Back to GetFilings.com
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-9785
TRI CITY BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-1158740
----------- ------------
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
6400 S. 27th Street, Oak Creek, WI
(Address of principal executive offices)
53154
Zip Code
(414) 761-1610
----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
The number of shares outstanding of $1.00 par value common stock, as of
June 30, 2002: 2,659,994
FORM 10-Q
TRI CITY BANKSHARES CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Page #
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets as of
June 30, 2002 and December 31, 2001 3
Consolidated Statements of Income
for the Three Months ended June 30, 2002
and 2001 4
Consolidated Statements of Income
for the Six Months ended June 30, 2002
and 2001 5
Consolidated Statements of Cash Flows
for the Six Months ended June 30, 2002
and 2001 6
Notes to Unaudited Consolidated Financial
Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Item 3 Quantitative and Qualitative Disclosures
About Market Risk 17
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 18
Item 6 Exhibits and Reports on Form 8-K 21
Signatures 22
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30,
2002 December 31,
(Unaudited) 2001
- --------------------------------------------- ------------- -------------
Cash and due from banks $ 27,022,012 $ 44,754,703
Federal funds sold 32,360,726 18,982,448
------------- -------------
Cash and cash equivalents 59,382,738 63,737,151
Investment securities:
Held-to-maturity (fair value of
2002 - $143,252,837
2001 - $115,109,782) 140,055,637 143,753,829
Loans 389,028,117 372,838,112
Allowance for loan losses (4,980,711) (4,827,300)
------------- -------------
Net Loans 384,047,406 368,010,812
Premises and equipment 22,279,087 22,755,736
Other assets 4,707,027 4,515,457
------------- -------------
TOTAL ASSETS $ 610,471,895 $ 602,772,985
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing 143,876,888 137,077,682
Interest bearing (over $100,000) 42,820,444 48,146,000
Interest bearing 341,765,562 336,045,627
------------- -------------
Total Deposits 528,462,894 521,269,309
Short-term borrowings:
Securities sold under agreements
to repurchase 2,150,000 3,250,000
Other 2,789,622 1,429,256
------------- -------------
4,939,622 4,679,256
Other Liabilities 1,244,354 1,958,971
------------- -------------
TOTAL LIABILITIES 534,646,870 527,907,536
Stockholders' equity:
Cumulative Preferred stock,
par value-$1 per share
authorized - 200,000 shares;
issued and outstanding - none
Common stock, par value-$1 per share
authorized - 5,000,000 shares;
issued and outstanding:
2002 - 2,659,994 shares;
2001 - 2,629,834 shares 2,659,994 2,629,834
Additional paid in capital 15,325,332 13,996,480
Retained earnings 57,839,699 58,239,135
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 75,825,025 74,865,449
------------- -------------
TOTAL LIABILITES AND
STOCKHOLDERS' EQUITY $ 610,471,895 $ 602,772,985
============= =============
See Notes to Unaudited Consolidated Financial Statements.
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
----------- -----------
Interest income:
Loans, including fees $ 7,403,231 $ 8,109,271
Investment securities:
Taxable 892,333 634,306
Exempt from federal income tax 760,995 825,620
Federal funds sold 64,277 241,161
----------- -----------
TOTAL INTEREST INCOME 9,120,836 9,810,358
Interest expense:
Deposits 2,008,209 3,051,482
Short-term borrowings 7,789 233,447
----------- -----------
TOTAL INTEREST EXPENSE 2,015,998 3,284,929
----------- -----------
NET INTEREST INCOME 7,104,838 6,525,429
Provision for loan losses (105,000) (105,000)
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,999,838 6,420,429
Other income:
Service charge income 708,350 726,935
Rental income 365,811 312,642
Other 844,508 730,807
----------- -----------
TOTAL OTHER INCOME 1,918,669 1,770,384
Other expense:
Salaries and employee benefits 3,304,823 3,046,224
Net occupancy 841,402 725,438
Equipment 438,542 377,210
Data processing 332,039 299,258
Advertising 179,947 159,422
Regulatory agency assessments 56,455 52,471
Office Supplies 120,290 140,235
Litigation Settlement 2,800,000 0
Other 655,396 668,374
----------- -----------
TOTAL OTHER EXPENSE 8,728,894 5,468,632
----------- -----------
Income before income taxes 189,613 2,722,181
Provision for income taxes (300,000) 734,000
----------- -----------
NET INCOME $ 489,613 $ 1,988,181
=========== ===========
Per share data:
Net income $ 0.18 $ 0.77
Average shares outstanding 2,657,010 2,600,128
See Notes to Unaudited Consolidated Financial Statements.
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
------------ ------------
Interest income:
Loans, including fees $ 14,900,710 $ 16,289,670
Investment securities:
Taxable 1,793,342 1,413,581
Exempt from federal income tax 1,530,677 1,689,792
Federal funds sold 102,699 298,181
------------ ------------
TOTAL INTEREST INCOME 18,327,428 19,691,224
Interest expense:
Deposits 4,119,479 6,233,595
Short-term borrowings 58,952 533,301
------------ ------------
TOTAL INTEREST EXPENSE 4,178,431 6,766,896
------------ ------------
NET INTEREST INCOME 14,148,997 12,924,328
Provision for loan losses (210,000) (210,000)
------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 13,938,997 12,714,328
Other income:
Service charge income 1,416,617 1,397,416
Rental income 729,540 625,014
Other 1,861,582 1,425,780
------------ ------------
TOTAL OTHER INCOME 4,007,739 3,448,210
Other expense:
Salaries and employee benefits 6,607,926 6,036,853
Net occupancy 1,664,121 1,480,177
Equipment 868,474 735,464
Data processing 650,823 593,677
Advertising 331,491 298,998
Regulatory agency assessments 112,502 103,522
Office Supplies 255,043 301,589
Litigation Settlement 4,250,000 0
Other 1,365,650 1,297,532
------------ ------------
TOTAL OTHER EXPENSE 16,106,030 10,847,812
------------ ------------
Income before income taxes 1,840,706 5,314,726
Provision for income taxes (28,000) 1,407,000
------------ ------------
NET INCOME $ 1,868,706 $ 3,907,726
============ ============
Per share data:
Net income $ 0.71 $ 1.51
Common stock investment $ 28.62 $ 27.75
Dividends $ 0.860 $ 0.760
Average shares outstanding 2,649,496 2,593,677
See Notes to Unaudited Consolidated Financial Statements.
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
------------ ------------
OPERATING ACTIVITIES
Net income $ 1,868,706 $ 3,907,726
Adjustments to reconcile net income
to net cash provided by operating
activities:
Proceeds from sale of loans
held for sale 31,391,002 18,915,817
Origination of loans held for sale (31,391,002) (18,915,817)
Amortization of investment securities
premiums and accretion of discounts 71,627 62,756
Provision for loan losses 210,000 210,000
Provision for depreciation 1,004,286 990,961
Decrease in interest receivable 126,474 293,535
Decrease in interest payable (311,444) (25,484)
Other (721,223) (443,498)
------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,248,426 4,995,996
INVESTING ACTIVITIES Held to Maturity:
Proceeds from maturities and
redemptions of investment securities 24,732,706 30,897,300
Purchase of investment securities (21,106,141) (9,826,167)
Net increase in loans (16,246,594) (13,824,535)
Purchases of premises and equipment (527,637) (1,658,942)
------------ ------------
NET CASH PROVIDED BY (USED BY)
INVESTING ACTIVITIES (13,147,666) 5,587,656
FINANCING ACTIVITIES
Net increase in deposits 7,193,585 1,973,438
Net increase in short-term borrowings 260,366 3,091,360
Sale of common stock 1,359,012 1,126,732
Cash dividends (2,268,136) (1,962,779)
------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 6,544,827 4,228,751
------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,354,413) 14,812,403
Cash and cash equivalents at the
beginning of the period 63,737,151 45,209,578
------------ ------------
CASH AND CASH EQUIVALENTS
AT THE END OF THE PERIOD $ 59,382,738 $ 60,021,981
============ ============
See Notes to Unaudited Consolidated Financial Statements.
TRI CITY BANKSHARES CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(A) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. These financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Annual Report on Form 10-K of Tri City Bankshares
Corporation ("Tri City") for the year ended December 31, 2001. The December 31,
2001 financial information included herein is derived from the December 31, 2001
Consolidated Balance Sheet of Tri City which is included in the aforesaid Annual
Report on Form 10-K. In the opinion of Tri City's Management, the accompanying
unaudited consolidated financial statements contain all adjustments, consisting
of normal recurring accruals, necessary to present fairly Tri City's financial
position as of June 30, 2002 and the results of its operations for the three
month and six month periods ended June 30, 2002 and 2001 and cash flows for the
six months ended June 30, 2002 and 2001. The operating results for the first six
months of 2002 are not necessarily indicative of the results which may be
expected for the entire 2002 fiscal year.
(B) COMMITMENTS AND CONTINGENT LIABILITIES
The banking subsidiary of the Corporation was involved in two separate legal
actions seeking damages in Milwaukee County Circuit Court. Both of these legal
actions have been resolved. A detailed explanation can be found in two separate
8-K filings of the Corporation dated March 25, 2002 and May 9, 2002.
TRI CITY BANKSHARES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS
This report contains statements that may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as statements other than historical facts contained or incorporated by reference
in this report. These statements speak of Tri City Bankshares' (the
"Corporation") plans, goals, beliefs or expectations, refer to estimates or use
similar terms. Future filings by the Corporation with the Securities and
Exchange Commission, and statements other than historical facts contained in
written material, press releases and oral statements issued by, or on behalf of
the Corporation may also constitute forward-looking statements.
Forward-looking statements are subject to significant risks and uncertainties,
and the Corporation's actual results may differ materially from the results
discussed in such forward-looking statements. Factors that might cause actual
results to differ from the results discussed in forward-looking statements
include, but are not limited to:
o General economic and industry conditions, either nationally or in the state
in which the Corporation does business, which are less favorable than
expected and that result in, among other things, a deterioration in credit
quality and/or loan performance and collectability;
o Legislation or regulatory changes which adversely affect the business in
which the Corporation is engaged;
o Changes in the interest rate environment;
o Changes in securities markets with respect to the market value of financial
assets and the level of volatility in certain markets such as foreign
exchange;
o Significant increases in competition in the banking and financial services
industry resulting from technological developments, new product
introductions, evolving industry standards, industry consolidation,
increased availability of financial services from non-banks, regulatory
changes and other factors, as well as actions taken by particular
competitors;
o The Corporation's success in continuing to generate significant levels of
new business in its existing markets and in identifying and penetrating
targeted markets;
o The Corporation's success in implementing its business strategy;
o Changes in consumer spending, borrowing and saving habits;
o Technological changes;
o Acquisitions and unanticipated occurrences which delay or reduce the
expected benefits of acquisitions;
o The Corporation's ability to increase market share and control expenses;
o The effect of compliance with legislation or regulatory changes;
o The effect of changes in accounting policies and practices; and
o The costs and effects of unanticipated litigation and of unexpected or adverse
outcomes in such litigation.
All forward-looking statements contained in this report or which may be
contained in future statements made for or on behalf of the Corporation are
based upon information available at the time the statement is made and the
Corporation assumes no obligation to update any forward-looking statement.
CRITICAL ACCOUNTING POLICIES
A number of accounting policies require us to use our judgement. Two of the more
significant policies are:
o Establishing the amount of the provision for loan loss reserve.
We evaluate our loan portfolio at least quarterly to determine the
adequacy of the loan loss reserve. Included in the review are 5
components. 1) An historic review of losses and reserve coverage
based on peak and average loss volume. 2) A review of portfolio
trends in volume and composition with attention to possible
concentrations. 3) A review of delinquency trends and loan
performance compared to our peer group. 4) A review of local and
national economic conditions. 5) A quality analysis review of
non-performing loans identifying charge-offs, potential loss after
collateral liquidation and credit weaknesses requiring above
normal supervision. If we misjudge the adequacy of the reserve and
experience a loss, a charge to earnings may result.
o Establishing the value of mortgage servicing rights.
Mortgage servicing rights (MSR's) are established on loans
(primarily mortgage loans) that we originate and sell, but
continue to service as we collect the payments and tax escrows.
GAAP requires that we recognize, as income, the estimated fair
market value of the asset when originated, even though management
does not intend to sell these rights. The estimated value of MSR's
is the present value of future net cash flows from the servicing
relationship using current market assumptions for factors such as
prepayments and servicing costs. As the loans are repaid and the
servicing revenue is earned MSR's are amortized. Net servicing
revenues and newly originated MSR's generally exceed this
amortization expense. However, if actual prepayment experience is
greater than anticipated, and new loan volume declines, net
servicing revenues may be less than expected and a charge to
earnings may result.
CHANGES IN FINANCIAL POSITION
During the first six months of 2002, total assets of Tri City Bankshares
Corporation (the "Corporation") have increased $7.7 million. Cash and due from
banks has decreased $17.7 million during this period, while Federal funds sold
increased $13.4 million. Management is keeping cash balances down at the
Corporation's subsidiary branches for security reasons and to maximize
investments of bank assets in earning assets.
Investment securities have decreased $3.7 million (2.6%) during the first six
months of 2002. Management is continually looking for quality security
investments to replace current maturing investments while maintaining an
acceptable rate of return and secondary source of liquidity, without undue risk
to the Corporation's entire portfolio. The integrity of the portfolio will not
be compromised in order to achieve a higher yield on purchased securities;
therefore management has enacted policy guidelines in order to maintain a
balanced and profitable security portfolio. The security market is scrutinized
by the management team in order to assure that any acceptable investments have
been reviewed and analyzed according to the guidelines established.
Loan balances have increased $16.2 million (4.3%) during the first six months of
2002. Loan demand has not slowed much since the beginning of the year, even
though the economy has faltered during the first half. Management is optimistic
that growth will continue throughout the remainder of 2002 although the rate of
growth may decrease. This loan activity during this trying economic period seems
to indicate that consumers have not lost confidence in the Corporation and are
willing to continue transacting business as usual. The loan portfolio of the
Corporation is reviewed periodically to ensure that the quality is maintained
and that problems are handled quickly and efficiently. The loan loss provision
has remained the same for the past several years although loan balances have
continued to increase. The reserve for loan loss has increased in proportion to
loan growth, which indicates that there are few charge-offs.
The Corporation's fixed assets have decreased $476,600 due primarily to normal
depreciation since there have been no significant additions during this six
month period in 2002. A new branch office located in a Pick `n Save food store
was opened in June and should not affect fixed assets dramatically.
Total deposits for the Corporation have increased $7.2 million (1.4%) during the
first six months of 2002. The Corporation continues to remain competitive in a
very unsure economic climate. Rates have remained low but depositors are still
uncertain about what the stock market has to offer. Although it offers rates in
the upper quartile of those offered by its competition, management believes that
the Corporation's strength lies in its reputation and business practices which
has instilled a confidence among its long term customers.
LIQUIDITY
The ability to provide the necessary funds for the day-to-day operations of the
Corporation depends on a sound liquidity position. Management has continued to
monitor the Corporation's liquidity position by reviewing the maturity
distribution between interest earning assets and interest bearing liabilities.
Fluctuations in interest rates can be the primary cause for the flow of funds
into or out of a financial institution. The Corporation continues to offer
products that it believes are competitive and will encourage depositors to leave
their funds in the Corporation's banking subsidiary. Management believes that
their efforts will help the Corporation to not only retain these deposits, but
also encourage continued growth. In the current economic environment with the
turmoil in the stock market, deposits have flowed into the banking subsidiary.
Loan demand has also eased, with the economic slowdown. As a result the banking
subsidiary is very liquid at this time, with $32.4 million in federal funds
sold. In addition, the banking subsidiary had available to meet demand at June
30, 2002, $30.0 million in federal funds purchased as well as $43.0 million
reverse repurchase agreements through its correspondent bank relationship.
CAPITAL RESOURCES
During the second quarter of 2002 the Corporation opened a new banking branch
inside a Pick `n Save food store located on 10200 W. Silver Spring Ave. in the
Northwest corner of Milwaukee. The Corporation's banking subsidiary funded this
project internally and expects that the final cost will be nominal. There are no
other major projects currently planned for 2002; however, management continues
to examine all ways in which the Corporation can grow and increase its
profitability. Presented with the right opportunity, management will act
according to the best interests of the Corporation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 AND 2001
The net income of the Corporation has decreased $1.5 million (75.4%) during the
second quarter of 2002 compared to the same period in 2001, primarily due to the
settlement of a second litigation with Creve Coeur Corporation. This settlement
resulted in a negative after tax effect of approximately $1.8 million on second
quarter earnings or $0.70 per share and is explained in a letter dated May 8,
2002 that was sent to shareholders (See Item 6: Exhibits and Reports on Form
8-K).
Interest income and fees on loans decreased $706,000 (8.7%) during the second
quarter of 2002 compared to the second quarter of 2001. Although loan balances
have increased $16.2 million in 2002, rates have dropped substantially during
the period. The Corporation experienced an 8.43% yield on its loans in 2001. The
current yield on loans is 7.33%. Despite this significant decrease, the
Corporation's net interest margin (NIM) has improved with current market
conditions.
Interest income on investment securities increased $193,400 (13.2%) during the
second quarter of 2002 compared to the second quarter of 2001. Lower rates have
made it difficult to find suitable securities in which to invest. The average
yield on investments has remained stable during the quarter. Management has been
fortunate in purchasing securities with a yield, which has not had a significant
effect on the entire investment portfolio. The average investment security
balance was approximately $5.0 million higher in 2002 than it was in 2001.
Management is trying to maintain a positive liquidity balance between interest
earning assets and interest bearing liabilities. They are continually watching
for suitable investments, which will earn an acceptable yield while allowing the
Corporation to provide for cash fluctuations. A proper matching of investments,
loans and deposits will provide this liquidity position. Interest income on
Federal funds sold decreased $176,900 (73.3%) during the second quarter of 2002
compared to the second quarter of 2001. In 2001 the Corporation's banking
subsidiary entered into several short term funding agreements with major
shareholders. These agreements will not be utilized in 2002.
Interest expense on deposits has decreased $1.0 million (34.2%) in the three
months ended June 30, 2002 compared to the same period in 2001. While deposit
balances have increased, rates have declined. The Corporation's subsidiary paid
an average yield of 2.26% on deposits during 2002 compared to an average yield
of 3.77% in 2001. This decline in interest expense has had a positive effect on
the Corporation's net income. Interest expense on short-term borrowings has
decreased $225,700 (96.7%) in 2002 compared to the same period in 2001. Although
short-term borrowing balances are lower, interest rate decline has had a more
positive effect on borrowings interest expense.
Other income has increased $148,300 (8.4%) during the second quarter of 2002
compared to the second quarter of 2001. Other expenses have increased $3.3
million (59.6%) in the second quarter of 2002 compared to the second quarter of
2001. The primary increase in total other expense for 2002 resulted from the
litigation settlement discussed above. Employee benefits have also contributed
to this increase since rates on medical insurance had doubled and were reflected
first during the middle of the third quarter in 2001.
A summarized change in income for the quarters appears below:
Three Months Ended June 30, June 30, 2002
2002 2001 Over(Under)
(UNAUDITED) (UNAUDITED) 2001
----------- ----------- -----------
Revenue and Expenses: (000's)
Interest Income $ 9,121 $ 9,810 $ (689)
Less: Interest Expense 2,016 3,285 (1,269)
----------- ----------- -----------
Net Interest Income 7,105 6,525 580
Less: Provision for Loan Loss 105 105 --
Other Operating Expense
Net of Other Operating
Revenues 4,010 3,698 312
----------- ----------- -----------
Income from Operations 2,990 2,722 268
One Time Litigation Settlement 2,800 0 2,800
----------- ----------- -----------
Income Before Income Taxes 190 2,722 (2,532)
Tax Provision (300) 734 (1,034)
----------- ----------- -----------
NET INCOME $ 490 $ 1,988 $ (1,498)
=========== =========== ===========
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
Net income for the first six months of 2002 decreased $2.0 million (52.2%),
compared to the first six months of 2001. The Corporation was involved with two
litigation settlements in the first two quarters of 2002, Centex Credit
Corporation v. Tri City National Bank and Creve Coeur Corporation v. Tri City
National Bank. The details of these litigations were explained in separate
letters to shareholders filed under Form 8-K on March 25 and May 9, 2002. The
settlements had an adverse affect on net income of approximately $2.6 million or
$1.50 per share.
Interest income and fees on loans decreased $1.4 million (8.5%) in the first
half of 2002 compared to the first six months of 2001. Although loan balances as
of June 30, 2002 are $13.5 million higher than on June 30, 2001, the average
yield on these loans has decreased 110 basis points. Management believes that
the current demand for loans will continue and that rates will remain low
through the remainder of 2002. Interest income on investment securities
increased $220,600 (7.1%) in the first six months of 2002 compared to the same
period in 2001. Although balances in investment securities have increased, the
average yield attained has not changed significantly.
Interest expense on deposits has decreased $2.1 million (33.9%) during the first
six months of 2002 compared to the first six months of 2001. The lowering of the
Federal rate several times after the events of September 11, 2001 has
significantly affected the yield paid to depositors over the past nine months.
The lower average rates paid on deposits has had a positive effect on overall
net income from operations. The Net Interest Margin has increased from 4.07% as
of June 30, 2001 to 4.59% as of June 30, 2002. Short-term borrowings interest
expense has decreased $474,300 (88.9%) compared to the same period in 2001.
Lower average balances in 2002 account primarily for this change.
Other income increased $560,000 (16.2%) during the first six months of 2002
compared to the first six months of 2001. The Corporation received a dividend of
approximately $174,000 from the sale of TYME Corporation stock during the first
quarter of 2002. Other expenses increased $5.3 million (48.5%) during the first
six months of 2002 compared to the same period in 2001. The primary increase is
associated with the litigation settlements referred to earlier.
CAPITAL ADEQUACY
Federal banking regulatory agencies have established capital adequacy rules,
which take into account risk attributable to balance sheet assets and
off-balance-sheet activities. All banks and bank holding companies must meet a
minimum risk-based capital ratio of 8.0% of which 4.0% must be comprised of tier
1 capital.
The federal banking agencies also have adopted leverage capital guidelines which
banking organizations must meet. Under these guidelines, the most highly rated
banking organizations must meet a minimum leverage ratio of at least 3.0% tier 1
capital to total assets, while lower rated banking organizations must maintain a
ratio of at least 4.0% to 5.0%.
The risk-based capital ratio for the Corporation is 20.10% and its leverage
ratio is 12.90%.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation's Annual Report on Form 10-K for the year ended December 31,
2001 contains certain disclosures about market risks affecting the Corporation.
There have been no material changes to the information provided which would
require additional disclosures as of the date of this filing.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
See Footnote (B) of the Notes to Unaudited Consolidated Financial
Statements for information relating to legal proceedings.
Item 4 Submission of Matters to a Vote of Security Holders
On June 12, 2002, Tri City Bankshares Corporation held its annual shareholders'
meeting. The only item held for a vote of shareholders was for the election of
Directors for the ensuing year. The number of shares of common stock represented
by proxy and in person was 2,364,483 which represented approximately 88.9% of
the total outstanding shares entitled to vote for directors. There was no
solicitation in opposition to management's nominees for directors and all such
nominees were elected pursuant to the following vote:
Director's Name: Frank Bauer
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: Sanford Fedderly
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: William Gravitter
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: Henry Karbiner, Jr.
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: William L. Komisar
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: Christ Krantz
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: William McGovern
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: Robert Orth
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: Ronald K. Puetz
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: David Ulrich, Jr.
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: William Werry
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
Director's Name: Scott A. Wilson
For 2,363,676
Against 0
Withheld 807
Abstain 0
Broker Non-Vote 0
Director's Name: Agatha T. Ulrich
For 2,363,696
Against 0
Withheld 787
Abstain 0
Broker Non-Vote 0
No other matters were voted on at the annual meeting.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
See "Index to Exhibits" which is incorporated herein by
reference.
(b) Reports on Form 8-K
The Corporation filed one Form 8-K during the quarter covered by
this report as follows:
(1) Form 8-K dated May 9, 2002 under Item 5. The Corporation
filed a letter to shareholders describing litigation
developments and other matters.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRI CITY BANKSHARES CORPORATION
(REGISTRANT)
DATE: August 13, 2002 /s/Henry Karbiner, Jr.
--------------------------- ----------------------
Henry Karbiner, Jr.
President, Chief Executive Officer,
and Treasurer
(Principal Executive Officer)
DATE: August 13, 2002 /s/Thomas W. Vierthaler
--------------------------- -----------------------
Thomas W. Vierthaler
Vice President and Comptroller
(Chief Accounting Officer)
INDEX TO EXHIBITS
Exhibit 99.1
Certification of CEO/CFO pursuant to Sarbanes-Oxley Act of 2002.
Exhibit 99.1
STATEMENT
Pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. ss.1350,
the undersigned officer of Tri City Bankshares Corporation (the"Company")
hereby certifies that:
(1) the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002 fully complies with the requirements of
Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934, and
(2) the information contained in the report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Dated: August 13, 2002
/s/Henry Karbiner, Jr.
--------------------------------------
Henry Karbiner, Jr.
President, Chief Executive Officer and
Treasurer
(principal executive and financial officer)