EX-99.1 CHARTER 2 pe042312a.htm 99.1 - PRESS RELEASE Converted by EDGARwiz

Exhibit 99.1


Mid-Wisconsin Financial Services, Inc. Reports First Quarter 2012 Financial Results

April 23, 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 $141,000, or $0.09 per common share, for the quarter ended March 31, 2012.  This compares to a net loss of $20,000, or $0.01 per common share, for the quarter ended March 31, 2011.  Excluding a one-time $500,000 legal settlement received in the first quarter of 2011, the net loss available to common shareholders would have been $320,000, or $0.19 per common share, after taxes, for that period.

Credit metrics have improved during the first quarter of 2012.  Nonaccrual loans were $9,804,000 at March 31, 2012, a decrease of $1,390,000, or 12%, from December 31, 2011, representing the lowest level in 12 quarters.  The provision for loan losses was $750,000 in the first quarter of 2012 compared to $900,000 for the fourth quarter of 2011 and $1,050,000 in the first quarter of 2011.  Net charge-offs were $498,000 for the first quarter of 2012 compared to $366,000 for the fourth quarter of 2011 and $814,000 for the first quarter of 2011.  Total nonperforming loans were $9,817,000 at March 31, 2012 compared to $11,215,000 at December 31, 2011.  Total nonperforming loans decreased in the first three months of 2012 due to a decrease in nonaccrual loans, primarily as a result of a large loan relationship that was refinanced at another financial institution.  At March 31, 2012, the allowance for loan losses was $10,068,000, or 3.09% of total loans, compared to $9,816,000, or 2.98% of total loans, at December 31, 2011.  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.

At March 31, 2012, the Companys gross loan portfolio was $326,001,000, down $3,862,000, or 1%, from $329,863,000 at December 31, 2011.  Much of this decrease was the result of a continued lack of demand in our market areas and  the regular pay downs of existing loans, as well as the banks current strategic focus on improving credit quality rather than loan growth at this time.  Total deposits of $376,888,000 at March 31, 2012 decreased $4,732,000 from December 31, 2011 primarily due to the seasonality of noninterest-bearing business deposits.

The net interest margin for the first quarter of 2012 was 3.38%, compared to 3.36% for the first quarter of 2011.  Yields on earning assets have compressed year over year as elevated levels of liquidity have been reinvested in lower-yielding investment securities as quality loan demand has been weak and levels of nonaccrual loans remain high.  The decline in yields was more than offset by the decline in the cost of interest-bearing deposits due to the reduction in demand, savings, and time deposits interest rates.

Noninterest income for the quarter ended March 31, 2012 was $985,000.  Excluding a legal settlement of $500,000 and a $55,000 loss on the sale of securities available-for-sale in the first quarter of 2011, noninterest income was $977,000 for the quarter ended March 31, 2011.  The increase in comparable quarterly noninterest income of $8,000 was a result of an increase in mortgage banking income from the sales of residential real estate loans into the secondary market, and an increase in other income from the recovery of loan fees from charged-off loans.  These increases were offset in part by a decline in service fees of $64,000, 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.  

 

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For the first quarter of 2012, noninterest expense, excluding foreclosure/OREO expense, decreased $350,000, or 9%, to $3,727,000 compared to the first quarter of 2011, primarily due to decreased salaries and employee benefits, occupancy expenses, data processing costs, FDIC expense and marketing expenses, partially offset by a $22,000 increase in legal and professional fees.  Foreclosure/OREO expense was $237,000 in the first quarter of 2012 compared to $42,000 in the first quarter of 2011, primarily due to valuation adjustments on OREO properties and net losses on the sales of various foreclosed OREO properties.  First quarter 2012 foreclosure/OREO expense included $80,000 of valuation adjustments against the carrying cost of various foreclosed properties based on appraisals obtained during the quarter compared to $6,000 in such valuation adjustments in the first quarter of 2011.  Net losses on the sale of foreclosed properties were $73,000 for the quarter ended March 31, 2012 compared to net gains on the sale of foreclosed properties of $51,000 for the quarter ended March 31, 2011.

At March 31, 2012 the Banks Tier One Capital Leverage ratio was 8.8% and Total Risk-Based capital ratio was 14.5%, compared to 8.7% and 14.2%, respectively, at December 31, 2011.  The Companys Tier One Capital Leverage ratio was 9.8% and Total Risk-Based capital ratio was 15.9%, compared to 9.6% and 15.6%, respectively, at December 31, 2011.  All ratios are above the regulatory guidelines stipulated in the Banks and Companys agreements with their primary regulators.


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 was 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 dividends on the Debentures and the TARP Preferred Stock which, as of March 31, 2012, were $197,000 and $628,000, 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, 2011 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.

 

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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 Operations (Unaudited)

(dollars in thousands)


 






For the Three Months Ended

March 31,

 

2012

2011

$ Change

% Change

Interest Income




 

  Loans, including fees

$

4,453 

$

4,826 

($373)

(8%) 

  Securities:





     Taxable

549 

638 

(89)

(14%) 

     Tax-exempt

96 

101 

(5)

(5%) 

  Other

15 

80 

(65)

(81%) 

Total interest income

5,113 

5,645 

(532)

(9%) 

Interest Expense





  Deposits

895 

1,286 

(391)

(30%) 

  Short-term borrowings

35 

25 

10 

40%

  Long-term borrowings

382 

405 

(23)

(6%) 

  Subordinated debentures

51 

45 

13%

Total interest expense

1,363 

1,761 

(398)

(23%) 

Net interest income

3,750 

3,884 

(134)

(3%) 

Provision for loan losses

750 

1,050 

(300)

(29%) 

Net interest income after provision for loan losses

3,000 

2,834 

166 

6%

Noninterest Income





  Service fees

189 

253 

(64)

(25%) 

  Wealth management

309 

310 

(1)

0%

  Mortgage banking

176 

149 

27 

18%

  Loss on sale of investments

(55)

55 

(100%) 

  Other

311 

765 

(454)

(59%) 

Total noninterest income

985 

1,422 

(437)

(31%) 

Noninterest Expense





  Salaries and employee benefits

1,998 

2,131 

(133)

(6%) 

  Occupancy

434 

484 

(50)

(10%) 

  Data processing

154 

173 

(19)

(11%) 

  Foreclosure/OREO expense

237 

42 

195 

464%

  Legal and professional fees

189 

167 

22 

13%

  FDIC expense

257 

314 

(57)

(18%) 

  Other

695 

808 

(113)

(14%) 

Total noninterest expense

3,964 

4,119 

(155)

(4%) 

Income before income taxes

21 

137 

(116)

(85%) 

Income tax benefit

(3)

(100%) 

Net income

$

21 

$

140 

($119)

(85%) 

Preferred stock dividends, discount and premium

(162)

(160)

(2)

(1%) 

Net loss available to common equity

($141)

($20)

($121)

605%

 

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Mid-Wisconsin Financial Services, Inc.

 

Financial Data (Unaudited)

 


For the Three Months Ended

 

March 31,

 

PER SHARE DATA

2012

2011

 

Loss per common share:




 

    Basic and diluted

($0.09) 

($0.01) 


 

Book value per common share

$

17.50  

$

19.81  


 

Weighted average common shares outstanding:




 

Basic and diluted

1,657,119  

1,652,189  


 

Stock Price Information:




 

   High Bid

$

3.50  

$

8.05  


 

   Low Bid

3.10  

7.80  


 

  Bid price at quarter end

3.10  

8.00  


 

KEY RATIOS




 

Return on average common equity

(1.94%) 

(0.25%) 


 

Average equity to average assets

8.22%

8.58%


 

Net interest margin (FTE) (1)

3.38%

3.36%


 

Net charge-offs to average loans

0.15%

0.24%


 

(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.

 



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Mid-Wisconsin Financial Services, Inc.

Selected Asset Quality Information (Unaudited)

(dollars in thousands)


Allowance for loan losses

March 31, 2012

December 31, 2011

Beginning balance

$

9,816 

$

9,471 

Provision for loan losses

750 

4,750 

Charge-offs

(652)

(4,988)

Recoveries

154 

583 

Ending balance

$

10,068 

$

9,816 


Credit Quality

March 31, 2012

December 31, 2011

Nonaccrual loans



  Commercial

$

5,721  

$

7,329  

  Agricultural

322  

134  

  Real estate residential

3,751  

3,726  

  Installment

10  

5  

    Total nonaccrual loans

9,804  

11,194  

Accruing loans past due 90 days or more

13  

21  

     Total nonperforming loans

9,817  

11,215  

Other real estate owned

4,164  

4,404  

Other repossessed assets

0  

60  

     Total nonperforming assets (1)

$

13,981  

$

15,679  

Ratios



Nonperforming loans to total loans

3.01%

3.40%

Nonperforming assets to total loans plus OREO

4.23%

4.69%

Nonperforming assets to total assets

2.89%

3.21%

Allowance for loan losses to nonperforming loans

103%

88%

Allowance for loan losses to total loans at end of period

3.09%

2.98%


 

(1) Beginning in 2012, the Company changed its definition of nonperforming assets to include nonaccrual loans, loans past due 90 day or more and still accruing interest, other real estate owned and other repossessed assets.


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Mid-Wisconsin Financial Services, Inc.

Consolidated Balance Sheets

(dollars in thousands)



March 31, 2012

December 31, 2011


 

(Unaudited)

(Audited)

$ Change

Assets




Cash and due from banks

$

11,212 

$

18,278 

($7,066)

Interest-bearing deposits in other financial institutions

22,985 

10 

22,975 

Federal funds sold and securities purchased under agreements to sell

1,412 

13,072 

(11,660)

Investment securities available-for-sale, at fair value

107,658 

110,376 

(2,718)

Loans held for sale

612 

2,163 

(1,551)

Loans

326,001 

329,863 

(3,862)

Less:  Allowance for loan losses

(10,068)

(9,816)

(252)

Loans, net

315,933 

320,047 

(4,114)

Accrued interest receivable

1,790 

1,640 

150 

Premises and equipment, net

7,785 

7,943 

(158)

Other investments, at cost

2,151 

2,616 

(465)

Other real estate owned

4,164 

4,404 

(240)

Deferred tax asset, net of $2,911 valuation allowance

1,250 

1,179 

71 

Other assets

6,143 

6,448 

(305)

Total assets

$

483,095 

$

488,176 

($5,081)

Liabilities and Stockholders' Equity




Noninterest-bearing deposits

$

66,140 

$

70,790 

($4,650)

Interest-bearing deposits

310,748 

310,830 

(82)

Total deposits

376,888 

381,620 

(4,732)

Short-term borrowings

15,611 

13,655 

1,956 

Long-term borrowings

38,061 

40,061 

(2,000)

Subordinated debentures

10,310 

10,310 

Accrued interest payable

833 

878 

(45)

Accrued expenses and other liabilities

2,102 

2,139 

(37)

Total liabilities

443,805 

448,663 

(4,858)

Total stockholders' equity

39,290 

39,513 

(223)

Total liabilities and stockholders' equity

$

483,095 

$

488,176 

($5,081)



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Mid-Wisconsin Financial Services, Inc.

Interest Margin Analysis (Unaudited)

 


For the Three Months Ended

March 31,


2012

2011

EARNING ASSETS



  Loans (1) (2)

5.46%

5.78%

  Investment securities:



    Taxable

2.32%

2.89%

    Tax-exempt (2)

4.64%

4.99%

    Interest-bearing deposits in other financial institutions

0.17%

0.00%

    Federal funds sold

0.09%

0.14%

    Securities purchased under agreements to sell

0.00%

1.37%

    Other interest earning-assets

1.24%

1.01%

  Total earning assets

4.59%

4.86%

INTEREST-BEARING LIABILITIES



  Interest-bearing demand

0.43%

0.51%

  Savings deposits

0.73%

0.78%

  Time deposits

1.72%

2.26%

Short-term borrowings

0.91%

0.99%

Long-term borrowings

4.00%

3.86%

Subordinated debentures

1.99%

1.77%

Total interest-bearing liabilities

1.47%

1.79%

Net interest rate spread (1) (2)

3.12%

3.07%

Net interest rate margin (1) (2)

3.38%

3.36%

AVERAGE BALANCE SHEET (in thousands)



Loans

$

329,446  

$

339,737  

Interest-bearing deposits

309,274  

391,976  

Assets

479,679  

501,359  

Stockholders' equity

39,445  

43,019  

(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.


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Mid-Wisconsin Financial Services, Inc.

Consolidated Statements of Operations - Quarterly Trend (Unaudited)

(dollars in thousands, except per share data)







 

March 31, 2012

December 31, 2011

September 30, 2011

June 30, 2011

March 31, 2011

Interest income






  Loans, including fees

$

4,453 

$

4,810 

$

4,598 

$

4,676 

$

4,826 

  Securities






     Taxable

549 

583 

651 

691 

638 

     Tax-exempt

96 

100 

102 

100 

101 

  Other

15 

14 

17 

52 

80 

Total interest income

5,113 

5,507 

5,368 

5,519 

5,645 

Interest expense






  Deposits

895 

993 

1,104 

1,183 

1,286 

  Short-term borrowings

35 

35 

35 

27 

25 

  Long-term borrowings

382 

391 

410 

408 

405 

  Subordinated debentures

51 

48 

45 

45 

45 

Total interest expense

1,363 

1,467 

1,594 

1,663 

1,761 

Net interest income

3,750 

4,040 

3,774 

3,856 

3,884 

Provision for loan losses

750 

900 

900 

1,900 

1,050 

Net interest income after provision for loan losses

3,000 

3,140 

2,874 

1,956 

2,834 

Noninterest income






  Service fees

189 

222 

226 

252 

253 

  Wealth management

309 

324 

317 

336 

310 

  Mortgage banking

176 

196 

94 

84 

149 

  Loss on sale of investments

(55)

  Other

311 

276 

278 

260 

765 

Total noninterest income

985 

1,018 

915 

932 

1,422 

Noninterest expense






  Salaries and employee benefits

1,998 

2,201 

2,133 

2,096 

2,131 

  Occupancy

434 

427 

432 

426 

484 

  Data processing

154 

166 

167 

161 

173 

  Foreclosure/OREO expenses

237 

425 

261 

129 

42 

  Legal and professional fees

189 

281 

219 

224 

167 

  FDIC expense

257 

255 

263 

285 

314 

  Other

695 

992 

709 

816 

808 

Total noninterest expense

3,964 

4,747 

4,184 

4,137 

4,119 

Income (loss) before income taxes

21 

(589)

(395)

(1,249)

137 

Income tax (benefit) expense

2,622 

(209)

(549)

(3)

Net income (loss)

$

21 

($3,211)

($186)

($700)

$

140 

Preferred stock dividends, discount and premium

(162)

(162)

(160)

(162)

(160)

Net loss available to common equity

($141)

($3,373)

($346)

($862)

($20)

Basic and diluted loss per common share

($0.09)

($2.04)

($0.21)

($0.52)

($0.01)




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