SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15 (d) of the Securities Exchange
Act of 1934 (No fee required)
For the fiscal year ended December 31, 1997
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) For the transition period from ____ to ____ .
Commission File No. 0-22220
TRI-COUNTY BANCORP, INC.
--------------------------------------------
(Name of Small Business Issuer in Its Charter)
Wyoming 83-0304855
- --------------------------------------------- -------------------
(State or Other Jurisdiction of Incorporation IRS Employer or
Organization) Identification No.
2201 Main Street, Torrington, Wyoming 82240
- --------------------------------------- ----------
(Address of Principal Executive Offices (Zip Code)
Issuer's Telephone Number, Including Area Code: (307) 532-2111
Securities registered under to Section 12(b) of the Exchange Act: None
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock, par value $0.10 per share
---------------------------------------
(Title of Class)
Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 [ ].
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $6,571,867
The registrant's voting stock trades on the Nasdaq SmallCap Market under
the symbol "TRIC." The aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the average bid and asked price of
the registrant's Common Stock as reported by the Nasdaq SmallCap Market on March
27, 1998, was $16,636,847 ($14.25 per share based on 1,167,498 shares of Common
Stock outstanding).
As of March 27, 1998, there were issued and outstanding 1,167,498 shares
of the registrant's Common Stock.
Transition Small Business Disclosure Format (check one): YES [ ] NO [X]
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal Year ended
December 31, 1997. (Parts I, II, and IV)
2. Portions of the Proxy Statement for the Annual Meeting of Stockholders
for the Fiscal Year ended December 31, 1997. (Part III)
<PAGE>
PART I
Item 1. Business
Business of the Company
Tri-County Bancorp, Inc. (the "Company") is a Wyoming corporation and
savings and loan holding company of Tri-County Federal Savings Bank (the
"Bank"). The Company is a unitary savings and loan holding company which, under
existing laws, generally is not restricted in the types of business activities
in which it may engage provided the Bank retains a specified amount of its
assets in housing-related investments. The office of the Company is located at
2201 Main Street, Torrington, Wyoming and its telephone number is (307)
532-2111.
Business of the Bank
The Bank is a federally chartered savings bank headquartered in
Torrington, Wyoming. The Bank's deposits have been federally insured since 1936
and are currently insured by the Savings Association Insurance Fund ("SAIF").
The Bank is primarily engaged in the business of attracting deposits from
the general public and using those deposits, together with other funds, to
originate mortgage loans for the purchase of residential properties and to
purchase mortgage-backed and investment securities. The Bank offers a full range
of single and multi-family mortgages, consumer loans, commercial real estate
loans, and second mortgage loans. In addition to originating loans in its market
area, the Bank also purchases mortgage loans, including participations, secured
by properties located primarily in Wyoming, Colorado and New Mexico,
mortgage-backed securities, and investment securities. These additional earning
assets are funded with the excess deposits and borrowed funds from the Federal
Home Loan Bank of Seattle ("FHLB").
The Bank is subject to examination and comprehensive regulation by the
Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance
Corporation ("FDIC"). The Bank is a member of and owns capital stock in the
FHLB, which is one of the 12 regional banks in the FHLB System.
The principal sources of funds for the Bank's lending activities are
deposits, borrowed funds from the FHLB, and the amortization, repayment, and
maturity of loans, investment securities, and mortgage-backed securities.
Principal sources of income are interest and fees on loans, mortgage-backed
certificates, investment securities, and deposits held in other financial
institutions. The Bank's principal expense is interest.
The Bank's home office is located at 2201 Main Street, Torrington,
Wyoming, and the Bank's telephone number is (307) 532-2111.
Year 2000. A significant amount of national attention has been directed at
the possible problems that may occur with computer programs and data processing
systems when they start utilizing the year 2000 in data fields. Many computer
programs that can only distinguish the final two digits of the year entered (a
common programming practice in earlier years) are expected to read entries for
the year 2000 as the year 1900 and incorrectly calculate interest and
delinquency dates. Rapid and accurate data processing is essential to the
operations of the Company. Accordingly, the Company has adopted an action plan
to identify all areas that may be affected by the change to the year 2000.
Furthermore, the plan requires that each data processing and software provider
be "certified" year 2000 compliant by December 31, 1998. The majority of the
Company's data is processed by a third party service bureau. The service bureau
of the Company has notified the Company that it will be year 2000 compliant by
December 31, 1998. The balance of the Company's data processing and software
providers have stated that they are or will be year 2000 compliant by December
31, 1998. If the Company's service bureau is unable to resolve this potential
problem in time, the Company would likely experience significant data processing
delays, mistakes or failures. These delays, mistakes or failures could have a
significant adverse impact on the financial condition and results of operation
of the Company.
<PAGE>
An assessment of external entities which it interfaces with, such as
vendors, counterparties, customers, payment systems, and others, is ongoing.
Until such assessments are complete, it is not possible to predict the affect on
the Company of noncompliance by external entities.
The Company expects that the principal costs will be those associated with
the remediation and testing of its computer applications. This effort is under
way and is following a process of inventory, scoping and analysis, modification,
testing and certification, and implementation. A major portion of these costs
will be met from existing resources through a reprioritization of technology
development initiatives, with the remainder representing incremental costs.
The Company does not anticipate that the related overall costs will be
material to any single year.
Market Area - Competition
The Bank primarily has focused on serving its customers located in the
communities of Torrington and Wheatland, Wyoming, which is where the Bank's
offices are located. The Bank is the only local thrift serving its market area.
Goshen and Platte Counties, Wyoming, and Scottsbluff County, Nebraska are
considered to be the Bank's primary market area. This area was founded on
agriculture, which continues to play a significant role in the economy. Some of
the larger crops include sugar beets, corn, and dry beans. Agriculture and its
related support industries account for the largest portion of the area's labor
force. The success of agriculture is subject to various factors, including, but
not limited to, weather and foreign competition. Other significant employers
include local government (schools and utilities) and retail trade. At December
31, 1997, over 62% of the Bank's net loan portfolio of $40.4 million consisted
of loans made to entities located in the Bank's market area. In fiscal 1997, the
Bank purchased $5.1 million of mortgage loans (including participations inside
its market area and outside its market area, primarily in Colorado).
The Bank encounters strong competition both in the attraction of deposits
and origination of real estate and other loans. Its most direct competition for
deposits has come from two locally headquartered commercial banks, branches of
one regional savings association, and one regional bank in its market area. Due
to their size, many of the Bank's competitors possess greater financial and
marketing resources. Based on published figures, the Bank is the only thrift
headquartered in its market area. The Bank competes for deposits by offering
depositors competitive interest rates and a high level of personal service.
The competition for real estate and other loans comes principally from
commercial banks, mortgage banking companies, and other savings associations.
This competition for loans has increased in recent years as a result of the
large number of institutions choosing to compete in the Bank's market area. The
Bank competes for loans primarily through the interest rates and loan fees it
charges and the efficiency and quality of services it provides borrowers.
<PAGE>
Lending Activities
General. Set forth below is selected data relating to the composition
of the Bank's loan portfolio by type of loan on the dates indicated.
At December 31,
------------------------------------------------
1996 1997
---------------------- ----------------------
$ % $ %
--------- ------- --------- -------
(Dollars in Thousands)
Type of Loans:
Construction............... $ 1,537 3.80% $ 52 0.15%
One-to four-family......... 31,395 77.66 28,972 82.15
Commercial and multi-family 5,096 12.61 4,165 11.80
Consumer loans:
Savings account loans.... 170 0.42 197 0.56
Home equity and second 1,065 2.63 785 2.23
mortgage...................
Automobile............... 1,391 3.44 1,279 3.63
Overdraft................ 37 0.09 29 0.08
Other.................... 248 0.61 295 0.84
Less:
Deferred loan fees....... (102) (0.25) (94) (0.27)
Allowance for estimated
loan losses............. (412) (1.01) (415) (1.17)
------- ------ ------- ------
Total loans, net........... $40,425 100.00% $35,265 100.00%
======= ====== ======= ======
The following table sets forth the maturity of the Bank's loan portfolio
at December 31, 1997. The table does not include prepayments. Prepayments
totaled $5.75 million and $6.56 million for the years ended December 31, 1997
and 1996, respectively. All loans are shown as based on contractual maturities.
<TABLE>
<CAPTION>
1-4 Family Multi-family
Real Estate Real Estate
Mortgages Mortgages Construction Consumer Total
----------- ------------ ------------ -------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual................................. $ 0 $ -- $ -- $ -- $ 0
------ ------ ------ ------ ------
Amounts due:
within year.............................. $ 148 $ 63 $ 1,992 $ 256 $ 2,459
1 to 5 years............................. $ 1,939 $ 251 $ -- $ 2,005 $ 4,195
after 5 years............................ $29,123 $ 4,495 $ -- $ 1,122 $34,740
Nonperforming.............................. -- -- -- -- --
------ ------ ------ ------ ------
Total amount due .......................... $31,210 $ 4,809 $ 1,992 $ 3,383 $41,394
====== ====== ====== ======
Less:
Allowance for loan losses.................................................................. (412)
Loans in process........................................................................... (455)
Deferred loan fees and unearned discounts.................................................. (102)
------
Loans receivable, net....................................................................$40,425
======
</TABLE>
<PAGE>
The following table sets forth the dollar amount of all loans due after
December 31, 1997 which have fixed interest rates and which have floating or
adjustable interest rates:
Floating or
Fixed-Rates Adjustable-Rates Total
----------- ---------------- -------
(In Thousands)
One- to four-family................. $19,564 $11,646 $31,210
Commercial and multi-family real 1,530 3,279 4,809
estate..............................
Construction........................ 1,992 -- 1,992
Consumer............................ 2,799 584 3,383
------- ------- -------
Total............................. $25,885 $15,509 $41,394
======= ======= =======
One- to Four-Family Mortgages. Historically, the Bank's primary lending
activity consists of the origination of one- to four-family, owner-occupied,
residential mortgage loans secured by property located in the Bank's primary
market area. The Bank also purchases mortgage loans (including participations)
outside its market area to supplement loan demand in its area. A majority of
these loans are purchased from a mortgage banker in Colorado and are secured by
single family homes (usually second homes) or condominiums located in the
central Colorado mountain resort areas.
The Bank currently offers adjustable-rate mortgages that adjust every year
and have terms from 10 to 30 years, and fixed-rate mortgage loans with terms of
primarily 10 to 30 years. Adjustable rate loans originated prior to 1994 were
primarily based on the National Monthly Median Cost of Funds with a limit on
increases of 1% per year and 4% over the life of the loan. Beginning in 1994,
the Bank began basing all adjustable-rate loans primarily on the one year
Treasury Note Constant Maturities Index with a limit on increases of 2% per year
and 6% over the life of the loan. In 1995, the Bank began offering mortgages
with fixed rates for 3 and 5 year terms. The loans then convert to fully indexed
adjustable rate loans based on the one year Treasury Note Constant Maturities
index. The loans are popular with the borrowers in Colorado purchasing second
family homes. These loans are called 3-one's and 5-one's, respectively. The Bank
considers the market factors and competitive rates on loans as well as its own
cost of funds when determining the rates on the loans that it offers.
The Bank's residential mortgage lending includes 15- and 30-year fixed-rate
loans, Federal Housing Administration ("FHA") loans, Veterans Administration
("VA") loans, Farmers Home Administration ("FmHA") loans, and State of Wyoming
subsidized loans as well as adjustable-rate mortgage loans. Generally, the Bank
sells all fixed rate loans with maturities in excess of 15 years.
The Bank's origination of fixed-rate mortgage loans versus adjustable-rate
mortgage loans is determined on an on-going basis and is based on changes in
market interest rates and consumer preferences. The primary purpose of offering
adjustable-rate mortgage loans and 10- and 15-year fixed-rate loans is to make
the Bank's loan portfolio more interest rate sensitive. Generally, during
periods of rising interest rates, the risk of default on an adjustable-rate
mortgage is considered to be greater than the risk of default on a fixed-rate
loan due to the upward adjustment of interest costs to the borrower. To help
reduce such risk, the Bank qualifies the loan at 2% above the fully-indexed
rate, as opposed to the original interest rate. The Bank does not originate
adjustable-rate mortgage loans with negative amortization.
<PAGE>
Regulations limit the amount that a savings association may lend in
relationship to the appraised value of the real estate securing the loan, as
determined by an appraisal at the time of loan origination. Such regulations
permit a maximum loan-to-value ratio of 100% for residential property and 90%
for all other real estate loans. The Bank's lending policies, however, generally
limit the maximum loan-to-value ratio to 80% of the appraised value of the
property, based on an independent appraisal. When the Bank makes a loan in
excess of 80% of the appraised value or purchase price, private mortgage
insurance is generally required for at least the amount of the loan in excess of
80% of the appraised value. The Bank generally does not make non-owner occupied
one- to four-family loans in excess of 75% of the appraised value. The
loan-to-value ratio, maturity, and other provisions of the residential real
estate loans made by the Bank reflect the policy of making loans generally below
the maximum limits permitted under applicable regulations.
One- to four-family residential real estate loans are normally originated
for the Bank's portfolio. In some cases, borrowers prepay their loans in full
upon the sale of the property pledged as security or upon refinancing the
original loan. In addition, substantially all of the mortgage loans in the
Bank's portfolio contain due-on-sale clauses providing that the Bank may declare
the unpaid amount due and payable upon the sale of the property securing the
loan. Thus, average loan maturity is a function of, among other factors, the
level of purchase and sale activity in the real estate market, prevailing
interest rates, and the interest rates payable on outstanding loans.
Multi-Family and Commercial Real Estate Loans. In order to enhance the
yield on its assets, the Bank originates and participates with other financial
institutions in permanent loans secured by multi-family and commercial real
estate. These loans are originated in amounts up to 75% of the appraised value
of the property. Such appraised value is determined by an independent appraiser.
The Bank's multi-family and commercial real estate loans are permanent loans
secured by approved property such as apartments, small office buildings, retail
stores, small strip plazas, and other non-residential buildings. The Bank
originates multi-family and commercial real estate loans with amortization
periods of 15 to 25 years, primarily as adjustable rate mortgages. As of
December 31, 1997, the Bank had 19 multi-family and commercial real estate loans
totaling $4,809,013, or 11.9% of the Bank's loan portfolio. Of the $4,809,013,
$185,289 at December 31, 1997 involved loans secured by multi-family real
estate. At December 31, 1997, the largest multi-family and commercial real
estate loans had balances of $122,855 and $915,197, respectively. See
"Origination, Purchase, and Sale of Loans" and "-- Loans-to-One Borrower."
Loans secured by multi-family and commercial real estate generally involve
a greater degree of risk than residential mortgage loans and carry larger loan
balances. This increased credit risk is a result of several factors, including
the concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income producing properties, and the
increased difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by commercial real estate is
typically dependent upon the successful operation of the related real estate
project. If the cash flow from the project is reduced, the borrower's ability to
repay the loan may be impaired.
<PAGE>
Commercial Business Loans. Regulations authorize the Bank to make secured
or unsecured loans for commercial, corporate, business, and agricultural
purposes. The aggregate amount of such loans outstanding may not exceed 10% of
the Bank's assets. As of December 31, 1997, the Bank had $472,418 in commercial
business loans outstanding.
Consumer Loans. Consumer loans consist of savings account loans, home
improvement loans, home equity lines-of-credit, second mortgage loans,
automobile loans, and personal unsecured loans. As of December 31, 1997, these
consumer loans totaled $2.91 million, or 7.20%, of the Bank's loan portfolio,
$1.39 million or 3.44% of which consisted of automobile loans. The Bank has
actively sought consumer loans within its market area, however, competition for
such loans and the low loan demand in the Bank's lending area effects the volume
of such originations. Consumer lending has permitted the Bank to obtain greater
yields and, at the same time, expose the institution to a smaller amount of
interest rate risk, as most consumer loans do not extend beyond five years.
The underwriting standards employed by the Bank for consumer loans include
a determination of the applicant's payment history on other debts and an
assessment of ability to meet existing obligations and payments on the proposed
loan. In addition, the stability of the applicant's monthly income from primary
employment is considered during the review process. Creditworthiness of the
applicant is of primary consideration; however, the review process also includes
a comparison of the value of the security in relation to the proposed loan
amount.
Consumer loans entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans that are unsecured or secured
by assets that depreciate rapidly, such as automobiles, mobile homes, boats, and
recreational vehicles. In such cases, repossessed collateral for a defaulted
consumer loan may not provide an adequate source of repayment for the
outstanding loan and the remaining deficiency often does not warrant further
substantial collection efforts against the borrower. In particular, amounts
realizable on the sale of repossessed automobiles may be significantly reduced
based upon the condition of the automobiles and the lack of demand for used
automobiles. Further, consumer loan collections are dependent on the borrower's
continuing financial stability, and therefore are more likely to be adversely
affected by job loss, divorce, illness, or personal bankruptcy. Finally, the
application of various federal and state laws, including federal and state
bankruptcy and insolvency laws, may limit the amount which can be recovered in
the event of default. The Bank has a consumer loan loss allowance, based on
general economic conditions and prior loss experience.
Loan Solicitation and Processing. The Bank's sources of mortgage loan
applications are referrals from existing or past customers and realtors, walk-in
customers, and advertising.
The loan approval process can take one of three forms. Loan officers at
each branch have authority to approve all loans up to $25,000. A staff loan
committee, consisting of senior officers of the Bank, can approve loans up to
$65,000. Any loan above the staff loan committee lending limit must be submitted
to the Loan Committee of the Board of Directors, which meets once a week. The
original lending officer presents the proposed loan at each of these two
committees. However, the original lending officer cannot vote on a loan that the
officer presents for approval. The Loan Committee of the Board of Directors
consists of at least three directors. All insider loans must be approved by the
majority of the Board with all interested directors abstaining from voting. The
Board of Directors ratifies all loans approved by officers or committees.
<PAGE>
In processing loans, the Bank utilizes forms, procedures, and requirements
that conform to those of the secondary market. This process provides the Bank
with the capability of selling loans not held in its loan portfolio and
management believes such efforts also enhance the value of the Bank's loan
portfolio.
The Bank uses fee appraisers on most real estate related transactions. It
is the Bank's policy to obtain title insurance on all real estate transactions
and to obtain flood (if applicable), fire, and casualty insurance on all loans
that require security.
Originated mortgage loans in the Bank's loan portfolio generally include
due-on-sale clauses which provide the Bank with the contractual right to deem
the loan immediately due and payable in the event that the borrower transfers
ownership of the property without the Bank's consent.
Purchase and Sale of Loans. The Bank's purchases in the secondary market
are dependent upon the demand for mortgage credit in the local market area and
the inflow of funds from traditional sources. Purchases of loans enable the Bank
to utilize available funds more quickly and to obtain a yield higher than could
generally be obtained in the alternative investment vehicles. The purchase of
such loans is part of the Bank's strategy to make its overall loan portfolio
more sensitive to current market conditions and interest rates.
The Bank purchases residential first mortgage ARM loans that meet the
Bank's underwriting standards, which generally follow FHLMC and FNMA guidelines,
except that the Bank will generally purchase loans up to $500,000, which exceeds
the limit up to which FHLMC and FNMA may purchase loans. The majority of these
loans purchased are sold by the seller without recourse. It is the Bank's policy
to limit the purchase of loan packages secured by a concentration of properties
in a single subdivision or condominium project.
The Bank reviews each purchased loan as if it were originating the loan
according to its underwriting standards. All loans must be documented, including
an original appraisal that substantiates the value of the subject property at
the time of origination of the loan. The Bank obtains from the seller a
duplicate copy of each original loan file, which generally includes an executed
loan application and mortgage note, financial statements and credit reports of
the borrower, appraisal and title insurance. The Bank may purchase a qualifying
loan up to $500,000 with a loan-to-value ratio of up to 80% based on the
original appraisal of the property.
The Bank purchases only ARM loans with interest rates that adjust on a
monthly, semi-annual and annual basis. Currently, all purchased ARM loans adjust
annually after the initial fixed period of 3 or 5 years. Most of the ARMs are
indexed to interest rates at a margin of 288 basis points above a recognized
index, usually the one year Treasury Note Constant Maturities Index. This cost
of funds index generally lags the current market interest rates. The Bank does
not purchase loans that provide for negative amortization.
Most of the loans purchased are secured by real estate located outside of
Wyoming, including Colorado, Idaho and New Mexico. At December 31, 1997, the
Bank's purchased loan portfolio and participation loans totaled $16.9 million,
or 41.32% of the loan portfolio. Of the purchased loan portfolio at December 31,
1997, $11.9 million are Colorado loans.
<PAGE>
The sale of loans is generally limited to fixed-rate mortgage loans with
maturities greater than 15 years and government guaranteed loans. All
adjustable-rate loans are held in the loan portfolio. The Bank presently sells
individual loans to a mortgage banking company and to the Wyoming Community
Development Authority, with servicing released. The loans are sold on a
non-recourse basis. Mortgage loans are primarily made with standard forms and
documentation to allow for future sale in the secondary market.
Loan and Rate Commitments. At the customer's request, the Bank will commit
to an interest rate for up to 60 days to prospective borrowers upon receipt of a
mortgage loan application. As such, the Bank is exposed to a 60 day fluctuation
on mortgage applications only for loans originated for its portfolio. In
addition, loan commitments, which are generally written, are not made until the
loan is approved in accordance with the Bank's loan underwriting policy. At
December 31, 1997, the Bank had $1,239,400 of loan commitments to originate
or purchase mortgage loans.
Loan Servicing. As of December 31, 1997, loans serviced for others totaled
$163,598. This servicing was generated more than five years ago, and fee income
from these loans is not significant.
Loans-to-One Borrower. Current regulations limit loans-to-one borrower in
an amount equal to 15% of unimpaired capital and unimpaired surplus on an
unsecured basis and an additional amount equal to 10% of unimpaired capital and
unimpaired surplus if the loan is secured by readily marketable collateral
(generally, financial instruments, not real estate) or $500,000, whichever is
higher. Penalties for violations of the loan-to-one borrower statutory and
regulatory restrictions include cease and desist orders, the imposition of a
supervisory agreement, and civil money penalties. The Bank's maximum loan-to-one
borrower limit was approximately $1.9 million as of December 31, 1997.
At December 31, 1997, the Bank's five largest aggregate lending
relationships had balances ranging from $1,211,523 to $570,462 with an average
balance of $837,180. All five of these lending relationships involved loans
purchased in 1997 and are secured by commercial real estate and single family
residences in New Mexico, Colorado, and Idaho. At December 31, 1997, all of
these loans were current.
Loan Delinquencies. The Bank's collection procedures provide that when a
mortgage loan is past due, a telephone call is made to the borrower within 30
days. If the delinquency continues, subsequent efforts are made to eliminate the
delinquency. If the loan continues in a delinquent status for 90 days or more,
management initiates foreclosure proceedings unless other repayment arrangements
are made. Collection procedures for non-mortgage loans generally begin after a
loan is 30 days delinquent.
Loans are reviewed on a regular basis and are generally placed on a
non-accrual status when the loan becomes 90 days delinquent and, in the opinion
of management, the collection of additional interest is doubtful. Interest
accrued and unpaid at the time a loan is placed on non-accrual status is charged
against interest income.
Loans 60 - 90 days delinquent totaled $152,641 at December 31, 1997.
<PAGE>
Nonperforming Assets. The following table sets forth information regarding
non-accrual loans, real estate owned, and other repossessed assets. At December
31, 1997 the Bank had no loans which were considered troubled debt
restructurings within the meaning of SFAS No. 15.
At December 31,
1997 1996
---- ----
(Dollars in Thousands)
Loans accounted for on a non-accrual basis:
Mortgage loans:
Permanent loans secured by 1-4 dwelling units..... $ 0 $ 35
All other mortgage loans.......................... 0 0
--- ---
Total............................................... $ 0 $ 35
=== ===
Accruing consumer loans which are contractually past
due 90 days or more............................... $ 0 $ 0
=== ===
Total nonperforming................................. $ 0 $ 35
=== ===
Real estate owned, net.............................. $ 0 $ 18
=== ===
Total nonperforming assets.......................... $ 0 $ 53
=== ===
Total nonperforming loans to net loans............. 0% 0.10%
=== ====
Total nonperforming loans to total assets.......... 0% 0.04%
=== ====
Total nonperforming assets to total assets......... 0% 0.06%
=== ====
Interest income not recorded on loans accounted for on a non-accrual basis
under the original terms of such loans was $0 and $4,000 for the years ended
December 31, 1997 and 1996, respectively. The Bank did not include any interest
income on non-accrual loans during the periods indicated. It is the Bank's
general policy to accrue interest only on loans less than 91 days delinquent.
Once loans are 91 days delinquent, the Bank reverses previously accrued but
unpaid interest.
Classified Assets. OTS regulations provide for a classification system for
problem assets of insured institutions, which covers all problem assets,
including assets that previously had been treated as "scheduled items." Under
this classification system, problem assets of insured institutions are
classified as "substandard," "doubtful," or "loss." An asset is considered
substandard if it is inadequately protected by the current net worth and paying
capacity of the obligor or of the collateral pledged, if any. Substandard assets
include those characterized by the "distinct possibility" that the insured
institution will sustain "some loss" if the deficiencies are not corrected.
Assets classified as doubtful have all of the weaknesses inherent in those
classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full," on the basis of currently
existing facts, conditions and values, "highly questionable and improbable."
Assets classified as loss are those considered "uncollectible" and of such
little value that their continuance as assets without the establishment of a
specific loss reserve is not warranted. Assets designated "special mention" by
management are assets included on the Bank's internal watchlist because of
potential weakness but which do not currently warrant classification in one of
the aforementioned categories.
<PAGE>
When an insured institution classifies problem assets as either substandard
or doubtful, it may establish general allowances for loan losses in an amount
deemed prudent by management. General allowances represent loss allowances that
have been established to recognize the inherent risk associated with lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem assets. When an insured institution classifies problem assets
as loss, it is required either to establish a specific allowance for losses
equal to 100% of that portion of the asset so classified or to charge-off such
amount. An institution's determination as to the classification of its assets
and the amount of its valuation allowances is subject to review by the OTS,
which may order the establishment of additional general or specific loss
allowances. A portion of general loss allowances established to cover possible
losses related to assets classified as substandard or doubtful may be included
in determining an institution's regulatory capital, while specific valuation
allowances for loan losses generally do not qualify as regulatory capital.
At December 31,
--------------------
1997 1996
---- ----
(In Thousands)
Special mention assets.. $ 61 $ 67
=== ===
Classified Assets:
Substandard........... $ 64 $ 99
Doubtful.............. -- --
Loss.................. -- --
--- ---
Total............... $ 64 $ 99
=== ===
Real Estate Owned. Real estate acquired by the Bank as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned
until it is sold. When property is acquired it is recorded at the lower of the
cost or fair value less estimated costs to sell. Valuations are periodically
performed by management and subsequent charges to income are taken when it is
determined that the carrying value of the property exceeds the fair value less
estimated costs to sell.
The Bank records loans as in-substance foreclosures if the borrower has
little or no equity in the property based upon its documented current fair value
and if the borrower has effectively abandoned control of the collateral or has
continued to retain control of the collateral but because of the current
financial status of the borrower it is doubtful the borrower will be able to
repay the loan in the foreseeable future. In-substance foreclosures are
accounted for as real estate acquired through foreclosure, however, title to the
collateral has not been acquired by the Bank. There may be significant other
expenses incurred such as attorney and other extraordinary servicing costs
involved with in-substance foreclosures. At December 31, 1997, the Bank did not
have any loans classified as an in-substance foreclosure.
The Bank held real estate owned, which consisted of one property. The
property consists of a tract of undeveloped one-to-four-family residential lots
and a single family dwelling. The value of the property on the records of the
Bank is zero.
<PAGE>
Allowance for Loan and Real Estate Losses. It is management's policy to
provide for losses on unidentified loans in its loan portfolio and foreclosed
real estate. A provision for loan losses is charged to operations based on
management's evaluation of the potential losses that may be incurred in the
Bank's loan portfolio after management has evaluated a number of factors,
including, historical experience, the volume and type of lending conducted by
the Bank, industry standards, the amount of nonperforming assets, current
general economic conditions as they relate to the Bank's loan portfolio, and
other factors related to the collectibility of the Bank's loan portfolio. Such
evaluation, which includes a review of all loans of which full collectibility of
interest and principal may not be reasonably assured, considers, among other
matters, the estimated net realizable value of the underlying collateral.
Management will continue to review the entire loan portfolio to determine the
extent, if any, to which further additional loss provisions may be deemed
necessary. There can be no assurance that the allowance for losses will be
adequate to cover losses that may be realized in the future and that additional
provisions for losses will not be required.
The following table sets forth information with respect to the Bank's
allowance for loan losses at the dates indicated:
At December 31,
-----------------
1997 1996
------ ------
(Dollars in Thousands)
Total loans outstanding(1)....................... $40,837 $35,771
====== ======
Average loans outstanding....................... 37,581 31,815
====== ======
Allowance for loan losses
(at beginning of period)...................... 415 424
Provision for loan losses (credit):
Residential.................................... -- --
Commercial real estate......................... -- --
Consumer(1).................................... -- --
Net charge-offs:
Residential.................................... -- (4)
Commercial real estate......................... -- --
Consumer....................................... (4) (5)
Net recoveries:
Consumer.......................................
1 --
------
Allowance for loan losses (at end of period).... $ 412 $ 415
====== ======
Allowance for loan losses as a percent of total
loans outstanding.............................. 1.01% 1.16%
Net loans charged-off as a percent of average
loans outstanding............................... (0.02)% 0.03%
Allowance for loan losses as a percent of
nonperforming loans............................. N/A 1,185.71%
- ----------------------
(1) Includes all loans receivable and loans held for sale, adjusted for
deferred loan fees, unearned discounts, and undisbursed loans in process.
<PAGE>
The following table sets forth information with respect to the Bank's
allowance for losses on real estate owned and other repossessed assets at the
dates indicated:
At or for the year ended
December 31,
----------------------
1997 1996
---- ----
(Dollars in Thousands)
Total real estate owned and in judgment....... $ 32 $ 50
==== ====
Allowance balances - beginning................ $ 32 $ 32
Provision..................................... -- --
Charge-offs................................... -- --
Recoveries.................................... -- --
--- ---
Allowance balances - ending................... $ 32 $ 32
==== ====
Allowance for losses on real estate owned and
in judgment to net real estate owned and in
judgment...................................... 100.00% 64.00%
====== =====
Interest-Bearing Accounts
At December 31, 1997, the Bank held $1,880,407 in interest-bearing demand
deposits in other financial institutions principally with the FHLB of Seattle.
The Bank maintains these accounts in order to maintain liquidity and improve the
interest-rate sensitivity of its assets.
Mortgage-backed Securities and Investment Activities
General. At December 31, 1997, the Company had an investment portfolio of
approximately $44.51 million, consisting primarily of United States agency and
mortgage-related securities and open-ended mutual funds whose underlying assets
are high quality fixed-rate and adjustable-rate mortgage-backed securities. The
Company will consinue to seek high quality investments with short to
intermediate maturities and durations of from one to five years as permitted by
OTS regulations.
The investment policy of the Bank was approved by the Board of Directors
and is implemented by the Investment/Asset Liability Management Committee, which
consists of the chief executive officer, the chief financial officer, and the
senior lending officer. The controller of the Bank serves as the investment
manager. Generally, the investment policy of the Bank is to invest funds among
various categories of investments and to select maturities based on the Bank's
asset/liability management policies, concern for highest investment quality,
liquidity needs, and performance objectives. The investment activities of the
Bank consist primarily of mortgage-backed securities and other securities,
consisting primarily of securities issued or guaranteed by the U.S. government
or agencies thereof.
<PAGE>
In 1995, the Board of the Bank and management made a decision to increase
its investment activities to utilize the credit capacity of the Bank, and its
excess liquidity. The result of this change has been to add investments in
adjustable rate mortgage backed securities financed with advances from the FHLB
of Seattle. The maturity of the advance is closely matched with the interest
rate adjustment on the mortgage backed security. This has allowed the Bank to
increase net interest income with little increase in interest rate risk. The
intent is to maintain this portfolio and increase the balances when
opportunities to make a reasonable spread on the investment are available. The
Bank has used two different advisors in this strategy neither of which is a
securities broker.
Investment Portfolio. The following table sets forth the amortized cost of
the Company's held to maturity investment portfolio, the market value of its
available for sale investment portfolio, the market value of its investment in
mortgage-related open-ended mutual funds and FHLMC stock, and the cost of its
FHLB stock and interest-bearing deposits. At December 31, 1997, the market value
of the Company's held to maturity portfolio was $8.26 million.
At December 31,
----------------------
1997 1996
------ ------
(In Thousands)
Available for sale portfolio
Agency securities $13,585 $ 8,921
Mortgage related securities 13,789 15,933
Held to maturity portfolio
Agency securities 503 1,006
Mortgage related securities 7,484 9,314
Open-ended mutual funds 6,428 9,563
FHLMC stock 1,099 723
FHLB stock 1,625 1,253
------- -------
Total $44,513 $46,713
======= =======
<PAGE>
Investment and Mortgage-backed Portfolio Maturities. The following table
sets forth certain information regarding the carrying values, weighted average
yields and maturities of the Bank's investment and mortgage-backed securities
portfolios (including those held to maturity and held for sale).
<TABLE>
<CAPTION>
At December 31, 1997
---------------------------------------------------------------------------------------------------------
One Year or Less One to Five Years Five to Ten Years More Than Ten Years Total Investment Securities
------------------ ------------------- ------------------ ------------------- ---------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------- ------
(Dollars in Thousands, including rates thereto)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. agency
obligations:
Held to Maturity $ -- --% $ 503 8.35% $ -- --% $ --% $ 503 8.35% $ 522
Available for Sale...... 2,000 5.85% 3,496 6.50% 6,094 6.18% 1,995 8.01% 13,585 7.00% 13,585
Mortgage-backed
Securities(1):
Held for Maturity....... 612 5.72% 1,602 6.17% 97 8.92% 5,173 8.11% 7,484 7.51% 7,739
Available for Sale...... -- -- -- -- -- -- 13,789 6.81% 13,789 6.81% 13,789
FHLB Stock(2)............. N/A N/A N/A N/A N/A N/A N/A N/A 1,625 N/A 1,625
FHLMC Stock(2)............ N/A N/A N/A N/A N/A N/A N/A N/A 1,099 N/A 1,099
AMF Funds-Adjustable Rate
Mortgage Portfolio(2)(3).. N/A N/A N/A N/A N/A N/A N/A N/A 534 5.76% 534
AMF Funds - Mortgage
Securities Performance
Portfolio................. N/A N/A N/A N/A N/A N/A N/A N/A 5,894 6.83% 5,894
------ ---- ------ --- ------ --- ------ --- ------- ---- ------
Total................. $2,612 5.82% $5,601 5.82% $6,191 6.22% $20,957 7.25% $44,513 7.01% $44,787
====== ==== ====== ==== ====== ==== ======= ==== ======= ==== =======
- --------------------------
(1) Included unamortized premiums of $47,413 at December 31, 1997.
(2) Amounts are only included in total columns because these investments do not
have stated maturities.
(3) Asset Management Funds for Financial Institutions ("AMF") is an open-end
management company registered under the Investment Company Act of 1940, as
amended. AMF consists of five separate portfolios, two in which the Bank
invests. AMF invests in various securities that federal savings and loan
associations can invest in directly. Shay Assets Management Co. serves as
AMF's investment advisor.
</TABLE>
<PAGE>
Sources of Funds
Deposits. Consumer and commercial deposits are attracted principally from
within the Bank's primary market area through the offering of a broad selection
of deposit instruments including regular savings, money market deposits, term
certificate accounts (including jumbo certificates in denominations of $99,000
or more), and individual retirement accounts. Deposit account terms vary
according to the minimum balance required, the time period the funds must remain
on deposit, and the interest rate, among other factors. The Bank does not obtain
funds through brokers, nor does it actively solicit funds outside of the State
of Wyoming.
The interest rates paid by the Bank on deposits can be set daily at the
direction of management and are determined by evaluating the following factors:
(i) the interest rates offered by other local savings institutions, and the
degree of competition the Bank wishes to maintain; (ii) the Bank's anticipated
need for cash and the timing of that desired cash flow; (iii) the cost of
borrowing from other sources versus the cost of acquiring funds through customer
deposits; and (iv) the Bank's anticipation of future economic conditions and
related interest rates. The Bank has not used above-market rates in recent years
to attract deposits.
Regular savings, NOW accounts, and money market accounts constituted $13.05
million, or 28.73% of the Bank's deposit portfolio at December 31, 1997.
Certificates of deposit with original maturities of three to 12 months
constituted $14.87 million or 32.75% of the deposit portfolio. Jumbo
certificates of deposit, with principal amounts of $99,000 or more, constituted
$4.40 million or 9.70% of the portfolio at December 31, 1997. Of that amount,
$877,000 was deposits of the State of Wyoming for which the Bank pledged a $3.0
million Federal Home Loan Bank (FHLB) debenture.
The following table sets forth the time deposits in the Bank classified by
rates as of the dates indicated.
At December 31,
----------------
1997 1996
---- ----
(In Thousands)
Interest Rate
- -------------
3.01-4.00%....................... $ -- $ 513
4.01-5.00%....................... 4,642 11,111
5.01-6.00%....................... 26,980 23,224
6.01-7.00%....................... 738 1,073
7.01-8.00........................ -- 45
------- -------
Total.......................... $32,360 $35,966
======= =======
<PAGE>
The following table sets forth the amount and maturities of time deposits
at December 31, 1997.
<TABLE>
<CAPTION>
Amount Due
--------------------------------------------------------------------
After
December 31, December 31, December 31, December 31,
Interest Rate 1998 1999 2000 2000 Total
- ------------- ------------ ------------ ------------ ------------ --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
3.01-4.00% $ -- $ -- $ -- $ -- $ --
4.01-5.00%......... 4,642 -- -- -- 4,642
5.01-6.00%......... 19,528 5,324 957 1,171 26,980
6.01-7.00%......... -- 282 404 52 738
7.01-8.00%......... -- -- -- -- --
------- ------ ------ ------ -------
Total............. $24,170 $5,606 $1,361 $1,223 $32,360
======= ====== ====== ====== =======
</TABLE>
The following table indicates the amount of the Bank's certificate accounts
of $100,000 or more by time remaining until maturity as of December 31, 1997.
Maturity Period Balances
--------
(In Thousands)
Three months or less......................... $1,662
Over three through six months................ 386
Over six through twelve months............... 1,479
Over twelve months........................... 877
------
Total.................................... $4,404
======
Borrowings
As a member of the FHLB of Seattle, the Bank has access to its advance
program and other credit products. At December 31, 1997, the Bank had $29.70
million borrowings outstanding from the FHLB. As of and for the year ended
December 31, 1997, the Bank had no other borrowings. The Bank matches FHLB
advances with mortgage-backed securities with similar maturity to take advantage
of the difference (or spread) between the rate paid on the advances and the
yield on the securities. The following table sets forth certain information as
the Bank's FHLB advances about the dates indicated.
As of and for the Years Ended
-----------------------------
1997 1996
------- -------
(Dollars in Thousands)
Maximum balance.......... $30,901 $23,460
Average balance.......... 26,624 17,629
Balance at end of period. 29,697 23,460
Weighted average rate:
at end of period....... 5.79% 5.52%
during the period...... 5.75% 5.35%
<PAGE>
Subsidiary Activity
In September 1993, the Company acquired all of the capital stock of the
Bank. The officers of the Company consist of the officers of the Bank. The
Company is organized as a savings and loan holding company. As of December 31,
1997, the net book value of the Company's investment in the Bank amounted to
$12.23 million.
The Bank has one wholly-owned subsidiary corporation, First Tri-County
Service, Inc. ("FTCS"). FTCS was incorporated in the State of Wyoming in August
1982 and is engaged in the sale of life, credit life, and disability insurance.
The Bank is permitted to invest up to 2% of its assets in the capital stock of
subsidiary corporations or in loans (secured or unsecured) to those entities. An
additional investment of 1% of assets is allowed if the additional investment is
used for community development purposes. Based upon the 2% limitation, as of
December 31, 1997, the Bank was authorized to invest up to approximately $1.79
million in the stock of service corporations. As of December 31, 1997, the net
book value of the Bank's investment in stock, unsecured loans and conforming
loans in its service corporation was $14,604.
Employees
Substantially, all of the activities of the Company are conducted through
the Bank, therefore at December 31, 1997, the Company did not have any salaried
employees. As of December 31, 1997, the Bank had 17 full-time employees and
three part-time employees. None of the Bank's employees are represented by a
collective bargaining group. The Bank believes that its relationship with its
employees is good.
Regulation
Set forth below is a brief description of certain laws that related to the
regulation of the Company and the Bank. The description does not purport to be
complete and is qualified in its entirety by reference to applicable laws and
regulations.
Company Regulation
General. The Company is a unitary savings and loan holding company subject
to regulatory oversight by the OTS. As such, the Company is required to register
and file reports with the OTS and is subject to regulation and examination by
the OTS. In addition, the OTS has enforcement authority over the Company and its
non-savings association subsidiaries, should such subsidiaries be formed, which
also permits the OTS to restrict or prohibit activities that are determined to
be a serious risk to the subsidiary savings association. This regulation and
oversight is intended primarily for the protection of the depositors of the Bank
and not for the benefit of stockholders of the Company.
Qualified Thrift Lender Test. As a unitary savings and loan holding
company, the Company generally is not subject to activity restrictions, provided
the Bank satisfies the Qualified Thrift Lender ("QTL") test. If the Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Company and any of its subsidiaries (other than the Bank or any other
SAIF-insured savings association) would become subject to restrictions
applicable to bank holding companies unless such other associations each also
qualify as a QTL and were acquired in a supervisory acquisition. See "--
Regulation of the Bank -- Qualified Thrift Lender Test."
<PAGE>
Restrictions on Acquisitions. The Company must obtain approval from the OTS
before acquiring control of any other SAIF-insured association. Such
acquisitions are generally prohibited if they result in a multiple savings and
loan holding company controlling savings associations in more than one state.
However, such interstate acquisitions are permitted based on specific state
authorization or in a supervisory acquisition of a failing savings association.
Subject to appropriate regulatory approvals, a bank holding company can
acquire control of a savings association, and if it controls a savings
association, merge or consolidate the assets and liabilities of the savings
association with, or transfer assets and liabilities to, any subsidiary bank
which is a member of the BIF with the approval of the appropriate federal
banking agency and the Federal Reserve Board. Generally, federal savings
associations can acquire or be acquired by any insured depository institution.
Federal Securities Law. The Company is subject to filing and reporting
requirement by virtue of having its common stock registered under the Securities
Exchange Act of 1934. Furthermore, company stock held by persons who are
affiliates (generally officers, directors and principal stockholders) of the
Company may not be resold without registration or unless sold in accordance with
certain resale restrictions. If the Company meets specified current public
information requirements, each affiliate of the Company is able to sell in the
public market, without registration, a limited number of shares in any
three-month period.
Regulation of the Bank
General. The Bank is subject to supervision and examination by the OTS. In
addition, the Bank is insured by and subject to certain regulations of the FDIC
and is a member of the FHLB. The Bank is also subject to various requirements
and restrictions under federal and state law, including requirements to maintain
reserves against deposits, restrictions on the types, amount and terms and
conditions of loans that may be granted and limitations on the types of
investments that may be made and the types of services that may be offered.
Various consumer laws and regulations also affect the operations of the Bank.
Insurance of Deposit Accounts. The Bank's deposit accounts are insured by
the SAIF to a maximum of $100,000 for each insured member (as defined by law and
regulation). The FDIC has the authority, should it initiate proceedings to
terminate an institution's deposit insurance, to suspend the insurance of any
such institution without tangible capital. However, if a savings association has
positive capital when it includes qualifying intangible assets, the FDIC cannot
suspend deposit insurance unless capital declines materially, the institution
fails to enter into and remain in compliance with an approved capital plan or
the institution is operating in an unsafe or unsound manner.
Regardless of an institution's capital level, insurance of deposits may be
terminated by the FDIC upon a finding that the institution has engaged in unsafe
or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC or the institution's primary regulator.
<PAGE>
The FDIC charges an annual assessment for the insurance of deposits based
on the risk a particular institution poses to its deposit insurance fund. Under
this system, a bank or thrift pays within a range of 0 cents to 27 cents per
$100 of domestic deposits, depending upon the institution's risk classification.
This risk classification is based on an institution's capital group and
supervisory subgroup assignment. In addition, the FDIC is authorized to increase
such deposit insurance rates, on a semi-annual basis, if it determines that such
action is necessary to cause the balance in the SAIF to reach the designated
reserve ratio of 1.25% of SAIF-insured deposits within a reasonable period of
time. The FDIC also may impose special assessments on SAIF members to repay
amounts borrowed from the U.S. Treasury or for any other reason deemed necessary
by the FDIC. The Bank's federal deposit insurance premium expense for the fiscal
year ended December 31, 1997, amounted to approximately $30,518.
Regulatory Capital Requirements. OTS capital regulations require savings
institutions to meet three capital standards: (1) tangible capital equal to 1.5%
of total adjusted assets, (2) a leverage ratio (core capital) equal to at least
3% of total adjusted assets, and (3) a risk-based capital requirement equal to
8.0% of total risk-weighted assets.
Savings associations with a greater than "normal" level of interest rate
exposure will, in the future, be subject to a deduction for an interest rate
risk ("IRR") component may be from capital for purposes of calculating their
risk-based capital requirement. See "-- Net Portfolio Value."
As shown below, the Bank's regulatory capital exceeded all minimum
regulatory capital requirements applicable to it as of December 31, 1997:
Percent of
Amount Adjusted
Assets
------- ----------
(Dollars in Thousands)
Tangible Capital:
Regulatory requirement.......... $ 1,332 1.50%
Actual capital.................. 11,842 13.34%
------ -----
Excess.................... $10,510 11.84%
====== =====
Core Capital:
Regulatory requirement.......... $ 2,668 3.00%
Actual capital.................. 11,842 13.34%
------ -----
Excess.................... $ 9,174 10.34%
======= =====
Risk-Based Capital:
Regulatory requirement.......... $ 2,784 8.00%
Actual capital.................. 12,185 34.00%
------ -----
Excess.................... $ 9,401 26.00%
======= =====
<PAGE>
Effect of Inflation and Changing Prices. The Bank's financial statements
and related data presented herein have been prepared in accordance with
generally accepted accounting principles ("GAAP"), which require the measurement
of financial position and operating results in terms of historical dollars,
without considering changes in the relative purchasing power of money over time
due to inflation. Unlike industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or with the same magnitude as the
prices of goods and services.
Net Portfolio Value. The OTS requires the computation of amounts by which
the net present value of an institution's cash flows from assets, liabilities,
and off balance sheet items (the institution's net portfolio value, or "NPV")
would change in the event of a range of assumed changes in market interest
rates. The OTS also requires the computation of estimated changes in net
interest income over a four-quarter period. These computations estimate the
effect of an institution's NPV and net interest income of instantaneous and
permanent 1% to 4% increases and decreases in market interest rates. In the
Bank's interest rate sensitive policy, the Board of Directors has established a
maximum decrease in net interest income and maximum decreases in NPV given these
instantaneous changes in interest rates.
An institution's interest rate risk is measured as the change to its NPV as
a result of a hypothetical 200 basis point change in market interest rates. A
resulting change in NPV of more than 2% of the estimated market value of its
assets will require the institution to deduct from its capital 50% of that
excess change. The rules provide that the OTS will calculate the IRR component
quarterly for each institution. The following table presents the Bank's NPV at
December 31, 1997 as calculated by the OTS and based on OTS assumptions
utilizing raw data voluntarily provided to the OTS by the Bank.
Change in Interest
Rates in Basis Points
(Rate Shock)(1) Net Portfolio Value NPV as % of Assets
- --------------------- ---------------------------- -----------------------
$ Amount $ Change % Change NPV Ratio Change
-------- -------- -------- --------- ------
(Dollars in Thousands)
+400 bp 9,510 (6,612) (41)% 11.44% -609 bp
+300 bp 11,279 (4,843) (30)% 13.20% -432 bp
+200 bp 13,062 (3,061) (19)% 14.88% -264 bp
+100 bp 14,701 (1,422) (9)% 16.34% -119 bp
0 bp 16,123 % 17.52% bp
-100 bp 17,222 1,099 7% 18.37% +85 bp
-200 bp 17,891 1,768 11% 18.81% +129 bp
-300 bp 18,711 2,588 16% 19.36% +183 bp
-400 bp 19,928 3,805 24% 20.21% +268 bp
- ---------------
(1) Denotes rate shock used to compute interest rate risk capital component.
<PAGE>
As of
December 31,
1997
------------
RISK MEASURES:
200 Basis Point Rate Shock
Pre-Shock NPV Ratio: NPV as %
of Present Value of Assets... 17.52%
Exposure Measure: Post-Shock
NPV Ratio.................... 14.88%
Sensitivity Measure: Change in
NPV Ratio.................... - 264 bp
CALCULATION OF CAPITAL COMPONENT:
Change in NPV as % of Present
Value of Assets.............. - 3.43%
Interest Rate Risk Capital
Component...................... --
Computations of prospective effects of hypothetical interest rate changes
are based on numerous assumptions, including relative levels of market interest
rates, loan prepayments and deposit run-offs, and should not be relied upon as
indicative of actual results. Further, the computations do not contemplate any
actions the Bank may undertake in response to changes in interest rates.
Although the Bank is not subject to the interest rate risk component
reduction discussed above, the Bank is still subject to interest rate risk and,
as can be seen above, rising interest rates will reduce the Bank's NPV. The OTS
has authority to require otherwise exempt institutions to comply with the rule
concerning interest rate risk
Dividend and Other Capital Distribution Limitations. OTS regulations
require the Bank to give the OTS 30 days advance notice of any proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory powers to prohibit the payment of dividends to the Company.
OTS regulations impose limitations upon all capital distributions by
savings institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to shareholders of another institution in
a cash-out merger and other distributions charged against capital. The rule
establishes three tiers of institutions, based primarily on an institution's
capital level. An institution that exceeds all fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory approval. As of
December 31, 1997, the Bank was a Tier 1 institution. In the event the Bank's
capital fell below its fully phased-in requirement or the OTS notified it that
it was in need of more than normal supervision, the Bank's ability to make
capital distributions could be restricted. In addition, the OTS could prohibit a
proposed capital distribution by any institution, which would otherwise be
permitted by the regulation, if the OTS determines that such distribution would
constitute an unsafe or unsound practice.
<PAGE>
In addition, the Bank may not declare or pay a cash dividend on its capital
stock if the effect thereof would be to reduce the regulatory capital of the
Bank below the amount required for the liquidation account to be established
pursuant to the Bank's Plan of Conversion. Finally, a savings association is
prohibited from making a capital distribution if, after making the distribution,
the savings association would be undercapitalized (not meet any one of its
minimum regulatory capital requirements).
Qualified Thrift Lender Test. Savings institutions must meet a QTL test. If
the Bank maintains an appropriate level of Qualified Thrift Investments
(primarily residential mortgages and related investments, including certain
mortgage-related securities) ("QTIs") and otherwise qualifies as a QTL, it will
continue to enjoy full borrowing privileges from the FHLB of Seattle. The
required percentage of QTIs is 65% of portfolio assets (defined as all assets
minus intangible assets, property used by the institution in conducting its
business and liquid assets equal to 10% of total assets). Certain assets are
subject to a percentage limitation of 20% of portfolio assets. In addition,
savings associations may include shares of stock of the FHLBs, FNMA and FHLMC as
qualifying QTIs. An association must be in compliance with the QTL test on a
monthly basis in nine out of every twelve months. As of December 31, 1997, the
Bank was in compliance with its QTL requirement with 87.70% of its assets
invested in QTIs.
A savings association that does not meet a QTL test must either convert to
a bank charter or comply with the following restrictions on its operations: (i)
the savings association may not engage in any new activity or make any new
investment, directly or indirectly, unless such activity or investment is
permissible for a national bank; (ii) the branching powers of the savings
association shall be restricted to those of a national bank; (iii) the savings
association shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of dividends by the savings association shall be subject to the rules
regarding payment of dividends by a national bank. Upon the expiration of three
years from the date the savings association ceases to be a QTL, it must cease
any activity and not retain any investment not permissible for a national bank
and immediately repay any outstanding FHLB advances (subject to safety and
soundness considerations).
Loans-to-One Borrower. See "-- Business of the Bank -- Origination, Sale,
and Purchase of Loans -- Loans-to-One Borrower."
Community Reinvestment. Under the Community Reinvestment Act ("CRA"), as
implemented by OTS regulations, a savings association has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with its examination of a savings institution,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution. Federal law requires public disclosure of an institution's
CRA rating and requires the OTS to provide a written evaluation of an
institution's CRA performance utilizing a four-tiered system. The Bank received
a "satisfactory" rating as a result of its last evaluation in March, 1996.
<PAGE>
Transactions With Affiliates. Generally, restrictions on transactions with
affiliates require that transactions between a savings association or its
subsidiaries and its affiliates be on terms as favorable to the Bank as
comparable transactions with non-affiliates. In addition, certain of these
transactions are restricted to an aggregate percentage of the Bank's capital;
collateral in specified amounts must usually be provided by affiliates to
receive loans from the Bank. Affiliates of the Bank include the Company and any
company that would be under common control with the Bank. In addition, a savings
association may not lend to any affiliate engaged in activities not permissible
for a bank holding company or acquire the securities of any affiliate that is
not a subsidiary. The OTS has the discretion to treat subsidiaries of savings
associations as affiliates on a case-by-case basis.
Regulations require the Bank (i) to extend credit to its officers,
directors, and 10% shareholders, as well as to entities that such persons
control on terms substantially similar to those offered to unaffiliated
individuals, (ii) place limits on the amount of loans the Bank may make to such
persons based, in part, on the Bank's capital position, and (iii) require
certain approval procedures to be followed. An exception to this limitation is
made where there is an employee benefit program that provides for extensions of
credit to insiders that are widely available to employees of the Bank and does
not give preference to an insider over other employees of the Bank.
Liquidity Requirements. All savings associations are required to maintain
an average daily balance of liquid assets equal to a certain percentage of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations. At December 31, 1997, the Bank's required
liquid asset ratio is 4%.
Federal Home Loan Bank System. The Bank is a member of the FHLB of Seattle,
which is one of 12 regional FHLBs that administers the home financing credit
function of savings associations. Each FHLB serves as a reserve or central bank
for its members within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It makes
loans to members (i.e., advances) in accordance with policies and procedures
established by the Board of Directors of the FHLB.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Seattle in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year. At December 31, 1997, the Bank had $1.63 million in
FHLB stock, which was in compliance with this requirement.
Federal Reserve System. The Federal Reserve Board requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW, and Super NOW
checking accounts) and non-personal time deposits. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve Board may be used
to satisfy the liquidity requirements that are imposed by the OTS. At December
31, 1997, the Bank was in compliance with these Federal Reserve Board
requirements.
<PAGE>
Item 2. Description of Property
(a) Properties.
Currently, the Company does not own real property but utilizes the offices
of the Bank. The Bank operates from its main office located in downtown
Torrington at 2201 Main Street, Torrington, Wyoming 82240 and from a branch
office located at 957 Maple Street, Wheatland, Wyoming 82201. The Bank owns both
office facilities. The main office was opened in 1935 and the present facility
has 4,380 square feet. The total investment in the property and equipment at the
main office is $1,237,062 with a net book value of $723,049 at December 31,
1997. The Wheatland branch was opened in June 1979 with the present facility
being built in July 1980. The total investment in the property and equipment at
the Wheatland branch is $529,834 with a net book value of $163,831 at December
31, 1997.
At December 31, 1997, the Bank had a total investment in its land,
buildings and improvements, and fixtures, furniture, and equipment of
$1,766,897, less accumulated depreciation of $880,018, for a net carrying value
of $886,879.
(b) Investment Policies.
See "Item 1. Business" above for a general description of the Bank's
investment policies and any regulatory or Board of Directors' percentage of
assets limitations regarding certain investments. All of the Bank's investment
policies are reviewed and approved by the Board of Directors of the Bank, and
such policies, subject to regulatory restrictions (if any), can be changed
without a vote of stockholders. The Bank's investments are primarily acquired to
produce income, and to a lesser extent, possible capital gain.
(1) Investments in Real Estate or Interests in Real Estate. See "Item
1. Business -- Lending Activities," "Item 1. Business --
Regulation of the Bank," and "Item 2. Description of Property.
(a) Properties" above.
(2) Investments in Real Estate Mortgages. See "Item 1. Business --
Lending Activities" and "Item 1. Business -- Regulation of the
Bank."
(3) Investments in Securities of or Interests in Persons Primarily
Engaged in Real Estate Activities. See "Item 1. Business --
Lending Activities," "Item 1. Business -- Regulation of the
Bank," and "Item 1. Business -- Subsidiary Activity."
(c) Description of Real Estate and Operating Data.
Not Applicable.
Item 3. Legal Proceedings
The Bank, from time to time, is a party to ordinary routine litigation,
which arises in the normal course of business, such as claims to enforce liens,
condemnation proceedings on properties in which the Bank holds security
interests, claims involving the making and servicing of real property loans, and
other issues incident to the business of the Bank. In the opinion of management,
no material loss is expected from any of such pending claims or lawsuits.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1997.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information contained under the section captioned "Market and Dividend
Information" in the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1997 (the "Annual Report"), is incorporated herein by
reference.
Item 6. Management's Discussion and Analysis or Plan of Operation
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
Item 7. Financial Statements
The Company's consolidated financial statements required herein are
incorporated herein by reference.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(b) of the Exchange Act
The information contained under the section captioned "I -- Information
with respect to Nominees for Director, Directors Continuing in Office, and
Executive Officers" in the Company's definitive proxy statement for the
Company's Annual Meeting of Stockholders to be held on April 29, 1998 (the
"Proxy Statement") which is incorporated herein by reference.
Item 10. Executive Compensation
The information contained under the section captioned "Director and
Executive Officer Compensation" in the Proxy Statement is incorporated herein by
reference.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the section captioned "Voting Securities and Principal
Holders Thereof" in the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by
reference to the section captioned "I -- Information with respect to
Nominees for Director, Directors Continuing in Office, and Executive
Officers" in the Proxy Statement.
(c) Changes in Control
Management of the Corporation knows of no arrangements, including
any pledge by any person of securities of the Corporation, the
operation of which may at a subsequent date result in a change in
control of the Registrant.
Item 12. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference
to the section captioned "Certain Relationships and Related Transactions" and
"Voting Securities and Principal Holders Thereof" in the Proxy Statement.
Item 13. Exhibits, List and Reports on Form 8-K
(a)(1)The Consolidated Financial Statements and Independent Auditors' Reports
included in the Annual Report, listed below, are incorporated herein by
reference.
1. Independent Auditors' Reports
2. Tri-County Bancorp, Inc. and Subsidiary
(a) Consolidated Statements of Financial Condition at December 31,
1997 and 1996
(b) Consolidated Statements of Operations for the years ended
December 31, 1997 and 1996
(c) Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997 and 1996
(d) Consolidated Statements of Cash Flows for the years ended
December 31, 1997 and 1996
(e) Notes to Consolidated Financial Statements
(a)(2)All schedules have been omitted because the required information is either
inapplicable or included in the Notes to Consolidated Financial Statements.
<PAGE>
(a)(3)Exhibits are either filed or attached as part of this Report or
incorporated herein by reference.
3.1 Articles of Incorporation of Tri-County Bancorp, Inc.*
3.2 Bylaws of Tri-County Bancorp, Inc.*
4 Specimen Stock Certificate**
10.1 1993 Stock Option Plan*
10.2 Management Stock Bonus Plan and Trust*
10.3 Employment Agreement with Robert L. Savage
10.4 Form of Employment Agreement with two Executive Officers of the
Bank
11 Statement re: Computation of Per Share Earnings (see Footnote 1
in the Annual Report)
13 Annual Report to Stockholders for the fiscal year ended December
31, 1997
21 Subsidiaries of the Registrant (See information provided at "Item
1. Business -- Subsidiary Activity"). 23 Consent of Dalby,
Wendland & Co., P.C.
23 Financial Data Schedule***
(b) Reports on Form 8-K.
On November 4, 1997, the Registrant announced that its Board of Directors
declared a 100% stock dividend. The Registrant issued a stock dividend of
100% on the Company's outstanding common stock, payable on December 8, 1997
to stockholders of record as of November 18, 1997.
(c) Exhibits to this Form 10-KSB are attached or incorporated by reference as
stated above.
- --------------------------
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (33-65162) declared effective by the Commission on August 12,
1993.
** Incorporated by reference to the Annual Securities Report on Form 10-KSB
for the fiscal year ended December 31, 1994 (File No. 0-22220) filed with
the SEC.
*** In electronic filing only.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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-COUNTY BANCORP, INC.
Dated: March 30, 1998 By: /s/ Robert L. Savage
--------------------
Robert L. Savage
President, Chief Executive
Officer and Director (Duly
Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Robert L. Savage By: /s/ William J. Rueb
---------------- ---------------
Robert L. Savage William J. Rueb
President, Chief Executive Officer Director
and Director (Principal Executive
Officer)
Date: March 30, 1998 Date: March 30, 1998
By: /s/ Larry C. Goddard By: /s/ Lance H. Griggs
---------------- ---------------
Larry C. Goddard Lance H. Griggs
Chairman of the Board Director
Date: March 30, 1998 Date: March 30, 1998
By: /s/ David C. Kellam By: /s/ Tommy A. Gardner
--------------- ----------------
David C. Kellam Tommy A. Gardner
Director Vice President,
Principal Accounting
and Financial Officer
Date: March 30, 1997 Date: March 30, 1998
By: /s/ Carl F. Rupp
------------
Carl F. Rupp
Director
Date: March 30, 1998
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this 30th day of January 1998, ("Effective
Date") by and between Tri-County Federal Savings Bank (the "Bank") and Robert L.
Savage (the "Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed by the Bank as the
President and is experienced in all phases of the business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued active
participation in the business of the Bank; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Bank and in consideration of the Executive's agreeing to remain in the employ of
the Bank, the parties desire to specify the continuing employment relationship
between the Bank and the Executive;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereby agree as follows:
1. Employment. The Bank hereby employs the Executive in the capacity of
President. The Executive hereby accepts said employment and agrees to render
such administrative and management services to the Bank and to Tri-County
Bancorp, Inc. ("Parent") as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity. The Executive
shall promote the business of the Bank and Parent. The Executive's other duties
shall be such as the Board of Directors for the Bank (the "Board of Directors"
or "Board") may from time to time reasonably direct, including normal duties as
an officer of the Bank.
2. Term of Employment. The term of employment of Executive under this
Agreement shall be for the period commencing on the Effective Date and ending
thirty-six (36) months thereafter ("Term"). Additionally, on, or before, each
annual anniversary date from the Effective Date, the Term of employment under
this Agreement shall be extended for up to an additional period beyond the then
effective expiration date upon a determination and resolution of the Board of
Directors that the performance of the Executive has met the requirements and
standards of the Board, and that the Term of such Agreement shall be extended.
References herein to the Term of this Agreement shall refer both to the initial
term and successive terms.
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Bank shall compensate and pay the Executive during the
Term of this Agreement a minimum base salary at the rate of $84,492 per annum
("Base Salary"), payable in cash not less frequently than monthly; provided,
that the rate of such salary shall be reviewed by the Board of Directors not
less often than annually, and the Executive shall be entitled to receive
increases at such percentages or in such amounts as determined by the Board of
Directors. The base salary may not be decreased without the Executive's express
written consent.
(b) Discretionary Bonus. The Executive shall be entitled to participate in
an equitable manner with all other senior management employees of the Bank in
discretionary bonuses that may be authorized and declared by the Board of
Directors to its senior management executives from time to time. No other
compensation provided for in this Agreement shall be deemed a substitute for the
Executive's right to participate in such discretionary bonuses when and as
declared by the Board.
<PAGE>
(c) Participation in Benefit and Retirement Plans. The Executive shall be
entitled to participate in and receive the benefits of any plan of the Bank
which may be or may become applicable to senior management relating to pension
or other retirement benefit plans, profit-sharing, stock options or incentive
plans, or other plans, benefits and privileges given to employees and executives
of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The Executive
shall be entitled to participate in and receive the benefits of any plan or
policy of the Bank which may be or may become applicable to senior management
relating to life insurance, short and long term disability, medical , dental,
eye-care, prescription drugs or medical reimbursement plans.
(e) Vacations and Sick Leave. The Executive shall be entitled to paid
annual vacation leave in accordance with the policies as established from time
to time by the board of Directors, which shall in no event be less than four
weeks per annum. The Executive shall also be entitled to an annual sick leave
benefit as established by the Board for senior management employees of the Bank.
the Executive shall not be entitled to receive any additional compensation from
the Bank for failure to take a vacation or sick leave, nor shall he be able to
accumulate unused vacation or sick leave from one year to the next, except to
the extent authorized by the Board of Directors.
(f) Expenses. The Bank shall reimburse the Executive or otherwise provide
for or pay for all reasonable expenses incurred by the Executive in furtherance
of, or in connection with the business of the Bank, including, but not by way of
limitation, automobile and traveling expenses, and all reasonable entertainment
expenses, subject to such reasonable documentation and other limitations as may
be established by the Board of Directors of the Bank. If such expenses are paid
in the first instance by the Executive, the Bank shall reimburse the Executive
therefor. The Bank will maintain an automobile for the use of the Executive
("Executive Car"); such automobile shall be replaced every four years within the
discretion of the Executive.
(g) Changes in Benefits. The Bank shall not make any changes in such plans,
benefits or privileges previously described in Section 3(c), (d) and (e) which
would adversely affect the Executive's rights or benefits thereunder, unless
such change occurs pursuant to a program applicable to all executive officers of
the Bank and does not result in a proportionately greater adverse change in the
rights of, or benefits to, the Executive as compared with any other executive
officer of the Bank. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to Executive pursuant to Section 3(a) hereof.
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or inters of the Bank
or Parent.
(b) Nothing contained in this Section 4 shall be deemed to prevent or limit
the right of Executive to invest in the capital stock or other securities of any
business dissimilar from that of the Bank or Parent, or, solely as a passive or
minority investor, in any business.
<PAGE>
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under this
Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement, in which
event the Executive's estate shall be entitled to receive the compensation due
the Executive through the last day of the calendar month in which Executive's
death shall have occurred.
(b) The Board of Directors may terminate the Executive's employment at any
time, but any termination by the Board of Directors other than termination for
Just Cause, shall not prejudice the Executive's right to compensation or other
benefits under the Agreement. The Executive shall have no right to receive
compensation or other benefits for any period after termination for Just Cause.
The Board may within its sole discretion, acting in good faith, terminate the
Executive for Just Cause and shall notify such Executive accordingly.
Termination for "Just Cause" shall include termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
<PAGE>
(c) The voluntary termination by the Executive during the term of this
Agreement with the delivery of no less than 60 days written notice to the Board
of Directors, other than pursuant to Section 9(b), in which case the Executive
shall be entitled to receive only the compensation, vested rights, and all
employee benefits up to the date of such termination.
7. Regulatory Exclusions.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)1)), the
Bank's obligations under the Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may within its discretion (i) pay the Executive all or
part of the compensation withheld while its contract obligations were suspended
and (ii) reinstate any of its obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of FDIA) all
obligations under this Agreement shall terminate as of the date of default, but
this paragraph shall not affect any vested rights of the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to the
extent determined that continuation of the Agreement is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision ("Director of OTS"), or his or her designee, at the time that the
Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her
designee, at the time that the Director of the OTS, or his or her designee
approves a supervisory merger to resolve problems related to operation of the
Bank or when the Bank is determined by the Director of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
(e) Notwithstanding anything herein to the contrary, any payments made to
the Executive pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 U.S.C. Section 1828(k) and any regulations
promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated to
the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms of the disability
insurance purchased by the Bank on behalf of the Executive in effect as of the
Effective Date of this Agreement. Upon returning to active full-time employment,
the Executive's full compensation as set forth in this Agreement shall be
reinstated as of the date of commencement of such activities. In the event that
the Executive returns to active employment on other than a full-time basis, then
his compensation (as set form in Section 3(a) of this Agreement) shall be
reduced in proportion to the time spent in said employment, or as shall
otherwise be agreed to by the parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event of
the involuntary termination of Executive's employment during the term of this
Agreement following any Change in Control of the Bank or Parent, or within 24
months thereafter of such Change in Control, absent Just Cause, Executive shall
be paid an amount equal to the product of 1.50 times the Base Salary in effect
as of the date of the Change in Control or the date of termination of
employment, whichever is greater. Said sum shall be paid, at the option of
Executive, either in one (1) lump sum within thirty (30) days of such
termination of service or in periodic payments over the next 18 months or the
remaining term of this Agreement whichever is less, as if Executive's employment
had not been terminated, and such payments shall be in lieu of any other future
payments which the Executive would be otherwise entitled to receive under
Section 6 of this Agreement. In addition, the Executive shall receive a lump-sum
bonus equal to the fair market value of the Executive Car, which bonus the
Executive may elect to forego in exchange for the title and ownership of the
Executive Car. Notwithstanding the forgoing, all sums payable hereunder when
aggregated with all other payments to be made to the Executive by the Bank or
the Parent shall be deemed an "excess parachute payment" in accordance with
<PAGE>
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
regulations promulgated thereunder and be subject to the excise tax provided at
Section 4999(a) of the Code. The term "Change in Control" shall refer to (i) the
sale of all, or a material portion, of the assets of the Savings Bank or the
Parent; (ii) the merger or recapitalization of the Savings Bank or the Parent
whereby the Savings Bank or the Parent is not the surviving entity; (iii) a
change of the Savings Bank or the Parent, as otherwise defined or determined by
the Office of Thrift Supervision or regulations promulgated by it; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five
percent (25%) or more of the outstanding voting securities of the Savings Bank
or the Parent by any person, trust, entity or group. The term "person" means an
individual other than the Executive, or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the contrary,
Executive may voluntarily terminate his employment during the term of this
Agreement following a Change in Control of the Bank or Parent, or within
twenty-four months following such Change in Control, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Bank, Executive would be required to report
to a person or persons other than the Board of Directors of the Bank; (iii) if
the Bank should fail to maintain Executive's base compensation in effect as of
the date of the Change in Control and the existing employee benefits plans,
including material fringe benefit, stock option and retirement plans; (iv) if
Executive would be assigned duties and responsibilities other than those
normally associated with his position as referenced at Section 1, herein; (v) if
Executive's responsibilities or authority have in any way been materially
diminished or reduced; or (vi) if Executive would not be reelected to the Board
of Directors of the Bank.
<PAGE>
10. Withholding. All payments required to be made by the Bank hereunder to
the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Bank or Parent which shall acquire, directly
or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal skills of the
Executive, the Executive shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of Wyoming.
14. Nature of Obligations. Nothing contained herein shall create or require
the Bank to create a trust of any kind to fund any benefits which may be payable
hereunder, and to the extent that the Executive acquires a right to receive
benefits from the Bank hereunder, such right shall be no greater than the right
of any unsecured general creditor of the Bank.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provision of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Association,
and judgment upon the award rendered may be entered in any court having
jurisdiction thereof, except to the extent that the parties may otherwise reach
a mutual settlement of such issue. Further, the settlement of the dispute to be
approved by the Board of the Bank may include a provision for the reimbursement
by the Bank to the Executive for all reasonable costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
or the Board of the Bank or the Parent may authorize such reimbursement of such
reasonable costs and expenses by separate action upon a written action and
determination of the Board following settlement of the dispute. Such
reimbursement shall be paid within ten (10) days of Executive furnishing to the
Bank or Parent evidence, which may be in the form , among other things, of a
canceled check or receipt, or any costs or expenses incurred by Executive.
<PAGE>
18. Confidential Information. The Executive acknowledges that during his or
her employment he or she will learn and have access to confidential information
regarding the Savings Bank and the Parent and its customers and businesses
("Confidential Information"). The Executive agrees and covenants not to disclose
or use for his or her own benefit, or the benefit of any other person or entity,
any such Confidential Information, unless or until the Savings Bank or the
Parent consents to such disclosure or use or such information becomes common
knowledge in the industry or is otherwise legally in the public domain. The
Executive shall not knowingly disclose or reveal to any unauthorized person any
Confidential Information relating to the Savings Bank, the Parent, or any
subsidiaries or affiliates, or to any of the businesses operated by them, and
the Executive confirms that such information constitutes the exclusive property
of the Savings Bank and the Parent. The Executive shall not otherwise knowingly
act or conduct himself (a) to the material detriment of the Savings Bank or the
Parent, or its subsidiaries, or affiliates, or (b) in a manner which is inimical
or contrary to the interests of the Savings Bank or the Parent. Executive
acknowledges and agrees that the existence of this Agreement and its terms and
conditions constitutes Confidential Information of the Savings Bank, and the
Executive agrees not to disclose the Agreement or its contents without the Prior
written consent of the Savings Bank. Notwithstanding the foregoing, the Savings
Bank reserves the right in its sole discretion to make disclosure of the
Agreement as it deems necessary or appropriate in compliance with its regulatory
reporting requirements. Notwithstanding anything herein to the contrary, failure
by the Executive to comply with the provisions of this Section may result in the
immediate termination of the Agreement within the sole discretion of the Savings
Bank, disciplinary action against the Executive taken by the Savings Bank,
including but not limited to the termination of employment of the Executive for
breach of the Agreement and the provisions of the Section, and other remedies
that may be available in law or in equity.
19. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first hereinabove written.
TRI-COUNTY FEDERAL SAVINGS BANK
By: /s/ Larry C. Goddard
ATTEST:
/s/ Carl F. Rupp
Secretary
WITNESS:
/s/ Earl F. Warren, Jr. /s/ Robert L. Savage
Executive
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this 30th day of January 1998, ("Effective
Date") by and between Tri-County Federal Savings Bank (the "Bank") and
________________________________ (the "Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed by the Bank as the
______________________________________ and is experienced in all phases of the
business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued active
participation in the business of the Bank; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Bank and in consideration of the Executive's agreeing to remain in the employ of
the Bank, the parties desire to specify the continuing employment relationship
between the Bank and the Executive;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereby agree as follows:
1. Employment. The Bank hereby employs the Executive in the capacity of
________________________________________________________. The Executive hereby
accepts said employment and agrees to render such administrative and management
services to the Bank and to Tri-County Bancorp, Inc. ("Parent") as are currently
rendered and as are customarily performed by persons situated in a similar
executive capacity. The Executive shall promote the business of the Bank and
Parent. The Executive's other duties shall be such as the Board of Directors for
the Bank (the "Board of Directors" or "Board") may from time to time reasonably
direct, including normal duties as an officer of the Bank.
2. Term of Employment. The term of employment of Executive under this
Agreement shall be for the period commencing on the Effective Date and ending
thirty-six (36) months thereafter ("Term"). Additionally, on, or before, each
annual anniversary date from the Effective Date, the Term of employment under
this Agreement shall be extended for up to an additional period beyond the then
effective expiration date upon a determination and resolution of the Board of
Directors that the performance of the Executive has met the requirements and
standards of the Board, and that the Term of such Agreement shall be extended.
References herein to the Term of this Agreement shall refer both to the initial
term and successive terms.
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Bank shall compensate and pay the Executive during the
Term of this Agreement a minimum base salary at the rate of
$________________________per annum ("Base Salary"), payable in cash not less
frequently than monthly; provided, that the rate of such salary shall be
reviewed by the Board of Directors not less often than annually, and the
Executive shall be entitled to receive increases at such percentages or in such
amounts as determined by the Board of Directors. The base salary may not be
decreased without the Executive's express written consent.
<PAGE>
(b) Discretionary Bonus. The Executive shall be entitled to participate in
an equitable manner with all other senior management employees of the Bank in
discretionary bonuses that may be authorized and declared by the Board of
Directors to its senior management executives from time to time. No other
compensation provided for in this Agreement shall be deemed a substitute for the
Executive's right to participate in such discretionary bonuses when and as
declared by the Board.
(c) Participation in Benefit and Retirement Plans. The Executive shall be
entitled to participate in and receive the benefits of any plan of the Bank
which may be or may become applicable to senior management relating to pension
or other retirement benefit plans, profit-sharing, stock options or incentive
plans, or other plans, benefits and privileges given to employees and executives
of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The Executive
shall be entitled to participate in and receive the benefits of any plan or
policy of the Bank which may be or may become applicable to senior management
relating to life insurance, short and long term disability, medical, dental,
eye-care, prescription drugs or medical reimbursement plans.
(e) Vacations and Sick Leave. The Executive shall be entitled to paid
annual vacation leave in accordance with the policies as established from time
to time by the board of Directors, which shall in no event be less than four
weeks per annum. The Executive shall also be entitled to an annual sick leave
benefit as established by the Board for senior management employees of the Bank.
the Executive shall not be entitled to receive any additional compensation from
the Bank for failure to take a vacation or sick leave, nor shall he be able to
accumulate unused vacation or sick leave from one year to the next, except to
the extent authorized by the Board of Directors.
(f) Expenses. The Bank shall reimburse the Executive or otherwise provide
for or pay for all reasonable expenses incurred by the Executive in furtherance
of, or in connection with the business of the Bank, including, but not by way of
limitation, automobile and traveling expenses, and all reasonable entertainment
expenses, subject to such reasonable documentation and other limitations as may
be established by the Board of Directors of the Bank. If such expenses are paid
in the first instance by the Executive, the Bank shall reimburse the Executive
therefor. (g) Changes in Benefits. The Bank shall not make any changes in such
plans, benefits or privileges previously described in Section 3(c), (d) and (e)
which would adversely affect the Executive's rights or benefits thereunder,
unless such change occurs pursuant to a program applicable to all executive
officers of the Bank and does not result in a proportionately greater adverse
change in the rights of, or benefits to, the Executive as compared with any
other executive officer of the Bank. Nothing paid to Executive under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to Executive pursuant to Section 3(a)
hereof.
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or inters of the Bank
or Parent.
(b) Nothing contained in this Section 4 shall be deemed to prevent or limit
the right of Executive to invest in the capital stock or other securities of any
business dissimilar from that of the Bank or Parent, or, solely as a passive or
minority investor, in any business.
<PAGE>
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under this
Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement, in which
event the Executive's estate shall be entitled to receive the compensation due
the Executive through the last day of the calendar month in which Executive's
death shall have occurred.
(b) The Board of Directors may terminate the Executive's employment at any
time, but any termination by the Board of Directors other than termination for
Just Cause, shall not prejudice the Executive's right to compensation or other
benefits under the Agreement. The Executive shall have no right to receive
compensation or other benefits for any period after termination for Just Cause.
The Board may within its sole discretion, acting in good faith, terminate the
Executive for Just Cause and shall notify such Executive accordingly.
Termination for "Just Cause" shall include termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
(c) The voluntary termination by the Executive during the term of this
Agreement with the delivery of no less than 60 days written notice to the Board
of Directors, other than pursuant to Section 9(b), in which case the Executive
shall be entitled to receive only the compensation, vested rights, and all
employee benefits up to the date of such termination.
7. Regulatory Exclusions.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)1)), the
Bank's obligations under the Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may within its discretion (i) pay the Executive all or
part of the compensation withheld while its contract obligations were suspended
and (ii) reinstate any of its obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of FDIA) all
obligations under this Agreement shall terminate as of the date of default, but
this paragraph shall not affect any vested rights of the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to the
extent determined that continuation of the Agreement is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision ("Director of OTS"), or his or her designee, at the time that the
Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her
designee, at the time that the Director of the OTS, or his or her designee
approves a supervisory merger to resolve problems related to operation of the
Bank or when the Bank is determined by the Director of the OTS to be in an
unsafe or unsound condition. any rights of the parties that have already vested,
however, shall not be affected by such action.
<PAGE>
(e) Notwithstanding anything herein to the contrary, any payments made to
the Executive pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 U.S.C. Section 1828(k) and any regulations
promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated to
the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall receive the compensation and
benefits determined in accordance with the policies of the Bank. Upon returning
to active full-time employment, the Executive's full compensation as set forth
in this Agreement shall be reinstated as of the date of commencement of such
activities. In the event that the Executive returns to active employment on
other than a full-time basis, then his compensation (as set form in Section 3(a)
of this Agreement) shall be reduced in proportion to the time spent in said
employment, or as shall otherwise be agreed to by the parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event of
the involuntary termination of Executive's employment during the term of this
Agreement following any Change in Control of the Bank or Parent, or within 24
months thereafter of such Change in Control, absent Just Cause, Executive shall
be paid an amount equal to the product of 1.0 times the Base Salary in effect as
of the date of the Change in Control or the date of termination of employment,
whichever is greater. Said sum shall be paid, at the option of Executive, either
in one (1) lump sum within thirty (30) days of such termination of service or in
periodic payments over the next 18 months or the remaining term of this
Agreement whichever is less, as if Executive's employment had not been
terminated, and such payments shall be in lieu of any other future payments
which the Executive would be otherwise entitled to receive under Section 6 of
this Agreement. Notwithstanding the forgoing, all sums payable hereunder when
aggregated with all other payments to be made to the Executive by the Bank or
the Parent shall be deemed an "excess parachute payment" in accordance with
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
regulations promulgated thereunder and be subject to the excise tax provided at
Section 4999(a) of the Code. The term "Change in Control" shall refer to (i) the
sale of all, or a material portion, of the assets of the Savings Bank or the
Parent; (ii) the merger or recapitalization of the Savings Bank or the Parent
whereby the Savings Bank or the Parent is not the surviving entity; (iii) a
change of the Savings Bank or the Parent, as otherwise defined or determined by
the Office of Thrift Supervision or regulations promulgated by it; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five
percent (25%) or more of the outstanding voting securities of the Savings Bank
or the Parent by any person, trust, entity or group. The term "person" means an
individual other than the Executive, or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
<PAGE>
(b) Notwithstanding any other provision of this Agreement to the contrary,
Executive may voluntarily terminate his employment during the term of this
Agreement following a Change in Control of the Bank or Parent, or within
twenty-four months following such Change in Control, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Bank, Executive would be required to report
to a person or persons other than the Board of Directors of the Bank or the
President of the Bank; (iii) if the Bank should fail to maintain Executive's
base compensation in effect as of the date of the Change in Control and the
existing employee benefits plans, including material fringe benefit, stock
option and retirement plans; (iv) if Executive would be assigned duties and
responsibilities other than those normally associated with his position as
referenced at Section 1, herein; (v) if Executive's responsibilities or
authority have in any way been materially diminished or reduced; or (vi) if
Executive's responsibilities or authority have in any way been materially
diminished or reduced.
10. Withholding. All payments required to be made by the Bank hereunder to
the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Bank or Parent which shall acquire, directly
or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal skills of the
Executive, the Executive shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of Wyoming.
14. Nature of Obligations. Nothing contained herein shall create or require
the Bank to create a trust of any kind to fund any benefits which may be payable
hereunder, and to the extent that the Executive acquires a right to receive
benefits from the Bank hereunder, such right shall be no greater than the right
of any unsecured general creditor of the Bank.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
<PAGE>
16. Severability. The provision of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect os the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Association,
and judgment upon the award rendered may be entered in any court having
jurisdiction thereof, except to the extent that the parties may otherwise reach
a mutual settlement of such issue. Further, the settlement of the dispute to be
approved by the Board of the Bank may include a provision for the reimbursement
by the Bank to the Executive for all reasonable costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
or the Board of the Bank or the Parent may authorize such reimbursement of such
reasonable costs and expenses by separate action upon a written action and
determination of the Board following settlement of the dispute. Such
reimbursement shall be paid within ten (10) days of Executive furnishing to the
Bank or Parent evidence, which may be in the form , among other things, of a
canceled check or receipt, or any costs or expenses incurred by Executive.
18. Confidential Information. The Executive acknowledges that during his or
her employment he or she will learn and have access to confidential information
regarding the Savings Bank and the Parent and its customers and businesses
("Confidential Information"). The Executive agrees and covenants not to disclose
or use for his or her own benefit, or the benefit of any other person or entity,
any such Confidential Information, unless or until the Savings Bank or the
Parent consents to such disclosure or use or such information becomes common
knowledge in the industry or is otherwise legally in the public domain. The
Executive shall not knowingly disclose or reveal to any unauthorized person any
Confidential Information relating to the Savings Bank, the Parent, or any
subsidiaries or affiliates, or to any of the businesses operated by them, and
the Executive confirms that such information constitutes the exclusive property
of the Savings Bank and the Parent. The Executive shall not otherwise knowingly
act or conduct himself (a) to the material detriment of the Savings Bank or the
Parent, or its subsidiaries, or affiliates, or (b) in a manner which is inimical
or contrary to the interests of the Savings Bank or the Parent. Executive
acknowledges and agrees that the existence of this Agreement and its terms and
conditions constitutes Confidential Information of the Savings Bank, and the
Executive agrees not to disclose the Agreement or its contents without the Prior
written consent of the Savings Bank. Notwithstanding the foregoing, the Savings
Bank reserves the right in its sole discretion to make disclosure of the
Agreement as it deems necessary or appropriate in compliance with its regulatory
reporting requirements. Notwithstanding anything herein to the contrary, failure
by the Executive to comply with the provisions of this Section may result in the
immediate termination of the Agreement within the sole discretion of the Savings
Bank, disciplinary action against the Executive taken by the Savings Bank,
including but not limited to the termination of employment of the Executive for
breach of the Agreement and the provisions of the Section, and other remedies
that may be available in law or in equity.
19. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first hereinabove written.
TRI-COUNTY FEDERAL SAVINGS BANK
By: /s/ Larry C. Goddard
ATTEST:
/s/ Carl F. Rupp
Secretary
WITNESS:
/s/ Robert L. Savage /s/ Executive
[Company Logo] Tri-County
Bancorp, Inc.
------------------
1997 Annual Report
------------------
<PAGE>
---------------------------------------------------------------
TABLE OF CONTENTS
---------------------------------------------------------------
Selected Financial Data 1
---------------------------------------------------------------
Letter to Stockholders 2
---------------------------------------------------------------
Management's Discussion and Analysis 3
---------------------------------------------------------------
Report of Independent Auditors 10
---------------------------------------------------------------
Consolidated Statements of Financial Condition 11
---------------------------------------------------------------
Consolidated Statements of Operations 12
---------------------------------------------------------------
Consolidated Statements of Stockholders' Equity 13
---------------------------------------------------------------
Consolidated Statements of Cash Flows 14
---------------------------------------------------------------
Notes to Consolidated Financial Statements 15
---------------------------------------------------------------
Corporate and Stockholders' Information 31
---------------------------------------------------------------
<PAGE>
SELECTED FINANCIAL DATA
At December 31,
-------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------
(In Thousands)
BALANCE SHEET DATA Total amount of:
Assets $89,961 $85,888 $65,766 $59,583 $59,763
Loans receivable, net 40,425 35,265 25,514 24,439 23,798
Mortgage-backed 21,273 25,247 16,252 11,895 13,069
securities, net
Investment securities, net 23,240 21,466 21,268 20,221 19,184
Deposits 45,405 48,533 44,583 45,589 46,102
FHLB advances 29,697 23,460 7,000 1,000 --
Stockholders' equity 13,827 13,146 13,496 12,705 13,247
Year Ended December 31
-------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------
(In Thousands)
STATEMENT OF OPERATIONS
DATA
Interest income $6,466 $5,494 $4,600 $4,100 $4,246
Net interest income 2,744 2,468 2,266 2,396 2,347
Provision for loan losses -- -- -- -- --
Non-interest income 105 159 171 71 117
Non-interest expenses 1,623 1,811(1)1,458 1,416 1,176
Net income 901 540(1) 649 764 877
At or For Year Ended December 31
-------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------
FINANCIAL RATIOS & OTHER
DATA
Return on average assets 1.02% 0.71%(1) 1.04% 1.28% 1.56%
Return on average 6.68% 4.05%(1) 4.96% 5.89% 10.01%
stockholders' equity
Average interest rate 2.48% 2.68% 2.69% 3.30% 3.60%
spread
Net yield on average 3.19% 3.35% 3.62% 4.12% 4.23%
earning assets
Non-interest expense to 1.80% 2.11%(1) 2.22% 2.38% 1.97%
total assets
Average equity/total assets 14.99% 15.51% 19.92% 21.78% 13.70%
Non-performing loans/total 0.00% 0.04% 0.03% 0.39% 0.41%
assets
At or For Year Ended December 31
-------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------
PER SHARE INFORMATION(2)
Earnings per share - $.071 $0.41(1) $.47 $.53 $0.16(3)
diluted
Dividends per share .33 .25 .19 .11 --
Book value per share 11.84 10.80 10.53 9.42 8.86
- ----------------------------
(1)Includes the effect of a one-time special assessment to recapitaliz
the SAIF.
(2)Restated to reflect 100% stock split effected by a 100% stock
dividend paid December 8, 1997.
(3)From Sept. 28, 1993.
<PAGE>
To Our Stockholders:
Tri-County Bancorp, Inc. produced record earnings in 1997. Earnings for the
Company were $901,004, which exceeded the previous year by 21.6% when 1996 is
normalized for the FDIC special assessment paid that year. Earnings per share
also increased to record levels of $.71 per share on a fully diluted basis and
exceeded 1996 by 23.0% when compared to that year excluding the FDIC special
assessment. Previously, our highest income year was 1993.
In addition to the record earnings, the Company paid its highest annual
dividends of $.325 per share. One 25,000 share (before the stock dividend)
repurchase was completed in 1997, and a stock dividend of 100% was paid on
December 8th. Our stock performed well with the bid price on the stock moving up
$4.69 to $13.69 at year end, a 52.1% increase.
Last year in our letter to stockholders, we discussed our financial
strategy to be more aggressive in adding securities, loans, and loan
participations. We planned to fund these assets primarily through borrowings
from the Federal Home Loan Bank. We also made a commitment to work harder at
adding checking account customers. These strategies were employed and
contributed to the record earnings. Loans for 1997 increased over $5 million or
14.6%, and our checking account numbers are rising significantly. As in the
past, our credit quality continues to be excellent.
Despite a somewhat unfavorable interest rate forecast, the outlook for 1998
is good. We will continue to focus on the financial strategies that we have
employed in the past to improve our Company.
Thank you for your continued support, and please contact us with your
questions about Tri-County Bancorp, Inc.
Sincerely,
Robert L. Savage Larry C. Goddard
President and Chief Executive Officer Chairman of the Board
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ORGANIZATION
Tri-County Bancorp, Inc. (the "Company") was organized in May of 1993 for the
purpose of acquiring all the capital stock of Tri-County Federal Savings Bank
(the "Bank") upon conversion of the Bank from mutual to stock form of ownership
("Conversion"). The Conversion was completed on September 29, 1993. In the
related initial public offering, 747,500 shares of Tri-County Bancorp, Inc.
common stock were sold at $10.00 per share. References throughout this report to
the Company include the Company and Bank on a consolidated basis unless the
context otherwise requires.
THE COMPANY'S BUSINESS
The Company is a unitary savings and loan holding company which, under existing
laws, generally is not restricted in the types of business activities in which
it may engage provided that the Bank retains a specified amount of its assets in
housing-related investments. At the present time, since it does not conduct any
active business, the Company does not intend to employ any persons other than
officers, using the support staff from the Bank from time to time to meet its
administrative needs.
The Bank is a federally chartered stock savings bank headquartered in
Torrington, Wyoming with one additional branch office in Wheatland, Wyoming. The
Bank was founded in 1935 as a federally chartered savings and loan association
under the name Tri-County Federal Savings and Loan Association. The Bank's
deposits are federally insured by the Savings Association Insurance Fund
("SAIF").
The Bank is primarily engaged in attracting deposits from the general public and
using those funds to originate real estate loans on one-to-four family
residences and, to a lesser extent, consumer loans, commercial real estate
loans, and commercial business loans. The Bank's market area is primarily Goshen
and Platte Counties, Wyoming and Scottsbluff County in western Nebraska. In
addition, the Bank invests in investment securities and mortgage-backed
securities. The Bank offers its customers several types of real estate loans,
including adjustable-rate and fixed-rate mortgage loans. The Bank has also been
an originator of multi-family and commercial real estate loans, and consumer
loans, including automobile and home equity loans. The Bank also purchases loans
and participates in loans with other financial and mortgage banking institutions
on a case by case basis. These activities are conducted in Wyoming and other
Rocky Mountain States.
CAPITAL STOCK
Since its issuance in September 1993, the Company's common stock has been traded
over-the-counter on the Nasdaq Stock MarketSM appearing under the symbol "TRIC."
The following table reflects the stock price as published by the Nasdaq
statistical report.
<PAGE>
1996 LOW1 HIGH1
First Quarter--03/31/96 $8.25 $9.25
Second Quarter--06/30/96 $8.75 $9.25
Third Quarter--09/30/96 $9.00 $9.44
Fourth Quarter--12/31/96 $9.00 $9.50
1997
First Quarter--03/31/97 $9.00 $9.50
Second Quarter--06/30/97 $9.50 $10.63
Third Quarter--09/30/97 $10.75 $12.25
Fourth Quarter--12/31/97 $11.50 $15.00
The number of shareholders of record as of December 31, 1997 was approximately
233. This does not reflect the number of persons or entities who held stock in
nominee or "street" name through various brokerage firms. At December 31, 1997,
there were 1,167,498 shares outstanding. The Company completed one repurchase of
stock in 1997 of 50,000(1) shares. The repurchase was completed in July with an
average price paid of $12.00(1) per share.
The Company's ability to pay dividends to stockholders is dependent upon the
dividends it receives from the Bank. The Bank may not declare or pay a cash
dividend on any of its stock if the effect thereof would cause the Bank's
regulatory capital to be reduced below (1) the amount required for the
liquidation account established in connection with the Bank's conversion from
mutual to stock form, or (2) the regulatory capital requirements imposed by the
Office of Thrift Supervision ("OTS"), the Bank's chartering authority and
primary federal regulator. The Company paid per share, dividends1 of $.075 on
March 31, June 30, September 30, and $.10 on December 31, 1997. The dividends
paid in 1997 exceeded 1996 dividends by $.075 or 30%. Additionally, the Company
issued a 100% stock dividend on December 8, 1998.
CHANGES IN FINANCIAL CONDITION
ASSETS
The total assets of the Bank increased by $4,072,444, or 4.74%, during 1997.
Securities held-to-maturity decreased by $2,332,456. The decrease was the result
of principal payments and prepayments of $1,839,685 on the Bank's portfolio of
mortgage-backed securities and the maturity of an agency security in the amount
of $500,000.
Securities available-for-sale decreased by $239,503 during 1997. Agency
securities totaling $7,765,700 were purchased during the year and the market
value of the portfolio increased by $875,542. These increases were offset by
principal payments and prepayments of $3,321,899 on mortgage-related securities
and the sale of securities totaling $5,299,271.
- ----------------------
(1) Restated to reflect 100% stock split effected by a 100% stock dividend paid
December 8, 1997.
<PAGE>
Loans receivable increased $5,160,010 during 1997. During this period the Bank
originated or purchased portfolio residential mortgage loans totaling
$7,839,781, non-residential mortgage loans totaling $1,970,712, consumer loans
totaling $2,270,330 and commercial loans totaling $478,725. By the end of the
period, the Bank had received repayments totaling $7,073,898. Of the total
mortgage loans originated or purchased during the year, $4,350,725 were
adjustable-rate and $5,459,768 were fixed-rate loans. Because of a lack of
demand for certain types of loans in the Bank's primary lending area, purchased
loans totaled 43% of mortgage lending during the period. The majority of
purchased loans are residential and non-residential real estate loans in
Colorado and non-residential real estate loans in western New Mexico. Purchased
loans are subjected to the same underwriting standards and loan terms as those
originated by the Bank for its portfolio.
LIABILITIES
Deposit balances decreased by $3,127,829 or 6.44% and consisted of increases of
$174,030 and $304,790 in demand accounts and savings and NOW deposits,
respectively, and a decrease of $3,606,649 in time deposits. The decrease in
time deposits was due, in part, to the scheduled maturity of deposits held by a
local school district, which were originally issued in the fourth quarter of
1996.
The Bank continued to increase its level of borrowings from the Federal Home
Loan Bank of Seattle from $23,460,492 at December 31, 1996 to $29,696,616 at
December 31, 1997. The advances were used primarily to fund loan originations
and purchase additional securities.
Deferred income taxes increased by $250,685 during 1997 and was mainly the
result of the application of SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities, which requires unrealized gains and losses on
available-for-sale securities to be reported, net of deferred income taxes, as a
separate component of stockholders' equity. The market value of these securities
increased $875,542 during the period, which resulted in an increase in deferred
income taxes.
STOCKHOLDERS' EQUITY
On November 4, 1997, the Company declared a 100% stock dividend, which was
distributed on December 8, 1997. In connection with the stock dividend, $74,750
was transferred from retained earnings to common stock.
The increase in additional paid-in capital of $70,996 was the result of the
application of an accounting standard which requires charging current expense
for the fair value of shares of stock committed to be released by the Bank's
Employee Stock Ownership Plan and crediting the difference between the fair
value and the cost of the shares to paid-in capital.
The increase in retained earnings was the result of net earnings totaling
$901,004 which more than offset the decrease in retained earnings caused by the
payments of dividends totaling $386,937 and the transfer to common stock of
$74,750 in connection with the stock split mentioned above.
<PAGE>
As discussed earlier, SFAS No. 115 requires unrealized gains and losses on
securities classified available-for-sale to be shown as a separate component of
stockholders' equity in an amount that is net of deferred income taxes. The
market value of these securities increased during 1997 and resulted in an
increase, net of deferred income tax, of $577,857 in stockholders' equity.
On July 10, 1997, the Company repurchased 50,000(1) shares of its outstanding
Common Stock at $12.001 per share for a total cost of $600,000.
AVERAGE BALANCE SHEET
The following table sets forth certain information relating to average balance
sheets and reflects the average yield on assets and average cost of liabilities
for the periods indicated and the average yields earned and rates paid. Such
yields and costs are derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the periods presented.
Average balances are derived from month-end balances. Management does not
believe that the use of month-end instead of daily average balances has caused
any material difference in the information presented.
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
----------------------------------------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
-----------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $37,581 $3,144 8.37% $31,815 $2,633 8.28%
Securities-Available for Sale 38,213 2,578 6.75% 28,676 1,884 6.57%
Securities-Hold to maturity 8,964 684 7.63% 12,671 944 7.45%
Other interest-earning assets 1,165 61 5.24% 447 33 7.38%
------- ------ ------- ------
Total interest-earning assets $85,923 $6,467 7.53% $73,609 $5,494 7.46%
------ ------
Non-interest earning assets 2,278 2,089
------- -------
Total Assets $88,201 $75,698
======= =======
Interest-bearing liabilities:
Deposits $47,111 $2,188 4.64% $45,708 $2,083 4.56%
Other borrowings 26,625 1,534 5.76% 17,629 943 5.35%
------- ------ ------- ------
Total interest-bearing liabilities $73,736 $3,722 5.05% $63,337 $3,026 4.78%
------ ------
Non-interest bearing liabilities 1,057 1,273
------- -------
Total liabilities 74,793 $64,610
Retained earnings 13,408 11,088
------- -------
Total liabilities and Retained Earnings $88,201 $75,698
======= =======
Net interest income $2,745 $2,468
====== ======
Interest rate spread 2.48% 2.68%
Net yield on interest earning assets 3.19% 3.35%
Ratio of average interest-earning assets 116.53% 116.22%
to interest-bearing liabilities
</TABLE>
- -------------------------------
(1)Restated to reflect 100% stock split effected by a 100% stock dividend
paid December 8, 1997.
<PAGE>
RATE/VOLUME ANALYSIS
The table below sets forth certain information regarding changes in interest
income and interest expense of the Bank for the periods indicated. For each
category of interest-earning asset and interest-bearing liability, information
is provided on changes attributable to (i) changes in volume (changes in average
volume multiplied by old rate); (ii) changes in rates (changes in rate
multiplied by old average volume); (iii) changes in rate/volume (changes in rate
multiplied by the change in average volume).
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
1997 vs. 1996 1996 vs. 1995
------------------------------- ------------------------------
Increase (Decrease) Due To Increase (Decrease) Due To
------------------------------- ------------------------------
Volume Rate Rate/Volume Net Volume Rate Rate/Volume Net
------ ---- ----------- --- ------ ---- ----------- ---
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable 478 29 5 512 521 17 4 542
Securities-Held to maturity 625 50 17 692 689 8 5 702
Securities-Held to maturity (276) 23 (7) (260) (308) 51 (13) (270)
Other interest-earning assets 54 (10) (15) 29 (85) 21 (16) (80)
---- --- --- ---- ---- -- --- ----
Total interest-earning assets 881 92 0 973 817 97 (20) 894
Interest-bearing liabilities:
Deposit accounts 65 41 0 106 12 (4) 0 8
Other liabilities 480 73 37 590 730 (12) (33) 685
---- --- --- ---- ---- --- --- ----
Total interest-bearing liabilities 545 114 37 696 742 (16) (33) 693
Net change in interest income 336 (22) (37) 277 75 113 13 201
interest income ==== === === ==== ==== === === ====
</TABLE>
COMPARISON OF THE OPERATING RESULTS FOR THE
YEARS ENDED DECEMBER 31, 1997 AND 1996
NET INCOME
Net income increased $360,855 during 1997 and net interest income increased by
$276,205. Non-interest income decreased by $53,846 and non-interest expense
decreased by $187,886. The provision for income taxes increased by $49,389.
The comparison of net income in 1997 to net income of 1996 was significantly
impacted by legislation passed in the third quarter of 1996 which provided for
the recapitalization of the Savings Association Insurance Fund via a one-time
special assessment to all financial institutions whose deposit insurance is
cover by this fund. The special assessment totaled $304,606 and was charged to
expense in the previous year.
<PAGE>
INTEREST INCOME
Interest income from loans increased $512,308 or 19.46% for the year. The
increase was the result of an increase in the average balance of loans
outstanding of $5,766,369 and an increase in yield on the loans from 8.27% to
8.37%.
Interest on securities held-to-maturity decreased $260,558 and was caused
primarily by a decrease in the average balance of the portfolio of $3,707,852
which offset an increase in the yield on the portfolio from 7.45% to 7.63%. The
increase in yield was the result of the maturity of securities, which, on
average, had a lower yield than the yield on the remaining portfolio. The
proceeds of the maturities were used to fund loans and purchase
available-for-sale securities.
The increase of $692,111 in interest on securities available-for-sale was the
result of an increase in the average balance of securities of $9,537,741 and an
increase in the average yield on the portfolio from 6.57% to 6.74%. The increase
in yield was the result of the purchase of securities, which, on average, had a
higher yield than the yield on the existing portfolio.
The increase in income from other interest-earning assets of $28,683 was
primarily caused by an increase in the average balance of these assets. This
category of assets consists primarily of interest-earning demand and time
deposits held at FHLB.
INTEREST EXPENSE
Interest expense on deposits increased $105,846 during the year of 1997. This
was the result of an increase in the average cost of deposits from 4.56% to
4.64%, which more than off-set a decrease of $1,403,32 in the average balance of
deposits.
The Bank took advantage of a relatively inexpensive source of funding available
through the FHLB to fund loans and purchase financial instruments that yield a
slightly higher return than the rate charged on the advances. The average
balance of these borrowings was $8,996,654 greater during 1997 than 1996 and the
average cost increased from 5.35% to 5.76% which resulted in an increase of
$590,493 in interest expense.
PROVISION FOR LOAN LOSSES
No provision for loan losses was made during 1997. The allowance for loan losses
is based on Management's evaluation of the risk inherent in its loan portfolio
after giving due consideration to the changes in general market conditions and
in the nature and volume of the Bank's loan activity. The Bank intends to
continue to provide for loan losses based on its periodic review of the loan
portfolio and general market conditions. The allowance for loan losses amounted
to $412,456 at December 31, 1997. While the Bank maintains its allowance for
loan losses at a level which it considers adequate to provide for potential
losses, there can be no assurances that further additions will not be made to
the loss allowance and that such losses will not exceed the estimated amounts.
<PAGE>
NON-INTEREST INCOME
Non-interest income decreased $53,847 during the twelve-month period ended
December 31, 1997. The decrease was primarily attributable to an increase in
losses on sale of securities of $65,825. These losses were incurred in the
redemption of $2,700,000 of available-for-sale shares in a mutual fund. Service
charges and deposits and gains on sale of loans increased $11,654 and $2,061,
respectively. These increases partially offset the overall decrease in
non-interest income.
NON-INTEREST EXPENSE
Overall, non-interest expense decreased $187,886 during 1997.
Compensation and benefits increased by $80,884 in 1997 and was primarily caused
by an increase in overall salaries and pension costs.
Occupancy and equipment expense increased $36,233 and was primarily caused by
increased data processing costs and by increased depreciation expense caused by
the installation of new computer hardware.
Legislation was passed in the third quarter of 1996 that provided for the
recapitalization of the SAIF insurance fund via a one-time special assessment to
the Bank in the amount of $304,606. Because of the recapitalization, the
insurance premiums charged by the fund decreased from $97,894 during 1996 to
$30,518 for 1997.
Other, net expenses increased by $66,979 and was primarily the result of two
events. The Bank received rent during 1996 on a mini-warehouse property held as
real estate owned. The receipt of the rents from the court appointed trustee
exceeded the expenses of caring for the property and collecting the monthly
rents during the foreclosure proceedings that were concluded in 1996. Also, the
Bank abandoned its efforts to start a de novo bank in Colorado in 1997 and
charged that cost to expense.
INCOME TAXES
The provision for income taxes increased $49,389 for the year ended December 31,
1997. This increase was due to an increase in earnings before taxes of $410,244.
Further, because the Bank had established reserves for loan losses which will be
charged with any subsequent loan losses and because the Bank will be allowed a
deduction for losses incurred on loans foreclosed after December 31, 1995 for
tax purposes, the Bank will have a difference in the treatment of loan losses
for tax and financial purposes. A deferred tax asset is being established by the
Bank and the effect of this change was a reduction in the expense for income
taxes totaling $70,000 for the current year.
<PAGE>
Board of Directors
Tri-County Bancorp, Inc. and Subsidiaries
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying consolidated statements of financial
condition of Tri-County Bancorp, Inc. and Subsidiaries (Tri-County) as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended.
These consolidated financial statements are the responsibility of
Tri-County's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
condition of Tri-County Bancorp, Inc. and Subsidiaries as of December 31,
1997 and 1996, and the consolidated results of their operations and their
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
DALBY, WENDLAND & CO., P.C.
Grand Junction, Colorado
February 6, 1998
<PAGE>
<TABLE>
<CAPTION>
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
Cash and due from banks $ 758,398 $ 537,195
Interest earning deposits with banks 1,880,407 1,751,397
Securities available for sale, at fair value 34,900,612 35,140,115
Securities held to maturity 7,987,250 10,319,706
Loans held for sale, at market value 117,111 90,000
Loans receivable, net of allowance for loan losses
of $412,456 (1997) and 40,425,288 35,265,278
$415,447 (1996)
Accrued interest receivable 655,339 549,524
Federal Home Loan Bank stock 1,625,400 1,253,300
Premises and equipment 886,879 921,681
Other assets 723,841 59,885
----------- -----------
Total Assets $89,960,525 $85,888,081
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $ 541,510 $ 367,480
Savings and NOW deposits 12,504,022 12,199,232
Other time deposits 32,359,696 35,966,345
----------- -----------
Total Deposits 45,405,228 48,533,057
Advances from Federal Home Loan Bank 29,696,616 23,460,492
Advances by borrowers for taxes and insurance 101,267 104,387
Accounts payable and accrued expenses 269,105 234,141
Deferred income taxes 661,125 410,440
----------- -----------
Total Liabilities 76,133,341 72,742,517
----------- -----------
Stockholders' Equity
Preferred stock, authorized 5,000,000 shares, -- --
$.10 par value authorized, none issued or
outstanding
Common stock, authorized 10,000,000 shares,
$.10 par value authorized, 1,495,000 (1997)
and 747,500 (1996) shares issued 149,500 74,750
Additional paid-in capital 7,100,600 7,029,604
Retained earnings - substantially restricted 8,792,947 8,353,630
Unearned compensation relating to Employee Stock
Option Plan and Management Stock Bonus Plan (388,025) (506,725)
Unrealized gain on securities available for
sale, net of tax 817,476 239,619
Treasury stock - 327,502 (1997) and 138,751
shares (1996), at cost (2,645,314) (2,045,314)
----------- -----------
Total Stockholders' Equity 13,827,184 13,145,564
----------- -----------
Total Liabilities and Stockholders' Equity $89,960,525 $85,888,081
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1997 1996
-----------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $3,144,917 $2,632,609
Interest and dividends on available for sale securities:
Taxable interest 2,459,395 1,781,693
Dividends 117,050 102,641
Interest on held to maturity securities, taxable 683,848 944,406
Other interest earning assets 61,236 32,553
---------- ----------
Total Interest Income 6,466,446 5,493,902
---------- ----------
INTEREST EXPENSE
Deposits 2,188,492 2,082,646
Advances 1,534,093 943,600
---------- ----------
Total Interest Expense 3,722,585 3,026,246
---------- ----------
Net Interest Income 2,743,861 2,467,656
PROVISION FOR LOAN LOSSES -- --
---------- ----------
Net Interest Income After
Provision for Loan Losses 2,743,861 2,467,656
---------- ----------
NONINTEREST INCOME
Service charges on deposits 112,449 100,795
Gain on sale of loans 35,420 33,359
Loss on sale of investments available for sale (71,421) (5,596)
Other income 28,973 30,710
---------- ----------
Total Noninterest Income 105,421 159,268
---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 891,096 810,212
Occupancy and equipment 330,726 294,493
SAIF assessment -- 304,606
Federal insurance premiums 30,518 97,894
Other expenses 370,476 303,497
---------- ----------
Total Noninterest Expense 1,622,816 1,810,702
---------- ----------
Net Income Before Income Taxes 1,226,466 816,222
PROVISION FOR INCOME TAXES 325,462 276,073
---------- ----------
Net Income $ 901,004 $ 540,149
========== ==========
EARNINGS PER SHARE
Basic $ .75 $ .44
===== =====
Diluted $ .71 $ .41
===== =====
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1997 and 1996
Employee Unrealized
Additional Stock Management Gains/
Common Paid-in Retained Ownership Stock Losses on Treasury
Stock Capital Earnings Plan Bonus Plan Securities Stock Total
--------- ---------- ---------- ---------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - January 1, 1996 $ 74,750 $6,983,901 $8,125,865 $(463,450) $(164,450) $ 398,026 $(1,458,218) $13,496,424
Net income - - 540,149 - - - - 540,149
Repayment of ESOP debt - - - 59,800 - - - 59,800
Allocation of ESOP shares - 45,703 - - - - - 45,703
Amortization of deferred
compensation-MSBP - - - - 61,375 - - 61,375
Treasury stock purchased - - - - - - (587,096) (587,096)
Change in unrealized loss on
securities available
for sale (net of taxes) - - - - - (158,407) - (158,407)
Cash dividend - - (312,384) - - - - (312,384)
--------- ---------- ---------- --------- --------- -------- ----------- -----------
BALANCE - December 31, 1996 74,750 7,029,604 8,353,630 (403,650) (103,075) 239,619 (2,045,314) 13,145,564
Net income - - 901,004 - - - - 901,004
Repayment of ESOP debt - - - 59,800 - - - 59,800
Allocation of ESOP shares - 70,996 - - - - - 70,996
Amortization of deferred
compensation-MSBP - - - - 58,900 - - 58,900
Treasury stock purchased - - - - - - (600,000) (600,000)
Change in unrealized gain on
securities available
for sale (net of taxes) - - - - - 577,857 - 577,857
Two for one stock split
effected as a stock dividend 74,750 - (74,750) - - - - -
Cash dividend - - (386,937) - - - - (386,937)
-------- ---------- ---------- --------- --------- --------- ----------- -----------
BALANCE - December 31, 1997 $149,500 $7,100,600 $8,792,947 $(343,850) $ (44,175) $ 817,476 $(2,645,314) $13,827,184
======== ========== ========== ========= ========= ========= =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 901,004 $540,149
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 89,258 89,104
Provision for deferred taxes (47,000) 42,000
Loss on sale of securities available for sale 71,421 5,596
Gain on sale of loans (35,420) (33,359)
Loss on sale of real estate owned - 2,615
FHLB stock dividends received (106,400) (93,400)
Unvested forfeitable stock awarded 58,900 61,375
Net change in other assets (781,340) (19,612)
Net change in other liabilities 76,061 135,766
Origination of loans held for sale (1,603,145) (1,780,506)
Proceeds from sale of loans 1,611,454 1,808,794
--------- ---------
Net Cash Provided By Operations 234,793 758,522
--------- ---------
INVESTING ACTIVITIES
Net loan origination and principal repayments on loans 697,364 99,009
Purchase of loans (5,869,928) (9,840,220)
Purchase of securities available for sale (7,765,700) (21,138,975)
Proceeds from sale of securities available for sale 5,227,850 2,710,541
Principal received on securities available for sale 3,321,899 1,154,524
Proceeds from maturity of securities held to maturity 500,000 -
Principal received on securities held to maturity 1,839,685 7,948,466
Proceeds from sale of real estate owned 75,786 210,777
Investment in property, equipment and real estate owned (89,574) (81,370)
--------- ----------
Net Cash Used By Investing Activities (2,062,618) (18,937,248)
--------- ----------
FINANCING ACTIVITIES
Net change in noninterest bearing demand, savings and NOW deposits 478,820 1,418,797
Net change in time deposits (3,606,649) 2,530,961
Advances from Federal Home Loan Bank 53,218,250 49,784,625
Repayment of Federal Home Loan Bank advances (46,982,125) (33,324,133)
Decrease in advances by borrowers for taxes and insurance (3,121) (11,984)
Dividends paid (386,937) (312,384)
ESOP payments received 59,800 59,800
Purchase of treasury stock (600,000) (587,096)
---------- ----------
Net Cash Provided by Financing Activities 2,178,038 19,558,586
---------- ----------
Increase in Cash and Cash Equivalents 350,213 1,379,860
Cash and cash equivalents - Beginning of Period 2,288,592 908,732
---------- ----------
Cash and cash equivalents - End of Period $2,638,805 $2,288,592
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
TRI-COUNTY BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Tri-County Bancorp, Inc. (Tri-County) is a bank holding company organized under
Wyoming law in 1993 and headquartered in Torrington, Wyoming. Through its
subsidiaries, Tri-County provides a wide range of banking services to customers
in its primary market area of eastern Wyoming.
Basis of Presentation
The consolidated financial statements include the accounts of Tri-County, its
subsidiaries, Tri-County Federal Savings Bank (the Bank) and First Tri-County
Services, Inc. The investment in the subsidiaries is accounted for using the
equity method of accounting. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain prior period amounts
have been reclassified to conform with the current year's presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect amounts reported in the consolidated financial
statements.
Actual results could differ from those estimates.
On January 1, 1997, Tri-County adopted Financial Accounting Standards Board
(FASB) Statement No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities (SFAS 125). The Statement is effective
for transactions occurring after December 31, 1996. However, transactions such
as securities lending, repurchase agreements, dollar rolls, and similar secured
financing arrangements are not subject to the provisions of SFAS 125 until
January 1, 1998. The standard provides that, following a transfer of financial
assets, an entity is to recognize the financial and servicing assets it controls
and the liabilities it has incurred, derecognize financial assets when control
has been surrendered and derecognize liabilities when extinguished. The adoption
of SFAS 125 did not have a material impact on Tri-County's consolidated
financial statements. The impact of the delayed provisions is also not expected
to be material.
In February 1997, the FASB issued Statement No. 128, Earnings Per Share (SFAS
128). SFAS 128 replaced the calculation of primary and fully diluted earnings
per share (EPS) with basic and diluted EPS. Unlike primary EPS, basic EPS
excludes any dilutive effects of options, warrants, and convertible securities.
Diluted EPS is very similar to fully diluted EPS. All EPS amounts presented have
been restated, as applicable, to conform with the new requirements.
<PAGE>
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income
(SFAS 130) and Statement No. 131, Disclosures about Segments of an Enterprise
and Related Information (SFAS 131). Each of the new statements is effective for
periods beginning after December 15, 1997, and requires that certain additional
information be reported in the financial statements and related notes.
Tri-County will adopt SFAS 130 in the first quarter of 1998 but doesn't expect
SFAS 131 to affect its 1998 financial statements.
Securities
Debt securities that Tri-County has both the positive intent and ability to hold
to maturity are classified as securities held to maturity. These are carried at
amortized cost. Securities purchased with the intention of recognizing
short-term profits are placed in the trading account and are carried at fair
value. Tri-County does not have any such securities at December 31, 1997 or
1996, or during the years then ended. Securities not classified as held to
maturity or trading are designated available for sale and carried at fair value.
Unrealized gains and losses (net of taxes) on securities available for sale are
carried as a separate component of stockholders' equity. Unrealized gains and
losses on securities classified as trading would be reported in earnings. The
amortized cost of specific securities sold is used to compute realized gains and
losses. Amortization of premiums and discounts are recognized in interest income
using the interest method.
Loans
Tri-County has established a lending policy where the credit worthiness of each
customer is reviewed and the amount and type of collateral obtained, upon
approval, is based on management's credit evaluation of the customer. Generally
the loans are collateralized by mortgages held by Tri-County.
Loans are stated at the principal amount outstanding, net of deferred loan fees,
discounts, and the allowance for loan losses. Interest on loans is calculated by
using the simple interest method on the balance of the principal amount
outstanding. Interest income on loans receivable is accrued as earned based on
the principal balance outstanding. Tri-County discontinues the accrual of
interest when the related loan is 90 days delinquent.
Net direct loan origination costs/fees, when material, are deferred and
amortized over the term of the loan as a yield adjustment.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed. For
impaired loans, cash receipts are applied entirely against principal until the
loan has been collected in full, after which time any additional cash receipts
are recognized as interest income.
Allowance for Loan Losses The allowance for loan losses reflects management's
judgment as to the level considered adequate to absorb potential losses inherent
in the loan portfolio. This judgment is based on a review of individual loans,
historical loss experience, economic conditions, portfolio trends and other
factors. Allowances for impaired loans are generally determined based on
collateral values or the present value of estimated cash flows. The allowance is
increased by provisions charged to earnings and reduced by charge-offs, net of
recoveries. Changes in the allowance relating to impaired loans are charged or
credited to the provision for loan losses. Because of uncertainties inherent in
the estimation process, management's estimate of credit losses inherent in the
loan portfolio and the related allowance may change in the near term.
<PAGE>
Mortgage Banking Operations
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. All
loans sold by Tri-County are sold with servicing released. Net unrealized losses
are recognized in a valuation allowance by a charge to income. The cost of loans
held for sale at December 31, 1997 and 1996 approximated their estimated market
value.
Other Real Estate
Other real estate, acquired through partial or total satisfaction of loans, is
included in other assets and carried at the lower of cost or fair value less
estimated costs of disposition. At the date of acquisition, any losses are
charged to the allowance for loan losses. Subsequent write-downs are included in
noninterest expense. Realized losses from disposition of the property and
declines in fair value that are considered permanent are charged to the reserve
for other real estate, as applicable.
Federal Home Loan Bank Stock
The Bank, as a member of the Federal Home Loan Bank (FHLB), is required to
maintain an investment in capital stock of the FHLB. No ready market exists for
the FHLB stock, and it has no quoted market value. The stock is carried at cost
and is assumed to have a market value which is equal to cost.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets.
Income Taxes
Deferred tax assets and liabilities are reflected at currently enacted income
tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Stock Options
In October 1995, FASB issued Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation (SFAS 123). Under SFAS 123, an
entity can choose to compute compensation expense related to stock options using
a fair value method or can continue to use the intrinsic value method. If the
intrinsic value method is chosen, then Tri-County will be required to present
pro forma data for all awards granted in future fiscal years. If the fair value
method is selected, SFAS 123 would be effective for all transactions entered
into for fiscal years that began after December 15, 1995.
Tri-County had no stock option transactions that would require the
implementation of SFAS 123 in the years ended December 31, 1997 and 1996. It is
currently anticipated that Tri-County will continue to account for stock-based
compensation plans under the intrinsic value method. Final determination of the
method selected will be done in the year Tri-County has transactions covered by
this accounting pronouncement.
<PAGE>
Cash and Cash Equivalents and Supplemental Disclosures
For the purpose of reporting cash flows, cash and cash equivalents include cash
on hand, demand deposits at other financial institutions and overnight deposits.
Supplemental cash payments and noncash activities were as follows:
1997 1996
---------- ----------
Interest paid $3,729,293 $2,927,883
Income taxes paid $ 367,300 $ 243,600
Noncash transactions:
Loans transferred to real estate owned $ 34,367 $ 17,947
Earnings Per Share
Basic earnings per share is the amount of earnings for the period available to
each share of common stock outstanding during the reporting period. Diluted
earnings per share is the amount of earnings available to each share of common
stock outstanding during the reporting period adjusted for the potential
issuance of common shares for stock options.
The calculation of basic and diluted earnings per share for the years ended
December 31 is as follows:
1997 1996
---------- ----------
Net income $ 901,004 $ 540,149
========== ==========
Average common shares outstanding 1,194,210 1,239,775
Dilutive effect of stock options 79,000 63,237
--------- ---------
1,273,210 1,303,012
========= =========
Earnings per share $ .75 $ .44
Diluted $ .71 $ .41
Average common shares outstanding and the dilutive effect of stock options have
been adjusted for Tri-County's December 8, 1997 two-for-one stock split effect
as a dividend.
<PAGE>
NOTE 2 - SECURITIES
The amortized cost and estimated fair value at December 31 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Securities Available for Sale Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
December 31, 1997
- -----------------
Debt Securities
U.S. Government and Federal
Agency/Corporation Obligations $13,496,353 $ 108,732 $ (20,000) $13,585,085
U.S. Agency mortgage-backed securities 13,621,365 190,988 (23,240) 13,789,113
----------- ----------- ----------- -----------
Total Debt Securities 27,117,718 299,720 (43,240) 27,374,198
----------- ----------- ----------- -----------
Equity Securities
U.S. Government and Federal
Agency/Corporation Obligations 25,662 1,073,436 - 1,099,098
Asset management funds
ARM portfolio 536,085 - (2,095) 533,990
Mortgage securities performance portfolio 5,982,545 - (89,219) 5,893,326
----------- ----------- ----------- -----------
Total Equity Securities 6,544,292 1,073,436 (91,314) 7,526,414
----------- ----------- ----------- -----------
$33,662,010 $ 1,373,156 $ (134,554) $34,900,612
=========== =========== =========== ===========
December 31, 1996
- -----------------
Debt Securities
U.S. Government and Federal
Agency/Corporation Obligations $ 8,928,006 $ 29,549 $ (36,291) $ 8,921,264
U.S. Agency mortgage-backed securities 15,932,166 61,955 (61,709) 15,932,412
----------- ----------- ----------- -----------
Total Debt Securities 24,860,172 91,504 (98,000) 24,853,676
----------- ----------- ----------- -----------
Equity Securities
U.S. Government and Federal
Agency/Corporation Obligations 25,662 697,515 - 723,177
Asset management funds
ARM portfolio 1,137,836 - (7,854) 1,129,982
Mortgage performance portfolio securities 8,753,387 - (320,107) 8,433,280
----------- ----------- ----------- -----------
Total Equity Securities 9,916,885 697,515 (327,961) 10,286,439
----------- ----------- ----------- -----------
$34,777,057 $ 789,019 $ (425,961) $35,140,115
=========== =========== =========== ===========
Securities Held to Maturity
December 31, 1997
- -----------------
U.S. Government and Federal
Agency/Corporation Obligations $ 503,321 $ 18,394 $ - $ 521,715
U.S. Agency mortgage-backed securities 7,483,929 264,543 (9,196) 7,739,276
----------- ----------- ----------- -----------
$7,987,250 $ 282,937 $ (9,196) $ 8,260,991
=========== =========== =========== ===========
December 31, 1996
- -----------------
U.S. Government and Federal
Agency/Corporation Obligations $1,005,570 $ 27,380 $ - $ 1,032,950
U.S. Agency mortgage-backed securities 9,314,136 264,217 (21,895) 9,556,458
----------- ----------- ----------- -----------
$10,319,706 $ 291,597 $ (21,895) $10,589,408
=========== =========== =========== ===========
</TABLE>
<PAGE>
The amortized cost and fair value of debt securities at December 31, 1997, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Held to Maturity Available for Sale
----------------------- ------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ - $ - $ 1,998,121 $ 1,999,780
Due after one year through five years 503,321 521,715 3,500,000 3,495,955
Due after five years through ten years - - 5,998,232 6,094,160
Due after ten years - - 2,000,000 1,995,190
---------- ---------- ----------- -----------
503,321 521,715 13,496,353 13,585,085
Mortgage-backed securities 7,483,929 7,739,276 13,621,365 13,789,113
---------- ---------- ----------- -----------
$7,987,250 $8,260,991 $27,117,718 $27,374,198
========== ========== =========== ===========
</TABLE>
Sales of securities available for sale during the years ended December 31
follows:
Proceeds Gross Gains Gross Losses
---------- ----------- ------------
1997 $5,227,850 $1,173 $72,593
1996 $2,710,541 $ - $ 5,596
Tri-County pledges investments for public deposits held in excess of $100,000.
The carrying and fair values of the pledged investments at December 31 follows:
Carrying Fair
Value Value
---------- ----------
1997 $9,085,820 $9,119,775
1996 $9,325,332 $9,337,688
NOTE 3 - LOANS RECEIVABLE
December 31,
1997 1996
----------- -----------
Real estate - mortgage $31,395,063 $28,970,513
Real estate - commercial 4,623,723 3,937,312
Real estate - construction 1,537,295 51,785
Commercial 472,418 228,348
Installment loans to individuals 2,911,034 2,585,360
----------- -----------
40,939,533 35,773,318
Less:
Allowance for loan losses (412,456) (415,447)
Deferred loan fees and unearned
discounts (101,789) (92,593)
----------- -----------
$40,425,288 $35,265,278
=========== ===========
<PAGE>
A summary of the changes in the allowance for loan losses is as follows:
Year Ended December 31,
1997 1996
-------- --------
Beginning of the period $415,447 $423,079
Provision for losses - -
Loan charge-offs (3,637) (7,632)
Recoveries 646 -
-------- --------
$412,456 $415,447
======== ========
At December 31, 1996, non-accrual loans were approximately$35,000 with foregone
interest of $3,400. There were no non-accrual loans at December 31, 1997.
Loans serviced by Tri-County for the benefit of others at December 31 were
$163,598 (1997) and $171,770 (1996).
NOTE 4 - PROPERTY AND EQUIPMENT
December 31,
1997 1996
---------- ----------
Land $ 65,776 $ 65,776
Building and improvements 1,102,357 1,095,749
Furniture, fixtures and equipment 598,764 626,624
---------- ----------
1,766,897 1,788,149
Less accumulated depreciation (880,018) (866,468)
---------- ----------
$ 886,879 $ 921,681
========== ==========
Depreciation expense for the years ended December 31 was $124,426 (1997) and
$112,916 (1996).
NOTE 5 - DEPOSITS
At December 31, 1997, scheduled maturities of certificates of deposit were as
follows:
Year
1998 $24,169,888
1999 5,605,389
2000 1,361,254
2001 1,223,165
-----------
Total $32,359,696
===========
The Federal Deposit Insurance Corporation (FDIC), an agency of the U.S.
Government, insures all depositors up to $100,000 in accordance with the rules
and regulations of the FDIC. Deposits in excess of $100,000 at December 31 were
$5,207,027 (1997) and $9,245,806 (1996), see Note 2.
<PAGE>
NOTE 6 - ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank (FHLB) at December 31 were $29,696,616
(1997) and $23,460,492 (1996) . The following table summarizes the maturities of
the FHLB advances:
Year
1998 5.70% - 6.16% $21,350,000
1999 5.92% - 6.07% 2,168,250
2000 6.08% 300,000
2002 5.39% - 5.62% 5,000,000
2016 5.96% 878,366
-----------
$29,696,616
===========
Pursuant to a blanket pledge agreement with the FHLB, the advances are secured
by the FHLB stock, real estate loans and other securities not otherwise pledged.
NOTE 7 - INCOME TAXES
The provisions for federal income taxes are as follows:
Year ended December 31,
1997 1996
-------- --------
Current $372,462 $234,073
Deferred (47,000) 42,000
-------- --------
$325,462 $276,073
Deferred income taxes and benefits are provided for significant income and
expense items recognized in different years for tax and financial reporting
purposes. Temporary differences which give rise to significant deferred tax
assets (liabilities) follow:
December 31,
1997 1996
---------- ----------
Joint Venture income $ 20,000 $ 10,000
Loan origination fees 5,000 6,000
Bad debt reserve 88,000 18,000
Valuation allowance - -
---------- ----------
Total Deferred Assets 113,000 34,000
---------- ----------
Federal Home Loan Bank stock dividends (323,000) (287,000)
Net unrealized gain on available for (421,125) (123,440)
sale securities
Accelerated depreciation (30,000) (34,000)
---------- ----------
Total Deferred Liabilities (774,125) (444,440)
---------- ----------
Net Deferred Liabilities $ (661,125) $ (410,440)
========== ==========
<PAGE>
Total income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34 percent in 1997 and 1996 to income before income
taxes as a result of the following:
Year ended December 31,
1997 1996
-------- --------
Normal "expected" corporate taxes $417,000 $277,500
Change in tax provision resulting from
Income tax refunds (62,690) -
Other (28,848) (1,427)
-------- --------
$325,462 $276,073
======== ========
Tri-County and its subsidiaries file a consolidated income tax return. Excess of
bad debt reserves for income tax purposes over book provisions for the Bank at
December 31, 1997 were approximately $2,005,000. No deferred income tax
liability has been provided for these reserves. If such reserves are used for
purposes other than to absorb the Bank's bad debts, the amount used is subject
to the then current federal corporate tax rates. Tri-County and its subsidiaries
are not subject to state income taxes.
NOTE 8 - RELATED PARTY TRANSACTIONS
Tri-County has had, and may be expected to have in the future, financial
transactions in the ordinary course of business with directors, principal
officers, their immediate families and affiliated companies in which they are
principal stockholders (commonly referred to as related parties), all of which
have been made in compliance with federal regulations.
Activity in loans to related parties for the years ended December 31:
1997 1996
-------- --------
Balance, beginning of year $209,739 $289,897
New loans 10,300 6,300
Repayments (72,446) (86,458)
-------- --------
Balance, end of year $147,593 $209,739
======== ========
Terms and rates of interest on deposit accounts of directors and officers are
substantially the same as those extended to unrelated Tri-County customers. At
December 31 deposits of related parties totaled $458,941 (1997) and $429,917
(1996).
NOTE 9 - EMPLOYEE RETIREMENT PLAN
Tri-County sponsors a 401(k) plan where Tri-County matches up to 3% of the
employees qualifying compensation. Employees may contribute up to 12% of their
qualifying compensation. Tri-County's expense was $17,054 (1997) and $15,632
(1996).
<PAGE>
NOTE 10 - STOCK BENEFIT PLANS
Stock Option Plan
Tri-County adopted a stock option plan (Option Plan) whereby stock options of
149,500 common shares may be granted to directors and officers of the Bank.
Options granted under the Option Plan may be either options that qualify as
Incentive Stock Options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended, or options that do not qualify. In the event of a change in
control, as defined, all options are immediately exercisable.
On September 28, 1993, qualified stock options were granted for the purchase of
143,522 shares exercisable at the market price at the date of grant of $5 per
share. All options expire ten years from the date of the grant. None of the
options had been exercised at December 31, 1997. The options vest over a 5 year
period. Stock options vested as of December 31 were 138,138 (1997) and 132,756
(1996).
Employee Stock Ownership Plan
Tri-County sponsors an employee stock ownership plan (ESOP). Tri-County issued
stock for a note receivable from the ESOP, which is unconditionally guaranteed
by the Bank. The note is at prime (determined at the beginning of each quarter),
payable quarterly through 2003. The ESOP's loan payments are provided by the
Bank's contributions to the ESOP and dividends on Tri-County's stock held by the
ESOP's Trustee.
Since the Bank guarantees the note, the receivable is reflected as a reduction
of stockholders' equity in the consolidated financial statements. At December 31
the balance was $343,850 (1997) and $403,650 (1996).
The ESOP covers substantially all employees. The Bank's ESOP contributions are
based on the note's scheduled principal and interest payments, net of
Tri-County's cash dividends paid to the ESOP. The released stock is allocated
based upon the ratio of each participating employee's eligible compensation to
total eligible compensation. The shares held by the ESOP are released in the
proportion each year's principal payment bears to the total principal payments
due. This is currently scheduled as 11,960 shares per year.
The Bank's ESOP contributions are recorded as compensation expense and totaled
$126,553 (1997) and $114,197 (1996). Dividends used to satisfy note payments
were $38,292 (1997) and $29,678 (1996). As of December 31, the ESOP held 66,990
(1997) and 80,730 (1996) unallocated shares. The unallocated shares' fair value
at December 31 (based on NASDAQ) was $913,744 (1997) and $736,661 (1996).
Management Stock Bonus Plan Tri-County and Bank have adopted a management stock
bonus plan (MSBP) to enable the Bank to attract and retain experienced and
capable personnel in key positions of responsibility. A total of 59,800 shares
of restricted stock were awarded on September 28, 1993, the conversion date, in
the form of restricted stock payable over a five-year vesting period, at 20
percent per year, beginning September 28, 1994. Tri-County will recognize
compensation expense in the amount of the fair market value of the common stock
at the grant date, prorata over the years during which the shares are payable.
The unvested shares are entitled to all voting and other stockholder rights,
except that the shares, while restricted, cannot be sold, pledged or otherwise
disposed of, and are required to be held in escrow.
<PAGE>
If a holder of restricted stock under the MSBP terminates employment for reasons
other than death, disability, retirement or change in control of Tri-County,
such employee forfeits all rights to any allocated shares which are still
restricted. If termination is caused by death, disability, retirement or change
in control of Tri-County, allocated shares become unrestricted. The unamortized
deferred compensation related to the MSBP conversion is deducted from
stockholders' equity.
NOTE 11 - REGULATORY CAPITAL
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators. These actions, if undertaken, could have a direct material effect on
the Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, banks must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. Bank's capital amounts and classifications are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require banks to maintain minimum amounts and ratios of total and Tier 1 capital
(as defined in the regulations) to risk-weighted assets (as defined). Management
believes that, as of December 31, 1997, the Bank meets all capital adequacy
requirements to which it is subject.
As of December 31, 1997, the most recent notification from applicable regulatory
agencies categorize the Bank as adequately capitalized under the regulatory
framework for prompt corrective action. To be categorized as adequately
capitalized, the Bank must maintain minimum ratios as set forth in the following
table (amounts in thousands):
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------- ----------------- -----------------
Dollars Ratio Dollars Ratio Dollars Ratio
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997
Total Adjusted Capital
(to risk-weighted assets) $12,185 34.0% $2,784 8.0% $3,480 10.0%
Tier 1 Capital
(to risk-weighted assets) $11,842 34.0% $1,392 4.0% $2,088 6.0%
Tier 1 Capital
(to adjusted total assets) $11,842 13.3% $2,664 3.0% $4,438 5.0%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------- ----------------- -----------------
Dollars Ratio Dollars Ratio Dollars Ratio
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996
Total Adjusted Capital
(to risk-weighted assets) $11,145 34.4% $2,592 8.0% $3,240 10.0%
Tier 1 Capital
(to risk-weighted assets) $10,740 33.2% $1,296 4.0% $1,944 6.0%
Tier 1 Capital
(to adjusted total assets) $10,740 12.6% $2,547 3.0% $4,246 5.0%
</TABLE>
At December 31, the Bank's tangible equity and tangible capital ratios were
13.3% (1997) and 12.7% (1996). This exceeds the capital adequacy requirements of
2% and 1.5%, respectively.
NOTE 12 - CONCENTRATION OF CREDIT RISK
In the normal course of business, Tri-County enters into commitments to extend
credit with off-balance-sheet risk to meet the financing needs of its customers.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the commitment.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. As some commitments normally expire without
being drawn upon, the total commitment amount does not necessarily represent
future cash requirements.
Tri-County evaluates each customer's credit worthiness on a case-by-case basis,
using the same credit policies in making commitments and conditional obligations
as it does for on-balance-sheet instruments. The amount and type of collateral
obtained, if deemed necessary by Tri-County upon extension of credit, is based
upon management's credit evaluation. Tri-County's underwriting policies for
mortgage loans generally require a maximum loan-to-value of 80% for owner
occupied residential loans and 75% on non-owner occupied one-to-four family
loans. Owner occupied residential loans in excess of 80% are generally required
to obtain private mortgage insurance.
Tri-County had the following commitments at December 31, 1997:
Loan commitments $1,239,400
Lines of credit $ 692,000
Available overdraft protection $ 135,500
The loan commitments ($869,400 fixed rate and $370,000 adjustable rate) are at
interest rates ranging from 7.375% to 9.75%.
Tri-County's loans and commitments include commitments to purchase loans in
western Colorado ($643,700) as well as commitments to extend credit to customers
in Tri-County's market area. The market area primarily consists of eastern
Wyoming. Agriculture and related support industries are a significant factor in
the primary market area's economy.
<PAGE>
The loans purchased in Colorado, through a mortgage banking relationship, are
located in various resort areas and comprise approximately 31% of the loan
portfolio.
NOTE 13 - CONTINGENCIES
Self-Insured Health Plan
The Bank sponsors a self-insured health plan for eligible employees. The Plan
provides for payment by the Bank of health claims up to $3,000 per eligible
employee, with reinsurance coverage for all claims greater than $3,000. An
estimate of claims incurred but not reported and claims reported but not funded
is included in accounts payable at December 31, 1997 and 1996.
Year 2000 Compliance
Tri-County relies upon computers for the daily conduct of its business and for
general data processing. Significant national attention has been directed at
possible problems that may occur with computer programs and data processing
systems when they start utilizing the year 2000 in data fields. Accordingly,
Tri-County has adopted a Year 2000 plan (the Plan) to identify all areas that
may be affected by the change to the year 2000. The Plan includes ensuring that
external vendors and services are adequately addressing the system and software
issues related to the year 2000 by requiring written certifications that the
systems and software are fully Year 2000 compliant by December 31, 1998. The
majority of Tri-County's data is processed by a third party service bureau. The
service bureau has notified Tri-County that it will be Year 2000 compliant by
December 31, 1998. If Tri-County's service bureau is unable to resolve this
potential problem in time, Tri-County would likely experience significant data
processing delays, mistakes or failures. These delays, mistakes or failures
could have a significant adverse impact on the consolidated financial condition
and results of operations of Tri-County.
Other
In the normal course of business, Tri-County is involved in various legal
actions arising from its lending and collection activities. In the opinion of
management, the outcome of these legal actions will not significantly affect the
consolidated financial position of Tri-County.
NOTE 14 - STOCKHOLDERS' EQUITY
In 1993, Tri-County was formed when the Bank converted from a mutual to a stock
form of ownership. A "liquidation account" was established that restricts a
portion of net worth for the benefit of deposit accounts at the Bank at the time
of the conversion. Eligible account holders who close their accounts cause a
corresponding reduction in the liquidation account. Except for the repurchase of
stock, payment of dividends and complete liquidation, the existence of the
account does not restrict the use of the Bank's net worth. At December 31, 1997,
the liquidation account was $2,098,184 as compared to $6,432,095 at inception.
Payment of dividends to Tri-County by the Bank are subject to the above
restriction as well as various other regulatory restrictions and approvals.
<PAGE>
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the amount at which a financial instrument could be exchanged in a
current transaction between willing parties, other than in a forced sale or
liquidation, and is best evidenced by a quoted market price, if one exists.
Fair value estimates are made as of a specific point in time based on the
characteristics of the financial instruments and relevant market information.
Where available, quoted market prices are used. In other cases, fair values are
based on estimates using present value or other valuation techniques. These
techniques involve uncertainties and are significantly affected by the
assumptions used and judgments made regarding risk characteristics of various
financial instruments, discount rates, estimates of future cash flows, future
expected loss experience and other factors. Changes in assumptions could
significantly affect these estimates and the resulting fair values. Derived fair
value estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in an immediate sale of the
instrument. Also, because of differences in methodologies and assumptions used
to estimate fair values, Tri-County's fair values should not be compared to
those of other financial institutions.
Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments.
Accordingly, the aggregate fair value amounts presented do not purport to
represent the underlying market of Tri-County.
The following summary presents the methodologies and assumptions used to
estimate the fair value of Tri-County's financial instruments.
Assets for Which Fair Value Approximates Carrying Value: The fair value of
certain financial assets carried at cost, including cash and due from banks,
deposits with banks, and accrued interest receivable are considered to
approximate their respective carrying values due to their short-term nature and
negligible credit losses. In addition, as discussed in Note 1, Tri-County valued
loans held for sale at fair value.
Federal Home Loan Bank Stock: As discussed in Note 1, the stock's fair value
approximates carrying value due to the limited marketability.
Securities: Held to maturity securities are carried at amortized costs.
Available for sale securities are carried at fair value. Fair value of actively
traded securities is determined by the secondary market, while the fair value of
nonactively traded securities is based on independent broker quotations.
Loans: Loans are valued using methodologies suitable for each loan type.
Variable rate loans that reprice frequently and have no significant change in
credit risk, fair value is assumed to approximate carrying amount. Fair value of
other loans is estimated using a discounted cash flow analysis based on interest
rates currently offered for similar loan products.
<PAGE>
Liabilities for Which Fair Value Approximates Carrying Value: The fair value of
accounts payable, accrued liabilities and accrued interest payable is considered
to approximate their respective book values due to their short-term nature. By
definition, fair values of deposits with no stated maturities, such as demand
deposits, savings and NOW accounts and money market deposit accounts are equal
to the amounts payable on demand at the reporting date.
Time Deposits: The fair value of time deposits is estimated by discounting cash
flows based on contractual maturities at current interest rates offered for
similar products.
Long-Term Debt: The valuation of long-term debt with floating rates is estimated
to be the same as carrying value. Fair value of long-term debt with fixed rates
is estimated based on quoted market prices for similar issues, or by using
current rates offered to Tri-County for debt of the same remaining maturity.
Unused Commitments and Letters of Credit: Tri-County has reviewed the unfunded
portion of commitments to extend credit as well as letters of credit and has
determined that the fair value of such financial instruments is not material.
Following are the estimated fair values of Tri-County's financial instruments:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets
Assets for which fair value approximates book value $ 5,021,975 $ 5,021,975 $ 2,928,116 $ 2,928,116
Securities $44,513,262 $44,787,003 $45,459,821 $45,729,523
Loans $40,425,288 $41,149,803 $35,265,278 $35,371,313
Financial liabilities
Liabilities for which fair value approximates
book value $14,077,029 $14,077,029 $12,722,895 $12,722,895
Time deposits $32,359,696 $32,436,396 $35,966,345 $36,045,962
Long-term debt $29,696,616 $29,573,248 $23,460,492 $23,380,663
</TABLE>
NOTE 16 - PARENT COMPANY FINANCIAL INFORMATION
CONDENSED PARENT COMPANY ONLY
STATEMENTS OF CONDITION
December 31,
1997 1996
----------- -----------
Assets
Cash $ 250,308 $ 613,000
Investment in subsidiary 12,229,216 11,246,946
Securities available for sale 533,990 1,129,983
Other assets, net 40,952 13,908
----------- -----------
Total Assets $13,054,466 $13,003,837
=========== ===========
Liabilities and stockholders' equity
Other liabilities $ 1,965 $ -
Stockholders' equity 13,052,501 13,003,837
----------- -----------
Total Liabilities and Stockholders' Equity $13,054,466 $13,003,837
=========== ===========
<PAGE>
STATEMENTS OF OPERATIONS
Year ended December 31,
1997 1996
--------- --------
Revenue
Equity in earnings of subsidiary $ 911,272 $512,482
Other income 82,734 105,989
Expense
Operating expenses (118,002) (79,357)
Income tax benefit 25,000 1,035
--------- --------
Net Income $ 901,004 $540,149
========= ========
STATEMENTS OF CASH FLOWS
Year ended December 31,
1997 1996
--------- ----------
Operating activities
Net income $ 901,004 $ 540,149
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Earnings of subsidiary (911,272) (512,482)
Amortization of organization expense 1,068 1,068
Loss on sale of securities 1,751 1,593
(Increase) decrease in other assets and
accrued liabilities (28,106) 6,601
--------- ----------
Net Cash Provided (Used) by Operating Activities (35,555) 36,929
--------- ----------
Investing activities
Sale of securities available for sale 600,000 200,000
Dividends received - 1,000,000
--------- ----------
Net Cash Provided by Investing Activities 600,000 1,200,000
--------- ----------
Financing activities
Dividends paid (386,937) (312,385)
ESOP payments received 59,800 59,800
Treasury stock purchased (600,000) (587,096)
--------- ----------
Net Cash Used by Financing Activities (927,137) (839,681)
--------- ----------
Net Increase (Decrease) in Cash (362,692) 397,248
Cash and cash equivalents - Beginning of Period 613,000 215,752
--------- ----------
Cash and cash equivalents - End of Period $ 250,308 $ 613,000
========= ==========
<PAGE>
DIRECTORS
LARRY C. GODDARD, Chairman
ROBERT L. SAVAGE, President & Chief Executive Officer
CARL F. RUPP, Secretary
LANCE H. GRIGGS
DAVID C. KELLAM
WILLIAM J. RUEB
AUDITORS
DALBY, WENDLAND & CO., P.C.
464 Main Street, P.O. Box 430
Grand Junction, Colorado 81502
LEGAL COUNSEL SPECIAL COUNSEL
JOHN B. PATRICK MALIZIA, SPIDI, SLOANE & FISCHE P.C.
241 East 21st Avenue 1301 K Street, N.W., Suite 700E
Torrington, Wyoming 82240 Washington, D.C. 20005
REGISTRAR AND STOCK TRANSFER AGENT
Inquiries regarding stock transfer, registration, lost certificates or changes
in name and/or address should be directed to the stock transfer agent and
registrar in writing.
ATTN: Investor Relations
AMERICAN SECURITIES TRANSFER, INCORPORATED
938 Quail Street, Suite 101
Lakewood, Colorado 80215-5513
MARKET MAKERS
As of December 31, 1997, the following firms were market makers in the Company's
shares:
Friedman, Billings, Ramsey & Co., Inc. - Washington D.C.
Herzog, Heine and Geduld - New York, New York
Sandler O'Neill & Partners - Chicago, Illinois
FORM 10-KSB
A copy of Form 10-KSB for the year ended December 31, 1997, excluding exhibits,
as filed with the Securities and Exchange Commission, will be furnished without
charge to stockholders as of the record date upon request to the Secretary,
Tri-County Bancorp, Inc., P.O. Box 1057, Torrington, Wyoming 82240.
<PAGE>
MAIN OFFICE BRANCH OFFICE
2201 Main Street, P.O. Box 1057 957 Maple, P.O. Box 337
Torrington, Wyoming 82240 Wheatland, Wyoming 82201
Telephone - (307)532-2111 Telephone - (307)322-9215
Fax - (307)532-7631 Fax - (307)322-4080
Email - [email protected]
EXECUTIVE OFFICERS
Robert L. Savage
President & Chief Executive Officer
Earl F. Warren, Jr.
Senior Vice President
Tommy A. Gardner
Vice President & Chief Financial Officer
STAFF
Roseanne L. Burnett, Vice President & Branch Manager
Jane E. Faber, Assistant Secretary
Richard R. Yates, Vice President
Colleen M. Holtzclaw
Nancy A. Martin
Michele L. Nation
Terri J. Pindell
Denny L. Ramos
Becky J. Shaffer
Linda L. Smith
Darlene L. Sorge
Debra K. Stoeger
Lynette K. Strecker
Diana R. Toner
Scott L. Vasko
Mona Kay Williams
EXHIBIT 23
Consent of Dalby, Wendland & Co., P.C.
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Form 10-KSB of Tri-County
Bancorp, Inc. of our report dated February 6, 1998, on our audits of the
consolidated financial statements of Tri-County Bancorp, Inc. as of December 31,
1997 and 1996, and for the years then ended, which report is included in the
Annual Report.
/s/ Dalby, Wendland & Co., P.C.
Grand Junction, Colorado
March 31, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Dec-31-1997
<CASH> 758,398
<INT-BEARING-DEPOSITS> 1,880,407
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,900,612
<INVESTMENTS-CARRYING> 7,987,250
<INVESTMENTS-MARKET> 8,260,991
<LOANS> 40,425,288
<ALLOWANCE> 412,456
<TOTAL-ASSETS> 89,960,525
<DEPOSITS> 45,405,228
<SHORT-TERM> 20,033,000
<LIABILITIES-OTHER> 30,728,113
<LONG-TERM> 9,663,617
0
0
<COMMON> 149,500
<OTHER-SE> 13,677,684
<TOTAL-LIABILITIES-AND-EQUITY> 89,960,525
<INTEREST-LOAN> 3,144,917
<INTEREST-INVEST> 3,260,293
<INTEREST-OTHER> 61,236
<INTEREST-TOTAL> 6,466,446
<INTEREST-DEPOSIT> 2,188,492
<INTEREST-EXPENSE> 3,722,585
<INTEREST-INCOME-NET> 2,743,861
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (71,421)
<EXPENSE-OTHER> 1,622,816
<INCOME-PRETAX> 1,226,466
<INCOME-PRE-EXTRAORDINARY> 1,226,466
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 901,004
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.71
<YIELD-ACTUAL> 3.19
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 124,501
<ALLOWANCE-OPEN> 415,447
<CHARGE-OFFS> 3,637
<RECOVERIES> 646
<ALLOWANCE-CLOSE> 412,456
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 412,456
</TABLE>
