subjective since it requires material
estimates that may be susceptible to significant change. Loans are charged
against the allowance for loan losses when management believes the
collectibility of the principal is unlikely. In addition, various regulatory
agencies periodically review the allowance for loan losses. These agencies may
require additions to the allowance for loan losses based on their judgments of
collectibility.

The Corporation considers loans secured by one- to four-unit residential
properties and all consumer loans to be large groups of smaller-balance
homogenous loans. These loans are collectively evaluated in the analysis of the
adequacy of the allowance for loan losses.

The Corporation's commercial portfolio is subject to a loan-by-loan
analysis of the adequacy of the allowance for loan losses and impairment. These
loans are considered impaired when, based on current information, it is probable
the Corporation will not collect all amounts due in accordance with the
contractual terms of the loan agreement. The value of impaired loans is based on
discounted cash flows of expected future payments using the loan's internal
effective interest rate or the fair value of the collateral if the loan is
collateral dependent. Interest income on impaired loans is recorded when cash is
received and only if principal is considered to be fully collectible.

In management's judgment, the allowance for loan losses is adequate to
cover probable losses relating to specifically identified loans, as well as
probable losses inherent in the balance of the loan portfolio.

30

Mortgage Servicing Rights -- The Corporation recognizes mortgage-servicing
rights on loans that are originated and subsequently sold or securitized and
servicing is retained. A portion of the cost of the loans is required to be
allocated to the servicing rights based on the relative fair values of the loans
and the servicing rights. The Corporation amortizes these mortgage servicing
rights over the period of estimated net servicing revenue. Impairment of
mortgage servicing rights is assessed based on the fair value of those rights.
Fair values are estimated using discounted cash flows based on a current market
interest rate.

Premises and Equipment -- Premises and equipment are stated at cost.
Maintenance and repair costs are charged to expense as incurred. Gains or losses
on disposition of premises and equipment are reflected in income. Depreciation
is computed on the straight-line method and is based on the estimated useful
lives of the assets.

Foreclosed Properties -- Foreclosed properties acquired by the Corporation
through foreclosure or deed in lieu of foreclosure on loans for which the
borrowers have defaulted as to the payment of principal and interest are
initially recorded at the lower of the fair value of the asset, less the
estimated costs to sell the asset, or the carrying value of the related loan
balance. Costs relating to the development and improvement of the property are
capitalized. Income and expenses incurred in connection with holding and
operating the property are charged to expense. Valuations are periodically
performed by management and third parties and a charge to expense is taken for
the excess of the carrying value of a property over its fair value less costs to
sell.

Intangible Assets and Goodwill -- Intangible assets consist of the value of
core deposits purchased as part of the bank acquisitions, servicing assets, and
trade name and customer base intangibles acquired in the acquisition of the
Insurance Center. Intangible assets are stated at cost less accumulated
amortization and are amortized over a period of one to ten years. Intangible
assets that have finite useful lives are amortized using a straight-line method
over their useful lives. Intangible assets that have indefinite useful lives are
not amortized but are tested at least annually for impairment. Intangible assets
are considered impaired if the fair value of the intangible asset is lower than
cost. The Corporation reviews intangible assets for impairment whenever events
or changes in circumstances indicate the carrying amount of an asset may not be
recoverable. Adjustments are recorded if it is determined that the benefit of
the intangible asset has decreased.

The excess of cost over the assets acquired (goodwill) was amortized using
the straight-line method over periods of 15 to 20 years. Amortization of
goodwill ceased on January 1, 2002, in accordance with the change in accounting
discussed below. The Corporation tested goodwill for impairment during the
fourth quarter and determined that there was no impairment during 2002. No
amortization or impairment expense was recognized in 2002.

Income Taxes -- The Corporation files one consolidated federal income tax
return. Federal income tax expense (credit) is allocated to each subsidiary
based on an intercompany tax sharing agreement. The subsidiaries file separate
state tax returns as applicable.

Deferred income taxes have been provided under the liability method.
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities as
measured by the current enacted tax rates which will be in effect when these
differences are expected to reverse. Deferred tax expense (benefit) is the
result of changes in the deferred tax asset and liability.

Advertising Costs -- Advertising costs are expensed as incurred.

Comprehensive Income -- Comprehensive income consists of net income and
other comprehensive income. Other comprehensive income includes unrealized gains
and losses on securities available for sale, net of tax, which are recognized as
a separate component of equity, accumulated other comprehensive income (loss).

Per Share Computations -- All per share financial information and equity
accounts have been adjusted to reflect the 2-for-1 stock splits declared in
October 2002 and June 2000. Weighted average shares outstanding were 6,937,268
for the years ended December 31, 2002, 2001, and 2000.

Reclassifications -- Certain reclassifications have been made to the 2001
and 2000 consolidated financial statements to conform to the 2002
classifications.
31

NOTE 2 CHANGES IN ACCOUNTING PRINCIPLES

Effective January 1, 2002, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 147, "Acquisitions of Certain Financial
Institutions." Except for transactions between two or more mutual enterprises,
this statement removes acquisitions of financial institutions from the scope of
both SFAS No. 72, "Accounting for Certain Acquisitions of Banking or Thrift
Institutions," and the Financial Accounting Standards Board (FASB)
Interpretation No. 9, "Applying APB Opinions No. 16 and 17 When a Savings and
Loan Association or a Similar Institution Is Acquired in a Business Combination
Accounted for by the Purchase Method," and requires that those transactions be
accounted for in accordance with SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets."

SFAS No. 141 supersedes Accounting Principles Board (APB) Opinion No. 16,
"Business Combinations," and SFAS No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises." SFAS No. 141 requires the use of the
purchase method of accounting for business combinations initiated after June 30,
2001.

SFAS No. 142 supersedes APB Opinion No. 17, "Intangible Assets." SFAS No.
142 addresses how intangible assets acquired outside of a business combination
should be initially recognized. SFAS No. 142 eliminates the amortization for
goodwill and other intangible assets with indefinite lives. Other intangible
assets with a finite life will be amortized over their useful life. Goodwill and
other intangible assets with indefinite useful lives shall be tested for
impairment annually or more frequently if events or changes in circumstances
indicate that the asset may be impaired.

SFAS No. 147 also amends SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," to include in its scope long-term
customer-relationship intangible assets of financial institutions, such as
depositor- and borrower-relationship intangible assets and credit cardholder
intangible assets. Consequently, those intangible assets are subject to the same
undiscounted cash flow recoverability test and impairment loss recognition and
measurement provision that SFAS No. 144 requires for other long-lived assets
that are held and used.

The effect of the adoption of SFAS No. 142 is detailed in Note 9.

NOTE 3 SECURITIES AVAILABLE FOR SALE

The amortized cost and estimated fair value of securities available for
sale are as follows:

32

The amortized cost and estimated fair value of securities at December 31,
2002, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.

There were no sales of securities in 2002, 2001, or 2000.

The amortized cost and estimated fair value of investment securities
available for sale pledged to secure public deposits, securities sold under
repurchase agreements, FHLB advances, and for other purposes required by law
were $68,821,000 and $70,368,000, respectively, as of December 31, 2002.

NOTE 4 LOANS

The composition of loans at December 31 follows:

An analysis of the allowance for loan losses for the years ended December
31 follows:

The aggregate amount of nonperforming loans was approximately $1,803,000
and $2,824,000 at December 31, 2002 and 2001, respectively. Nonperforming loans
are those which are contractually past due 90 days or more as to interest or
principal payments, on nonaccrual of interest status, or loans the terms of
which have been renegotiated to provide a reduction or deferral of interest or
principal. If nonperforming loans had been current, approximately $234,000,
$322,000, and $297,000 of interest income would have been recorded for the years
ended December 31, 2002, 2001, and 2000, respectively. Interest income on
nonperforming loans of $54,000, $155,000, and $101,000 was recognized for cash
payments received in 2002, 2001, and 2000, respectively.

33

Information regarding impaired loans as of December 31 follows:

The Bank, in the ordinary course of banking business, grants loans to the
Corporation's executive officers and directors, including their immediate
families and affiliated companies in which they are principal owners.
Substantially all loans to officers, directors, and shareholders owning 5% or
more of the Corporation were made on the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
others and did not involve more than the normal risk of collectibility or
present other unfavorable features.

Activity in such loans during 2002 is summarized below (in thousands):

Loans outstanding, December 31, 2001........................ $ 3,832
New loans................................................... 5,992
Repayments.................................................. (6,174)
-------
Loans outstanding, December 31, 2002........................ $ 3,650
=======

NOTE 5 LOAN SERVICING

Mortgage loans of $151,963,000 and $109,406,000 as of December 31, 2002 and
2001, respectively, were serviced for others. These loans are not included in
the accompanying consolidated balance sheets. Mortgage servicing rights are
capitalized when the serviced loans are sold. This asset is amortized over the
estimated period that servicing income is recognized. The following is an
analysis of changes in mortgage servicing rights:

No impairment of mortgage servicing rights existed at December 31, 2002 or
2001; therefore, no valuation allowance was recorded.

The carrying value of the mortgage servicing rights is included with
intangible assets and approximates fair market value at December 31, 2002 and
2001. The fair value of mortgage servicing rights was determined using the
present value of future cash flows method.

34

NOTE 6 PREMISES AND EQUIPMENT

Premises and equipment at December 31 consist of the following:

Depreciation and amortization expense was $946,000, $870,000, and $789,000
for the years ended December 31, 2002, 2001, and 2000, respectively.

NOTE 7 INVESTMENT IN CORPORATION

The Bank owns 49.8% of the stock of a corporation ("venture") whose
business is developing and providing data processing services to the Bank and
other financial institutions. The venture has total assets of $3,986,000 and
liabilities of $534,000. The Bank's earnings from its investment in the venture
were approximately $378,000, $282,000, and $247,000 for the years ended December
31, 2002, 2001, and 2000, respectively. Data processing service fees paid by the
Bank to the venture were approximately $843,000, $824,000, and $812,000 for the
years ended December 31, 2002, 2001, and 2000, respectively.

The Bank has a long-term cancelable contract with the venture that extends
through December 2004. At that time, the contract is automatically renewed for a
period of one year. The Bank has the option to terminate the contract at any
time, but would incur a termination penalty of approximately $880,000 at
December 31, 2002. The termination penalty is calculated using the greater of
50% of the total estimated remaining unpaid monthly processing fees or six times
the average monthly fee over the prior three months. A termination penalty is
not incurred if the Bank provides 180 days' notice and continues processing up
to the end of that period.

NOTE 8 INTANGIBLE ASSETS

Intangible assets consist of the following at December 31:

Amortization expense for intangible assets, excluding mortgage servicing
rights, was $303,000 in 2002, $223,000 in 2001, and $151,000 in 2000.

35

The following table shows the estimated future amortization expense for
amortizing intangible assets. The projections of amortization expense are based
on existing asset balances as of December 31, 2002.

NOTE 9 GOODWILL

The changes in the carrying amount of goodwill for the years ended December
31 are as follows:

The following table illustrates the effect amortization of goodwill had on
net income previous to the adoption of Statement of Financial Accounting
Standards No. 142 for the years ended December 31:

NOTE 10 DEPOSITS

The distribution of deposits at December 31 is as follows:

Time deposits of $100,000 or more were approximately $45,269,000 and
$39,205,000 at December 31, 2002 and 2001, respectively. Interest expense on
time deposits of $100,000 or more was approximately $1,505,000, $1,978,000, and
$1,614,000 for the years ended December 31, 2002, 2001, and 2000, respectively.

36

At December 31, 2002, the scheduled maturities of time deposits are as
follows (in thousands):

2003........................................................ $136,337
2004........................................................ 26,587
2005........................................................ 15,515
2006........................................................ 2,209
2007........................................................ 5,615
Thereafter.................................................. 373
--------
Total....................................................... $186,636
========

NOTE 11 SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

Securities sold under agreements to repurchase have contractual maturities
up to one year from the transaction date with variable and fixed-rate terms. The
agreements to repurchase securities require that the Corporation (seller)
repurchase identical securities as those that are sold. The securities
underlying the agreements were under the Corporation's control.

Information concerning securities sold under agreements to repurchase
consist of the following:

Securities sold under agreements to repurchase with the Corporation's
executive officers, directors, and affiliated companies in which they are
principal owners were $2,890,000 and $1,840,000 at December 31, 2002 and 2001,
respectively.

NOTE 12 BORROWED FUNDS

Borrowed funds are summarized as follows at December 31:

37

The Corporation is a Treasury, Tax & Loan (TT&L) depository for the Federal
Reserve Bank (FRB) and, as such, it accepts TT&L deposits. The Corporation is
allowed to borrow these funds until they are called. The average rate paid on
the treasury, tax, and loan account was 1.46% in 2002, 3.70% in 2001, and 6.15%
in 2000. U.S. Agency Securities with a face value greater than or equal to the
amount borrowed are pledged as a condition of borrowing TT&L deposits.

FHLB advances are subject to a prepayment penalty if they are repaid prior
to maturity. The FHLB advances are callable either six months or one year after
origination and quarterly thereafter. The Corporation is required to maintain as
collateral unencumbered first mortgage loans in its portfolio aggregating at
least 167% of the amount of outstanding advances from the FHLB. Total loans
pledged as collateral were approximately $106,018,000 and $113,804,000 at
December 31, 2002 and 2001, respectively. The FHLB advances are also
collateralized by $2,435,100 and $2,312,800 of FHLB stock owned by the
Corporation and included in other investments at December 31, 2002 and 2001,
respectively. This stock is recorded at cost, which approximates fair value.
Transfer of the stock is substantially restricted.

Scheduled maturities of borrowed funds outstanding at December 31, 2002,
are as follows (in thousands):

2003........................................................ $ 5,733
2004........................................................ 15,000
2005........................................................ --
2006........................................................ --
2007........................................................ --
Thereafter.................................................. 15,405
-------
Total....................................................... $36,138
=======

NOTE 13 INCOME TAXES

The provision for income taxes consists of the following:

38

A summary of the source of differences between income taxes at the federal
statutory rate and the provision for income taxes for the years ended December
31 follows:

Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Corporation's assets and
liabilities. The major components of net deferred tax assets at December 31 are
as follows:

The Bank has state net operating loss carryforwards of approximately
$5,218,000. The Bank's net operating losses begin to expire in 2014. The
Corporation's alternative minimum tax credit carryovers have no expiration date.

Effective January 1, 2002, the Corporation merged its defined contribution
money purchase plan into its defined contribution profit sharing 401(k) plan.
The plan is available to all employees after completion of six months of
service. Employees participating in the plan may elect to defer a minimum of 2%
of compensation up to the limits specified by law. The Corporation may make
discretionary contributions up to the limits established by IRS regulations. The
discretionary match was 35% of participant tax deferred contributions up to 10%
in 2002, 2001, and 2000. The Corporation made additional discretionary
contributions to the plan of $323,000, $283,000, and $240,000 in 2002, 2001, and
2000, respectively. All discretionary contributions are at the direction of the
Board of Directors. Total expense associated with the plans was approximately
$487,000, $411,000, and $364,000 in 2002, 2001, and 2000, respectively.

39

The Corporation has a deferred compensation agreement with one of its
officers. Under the terms of the agreement, benefits to be received in the
future vest over each year until the officer reaches retirement age. The
benefits are generally payable beginning with the date of termination of
employment with the Corporation. The agreement requires an annual payment of
$80,600 over 15 years. Related expense for this agreement was approximately
$107,000, $108,000, and $107,000 for the years ended December 31, 2002, 2001,
and 2000, respectively. Included in other liabilities is the vested present
value of future payments of approximately $536,000 and $429,000 at December 31,
2002 and 2001, respectively.

The Corporation has a nonqualified deferred directors' fee compensation
plan which permits directors to defer a portion of their compensation. The
benefits are generally payable beginning with the earlier of attaining age 70 or
resignation from the Board of the Corporation. Included in other liabilities is
the estimated present value of future payments of approximately $1,443,000 and
$1,254,000 at December 31, 2002 and 2001, respectively. Expense associated with
this plan was approximately $200,000, $188,000, and $171,000 in 2002, 2001, and
2000, respectively.

NOTE 15 SHAREHOLDERS' EQUITY

The Corporation is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory -- and possibly additional
discretionary -- actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation must meet specific capital guidelines that involve quantitative
measures of the Corporation's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Corporation's
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Corporation to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital to risk-weighted assets and of Tier I
capital to average assets. Management believes, as of December 31, 2002, that
the Corporation meets all capital adequacy requirements to which it is subject.

As of December 31, 2002, the most recent notification from the regulatory
agencies categorized the Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, the Bank
must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.

40

The Corporation's and Bank's actual and regulatory capital amounts and
ratios are as follows:

At December 31, 2002, the Bank could have paid approximately $16,147,000 of
additional dividends to the Corporation without prior regulatory approval. The
payment of dividends is restricted by certain statutory and regulatory
limitations and may be further limited because of the need for the Bank to
maintain capital ratios satisfactory to applicable regulatory agencies.

NOTE 16 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Comprehensive income is shown in the consolidated statements of
shareholders' equity. The Corporation's accumulated other comprehensive income
(loss) is comprised of the unrealized gain or loss on securities available for
sale. The following shows the activity in accumulated other comprehensive income
(loss):

NOTE 17 SEGMENT INFORMATION

First Manitowoc Bancorp, Inc., through a branch network of its subsidiary,
First National Bank in Manitowoc, provides a full range of consumer and
commercial financial institution services to individuals and businesses in
Northeastern Wisconsin. These services include demand, time, and savings
deposits; ATM processing; insurance services; and trust services.

41

While the Corporation's chief decision-makers monitor the revenue streams
of various Corporation products and services, operations are managed and
financial performance is evaluated on a Corporationwide basis. Accordingly, all
of the Corporation's financial institution operations are considered by
management to be aggregated in one reportable operating segment.

NOTE 18 COMMITMENTS AND CONTINGENCIES

The Corporation is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments consist of commitments to extend credit
and standby letters of credit. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the consolidated balance sheets. The contract amounts reflect the extent of
involvement the Corporation has in the particular class of financial instrument.
The Corporation's maximum exposure to credit loss for commitments to extend
credit is represented by the contract amount of those instruments.

Off-balance-sheet financial instruments whose contract amounts represent
credit and/or interest rate risk at December 31 are as follows:

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.

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.

NOTE 19 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates, methods, and assumptions for the Corporation's
financial instruments are summarized below.

Cash and Cash Equivalents -- The carrying values approximate the fair
values for these assets.

Securities Available for Sale -- Fair values are based on quoted market
prices where available. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.

Other Investments -- The carrying amount reported in the consolidated
balance sheets for other investments approximates the fair value of these
assets.

Loans and Loans Held for Sale -- For certain homogeneous categories of
loans, such as fixed-rate residential mortgages, fair value is estimated using
the quoted market prices for securities backed by similar

42

loans, adjusted for differences in loan characteristics. The fair value of other
types of loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings.

The methodology in determining fair value of nonaccrual loans is to average
them into the blended interest rate at 0% interest. This has the effect of
decreasing the carrying amount below the risk-free rate amount and therefore
discounts the estimated fair value.

Impaired loans are measured at the estimated fair value of the expected
future cash flows at the loan's effective interest rate or the fair value of the
collateral for loans which are collateral dependent. Therefore, the carrying
values of impaired loans approximate the estimated fair values for these assets.

Mortgage Servicing Rights -- Fair values were determined using the present
value of future cash flow method. Carrying value approximates fair value.

Deposits -- The fair value of deposits with no stated maturity, such as
passbooks, negotiable order of withdrawal accounts, and variable rate insured
money market accounts, is the amount payable on demand on the reporting date.
The fair value of fixed-rate, fixed-maturity certificate accounts is estimated
using discounted cash flows with discount rates at interest rates currently
offered for deposits of similar remaining maturities.

Securities Sold Under Repurchase Agreements -- The fair value of securities
sold under repurchase agreements with variable rates or due on demand is the
amount payable at the reporting date. The fair value of securities sold under
repurchase agreements with fixed terms is estimated using discounted cash flows
with discount rates at interest rates currently offered for securities sold
under repurchase agreements of similar remaining maturities.

Borrowed Funds -- Rates currently available to the Corporation for debt
with similar terms and remaining maturities are used to estimate fair value of
existing debt. The fair value of borrowed funds due on demand is the amount
payable at the reporting date. The fair value of borrowed funds with fixed terms
is estimated using discounted cash flows with discount rates at interest rates
currently offered by lenders for similar remaining maturities.

Accrued Interest -- The carrying amount of accrued interest approximates
its fair value.

Off-Balance-Sheet Instruments -- The fair value of commitments is estimated
using the fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements, the current interest rates, and
the present creditworthiness of the counterparties. Since this amount is
immaterial, no amounts for fair value are presented.

43

The carrying amount and estimated fair value of financial instruments at
December 31 were as follows:

Limitations -- Fair value estimates are made at a specific point in time
based on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Corporation's entire holdings of a
particular instrument. Because no market exists for a significant portion of the
Corporation's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters that
could affect the estimates. Fair value estimates are based on existing on- and
off-balance-sheet financial instruments without attempting to estimate the value
of anticipated future business and the value of assets and liabilities that are
not considered financial instruments. Deposits with no stated maturities are
defined as having a fair value equivalent to the amount payable on demand. This
prohibits adjusting fair value derived from retaining those deposits for an
expected future period of time. This component, commonly referred to as a
deposit base intangible, is neither considered in the above amounts nor is it
recorded as an intangible asset on the consolidated balance sheets. Significant
assets and liabilities that are not considered financial assets and liabilities
include premises and equipment. In addition, the tax ramifications related to
the realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in the estimates.

44

NOTE 20 CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

BALANCE SHEETS

STATEMENTS OF INCOME

45

STATEMENTS OF CASH FLOWS

46

ITEM 9
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 401 of Regulation S-K is included in the
Corporation's definitive Proxy Statement, prepared for the 2003 Annual Meeting
of Shareholders, under the caption "Election of Directors," and the information
concerning executive officers of the registrant, under the caption "Executive
Officers Who Are Not Directors," which is incorporated herein by reference. The
information required by Item 405 of Regulation S-K concerning compliance with
Section 16(a) of the Exchange Act is included in the Corporation's definitive
Proxy Statement, prepared for the 2003 Annual Meeting of Shareholders, under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance," which is
incorporated herein by reference.

ITEM 11
EXECUTIVE COMPENSATION

The information required by this item is included under the heading
"Compensation of Executive Officers and Directors" in the Corporation's
definitive Proxy Statement, prepared for the 2003 Annual Meeting of
Shareholders, which is incorporated herein by reference.

ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SHAREHOLDERS MATTERS

The information required by this item is included under the heading
"Security Ownership of Certain Beneficial Owners and Management" in the
Corporation's definitive Proxy Statement, prepared for the 2003 Annual Meeting
of Shareholders, which is incorporated herein by reference.

ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is included under the heading
"Indebtedness of Management and Certain Transactions" in the Corporation's
definitive Proxy Statement, prepared for the 2003 Annual Meeting of
Shareholders, which is incorporated herein by reference.

47

PART IV

ITEM 14
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. Within the 90-day period
preceding the filing date of this report, an evaluation of the Corporation's
disclosure controls and procedures (as defined in Section 13(a)-14(c) of the
Securities Exchange Act of 1934 (the "Act") was carried out under the
supervision and with the participation of the Corporation's Chief Executive
Officer, Chief Financial Officer and several other members of the Corporation's
senior management, as appropriate. Based on the evaluation, the Corporation's
Chief Executive Officer and Chief Financial Officer concluded that the
Corporation's disclosure controls and procedures as currently in effect are
effective in ensuring that the information required to be disclosed by the
Corporation in the reports it files or submits under the Act is (i) accumulated
and communicated to the Corporation's management (including the Chief Executive
Officer and Chief Financial Officer) in a timely manner, and (ii) recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms.

For the quarter ended December 31, 2002, 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.

ITEM 15
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) Financial Statements

The following financial statements and financial statement schedules are
included under a separate caption "Financial Statements and Supplementary Data"
in Part II, Item 8 hereof and are incorporated herein by reference:

Independent Auditors' Report

Consolidated Balance Sheets -- December 31, 2002 and 2001

Consolidated Statements of Income -- For the Years Ended December 31, 2002,
2001, and 2000

Consolidated Statements of Shareholders' Equity -- For the Years Ended
December 31, 2002, 2001, and 2000

Consolidated Statements of Cash Flows -- For the Years Ended December 31,
2002, 2001, and 2000

Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

All financial statement schedules have been omitted because they are not
applicable, not required, or the information has been otherwise supplied in the
Consolidated Financial Statements or notes to the Consolidated Financial
Statements.

(a)(3) Exhibits

48

A copy of one or more of the exhibits listed herein can be obtained by
writing Thomas J. Bare, Chief Financial Officer, First Manitowoc Bancorp, 402
North Eighth Street, Manitowoc, Manitowoc County, Wisconsin.

(b) Reports on Form 8-K

During the fourth quarter of 2002, the Corporation did not file any current
reports on Form 8-K.

49

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

FIRST MANITOWOC BANCORP, INC.

Date: March 14, 2003 /s/ THOMAS J. BARE
--------------------------------------
Thomas J. Bare
Chief Executive Officer and Chief
Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

/s/ THOMAS J. BARE /s/ ROBERT S. WEINERT
- ----------------------------------------------------- -----------------------------------------------------
Thomas J. Bare, President and Treasurer Robert S. Weinert, Chairman
Date: March 14, 2003 Date: March 14, 2003

/s/ JOHN J. ZIMMER /s/ JOHN M. JAGEMANN
- ----------------------------------------------------- -----------------------------------------------------
John J. Zimmer, Vice President John M. Jagemann, Director
Date: March 14, 2003 Date: March 14, 2003

/s/ JOHN C. MILLER /s/ JOHN E. NORDSTROM
- ----------------------------------------------------- -----------------------------------------------------
John C. Miller, Director John E. Nordstrom, Director
Date: March 14, 2003 Date: March 14, 2003

/s/ CRAIG A. PAULY /s/ KATHERINE M. REYNOLDS
- ----------------------------------------------------- -----------------------------------------------------
Craig A. Pauly, Director Katherine M. Reynolds, Director
Date: March 14, 2003 Date: March 14, 2003

/s/ JOHN M. WEBSTER
- -----------------------------------------------------
John M. Webster, Director
Date: March 14, 2003

50

CERTIFICATION

I, Thomas J. Bare, certify that:

1. I have reviewed this annual report on Form 10-K of First Manitowoc Bancorp,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

Date: March 14, 2003

By: /s/ Thomas J. Bare
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Thomas J. Bare
Chief Executive Officer

/s/ Thomas J. Bare
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Thomas J. Bare
Chief Financial Officer