SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934: For the fiscal year ended December 31, 1999
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 for such shorter period that the registrant was
required to file such reports) (2) and 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 1, 2000, 933,735 shares of common stock were outstanding and the
aggregate market value of the shares held by non-affiliates was approximately
$35,528,617.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated in
- -------- ---------------
Annual report to shareholders for fiscal year ended
December 31, 1999 Parts II and IV
Proxystatement for annual meeting of shareholders
to be held on June 14, 2000. 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 Equity 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 Suppl19entary 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, through its wholly-owned subsidiary
Tri City National Bank (the 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, 1999, Registrant had assets of
$529,190,815, net loans of $314,559,078 deposits of $459,469,937 and
stockholders' equity of $63,124,833. 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 segment, namely commercial 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.
The following table sets forth certain information regarding Tri City National
Bank:
Assets as of
Name of Bank and Location Year Organized December 31, 1999
- ------------------------- -------------- -----------------
Tri City National Bank
6400 South 27th Street
Oak Creek, Wisconsin 1963 $526,845,146
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 capital,
allowance for loan loss, 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 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 for banks with assets in excess of
$500 million. 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.
The laws and regulations to which the Registrant is subject are constantly under
review by Congress, regulatory agencies and state legislatures. On November 12,
1999, President Clinton signed important legislation passed by Congress to
overturn Depression-era restrictions on affiliations by banking organizations.
This comprehensive legislation, referred to as the Gramm-Leach-Bliley Act (the
Act), eliminates certain barriers to and restrictions on affiliations between
banks and securities firms, insurance companies and other financial services
organizations. The Act provides for a new type of "financial holding company"
structure under which affiliations among these entities may occur, subject to
the regulation of the Board and regulation of affiliates by the functional
regulators, including the Securities and Exchange Commission (the SEC) and state
insurance regulators. In addition, the Act permits certain non-banking financial
and financially related activities to be conducted by operating subsidiaries of
a national bank. Under the Act, a bank holding company may become certified as a
financial holding company by filing a notice with the Board, together with a
certification that the bank holding company meets certain criteria, including
capital, management and Community Reinvestment Act requirements. The Act
contains a number of provisions allocating regulatory authority among the Board,
other banking regulators, the SEC and state insurance regulators. In addition,
the Act imposes strict new privacy disclosure and "opt out" requirements
regarding the ability of financial institutions to share personal non-public
customer information with third parties.
Other important provisions of the Act permit merchant banking and venture
capital activities, and insurance underwriting, to be conducted by a subsidiary
of a financial holding company, and municipal securities underwriting activities
to be conducted directly by a national bank or by its subsidiary. Under the Act,
the financial holding company may engage in a broad list of "financial
activities," and any non-financial activity that the Board determines is
"complementary" to a financial activity and poses no substantial risk to the
safety and soundness of depository institutions or the financial system.
While certain provisions of the Act became effective on November 12, 1999, other
provisions are subject to delayed effective dates, and in some cases, will be
implemented only upon the adoption by federal regulatory agencies of rules
prescribed by the Act.
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 in Milwaukee, Waukesha,
Racine and Ozaukee Counties. Accordingly, the bank competes with all the major
banks and bank holding companies located in metropolitan Milwaukee, most of whom
are far larger in terms of assets and deposits. The banking industry in this
area 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, 1999, Registrant employed 88 officers and 330 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
Securities and Exchange Commission Guides for Preparation and Filing of Reports
and Registration Statements and Reports.
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, 1999, 1998 and 1997.
Year Ended December 31
-------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------------------------
Average Yield Average Yield Average Yield
Balance Interest or Rate Balance Interest or Rate Balance Interest or Rate
-------------------------------------------------------------------------------------
ASSETS
Interest-earning assets:
Loans (1) $296,868 $25,912 8.73% $272,324 $25,593 9.39% $259,976 $24,764 9.53%
Taxable
investment securities 63,106 3,891 6.17 56,055 3,855 6.88 63,889 4,360 6.82
Nontaxable investment
securities(2) 84,695 5,731 6.77 70,586 4,866 6.89 56,903 4,404 7.74
Federal funds sold 4,146 203 4.90 15,664 824 5.26 6,118 340 5.56
------------------ ------------------ -----------------
Total interest-earning
assets 448,815 35,737 7.96% 414,629 35,138 8.47% 386,886 33,868 8.75%
Noninterest-earning
assets:
Cash and due from banks 35,381 30,063 28,217
Premises and
equipment, net 20,837 18,362 18,534
Other assets 2,199 2,383 2,567
--------- --------- ---------
$507,232 $465,437 $436,204
========= ========= =========
DISTRIBUTION OF ASSETS, LIABILITIES & STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
(Dollars in Thousands)
Year Ended December 31
--------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------
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 $196,559 $ 4,758 2.42% $182,111 $ 4,978 2.73% $169,513 $ 4,677 2.76%
Other time deposits 113,791 5,745 5.05 109,690 6,010 5.48 102,088 5,614 5.50
Short-term borrowings 8,796 460 5.24 3,004 183 6.09 6,649 366 5.50
----------------------------------------------------------------------------------
Total interest-bearing
liabilities 319,146 10,963 3.44 294,805 11,171 3.79% 278,250 10,657 3.83%
Noninterest-bearing liabilities:
Demand deposits 124,696 112,504 104,493
Other 3,696 3,006 3,175
Stockholders' equity 60,144 55,122 50,286
---------- ---------- ----------
$507,232 $465,437 $436,204
========== ========== ==========
Net interest earnings and
interest rate spread $24,774 4.52% $23,967 4.68% $23,211 4.92%
=============== =============== ===============
Net yield on interest-earning assets 5.52% 5.78% 6.00%
===== ===== =====
(1) For purposes of these computations, nonaccrual loans are included in the
daily average loan amounts outstanding. Interest income includes $1,736,
$1,747 and $1,431 of loan fees in 1999, 1998 and 1997, 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 $1,949, $1,598 and $1,668 in 1999,
1998 and 1997, respectively.
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:
1999 Compared to 1998 1998 Compared to 1997
Increase (Decrease) Due to Increase (Decrease) Due to
------------------------------ ------------------------------
Volume Rate(1) Net Volume Rate(1) Net
Interest earned on:
Loans $ 2,304 $(1,985) $ 319 $1,176 $ (347) $ 829
Taxable investment securities 485 (449) 36 (534) 29 (505)
Nontaxable investment securities 972 (107) 865 1,059 (597) 462
Federal funds sold (606) (15) (621) 531 (47) 484
------------------------------ ------------------------------
Total interest-earning assets $ 3,155 $(2,556) $ 599 $2,232 $ (962) $1,270
=====================--------- =====================---------
Interest paid on:
Savings deposits $ 394 $ (614) $ (220) $ 348 $ (47) $ 301
Other time deposits 225 (490) (265) 418 (22) 396
Short-term borrowings 353 (75) 278 (200) 17 (183)
------------------------------ ------------------------------
Total interest-bearing liabilities $ 972 $(1,179) $ (208) $ 566 $ (52) 514
=====================--------- =====================---------
Increase in net interest income $ 807 $ 756
========= =========
(1) The change in interest due to both rate and volume has been allocated to
rate changes.
INVESTMENT PORTFOLIO
(Dollars in Thousands)
The book value of investment securities at the dates indicated is:
December 31
------------------------------------
1999 1998 1997
------------------------------------
U.S. Treasury and government agencies $ 56,446 $ 56,948 $ 54,336
States and political subdivisions 85,576 77,590 72,017
Industrial revenue bonds 0 0 46
------------------------------------
Total investment securities $142,022 $134,538 $126,399
====================================
The following table sets forth the maturities of investment securities at
December 31, 1999, 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
Amount Yield Amount Yield Amount Yield
-------------------------------------------------------------------------
U.S.Treasury and government
agencies $ 2,502 7.61% $ 39,000 5.90% $ 14,944 6.39%
States and political
subdivisions 4,229 6.71 53,993 6.67 27,354 6.93
--------- --------- ---------
$ 6,731 7.04% $ 92,993 6.35% $ 42,298 6.74%
========= ========= =========
Tax equivalent adjustment
for Calculation of yield $ 97 $ 1,179 $ 673
========= ========= =========
Note: The weighted average yields on tax-exempt obligations have been
computed on a fully tax-equivalent basis assuming a tax rate of 34%.
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
---------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Commercial $ 26,954 $ 13,730 $ 13,015 $ 10,414 $ 11,058
Real estate-- construction 16,503 16,358 19,148 16,142 21,692
Real estate-- mortgage 247,957 215,381 201,322 191,288 167,945
Installment 27,485 31,715 33,914 35,908 31,777
------- -------- -------- -------- -------
$318,899 $277,184 $267,399 $253,752 $232,472
======= ======= ======== ======== ========
The maturity distribution of all loans at December 31, 1999, are:
Maturity
After One
One Year Through After
or Less Five YearsFive Years Total
Commercial $10,039 $15,641 $1,274 $26,954
Real estate construction 13,830 2,585 88 16,503
Real estate mortgage 71,391 169,904 6,662 247,957
Installment Loans 5,638 15,824 6,023 27,485
------- ------- ----- -------
$100,898 $203,954 $14,047 $318,899
========= ======== ======= ========
Interest rate sensitivity of all loans with maturities greater than one year at
December 31, 1999, are:
Interest Sensitivity
Fixed Rate Variable Rate
Due after one, but within five years $ 196,345 $ 7,609
Due after five years 13,526 521
------ -------
$ 209,871 $ 8,130
========= ========
LOAN PORTFOLIO (Continued)
(Dollars in Thousands)
The following table presents information concerning the aggregate amount of
nonperforming loans. Nonperforming loans are comprised of (a) loans accounted
for on a nonaccrual basis and (b) loans contractually past due 90 days or more
as to interest or principal payments, for which interest continues to be
accrued.
December 31
- -------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Loans accounted for on a
nonaccrual basis $ 595 $ 334 $ -0- $ 725 $1,033
Loans contractually past due
90 days or more as to interest
or principal payments 1,372 1,848 694 1,220 630
Ratio of nonaccrual loans to
total loans .19% .12% 0% .28% .44%
Interest income of $28,000 was recognized during 1999 on loans which were
accounted for on a nonaccrual basis. An additional $8,000 of interest income
would have been recorded in 1999 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, 1999 or 1998 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," if any, 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
- -----------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Balance of allowance for loan losses
at beginning of period $4,245 $3,500 $3,010 $3,626 $3,395
Loans charged-off:
Commercial 116 0 57 899 0
Real estate 9 0 0 0 0
Installment 61 154 97 23 21
------ ------ ------ ----- ------
TOTAL LOANS CHARGED-OFF 186 154 154 922 21
Recoveries of loans previously
charged-off:
Commercial 12 0 20 0 0
Real estate 0 244 0 0 0
Installment 44 55 24 6 4
------ ------- ------ ----- -----
TOTAL RECOVERIES 56 299 44 6 4
------ ------ ------ ----- -----
Net loans charged-off (recovered) 130 (145) 110 916 17
Additions to allowance charged to
expense 225 600 600 300 248
----- ----- ----- ----- -----
Balance at end of period $4,340 $4,245 $3,500 $3,010 $3,626
====== ====== ====== ====== ======
Ratio of net loans charged-off
(recoveries)during the period
to average loans outstanding .04% (.05%) .04% .38% .01%
==== ===== ==== ==== ====
Ratio of allowance at end of year
to total loans 1.36% 1.53% 1.31% 1.19% 1.56%
===== ===== ===== ===== =====
Ratio of allowance at end of year
to nonaccrual loans 729.41% 1,270.96% NMF* 415.17% 351.02%
======= ========= ==== ======= =======
*Data not meaningful
The additions 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 estimable 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.
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 policies of the Bank. The committee reviews a summary of the loan
portfolio classified into the risk categories monthly. 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-off 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.
Real estate loans comprise the largest portion of the loan portfolio with 82.93%
of loans outstanding at December 31, 1999. The majority of the real estate loan
portfolio consists of residential mortgage loans, an area in which the
Registrant has had few losses in past years.
In the installment 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.
The remainder of the loan portfolio consists of loans classified as commercial.
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 and are generally more difficult to predict.
Losses in 2000 are not expected to vary significantly from net losses
experienced over the last two years.
DEPOSITS
(Dollars in Thousands)
The average daily balance of deposits and the average rate paid on deposits is
summarized for the periods indicated in the following table:
Year Ended December 31
----------------------------------------------------
1999 1998 1997
====================================================
Amount Rate Amount Rate Amount Rate
----------------------------------------------------
Noninterest-bearing demand
deposits $124,696 0.00% $112,504 0.00% $104,493 0.00%
Interest bearing
transaction deposits 86,364 2.52% 80,090 2.69% 80,517 2.65%
Savings 110,195 2.35% 102,021 2.77 88,995 2.86
Time deposits (excluding
time certificates of
deposit of $100,000 or
more) 84,084 5.22% 81,877 5.85 77,221 5.69
Time certificates of
deposits of $100,000 or
more $ 29,707 4.56% $ 27,813 4.39 $ 24,867 4.91
--------- --------- ---------
$435,046 $404,305 $376,093
========= ========= =========
The maturity distribution of time certificates of deposit issued in amounts of
$100,000 and over and outstanding at December 31, 1999, is:
Three months or less $7,282
After 3 through 6 months 4,280
After 6 through 12 months 5,361
After 1 year through 2 years 4,768
After 2 years through 3 years 676
After 3 years through 4 years 1,894
After 4 years through 5 years 1,831
------
$26,092
=======
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
1999 1998 1997
---- ---- ----
Percentage of net income to:
Average stockholders' equity 11.66% 12.65% 12.91%
Average total assets 1.38 1.50 1.49
Percentage of dividends declared per common
share to net income per common share 43.32 36.10 32.69
Percentage of average stockholders' equity
to daily average total assets 11.86 11.84 11.53
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:
1999 $ 0 $ 4,579
1998 0 827
1997 0 5,711
Weighted average interest rate at year end:
1999 0 5.55%
1998 0 5.54
1997 0 5.80
Maximum amount outstanding at any month's end:
1999 $15,650 6,006
1998 10,000 5,265
1997 16,500 5,711
Average amount outstanding during the year:
1999 $ 6,863 $ 1,933
1998 769 1,847
1997 4,460 2,189
Average interest rate during the year:
1999 5.14% 4.75%
1998 5.94 6.12
1997 5.79 5.12
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)
6462 South 27th Street
Oak Creek, Wisconsin 580 Leased(1)
2555 West Ryan Road
Oak Creek, 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 640 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
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 710 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)
Approximate
Location Floor Area in Square Feet Owned or Leased
-------- ------------------------- ---------------
8770 S. Howell Avenue
Oak Creek, 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)
8710 Durand Avenue
Sturtevant, Wisconsin 2,400 Owned
851 South 70th Street
West Allis, Wisconsin 31,100 Owned
(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 thirteen locations in Oak Creek,
Milwaukee, Brookfield, Menomonee Falls, West Allis, Hales Corners, Wauwatosa,
Cedarburg and Sturtevant. Approximately 73,338 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 currently 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 1999 to a vote of
security holders through the solicitation of proxies or otherwise.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
-------------------------------------------------------------------
The information required by Item 5 is incorporated herein by reference to
Registrant's 1999 Annual Report to Shareholders under the captions entitled
"Market for Corporation's Common Stock and Related Stockholder Matters" (Page
15) and "Selected Financial Data" (Page 14) as to cash dividends paid.
Item 6. SELECTED FINANCIAL DATA
-----------------------
The information required by Item 6 is incorporated herein by reference to
Registrant's 1999 Annual Report to Shareholders under the caption entitled
"Selected Financial Data" (Page 14).
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 1999 Annual Report to Shareholders under the caption entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (Pages 5 to 11).
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The information required by Item 7A is incorporated herein by reference to
Registrant's 1999 Annual Report to Shareholders under the caption entitled
"Quantitative and Qualitative Disclosures About Market Risk" (Pages 12 to 13).
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------
The information required by Item 8 is incorporated herein by reference to
Registrant's 1999 Annual Report to Shareholders (Pages 16 to 37).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
----------------------------------------------------------------
None.
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 14, 2000, 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(b).
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 14, 2000, under the caption entitled "Executive Compensation" which
definitive Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Rule 14a-6(b).
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 14, 2000, 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(b).
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 14, 2000, 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(b).
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 3a-- Articles of incorporation and bylaws
Exhibit 3b-- Registrant's Registration Statement
No. 2-65616 on Form S-1.
Exhibit 13--Annual Report to Shareholders for the year
ended December 31, 1999.
With the exception of the information incorporated
by reference into Items 5, 6, 7, and 8 of this Form
10-K, the 1999 Annual Report to Shareholders is not
deemed filed as part of this report.
Exhibit 21--Subsidiary of Registrant.
Exhibit 24--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
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, 1999
TRI CITY BANKSHARES CORPORATION
OAK CREEK, WISCONSIN
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, 1999, are
incorporated by reference in Item 8:
Consolidated balance sheets--December 31, 1999 and 1998
Consolidated statements of income--Years ended December 31, 1999, 1998 and
1997 Consolidated statements of stockholders' equity--Years ended December 31,
1999, 1998 and 1997
Consolidated statements of cash flows--Years ended December 31, 1999, 1998 and
1997 Notes to consolidated financial statements--December 31, 1999 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.
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/ Henry Karbiner, Jr.
- ----------------------------------------
Henry Karbiner, Jr., 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/ Henry Karbiner, Jr. 3/08/2000
- ----------------------------- ----------
Henry Karbiner, Jr. Chairman of the Board and
Chief Executive Officer
/s/ Scott A. Wilson 3/08/2000
- ----------------------------- ----------
Scott A. Wilson Secretary and Director
/s/ Thomas W. Vierthaler 3/08/2000
- ----------------------------- ----------
Thomas W. Vierthaler Vice-President and
Comptroller
/s/ Frank J. Bauer 3/08/2000
- ----------------------------- ----------
Frank J. Bauer Director
/s/ Sanford Fedderly 3/08/2000
- ----------------------------- ----------
Sanford Fedderly Director
- ----------------------------- ----------
William Gravitter Director
/s/ Christ Krantz 3/08/2000
- ----------------------------- ----------
Christ Krantz Director
/s/ William L. Komisar 3/08/2000
- ----------------------------- ----------
William L. Komisar Director
/s/ Rudie L. Lauterbach 3/08/2000
- ----------------------------- ----------
Rudie L. Lauterbach Director
/s/ William P. McGovern 3/08/2000
- ----------------------------- ----------
William P. McGovern Director
/s/ Robert W. Orth 3/08/2000
- ----------------------------- ----------
Robert W. Orth Senior Vice President and
Director
/s/ Ronald K. Puetz 3/08/2000
- ----------------------------- ----------
Ronald K. Puetz Senior Vice President
and Director
/s/ John M. Rupcich 3/08/2000
- ----------------------------- ----------
John M. Rupcich
Director
- ----------------------------- ----------
Agatha T. Ulrich Director
/s/ David A. Ulrich, Jr. 3/28/2000
- ----------------------------- ----------
David A. Ulrich, Jr. Director
/s/ William J. Werry 3/08/2000
- ----------------------------- ----------
William J. Werry Director
EXHIBIT 3
EXHIBIT 13
EXHIBIT 21
SUBSIDIARY OF REGISTRANT
Name Percentage of Shares Owned
Tri City National Bank 100.0%
(Wisconsin Corporation)
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 18, 2000 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, 1999.
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 18, 2000, 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, 1999.
/s/ Ernst & Young
Milwaukee, Wisconsin
March 30, 2000