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1
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, 2000
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. [ ]
As of March 1, 2001, 961,565 shares of common stock were outstanding and the
aggregate market value of the shares held by non-affiliates was approximately
$40,289,574.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated in
- -------- ---------------
Annual report to shareholders for fiscal year ended
December 31, 2000 Parts II and IV
Proxy statement for annual meeting of
shareholders to be held on June 13, 2001 Part III
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Form 10-K Table of Contents
- ---------------------------------------------------------------------------------------------------------------------
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 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
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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).
On a consolidated basis at December 31, 2000, Registrant had assets of
$563,074,933, net loans of $357,249,682, deposits of $470,141,136 and
stockholders' equity of $68,896,442. 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 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 primary 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. In 2000 the Registrant also realized proceeds from the sale of
it's investment in another subsidiary bank.
Registrant is engaged in only one business 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.
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The following table sets forth certain information regarding Tri City National
Bank:
Name of Bank and
---------------- Assets as of
Location Year Organized December 31, 2000
-------- -------------- -----------------
Tri City National Bank 1963 $562,646,240
6400 South 27th Street
Oak Creek, Wisconsin
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 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 stockholders 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
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Deposit Insurance Corporation Improvement Act (FDICIA) and the
Gramm-Leach-Bliley Act (the Act).
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 Gramm-Leach-Bliley Act (the Act), was passed in 1999 to overturn
Depression-era restrictions on affiliations by banking organizations. The Act
eliminates certain barriers to and restrictions on affiliations between banks
and securities firms, insurance companies and other financial services
organizations by providing 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.
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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.
On June 1, 2000, the federal bank regulatory agencies issued final regulations
implementing the Act's consumer privacy protections. Among other things, the new
privacy regulations give customers the right to "opt out" of having their
nonpublic, personal information shared by a financial institution with
nonaffiliated third parties. The Act also bars financial institutions from
disclosing customer account numbers or other such access codes to nonaffiliated
third parties for direct marketing purposes and requires annual disclosure by
financial institutions of their policies and procedures for protecting
customers' nonpublic, personal information. Full compliance with the new privacy
regulations is mandatory as of July 1, 2001.
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, 2000, Registrant employed 89 officers and 337 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.
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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, 2000, 1999 and 1998.
Year Ended December 31
----------------------
2000 1999 1998
---- ---- ----
Average Yield Average Yield Average Yield
Balance Interest or Rate Balance Interest or Rate Balance Interest or Rate
------- -------- ------- ------- -------- ------- ------- -------- -------
ASSETS
Interest-earning assets:
Loans (1) $342,806 $30,592 8.92% $296,868 $25,912 8.73$ 272,324 $25,593 9.39%
Taxable investment securities 57,411 3,481 6.06 63,106 3,891 6.17 56,055 3,855 6.88
Nontaxable investment
securities(2) 80,328 5,350 6.66 84,695 5,731 6.77 70,586 4,866 6.89
Federal funds sold 14,285 895 6.27 4,146 203 4.90 15,664 824 5.26
-------- ------- -------- ------- ------- -------
Total interest-earning assets 494,830 40,318 8.15% 448,815 35,737 7.96 414,629 $35,138 8.47%
Noninterest-earning assets:
Cash and due from banks 30,885 35,381 30,063
Premises and equipment, net 20,824 20,837 18,362
Allowance for loan losses (4,457) (4,330) (3,799)
Other assets 4,101 6,529 6,182
-------- -------- --------
$546,183 $507,232 $465,437
======== ======== ========
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DISTRIBUTION OF ASSETS, LIABILITIES & STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
(Dollars in Thousands)
Year Ended December 31
----------------------
2000 1999 1998
---- ---- ----
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 $ 197,085 $ 5,022 2.55% $196,559 $ 4,758 2.42% $182,111 $ 4,978 2.73%
Other time deposits 116,603 6,361 5.46 113,791 5,745 5.05 109,690 6,010 5.48
Short-term borrowings 37,187 2,258 6.07 8,796 460 5.23 3,004 183 6.09
--------- ------- ------ -------- ------- ----- -------- ------- ------
Total interest-bearing liabilities 350,875 13,641 3.89% 319,146 10,963 3.44% 294,805 11,171 3.79%
Noninterest-bearing liabilities:
Demand deposits 126,933 124,696 112,504
Other 2,948 3,246 3,006
Stockholders' equity 65,427 60,144 55,122
--------- -------- -------
$ 546,183 $507,232 $465,437
========= ======== ========
Net interest earnings and interest
rate spread $26,677 4.26% $24,774 4.52% $23,967 4.68%
======= ===== ======= ===== ======= =====
Net yield on interest-earning assets 5.39% 5.52% 5.78%
===== ===== =====
(1) For purposes of these computations, nonaccrual loans are included in the
daily average loan amounts outstanding. Interest income includes $1,836,
$1,736 and $1,747 of loan fees in 2000, 1999 and 1998, 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 $1,755, $1,949 and $1,598 in 2000,
1999 and 1998, respectively.
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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:
2000 Compared to 1999 1999 Compared to 1998
--------------------- ---------------------
Increase (Decrease) Due to Increase (Decrease) Due to
--------------------------- --------------------------
Volume Rate(1) Net Volume Rate(1) Net
------ ------- --- ------ ------- ---
Interest earned on:
Loans $ 4,010 $ 670 $ 4,680 $2,304 $(1,985) $319
Taxable investment securities (351) (59) (410) 485 (449) 36
Nontaxable investment securities (296) (85) (381) 972 (107) 865
Federal funds sold 497 195 692 (606) (15) (621)
-------- -------- -------- ------- -------- -----
Total interest-earning assets $ 3,860 $ 721 $ 4,581 $3,155 $(2,556) $599
======== ======== -------- ======= ======== -----
Interest paid on:
Savings deposits $ 13 $ 251 $ 264 $ 394 $ (614) $(220)
Other time deposits 142 474 616 225 (490) (265)
Short-term borrowings 1,488 310 1,798 353 (75) 278
-------- -------- -------- ------- -------- ------
Total interest-bearing liabilities $ 1,643 $ 1,035 $ 2,678 $ 972 $(1,179) $(207)
======== ======== -------- ======= ======== ------
Increase in net interest income $ 1,903 $ 806
======== ======
(1) The change in interest due to both rate and volume has been allocated to
rate changes.
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INVESTMENT PORTFOLIO
(Dollars in Thousands)
The book value of investment securities at the dates indicated is:
December 31
-----------
2000 1999 1998
---- ---- ----
U.S. Treasury and government agencies $ 53,955 $ 56,446 $ 56,948
States and political subdivisions 80,332 85,576 77,590
---------- --------- ---------
Total investment securities $ 134,287 $ 142,022 $ 134,538
========== ========= =========
The following table sets forth the maturities of investment securities at
December 31, 2000, 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 $ 1,000 5.30% $ 50,955 6.04% $ 2,000 6.02%
States and political subdivisions 10,939 6.66 52,625 6.79 16,768 6.82
--------- --------- --------
$ 11,939 6.54% $ 103,580 6.42% $ 18,768 6.73%
========= ========= ========
Tax equivalent adjustment for
Calculation of yield $ 231 $ 1,138 $ 386
========= ========= ========
Note: The weighted average yields on tax-exempt obligations have been computed
on a fully tax-equivalent basis assuming a tax rate of 34%.
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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
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Commercial $ 38,012 $ 26,954 $ 13,730 $ 13,015 $ 10,414
Real estate-- construction 19,733 16,503 16,358 19,148 16,142
Real estate-- mortgage 276,487 247,957 215,381 201,322 191,288
Installment 27,539 27,485 31,715 33,914 35,908
--------- --------- --------- --------- ---------
$ 361,771 $ 318,899 $ 277,184 $ 267,399 $ 253,752
========= ========= ========= ========= =========
The maturity distribution of all loans at December 31, 2000, are:
Maturity
--------
After One
One Year Through After
or Less Five Years Five Years Total
------- ---------- ---------- -----
Commercial $ 17,672 $ 20,340 $ -0- $ 38,012
Real estate construction 11,179 8,554 -0- 19,733
Real estate mortgage 93,368 178,886 4,233 276,487
Installment Loans 4,953 16,366 6,220 27,539
--------- --------- --------- ---------
$ 127,172 $ 224,146 $ 10,453 $ 361,771
========= ========= ========= =========
Interest rate sensitivity of all loans with maturities greater than one year at
December 31, 2000, are:
Interest Sensitivity
--------------------
Fixed Rate Variable Rate
---------- -------------
Due after one, but within five years $ 212,451 $ 11,695
Due after five years 10,198 255
--------- ----------
$ 222,649 $ 11,950
========= ==========
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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
-----------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Loans accounted for on a nonaccrual basis $ 214 $ 595 $ 334 $ -0- $ 725
Loans contractually past due 90
days or more as to interest or principal
payments 1,669 1,372 1,848 694 1,220
------ ------ ------ ------ ------
Total nonperforming loans $1,883 $1,967 $2,182 $ 694 $1,945
Ratio of nonaccrual loans to total loans .06% .19% .12% 0% .28%
Ratio of nonperforming loans to total loans .52 .62 .79 .26 .77
Interest income of $4 was recognized during 2000 on loans which were accounted
for on a nonaccrual basis. An additional $23 of interest income would have been
recorded in 2000 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, 2000 or 1999 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.
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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 selected
performance ratios.
Year Ended December 31
----------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
Balance of allowance for loan losses at
beginning of period $ 4,340 $ 4,245 $ 3,500 $ 3,010 $ 3,626
Loans charged-off:
Commercial 130 116 0 57 899
Real estate 62 9 0 0 0
Installment 9 61 154 97 23
-------- ------- -------- ------- -------
TOTAL LOANS CHARGED-OFF 201 186 154 154 922
Recoveries of loans previously charged-off:
Commercial 37 12 0 20 0
Real estate 0 0 244 0 0
Installment 45 44 55 24 6
-------- ------- -------- ------- -------
TOTAL RECOVERIES 82 56 299 44 6
-------- ------- -------- ------- -------
Net loans charged-off (recovered) 119 130 (145) 110 916
Additions to allowance charged to expense 300 225 600 600 300
-------- ------- -------- ------- -------
Balance at end of period $ 4,521 $ 4,340 $ 4,245 $ 3,500 $ 3,010
======== ======= ======== ======= =======
Ratio of net loans charge-off (recoveries)
during the period to average loans
outstanding .03% .04% (.05%) .04% .38%
======== ======= ======== ======= =======
Ratio of allowance at end of year to total
loans 1.25% 1.36% 1.53% 1.31% 1.19%
======== ======= ======== ======= =======
Ratio of allowance at end of year to
nonaccrual loans 2,112.83% 729.41% 1,270.96% NMF* 415.17%
======== ======= ======== ======= =======
*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.
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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 one of the following five 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, carried in a nonaccrual of interest status or charged-off to the
level of expected recovery.
Real estate loans comprise the largest portion of the loan portfolio with 81.88%
of loans outstanding at December 31, 2000. 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 2001 are not expected to vary significantly from net losses
experienced over the last two years.
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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
----------------------
2000 1999 1998
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
Noninterest-bearing demand deposits $126,933 0% $124,696 0% $112,504 0%
Interest bearing transaction deposits 88,022 2.94% 86,364 2.52% 80,090 2.69%
Savings 109,063 2.23% 110,195 2.35% 102,021 2.77%
Time deposits (excluding time certificates
of deposit of $100,000 or more) 87,184 5.46% 84,084 5.22% 81,877 5.85%
Time certificates of deposits of $100,000
or more 29,419 5.44% 29,707 4.56% 27,813 4.39%
-------- -------- --------
$440,621 $435,046 $404,305
======== ======== ========
The maturity distribution of deposits in amounts of $100,000 and over at
December 31, 2000, is:
Three months or less $ 5,992
After 3 through 6 months 3,018
After 6 through 12 months 17,385
After 1 year through 2 years 9,268
After 2 years through 3 years 1,871
After 3 years through 4 years 338
After 4 years through 6 years 6,343
--------
$ 44,215
========
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RETURN ON EQUITY AND ASSETS AND SELECTED CAPITAL RATIOS
The following table shows consolidated operating and capital ratios of the
Registrant for each of the last three years:
Year Ended December 31
----------------------
2000 1999 1998
---- ---- ----
Percentage of net income to:
Average stockholders' equity 12.04% 11.66% 12.65%
Average total assets 1.44 1.38 1.50
Percentage of dividends declared per common share to
net income per common share 45.45 43.32 36.10
Percentage of average stockholders' equity
to daily average total assets 11.98 11.86 11.84
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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:
2000 $ 19,787 $ 2,233
1999 0 4,579
1998 0 827
Weighted average interest rate at year end:
2000 6.29% 6.32%
1999 0 5.55
1998 0 5.54
Maximum amount outstanding at any month's end:
2000 $ 76,891 $ 5,347
1999 15,650 6,006
1998 10,000 5,265
Average amount outstanding during the year:
2000 $ 35,148 $ 2,038
1999 6,863 1,933
1998 769 1,847
Average interest rate during the year:
2000 6.05% 6.48%
1999 5.14 4.75
1998 5.94 6.12
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.
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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
6462 South 27th Street
Oak Creek, Wisconsin 580 Leased
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
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
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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
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
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
150 West Holt Avenue
Milwaukee, Wisconsin 590 Leased
6201 N. Teutonia Avenue
Milwaukee, Wisconsin 618 Leased
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Approximate
Location Floor Area in Square Feet Owned or Leased
-------- ------------------------- ---------------
8770 S. Howell Avenue
Oak Creek, Wisconsin 1,052 Leased
4689 S. Whitnall Avenue
Milwaukee, Wisconsin 1,159 Leased
7830 W. Good Hope Road
Milwaukee, Wisconsin 523 Leased
1818 W. National Avenue
Milwaukee, Wisconsin 1,188 Leased
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 85,392 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 business.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 2000 to a vote of
security holders through the solicitation of proxies or otherwise.
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21
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 2000 Annual Report to Stockholders under the captions entitled
"Market for Corporation's Common Stock and Related Stockholder Matters" (Page
14) and "Selected Financial Data" (Page 13) as to cash dividends paid.
Item 6. SELECTED FINANCIAL DATA
The information required by Item 6 is incorporated herein by reference to
Registrant's 2000 Annual Report to Stockholders under the caption entitled
"Selected Financial Data" (Page 13).
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 2000 Annual Report to Stockholders under the caption entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (Pages 4 to 10).
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by Item 7A is incorporated herein by reference to
Registrant's 2000 Annual Report to Stockholders under the caption entitled
"Quantitative and Qualitative Disclosures About Market Risk" (Pages 11 to 12).
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is incorporated herein by reference to
Registrant's 2000 Annual Report to Stockholders (Pages 16 to 38).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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22
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 stockholders
on June 13, 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 stockholders
on June 13, 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 stockholders
on June 13, 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 stockholders
on June 13, 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).
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23
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 3.1 -- Restated Articles of incorporation.
Exhibit 3.2 -- By-Laws, as amended.
Exhibit 13 -- Annual Report to Stockholders for the
year ended December 31, 2000.
With the exception of the information
incorporated by reference into Items 5,
6, 7, and 8 of this Form 10-K, the 2000
Annual Report to Stockholders is not
deemed filed as part of this report.
Exhibit 21 -- Subsidiary of Registrant.
Exhibit 23 -- Consent of Independent Auditors
(b) Reports on Form 8-K
None
(c) Exhibits--The response to this portion of Item 14 is submitted
as a separate section of this report.
(d) Financial Statement Schedules--None
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24
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, 2000
TRI CITY BANKSHARES CORPORATION
OAK CREEK, WISCONSIN
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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, 2000, are
incorporated by reference in Item 8:
Consolidated balance sheets--December 31, 2000 and 1999
Consolidated statements of income--Years ended December 31, 2000, 1999 and
1998
Consolidated statements of stockholders' equity--Years ended December 31,
2000, 1999 and 1998
Consolidated statements of cash flows--Years ended December 31, 2000, 1999
and 1998
Notes to consolidated financial statements--December 31, 2000
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.
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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. 3/14/01
- ------------------------- ------------
Henry Karbiner, Jr. Chairman of the Board and Chief
Executive Officer
/s/ Ronald K. Puetz 3/14/01
- ------------------------- ------------
Ronald K. Puetz Executive Vice-President and
Director
/s/ Scott A. Wilson 3/14/01
- ------------------------- ------------
Scott A. Wilson Secretary and Director
/s/ Robert W. Orth 3/14/01
- ------------------------- ------------
Robert W. Orth Senior Vice-President and
Director
/s/ Thomas W. Vierthaler 3/14/01
- ------------------------- ------------
Thomas W. Vierthaler Vice President and Comptroller
(Principal Accounting Officer)
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/s/ Frank J. Bauer 3/14/01
- ------------------------- ------------
Frank J. Bauer Director
- ------------------------- ------------
Sanford Fedderly Director
- ------------------------- ------------
William Gravitter Director
/s/ Christ Krantz 3/14/01
- ------------------------- ------------
Christ Krantz Director
/s/ William L. Komisar 3/14/01
- ------------------------- ------------
William L. Komisar Director
/s/ William P. McGovern 3/14/01
- ------------------------- ------------
William P. McGovern Director
- ------------------------- ------------
John M. Rupcich Director
- ------------------------- ------------
Agatha T. Ulrich Director
/s/ David A. Ulrich, Jr. 3/14/01
- ------------------------- ------------
David A. Ulrich, Jr. Director
/s/ William J. Werry 3/14/01
- ------------------------- ------------
William J. Werry Director
25