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 March 31, 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 March 31, 1996: 2,474,549
<PAGE>
FORM 10-Q
TRI CITY BANKSHARES CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Page #
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets as of
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Income
for the Three Months ended March 31,
1996 and 1995 4
Consolidated Statements for Cash Flows
for the Three Months ended March 31,
1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part II - Other Information
Items 1 - 6 13
Signatures 14
2
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS March 31, December 31,
1996 1995
------------ -------------
Cash and due from banks $ 26,799,236 $ 32,535,066
Federal funds sold 19,350,000 2,190,000
Investment securities:
Available-for-sale
(at fair value) 10,243,913 12,763,844
Held-to-maturity (fair 97,412,477 96,627,721
value of 1996 - $97,120,451
1995 - $96,883,742)
Loans 234,396,022 232,472,708
Allowance for loan losses (3,700,725) (3,626,217)
------------- -------------
NET LOANS 230,695,297 228,846,491
Premises and equipment 19,476,591 19,550,437
Other assets 5,459,698 5,135,365
------------- -------------
$ 409,437,212 $ 397,648,924
============= =============
LIABILITIES AND STOCKHOLDERS'EQUITY
Deposits:
Non-interest bearing $ 92,631,650 $ 90,745,057
Interest bearing
(over $100,000) 17,337,000 14,516,000
Interest bearing 250,332,238 244,958,463
------------- -------------
TOTAL DEPOSITS 360,300,888 350,219,520
Short-term borrowings 2,021,138 1,914,521
Other Liabilities 1,866,957 1,200,152
------------- -------------
TOTAL LIABILITIES 364,188,983 353,334,193
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:
1996 - 2,474,549 shares;
1995 - 2,470,449 2,474,549 2,470,449
Additional paid in capital 8,468,315 8,372,997
Retained earnings 34,194,423 33,363,037
Net unrealized gains on investment
securities available-for-sale 110,942 108,248
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 45,248,229 44,314,731
------------- -------------
$ 409,437,212 $ 397,648,924
============= =============
See Notes to Unaudited Consolidated Financial Statements.
3
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
1996 1995
---- ----
Interest income:
Loans, including fees $ 5,568,166 $ 5,104,048
Investment securities:
Taxable 1,059,221 1,048,960
Exempt from federal income tax 537,406 381,548
Federal funds sold 117,867 43,378
----------- -----------
TOTAL INTEREST INCOME 7,282,660 6,577,934
Interest expense:
Deposits 2,589,639 1,952,565
Short-term borrowings 28,491 114,752
----------- -----------
TOTAL INTEREST EXPENSE 2,618,130 2,067,317
----------- -----------
NET INTEREST INCOME 4,664,530 4,510,617
Provision for loan losses (75,000) (75,000)
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,589,530 4,435,617
Other income:
Service charge income 820,961 739,231
Rental income 229,833 209,130
Other 364,647 781,614
----------- -----------
TOTAL OTHER INCOME 1,415,441 1,729,975
Other expense:
Salaries and employee benefits 2,285,621 2,106,812
Occupancy 668,446 602,397
Equipment 319,820 306,619
Data processing 139,011 122,847
Advertising 92,579 93,897
Regulatory agency assessments 7,773 186,701
Office supplies 54,393 97,343
Other 741,362 556,341
----------- -----------
TOTAL OTHER EXPENSE 4,309,005 4,082,957
----------- -----------
Income before income taxes 1,695,966 2,082,635
Provision for income taxes 432,250 641,641
----------- -----------
NET INCOME $ 1,263,716 $ 1,440,994
=========== ===========
Per share data:
Net income $ 0.51 $ 0.59
Average shares outstanding 2,473,693 2,460,289
See Notes to Unaudited Consolidated Financial Statements.
4
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
1996 1995
---- ----
OPERATING ACTIVITIES
Net income $ 1,263,716 $ 1,440,994
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 75,000 75,000
Provision for depreciation 379,821 383,925
Decrease in interest receivable (180,675) (367,596)
Increase in interest payable 553,371 623,485
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,091,233 2,155,808
INVESTING ACTIVITIES
Available for Sale:
Proceeds from maturities
and redemptions of
investment securities 2,605,231 0
Purchases of investment
securities (82,604) 0
Held to Maturity:
Proceeds from maturities
and redemptions of
investment securities 10,459,542 428,323
Purchase of investment
securities (11,744,300) (1,862)
Net increase in loans (1,423,806) (9,810,638)
Purchases of premises and
equipment (305,975) (310,859)
Net (increase) decrease in
other assets (143,658) 727,837
------------ ------------
NET CASH USED
BY INVESTING ACTIVITIES (635,570) (8,967,199)
FINANCING ACTIVITIES
Sale of Common Stock 99,417 74,064
Net increase in deposits 10,081,368 20,895,135
Net increase(decrease) in short-
term borrowings 106,617 (15,680,280)
Cash dividends (432,330) (307,186)
Net increase in other liabili 113,435 35,666
------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 9,968,507 5,017,399
------------ ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 11,424,170 (1,793,992)
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 $ 46,149,236 $ 26,248,074
============ ============
See Notes to Unaudited Consolidated Financial Statements.
5
<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 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 ("Tri City") 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 Tri City which is included in the
aforesaid Annual Report on Form 10-K.
In the opinion of Tri City's management, the accompanying
unaudited consolidated financial statements contain all
adjustments consisting of normal recurring accruals considered
necessary to present fairly Tri City's financial position as of
March 31, 1996 and December 31, 1995 and the results of its
operations and cash flows for the three month period ended March
31, 1996 and 1995. The operating results for the first three
months of 1996 are not necessarily indicative of the results
which may be expected for the entire 1996 fiscal year.
6
<PAGE>
TRI CITY BANKSHARES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
CHANGES IN FINANCIAL POSITION
During the first three months of 1996, Tri City Bankshares Corporation
(the "Corporation") increased net assets by $11.8 million (3.0%)
compared to $7.1 million (2.0%) during the first three months of 1995.
The Corporation has continued to grow with deposits increasing $10.1
million (2.9%) during the first quarter of 1996 compared to a growth of
$20.9 million (7.0%) during the first three months of 1995. Management
offered a special promotional rate on eighteen month certificates of
deposit in the first quarter of 1995 which aided deposit growth during
that period. Loans increased $1.9 million (0.8%) in the first quarter
of 1996 compared to a growth of $9.8 million (4.6%) during the same
period in 1995. Loan demand has been slow for the first three months
of 1996, but market indications seem to imply that the demand will
increase as the year progresses. Since we are in an election year, management
anticipates that interest rates should remain stable and not increase. The
economy has also been good and appears to be growing. Unemployment has risen
slightly but has remained low in the Corporation's market area.
The Corporation for the short term has placed excess funds from deposit
growth which have not been used for loans or to purchase additional
securities into Federal Funds Sold which increased $17.2 million in the
first three months of 1996 compared to an increase of $4.8 million
during the first three months of 1995.
7
<PAGE>
LIQUIDITY
Management of the Corporation has always strived to maintain a strong
liquidity position through monitoring the correlation between interest
earning assets and interest bearing liabilities. Fluctuations in
interest rates can be the main cause for the flow of funds either into
or out of a financial institution. As interest rates rise depositors
want to acquire the best yield that they can and thus deposits may
increase, while as rates decrease the demand for loans often times
increases substantially. Management has been diligent in maintaining a
low borrowing position for the Corporation so that as these
fluctuations occur, the Corporation can respond more readily to these
changes.
CAPITAL RESOURCES
There were no capital expenditures made during the first three months
of 1996. The Corporation however does have plans for opening one new
facility inside a Pick 'n Save food store in Milwaukee, Wisconsin during the
latter part of 1996. The cost of this facility should be nominal and will be
borne by the Corporation's banking subsidiary.
8
<PAGE>
Management has no immediate plans for additional capital expenditures
in 1996, but will pursue any opportunities which would benefit the
Corporation and aid in its growth and increase net income.
RESULTS OF OPERATIONS
During the first three months of 1996 the Corporation's net income
decreased $177.3 thousand (12.3%) compared to an increase of $339.7
thousand (30.9%) during the first three months of 1995. The
Corporation experienced a $375.0 thousand gain on the sale of other
real estate owned during the first quarter of 1995 which added
substantially to the profitability during that period. There are no
such gains recorded in the income of the Corporation for the first
quarter of 1996. Excluding the gain on the sale of real estate in 1995 and
related income taxes, net income for the first quarter of 1996 exceeded net
income for the first quarter of 1995 by $50.7 thousand.
Interest income and fees on loans increased $464.1 thousand (9.1%)
during the first three months of 1996 compared to an increase of $653.9
thousand (14.7%) during the same period in 1995. Loan balances and
interest rates increased during the first quarter of 1996 which
contributed to the increase in loan interest income. Management has
been working very hard with the Corporation's loan officers examining
ways to stimulate loan demand.
Investment security interest income increased $166.1 thousand (11.6%)
during the first three months of 1996 compared to a decrease of $97.7
thousand (6.4%) in the first three months of 1995. Lower yielding
investment securities matured during 1995 and the first quarter of
9
<PAGE>
1996. These securities were replaced with agency and municipal
securities which carried a much better interest rate yield. Management
tries to purchase securities which return a good yield and still
maintain the Corporation's investment portfolio integrity. Interest
income on Federal Funds Sold increased $74.5 thousand (171.7%) in 1996
compared to an increase of $21.9 thousand (102.0%) in 1995.
During the first quarter of 1996 interest expense on deposits increased
$637.1 thousand (32.6%) compared to an increase of $414.4 thousand
(26.9%) during the first quarter of 1995. Deposit growth coupled with
an increase in rates accounted for this increase. Management believes
that interest rates should remain stable the remainder of 1996 and thus
retain the majority of new deposits. Interest expense on short term
borrowings decreased $86.2 thousand (75.2%) in the first three months
of 1996 compared to a decrease of $13.5 thousand (10.5%) during the
same period in 1995. The Corporation remained in a funds sold position
for the entire first quarter of 1996 while in 1995 was in a funds
borrowed position for most of the quarter.
Other income decreased $314.5 thousand (18.2%) during the first three
months of 1996 compared to an increase of $501.3 thousand (40.8%)
during the same period in 1995. A net gain of approximately $375.0
thousand was realized in the first quarter of 1995 which accounts for much
of this change. Other expenses increased $226.0 thousand (5.5%) compared
10
<PAGE>
to $135.8 thousand (3.4%) increase during the first three months of
1996 and 1995 respectively. With four new Pick 'n Save bank locations
opened during 1995 salaries and benefits, occupancy and supplies all
increased during the first quarter of 1996. The new branch locations
opened throughout 1995 and the full impact of operating costs can
first be experienced in 1996.
A summarized change in income for the quarters appears below :
Three Months Ended March 31, March 31, 1996
1996 1995 Over(Under)
(Unaudited) (Unaudited) 1995
------------- ------------- ------------
Revenue and Expenses:(000's)
Interest Income $ 7,283 $ 6,578 $ 705
Less:Interest Expense 2,618 2,067 551
-------- -------- -------
Net Interest Income 4,665 4,511 154
Provision for Loan Loss 75 75 0
Other Operating Expense
Net of Other Operating
Revenues 2,894 2,353 541
-------- -------- -------
Income Before Income Taxes 1,696 2,083 (387)
Tax Provision 432 642 (210)
-------- -------- -------
NET INCOME $ 1,264 $ 1,441 $ (177)
======== ======== =======
11
<PAGE>
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 ratio of at
least 4.0% to 5.0%.
The risk-based capital ratio for the Corporation is 17.65% and its
leverage ratio is 11.25% as of March 31, 1996.
12
<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
Tri City did not file any reports on form 8-K during the three
month period ended March 31, 1996.
13
<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: May 10, 1996 /s/Henry Karbiner, Jr.
-------------------- ----------------------------------
Henry Karbiner, Jr.
Executive Vice President,
Secretary/Treasurer
DATE: May 10, 1996 /s/Thomas W. Vierthaler
-------------------- ----------------------------------
Thomas W. Vierthaler
Vice President and Comptroller
(Chief Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000313337
<NAME> TRI CITY BANKSHARES CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 26,799
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 19,350
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,244
<INVESTMENTS-CARRYING> 97,412
<INVESTMENTS-MARKET> 97,120
<LOANS> 234,396
<ALLOWANCE> 3,701
<TOTAL-ASSETS> 409,437
<DEPOSITS> 360,301
<SHORT-TERM> 2,021
<LIABILITIES-OTHER> 1,867
<LONG-TERM> 0
0
0
<COMMON> 2,475
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 409,437
<INTEREST-LOAN> 5,568
<INTEREST-INVEST> 1,597
<INTEREST-OTHER> 118
<INTEREST-TOTAL> 7,283
<INTEREST-DEPOSIT> 2,590
<INTEREST-EXPENSE> 2,618
<INTEREST-INCOME-NET> 4,665
<LOAN-LOSSES> 75
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<EXPENSE-OTHER> 4,309
<INCOME-PRETAX> 1,696
<INCOME-PRE-EXTRAORDINARY> 1,264
<EXTRAORDINARY> 0
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<NET-INCOME> 1,264
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
<YIELD-ACTUAL> 5.34
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<LOANS-PAST> 1,037
<LOANS-TROUBLED> 0
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