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, 1997
[ ] 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, 1997: 2,491,157
<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, 1997 and December 31, 1996 3
Consolidated Statements of Income
for the Three Months ended March 31,
1997 and 1996 4
Consolidated Statements of Cash Flows
for the Three Months ended March 31,
1997 and 1996 5
Notes to Unaudited Consolidated Financial
Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Part II - Other Information
Items 1 - 6 14
Signatures 15
2
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TRI CITY BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS March 31, December 31,
1997 1996
---------------- ----------------
Cash and due from banks $ 33,900,737 $ 35,507,815
Investment securities:
Available-for-sale
(at fair value) 10,014,313 10,100,875
Held-to-maturity (fair 108,776,725 115,374,235
value of 1997 - 107,863,868
1996 - 115,264,736)
Loans 262,054,890 253,752,225
Allowance for loan losses (3,178,240) (3,010,230)
---------------- ----------------
NET LOANS 258,876,650 250,741,995
Premises and equipment 18,734,427 18,918,098
Other assets 6,196,207 6,013,142
---------------- ----------------
$ 436,499,059 $ 436,656,160
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 106,113,098 $ 103,807,536
Interest bearing
(over $100,000) 22,922,000 22,037,030
Interest bearing 246,350,344 255,169,111
---------------- ----------------
TOTAL DEPOSITS 375,385,442 381,013,677
Short-term borrowings:
Federal funds purchased and
securities sold under agree-
ments to repurchase 6,750,000 3,200,000
Other 2,321,724 2,199,957
---------------- ----------------
9,091,724 5,399,957
Other Liabilities 2,265,566 1,530,864
---------------- ----------------
TOTAL LIABILITIES 386,722,732 387,944,498
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:
1997 - 2,491,157 shares;
1996 - 2,486,098 2,491,157 2,486,098
Additional paid in capital 8,882,396 8,750,861
Retained earnings 38,415,333 37,437,024
Net unrealized gains on
investment securities
available-for-sale (12,559) 37,679
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 49,776,327 48,711,662
---------------- ---------------
$ 436,499,059 $ 436,656,160
================ ===============
See Notes to Unaudited Consolidated Financial Statements.
3
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TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
---- ----
Interest income:
Loans, including fees $ 6,103,032 $ 5,568,166
Investment securities:
Taxable 1,148,648 1,059,221
Exempt from federal
income tax 630,048 537,406
Federal funds sold 789 117,867
------------- -------------
TOTAL INTEREST INCOME 7,882,517 7,282,660
Interest expense:
Deposits 2,483,157 2,589,639
Short-term borrowings 176,132 28,491
------------- -------------
TOTAL INTEREST EXPENSE 2,659,289 2,618,130
------------- -------------
NET INTEREST INCOME 5,223,228 4,664,530
Provision for loan losses (150,000) (75,000)
------------- -------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,073,228 4,589,530
Other income:
Service charge income 793,988 820,961
Rental income 218,755 229,833
Other 383,541 364,647
------------- -------------
TOTAL OTHER INCOME 1,396,284 1,415,441
Other expense:
Salaries and employee benefits 2,492,037 2,285,621
Net occupancy 659,867 668,446
Equipment 320,933 319,820
Data processing 142,740 139,011
Advertising 110,847 92,579
Regulatory Agency Assessments 33,267 23,808
Office Supplies 134,749 129,938
Other 530,166 649,782
------------- -------------
TOTAL OTHER EXPENSE 4,424,606 4,309,005
------------- -------------
Income before income taxes 2,044,906 1,695,966
Provision for income taxes 538,300 432,250
------------- -------------
NET INCOME $ 1,506,606 $ 1,263,716
============= =============
Per share data:
Net income $ 0.61 $ 0.51
Average shares outstanding 2,489,921 2,473,693
See Notes to Unaudited Consolidated Financial Statements.
4
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TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
---- ----
OPERATING ACTIVITIES
Net income $ 1,506,606 $ 1,263,716
Adjustments to reconcile net
income to net cash provided
by operating activities:
Proceeds from sale of loans
held for sale 1,637,757 1,581,513
Origination of loans held
for sale (1,637,757) (1,581,513)
Amortization of investment
securities premiums and
accretion of discounts 40,913 81,064
Provision for loan losses 150,000 75,000
Provision for depreciation 414,357 379,821
Decrease in interest receivable (260,474) (180,675)
Increase in interest payable 539,707 553,371
Other 299,404 (16,923)
------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,690,513 2,155,374
INVESTING ACTIVITIES
Available for Sale:
Proceeds from maturities
and redemptions of
investment securities 0 2,500,000
Held to Maturity:
Proceeds from maturities
and redemptions of
investment securities 5,755,101 6,141,035
Purchase of investment
securities 0 (6,997,530)
Net increase in loans (7,473,834) (1,923,806)
Purchases of premises and
equipment (230,686) (305,975)
------------- -------------
NET CASH (USED) PROVIDED
BY INVESTING ACTIVITIES (1,949,419) (586,276)
FINANCING ACTIVITIES
Sale of Common Stock 136,594 99,417
Net increase (decrease) in deposits (5,628,235) 10,081,368
Net decrease in short-term
borrowings 3,671,767 106,617
Cash dividends (528,297) (432,330)
------------- -------------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES (2,348,171) 9,855,072
------------- -------------
INCREASE IN CASH AND
CASH EQUIVALENTS (1,607,078) 11,424,170
Cash and cash equivalents at the
beginning of the period 35,507,815 34,725,066
------------- -------------
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $ 33,900,738 $ 46,149,236
============= =============
See Notes to Unaudited Consolidated Financial Statements.
5
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TRI CITY BANKSHARES CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(A) BASIS OF PRESENTATION
The accompanying audited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to form 10Q and Article 10 of Regulation
5-X. Accordingly, they do not include all of the information
and footnotes required by Generally Accepted Accounting
Principles for complete financial statements. These financial
statements should be read in conjunction with the financial
statements and the notes thereto included in the Annual Report
on Form 10-K of Tri City Bankshares Corporation ("Tri City")
for the year ended December 31, 1996. The December 31, 1996
financial information included herein is derived from the
December 31, 1996 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,
necessary to present fairly Tri City's financial position as
of March 31, 1997 and the results of its operations and cash
flows for the three month period ended March 31, 1997 and
1996. The operating results for the first three months of
1997 are not necessarily indicative of the results which may
be expected for the entire 1997 fiscal year.
6
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(B) EARNINGS PER SHARE
In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" (Statement 128), which is
required to be adopted on December 31, 1997. Statement 128 may not be
adopted early. Statement 128 modifies the calculation of earnings per
share for companies with common stock equivalents such as stock options
and other potentially dilutive securities. As Tri City does not have
any common stock equivalents or other potentially dilutive securities
outstanding, the adoption of Statement 128 is not expected to be
material.
7
<PAGE>
TRI CITY BANKSHARES CORPORATION
MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
The following discussion contains certain "forward-looking statements,"
including statements concerning objectives and future events or
performance, and other statements which are other than historical fact.
Factors which may cause actual results to differ materially from those
contemplated by such forward-looking statements include, but are not
limited to, the following possibilities: (i) lower than anticipated loan
and deposit growth due to a variety of factors, including changes in the
interest rate environment and an increase in competitive pressures in the
banking and financial services industry; (ii) insufficient reserves for
loan losses; (iii) poorer than expected general economic conditions; (iv)
legislation or regulatory changes which adversely affect the banking
industry; and (v) other unanticipated occurrences.
CHANGES IN FINANCIAL POSITION
During the first quarter of 1997, Tri City Bankshares Corporation (the
Corporation ) decreased in net assets by $157,000 compared to an
increase during the first quarter of 1996 of $11.8 million (3.0%). In
the first three months of 1997, $6.6 million of investment securities
matured or were called and management decided not to replace them since
time deposits of $8.8 million also matured. Since interest rates have
8
<PAGE>
slowly begun to rise, investors have started to look for more lucrative
instruments in which to place their funds from maturing time deposits in
order to obtain the best yield possible. Loans increased $8.3 million
(3.3%) during the first three months of 1997 compared to an increase of
$1.9 million (0.8%) during the first three months of 1996. Loan demand
during the first quarter of 1997 has increased and management has
endeavored to meet this demand while still maintaining the high quality
of the Corporation s loan portfolio. Management has continued to monitor
the Corporation s loan portfolio and thus has determined that the reserve
for loan losses is adequate; however, with new loans being added and the
large charge-off in 1996, a decision was made to increase the loan loss
provision in the quarter ended March 31, 1997 to maintain the reserve at
1.25% of total loans.
Deposits for the first three months of 1997 have decreased $5.6 million
(1.5%) compared to an increase of $10.1 million (2.9%) during the first
three months of 1996. The outward flow of funds from matured time
deposits is the principal reason for this decline. Management feels that
they can attract new deposit growth as well as loan demand with the
opening of a new banking location at Clarke Square located in Milwaukee,
Wisconsin. The Federal Reserve recently raised the discount rate which
may eventually increase the rates paid on deposits, as a result,
management feels that growth in deposits will be good due to such changes
in the rates. Total borrowings for the Corporation increased $3.7
million (68.0%) during the first three months of 1997 compared to an
increase of $106,600 (5.6%) during the first three months of 1996.
9
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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
On January 19, 1997, a new banking facility was opened inside a Pick n
Save food store located at Clarke Square on the near south side of
Milwaukee, Wisconsin. The cost of this facility was considered nominal
and was borne by the Corporation s banking subsidiary. This new banking
branch will add to the growth of the Corporation and help establish the
banking subsidiary within the inner boundaries of Milwaukee.
There are no additional plans for major capital expenditures for the
remainder of 1997. Management, however, will seriously consider any
opportunities which may present themselves for the growth and
profitability of the Corporation.
10
<PAGE>
RESULTS OF OPERATIONS
For the quarter ended March 31, 1997, the Corporation reported net income
of $1,506,606, an increase of $242,900 (19.2%) from the $1,263,716
reported in the quarter ended March 31, 1996. This increase can be
attributed primarily to the increase in new loans. Interest income and
fees on loans increased $534,900 (9.6%) in the first three months of 1997
compared to an increase of $464,100 (9.1%) in the first three months of
1996. Loan demand has increased for 1997 and management has worked hard
to comply with this demand while not jeopardizing the quality of the
entire loan portfolio.
Investment security interest income has also increased $182,100 (11.4%)
in the first three months of 1997 compared to an increase of $166,100
(11.6%) during the first quarter of 1996. Although investment security
balances decreased $6.6 million, the average yield on the remaining
securities is higher than the rate paid on the maturing securities.
Management does not want to borrow in order to replace securities which
have matured.
In the first quarter of 1997 interest expense increased $41,200 (1.6%)
compared to an increase of $637,100 (32.6%) in the first quarter of 1996.
Approximately $8.8 million in time deposits matured during the first
three months of 1997. Time deposits are generally one of the more
expensive interest bearing liabilities. The decline in interest expense
on deposit accounts was offset by an increase in interest expense on
Federal Funds Purchased and Securities Sold under Agreements to
Repurchase.
11
<PAGE>
Other income decreased $19,200 (1.4%) in the first quarter of 1997
compared to a decrease of 314,500 in the first quarter of 1996. Other
expenses increased $115,600 (2.7%) during the first three months of 1997
compared to an increase of $226,000 (5.5%) during the same period in
1996. A refund of approximately $86,000 was received in January for land
cleanup performed at foreclosed property in 1995. One new branch
location was also opened in January of 1997 and expenses were recorded in
the first quarter of 1997 while none were recorded during the same period
of 1996.
12
<PAGE>
A summarized change in income for the quarters appears below :
Three Months Ended March 31, March 31, 1997
1997 1996 Over(Under)
(Unaudited) (Unaudited) 1996
------------- ------------- -------------
Revenue and Expenses:(000 s)
Interest Income $ 7,882 $ 7,283 $ 599
Less: Interest Expense 2,659 2,618 41
------- ------- ------
Net Interest Income 5,223 4,665 558
Provision for Loan Loss 150 75 75
Other Operating Expense
Net of Other Operating
Revenues 3,028 2,894 134
------- ------- ------
Income Before Income Taxes 2,045 1,696 349
Tax Provision 538 432 106
------- ------- ------
NET INCOME $ 1,507 $ 1,264 $ 243
======= ======= ======
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%.
As of March 31, 1997, the Corporation has attained a tier 1 capital ratio
of 17.36%, total risk-based capital ratio of 18.47% and a leverage ratio
of 11.57%.
13
<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 Number Description
-------------- ------------------------
27 Financial Data Schedule
(b) Form 8-K
Tri City did not file any reports on form 8-K during the
three month period ended March 31, 1997.
14
<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, 1997 /s/Henry Karbiner, Jr.
------------------- ----------------------------
Henry Karbiner, Jr.
Executive Vice President,
Secretary/Treasurer
DATE: May 10, 1997 /s/Thomas W. Vierthaler
-------------------- ----------------------------
Thomas W. Vierthaler
Vice President and Comptroller
(Chief Accounting Officer)
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000313337
<NAME> TRI CITY BANKSHARES CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 33,901
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,014
<INVESTMENTS-CARRYING> 108,777
<INVESTMENTS-MARKET> 107,864
<LOANS> 262,055
<ALLOWANCE> 3,178
<TOTAL-ASSETS> 436,499
<DEPOSITS> 375,385
<SHORT-TERM> 9,092
<LIABILITIES-OTHER> 2,266
<LONG-TERM> 0
0
0
<COMMON> 2,491
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 436,499
<INTEREST-LOAN> 6,103
<INTEREST-INVEST> 1,779
<INTEREST-OTHER> 1
<INTEREST-TOTAL> 7,883
<INTEREST-DEPOSIT> 2,483
<INTEREST-EXPENSE> 2,659
<INTEREST-INCOME-NET> 5,223
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,425
<INCOME-PRETAX> 2,045
<INCOME-PRE-EXTRAORDINARY> 1,507
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,507
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<YIELD-ACTUAL> 5.49
<LOANS-NON> 727
<LOANS-PAST> 1,271
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,010
<CHARGE-OFFS> 4
<RECOVERIES> 22
<ALLOWANCE-CLOSE> 3,178
<ALLOWANCE-DOMESTIC> 3,178
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</TABLE>
