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									Mid-Wisconsin Financial Services, Inc
CEO Presentation to the Shareholders, April 22, 2008
Last year, we reported that our focus for 2007 would be on profitability, quality and growth.
While we achieved some of our goals, we did not achieve our principal profitability targets and
the credit quality of our loan portfolio deteriorated throughout the year as a result of a general
decline in economic conditions. Asset growth focus is not as important today as capital

Industry Trends
General economic conditions began showing signs of deterioration in the 4th quarter of 2006
and continued on a downward trend throughout 2007 and 2008. Everyone here tonight has at
one time or another seen or read about the collapse of the Sub-Prime Mortgage Industry and
the impact it has had on consumers, investors and the financial industry overall. I can
confidently say that Mid-Wisconsin did not participate in this type of lending. However, the
sub-prime crisis is in part responsible for the economic slowdown which has been felt in our

Key indicators of the economic slowdown are the continuing slide in new home sales and the
increasing inventory of existing homes on the market for sale. New home sales across the
nation are now at the slowest pace since February 1995, and current housing inventory is at the
highest point in the past 26 years. For example, in Marathon County there are over 1400
homes currently listed for sale. During the first two months of the year, there were only 10
homes sold for an amount over $275,000.

Businesses that are closely associated with the housing industry are also impacted. Here in
North Central Wisconsin, it starts with the logging industry and moves on up the supply chain.
A number of our local businesses are feeling the pain. Over the past months I have met with a
number of business owners and some are reporting sales being down 30 to 40%. Many have
already reduced the number of hours for employees, some have announced layoffs, while
others have announced plant closures. Whether it is job cutbacks or reduced overtime, the end
result to consumers is lower disposable income. In my 36 years of banking I have experienced a
number of major economic cycles, but this is the worst one I’ve seen so far, and it isn’t over.

With the softening of the housing market, many real estate developers have experienced
difficulty in generating sufficient cash flows to service their debt. With lower disposable
income and more monies needed for gas, energy and food, the growth of deposits in our
marketplace has been lower than many communities within the state. Additionally, new loan
requests show the stress of current economic times. In addition to cash flow concerns, the
underlying property values behind our loans, whether residential real estate or small-business
customers’ properties, have declined. Not only are liquidation values lower, but holding
periods of foreclosed properties have lengthened, thereby increasing selling costs.
The result of the economic conditions for all of the financial services industry has been
decreasing credit quality showing up as increased provision for loan losses, charge-offs and

Let’s talk about Mid-Wisconsin and what we accomplished last year, which is sometimes
overlooked with the economic news.

2007 Accomplishments
We established a new position of Chief Credit Officer in order to have one executive focus his
attention on the changes taking place within the portfolios and address any issues related to
processes and procedures.

In the spring of 2007, we established a mortgage loan origination unit with a dedicated sales
manager and an experienced mortgage loan underwriter with secondary market underwriting
qualifications. This process has improved our product offerings and strengthened our
underwriting process. This has been and will continue to be a key driver of increasing our non-
interest income and serving our community banking customers.

Our newest office is in Eagle River, which will be aided by the new mortgage origination unit.

During the year, we introduced a new pricing and profitability tool for commercial lenders,
which has helped us make more informed pricing decisions on loan transactions. We can now
do a much better job of offering alternative financing arrangements to customers and

2007 Financial Performance
During the first three quarters of 2007, we were negatively impacted with the carrying costs,
legal expenses and valuation write-downs associated with the impaired commercial borrower
described in our 2006 and 2007 Annual Reports. We own various properties formerly owned
by the impaired borrowers, and have been actively marketing the real estate. We, as other
banks, experienced increased levels of delinquencies in our commercial portfolios throughout
the year. In the late third quarter of 2007, demand for loans softened precipitously, economic
conditions were worsening, credit quality was dropping and earnings were below expectations.
Furthermore, asset and loan growth were continuing at near double-digit rates. These factors,
coupled with regulatory guidelines for maintaining capital levels for a well-capitalized
institution and for future growth, contributed to management’s recommendation to the Board
to forego the payment of a fourth quarter dividend to shareholders.

Despite our efforts to mitigate risks, we began to see a rise in consumer delinquency rates, non-
accruals and charge-offs during the fourth quarter of 2007. The main drivers of lower
profitability in 2007 were the additional loan loss provision and the write-downs associated
with the impaired borrower mentioned earlier. Competition for low cost deposits remained
intense; as a result, core consumer and business deposits were flat. Our 8% average loan
growth for the year was funded with wholesale funding sources which carry a higher cost. As a
result, our net interest income showed little change from 2006. On a positive note, we were
able to hold our net interest margin to 3.63% which is above other banks that we track in
Wisconsin. A more complete discussion of the results is contained in our Form 10-K, which
each of you received and is always available through a link on our website.

What have we done to address the issues going into 2008?
We began the year focused on three objectives – improving credit quality, improving risk
management and cost control.

Regarding credit quality, with Gene Knoll’s retirement earlier this month, we have appointed
Len Hamman to the position of Senior Credit Officer reporting directly to me. During 2008, we
increased the number of credit analysts to assist our lending staff in evaluating larger
commercial and agricultural loan transactions, and lastly, in view of the increasing level of
consumer delinquencies, we have expanded our retail collections staff by retaining an
independent collections expert to provide additional support.

Regarding risk management, in 2007 we completed the SOX 404 project in each major area of
the bank which was mandated by the SEC and enhanced our internal controls over financial
reporting. Since January 22 of this year, the Federal Reserve has reduced its Fed Funds target
rate by 200 basis points, which has challenged us in enhancing our net interest margin. Similar
to 2007, managing credit risk will remain the single largest challenge despite additional
resources. Finally, the need for capital management and adequacy is paramount in today’s
ever-changing economic environment.

Our third major area of focus is cost control. Our growth will come from the markets that we
are currently serving. There are no plans for expansion into new markets in 2008. Salary and
benefits comprise almost 60% of non-interest expense for financial institutions. Salary increases
for staff were limited to approximately 2% for 2008; your executive team did not receive a
salary increase in2008, nor were bonuses paid to executives in 2007 under the bonus program.
No major increases in staffing are contemplated for the remainder of 2008. We have
implemented a number of cost-savings measures to improve profitability and efficiency. You
have already seen some examples, i.e., the elimination of costs in producing a Summary Annual
Report in color. All employees, through cost-saving idea contests or just through their day-to-
day work, are focused on containing and lowering costs without impacting customer service.

Now, let’s move to our first quarter results which were released to the Securities and Exchange
Commission earlier this afternoon and are available on our website.

First Quarter Results
As in 2007, credit quality drove the operating results for the first quarter. We have experienced
a rise in the level of nonaccruals and delinquencies not only in the commercial category, but
also in our consumer portfolios. Over the past five years, the consumer charge-offs taken by
Mid-Wisconsin were insignificant. We are in a different economic cycle now. The fact is we are
dealing in a very fragile economic environment and no one seems to know when things are
going to turn around. Consumer debt is at an all-time high and disposable incomes have
declined. Banks across the country are reporting higher levels of delinquencies, nonperforming
loans, personal bankruptcies and potential charge-offs. Earlier this month the government
announced that the number of consumer bankruptcies increased 27% during the first quarter
of 2008. Banks in Wisconsin have not been immune. Four of the six largest banks in the state
reported significant increases in the level of their loan delinquencies, nonperforming assets and
charge-offs. Last month the Milwaukee Journal Sentinel reported that 2007 earnings were
down for most Wisconsin banks, with 21 banks posting no profits at all.

Regarding our overall results, on a very positive note, despite the decline in interest rates
during the first quarter, Mid-Wisconsin has been able to increase net interest income by nearly
$300,000 over March 2007. Efforts to improve our net interest margin have resulted in a slight
improvement in the overall net interest margin percentage to 3.75% compared to 3.63% in the
first quarter of 2007.

You will notice a sizable increase in our loan loss provision for the quarter. This reflects the
amount necessary to maintain the allowance for losses at an adequate level based on the
analysis of our portfolio. The executive management team and the Board will continue to
monitor the performance of our loan portfolio and will react to conditions as they develop. The
increase in loan loss provision was partially offset by a recent tax benefit related to a positive
ruling in the Tax Court.

At the end of March, we remain a well-capitalized institution and expect to maintain that

Even with the challenging economy, Mid-Wisconsin is positioned as a community bank to
succeed. We have the staff, competitive products and the support of our Board. We are
optimistic that more customers will look to financial institutions in the wake of the sub-prime
mortgage crisis. We want to continue to be “Your Bank When Decisions Matter.”

The Board and Executive Management team truly appreciate the loyalty and support that you
have demonstrated. Thank you.


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