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, 1996
[ ] 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
October 31, 1996: 2,486,098
<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, 1996 and
December 31, 1995 3
Consolidated Statements of Income
for the Three Months ended September 30,
1996 and 1995 4
Consolidated Statements of Income
for the Nine Months ended September 30,
1996 and 1995 5
Consolidated Statements of Cash Flows
for the Nine Months ended September 30,
1996 and 1995 6
Notes to Unaudited 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 17
Signatures 18
-2-
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS September 30, December 31,
1996 1995
------------- -------------
Cash and cash equivalents $ 29,333,792 $ 34,725,066
Investment securities:
Available-for-sale
(at fair value) 9,974,888 12,763,844
Held-to-maturity (fair 112,792,392 96,627,721
value of 1996 -$111,249,314
1995 - $96,883,742)
Loans 245,253,089 232,472,708
Less allowance for loan losses (3,796,891) (3,626,217)
------------- -------------
NET LOANS 241,456,198 228,846,491
Premises and equipment 19,088,253 19,550,437
Other assets 6,003,507 5,135,365
------------- -------------
TOTAL ASSETS $ 418,649,030 $ 397,648,924
============= =============
LIABILITIES AND STOCKHOLDERS'EQUITY
Deposits:
Non-interest bearing $ 103,267,620 $ 90,745,057
Interest bearing
(over $100,000) 17,341,000 14,516,000
Interest bearing 241,770,980 244,958,463
------------- -------------
TOTAL DEPOSITS 362,379,600 350,219,520
Short-term borrowings:
Federal funds purchased 3,100,000 0
Other 3,752,678 1,914,521
------------- -------------
TOTAL BORROWINGS 6,852,678 1,914,521
Other Liabilities 2,203,824 1,200,152
------------- -------------
TOTAL LIABILITIES 371,436,102 353,334,193
Stockholders' equity:
Cumulative preferred stock,
par value -$1 per share
Authorized-200,000 shares
Issued and outstanding-none 0 0
Common stock, par value
$1 per share
Authorized-5,000,000 shares
Issued and outstanding:
1996 - 2,482,240 shares;
1995 - 2,470,449 2,482,240 2,470,449
Additional paid in capital 8,654,416 8,372,997
Retained earnings 36,127,476 33,363,037
Net unrealized gains (losses)
on investment securities
available-for-sale (51,204) 108,248
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 47,212,928 44,314,731
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 418,649,030 $ 397,648,924
============= =============
See Notes to Unaudited Consolidated Financial Statements.
-3-
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
---- ----
Interest income:
Loans, including fees $ 5,756,065 $ 5,497,130
Investment securities:
Taxable 1,180,946 1,044,297
Exempt from federal income tax 642,852 406,815
Federal funds sold 70,144 188,028
------------ ------------
TOTAL INTEREST INCOME 7,650,007 7,136,270
Interest expense:
Deposits 2,661,749 2,439,503
Short-term borrowings 44,077 46,805
------------ ------------
TOTAL INTEREST EXPENSE 2,705,826 2,486,308
------------ ------------
NET INTEREST INCOME 4,944,181 4,649,962
Provision for loan losses (75,000) (75,000)
------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,869,181 4,574,962
Other income:
Service charge income 866,230 831,139
Rental income 226,222 160,419
Other 380,587 391,354
------------ ------------
TOTAL OTHER INCOME 1,473,039 1,382,912
Other expense:
Salaries and employee benefits 2,336,659 2,148,379
Net occupancy 649,941 587,146
Equipment 337,330 322,546
Data processing 121,018 126,410
Advertising 132,241 126,960
Regulatory Agency Assessments 24,193 (1,882)
Office Supplies 150,475 120,427
Other 674,638 664,797
------------ ------------
TOTAL OTHER EXPENSE 4,426,495 4,094,783
Income before income taxes 1,915,725 1,863,091
Provision for income taxes 442,100 529,500
------------ ------------
NET INCOME $ 1,473,625 $ 1,333,591
============ ============
Per share data:
Net income $ 0.59 $ 0.54
Average shares outstanding 2,481,249 2,466,433
See Notes to Unaudited Consolidated Financial Statements.
-4-
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
---- ----
Interest income:
Loans, including fees $ 16,962,762 $ 15,906,097
Investment securities:
Taxable 3,296,912 3,095,521
Exempt from federal income tax 1,787,547 1,167,535
Federal funds sold 363,793 355,294
------------ ------------
TOTAL INTEREST INCOME 22,411,014 20,524,447
Interest expense:
Deposits 7,926,810 6,702,105
Short-term borrowings 87,851 187,110
------------ ------------
TOTAL INTEREST EXPENSE 8,014,661 6,889,215
------------ ------------
NET INTEREST INCOME 14,396,353 13,635,232
Provision for loan losses (225,000) (173,139)
------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 14,171,353 13,462,093
Other income:
Service charge income 2,529,825 2,368,813
Rental income 660,442 571,992
Other 1,140,994 1,447,605
------------ ------------
TOTAL OTHER INCOME 4,331,261 4,388,410
Other expense:
Salaries and employee benefits 6,921,773 6,373,263
Net occupancy 1,930,815 1,720,612
Equipment 958,286 945,785
Data processing 396,682 375,697
Advertising 343,672 347,906
Regulatory Agency Assessments 72,320 371,515
Office Supplies 417,559 354,610
Other 2,061,453 1,859,987
------------ ------------
TOTAL OTHER EXPENSE 13,102,560 12,349,375
------------ ------------
Income before income taxes 5,400,054 5,501,128
Provision for income taxes 1,336,700 1,608,841
------------ ------------
NET INCOME $ 4,063,354 $ 3,892,287
Per share data:
Net income $ 1.64 $ 1.58
Common stock investment $ 19.06 $ 17.47
Dividends $ 0.525 $ 0.375
Average shares outstanding 2,477,453 2,463,317
See Notes to Unaudited Consolidated Financial Statements.
-5-
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
---- ----
OPERATING ACTIVITIES
Net income $ 4,063,354 $ 3,892,287
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 225,000 173,139
Provision for depreciation 1,196,943 1,151,775
Increase in interest receivable (659,016) (414,640)
Increase in interest payable 552,329 834,742
------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 5,378,610 5,637,303
INVESTING ACTIVITIES
Proceeds from maturities
and redemptions of
investment securities available
for sale 2,996,656 0
Purchases of investment
securities available for sale (367,151) 0
Proceeds from maturities
and redemptions of
investment securities held
to maturity 18,668,479 8,811,956
Purchase of investment
securities held to maturity (34,833,151) (19,028,933)
Net increase in loans (12,834,707) (15,295,546)
Purchases of premises and
equipment (734,759) (573,844)
Net (increase) decrease in other
assets (209,126) 1,451,936
------------ ------------
NET CASH USED
BY INVESTING ACTIVITIES (27,313,759) (24,634,431)
FINANCING ACTIVITIES
Sale of Common Stock 293,210 220,036
Net increase in deposits 12,160,080 38,350,762
Net increase (decrease) in
short-term borrowings 4,938,157 (13,375,585)
Cash dividends (1,298,916) (922,667)
Net increase in other liabilities 451,344 119,354
------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 16,543,875 24,391,900
------------ ------------
INCREASE (DECREASE)IN CASH
AND CASH EQUIVALENTS (5,391,274) 5,394,772
Cash and cash equivalents at the
beginning of the period 34,725,066 28,042,066
------------ ------------
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $ 29,333,792 $ 33,436,838
============ ============
See Notes to Unaudited Consolidated Financial Statements.
-6-
<PAGE>
TRI CITY BANKSHARES CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and
include the accounts of the Corporation and its subsidiary. All
significant intercompany balances and transactions have been
eliminated. The Corporation's investment in an unconsolidated
affiliate bank is recorded using the equity method of accounting.
In preparing the consolidated financial statements in conformity
with generally accepted accounting principles, management is
required to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those
estimates. Material estimates that are particularly susceptible
to change in the near term relate to the determination of the
allowance for losses and the valuation of investment securities.
(B) 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.
-7-
<PAGE>
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, 1995. The
December 31, 1995 financial information included herein is
derived from the December 31, 1995 Consolidated Balance Sheet of
the Corporation 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, 1996 and December 31, 1995 and the results of
its operations and cash flows for the three and nine month
periods ending September 30, 1996 and 1995.
-8-
<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 1996, net assets of Tri City
Bankshares Corporation ( the "Corporation") grew $21.0 million
(5.3%) compared to an increase of $29.2 million (8.2%) during the
first nine months of 1995. Investment securities available for
sale decreased $2.8 million (21.9%) in the first nine months of
1996 due to normal maturites. No securities were classified as
available for sale during the first nine months of 1995. Held to
maturity securities increased $16.2 million (16.7%) in the first
nine months of 1996. Total securities therefore increased $13.4
million (12.2%) during the nine months ending September 30, 1996
compared to an increase of $10.2 million (11.0%) during the nine
months ended September 30, 1995. The rates on government securities
have remained low and in order to help increase net income after tax,
the Corporation has been purchasing municipal investment securities
which are generally exempt from federal income taxes. Net loans for
the first nine months of 1996 have increased $12.6 million (5.5%)
compared to an increase of $15.1 million (7.2%) during the same
period in 1995. Management has strived to attract new loan customers
without sacrificing the integrity of the Corporation's current loan
-9-
<PAGE>
portfolio. They attempt to maintain the integrity of the
Corporation's loan portfolio by systematically reviewing all
loans, existing and new, for signs that may indicate a problem.
Management has tried to offer loan packages to consumers that
would be attractive to them but also provide a profit for the
Corporation.
Premises and equipment during the first three quarters of 1996
decreased $462,200 (2.4%) compared to a decrease of $539,000
(2.7%) during the same period in 1995. Normal depreciation
accounts for this decrease since capital expenditures for the
Corporation have been very minimal during 1996. Other assets
have increased $868,000 (16.9%) in the first nine months of 1996
compared to a decrease of $1.0 million (16.9%) during the first
nine months of 1995. An increase in accrued interest receivable
attributable to the additional investment securities and new
loans is the primary reason for the increase in 1996, while the
sale of other real estate owned was responsible for the decrease
in 1995.
Total deposits for the Corporation have increased $12.2 million
(3.5%) during the first three quarters of 1996 compared to an
increase of $38.4 million (12.8%) during the first three quarters
of 1995. The Corporation has been able to retain most of the
$20.0 million of new deposits from the promotion it offered in
the beginning of 1995 in addition to attracting additional
-10-
<PAGE>
deposits during the first nine months of 1996. Demand deposits
accounted for the entire gain since interest bearing deposits
over $100,000 increased $2.8 million (19.5%) and interest bearing
deposits-other decreased $3.2 million (1.3%) in the first nine
months of 1996.
Since the Corporation's investment in securities and new loans
exceeded the increase in deposits, the Corporation had to borrow
for the short term in federal funds purchased. Other liabilities
increased $1.0 million (83.6%) in the first nine months of 1996
compared to an increase of $954,000 (82.7%) during the same
period in 1995. This increase is due to accrued interest which
will be paid at the end of 1996.
LIQUIDITY
The liquidity position of the Corporation is maintained by
monitoring the balance between interest earning assets and
interest bearing liabilities. Interest rate fluctuations can be
the main reason for the flow of funds into or out of the
Corporation. In order to maintain a strong liquidity position,
management must be able to match maturities of interest earning
assets to those of interest bearing liabilities and thus provide
for positive cash flow of the Corporation.
CAPITAL RESOURCES
There were no major capital expenditures made during the first
nine months of 1996. The Corporation is planning to open a new
-11-
<PAGE>
banking facility inside a Pick'n Save food store which is
scheduled to open in late December of 1996 in the Milwaukee,
Wisconsin area. The cost for this location, which is considered
to be nominal based on the Corporation's prior construction
experience with this type of facility, will be absorbed by the
Corporation's banking subsidiary.
Management has no immediate plans for any additional capital
expenditures during 1996, but will pursue any opportunities that
would benefit the Corporation and aid in its growth and financial
prosperity.
RESULTS OF OPERATIONS
The Corporation's net income increased $140,000 (10.5%) during
the third quarter of 1996 compared to an increase of $108,000
(8.8%) during the third quarter of 1995. Interest income and
fees on loans increased $259,000 (4.7%) during the third quarter
in 1996 compared to an increase of $823,000 (17.6%) during the
third quarter of 1995. Rates for loans remained steady during
this period but loan demand has been slow. Management has tried
to stimulate demand in this area with special rates and
promotions for certain types of consumer loans.
Interest income on investment securities increased $373,000
(25.7%) during the third quarter of 1996 compared to an decrease
of $98,000 (6.3%) during the same period in 1995. This increase
in 1996 can be attributed to both higher balances and yields.
-12-
<PAGE>
Interest income on Federal funds sold decreased $118,000 (62.7%)
during the third quarter of 1996 compared to an increase of
$177,000 (163.0%) during the third quarter of 1995. The
Corporation was able to replace the Federal funds sold with
higher yielding loans and government and municipal securities and
thereby increase net income.
A growth of $12.2 million in deposits accounted for an increase
in interest expense of $222,000 (9.1%) in the third quarter of
1996 compared to an increase of $784,000 (47.4%) during the third
quarter of 1995. In 1996, rates have remained fairly steady with
no unusual fluctuations. During 1995, rates had been on the
increase at the beginning of the year, but leveled off toward the
end of the third quarter. Interest expense on short-term
borrowings remained steady for the third quarter decreasing
$3,000 (5.8%) in 1996 compared to a decrease of $57,000 (54.9%)
during the third quarter of 1995.
Other income during the three months ended September 30, 1996
increased $90,000 (6.7%); this compares to an increase of $86,000
(6.6%) during the three months ended September 30, 1995. Other
expenses, however, increased $333,000 (8.1%) during the third
quarter of 1996 compared to an increase of $146,000 (3.7%) during
the third quarter of 1995. Salaries and employee benefits,
occupancy and equipment expenses increased $267,000 (8.7%) during
the third quarter of 1996 compared to an increase of $181,000
-13-
<PAGE>
(6.3%) during the same period in 1995. Expenses associated with
the operations of new banking facilities which were opened the
beginning of 1996 are not included in 1995 while being fully felt
during the third quarter of 1996.
A summarized change in income for the quarters appears below :
Three Months Ended September 30, September 30, 1996
1996 1995 Over(Under)
(Unaudited) (Unaudited) 1995
------------- ------------- -----------
Revenue and Expenses:(000's)
Interest Income $ 7,650 $ 7,136 $ 514
Less:Interest Expense 2,706 2,486 220
--------- --------- -------
Net Interest Income 4,944 4,650 294
Provision for Loan Loss 75 75 0
Other Operating Expense
Net of Other Operating
Revenues 2,954 2,712 242
--------- --------- -------
Income Before Income Taxes 1,915 1,863 52
Tax Provision 442 530 (88)
--------- --------- -------
NET INCOME $ 1,473 $ 1,333 $ 140
========= ========= =======
Net income during the first nine months of 1996 increased
$171,000 (4.4%) compared to an increase $444,000 (12.9%) during
the first nine months of 1995. In 1995 the sale of other real
estate owned contributed approximately $358,000 to net income.
Total interest income increased $1.9 million (9.2%) during the
first nine months of 1996 compared to an increase of $2.2 million
(12.1%) in the first nine months of 1995. Rates had declined
slightly during the fourth quarter of 1995 and have remained
steady throughout the first nine months of 1996. The increase in
interest income therefore can be attributed to an increase in
balances for both loans and investment securities. Interest
-14-
<PAGE>
expense on deposits increased $1.2 million (18.3%) during the
first nine months of 1996 compared to an increase of $1.8 million
(35.2%) during the same period in 1995. Since rates on deposits
and borrowed funds have remained steady, the increase in 1996 can
be attributed to an increase in deposit balances. Other expenses
net of other income increased $810,000 (10.2%) in the nine month
period ended September 30, 1996 compared to a decrease of
$127,000 (0.8%) in the nine months ended September 30, 1995.
During 1995 other income included approximately $400,000 which is
attributable to the gain derived from the sale of other real
estate owned. Without this gain other expenses net of other
income would have increased $247,000 (1.8%) during the first nine
months of 1995.
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.
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
-15-
<PAGE>
ratio of at least 4.0% to 5.0%.
The Corporation has been able to exceed the minimum requirements
for a risk-based capital ratio by 10.6% and the leverage ratio by
8.4%. As of September 30, 1996, the Corporation's capital ratio
is 18.6% and its leverage ratio is 11.4%.
-16-
<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
(A) Exhibits
Exhibit 27 - Financial Data Schedule
(B) Form 8-K
None
-17-
<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 13, 1996 /s/Henry Karbiner, Jr.
-------------------- -------------------------
Henry Karbiner, Jr.
Executive Vice President,
Secretary/Treasurer
DATE: November 13, 1996 /s/Thomas W. Vierthaler
-------------------- --------------------------
Thomas W. Vierthaler
Vice President and Comptroller
(Chief Accounting Officer)
-18-
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000313337
<NAME> TRI CITY BANKSHARES CORP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 29,334
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,975
<INVESTMENTS-CARRYING> 112,792
<INVESTMENTS-MARKET> 111,249
<LOANS> 245,253
<ALLOWANCE> 3,797
<TOTAL-ASSETS> 418,649
<DEPOSITS> 362,380
<SHORT-TERM> 6,853
<LIABILITIES-OTHER> 2,204
<LONG-TERM> 0
0
0
<COMMON> 2,482
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 418,649
<INTEREST-LOAN> 16,963
<INTEREST-INVEST> 5,084
<INTEREST-OTHER> 364
<INTEREST-TOTAL> 22,411
<INTEREST-DEPOSIT> 7,927
<INTEREST-EXPENSE> 8,015
<INTEREST-INCOME-NET> 14,396
<LOAN-LOSSES> 225
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 13,103
<INCOME-PRETAX> 5,400
<INCOME-PRE-EXTRAORDINARY> 4,063
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,063
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.64
<YIELD-ACTUAL> 5.33
<LOANS-NON> 1,509
<LOANS-PAST> 2,732
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,626
<CHARGE-OFFS> 58
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 3,797
<ALLOWANCE-DOMESTIC> 3,797
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
