-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H5Myb3fgFEFMirCSZ1ACSdBQwFxnFsFH4GzFCAP1bTDgXtW++K7WIWiwRcqguvNw kMWXClOOJ3fcxswtZHF4rQ== 0000356171-97-000006.txt : 19971114 0000356171-97-000006.hdr.sgml : 19971114 ACCESSION NUMBER: 0000356171-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRICO BANCSHARES / CENTRAL INDEX KEY: 0000356171 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 942792841 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-10661 FILM NUMBER: 97713801 BUSINESS ADDRESS: STREET 1: TRI COUNTIES BANK ADMINISTRATION STREET 2: 40 PHILADELPHIA DRIVE CITY: CHICO STATE: CA ZIP: 95973 BUSINESS PHONE: 9168980300 MAIL ADDRESS: STREET 1: TRI COUNTIES BANK ADMINISTRATION STREET 2: 40 PHILADELPHIA DRIVE CITY: CHICO STATE: CA ZIP: 95973 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Quarter Ended September 30, 1997 Commission file number 0-10661 - ------------------------------------ ------------------------------ TRICO BANCSHARES (Exact name of registrant as specified in its charter) California 94-2792841 - ------------------------------ ------------------- (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification No.) 15 Independence Circle, Chico, California 95973 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 916/898-0300 - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of Class: Common stock, no par value Outstanding shares as of November 4, 1997: 4,658,949 TRICO BANCSHARES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands)
September 30, December 31, -------------------------------------- 1997 1996 Assets: Cash and due from banks $ 38,447 $ 52,231 Securities held-to-maturity (approximate fair value $95,876 and $103,488) 96,245 104,713 Securities available-for-sale, net of unrealized gain (loss) of $196 and $(991) 150,423 65,316 Loans, net of allowance for loan losses of $(6,364) and $(6,097) 461,697 433,192 Premises and equipment, net 17,731 14,717 Investment in real estate properties 606 1,173 Other real estate owned 2,081 1,389 Accrued interest receivable 5,076 4,572 Intangible assets 9,286 1,036 Other assets 16,549 16,520 ----------------- ----------------- Total assets $ 798,141 $ 694,859 ================= ================= Liabilities: Deposits Noninterest-bearing demand $ 113,610 $ 100,879 Interest-bearing demand 127,545 97,178 Savings 208,271 172,789 Time certificates 259,527 224,775 ----------------- ----------------- Total deposits 708,953 595,621 Fed funds purchased - 4,900 Repurchase agreements 4,700 - Accrued interest payable and other liabilities 9,214 9,280 Long term borrowings 11,443 24,281 ----------------- ----------------- Total liabilities 734,310 634,082 Shareholders' equity: Common stock 47,930 47,652 Retained earnings 16,088 14,076 Unrealized loss on securities available for sale, net (187) (951) ----------------- ----------------- Total shareholders' equity 63,831 60,777 ----------------- ----------------- Total liabilities and shareholders' equity $ 798,141 $ 694,859 ================= =================
TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands except earnings per common share)
For the three months For the nine months ended September 30, ended September 30, 1997 1996 1997 1996 Interest income: Interest and fees on loans $ 11,767 $ 9,955 $ 33,338 $ 27,548 Interest on investment securities-taxable 3,519 2,577 10,165 7,916 Interest on investment securities-tax exempt 189 30 440 93 Interest on federal funds sold 24 - 292 332 -------------- ------------- ------------- ------------- Total interest income 15,499 12,562 44,235 35,889 -------------- ------------- ------------- ------------- Interest expense: Interest on deposits 5,885 4,196 16,775 12,295 Interest on federal funds purchased 29 204 160 348 Interest on other borrowings 213 456 899 1,246 -------------- ------------- ------------- ------------- Total interest expense 6,127 4,856 17,834 13,889 -------------- ------------- ------------- ------------- Net interest income 9,372 7,706 26,401 22,000 Provision for loan losses 1,000 537 2,200 627 -------------- ------------- ------------- ------------- Net interest income after provision for loan losses 8,372 7,169 24,201 21,373 Noninterest income: Service charges and fees 1,748 1,296 4,923 3,591 Other income 729 449 2,041 1,200 Securities gains (losses), net - - 18 - -------------- ------------- ------------- ------------- Total noninterest income 2,477 1,745 6,982 4,791 -------------- ------------- ------------- ------------- Noninterest expenses: Salaries and related expenses 3,997 2,941 11,604 8,905 Other, net 4,203 2,876 12,708 8,241 -------------- ------------- ------------- ------------- Total noninterest expenses 8,200 5,817 24,312 17,146 -------------- ------------- ------------- ------------- Net income before income taxes 2,649 3,097 6,871 9,018 Income taxes 1,035 1,276 2,614 3,749 -------------- ------------- ------------- ------------- Net income 1,614 1,821 4,257 5,269 Primary earnings per common share $ 0.33 $ 0.39 $ 0.88 $ 1.13 ============== ============= ============= ============= Fully diluted earnings per common share $ 0.33 $ 0.39 $ 0.88 $ 1.13 ============== ============= ============= =============
TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) (in thousands, except number of shares)
Common stock Unrealized ------------------------------ (loss) on Number Retained securities, of shares Amount earnings net Total -------------- ------------- ------------- ------------ ------------ Balance, December 31, 1996 4,641,223 $ 47,652 $ 14,076 $ (951) $ 60,777 Exercise of common stock options 18,826 143 $ 143 Repurchase of common stock (1,100) (11) (19) $ (30) Common stock cash dividends (2,226) $ (2,226) Change in unrealized loss on securities 764 $ 764 Stock option amortization 146 $ 146 Net income, September 30, 1997 4,257 $ 4,257 -------------- ------------- ------------- ------------ ------------ Balance, September 30, 1997 4,658,949 $ 47,930 $ 16,088 $ (187) $ 63,831 ============== ============= ============= ============ ============
TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
For the nine months ended September 30, 1997 1996 Operating activities: Net income $ 4,257 $ 5,269 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 2,200 627 Provision for losses on OREO 169 - Depreciation and amortization 1,759 1,328 Amortization of investment security discounts (62) 42 Deferred income taxes (97) 107 Investment security (gains) losses (net) (18) - (Gain) loss on sale of other real estate owned 33 (5) (Gain) loss on sale of premises and equipment (14) (7) (Gain) loss on sale of loans (139) 8 Proceeds from loan sales 15,130 13,217 Origination of loans held for sale (22,325) (20,483) Amortization of stock options 146 156 (Increase) decrease in interest receivable (504) 527 Increase (decrease) in interest payable 771 (729) (Increase) decrease in other assets and liabilities (9,814) (2,195) ------------ ----------- Net cash provided (used) by operating activities (8,508) (2,138) ------------ ----------- Investing activities: Proceeds from maturities of securities held-to-maturity 8,595 16,627 Purchases of securities held-to-maturity - (5,516) Proceeds from maturities of securities available-for-sale 18,815 19,777 Proceeds from sales of securities available-for-sale 29,033 - Purchases of securities available-for-sale (131,695) (13,644) Net (increase) decrease in loans (24,735) (56,023) Purchases of premises and equipment (3,940) (2,030) Proceeds from sale of other real estate owned 470 515 ------------ ----------- Net cash provided (used) by investing activities (103,457) (40,294) ------------ ----------- Financing activities: Net increase (decrease) in deposits 113,332 9,426 Net increase (decrease) in federal funds purchased (4,900) 7,500 Borrowings under repurchase agreements 4,700 - Payments of principal on long-term debt agreements (12,838) (2,008) Repurchase of common stock (30) (146) Cash dividends - Common (2,226) (1,779) Exercise of common stock options 143 356 ------------ ----------- Net cash provided (used) by financing activities 98,181 13,349 ------------ ----------- Increase (decrease) in cash and cash equivalents (13,784) (29,083) Cash and cash equivalents at beginning of year 52,231 65,273 ------------ ----------- Cash and cash equivalents at end of period $ 38,447 $ 36,190 ============ =========== Supplemental information: Cash paid for taxes $ 2,924 $ 4,097 Cash paid for interest expense $ 18,187 $ 14,618
Item 1. Notes to Condensed Consolidated Financial Statements Note A - Basis of Presentation The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and in Management's opinion, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of results for such interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to SEC rules or regulations; however, the Company believes that the disclosures made are adequate to make the information presented not misleading. The interim results for the nine months ended September 30, 1997 and 1996, are not necessarily indicative of results for the full year. It is suggested that these financial statements be read in conjunction with the financial statements and the notes included in the Company's Annual Report for the year ended December 31, 1996. Note B - Recently Issued Accounting Pronouncements In February of 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). The Company is required to adopt SFAS 128 in the fourth quarter of 1997 and at that time will restate earnings per share data for prior periods to conform with SFAS 128. Earlier application is not permitted. SFAS 128 replaces current earnings per share reporting requirements and requires a dual presentation of basic and diluted earnings per share. Basic earnings per share excludes dilution and is computed by dividing net income by the weighted average common shares outstanding during the reported period. Diluted earnings per share reflects the potential dilution that could occur if common shares were issued pursuant to the exercise of options under the Bank's Stock Option Plans. Diluted earnings per share under SFAS 128 should not be significantly different than primary earnings per share currently reported for the periods. Pro forma amounts for basic and diluted earnings per share assuming SFAS 128 had been in effect for the three months and nine months ended September 30, 1997 and 1996 are as follows: Three months ended Nine months ended September 30, September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Basic earnings per share $0.35 $0.41 $0.92 $1.18 Diluted earnings per share $0.33 $0.39 $0.88 $1.13 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As TriCo Bancshares (the "Company") has not commenced any business operations independent of Tri Counties Bank (the "Bank"), the following discussion pertains primarily to the Bank. Average balances, including such balances used in calculating certain financial ratios, are generally comprised of average daily balances for the Company. Except within the "overview" section, interest income and net interest income are presented on a tax equivalent basis. In addition to the historical information contained herein, this Quarterly Report contains certain forward-looking statements. The reader of this Quarterly Report should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome. The Company's actual results could differ materially from those suggested by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, loan losses, expenses, rates charged on loans and earned on securities investments, rates paid on deposits, competition effects, fee and other noninterest income earned as well as other factors. This entire Quarterly Report should be read to put such forward-looking statements in context and to gain a more complete understanding of the uncertainties and risks involved in the Company's business. Overview The Company earned $1,614,000 for the third quarter ended September 30, 1997 versus $1,821,000 for the same period in 1996. Fully diluted earnings per share for the third quarter periods were $0.33 and $0.39, respectively. Earnings for the nine months ended September 30, 1997 were $4,257,000 versus year ago results of $5,269,000. The fully diluted earnings per share were $.88 and $1.13 for the respective nine month periods. Pretax earnings for the third quarter of 1997 were $2,649,000 versus $3,097,000 for the same period in 1996. While quarterly pretax earnings declined $448,000 from the prior year, the 1997 third quarter pretax earnings rose $982,000 or 58.9% above the second quarter 1997 results. Higher operating costs related to the February 21, 1997 acquisition and integration of nine branches from Wells Fargo Bank, N.A. continued to adversely impact earnings as compared to prior year results. Additionally, the Bank made provisions for loan losses totaling $1,000,000 in the quarter versus $537,000 in the third quarter last year. The higher provision was made due to loan growth and an increase of $669,000in net loans charged off in the third quarter of 1997 from a total of $200,000 in the third quarter of 1996. Net interest income reflected growth of 21.6% to $9,372,000. The interest income component was up $2,937,000 (23.4%) due to higher quarter over quarter volume of both loans and securities and a 23 basis point increase in yields on securities. Average rates received on loans was lower by 39 basis points due primarily to the effect of lower rate mortgage loans acquired in the Sutter Buttes Savings Bank acquisition in the fourth quarter of last year. Interest expense increased $1,271,000 (26.1%) which was due predominately to increased volume of interest bearing liabilities. Net interest margin was 5.12% for the third quarter of 1997 versus 5.39% in the prior year. This lower net interest margin reflects the change in the mix of earning assets and deposits as a result of the Sutter Buttes acquisition and the first quarter purchase of the Wells' branches. The acquired deposits from Wells were invested in government securities. The net interest margin for 1997 will most likely continue to be lower than prior year levels until additional loan production replaces more of the investment securities. Noninterest income reflected growth of 42.0% to a total of $2,477,000 for the third quarter of 1997 over the prior year third quarter. The service charge and fee income portion increased 34.9% to $1,748,000 due to an increase in account volumes. Other income increased from $449,000 in 1996 to $711,000 in 1997. Commissions on the sale of mutual funds and annuities accounted for $227,000 of the increase. Noninterest expense increased $2,383,000 to $8,200,000 in the third quarter 1997 versus 1996. Of the higher costs, $851,000 were directly related to continuing operations of the purchased branches. Additionally, amortization of intangible assets associated with the Sutter Buttes and Wells branch acquisitions amounted to $386,000. Increased staffing in various support departments and loan offices to service the new branches in addition to normal salary progressions added $530,000 (18.0%) to salary and benefit expense on a quarter over quarter basis. Occupancy costs exclusive of the new branches was $141,000 (14.5%) higher. Of this amount, depreciation on equipment had the largest single increase and accounted for $101,000. Much of the depreciation related to improved computer and communication networks. Other expense categories such as courier service, telephone, ATM charges and postage, had significant increases as a result of the Sutter Buttes and Wells Fargo branch acquisitions. The provision for OREO losses was $117,000 in the third quarter of 1997 versus no provision in the same quarter last year. Noninterest expenses related to ongoing operations, exclusive of onetime acquisition costs, dropped $214,000 in the third quarter of 1997 from the second quarter 1997 results. Management will continue to focus its attention on increasing efficiencies and reducing the noninterest expenses. Assets of the Company totaled $798,141,000 at September 30, 1997 which was an increase of $103,282,000 (14.9%) and $177,102,000 (28.5%) from the December 31, 1996 and September 30, 1996 ending balances, respectively. Changes in earning assets from the prior year quarter end balances included an increase in loans of $88,111,000 to $468,061,000 and an increase in securities of $72,571,000 to $246,668,000. Nonperforming assets decreased $2,241,000 from December 31, 1996 to a balance of $8,212,000 at September 30, 1997. Year to date 1997, the Company had an annualized return on assets of .73% and a return on equity of 9.12% versus 1.17% and 12.80% in 1996. TriCo Bancshares ended the quarter with a Tier 1 capital ratio of 10.48% and a total risk-based capital ratio of 11.7%. The following tables provide a summary of the major elements of income and expense for the third quarter of 1997 compared with the third quarter of 1996 and for the first nine months of 1997 compared with the first nine months of 1996. TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Three months ended September 30, Percentage 1997 1996 Change (in thousands, except increase earnings per share) (decrease) Interest income $ 15,597 $ 12,584 23.9% Interest expense 6,127 4,856 26.2% ------------ ------------ Net interest income 9,470 7,728 22.6% Provision for loan losses 1,000 537 86.2% ------------ ------------ Net interest income after 8,470 7,191 17.8% provision for loan losses Noninterest income 2,477 1,745 41.9% Noninterest expenses 8,200 5,817 41.0% ------------ ------------ Net income before income taxes 2,747 3,119 (11.9%) Income taxes 1,035 1,276 (18.9%) Tax equivalent adjustment1 98 22 355.0% ------------ ------------ Net income 1,614 1,821 (11.4%) ============ ============ Primary earnings per common share $ 0.33 $ 0.39 (15.4%) 1 Interest on tax-free securities is reported on a tax equivalent basis of 1.52 and 1.72 for September 30, 1997 and 1996. TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Nine months ended September 30, Percentage 1997 1996 Change (in thousands, except increase earnings per share) (decrease) Interest income $ 44,464 $ 35,956 23.7% Interest expense 17,834 13,889 28.4% ------------ ------------ Net interest income 26,630 22,067 20.7% Provision for loan losses 2,200 627 250.9% ------------ ------------ Net interest income after 24,430 21,440 13.9% provision for loan losses Noninterest income 6,982 4,791 45.7% Noninterest expenses 24,312 17,146 41.8% ------------ ------------ Net income before income taxes 7,100 9,085 (21.9%) Income taxes 2,614 3,749 (30.3%) Tax equivalent adjustment1 229 67 241.7% ------------ ------------ Net income 4,257 5,269 (19.2%) ============ ============ Primary earnings per common share $ 0.88 $ 1.13 (22.1%) 1 Interest on tax-free securities is reported on a tax equivalent basis of 1.52 and 1.72 for September 30, 1997 and 1996. Net Interest Income / Net Interest Margin Net interest income represents the excess of interest and fees earned on interest-earning assets (loans, securities and Federal Funds sold) over the interest paid on deposits and borrowed funds. Net interest margin is net interest income expressed as a percentage of average earning assets. Net interest income comprises the major portion of the Bank's income. For the quarter ended September 30, 1997, interest income increased $3,013,000 or 23.9%over the same period in 1996. The average balance of total earning assets was higher by $159,654,000 which was a 28.4% increase. The acquisition of Sutter Buttes Savings Bank in the fourth quarter of 1996 and the purchase of deposits from Wells Fargo in February 1997 were the major contributing factors for the increase in earning assets. The average balances of loans outstanding and securities increased $86,299,000 and $71,618,000, respectively. These two volume increases accounted for additional interest income of $2,270,000 and $1,029,000, respectively. The average rate received on loans in the third quarter of 1997 was 10.1% which was a decrease of 39 basis points from the third quarter last year. The lower rate resulted in an unfavorable variance in interest income of $458,000. The large number of mortgage loans in the Sutter Buttes portfolio was the major cause in lowering the average rate for loans. The average rate received on securities rose 23 basis points to 6.0% which accounted for a $148,000 increase in interest income. For the third quarter of 1997, interest expense increased by $1,271,000 or 26.2% over the year earlier period. Due to the two acquisitions, average balances of interest bearing deposit liabilities increased in all categories from the same period of the previous year. These average balances rose $160,213,000 (36.8%). The higher volumes of interest bearing deposit liabilities increased interest expense by $1,567,000. Average balances of Federal Funds purchased and debt fell $25,406,000 to $18,801,000 which resulted in a decrease of $381,000 in interest expense on a quarter over quarter basis. Average rates paid on all interest bearing liabilities were down 6 basis points in the third quarter 1997 versus 1996. The combined effect of the increase in both interest income and interest expense for the third quarter of 1997 versus the same period in 1996 resulted in an increase of $1,742,000 (22.6%) in net interest income. Net interest margin for the comparative quarters fell from 5.51% to 5.25%. Net interest margin is affected by the rates received on earning assets, the mix of products i.e. loans and securities within the assets, the yields paid on interest bearing liabilities and the mix within these liabilities. As a result of the two acquisitions, all four of these variables changed in the third quarter as compared to the third quarter of last year. While net interest margin for the third quarter of 1997 improved 29 basis points over the second quarter 1997 level, management expects the net interest margin will continue to be lower overall in 1997 versus 1996. The margin will probably remain lower than in periods prior to the acquisition until higher loan volume can replace investment securities. The nine month period ending September 30, 1997, was essentially impacted by the same factors as the third quarter. The mix and volume of earning assets and interest bearing liabilities changed because of the two acquisitions. As a result, interest income increased $8,508,000 or 23.7% in the first nine months of 1997 over the same period in 1996. Most of the increase resulted from higher average balances on loans and investment securities. Interest income from the volume increase for these two items totaled $9,916,000. It was offset by a $1,865,000 decrease in interest income due to a lower average yield on loans. The average rate received on all earning assets for the nine month period ended September 30, 1997 was 8.54% or 25 basis points lower than the 8.79% for the same period in 1996. Interest expense for the nine month period increased $3,945,000 from that for the same period in 1996. Volume increases in deposits added $4,487,000 of interest expense. This was offset in part by slightly lower rates and a $12,105,000 reduction in Federal Funds purchased and debt outstanding. Overall average rates paid on interest-bearing liabilities in the first nine months of 1997 decreased 4 basis points to 3.97% from the same period in 1996. The combined effect of the increase in both interest income and interest expense for the first six months of 1997 versus 1996 resulted in an increase of $2,821,000 or 20.4% in net interest income. Net interest margin decreased 29 basis points from 5.34% to 5.05%. The following four tables provide summaries of the components of the interest income, interest expense and net interest margins on earning assets for the quarter and nine month periods ended September 30, 1997 versus the same periods in 1996. TRICO BANCSHARES ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS (in thousands)
Three Months Ended 30-Sep-97 30-Sep-96 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning assets Loans 2,3 $ 464,748 $ 11,767 10.13% $ 378,449 $ 9,955 10.52% Securities4 254,517 3,806 5.98% 182,899 2,629 5.75% Federal funds sold 1,737 24 5.53% - - ------------- ----------- ------------ ----------- Total earning assets 721,002 15,597 8.65% 561,348 12,584 8.97% ----------- ----------- Cash and due from bank 31,777 33,374 Premises and equipment 16,936 14,293 Other assets, net 30,388 18,603 Less: allowance for loan losses (6,208) (5,338) ------------- ------------ Total $ 793,896 $ 622,280 ============= ============ Liabilities and shareholders' equity Interest-bearing Demand deposits $ 126,420 720 2.28% $ 90,215 519 2.30% Savings deposits 208,147 1,613 3.10% 158,640 1,229 3.10% Time deposits 261,630 3,552 5.43% 187,129 2,448 5.23% Federal funds purchased 1,989 29 5.83% 13,701 204 5.96% Short-term debt 5,368 42 3.13% 6,196 88 5.68% Long-term debt 11,444 171 5.98% 24,310 368 6.06% ------------- ----------- ------------ ----------- Total interest-bearing liabilities 614,998 6,127 3.99% 480,191 4,856 4.05% ----------- ----------- Noninterest-bearing deposits 105,264 78,999 Other liabilities 10,299 7,166 Shareholders' equity 63,335 55,924 ------------- ------------ Total liabilities and shareholders' equity $ 793,896 $ 622,280 ============= ============ Net interest rate spread5 4.67% 4.92% Net interest income/net $ 9,470 $ 7,728 =========== =========== interest margin6 5.25% 5.51% =========== =========== 1 Average balances are computed principally on the basis of daily balances. Average balance of securities is based on amortized cost. 2 Nonaccrual loans are included. 3 Interest income on loans includes fees on loans of $496,000 in 1997 and $502,000 in 1996. 4 Interest income is stated on a tax equivalent basis of 1.52 and 1.72 at September 30, 1997 and 1996. 5 Net interest rate spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. 6 Net interest margin is computed by dividing net interest income by total average earning assets.
TRICO BANCSHARES ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS (in thousands)
Nine Months Ended 30-Sep-97 30-Sep-96 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning assets Loans 2,3 $ 445,908 $ 33,338 9.97% $ 348,943 $ 27,548 10.53% Securities4 240,781 10,834 6.00% 188,123 8,076 5.72% Federal funds sold 7,224 292 5.39% 8,383 332 5.28% ------------- ------------ ------------ ------------- Total earning assets 693,913 44,464 8.54% 545,449 35,956 8.79% ------------ ------------- Cash and due from bank 37,107 30,716 Premises and equipment 16,301 13,917 Other assets, net 31,551 18,316 Less: allowance for loan losses (6,086) (5,438) ------------- ------------ Total $ 772,786 $ 602,960 ============= ============ Liabilities and shareholders' equity Interest-bearing Demand deposits $ 118,924 2,019 2.26% $ 86,313 1,472 2.27% Savings deposits 206,087 4,736 3.06% 161,712 3,721 3.07% Time deposits 250,038 10,020 5.34% 177,373 7,102 5.34% Federal funds purchased 3,807 160 5.60% 8,397 348 5.53% Short-term debt 8,325 354 5.67% 3,285 137 5.56% Long-term debt 12,316 545 5.90% 24,871 1,109 5.95% ------------- ------------ ------------ ------------- Total interest-bearing liabilities 599,497 17,834 3.97% 461,951 13,889 4.01% ------------ ------------- Noninterest-bearing deposits 100,955 77,905 Other liabilities 10,081 8,202 Shareholders' equity 62,253 54,902 ------------- ------------ Total liabilities and shareholders' equity $ 772,786 $ 602,960 ============= ============ Net interest rate spread5 4.58% 4.78% Net interest income/net $ 26,630 $ 22,067 ============ ============= interest margin6 5.12% 5.39% ============ ============= 1 Average balances are computed principally on the basis of daily balances. Average balance of securities is based on amortized cost. 2 Nonaccrual loans are included. 3 Interest income on loans includes fees on loans of $1,520,000 in 1997 and $1,407,000 in 1996. 4 Interest income is stated on a tax equivalent basis of 1.52 and 1.72 at September 30, 1997 and 1996. 5 Net interest rate spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. 6 Net interest margin is computed by dividing net interest income by total average earning assets.
TRICO BANCSHARES ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSE (in thousands) For the three months ended September 30, 1997 over 1996 Yield/ Volume Rate4 Total ---------------- ----------------- ------------ Increase (decrease) in interest income: Loans 1,2 $ 2,270 $ (458) $ 1,812 Investment securities3 1,029 148 1,177 Federal funds sold 24 - 24 ---------------- ----------------- ------------ Total 3,323 (310) 3,013 ---------------- ----------------- ------------ Increase (decrease) in interest expense: Demand deposits (interest-bearing) 208 (7) 201 Savings deposits 384 - 384 Time deposits 975 129 1,104 Federal funds purchased (174) (1) (175) Short-term debt (12) (34) (46) Long-term debt (195) (2) (197) ---------------- ----------------- ------------ Total 1,186 85 1,271 ---------------- ----------------- ------------ Increase (decrease) in net interest income $ 2,137 $ (395) $ 1,742 ================ ================= ============ 1 Nonaccrual loans are included. 2 Interest income on loans includes fee income on loans of $496,000 in 1997 and $502,000 in 1996. 3 Interest income is stated on a tax equivalent basis of 1.52 and 1.72 for September 30, 1997 and 1996. 4 The rate/volume variance has been included in the rate variance. TRICO BANCSHARES ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSE (in thousands) For the nine months ended September 30, 1997 over 1996 Yield/ Volume Rate4 Total ------------ ----------- ----------- Increase (decrease) in interest income: Loans 1,2 $ 7,655 $ (1,865) $ 5,790 Investment securities3 2,261 497 2,758 Federal funds sold (46) 6 (40) ------------ ----------- ----------- Total 9,870 (1,362) 8,508 ------------ ----------- ----------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 556 (9) 547 Savings deposits 1,021 (6) 1,015 Time deposits 2,910 8 2,918 Federal funds purchased (190) 2 (188) Short-term debt 210 7 217 Long-term debt (560) (4) (564) ------------ ----------- ----------- Total 3,947 (2) 3,945 ------------ ----------- ----------- Increase (decrease) in net interest income $ 5,923 $ (1,360) $ 4,563 ============ =========== =========== 1 Nonaccrual loans are included. 2 Interest income on loans includes fee income on loans of $1,520,000 in 1997 and $1,407,000 in 1996. 3 Interest income is stated on a tax equivalent basis of 1.52 and 1.72 for September 30, 1997 and 1996. 4 The rate/volume variance has been included in the rate variance. Provision for Loan Losses During the third quarter of 1997, the Bank provided $1,000,000 for loan losses which was $463,000 higher than provided in the year ago quarter. The higher provision was necessitated by higher net charge offs which were $869,000 in the third quarter versus $200,000 in the third quarter of 1996. Charged off loans were higher in all loan categories. For the nine month period ended September 30,1997 the Bank provided $2,200,000 for loan losses versus $627,000 in the same period of 1996. Net charge offs for the nine month periods in 1997 and 1996 were $1,933,000 and $636,000 respectively. Net charge offs of commercial loans during the nine months were $863,000 in 1997 versus $35,000 in 1996. Credit card net charge offs in the first nine months of 1997 increased $246,000 to $695,000 as compared to the same period in 1996. These two loan categories accounted for the major portion of the higher charge offs. It is expected that the Bank will continue to provide for loan losses at higher levels than were recorded in 1996 as a result of loan growth and higher level of adversely rated credits in the loan portfolio. Noninterest Income Total noninterest income for the third quarter of 1997 was up $732,000 or 42.0% from the same period in 1996. Service charges and fees on deposit accounts increased 34.9% to $1,748,000 in the third quarter versus year ago results. This change was due to increases in account volumes mainly as a result of the previously mentioned acquisitions. Other income was up from $449,000 in the third quarter of 1996 to $711,000 in 1997. Much of the change was related to a $227,000 (83.5%) increase in commissions on the sale of mutual funds and annuities. Results for the nine months were consistent with the third quarter. Overall, noninterest income was higher by $2,191,000 or 45.7% in the first nine months of 1997 versus the same period in 1996. Service charges and fee income reflected a 37.1% increase to $4,923,000. Both the increased volume of accounts from the acquisitions and selective fee increases made in June of 1996 contributed to the higher income. Other income was up $841,000 to $2,041,000 of which $559,000 of the increase was attributable to commissions on the sale of mutual funds and annuities. Gains on the sale of real estate loans accounted for $147,000 of the increase. Noninterest Expense Noninterest expense is comprised of operating expenses of the Company and the Bank, plus the total noninterest (income) expenses of the Bank's real estate development subsidiary. Noninterest expense increased $2,383,000 to $8,200,000 in the third quarter 1997 versus 1996. Of the higher costs, $851,000 were directly related to continuing operations of the purchased branches. Additionally, amortization of intangible assets associated with the Sutter Buttes and Wells branch acquisitions amounted to $386,000. Increased staffing in various support departments and loan offices to service the new branches in addition to normal salary progressions added $530,000 (18.0%) to salary and benefit expense on a quarter over quarter basis. Occupancy costs exclusive of the new branches was $141,000 (14.5%) higher. Of this amount, depreciation on equipment had the largest single increase and accounted for $101,000. Much of the depreciation related to improved computer and communication networks. Other expense categories such as courier service, telephone, ATM charges and postage, had significant increases as a result of the Sutter Buttes and Wells Fargo branch acquisitions. The provision for OREO losses was $117,000 in the third quarter of 1997 versus no provision in the same quarter last year. This provision was made on five different OREO properties. Noninterest expenses related to ongoing operations, exclusive of onetime acquisition costs, dropped $214,000 in the third quarter of 1997 from the second quarter 1997 results. Management will continue to focus its attention on increasing efficiencies and reducing the noninterest expenses. For the nine month period noninterest expenses increased $7,166,000 or 41.8% in 1997 over 1996. Of this amount conversion and direct operating costs associated with the acquired branches accounted for $2,257,000. Amortization of intangible assets associated with the acquisitions amounted to $957,000. Other expenses which had significant increases on a year over year basis and were closely related to providing services to the new branches and customers include: Salary and benefits $1,405,000, premise and equipment $572,000, telephone $158,000, ATM charges $136,000, courier service $152,000, postage $58,000 and FDIC insurance $70,000. Provision for OREO loss and other OREO expenses increased $238,000. The overhead efficiency ratio for the first nine months of 1997 was 72.8% versus 64.0% in the like period of 1996. Provision for Income Taxes The effective tax rate for the nine months ended September 30, 1997 is 38.1% and reflects a decrease from 41.6% in the year earlier period. The decrease in tax rate is the result of higher nontaxable earnings from municipal bonds and life insurance on a smaller income base from the prior year. The Bank has increased its holdings of tax-exempt municipal bonds in the first half of 1997, so the tax rate should continue to be somewhat lower during 1997. Loans In the third quarter of 1997, loan balances increased $7,320,000 or 1.6% from the ending balances at June 30, 1997. Loan balances were higher in all categories. The balances also exceeded year end balances by $28,771,000 and 1996 third quarter ending balances by $88,111,000. The year over year gains are attributable to the Sutter Buttes acquisition and loan growth of 7.2%. The Bank has increased its commercial lending staff in the Sacramento, Bakersfield and northern San Joaquin Valley loan offices. Seasonal agricultural loans are expected to start paying down in the fourth quarter so no net loan growth is anticipated during the remainder of the 1997. Securities At September 30, 1997, securities held-to-maturity had a cost basis of $96,245,000 and an approximate fair value of $95,876,000. This portfolio contained mortgage-backed securities totaling $73,936,000 of which $31,575,000 were CMO's. The securities available-for-sale portfolio had a fair value of $150,423,000 and an amortized cost of $150,227,000. This portfolio contained mortgage-backed securities with an amortized cost of $26,929,000 of which $19,486,000 were CMO's. At December 31, 1996, securities held-to-maturity had a cost basis of $104,713,000 and an approximate fair value of $103,488,000. This portfolio contained mortgage-backed securities totaling $81,202,000 of which $33,936,000 were CMO's. The securities available-for-sale portfolio had a fair value of $65,316,000 and an amortized cost of $66,307,000. This portfolio contained mortgage-backed securities with an amortized cost of $30,260,000 of which $21,603,000 were CMO's. Growth in the securities portfolio resulted from the investment of the net proceeds generated from the acquisition of the Wells Fargo deposits in the first quarter. Nonperforming Loans As shown in the following table, total nonperforming assets at September 30, 1997 were $8,212,000 which is a decrease of 21.4% from the year end balance. At September 30, 1997 non performing assets represent 1.03% of total assets versus 1.50% at year end. Nonaccrual loans secured by real estate decreased approximately $3,227,000 (43.7%) to $4,154,000, which accounted for the largest single change. Commercial and consumer installment nonperforming loans also had decreases. Agricultural nonperforming loans reflected some increase. OREO increased $692,000 as the net result of ten properties being added and ten being sold during this period and an additional OREO provision of $170,000. All nonaccrual loans are considered to be impaired when determining the valuation allowance under SFAS 114. The increase in nonperforming loans is of concern to Management. Progress has been made in the process to identify problem and potential problem loans earlier. Collection processes are being changed to help improve the timeliness of loan payments. September 30, December 31, 1997 1996 Nonaccrual loans $ 5,515 $ 9,044 Accruing loans past due 90 days or more 616 20 Restructured loans (in compliance with modified terms) - - ----------- ------------ Total nonperforming loans 6,131 9,064 Other real estate owned 2,081 1,389 ----------- ------------ Total nonperforming assets $ 8,212 $ 10,453 =========== ============ Nonincome producing investments in real estate held by Bank's real estate development subsidiary $ 606 $ 1,173 =========== ============ Nonperforming loans to total loans 1.31% 2.06% Allowance for loan losses to nonperforming loans 104% 67% Nonperforming assets to total assets 1.03% 1.50% Allowance for loan losses to nonperforming assets 77% 58% Allowance for Loan Loss The Bank maintains its allowance for loan losses at a level Management believes will be adequate to absorb probable losses inherent in existing loans, leases and commitments to extend credit, based on evaluations of the collectibility, impairment and prior loss experience of loans, leases and commitments to extend credit. The following table presents information concerning the allowance and provision for loan losses. For the nine months ended September 30 1997 1996 (in thousands) Balance, Beginning of period $ 6,097 $ 5,580 Provision charged to operations 2,200 627 Loans charged off (2,105) (919) Recoveries of loans previously charged off 172 283 Balance, end of period $ 6,364 $ 5,571 =========== ============ Ending loan portfolio $ 468,061 $ 379,950 =========== ============ Allowance for loans as a percentage of ending loan portfolio 1.36% 1.47% =========== ============ Equity The following table indicates the amounts of regulatory capital of the Company.
To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio As of September 30, 1997: Total Capital to Risk Weighted Assets $61,096 11.70% =>$41,790 =>8.0% =>$52,237 =>10.0% Tier I Capital to Risk Weighted Assets $54,732 10.48% =>$20,895 =>4.0% =>$31,342 => 6.0%
PART II Other Information (a) Item 6. Exhibits Filed Herewith Exhibit No. Exhibits 3.1 Articles of Incorporation, as amended to date, filed as Exhibit 3.1 to Registrant's Report on Form 10-K, filed for the year ended December 31, 1989, are incorporated herein by reference. 3.2 Bylaws, as amended to 1992, filed as Exhibit 3.2 to Registrant's Report on Form 10-K, filed for the year ended December 31, 1992, are incorporated herein by reference. 4.2 Certificate of Determination of Preferences of Series B Preferred Stock, filed as Appendix A to Registrant's Registration Statement on Form S-1 (No. 33-22738), is incorporated herein by reference. 10.1 Lease for Park Plaza Branch premises entered into as of September 29, 1978, by and between Park Plaza Limited Partnership as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.9 to the TriCo Bancshares Registration Statement on Form S-14 (Registration No. 2-74796) is incorporated herein by reference. 10.2 Lease for Administration Headquarters premises entered into as of April 25, 1986, by and between Fortress-Independence Partnership (A California Limited Partnership) as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.6 to Registrant's Report on Form 10-K filed for the year ended December 31, 1986, is incorporated herein by reference. 10.3 Lease for Data Processing premises entered into as of April 25, 1986, by and between Fortress-Independence Partnership (A California Limited Partnership) as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.7 to Registrant's Report on Form 10-K filed for the year ended December 31, 1986, is incorporated herein by reference. 10.4 Lease for Chico Mall premises entered into as of March 11, 1988, by and between Chico Mall Associates as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.4 to Registrant's Report on Form 10-K filed for the year ended December 31, 1988, is incorporated by reference. 10.5 First amendment to lease entered into as of May 31, 1988 by and between Chico Mall Associates and Tri Counties Bank, filed as Exhibit 10.5 to Registrant's Report on Form 10-K filed for the year ended December 31, 1988, is incorporated by reference. 10.9 Employment Agreement of Robert H. Steveson, dated December 12, 1989 between Tri Counties Bank and Robert H. Steveson, filed as Exhibit 10.9 to Registrant's Report on Form 10-K filed for the year ended December 31, 1989, is incorporated by reference. 10.11 Lease for Purchasing and Printing Department premises entered into as of February 1, 1990, by and between Dennis M. Casagrande as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.11 to Registrant's Report on Form 10-K filed for the year ended December 31, 1991, is incorporated herein by reference. 10.12 Addendum to Employment Agreement of Robert H. Steveson, dated April 9, 1991, filed as Exhibit 10.12 to Registrant's Report on Form 10-K filed for the year ended December 31, 1991, is incorporated herein by reference. 11.1 Computation of earnings per share. 22.1 Tri Counties Bank, a California banking corporation, is the only subsidiary of Registrant. (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. TRICO BANCSHARES Date November 7, 1997 /s/ Robert H. Steveson ------------------ ----------------------- Robert H. Steveson President and Chief Executive Officer Date November 7, 1997 /s/ Robert M. Stanberry ------------------ ------------------------ Robert M. Stanberry Vice President and Chief Financial Officer EX-11 2 EX-11 EXHIBIT 11 COMPUTATIONS OF EARNINGS PER SHARE (in thousands except earnings per share) (unaudited)
For the three months For the nine months ended September 30, ended September 30, 1997 1996 1997 1996 Shares used in the computation of earnings per share: Weighted daily average of shares outstanding 4,657,719 4,498,831 4,649,468 4,476,299 Shares used in the computation of primary earnings per shares 4,833,158 4,673,451 4,827,288 4,657,051 ================ ================ ============== ============== Shares used in the computation of fully diluted earnings per share 4,849,605 4,713,229 4,851,197 4,680,967 ================ ================ ============== ============== Net income used in the computation of earnings per common share: Net income, as reported $ 1,614 $ 1,821 $ 4,257 $ 5,269 ================ ================ ============== ============== Primary earnings per share $ 0.33 $ 0.39 $ 0.88 $ 1.13 ================ ================ ============== ============== Fully diluted earnings per share $ 0.33 $ 0.39 $ 0.88 $ 1.13 ================ ================ ============== ==============
EX-27 3 EX-27
9 0000356171 TRICO BANCSHARES 1,000 9-MOS DEC-31-1997 SEP-30-1997 38,447 595,343 0 0 150,423 96,245 95,876 468,061 6,364 798,141 708,953 4,700 9,214 11,443 0 0 47,930 15,901 798,141 33,338 10,605 292 44,235 16,775 17,834 26,401 2,200 18 24,312 6,871 6,871 0 0 4,257 0.88 0.88 8.54 5,515 616 0 0 6,097 2,105 172 6,364 6,364 0 0
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