EX-99.1 CHARTER 2 pe123111a.htm EXHIBIT 99.1 - PRESS RELEASE Converted by EDGARwiz

Exhibit 99.1


Mid-Wisconsin Financial Services, Inc. Reports Fourth Quarter and full year 2011 Financial Results


February 16, 2012

Medford, Wisconsin


Mid-Wisconsin Financial Services, Inc. (OTCBB:  MWFS.OB), the holding company (Company) of Mid-Wisconsin Bank (Bank) headquartered in Medford, WI reported a net loss available to common shareholders of $3,373,000, or $2.04 per common share, for the quarter ended December 31, 2011.  This compares to net income of $80,000, or $0.05 per common share, for the quarter ended December 31, 2010.  For the year ended December 31, 2011, the Company reported a net loss available to common shareholders of $4,601,000, or $2.78 per common share.  This compares to net income available to common shareholders of $102,000, or $0.06 per common share, for the year ended December 31, 2010.


Asset quality continues to negatively impact the Companys financial results.  While the provision for loan losses was $900,000 in the fourth quarter of 2011 compared to $1,500,000 in the fourth quarter of 2010, the annual provision for loan loss remained relatively unchanged at $4,750,000 and $4,755,000 for the years ended December 31, 2011 and 2010, respectively.  Net charge-offs were $4,405,000 for the full year of 2011 compared to $3,241,000 in 2010.  Total nonperforming loans were $20,741,000 at December 31, 2011, an increase of $6,933,000 since year-end 2010.  Total nonperforming loans increased in 2011 mainly due to the addition of $6,276,000 in trouble debt restructured loans.  A loan is accounted for as a troubled debt restructuring when its original terms are restructured to increase the likelihood of long-term loan repayment and maximize its value to the Bank.  Restructured loans are classified as nonperforming loans, even if the borrower is paying according to the restructured terms.  Nonaccrual loans were $11,194,000 at December 31, 2011, a $346,000 decrease from year-end 2010.  At December 31, 2011, the allowance for loan losses was $9,816,000, or 2.98% of total loans, compared to $9,471,000, or 2.79% of total loans, at December 31, 2010.  Various regulatory agencies, as an integral part of their examination process, periodically review the Companys allowance for loan losses and level of provision for loan losses.  Such agencies may require the Company to make additional provisions for loan losses and require that certain loan balances be charged-off or downgraded into criticized loan categories when their credit evaluations differ from those of management at the time of their examination.

In addition, foreclosure/OREO expense increased in the fourth quarter of 2011 to $425,000 compared to $101,000 in the fourth quarter of 2010.  Fourth quarter 2011 foreclosure/OREO expense included $310,000 of valuation adjustments against the carrying cost of various foreclosed properties based on appraisals obtained during the quarter compared to $84,000 in such valuation adjustments in the fourth quarter of 2010.  For the full year of 2011, the Company expensed $628,000 of valuation adjustments on various foreclosed properties compared to $159,000 in 2010.  In total, the provision for loan losses and foreclosure/OREO expense were an aggregate $5,607,000 in 2011 compared to $4,998,000 in 2010.


Another major contributor to current year results was $2,911,000 valuation allowance taken in the fourth quarter of 2011, that was recognized in income tax expense to offset deferred tax assets.  The valuation allowance was taken to account for the possibility that some portion of the deferred tax asset will not be realized in the future.   A deferred tax asset is the amount of tax deductions the Company has available to be utilized on future income tax returns.  Upon the generation of future taxable income during the periods in which the tax deductions become deductible all or a portion of the established valuation allowance could be reversed.  At December 31, 2011 the balance of the deferred tax asset was $1,179,000.





At December 31, 2011, the Companys gross loan portfolio was $329,863,000, down $9,307,000, or 2.7%, from $339,170,000 at December 31, 2010.  Much of this decrease was the result of a lack of demand in our market areas for new loans and the regular pay downs of existing loans.  Total deposits of $381,620,000 at December 31, 2011 decreased $18,990,000 from December 31, 2010 due to $18,857,000 of brokered deposits and deposits acquired under a listing service that matured in 2011 and were not replaced.  On February 1, 2011, a suite of new consumer deposit products that pay rewards based on customers debit card activity was introduced and was a major contributor to the $10,344,000, or 17%, increase in noninterest-bearing demand deposits and $4,297,000, or 17%, increase in savings deposits experienced in 2011.


The net interest margin for the fourth quarter 2011 was 3.52%, an increase of 27 basis points from the third quarter of 2011, mainly due to the recovery of current year interest income on two nonaccrual loan relationships that were paid-off in-full during the fourth quarter.  The net interest margin for 2011 was 3.38%, compared to 3.46% in 2010.  The decrease in the net interest margin was primarily due to an elevated level of liquidity that was invested in lower-yielding assets, weak loan demand, high levels of nonaccrual loans, and the sale of a portion of the investment securities portfolio during the latter half of 2010.


Excluding the $556,000 gain on the sale of securities available-for-sale in the fourth quarter 2010, noninterest income for the quarter ended December 31, 2011 was $1,018,000 compared to $1,320,000 for the quarter ended December 31, 2010.  The decrease in quarterly noninterest income was led by the decrease in mortgage banking income, partially offset by an increase in wealth management fees.  During the fourth quarter of 2010, mortgage rates fell to low levels, prompting a wave of consumer refinancing activity greater than experienced in the fourth quarter 2011.   Service fees decreased $221,000 primarily due to a general decrease in the amount of NSF/overdraft fees resulting from regulatory changes under the Dodd-Frank Wall Street Reform and Consumer Protection Act.  


Excluding a legal settlement of $500,000 and a $55,000 loss on the sale of securities available-for-sale in 2011 and the $1,054,000 gain on sale of securities available-for-sale recognized in 2010, noninterest income for the year ended December 31, 2011 totaled $3,842,000, down $654,000, or 15%, compared to 2010.   Noninterest income continued to decline from declining service fees due to regulatory changes and decreased mortgage banking income from the sales of residential real estate loans into the secondary market.  Mortgage banking income did increase in the third and fourth quarters of 2011 due to declines in interest rates; however, even with the uptick in refinancing, the activity was not as high as 2010 levels.  


Noninterest expense for the fourth quarter 2011 increased $662,000 to $4,747,000, or 16%, compared to the fourth quarter of 2010, primarily due to $310,000 of valuation adjustments against the carrying cost of various foreclosed properties and increased legal and professional fees in 2011.  Noninterest expense during the full year of 2011 was $17,187,000, an increase of $1,382,000, or 9%, over 2010, due primarily to increased foreclosure/OREO expenses, collection expenses, FDIC costs, marketing and product expenses associated with a new suite of deposit products, loan servicing costs, and loss on sale of securities available-for-sale.  


At December 31, 2011 the Banks Tier One Capital Leverage ratio was 8.7% and Total Risk-Based capital ratio was 14.2%, compared to 9.0% and 13.9%, respectively, at December 31, 2010.  The Companys Tier One Capital Leverage ratio was 9.6% and Total Risk-Based capital ratio was 15.6%, compared to 10.0% and 15.5%, respectively, at December 31, 2010.  All ratios are above the regulatory guidelines stipulated in the Banks and Companys agreements with their primary regulators.


On December 1, 2011, Mr. James F. Warsaw, President and Chief Executive Officer, resigned from Mid-Wisconsin Financial Services, Inc. and its board of directors.  Mr. Warsaw also resigned from all positions held with the Companys related entities, including its wholly-owned bank subsidiary, Mid-Wisconsin Bank.  





On December 2, 2011, the Board appointed Mr. Scot G. Thompson, to serve as the Principal Executive Officer of the Company, as well as President of the Bank.  Mr. Thompson was also appointed to the board of directors of the Bank.   Mr. Thompson first joined the Bank in February 2007 and since that time has served as the Banks Executive Vice PresidentCommercial & Retail Banking.  Prior to joining the Bank, Mr. Thompson accumulated approximately 20 years experience in the financial services industry in various roles with other institutions.


As referenced in the Companys Quarterly Report on Form 10-Q for the period ended September 30, 2010, the Banks board of directors entered into a formal written agreement (the Agreement) on November 9, 2010 with the Federal Deposit Insurance Corporation (the FDIC) and the Wisconsin Department of Financial Institutions (the WDFI) to take certain actions and operate in compliance with the Agreements provisions during its term.  The Agreement was based on the results of an examination of the Bank that was performed as of December 31, 2009 during the second quarter of 2010 by the FDIC and WDFI.  As expected, the Company entered into a similar agreement with similar restrictions with its primary regulator, the Federal Reserve Bank of Minneapolis (the Federal Reserve), on May 10, 2011.  In consultation with the Federal Reserve on May 12, 2011, the Company exercised its rights to suspend dividends on the outstanding shares of preferred stock that is issued to the U.S. Department of the Treasury as a part of the Capital Purchase Program (the TARP Preferred Stock) and has elected to defer interest on the junior subordinated debentures (the Debentures) related to its trust preferred securities.  Consequently, the Company will not be able to pay dividends on its common stock until it has fully paid all accrued and unpaid divided on the Debentures and the TARP Preferred Stock which, as of December 31, 2011, were $146,000 and $477,000, respectively.  


Special Note Concerning Forward-Looking Statements

Statements made in this press release which are not purely historical are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, including any statements regarding descriptions of managements plans, objectives, or goals for future operations, products or services, and forecasts of its revenues, earnings, or other measures of performance. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements may be identified by the use of words such as believe, expect, anticipate, plan, estimate, should, will, intend, or similar expressions. Investors should note that many factors, some of which may be discussed in this press release, could affect the future financial results of the Company and could cause those results to differ materially from those expressed in forward-looking statements contained in this release. These factors, many of which are beyond the Companys control, include the following:

·

operating, legal and regulatory risks, including the effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations promulgated thereunder;

·

economic, political and competitive forces affecting our banking and wealth management businesses;

·

changes in monetary policy and general economic conditions, which may impact our net interest income;

·

the risk that our analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful; and

·

other factors discussed under Item 1A, Risk Factors in our Annual Report on Form 10-K for the period ended December 31, 2010 and elsewhere therein and herein, and from time to time in our other filings with the Securities and Exchange Commission after the date of this release.

These factors should be considered in evaluating the forward-looking statements, and you should not place undue reliance on such statements. We specifically disclaim any obligation to update factors or to publicly announce the results of revisions to any of the forward-looking statements or comments included herein to reflect future events or developments.



Mid-Wisconsin Financial Services, Inc.









Consolidated Statements of Income (Loss) (Unaudited)








(dollars in thousands)



















For the Three Months Ended


For the Year Ended




December 31,

Quarter

December 31,

Year-to-Date

 

2011

2010

$ Change

% Change

2011

2010

$ Change

% Change

Interest Income









  Loans, including fees

$

4,810 

$

5,250 

($440)

(8%) 

$

18,910 

$

21,325 

($2,415)

(11%) 

  Securities:









     Taxable

583 

615 

(32)

(5%) 

2,563 

3,216 

(653)

(20%) 

     Tax-exempt

100 

89 

11 

12%

403 

366 

37 

10%

  Other

14 

64 

(50)

(78%) 

163 

155 

5%

Total interest income

5,507 

6,018 

(511)

(8%) 

22,039 

25,062 

(3,023)

(12%) 

Interest Expense









  Deposits

993 

1,430 

(437)

(31%) 

4,566 

6,402 

(1,836)

(29%) 

  Short-term borrowings

35 

27 

30%

122 

95 

27 

28%

  Long-term borrowings

391 

413 

(22)

(5%) 

1,614 

1,670 

(56)

(3%) 

  Subordinated debentures

48 

134 

(86)

(64%) 

183 

595 

(412)

(69%) 

Total interest expense

1,467 

2,004 

(537)

(27%) 

6,485 

8,762 

(2,277)

(26%) 

Net interest income

4,040 

4,014 

26 

1%

15,554 

16,300 

(746)

(5%) 

Provision for loan losses

900 

1,500 

(600)

(40%) 

4,750 

4,755 

(5)

0%

Net interest income after provision for loan losses

3,140 

2,514 

626 

25%

10,804 

11,545 

(741)

(6%) 

Noninterest Income









  Service fees

222 

287 

(65)

(23%) 

953 

1,174 

(221)

(19%) 

  Wealth management

324 

308 

16 

5%

1,287 

1,324 

(37)

(3%) 

  Mortgage banking

196 

407 

(211)

(52%) 

523 

955 

(432)

(45%) 

  Gain (loss) on sale of investments

556 

(556)

(100%) 

(55)

1,054 

(1,109)

(100%) 

  Other

276 

318 

(42)

(13%) 

1,579 

1,043 

536 

51%

Total noninterest income

1,018 

1,876 

(858)

(46%) 

4,287 

5,550 

(1,263)

(22%) 

Other-than-temporary impairment losses, net









  Total other-than-temporary impairment losses

0%

(426)

426 

100%

  Amount in other comprehensive income, before taxes

0%

14 

(14)

100%

  Total impairment

0%

(412)

412 

100%

Noninterest Expense









  Salaries and employee benefits

2,201 

2,163 

38 

2%

8,561 

8,537 

24 

0%

  Occupancy

427 

451 

(24)

(5%) 

1,769 

1,830 

(61)

(3%) 

  Data processing

166 

158 

5%

667 

651 

16 

2%

  Foreclosure/OREO expense

425 

101 

324 

NM

857 

243 

614 

253%

  Legal and professional fees

281 

149 

132 

89%

891 

677 

214 

32%

  FDIC expense

255 

339 

(84)

(25%) 

1,117 

1,036 

81 

8%

  Other

992 

724 

268 

37%

3,325 

2,831 

494 

17%

Total noninterest expense

4,747 

4,085 

662 

16%

17,187 

15,805 

1,382 

9%

Income (loss) before income taxes

(589)

305 

(894)

NM

(2,096)

878 

(2,974)

NM

Income tax (benefit) expense

2,622 

65 

2,557 

NM

1,861 

135 

1,726 

NM

Net income (loss)

($3,211)

$

240 

($3,451)

NM

($3,957)

$

743 

($4,700)

NM

Preferred stock dividends, discount and premium

(162)

(160)

(2)

1%

(644)

(641)

(3)

0%

Net income (loss) available to common equity

($3,373)

$

80 

($3,453)

NM

($4,601)

$

102 

($4,703)

NM

NM - Not Meaningful











Mid-Wisconsin Financial Services, Inc.





Financial Data (Unaudited)






For the Three Months Ended

For the Year Ended


December 31,

December 31,

PER SHARE DATA

2011

2010

2011

2010

Earnings (loss) per common share:





    Basic and diluted

($2.04) 

$

0.05  

($2.78) 

$

0.06  

Book value per common share

$

17.65  

$

19.85  

$

17.65  

$

19.85  

Weighted average common shares outstanding:





Basic and diluted

1,655,400  

1,651,065  

1,653,677  

1,649,730  

Stock Price Information:





   High Bid

$

5.00  

$

7.85  

$

10.00  

$

11.00  

   Low Bid

3.50  

7.80  

3.50  

6.00  

  Bid price at quarter end

3.50  

7.80  

3.50  

7.80  

KEY RATIOS





Return on average common equity

(10.39%) 

0.72%

(14.05%) 

0.23%

Average equity to average assets

8.76%

8.68%

8.70%

8.70%

Net interest margin (FTE) (1)

3.52%

3.38%

3.38%

3.46%

Net charge-offs to average loans

0.11%

0.23%

1.30%

0.91%

(1) The yield on tax-exempt loans and investment securities is computed on a tax-equivalent basis using a Federal tax rate of 34% and excluding disallowed interest expense


Mid-Wisconsin Financial Services, Inc.



Selected Asset Quality Information (Unaudited)



(dollars in thousands)






Allowance for loan losses

December 31, 2011

December 31, 2010

Beginning balance

$

9,471 

$

7,957 

Provision for loan losses

4,750 

4,755 

Charge-offs

(4,988)

(4,034)

Recoveries

583 

793 

Ending balance

$

9,816 

$

9,471 


Credit Quality

December 31, 2011

December 31, 2010

Nonaccrual loans



  Commercial

$

7,329  

$

8,368  

  Agricultural

134  

440  

  Real estate residential

3,726  

2,730  

  Installment

5  

2  

    Total nonaccrual loans

11,194  

11,540  

Impaired loans still accruing interest

1,985  

993  

Accruing loans past due 90 days or more

21  

10  

Restructured loans (accruing)

7,541  

1,265  

     Total nonperforming loans

20,741  

13,808  

Other real estate owned

4,404  

4,230  

Other repossessed assets

60  

0  

Investment security (Trust Preferred)

0  

136  

     Total nonperforming assets

$

25,205  

$

18,174  

Ratios



Nonperforming loans to total loans

6.29%

4.07%

Nonperforming assets to total loans plus OREO

7.54%

5.29%

Nonperforming assets to total assets

5.16%

3.57%

Allowance for loan losses to nonperforming loans

47%

69%

Allowance for loan losses to total loans at end of year

2.98%

2.79%



Mid-Wisconsin Financial Services, Inc.




Consolidated Balance Sheets (Unaudited)




(dollars in thousands)








 

December 31, 2011

December 31, 2010

Dollar

 Change

Assets



 

Cash and due from banks

$

18,278 

$

9,502 

$

8,776 

Interest-bearing deposits  in other financial institutions

10 

Federal funds sold and securities purchased under agreements to sell

13,072 

32,473 

(19,401)

Investment securities available-for-sale, at fair value

110,376 

101,310 

9,066 

Loans held for sale

2,163 

7,444 

(5,281)

Loans

329,863 

339,170 

(9,307)

Less:  Allowance for loan losses

(9,816)

(9,471)

(345)

Loans, net

320,047 

329,699 

(9,652)

Accrued interest receivable

1,640 

1,853 

(213)

Premises and equipment, net

7,943 

8,162 

(219)

Other investments, at cost

2,616 

2,616 

Deferred tax asset

1,179 

3,959 

(2,780)

Other assets

10,852 

12,056 

(1,204)

Total assets

$

488,176 

$

509,082 

($20,906)

Liabilities and Stockholders' Equity




Noninterest-bearing deposits

$

70,790 

$

60,446 

$

10,344 

Interest-bearing deposits

310,830 

340,164 

(29,334)

  Total deposits

381,620 

400,610 

(18,990)

Short-term borrowings

13,655 

9,512 

4,143 

Long-term borrowings

40,061 

42,561 

(2,500)

Subordinated debentures

10,310 

10,310 

Accrued interest payable

878 

992 

(114)

Accrued expenses and other liabilities

2,139 

2,127 

12 

Total liabilities

448,663 

466,112 

(17,449)

Total stockholders' equity

39,513 

42,970 

(3,457)

Total liabilities and stockholders' equity

$

488,176 

$

509,082 

($20,906)



Mid-Wisconsin Financial Services, Inc.





Interest Margin Analysis (Unaudited)






For the Three Months Ended

For the Year Ended


December 31,

December 31,


2011

2010

2011

2010

EARNING ASSETS





  Loans (1) (2)

5.70%

5.96%

5.61%

6.02%

  Investment securities:





    Taxable

2.42%

3.21%

2.74%

3.74%

    Tax-exempt (2)

4.69%

5.18%

4.83%

5.43%

    Federal funds sold

0.14%

0.14%

0.13%

0.15%

    Securities purchased under agreements to sell

0.00%

1.67%

1.34%

1.70%

    Other interest earning-assets

1.03%

1.05%

1.11%

1.49%

  Total earning assets

4.78%

5.03%

4.76%

5.29%

INTEREST-BEARING LIABILITIES





  Interest-bearing demand

0.44%

0.49%

0.46%

0.59%

  Savings deposits

0.78%

0.86%

0.77%

1.00%

  Time deposits

1.82%

2.36%

2.06%

2.56%

Short-term borrowings

0.99%

0.96%

1.00%

0.91%

Long-term borrowings

3.87%

3.84%

3.91%

3.92%

Subordinated debentures

1.85%

5.16%

1.77%

5.77%

Total interest-bearing liabilities

1.55%

1.97%

1.68%

2.16%

Net interest rate spread (1) (2)

3.23%

3.06%

3.08%

3.13%

Net interest rate margin (1) (2)

3.52%

3.38%

3.38%

3.46%

AVERAGE BALANCE SHEET (in thousands)





Loans

$

336,074  

$

350,559  

$

338,607  

$

355,575  

Interest bearing deposits

310,072  

339,007  

322,412  

342,664  

Assets

487,637  

507,098  

493,686  

505,597  

Stockholders' equity

42,726  

44,037  

42,973  

43,976  

(1)  Non-accrual loans are included in the daily average loan balances outstanding.

(2)  The yield on tax-exempt loans and investment securities is computed on a tax-equivalent basis using a federal tax rate of 34% and adjusted for the disallowance of interest expense



Mid-Wisconsin Financial Services, Inc.






Consolidated Statements of Income - Quarterly Trend (Unaudited)





(dollars in thousands, except per share data)












 

December 31, 2011

September 30, 2011

June 30, 2011

March 31, 2011

December 31, 2010

Interest income






  Loans, including fees

$

4,810 

$

4,598 

$

4,676 

$

4,826 

$

5,250 

  Securities






     Taxable

583 

651 

691 

638 

615 

     Tax-exempt

100 

102 

100 

101 

89 

  Other

14 

17 

52 

80 

64 

Total interest income

5,507 

5,368 

5,519 

5,645 

6,018 

Interest expense






  Deposits

993 

1,104 

1,183 

1,286 

1,430 

  Short-term borrowings

35 

35 

27 

25 

27 

  Long-term borrowings

391 

410 

408 

405 

413 

  Subordinated debentures

48 

45 

45 

45 

134 

Total interest expense

1,467 

1,594 

1,663 

1,761 

2,004 

Net interest income

4,040 

3,774 

3,856 

3,884 

4,014 

Provision for loan losses

900 

900 

1,900 

1,050 

1,500 

Net interest income after provision for loan losses

3,140 

2,874 

1,956 

2,834 

2,514 

Noninterest income






  Service fees

222 

226 

252 

253 

287 

  Wealth management

324 

317 

336 

310 

308 

  Mortgage banking

196 

94 

84 

149 

407 

  Gain (loss) on sale of investments

(55)

556 

  Other

276 

278 

260 

765 

318 

Total noninterest income

1,018 

915 

932 

1,422 

1,876 

Noninterest expense






  Salaries and employee benefits

2,201 

2,133 

2,096 

2,131 

2,163 

  Occupancy

427 

432 

426 

484 

451 

  Data processing

166 

167 

161 

173 

158 

  Foreclosure/OREO expenses

425 

261 

129 

42 

101 

  Legal and professional fees

281 

219 

224 

167 

149 

  FDIC expense

255 

263 

285 

314 

339 

  Other

992 

709 

816 

808 

724 

Total noninterest expense

4,747 

4,184 

4,137 

4,119 

4,085 

Income (loss) before income taxes

(589)

(395)

(1,249)

137 

305 

Income tax (benefit) expense

2,622 

(209)

(549)

(3)

65 

Net income (loss)

($3,211)

($186)

($700)

$

140 

$

240 

Preferred stock dividends, discount and premium

(162)

(160)

(162)

(160)

(160)

Net income (loss) available to common equity

($3,373)

($346)

($862)

($20)

$

80 

Earnings (Loss) Per Common Share:






  Basic and diluted

($2.04)

($0.21)

($0.52)

($0.01)

$

0.05