-----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, Iutq8W9hRqHH/Q1zdFGC9ziJgGrVGEvSGUR9uPt9Vxar5hvDKvsddDlCIqFIpJOB U0tyC0UNIeeLudo8LhSIWA== /in/edgar/work/20000728/0000356171-00-000005/0000356171-00-000005.txt : 20000921 0000356171-00-000005.hdr.sgml : 20000921 ACCESSION NUMBER: 0000356171-00-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRICO BANCSHARES / CENTRAL INDEX KEY: 0000356171 STANDARD INDUSTRIAL CLASSIFICATION: [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: 680881 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 0001.txt 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, 2000 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 July 25, 2000: 7,200,251
TRICO BANCSHARES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) June 30, December 31, ------------------ ------------------ 2000 1999 Assets: Cash and due from banks $ 56,778 $ 51,236 Federal funds sold and repurchase agreements 1,000 8,400 ------------------ ------------------ Cash and cash equivalents 57,778 59,636 Interest-bearing deposits in banks 800 800 Securities available-for-sale 217,287 231,708 Loans, net of allowance for loan losses of $12,592 and $11,037, respectively 626,978 576,942 Premises and equipment, net 17,136 16,043 Other real estate owned 1,040 760 Accrued interest receivable 6,599 6,076 Other assets 33,449 32,831 ------------------ ------------------ Total assets $ 961,067 $ 924,796 ================== ================== Liabilities: Deposits: Noninterest-bearing demand $ 153,903 $ 155,937 Interest-bearing demand 147,202 143,923 Savings 212,274 222,615 Time certificates 274,188 271,635 ------------------ ------------------ Total deposits 787,567 794,110 Federal funds purchased 17,000 - Repurchase agreements 4,900 - Accrued interest payable and other liabilities 13,004 12,058 Long term borrowings 60,494 45,505 ------------------ ------------------ Total liabilities 882,965 851,673 Shareholders' equity: Common stock 50,554 50,043 Retained earnings 32,798 28,613 Accumulated other comprehensive loss (5,250) (5,533) ------------------ ------------------ Total shareholders' equity 78,102 73,123 ------------------ ------------------ Total liabilities and shareholders' equity $ 961,067 $ 924,796 ================== ==================
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, -------------------- ------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Interest income: Interest and fees on loans $ 15,385 $ 12,889 $ 29,448 $ 25,273 Interest on investment securities-taxable 2,957 3,108 6,026 6,513 Interest on investment securities-tax exempt 556 562 1,114 1,110 Interest on federal funds sold 50 35 243 43 Interest on deposits in banks 12 - 23 - ----------- ----------- ---------- ---------- Total interest income 18,960 16,594 36,854 32,939 ----------- ----------- ---------- ---------- Interest expense: Interest on deposits 5,933 5,066 11,702 10,175 Interest on federal funds purchased 208 94 217 295 Interest on repurchase agreements 84 21 85 28 Interest on other borrowings 685 672 1,314 1,193 ----------- ----------- ---------- ---------- Total interest expense 6,910 5,853 13,318 11,691 ----------- ----------- ---------- ---------- Net interest income 12,050 10,741 23,536 21,248 Provision for loan losses 900 870 1,700 1,710 ----------- ----------- ---------- ---------- Net interest income after provision for loan losses 11,150 9,871 21,836 19,538 Noninterest income: Service charges and fees 1,886 1,780 3,693 3,487 Other income 1,354 1,588 4,173 2,843 ----------- ----------- ---------- ---------- Total noninterest income 3,240 3,368 7,866 6,330 ----------- ----------- ---------- ---------- Noninterest expenses: Salaries and related expenses 4,948 4,480 9,782 8,913 Other, net 4,502 4,407 8,692 8,460 ----------- ----------- ---------- ---------- Total noninterest expenses 9,450 8,887 18,474 17,373 ----------- ----------- ---------- ---------- Net income before income taxes 4,940 4,352 11,228 8,495 Income taxes 1,796 1,601 4,156 3,110 ----------- ----------- ---------- ---------- Net income 3,144 2,751 7,072 5,385 =========== =========== ========== ========== Basic earnings per common share $ 0.44 $ 0.39 $ 0.99 $ 0.76 =========== =========== ========== ========== Diluted earnings per common share $ 0.43 $ 0.38 $ 0.96 $ 0.74 =========== =========== ========== ==========
TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) (in thousands, except number of shares) Common stock Accumulated Other Number Retained Comprehensive Comprehensive of shares Amount earnings Loss Total Income ----------- ---------- ---------- -------------- --------- --------------- Balance, December 31, 1999 7,152,329 $50,043 $28,613 ($5,533) $73,123 Exercise of Common Stock options, net of tax 57,650 510 510 Repurchase of Common Stock (9,728) (68) (86) (154) Common stock cash dividends (2,801) (2,801) Stock option amortization 69 69 Comprehensive income: Net income 7,072 7,072 $7,072 Other comprehensive income: Change in unrealized loss on securities, net of tax 283 -------------- Other comprehensive income 283 283 283 -------------- Comprehensive income 7,355 ----------- --------- --------- ---------- --------- -------------- Balance, June 30, 2000 7,200,251 $50,554 $32,798 ($5,250) $78,102 =========== ========= ========= ========== =========
TRICO BANCSHARES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the six months ended June 30, 2000 1999 Operating activities: Net income $ 7,072 $ 5,385 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 1,700 1,710 Provision for losses on other real estate owned 10 10 Depreciation and amortization 1,256 1,309 Amortization of intangible assets 482 568 Accretion and amortization of investment securities discounts and premiums, net 141 345 Deferred income taxes (173) (106) Investment security (gains) losses, net - (24) Gain on sale of OREO (50) (170) Gain on sale of loans (179) (553) (Gain) loss on sale of fixed assets 44 (7) Amortization of stock options 69 82 Decrease (increase) in interest receivable (523) 155 Increase (decrease) in interest payable 454 (379) Decrease in other assets and liabilities (474) (1,532) -------------- -------------- Net cash provided by operating activities 9,829 6,793 Investing activities: Proceeds from maturities of securities available-for-sale 23,596 48,956 Proceeds from sales of securities available-for-sale - 14,137 Purchases of securities available-for-sale (8,955) (28,083) Proceeds from sale of fixed asset 30 28 Net increase in loans (52,101) (32,627) Purchases of premises and equipment (2,253) (1,228) Proceeds from sale of OREO 304 952 -------------- -------------- Net cash provided (used) by investing activities (39,379) 2,135 Financing activities: Net decrease in deposits (6,543) (23,078) Net increase (decrease) in Fed funds purchased 17,000 (10,400) Net increase in repurchase agreements 4,900 - Borrowings under long-term debt agreements 35,000 21,000 Payments of principal on long-term debt agreements (20,011) (3,409) Repurchase of common stock (154) (49) Cash dividends - Common (2,801) (2,280) Exercise of common stock options 301 403 -------------- -------------- Net cash provided (used) by financing activities 27,692 (17,813) -------------- -------------- (Decrease) in cash and cash equivalents (1,858) (8,885) Cash and cash equivalents at beginning of period 59,636 50,483 -------------- -------------- Cash and cash equivalents at end of period $ 57,778 $ 41,598 ============== ============== Supplemental information Cash paid for taxes $ 3,961 $ 3,680 Cash paid for interest expense $ 12,864 $ 12,070
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 six months ended June 30, 2000 and 1999 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, 1999. Note B - Comprehensive Income 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 other comprehensive income. 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, 2000 1999 2000 1999 Net income $ 3,144 $ 2,751 $ 7,072 $ 5,385 Net change in unrealized gains (losses)on securities available-for-sale 815 (3,598) 283 (4,375) ------- ------- ------- ------- Comprehensive income (loss) $ 3,959 $ (847) $ 7,355 $ 1,010 ======= ======== ======= ======= 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 June 30, 2000 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $3,144 7,188,003 $0.44 Common stock options outstanding -- 152,309 Diluted Earnings per Share Net income available to common shareholders $3,144 7,340,312 $0.43 ====== ========= Three Months Ended June 30, 1999 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $2,751 7,124,366 $0.39 Common stock options outstanding -- 187,514 Diluted Earnings per Share Net income available to common shareholders $2,751 7,311,880 $0.38 ====== ========= Six Months Ended June 30, 2000 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $7,072 7,179,853 $0.99 Common stock options outstanding -- 159,388 Diluted Earnings per Share Net income available to common shareholders $7,072 7,339,241 $0.96 ====== ========= Six Months Ended June 30, 1999 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $5,385 7,115,024 $0.76 Common stock options outstanding -- 189,689 Diluted Earnings per Share Net income available to common shareholders $5,385 7,304,713 $0.74 ====== ========= Note D - Business Segments The Company is principally engaged in traditional community banking activities provided through its twenty-nine branches and eight in-store branches located throughout Northern California. Community banking activities include the Bank's commercial and retail lending, deposit gathering and investment and liquidity management activities. In addition to its community banking services, the Bank offers investment brokerage and leasing services. The Company held investments in real estate through its wholly-owned subsidiary, TCB Real Estate. During 1998, TCB Real Estate divested all investment properties, and in April 1999, TCB Real Estate was dissolved. These activities were monitored and reported by Bank management as separate operating segments. As permitted under the Statement, the results of the separate branches have been aggregated into a single reportable segment, Community Banking. The Company's leasing, investment brokerage and real estate segments do not meet the prescribed aggregation or materiality criteria and therefore are reported as "Other" in the following table. Summarized financial information concerning the Bank's reportable segments is as follows (in thousands): Community Banking Other Total Three Months Ended June 30, 2000 Net interest income $ 11,825 $ 225 $ 12,050 Noninterest income 2,404 836 3,240 Noninterest expense 8,904 546 9,450 Net income 2,858 286 3,144 Assets $ 947,383 $13,684 $ 961,067 Three Months Ended June 30, 1999 Net interest income $ 10,667 $ 74 $ 10,741 Noninterest income 2,708 660 3,368 Noninterest expense 8,523 364 8,887 Net income 2,524 227 2,751 Assets $ 883,374 $ 5,051 $ 888,425 Six Months Ended June 30, 2000 Net interest income $ 23,131 $ 405 $ 23,536 Noninterest income 6,330 1,536 7,866 Noninterest expense 17,503 971 18,474 Net income 6,536 536 7,072 Assets $ 947,383 $13,684 $ 961,067 Six Months Ended June 30, 1999 Net interest income $ 21,157 $ 91 $ 21,248 Noninterest income 5,060 1,270 6,330 Noninterest expense 16,707 666 17,373 Net income 4,954 431 5,385 Assets $ 883,374 $ 5,051 $ 888,425 Note E - Other Income Included in the results for the three months ended March 31, 2000 was a one-time pre-tax income item of $1,510,000. This one-time item represents the initial value of 88,796 common shares of John Hancock Financial Services, Inc. (JHF) which the Bank received as a consequence of its ownership of certain insurance policies through John Hancock Mutual Life Insurance Company and John Hancock's conversion from a mutual company to a stock company. Note F - Stock Repurchase Plan On July 20, 2000, the Company announced that its Board of Directors approved a plan to repurchase, as conditions warrant, up to 150,000 shares of the company's stock on the open market or in privately negotiated transactions. The timing of purchases and the exact number of shares to be purchased will depend on market conditions. The repurchase plan represents approximately 2.1% of the Company's currently outstanding common stock and is open-ended. 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 quarterly earnings of $3,144,000 for the quarter ended June 30, 2000. The quarterly earnings represented a 14.3% increase over the $2,751,000 reported for the same period of 1999. Diluted earnings per share for the second quarter of 2000 were $0.43 versus $0.38 in the year earlier period. Earnings for the six months ended June 30, 2000 were $7,072,000 versus year ago results of $5,385,000, and represented a 31.3% increase. The diluted earnings per share were $0.96 and $0.74 for the respective six-month periods. Included in the results for the six months ended June 30, 2000 was a one-time pre-tax income item of $1,510,000. This one-time item represents the initial value of 88,796 common shares of John Hancock Financial Services, Inc. (JHF) which the Bank received in the first quarter of 2000 as a consequence of its ownership of certain insurance policies through John Hancock Mutual Life Insurance Company and John Hancock's conversion from a mutual company to a stock company. Excluding the receipt of the JHF shares, net income for the six months ended June 30, 2000 would have been $6,183,000 and diluted earnings per share would have been $0.84, which would have represented 14.8% and 13.5% increases over the same period in the prior year, respectively. Factors contributing to the improved operating results included continued loan growth, and an increase in net interest margin. Pretax earnings for the second quarter of 2000 were $4,940,000 versus $4,352,000 for the same period in 1999. Net interest income reflected growth of $1,309,000 (12.2%) to $12,050,000. The interest income component was up $2,366,000 (14.3%) to $18,960,000 due to higher quarter-over-quarter volume of earning assets ($843,675,000 versus $807,687,000) and a 76 basis point increase in yield on average earning assets. Interest expense increased $1,057,000 (18.1%) to $6,910,000 as a result of higher quarter-over-quarter volume of paying liabilities ($698,786,000 versus $668,647,000) and a 46 basis point increase in the average rate paid on interest bearing liabilities. Net interest margin was 5.85% for the second quarter of 2000 versus 5.46% in the same quarter of the prior year. The provision for loan losses of $900,000 for the second quarter of 2000 was $30,000 higher than the $870,000 recorded in the same quarter of 1999. Noninterest income for the second quarter of 2000 decreased $128,000 (3.8%) to $3,240,000 from $3,368,000 during the same period in 1999. Income from service charges and fees increased $106,000 (6.0%) to $1,886,000, primarily due to increased ATM fees. Other income decreased $234,000 (14.7%) to $1,354,000 in the second quarter of 2000 versus the same quarter in 1999. Accounting for the decrease in other income was a $135,000 decrease in gain on sale of other real estate owned from $156,000 to $21,000, a $91,000 decrease in gain on sale of loans from $195,000 to $104,000, and a recovery of $124,000 made in the second quarter of 1999 that was related to the Bank's credit card portfolio which was sold in May of 1998. These decreases in other income were partially offset by an increase in commissions on the sale of insurance, mutual funds and annuities, which were up $139,000 (20.9%) to $804,000 for the quarter ended June 30, 2000. Excluding the effect of the gain on sale of other real estate owned and the credit card related recovery made in the second quarter of 1999, noninterest income would have increased 4.2% in the second quarter of 2000 versus the same period in 1999. Noninterest expense increased $563,000 (6.3%) in the second quarter 2000 versus 1999. Salary and benefit expense increased $468,000 (10.5%) on a quarter over quarter basis to $4,948,000. The salary expense was higher due to a 2.9% increase in average full-time equivalent employees to 390, higher commissions and other incentives that are tied to the increased profitability of the Company, and annual salary increases. Other noninterest expenses increased $95,000 (2.2%) to $4,502,000 in the second quarter of 2000. Assets of the Company totaled $961,067,000 at June 30, 2000 and represented increases of $36,271,000 (3.9%) and $72,642,000 (8.2%) from December 31, 1999 and June 30, 1999 ending balances, respectively. Changes in earning assets from the prior year quarter end balances included an increase in loans of $74,928,000 (13.3%) to $639,570,000 and a decrease in securities of $20,148,000 (8.5%) to $217,287,000. From year-end 1999 balances, nonperforming assets have increased $2,936,000 and total $6,377,000 at June 30, 2000. Nonperforming assets were 0.66% of total assets at quarter end. Year to date 2000, on an annualized basis, the Company realized a return on assets of 1.54% and a return on equity of 18.78% versus 1.21% and 14.68% in the first half of 1999. Excluding the one-time income event that occurred in the first quarter of 2000, the Company would have had an annualized return on assets of 1.35% and a return on equity of 16.42%. TriCo Bancshares ended the quarter with a Tier 1 capital ratio of 10.7% and a total risk-based capital ratio of 11.9%. The following tables provide a summary of the major elements of income and expense for the second quarter of 2000 compared with the second quarter of 1999 and for the first six months of 2000 compared with the first six months of 1999.
TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Three months ended June 30, Percentage 2000 1999 Change increase (decrease) Interest income $ 19,241 $ 16,886 13.9% Interest expense 6,910 5,853 18.1% -------------- -------------- Net interest income 12,331 11,033 11.8% Provision for loan losses 900 870 3.4% -------------- -------------- Net interest income after 11,431 10,163 12.5% provision for loan losses Noninterest income 3,240 3,368 -3.8% Noninterest expenses 9,450 8,887 6.3% -------------- -------------- Net income before income taxes 5,221 4,644 12.4% Income taxes 1,796 1,601 12.2% Tax equivalent adjustment1 281 292 -3.8% -------------- -------------- Net income $ 3,144 $ 2,751 14.3% ============== ============== Diluted earnings per common share $ 0.43 $ 0.38 13.2% 1Interest on tax-free securities is reported on a tax equivalent basis of 1.52 for June 30, 2000 and 1999.
TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Six months ended June 30, Percentage 2000 1999 Change increase (decrease) Interest income $ 37,422 $ 33,516 11.7% Interest expense 13,318 11,691 13.9% -------------- -------------- Net interest income 24,104 21,825 10.4% Provision for loan losses 1,700 1,710 (0.6%) -------------- -------------- Net interest income after 22,404 20,115 11.4% provision for loan losses Noninterest income 7,866 6,330 24.3% Noninterest expenses 18,474 17,373 6.3% -------------- -------------- Net income before income taxes 11,796 9,072 30.0% Income taxes 4,156 3,110 33.6% Tax equivalent adjustment1 568 577 -1.6% -------------- -------------- Net income $ 7,072 $ 5,385 31.3% ============== ============== Diluted earnings per common share $ 0.96 $ 0.74 29.7% 1Interest on tax-free securities is reported on a tax equivalent basis of 1.52 for June 30, 2000 and 1999.
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, 2000, interest income increased $2,355,000 (14.0%) over the same period in 1999. The average balance of total earning assets was higher by $35,988,000 (4.5%). Average loan balances were up $67,614,000 (12.2%) while average security balances were down $32,697,000 (13.0%). The average yield on loans, securities and Fed funds sold were higher by 60, 63 and 146 basis points respectively. The overall yield on average earning assets increased 76 basis points to 9.12%. For the second quarter of 2000, interest expense increased $1,057,000 (18.1%) over the year earlier period. Average balances of interest-bearing liabilities were up $30,139,000 (4.5%). The average rate paid on time deposits and all borrowings increased 87 and 67 basis points, respectively, and accounted for $583,000 and $118,000 of the increase in interest expense, respectively. The average rate paid on interest bearing liabilities increased 46 basis points to 3.96%. The combined effect of the increases in interest income and interest expense for the second quarter of 2000 versus 1999 resulted in an increase of $1,298,000 (11.8%) in net interest income. Net interest margin was up 39 basis points to 5.85% from 5.46% for the same periods in 2000 and 1999. The six-month period ending June 30, 2000, reflects an interest income increase of $3,906,000 (11.7%) over the same period in 1999. An increase of $60,056,000 (11.1%) in average balances on loans accounted for a $2,792,000 increase in interest income. The average yield received on all earning assets for the six-month period ended June 30, 2000 was up 66 basis points to 8.96%, and contributed $2,193,000 to the increase in interest income. Interest expense for the six-month period increased $1,627,000 (13.9%) from that for the same period in 1999. Rate increases in deposits and borrowings added $1,097,000 to interest expense. The combined effect of the increase in interest income and increase in interest expense for the first six months of 2000 versus 1999 resulted in an increase of $2,279,000 (10.4%) in net interest income. Net interest margin rose 37 basis points to 5.77% from 5.40%. 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, 2000 versus the same periods in 1999.
TRICO BANCSHARES ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS (in thousands) Three Months Ended June 30, 2000 June 30, 1999 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning Assets Loan 2,3 $620,643 $ 15,385 9.92% $553,029 $ 12,889 9.32% Securities 219,017 3,794 6.93% 251,714 $ 3,962 6.30% Federal funds sold 3,215 50 6.22% 2,944 35 4.76% Deposits in banks 800 12 6.00% - - ------------- ------------ ----------- ------------- ------------- ----------- Total earning assets 843,675 19,241 9.12% 807,687 16,886 8.36% ------------ ------------- Cash and due from bank 37,092 35,110 Premises and equipment 16,131 16,323 Other assets,net 42,507 33,957 Less: allowance for loan losses (12,056) (9,223) ------------- ------------- Total $927,349 $883,854 ============= ============= Liabilities and shareholders' equity Interest-bearing Demand deposits $148,609 584 1.57% $143,329 561 1.57% Savings deposits 215,533 1,640 3.04% 222,717 1,681 3.02% Time deposits 269,765 3,709 5.50% 243,713 2,824 4.63% Fed funds purchased 12,556 208 6.63% 7,538 94 4.99% Repurchase agreements 5,179 84 6.49% 1,701 21 4.94% Long-term debt 47,144 685 5.81% 49,649 672 5.41% ------------- ------------ ----------- ------------- ------------- ----------- Total interest-bearing liabilities 698,786 6,910 3.96% 668,647 5,853 3.50% ------------ ------------- Noninterest-bearing deposits 138,409 129,864 Other liabilities 13,410 11,942 Shareholders' equity 76,744 73,401 ------------- ------------- Total liabilities and shareholders' equity $927,349 $883,854 ============= ============= Net interest rate spread5 5.16% 4.86% Net interest income/net $ 12,331 $ 11,033 ============ ============= interest margin6 5.85% 5.46% ============ ============= 1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $715,000 in 2000 and $751,000 in 1999. 4Interest income is stated on a tax equivalent basis of 1.52 at June 30, 2000 and 1999. 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 June 30, 2000 June 30, 1999 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning Assets Loan 2,3 $ 603,651 $29,448 9.76% $ 543,595 $25,273 9.30% Securities 222,446 7,708 6.93% 262,671 8,200 6.24% Federal funds sold 8,439 243 5.76% 1,839 43 4.68% Deposits in banks 800 23 5.75% - - ------------- ------------ ----------- ------------- ------------- ----------- Total earning assets 835,336 37,422 8.96% 808,105 33,516 8.30% ------------ ------------- Cash and due from bank 36,827 35,351 Premises and equipment 16,078 16,215 Other assets,net 41,717 34,629 Less: allowance for loan losses (11,730) (8,847) ------------- ------------- Total $ 918,228 $ 885,453 ============= ============= Liabilities and shareholders' equity Interest-bearing Demand deposits $ 147,924 1,162 1.57% $ 144,318 1,125 1.56% Savings deposits 219,719 3,335 3.04% 223,609 3,360 3.01% Time deposits 269,272 7,205 5.35% 244,209 5,690 4.66% Fed funds purchased 6,570 217 6.61% 11,909 295 4.95% Repurchase agreements 2,629 85 6.47% 1,128 28 4.96% Long-term debt 46,323 1,314 5.67% 43,705 1,193 5.46% ------------- ------------ ----------- ------------- ------------- ----------- Total interest-bearing liabilities 692,437 13,318 3.85% 668,878 11,691 3.50% ------------ ------------- Noninterest-bearing deposits 137,262 131,111 Other liabilities 13,202 12,092 Shareholders' equity 75,327 73,372 ------------- ------------- Total liabilities and shareholders' equity $ 918,228 $ 885,453 ============= ============= Net interest rate spread5 5.11% 4.80% Net interest income/net $24,104 $21,825 ============ ============= interest margin6 5.77% 5.40% ============ ============= 1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $1,321,000 in 2000 and $1,488,000 in 1999. 4Interest income is stated on a tax equivalent basis of 1.52 at June 30, 2000 and 1999. 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 thousand) For the three months ended June 30, 2000 over 1999 Yield/ Volume Rate4 Total ----------- ---------- ---------- Increase (decrease) in interest income: Loans 1,2 $ 1,576 $ 920 $ 2,496 Investment securities3 (515) 347 (168) Federal funds sold 3 12 15 Deposits in banks 12 0 12 ----------- ---------- ---------- Total 1,076 1,279 2,355 ----------- ---------- ---------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 21 2 23 Savings deposits (54) 13 (41) Time deposits 302 583 885 Federal funds purchased 63 51 114 Repurchase agreements 43 20 63 Long-term debt (34) 47 13 ----------- ---------- ---------- Total 341 716 1,057 ----------- ---------- ---------- Increase in net interest income $ 735 $ 563 $ 1,298 =========== ========== ========== 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $715,000 in 2000 and $751,000 in 1999. 3Interest income is stated on a tax equivalent basis of 1.52 for June 30, 2000 and 1999 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 thousand) For the six months ended June 30, 2000 over 1999 Yield/ Volume Rate4 Total ----------- ---------- ---------- Increase (decrease) in interest income: Loans 1,2 $ 2,792 $ 1,383 $ 4,175 Investment securities3 (1,256) 764 (492) Federal funds sold 154 46 200 Deposits in banks 23 0 23 ----------- ---------- ---------- Total 1,713 2,193 3,906 ----------- ---------- ---------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 28 9 37 Savings deposits (58) 33 (25) Time deposits 584 931 1,515 Federal funds purchased (132) 54 (78) Repurchase agreements 37 20 57 Long-term debt 71 50 121 ----------- ---------- ---------- Total 530 1,097 1,627 ----------- ---------- ---------- Increase in net interest income $ 1,183 $ 1,096 $ 2,279 =========== ========== ========== 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $1,321,000 in 2000 and $1,488,000 in 1999. 3Interest income is stated on a tax equivalent basis of 1.52 for June 30, 2000 and 1999. 4The rate/volume variance has been included in the rate variance. Provision for Loan Losses The Bank provided $900,000 for loan losses in the second quarter of 2000 versus $870,000 in 1999. Net charge-offs for all loans in the second quarter of 2000 totaled $222,000 versus $140,000 in the year earlier period. Noninterest Income Noninterest income for the second quarter of 2000 decreased $128,000 (3.8%) to $3,240,000 from $3,368,000 during the same period in 1999. Income from service charges and fees increased $106,000 (6.0%) to $1,886,000, primarily due to increased ATM fees. Other income decreased $234,000 (14.7%) to $1,354,000 in the second quarter of 2000 versus the same quarter in 1999. Accounting for the decrease in other income was a $135,000 decrease in gain on sale of other real estate owned from $156,000 to $21,000, a $91,000 decrease in gain on sale of loans from $195,000 to $104,000, and a recovery of $124,000 made in the second quarter of 1999 that was related to the Bank's credit card portfolio which was sold in May of 1998. These decreases in other income were partially offset by an increase in commissions on the sale of insurance, mutual funds and annuities, which were up $139,000 (20.9%) to $804,000 for the quarter ended June 30, 2000. Excluding the effect of the gain on sale of other real estate owned and the credit card related recovery made in the second quarter of 1999, noninterest income would have increased 4.2% in the second quarter of 2000 versus the same period in 1999. For the six months ended June 30, 2000, noninterest income was up $1,536,000 (24.3%) over the same period for 1999. As described above, during the quarter ended March 31, 2000 the Company recorded a one-time pre-tax income item of $1,510,000 from the receipt of common stock. Excluding this one-time event, noninterest income for the six months ended June 30, 2000 would have increased $26,000 (0.4%) to $6,356,000. Service charges and fee income was up $206,000 (5.9%) to 3,693,000 mainly due to increased ATM fees. Other income increased $1,330,000 (46.8%) to $4,173,000. Significant changes in the following items contributed to the net increase: $1,510,000 from the receipt of common stock noted above, commissions on insurance, mutual fund and annuity sales increased $283,000 to $1,484,000, gain on sale of loans decreased $374,000 to $179,000, and gain on sale of other real estate owned decreased $120,000 to $50,000. Noninterest Expense Noninterest expense increased $563,000 (6.3%) to $9,450,000 in the second quarter of 2000 versus 1999. Salary and benefit expense increased $468,000 (10.5%) on a quarter over quarter basis to $4,948,000. The salary expense was higher due to a 2.9% increase in average full-time equivalent employees to 390, higher commissions and other incentives that are tied to the increased profitability of the Company, and annual salary increases. The net addition of approximately 11 FTE between June 30, 1999 and June 30, 2000 was the result of the opening of branches at Beale AFB, Modesto, and Visalia, the pending opening of a branch in Paradise, the addition of several commercial lenders in various regions, and the reduction of approximately 8 backroom FTE during this period. Other noninterest expenses increased $95,000 (2.2%) to $4,502,000 in the second quarter of 2000. For the first six months noninterest expenses increased $1,101,000 (6.3%) to $18,474,000 in 2000 compared to 1999. Salary and benefit expense increased $869,000 (9.8%) to $9,782,000. The salary expense was higher due to a 2.9% increase in average full-time equivalent employees to 386, higher commissions and other incentives that are tied to the increased profitability of the Company, and annual salary increases. Other expenses increased $232,000 (2.7%). Provision for Income Taxes The effective tax rate for the six months ended June 30, 2000 is 37.0% and reflects an increase from 36.6% in the year earlier period. The tax rate is lower than the statutory rate of 40.4% due to nontaxable earnings from municipal bonds. Loans At June 30, 2000, loan balances were $74,928,000 (13.3%) higher than the ending balances at June 30, 1999 and $50,714,000 (8.6%) higher than the ending balances at December 31, 1999. On a year over year basis at June 30, commercial, consumer, and real estate mortgage loan balances were higher by $50,427,000 (20.1%), $13,167,000 (17.8%), and $12,695,000 (6.2%), respectively. Real estate construction loan balances were lower by $1,361,000 (3.8%). Securities At June 30, 2000, securities available-for-sale had a fair value of $217,287,000 and an amortized cost of $225,643,000. This portfolio contained mortgage-backed securities with an amortized cost of $127,520,000 of which $16,848,000 were CMOs. Nonperforming Loans As shown in the following table, total nonperforming assets have increased 85.3% to $6,377,000 in the first six months of 2000. Nonperforming assets represent 0.66% of total assets. 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, 2000 1999 Nonaccrual loans $ 4,292 $ 1,758 Accruing loans past due 90 days or more 1,045 923 Restructured loans (in compliance with modified terms) 0 0 ------------- -------------- Total nonperforming loans 5,337 2,681 Other real estate owned 1,040 760 ------------- -------------- Total nonperforming assets $ 6,377 $ 3,441 ============= ============== Nonperforming loans to total loans 0.83% 0.46% Allowance for loan losses to nonperforming loans 236% 412% Nonperforming assets to total assets 0.66% 0.37% Allowance for loan losses to nonperforming assets 197% 321% Allowance for Loan Loss Credit risk is inherent in the business of lending. As a result, the Company maintains an Allowance for Loan and Leases Losses to absorb losses inherent in the Company's loan and lease portfolio. This is maintained through periodic charges to earnings. These charges are shown in the Consolidated Income Statements as provision for loan losses. All specifically identifiable and quantifiable losses are immediately charged off against the allowance. However, for a variety of reasons, not all losses are immediately known to the Company and, of those that are known, the full extent of the loss may not be quantifiable at that point in time. The balance of the Company's Allowance for Loan and Lease Losses is meant to be an estimate of these unknown but probable losses inherent in the portfolio. For the remainder of this discussion, "loans" shall include all loans and lease contracts, which are a part of the Bank's portfolio. The Company formally assesses the adequacy of the allowance on a quarterly basis. Determination of the adequacy is based on ongoing assessments of the probable risk in the outstanding loan and lease portfolio, and to a lesser extent the Company's loan and lease commitments. These assessments include the periodic re-grading of credits based on changes in their individual credit characteristics including delinquency, seasoning, recent financial performance of the borrower, economic factors, changes in the interest rate environment, growth of the portfolio as a whole or by segment, and other factors as warranted. Loans are initially graded when originated. They are re-graded as they are renewed, when there is a new loan to the same borrower, when identified facts demonstrate heightened risk of nonpayment, or if they become delinquent. Re-grading of larger problem loans occur at least quarterly. Confirmation of the quality of the grading process is obtained by independent credit reviews conducted by consultants specifically hired for this purpose and by various bank regulatory agencies. The Company's method for assessing the appropriateness of the allowance includes specific allowances for identified problem loans and leases as determined by FASB 114, formula allowance factors for pools of credits, and allowances for changing environmental factors (e.g., interest rates, growth, economic conditions, etc.). Allowance factors for loan pools are based on the previous 5 years historical loss experience by product type. Allowances for specific loans are based on FASB 114 analysis of individual credits. Allowances for changing environmental factors are Management's best estimate of the probable impact these changes have had on the loan portfolio as a whole. This process is explained in detail in the notes to the Company's Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 1999. The following table presents information concerning the allowance and provision for loan losses. June 30, June 30, 2000 1999 (in thousands) Balance, beginning of period $ 11,037 $ 8,206 Provision charged to operations 1,700 1,710 Loans charged off (424) (270) Recoveries of loans previously charged off 279 70 ---------------- --------------- Balance, end of period $ 12,592 $ 9,716 ================ =============== Ending loan portfolio $ 639,570 $ 564,642 ================ =============== Allowance to loans as a percentage of ending loan portfolio 1.97% 1.72% ================ =============== 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, 2000: Total Capital to Risk Weighted Assets: Consolidated $86,482 11.91% =>$58,087 =>8.0% =>$72,609 =>10.0% Tri Counties Bank $84,947 11.72% =>$57,985 =>8.0% =>$72,481 =>10.0% Tier I Capital to Risk Weighted Assets: Consolidated $77,406 10.66% =>$29,044 =>4.0% =>$43,565 => 6.0% Tri Counties Bank $75,843 10.46% =>$28,992 =>4.0% =>$43,488 => 6.0% Tier I Capital to Average Assets: Consolidated $77,406 8.40% =>$36,857 =>4.0% =>$46,072 => 5.0% Tri Counties Bank $75,843 8.24% =>$36,808 =>4.0% =>$46,010 => 5.0%
Year 2000 The Company previously recognized the material nature of the business issues surrounding computer processing of dates into and beyond the Year 2000 and began taking corrective action as required pursuant to the interagency statements issued by the Federal Financial Institutions Examination Council. Management believes the Company has completed all the activities within its control to ensure that the Company's systems are Year 2000 compliant. The Company has not experienced and interruptions to normal operations due to the start of the Year 2000. The Company's Year 2000 readiness costs were approximately $103,000. The Company does not currently expect to apply any further funds to address the Year 2000 issues. As of June 30, 2000, the Company has not experienced any material disruptions of its internal computer systems or software applications and has not experienced any problems with the computer systems or software applications of its third party vendors, suppliers or service providers. The Company will continue to monitor these third parties to determine the impact, if any, on its business and the actions it must take, if any, in the event of non-compliance by any of these third parties. Based upon the Company's assessment of compliance by third parties, there appears to be no material business risk posed by any such non-compliance. Although the Company's Year 2000 rollover did not present any material business disruption, there are some remaining Year 2000 related risks. Management believes that appropriate actions have been taken to address these remaining Year 2000 issues and contingency plans are in place to minimize the financial impact to the Company. Management, however, cannot be certain that Year 2000 issues affecting its customers, suppliers or service providers will not have a material adverse impact on the Company. Item 3. MARKET RISK MANAGEMENT There have not been any significant changes in the market risk profile of the Bank since December 31, 1999. PART II Other Information (a) Item 4. Submission of Matters to a Vote of Security Holders (a.) Annual Meeting held May 9, 2000. Number of shares represented in person or by proxy and constituting a quorum: 6,081,507 85% (c.) Election of directors VOTES FOR --------- Everett B. Beich 6,053,251 --------- William J. Casey 6,053,858 --------- Craig S. Compton 6,053,858 --------- Douglas F. Hignell 6,053,656 --------- Brian D. Leidig 6,053,108 --------- Wendell J. Lundberg 6,053,108 --------- Donald E. Murphy 6,053,108 --------- Richard P. Smith 6,053,758 --------- Robert H. Steveson 5,908,842 --------- Carroll Taresh 6,049,525 --------- Alex A. Vereschagin, Jr. 6,053,108 --------- Ratify the appointment of Arthur Andersen LLP as independent public accountants of the Company for 2000. Votes: FOR 6,021,563, AGAINST 2,626, ABSTAIN 57,318 (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. 21.1 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 July 25, 2000 /s/ Richard P. Smith -------------------- ----------------------- President and Chief Executive Officer Date July 25, 2000 /s/ Thomas J. Reddish -------------------- ----------------------- Vice President and Chief Financial Officer EX-27 2 0002.txt EX-27
9 0000356171 TRICO BANCSHARES 1,000 6-MOS DEC-31-2000 JUN-30-2000 56,778 800 1,000 0 0 217,287 217,287 639,570 12,592 961,067 787,567 21,900 13,004 60,494 0 0 50,554 27,548 78,102 29,448 7,140 266 36,854 11,702 13,318 23,536 1,700 0 18,474 11,228 11,228 0 0 7,072 0.99 0.96 8.96 4,292 1,045 0 0 11,037 424 279 12,592 12,592 0 0
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