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, 1995
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9785
TRI CITY BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-1158740
- ------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
6400 S. 27th Street, Oak Creek, WI 53154
-------------------------------------------
(Address of principal executive offices)
(414) 761-1610
------------------------------------------------
(Registrant's phone number, including area code)
Indicate by check mark whether the registrant (1) has filed all documents
and 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
------ -------
The number of shares outstanding of $1.00 par value common stock, as of
September 30, 1995: 2,467,325
<PAGE>
FORM 10-Q
TRI CITY BANKSHARES CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Page #
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets as of
September 30, 1995 and December 31, 1994 3
Consolidated Statements of Income
for the Three Months ended September 30,
1995 and 1994 4
Consolidated Statements of Income
for Nine Months ended September 30, 1995
and 1994 5
Consolidated Statements of Cash Flows
for the Nine Months ended September 30,
1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Items 1 - 6 15
Signatures 16
2
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS September 30, December 31,
1995 1994
------------ -------------
Cash and due from banks $ 22,506,838 $ 28,042,066
Federal funds sold 10,930,000 0
Investment securities (market
value: 1995 - $103,169,569;
1994 - $87,698,918) 103,494,572 93,277,595
Loans 228,569,194 213,287,740
Allowance for loan losses (3,554,148) (3,395,101)
------------ ------------
NET LOANS 225,015,046 209,892,639
Premises and equipment 19,319,100 19,857,706
Other assets 5,225,676 6,259,987
----------- -----------
$ 386,491,232 $ 357,329,993
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 89,668,215 $ 83,072,574
Interest bearing
(over $100,000) 11,652,000 9,691,000
Other interest bearing 237,107,042 207,312,921
----------- -----------
TOTAL DEPOSITS 338,427,257 300,076,495
Short-term borrowings:
Federal funds purchased and
securities sold under agree-
ments to repurchase 0 13,900,000
Other 2,931,385 2,406,970
----------- -----------
TOTAL BORROWINGS 2,931,385 16,306,970
Other Liabilities 2,107,878 1,153,632
----------- -----------
TOTAL LIABILITIES 343,466,520 317,537,097
Stockholders' equity:
Cumulative preferred stock, par
value - $1 per share
Authorized - 200,000 shares
Issued and outstanding - none
Common stock, par value - $1 per
share
Authorized - 5,000,000 shares
Issued and outstanding: 1995 -
2,467,325 shares; 1994 -
2,457,489 2,467,325 2,457,489
Additional paid in capital 8,301,912 8,091,712
Retained earnings 32,255,475 29,243,695
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 43,024,712 39,792,896
----------- -----------
$ 386,491,232 $ 357,329,993
=========== ===========
See Notes to Unaudited Consolidated Financial Statements.
3
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
1995 1994
---- ----
Interest income:
Loans, including fees $ 5,497,130 $ 4,673,902
Investment securities:
Taxable 1,044,297 1,145,872
Exempt from federal income tax 406,815 402,757
Federal funds sold 188,028 10,866
--------- ---------
TOTAL INTEREST INCOME 7,136,270 6,233,397
Interest expense:
Deposits 2,439,503 1,655,244
Short-term borrowings 46,805 103,769
--------- ---------
TOTAL INTEREST EXPENSE 2,486,308 1,759,013
NET INTEREST INCOME 4,649,962 4,474,384
Provision for loan losses (75,000) (75,000)
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,574,962 4,399,384
Other income:
Service charge income 831,139 755,479
Rental income 160,419 197,922
Investment securities gains 0 1,017
Other 391,354 342,448
--------- ---------
TOTAL OTHER INCOME 1,382,912 1,296,866
Other expense:
Salaries and employee benefits 2,148,379 1,972,867
Net occupancy 587,146 618,866
Equipment 322,546 284,971
Data processing 126,410 156,002
Advertising 126,960 125,751
Regulatory Agency Assessments (1,882) 184,977
Office Supplies 120,427 115,245
Other 664,797 490,116
--------- ---------
TOTAL OTHER EXPENSE 4,094,783 3,948,795
Income before income taxes 1,863,091 1,747,455
Provision for income taxes 529,500 522,153
--------- ---------
NET INCOME $ 1,333,591 $ 1,225,302
========= =========
Net income $ 0.54 $ 0.52
Average shares outstanding 2,466,433 2,380,615
See Notes to Unaudited Consolidated Financial Statements.
4
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
1995 1994
---- ----
Interest income:
Loans, including fees $ 15,906,097 $ 13,637,291
Investment securities:
Taxable 3,095,521 3,416,921
Exempt from federal income tax 1,167,535 1,208,136
Federal funds sold 355,294 43,381
---------- ----------
TOTAL INTEREST INCOME 20,524,447 18,305,729
Interest expense:
Deposits 6,702,105 4,781,267
Short-term borrowings 187,110 314,421
---------- ----------
TOTAL INTEREST EXPENSE 6,889,215 5,095,688
---------- ----------
NET INTEREST INCOME 13,635,232 13,210,041
Provision for loan losses (173,139) (375,000)
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 13,462,093 12,835,041
Other income:
Service charge income 2,368,813 2,095,310
Rental income 571,992 604,460
Investment securities gains 0 3,017
Other 1,447,605 1,037,898
---------- ----------
TOTAL OTHER INCOME 4,388,410 3,740,685
Other expense:
Salaries and employee benefits 6,373,263 5,984,020
Net occupancy 1,720,612 1,854,426
Equipment 945,785 877,897
Data processing 375,697 464,249
Advertising 347,906 290,024
Regulatory Agency Assessments 371,515 547,051
Office Supplies 354,610 287,647
Other 1,859,987 1,523,079
---------- ----------
TOTAL OTHER EXPENSE 12,349,375 11,828,393
---------- ----------
Income before income taxes 5,501,128 4,747,333
Provision for income taxes 1,608,841 1,299,153
---------- ----------
NET INCOME $ 3,892,287 $ 3,448,180
========== ==========
Per share data:
Net income $ 1.58 $ 1.45
Common stock investment $ 17.47 $ 15.59
Dividends $ 0.375 $ 0.300
Average shares outstanding 2,463,317 2,374,151
See Notes to Unaudited Consolidated Financial Statements.
5
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
1995 1994
---- ----
OPERATING ACTIVITIES
Net income $ 3,892,287 $ 3,448,181
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 173,139 375,000
Provision for depreciation 1,151,775 1,171,886
Increase in interest receivable (414,640) (204,297)
Increase in interest payable 834,742 575,859
------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 5,637,303 5,366,629
INVESTING ACTIVITIES
Proceeds from maturities
and redemptions of
investment securities 8,811,956 7,759,628
Purchases of investment
securities (19,028,933) (5,809,542)
Net increase in loans (15,295,546) (2,539,586)
Purchases of premises and
equipment (573,844) (915,667)
Net (increase) decrease in other
assets 1,451,936 (1,436,006)
------------ ------------
NET CASH USED
BY INVESTING ACTIVITIES (24,634,431) (2,941,173)
FINANCING ACTIVITIES
Net increase in deposits 38,350,762 8,876,803
Net decrease in short-term
borrowings (13,375,585) (9,124,517)
Cash dividends (702,631) (324,190)
Net increase in other liabilities 119,354 300,658
------------ ------------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES 24,391,900 (271,246)
------------ ------------
INCREASE IN CASH AND
CASH EQUIVALENTS 5,394,772 2,154,210
Cash and cash equivalents at the
beginning of the period 28,042,066 22,189,794
------------ ------------
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $ 33,436,838 $ 24,344,004
============ ============
See Notes to Unaudited Consolidated Financial Statements.
6
<PAGE>
TRI CITY BANKSHARES CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(A) Basis of Presentation
The unaudited consolidated financial statements included herein omit
certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles. Such condensation is permitted by generally
accepted accounting principles applicable to interim financial data and by
rules and regulations of the Securities and Exchange Commission. These
financial statements should be read in conjunction with the financial
statements and the notes thereto included in the latest Annual Report on
Form 10-K of Tri City Bankshares Corporation (the "Corporation") for the
year ended December 31, 1994. The December 31, 1994 financial information
included herein is derived from the December 31, 1994 Consolidated Balance
Sheet of Tri City which is included in the aforesaid Annual Report on Form
10-K.
In the opinion of the Corporation's management, the accompanying unaudited
consolidated financial statements contain all adjustments consisting of
normal recurring accruals considered necessary to present fairly the
Corporation's financial position as of September 30, 1995 and December 31,
1994 and the results of its operations and cash flows for the three and
nine month periods ending September 30, 1995 and 1994.
7
<PAGE>
TRI CITY BANKSHARES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
CHANGES IN FINANCIAL POSITION
During the first nine months of 1995, Tri City Bankshares Corporation (the
"Corporation") increased its net assets $29.2 million (8.2%) compared to a
$3.8 million (1.1%) increase during the first nine months of 1994. Federal
funds sold increased $10.9 million during the first nine months of 1995
compared to an increase of $2.2 million during the first nine months of
1994. The Corporation has increased its investment in the federal funds
market because interest rates on investment securities have remained low,
thereby making the federal funds market more attractive. Management has
invested for the short term in federal funds sold so that these funds would
remain readily available to invest in a higher yielding investment should
it become available or be used for loans which currently provide a higher
yield. Investment securities have increased $10.2 million (11.0%) during
the first nine months of 1995 compared to a decrease of $2.0 million (2.0%)
during the same period in 1994. Although rates have not been very
attractive, management has been able to find some investment securities
which have been acceptable and which provide the Corporation with a term
instrument to place funds and match the maturity of some savings and time
deposits. Net loans have also increased $15.1 million (7.2%) in the first
nine months of 1995 compared to an increase of $2.2 million (1.1%) in the
first nine months of 1994 primarily due to management's effort to attract
new customers as well as retain old customers through several different
8
<PAGE>
promotional campaigns. During 1995, the Corporation opened several new
banking facilities inside Pick'n Save warehouse food stores. Since the
cost involved with building and equipping these facilities was very
minimal, premises and equipment decreased $539,000 (2.7%) during the first
nine months of 1995 compared to a decrease of $256,000 (1.3%) in the first
nine months of 1994, which can be attributed to the normal accrual of
depreciation. Other assets have decreased $1.0 million (16.5%) during the
first nine months of 1995 compared to a $1.6 million (28.8%) increase
during the same period in 1994. This decrease can be attributed primarily
to the sale of other real estate owned. A total net gain of approximately
$400,000 was realized from this sale.
Deposits for the Corporation have increased $38.4 million (12.8%) in the
first nine months of 1995 compared to an increase of $8.9 million (3.0%)
during the same period in 1994. During the first several months of 1995,
the Corporation offered a special rate on fifteen month certificates of
deposit in order to attract an additional $20 million of new deposit money.
With this infusion of additional funds, the Corporation was able to reduce
short term borrowings by $13.9 million (100.0%) during the first nine
months of 1995, compared to a decrease of $6.0 million (60.7%) during the
first nine months of 1994. Other liabilities increased $954,000 (82.7%) in
the first nine months of 1995 compared to an increase of $880,000 (79.9%)
during the same period in 1994. These increases can be attributed to the
increase in accrued interest on deposits and borrowed funds during each
respective year in which such increase occurred.
9
<PAGE>
LIQUIDITY
The Corporation's liquidity position is continually monitored by
management, which strives to maintain a balance of interest earning assets
and interest bearing liabilities which will best serve the Corporation's
needs and provide for the normal demand for funds which occurs during the
day-to-day operations. Since interest rates have remained stable,
management has been able to maintain an acceptable balance in the
Corporation's portfolios. Management believes that it has provided an
adequate mix of assets and liabilities to maintain a good asset earnings
ratio and still provide for the normal cash demands which occur.
CAPITAL RESOURCES
During the first nine months of 1995, three new full-service banking
facilities were opened in Pick'n Save food stores, one in Oak Creek and two
in Milwaukee, Wisconsin. Funding for these facilities was generated
internally and considered to be nominal.
The Corporation has plans to open a fourth full-service banking facility to
be located inside a Pick'n Save food store in Cudahy, Wisconsin sometime
late in the fourth quarter of 1995. The cost of this facility is
considered to be nominal and funding for this project will be absorbed by
the Corporation's banking subsidiary.
There are no other major capital expenditures which are planned for the
current year. Management however, reserves the right to pursue any
opportunities which present themselves and help to enhance the operations
10
of the Corporation.
RESULTS OF OPERATIONS
Net income for the Corporation increased $108,000 (8.8%) in the third
quarter of 1995 compared to an increase of $149,000 (13.8%) in the third
quarter of 1994. Total interest income increased $903,000 (14.5%) compared
to an increase of $98,000 (1.6%) during the third quarter of 1995 and 1994,
respectively. Interest income and fees on loans increased $823,000 (17.6%)
during the three months ended September 30, 1995 compared to a decrease of
$118,000 (2.5%) during the three months ended September 30, 1995. Because
yields on loans are currently more attractive than yields on investment
securities, management has made a concerted effort to increase the
Corporation's loan portfolio. As a result, the increase in interest income
and fees on loans during the third quarter of 1995, as compared with the
same period in 1994 accounts for the majority of the increase in interest
income. Taxable investment security income decreased $102,000 (8.8%) in
the third quarter of 1995 compared to an increase of $223,000 (24.2%)
during the third quarter of 1994. The reason for this decrease is that the
current yields on investment securities are low. Accordingly, when higher
yielding maturing securities are replaced with lower yielding securities,
interest income declines. Federal funds sold interest income increased
$177,000 (163.0%) during the third quarter of 1995 compared to a decrease
of $7,000 (40.6%) during the third quarter of 1994. Management in the
short term has been investing funds in federal funds sold until a suitable
security investment can be found which will provide a good yield without
sacrificing the integrity of the investment security portfolio.
11
<PAGE>
Interest expense on deposit accounts has increased $784,000 (47.4%) in the
three months ended September 30, 1995 compared to an increase of $18,000
(1.1%) during the same period in 1994 primarily due to the Corporation's
efforts to increase deposits through a special promotion in the beginning
of the year. The increased deposits have also been responsible for the
decrease in short-term borrowings and therefore interest expense on short-
term borrowings has decreased $57,000 (54.9%) during the third quarter of
1995 compared to an increase of $46,000 (78.2%) during the third quarter of
1994.
Other income increased $86,000 (6.6%) in the third quarter of 1995 compared
to an increase of $116,000 (9.9%) in the third quarter of 1994. Other
expenses increased $146,000 (3.7%) during the third quarter of 1995
compared to a decrease of $66,000 (1.6%) during the same period of 1994.
During the third quarter of 1995, the Federal Deposit Insurance Corporation
substantially reduced the premium banks are charged for federal deposit
insurance. This change became retroactive to June 1, 1995 and thus
regulatory agency assessments decreased $187,000 (101.0%) during this
period in 1995 compared to an increase of $15,000 (8.5%) in the same period
in 1994. Third quarter results include $193,400 of assessments from June
1, 1995 which have been refunded to the Corporation.
12
<PAGE>
A summarized change in income for the quarters appears below:
September 30, September 30, 1995
1995 1994 Over(Under)
Three Months Ended (Unaudited) (Unaudited) 1994
----------- ----------- -----------
Revenue and Expenses:(000's)
Interest Income $7,136 $6,233 $ 903
Less: Interest Expense 2,486 1,759 727
------ ------ ------
Net Interest Income 4,650 4,474 176
Less: Provision for Loan Loss 75 75 0
Other Operating Expense
Net of Other Operating
Revenues 2,712 2,652 60
------ ------ ------
Income Before Income Taxes 1,863 1,747 116
Tax Provision 530 522 8
------ ------ ------
NET INCOME $1,333 $1,225 $ 108
====== ====== ======
During the first nine months of 1995, net income increased $444,000 (12.9%)
compared to $117,000 (3.5%) during the first nine months of 1994. This
increase is attributed primarily to the $358,000 gain realized on the sale
of other real estate owned.
Total interest income increased $2.2 million (12.1%) during the first nine
months of 1995 compared to an increase of $28,000 (0.2%) during the same
period of 1994 due to an increase in loan demand. The decrease in interest
income on investment securities is offset by an increase in interest income
on federal funds sold. Interest expense for the nine months ended
September 30, 1995 increased $1.8 million (35.2%) compared to a decrease of
$37,000 (0.7%) during the same period in 1994. Deposit interest expense
accounted for this increase since the interest expense on borrowed funds
decreased $127,000 (40.5%) during the nine months ended September 30, 1995.
13
<PAGE>
Total other income during the first nine months of 1995 increased $648,000
(17.3%) compared to an increase of $182,000 (5.1%) during the first nine
months of 1994 primarily due to the gain recognized on the sale of other
real estate owned. Total other expenses increased $521,000 (4.4%) during
the first nine months of 1995 compared to an increase of $257,000 (2.2%)
during the same period in 1994.
CAPITAL ADEQUACY
Federal banking regulatory agencies have established capital adequacy rules
which take into account risk attributable to balance sheet assets and off-
balance-sheet activities. All banks and bank holding companies must meet a
minimum risk-based capital ratio of 8.0%, of which 4.0% must be comprised
of Tier 1 capital, as that term is defined.
The federal banking agencies also have adopted leverage capital guidelines
which banking organizations must meet. Under these guidelines, the most
highly rated banking organizations must meet a minimum leverage ratio of at
least 3.0% Tier 1 capital to total assets, while lower rated banking
organizations must maintain a ratio of at least 4.0% to 5.0%.
The risk-based capital ratio and leverage ratio for the Corporation are
17.6% and 11.6%, respectively.
14
<PAGE>
PART II- OTHER INFORMATION
--------------------------
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
Exhibits - None
Form 8-K The Corporation did not file any reports on Form 8-K during the
three month period ended September 30, 1995.
15
<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.
TRI CITY BANKSHARES CORPORATION
DATE: November 10, 1995 /s/Henry Karbiner
--------------------- --------------------------
Henry Karbiner, Jr.
Executive Vice President,
Secretary/Treasurer
DATE: November 10, 1995 /s/Thomas W. Vierthaler
---------------------- --------------------------
Thomas W. Vierthaler
Vice President and Comptroller
(Chief Accounting Officer)
16
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<ARTICLE> 9
<CIK> 0000313337
<NAME> TRI CITY BANKSHARES CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 22,507
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,930
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 103,495
<INVESTMENTS-MARKET> 103,170
<LOANS> 228,569
<ALLOWANCE> 3,554
<TOTAL-ASSETS> 386,491
<DEPOSITS> 338,427
<SHORT-TERM> 2,931
<LIABILITIES-OTHER> 2,108
<LONG-TERM> 0
<COMMON> 2,467
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 386,491
<INTEREST-LOAN> 15,906
<INTEREST-INVEST> 4,263
<INTEREST-OTHER> 355
<INTEREST-TOTAL> 20,524
<INTEREST-DEPOSIT> 6,702
<INTEREST-EXPENSE> 6,889
<INTEREST-INCOME-NET> 13,635
<LOAN-LOSSES> 173
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<EXPENSE-OTHER> 12,349
<INCOME-PRETAX> 5,501
<INCOME-PRE-EXTRAORDINARY> 3,892
<EXTRAORDINARY> 0
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<NET-INCOME> 3,892
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
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