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, 2000
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) 748-8300
(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, 2000, there were 1,810,096 shares of $.10 par value common
stock outstanding.
<PAGE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Income
Three Months Ended September 30, 2000 and 1999
And Nine Months Ended September 30, 2000 and 1999 4
Consolidated Statements of Changes
in Stockholders' Equity
Nine Months Ended September 30, 2000 5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 8-14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K 15-16
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>
September 30, 2000 December 31, 1999
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks $11,186,756 $16,400,484
Interest-bearing deposits in other financial institutions 18,686 16,628
Federal funds sold 2,087,000 0
Investment securities available for sale -At fair value 67,855,464 63,364,665
Loans held for sale 273,240 50,000
Loans receivable, net of allowance for credit losses of
$2,478,299 in 2000 and $2,285,675 in 1999 225,758,398 215,260,185
Accrued interest receivable 2,150,386 2,048,587
Premises and equipment 6,396,167 6,740,834
Goodwill and purchased intangibles 1,901,687 2,156,512
Other assets 1,428,094 1,645,693
TOTAL ASSETS $319,055,878 $307,683,588
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $28,662,517 $30,615,700
Interest-bearing deposits 208,267,289 199,554,383
Total Deposits 236,929,806 230,170,083
Short-term borrowings 33,214,070 25,919,665
Long term borrowings 16,200,000 20,000,000
Accrued expenses and other liabilities 3,678,876 3,095,203
Total Liabilities 290,022,752 279,184,951
Stockholders' equity:
Common stock-Par value $.10 per share:
Authorized - 6,000,000 shares in 2000 & 1999
Issued & outstanding - 1,810,096 shares in 2000 181,010
- 1,824,718 shares in 1999 182,472
Additional paid-In capital 11,769,117 11,759,737
Retained earnings 17,544,257 17,356,953
Accumulated other comprehensive income, net of tax (461,258) (800,525)
Total Stockholders' Equity 29,033,126 28,498,637
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $319,055,878 $307,683,588
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
Item 1. Financial Statements Continued:
<TABLE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three months ended Nine Months Ended
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $5,156,099 $4,412,537 $14,878,428 $12,720,580
Interest on investment securities:
Taxable 789,765 752,566 2,394,131 2,237,899
Tax-exempt 207,801 175,723 604,535 497,619
Other interest and dividend income 31,029 2,351 61,675 115,454
Total interest income 6,184,694 5,343,177 17,938,769 15,571,552
Interest expense
Deposits 2,703,178 2,008,736 7,365,897 6,021,092
Short-term borrowings 438,061 274,025 1,241,745 773,299
Long-term borrowings 254,080 189,413 832,733 325,011
Total interest expense 3,395,319 2,472,174 9,440,375 7,119,402
Net Interest income 2,789,375 2,871,003 8,498,394 8,452,150
Provision for credit losses 120,000 0 280,000 120,000
Net interest income after provision
for credit losses 2,669,375 2,871,003 8,218,394 8,332,150
Noninterest income:
Service fees 216,874 178,236 583,837 520,727
Trust Service fees 150,470 141,530 481,844 420,120
Investment product commissions 48,375 42,528 194,559 186,844
Other operating income 203,966 116,739 459,676 466,650
Total noninterest income 619,685 479,033 1,719,916 1,594,341
Noninterest expenses:
Salaries and employee benefits 1,116,232 1,135,909 3,493,565 3,419,338
Occupancy 335,392 338,227 983,107 1,041,202
Data Processing & Information Systems 119,747 114,317 347,656 318,533
Goodwill & Core Deposit Intang Amortization 84,942 80,798 254,825 242,395
Other operating 462,322 509,287 1,510,100 1,478,815
Total noninterest expenses 2,118,635 2,178,538 6,589,253 6,500,283
Income before income taxes 1,170,425 1,171,498 3,349,057 3,426,208
Provision for income taxes 333,686 299,769 942,450 975,841
Net income $836,739 $871,729 $2,406,607 $2,450,367
Basic and diluted earnings per share $0.46 $0.48 $1.33 $1.34
Cash dividends declared per share $0.20 $0.20 $1.00 $0.97
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
Item 1. Financial Statements Continued:
<TABLE>
Mid-Wisconsin Financial Services, Inc.
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
<CAPTION>
Accumulated
Additional Other
Common Stock Paid-In Retained Comprehensive
Amount Capital Earnings Income (Loss) Totals
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 $182,472 $11,759,737 $17,356,953 ($800,525) $28,498,637
Comprehensive Income:
Net Income 2,406,607 2,406,607
Unrealized gain on securities
available for sale, net of tax 339,267 339,267
Total comprehensive income 2,745,874
Proceeds from stock options 65 12,533 12,598
Repurchase of common stock (1,527) (3,153) (406,282) (410,962)
Cash dividends declared $1.00
per share (1,813,021) (1,813,021)
Balance September 30, 2000 $181,010 $11,769,117 $17,544,257 ($461,258) $29,033,126
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
Item 1. Financial Statements Continued:
<TABLE>
Mid-Wisconsin Financial Services, Inc.
and Subsidiary
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<CAPTION>
2000 1999
<S> <C> <C>
Increase (decrease) in cash and due from banks:
Cash flows from operating activities:
Net income $2,406,607 $2,450,367
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and net amortization 889,931 931,060
Provision for credit losses 280,000 120,000
Proceeds from sales of loans held for sale 2,055,865 5,784,852
Gain on sale of loans held for sale (30,635) (74,367)
Originations of loans held for sale (1,701,990) (4,758,835)
Loss on premises and equipment disposals 20,148 12,956
Gain on sale of other real estate - (4,154)
Changes in operating assets and liabilities:
Other assets (62,550) (113,859)
Other liabilities 583,673 50,823
Net cash provided by operating activities 4,441,049 4,398,843
Cash flows from investing activities:
Available for sale securities:
Proceeds from maturities 8,966,444 21,042,647
Payment for purchases (12,911,657) (29,490,386)
Net increase in loans (11,356,198) (19,101,364)
Net (increase) decrease in interest-bearing deposits
in other institutions (2,058) 22,662
Net (increase) decrease in federal funds sold (2,087,000) 9,223,000
Capital expenditures (316,085) (1,088,817)
Proceeds from sale of premises and equipment 8,508 -
Proceeds from sale of other real estate 525 124,093
Net cash used in investing activities (17,697,521) (19,268,164)
Cash flows from financing activities:
Net decrease in noninterest-bearing deposits (2,018,642) (156,569)
Net increase in interest-bearing deposits 8,778,365 1,729,300
Proceeds from exercise of stock options 12,598 40,087
Payment for repurchase of common stock (410,961) (1,092,520)
Net increase in short-term borrowing 7,294,405 7,329,805
Net increase (decrease) from issuance of long-term borrowings (3,800,000) 9,200,000
Dividends paid (1,813,021) (1,768,151)
Net cash provided by financing activities 8,042,744 15,281,953
Net increase (decrease) in cash and cash equivalents (5,213,728) 412,632
Cash and cash equivalents at beginning 16,400,484 14,025,302
Cash and cash equivalents at end $11,186,756 $14,437,934
Supplemental cash flow information: 2000 1999
Cash paid during the year for:
Interest $9,221,570 $7,259,952
Income taxes $1,086,000 $1,211,591
Supplemental schedule of non-cash investing and financing activities:
Loans transferred to other real estate $31,422 $223,027
Loans charged off $156,927 $71,856
Loans made in connection with the disposition of other real
estate $- $25,372
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - GENERAL
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly Mid-Wisconsin
Financial Services, Inc.'s ("Company") financial position, results of its
operations and cash flows for the periods presented, and all such adjustments
are of a normal recurring nature. The consolidated financial statements
include the accounts of all subsidiaries. All material intercompany
transactions and balances are eliminated. The results of operations for the
interim periods are not necessarily indicative of the results to be expected
for the full year.
These interim consolidated financial statements have been prepared according to
the rules and regulations of the Securities and Exchange Commission and,
therefore, certain information and footnote disclosures normally presented in
accordance with generally accepted accounting principles have been omitted or
abbreviated. The information contained in the consolidated financial
statements and footnotes in the Company's 1999 annual report on Form 10-K,
should be referred to in connection with the reading of these unaudited interim
financial statements.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ significantly from those estimates.
Estimates that are susceptible to significant change include the determination
of the allowance for credit losses and the valuations of investments.
NOTE 2 - INVESTMENT SECURITIES
All investments are available for sale. The amortized cost and fair value of
investment securities for the periods indicated are summarized as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
Amortized Cost Fair Value Amortized Cost Fair Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of other U.S. Govt agencies & corp $15,186,642 $14,899,223 $12,947,539 $12,487,600
Mortgage Backed Securities 33,212,456 32,739,061 32,989,062 32,389,232
Oblig. to states & political subdivisions 18,008,653 18,023,821 16,276,194 16,046,592
Corporate Securities 75,000 75,000 575,000 574,400
Equity Securities 2,118,359 2,118,359 1,866,841 1,866,841
Totals $68,601,110 $67,855,464 $64,654,636 $63,364,665
</TABLE>
<PAGE>
NOTE 3 - EARNINGS PER SHARE
Basic earnings per common share is calculated by dividing net income available
to common stockholders by the weighted average number of common shares
outstanding which includes the common stock equivalents applicable to shares
issuable under the stock options granted.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
<S> <C> <C>
Net income available to common
stockholders $2,406,607 $2,450,367
Weighted average shares outstanding 1,814,003 1,826,932
Basic earnings per share $1.33 $1.34
</TABLE>
NOTE 4 - COMPREHENSIVE INCOME
Generally accepted accounting principles require that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The Company's
comprehensive income for September 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
<S> <C> <C>
Net Income $2,406,607 $2,450,367
Unrealized gain(loss) on securities
available for sale, net of tax 339,267 (899,878)
$2,745,874 $1,550,489
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
The following discussion and analysis is presented to assist in the
understanding and evaluation of the Company's financial condition and results
of operations. It is intended to complement the unaudited financial
statements, footnotes, and supplemental financial data appearing elsewhere in
this Form 10-Q and should be read in conjunction therewith. Quarterly
comparisons reflect continued consistency of operations and do not reflect any
significant trends or events other than those noted in the comments.
Forward-looking statements have been made in this document that are subject to
risks and uncertainties. While the Company believes that these forward-looking
statements are based on reasonable assumptions, all such statements involve
risk and uncertainties that could cause actual results to differ materially
from these contemplated in this report.
<PAGE>
The assumptions, risks and uncertainties relating to the forward-looking
statements in this report include those described under the caption "Cautionary
Statements Regarding Forward Looking Information" in Part I of the Company's
Form 10-K for the year ended December 31, 1999 and, from time to time, in the
Company's other filings with the Securities and Exchange Commission.
BALANCE SHEET
At September 30, 2000, total assets were $319,055,878, an increase of
$21,693,794, or 7.3%, over September 30, 1999, while assets grew $11,372,290
over December 31, 1999. Gross loans were $228,509,937 at September 30, 2000,
growing $19,695,687 over third quarter 1999 and $10,914,077 over fourth
quarter 1999. Loan growth has come primarily from commercial and real estate
loans.
During the first nine months of 2000 total deposits increased $6,759,723.
Short-term borrowings increased $7,294,405. Within short-term borrowings, fed
funds purchased decreased $3,211,000 and repurchase agreements increased
$10,505,405. Long-term borrowings from FHLB advances decreased $3,800,000.
Table 1: Period End Loan Composition
<TABLE>
<CAPTION>
September 30 % of Dec. 31 % of
2000 total 1999 total
<S> <C> <C> <C> <C>
Commercial and financial $43,662,030 19.11% $43,360,501 19.93%
Construction Loans 3,999,227 1.75% 4,136,740 1.90%
Agricultural 41,559,145 18.19% 40,279,168 18.51%
Real estate 127,781,150 55.91% 118,640,913 54.52%
Installment 11,267,598 4.93% 10,931,389 5.03%
Lease financing 240,787 0.11% 247,149 0.11%
Total loans (including loans held for sale) $228,509,937 100.00% $217,595,860 100.00%
</TABLE>
The loan portfolio is the Company's primary asset subject to credit risk. The
Company's process for monitoring credit risks includes weekly analysis of loan
quality, 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.
The decision of management to place loans in this category does not necessarily
mean that the Company expects losses to occur but that management recognizes
that a higher degree of risk is associated with these loans.
<PAGE>
The aggregate amount of non-performing loans decreased $441,786 to $1,924,399
at September 30, 2000 from $2,366,185 at September 30, 1999. The majority of
the decrease is due to a large commercial loan and several non-performing real
estate and agricultural loans taken off nonaccrual status. During the third
quarter 2000 non-performing loans increased $390,711 from June 30, 2000. The
increase is due to a commercial loan that has been in and out of non-accrual
status throughout the year. Non-performing loans 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.
Table 2: Allowance for Credit Losses and Nonperforming Assets
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 2000 September 30, 1999
<S> <C> <C>
Allowance for credit losses at
beginning of period $2,285,675 $2,159,145
Provision Charged to Operating Expense 280,000 120,000
Recoveries on Loans 69,368 57,253
Loans Charged off (156,744) (71,856)
Allowance for losses at end of period $2,478,299 $2,264,542
NONPERFORMING ASSETS
Nonaccrual loans $1,605,893 $1,952,518
Accruing loans past due
90 days or more 20,838 23,037
Restructured loans 297,668 390,630
Total non-performing
loans 1,924,399 2,366,185
Other real estate owned 101,235 158,725
Total nonperforming assets $2,025,634 $2,524,910
</TABLE>
Management is not aware of any additional loans that represent material credits
or of any information that causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
LIQUIDITY
Liquidity refers to the ability of the Company to generate adequate amounts of
cash to meet the Company's need for cash. The Company manages its liquidity to
provide adequate funds to support borrowing needs 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.
Deposit growth is the primary source of liquidity. Deposits as a percentage of
total funding sources were 82.7% for the first nine months of 2000 and 84.2%
for the first nine months of 1999. Wholesale funding represents the balance of
the Company's total funding needs. The primary wholesale funding sources
utilized are Federal Home Loan Bank advances, federal funds purchased,
repurchase agreements from a base of individuals, businesses, and public
entities, and brokered CDs.
<PAGE>
CAPITAL RESOURCES
Stockholders' equity at September 30, 2000 increased to $29,033,126 compared to
$28,498,637 at December 31, 1999. The net increase in equity was composed of:
net income for the first nine months of $2,406,607, cash dividends of
$1,813,021, stock options of $12,598 and stock repurchases of $410,962.
Stockholders' equity included unrealized gains (losses), net of tax, on
securities available for sale, net of their tax effect of ($461,258) at
September 30, 2000 compared to $(800,525) at December 31, 1999.
Cash dividends of $0.20 per share were paid in the third quarter of 2000,
representing a payout ratio of 43.3% for the quarter.
The adequacy of the Company's capital is regularly reviewed to ensure
sufficient capital is available for current and future needs and is in
compliance with regulatory guidelines. As of September 30, 2000 the Company's
tier 1 risk-based capital ratio, total risk-based capital, and tier 1 leverage
ratio were well in excess of regulatory minimums.
Table 3: Capital Ratios
<TABLE>
<CAPTION>
Tier 1 Capital Total Capital
<S> <C> <C>
September 30, 2000 11.83% 12.89%
September 30, 1999 12.13% 13.16%
Regulatory minimum requirements
for well capitalized 4.00% 8.00%
</TABLE>
RESULTS OF OPERATIONS
Net income for the nine months ended September 30, 2000 totaled $2,406,607 or
$1.33 for basic and diluted earnings per share. Comparatively, net income for
the nine months ended September 30, 1999 was $2,450,367, or $1.34 for basic and
diluted earnings per share. Operating results for the third quarter 2000
generated an annualized return on average assets of 1.05% and an annualized
return on average equity of 11.76%, compared to 1.20% and 12.46% for the
comparable period in 1999. The net interest margin for third quarter 2000 was
3.93 % compared to 4.48% for the comparable quarter in 1999.
<PAGE>
Table 4: Summary Results of Operations
<TABLE>
<CAPTION>
(Dollars in thousands, 2000 1999
except per share amounts) Third Second First Fourth Third
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS:
Earnings and Dividends:
Net interest income $2,789 $2,851 $2,858 $2,943 $2,871
Provision for credit losses 120 80 80 60 0
Other noninterest income 620 555 546 512 479
Other noninterest expense 2,119 2,178 2,293 2,042 2,179
Net income 837 821 749 898 872
Per common share
Basic and diluted earnings 0.46 0.45 0.41 0.49 0.48
Dividends declared 0.20 0.60 0.20 0.20 0.20
Book Value 16.04 15.56 15.68 15.62 15.52
Average common shares (000's) 1,814 1,814 1,814 1,827 1,827
Dividend payout ratio 43.3% 132.3% 48.7% 40.7% 41.8%
Balance Sheet Summary:
At quarter end:
Loans net of unearned income 228,236 228,225 221,371 217,546 208,815
Assets 319,056 314,909 309,235 307,684 297,362
Deposits 236,930 231,631 232,137 230,170 223,894
Shareholders equity 29,033 28,172 28,368 28,499 28,300
Average balances:
Loans net of unearned income 228,881 225,681 218,564 214,263 204,237
Assets 317,557 313,327 307,118 302,851 290,405
Deposits 239,907 230,378 231,901 228,052 224,470
Shareholders equity 28,469 27,979 28,265 28,346 27,989
Performance Ratios:
Return on average assets 1.05% 1.05% 0.98% 1.19% 1.20%
Return on average common equity 11.76% 11.74% 10.60% 12.67% 12.46%
Tangible Equity to assets 8.40% 8.34% 8.57% 8.70% 8.92%
Total risk-based capital 12.89% 12.67% 12.82% 12.93% 13.16%
Net loan charge-offs as a percentage
of average loans 0.03% 0.006% 0.004% 0.02% 0.01%
Nonperforming assets as a percentage
of loans and other real estate 0.70% 0.54% 0.29% 0.63% 0.93%
Net interest margin 3.93% 4.07% 4.17% 4.47% 4.48%
Efficiency ratio(1) 59.91% 61.62% 64.97% 57.08% 62.79%
Fee revenue as a percentage of
average assets 0.17% 0.17% 0.17% 0.16% 0.16%
Stock Price Information:
High $26.00 $27.00 $27.50 $27.50 $27.38
Low 25.75 27.00 27.00 27.50 27.38
Market value at quarter end (2) 25.75 27.00 27.00 27.50 27.38
<FN>
(1) The yield on tax-exempt loans and securities is computed on a tax-
equivalent basis using a tax rate of 34% for all periods presented.
(2) Market value at quarter end represents the bid price. The quotations
reflect prices, without retail mark-up, markdown or commissions, and may not
necessarily represent actual transactions.
</TABLE>
<PAGE>
NET INTEREST INCOME
Net interest income is the most significant component of earnings. Net interest
income for the three months ended September 30, 2000 was $2,789,375.
Comparatively, net interest income for the third quarter 1999 was $2,871,003.
Fully taxable equivalent net interest income for the third quarter 2000
decreased $73,674 to $2,916,521 from third quarter 1999. Average earning
assets grew $29 million from the third quarter 1999. The net interest margin
for September 30, 2000 was 3.93% or 55 basis points less than the 4.48% margin
in the third quarter 1999. The net interest margin continues to decline due to
more short-term deposits than variable rate assets. Yields on earning assets
increased to 8.50% compared to 8.17% in 1999. However, the costs for interest
bearing deposits increased to 5.32% from 4.34%. The Company is trying to
position more variable assets to reprice with the market to maintain or
increase the net interest margin.
PROVISION FOR CREDIT LOSSES
Management determines the adequacy of the provision 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
uncollectable, these amounts are promptly charged off against the allowance.
The provision for credit losses was $280,000 for the nine months ended
September 30, 2000, and $120,000 for the nine months ended September 30, 1999.
Net charge-offs as a percentage of average loans outstanding were .039% and
.007% during the nine months ended September 30, 2000 and 1999, respectively.
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 adequacy of the reserve and the provision for credit losses
is consistent with the composition of the loan portfolio and recent credit
quality history.
NON-INTEREST INCOME
Non-interest income increased 7.9% to $1,719,916 during the nine months ended
September 30, 2000, from the comparable nine months ended September 30, 1999.
There were no gains or losses on securities during the nine months ended
September 30, 2000 and 1999.
Service fees on deposit accounts increased $63,110 for the nine months ended
September 30, 2000 from September 30, 1999. Trust service fees increased
$61,724 due to the continuing growth in trust business volume and assets
managed by the Company's Trust Department. Investment product sales increased
$7,715.
<PAGE>
Table 5: Noninterest Income
<TABLE>
<CAPTION>
September September
2000 1999 Change Change
<S> <C> <C> <C> <C>
Service Fees $583,837 $520,727 $63,110 12.12%
Trust Service Fees 481,844 420,120 61,724 14.69%
Investment product commissions 194,559 186,844 7,715 4.13%
Other operating income 459,676 466,650 (6,974) -1.49%
Total noninterest income $1,719,916 $1,594,341 $125,575 7.88%
</TABLE>
NON-INTEREST EXPENSE
Non-interest expenses increased $88,970 to $6,589,253 for the nine months ended
September 30, 2000, from $6,500,283 for the nine months ended September 30,
1999. The Company continues to utilize its current equipment to increase
productivity and profits and has not made large capital expenditures in 2000.
Software maintenance contracts and software amortization are increasing the
data processing and information systems expense.
Table 6: Noninterest Expense
<TABLE>
<CAPTION>
September September
2000 1999 Change Change
<S> <C> <C> <C> <C>
Salaries and employee benefits $3,493,565 $3,419,338 $74,227 2.17%
Occupancy 983,107 1,041,202 (58,095) -5.58%
Data Processing & Information Systems 347,656 318,533 29,123 9.14%
Goodwill & Core Deposit Intang Amortization 254,825 242,395 12,430 5.13%
Other operating 1,510,100 1,478,815 31,285 2.12%
Total noninterest expense $6,589,253 $6,500,283 $88,970 1.37%
</TABLE>
ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FASB133). FASB 133 establishes new accounting and
reporting requirements for derivative instruments, including certain derivative
instruments embedded in other contracts and hedging activities. The standard
requires all derivatives to be measured at fair value and recognized as either
assets or liabilities in the statement of condition. Under certain conditions,
a derivative may be specifically designated as a hedge. Accounting for the
changes in the fair value of a derivative depends on the intended use of the
derivative and the resulting designation. Adoption of the standard is required
for the Company's December 31, 2001 financial statements with early adoption
allowed as of the beginning of any quarter after June 30, 1998. Management is
in the process of assessing the impact and period of adoption of the standard.
Adoption is not expected to result in material financial impact.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
There was no material change in the information provided in response to Item 7A
of the Company's Form 10-K for the year ended December 31, 1999.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits required by Item 601 of Regulation S-K
The following exhibits are filed as part of this quarterly report on Form 10-Q.
4.1 Articles of Incorporation, as amended (incorporated by reference to
Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995)
4.2 Bylaws, as amended September 20, 1995 (incorporated by reference to
Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995)
10.1* Mid-Wisconsin Financial Services, Inc. 1991 Employee Stock Option Plan
(incorporated by reference to Exhibit 10(b) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995)
10.2* Mid-Wisconsin Financial Services, Inc. Directors' Deferred Compensation
Plan as last amended July 19, 2000
10.3* Executive Officer Employment and Severance Agreement (incorporated by
reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997)
10.4* Mid-Wisconsin Bank Senior Officer Incentive Bonus Plan (incorporated by
reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997)
10.5* Director Retirement Benefit Policy (incorporated by reference to Exhibit
10(e) to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999)
10.6* 1999 TeamBank Bonus Plan (incorporated by reference to Exhibit 10(f) to
the Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1999)
<PAGE>
10.7 Mid-Wisconsin Financial Services, Inc. Employee Stock Purchase Plan
(incorporated by reference to exhibit 10.7 to the Registrant's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2000)
10.8* Mid-Wisconsin Financial Services, Inc. 1999 Stock Option Plan
(incorporated by reference to Exhibit 10.8 to the Registrant's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2000)
22.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21)
to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995)
27.1 Financial Data Schedule (electronic filing only)
*Denotes Executive Compensation Plans and Arrangements
(b) Reports on Form 8-K.
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 14, 2000 GENE C. KNOLL
Gene C. Knoll, President
(Principal Executive Officer)
Date November 14, 2000 RHONDA R. KELLEY
Rhonda R. Kelley, Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
to
FORM 10-Q
of
MID-WISCONSIN FINANCIAL SERVICES, INC.
For the period ended September 30, 2000
Pursuant to Section 102(d), Regulation S-T
(17 C.F.R. <section>232.102(d))
Exhibit 10 .2 - Mid-Wisconsin Financial Services, Inc. Directors' Deferred
Compensation Plan as last amended July 19, 2000
Exhibit 27 - Financial Data Schedule
<PAGE>
EXHIBIT 10.2
MID-WISCONSIN FINANCIAL SERVICES, INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
1. Amendment and Restatement of Plan. Mid-Wisconsin Financial Services, Inc.
("Mid-Wisconsin") hereby amends and restates the Mid-Wisconsin Financial
Services, Inc. Directors' Deferred Compensation Plan (the "Plan") effective as
of December 15, 1999.
2. Purpose. The purpose of the Plan is to provide an alternative method of
compensating members (the "Directors") of the boards of directors of Mid-
Wisconsin, Mid-Wisconsin Bank, and each other Subsidiary which has been
designated by Mid-Wisconsin to participate in the Plan, whether or not they
otherwise receive compensation as employees, in order to aid Mid-Wisconsin and
its Subsidiaries in attracting and retaining as Directors persons whose
abilities, experience, and judgment can contribute to the continued progress of
Mid-Wisconsin and its Subsidiaries and to provide a mechanism by which the
interests of the Directors and the shareholders of Mid-Wisconsin can be more
closely aligned.
3. Definitions. As used in this Plan, the following terms shall have the
meaning set forth in this paragraph 3:
(a) "Accounts" means, as of any date after December 31, 1999, such of a
Participant's Deferred Cash Account and Deferred Stock Account which have an
undistributed balance.
(b) "Beneficiary" means such person or persons, or organization or
organizations, as the Participant from time to time may designate by a written
designation filed with Mid-Wisconsin during the Participant's life. Any
amounts payable hereunder to a Participant's Beneficiary shall be paid in such
proportions and subject to such trusts, powers, and conditions as the
Participant may provide in such designation. Each such designation, unless
otherwise expressly provided therein, may be revoked by the Participant by a
written revocation filed with Mid-Wisconsin during the Participant's life. If
more than one such designation shall be filed by a Participant with Mid-
Wisconsin, the last designation so filed shall control over any revocable
designation filed prior to such filing. To the extent that any amounts payable
under this Plan to a Participant's Beneficiary are not effectively disposed of
pursuant to the above provisions of this paragraph 3(b), either because no
designation was in effect at the Participant's death or because a designation
in effect at the Participant's death failed to dispose of such amounts in their
entirety, then for purposes of this Plan, the Participant's "Beneficiary" as to
such undisposed of amounts shall be the Participant's estate.
(c) "Board" means the Board of Directors of Mid-Wisconsin.
<PAGE>
(d) "Change in Control" means the happening of any of the following events:
(i) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 25% or more of either (A) the then outstanding shares of common stock of
Mid-Wisconsin (the "Outstanding Company Common Stock") or (B) the combined
voting power of the then outstanding voting securities of Mid-Wisconsin
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
paragraph (i), the following acquisitions shall not constitute a Change in
Control: (1) any acquisition directly from Mid-Wisconsin other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from Mid-Wisconsin,
(2) any acquisition by Mid-Wisconsin, (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by Mid-Wisconsin or any
entity controlled by Mid-Wisconsin, and (4) any acquisition pursuant to a
transaction which complies with clauses (A), (B), and (C) of paragraph (iii) of
this paragraph 3(d); or
(ii) A change in the composition of the Board such that the individuals
who, as of the Effective Date, constitute the Board (such Board shall be here
inafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, for purposes
of the Plan, that any individual who becomes a member of the Board subsequent
to the Effective Date whose election, or nomination for election by
Mid-Wisconsin's shareholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be deemed
to be and shall be considered as though such individual were a member of the
Incumbent Board, but provided, further, that any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board shall
not be so deemed or considered as a member of the Incumbent Board; or
(iii) Consummation of a reorganization, merger or consolidation, or sale
or other disposition of all or substantially all of the assets of Mid-Wisconsin
or the acquisition of the assets or securities of any other entity (a "Corporate
Transaction"); excluding, however, such a Corporate Transaction pursuant to
which (A) all or substantially all of the individuals and entities who are the
<PAGE>
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting
from such Corporate Transaction (including, without limitation, a corporation
which as a result of such transaction owns Mid-Wisconsin or all or
substantially all of Mid-Wisconsin's assets either directly or through one or
more subsidiaries) (the "Resulting Company") in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (other than Mid-Wisconsin,
any employee benefit plan (or related trust) of Mid-Wisconsin) will
beneficially own, directly or indirectly, 25% or more of, respectively, the
outstanding shares of common stock of the Resulting Company or the combined
voting power of the then outstanding voting securities of such Resulting
Company entitled to vote generally in the election of directors except to the
extent that such ownership existed with respect to Mid-Wisconsin prior to the
Corporate Transaction, and (C) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the board of
directors of the Resulting Company; or
(iv) The approval by the shareholders of Mid-Wisconsin of a complete
liquidation or dissolution of Mid-Wisconsin.
(e) "Committee and Meeting Fees" means that portion of the annual amount of
Directors' Fees which does not constitute a Director's Retainer, whether such
fees are paid for service on committees of the Board or a board of directors of
a Subsidiary, the attendance at meetings, the performance of other duties, or
otherwise.
(f) "Common Stock" means the common stock, $.10 par value, of Mid-Wisconsin.
(g) "Deferred Cash Account" means the account established to record a
Participant's Directors' Fees which have been credited in accordance with
paragraph 6.
(h) "Deferred Stock Account" means the account established to record a
Participant's Directors' Fees which have credited with "Stock Equivalent Units"
pursuant to paragraph 7.
<PAGE>
(i) "Directors' Fees" means all of the compensation to which a Director
would otherwise become entitled for services to be rendered as a Director, but
excluding any compensation to which such person is entitled to receive in his
capacity, if any, as an employee of Mid-Wisconsin or any Subsidiary.
(j) "Ending Balance" means the balance of a Participant's Deferred Cash
Account as determined pursuant to paragraph 8(b) following the Participant's
Termination of Service.
(k) "Fair Market Value" of a share of the Common Stock as of any date means
the price per share as determined in accordance with the following:
(i) Exchange. If the principal market for the Common Stock is a national
securities exchange, "Fair Market Value" means the average of the highest and
lowest reported sale prices of the Common Stock on the New York Stock Exchange
composite transaction tape if the Common Stock is then listed for trading on
such exchange, otherwise, the average of the highest and lowest reported sales
prices of the Common Stock in any transaction reported on the principal
exchange on which the Common Stock is then listed for trading.
(ii) Over-the-Counter. If the principal market for the Common Stock is an
over-the-counter market, "Fair Market Value" means the average of the highest
bid and lowest ask prices of the Common Stock reported in The Nasdaq National
Market, or The Nasdaq Small Cap Market, or if the Common Stock is not then
listed for trading in either of such markets, the average of the highest bid
and lowest ask prices of the Common Stock reported on the OTC Bulletin Board,
or, if prices for the Common Stock are not quoted on the OTC Bulletin Board,
the average of the highest bid and lowest ask prices reported on any other bona
fide over-the-counter stock market selected in good faith by the Committee.
(iii) Other Determination. If subparagraphs (i) and (ii) are not
applicable, or if the Board in its sole discretion does not believe that the
procedure set forth in subparagraphs (i) and (ii) is an accurate measurement
of the market value of the Common Stock because of the limited trading market
of the Common Stock, "fair market value" means such amount as may be determined
by the Board by whatever means or method as the Board, in the good faith
exercise of its discretion, shall at such time deem appropriate.
(iv) Date. If the date on which "Fair Market Value" is to be determined
is not a business day, or, if there shall be no reported transactions for such
<PAGE>
date, such determination shall be made on the next preceding business day for
which transactions were reported of the Common Stock on any day shall be deemed
to be the mean between the published high and low sale prices at which the
Common Stock is traded on a bona fide over-the-counter market or, if such stock
is not so traded on such day, on the next preceding day on which the Common
Stock was so traded.
(l) "Participant" means a Director who has an undistributed balance in one or
more Accounts.
(m) "Prime Rate" means, as of any date, the prime rate as published in The
Wall Street Journal for such date; provided, however, that if such rate is not
published on such date, the prime rate as published in The Wall Street Journal
on the first immediately preceding date.
(n) "Rate of Return" for a fiscal year of Mid-Wisconsin shall be determined in
accordance with generally accepted accounting principles and means a percentage
equal to (a) Mid-Wisconsin's return on equity as determined by dividing (i)
Mid-Wisconsin's net income for the applicable year by (ii) Mid-Wisconsin's
average daily equity for such year minus (b) 400 basis points.
(o) "Retainer" means that portion of the annual amount of Directors' Fees
which is designated by the Board (or the board of directors of a Subsidiary) as
a retainer payable to a Director irrespective of the attendance at meetings or
the performance of other duties.
(p) "Subsidiary" means Mid-Wisconsin Bank and each other subsidiary of Mid-
Wisconsin, including any subsidiary of the Bank.
(q) "Termination of Service" means the bona fide termination of a
Participant's services as a member of the Board and each other board of
directors of any Subsidiary which has been designated as a participating
Subsidiary.
4. Deferral of Directors' Fees.
(a) Retainer. No portion of a Retainer shall be paid in cash to a Director
from and after January 1, 2000. As of each date after December 31, 1999 on
which all or any portion of the Retainer would otherwise be paid in cash to a
Director, an amount equal to such payment shall be credited by Mid-Wisconsin or
the Subsidiary, as the case may be, to such Director's Deferred Stock Account.
<PAGE>
(b) Annual Election. Each Director may elect before January 25, 2000 with
respect to the year ended December 21, 2000 and before January 1 of any
subsequent fiscal year of Mid-Wisconsin to defer the payment of all or any
portion of the Director's Committee and Meeting Fees to which the Director
would otherwise become entitled for services to be rendered during each fiscal
year subsequent to the date on which such election is effective. An election
by a Director to defer Committee and Meeting Fees pursuant to this subparagraph
(b) shall be effective with respect to Committee and Meeting Fees earned during
the first fiscal year beginning after the date such election is made and during
each subsequent fiscal year until revoked or amended, provided, however, that
any such revocation or amendment shall only be effective with respect to fiscal
years beginning after the date written notice of such revocation or amendment
is first received by Mid-Wisconsin.
(c) New Director. Despite any other provision of subparagraph (b), if a
person first becomes a Director during a fiscal year, such Director may elect
to become a Participant with respect to all or any portion of the Committee and
Meeting Fees earned and payable (i) from and after the date on which he is
elected a Director if an election is filed on or before the date of such
election or (ii), if no election is filed pursuant to clause (i), on the first
day of the first month immediately following the month in such fiscal year in
which such election is made. An election by a Director to defer Committee and
Meeting Fees pursuant to this subparagraph (c) shall remain in effect until the
last day of the fiscal year in which such election is made and during each
subsequent fiscal year until revoked or amended, provided that any such
revocation or amendment shall only be effective with respect to fiscal years
beginning after the date written notice of such revocation or amendment is
first received by Mid-Wisconsin.
(d) Payment of Fees. Directors' Fees which are deferred pursuant to this
paragraph 4 shall be distributable in accordance with paragraph 8 hereof and
only after such Participant's Termination of Service. Any Committee and
Meeting Fees not subject to an election made in accordance with this paragraph
4 shall be paid to the Director in cash.
5. Accounting and Elections.
(a) Accounts. Mid-Wisconsin and each participating Subsidiary shall establish
a Deferred Cash Account and a Deferred Stock Account in the name of each of
their Directors.
(b) December 31, 1999 Balance. Each Director who does not incur a
Termination of Service prior to January 1, 2000 and who has an undistributed
balance in his account as of December 31, 1999 may file an election with Mid-
Wisconsin on or before December 31, 1999 which specifies the Account or
<PAGE>
Accounts (and the respective percentages thereof in the case two Accounts are
specified) to which the balance of his account as of December 31, 1999 shall be
credited as of January 1, 2000. In the event a Participant does not file an
election in accordance with the preceding sentence, the balance of such
Participant's account as of December 31, 1999 shall be credited to such
Participant's Deferred Cash Account on January 1, 2000.
(c) Election of Accounts. Each Participant who elects to defer Committee and
Meeting Fees shall make an election to have such deferred fees allocated to his
Deferred Cash Account or his Deferred Stock Account at the time his deferral
election is filed pursuant to paragraph 4. Each fiscal year, a Participant
may file a new election with Mid-Wisconsin specifying the Account or Accounts
to which all Committee and Meeting Fees deferred subsequent to the last day of
such fiscal year (and prior to the effective date of any subsequent election)
shall be allocated.
(d) Crediting Deferred Fees. As of each date on which payment of all or a
portion of a Retainer would otherwise be paid in cash, each Director's Deferred
Stock Account shall be credited with such amount by Mid-Wisconsin or the
Subsidiary, as the case may be. As of each date on which Mid-Wisconsin or a
Subsidiary shall make payment of Committee and Meeting Fees, the Committee and
Meeting Fees of each Participant who has a deferral election then in effect
shall, to the extent deferred, be credited by Mid-Wisconsin or the Subsidiary,
as the case may be, to the Participant's Deferred Cash Account or Deferred
Stock Account, as the case may be, in accordance with such Participant's most
recent effective election. No transfers shall be made between a Participants
Accounts.
(e) Annual Report. Within 90 days of the end of each fiscal year in which
this Plan is in effect, Mid-Wisconsin shall furnish each Participant a
statement of the year-end balance in such Participant's Deferred Cash Account
and Deferred Stock Account.
6. Deferred Cash Account. As of the last day of each fiscal year which begins
on or after January 1, 2000 (the "Current Fiscal Year") there shall be
computed, with respect to the Deferred Cash Account of each Participant who has
not then incurred a Termination of Service, interest on the average daily
balance in the Participant's Account (assuming that the Committee and Meeting
Fees to be deferred during the year were credited to his Account as of the date
on which they would have otherwise been paid to the Participant in cash) at a
rate per annum equal to the Rate of Return for the fiscal year ending
immediately prior to the Current Fiscal Year. The amount so determined shall
be credited to and become part of the balance of such Account as of the first
day of the next fiscal year.
<PAGE>
7. Deferred Stock Account.
(a) Crediting Director Fees. As of each date on which the Directors' Fees
otherwise payable to such Participant in cash are credited to a Participant's
Deferred Stock Account, the amount of such deferred Directors' Fees shall be
converted into that number of "Stock Equivalent Units" (rounded to the nearest
one-ten thousandth of a unit) determined by dividing the amount of such
Directors' Fees by an amount equal to the per share Fair Market Value of the
Common Stock on such date.
(b) Dividends. On each date on which a dividend payable in cash or property
is paid on the Common Stock, there shall be credited to each Deferred Stock
Account such number of additional Stock Equivalent Units as are determined by
dividing (i) the amount of the cash or other dividend which would have then
been payable on the number of shares of Common Stock equal to the number of
Stock Equivalent Units (including fractional shares) then represented in such
Account by (ii) an amount equal to the per share Fair Market Value of the
Common Stock on such date. If the date on which a dividend is paid on the
Common Stock is the same date as of which Directors' Fees are to be converted
into Stock Equivalent Units, the dividend equivalent to be credited to such
Account under this paragraph 7 shall be determined after giving effect to the
conversion of the credit balance in such Account into Stock Equivalent Units.
(c) Recording of Stock Equivalent Units. The number of Stock Equivalent Units
credited to a Participant's Deferred Stock Account shall be adjusted (to the
nearest one-ten thousandth of a unit) to reflect any change in the Common Stock
resulting from a stock dividend, stock split-up, combination, recapitalization
or exchange of shares, or the like.
8. Distribution of Deferred Amounts.
(a) Conversion of Deferred Stock Accounts. As of the last day of the month in
which a Participant's Termination of Service occurs, the number of Stock
Equivalent Units then credited to the Participant's Deferred Stock Account
shall be determined after giving effect to all other adjustments required by
this Plan and such Stock Equivalent Units shall be converted into a cash
equivalent by multiplying the number of such units by an amount equal to the
per share Fair Market Value of the Common Stock on such date and, as of such
date, the Participant's Deferred Stock Account shall be debited by the number
of Stock Equivalent Units so transferred and the Participant's Deferred Cash
Account credited by the amount of cash equivalent so determined.
<PAGE>
(b) Determination of Ending Balance. As of the last day of the month in
which a Participant's Termination of Service occurs, the balance of the
Participant's Deferred Cash Account shall be determined by adding to the value
of his Deferred Cash Account as of the last day of the immediately preceding
fiscal year (i) interest on such value computed at an annual rate equal to the
Rate of Return for the number of days of the fiscal year elapsed as of the last
day of the month in which the Termination of Service occurred, (ii) all
Committee and Meeting Fees deferred by such Participant during the fiscal year
in which the Termination of Service occurred, (iii) interest, as determined in
clause (i) of this sentence, on the average daily balance of the Committee and
Meeting Fees described in clause (ii) (assuming that the Directors' Fees
deferred during the year were credited to his Account as of the date on which
they would have otherwise been paid to the Participant in cash), and (iv) the
value of the amount credited to such Deferred Cash Account pursuant to
paragraph 8(a). The amount so determined pursuant to the preceding sentence,
when added to the most recent year-end balance credited pursuant to paragraph 7
as of the last day of the fiscal year immediately preceding the year in which
the Participant's Termination of Service occurs, shall constitute the Ending
Balance of the Participant's Deferred Cash Account (the "Ending Balance").
(c) Distributions. Distribution of a Participant's Deferred Cash Account
shall be made in cash in accordance with the following:
(i) Automatic Form of Payment. Payment of the Ending Balance of a
Participant whose Termination of Service occurs for a reason other than death
and prior to a Change in Control shall be made in a lump sum as of the last
day of the month in which the Participant's Termination of Service occurs
unless the Participant elects otherwise in accordance with the provisions of
paragraph 8(d).
(ii) Death Benefit. In the event that a Participant dies before receiving
payment of the entire amount to which such Participant is entitled under this
Plan, the unpaid balance shall be paid in a lump sum or in installments, as
specified in the Participant's most recent election in accordance with the
provisions of paragraph 8(d), to the Beneficiary of such Participant. If a
Beneficiary dies after the Participant's death, but before receiving the entire
payment of the Beneficiary's portion of the amount to which the Participant was
entitled under this Plan, the portion of the unpaid balance which such
Beneficiary would have received if he had not died shall be paid in a lump sum
to such Beneficiary's estate unless the Participant designated otherwise.
(iii) Change in Control. In the event a Participant incurs a Termination
of Service in connection with a Change in Control, payment of the Ending Balance
shall be made in a lump sum as of the last day of the month in which the
Participant's Termination of Service occurs.
<PAGE>
(d) Elective Forms of Distribution. On or before August 15, 2000, but in no
event subsequent to his Termination of Service, a Participant may elect that
payment of the Participant's Ending Balance shall be made in one of the forms
specified in subparagraphs (d)(i), (ii), or (iii) below. Thereafter, a
Participant may elect, (1) before the first day of each fiscal year, (2)
subject to the automatic distribution provisions of subparagraph 8(c)(iii),
which shall govern the distribution of benefits in the event of Termination of
Service which occurs in connection with a Change in Control, and (3) prior to
his Termination of Service, that payment of the Participant's Ending Balance
shall be made in one of the forms specified in subparagraphs (d)(i), (ii), or
(iii) below.
(i) 60 Payments. In 60 monthly installments beginning on the last day
of any month (the "Initial Payment Date") which is not later than the last day
of the month in which the first anniversary of the Participant's Termination of
Service occurs in an amount which is determined in accordance with the
following:
(A) The monthly payment for the first twelve months shall be equal
to the amount necessary to amortize the repayment of a loan in an amount equal
to the Ending Balance in 60 equal monthly payments at the Prime Rate on the
last day of the month in which the Initial Payment Date occurs;
(B) As of the last day of the month in which each of the first,
second, third, and fourth anniversaries of the Initial Payment Date occurs,
the amount of each of the next twelve monthly payments shall be recalculated
and shall, for the twelve-month period beginning on each such anniversary, be
equal to the amount necessary to amortize the repayment of a loan in an amount
equal to the then unpaid Ending Balance in monthly payments over the Remaining
Payment Period at the Prime Rate on the last day
(ii) Lump Sum. In a lump sum, payable at any time on or before the third
anniversary of the Participant's Termination of Service; or
(iii) Other Installments. In one or more installments of equal or unequal
amounts payable at one or more times not more frequently than monthly;
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provided, however, the Ending Balance shall be fully distributed on or before
the third anniversary of the Participant's Termination of Service; and
provided, further, that the amount payable pursuant to any election to receive
equal payments shall be determined by the amount necessary to amortize the
repayment of a loan in an amount equal to the Participant's Ending Balance in
the number of payments so elected at the Prime Rate on the last day of the
month in which the Participant's Termination of Service occurred. The average
daily undistributed Ending Balance of a Participant who has elected a form of
distribution provided for in this subparagraph (d)(iii) which does not provide
for level payments shall continue to accrue interest at a rate equal to the
Prime Rate on the last day of the month in which the Participant's Termination
of Service occurred; provided, however, that if the distribution of the Ending
Balance shall not be complete on the first anniversary date of the
Participant's Termination of Service, the interest to be credited to such
Account after the first anniversary shall be at a rate equal to the Prime Rate
on the last day of the month in which such anniversary occurred.
Any election filed pursuant to the first sentence of this paragraph 8(d) shall
be effective as of the first day on which such election has been made. Any
election filed pursuant to the second sentence of this paragraph 8(d) shall be
effective as of the first day of the first fiscal year which begins next
subsequent to the fiscal year in which (i) such election has been made and (ii)
such election has been approved by the Board.
(e) Payments to Retirees as of December 31, 1999. Notwithstanding any other
provision of this amended and restated Plan, any Accounts which were in pay
status on December 31, 1999 shall continue to be paid in accordance with the
terms of the Plan as in effect on December 14, 1999.
(f) Modification of Payments. After a Participant's Termination of Service
occurs, neither such Participant or his Beneficiary shall have any right to
modify in any way the schedule for the distribution of amounts credited to such
Participant under this Plan as specified in the last election filed by the
Participant. However, upon a written request submitted to the Secretary of
Mid-Wisconsin by the person then entitled to receive payments under this Plan
(who may be the Participant or a Beneficiary), the Board may in its sole
discretion, accelerate the time for payment of any one or more installments
remaining unpaid.
9. Form for Elections. The Secretary of Mid-Wisconsin shall provide election
forms for use by Directors in making an initial election to become a
Participant and for making all other elections or designations permitted or
required by the Plan.
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10. Miscellaneous.
(a) No Assignment. Amounts payable hereunder may not be voluntarily or
involuntarily sold or assigned, and shall not be subject to any attachment,
levy or garnishment.
(b) No Right of Election. Participation in this Plan by any person shall not
confer upon such person any right to be nominated for re-election or re-elected
to the Board or the board of directors of a Subsidiary.
(c) Unsecured Claims. Neither Mid-Wisconsin nor any Subsidiary shall be
obligated to reserve or otherwise set aside funds for the payment of its
obligations hereunder, and the rights of any Participant under the Plan shall
be an unsecured claim against the general assets of Mid-Wisconsin or a
Subsidiary, whichever, and only to the extent it, established the Participant's
Accounts. All amounts due Participants or Beneficiaries under this Plan shall
be paid out of the general assets of Mid-Wisconsin or the Subsidiary,
whichever, and only to the extent it, established the Participant's Accounts
and in no event shall there be joint liability for the payment of an Account
established by another participating entity.
(d) Plan Administration. The Board shall have all powers necessary to
administer this Plan, including all powers of Plan interpretation, of
determining eligibility, and the effectiveness of elections, and of deciding
all other matters relating to the Plan; provided, however, that no Participant
shall take part in any discussion of, or vote with respect to, a matter of Plan
administration which is personal to him, and not of general applicability to
all Participants. All decisions of the Board shall be final as to any
Participant under this Plan.
(e) Amendment and Termination. The Board may amend this Plan in any and all
respects at any time (including, specifically, but not limited to, the rate at
which interest will be credited to any Account from and after the date of such
amendment), or from time to time, or may terminate this Plan at any time, but
any such amendment or termination shall be without prejudice to any
Participant's right to receive amounts previously credited to such Participant
under this Plan. A Subsidiary of Mid-Wisconsin may terminate its participation
in the Plan at any time by action of its Board of Directors, but such
termination shall be without prejudice to any Participant's right to receive
amounts previously credited to such Participant under this Plan.
