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 30,1997
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 June 30, 1997, there were 1,865,369 shares of $.10 par value commonstock
outstanding.
<PAGE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income
Three Months Ended June 30, 1997 and June 30, 1996
and Six Months Ended June 30, 1997 and June 30, 1996 4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and June 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 4. Submission of Matters to a Vote of Security
Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports of Form 8-K 16
Signatures 17
Exhibit Index 18
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
and Subsidiary
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, 1997 December 31, 1996
ASSETS
<S> <C> <C>
Cash & cash equivalents $11,890,362 $13,734,886
Interest-bearing deposits in other
financial institutions 15,237 10,233
Investment securities available
for sale -At fair value 57,320,342 57,164,723
Fed Funds Sold 340,000
Loans held for sale 120,000
Total loans 180,108,499 174,841,989
Less - Allowance for credit losses (2,045,352) (2,030,878)
Net loans 178,063,147 172,931,111
Premises and equipment 4,242,969 3,906,661
Accrued interest and other assets 3,776,989 3,753,670
TOTAL ASSETS $255,649,046 $251,501,284
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest bearing deposits $22,493,449 $23,083,585
Interest-bearing deposits 176,852,870 179,328,522
Total Deposits 199,346,319 202,412,107
Short-term borrowings 19,852,359 14,671,264
Long term borrowings 6,400,000 5,400,000
Accrued interest and other liabilities 3,155,825 3,293,282
Total Liabilities 228,754,503 225,776,653
Stockholders' equity:
Common stock-Par value $.10 per share:
Authorized - 6,000,000 shares in 1997 & 1996
Issued & outstanding- 1,865,369 shares in 1997 186,537
- 1,865,369 shares in 1996 186,537
Additional paid-In capital 12,625,551 12,647,615
Retained earnings 13,926,626 12,714,474
Unrealized gain (loss) on securities available for sale 155,829 176,005
Total Stockholders' Equity 26,894,543 25,724,631
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $255,649,046 $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 Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
<C> <S> <S> <S> <S>
Interest income
Interest and fees on loans $4,138,359 $4,063,544 8,109,572 8,081,526
Interest on investment securities:
Taxable 799,666 846,562 1,623,669 1,670,472
Tax-exempt 102,299 74,950 195,542 139,782
Other interest income 20,851 10,446 56,143 10,725
Total interest income 5,061,175 4,995,502 9,984,926 9,902,505
Interest expense
Deposits-NOW 75,814 103,084 176,711 212,103
MMD 330,016 247,061 697,610 487,582
Savings 109,444 120,477 222,304 237,849
CDs & IRAs 1,524,101 1,457,450 3,011,142 2,918,957
U.S. Repurchase agreements 284,223 278,184 465,030 530,571
Long-term borrowings 93,821 49,140 173,543 98,280
Total interest expense 2,417,419 2,255,396 4,746,340 4,485,342
Net Interest income 2,643,756 2,740,106 5,238,586 5,417,163
Provision for credit losses 30,000 60,000 60,000 120,000
Net interest income after provision
for credit losses 2,613,756 2,680,106 5,178,586 5,297,163
Other income:
Service fees 151,494 144,005 300,905 286,980
Insurance commissions 5,588 18,234 15,271 35,949
Trust Service fees 118,500 92,761 227,954 185,648
Other fee income 149,703 131,698 278,781 243,012
Net security gains 14,369 (69,150) 14,369 (93,749)
Other operating income 247,692 15,056 276,760 33,521
Total other income 687,346 332,604 1,114,040 691,361
Operating expenses:
Salaries 747,494 677,654 1,437,641 1,394,038
Employee Benefits 266,641 270,083 538,649 534,450
Net occupancy expense 319,090 329,295 647,338 679,120
FDIC expense 6,578 500 12,307 1,000
Other operating expense 509,344 435,973 935,745 841,431
Total operating expenses 1,849,147 1,713,505 3,571,680 3,450,039
Income before income taxes 1,451,955 1,299,205 2,720,946 2,538,485
Provision for income taxes 508,583 472,159 948,906 905,691
Net income $943,372 $827,046 $1,772,040 $1,632,794
Earnings per share $0.50 $0.44 $0.94 $0.87
<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
Three Months Ended June 30, 1997 and 1996
<CAPTION>
1997 1996
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income $1,772,040 $1,632,793
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation amort & accretion 374,793 369,929
Provision for loan losses 60,000 120,000
(Gain) Loss on sale of investment securities (14,186) 93,749
(Gain) Loss on equipment disposals 1,417
(Gain) Loss on sale of other real estate 24,092 -
Changes in operating assets and liabilities:
Other assets (181,076) (132,271)
Other liabilities (136,188) 148,290
Net cash provided by operating activities 1,899,475 2,233,907
Cash flows from investing activities:
Proceeds from sale:
Available for Sale Investment Securities 534,836 2,433,730
Proceeds from Maturities:
Available for Sale Investment Securities 5,979,345 13,581,250
Payment for purchases:
Available for sale Investment Securities (6,687,229) (17,711,589)
Proceeds from sale of loans 2,088,525 2,683,000
Net (increase) decrease in loans (7,484,841) (1,252,473)
Net (increase) decrease in interest-bearing deposits
in other institutions (5,004) 10,957
Net decrease in Fed Funds Sold (340,000)
Capital expenditures (613,370) (173,366)
Proceeds from sale of equipment 2,950
Proceeds from sale of other real estate 250,384
Net cash used in investing activities (6,277,354) (425,541)
Cash flows from financing activities:
Net increase (decrease) in deposits (3,065,788) (6,020,426)
Proceeds from exercise of stock options 25,086 19,152
Net increase (decrease) in short-term borrowing 5,181,095 2,878,935
Proceeds from issuance of long-term borrowings 1,000,000
Payment for repurchase of common stock (47,150)
Dividends paid (559,888) (483,090)
Net cash provided by financing activities 2,533,355 (3,605,429)
Net increase (decrease) in cash and cash equivalents (1,844,524) (1,797,063)
Cash and cash equivalents at beginning 13,734,886 10,683,544
Cash and cash equivalents at end $11,890,362 $8,886,481
Supplemental cash flow information: 1997 1996
Cash paid during the year for:
Interest $4,795,779 $4,619,453
Income taxes $875,025 $905,025
Supplemental schedule of non-cash investing and financing activities:
Loans transferred to other real estate $203,612 $100,000
Loans charged off $119,719 $113,424
Loans made in connection with the disposition of other
real estate $181,000 0
<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 June 30, 1997, and the consolidated
statements of income for the three month periods ended June30, 1997 and 1996,
and the six month periods ended June 30, 1997 and 1996,and the consolidated
statements of cash flows for the six month periods ended June 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.
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, 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>
June 30, 1997 Dec. 31, 1996
<S> <C> <C>
U.S. Treasury securities and obligations
of other U.S. Govt agencies & corp $21,587,941 $23,095,170
Mortgage Backed Securities 24,223,859 23,838,501
Oblig. to states & political subdivisions 8,655,678 6,893,312
Corporate Securities 1,204,350 1,620,370
Equity Securities 1,648,514 1,717,370
Totals $57,320,342 $57,164,723
</TABLE>
Included in the totals of Investment Securities at June 30, 1997, are
unrealized gains of $222,681 on debt securities classified as available for
sale. The net of tax unrealized holding gain of $155,829 on securities
classified as available-for-sale is reflected in stockholders' equity.
Securities with an approximate carrying value of $35,397,049 and
$37,993,443 at June 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 3.012% for the six months ended June 30, 1997;
increasing from $174,841,989 at December 31, 1996, to $180,108,499 at
June 30, 1997.
<TABLE>
The composition of loans at June 30, 1997, and December 31, 1996, follows:
<CAPTION>
June 30 % of Dec. 31 % of
(Dollars in Thousands) 1997 total 1996 total
<S> <C> <C> <C> <C>
Commercial and financial $28,067 15.58% $26,923 15.40%
Construction Loans 1,110 0.61% 891 0.50%
Agricultural 32,252 17.91% 30,869 17.66%
Real estate 106,316 59.03% 104,002 59.48%
Installment 11,830 6.57% 11,499 6.58%
Lease financing 533 0.30% 658 0.38%
Total loans $180,108 100.00% $174,842 100.01%
</TABLE>
The composition of loans in the loan portfolio shows an increase in all
categories except lease financing at June 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.
Mid-Wisconsin'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>
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.
<TABLE>
<CAPTION>
Non-performing loans June 30 % of total Dec. 31 % of total
(Dollars in Thousands) 1997 loans 1996 loans
<S> <C> <C> <C> <C>
Non-accrual loans $967 0.54% $847 0.49%
Loans past due 90 days or more 102 0.06% 36 0.02%
Restructured loans 248 0.14% 189 0.11%
Total Non-performing loans $1,317 0.73% $1,072 0.62%
Other real estate owned 64 0.04% 135 0.08%
Total non-performing assets $1,381 0.77% $1,207 0.70%
</TABLE>
Included above are $435,931 of impaired loans (.242%) in non-accrual
status at June 30, 1997. In addition, there are impaired loans of $177,983
(.099%) which management has considered in the allowance for credit losses.
The average balance of impaired loans during the first six months of 1997
was $807,852. The impaired loans with an aggregate outstanding balance of
$613,914 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 six months ended June 30, 1997. As a percentage of total
outstanding loans, the non-performing assets increased .07% to .77% at
June 30, 1997, from .70% at December 31, 1996.
The aggregate amount of non-performing assets was approximately $1,381,000
and $1,207,000 at June 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, $53,812 of interest income would have been recorded for the
six months ended June 30, 1997. Interest income actually collected and recorded
was $50,840.
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
June 30, 1997, and December 31, 1996 follows:
<CAPTION>
(Dollars in Thousands)
June 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 60 400
Recoveries on Loans 49 107
Loans Charged off (95) (312)
Allowance for losses at end of period $2,045 $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 1,872,694 for the three months ended June 30, 1997,
and 1,868,358 for the three months ended June 30, 1996.
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
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) Second First Fourth Third Second
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS:
Earnings and Dividends:
Net interest revenue $2,644 $2,595 $2,656 $2,684 $2,740
Provision for credit losses 30 30 230 50 60
Other operating revenue 687 427 824 358 333
Other operating expense 1,849 1,723 1,975 1,749 1,714
Net income 943 829 835 809 827
Per common share: (1)
Net income 0.50 0.44 0.45 0.43 0.44
Dividends declared 0.15 0.15 0.28 0.13 0.13
Stockholders' equity 14.42 13.96 13.79 13.50 13.15
Average common shares (000's) 1,873 1,873 1,873 1,869 1,868
Dividend payout ratio 29.69 34.05% 62.57% 29.87% 29.22%
Balance Sheet Summary:
At quarter end:
Loans net of unearned income $180,108 $172,037 $174,842 $175,052 $171,067
Assets 255,649 248,172 251,501 249,732 242,302
Deposits 199,346 196,444 202,412 192,636 186,124
Shareholders equity 26,895 26,039 25,725 25,087 24,442
Average balances:
Loans net of unearned income 176,480 172,746 173,910 172,682 169,624
Assets 250,278 248,951 248,374 246,663 242,561
Deposits 192,570 199,176 196,792 197,447 188,347
Shareholders equity 26,133 25,862 25,347 24,658 24,183
Performance Ratios:
Return on average assets 1.51% 1.34% 1.34% 1.31% 1.36%
Return on average common equity 14.43% 12.82% 13.18% 13.12% 13.68%
Equity to assets 10.28% 10.24% 9.94% 9.77% 9.80%
Total risk-based capital 16.14% 16.33% 15.66% 15.28% 14.83%
Net loan charge-offs as a percentage
of average loans 0.03% 0.02% 0.12% -0.01% 0.02%
Nonperforming assets as a percentage
of loans and other real estate 0.77% 1.11% 0.69% 0.45% 0.51%
Net interest margin 4.61% 4.46% 4.67% 4.74% 4.89%
Efficiency ratio 54.22% 56.29% 56.12% 56.77% 55.06%
Fee revenue as a percentage of
average assets 0.11% 0.11% 0.11% 0.11% 0.11%
Stock Price Information:
High $25.50 $25.50 $24.00 $23.00 $22.63
Low 25.00 24.00 23.00 22.63 22.50
Market value at quarter end (2) 25.00 25.50 24.00 23.00 22.63
<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 $3,065,788 during the six month period ended
June 30, 1997. Non-interest bearing deposits decreased $590,136 and interest
bearing deposits decreased $2,475,652. The company's market area continues
to be highly rate competitive. The Bank will be finalizing the acquisition
of two branches in September 1997 and will increase deposits by approximately
$20,000,000.
Loans increased $5,266,510 during the six month period ended June 30, 1997.
The company became more aggressive in acquiring new loans.
Investments increased $155,619 during the six month period ended June
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 June 30, 1997,
the carrying value of debt securities maturing within one year amounted to
$4,913,561 or 8.826% of the total debt securities portfolio. Mid-Wisconsin
also holds $1,648,514 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, 1997, shareholders' equity increased $1,169,912 to
$26,894,543 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 $155,829 at June 30, 1997 and $176,005 at
December 31, 1996.
The primary capital to asset ratio was 10.28% as of June 30, 1997, compared
to 9.97% at December 31, 1996. The company's risk-based capital ratio for
Tier 1 (core) amounted to 14.97% and total risk-based capital amounted to
16.14%. 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 June
30, 1997, increased $116,326 or 14.065% to $943,372 from $827,046 for the three
months ended June 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 June 30, 1997. Net interest income decreased $96,350 during the
three months ended June 30, 1997, over the three months ended June 30, 1996.
Pricing of loans and deposits remains competitive in the market area.
Return on average common stockholders' equity amounted to 14.43% for the
three months ended June 30, 1997; compared to 13.68% for the three months ended
June 30, 1996.
Return on average assets for the three months ended June 30, 1997, amounted
to 1.51%; compared to 1.36% for the three months ended June 30, 1996.
Net earnings per share amounted to $.50 per share for the three months
ended June 30, 1997, compared to $.44 for the three months ended June 30, 1996.
Cash dividends paid were .15 per share in June 1997 and .13 per share in
June 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
June 30, 1997, and $60,000 for the three months ended June 30, 1996. The
allowance for credit losses as a percentage of gross loans outstanding was
$2,045,352 or 1.14% of total loans on June 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 .03% during the three months ended
June 30, 1997 compared to .02% for the three months ended June 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 155% at June 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 June 30, 1997, to be 4.61%; compared to 4.90% for the three months
ended June 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 decreased .13% and the average rate on
interest bearing liabilities increased .19%. Interest spread decreased .32%.
NON-INTEREST INCOME
Non-interest income, other than net security transactions and income
from pension plan curtailment, increased 7.51% to $431,938 during the three
months ended June 30, 1997, from $401,754 during the three months ended
June 30, 1996. Security gains were $14,369 during the three months ended
June 30, 1997 and security losses were $69,150 during the three months ended
June 30, 1996. Income from the curtailment of the defined benefit pension plan
was $241,039. Fee income on deposit accounts increased $7,489 to $151,494
during the three months ended June 30, 1997, from $144,005 during the three
months ended June 30, 1996. Other fee income increased $18,005, trust service
fees increased $25,739, insurance commissions decreased $12,646, and other
operating income decreased $8,403.
NON-INTEREST EXPENSE
Non-interest expenses increased 7.916% to $1,849,147 for the three months
ended June 30, 1997, from $1,713,505 for the three months ended June 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 scheduled for
August 4, 1997. 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>
Part II - Other Information
ITEM 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on
April 22, 1997.
<TABLE>
The matters voted upon, including the number of votes cast for, against,
or withhold, as well as the number of abstentions and broker non-votes, as to
each such matter were as follows:
<CAPTION>
Matter Shares
<S> <C> <C> <C> <C> <C>
1.Election of Directors
Broker
For Against Withheld Abstain Non-Vote
(a)Gene C. Knoll 1,215,457 N/A 3,428 N/A 0
Broker
For Against Withheld Abstain Non-Vote
(b)Kurt D. Mertens 1,213,611 N/A 5,274 N/A 0
Broker
For Against Withheld Abstain Non-Vote
(c)Fred J. Schroeder 1,215,457 N/A 3,428 N/A 0
Broker
For Against Withheld Abstain Non-Vote
(d)John P. Selz 1,215,457 N/A 3,428 N/A 0
2.Approval of appointment of Broker
independent auditors for year For Against Withheld Abstain Non-Vote
ending December 31, 1997 1,216,604 50 N/A 2,231 0
</TABLE>
<PAGE>
ITEM 5. Other Information
Beginning August 4, 1997, Mid-Wisconsin Bank will officially open its
branch office in Phillips, WI. The office will be open Monday through Saturday
for lobby and drive up activities.
The new facility is a 5000 square foot full service banking office. The
location will feature four teller windows, private offices, safe deposit boxes,
drive-up services and a 24-hour Automated Teller Machine.
The bank also announced it's intention to expand into Rhinelander, WI and
Lake Tomahawk, WI through the purchase of branches in those communities from
Marshall & Ilsley Corporation's M & I Merchants Bank.
The acquisition of the Rhinelander and Lake Tomahawk branches is expected
to be completed in September. The acquisition is subject to regulatory approval
and satisfaction of the terms and conditions set forth in the agreement.
The acquisition will expand Mid-Wisconsin's market area into Oneida County.
These branches are being sold by Marshall & Ilsley Corporation to meet
regulatory requirements necessary to complete the purchase of Security Bank SSB.
The addition of these two locations will increase the company's assets by about
$20 million.
<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. Exhibits incorporated by reference are indicated by footnote reference to
to the incorporated filing.
Incorporated
Exhibit No. and Description Exhibit<dagger>
(3) Articles of Incorporation and Bylaws
(a) Articles of Incorporation, as amended 3 (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 quarter 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 August 8, 1997 GENE C. KNOLL
Gene C. Knoll, President
(Principal Executive Officer)
Date August 8, 1997
LUCILLE BRANDNER
Lucille Brandner, Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
to
MID-WISCONSIN FINANCIAL SERVICES, INC.
for the period ended June 30, 1997
Pursuant to Section 102(d), Regulation S-T
(17 C.F.R. <section>232.102(d))
EXHIBIT 27. Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 11,890
<INT-BEARING-DEPOSITS> 176,853
<FED-FUNDS-SOLD> 340
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 57,320
<INVESTMENTS-CARRYING> 57,320
<INVESTMENTS-MARKET> 57,320
<LOANS> 180,108
<ALLOWANCE> (2,045)
<TOTAL-ASSETS> 255,649
<DEPOSITS> 199,346
<SHORT-TERM> 19,852
<LIABILITIES-OTHER> 3,156
<LONG-TERM> 6,400
0
0
<COMMON> 187
<OTHER-SE> 26,709
<TOTAL-LIABILITIES-AND-EQUITY> 255,649
<INTEREST-LOAN> 4,138
<INTEREST-INVEST> 902
<INTEREST-OTHER> 21
<INTEREST-TOTAL> 5,061
<INTEREST-DEPOSIT> 2,039
<INTEREST-EXPENSE> 2,417
<INTEREST-INCOME-NET> 2,644
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 14
<EXPENSE-OTHER> 1,849
<INCOME-PRETAX> 1,452
<INCOME-PRE-EXTRAORDINARY> 1,452
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 943
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
<YIELD-ACTUAL> 8.73
<LOANS-NON> 967
<LOANS-PAST> 102
<LOANS-TROUBLED> 248
<LOANS-PROBLEM> 614
<ALLOWANCE-OPEN> 2,031
<CHARGE-OFFS> 95
<RECOVERIES> 49
<ALLOWANCE-CLOSE> 2,045
<ALLOWANCE-DOMESTIC> 60
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 58
</TABLE>
