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, 2003
Commission file number 0-25983

FIRST MANITOWOC BANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)

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

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 998,312 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, 2003, was approximately $86,114,862

As of February 27, 2004, 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 2004 Annual Meeting of Shareholders are incorporated by reference into
Part III of this Form 10-K.

2003 FORM 10-K TABLE OF CONTENTS

PART I

FORWARD-LOOKING STATEMENTS

Statements made in this Report on Form 10-K and in documents that are
incorporated by reference which are not purely historical are forward-looking
statements, as defined in the Private Securities Litigation Reform Act of 1995,
including any statements regarding descriptions of management's plans,
objectives, or goals for future operations, products or services, and forecasts
of its revenues, earnings, or other measures of performance. Forward-looking
statements are based on current management expectations and, by their nature,
are subject to risks and uncertainties. These statements may be identified by
the use of words such as believe, expect, anticipate, plan, estimate, should,
will, intend, or similar expressions.

Shareholders should note that many factors, some of which are discussed
elsewhere in this document and in the documents that are incorporated by
reference, could affect the future financial results of First Manitowoc Bancorp,
Inc. (the "Corporation") and could cause those results to differ materially from
those expressed in forward-looking statements contained or incorporated by
reference in this document. These factors, many of which are beyond the
Corporation's control, include, but are not limited to:

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

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

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

o 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;

o 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;

o Changes in consumer spending, borrowing and savings habits;

o Technological changes;

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

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

o The effect of compliance with legislation or regulatory changes;

o The effect of changes in accounting policies and practices;

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

o 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 1. BUSINESS

GENERAL

First Manitowoc Bancorp, Inc. 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 635 holders of record on February 27, 2004.

As of December 31, 2003, the Corporation had assets of approximately $582.0
million, net loans of approximately $367.1 million, and deposits of $428.3
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, 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 "Investor Relations, SEC web site" link of our web site.
The SEC also maintains a web site at www.sec.gov that contains reports, proxy
statements and other information regarding SEC registrants.

1

STATEMENT ON CORPORATE GOVERNANCE

We have reviewed the provisions of the Sarbanes-Oxley Act of 2002 and
the SEC rules regarding corporate governance policies and processes and are in
compliance with the rules and listing standards. We have adopted a Code of
Business Conduct and Ethics which is applicable to all of our directors,
officers and employees. You can access our Nominating Committee Charter, Audit
Committee Charter and Code of Business Conduct and Ethics on our Website at
http://www.bankfirstnational.com or by writing to us at 402 North Eighth Street,
Manitowoc, Wisconsin 54221 Attention: Rachel Wiegert, Secretary.

BUSINESS STRATEGY

The Bank's strategy is to provide high quality financial products and services
to individuals, businesses, and governmental entities. The Bank employs a
well-trained, qualified staff and maximizes automation to provide fast,
efficient, convenient delivery of its products and services.

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. 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, bill payment, e-mail statements, account transfers,
check ordering, and check copies among other services. Services provided include
checking accounts, savings and time accounts, and safe deposit boxes.

The Bank makes loans in the following categories: Commercial and Agricultural
loans, Commercial Real Estate, Residential Real Estate, and Consumer and Other
loans.

COMMERCIAL AND AGRICULTURAL BUSINESS LENDING

As of December 31, 2003, commercial and agricultural business loans accounted
for approximately 29.4% of the Bank's gross loans. These loans may take the form
of lines of credit, single payment loans, or term payment loans, and may be
secured or unsecured depending on the creditworthiness of the borrower. The Bank
operates under a commercial business lending policy that establishes guidelines
for management in making commercial lending decisions. Among these guidelines
are the purpose of the loan, the source of repayment, and an alternate source of
repayment (generally in the form of collateral or guarantee). Applications for
commercial and agricultural business loans are accepted at the Bank's main and
branch offices. It is the Bank's general policy to restrict its commercial and
agricultural business lending to a market area defined as within a 100-mile
radius of any office location where business banking products and services are
sold.

Commercial and agricultural business loans are generally made for business
expansion or ongoing business needs. The purpose of commercial and agricultural
business loans can include the purchase of equipment or the provision of
operating capital for the financing of accounts receivable and inventory.
Commercial business loans are not generally made for the purpose of acquiring
real estate, although real estate may occasionally be accepted as incidental
collateral on a loan made for another business purpose. Agricultural business
loans, however, may include loans for farmland, including a farm residence and
other improvements.

2

Credit risk is controlled and monitored through active asset quality management
and the use of lending standards, thorough review of potential borrowers, and
active asset quality administration. Active asset quality administration,
including early problem loan identification and timely resolution of problems,
further ensures appropriate management of credit risk and minimization of loan
losses.

The Bank occasionally participates in commercial business loans originated by
third-party financial institutions. The Corporation, however, does not generally
service such loans.

The Bank believes that the higher yields earned on commercial business loans
compensate for the increased risk associated with such loans and that commercial
business loans are important to the Bank's efforts to increase the interest rate
sensitivity and shorten the average maturity of its loan portfolio.

COMMERCIAL REAL ESTATE LENDING

Non-residential real estate loans accounted for approximately 30.0% of the
Bank's gross loans as of December 31, 2003. Such loans are subject to the
general policies and procedures outlined in "Commercial Business Lending",
below. It is the Bank's general policy to restrict its commercial real estate
lending to loans secured by properties located within a 100-mile radius of
Manitowoc. There are no policy restrictions on the amount of loan funds secured
by property type.

Applications for commercial real estate loans are generally obtained from
existing borrowers, direct contacts by loan officers, and referrals. In general,
these loans have amortization periods ranging from 10 to 25 years, mature in
five years or less, and have interest rates which are fixed or variable.
Loan-to-value ratios on the Bank's commercial real estate loans follow OCC
requirements. It is also the Bank's general policy to obtain personal guarantees
on its commercial real estate loans and, when such guarantees cannot be
obtained, to impose more stringent loan-to-value ratios, debt coverage ratios,
and other underwriting requirements.

From time-to-time the Bank originates loans to construct multi-family
residential and non-residential real estate properties. Construction loans are
generally considered to involve a higher degree of risk than mortgage loans on
completed properties. The Bank's risk of loss on a construction loan is
dependent largely upon the accuracy of the initial estimate of the property's
value at completion of construction, the reputation of the contractor, the
estimated cost of construction, and the borrower's ability to advance additional
construction funds if such should become necessary.

Commercial real estate lending is generally considered to involve a higher level
of risk than single-family residential lending. This is due to the concentration
of principal in a limited number of loans and borrowers, and the effects of
general economic conditions on real estate developers and managers and on income
producing properties. In addition, loans secured by properties located outside
of the Corporation's immediate market area may involve a higher degree of risk.
This is because the Bank may not be as familiar with market conditions and other
relevant factors as it would be in the case of loans secured by properties
located within its market areas. The Bank does not have a material concentration
of commercial real estate loans outside of its immediate market area.

3

RESIDENTIAL REAL ESTATE LENDING

Single-family residential loans accounted for approximately 34.8% of the Bank's
gross loans as of December 31, 2003. Applications for single-family residential
loans are accepted by qualified lenders at all offices except the Plymouth West
office. The Bank makes predominantly fixed-rate loans for terms ranging from ten
to thirty years, but does also make loans that provide for periodic adjustments
of the interest rate ("adjustable rate loans"). In general, the Bank looks to
sell to the secondary market but will do an in house loan on occasion.

Although the Corporation generally does not retain residential loans in its
portfolio, it continues to originate and service residential loans in order to
provide a full range of products to its customers. In general, such loans are
originated only under terms, conditions, and documentation standards that make
such loans eligible for sale to the Federal National Mortgage Association
("Fannie Mae"). Sales or securitizations of mortgage loans through Freddie Mac
and Fannie Mae have generally been under terms that do not provide for any
recourse against the Bank by the investor. The Bank generally sells these loans
at the time they are originated, but continues to service these loans for its
customers. Sales of mortgage loans provide additional funds for lending and
other business purposes.

The Bank's general policy is to lend up to 80% of the independently appraised
value of the property (referred to as the "loan-to-value ratio"). The Bank will
occasionally lend in excess of an 80% loan-to-value ratio on a first mortgage
loan, but will generally require the borrower to obtain private mortgage
insurance on the portion of the loan that exceeds 80%.

The Bank also originates loans to individuals to construct single-family
residences. The borrower must have take-out commitments for permanent financing
on hand at the time of origination. Construction loans generally have a maturity
of 6 to 12 months and a fixed rate of interest, with payments being made monthly
on an interest-only basis. Construction loans are otherwise underwritten and
approved in the same manner as other single-family residential loans.
Construction loans, however, are generally considered to involve a higher degree
of risk than conventional residential mortgage loans. This is because the risk
of loss is largely dependent on the accuracy of the initial estimate of the
property's value at completion of construction, the reputation of the
contractor, the estimated cost of construction, and the borrower's ability to
advance additional construction funds, if necessary. This risk has not had any
adverse effect on the Bank to date, although no assurances can be made with
respect to future periods.

The Bank continues to service most of the loans that it sells to third-party
investors (commonly referred to as "loans serviced for others"). Servicing
mortgage loans, whether for its own portfolio or for others, includes such
functions as collecting monthly principal and interest payments from borrowers,
maintaining escrow accounts for real estate taxes and insurance, and making such
payments on behalf of borrowers when they are due. When necessary, servicing of
mortgage loans also includes functions related to the collection of delinquent
principal and interest payments, loan foreclosure proceedings, and disposition
of foreclosed real estate. As of December 31, 2003, loans serviced for others
were $178.7 million. The amount of capitalized mortgage servicing rights as of
December 31, 2003 was $1.8 million.

When the Bank services loans for others, it is compensated for these services
through the retention of a servicing fee from borrowers' monthly payments. The
Bank pays the third-party investors an agreed-upon yield on the loans, which is
generally less than the interest agreed to be paid by the borrowers. The
difference is retained by the Bank and recognized as servicing fee income over
the lives of the loans, net of amortization of capitalized mortgage servicing
rights. The Bank also receives fees and interest income from ancillary sources
such as delinquency charges and float on escrow and other funds.

4

Management believes that servicing mortgage loans for third parties provides a
natural hedge against other risks inherent in the Bank's mortgage banking
operations. That is, fluctuations in volumes of mortgage loan originations and
resulting gains on sales of such loans caused by changes in market interest
rates will generally be offset in part by an opposite change in loan servicing
fee income. These fluctuations are usually the result of actual loan prepayment
activity that is different from that which was anticipated when the related
servicing rights were originally recorded. However, fluctuations in the value of
mortgage servicing rights may also be caused by mark-to-market adjustments under
generally accepted accounting principles ("GAAP"). That is, the value of
servicing rights may fluctuate because of changes in the future prepayment
assumptions or discount rates used to periodically value servicing rights.
Although management believes that most of the Bank's loans that prepay are
replaced by a new loan to the same customer or even a different customer (thus
preserving the future servicing cash flow), GAAP requires mark-to-market gains
or losses resulting from a change in future prepayment assumptions to be
recorded in the period in which the change occurs. However, the offsetting gain
on the sale of the new loan, if any, cannot be recorded under GAAP until the
customer actually prepays the old loan and the new loan is sold in the secondary
market. Mortgage servicing rights are particularly susceptible to unfavorable
mark-to-market adjustments during periods of declining interest rates during
which prepayment activity typically accelerates to levels above that which had
been anticipated when the servicing rights were originally recorded. During
periods of rising rates, mark-to-market adjustments tend to result in gains to
the value of servicing rights as the assumption is adjusted to reflect a
declaration in payments.

CONSUMER AND OTHER LENDING

The Bank offers consumer and other loans in order to provide a full range of
financial services to its customers. Such loans accounted for approximately 5.8%
of the Corporation's gross loans as of December 31, 2003. Most of the Bank's
consumer loan portfolio consists of second mortgage loans and home equity lines
of credit, but also includes automobile loans, recreational vehicle and mobile
home loans, deposit account secured loans, and unsecured lines of credit or
signature loans. The Bank services all of its own consumer loans.

Applications for consumer loans are taken at all of the Bank's offices.
Applications for automobile loans are also accepted through relationships
established with a limited number of qualifying automobile dealerships
("indirect automobile lending"). The majority of consumer loans are
underwritten, approved, and serviced on an on-going basis by loan officers.

Consumer loans generally have shorter terms and higher rates of interest than
conventional mortgage loans, but typically involve more credit risk than such
loans because of the nature of the collateral and, in some instances, the
absence of collateral. In general, consumer loans are more dependent upon the
borrower's continuing financial stability, are more likely to be affected by
adverse personal circumstances, and are often secured by rapidly depreciating
personal property such as automobiles. In addition, various laws, including
bankruptcy and insolvency laws, may limit the amount that may be recovered from
a borrower. However, such risks are mitigated to some extent in the case of
second mortgage loans and home-equity lines of credit. These types of loans are
secured in part or in full by a second mortgage on the borrower's residence.

The Bank believes that the higher yields earned on consumer loans compensate for
the increased risk associated with such loans and that consumer loans are
important to the Bank's efforts to increase the interest rate sensitivity and
shorten the average maturity of its loan portfolio. Furthermore, the Bank's net
charge-offs on consumer loans as a percentage of gross loans have not been
significant in recent years, despite the risks inherent in consumer lending.

5

In conjunction with its consumer lending activities, the Corporation offers
customers credit life and disability insurance products. The Bank and its loan
officers receive commission revenue related to the sales of these products. In
addition, a wholly-owned subsidiary of the Bank receives premium revenue in
exchange for the portion of the insurance risk it has reinsured on these sales.
Refer to "Subsidiaries", below, for additional discussion.

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. The Bank employs a licensed
investment representative who provides a variety of investment and insurance
products through arrangements with other service providers. These products
include mutual funds, stocks, bonds, annuities, and life insurance products.

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
marketing promotions, personal contact by its officers, staff and directors,
referrals by current customers, extended banking hours, personalized service,
and contact with on-line customers via the Bank's website or e-mail statements.

NON-PERFORMING AND OTHER CLASSIFIED ASSETS

Loans are generally placed on non-accrual status and considered "non-performing"
when, in the judgment of management, the probability of collection of principal
or interest is deemed to be insufficient to warrant further accrual of interest.
When a loan is placed on non-accrual and/or non-performing status, previously
accrued but unpaid interest is deducted from interest income. In general, the
Bank does not record accrued interest on loans 90 or more days past due. For
additional information, refer to Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Notes 1 and 4 of
the Bank's Audited Consolidated Financial Statements, included herein under Part
II, Item 8, "Financial Statements and Supplementary Data".

When a loan is placed on non-accrual and/or non-performing status, the Bank
generally institutes foreclosure or other collection proceedings. Real estate
acquired by the Bank as a result of foreclosure or deed-in-lieu of foreclosure
is classified as "other real estate" and is considered "non-performing" until
sold. Other property acquired through adverse judgment, such as automobiles and
other depreciable assets, are generally classified as "other personal property".

The Bank has internal policies and procedures in place to evaluate risk ratings
on all loans. In addition, in connection with examinations of banks, federal
examiners have authority to classify problem assets as "Substandard",
"Doubtful", or "Loss". An asset is classified as "Substandard" if it is
determined to involve a distinct possibility that the Bank could sustain some
loss if deficiencies associated with the loan are not corrected. An asset is
classified as "Doubtful" if full collection is highly questionable or
improbable. An asset is classified as "Loss" if it is considered uncollectible,
even if a partial recovery could be expected in the future. If an asset or
portion thereof is classified as "Loss", the Bank must either establish a
specific allowance for the portion of the asset classified as "Loss", or charge
off such amount. Refer to Part II, Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," for additional discussion.

6

ALLOWANCES FOR LOSSES ON LOANS AND REAL ESTATE

The Bank's policy is to establish allowances for estimated losses on specific
loans and real estate when it determines that losses are probable and estimable.
In addition, the Corporation maintains a general loss allowance against its loan
and real estate portfolios that is based on its own loss experience,
management's ongoing assessment of current economic conditions, the credit risk
inherent in the portfolios, and the experience of the financial services
industry. For additional information, refer to Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Notes 1 and 4 of the Corporation's Audited Consolidated Financial Statements,
included herein under Part II, Item 8, "Financial Statements and Supplementary
Data".

Management of the Bank believes that the current allowances established by the
Bank are adequate to cover probable and estimable losses in the Bank's loan and
real estate portfolios. However, future adjustments to these allowances may be
necessary and the Bank's results of operations could be adversely affected if
circumstances differ substantially from the assumptions used by management in
making its determinations in this regard.

SOURCES OF FUNDS

DEPOSIT LIABILITIES

The Bank's current deposit products include regular savings accounts, checking
accounts, money market deposit accounts, individual retirement accounts, and
certificates of deposit ranging in terms from three months to five years. As of
December 31, 2003, deposit liabilities accounted for approximately 73.6% of the
Corporation's total liabilities and equity.

In addition to serving as the Bank's primary source of funds, deposit
liabilities (especially checking accounts) are a substantial source of
non-interest income. This income is generally received in the form of overdraft
fees, periodic service charges, automated teller machine ("ATM") and debit card
fees, and other transaction charges. The Bank's extensive branch network also
creates opportunities for sales of non-deposit products such as tax-deferred
annuities, mutual funds, and other investment products. In exchange for these
sales, the Bank receives commission revenue from the third-party providers of
the financial products and/or services.

The principal methods used by the Bank to attract deposit accounts include
offering a variety of products and services, competitive interest rates, and
convenient office locations and hours. All of the Bank's offices have drive-up
facilities and, the Bank owns eleven ATM machines, all of which are located in
the Bank's primary markets. Depositors may also obtain a debit card from the
Bank, which allows them to purchase goods and services directly from merchants.
The same debit card also provides access to the ATM network.

FEDERAL HOME LOAN BANK ADVANCES

The Bank obtains advances from the FHLB secured by certain of its home mortgage
loans and mortgage-related securities, as well as stock in the FHLB, a minimum
amount of which the Bank is required to own. Such advances may be made pursuant
to several different credit programs, each with its own interest rate and range
of maturity dates. As of December 31, 2003, FHLB advances accounted for
approximately 5.2% of the Bank's total liabilities and equity.

7

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The Bank regularly enters into sales of securities under agreements to
repurchase. In form, these transactions are an arrangement in which the sale of
securities is accompanied by a simultaneous agreement to repurchase the
identical securities (or substantially the same securities) at a future date. In
substance, however, these arrangements are borrowings secured by high-quality,
highly-liquid securities such as Fannie Mae or Freddie Mac MBSs. Accordingly,
these arrangements are accounted for as borrowings in the Bank's financial
statements.

FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS

The Corporation has lines of credit with three financial institutions. These
lines, which amount to $25 million in the aggregate, permit the overnight
purchase of federal funds. As of December 31, 2003, there was $0 outstanding
under these lines of credit.

BANK SUBSIDIARY CORPORATIONS

FNBM Investment Corporation - FNBM Investment Corporation - ("FNBM") was
incorporated in the State of Nevada in December 1993. FNBM is located in Las
Vegas, Nevada. The Bank owns 100% of the outstanding common stock of FNBM. FNBM
was formed to consolidate and improve the efficiency, management, safekeeping,
and operations of the Bank's investment securities portfolio and certain other
holdings.

Insurance Center of Manitowoc, Inc - Insurance Center of Manitowoc, Inc. -
("ICM") was incorporated in the State of Wisconsin in 1932. Bank acquired 100%
of the outstanding common stock of the ICM in January 2001. ICM has an office in
Manitowoc, Wisconsin that operates under the trade name Insurance Center of
Manitowoc, Inc. and an office in Green Bay, Wisconsin that operates under the
trade name Gary Vincent & Associates, Inc. ICM is a regional independent agency
offering commercial, personal, life, and health insurance. ICM provides various
bank-related insurance coverages for the Bank including Directors & Officers
Liability, Trust, and Blanket Bond.

United Financial Services, Inc - United Financial Services, Inc. - ("UFS") was
incorporated in the State of Wisconsin in September 1991. UFS is located in
Grafton, Wisconsin. The Bank owns 49.8% of the outstanding common stock of UFS.
The subsidiary, UFS, was formed to provide data processing services to the
banking industry. UFS provides data processing services to owner banks Baylake
Bank and the Bank in addition to 52 other banks located in Wisconsin. The Bank's
investment in UFS is accounted for under the equity method.

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.

FOREIGN OPERATIONS

The Bank does not engage in operations in foreign countries.

EMPLOYEES

As of February 27, 2004, the Corporation employed 210 individuals, 84 of whom
worked part-time.

8

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 Bank Holding Company Act of 1956,
as amended (the "Act"). 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.

9

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
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.

10

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 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
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, 2003.

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. 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%.

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.

11

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

Federal Taxation - The Corporation is subject to those rules of federal income
taxation generally applicable to corporations under the Internal Revenue Code of
1986, as amended (the "IRC"). The Corporation, the Bank, and the Bank's
wholly-owned subsidiaries file a consolidated federal income tax return. This
has the effect of eliminating or deferring the tax consequences of intercompany
distributions, including dividends, in the computation of consolidated taxable
income. The consolidated entity pays taxes at the federal statutory rate of 34%
of its taxable income, as defined in the IRC.

State Taxation - The State of Wisconsin imposes a tax on the Corporation's
taxable income at the rate of 7.9%. State income taxes are deductible on the
Corporation's federal income tax return. Wisconsin's definition of taxable
income is generally similar to the federal definition, except that interest from
state and municipal obligations is taxable. In Wisconsin, net operating losses
may be carried forward but not back.

FNBM is incorporated in the State of Nevada, which does not currently impose a
corporate income tax. Although the earnings of FNBM are not currently subject to
taxation in the State of Wisconsin, from time-to-time legislation is proposed
which, if adopted, would require consolidated income tax returns for entities
headquartered in the state and result in taxation of FNBM's earnings. To date,
none of these legislative proposals have been adopted. In addition, from
time-to-time the Wisconsin Department of Revenue ("WDR") attempts to impose
income tax on out-of-state investment subsidiaries like FNBM. Indeed, in 2003
the WDR began examinations of a number of financial institutions, including the
Bank, specifically aimed at their relationships with their investment
subsidiaries. Management believes the WDR may take the position that the income
of FNBM is taxable in Wisconsin. Management believes the Bank, as well as FNBM,
have complied with the tax rules relating to the income of out-of-state
subsidiaries. The WDR has indicated that it may repudiate these rulings and
management is uncertain at this time whether the WDR exam will result in an
assessment. The Bank will vigorously oppose an assessment, if any.

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 has a significant impact
on the Bank's business.

12

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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to security holders for a vote during the fourth
quarter of 2003.

13

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 common stock
("Shares"). Accordingly, there is no comprehensive record of trades or the
prices of any such trades. The following tables reflect stock prices for 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 27, 2004, there were approximately 635 holders of record of the
Corporation's Shares.

14

DIVIDENDS

The Corporation declared and paid cash dividends per share totaling $0.210 per
share or $1.5 million during fiscal 2003, and $0.183 per share or $1.3 million
during fiscal 2002. The Corporation currently expects that comparable cash
dividends will continue in the future.

Dividends may be paid to the holders of the Corporation's shares, 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 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.

15

ITEM 6. SELECTED FINANCIAL DATA

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. In thousands, except per
share amounts.

* Per share data for 1999 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.

16

SUMMARY QUARTERLY FINANCIAL INFORMATION
In thousands, except per share amounts

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

17

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

The discussion and analysis in this section should be read in conjunction with
Item 8, Financial Statements and Supplemental Data as well as with the selected
financial data found elsewhere in this report.

Critical Accounting Policies

In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ significantly from those estimates.
Estimates that are particularly susceptible to significant change include the
determination of the allowance for loan losses and mortgage servicing rights
valuation.

The consolidated financial statements of the Corporation are prepared in
conformity with accounting principles generally accepted in the United States of
America and follow general practices within the industries in which it operates.
This preparation requires management to make estimates, assumptions, and
judgments that affect the amounts reported in the financial statements and
accompanying notes. These estimates, assumptions, and judgments are based on
information available as of the date of the financial statements; accordingly,
as this information changes, actual results could differ from the estimates,
assumptions, and judgments reflected in the financial statements. Certain
policies inherently have a greater reliance on the use of estimates, assumptions
and judgments and, as such, have a greater possibility of producing results that
could be materially different than originally reported. Management believes the
following policies are both important to the portrayal of the Corporation's
financial condition and results and require subjective or complex judgments and,
therefore, management considers the following to be critical accounting
policies.

Allowance for Loan Losses - Management's evaluation process used to determine
the adequacy of the allowance for loan losses is subject to the use of
estimates, assumptions, and judgments including management's ongoing review and
grading of the loan portfolio, consideration of past loan loss experience,
trends in past due and nonperforming loans, risk characteristics of the various
classifications of loans, existing economic conditions, the fair value of
underlying collateral, and other qualitative and quantitative factors which
could affect probable credit losses. Because current economic conditions can
change and future events are inherently difficult to predict, the anticipated
amount of estimated loan losses, and therefore the adequacy of the allowance,
could change significantly. As an integral part of their examination process,
various regulatory agencies also review the allowance for loan losses. Such
agencies may require that certain loan balances be charged off when their credit
evaluations differ from those of management, based on their judgments about
information available to them at the time of their examination. The Corporation
believes the allowance for loan losses is adequate and properly recorded in the
financial statements. See section "Allowance for Loan Losses."

Mortgage Servicing Rights Valuation - The fair value of the Corporation's
mortgage servicing rights asset is important to the presentation of the
consolidated financial statements in that mortgage servicing rights are subject
to a fair value-based impairment standard. Mortgage servicing rights do not
trade in an active open market with readily observable prices. As such, like
other participants in the mortgage banking business, the Corporation relies on
an internal estimated cash flow model to establish the fair value of its
mortgage servicing rights. While the Corporation believes that the values
produced by its internal model are indicative of the fair value of its mortgage
servicing rights portfolio, these values can change significantly depending upon
the then current interest rate environment, estimated prepayment speeds of the
underlying mortgages serviced, and other economic conditions. The proceeds that
might be received should the Corporation actually consider a sale of the
mortgage servicing rights portfolio could differ from the amounts reported at
any point in time. The Corporation believes the mortgage servicing rights asset
is properly recorded in the financial statements.

18

For additional information concerning critical accounting policies, see Notes to
Consolidated Financial Statements, "Note 1, Summary of Significant Accounting
Policies" and "Note 2, Changes in Accounting Principles".

Results of Operations

INCOME STATEMENT

The Corporation recorded net income of $7.6 million for the year ended December
31, 2003, an increase of 7.0% over the $7.1 million earned in 2002. These
amounts represented returns on average assets of 1.35% for 2003 and 1.33% for
2002. Returns on average equity were 13.34% for 2003 and 13.97% for 2002.
Earnings per share in 2003 (basic and diluted) were $1.10, an increase of 7.8%
over 2002 earnings per share of $1.02.

Interest income decreased $3.6 million, from $30.8 million in 2002 to $27.2
million in 2003. Interest expense decreased from $12.0 million in 2002 to $9.7
million in 2003. These items continue to be affected by the low interest rate
environment in 2003. As a result, net interest income decreased $1.3 million in
2003. However, as mentioned previously, net income increased for the year. The
decrease in net interest income was offset by the increase in other income as
detailed below.

Other income increased $1.3 million in 2003, from $6.6 million in 2002 to $7.9
million in 2003. A sustained decrease in mortgage rates led to significant gains
on sales of these loans to the secondary market and the corresponding servicing
income. Other expense held steady: increases in employee compensation were
offset by decreases in other expense categories such as occupancy expense.

BALANCE SHEET

Total assets at December 31, 2003 increased $16.2 million from $565.8 million in
2002 to $582.0 million in 2003. Loans were $371.1 million at December 31, 2003,
an increase of $27.0 million or 7.8% over December 31, 2002. Significant
increases in loans were as follows: Commercial loans increased $7.5 million,
commercial real estate loans increased $7.4 million, and consumer loans
increased $8.8 million.

Challenging economic conditions continue to affect the Bank's customers. The
allowance for loan losses increased to $4.0 million at December 31, 2003 from
$3.3 million at December 31, 2002. The ratio of allowance for loan losses to
total loans was 1.08% for 2003 and 0.98% for 2002. Non-performing loans were
$3.3 million, representing 0.9% of total loans at year end 2003, compared to
$1.8 million or 0.5% of total loans last year. The increase in non-performing
loans came primarily from the commercial loan sector of the Bank's loan
portfolio.

Deposits increased $12.1 million, from $416.1 million at December 31, 2002 to
$428.2 million at December 31, 2003. 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. Repurchase agreements increased $4.5 million or 8.8%
over 2002 due to increased deposits by municipalities at year end as a result of
tax collections. Borrowed funds decreased $6.2 million to $31.9 million at
December 31, 2003 from $38.1 million at December 31, 2002. An FHLB borrowing in
the amount of $5.0 million reached maturity during the year 2003.

Results of Operations Overview for fiscal years 2003, 2002 and 2001

The Corporation reported $7.6 million in net income for 2003 or $1.10 per share
compared to 2002 net income of $7.1 million or $1.02 per share, and $5.4 million
or $0.78 per share for 2001. Earnings for the year represent a record level of
performance for the Corporation, exceeding the previous record of $7.1 million
achieved in 2002. The improvement was primarily attributed to other operating
income. Return on average assets was 1.35%, 1.33% and 1.07% in 2003, 2002 and
2001, respectively. Return on average equity was 13.34% for 2003, 13.97% for
2002, and 12.07% for 2001.

19

Net Interest Income, Interest Rate Spread, and Net Interest Margin

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%.

Table 1 provides average balances of earning assets and interest-bearing
liabilities, the associated interest income and expense and the corresponding
interest rates earned and paid. Net interest income, interest rate spread and
net interest margin on a tax-equivalent basis are shown for the three years
ended December 31, 2003, 2002, and 2001, respectively.

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. The amount of net interest income is affected by
changes in interest rates and by the amount and composition of earning assets
and interest-bearing liabilities. Interest rates fell during 2003 and 2002. Net
interest income (on a tax equivalent basis) for 2003 decreased by $1.3 million
or 7.0% compared to the year ended December 31, 2002, while 2002 net interest
income increased by $1.4 million or 8.0% from the previous year ended December
31, 2001. (See Tables 1 and 2)

Interest rate spread and net interest margin are utilized to measure and explain
changes in net interest income. Interest rate spread is the difference between
the average yield on interest earning assets and the average rate paid on
interest bearing liabilities. Interest rate spread for the years ended December
31, 2003, 2002 and 2001 was 2.97%, 3.37%, and 3.07%, respectively. Net interest
margin is calculated as tax equivalent net interest income divided by average
earning assets and represents the Bank's net yield on its earning assets. The
net interest margin exceeds the interest rate spread because non-interest
bearing sources of funds, primarily demand deposits and shareholder's equity,
also support earning assets. For 2003, the net interest margin was 3.35%
compared to 3.81% in 2002. The net interest margin for 2001 was 3.74%. These
changes are the result of repricing and volume changes as previously discussed
and illustrated in Table 2 "Rate and Volume Variance Analysis Based on Average
Balances."

As shown in the rate/volume analysis in Table 2, changes in the rates resulted
in a $2.4 million decrease in taxable equivalent net interest income. Decreases
in volume and changes in the mix of both earning assets and interest-bearing
liabilities added $1.0 million for a combined decrease of $1.3 million in
taxable equivalent net interest income. Rate changes on interest-bearing
liabilities lowered interest expense by $2.6 million, while rate changes on
earning assets reduced interest income by $4.9 million.

For 2003, the cost of interest-bearing liabilities decreased 64 basis points to
2.22% aided by the low interest rate environment. The most significant rate
decrease occurred in the CD and IRA deposit category, a decline of 94 basis
points.

20

The yield on earning assets fell 93 basis points to 5.69% for 2003. The average
loan yield was 6.27%. The lower rate environment for new originations,
competitive pricing pressure and refinancing in many loan categories contributed
to the downward trend in loan yields. The yield on securities was down 107 basis
points to 5.13%. The earning asset rate changes reduced interest income by $3.0
million, a combination of $1.7 million in lower interest on loans and $1.3
million in lower interest on securities.

From a volume perspective, earning assets contributed $1.4 million to taxable
equivalent net interest income while interest-bearing liabilities cost $0.2
million, netting a $1.2 million increase to taxable equivalent net interest
income.

Average earning assets were $522.9 million in 2003, an increase of $28.1 million
from 2002. Loans accounted for the majority of the growth in earning assets.
Loans increased $17.7 million or 5.2% to $353.3 million on average in 2003.
Securities increased $3.4 million and Federal Funds Sold increased $7.0 million
on average in 2003.

Average interest-bearing liabilities were $434.5 million in 2003, an increase of
$15.6 million from 2002. Certificates of deposit and IRA deposits accounted for
a $9.9 million increase on average over 2002.

21

Table 1 displays the average balances and average rates paid on all major
deposit classifications for 2003, 2002, and 2001.

AVERAGE BALANCES, YIELD AND RATES
(In thousands)

Table 1

22

The following table sets forth the effects of changing rates and volumes on net
interest income of the Corporation for the periods indicated. Information is
provided with respect to (1) effects on net interest income attributable to
changes in volume (changes in volume multiplied by prior rate); (2) effects on
net interest income attributable to changes in rate (changes in rate multiplied
by prior volume); and (3) the net change in interest income.

RATE AND VOLUME VARIANCE ANALYSIS
BASED ON AVERAGE BALANCES
(IN THOUSANDS)

Table 2

Provision and Allowance for Loan Losses

For the year ended December 31, 2003, the Bank recorded net charge-offs of
$635,000 compared to net charge- offs of $1,303,000 in 2002 and $4,087,000 in
2001. Net charge-offs in 2001 included 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.

23

Gross charge-offs amounted to $749,000 in 2003, $1,578,000 in 2002, and
$4,134,000 in 2001, 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 $114,000 in 2003,
$275,000 in 2002, and $47,000 in 2001.

The methodology used in determining the allowance for loan losses is based on
guidelines provided by the Financial Accounting Standards Board. 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.

The factor of loan volume trends is based on actual lending activity. This
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. Specific problem loans are subject to classification according to one of
two categories: "Substandard" or "Doubtful". An institution is required to
develop its own program to classify its assets on a regular basis and to set
aside appropriate loss reserves on the basis of such classification. The
allocation of the allowance among the various loan categories is based on the
average proportion within those categories using a three year historical loss
percentage. 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 of the allowance for loan losses is shown in the following table.

Table 3

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS)
DECEMBER 31,

24

Local economic concerns continue to affect the bank's customers. These concerns
are reflected in the increase shown in the allocation of allowance for loan
losses. An increase in local unemployment rates since December 31, 2002 was
taken into consideration when determining the increase in the unallocated
portion of the allowance.

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.

Table 4
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS)

FOR THE YEARS ENDED DECEMBER 31,

25

The allowance for loan losses of $3,999,000 as of December 31, 2003 amounted to
1.08% of the outstanding loan portfolio. As of December 31, 2002, the $3,384,000
allowance for loan losses was 0.98% of gross loans and the allowance for loan
losses of $2,737,000 as of December 31, 2001 represented 0.84% of gross loans.
Net charge-offs for the year ended December 31, 2003 were less than the
provision for loan losses for 2003. This accounts for the increase in the
allowance for loan losses from $3,384,000 at December 31, 2002 to $3,999,000 at
December 31, 2003. 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, 2003. See Note 4 in
the Consolidated Financial Statements.

Other Income

Other income increased $1.3 million, or 19.8%, from 2002 to 2003. The increased
volume of mortgage loans and refinancings processed and sold to the FNMA
secondary market led to increased gains on loans sold and servicing fees
associated with them.

Other income increased $1.2 million, 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 Expense

Other expense decreased by $109,000, or 0.8%, from 2002 to 2003.

Other expense increased by $1.1 million, 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.

Income Taxes

The effective tax rates for the Corporation were 21.40%, 20.58%, and 14.59%, for
2003, 2002, and 2001, respectively. The increase in the effective tax rate for
2003 is a result of higher taxable income in 2003. The primary reason for higher
taxable income is that the tax benefit from 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 12% in 2002 to 11% in 2003. 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 were $138.3 million, $135.7 million, and $126.8 million as of
December 31, 2003, 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.

26

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.

Table 5
SECURITIES AVAILABLE FOR SALE
(IN THOUSANDS)

The following table presents the maturity by type of the investment portfolio
for the year ended December 31, 2003.

Table 6

INVESTMENT PORTFOLIO ANALYSIS
DECEMBER 31, 2003
(IN THOUSANDS)

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.

27

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 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.

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, 2003 was $7.3
million.

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 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.

28

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

Table 7
SUMMARY OF LOAN PORTFOLIO
(IN THOUSANDS)
LOANS OUTSTANDING AS OF DECEMBER 31,

Table 8

MATURITIES OF LOAN PORTFOLIO
DECEMBER 31, 2003
(IN THOUSANDS)

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 is subject. The Bank had no foreign loans in its
portfolio as of December 31, 2003.

29

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, 2003 and 2002 were $3.3 million and
$1.8 million, 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 consumer loans, 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.

Table 9

RISK ELEMENTS OF LOAN PORTFOLIO
(IN THOUSANDS)
DECEMBER 31,

Total nonperforming loans at December 31, 2003 were $3.3 million, an increase of
$1.5 million from $1.8 million at December 31, 2002. The increase in
non-performing loans came primarily from the consumer loan portfolio.

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.

The following table represents maturities of time deposits in denominations of
$100,000 or more for the years ended December 31, 2003 and 2002.

30

Table 10

MATURITY OF TIME DEPOSITS $100,000 OR MORE
(IN THOUSANDS)
FOR THE YEARS ENDED
DECEMBER 31,

Table 11

Contractual Obligations

Payments due by period as of 12/31/2003

Borrowings

FHLB advances decreased from $35.0 million at December 31, 2002 to $30.0 million
at December 31, 2003, a decrease of $5.0 million or 14.3%. 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 $345,000 at December 31, 2003.

Off-Balance Sheet Arrangements

The Corporation has become a party to financial instruments with off-balance
sheet risk in the normal course of its business in order to meet the financing
needs of its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to extend credit
and standby letters of credit.

31

Off-balance sheet financial instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amounts recognized in the
Statement of Financial Condition. In the event of non-performance by the other
party to a financial instrument, the Corporation's exposure to credit loss is
represented by the contractual amount of the instrument. The Corporation uses
the same credit policies in granting commitments and letters of credit as it
does for on-balance sheet financial instruments. See Note 18 of the consolidated
financial statements for specifics on the Corporation's off-balance sheet
arrangements.

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 $5.9 million or 10.9% in 2003 to $60.2
million at the end of the year from $54.3 million at December 31, 2002. Net
income of $7.6 million less an other comprehensive loss of $0.2 million and $1.5
million in dividends paid 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, 2003, 2002, and 2001 was 8.4%, 7.5%, and 6.8%,
respectively. The bank is also required to maintain a ratio of Tier 1 capital to
risk-weighted assets of at least 4.0%. The Bank's Tier 1 capital (to
risk-weighted assets) ratio for the years ended December 31, 2003, 2002, and
2001 was 12.0%, 11.1%, and 10.4% respectively.

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, 2003,
and for each of the two preceding years was 13.1%, 12.0%, and 11.3%,
respectively. According to FDIC capital guidelines, the Bank is considered to be
"well capitalized" as of December 31, 2003.

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.

32

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. 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.

Interest Rate Risk

In order to measure earnings sensitivity to changing rates, the Corporation uses
three different measurement tools: static gap analysis, simulation of earnings,
and economic value of equity. The static gap analysis starts with contractual
repricing information for assets, liabilities, and off-balance sheet
instruments. These items are then combined with repricing estimations for
administered rate (interest-bearing demand deposits, savings, and money market
accounts) and non-rate related products (demand deposit accounts, other assets,
and other liabilities) to create a baseline repricing balance sheet. In addition
to the contractual information, residential mortgage whole loan products and
mortgage-backed securities are adjusted based on industry estimates of
prepayment speeds that capture the expected prepayment of principal above the
contractual amount based on how far away the contractual coupon is from market
coupon rates. There is no guaranty that prepayment speeds of mortgage backed
securities will continue to be accelerated.

33

The following table represents the Corporation's consolidated static gap
position as of December 31, 2003.

Table 12: Interest Rate Sensitivity Analysis

*Based on historical evidence 90% of non-interest bearing deposits have a 1-5
year life while 10% have a 0-12 month life.

(1) The interest rate sensitivity assumptions for demand deposits, savings
accounts, money market accounts, and interest-bearing demand deposit
accounts are based on current and historical experiences regarding
portfolio retention and interest rate repricing behavior. Based on these
experiences, a portion of these balances are considered to be long-term and
fairly stable and are therefore included in the "1 - 5 year" category.

The static gap analysis in Table 11 provides a representation of the
Corporation's earnings sensitivity to changes in interest rates. It is a static
indicator that does not reflect various repricing characteristics and may not
necessarily indicate the sensitivity of net interest income in a changing
interest rate environment.

At the end of 2003, the Corporation's balance sheet was relatively neutral to
interest rate movements. In the 1 - 5 year category, liabilities are repricing
faster than assets.

Interest rate risk of embedded positions (including prepayment and early
withdrawal options, lagged interest rate changes, administered interest rate
products, and cap and floor options within products) require a more dynamic
measuring tool to capture earnings risk. Earnings simulation and economic value
of equity are used to more completely assess interest rate risk.

34

Along with the static gap analysis, determining the sensitivity of short-term
future earnings to a hypothetical plus or minus 100, 200, and 300 basis point
parallel rate shock can be accomplished through the use of simulation modeling.
In addition to the assumptions used to create the static gap, simulation of
earnings includes the modeling of the balance sheet as an ongoing entity. Future
business assumptions involving administered rate products, prepayments for
future rate-sensitive balances, and the reinvestment of maturing assets and
liabilities are included. These items are then modeled to project net interest
income based on a hypothetical change in interest rates. The resulting net
interest income for the next 12-month period is compared to the net interest
income amount calculated using the flat rates. This difference represents the
Corporation's earnings sensitivity to a plus or minus 100 basis point parallel
rate shock.

The resulting simulations for December 31, 2003, projected that net interest
income would decrease by approximately 0.2% of budgeted net interest income if
rates rose by a 100 basis point shock, and projected that the net interest
income would decrease by approximately 2.5% if rates fell by a 100 basis point
shock.

Economic value of equity is another tool used to measure the impact of interest
rates on the present value of assets, liabilities and off-balance sheet
financial instruments. This measurement is a longer-term analysis of interest
rate risk as it evaluates every cash flow produced by the current balance sheet.
The projected changes for earnings simulation and economic value of equity for
2003 were within the Corporation's interest rate risk policy. The results of the
2003 modeling mirrored the other interest rate risk tests discussed above, as
the Corporation maintained a relatively neutral position at December 31, 2003.

These results are based solely on immediate and sustained parallel changes in
market rates and do not reflect the earnings sensitivity that may arise from
other factors. These factors may include changes in the shape of the yield
curve, the change in spread between key market rates, or accounting recognition
of the impairment of certain intangibles. The above results are also considered
to be conservative estimates due to the fact that no management actions to
mitigate potential income variances are included within the simulation process.
This action could include, but would not be limited to, delaying an increase in
deposit rates, extending liabilities, changing the pricing characteristics of
loans, or changing the growth rate of certain assets and liabilities.

35

ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

[WIPFLI LLP LOGO]

Independent Auditor's Report

Board of Directors and Stockholders
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, 2003 and 2002, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 2003. 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 the standards of the Public Company
Accounting Oversight Board (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, 2003 and 2002, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States.

Wipfli LLP

January 23, 2004
Green Bay, Wisconsin

36

First Manitowoc Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

37

First Manitowoc Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

See accompanying notes to consolidated financial statements.

38

First Manitowoc Bancorp, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity

See accompanying notes to consolidated financial statements.

39

First Manitowoc Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

See accompanying notes to consolidated financial statements.

40

First Manitowoc Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

See accompanying notes to consolidated financial statements.

41

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 United Financial Services,
Inc., the Bank's 49.8% owned subsidiary, is accounted for on the equity method.

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, 2003, those required reserves of
$1,637,000 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, 2003, were approximately $11,881,000.

Investment Securities - The Corporation'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 stockholders'
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 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.

42

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Continued)

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.

43

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Continued)

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.

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, and 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 fair value of
the intangible asset has decreased in comparison to the carrying amount.

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 2003 and 2002. No
amortization or impairment expense was recognized in 2003 or 2002.

44

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Continued)

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.

Off-Balance-Sheet Financial Instruments - In the ordinary course of business,
the Corporation has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit, commitments under commercial letters
of credit, and standby letters of credit. Such financial instruments are
recorded in the consolidated financial statements when they become payable.

Rate Lock Commitments - The Corporation enters into commitments to originate
loans whereby the interest rate on the loan is determined prior to funding (rate
lock commitments). Rate lock commitments on mortgage loans that are intended to
be sold are considered to be derivatives. Accordingly, such commitments, along
with any related fees received from potential borrowers, are recorded at fair
value as derivative assets or liabilities, with changes in fair value recorded
in the net gain or loss on sale of mortgage loans. Fair value is based on fees
currently charged to enter into similar agreements, and for fixed-rate
commitments also considers the difference between current levels of interest
rates and the committed rates. The notional amount of rate lock commitments at
December 31, 2003, was $5,360,000. The fair value of these derivatives was
immaterial to the financial statements.

Advertising Costs - Advertising costs are expensed as incurred.

Comprehensive Income - Comprehensive income consists of net income and other
comprehensive income (loss). Other comprehensive income (loss) 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 split declared in October 2002.
Weighted average shares outstanding were 6,937,268 for the years ended December
31, 2003, 2002, and 2001.

Reclassifications - Certain reclassifications have been made to the 2002 and
2001 consolidated financial statements to conform to the 2003 classifications.

New Accounting Pronouncements - In April 2003, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies financial accounting and reporting
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement amends SFAS No.
133 for decisions made as part of the Derivatives Implementation Group process
and in connection with implementation issues raised in relation to the
application of the definition of a derivative. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003. The adoption had no
material impact on the Corporation's results of operations, financial position,
or liquidity.

45

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Continued)

New Accounting Pronouncements (Continued) - In May 2003, the FASB issued SFAS
No. 150, Accounting for Certain Financial Instruments With Characteristics of
Both Liabilities and Equity. SFAS No. 150 establishes standards on how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003; otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption had no effect on the Company's results of operations, financial
position, or liquidity.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46). The objective of this interpretation is to
provide guidance on how to identify a variable interest entity and determine
when the assets, liabilities, noncontrolling interests, and results of
operations of a variable interest entity need to be included in a company's
consolidated financial statements. A company that holds variable interests in an
entity will need to consolidate the entity if the company's interest in the
variable interest entity is such that the company will absorb a majority of the
variable interest entity's losses and/or receive a majority of the entity's
expected residual returns, if they occur. FIN 46 also requires additional
disclosures by primary beneficiaries and other significant variable interest
holders. The provisions of this interpretation, as subsequently amended, were
effective upon issuance for new variable interest entities and for fiscal years
ending after December 15, 2003, for existing variable interest entities. The
requirements of FIN 46 did not have a material impact on the results of
operations, financial position, or liquidity.

In November 2002, the FASB issued Interpretation No. 45, an interpretation of
FASB Statements Nos. 5, 57, and 107, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others (FIN 45). This interpretation elaborates on the disclosures to be made by
a guarantor in its financial statements regarding certain guarantees that it has
issued. It also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The disclosure requirements of FIN 45 were
effective as of December 31, 2002, and require disclosure of the nature of the
guarantee, the maximum potential amount of future payments that the guarantor
could be required to make under the guarantee, and the current amount of the
liability, if any, for the guarantor's obligations under the guarantee. The
recognition requirements of FIN 45 were effective beginning January 1, 2003. The
requirements of FIN 45 did not have a material impact on the results of
operations, financial position, or liquidity.

Note 2 Changes in Accounting Principles

Effective January 1, 2002, the Corporation adopted 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.

46

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2 Changes in Accounting Principles (Continued)

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:

47

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 3 Securities Available for Sale (Continued)

The following table shows the securities' gross unrealized losses and fair
value, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position, at December 31,
2003:

All unrealized losses in the portfolio are considered to be temporarily impaired
due to the current interest rate environment and the stated rate on the
individual securities. The temporary impairment is not considered to be severe
and duration of the impairment is considered to be manageable at this time.

The amortized cost and estimated fair value of securities at December 31, 2003,
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 2003, 2002, and 2001.

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
$70,148,000 and $70,825,000, respectively, as of December 31, 2003.

48

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

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 $3,278,000 and
$1,803,000 at December 31, 2003 and 2002, 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 $308,000,
$234,000, and $322,000 of interest income would have been recorded for the years
ended December 31, 2003, 2002, and 2001, respectively. Interest income on
nonperforming loans of $87,000, $54,000, and $155,000 was recognized for cash
payments received in 2003, 2002, and 2001, respectively.

49

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 4 Loans (Continued)

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 stockholders 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 2003 is summarized below (in thousands):

Loans outstanding, December 31, 2002 $ 3,650
New loans 16,021
Repayments (7,031)
--------

Loans outstanding, December 31, 2003 $ 12,640
========

Note 5 Loan Servicing

Mortgage loans of $178,722,000 and $151,963,000 as of December 31, 2003 and
2002, 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:

50

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 5 Loan Servicing (Continued)

No impairment of mortgage servicing rights existed at December 31, 2003 or 2002;
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, 2003 and 2002. The
fair value of mortgage servicing rights was determined using the present value
of future cash flows method.

Note 6 Premises and Equipment

Premises and equipment at December 31 consist of the following:

Depreciation and amortization expense was $736,000, $946,000, and $870,000 for
the years ended December 31, 2003, 2002, and 2001, 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 $5,445,000 and
liabilities of $1,252,000. The Bank's earnings from its investment in the
venture were approximately $369,000, $378,000, and $282,000 for the years ended
December 31, 2003, 2002, and 2001, respectively. Data processing service fees
paid by the Bank to the venture were approximately $787,000, $843,000, and
$824,000 for the years ended December 31, 2003, 2002, and 2001, respectively.

The Bank has a 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 $450,000 at December 31, 2003. 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.

51

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 8 Intangible Assets

Intangible assets consist of the following at December 31:

Amortization expense for intangible assets, excluding servicing rights, was
$274,000 in 2003, $303,000 in 2002, and $223,000 in 2001.

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, 2003.

52

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 9 Goodwill

There were no changes in goodwill for the years ended December 31, 2003 and
2002.

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 $48,532,000 and $45,269,000
at December 31, 2003 and 2002, respectively. Interest expense on time deposits
of $100,000 or more was approximately $1,340,000, $1,505,000, and $1,978,000 for
the years ended December 31, 2003, 2002, and 2001, respectively.

At December 31, 2003, the scheduled maturities of time deposits are as follows
(in thousands):

2004 $138,787
2005 27,811
2006 5,366
2007 11,726
2008 2,685
Thereafter 517
--------
Total $186,892
========

Deposit balances with the Corporation's executive officers, directors, and
affiliated companies in which they are principal owners were $1,120,000 at
December 31, 2003.

53

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

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 $3,493,000 and $2,890,000 at December 31, 2003 and 2002, respectively.

Note 12 Borrowed Funds

Borrowed funds are summarized as follows at December 31:

54

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 12 Borrowed Funds (Continued)

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 1.08% in 2003, 1.46% in 2002, and 3.70%
in 2001. 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 $105,892,000 and $106,018,000 at
December 31, 2003 and 2002, respectively. The FHLB advances are also
collateralized by $4,631,700 and $2,435,100 of FHLB stock owned by the
Corporation and included in other investments at December 31, 2003 and 2002,
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, 2003, are as
follows (in thousands):

2004 $15,000
2005 --
2006 --
2007 --
2008 345
Thereafter 15,000
-------
Total $30,345
=======

55

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 13 Income Taxes

The provision for income taxes consists of the following:

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:

56

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 13 Income Taxes (Continued)

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 $2,609,000.
The Bank's net operating losses begin to expire in 2014.

Note 14 Benefit Plans

Effective January 1, 2002, the Corporation merged its defined contribution money
purchase plan into its defined contribution profit sharing 401(k) plan, and
effective January 1, 2003, the plan was amended to include provisions for an
employee stock ownership plan (ESOP). All participants of the 401(k) plan are
eligible for the ESOP. As of December 31, 2003, shares are purchased on the open
market as they become available. The plan held 537,719 shares. These shares are
included in the calculation of the Corporation's earnings per share. 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 2003, 2002,
and 2001. The Corporation made additional discretionary contributions to the
plan of $333,000, $323,000, and $283,000 in 2003, 2002, and 2001, respectively.
All discretionary contributions are at the direction of the Board of Directors.
Total expense associated with the plans was approximately $508,000, $487,000,
and $411,000 in 2003, 2002, and 2001, respectively.

57

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 14 Benefit Plans (Continued)

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.
The annual payment increases 5% per year from 2004 through 2008. Related expense
for this agreement was approximately $107,000, $107,000, and $108,000 for the
years ended December 31, 2003, 2002, and 2001, respectively. Included in other
liabilities is the vested present value of future payments of approximately
$643,000 and $536,000 at December 31, 2003 and 2002, 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 $1,641,000 and
$1,443,000 at December 31, 2003 and 2002, respectively. Expense associated with
this plan was approximately $210,000, $200,000, and $188,000 in 2003, 2002, and
2001, respectively.

Note 15 Stockholders' 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 consolidated 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, 2003, that
the Corporation meets all capital adequacy requirements to which it is subject.

As of December 31, 2003, 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.

58

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 15 Stockholders' Equity (Continued)

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

The payment of dividends is restricted by certain statutory and regulatory
limitations. The Bank could have paid an additional $11,962,000 of dividends to
the Corporation and still maintained capital ratios satisfactory to applicable
regulatory agencies.

59

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 16 Accumulated Other Comprehensive Income

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

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.

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.

60

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 18 Commitments and Contingencies (Continued)

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.

Like many Wisconsin financial institutions, the Corporation has a non-Wisconsin
subsidiary that holds and manages investment assets which have not been subject
to Wisconsin tax. The Wisconsin Department of Revenue has instituted an audit
program specifically aimed at out-of-state bank subsidiaries and has indicated
that it may withdraw favorable rulings previously issued in connection with such
subsidiaries. As a result of these developments, the Department may take the
position that the income of the out-of-state subsidiaries is taxable in
Wisconsin, which will likely be challenged by financial institutions in the
state. If the Department is successful in its efforts, it would result in a
negative impact on the earnings of the Corporation.

61

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

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 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 flows 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.

62

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 19 Fair Value of Financial Instruments (Continued)

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.

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.

63

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 20 Condensed Parent Company Only Financial Statements

Balance Sheets

64

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 20 Condensed Parent Company Only Financial Statements (Continued)

Statements of Income

65

First Manitowoc Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 20 Condensed Parent Company Only Financial Statements (Continued)

Statements of Cash Flows

66

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

None.

ITEM 9A. 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, 2003, 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.

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 2004 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 2004 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 2004 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 2004 Annual Meeting of
Shareholders, which is incorporated herein by reference.

67

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 2004 Annual Meeting of
Shareholders, which is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is included under the heading "Principal
Accountant Fees and Services" in the Corporation's definitive Proxy Statement,
prepared for the 2004 Annual Meeting of Shareholders, which is incorporated
herein by reference.

PART IV

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, 2003 and 2002

Consolidated Statements of Income---For the Years Ended December 31,
2003, 2002, and 2001

Consolidated Statements of Shareholders' Equity---For the Years Ended
December 31, 2003, 2002, and 2001

Consolidated Statements of Cash Flows---For the Years Ended December
31, 2003, 2002, and 2001

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

EXHIBIT NUMBER DESCRIPTION OF DOCUMENTS

3.1 Articles of Incorporation (incorporated by reference
to Exhibit (3)(1) to the Corporation's Report on Form
10 filed May 5, 1999).

3.2 Bylaws of First Manitowoc Bancorp, Inc. as amended on
February 11, 2003 (incorporated by reference to
Exhibit (3)(2) to the Corporation's Report on Form
10-K filed March 14, 2003).

10.1 First Manitowoc Bancorp, Inc. 401(k) Profit Sharing
Plan (incorporated by reference to Exhibit (10)(1) to
the Corporation's Report on Form 10-Q filed May 15,
2003).

68

10.2 Executive Employee Salary Continuation Plan for
Thomas J. Bare, dated March 19, 1998, between First
National Bank in Manitowoc and Thomas J. Bare
(incorporated by reference to Exhibit (10)(2) to the
Corporation's Report on Form 10-K filed March 14,
2003).

10.3 First National Bank in Manitowoc Voluntary Deferred
Compensation Plan (incorporated by reference to
Exhibit (10)(3) to the Corporation's Report on Form
10-K filed March 14, 2003).

11 Statement Re Computation of Per Share Earnings. See
Note 1 in Part II Item 8.

12 Annual Report of First Manitowoc Bancorp, Inc. to
Shareholders for the period ended December 31, 2003.

21 Subsidiaries of the Corporation.

23 Consent of Independent Auditors.

31.1 Certification of Thomas J. Bare pursuant to Rule
13a-14(a) or 15(d)-14(a)

31.2 Certification of Thomas J. Bare pursuant to Rule
13a-14(a) or 15(d)-14(a)

32.1 Section 1350 Certification of Thomas J. Bare

99.1 Proxy Statement of First Manitowoc Bancorp, Inc. for
2004 Annual Meeting of Shareholders.

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 2003, the Corporation did not file any
current reports on Form 8-K.

69

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 12, 2004 /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 12, 2004 Date: March 12, 2004

/s/ John J. Zimmer /s/ John M. Jagemann
- --------------------------------------- -------------------------------------
John J. Zimmer, Vice President John M. Jagemann, Director

Date: March 12, 2004 Date: March 12, 2004

/s/ John C. Miller /s/ John E. Nordstrom
- --------------------------------------- -------------------------------------
John C. Miller, Director John E. Nordstrom, Director

Date: March 12, 2004 Date: March 12, 2004

/s/ Craig A. Pauly /s/ Katherine M. Reynolds
- --------------------------------------- -------------------------------------
Craig A. Pauly, Director Katherine M. Reynolds, Director

Date: March 12, 2004 Date: March 12, 2004

/s/ John M. Webster
- ---------------------------------------
John M. Webster, Director

Date: March 12, 2004