-----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, RxNwU5fa2AhyntiTlizh3tIjiauIpHfNneJUTXlbFz4l98/n11pyweYRWiV3bONh fAzxNGDSxezzAwlGqXS+Vw== 0000356171-98-000004.txt : 19980813 0000356171-98-000004.hdr.sgml : 19980813 ACCESSION NUMBER: 0000356171-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 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: 98683170 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 June 30, 1998 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.) 63 Constitution Drive, Chico, California 95973 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 530/898-0300 (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 August 11, 1998: 4,681,232
TRICO BANCSHARES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) June 30, December 31, 1998 1997 ------------------ ------------------ Assets: Cash and due from banks $ 39,420 $ 48,476 Federal funds sold 2,500 15,000 ------------------ ------------------ Cash and cash equivalents 41,920 63,476 Securities held-to-maturity (approximate fair value $82,856 and $88,950) 82,926 90,764 Securities available-for-sale, net of unrealized gain of $609 and $471 214,951 175,753 Loans, net of allowance for loan losses of $(7,138) and $(6,459) 484,165 442,508 Premises and equipment, net 16,807 18,901 Investment in real estate properties 449 856 Other real estate owned 1,464 2,230 Accrued interest receivable 6,231 5,701 Other assets 24,382 25,976 ------------------ ------------------ Total assets $ 873,295 $ 826,165 ================== ================== Liabilities: Deposits Noninterest-bearing demand $ 125,073 $ 122,069 Interest-bearing demand 128,145 130,958 Savings 206,321 216,402 Time certificates 265,939 254,665 ------------------ ------------------ Total deposits 725,478 724,094 Fed funds purchased 15,000 15,300 Repurchase agreements 17,600 - Accrued interest payable and other liabilities 10,756 10,207 Long term borrowings 36,432 11,440 ------------------ ------------------ Total liabilities 805,266 761,041 Shareholders' equity: Common stock 48,341 48,161 Retained earnings 19,529 16,956 Unrealized gain on securities available for sale, net 159 7 ------------------ ------------------ Total shareholders' equity 68,029 65,124 ------------------ ------------------ Total liabilities and shareholders' equity $ 873,295 $ 826,165 ================== ==================
TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands except earnings per common share) For the three months For the six months ended June 30, ended June 30, -------------- -------------- 1998 1997 1998 1997 ---- ---- ---- ---- Interest income: Interest and fees on loans $ 11,922 $ 10,840 $ 23,243 $ 21,571 Interest on investment securities-taxable 3,860 3,702 7,490 6,646 Interest on investment securities-tax exempt 437 183 685 251 Interest on federal funds sold 62 53 128 268 -------------- -------------- -------------- ------------- Total interest income 16,281 14,778 31,546 28,736 -------------- -------------- -------------- ------------- Interest expense: Interest on deposits 5,867 5,681 11,579 10,890 Interest on federal funds purchased 64 92 68 131 Interest on repurchase agreements 159 - 212 - Interest on other borrowings 410 326 579 686 -------------- -------------- -------------- ------------- Total interest expense 6,500 6,099 12,438 11,707 -------------- -------------- -------------- ------------- Net interest income 9,781 8,679 19,108 17,029 Provision for loan losses 1,235 600 2,060 1,200 -------------- -------------- -------------- ------------- Net interest income after provision for loan losses 8,546 8,079 17,048 15,829 Noninterest income: Service charges and fees 1,875 1,684 3,757 3,175 Other income 2,080 724 3,204 1,330 -------------- -------------- -------------- ------------- Total noninterest income 3,955 2,408 6,961 4,505 -------------- -------------- -------------- ------------- Noninterest expenses: Salaries and related expenses 4,228 4,031 8,415 7,607 Other, net 4,880 4,789 9,080 8,505 -------------- -------------- -------------- ------------- Total noninterest expenses 9,108 8,820 17,495 16,112 -------------- -------------- -------------- ------------- Net income before income taxes 3,393 1,667 6,514 4,222 Income taxes 1,252 588 2,443 1,579 -------------- -------------- -------------- ------------- Net income 2,141 1,079 4,071 2,643 Basic earnings per common share $ 0.46 $ 0.23 $ 0.87 $ 0.57 ============== ============== ============== ============= Diluted earnings per common share $ 0.44 $ 0.22 $ 0.84 $ 0.55 ============== ============== ============== =============
TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) (in thousands, except number of shares) Common stock Unrealized securities Number Retained holding of shares Amount earnings gain Total ------------- ------------- ------------- --------------- ------------ Balance, December 31, 1997 4,662,649 $ 48,161 $ 16,956 $ 7 $ 65,124 Exercise of common stock options 12,543 97 $ 97 Common stock cash dividends (1,498) $ (1,498) Change in unrealized gain on securities 152 $ 152 Stock option amortization 83 $ 83 Net income 4,071 $ 4,071 ------------- ------------- ------------- --------------- ------------ Balance, June 30, 1998 4,675,192 $ 48,341 $ 19,529 $ 159 $ 68,029 ============= ============= ============= =============== ============
TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the six months ended June 30, 1998 1997 Operating activities: Net income $ 4,071 $ 2,643 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 2,060 1,200 Provision for losses on other real estate owned 342 52 Depreciation and amortization 1,287 1,156 Amortization of intangible assets 669 571 Accretion of investment security discounts (138) (39) Deferred income taxes (124) 438 Investment security (gains) losses (net) (137) (19) (Gain) loss on sale of OREO (30) 31 (Gain) loss on sale of loans (294) (17) (Gain) loss on sale of fixed assets 69 14 Amortization of stock options 83 105 (Increase) decrease in interest receivable (530) (1,062) Increase (decrease) in interest payable 301 1,197 (Increase) decrease in other assets and liabilities 1,097 (552) --------------- -------------- Net cash provided (used) by operating activities 8,726 5,718 Investing activities: Proceeds from maturities of securities held-to-maturity 7,939 5,517 Proceeds from maturities of securities available-for-sale 59,577 16,206 Proceeds from sale of securities available-for-sale 37,710 27,036 Purchases of securities available-for-sale (136,066) (121,688) Net (increase) decrease in loans (42,029) (22,929) Proceeds from sales of fixed assets 180 23 Purchases of premises and equipment (1,071) (2,408) Purchases and additions to real estate properties (21) (237) Proceeds from the sale of OREO 1,224 397 --------------- -------------- Net cash provided (used) by investing activities (72,557) (98,083) Financing activities: Net increase (decrease) in deposits 1,384 97,984 Net increase (decrease) in Fed funds purchased (300) - Net increase (decrease) in repurchase agreements 17,600 (4,900) Borrowings under long-term debt agreements 30,000 - Payments of principal on long-term debt agreements (5,008) (3,006) Cash dividends - Common (1,498) (1,479) Exercise of common stock options 97 84 --------------- -------------- Net cash provided (used) by financing activities 42,275 88,683 --------------- -------------- Increase (decrease) in cash and cash equivalents (21,556) (3,682) Cash and cash equivalents at beginning of year 63,476 52,231 --------------- -------------- Cash and cash equivalents at end of period $ 41,920 $ 48,549 =============== ============== Supplemental information: Cash paid for taxes $ 3,280 $ 1,808 Cash paid for interest expense $ 12,137 $ 10,510
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 three months ended June 30, 1998 and 1997 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, 1997. Note B - Comprehensive Income As of January 1, 1998, the Company adopted FASB Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, (SFAS 130). This Statement established standards for the reporting and display of comprehensive income and its components in the financial statements. For the Company, comprehensive income includes net income reported on the statement of income and changes in the fair value of its available-for-sale investments reported as a component of shareholders' equity. The following table presents net income adjusted by the change in unrealized gains or losses on the available-for-sale investments as a component of comprehensive income (in thousands).
Three months ended Six months ended June 30, June 30, 1998 1997 1998 1997 ------------------ ---------------- Net income $ 2,141 $ 1,079 $ 4,071 $ 2,643 Net change in unrealized gains (losses) on available-for-sale investments 183 591 152 265 -------- -------- -------- -------- Comprehensive income $ 2,324 $ 1,670 $ 4,223 $ 2,908 ======= ======= ======= =======
Note C - Earnings per Share The Company's basic and diluted earnings per share are as follows (in thousands except per share data): Three Months Ended June30, 1998 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $2,141 4,671,523 $0.46 Common stock options outstanding -- 187,464 Diluted Earnings per Share Net income available to common shareholders $2,141 4,858,987 $0.44 ====== ========= Three Months Ended June30, 1997 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $1,079 4,649,403 $0.23 Common stock options outstanding -- 178,145 Diluted Earnings per Share Net income available to common shareholders $1,079 4,827,548 $0.22 ====== ========= Six Months Ended June30, 1998 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $4,071 4,665,311 $0.87 Common stock options outstanding -- 190,032 Diluted Earnings per Share Net income available to common shareholders $4,071 4,855,343 $0.84 ====== ========= Six Months Ended June30, 1997 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $2,643 4,645,639 $0.57 Common stock options outstanding -- 178,620 Diluted Earnings per Share Net income available to common shareholders $2,643 4,824,259 $0.55 ====== =========
Note D - Derivative Instruments and Hedging Activities In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedge item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Statement 133 is effective for fiscal years beginning after June 15, 1999 and the Company plans to adopt its provisions effective January 1, 2000. While the Company does not currently utilize any traditional derivative instruments (options, swaps, forwards, etc.) in its business, certain of its investments and long-term borrowings have embedded options due to call or put features that may be required to be accounted for differently under this Statement as compared to current accounting principles. The Company has not yet quantified the impacts of adopting Statement 133 on its consolidated financial statements, however, the Statement could increase the volatility of future earnings and other comprehensive income. 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 had record quarterly earnings of $2,141,000 for the second quarter ended June 30, 1998. The quarterly earnings represented a 98.4% increase over the $1,079,000 reported for the same period of 1997. Diluted earnings per share for the second quarter 1998 were $0.44 versus $0.22 in the year earlier period. Earnings for the six months ended June 30, 1998 were $4,071,000 versus year ago results of $2,643,000. The diluted earnings per share were $.84 and $.55 for the respective six month periods. Pretax earnings for the second quarter of 1998 were $3,393,000 versus $1,667,000 for the same period in 1997. During the quarter the Bank sold its credit card portfolio of $14,365,000 for a gain of $793,000 which is included in noninterest income. Net interest income reflected growth of 12.7% to $9,781,000. The interest income component was up $1,503,000 (10.2%) due to higher quarter-over-quarter volume of earning assets ($769,550,000 versus $707,595,000) and a 17 basis point increase in yield on average earning assets. Interest expense increased $401,000 (6.6%) which was due predominately to a $35,994,000 (5.85%) increase in interest-bearing liabilities. Average rates paid for interest-bearing liabilities increased 3 basis points over the second quarter of 1997. Net interest margin was 5.20% for the second quarter of 1998 versus 4.96% in the same quarter of the prior year. This higher net interest margin reflects the effects of the higher growth rate in earning assets versus the interest-bearing liabilities. The provision for loan losses of $1,235,000 for the second quarter of 1998 was $635,000 higher than in the same quarter of 1997 due to loan growth and an increased level of loans charged off. Noninterest income, net of the gain on sale of the credit card portfolio discussed above, increased $754,000 or 31.3% for the second quarter of 1998 over the prior year second quarter. The service charge and fee income portion increased 11.4% to $1,875,000 due to an increase in account volumes and fees on non-Bank customer ATM transactions implemented in the fourth quarter of 1997. Other income, net of the nonrecurring item, increased $563,000 or 77.8% in the second quarter of 1998 versus the same quarter in 1997. A miscellaneous income adjustment accounted for $228,000 of the increase. Gains on the sale of investments and real estate mortgage loans were up $55,236 to $105,455. Commissions on the sale of mutual funds and annuities were up $55,471 to $649,623. Noninterest expense increased $288,000 or 3.2% in the second quarter 1998 versus 1997. Salary and benefit expense increased $197,000 (4.9%) mostly due to higher commission payments to sales personnel and accruals for the management incentive program. Other expenses increased $91,000 or 1.9%. On a quarter-over-quarter basis, provisions for OREO property valuations added $303,000 to the other expenses and all other expenses were favorable by a total of $212,000. Assets of the Company totaled $873,295,000 at June 30, 1998 which was an increase of $47,130,000 (5.7%) and $76,158,000 (9.6%) from the December 31, 1997 and June 30, 1997 ending balances, respectively. Changes in earning assets from the prior year quarter end balances included an increase in loans of $30,562,000 to $491,303,000 and an increase in securities of $54,358,000 to $297,877,000. From year end 1997 balances, nonperforming assets have decreased $2,026,000 and total $5,453,000 at June 30, 1998. Nonperforming assets were 0.62% of total assets at quarter end. Year to date 1998, on an annualized basis, the Company realized a return on assets of .99% and a return on equity of 12.19% versus 0.69% and 8.57% in the first half of 1997. TriCo Bancshares ended the quarter with a Tier 1 capital ratio of 10.6% and a total risk-based capital ratio of 11.8%. The following tables provide a summary of the major elements of income and expense for the second quarter of 1998 compared with the second quarter of 1997 and for the first six months of 1998 compared with the first six months of 1997.
TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Three months ended June 30, Percentage 1998 1997 Change (in thousands, except increase earnings per share) (decrease) Interest income $ 16,504 $ 14,873 11.0% Interest expense 6,500 6,099 6.6% --------------- --------------- Net interest income 10,004 8,774 14.0% Provision for loan losses 1,235 600 105.8% --------------- --------------- Net interest income after 8,769 8,174 7.3% provision for loan losses Noninterest income 3,955 2,408 64.2% Noninterest expenses 9,108 8,820 3.3% --------------- --------------- Net income before income taxes 3,616 1,762 105.2% Income taxes 1,252 588 112.9% Tax equivalent adjustment1 223 95 134.2% --------------- --------------- Net income $ 2,141 $ 1,079 98.4% =============== =============== Diluted earnings per common share $ 0.44 $ 0.22 100.0% 1Interest on tax-free securities is reported on a tax equivalent basis of 1.51 and 1.52 for June 30, 1998 and 1997 respectively.
TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Six months ended June 30, Percentage 1998 1997 Change (in thousands, except increase earnings per share) (decrease) Interest income $ 31,895 $ 28,867 10.5% Interest expense 12,438 11,707 6.2% --------------- --------------- Net interest income 19,457 17,160 13.4% Provision for loan losses 2,060 1,200 71.7% --------------- --------------- Net interest income after 17,397 15,960 9.0% provision for loan losses Noninterest income 6,961 4,505 54.5% Noninterest expenses 17,495 16,112 8.6% --------------- --------------- Net income before income taxes 6,863 4,353 57.7% Income taxes 2,443 1,579 54.7% Tax equivalent adjustment1 349 131 167.7% --------------- --------------- Net income $ 4,071 $ 2,643 54.0% =============== =============== Diluted earnings per common share $ 0.84 $ 0.55 52.7% 1Interest on tax-free securities is reported on a tax equivalent basis of 1.51 and 1.52 for June 30, 1998 and 1997 respectively.
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 three months ended June 30, 1998, interest income increased $1,631,000 or 11.0% over the same period in 1997. The average balance of total earning assets was higher by $61,955,000 for an 8.8% increase. All categories of earning assets had higher average balances with loans up $32,295,000 (7.3%) and securities up $29,076,000 (11.1%). Interest income increased $1,242,000 as a result of higher average balances. The average yields on loans, securities and Federal Funds sold were higher by 24, 14 and 8 basis points respectively, adding $389,000 to interest income for the quarter. The overall yield on average earning assets rose 17 basis points to 8.58%. For the second quarter of 1998, interest expense increased by $401,000 (6.6%) over the year earlier period. Average balances of interest-bearing liabilities were up $35,994,000 (5.58%) which resulted in a $469,000 increase in interest expense. Average balances of long-term debt and time deposits increased $17,334,000 (51.4%) and $15,675,000 (6.3%) respectively and accounted for most of the change in interest-bearing liabilities. Rate variances on a quarter-over-quarter basis resulted in a decrease of $68,000 in interest expense for the second quarter of 1998. The combined effect of the increase in both interest income and interest expense for the second quarter of 1998 versus 1997 resulted in an increase of $1,230,000 or 14.0% in net interest income. Net interest margin was up 24 basis points to 5.20% from 4.96% for the same periods. However, net interest margin was down from the 5.22% level in the first quarter of 1998. During the second quarter of 1998 the Company borrowed $30,000,000 from the Federal Home Loan Bank and negotiated for $20,000,000 in certificates of deposits with the State of California. These funds were invested in securities at an average spread of 149 basis points. The ongoing effect of these transactions will be to increase net interest income and slightly depress the net interest margin. To the extent the Bank is successful in replacing some of the investment portfolio with higher yielding loans, the net interest margin will tend to move higher during the balance of 1998. Net interest income and net interest margin comparisons between the first six months of 1998 and 1997 are influenced by the inclusion of six months of operations in 1998 of the nine branches purchased from Wells Fargo Bank on February 21, 1997, compared to the inclusion of just over four months of such operations in 1997. The six month period ending June 30, 1998, reflects an interest income increase of $3,028,000 or 10.5% over the same period in 1997. 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 $2,711,000. The balance of the increase came from slightly higher yields on earning assets. The average rate received on all earning assets for the six month period ended June 30, 1998 was 8.54% or 6 basis points higher than the 8.49% for the same period in 1997. Interest expense for the six month period increased $731,000 (6.2%) from that for the same period in 1997. Volume increases in deposits and borrowings added $929,000 of interest expense. This was offset in part by slightly lower rates and reductions in Federal Funds purchased and short-term debt outstanding. Overall average rates paid on interest-bearing liabilities in the first six months of 1998 decreased 4 basis points to 3.92% from the same period in 1997. The combined effect of the increase in both interest income and interest expense for the first six months of 1998 versus 1997 resulted in an increase of $2,297,000 or 13.4% in net interest income. Net interest margin rose 17 basis points to 5.21 from 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 six month periods ended June 30, 1998 versus the same periods in 1997.
TRICO BANCSHARES ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS (in thousands) Three Months Ended 6/30/98 6/30/97 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning assets Loans 2,3 $ 473,108 $ 11,922 10.08% $ 440,813 $ 10,840 9.84% Securities4 292,051 4,520 6.19% 262,975 3,980 6.05% Federal funds sold 4,391 62 5.65% 3,807 53 5.57% ------------- ------------ -------------- ----------- Total earning assets 769,550 16,504 8.58% 707,595 14,873 8.41% ------------ ----------- Cash and due from bank 30,960 38,664 Premises and equipment 17,877 16,440 Other assets,net 33,501 35,172 Less: allowance for loan losses (7,023) (6,030) ------------- -------------- Total $ 844,865 $ 791,841 ============= ============== Liabilities and shareholders' equity Interest-bearing Demand deposits $ 133,156 755 2.27% $ 123,443 695 2.25% Savings deposits 207,106 1,589 3.07% 213,186 1,630 3.06% Time deposits 266,663 3,523 5.28% 250,988 3,356 5.35% Federal funds purchased 4,543 64 5.64% 6,587 92 5.59% Short-term debt 11,224 159 5.67% 9,828 156 6.35% Long-term debt 28,782 410 5.70% 11,448 170 5.94% ------------- ------------ -------------- ----------- Total interest-bearing liabilities 651,474 6,500 3.99% 615,480 6,099 3.96% ------------ ----------- Noninterest-bearing deposits 114,117 104,508 Other liabilities 11,885 10,268 Shareholders' equity 67,389 61,585 ------------- -------------- Total liabilities and shareholders' equity $ 844,865 $ 791,841 ============= ============== Net interest rate spread5 4.59% 4.44% Net interest income/net $ 10,004 $ 8,774 ============ =========== interest margin6 5.20% 4.96% ============ =========== 1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $ 802,000 in 1998 and $448,000 in 1997. 4Interest income is stated on a tax equivalent basis of 1.51 and 1.52 at June 30, 1998 and 1997 respectively. 5Net interest rate spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. 6Net 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) Six Months Ended 6/30/98 6/30/97 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning assets Loans 2,3 $ 463,320 $ 23,243 10.03% $ 436,332 $ 21,571 9.89% Securities4 279,615 8,524 6.10% 233,799 7,028 6.01% Federal funds sold 4,424 128 5.79% 10,013 268 5.35% -------------- ------------- ------------- ------------ Total earning assets 747,359 31,895 8.54% 680,144 28,867 8.49% ------------- ------------ Cash and due from bank 31,815 39,816 Premises and equipment 18,431 15,978 Other assets,net 33,960 32,142 Less: allowance for loan losses (6,822) (6,024) -------------- ------------- Total $ 824,743 $ 762,056 ============== ============= Liabilities and shareholders' equity Interest-bearing Demand deposits $ 133,383 1,503 2.25% $ 115,114 1,299 2.26% Savings deposits 212,145 3,237 3.05% 205,040 3,123 3.05% Time deposits 259,233 6,839 5.28% 244,146 6,468 5.30% Federal funds purchased 2,389 68 5.69% 4,731 131 5.54% Short-term debt 7,473 212 5.67% 9,828 312 6.35% Long-term debt 20,110 579 5.76% 12,759 374 5.86% -------------- ------------- ------------- ------------ Total interest-bearing liabilities 634,733 12,438 3.92% 591,618 11,707 3.96% ------------- ------------ Noninterest-bearing deposits 111,849 98,765 Other liabilities 11,365 9,970 Shareholders' equity 66,796 61,703 -------------- ------------- Total liabilities and shareholders' equity $ 824,743 $ 762,056 ============== ============= Net interest rate spread5 4.62% 4.53% Net interest income/net $ 19,457 $ 17,160 ============= ============ interest margin6 5.21% 5.05% ============= ============ 1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $ 1,429,000 in 1998 and $1,024,000 in 1997. 4Interest income is stated on a tax equivalent basis of 1.51 and 1.52 at June 30, 1998 and 1997 respectively. 5Net interest rate spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. 6Net 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 June 30, 1998 over 1997 Yield/ Volume Rate4 Total -------------- -------- --------- Increase (decrease) in interest income: Loans 1,2 $ 794 $ 288 $ 1,082 Investment securities3 440 100 540 Federal funds sold 8 1 9 -------------- -------- --------- Total 1,242 389 1,631 -------------- -------- --------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 55 5 60 Savings deposits (46) 5 (41) Time deposits 210 (43) 167 Federal funds purchased (29) 1 (28) Short-term debt 22 (19) 3 Long-term debt 257 (17) 240 -------------- -------- --------- Total 469 (68) 401 -------------- -------- --------- Increase (decrease) in net interest income $ 773 $ 457 $ 1,230 ============== ======== ========= 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $ 802,000 in 1998 and $448,000 in 1997. 3Interest income is stated on a tax equivalent basis of 1.51 and 1.52 for June 30, 1998 and 1997 respectively. 4The 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 six months ended June 30, 1998 over 1997 Yield/ Volume Rate4 Total -------- -------- -------- Increase (decrease) in interest income: Loans 1,2 $ 1,334 $ 338 $ 1,672 Investment securities3 1,377 119 1,496 Federal funds sold (150) 10 (140) -------- -------- -------- Total 2,561 467 3,028 -------- -------- -------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 206 (2) 204 Savings deposits 108 6 114 Time deposits 400 (29) 371 Federal funds purchased (65) 2 (63) Short-term debt (75) (25) (100) Long-term debt 215 (10) 205 -------- -------- -------- Total 789 (58) 731 -------- -------- -------- Increase (decrease) in net interest income $ 1,772 $ 525 $ 2,297 ======== ======== ======== 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $ 1,429,000 in 1998 and $1,024,000 in 1997. 3Interest income is stated on a tax equivalent basis of 1.51 and 1.52 for June 30, 1998 and 1997 respectively. 4The rate/volume variance has been included in the rate variance. Provision for Loan Losses The Bank provided $1,235,000 for loan losses in the second quarter of 1998 versus $600,000 in 1997. Net charge-offs for all loans in the second quarter of 1998 totaled $881,000 versus $233,000 in the year earlier period. Two loans accounted for $728,000 of the charge-offs in the quarter. Additional provision required to cover loan growth from the first quarter of 1998 amounted to $336,000. As reported in the Form 10-Q for the first quarter of 1998, the Bank sold its credit card portfolio effective May 1, 1998, and is no longer liable for charge offs in that portfolio. For all of 1997, net credit card charge offs totaled $958,000 representing 36.3% of the total net charge offs for the year. For the six months ended June 30, 1998, net credit card charge-offs totaled $316,000 (through the sale date of May 1, 1998) representing 22.9% of total net charge offs of $1,381,000. Management anticipates the level of the monthly provision for loan losses for the remainder of 1998 should decrease as a result of the sale of the credit card portfolio and the current performance of the loan portfolio. Noninterest Income The Bank sold its credit card portfolio of $14,365,000 for a gain of $793,000 in the second quarter of 1998. Noninterest income for the second quarter of 1998, net of the gain on the sale of the credit card portfolio, increased $754,000 or 31.3% from the same period in 1997. Income from service charges and fees increased 11.4% to $1,875,000 due to an increase in account volumes and fees on non-Bank customer ATM transactions implemented in the fourth quarter of 1997. Other income, net of the gain on the sale of the credit card portfolio, increased $563,000 or 77.8% in the second quarter of 1998 versus the same quarter in 1997. A miscellaneous income adjustment accounted for $228,000 of the increase. Gains on the sale of investments and real estate mortgage loans were up $55,000 to $105,000. Commissions on the sale of mutual funds and annuities were up $55,000 to $650,000. For the six months ended June 30, 1998, excluding the gain on the sale of the credit card portfolio, noninterest income was up $1,663,000 or 36.9% over the same period for 1997. Part of the increase is attributable to full first quarter 1998 operations of the nine branches purchased from Wells Fargo Bank versus only five weeks of operations for those branches in 1997. Service charges and fee income was up $582,000 (18.3%) as a result of increased volume of accounts and the ATM fees described in the previous paragraph. Other income, exclusive of the credit card gain, increased $1,081,000 (81.3%). Significant increases in the following items contributed to the overall increase: commissions on mutual fund and annuity sales $121,000, gain on sale of investments $117,000, gain on sale of mortgage loans $254,000 and nonrecurring miscellaneous income items $449,000. 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 $288,000 or 3.2% in the second quarter 1998 versus 1997. Salary and benefit expense increased $197,000 (4.9%) mostly due to higher commission payments to sales personnel and accruals for the management incentive program. Other expenses increased $91,000 or 1.9%. On a quarter-over-quarter basis, provisions for OREO property valuations added $303,000 to the other expenses and all other expenses were favorable by a total of $212,000. For the six month period noninterest expenses increased $1,383,000 (8.6%) in 1998 over 1997. Part of the increase is attributable to full first quarter 1998 operations of the nine branches purchased from Wells Fargo Bank versus only five weeks of operations for those branches in 1997. One time direct costs related to the conversion of the nine Wells branches totaled $358,000 in first six months of 1997. Salary and benefit expense increased $808,000 or 10.6% on a year-over-year basis. The salary expense was higher due to first quarter effect of increased staff from the 1997 Wells branch acquisition, higher benefit costs, commissions paid to sales staff and normal salary progression. Occupancy costs increased $134,000 mostly due to higher depreciation relating to equipment for the acquired branches, leases for five of the acquired branches and upgraded technology. Other expenses such as computer communications, telephone, ATM charges, courier service and postage were higher as a result of the branch acquisition. Amortization of intangible assets related to the acquired branches added $98,000 of expense in the first six months of 1998. Provisions for OREO property valuations increased $290,000 for the six months. Provision for Income Taxes The effective tax rate for the six months ended June 30, 1998 is 37.5% and reflects a slight increase from 37.4% in the year earlier period. The tax rate is lower than the statutory rate of 40.4% due to nontaxable earnings from municipal bonds. The Bank has been increasing its holdings of tax-exempt municipal bonds so the tax rate should continue to be lower than the statutory rate. Securities At June 30, 1998, securities held-to-maturity had a cost basis of $82,926,000 and an approximate fair value of $82,856,000. This portfolio contained mortgage-backed securities totaling $60,506,000 of which $23,751,000 were collateralized mortgage obligations (CMOs). The securities available-for-sale portfolio had a fair value of $214,951,000 and an amortized cost of $214,342,000. This portfolio contained mortgage-backed securities with an amortized cost of $78,876,000 of which $17,379,000 were CMOs. At December 31, 1997, securities held-to-maturity had a cost basis of $90,764,000 and an approximate fair value of $88,950,000. This portfolio contained mortgage-backed securities totaling $68,429,000 of which $27,821,000 were CMOs. The securities available-for-sale portfolio had a fair value of $175,753,000 and an amortized cost of $175,282,000. This portfolio contained mortgage-backed securities with an amortized cost of $36,556,000 of which $19,677,000 were CMOs. Loans At June 30, 1998, loan balances were $30,562,000 or 6.6% higher than the ending balances at June 30, 1997 and $42,336,000 or 9.4% higher than the ending balances at December 31, 1997. The Bank sold its credit card portfolio totaling $14,365,000 in the second quarter of 1998. Had these loans been included at quarter end, loan growth on a year over year basis would have been 9.8%. On a year over year basis at June 30, commercial and real estate loan balances were higher while there was a decrease in consumer loans due to the sale of the credit cards. Real estate construction loans were relatively flat. Nonperforming Loans As shown in the following table, total nonperforming assets have decreased 27.1% to $5,453,000 in the first six months of 1998. Nonperforming assets represent only 0.62% of total assets. Both nonaccrual loans and OREO decreased during this period. All nonaccrual loans are considered to be impaired when determining the valuation allowance under SFAS 114. The Collections Department personnel continue to make a concerted effort to work problem and potential problem loans to reduce risk of loss. June 30, December 31, 1998 1997 Nonaccrual loans $ 3,687 $ 4,721 Accruing loans past due 90 days or more 302 528 Restructured loans (in compliance with modified terms) 0 0 ------------- ------------- Total nonperforming loans 3,989 5,249 Other real estate owned 1,464 2,230 ------------- ------------- Total nonperforming assets $ 5,453 $ 7,479 ============= ============= Nonincome producing investments in real estate held by Bank's real estate development subsidiary $ 449 $ 856 ============= ============= Nonperforming loans to total loans 0.81% 1.17% Allowance for loan losses to nonperforming loans 179% 123% Nonperforming assets to total assets 0.62% 0.91% Allowance for loan losses to nonperforming assets 131% 86% 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. June 30, June 30, 1998 1997 (in thousands) Balance, Beginning of period $ 6,459 $ 6,097 Provision charged to operations 2,060 1,200 Loans charged off (1,602) (1,167) Recoveries of loans previously charged off 221 103 ---------- ------------ Balance, end of period $ 7,138 $ 6,233 ========== ============ Ending loan portfolio $ 491,303 $ 460,741 ========== ============ Allowance for loan losses as a percentage of ending loan portfolio 1.45% 1.35% ========== ============ 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 June 30, 1998: Total Capital to Risk Weighted Assets $66,689 11.82% =>$45,137 =>8.0% =>$56,421 =>10.0% Tier I Capital to Risk Weighted Assets $59,636 10.57% =>$22,568 =>4.0% =>$33,852 => 6.0% Tier I Capital to Average Assets $59,636 7.13% =>$22,568 =>4.0% =>$28,210 => 5.0%
Item 3. MARKET RISK MANAGEMENT There have not been any significant changes in the risk management profile of the Bank since December 31, 1997. PART II Other Information (a) Item 4. Submission of Matters to a Vote of Security Holders (a.) Annual Meeting held May 19, 1998. Number of shares represented in person or by proxy and constituting a quorum. 3,599,622 77% (c.) Election of directors VOTES FOR --------- Everett B. Beich 3.572,670 --------- William J. Casey 3,573,360 --------- Craig S. Compton 3,574,160 --------- Douglas F. Hignell 3,574,148 --------- Brian D. Leidig 3,570,563 --------- Wendell J. Lundberg 3,572,170 --------- Donald E. Murphy 3,574,274 --------- Rodney W. Peterson 3,569,433 --------- Robert H. Steveson 3,571,040 --------- Carroll Taresh 3,569,433 --------- Alex A. Vereschagin, Jr. 3,573,774 --------- Ratify the appointment of Arthur Andersen LLP as independent public accountants of the Company for 1997. Votes: FOR 3,571,748, AGAINST 8,591 , ABSTAIN 19,282 (b) 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. 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 August 11, 1998 /s/ Robert H. Steveson ------------------------------- ----------------------- Robert H. Steveson President and Chief Executive Officer Date August 11, 1998 /s/ Robert M. Stanberry ------------------------------- ----------------------- Robert M. Stanberry Vice President and Chief Financial Officer EX-27 2 EX-27
9 0000356171 TRICO BANCSHARES 1,000 6-MOS DEC-31-1998 DEC-31-1997 JUN-30-1998 39,420 0 2,500 0 214,951 82,926 82,856 491,303 7,138 873,295 725,478 32,600 10,756 36,432 0 0 48,341 19,688 873,295 23,243 8,175 128 31,546 11,579 12,438 19,108 2,060 137 17,495 6,514 5,721 793 0 4,071 $0.87 $0.84 8.58 3,687 302 0 0 6,459 1,602 221 7,138 7,138 0 0
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