Attached files
Exhibit 99.1
Mid-Wisconsin Financial Services, Inc. Reports Fourth Quarter and 2010 Financial
Results
February 18, 2011
Medford, Wisconsin
Mid-Wisconsin Financial Services, Inc. (OTCBB: MWFS.OB), the holding company of
Mid-Wisconsin Bank (the "Bank") headquartered in Medford, WI, reported net
income to common shareholders of $80,000 or $0.05 per common share, for the
quarter ended December 31, 2010 compared to a net loss of $1,155,000, or $0.70
per common share, for the quarter ended December 31, 2009. This resulted in net
income of $102,000, or $0.06 per common share, for 2010, compared to a net loss
of $3,033,000, or $1.84 per common share, for 2009.
"Although our earnings did not recover to historical levels, we were pleased
with the marked improvement in our financial performance during 2010. Our local
markets have been slowly and unevenly recovering from the depressed economic
conditions we've experienced over the past three years. We remain optimistic
that an economic recovery may be imminent in light of several positive trends
that began to emerge at the end of the year. For example, the futures for milk
prices are much higher than they were at this time last year. Unfortunately, the
unemployment rates in our primary markets still remain painfully higher than
state and national averages. These conditions have resulted in stubbornly
higher levels of delinquencies and defaults than historical levels. We have
continued to work with our consumer and business loan customers who have
experienced difficulties, but feel we are beginning to see a light at the end of
the tunnel," stated James F. Warsaw, President and CEO.
"The trend of our core earnings, which represent those earnings available to
common shareholders prior to the payment of taxes, loan loss provisions, credit
collection expense and FDIC insurance premiums, have continued to show
improvement year over year as seen in the accompanying non-GAAP financial
measures. Management believes it is important to factor out these expenses as
many are directly related to the economic stress and resulting deterioration in
our loan portfolios over the past three years. During 2010 our credit-related
costs significantly declined. Throughout 2010 we were able to reduce the levels
of: our loan loss provisions, charge-offs, non-accruals and collection expenses.
During the fourth quarter of 2010 our collection expenses were $101,000 compared
to $36,000 in the fourth quarter of 2009; however, total collection expenses for
2010 were $243,000 compared to $1,278,000 in 2009," stated Mr. Warsaw.
In general, overall credit quality has shown signs of stabilization despite the
weak economic conditions that have persisted over the past three years. Over
the past five quarters non-accrual loans (loans not accruing interest) peaked at
$14,327,000 at September 30, 2009 and have since trended down to $11,540,000 at
December 31, 2010 versus the $13,925,000 reported on December 31, 2009.
Net charge-offs for 2010 were $3,241,000, significantly lower than the
$5,091,000 reported in 2009. Total loan loss provisions for 2010 were reduced
significantly to $4,755,000 compared to $8,506,000 in 2009. Provisions for loan
losses were $1,500,000 in the fourth quarter ended December 31, 2010 compared to
$2,856,000 for the quarter ended December 31, 2009. During the year the level
of our allowance for loan and lease losses increased by $1,514,000 to $9,471,000
at December 31, 2010, compared to the $7,957,000 reported at December 31, 2009.
The Bank's coverage ratio of reserves to total loans at year end 2010 improved
to 2.79% from 2.22% at year end 2009. These levels are substantially higher
than the $3,028,000 and coverage ratio of 0.97% reported at December 31, 2005.
Like many other financial institutions, the Bank benefited from the re-financing
of residential mortgages that took place throughout the year resulting from the
historically low mortgage rates. In 2010 the Bank sold 407 loans totaling
$68,886,000 into the secondary market, which generated non-interest fee income
of $955,000, compared to fee income of $564,000 from the sale of 301 loans
totaling $47,436,000 in 2009.
A further indication of the Company's potential earning power is the general
stability of its net interest income, net interest margin and control over non-
interest related expenses over the past 17 quarters. The Bank experienced a
drop in its net interest margin during the fourth quarter 2010 due to an
elevated liquidity position that was generated from core deposit growth and weak
loan demand during the fourth quarter. Net interest income of $4,014,000 for
the three months ended December 31, 2010 decreased 4% from the same quarter in
2009. On a fully tax-equivalent basis, the net interest margin for the quarter
ended December 31, 2010 decreased to 3.38%, compared to 3.53% for the same
quarter of 2009. As of December 31, 2010, fed funds sold and overnight
repurchase agreements totaled $32,473,000 versus $9,064,000 as of December 31,
2009. The average balance of fed funds and overnight investments during 2010 was
$23,013,000 versus $12,164,000 in 2009.
"Our non-interest bearing deposits grew 9% in 2010 while interest bearing
deposits dropped 1%. Non-interest bearing deposits represent less than 15% of
our total deposits. We anticipate these deposits to increase with the
February 1, 2011 launch of a new suite of innovative consumer deposit products
which were developed by BancVue and marketed through Kasasa[TM]. Increasing
core deposits will reduce our dependency on wholesale funding and reliance on
brokered deposits as those instruments mature and roll off during 2011," said
Mr. Warsaw.
Loan balances were $339,170,000 at December 31, 2010, a decrease of $19,446,000
from December 31, 2009. Contributing to the decline was $3,241,000 of net
charge-offs and overall weak loan demand. Loan demand has remained soft across
all of the Bank's markets and management expects these conditions to continue
through 2011. Competition among local and regional banks for creditworthy
borrowers and core deposit customers remains high. The Bank remains committed
to its community banking philosophy and will continue to support its local
markets by making available various government loan programs to creditworthy
borrowers as credit opportunities arise.
Stockholders' equity at December 31, 2010 was $42,970,000 compared to
$43,184,000 at December 31, 2009, a decrease of $214,000. The main factors
decreasing capital included $641,000 attributed to the cost of the issuance of
preferred stock through the U.S. Treasury's Capital Purchase Program and a
decrease in accumulated other comprehensive income of $466,000, resulting from
the sale of investment securities throughout the year rather than to the change
in market rates. The Board remains committed to increasing capital levels at the
Bank and the Company. As a result, the Bank's Tier One Capital Leverage ratio
improved to 8.95% and the Company's to 10.04% at December 31, 2010, compared to
8.21% and 9.82%, respectively, as of December 31, 2009. This compares favorably
to the regulatory requirement of 8.50% for the Bank. The Bank's Total Risk
Based Capital ratio increased from 12.33%at December 31, 2009 to 13.94% as of
December 31, 2010 which compares favorably to the regulatory requirement of
12.00%.
On September 30, 2010 a Marathon County jury found the former owners of Smith
Bros. Ford in Mosinee, Wisconsin liable for intentionally misrepresenting the
financial condition of their dealership and for acts of conspiracy in enticing
the Bank to extend credit to them. The jury awarded the Bank a $4.0 million
judgment for the losses it suffered as a result of this transaction. This
judgment is subject to appeal and the ability to collect is unclear at this
time. As a result of our continuing collection efforts in this matter, the Bank
recently negotiated an insurance settlement in the amount of $500,000 which will
be recognized as income in the first quarter of 2011. We continue to pursue all
avenues of recovery.
As referenced in our 3rd quarter 10Q filing, the Bank's 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 "DFI") to take certain actions and
operate in compliance with the Agreement's 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 DFI. At this time, the board believes it has satisfied most of
the conditions of the Agreement and has taken appropriate actions necessary to
resolve all other requirements referenced in the Agreement.
Mid-Wisconsin Financial Services, Inc., headquartered in Medford, Wisconsin, is
the holding company of Mid-Wisconsin Bank which operates thirteen retail banking
locations throughout central and northern Wisconsin serving markets in Clark,
Eau Claire, Lincoln, Marathon, Oneida, Price, Taylor and Vilas counties. In
addition to traditional loan and deposit products, the Bank offers trust,
brokerage and private client services through its Wealth Management Services
Group.
This press release contains forward-looking statements or comments that are
provided to assist in the understanding of anticipated future financial
performance. These forward-looking statements are not guarantees of future
performance, nor should they be relied upon as representing management's view as
of any subsequent date. If the risks or uncertainties never materialize or the
assumptions prove incorrect, our results may differ materially from those
presented, either expressed or implied, in this filing. All statements other
than statements of historical fact are statements that could be deemed forward-
looking statements. Forward-looking statements may be identified by, among
other things, expressions of beliefs or expectations that certain events may
occur or are anticipated, and projections or statements of expectations. Such
forward-looking statements include, without limitation, statements regarding
expected financial and operating activities and results that are preceded by,
followed by, or that include words such as "may," "expects," "anticipates,"
"estimates," or "believes." Such statements are subject to important factors
that could cause Mid-Wisconsin's actual results to differ materially from those
anticipated by the forward-looking statements. These factors include: (i) Mid-
Wisconsin's exposure to the volatile commercial and residential real estate
markets, which could result in increased charge-offs and increases in the
allowance for loan losses to compensate for potential losses in its real estate
portfolios or further write-downs of other real estate values; (ii) the effect
of legislative and regulatory changes in banking laws and regulations and their
application by the Company's regulators; (iii) adverse changes in the financial
performance and/or condition of Mid-Wisconsin's borrowers, which could impact
repayment of such borrowers' outstanding loans; (iv) Mid-Wisconsin's ability to
maintain required levels of capital, (v) fluctuation in Mid-Wisconsin's stock
price, (vi) other risks and assumptions described in Mid-Wisconsin's Annual
Report on Form 10-K for the year ended December 31, 2009 under the headings
"Forward-Looking Statements" and "Risk Factors" which are incorporated herein by
reference, and (vii) such other factors as may be described in other Mid-
Wisconsin filings with the Securities and Exchange Commission ("SEC"), which
such factors are incorporated herein by reference. Forward-looking estimates and
statements involve significant risks and uncertainties and actual results may
differ materially from those presented, either expressed or implied, in this
filing. Readers are cautioned not to place undue reliance on these forward-
looking statements, which reflect only Mid-Wisconsin's belief as of the date of
this press release. Mid-Wisconsin specifically disclaims any obligation to
update factors or to publicly announce the result of revisions to any of the
forward-looking statements or comments included herein to reflect future events
or developments except as required by federal securities law.
Mid-Wisconsin Financial Services, Inc.
Consolidated Statements of Income - Quarterly Trend
(dollars in thousands, except per share data - unaudited)
December 31, September 30, June 30, March 31, December 31,
2010 2010 2010 2010 2009
Interest income
Loans, including fees $5,250 $5,296 $5,381 $5,398 $5,527
Securities
Taxable 615 768 896 937 956
Tax-exempt 89 88 91 98 114
Other 64 44 23 24 26
Total interest income 6,018 6,196 6,391 6,457 6,623
Interest expense
Deposits 1,430 1,580 1,673 1,719 1,804
Short-term borrowings 27 29 19 20 30
Long-term borrowings 413 412 410 435 469
Subordinated debentures 134 154 153 154 153
Total interest expense 2,004 2,175 2,255 2,328 2,456
Net interest income 4,014 4,021 4,136 4,129 4,167
Provision for loan losses 1,500 900 955 1,400 2,856
Net interest income after provision for loan losses 2,514 3,121 3,181 2,729 1,311
Noninterest income
Service fees 287 283 317 287 316
Wealth management 308 346 344 326 344
Mortgage banking 407 250 148 150 109
Gain on sale of investments 556 330 168 0 0
Other operating income 318 258 243 224 232
Total noninterest income 1,876 1,467 1,220 987 1,001
Other-than-temporary impairment losses, Net
Total other-than-temporary impairment losses 0 426 0 0 (15)
Amount in other comprehensive income, before taxes 0 14 0 0 (15)
Total impairment 0 412 0 0 0
Noninterest expense
Salaries and employee benefits 2,163 2,164 2,105 2,105 2,027
Occupancy 451 449 469 461 463
Data processing 158 165 162 166 163
Foreclosure/OREO expenses 101 17 130 (5) 36
Legal and professional fees 149 147 184 197 202
FDIC expense 339 232 230 235 266
Other 724 819 665 623 630
Total noninterest expense 4,085 3,993 3,945 3,782 3,787
Income (loss) before income taxes 305 183 456 (66) (1,475)
Income tax expense (benefit) 65 21 128 (79) (478)
Net income (loss) $240 $162 $328 $13 ($997)
Preferred stock dividends, discount and premium (160) (160) (160) (161) (158)
Net income (loss) available to common equity $80 $2 $168 ($148) ($1,155)
Earnings (Loss) Per Common Share:
Basic and diluted $0.05 $0.00 $0.10 ($0.09) ($0.70)
Mid-Wisconsin Financial Services, Inc.
Financial Data
Three Months Ended Twelve Months Ended
December 31, 2010 December 31, 2009 December 31, 2010 December 31, 2010
PER SHARE DATA
Earnings (loss) per common share:
Basic and diluted $0.05 ($0.70) $0.06 ($1.84)
Cash dividends per share 0.00 0.00 0.00 0.11
Book value per common share $19.85 $20.10 $19.85 $20.10
Weighted average common shares outstanding:
Basic 1,651 1,647 1,650 1,645
Diluted 1,651 1,647 1,650 1,646
Dividend payout ratio (1) 0.00 0.00 0.0% -6.0%
Stock Price Information:
High Bid $7.85 $8.30 $11.00 $16.25
Low Bid 7.80 7.00 6.00 7.00
Bid price at quarter end 7.80 7.00 7.80 7.00
KEY RATIOS
Return on average assets 0.06% -0.96% 0.02% -0.61%
Return on average equity 0.72% -10.20% 0.23% -6.87%
Average equity to average assets 8.68% 9.43% 8.70% 8.86%
Net interest margin (FTE) (2) 3.38% 3.53% 3.46% 3.53%
Net charge-offs to average loans 0.23% 0.92% 0.91% 1.40%
Allowance for loan loss to period-end loans 2.79% 2.22% 2.79% 2.22%
(1) Ratio is based upon basic earnings per common share
(2) The yield on tax-exempt loans and investments is computed on a tax-equivalent basis
using a Federal tax rate of 34% and excluding disallowed interest expense.
Mid-Wisconsin Financial Services, Inc.
Consolidated Balance Sheets
As of As of
December 30, December 31, Percent
(dollars in thousands, except per share data - unaudited) 2010 2009 Change
Assets
Cash and due from banks $9,502 $9,824 -3%
Interest-bearing deposits in other financial institutions 8 13 NM
Federal funds sold 32,473 9,064 258%
Investment securities available for sale, at fair value 101,310 103,477 -2%
Loans held for sale 7,444 5,452 37%
Loans 339,170 358,616 -5%
Less: Allowance for loan losses (9,471) (7,957) 19%
Loans, net 329,699 350,659 -6%
Accrued interest receivable 1,853 1,940 -4%
Premises and equipment, net 8,162 8,294 -2%
Other investments, at cost 2,616 2,616 0%
Other assets 16,015 14,121 13%
Total assets $509,082 $505,460 1%
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $60,446 $55,218 9%
Interest-bearing deposits 340,164 342,582 -1%
Total deposits 400,610 397,800 1%
Short-term borrowings 9,512 7,983 19%
Long-term borrowings 42,561 42,561 0%
Subordinated debentures 10,310 10,310 0%
Accrued interest payable 992 1,287 -23%
Accrued expenses and other liabilities 2,127 2,335 -9%
Total liabilities 466,112 462,276 1%
Total stockholders' equity 42,970 43,184 0%
Total liabilities and stockholders' equity $509,082 $505,460 1%
Nonaccrual loans $11,540 $13,925 -17%
Other real estate $4,230 $1,808 134%
Net charge-offs $3,241 $5,091 -36%
Mid-Wisconsin Financial Services, Inc.
Consolidated Statements of Income
Three Months Ended Twelve Months Ended
(dollars in thousands, except per share data) December 31, December 31, Percent December 31, December 31, Percent
2010 2009 Change 2010 2009 Change
Interest Income
Loans, including fees $5,250 $5,527 -5% $21,325 $22,756 -6%
Securities
Taxable 615 956 -36% 3,216 3,540 -9%
Tax-exempt 89 114 -22% 366 487 -25%
Other 64 26 146% 155 149 4%
Total interest income 6,018 6,623 -9% 25,062 26,932 -7%
Interest Expense
Deposits 1,430 1,804 -21% 6,402 7,801 -18%
Short-term borrowings 27 30 -10% 95 124 -23%
Long-term borrowings 413 469 -12% 1,670 1,961 -15%
Subordinated debentures 134 153 -12% 595 614 -3%
Total interest expense 2,004 2,456 -18% 8,762 10,500 -17%
Net interest income 4,014 4,167 -4% 16,300 16,432 -1%
Provision for loan losses 1,500 2,856 -47% 4,755 8,506 -44%
Net interest income after provision for loan losses 2,514 1,311 92% 11,545 7,926 46%
Noninterest Income
Service fees 287 316 -9% 1,174 1,239 -5%
Wealth management 308 344 -10% 1,324 1,261 5%
Mortgage banking 407 109 273% 955 564 69%
Gain on sale of investments 556 0 100% 1,054 449 135%
Other operating income 318 232 37% 1,043 908 15%
Total noninterest income 1,876 1,001 87% 5,550 4,421 26%
Other-than-temporary impairment losses, net
Total other-than-temporary impairment losses 0 15 -100% (426) (374) 14%
Amount in other comprehensive income, before taxes 0 (15) -100% 14 73 -81%
Total impairment 0 0 -100% (412) (301) 37%
Noninterest Expense
Salaries and employee benefits 2,163 2,027 7% 8,537 8,411 1%
Occupancy 451 463 -3% 1,830 1,893 -3%
Data processing 158 163 -3% 651 648 0%
Foreclosure/OREO expense 101 36 181% 243 1,278 -81%
Legal and professional fees 149 202 -26% 677 882 -23%
FDIC expense 339 266 27% 1,036 1,057 -2%
Other 724 630 15% 2,831 2,281 24%
Total noninterest expense 4,085 3,787 8% 15,805 16,450 -4%
Income (loss) before income taxes 305 (1,475) 121% 878 (4,404) 120%
Income tax expense (benefit) 65 (478) 114% 135 (1,916) 107%
Net income (loss) $240 ($997) 124% $743 ($2,488) 130%
Preferred stock dividends, discount and premium (160) (158) 1% (641) (545) 18%
Net income (loss) available to common equity $80 ($1,155) 107% $102 ($3,033) 103%
Mid-Wisconsin Financial Services, Inc.
Non-GAAP Financial Measure
Core Earnings (Pre-tax, Pre-credit-cost, Pre-FDIC Premiums)
(dollars in thousands)
FY 2010 FY 2009 FY 2008 FY 2007 FY 2006 FY 2005
Earnings (loss) before tax provision $878 ($4,404) $1,251 $1,163 $1,136 $6,664
Add back: credit costs
Add back: Provision for loan losses 4,755 8,506 3,200 1,140 5,133 342
Foreclosure/OREO Costs 243 1,278 541 2,527 18 18
OTTI Impairment write-downs 412 301 0 0 0 0
Total credit costs: 5,410 10,085 3,741 3,667 5,151 360
Remove: non-recurring items
Gains on sales of investment securities 1,054 449 0 0 0 0
Goodwill impairment 0 0 (295) 0 0 0
Total non-recurring items: 1,054 449 (295) 0 0 0
Add back: FDIC Premiums
FDIC expense 1,036 1,057 220 42 40 39
Total FDIC Premiums: 1,036 1,057 220 42 40 39
Total Pre-tax, Pre-credit-cost Earnings,
Pre-FDIC Premiums: $6,270 $6,289 $5,507 $4,872 $6,327 $7,063
ROAA (based on top line revenue): 1.24% 1.26% 1.15% 1.04% 1.44% 1.71%
ROAE (based on top line revenue): 14.26% 14.25% 15.59% 14.18% 17.75% 19.38%
Mid-Wisconsin Financial Services, Inc.
Interest Margin Analysis
Three Months Ended Twelve Months Ended
December 31, 2010 December 31, 2009 December 31, 2010 December 31, 2009
EARNING ASSETS
Loans (FTE) 5.96% 6.07% 6.02% 6.27%
Investment securities:
Taxable 3.21% 4.26% 3.74% 4.48%
Tax-exempt (FTE) 5.18% 5.94% 5.43% 6.15%
Other interest earning-assets 0.60% 0.74% 0.57% 0.75%
Total earning assets 5.03% 5.57% 5.29% 5.74%
INTEREST-BEARING LIABILITIES
Interest-bearing demand 0.49% 0.58% 0.59% 0.63%
Savings deposits 0.86% 1.15% 1.00% 1.32%
Time deposits 2.36% 2.87% 2.56% 3.18%
Short-term borrowings 0.96% 0.95% 0.91% 1.04%
Long-term borrowings 3.84% 4.17% 3.92% 4.15%
Subordinated debentures 5.16% 5.98% 5.77% 5.98%
Total interest-bearing liabilities 1.97% 2.44% 2.16% 2.62%
Net Interest rate spread (FTE) 3.06% 3.13% 3.13% 3.12%
Net interest rate margin (FTE) 3.38% 3.53% 3.46% 3.53%
Average Balance Sheet (in thousands)
Loans $350,559 $362,045 $355,575 $363,966
Deposits 395,411 382,668 394,871 380,633
Assets 507,098 476,218 505,597 497,994
Stockholders' equity 44,037 44,930 43,976 44,122
