THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION
S-T.
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-18542
MID-WISCONSIN FINANCIAL SERVICES, INC.
Exact name of registrant as specified in its charter)
Wisconsin 06-1169935
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
132 West State Street, Medford, WI 54451
(Address of principal executive offices, including zip code)
(715) 748-4364
(Registrant's telephone number, including area code)
_____________________________________________________________________________
(Former name, former address & former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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
As of June 30, 1996 there were 1,858,790 shares of $.10 par value common stock
outstanding.
<PAGE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995 3
Consolidated Statements of Income
Three Months Ended June 30, 1996 and June 30, 1995;
and Six Months Ended June 30, 1996 and June 30, 1995 4
Consolidated Statements of Cash Flows
Six months Ended June 30, 1996 and June 30, 1995 5
Notes to Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operations 11-13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports of Form 8-K 15
Signatures 16
Exhibit Index 17
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
and Subsidiary
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, 1996 December 31, 1995
ASSETS
<S> <C> <C>
Cash & cash equivalents $8,886,481 $10,683,544
Interest-bearing deposits in other financial
institutions 9,289 20,246
Investment securities available for sale
At fair value 56,116,383 55,280,506
Total loans 171,067,187 172,678,045
Less - Allowance for credit losses (1,875,623) (1,835,951)
Net loans 169,191,564 170,842,094
Premises and equipment 3,986,312 4,135,949
Accrued interest and other assets 4,112,401 3,643,833
TOTAL ASSETS $242,302,430 $244,606,172
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest bearing deposits $19,924,074 $22,645,269
Interest-bearing deposits 166,199,906 169,499,137
Total Deposits 186,123,980 192,144,406
Short-term borrowings 24,265,558 21,386,623
Long term borrowings 4,000,000 4,000,000
Accrued interest and other liabilities 3,470,916 3,325,185
Total Liabilities 217,860,454 220,856,214
Stockholders' equity:
Common stock-Par value $.10 per share:
Authorized - 6,000,000 shares in 1996
- 6,000,000 shares in 1995
Issued & outstanding
- 1,858,790 shares in 1996 185,879
- 1,857,290 shares in 1995 185,729
Additional paid-In capital 12,592,369 12,573,366
Retained earnings 11,834,773 10,685,070
Unrealized gain on securities available
for sale (171,045) 305,793
Total Stockholders' Equity 24,441,976 23,749,958
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $242,302,430 $244,606,172
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three months ended Six Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $ 4,063,544 $ 3,863,099 $ 8,081,526 $ 7,508,595
Interest on investment securities:
Taxable 846,562 794,510 1,670,472 1,605,404
Tax-exempt 74,950 84,026 139,782 176,108
Other interest income 10,446 24,219 10,725 31,638
Total interest income 4,995,502 4,765,854 9,902,505 9,321,745
Interest expense
Deposits-NOW 103,084 139,588 212,103 298,210
MMD 247,061 167,451 487,582 337,868
Savings 120,477 155,643 237,849 313,445
CDs & IRAs 1,457,450 1,490,871 2,918,957 2,839,925
U.S. Repurchase agreements 278,184 264,955 530,571 535,848
Long-term borrowings 49,140 55,684 98,280 110,266
Total interest expense 2,255,396 2,274,192 4,485,342 4,435,562
Net Interest income 2,740,106 2,491,662 5,417,163 4,886,183
Provision for credit losses 60,000 30,000 120,000 90,000
Net interest income after provision
for credit losses 2,680,106 2,461,662 5,297,163 4,796,183
Other income:
Service fees 144,005 160,886 286,980 310,994
Insurance commissions 18,234 20,600 35,949 32,800
Trust Service fees 92,761 89,672 185,648 179,702
Other fee income 131,698 90,188 243,012 182,198
Net security gains (69,150) 75,436 (93,749) (70,527)
Other operating income 15,056 19,010 33,521 37,327
Total other income 332,604 455,792 691,361 672,494
Operating expenses:
Salaries 677,654 735,542 1,394,038 1,455,010
Employee Benefits 270,083 236,816 534,450 420,871
Net occupancy expense 329,295 326,318 679,120 652,429
FDIC expense 500 105,200 1,000 210,400
Other operating expense 435,973 370,363 841,431 761,280
Total operating expenses 1,713,505 1,774,239 3,450,039 3,499,990
Income before income taxes 1,299,205 1,143,215 2,538,485 1,968,687
Provision for income taxes 472,159 384,632 905,691 665,273
Net income $827,046 $758,583 $1,632,794 $1,303,414
Earnings per share $0.44 $0.41 $0.87 $0.70
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1996 and 1995
<CAPTION>
1996 1995
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income $1,632,793 $1,303,414
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation amort & accretion 369,929 379,463
Provision for loan losses 120,000 90,000
(Gain) Loss on sale of investment securities 93,749 70,527
(Gain) Loss on equipment disposals 1,417 5,317
(Gain) loss on sale of other real estate - 1,777
Changes in operating assets and liabilities:
Other assets (132,271) (152,503)
Other liabilities 148,290 (30,793)
Net cash provided by operating activities 2,233,907 1,667,202
Cash flows from investing activities:
Proceeds from sale:
Available for Sale Investment Securities 2,433,730 2,788,473
Proceeds from Maturities:
Held to maturity - 385,000
Available for sale Investment Securities 13,581,250 3,169,712
Payment for purchases:
Held to maturity - -
Available for sale Investment Securities (17,711,589) (246,800)
Proceeds from sale of loans 2,683,000 384,600
Net (increase) decrease in loans (1,252,473) (1,544,016)
Net (increase) decrease in interest-bearing
deposits in other institutions 10,957 (2,582,815)
Capital expenditures (173,366) (144,091)
Proceeds from sale of equipment 2,950 200
Proceeds from sale of other real estate - 23,222
Net cash used in investing activities (425,541) 2,233,485
Cash flows from financing activities:
Net increase (decrease) in deposits (6,020,426) 3,747,139
Net increase (decrease) in short-term borrowing 2,878,935 (6,325,414)
Proceeds from sale of stock options 19,152 -
Dividends paid (483,090) (425,467)
Net cash provided by financing activities (3,605,429) (3,003,742)
Net increase (decrease) in cash and cash equivalents (1,797,063) 896,945
Cash and cash equivalents at beginning 10,683,544 9,245,910
Cash and cash equivalents at end $8,886,481 $10,142,855
Supplemental cash flow information: 1996 1995
Cash paid during the year for:
Interest $4,619,453 $4,519,185
Income taxes $905,025 $735,025
Supplemental schedule of non-cash investing and
financing activities:
Loans transferred to other real estate $100,000 -
Loans charged off $113,424 $74,239
Loans made in connection with the
disposition of other real estate
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
The consolidated balance sheet as of June 30, 1996, and the consolidated
statements of income for the three month periods ended June 30, 1996 and 1995,
and the six month periods ended June 30, 1996 and 1995, and the consolidated
statements of cash flows for the six month periods ended June 30, 1996 and
1995, have been prepared by the company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
changes in financial position for the unaudited interim periods have been
made.
Mid-Wisconsin is not aware of any known trends, events, or uncertainties
that will have or that are reasonably likely to have a material effect on the
Company's liquidity, capital resources, or operations.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the financial
statements and notes included in the Company's December 31, 1995, annual
report to the Shareholders. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the entire
year.
<TABLE>
NOTE 2 - INVESTMENT SECURITIES
<CAPTION>
The book value and market value of investment securities are summarized as
follows:
BOOK VALUE
June 30, 1996 Dec. 31, 1995
<S> <C> <C>
U.S. Treasury securities and obligations
of other U.S. Govt agencies & corp $ 22,694,809 $ 22,475,820
Mortgage Backed Securities 18,658,782 15,511,636
Oblig. to states & political subdivisions 6,031,772 4,900,426
Corporate Securities 5,289,979 5,813,709
Equity Securities 3,441,041 6,578,915
Totals $ 56,116,383 $ 55,280,506
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
<S> <C> <C>
U.S. Treasury securities and obligations
of other U.S. Govt agencies & corp $ 22,694,809 $ 22,475,820
Mortgage Backed Securities 18,658,782 15,511,636
Oblig. to states & political subdivisions 6,031,772 4,900,426
Corporate Securities 5,289,979 5,813,709
Equity securities 3,441,041 6,578,915
Totals $ 56,116,383 $ 55,280,506
</TABLE>
Included in the totals of Investment Securities at June 30, 1996, are
unrealized losses of $99,287 on marketable equity securities and net
unrealized losses of $199,050 on debt securities classified as available for
sale. The net of tax unrealized holding loss of $65,529 applicable to
marketable equity securities combined with the $105,516 net of tax unrealized
loss on securities classified as available-for-sale represents the $171,045
net unrealized loss reflected in stockholders' equity.
Securities with an approximate carrying value of $34,380,995 and
$30,389,165 at June 30, 1996 and December 31, 1995, respectively, were pledged
primarily to secure public deposits and for other purposes required by law.
Included in Corporate Securities are securities issued by Bankers Trust, New
York, with an aggregate book value of $2,203,004 and an aggregate market value
of $2,205,500. Included in Equity Securities are the Baird Adjustable Rate
Income Funds with a historical cost of $2,191,628 and a market value of
$2,092,241.
Note 3 - LOANS
Loans outstanding decreased .933% for the six months ended June 30, 1996;
decreasing from $172,678,045 at December 31, 1995, to $171,067,187 at June 30,
1996.
<TABLE>
The composition of loans at June 30, 1996, and December 31, 1995, follows:
<CAPTION>
June 30 % of Dec. 31 % of
(Dollars in Thousands) 1996 total 1995 total
<S> <C> <C> <C> <C>
Commercial and financial $ 26,845 15.69% $ 28,075 16.26%
Construction Loans 1,291 0.75% 1,272 0.74%
Agricultural 27,632 16.16% 27,963 16.19%
Real estate 103,016 60.22% 102,787 59.53%
Installment 11,625 6.80% 11,819 6.84%
Lease financing 658 0.38% 762 0.44%
Total loans $171,067 100.00% $172,678 100.00%
</TABLE>
The composition of loans in the loan portfolio shows an increase in
real estate loans and a slight decrease in all other loan categories at June
30, 1996. The bank is making increased efforts to sell loans in the secondary
market which will provide funds for liquidity needs and continue to provide
service to customers in its market area.
<PAGE>
Mid-Wisconsin's process for monitoring loan quality includes monthly
analysis of delinquencies, nonperforming assets, and potential problem loans.
Loans are placed on a nonaccrual status when they become contractually past
due 90 days or more as to interest or principal payments. All interest
accrued but not collected for loans (including applicable impaired loans) that
are placed on nonaccrual or charged off is reversed to interest income. The
interest on these loans is accounted for on the cash basis until qualifying
for return to accrual status. Loans are returned to accrual status when all
the principal and interest amounts contractually due have been collected and
there is reasonable assurance that repayment will continue within a reasonable
time frame.
A loan is considered impaired when, based on current information, it is
probable that the bank will not collect all amounts due in accordance with the
contractual terms of the loan agreement. Impairment is based on discounted
cash flows of expected future payments using the loan's initial effective
interest rate or the fair value of the collateral if the loan is collateral
dependent. Smaller balance homogeneous loans that are collectively evaluated
for impairment include certain smaller balance commercial and agricultural
loans, residential real estate loans, and credit card loans.
<TABLE>
The following table shows the amount of non-performing assets and other
real estate owned as of the date indicated.
<CAPTION>
Non-performing loans June 30 % of total Dec. 31 % of total
(Dollars in Thousands) 1996 loans 1995 loans
<S> <C> <C> <C> <C>
Non-accrual loans $ 609 0.36% $ 1,132 0.66%
Loans past due 90 days 41 0.02% 3 0.00%
or more
Restructured loans 119 0.07% 17 0.01%
Total Non-performing
Loans $ 769 0.45% $ 1,152 0.67%
Other real estate owned 105 0.06% 5 0.00%
Total non-performing
assets $ 874 0.51% $ 1,157 0.67%
</TABLE>
Included above are $129,281 of impaired loans (.075%) in non-accrual
status at June 30, 1996. In addition, there are impaired loans of $103,771
(.065%) which management has considered in the allowance for credit losses.
The average balance of impaired loans during the first six months of 1996 was
$397,593. The impaired loans with an aggregate outstanding balance of
$233,052 are based on fair value of the collateral of the loans as these loans
are collateral dependent.
Total nonperforming assets (loans and other real estate) decreased during
the six months ended June 30, 1996. As a percentage of total outstanding
loans, the non-performing assets decreased .16% to .51% at June 30, 1996,
from .67% at December 31, 1995.
<PAGE>
The aggregate amount of non-performing assets was approximately $874,000
and $1,157,000 at June 30, 1996, and December 31, 1995, respectively. Non-
performing assets are those which are either contractually past due 90 days or
more as to interest or principal payments, on a nonaccrual status, or the
terms of which have been renegotiated to provide a reduction or deferral of
interest or principal. If nonaccrual and renegotiated loans had been current
or not troubled, $69,148 of interest income would have been recorded for the
six months ended June 30, 1996. Interest income actually collected and
recorded was $118,988.
Management is not aware of any additional loans that represent material
credits or of any information which causes management to have serious doubts
as to the ability of such borrowers to comply with the loan repayment terms.
On January 1, 1996, Mid-Wisconsin adopted Statement of Financial
Accounting Standards No. 122 (SFAS122), "Accounting for Mortgage Servicing
Rights". The adoption of SFAS No. 122 did not have a significant impact on
the Company's financial condition or results of operations.
An analysis of the allowance for credit losses for the periods ended
June 30, 1996, and December 31, 1995 follows:
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
(Dollars in Thousands)
<S> <C> <C>
Allowance for credit losses at
beginning of period $ 1,836 $ 1,859
Provision Charged to Operating Expense 120 100
Recoveries on Loans 33 67
Loans Charged off (113) (190)
Allowance for losses at end of period $ 1,876 $ 1,836
</TABLE>
NOTE 4 - EARNINGS PER SHARE
Earnings per common share are based upon the weighted average number of
common shares outstanding which includes the common stock equivalents
applicable to shares issuable under the stock options granted. The weighted
number of shares outstanding were 1,868,358 for the three months ended June 30,
1996, and 1,860,255 for the three months ended June 30, 1995.
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
The following table presents consolidated financial data of Mid-Wisconsin
Financial Services, Inc. and subsidiary. This information and the following
discussion and analysis should be read in conjunction with other financial
information presented elsewhere in this report.
<CAPTION>
Quarters
(Dollars in thousands, 1996 1995
except per share amounts) Second First Fourth Third Second First
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS:
Earnings and Dividends:
Net interest revenue $ 2,740 $ 2,677 $ 2,677 $ 2,619 $ 2,492 $ 2,394
Provision for credit losses 60 60 (20) 30 30 60
Other operating revenue 333 359 318 406 455 217
Other operating expense 1,714 1,737 1,812 1,752 1,774 1,726
Net income 827 806 771 806 759 545
Per common share: (1)
Net income 0.44 0.43 0.41 0.43 0.41 0.59
Dividends declared 0.13 0.13 - 0.24 0.11 0.11
Stockholders' equity 13.15 12.99 12.79 12.28 12.06 11.42
Average common shares (000's) 1,868 1,861 1,861 1,861 1,860 1,859
Dividend payout ratio 29.22% 29.97% - 55.29% 29.28% 37.35%
Balance Sheet Summary:
At quarter end:
Loans net of unearned income $171,067 $167,088 $172,678 $169,459 $166,554 $164,336
Assets 242,302 241,778 244,606 235,707 237,260 234,628
Deposits 186,124 189,312 192,144 187,532 189,898 187,267
Shareholders equity 24,442 24,126 23,750 22,729 22,313 21,122
Average balances:
Loans net of unearned income 169,624 169,277 170,562 167,800 165,204 164,184
Assets 242,561 241,591 238,778 237,912 234,873 234,884
Deposits 188,347 189,713 189,650 189,549 187,440 187,678
Shareholders equity 24,183 23,970 23,101 22,477 21,536 20,529
Performance Ratios:
Return on average assets 1.36% 1.34% 1.29% 1.36% 1.29% 0.93%
Return on average common equity 13.68% 13.45% 13.35% 14.35% 14.09% 11.10%
Equity to assets 9.80% 9.68% 9.67% 10.13% 9.67% 9.47%
Total risk-based capital 14.83% 14.52% 13.92% 13.58% 13.52% 13.09%
Net loan charge-offs as a percentage
of average loans 0.02% 0.03% 0.07% 0.05% 0.02% 0.00%
Nonperforming assets as a percentage
of loans and other real estate 0.51% 0.61% 0.67% 0.62% 0.56% 0.75%
Net interest margin 4.89% 4.81% 4.66% 4.77% 4.60% 4.46%
Efficiency ratio 55.06% 56.49% 59.73% 57.19% 59.45% 65.26%
Fee revenue as a percentage of
average assets 0.11% 0.11% 0.11% 0.11% 0.12% 0.11%
Stock Price Information:
High $22.63 $22.50 $21.00 $19.00 $18.00 $16.00
Low 22.50 19.50 18.00 17.00 16.00 15.00
Market value at quarter end (2) 22.63 21.50 19.50 18.50 17.00 15.50
<FN>
(1) All per share amounts (income and dividends) have been restated to reflect
the stock split in the form of a 100 percent stock dividend issued May 8,
1995.
(2) Market value at quarter end represents the average of bid and asked
prices.
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Management is not aware of any known trends, events, or uncertainties that
will have or that are reasonably likely to have a material effect on the
Company's liquidity, capital resources, or operations.
Deposits decreased $6,020,426 during the six month period ended June 30,
1996. Non-interest bearing deposits decreased $2,721,195 and interest bearing
deposits decreased $3,299,231. The decrease in interest bearing deposits
occurred primarily in Now accounts and shorter term certificates of deposit.
Loans decreased $1,610,858 during the six month period ended June 30,
1996. In addition, the company did not aggressively market new loans, due to
the need for liquidity and high funding cost. Investments increased $835,877
during the six month period ended June 30, 1996. The increase in investments
was used primarily to satisfy pledging requirements for municipal deposits.
LIQUIDITY
Mid-Wisconsin manages its liquidity to provide adequate funds to support
borrowing requirements and deposit flow of its customers. Management views
liquidity as the ability to raise cash at a reasonable cost or with a minimum
of loss and as a measure of balance sheet flexibility to react to marketplace,
regulatory and competitive changes. The primary sources of Mid-Wisconsin's
liquidity are marketable assets maturing within one year. At June 30, 1996,
the carrying value of debt securities maturing within one year amounted to
$9,285,065 or 17.63% of the total debt securities portfolio. Mid-Wisconsin
also holds $2,092,241 in marketable equity securities. Mid-Wisconsin attempts,
when possible, to match relative maturities of assets and liabilities, while
maintaining the desired net interest margin.
CAPITAL RESOURCES
As of June 30, 1996, shareholders' equity increased $692,018 to
$24,441,976 from $23,749,958 at December 31, 1995. This net increase is due
to retention of current year earnings and adjustments for unrealized gains or
losses. Net unrealized gains were $305,793 at December 31, 1995, and net
unrealized losses were $171,045 at June 30, 1996.
The primary capital to asset ratio was 9.80% as of June 30, 1996, compared
to 9.41% at December 31, 1995. The company's risk-based capital ratio for
Tier 1 (core) amounted to 13.75% and total risk-based capital amounted to
14.83%. This compares to Tier 1 (core) capital of 12.87% and total risk-based
capital of 13.92% at December 31, 1995. The company expects to increase its
total capital through retention of earnings.
RESULTS OF OPERATIONS
The company's consolidated net income for the three months ended June 30,
1996, increased $68,463 or 9.03% to $827,046 from $758,583 for the three
months ended June 30, 1995. Net interest income increased $248,444 during the
three months ended June 30, 1996, over the three months ended June 30, 1995.
Pricing of loans and deposits remains competitive in the market area.
<PAGE>
Return on average common stockholders' equity amounted to 13.68% for the
three months ended June 30, 1996; compared to 14.09% for the three months
ended June 30, 1995.
Return on average assets for the three months ended June 30, 1996,
amounted to 1.36%; compared to 1.29% for the three months ended June 30, 1995.
Net earnings per share increased to $ .44 per share for the three months
ended June 30, 1996, from $ .41 for the three months ended June 30, 1995.
Cash dividends paid were .13 per share in June 1996 and .11 per share in June
1995.
PROVISION FOR CREDIT LOSSES
Management determines the adequacy of the allowance for credit losses
based on past loan experience, current economic conditions, composition of the
loan portfolio, and the potential for future loss. Accordingly, the amount
charged to expense is based on management's evaluation of the loan portfolio.
It is the Company's policy that when available information confirms that
specific loans and leases, or portions thereof, including impaired loans, are
uncollectible, these amounts are promptly charged off against the allowance.
The provision for credit losses was $60,000 for the three months ended June
30, 1996, and $30,000 for the three months ended June 30, 1995. The
allowance for credit losses as a percentage of gross loans outstanding was
$1,875,623 or 1.10% of total loans on June 30, 1996, compared to $1,835,951 or
1.06% of total loans on December 31, 1995. Net charge-offs as a percentage of
average loans outstanding were .02% during the three months ended June 30,
1996 compared to .07% for the three months ended December 31, 1995.
Non-performing loans are reviewed to determine exposure for potential loss
within each loan category. The adequacy of the allowance for credit losses is
assessed based on credit quality and other pertinent loan portfolio
information. The reserve for credit losses provided strong nonperforming loan
coverage, increasing to 215% at June 30, 1996 from 158% at December 31, 1995.
The adequacy of the reserve and the provision for credit losses is consistent
with the composition of the loan portfolio and recent credit quality history.
NET INTEREST INCOME
Net interest income is the most significant component in earnings. For
analysis purposes, interest earned on tax exempt assets is adjusted to a fully
taxable equivalent basis.
The net yield on interest earning assets shows the yield for the three
months ended June 30, 1996, to be 4.89%; compared to 4.60% for the three
months ended June 30, 1995. This increase is due primarily to the collection
and recording on the cash basis of interest on non-accrual loans. Decreases
in the average rate on borrowed funds also contributed to the increase in net
interest margin. Net interest margins are expected to remain stable during the
remainder of 1996.
The average rate on earning assets increased .12% and the average rate on
interest bearing liabilities decreased .15%. Interest spread increased .27%.
<PAGE>
NON-INTEREST INCOME
Non-interest income other than net security transactions increased 4.70%
to $401,754 during the three months ended June 30, 1996, from $380,356 during
the three months ended June 30, 1995. Net security losses were $69,150 during
the three months ended June 30, 1996; compared to net security gains of
$75,436 during the three months ended June 30, 1995. Fee income on deposit
accounts has decreased $16,881 to $144,005 during the three months ended June
30, 1996, from $160,886 during the three months ended June 30, 1995. Other
fee income increased $41,510, trust service fees increased $3,089, insurance
commissions decreased $2,366, and other operating income decreased $3,954.
NON-INTEREST EXPENSE
Non-interest expenses decreased 3.42% to $1,713,505 for the three months
ended June 30, 1996, from $1,774,239 for the three months ended June 30,
1995. Net occupancy expense increased $2,977 or .91% and other expenses
increased $65,610 or 17.715%. There are no expenses included in other
expenses that exceed 1% of total interest and other income for either 1996 or
1995. The largest increase in other expenses was in consulting fees. These
consulting fees are associated with studies being done to access the company's
utilization of technology and human resources. The largest decrease in non-
interest expense occurred in FDIC assessment fees, which decreased $104,700
or 99.53% for the three months ended June 30, 1996, from the three months
ended June 30, 1995. Mid-Wisconsin is expanding the use of technology
throughout its banks in order to provide increased customer service and allow
for more efficient consolidation of its operational areas. Mid-Wisconsin has
placed emphasis on increased productivity and standardization of programs and
procedures throughout all of its locations.
<PAGE>
ITEM 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on
April 23, 1996.
The matters voted upon, including the number of votes cast for, against,
or withheld, as well as the number of abstentions and broker non-votes, as to
each such matter were as follows:
Matter Shares
1. Election of Directors
Broker
For Against Withheld Abstain Non-Vote
(a) James Melvin 1,319,622 1,000 0 0 0
Broker
For Against Withheld Abstain Non-Vote
(b) James Dougherty 1,318,382 2,240 0 0 0
Broker
For Against Withheld Abstain Non-Vote
(c) Roger Olson 1,318,382 2,240 0 0 0
Broker
For Against Withheld Abstain Non-Vote
(d) James R. Peterson 1,318,382 2,240 0 0 0
Broker
For Against Withheld Abstain Non-Vote
(e) Jack Wild 1,317,278 3,344 0 0 0
2. Approval of appointment
of independent auditors Broker
for year ending For Against Withheld Abstain Non-Vote
December 31, 1996 1,314,550 660 0 6,072 0
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) No reports on Form 8-k have been filed during the quarter for which this
Form 10-Q is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
MID-WISCONSIN FINANCIAL SERVICES, INC.
Date: August 8, 1996 RONALD ISAACSON
Ronald Isaacson, President
(Principal Executive Officer)
Date: August 8, 1996 LUCILLE BRANDNER
Lucille Brandner, Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
PURSUANT TO SECTION 232 102(D), REGULATION S-T
EXHIBIT 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,886
<INT-BEARING-DEPOSITS> 166,200
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,116
<INVESTMENTS-CARRYING> 56,116
<INVESTMENTS-MARKET> 56,116
<LOANS> 171,067
<ALLOWANCE> (1,876)
<TOTAL-ASSETS> 242,302
<DEPOSITS> 186,124
<SHORT-TERM> 24,266
<LIABILITIES-OTHER> 3,471
<LONG-TERM> 4,000
0
0
<COMMON> 186
<OTHER-SE> 24,556
<TOTAL-LIABILITIES-AND-EQUITY> 242,302
<INTEREST-LOAN> 4,063
<INTEREST-INVEST> 922
<INTEREST-OTHER> 10
<INTEREST-TOTAL> 4,995
<INTEREST-DEPOSIT> 1,927
<INTEREST-EXPENSE> 2,255
<INTEREST-INCOME-NET> 2,740
<LOAN-LOSSES> 60
<SECURITIES-GAINS> (69)
<EXPENSE-OTHER> 1,714
<INCOME-PRETAX> 1,299
<INCOME-PRE-EXTRAORDINARY> 1,299
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 827
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
<YIELD-ACTUAL> 8.78
<LOANS-NON> 609
<LOANS-PAST> 41
<LOANS-TROUBLED> 119
<LOANS-PROBLEM> 103
<ALLOWANCE-OPEN> 1,836
<CHARGE-OFFS> 113
<RECOVERIES> 120
<ALLOWANCE-CLOSE> 1,876
<ALLOWANCE-DOMESTIC> 120
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 16
</TABLE>
