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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934: For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-9785
TRI CITY BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-1158740
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6400 South 27th Street
Oak Creek, Wisconsin 53154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 761-1610
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
$1.00 Par Value Common Stock
The registrant 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 and
has been subject to such filing requirements for the past 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to
this Form 10-K. [ ]
As of March 1, 1996, 2,474,549 shares of common stock were outstanding and the
aggregate market value of the shares held by nonaffiliates was approximately
$21,570,450.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated in
Annual report to shareholders for fiscal year ended
December 31, 1995 Parts II and IV
Proxy statement for annual meeting of shareholders to be held on
June 12, 1996. Part III
FORM 10-K TABLE OF CONTENTS
Page
PART I
Item 1 Business 1
Item 2 Properties 17
Item 3 Legal Proceedings 19
Item 4 Submission of Matters to a Vote of Security Holders 19
PART II
Item 5 Market for the Registrant's Common Stock and Related Stockholder
Matters 20
Item 6 Selected Financial Data 20
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations 20
Item 8 Consolidated Financial Statements and Supplementary Data 20
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 20
PART III
Item 10 Directors and Executive Officers of the Registrant 21
Item 11 Executive Compensation 21
Item 12 Security Ownership of Certain Beneficial Owners and Management 21
Item 13 Certain Relationships and Related Transactions 21
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 22
Signature's 25
PART I
Item 1. BUSINESS
General
Tri City Bankshares Corporation (Registrant), a registered bank holding company,
is a Wisconsin corporation organized in 1970 which provides commercial banking
services in the metropolitan Milwaukee area. On August 15, 1990, the
Registrant's six bank subsidiaries (Tri City National Bank of Oak Creek,
Tri City National Bank of Hales Corners, Tri City National Bank of West Allis,
Tri City National Bank of Brown Deer, Tri City National Bank of Brookfield, Tri
City National Bank of Menomonee Falls), and Tri City Service Corporation, a
centralized proof and bookkeeping operation, merged to form Tri City National
Bank (the Bank). The merging of the subsidiaries enabled the surviving bank to
experience cost savings through the elimination of duplicate cash requirements
and allows customers the ability to access their accounts at any Tri City
National Bank location. Registrant owns 100% of the stock of Tri City National
Bank.
In addition to Tri City National Bank, the Registrant owns 23.5% of the
outstanding shares in First National Bank of Eagle River, Eagle River, Wisconsin
(First National). The Registrant's investment in First National is accounted
for by the equity method of accounting.
On a consolidated basis at December 31, 1995, Registrant had assets of
$397,648,924, net loans of $228,846,491, deposits of $350,219,520 and
stockholders' equity of $44,314,731. Registrant's primary function is to
coordinate the banking policies and operations of Tri City National Bank in
order to improve and expand its banking services and effect economies in its
operation by joint efforts in certain areas such as auditing, regulatory
compliance, training of personnel, advertising, proof and bookkeeping, and
business development. Registrant's services are furnished through officers of
Registrant who are also officers of Tri City National Bank. Registrant's sources
of revenues are (1) dividends paid on the shares of the subsidiary banks' stock
which it owns and (2) management fees in payment for the services it provides to
Tri City National Bank.
Registrant is engaged in only one line of business and industry segment, namely
banking.
The Registrant's banking business is principally conducted by one commercial
bank bearing the "Tri City' name. Tri City National Bank is supervised by the
Comptroller of the Currency and its deposits are insured by the Federal Deposit
Insurance Corporation. Tri City National Bank provides full-service banking to
individuals and businesses, including checking and savings accounts, commercial
and consumer loans, installment loans, real estate and mortgage loans, mobile
home loans, Master Charge cards, and personal reserve accounts. Tri City
National Bank maintains an investment portfolio consisting primarily of U.S.
Treasury, U.S. Agency, and state and political subdivision securities. Certain
bank locations have drive-in banking facilities. A separate department provides
centralized proof and bookkeeping services to all Tri City National Bank
locations.
1
The following table sets forth certain information regarding Tri City National
Bank:
Assets as of
Name of Bank and Location Year Organized December 31, 1995
Tri City National Bank
6400 South 27th Street
Oak Creek, Wisconsin 1963 $395,806,886
Supervision and Regulation
As a bank holding company, Registrant is registered under the Bank Holding
Company Act of 1956, as amended, and files periodic reports with, and is subject
to the supervision of, the Federal Reserve Board (the Board). The Board has the
power to make examinations of the Registrant and must give its approval prior to
the Registrant's acquiring substantially all of the assets of a bank or direct
or indirect ownership or control of any voting shares of any bank if, after such
acquisition, Registrant would control more than 5% of the voting shares of such
bank. The Board approved Registrant's acquisition of the shares of First
National by order dated October 2, 1981. The Board expects bank holding
companies, such as Registrant, to be a source of financial strength for their
subsidiary banks and, accordingly, the Board may condition approvals of bank
acquisitions on the injection of additional capital into existing banks if
capital-to-asset ratios do not meet the Board's standards. The Bank Holding
Company Act restricts Registrant's ability to engage only in those activities
which are found by the Board to be so closely related to banking as to be a
proper incident thereto.
Tri City National Bank is regularly examined by the Comptroller of the Currency
and is subject to examination by the Federal Deposit Insurance Corporation.
Areas subject to regulation by these two federal agencies include reserves,
investments, loans, mergers, issuance of securities, payment of dividends,
establishment of branches and other aspects of operations.
The banking industry is very heavily regulated at both the state and federal
levels. Since 1979, Congress has enacted major pieces of legislation affecting
the banking industry: the Community Reinvestment Act (to encourage banks to make
loans to individuals and businesses in their immediate service areas,
particularly to low- and middle-income borrowers); the Financial Institutions
Regulatory and Interest Rate Control Act (to add restrictions dealing with loans
to officers, directors, and principal shareholders of banks and their
affiliates); the Financial Institutions Deregulation and Monetary Control Act
(to permit both banks and thrift institutions to pay interest on checking
accounts and phase out prior ceilings on interest rates); the Competitive
Equality Banking Act (to expand the definition of "bank" under the Bank Holding
Company Act to include all institutions insured by the Federal Deposit Insurance
Corporation and thereby restrict the ability of bank holding companies and
certain commercial and other nonbanking firms to acquire "non-bank banks"); and
the Financial Institutions Reform, Recovery and Enforcement Act of 1989, or
FIRREA (comprehensive legislation to reform the very nature
2
of regulation in the financial institutions industry) and the Federal Deposit
Insurance Corporation Improvement Act (FDICIA). FDICIA, which was enacted in
1991, affects all federally insured banks, savings banks and thrifts. FDICIA
contains a $70 billion recapitalization of the Bank Insurance Fund (BIF) by
significantly increasing the amount that the FDIC can borrow from the Treasury.
The FDIC must assess premiums that are sufficient to give the BIF reserves of
$1.25 for each $100 of insured deposits. Additional significant provisions of
FDICIA include requiring prompt corrective action by regulators if minimum
capital standards are not met; establishing early intervention procedures for
"significantly" undercapitalized institutions; limiting FDIC reimbursement of
uninsured deposits when large banks fail; requiring an annual regulatory
examination; and imposing new auditing and accounting requirements, effective
for fiscal years beginning on or after January 1, 1993, including management and
auditor reporting on internal controls over financial reporting and on
compliance with laws and regulations. Additionally, a number of legislative and
regulatory mandates have been enacted that are designed to strengthen the
federal deposit insurance system and to improve the overall financial stability
of the U.S. banking system. It is uncertain what form future proposals may take
and, if adopted, what their effect will be on Registrant and its principal bank
subsidiary.
Capital Requirements
The Board established risk-based capital guidelines for banks effective
March 15, 1989. The guidelines define Tier 1 Capital and Total Capital. Tier 1
Capital consists of common and qualifying preferred stockholders' equity, and
minority interests less goodwill. Total Capital consists of, in addition to
Tier 1 Capital, preferred stock not qualifying as Tier 1 Capital, subordinated
and other qualifying term debt and the allowance for loan losses. The Tier 1
Capital component must comprise at least 50% of qualifying Total Capital.
Risk-based capital ratios are calculated with reference to risk-weighted assets
which include both on- and off-balance-sheet exposures. As of December 31, 1995,
the minimum required ratio under the guidelines for qualifying Total Capital is
8.00%, of which 4.00% must be Tier 1 Capital. As of December 31, 1995, Tri City
National Bank's Tier 1 and Total Capital risk-based ratios were 16.79% and
17.91%, respectively.
Effective September 7, 1990, the Board implemented regulations that establish a
minimum leverage capital ratio of 3% Tier 1 capital to total assets less
goodwill. For most banks, including Tri City National Bank, the minimum Tier 1
ratio is to be 3% plus an additional cushion of at least 100 to 200 basis points
depending upon risk profiles and other factors. As of December 31, 1995, Tri
City National Bank's leverage ratio was 11.72%. Future regulations are
anticipated which would establish capital standards to reflect the level of
interest rate risk inherent in the financial institutions operations. The Bank
now exceeds all current or proposed capital requirements.
3
The following tables present Tri City National Bank's regulatory capital
position at December 31, 1995:
RISK-BASED CAPITAL RATIOS
As of December 31, 1995
Amount Ratio
(Dollars in Thousands)
Tier 1 capital $ 43,586 16.79%
Tier 1 capital minimum requirement 10,381 4.00
Excess $ 33,205 12.79%
Total capital $ 46,483 17.91%
Total capital minimum requirement 20,762 8.00
Excess $ 25,721 9.91%
Risk-adjusted assets, net of goodwill and
excess allowances $ 259,330
LEVERAGE RATIO
As of December 31, 1995
Amount Ratio
(Dollars in Thousands)
Tier 1 capital to adjusted total assets
(leverage ratio) $ 43,586 11.72%
Minimum leverage ratio requirement 11,153 3.00
Excess $ 32,433 8.72%
Average total assets, net of goodwill $371,779
Monetary Policy
Registrant's operations and earnings are affected by the credit policies of
monetary authorities, including the Federal Reserve System, which regulates the
national supply of bank credit. Such regulation influences overall growth of
bank loans, investments, and deposits, and may also affect interest rates
charged on loans and paid on deposits. The monetary policies of the Federal
Reserve authorities have had a significant effect on the operating results of
bank holding companies and commercial banks in the past and are expected to
continue to do so in the future.
4
Competition
All of the Registrant's banking facilities are located on the perimeter of
Milwaukee County. Accordingly, the bank competes with all the major banks and
bank holding companies located in Milwaukee, most of whom are far larger in
terms of assets and deposits. The banking industry in metropolitan Milwaukee is
highly competitive and the Registrant's bank faces vigorous competition not only
from the many banks in the area, but from other financial institutions such as
savings and loan associations, credit unions, and finance companies.
Employees
At December 31, 1995, Registrant employed 77 officers and 319 employees in
total. Employees are provided a variety of employment benefits, and Registrant
considers its employee relations to be excellent.
The following pages set forth the statistical data required by Guide 3 of the
Guides for Preparation and Filing of Reports and Registration Statements and
Reports.
5
DISTRIBUTION OF ASSETS, LIABILITIES & STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
(Dollars in Thousands)
The following table shows average assets, liabilities and stockholders' equity;
the interest earned and average yield on interest-earning assets; the interest
paid and average rate on interest-bearing liabilities, the net interest
earnings, the net interest rate spread and the net yield on interest-earning
assets for the years ended December 31,
1995, 1994 and 1993.
Year Ended December 31
<-------- 1995 --------> <-------- 1994 --------> <-------- 1993 ------->
Average Yield Average Yield Average Yield
Balance Interest or Rate Balance Interest or Rate Balance Interest or Rate
ASSETS
Interest-earning assets:
Loans (1) $224,219 $21,280 9.49% $201,000 $18,362 9.14% $199,069 $18,952 9.52%
Taxable investment
securities 66,238 4,306 6.50 68,007 4,463 6.56 51,443 3,753 7.30
Nontaxable investment
securities (2) 30,460 2,452 8.05 28,803 2,420 8.40 22,803 2,124 9.31
Federal funds sold 9,326 520 5.58 2,233 81 3.63 3,539 100 2.83
Total interest-earning
assets 330,243 28,558 8.65% 300,043 25,326 8.44% 276,854 24,929 9.00%
Noninterest-earning
assets:
Cash and due from banks 20,421 18,162 17,053
Premises and equipment,
net 19,608 19,645 20,158
Other assets 1,523 2,652 3,366
$371,795 $340,502 $317,431
6
DISTRIBUTION OF ASSETS, LIABILITIES & STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
(Dollars in Thousands)
Year Ended December 31
<-------- 1995 --------> <-------- 1994 --------> <-------- 1993 -------->
Average Yield Average Yield Average Yield
Balance Interest or Rate Balance Interest or Rate Balance Interest or Rate
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing
liabilities:
Savings deposits $158,557 $ 4,428 2.79% $165,224 $ 4,123 2.50% $154,813 $ 4,211 2.72%
Other time
deposits 84,419 4,829 5.72 58,417 2,345 4.01 59,555 2,372 3.98
Short-term
borrowings 3,964 211 5.32 7,898 391 4.95 7,131 263 3.69
Total interest
-bearing
liabilities 246,940 9,468 3.83% 231,539 6,859 2.96% 221,499 6,846 3.09%
----- ----- -----
Noninterest-bearing
liabilities:
Demand deposits 81,492 70,928 61,759
Other 1,831 1,984 2,846
Stockholders' equity 41,532 36,051 31,327
-------- -------- --------
$371,795 $340,502 $317,431
======== ======== ========
Net interest earnings
and interest rate
spread $19,090 4.82% $18,467 5.48% $18,083 5.91%
================ =============== ===============
Net yield on interest
-earning assets 5.78% 6.15% 6.53%
===== ===== =====
(1) For purposes of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding. Interest income includes $1,258, $1,331
and $1,266 of loan fees in 1995, 1994 and 1993, respectively.
(2) Nontaxable investment securities income has been stated on a fully taxable
equivalent basis using a 34% adjusting rate. The related tax equivalent
adjustment for calculations of yield was $834, $823 and $722 in 1995, 1994 and
1993, respectively.
7
INTEREST INCOME AND EXPENSE VOLUME AND RATE CHANGE
(Dollars in Thousands)
The following table sets forth, for the periods indicated, a summary of the
changes in interest earned (on a fully taxable equivalent basis) and interest
paid resulting from changes in volume and changes in rates:
1995 Compared to 1994 1994 Compared to 1993
Increase (Decrease) Due to Increase (Decrease) Due to
Volume Rate(1) Net Volume Rate(1) Net
Interest earned on:
Loans $2,122 $ 796 $2,918 $ 184 $ (774) $(590)
Taxable investment
securities (116) (41) (157) 1,209 (499) 710
Nontaxable investment
securities 139 (107) 32 558 (262) 296
Federal funds sold 257 182 439 (37) 18 (19)
Total interest-earning assets $2,402 $ 830 3,232 $1,914 $(1,517) 397
===================---------- ===================----------
Interest paid on:
Savings deposits $ (167) $ 472 305 $ 283 $ (371) (88)
Other time deposits 1,043 1,441 2,484 (45) 18 (27)
Short-term borrowings (194) 14 (180) 28 100 128
-----------------------------------------------------------
Total interest-bearing
liabilities $ 682 $1,927 2,609 $ 266 $ (253) 13
===================---------- ====================---------
Increase in net interest income $ 623 $ 384
======= ======
(1) The change in interest due to both rate and volume has been allocated to
rate changes.
8
INVESTMENT PORTFOLIO
(Dollars in Thousands)
The book value of investment securities at the dates indicated is:
December 31
1995 1994 1993
U.S. Treasury and government agencies $ 65,616 $ 62,011 $ 66,973
States and political subdivisions 43,622 31,067 31,282
Industrial revenue bonds 153 200 243
------------------------------------
Total investment securities $ 109,391 $ 93,278 $ 98,498
====================================
The following table sets forth the maturities of investment securities at
December 31, 1995, the weighted average yields of such securities (calculated on
the basis of the cost and effective yields weighted for the scheduled maturity
of each security) and the tax-equivalent adjustment used in calculating the
yields.
Maturity
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
U.S. Treasury and
government agencies $ - -% $28,900 6.19% $36,716 6.67% $ - -%
States and political
subdivisions 3,622 8.45 15,769 7.38 22,979 7.37 1,252 8.69
Industrial revenue bonds - - 153 14.39 - - - -
------- ------- ------- -------
$ 3,622 8.45 $44,822 6.64 $59,695 6.94 $ 1,252 8.69
======= ======= ======= =======
Tax equivalent
adjustment for
calculation of yield $ 104 $ 387 $ 532 $ 37
======= ======= ======= =======
Note: The weighted average yields on tax-exempt obligations have been computed
on a fully tax-equivalent basis assuming a tax rate of 34%.
9
LOAN PORTFOLIO
(Dollars in Thousands)
The amounts of loans outstanding at the indicated dates are shown in the
following table according to type of loan:
December 31
1995 1994 1993 1992 1991
------------------------------------------------
Commercial and financial $ 11,058 $ 10,447 $ 12,598 $ 19,544 $ 27,666
Real estate-construction 21,692 16,811 7,231 7,943 7,386
Real estate-mortgage 167,945 157,859 150,469 147,524 131,073
Installment 31,777 28,171 31,627 23,851 18,923
-------- -------- -------- -------- --------
$232,472 $213,288 $201,925 $198,862 $185,048
======== ======== ======== ======== ========
The maturity distribution and interest rate sensitivity of all loans at
December 31, 1995, are:
Maturity
--------------------------------------------
After One
One Year Through After
or Less Five Years Five Years Total
--------------------------------------------
Commercial and financial $ 5,679 $ 5,258 $ 121 $ 11,058
Real estate construction 21,692 - - 21,692
Real estate mortgage and
installment 70,501 127,558 1,663 199,722
------- -------- ------ --------
$97,872 $132,816 $1,784 $232,472
======= ======== ====== ========
Interest Sensitivity
Fixed Rate Variable Rate
---------- -------------
Due after one, but within five years $ 124,882 $ 7,934
Due after five years 176 1,608
--------- -----------
$ 125,058 $ 9,542
========= ===========
10
LOAN PORTFOLIO (Continued)
(Dollars in Thousands)
The following table presents information concerning the aggregate amount of
nonperforming loans. Nonperforming loans comprise (a) loans accounted for on a
nonaccrual basis and (b) loans contractually past due 90 days or more as to
interest or principal payments, but not included in the nonaccrual loans.
December 31
1995 1994 1993 1992 1991
--------------------------------------------------
Loans accounted for on a
nonaccrual basis $ 1,033 $ 1,932 $ 4,362 $ 3,580 $ 1,897
Loans contractually past
due 90 days or more as to
interest or principal
payments 630 490 826 3,560 1,977
Ratio of nonaccrual loans
to total loans .44% .90% 2.16% 1.80% 1.02%
$33 thousand of interest income was recognized during 1995 on loans which were
accounted for on a nonaccrual basis. An additional $379 thousand of 1995
interest income would have been recorded under the original loan terms had
these loans not been assigned nonaccrual status.
The accrual of interest income is generally discontinued when a loan becomes 90
days past due as to principal or interest. Registrant's management may
continue the accrual of interest when the estimated net realizable value of
collateral is sufficient to cover the principal balance and accrued interest.
There were no other loans at December 31, 1995 or 1994, whose terms had been
renegotiated to provide a reduction or deferral of interest or principal
because of a deterioration in the financial position of the borrower, and
there are no current loans where, in the opinion of management, there are
serious doubts as to the ability of the borrower to comply with present loan
repayment terms. Loans defined as impaired by Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," are included in nonaccrual loans above.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in Thousands)
The following table summarizes loan loss allowance balances at the beginning and
end of each year; changes in the allowance for loan losses arising from loans
charged off and recoveries on loans previously charged off, by loan category;
additions to the allowance which have been charged to expense; and the ratio of
net charge-offs to the daily average balance of loans outstanding.
Year Ended December 31
1995 1994 1993 1992 1991
Balance of allowance for
loan losses at beginning
of period $ 3,395 $ 3,164 $ 2,740 $ 2,254 $ 1,942
Loans charged off:
Commercial and financial - 87 8 76 48
Real estate - 32 - 82 71
Installment 21 41 49 93 39
------- ------- ------- ------- -------
TOTAL LOANS CHARGED OFF 21 160 57 251 158
Recoveries of loans
previously charged off:
Commercial and financial - 3 - - -
Real estate - - 22 - -
Installment 4 13 19 7 27
------- ------- ------- ------- -------
TOTAL RECOVERIES 4 16 41 7 27
Net loans charged off 17 144 16 244 131
Additions to allowance
charged to expense 248 375 440 730 443
------- ------- ------- ------- -------
Balance at end of period $ 3,626 $ 3,395 $ 3,164 $ 2,740 $ 2,254
Ratio of net charge-offs
during the period to
average loans outstanding .01% .07% .01% .13% .07%
Ratio of allowance at end
of year to total loans 1.56% 1.59% 1.57% 1.38% 1.22%
Ratio of allowance at end
of year to nonaccrual loans 351.02% 175.91% 72.54% 76.54% 118.82%
The amount of the addition to the allowance charged to operating expense is the
amount necessary to bring the allowance for loan losses to a level which will
provide for known and potential losses in the loan portfolio. The adequacy of
the allowance is based principally upon continuing management review for
potential losses in the portfolio, actual charge-offs during the year,
historical loss experience, current and anticipated economic conditions,
estimated value of collateral and industry guidelines.
Management evaluates the adequacy of the allowance for loan losses on an overall
basis as opposed to allocating the allowance to specific categories of loans.
12
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in Thousands)
The Bank has a loan committee which meets periodically. Its function is to
review new loan applications and to ensure adherence to the written loan and
credit policy of the Bank. Each month, this committee reviews a summary of the
loan portfolio classified into the risk categories described below. Loans are
reviewed quarterly or as necessary as to proper classification.
1. Absence of any significant credit risk.
2. Presence of normal, but not undue, credit risk.
3. Presence of greater than normal credit risk.
4. Excess credit risk requiring continuous monitoring.
5. Doubtful and loss.
The balance in each of the aforementioned categories serves as a guideline in
determining the adequacy of the allowance for loan losses and the provision
required to bring this balance to a level necessary to absorb the present
and potential risk characteristics of the loan portfolio.
The Bank's loan committee also considers collection problems which may exist.
Loans with contractual payments more than 90 days past due are reviewed. If
collection possibilities are considered to be remote, the loan is charged
to the allowance for loan losses. Should any special circumstances exist,
such as a reasonable belief that the loan may ultimately be paid or be
sufficiently secured by collateral having established marketability, the loan
may be rewritten or carried in a nonaccrual of interest status.
At December 31, 1995, there were no unusual risks in the loan portfolio. For
management's purposes, the loan portfolio consists of real estate loans,
consumer installment loans, and commercial business loans.
Real estate loans comprise the largest portion of the loan portfolio with 72.2%
of loans outstanding at December 31, 1995. The majority of these consist of
residential mortgage loans, an area in which the Registrant has had few losses
in past years.
In the consumer loan category, which includes auto loans, home improvement
loans, and credit card loans, among others, management considers the historical
net loss experience to be the best indicator of losses to be expected in
the immediate future.
All other loans are classified as commercial, including loans to financial
institutions. While these loans carry the greatest exposure to risk of loss,
that exposure is limited to problems associated with particular companies rather
than to specific industries. Currently, the Registrant has no unusual or
significant problems in the commercial loan portfolio.
Losses in 1996 are not expected to vary significantly from net losses
experienced over the last two years.
13
DEPOSITS
(Dollars in Thousands)
The average daily amount of deposits is summarized for the periods indicated in
the following table:
Year Ended December 31
1995 1994 1993
-------------------------------------------------------
Amount Rate Amount Rate Amount Rate
-------------------------------------------------------
Noninterest-bearing
demand deposits $ 81,492 -% $ 70,927 -% $ 61,759 -%
Savings 158,557 2.79 165,224 2.50 154,813 2.72
Time deposits
(excluding time
certificates of
deposit of
$100,000 or more) 73,216 5.81 48,770 4.10 51,340 4.11
Time certificates of
deposits of $100,000
or more 11,204 5.16 9,647 3.58 8,215 3.19
-------- -------- --------
$324,469 $294,568 $276,127
======== ======== ========
The maturity distribution of time certificates of deposit issued in amounts of
one hundred thousand dollars and over and outstanding at December 31, 1995, is:
Three months or less $ 3,779
After 3 through 6 months 2,212
After 6 through 12 months 6,476
After 12 months 2,049
-------
$ 14,516
========
14
RETURN ON EQUITY AND ASSETS
The following table shows consolidated operating and capital ratios of the
Registrant for each of the last three years:
Year Ended December 31
1995 1994 1993
---- ---- ----
Percentage of net income to:
Average stockholders' equity 12.88% 13.53% 14.81%
Average total assets 1.44 1.43 1.46
Percentage of dividends
declared per common share to
net income per common share 23.26 19.61 15.99
Percentage of average stockholders'
equity to daily average total
assets 11.17 10.59 9.87
15
SHORT-TERM BORROWINGS
(Dollars in Thousands)
Information relating to short-term borrowings follows:
Federal Funds Purchased
and Securities Sold Under Notes Other Short-Term
Agreements to Repurchase Payable Borrowings
------------------------- ------- ----------------
Balance at December 31:
1995 $ - $ - $ 1,915
1994 13,900 - 2,407
1993 9,925 2,000 6,000
Weighted average interest
rate at year end:
1995 -% -% 6.36%
1994 5.82 - 5.12
1993 3.41 6.00 2.75
Maximum amount outstanding
at any month's end:
1995 $ 9,100 $ - $ 5,877
1994 13,900 2,000 5,095
1993 9,925 2,000 6,000
Average amount outstanding
during the year:
1995 $ 1,269 $ - $ 2,438
1994 4,129 1,667 2,272
1993 2,395 2,000 2,736
Average interest rate
during the year:
1995 4.93% -% 5.61%
1994 4.56 6.90 3.81
1993 2.73 6.00 2.74
Federal funds purchased and securities sold under agreements to repurchase
generally mature within one to four days of the transaction date. Notes payable
mature in one year and are renewable for a like term. Other short-term
borrowings generally mature within 90 days.
Item 2. PROPERTIES
The following table summarizes the properties in which the Registrant's bank
conducts its business:
Approximate
Location Floor Area in Square Feet Owned or Leased
6400 South 27th Street
Oak Creek, Wisconsin 16,000 Leased (1)
3701 South 27th Street
Milwaukee, Wisconsin 570 Leased (1)
6312 South 27th Street
Oak Creek, Wisconsin 500 Leased (1)
2555 West Ryan Road
Franklin, Wisconsin 2,000 Owned
5555 South 108th Street
Hales Corners, Wisconsin 20,000 Owned
5455 South 108th Street
Hales Corners, Wisconsin 1,600 Owned
10909 West Greenfield Avenue
West Allis, Wisconsin 9,000 Owned
10200 West Bluemound Road
Wauwatosa, Wisconsin 200 Leased
10859 West Bluemound Road
Wauwatosa, Wisconsin 3,500 Owned
2625 South 108th Street
West Allis, Wisconsin 470 Leased (1)
4455 West Bradley Road
Brown Deer, Wisconsin 6,600 Leased
7213 North Teutonia
Milwaukee, Wisconsin 2,000 Owned
17100 West Bluemound Road
Brookfield, Wisconsin 5,700 Owned
17
Approximate
Location Floor Area in Square Feet Owned or Leased
12745 West Capitol Drive
Brookfield, Wisconsin 6,500 Owned
12735 West Capitol Drive
Brookfield, Wisconsin 720 Leased (1)
N96 W18221 County Line Road
Menomonee Falls, Wisconsin 4,100 Owned
7525 West Oklahoma Avenue
Milwaukee, Wisconsin 6,400 Leased (1)
3378 South 27th Street
Milwaukee, Wisconsin 1,900 Owned
6767 West Greenfield Avenue
West Allis, Wisconsin 5,200 Owned
6760 West National Avenue
West Allis, Wisconsin 460 Leased (1)
9200 North Green Bay Road
Brown Deer, Wisconsin 386 Leased
220 East Sunset Drive
Waukesha, Wisconsin 412 Leased
1827 Wisconsin Avenue
Grafton, Wisconsin 361 Leased
W61 N529 Washington Avenue
Cedarburg, Wisconsin 7,800 Owned
4200 South 76th St.
Greenfield, Wisconsin 572 Leased (1)
150 West Holt Avenue
Milwaukee, Wisconsin 590 Leased (1)
6201 N. Teutonia Avenue
Milwaukee, Wisconsin 618 Leased (1)
18
Approximate
Location Floor Area in Square Feet Owned or Leased
3770 S. Howell Avenue
Milwaukee, Wisconsin 1,052 Leased (1)
4689 S. Whitnall Avenue
Milwaukee, Wisconsin 1,159 Leased (1)
7830 W. Good Hope Road
Milwaukee, Wisconsin 523 Leased
(1) The Bank leases space from an affiliated entity. See Note 12 to consolidated
financial statements, incorporated herein by reference, for further
information.
Tri City National Bank owns buildings at twelve locations in Oak Creek,
Milwaukee, Brookfield, Menomonee Falls, West Allis, Hales Corners, Wauwatosa
and Cedarburg. Approximately 60,098 square feet is leased to third parties;
such square footage is not shown above.
Registrant believes that its bank locations are in buildings that are attractive
and efficient, and adequate for their operations, with sufficient space for
parking and drive-in facilities. Eight full-service banking centers are located
in metropolitan Milwaukee food discount centers.
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against Registrant or its
subsidiary bank; however, the bank is involved from time to time in routine
litigation incident to the conduct of its respective businesses.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1995 to a vote of
security holders through the solicitation of proxies or otherwise.
19
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information required by Item 5 is incorporated herein by reference to
Registrant's 1995 Annual Report to Shareholders under the captions entitled
"Market for Corporation's Common Stock and Related Stockholder Matters"
(Page 13) and "Selected Financial Data" (Page 12) as to cash dividends paid.
Item 6. SELECTED FINANCIAL DATA
The information required by Item 6 is incorporated herein by reference to
Registrant's 1995 Annual Report to Shareholders under the caption entitled
"Selected Financial Data" (Page 12).
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by Item 7 is incorporated herein by reference to
Registrant's 1995 Annual Report to Shareholders under the caption entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (Pages 6 to 11).
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is incorporated herein by reference to
Registrant's 1995 Annual Report to Shareholders (Pages 14 to 35).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by Item 10 is incorporated herein by reference to
Registrant's definitive Proxy Statement for its annual meeting of shareholders
on June 12, 1996, under the caption entitled "Election of Directors" which
definitive Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Rule 14a-6(c).
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to
Registrant's definitive Proxy Statement for its annual meeting of shareholders
on June 12, 1996, under the caption entitled "Executive Compensation" which
definitive Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Rule 14a-6(c).
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by reference to
Registrant's definitive Proxy Statement for its annual meeting of shareholders
on June 12, 1996, under the caption entitled "Stock Ownership of Certain
Beneficial Owners and Management" which definitive Proxy Statement will be filed
with the Securities and Exchange Commission pursuant to Rule 14a-6(c).
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference to
Registrant's definitive Proxy Statement for its annual meeting of shareholders
on June 12, 1996, under the captions entitled "Election of Directors" and
"Loans and Other Transactions with Management" which definitive Proxy Statement
will be filed with the Securities and Exchange Commission pursuant to
Rule 14a-6(c).
21
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial statements and financial statement schedules
The response to this portion of Item 14 is submitted as a separate
section of this report.
(3) Listing of Exhibits
Exhibit 3 - Articles of incorporation and bylaws incorporated
herein by reference to Exhibit 3a and Exhibit 3b
to Registrant's Registration Statement
No. 2-65616 on Form S-1.
Exhibit 13 - Annual Report to Shareholders for the year ended
December 31, 1995.
With the exception of the information
incorporated by reference into Items 5, 6, 7,
and 8 of this Form 10-K, the 1995 Annual Report
to Shareholders is not deemed filed as part of
this report.
Exhibit 22 - Subsidiary of Registrant.
Exhibit 24 - Consent of Independent Auditors
(b) Reports on Form 8-K
None
(c) Exhibits--The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules--None
22
PART IV
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1), (2) and (c)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES
CERTAIN EXHIBITS
Year Ended December 31, 1995
TRI CITY BANKSHARES CORPORATION
OAK CREEK, WISCONSIN
23
FORM 10-K--ITEM 14(a)(1) and (2)
TRI CITY BANKSHARES CORPORATION
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of independent
auditors of Tri City Bankshares Corporation, included in the annual report
of the Registrant to its stockholders for the year ended December 31, 1995,
are incorporated by reference in Item 8:
Consolidated balance sheets--December 31, 1995 and 1994
Consolidated statements of income--Years ended December 31, 1995, 1994 and
1993
Consolidated statements of stockholders' equity--Years ended December 31,
1995, 1994 and 1993
Consolidated statements of cash flows--Years ended December 31, 1995, 1994
and 1993
Notes to consolidated financial statements--December 31, 1995
Report of independent auditors
Schedules to the consolidated financial statements required by Article 9 of
Regulation S-X are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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
BY: /s/ David A. Ulrich
----------------------------
David A. Ulrich, President
Pursuant to the requirements 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.
Name Capacity Date
/s/ David A. Ulrich 3/13/96
- ------------------------ ---------
David A. Ulrich Principal Executive Officer
/s/ Henry Karbiner, Jr. 3/13/96
- ------------------------ ---------
Henry Karbiner, Jr. Principal Financial and Accounting Officer
/s/ Thomas W. Vierthaler 3/13/96
- ------------------------ ---------
Thomas W. Vierthaler Vice-President and Comptroller
/s/ Frank J. Bauer 3/13/96
- ------------------------ ---------
Frank J. Bauer Director
/s/ Sanford Fedderly 3/13/96
- ------------------------ ---------
Sanford Fedderly Director
/s/ Richard J. Fitzgerald 3/13/96
- ------------------------ ---------
Richard J. Fitzgerald Director
/s/ William Gravitter 3/13/96
- ------------------------ ---------
William Gravitter Director
25
- ------------------------ ---------
Christ Krantz Director
/s/ Rudie L. Lauterbach 3/13/96
- ------------------------ ---------
Rudie L. Lauterbach Director
/s/ William P. McGovern 3/13/96
- ------------------------ ---------
William P. McGovern Director
/s/ Ronald K. Puetz 3/13/96
- ------------------------ ---------
Ronald K. Puetz Director
/s/ John M. Rupcich 3/13/96
- ------------------------ ---------
John M. Rupcich Director
- ------------------------ ---------
Marilyn T. Ulrich-Graves Director
/s/ William J. Werry 3/13/96
- ------------------------ ---------
William J. Werry Director
/s/ Scott A. Wilson 3/13/96
- ------------------------ ---------
Scott A. Wilson Director
26
EXHIBIT 3
EXHIBIT 22
SUBSIDIARY OF REGISTRANT
Name Percentage of Shares Owned
Tri City National Bank 100.0%
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Tri City Bankshares Corporation of our report dated February 9, 1996, with
respect to the consolidated financial statements of Tri City Bankshares
Corporation, included in the Annual Report to Shareholders of Tri City
Bankshares Corporation for the year ended December 31, 1995.
We also consent to the incorporation by reference in the Registration Statement
(Form S-3) of Tri City Bankshares Corporation pertaining to the Automatic
Dividend Reinvestment Plan of Tri City Bankshares Corporation and in the
related Prospectus of our report dated February 9, 1996, with respect to the
consolidated financial statements of Tri City Bankshares Corporation
incorporated by reference in this Annual Report (Form 10-K) for the year ended
December 31, 1995.
/s/ Ernst & Young
- ---------------------------
Milwaukee, Wisconsin
March 25, 1996