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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, 1997
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
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 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 ___
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. [X]
As of March 2, 1998, 862,381 shares of common stock were outstanding and the
aggregate market value of the shares held by nonaffiliates was approximately
$26,647,573.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated in
Annual report to shareholders for fiscal year ended
December 31, 1997 Parts II and IV
Proxy statement for annual meeting of shareholders
to be held on June 10, 1998. Part III
PART I
Item 1 Business 1
Item 2 Properties 16
Item 3 Legal Proceedings 18
Item 4 Submission of Matters to a Vote of Security Holders 18
PART II
Item 5 Market for the Registrant's Common Stock and Related
Stockholder Matters 19
Item 6 Selected Financial Data 19
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Item 7A Quantitative and Qualitative Disclosures about Market Risk 19
Item 8 Consolidated Financial Statements and Supplementary Data 19
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 19
PART III
Item 10 Directors and Executive Officers of the Registrant 20
Item 11 Executive Compensation 20
Item 12 Security Ownership of Certain Beneficial Owners and
Management 20
Item 13 Certain Relationships and Related Transactions 20
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 21
Signatures 24
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 allowed 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, 1997, Registrant had assets of
$459,633,565, net loans of $263,898,892, deposits of $398,943,370 and
stockholders' equity of $53,497,681. 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.
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, 1997
- ------------------------- -------------- -----------------
Tri City National Bank
6400 South 27th Street
Oak Creek, Wisconsin 1963 $457,497,914
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"); the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, or FIRREA
2
(comprehensive legislation to reform the very nature 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
- --------------------
See footnote 8 to the audited financial statements for a discussion of the
capital requirements of the Registrant and the Bank.
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.
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 which 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.
3
Employees
- ---------
At December 31, 1997, Registrant employed 84 officers and 367 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.
4
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, 1997, 1996 and 1995.
Year Ended December 31
1997 1996 1995
------------------------------------------------------------------------------------------
Average Yield Average Yield Average Yield
Balance Interest or Rate Balance Interest or Rate Balance Interest or Rate
------------------------------------------------------------------------------------------
ASSETS
Interest-earning assets:
Loans (1) $ 259,976 $ 24,764 9.53% $ 239,980 $ 22,764 9.49% $ 224,219 $ 21,280 9.49%
Taxable investment
securities 63,889 4,360 6.82 66,585 4,486 6.73 66,238 4,306 6.50
Nontaxable investment
securities(2) 56,903 4,404 7.74 50,758 3,782 7.45 30,460 2,452 8.05
Federal funds sold 6,118 340 5.56 7,194 368 5.12 9,326 520 5.58
---------------------- ----------------------- -----------------------
Total interest-earning
assets 386,886 33,868 8.75% 364,517 31,400 8.61% 330,243 8,558 8.65%
Noninterest-earning
assets:
Cash and due from
banks 28,217 25,776 20,421
Premises and
equipment, net 18,534 19,282 19,608
Other assets 2,567 1,400 1,523
-------- -------- --------
$ 436,204 $ 410,975 $ 371,795
======== ======== ========
5
DISTRIBUTION OF ASSETS, LIABILITIES & STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
(Dollars in Thousands)
Year Ended December 31
1997 1996 1995
------------------------------------------------------------------------------------------
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 $ 169,513 $ 4,677 2.76% $ 162,206 $ 4,424 2.73% $ 158,557 $ 4,428 2.79%
Other time deposits 102,088 5,614 5.50 104,052 5,971 5.74 84,419 4,829 5.72
Short-term borrowings 6,649 366 5.50 4,517 250 5.53 3,964 211 5.32
------------------- ------------------- -------------------
Total interest-bearing
liabilities 278,250 10,657 3.83% 270,775 10,645 3.93% 246,940 9,468 3.83%
Noninterest-bearing
liabilities:
Demand deposits 104,493 92,038 81,492
Other 3,175 2,485 1,831
Stockholders' equity 50,286 45,677 41,532
-------- -------- --------
$ 436,204 $ 410,975 $ 371,795
======== ======== ========
Net interest earnings and
interest rate spread $ 23,211 4.92% $ 20,755 4.68% $ 19,090 4.82%
================ ================ ===============
Net yield on interest
-earning assets 6.00% 5.69% 5.78%
===== ===== =====
(1) For purposes of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding. Interest income includes $1,431,
$1,325 and $1,258 of loan fees in 1997, 1996 and 1995, 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 $1,668, $1,427 and $834 in 1997,
1996 and 1995, respectively.
6
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:
1997 Compared to 1996 1996 Compared to 1995
Increase (Decrease) Due to Increase (Decrease) Due to
--------------------------- --------------------------
Volume Rate(1) Net Volume Rate(1) Net
--------------------------- --------------------------
Interest earned on:
Loans $ 1,897 $ 103 $ 2,000 $ 1,496 $ (12) $ 1,484
Taxable investment
securities (181) 55 (126) 23 157 180
Nontaxable investment
securities 457 165 622 1,634 (304) 1,330
Federal funds sold (55) 27 (28) (119) (33) (152)
------------------------- --------------------------
Total interest
-earning assets $2,118 $ 350 $ 2,468 $ 3,034 $ (192) $ 2,842
================------- =================-------
Interest paid on:
Savings deposits $ 199 $ 55 $ 253 $ 101 $ (105) $ (4)
Other time deposits (113) (244) (357) 1,123 19 1,142
Short-term borrowings 118 (2) 116 29 10 39
----------------------- ---------------------------
Total interest
-bearing liabilities $ 204 $ (192) $ 12 $ 1,253 $ (76) $ 1,177
================------- =================-------
Increase in net
interest income $ 2,456 $ 1,665
====== ======
(1) The change in interest due to both rate and volume has been allocated to
rate changes.
7
INVESTMENT PORTFOLIO
(Dollars in Thousands)
The book value of investment securities at the dates indicated is:
December 31
----------------------------------
1997 1996 1995
----------------------------------
U.S. Treasury and government agencies $ 54,336 $ 64,851 $ 65,616
States and political subdivisions 72,017 60,461 43,622
Industrial revenue bonds 46 102 153
------- ------- -------
Total investment securities $ 126,399 $ 125,414 $ 109,391
======== ======== ========
The following table sets forth the maturities of investment securities at
December 31, 1997, 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 $ 3,000 8.18% $ 22,015 6.44% $ 29,321 6.56% $ --- ---
States and political
subdivisions 9,018 6.82 30,506 6.91 32,292 7.35 201 9.09%
Industrial revenue
bonds 46 14.39 --- --- --- --- --- ---
------- ------- ------- ------
$ 12,064 7.19% $ 52,521 6.71% $ 61,613 6.97% $ 201 9.09%
======= ======= ======= ======
Tax equivalent
adjustment for
calculation of yield $ 212 $ 672 $ 778 $ 6
======= ======= ======= ======
Note: The weighted average yields on tax-exempt obligations have been
computed on a fully tax-equivalent basis assuming a tax rate of 34%.
8
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
-----------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Commercial and financial $ 13,015 $ 10,414 $ 11,058 $ 10,447 $ 12,598
Real estate-construction 19,148 16,142 21,692 16,811 7,231
Real estate-mortgage 201,322 191,288 167,945 157,859 150,469
Installment 33,914 35,908 31,777 28,171 31,627
-------- -------- -------- -------- --------
$ 267,399 $ 253,752 $ 232,472 $ 213,288 $ 201,925
The maturity distribution and interest rate sensitivity of all loans at
December 31, 1997, are:
Maturity
--------------------------------------------
After One
One Year Through After
or Less Five Years Five Years Total
------- ---------- ---------- -----
Commercial and financial $ 6,938 $ 6,041 $ 36 $ 13,015
Real estate construction 19,148 --- --- 19,148
Real estate mortgage and
installment 84,418 148,842 1,976 235,236
-------- -------- -------- --------
$ 110,504 $ 154,883 $ 2,012 $ 267,399
======== ======== ======== ========
Interest Sensitivity
----------------------------
Fixed Rate Variable Rate
---------- -------------
Due after one, but within five years $ 142,756 $ 12,127
Due after five years 132 1,880
-------- --------
$ 142,888 $ 14,007
======== ========
9
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
-------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Loans accounted for
on a nonaccrual basis $ --- $ 725 $ 1,033 $ 1,932 $ 4,362
Loans contractually
past due 90 days or
more as to interest
or principal payments 694 1,220 630 490 826
Ratio of nonaccrual
loans to total loans 0% .28% .44% .90% 2.16%
$26 thousand of interest income was recognized during 1997 on loans which were
accounted for on a nonaccrual basis. An additional $42 thousand of 1997 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, 1997 or 1996, 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.
10
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
----------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Balance of allowance for
loan losses at beginning
of period $ 3,010 $ 3,626 $ 3,395 $ 3,164 $ 2,740
Loans charged off:
Commercial and financial 57 899 --- 87 8
Real estate --- --- --- 32 ---
Installment 97 23 21 41 49
------- ------- ------- ------- -------
TOTAL LOANS CHARGED OFF 154 922 21 160 57
Recoveries of loans
previously charged off:
Commercial and financial 20 --- --- 3 ---
Real estate --- --- --- --- 22
Installment 24 6 4 13 19
------- ------- ------- ------- -------
TOTAL RECOVERIES 44 6 4 16 41
------- ------- ------- ------- -------
Net loans charged off 110 916 17 144 16
Additions to allowance
charged to expense 600 300 248 375 440
------- ------- ------- ------- -------
Balance at end of period $ 3,500 $ 3,010 $ 3,626 $ 3,395 $ 3,164
======= ======= ======= ======= =======
Ratio of net charge-offs
during the period to
average loans outstanding .04% .38% .01% .07% .01%
======= ======= ======= ======= =======
Ratio of allowance at
end of year to total loans 1.31% 1.19% 1.56% 1.59% 1.57%
======= ======= ======= ======= =======
Ratio of allowance at
end of year to nonaccrual
loans NMF* 415.17% 351.02% 175.91% 72.54%
======= ======= ======= ======= =======
*Data not meaningful, there are no nonaccrual loans at December 31, 1997.
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.
11
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, 1997, 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 82.45%
of loans outstanding at December 31, 1997. 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 1998 are not expected to vary significantly from net losses
experienced over the last two years.
12
DEPOSITS
(Dollars in Thousands)
The average daily amount of deposits is summarized for the periods indicated in
the following table:
Year Ended December 31
1997 1996 1995
Amount Rate Amount Rate Amount Rate
Noninterest-bearing
demand deposits $ 104,493 --- $ 92,038 --- $ 81,492 ---
Interest bearing
transaction deposits 80,517 2.65% 77,635 2.58% 78,150 2.71%
Savings 88,995 2.86 84,571 2.87 80,407 2.87
Time deposits (excluding
time certificates of
deposit of $100,000
or more) 77,221 5.69 85,754 6.18 73,216 5.81
Time certificates of
deposits of $100,000
or more 24,867 4.91 18,298 3.65 11,204 5.16
--------- ---- --------- ---- --------- ----
$ 376,093 $ 358,296 $ 324,469
========= ========= =========
The maturity distribution of time certificates of deposit issued in amounts of
one hundred thousand dollars and over and outstanding at December 31, 1997, is:
Three months or less $ 8,444
After 3 through 6 months 7,001
After 6 through 12 months 3,888
After 1 year through 2 years 1,540
After 2 years through 3 years 1,856
After 3 years through 4 years 660
After 4 years through 5 years 1,047
-------
$ 24,436
========
13
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
-------------------------
1997 1996 1995
---- ---- ----
Percentage of net income to:
Average stockholders' equity 12.91% 12.71% 12.88%
Average total assets 1.49 1.41 1.44
Percentage of dividends declared
per common share to net income
per common share 32.69 29.91 23.26
Percentage of average stockholders'
equity to daily average total
assets 11.53 11.11 11.17
14
SHORT-TERM BORROWINGS
(Dollars in Thousands)
Information relating to short-term borrowings follows:
Federal Funds Purchased
and Securities Sold Under Other Short-Term
Agreements to Repurchase Borrowings
------------------------- ----------------
Balance at December 31:
1997 $ --- $ 5,711
1996 3,200 2,200
1995 --- 1,915
Weighted average interest
rate at year end:
1997 --- 5.80%
1996 5.88% 5.26
1995 --- 6.36
Maximum amount outstanding
at any month's end:
1997 $ 16,500 5,711
1996 7,700 4,310
1995 9,100 5,877
Average amount outstanding
during the year:
1997 $ 4,460 $ 2,189
1996 1,550 2,074
1995 1,269 2,438
Average interest rate
during the year:
1997 5.79% 5.12%
1996 5.61 5.40
1995 4.93 5.61
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.
15
Item 2. PROPERTIES
The following table summarizes the properties in which the Registrant's bank
conducts its business:
Approximate
Floor Area
Location 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
16
Approximate
Floor Area
Location 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 53220 572 Leased (1)
150 West Holt Avenue
Milwaukee, Wisconsin 590 Leased (1)
6201 N. Teutonia Avenue
Milwaukee, Wisconsin 618 Leased (1)
17
Approximate
Floor Area
Location 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
1818 W. National Avenue
Milwaukee, Wisconsin 1,188 Leased
(1) The Bank leases space from an affiliated entity. See Note 11 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 73,343 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. Fifteen 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 1997 to a vote of
security holders through the solicitation of proxies or otherwise.
18
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 1997 Annual Report to Shareholders under the captions entitled
"Market for Corporation's Common Stock and Related Stockholder Matters"
(Page 16) and "Selected Financial Data" (Page 15) as to cash dividends paid.
Item 6. SELECTED FINANCIAL DATA
The information required by Item 6 is incorporated herein by reference to
Registrant's 1997 Annual Report to Shareholders under the caption entitled
"Selected Financial Data" (Page 15).
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 1997 Annual Report to Shareholders under the caption entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (Pages 6 to 14).
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by Item 7A is incorporated herein by reference to
Registrant's 1997 Annual Report to Shareholders under the caption entitled
"Quantitative and Qualitative Disclosures about Market Risk" (Pages 12-14).
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is incorporated herein by reference to
Registrant's 1997 Annual Report to Shareholders (Pages 7 to 40).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
19
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 10, 1998, under the caption entitled "Election of Directors".
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 10, 1998, under the caption entitled "Executive Compensation".
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 10, 1998, under the caption entitled "Stock Ownership of Certain
Beneficial Owners and Management".
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 10, 1998, under the captions entitled "Election of Directors" and "Loans
and Other Transactions with Management".
20
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, 1997.
With the exception of the information
incorporated by reference into Items 5, 6, 7, and
8 of this Form 10-K, the 1997 Annual Report to
Shareholders is not deemed filed as part of this
report.
Exhibit 21 --Subsidiary of Registrant.
Exhibit 23 --Consent of Independent Auditors
Exhibit 27 --Financial Data Schedule
(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
21
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, 1997
TRI CITY BANKSHARES CORPORATION
OAK CREEK, WISCONSIN
22
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, 1997, are
incorporated by reference in Item 8:
Consolidated balance sheets December 31, 1997 and 1996
Consolidated statements of income Years ended December 31, 1997, 1996 and 1995
Consolidated statements of stockholders' equity Years ended December 31, 1997,
1996 and 1995
Consolidated statements of cash flows Years ended December 31, 1997, 1996 and
1995
Notes to consolidated financial statements December 31, 1997
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.
23
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 Date: March 10, 1998
----------------------------- -----------------------
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 3/10/98
- ---------------------------- -----------
David A. Ulrich Principal Executive Officer
/s/Henry Karbiner, Jr. 3/10/98
- ---------------------------- -----------
Henry Karbiner, Jr. Principal Financial and
Accounting Officer
/s/Thomas W. Vierthaler 3/10/98
- ---------------------------- -----------
Thomas W. Vierthaler Vice-President and Comptroller
/s/Frank J. Bauer 3/10/98
- ---------------------------- -----------
Frank J. Bauer Director
/s/Sanford Fedderly 3/10/98
- ---------------------------- -----------
Sanford Fedderly Director
- ---------------------------- -----------
William Gravitter Director
- ---------------------------- -----------
Christ Krantz Director
/s/Rudie L. Lauterbach 3/10/98
- ---------------------------- -----------
Rudie L. Lauterbach Director
24
/s/William P. McGovern 3/10/98
- ---------------------------- -----------
William P. McGovern Director
/s/Robert W. Orth 3/10/98
- ---------------------------- -----------
Robert W. Orth Director
/s/Ronald K. Puetz 3/10/98
- ---------------------------- -----------
Ronald K. Puetz Director
/s/John M. Rupcich 3/10/98
- ---------------------------- -----------
John M. Rupcich Director
/s/David A. Ulrich, Jr. 3/10/98
- ---------------------------- -----------
David A. Ulrich, Jr. Director
/s/William J. Werry 3/10/98
- ---------------------------- -----------
William J. Werry Director
/s/Scott A. Wilson 3/10/98
- ---------------------------- -----------
Scott A. Wilson Director
25
EXHIBIT 13