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 MARCH 31, 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 March 31, 1996 there were 1,857,290 shares of $.10 par value common
stock outstanding.
This document contains a total of 15 pages. The Exhibit Index is located
on page 14.
<PAGE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Income
Three Months Ended March 31, 1996
and March 31, 1995 4
Consolidated Statements of Cash Flows
Three months Ended March 31, 1996 5
and March 31, 1995
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 10-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K 12
Signatures 13
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, 1996 December 31, 1995
ASSETS
<S> <C> <C>
Cash & cash equivalents $ 8,695,582 $ 10,683,544
Interest-bearing deposits in other financial
institutions 11,908 20,246
Investment securities available for sale - At
fair value 59,857,238 55,280,506
Total loans 167,088,374 172,678,045
Less - Allowance for credit losses (1,842,876) (1,835,951)
Net loans 165,245,498 170,842,094
Premises and equipment 4,022,626 4,135,949
Accrued interest and other assets 3,944,975 3,643,833
TOTAL ASSETS $241,777,827 $244,606,172
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest bearing deposits $ 20,786,323 $ 22,645,269
Interest-bearing deposits 168,525,283 169,499,137
Total Deposits 189,311,606 192,144,406
Short-term borrowings 20,692,805 21,386,623
Long term borrowings 4,000,000 4,000,000
Accrued interest and other liabilities 3,647,766 3,325,185
Total Liabilities 217,652,177 220,856,214
Stockholders' equity:
Common stock-Par value $.10 per share:
Authorized - 6,000,000 shares in 1996
- 6,000,000 shares in 1995 185,729 185,729
Issued & outstanding - 1,857,290 shares in 1996
- 1,857,290 shares in 1995
Additional paid-In capital 12,573,366 12,573,366
Retained earnings 11,249,370 10,685,070
Unrealized gain on securities available for sale 117,185 305,793
Total Stockholders' Equity 24,125,650 23,749,958
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $241,777,827 $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
MARCH 31, 1996 MARCH 31,1995
<S> <C> <C>
Interest revenue:
Interest and fees on loans $4,017,982 $3,645,496
Interest on investment securities:
Taxable 823,910 810,894
Tax-exempt 64,832 92,082
Other interest revenue 279 7,419
Total interest revenue 4,907,003 4,555,891
Interest expense:
Deposits 1,928,419 1,835,895
Short-term borrowings 252,387 270,893
Long-term borrowings 49,140 54,582
Total interest expense 2,229,946 2,161,370
Net Interest revenue 2,677,057 2,394,521
Provision for credit losses 60,000 60,000
Net interest revenue after provision
for credit losses 2,617,057 2,334,521
Noninterest revenue
Service fees 142,975 150,108
Insurance commissions 17,715 12,200
Trust Service fees 92,887 90,030
Net security gains (losses) (24,599) (145,963)
Other operating income 129,779 110,327
Total noninterest revenue 358,757 216,702
Noninterest expenses:
Salaries 716,384 719,468
Employee Benefits 264,367 184,055
Net occupancy expense 274,418 253,735
FDIC expense 500 105,200
Other operating expense 480,865 463,293
Total noninterest expenses 1,736,534 1,725,751
Income before income taxes 1,239,280 825,472
Provision for income taxes 433,532 280,641
Net income $ 805,748 $ 544,831
EARNINGS PER SHARE $0.43 $0.29
<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
<CAPTION>
Three Months Ended March 31, 1996 and 1995
1996 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 805,748 $ 544,831
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation amort & accretion 182,912 197,417
Provision for loan losses 60,000 60,000
Provision for deferred income taxes -
(Gain) Loss on sale of investment securities 24,610 145,963
(Gain) Loss on equipment disposals (976) 5,317
(Gain) Loss on sale of other real estate - 1,777
Changes in operating assets and liabilities:
Other assets (198,773) (132,945)
Other liabilities 323,860 162,277
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,197,382 984,637
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale:
Available for Sale Investment Securities 1,000,500 1,838,037
Proceeds from Maturities:
Held to maturity Investment Securities 385,000
Available for sale Investment Securities 5,579,493 856,410
Payment for purchases:
Held to maturity
Available for sale Investment Securities (11,483,107) (116,300)
Proceeds from sale of loans 1,419,200 47,250
Net (increase) decrease in loans 4,117,391 1,038,562
Net (increase) decrease in interest-bearing
deposits in other institutions 8,338 (943,671)
Net decrease in federal funds sold
Capital expenditures (60,793) (51,275)
Proceeds from sale of equipment 1,700 200
Proceeds from sale of other real estate - 23,222
NET CASH USED IN INVESTING ACTIVITIES 582,722 3,077,435
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (2,832,800) 1,115,765
Net increase (decrease) in short-term borrowing (693,818) (5,330,094)
Dividends paid (241,448) (203,484)
NET CASH PROVIDED BY FINANCING ACTIVITIES (3,768,066) (4,417,813)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,987,962) (355,741)
CASH AND CASH EQUIVALENTS AT BEGINNING 10,683,544 9,245,910
CASH AND CASH EQUIVALENTS AT END $ 8,695,582 $ 8,890,169
Supplemental cash flow information: 1996 1995
Cash paid during the year for:
Interest $ 2,298,405 $ 2,085,744
Income taxes $ 65,025 $ 320,025
Supplemental schedule of non-cash investing and
financing activities:
Loans transferred to other real estate $ - $ -
Loans charged off $ 80,280 $ 32,718
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 March 31, 1996, and the consolidated
statements of income for the three-month periods ended March 31, 1996 and
1995, and the consolidated statements of cash flows for the three-month
periods ended March 31, 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.
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
MARCH 31, 1996 DEC. 31, 1995
<S> <C> <C>
U.S. Treasury securities and obligations
of other U.S. Govt agencies & corp $ 23,909,093 $ 22,475,820
Mortgage Backed Securities 18,766,438 15,511,636
Oblig. to states & political subdivisions 5,311,938 4,900,426
Corporate Securities 5,391,739 5,813,709
Equity Securities 6,478,028 6,578,915
Totals $ 59,857,236 $ 55,280,506
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
<S> <C> <C>
U.S. Treasury securities and obligations
of other U.S. Govt agencies & corp $ 23,909,093 $ 22,475,820
Mortgage Backed Securities 18,766,438 15,511,636
Oblig. to states & political subdivisions 5,311,938 4,900,426
Corporate securities 5,391,739 5,813,709
Equity securities 6,478,028 6,578,915
Totals $ 59,857,236 $ 55,280,506
</TABLE>
Included in the totals of Investment Securities at March 31, 1996, are
unrealized losses of $118,346 on marketable equity securities and net
unrealized gains of $292,478 on securities classified as available for sale.
The net of tax unrealized holding loss of $90,725 applicable to marketable
equity securities combined with the $207,910 net of tax unrealized gain on
securities classified as available-for-sale represents the $117,185 reflected
in stockholders' equity.
<PAGE>
Securities with an approximate carrying value of $28,428,513 and
$30,389,165 at March 31, 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 $2,205,214 and an aggregate market
value of $2,217,160. Included in Equity Securities are the Baird Adjustable
Rate Income Funds with a historical cost of $5,571,749 and a market value of
$5,453,403.
Note 3 - LOANS
Loans outstanding decreased 3.327% for the three months ended March 31,
1996; decreasing from $172,678,045 at December 31, 1995, to $167,088,374 at
March 31, 1996.
<TABLE>
<CAPTION>
The composition of loans at March 31, 1996, and December 31, 1995,
follows:
March 31 % of Dec. 31 % of
(Dollars in Thousands) 1996 TOTAL 1995 TOTAL
<S> <C> <C> <C> <C>
Commercial and financial $ 26,402 15.80% $ 28,075 16.26%
Construction Loans 1,186 0.71% 1,272 0.74%
Agricultural 26,008 15.56% 27,963 16.19%
Real estate 101,036 60.47% 102,787 59.53%
Installment 11,790 7.06% 11,819 6.84%
Lease financing 666 0.40% 762 0.44%
Total loans $167,088 100.00% $172,678 100.00%
</TABLE>
The composition of loans in the loan portfolio shows a decrease in all
categories at March 31, 1996. The bank has made the decision to not renew
several blocks of participation loans that were yielding less than current
market rates and paydowns occurred on seasonal agricultural lines. 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.
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
<PAGE>
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 March 31 % of total Dec. 31 % of total
(Dollars in Thousands) 1996 LOAN 1995 LOANS
<S> <C> <C> <C> <C>
Non-accrual loans $1,008 0.60% $1,132 0.65%
Loans past due 90 days
or more 0 0.00% 3 0.00%
Restructured loans 0 0.00% 17 0.01%
Total Non-performing
loans $1,008 0.60% $1,152 0.66%
Other real estate owned 5 0.01% 5 0.01%
Total non-performing
assets $1,013 0.61% $1,157 0.67%
</TABLE>
Included above are $336,000 of impaired loans (.2%) in non-accrual status
at March 31, 1996. In addition, there are impaired loans of $72,000 (.043%)
which management has considered in the allowance for credit losses. The
average balance of impaired loans during the first three months of 1996 was
$364,000. The impaired loans with an aggregate outstanding balance of
$408,000 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 three months ended March 31, 1996. As a percentage of total outstanding
loans, the non-performing assets decreased .06% to .61% at March 31, 1996,
from .67% at December 31, 1995.
The aggregate amount of non-performing assets was approximately $1,013,000
and $1,157,000 at March 31, 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, $48,532 of interest income would have been recorded for the
three months ended March 31, 1996. Interest income actually recorded was
$49,542.
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.
<PAGE>
<TABLE>
An analysis of the allowance for credit losses for the periods ended
March 31, 1996, and December 31, 1995 follows:
<CAPTION>
(Dollars in Thousands)
MARCH 31, 1996 DEC. 31, 1995
<S> <C> <C>
Allowance for credit losses at beginning
of period $1,836 $1,859
Provision Charged to Operating Expense 60 100
Recoveries on Loans 27 67
Loans Charged off (80) (190)
Allowance for losses at end of period $1,843 $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 1,867,383 for the three months ended March
31, 1996, and 1,859,330 for the three months ended March 31, 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
1996
(Dollars in thousands, except per First Fourth Third Second First
share amounts)
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS:
Earnings and Dividends:
Net interest revenue $ 2,677 $ 2,677 $ 2,619 $ 2,492 $ 2,394
Provision for credit losses 60 (20) 30 30 60
Other operating revenue 359 318 406 455 217
Other operating expense 1,737 1,812 1,752 1,774 1,726
Net income 1,239 1,203 1,243 1,143 825
Per common share: (1)
Net income 0.43 0.41 0.43 0.41 0.59
Dividends declared .13 .24 .11 .11
Stockholders' equity 12.99 12.79 12.28 12.06 11.42
Average common shares (000's) 1,861 1,861 1,861 1,860 1,859
Dividend payout ratio 29.97% 55.29% 29.28% 37.35%
Balance Sheet Summary:
At quarter end:
Loans net of unearned income $167,088 $172,678 $169,459 $166,554 $164,336
Assets 241,778 244,606 235,707 237,260 234,628
Deposits 189,312 192,144 187,532 189,898 187,267
Shareholders equity 24,126 23,750 22,729 22,313 21,122
Average balances:
Loans net of unearned income 169,277 170,562 167,800 165,204 164,184
Assets 241,591 238,778 237,912 234,873 234,884
Deposits 189,713 189,650 189,549 187,440 187,678
Shareholders equity 23,970 23,101 22,477 21,536 20,529
Performance Ratios:
Return on average assets 1.34% 1.29% 1.36% 1.29% 0.93%
Return on average common equity 13.91% 13.35% 14.35% 14.09% 11.10%
Equity to assets 9.68% 9.67% 10.13% 9.67% 9.47%
Total risk-based capital 14.52% 13.92% 13.58% 13.52% 13.09%
Net loan charge-offs as a percentage
of average loans 0.03% 0.07% 0.05% 0.02% 0.00%
Nonperforming assets as a percentage
of loans and other real estate 0.61% 0.67% 0.62% 0.56% 0.75%
Net interest margin 4.81% 4.66% 4.77% 4.60% 4.46%
Efficiency ratio 56.49% 59.73% 57.19% 59.45% 65.26%
Fee revenue as a percentage of
average assets 0.11% 0.11% 0.11% 0.12% 0.11%
Stock Price Information:
High $22.50 $21.00 $19.00 $18.00 $16.00
Low 19.50 18.00 17.00 16.00 15.00
Market value at quarter end (2) 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 splits 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 $2,832,800 during the three-month period ended March
31, 1996. Non-interest bearing deposits decreased $1,858,946 and interest
bearing deposits decreased $973,854. The decrease in interest bearing deposits
occurred primarily in shorter term certificates of deposit.
Loans decreased $5,589,671 during the three-month period ended March 31,
1996. In addition, the company did not aggressively market new loans, due to
the need for liquidity and high funding cost. Investments increased
$4,576,732 during the three-month period ended March 31, 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 March 31, 1996,
the carrying value of debt securities maturing within one year amounted to
$12,084,004 or 22.64% of the total debt securities portfolio. Mid-Wisconsin
also holds $5,453,403 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 March 31, 1996, shareholders' equity increased $375,692 to
$24,125,650 from $23,749,958 at December 31, 1995. This net increase is due
to retention of current year earnings and adjustments for unrealized gains.
Net unrealized gains decreased from $305,793 at December 31, 1995, to $117,185
at March 31, 1996.
The primary capital to asset ratio was 9.68% as of March 31, 1996,
compared to 9.41% at December 31, 1995. The company's risk-based capital
ratio for Tier 1 (core) amounted to 13.45% and total risk-based capital
amounted to 14.52%. 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 March 31,
1996, increased $260,917 or 47.89% to $805,748 from $544,831 for the three
months ended March 31, 1995. Net interest income increased $282,536 during the
three months ended March 31, 1996, over the three months ended March 31,
1995. Pricing of loans and deposits remains competitive in the market area.
<PAGE>
Return on average common stockholders' equity amounted to 13.91% for the
three months ended March 31, 1996; compared to 11.10% for the three months
ended March 31, 1995.
Return on average assets for the three months ended March 31, 1996,
amounted to 1.34%; compared to .93% for the three months ended March 31, 1995.
Net earnings per share increased to $ .43 per share for the three months
ended March 31, 1996, from $ .29 for the three months ended March 31, 1995.
Cash dividends paid were .13 per share in March 1996 and .11 per share in
March 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 first three months of 1996
and 1995. The allowance for credit losses as a percentage of gross loans
outstanding was $1,842,876 or 1.10% of total loans on March 31, 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 .03% during the three months
ended March 31, 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 182% at March 31, 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 March 31, 1996, to be 4.81%; compared to 4.46% for the three
months ended March 31, 1995. This increase is due primarily to increased
yields on earning assets. Net interest margins are expected to remain stable
during the remainder of 1996.
The average rate on earning assets increased .40% and the average rate on
interest bearing liabilities increased .09%. Interest spread increased .31%.
NON-INTEREST INCOME
Non-interest income other than net security transactions increased 9.55%
to $383,356 during the three months ended March 31, 1996, from $362,655 during
the three months ended March 31, 1995. Net security losses were $24,999
during the three months ended March 31, 1996; compared to $145,963 during the
<PAGE>
three months ended March 31, 1995. Fee income on deposit accounts has
decreased $7,133 to $142,975 during the three months ended March 31, 1996,
from $150,108 during the three months ended March 31, 1995. Insurance
commissions decreased $5,515, trust service fees increased $2,857 and other
operating income increased $19,452.
NON-INTEREST EXPENSE
Non-interest expenses increased .62% to $1,736,534 for the three months
ended March 31, 1996, from $1,725,751 for the three months ended March 31,
1995. Net occupancy expense increased $20,683 or 8.15% and other expenses
increased $17,572 or 3.79%. The largest decrease in non-interest expense
occurred in FDIC assessment fees, which decreased $104,700 or 99.53% for the
three months ended March 31, 1996, from the three months ended March 31, 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.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Material Contracts
(a) CEO Employment and Severance Agreement
(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 May 8, 1996 RONALD ISAACSON
Ronald Isaacson, President
(Principal Executive Officer)
Date May 8, 1996 LUCILLE BRANDNER
Lucille Brandner, Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
PURSUANT TO <section>232.102(D), REGULATION S-T
EXHIBIT (10)(a) CEO Employment and Severance Agreement
EXHIBIT 27 Financial Data Schedule
EXHIBIT 10(a)
EMPLOYMENT AGREEMENT
This Employment Agreement made this 31st day of December, 1995, by and
between Ronald Isaacson ("Employee") and Mid-Wisconsin Financial Services,
Inc. ("Employer").
W I T N E S S E T H
WHEREAS, Employee has been employed by Employer as Chairman of the
Board of Directors of Mid-Wisconsin Bank; and
WHEREAS, Employee has informed Employer that he intends to voluntarily
retire effective December 31, 1996; and
WHEREAS, in order to effectuate a smooth transition of the duties of
Chairman of the Board to Employee's successor in that position, Employer
desires to retain the services of Employee and to receive the benefit of
Employee's knowledge, experience, reputation, and contacts. Employer is
willing to offer Employee continued employment under the terms and
conditions set forth below.
NOW, THEREFORE, it is agreed between the parties as follows:
1. EMPLOYMENT: Subject to the terms and conditions hereafter set
forth, effective January 1, 1996, Employer hereby agrees to
employ Employee in the position of Chairman of the Board of
Directors of Mid-Wisconsin Bank, a part-time position requiring
25% of full-time employment, and Employee hereby accepts such
employment. The percentage of full-time employment can be
changed by mutual consent of both parties.
2. TERM: Except in the case of earlier termination as hereinafter
specifically provided, this Agreement shall be effective as of
January 1, 1996, and continue until December 31, 1996
("employment term"). This Agreement shall be automatically
renewed for additional one year periods unless either party
serves written notice on the other party not less thirty (30)
days prior to the expiration date, or any subsequent expiration
thereafter, specifying a desire to modify or terminate this
Agreement.
3. DUTIES: Throughout the employment term, Employee shall devote a
minimum of 520 hours per year (less any vacation and sick leave)
to the affairs of the Employer. Duties are to include, but are
not limited to, strategic planning with Executive Management,
meeting leadership and direction, will serve as a reporting
mechanism to the Board from Executive Management, holding company
duties including mergers and acquisitions and stockholder
relations. Employee shall at all times during employment
hereunder conduct himself in a manner consistent with his
position with Employer and shall not knowingly perform any act
contrary to the best interest of Employer.
<PAGE>
4. SALARY: Employer shall pay Employee for all services rendered
hereunder a salary of Twenty-nine Thousand Five Hundred and
No/100ths Dollars ($29,500.00) per year. Such salary will be
paid in accordance with the usual manner of payment for employees
of Employer.
5. BONUS: Employee will be eligible for a senior officer bonus
under the current Employer plan. At the time of actual
retirement, Employee shall be paid for any accrued but unpaid
bonuses.
6. STOCK OPTIONS: Employee will be eligible for a stock option
under the current Employer plan. At the time of actual
retirement, Employee shall be eligible to exercise all accrued
but unexercised stock options.
7. FRINGE BENEFITS: Employee will be entitled to participate in
such medical, accident, health, retirement, and other fringe
benefit plans, in accordance with their terms, as shall be made
available by Employer generally to employees and Employer shall
pay such premiums arising with respect to Employee's coverage as
it pays generally for employees of the same class prorated based
upon the percentage of Employee's employment as compared to full-
time.
8. EXPENSES: Employer will reimburse Employee for all reasonable
and necessary expenses incurred by him in carrying out his duties
under this Agreement consistent with the policies of Employer.
9. TERMINATION: Either Employer or Employee can terminate
employment at any time during the term of this Agreement, with or
without cause, upon providing not less than thirty (30) days
written notice to the other party specifying the effective date
of termination.
10. ARBITRATION: In the event any difference of opinion or dispute
arises between Employee and Employer with respect to the
construction or interpretation of this Agreement or the alleged
breach thereof, which cannot be settled amicably by agreement of
the parties, such dispute shall be submitted to and determined by
arbitration in accordance with the provisions of the arbitration
agreement, which is attached hereto and incorporated herein by
reference as Exhibit "A".
11. VOLUNTARY EARLY RETIREMENT: In the event Employee elects to
voluntarily retire during the employment term or at the end of
the employment term, Employer agrees to pay Employee a severance
benefit of one (1) week of severance pay for each full year of
service as of the date of retirement, subject to the terms and
conditions hereinafter set forth in this paragraph. The
severance pay shall be calculated by averaging the highest five
(5) years of employment compensation less any profit sharing paid
during that period. In consideration for the severance pay and
as a condition of receiving such pay, Employee understands that
he will be required to execute a severance agreement and release,
a copy of which is attached hereto and incorporated herein by
reference as Exhibit "B", before any severance benefits will be
paid.
<PAGE>
12. DEATH BENEFIT: In the event Employee dies during the term of
this Agreement or during any period after the expiration of this
Agreement in which Employee is receiving severance pay pursuant
to paragraph 11, Employer will pay to such beneficiary as
Employee shall designate by instrument in writing, filed with
Employer during Employee's lifetime, or to Employee's estate if
no beneficiary has been so designated, a death benefit to be
computed and paid in a lump sum as follows:
Commencing with the month following the month in which
Employee's death occurs, Employer shall pay to
Employee's designated beneficiary, or Employee's
estate, as the case may be, one (1) week of death
benefits for each year of service at the date of death.
The death benefit shall be calculated by averaging the
highest five (5) years of employment compensation paid
to Employee less any profit sharing. If employee dies
during a period after the expiration date of this
Agreement in which Employee is receiving severance pay,
the death benefit shall be reduced by an amount equal
to the severance pay paid up to the date of death.
13. ASSIGNMENT: This Agreement is personal to Employee and Employer
and neither party may assign or delegate any of their rights or
obligations hereunder without first obtaining the written consent
of the other party.
14. AMENDMENTS AND WAIVERS: No amendments or additions to the
Agreement shall be binding unless in writing and signed by both
parties. The waiver of either party of a breach or violation of
any part of this Agreement shall not operate or be construed to
be a waiver of any subsequent breaches thereof.
15. SEVERABILITY: If any provision of this Agreement is deemed to be
invalid or unenforceable, it shall be severed from the remainder
of this Agreement and shall not cause the invalidity or
unenforceability of the remainder of this Agreement. If such
provision shall be deemed invalid or unenforceable because of its
scope or breath, such provisions shall be deemed valid or
enforceable to the extend of the scope and breath permitted by
law.
16. APPLICABLE LAW: This Agreement and all rights and obligations of
Employer and Employee with respect to it, shall be construed in
accordance with, and govern by, the laws of the state of
Wisconsin.
17. ENTIRE AGREEMENT: This Agreement constitutes the entire
agreement between the parties and contains all the agreements
between them with respect to the subject matter hereof. It also
supersedes any and all other agreements or contracts, either oral
or written, between the parties with respect to the subject
matter hereof. The terms and conditions of this Agreement may be
amended at any time by mutual agreement of the parties, provided
that before any amendment shall be valid or effective, it shall
have been reduced to writing and signed by the parties hereto.
<PAGE>
The parties have executed, in duplicate, the above employment
agreement on the date and year first above-written.
RONALD ISAACSON
Ronald Isaacson
MID-WISCONSIN FINANCIAL SERVICES, INC.
By: JAMES PETERSON
James Peterson, Chairman of the
Board
<PAGE>
ARBITRATION AGREEMENT
1. SCOPE OF ARBITRATION
The parties agree to submit to arbitration, in accordance with these
provisions, any and all disputes arising from or related to the
termination of the employment relationship between the parties including
but not limited to, claims under the Age Discrimination in Employment Act,
the Americans with Disabilities Act, the Civil Rights Acts of 1964 and
1991, the Wisconsin Fair Employment Act, or any other claims of
discrimination under state or federal law; breach of contract, wrongful
discharge, common law tort violations, or violations of state or federal
statutory rights. The parties further agree that the arbitration process
agreed upon herein shall be the exclusive means for resolving all disputes
made subject to arbitration herein.
2. GOVERNING LAW
Notwithstanding any other choice of law provisions in the Agreement,
the interpretation and enforcement of the arbitration provisions of this
Agreement shall be governed exclusively by the Federal Arbitration Act,
(FAA), 9 U.S.C. <section><section> 1 et seq., provided that they are
enforceable under the FAA, and shall otherwise be governed by the law of
the State of Wisconsin.
3. TIME LIMITS ON SUBMITTING DISPUTES
The parties agree and understand that one of the objectives of this
arbitration agreement is to resolve disputes expeditiously as well as
fairly, and that it is the obligation of both parties, to those ends, to
raise any disputes subject to arbitration hereunder in an expeditious
manner. Accordingly, the parties agree to waive all statutes of
limitations that might otherwise be applicable and agree further that, as
to any dispute that can be brought hereunder, a demand for arbitration
must be postmarked or delivered in person to the other party no later than
thirty (30) days after the employment relationship is terminated. In the
absence of a timely submitted written demand for arbitration, an
arbitrator has no authority to resolve the disputes or render an award and
no arbitrator has authority hereunder to determine the timeliness of an
arbitration demand.
4. AMERICAN ARBITRATION ASSOCIATION RULES APPLY AS MODIFIED HEREIN
Any arbitration hereunder shall be conducted under the Model
Employment Procedures of the American Arbitration Association (AAA), as
modified herein.
5. INVOKING ARBITRATION
Either party may invoke the arbitration procedures described herein,
by submitting to the other, in person or by mail, a written demand for
arbitration, containing a statement of the matter to be arbitrated
sufficient to establish the timeliness of the demand. The parties shall
then have fourteen days within which they may identify a mutually
agreeable arbitrator. After the fourteen-day period has expired, the
parties shall prepare and submit to the American Arbitration Association a
joint submission, with each party to contribute half of the appropriate
administrative fee. In their submission to the AAA, the parties shall
<PAGE>
either designate a mutually acceptable arbitrator or request a panel of
arbitrators from the AAA according to the procedure described in Section 6
below.
6. ARBITRATOR SELECTION
In the event the parties cannot agree upon an arbitrator within
fourteen days after the demand for arbitration is received, their joint
submission to the AAA shall request a panel of nine arbitrators who are
practicing attorneys with professional experience in the field of labor
and/or employment law, and the parties shall attempt to select an
arbitrator from that panel according to AAA procedures. In the event that
the parties are unsuccessful, they shall request a second panel of nine
comparably qualified arbitrators and repeat the selection process. If the
parties remain unable to select an arbitrator, then they shall request
from AAA a third panel of three comparably qualified arbitrators, from
which the AAA shall reject the least preferred candidate of each party,
and select the candidate with the highest joint ranking of the parties.
In the event of the death or disability of an arbitrator, the parties
shall select a new arbitrator as provided above. The substitute
arbitrator shall have the power to determine the extent to which he or she
shall act on the record already made in arbitration.
7. PREHEARING PROCEDURES
In order to achieve the objectives of a just, fair, and expeditious
resolution of the dispute, the arbitrator shall promptly conduct, upon
accepting assignment as arbitrator, a preliminary hearing, at which each
party shall be entitled to submit a brief statement of their respective
positions, and at which the arbitrator shall establish a timetable for
prehearing activities and the conduct of the hearing, and may address
initial requests from the parties for prehearing disclosure of
information. At the preliminary hearing and/or thereafter, the arbitrator
shall have the discretion and authority to order, upon request or
otherwise, the prehearing disclosure of information to the parties,
including, without limitation, production of requested documents, exchange
of witness lists and summaries of the testimony of proposed witnesses, and
examination by deposition of potential witnesses. Pursuant to these same
objectives, the arbitrator shall have the authority, upon request or
otherwise, to conference with the parties or their designated
representatives concerning any matter, and to set or modify timetables for
all aspects of the arbitration proceeding.
8. STENOGRAPHIC RECORD
There shall be a stenographic record of the arbitration hearing,
unless the parties agree to record the proceedings by other reliable
means. The costs of recording the proceedings shall be borne equally by
both parties.
9. LOCATION
Unless otherwise agreed by the parties, arbitration hearings shall
take place in Wausau, Wisconsin, at a place designated by the AAA.
<PAGE>
10. POSTHEARING BRIEFS
After the close of the arbitration hearing, and on any issue
concerning prehearing procedures, the arbitrator shall allow the parties
to submit written briefs.
11. CONFIDENTIALITY
All arbitration proceedings hereunder shall be confidential. Neither
party shall disclose any information about the evidence adduced by the
other in the arbitration proceeding or about documents produced by the
other in connection with the proceeding, except in the course of a
judicial, regulatory, or arbitration proceeding, or as may be requested by
governmental authority. Before mailing any disclosure permitted by the
preceding sentence, the party shall give the other party reasonable
written notice of the intended disclosure and an opportunity to protect
its interests. Expert witnesses and stenographic reporters shall sign
appropriate nondisclosure agreements.
12. COSTS
Each party shall be responsible for its costs incurred in any
arbitration, and the arbitrator shall not have authority to include all or
any portion of said costs in an award, regardless of which party prevails.
The costs and fees of the arbitrator and of the AAA shall be borne equally
by the parties.
13. REMEDIES
The arbitrator shall have authority to award any remedy or relief that
a court of the State of Wisconsin could grant in conformity to applicable
law.
14. LAW GOVERNING THE ARBITRATOR'S AWARD
In rendering an award, the arbitrator shall determine the rights and
obligations of the parties according to federal law and the substantive
law of the State of Wisconsin (excluding conflicts of laws principles),
and the arbitrator's decision shall be governed by state and federal
substantive law, including state and federal discrimination laws, as
though the matter were before a court of law.
15. WRITTEN AWARDS AND ENFORCEMENT
Any arbitration award shall be accompanied by a written statement
containing a summary of the issues in controversy, a description of the
award, and an explanation of the reasons for the award. The parties agree
that a competent court shall enter judgment upon the award of the
arbitrator, provided it is in conformity with the terms of this Agreement.
16. DISCLAIMER OF EMPLOYMENT RIGHTS
It is understood and agreed by the parties that their agreements
herein concerning arbitration do not contain, and cannot be relied upon by
the employee to contain, any promises or representations concerning the
duration of the employment relationship, or the circumstances under or
procedures by which the employment relationship may be terminated.
<PAGE>
EXHIBIT B
SEVERANCE AGREEMENT AND RELEASE
This Severance Agreement and Release (hereinafter "Agreement"), is
entered into between Mid-Wisconsin Financial Services, Inc., (hereinafter
"Company") and Ronald Isaacson (hereinafter "Employee").
This Agreement shall not in any way be regarded as an admission by the
Company that it has acted wrongfully toward Employee. Also, this
Agreement shall not be regarded as an admission by the Company that
Employee has any rights against the Company. Indeed, the Company
specifically denies any liability to, or wrongful act against Employee.
Employee understands and agrees that his employment with the Company
terminated as of _______________________, 19__.
Employee represents that he has not filed any complaints, charges, or
lawsuits against the Company with any governmental agency or any court.
However, Employee shall have the right to file a lawsuit for the sole
purpose of enforcing Employee's rights under this Agreement.
In consideration for the terms and considerations set forth in this
Agreement, the Company agrees to pay to Employee ________ weeks of
severance pay at the gross sum of $____________ per ____________ as a
severance benefit, over and above what is
required by law and company policies. Employee understands the Company
will deduct from this gross sum federal and state withholding taxes and
other deductions the company is required by law to make from wage payments
to employees.
In consideration for the severance payment, the Employee agrees to
release the Company, and each of its past and present directors, managers,
officers, shareholders, agents, employees, subsidiaries, divisions,
affiliates, successors, and assigns from all claims or demands the
Employee may have based upon the Employee's employment with the Company or
the termination of that employment. This includes a release of any rights
or claims Employee may have under the Age Discrimination Employment Act,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Americans with Disabilities Act, the Wisconsin Fair Employment Act, or
any other federal, state or local laws or regulations which prohibit
employment discrimination. This also includes a release by the Employee
of any claims for wrongful discharge or any other claims under any state,
local or common law relating in any way to the employment relationship.
This release covers both claims that the Employee knows about or those he
may not know about.
This release does not include, however, a right or claim which might
arise after the date this Agreement is signed. In addition, this release
does not include a release of Employee's right to vested pension benefits
under the company's pension plan. However, none of the payments made to
the Employee under the terms of this Agreement are considered qualified
earnings for the purpose of the pension plan.
The Employee promises never to file a charge or lawsuit asserting any
claims that are released herein. If the Employee breaks this promise, the
Employee agrees to pay for all costs incurred by the company, including
reasonable attorneys' fees, in defending against the Employee's claim.
<PAGE>
Federal law provides that the Employee may have 21 days from the
receipt of this Agreement, to review and consider this Agreement before
signing it. The Employee understands that he may use as much of this 21-
day period as he wishes prior to signing. Federal law further provides
that Employee may revoke this Agreement within 7 days of the Employee
signing it. Revocation must be made by delivering a written notice of
revocation to _________________________________. For this revocation to
be effective, written notice must be received by _______________________
no later than the close of business on the 7th day after Employee signs
this Agreement. If Employee revokes this Agreement, it shall not be
effective or enforceable and Employee will not receive the severance pay.
Federal law also requires the Company to advise the Employee to
consult with an attorney before signing this Agreement. Employee
understands that whether or not to do so is the Employee's decision.
This is the entire Agreement between the Employee and the Company.
The Company has made no promises to the Employee other than those in this
Agreement.
THE EMPLOYEE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT, UNDERSTANDS
IT AND IS VOLUNTARILY ENTERING INTO IT.
THIS AGREEMENT HAS BEEN AGREED TO AND BEEN SIGNED VOLUNTARILY AND
KNOWINGLY.
___________________________________
Signed: Ronald Isaacson
Dated: ____________________________
STATE OF ________________)
) ss.
COUNTY OF _______________)
Personally came before me this _____ day of ____________, 19__, the
above-named __________________________________, to me known to be the
person who executed the foregoing Severance Agreement and Release and
acknowledges the same.
___________________________________
____________________, Notary Public
_________________ County, _________
My Commission ____________________.
MID-WISCONSIN FINANCIAL SERVICES, INC.
By:________________________________
(Name of Company Official)
Dated: ____________________________
<PAGE>
STATE OF ________________)
) ss.
COUNTY OF _______________)
Personally came before me this _____ day of _____________, 19__, the
above-named _____________________________________, to me known to be the
person who executed the foregoing Severance Agreement and Release and
acknowledges the same.
___________________________________
____________________, Notary Public
________________ County, __________
My Commission ____________________.
<TABLE> <S> <C>
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<S> <C>
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<PERIOD-END> MAR-31-1996
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0
0
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</TABLE>
