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 SEPTEMBER 30, 1997
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 of (IRS Employer Identification No.)
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 September 30, 1997 there were 1,860,033 shares of $.10 par value
commonstock outstanding.
MID-WISCONSIN FINANCIAL SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Income
Three Months Ended September 30, 1997 and
September 30, 1996 and Nine months Ended
September 30, 1997 and September 30, 1996 4
Consolidated Statements of Cash Flows
Nine months Ended September 30, 1997 and
September 30, 1996 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 5. Other Information 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>
September 30, 1997 December 31, 1996
ASSETS
<S> <C> <C>
Cash & cash equivalents $12,075,721 $13,734,886
Interest-bearing deposits in other financial institutions 77,485 10,233
Investment securities available for sale -At fair value 54,729,104 57,164,723
Loans held for sale 50,600 120,000
Total loans 183,159,387 174,841,989
Less - Allowance for credit losses (2,029,548) (2,030,878)
Net loans 181,129,839 172,931,111
Premises and equipment 5,480,981 3,906,661
Accrued interest and other assets 5,680,140 3,753,670
TOTAL ASSETS $259,223,870 $251,501,284
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest bearing deposits $24,907,844 $23,083,585
Interest-bearing deposits 178,845,066 179,328,522
Total Deposits 203,752,910 202,412,107
Short-term borrowings 17,929,355 14,671,264
Long term borrowings 6,400,000 5,400,000
Accrued interest and other liabilities 3,633,481 3,293,282
Total Liabilities 231,715,746 225,776,653
Stockholders' equity:
Common stock-Par value $.10 per share:
Authorized - 6,000,000 shares in 1997 & 1996
Issued & outstanding - 1,860,033 shares in 1997 186,003
- 1,865,369 shares in 1996 186,537
Additional paid-In capital 12,466,249 12,647,615
Retained earnings 14,562,898 12,714,474
Unrealized gain (loss) on securities available for sale 292,974 176,005
Total Stockholders' Equity 27,508,124 25,724,631
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $259,223,870 $251,501,284
<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 Nine Months Ended
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $4,336,627 $4,102,431 $12,446,199 $12,183,957
Interest on investment securities:
Taxable 784,526 834,225 2,408,195 2,504,697
Tax-exempt 110,107 79,910 305,649 219,692
Other interest income 1,328 18,121 57,471 28,846
Total interest income 5,232,588 5,034,687 15,217,514 14,937,192
Interest expense
Deposits-NOW 81,853 100,612 258,564 312,715
MMD 317,418 329,690 1,015,028 817,272
Savings 105,155 125,343 327,459 363,192
CDs & IRAs 1,578,085 1,485,325 4,589,227 4,404,282
U.S. Repurchase agreements 286,615 253,506 751,645 784,077
Long-term borrowings 94,852 56,345 268,395 154,625
Total interest expense 2,463,978 2,350,821 7,210,318 6,836,163
Net Interest income 2,768,610 2,683,866 8,007,196 8,101,029
Provision for credit losses 30,000 50,000 90,000 170,000
Net interest income after provision
for credit losses 2,738,610 2,633,866 7,917,196 7,931,029
Other income:
Service fees 159,475 154,681 460,380 441,661
Insurance commissions 14,313 19,013 29,584 54,962
Trust Service fees 105,446 93,013 333,400 278,661
Other fee income 152,380 140,300 431,344 383,312
Net security gains 0 (66,071) 14,186 (159,820)
Other operating income 17,377 16,677 294,137 50,198
Total other income 448,991 357,613 1,563,031 1,048,974
Operating expenses:
Salaries 771,495 763,976 2,209,136 2,158,014
Employee Benefits 264,163 250,954 802,812 785,404
Net occupancy expense 312,967 431,369 960,305 995,686
FDIC expense 6,212 500 18,519 1,500
Other operating expense 430,118 302,234 1,365,863 1,258,468
Total operating expenses 1,784,955 1,749,033 5,356,635 5,199,072
Income before income taxes 1,402,646 1,242,446 4,123,592 3,780,931
Provision for income taxes 486,263 433,543 1,435,169 1,339,234
Net income $916,383 $808,903 $2,688,423 $2,441,697
Earnings per share $0.49 $0.43 $1.44 $1.31
<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 CASH FLOWS
Nine Months Ended September 30, 1997 and 1996
<CAPTION>
1997 1996
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income $2,688,424 $2,441,697
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation amort & accretion 584,042 586,754
Provision for loan losses 90,000 170,000
(Gain) Loss on sale of investment securities (14,186) 159,821
(Gain) Loss on equipment disposals - 441
(Gain) loss on sale of other real estate 26,871 -
Changes in operating assets and liabilities:
Other assets (7,754) (30,887)
Other liabilities 341,469 353,562
Net cash provided by operating activities 3,708,866 3,681,388
Cash flows from investing activities:
Proceeds from sale:
Available for Sale Investment Securities 534,836 6,555,302
Proceeds from Maturities:
Held to maturity
Available for sale Investment Securities 10,317,510 13,369,293
Payment for purchases:
Available for sale Investment Securities (8,225,109) (22,887,058)
Proceeds from sale of loans 3,847,675 3,859,800
Net (increase) decrease in loans (12,391,812) (6,391,543)
Net (increase) decrease in interest-bearing deposits
in other institutions (67,252) 8,750
Capital expenditures (2,066,888) (230,034)
Proceeds from sale of equipment 21,565 2,950
Proceeds from sale of other real estate 309,179 -
Premium paid on purchase of deposits (2,224,730) -
Net cash used in investing activities (9,945,025) (5,712,540)
Cash flows from financing activities:
Net increase (decrease) in deposits 1,340,803 491,522
Proceeds from exercise of stock options 57,104 3,547,460
Net increase (decrease) in short-term borrowing 3,258,091 (600,000)
Proceeds from issuance of long term borrowing 1,000,000 19,152
Payment for repurchase of common stock (239,004) -
Dividends paid (840,000) (724,733)
Net cash provided by financing activities 4,576,994 2,733,401
Net increase (decrease) in cash and cash equivalents (1,659,165) 702,249
Cash and cash equivalents at beginning 13,734,886 10,683,544
Cash and cash equivalents at end $12,075,721 $11,385,793
Supplemental cash flow information: 1997 1996
Cash paid during the year for:
Interest $7,155,980 $6,970,748
Income taxes $1,370,025 $1,395,025
Supplemental schedule of non-cash investing and financing activities:
Loans transferred to other real estate $203,612 $100,000
Loans charged off $148,435 $153,503
Loans made in connection with the disposition of other
real estate $241,752
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - GENERAL
The consolidated balance sheet as of September 30, 1997, and the
consolidated statements of income for the three month periods ended
September 30, 1997 and 1996, and the nine month periods ended September 30,
1997 and 1996, and the consolidated statements of cash flows for the nine
month periods ended September 30, 1997 and 1996, 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 period have been made.
The Company 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, 1996,
annual report to the Shareholders. The results of operations for the
interim period are not necessarily indicative of the results to be expected
for the entire year.
NOTE 2 - INVESTMENT SECURITIES
All investment securities are held as available for sale. The book
value and market value of investment securities are summarized as follows:
<TABLE>
BOOK VALUE and MARKET VALUE
<CAPTION>
September 30, 1997 December 31, 1996
<S> <C> <C>
U.S. Treasury securities and obligations
of other U.S. Govt agencies & corp $18,246,204 $23,095,170
Mortgage Backed Securities 23,904,921 23,838,501
Oblig. to states & political subdivisions 9,520,832 6,893,312
Corporate Securities 1,697,940 1,620,370
Equity Securities 1,359,207 1,717,370
Totals $54,729,104 $57,164,723
</TABLE>
Included in the totals of Investment Securities at September 30,
1997, are unrealized gains of $442,808 on debt securities classified as
available for sale. The net of tax unrealized holding gain of $292,974 on
securities classified as available-for-sale is reflected in stockholders'
equity.
Securities with an approximate carrying value of $32,646,989 and
$37,993,443 at September 30, 1997 and December 31, 1996, respectively, were
pledged primarily to secure public deposits and for other purposes required
by law. There are no securities of any one issuer that exceed ten percent
of stockholder's equity.
<PAGE>
Note 3 - LOANS
Loans outstanding increased 4.76% for the nine months ended September
30, 1997; increasing from $174,841,989 at December 31, 1996, to
$183,159,387 at September 30, 1997.
<TABLE>
The composition of loans at September 30, 1997, and December 31, 1996,
follows:
<CAPTION>
Sept. 30 % of Dec. 31 % of
(Dollars in Thousands) 1997 total 1996 total
<S> <C> <C> <C> <C>
Commercial and financial $27,206 14.85% $26,923 15.40%
Construction Loans 1,224 0.68% 891 0.50%
Agricultural 33,907 18.51% 30,869 17.66%
Real estate 108,201 59.07% 104,002 59.48%
Installment 12,141 6.63% 11,499 6.58%
Lease financing 480 0.26% 658 0.38%
Total loans $183,159 100.00% $174,842 100.00%
</TABLE>
The composition of loans in the loan portfolio shows an increase in
all categories except lease financing at September 30, 1997. The bank is
continuing its 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.
The Company's process for monitoring loan quality includes monthly
analysis of delinquencies, non-performing 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.
<PAGE>
<TABLE>
The Company maintains generally high quality loans. The following
table shows the amount of non-performing assets and other real estate owned
as of the dates indicated.
<CAPTION>
Non-performing loans Sept. 30 % of total Dec. 31 % of total
(Dollars in Thousands) 1997 loans 1996 loans
<S> <C> <C> <C> <C>
Non-accrual loans $1,021 0.56% $847 0.49%
Loans past due 90 days 32 0.02% 36 0.02%
or more
Restructured loans 217 0.12% 189 0.11%
Total Non-performing
loans $1,270 0.69% $1,072 0.62%
Other real estate owned 3 0.00% 135 0.08%
Total non-performing
assets $1,273 0.70% $1,207 0.70%
</TABLE>
Included above are $472,448 of impaired loans (.257%) in non-accrual
status at September 30, 1997. In addition, there are impaired loans of
$143,837 (.079%) which management has considered in the allowance for
credit losses. The average balance of impaired loans during the first nine
months of 1997 was $763,015. The impaired loans with an aggregate
outstanding balance of $616,285 are based on fair value of the collateral
of the loans, as these loans are collateral dependent.
Total non-performing assets (loans and other real estate) increased
during the nine months ended September 30, 1997. As a percentage of total
outstanding loans, the non-performing assets were .70% at September 30,
1997 and .70% at December 31, 1996.
The aggregate amount of non-performing assets was approximately
$1,273,000 and $1,207,000 at September 30, 1997, and December 31, 1996,
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,
$99,267 of interest income would have been recorded for the nine months
ended September 30, 1997. Interest income actually collected and recorded
was $88,515.
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 period ended
September 30, 1997, and December 31, 1996 follows:
<CAPTION>
(Dollars in Thousands)
Sept. 30, 1997 Dec. 31, 1996
<S> <C> <C>
Allowance for credit losses at
beginning of period $2,031 $1,836
Provision Charged to Operating Expense 90 400
Recoveries on Loans 57 107
Loans Charged off (148) (312)
Allowance for losses at end of period $2,030 $2,031
</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 1,871,260 for the three months
ended September 30, 1997, and 1,868,358 for the three months ended
September 30, 1996.
<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>
(Dollars in thousands, 1997 1996
except per share amounts) Third Second First Fourth Third Second First
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS:
Earnings and Dividends:
Net interest revenue $2,767 $2,644 $2,595 $2,656 $2,684 $2,740 $2,677
Provision for credit losses 30 30 30 230 50 60 60
Other operating revenue 449 687 427 824 358 333 359
Other operating expense 1,785 1,849 1,723 1,975 1,749 1,714 1,737
Net income 916 943 829 835 809 827 806
Per common share: (1)
Net income 0.49 0.50 0.44 0.45 0.43 0.44 0.43
Dividends declared 0.15 0.15 0.15 0.28 0.13 0.13 0.13
Stockholders' equity 14.79 14.42 13.96 13.79 13.50 13.15 12.99
Average common shares (000's) 1,871 1,873 1,873 1,873 1,869 1,868 1,861
Dividend payout ratio 30.57% 29.69% 34.05% 62.57% 29.87% 29.22% 29.97%
Balance Sheet Summary:
At quarter end:
Loans net of unearned income $183,159 $180,108 $172,037 $174,842 $175,052 $171,067 $167,088
Assets 259,224 255,649 248,172 251,501 249,732 242,302 241,778
Deposits 203,753 199,346 196,444 202,412 192,636 186,124 189,312
Shareholders equity 27,508 26,895 26,039 25,725 25,087 24,442 24,126
Average balances:
Loans net of unearned income 181,390 176,480 172,746 173,910 172,682 169,624 169,277
Assets 254,216 250,278 248,951 248,374 246,663 242,561 241,591
Deposits 195,609 192,570 199,176 196,792 197,447 188,347 189,713
Shareholders equity 26,993 26,133 25,862 25,347 24,658 24,183 23,970
Performance Ratios:
Return on average assets 1.44% 1.51% 1.34% 1.34% 1.31% 1.36% 1.34%
Return on average common equity 13.57% 14.43% 12.82% 13.18% 13.12% 3.68% 13.45%
Equity to assets 10.30% 10.28% 10.24% 9.94% 9.77% 9.80% 9.68%
Total risk-based capital 14.72% 16.14% 16.33% 15.66% 15.28% 14.83% 14.52%
Net loan charge-offs as a percentage
of average loans 0.05% 0.03% 0.02% 0.12% -0.01% 0.02% 0.03%
Nonperforming assets as a percentage
of loans and other real estate 0.70% 0.77% 1.11% 0.69% 0.45% 0.51% 0.61%
Net interest margin 4.76% 4.61% 4.46% 4.67% 4.74% 4.89% 4.81%
Efficiency ratio 55.04% 55.75% 56.29% 56.12% 56.77% 55.06% 56.49%
Fee revenue as a percentage of
average assets 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11%
Stock Price Information:
High $27.00 $25.50 $25.50 $24.00 $23.00 $22.63 $22.50
Low 25.50 25.00 24.00 23.00 22.63 22.50 19.50
Market value at quarter end (2) 27.00 25.00 25.50 24.00 23.00 22.63 21.50
<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 increased $1,340,803 during the nine month period ended
September 30, 1997. Non-interest bearing deposits increased $1,824,259 and
interest-bearing deposits decreased $483,456. The Company's market area
continues to be highly rate competitive. The Bank completed the purchase
of two branches in September 1997. The Bank acquired a total of
$19,831,000 in deposits and $872,220 in loans from this acquisition.
Loans increased $8,317,398 during the nine month period ended
September 30, 1997. The company continues to be aggressive in acquiring
new loans.
Investments decreased $2,435,619 during the nine month period ended
September 30, 1997. The company's policy is to provide funds for loans in
the communities it services, increases in the investment portfolio are made
to satisfy pledging requirements for municipal deposits and to provide
higher earnings than could be obtained from short term fed funds.
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 September 30, 1997, the carrying value of
debt securities maturing within one year amounted to $6,397,853 or 11.988%
of the total debt securities portfolio. Mid-Wisconsin also holds
$1,359,207 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 September 30, 1997, shareholders' equity increased $1,783,493 to
$27,507,124 from $25,724,631 at December 31, 1996. This net increase is
due to retention of current year earnings and adjustments for unrealized
gains or losses. Net unrealized gains were $292,974 at September 30, 1997
and $176,005 at December 31, 1996.
The primary capital to asset ratio was 9.61% as of September 30, 1997,
compared to 9.97% at December 31, 1996. The company's risk-based capital
ratio for Tier 1 (core) amounted to 13.59% and total risk-based capital
amounted to 14.72%. This compares to Tier 1 (core) capital of 14.47% and
total risk-based capital of 15.66% at December 31, 1996.
<PAGE>
RESULTS OF OPERATIONS
The company's consolidated net income for the three months ended
September 30, 1997, increased $107,480 or 13.287% to $916.383 from $808,903
for the three months ended September 30, 1996. The increase included income
of $241,039 resulting from the curtailment of the company's defined benefit
pension plan, which was paid out on September 30, 1997. Net interest
income increased $84,744 during the three months ended September 30, 1997,
over the three months ended September 30, 1996. Pricing of loans and
deposits remains competitive in the market area.
Return on average common stockholders' equity amounted to 14.04% for
the three months ended September 30, 1997; compared to 13.54% for the three
months ended September 30, 1996.
Return on average assets for the three months ended September 30,
1997, amounted to 1.44%; compared to 1.32% for the three months ended
September 30, 1996.
Net earnings per share amounted to $ .49 per share for the three
months ended September 30, 1997, compared to $ .43 for the three months
ended September 30, 1996. Cash dividends paid were .15 per share in
September 1997 and .13 per share in September 1996.
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 $30,000 for the
three months ended September 30, 1997, and $50,000 for the three months
ended September 30, 1996. The allowance for credit losses as a percentage
of gross loans outstanding was $2,029,548 or 1.11% of total loans on
September 30, 1997, compared to $2,030,878 or 1.16% of total loans on
December 31, 1996. Net charge-offs as a percentage of average loans
outstanding were .02% during the three months ended September 30, 1997
compared to .02% for the three months ended September 30, 1996.
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 continues to provide
strong non-performing loan coverage, decreasing to 160% at September 30,
1997 from 189% at December 31, 1996. 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 September 30, 1997, to be 4.76%; compared to 4.74% for the
three months ended September 30, 1996. Decreases in the average rate on
earning assets along with increases in the average rate on interest bearing
liabilities contributed to the decrease in net interest margin. The company
is making an effort to increase net interest margin through the strategic
pricing of loans and deposits.
<PAGE>
The average rate on earning assets increased .09% and the average rate
on interest bearing liabilities increased .10%. Interest spread decreased
.01%.
NON-INTEREST INCOME
Non-interest income, other than net security transactions and income
from pension plan curtailment, increased 5.96% to $448,991 during the three
months ended September 30, 1997, from $423,684 during the three months
ended September 30, 1996. There were no security gains during the three
months ended September 30, 1997 and security losses were $66,071 during
the three months ended September 30, 1996. Income from the curtailment of
the defined benefit pension plan was $241,039. Fee income on deposit
accounts increased $4,794 to $159,475 during the three months ended
September 30, 1997, from $154,681 during the three months ended September
30, 1996. Other fee income increased $12,263, trust service fees increased
$12,433, insurance commissions decreased $4,700, and other operating income
increased $517.
NON-INTEREST EXPENSE
Non-interest expenses increased 2.054% to $1,784,955 for the three
months ended September 30, 1997, from $1,749,033 for the three months
ended September 30, 1996. The increase in expenses is due in part to the
start up costs associated with the opening of the new branch office in
Phillips, WI which opened August 4, 1997 and the acquisition of the two
branches in Rhinelander, WI and Lake Tomahawk, WI. There are no expenses
included in other expenses that exceed 1% of total interest and other
income for either 1997 or 1996. The Company 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.
RETIREMENT PLANS
The Company has terminated the defined benefit pension plan effective
January 1, 1997 and has established a new defined contribution pension
plan effective January 1, 1997. The final payout of the defined benefit
pension plan occurred on June 30, 1997.
<PAGE>
ITEM 5. Other Information
On September 22, 1997, Mid-Wisconsin Bank completed the purchase of
branch offices in Rhinelander, WI and Lake Tomahawk, WI from Marshall &
Ilsley Corporation's M&I Merchants Bank. The acquisition expands Mid-
Wisconsin's market area into Oneida County.
Management is addressing concerns related to the year 2000 and all
costs associated with correcting year 2000 concerns are being expensed as
incurred.
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
The following exhibits are filed as part of this quarterly report on
Form 10-Q.
Incorporated
Exhibit No. and Description Exhibit <dagger>
(3) Articles of Incorporation and Bylaws
(a) Articles of Incorporation, as amended (a) (1)
(b) Bylaws, as amended September 20, 1995 3 (b) (1)
(4) Instruments defining the rights of security
holders, including indentures
(a) Articles of Incorporation and
Bylaws (See (3)(a) and (b))
(10) Material contracts:
**(a) Mid-Wisconsin Bank
Senior Officer Incentive Bonus Plan (1996-1997) 10 (a) (2)
**(b) Mid-Wisconsin Financial Services, Inc.
1991 Employee Stock Option Plan 10 (b) (1)
**(c) Mid-Wisconsin Financial Services, Inc.
Directors' Deferred Compensation Plan 10 (a) (3)
**(d) Executive Officer Employment and Severance
Agreement 10 (a) (4)
**(e) 1996 Executive Officer Bonus Plan
(22) Subsidiaries of the registrant 21 (1)
(27) Financial Data Schedule
**Denotes Executive Compensation Plans and Arrangements
<dagger> Where exhibit has been previously filed and is incorporated
herein by reference, exhibit numbers set forth herein correspond to the
exhibit numbers where such exhibit can be found in the following reports of
the registrant (Commission File No. 0-18542) filed with the Securities and
Exchange Commission:
(1) Form 10-K for the year ended December 31, 1995, as filed with the
Commission on March 26, 1996.
(2) Form 10-K for the year ended December 31, 1996, as filed with the
Commission on March 26, 1997.
(3) Form 10-K for the year ended December 31, 1992, as filed with the
Commission on March 30, 1993.
(4) Form 10-Q for the quarterly period ended March 31, 1996, as filed
with the Commission on May 14, 1996.
(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 November 7, 1997 GENE C. KNOLL
Gene C. Knoll, President
(Principal Executive Officer)
Date November 7, 1997 LUCILLE BRANDNER
Lucille Brandner, Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
to
FORM 10-Q
of
MID-WISCONSIN FINANCIAL SERVICES, INC.
for the period ended September 30, 1997
Pursuant to Section 102(d), Regulation S-T
(17 C.F.R. <section>232.102(d))
Exhibit 27. Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 12,076
<INT-BEARING-DEPOSITS> 178,845
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 54,729
<INVESTMENTS-CARRYING> 54,729
<INVESTMENTS-MARKET> 54,729
<LOANS> 183,159
<ALLOWANCE> (2,030)
<TOTAL-ASSETS> 259,224
<DEPOSITS> 203,753
<SHORT-TERM> 17,929
<LIABILITIES-OTHER> 3,633
<LONG-TERM> 6,400
0
0
<COMMON> 186
<OTHER-SE> 27,322
<TOTAL-LIABILITIES-AND-EQUITY> 259,224
<INTEREST-LOAN> 4,337
<INTEREST-INVEST> 895
<INTEREST-OTHER> 1
<INTEREST-TOTAL> 5,233
<INTEREST-DEPOSIT> 2,082
<INTEREST-EXPENSE> 2,464
<INTEREST-INCOME-NET> 1,769
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,785
<INCOME-PRETAX> 1,403
<INCOME-PRE-EXTRAORDINARY> 1,403
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 916
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.49
<YIELD-ACTUAL> 8.80
<LOANS-NON> 1,021
<LOANS-PAST> 32
<LOANS-TROUBLED> 217
<LOANS-PROBLEM> 616
<ALLOWANCE-OPEN> 2,031
<CHARGE-OFFS> 148
<RECOVERIES> 57
<ALLOWANCE-CLOSE> 2,030
<ALLOWANCE-DOMESTIC> 90
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 54
</TABLE>
