FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-9785
TRI CITY BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-115874
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(State or other jurisdiction of (IRS Employer ID Number)
Incorporation or organization)
6400 S. 27th Street, Oak Creek, WI
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(Address of principal executive offices)
53154
Zip Code
(414) 761-1610
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ___
----- -
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) YES ___ NO X
The number of shares outstanding of $1.00 par value common stock, as of:
September 30, 2002: 2,673,923
FORM 10-Q
TRI CITY BANKSHARES CORPORATION
INDEX
PART 1 - FINANCIAL INFORMATION
Page #
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets as of
September 30, 2002 and December 31, 2001 3
Consolidated Statements of Income
for the Three Months ended
September 30, 2002 and 2001 4
Consolidated Statements of Income
for the Nine Months ended
September 30, 2002 and 2001 5
Consolidated Statements of Cash Flows
for the Nine Months ended
September 30, 2002 and 2001 6
Notes to Unaudited Consolidated Financial
Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3 Quantitative and Qualitative Disclosures
About Market Risk 18
Item 4 Controls and Procedures
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 19
Signatures 20
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 2002 2001
------------- -------------
(Unaudited)
Cash and due from banks $ 28,190,606 $ 44,754,703
Federal funds sold 24,388,392 18,982,448
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Cash and cash equivalents
Investment securities:
Held-to-maturity (fair
value of 2002 - $162,895,873
2001 - $121,318,667) 159,480,933 143,753,829
Loans 395,779,462 372,838,112
Allowance for loan losses (5,044,991) (4,827,300)
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Net Loans 390,734,471 368,010,812
Premises and equipment 22,295,217 22,755,736
Other assets 5,350,101 4,515,457
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TOTAL ASSETS $630,439,720 $602,772,985
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $154,197,880 $137,077,682
Interesting bearing (over $100,000) 43,741,291 48,146,000
Interest bearing 345,860,681 336,045,627
------------- -------------
Total Deposits
Short-term borrowings:
Securities sold under agreements to
repurchase 1,499,977 3,250,000
Other 4,908,893 1,429,256
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Other Liabilities 2,455,308 1,958,971
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TOTAL LIABILITIES 552,664,030 527,907,536
Stockholders' equity:
Cumulative Preferred stock,
par value - $1 per share
authorized - 200,000 shares;
issued and outstanding - none
Commonstock,
par value - $1 per share
authorized - 5,000,000 shares;
Issued and outstanding:
2002 - 2,673,923 shares;
2001 - 2,616,216 shares 2,673,923 2,629,834
Additional paid in capital 15,967,464 13,996,480
Retained earnings 59,134,303 58,239,135
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TOTAL STOCKHOLDERS' EQUITY 77,775,690 74,865,449
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $630,439,720 $602,772,985
============= =============
See Notes to Unaudited Consolidated Financial Statements.
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
2002 2001
----------- -----------
Interest income:
Loans, including fees $ 7,548,671 $ 7,995,846
Investment securities:
Taxable 878,833 622,698
Exempt from federal income tax 777,069 803,436
Federal funds sold 108,892 364,815
----------- -----------
TOTAL INTEREST INCOME 9,313,465 9,786,795
Interest expense:
Deposits 1,944,553 3,037,282
Short-term borrowings 10,465 170,477
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TOTAL INTEREST EXPENSE
-----------
NET INTEREST INCOME 7,358,447 6,579,036
Provision for loan losses (105,000) (105,000)
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,253,447 6,474,036
Other income:
Service charge income 726,178 682,413
Rental income 305,871 317,562
Other 1,043,333 757,647
----------- -----------
TOTAL OTHER INCOME
Other Expense:
Salaries and employee benefits 3,365,096 3,188,481
Net occupancy 772,601 774,977
Equipment 440,839 377,042
Data processing 355,878 309,957
Advertising 200,817 227,916
Regulatory Agency Assessments 55,631 52,241
Office Supplies 143,562 134,322
Other 635,011 999,084
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TOTAL OTHER EXPENSE
Income before income taxes 3,359,394 2,167,638
Provision for income Taxes 921,000 529,000
----------- -----------
NET INCOME $ 2,438,394 $ 1,638,638
=========== ===========
Per share data:
Net income $ 0.92 $ 0.63
Average shares outstanding $ 2,671,198 $ 2,613,477
See Notes to Unaudited Consolidated Financial Statements.
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
2002 2001
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Interest income:
Loans, including fees $ 22,449,381 $ 24,285,516
Investment securities:
Taxable 2,672,175 2,036,279
Exempt from federal income tax 2,307,746 2,493,228
Federal funds sold 211,591 662,996
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TOTAL INTEREST INCOME 27,640,893 29,478,019
Interest expense:
Deposits 6,064,032 9,270,877
Short-term borrowings 69,417 703,778
------------ ------------
TOTAL INTEREST EXPENSE
------------
NET INTEREST INCOME 21,507,444 19,503,364
Provision for loan losses (315,000) (315,000)
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 21,192,444 19,188,364
Other income:
Service charge income 2,142,795 2,079,829
Rental income 889,042 942,576
Other 2,904,915 2,183,427
------------ ------------
TOTAL OTHER INCOME
Other expense:
Salaries and employee benefits 9,973,022 9,225,334
Net occupancy 2,290,353 2,255,154
Equipment 1,309,313 1,112,506
Data processing 1,006,701 903,634
Advertising 532,308 526,914
Regulatory agency assessments 168,133 155,763
Office Supplies 398,605 435,911
Litigation Settlement 4,250,000 0
Other 2,000,661 2,296,616
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TOTAL OTHER EXPENSE
Income before income taxes 5,200,100 7,482,364
Provision for income taxes 893,000 1,936,000
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NET INCOME $ 4,307,100 $ 5,546,364
============ ============
Per share data:
Net income $ 1.62 $ 2.13
Common stock investment $ 29.27 $ 28.15
Dividends $ 1.290 $ 1.140
Average shares outstanding 2,659,809 2,600,350
See Notes to Unaudited Consolidated Financial Statements.
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
2002 2001
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OPERATING ACTIVITIES
Net income $ 4,307,100 $ 5,546,364
Adjustments to reconcile net income to
net cash provided by operating activities:
Proceeds from sale of loans
held for sale 46,069,988 39,216,711
Origination of loans held for sale (46,069,988) (39,216,711)
Amortization of investment securities
premiums and accretion of discounts 124,873 107,517
Provision for loan losses 315,000 315,000
Provision for depreciation 1,508,526 1,484,590
(Increase) Decrease in interest receivab (332,317) 263,989
(Decrease) Increase in interest payable (309,476) 35,998
Other 303,487 147,396
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 5,917,193 7,900,854
INVESTING ACTIVITIES
Investment Securities Held to Maturity:
Proceeds from maturities and redemptions
of investment securities 46,838,138 50,045,053
Purchase of investment
securities (62,690,115) (33,978,160)
Net (increase) in loans (23,038,659) (14,926,702)
Purchases of premises and equipment (1,048,007) (2,576,164)
------------ ------------
NET CASH USED
BY INVESTING ACTIVITIES (39,938,643) (1,435,973)
FINANCING ACTIVITIES
Net increase in deposits 22,530,543 22,243,985
Net increase in short-term borrowings 1,729,614 (7,240,037)
Issuance of Common Stock 2,015,073 1,697,240
Cash dividends (3,411,933) (2,951,891)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 22,863,297 13,749,297
------------ ------------
INCREASE(DECREASE)IN CASH AND
CASH EQUIVALENTS (11,158,153) 20,214,178
Cash and cash equivalents at the
beginning of the period 63,737,151 45,209,578
------------ ------------
CASH AND CASH EQUIVALENTS
AT THE END OF THE PERIOD $52,578,998 $65,423,756
============ ============
See Notes to Unaudited Consolidated Financial Statements.
TRI CITY BANKSHARES CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(A) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. These financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Annual Report on Form 10-K of Tri City Bankshares
Corporation ("Tri City" or the "Corporation") for the year ended December 31,
2001. The December 31, 2001 financial information included herein is derived
from the December 31, 2001 Consolidated Balance Sheet of Tri City which is
included in the aforesaid Annual Report on Form 10-K. In the opinion of Tri
City's management, the accompanying unaudited consolidated financial statements
contain all adjustments, consisting of normal recurring accruals, necessary to
present fairly Tri City's financial position as of September 30, 2002 and the
results of its operations for the three month and nine month periods ended
September 30, 2002 and 2001 and cash flows for the nine months ended September
30, 2002 and 2001. The operating results for the first nine months of 2002 are
not necessarily indicative of the results which may be expected for the entire
2002 fiscal year.
(B) COMMITMENTS AND CONTINGENT LIABILITIES
The banking subsidiary of the Corporation was involved in two separate legal
actions seeking damages in Milwaukee County Circuit Court. Both of these legal
actions have been resolved. A detailed explanation can be found in two separate
8-K filings of the Corporation dated March 25, 2002 and May 9, 2002.
TRI CITY BANKSHARES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS
This report contains statements that may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as statements other than historical facts contained or incorporated by reference
in this report. These statements speak of the Corporation's plans, goals,
beliefs or expectations, refer to estimates or use similar terms. Future filings
by the Corporation with the Securities and Exchange Commission, and statements
other than historical facts contained in written material, press releases and
oral statements issued by, or on behalf of the Corporation may also constitute
forward-looking statements.
Forward-looking statements are subject to significant risks and uncertainties,
and the Corporation's actual results may differ materially from the results
discussed in such forward-looking statements. Factors that might cause actual
results to differ from the results discussed in forward-looking statements
include, but are not limited to:
o General economic and industry conditions, either nationally or in the state
in which the Corporation does business, which are less favorable than
expected and that result in, among other things, a deterioration in credit
quality and/or loan performance and collectability;
o Legislation or regulatory changes which adversely affect the business in
which the Corporation is engaged;
o Changes in the interest rate environment;
o Changes in securities markets with respect to the market value of financial
assets and the level of volatility in certain markets such as foreign
exchange;
o Significant increases in competition in the banking and financial services
industry resulting from technological developments, new product
introductions, evolving industry standards, industry consolidation,
increased availability of financial services from non-banks, regulatory
changes and other factors, as well as actions taken by particular
competitors;
o The Corporation's success in continuing to generate significant levels of
new business in its existing markets and in identifying and penetrating
targeted markets;
o The Corporation's success in implementing its business strategy;
o Changes in consumer spending, borrowing and saving habits;
o Technological changes;
o Acquisitions and unanticipated occurrences which delay or reduce the
expected benefits of acquisitions;
o The Corporation's ability to increase market share and control expenses;
o The effect of compliance with legislation or regulatory changes;
o The effect of changes in accounting policies and practices; and
o The costs and effects of unanticipated litigation and of unexpected or
adverse outcomes in such litigation.
All forward-looking statements contained in this report or which may be
contained in future statements made for or on behalf of the Corporation are
based upon information available at the time the statement is made and the
Corporation assumes no obligation to update any forward-looking statement.
CRITICAL ACCOUNTING POLICIES
A number of accounting policies require us to use our judgement. Two of the more
significant policies are:
o Establishing the amount of the provision for loan loss reserve.
We evaluate our loan portfolio at least quarterly to determine the
adequacy of the loan loss reserve. Included in the review are 5
components. 1) A historic review of losses and reserve coverage
based on peak and average loss volume. 2) A review of portfolio
trends in volume and composition with attention to possible
concentrations. 3) A review of delinquency trends and loan
performance compared to our peer group. 4) A review of local and
national economic conditions. 5) A quality analysis review of
non-performing loans identifying charge-offs, potential loss after
collateral liquidation and credit weaknesses requiring above
normal supervision. If we misjudge the adequacy of the reserve and
experience a loss, a charge to earnings may result.
o Establishing the value of mortgage servicing rights.
Mortgage servicing rights (MSR's) are established on loans
(primarily mortgage loans) that we originate and sell, but
continue to service as we collect the payments and tax escrows.
Generally Accepted Accounting Principals require that we
recognize, as income, the estimated fair market value of the asset
when originated, even though management does not intend to sell
these rights. The estimated value of MSR's is the present value of
future net cash flows from the servicing relationship using
current market assumptions for factors such as prepayments and
servicing costs. As the loans are repaid and the servicing revenue
is earned, MSR's are amortized. Net servicing revenues and newly
originated MSR's generally exceed this amortization expense.
However, if actual prepayment experience is greater than
anticipated and new loan volume declines, net servicing revenues
may be less than expected and a charge to earnings may result.
CHANGES IN FINANCIAL POSITION
Total assets of the Corporation have increased $27.7 million during the first
nine months of 2002. Cash and cash equivalents have decreased $11.2 million
during this period. The Corporation is investing excess funds into earning
assets in order to maximize its earning potential and provide resources for
continued growth. Management continues to search for ways to optimize the
Corporation's ability for growth and profitability. Sound lending and investment
policies have provided the Corporation with a solid base for continued growth.
Investment securities for the first nine months of 2002 have increased $15.7
million. Management has endeavored to find high quality investment securities,
which will enhance the overall portfolio while working within the Corporation's
investment portfolio policies and guidelines. There has been a significant
increase in investment securities as a result of declining interest rates and
normal call features in portfolio investments. For the reinvestment of these
called assets as well as normal growth in the portfolio, management has been
willing to accept lower yields in its effort to maintain high quality while
reducing the overall average maturity of portfolio assets. Management wants to
have the ability to react to the current unstable market conditions and its
desire to maintain a higher than normal level of liquidity at this time.
In the nine months ended September 30, 2002, loan balances have increased $22.9
million. Management considers this level of growth to be reasonable in light of
the current economic environment. Loan demand remains steady. A conservative
lending policy has maintained the overall integrity of the loan portfolio.
Problem loans are at a minimum and non-performing loan balances are regarded as
low in comparison to the entire portfolio. As a result of very few loan
charge-offs, the reserve for loan loss has continued to be regarded as
acceptable despite the increase in loan volume and the minimal provision
provided.
During the first nine months of 2002, total deposits for the Corporation have
increased $22.5 million. Management believes that the continued growth in
deposits shows the continued confidence of consumers in the Corporation and
their lack of confidence in the stock market. Management continues to remain
competitive in the different products offered to consumers and tries to maximize
yields offered whenever possible. The strength of the Corporation lies in its
reputation and business practices with its established customers.
LIQUIDITY
The ability to provide the necessary funds for the day-to-day operations of the
Corporation depends on a sound liquidity position. Management has continued to
monitor the Corporation's liquidity position by reviewing the maturity
distribution between interest earning assets and interest bearing liabilities.
Fluctuations in interest rates can be the primary cause for the flow of funds
into or out of a financial institution. The Corporation continues to offer
products that management believes are competitive and will encourage depositors
to leave their funds in the Corporation's banking subsidiary. Management
believes that their efforts will help the Corporation to not only retain these
deposits, but also encourage continued growth. In the event the Corporation's
primary source of liquidity, the core deposits of its banking subsidiary, is
insufficient to meet liquidity needs, the banking subsidiary had available to
meet demand, at September 30, 2002, $30.0 million in federal funds purchased as
well as $43.0 million reverse repurchase agreements through its correspondent
bank relationship.
CAPITAL RESOURCES
During the second quarter of 2002 the Corporation opened a new banking branch
inside a Pick `n Save food store located at 10200 W. Silver Spring Avenue in the
Northwest corner of Milwaukee. The Corporation's banking subsidiary funded this
project internally and the cost of this project was nominal. There are no other
major projects currently planned for 2002; however, management continues to
examine all ways in which the Corporation can grow and increase its
profitability. Presented with the right opportunity, management will act
according to the best interests of the Corporation.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2002 and 2001
Net income for the Corporation has increased $799,800 (48.8%) during the third
quarter of 2002 compared to the third quarter of 2001. This is primarily due to
the continued decline in interest rates and the resulting enhanced Net Interest
Margin. It has been a little over one year since the events of September 11,
2001. The economy has continued to remain slow although there are indications
that a recovery may occur soon. The market is also reacting to negative events
which have occurred in the corporate world. Consumer confidence needs to be
strengthened and corporate integrity reestablished in order for a continuing
recovery to occur. The Federal Reserve has cut interest rates substantially
since September 11, 2001 in order to try to jump start the economy.
The Corporation's interest income and fees on loans decreased $447,200 (5.6%)
during the three months ended September 30, 2002 compared to the third quarter
of 2001. Interest rates have continued to remain low throughout 2002. Although
loan balances have increased $19.1 million during the past twelve months, the
average yield earned on all loans has decreased from 8.27% in 2001 to an average
yield of 7.28% in 2002. The yield reduction was considerably less than the
decrease in the average yield paid on all deposits. As a result, the Net
Interest Margin improved by 17 basis points. Management is careful in their
pricing and maturities of loans to ensure that the Corporation will not be
exposed to excessive interest rate risk.
Interest income on investment securities increased $229,800 (16.1%) during the
third quarter of 2002 compared to the third quarter of 2001. Although interest
rates have remained low, investment security balances have increased during the
quarter $19.4 million. Management places excess funds of the Corporation into
instruments which they believe will earn the maximum yield. They primarily try
to channel these funds into the loan portfolio which generally produces a higher
yield. If there are more funds available than demand, management will purchase
suitable investment securities to achieve a greater yield than Federal Funds
sold will produce. Management follows a strict guideline as laid out in the
Corporation's investment policies adopted by the Board of Directors.
Management continues to use liquidity as a guide in balancing out loans and
investment securities with savings and time deposits, attempting to match the
Corporation's short term earning assets with its short-term liabilities.
Interest expense paid on deposits has decreased $1.1 million (36.0%) for the
three months ended September 30, 2002 compared to the same period in 2001.
Although deposit balances have increased throughout 2002, the rate paid on most
instruments has decreased substantially. The average yield paid on all deposits
has decreased from 3.64% in 2001 to an average yield of 2.16% in 2002. Although
interest bearing deposits have increased $5.0 million during the three month
period ending September 30, 2002, interest expense has decreased due to the
maturities of higher yielding time deposits which would have been renewed at a
much lower rate.
Other income has increased $317,800 (18.1%) during the quarter ended September
30, 2002 compared to the quarter ended September 30, 2001. This increase is
primarily the result of a $209,100 increase on the gain realized from the sale
of Freddie-Mac loans for the quarter. Other expenses decreased $94,600 (1.6%)
during the third quarter of 2002 compared to the third quarter of 2001. This
decrease was the result of reduced legal fees which were expensed in 2001 for
legal proceedings which were settled during the first two quarters of 2002.
A summarized change in income for the quarters appears below:
Three Months Ended September 30, September 30, 2002
2002 2001 Over(Under)
(Unaudited) (Unaudited) 2001
--------- --------- -------
Revenue and Expenses: (000's)
Interest Income $ 9,313 $ 9,787 $ (474)
Less: Interest Expense 1,955 3,208 (1,253)
-------- -------- --------
Net Interest Income 7,358 6,579 779
Less: Provision for Loan Loss 105 105 --
Other Operating Expense
Net of Other Operating
Revenues 3,893 4,306 (413)
--------- -------- --------
Income Before Income Taxes 3,360 2,168 1,192
Tax Provision 921 529 392
--------- -------- --------
NET INCOME $ 2,439 $ 1,639 $ 800
========= ======== ========
Nine Months Ended September 30, 2002 and 2001
Net income for the first nine months of 2002 decreased $1.2 million (22.3%)
compared to the first nine months of 2001. During the first half of 2002 the
Corporation was involved with two lawsuits which were settled. The amount of the
settlements was expensed and explained in two separate letters to shareholders
filed under Forms 8-K on March 25 and May 9 of 2002. This resulted in an adverse
affect on net income of approximately $2.6 million or $1.50 per share.
During the first nine months of 2002, interest income and fees on loans
decreased $1.8 million (7.6%) compared to the same period in 2001. The average
yield on loans has decreased almost 100 basis points since September 30, 2001.
Due to the slow economy, the Federal Reserve cut interest rates four times since
September of 2001. Management has observed several economic indicators and
believes that the current trend will begin to turn and interest rates will begin
to rise sometime during the first half of 2003. They have been carefully
monitoring the liquidity position of the Corporation to make sure that
maturities of earning assets will be sufficient to balance the maturities of
interest bearing liabilities in the short term.
Interest income on investment securities has increased $450,400 (9.9%) during
the first nine months of 2002 compared to the same period in 2001. Although
interest rates have declined, the balance in investment securities has continued
to increase, growing $41.4 million (35.0%) from September 2001 to September 2002
compared to the period from September 2000 to September 2001. Management seeks
to ensure that the yields on earning assets of the Corporation are maximized and
contributing equally to net income.
Interest expense on deposits has also been affected by lowering interest rates
and has decreased $3.2 million (34.6%) during the first nine months of 2002
compared to the first nine months of 2001. The average yield on deposits has
decreased almost 150 basis points during the twelve month period ended September
30, 2002. Management is pleased that although rates have remained low, the
Corporation's depositors have remained loyal and balances have increased.
Other income has increased $730,900 (14.0%) during the first nine months of 2002
compared to the same period in 2001. This increase is primarily from the gain
realized on the sale of Freddie-Mac loans which increased $421,400 in 2002. The
Corporation had also received proceeds of approximately $174,000 from the sale
of TYME Corporation stock during the first quarter of 2002. Other expenses
increased $5.0 million (29.7%) in the first nine months of 2002 compared to the
first nine months of 2001. The major source of this increase is the $4.3 million
litigation settlement which was paid during the first half of 2002.
CAPITAL ADEQUACY
Federal banking regulatory agencies have established capital adequacy rules,
which take into account risk attributable to balance sheet assets and
off-balance-sheet activities. All banks and bank holding companies must meet a
minimum risk-based capital ratio of 8.0% of which 4.0% must be comprised of tier
1 capital.
The federal banking agencies also have adopted leverage capital guidelines which
banking organizations must meet. Under these guidelines, the most highly rated
banking organizations must meet a minimum leverage ratio of at least 3.0% tier 1
capital to total assets, while lower rated banking organizations must maintain a
ratio of at least 4.0% to 5.0%.
The risk-based capital ratio for the Corporation is 19.51% and its leverage
ratio is 12.78%.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation's Annual Report on Form 10-K for the year ended December 31,
2001 contains certain disclosures about market risks affecting the Corporation.
There have been no material changes to the information provided which would
require additional disclosures as of the date of this filing.
ITEM 4
CONTROLS AND PROCEDURES
Based on his evaluation of the Corporation's disclosure controls and procedures
as of a date within 90 days of the filing date of this report, the Corporation's
President, Chief Executive Officer and Treasurer has determined that the
disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Corporation is recorded, processed, summarized
and reported by the filing date of this report, and that information required to
be disclosed in the report is communicated to management, as appropriate, to
allow timely decisions regarding required disclosure.
There were no significant changes in the Corporation's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation, and there were no corrective actions with regard to
significant deficiencies or material weaknesses.
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
See "Index to Exhibits" which is incorporated herein by reference
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRI CITY BANKSHARES CORPORATION
(registrant)
DATE: November 13, 2002 /s/Henry Karbiner,Jr.
-------------------------- ------------------------------------
Henry Karbiner, Jr., President and
Chief Executive Officer
(Principal Executive Officer)
DATE: November 13, 2002 /s/Thomas W. Vierthaler
-------------------------- ------------------------------------
Thomas W. Vierthaler
Vice President and Comptroller
(Chief Accounting Officer)
Certifications
I, Henry Karbiner, Jr. certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tri City Bankshares
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
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/s/Henry Karbiner, Jr.
-----------------------------------
Henry Karbiner, Jr.
President, Chief Executive Officer
and Treasurer(Principal Executive
and Financial Officer)
INDEX TO EXHIBITS
Exhibit 99.1
Certification of CEO/CFO pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Exhibit 99.1
STATEMENT
Pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. ss.1350, the undersigned officer of Tri City Bankshares Corporation (the
"Company") hereby certifies that:
(1) the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 2002 fully complies with the requirements of Section 13(a) or 15(d), as
applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: November 13, 2002
------------------
/s/Henry Karbiner, Jr.
-----------------------------------
Henry Karbiner, Jr.
President, Chief Executive Officer
and Treasurer(Principal Executive
and Financial Officer)