-----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, Ie7F7LasDhYOWJIVwADZKnMYEobNn6Hc06a5ArQQgtsinOrG3U44/Dy3YUjwS2cs CJVSUedUDyCUUI6X+wwHgg== /in/edgar/work/0000356171-00-000006/0000356171-00-000006.txt : 20001109 0000356171-00-000006.hdr.sgml : 20001109 ACCESSION NUMBER: 0000356171-00-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001108 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: 756015 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 September 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 November 7, 2000: 7,211,226
TRICO BANCSHARES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) September 30, December 31, ------------------- ------------------ 2000 1999 Assets: Cash and due from banks $ 43,948 $ 51,236 Federal funds sold 6,400 8,400 ------------------ ------------------ Cash and cash equivalents 50,348 59,636 Interest-bearing deposits in banks 800 800 Securities available-for-sale 214,063 231,708 Loans, net of allowance for loan losses of $11,218 and $11,037, respectively 639,589 576,942 Premises and equipment, net 17,218 16,043 Other real estate owned 781 760 Accrued interest receivable 6,361 6,076 Other assets 32,821 32,831 ------------------ ------------------ Total assets $ 961,981 $ 924,796 ================== ================== Liabilities: Deposits Noninterest-bearing demand $ 152,522 $ 155,937 Interest-bearing demand 150,019 143,923 Savings 216,641 222,615 Time certificates 289,428 271,635 ------------------ ------------------ Total deposits 808,610 794,110 Fed funds purchased 13,600 - Accrued interest payable and other liabilities 13,194 12,058 Long term borrowings 45,488 45,505 ------------------ ------------------ Total liabilities 880,892 851,673 Shareholders' equity: Common stock 50,627 50,043 Retained earnings 34,157 28,613 Accumulated other comprehensive income (loss) (3,695) (5,533) ------------------ ------------------ Total shareholders' equity 81,089 73,123 ------------------ ------------------ Total liabilities and shareholders' equity $ 961,981 $ 924,796 ================== ==================
TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands except earnings per common share) For the three months For the nine months ended September 30, ended September 30, -------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Interest income: Interest and fees on loans $ 16,470 $ 13,978 $ 45,918 $ 39,251 Interest on investment securities-taxable 2,841 2,979 8,867 9,492 Interest on investment securities-tax exempt 555 561 1,669 1,671 Interest on federal funds sold 35 40 278 83 Interest on deposits in banks 11 - 34 - -------------- ------------- ------------- ------------- Total interest income 19,912 17,558 56,766 50,497 -------------- ------------- ------------- ------------- Interest expense: Interest on deposits 6,382 5,409 18,084 15,584 Interest on federal funds purchased 295 56 512 351 Interest on repurchase agreements 14 2 99 30 Interest on other borrowings 950 770 2,264 1,963 -------------- ------------- ------------- ------------- Total interest expense 7,641 6,237 20,959 17,928 -------------- ------------- ------------- ------------- Net interest income 12,271 11,321 35,807 32,569 Provision for loan losses 1,800 875 3,500 2,585 -------------- ------------- ------------- ------------- Net interest income after provision for loan losses 10,471 10,446 32,307 29,984 Noninterest income: Service charges and fees 1,870 1,792 5,563 5,279 Other income 1,464 1,056 5,637 3,899 -------------- ------------- ------------- ------------- Total noninterest income 3,334 2,848 11,200 9,178 -------------- ------------- ------------- ------------- Noninterest expenses: Salaries and related expenses 4,946 4,454 14,728 13,367 Other, net 4,359 4,186 13,051 12,646 -------------- ------------- ------------- ------------- Total noninterest expenses 9,305 8,640 27,779 26,013 -------------- ------------- ------------- ------------- Net income before income taxes 4,500 4,654 15,728 13,149 Income taxes 1,653 1,721 5,809 4,831 -------------- ------------- ------------- ------------- Net income $ 2,847 $ 2,933 $ 9,919 $ 8,318 ============== ============= ============= ============= Basic earnings per common share $ 0.40 $ 0.41 $ 1.38 $ 1.17 ============== ============= ============= ============= Diluted earnings per common share $ 0.39 $ 0.40 $ 1.35 $ 1.14 ============== ============= ============= =============
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 Income (Loss) Total Income ---------- -------- ----------- ----------------- ------- ---------------- Balance, December 31, 1999 7,152,329 $50,043 $28,613 ($5,533) $73,123 Exercise of Common Stock options 69,725 618 618 Repurchase of Common Stock (14,728) (103) (132) (235) Common stock cash dividends (4,243) (4,243) Stock option amortization 69 69 Comprehensive income: Net income 9,919 9,919 $9,919 Other comprehensive income, net of tax: Change in unrealized loss on securities, net of tax 1,838 1,838 1,838 --------------- Comprehensive income $11,757 --------------- ----------- --------- --------- ---------- --------- Balance, September 30, 2000 7,207,326 $50,627 $34,157 ($3,695) $81,089 =========== ========= ========= ========== =========
TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the nine months ended September 30, 2000 1999 Operating activities: Net income $ 9,919 $ 8,318 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 3,500 2,585 Provision for losses on other real estate owned 25 10 Depreciation and amortization 1,875 1,954 Amortization of intangible assets 724 851 Accretion of investment security discounts 200 461 Deferred income taxes (245) (158) Investment security (gains) losses (net) - (24) (Gain) loss on sale of OREO (68) (175) (Gain) loss on sale of loans (385) (692) (Gain) loss on sale of fixed assets 52 1 Amortization of stock options 69 123 (Increase) decrease in interest receivable (285) (163) Increase (decrease) in interest payable 429 (352) (Increase) decrease in other assets and liabilities (773) (2,271) ------------- ------------ Net cash provided (used) by operating activities 15,037 10,468 Investing activities: Proceeds from maturities of securities available-for-sale 29,309 58,653 Proceeds from sale of securities available-for-sale - 14,137 Purchases of securities available-for-sale (9,023) (31,138) Net (increase) decrease in loans (66,654) (69,580) Proceeds from sales of fixed assets 32 29 Purchases of premises and equipment (2,872) (1,722) Proceeds from the sale of OREO 914 1,016 ------------- ------------ Net cash provided (used) by investing activities (48,294) (28,605) Financing activities: Net increase (decrease) in deposits 14,500 932 Net increase (decrease) in Fed funds purchased 13,600 (3,600) Borrowings under long-term debt agreements 35,000 21,000 Payments of principal on long-term debt agreements (35,017) (3,414) Cash dividends - Common (4,243) (3,638) Repurchase of common stock (235) (85) Exercise of common stock options 364 504 ------------- ------------ Net cash provided (used) by financing activities 23,969 11,699 ------------- ------------ Increase (decrease) in cash and cash equivalents (9,288) (6,438) Cash and cash equivalents at beginning of year 59,636 50,483 ------------- ------------ Cash and cash equivalents at end of period $ 50,348 $ 44,045 ============= ============ Supplemental information: Cash paid for taxes $ 6,573 $ 5,836 Cash paid for interest expense $ 20,530 $ 18,280
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 September 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 Nine months ended September 30, September 30, 2000 1999 2000 1999 Net income $ 2,847 $ 2,933 $ 9,919 $ 8,318 Net change in unrealized gains (losses) on securities available-for-sale 1,555 (1,167) 1,838 (5,542) ------- ------- ------- ------- Comprehensive income $ 4,402 $ 1,766 $11,757 $ 2,776 ======= ======= ======= ======= 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 September 30, 2000 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $2,847 7,203,004 $0.40 Common stock options outstanding -- 146,398 Diluted Earnings per Share Net income available to common shareholders $2,847 7,349,402 $0.39 ====== ========= Three Months Ended September 30, 1999 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $2,933 7,140,427 $0.41 Common stock options outstanding -- 189,194 Diluted Earnings per Share Net income available to common shareholders $2,933 7,329,621 $0.40 ====== ========= Nine Months Ended September 30, 2000 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $9,919 7,187,655 $1.38 Common stock options outstanding -- 155,010 Diluted Earnings per Share Net income available to common shareholders $9,919 7,342,665 $1.35 ====== ========= Nine Months Ended September 30, 1999 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $8,318 7,123,585 $1.17 Common stock options outstanding -- 189,522 Diluted Earnings per Share Net income available to common shareholders $8,318 7,313,107 $1.14 ====== ========= 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 September 30, 2000 Net interest income $ 12,059 $ 212 $ 12,271 Noninterest income 2,507 827 3,334 Noninterest expense 8,792 513 9,305 Net income 2,552 295 2,847 Assets $ 947,064 $ 14,917 $ 961,981 Three Months Ended September 30, 1999 Net interest income $ 10,338 $ 107 $ 10,445 Noninterest income 2,328 520 2,848 Noninterest expense 8,372 268 8,640 Net income 2,724 209 2,933 Assets $ 911,898 $ 6,868 $ 918,766 Nine Months Ended September 30, 2000 Net interest income $ 35,190 $ 617 $ 35,807 Noninterest income 8,837 2,363 11,200 Noninterest expense 26,295 1,484 27,779 Net income 9,088 831 9,919 Assets $ 947,064 $ 14,917 $ 961,981 Nine Months Ended September 30, 1999 Net interest income $ 29,785 $ 198 $ 29,983 Noninterest income 7,388 1,790 9,178 Noninterest expense 25,079 934 26,013 Net income 7,679 639 8,318 Assets $ 911,898 $ 6,868 $ 918,766 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 then outstanding common stock and is open-ended. Through September 30, 2000, the Company has repurchased 5,000 shares under the repurchase plan at an average price of $16.50 per share. 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 $2,847,000 for the quarter ended September 30, 2000. The quarterly earnings represented a 2.9% decrease from the $2,933,000 reported for the same period of 1999. Diluted earnings per share for the third quarter of 2000 were $0.39 versus $0.40 in the year earlier period. Earnings for the nine months ended September 30, 2000 were $9,919,000 versus year ago results of $8,318,000, and represented a 19.2% increase. The diluted earnings per share were $1.35 and $1.14 for the respective nine-month periods. Included in the results for the nine months ended September 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 nine months ended September 30, 2000 would have been $9,030,000 and diluted earnings per share would have been $1.23, which would have represented 8.6% and 7.9% increases over the same period in the prior year, respectively. The decrease in third quarter operating results was due to a $925,000 (106%) increase in the quarterly provision for loan losses from $875,000 in the third quarter of 1999 to $1,800,000 in the third quarter of 2000. The increase in the quarterly provision for loan losses was primarily in response to a $3,000,000 loan charge-off taken by the Company during the quarter on agriculture related loans to one borrower. The charge-off was taken when the Company determined that the primary source of repayment of these agriculture related loans appeared to be insufficient to cover the contractual terms of the loan. The $10,000,000 balance of this loan relationship (net of the charge-off) was placed into non-accrual status at the time of the charge-off. The effect of the increase in the provision for loan losses was partially offset by continued improvements in net interest margin and operating efficiency. Net interest income for the quarter ended September 30, 2000 grew $958,000 (8.3%) to $12,571,000 on a fully tax equivalent basis. Interest income was up $2,362,000 (13.2%) due to a 5.5% increase in the quarter-over-quarter volume of earning assets ($869,779,000 versus $824,277,000). The average yield on earning assets increased sixty-four basis points to 9.30%. Interest expense increased $1,404,000 (22.5%) as a result of a 4.5% increase in average balances of interest bearing liabilities to $719,170,000 and a sixty-two basis point increase in the average rate paid on interest bearing liabilities to 4.25%. Net interest margin was 5.78% for the third quarter of 2000 versus 5.64% in the same quarter of the prior year. Noninterest income for the third quarter of 2000 increased $486,000 (17.1%) to $3,334,000 from the same period in 1999. Gains on the sale of loans were up $67,000 (48%) to $206,000. Commissions on the sale of non-deposit investment products were up $170,000 (33%) to $681,000. ATM fee income was up $72,000 (28%) to $328,000. Noninterest expense increased $665,000 (7.7%) to $9,305,000 in the third quarter 2000 versus the same period in 1999. Salary and benefit expense increased $492,000 (11.1%) to $4,946,000. The Company's Paradise, Modesto, and Visalia branches, which were opened in August 2000, January 2000, and August 1999, respectively, accounted for $103,000 of the increase in salaries and benefits expense. Increases in personnel and commission payments related to the sale of non-deposit investment products accounted for an additional $136,000 of the increase in salaries and benefits expense noted above. Excluding the increases due to the recently opened branches and non-deposit investment products noted above, salaries and benefits expense would have increased 5.7% from the year early quarter. Other expenses increased $173,000 (4.1%) to $4,359,000. Assets of the Company totaled $961,981,000 at September 30, 2000 and represented increases of $37,185,000 (4.0%) and $43,215,000 (4.7%) from the December 31, 1999 and September 30, 1999 ending balances, respectively. Changes in average earning assets from the prior year third quarter-end balances included an increase in loans of $63,964,000 (10.9%) to $651,049,000 and a decrease in securities of $18,251,000 (7.8%) to $215,746,000. From year-end 1999 balances, nonperforming assets have increased $12,287,000 (357%) and total $15,728,000 at September 30, 2000. Nonperforming assets were 1.63% and 0.37% of total assets at September 30, 2000 and December 31, 1999, respectively. Ten million of the increase in nonperforming assets is due to the loan relationship with a single borrower noted above. Excluding the effect of these nonperforming loans with a single borrower, nonperforming assets would have been $5,728,000 at September 30, 2000. Nonperforming assets were $6,377,000, $5,159,000, and $3,441,000 at June 30, 2000, March 31, 2000, and December 31, 1999, respectively. Year-to-date 2000, on an annualized basis, the Company realized a return on assets of 1.42% and a return on equity of 17.16% versus 1.24% and 15.19% in the nine months ended September 30, 1999. TriCo Bancshares ended the quarter with a Tier 1 capital ratio of 10.68% and a total risk-based capital ratio of 11.93%. The following tables provide a summary of the major elements of income and expense for the third quarter of 2000 compared with the third quarter of 1999 and for the first nine months of 2000 compared with the first nine months of 1999.
TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Three months ended September 30, Percentage 2000 1999 Change increase (decrease) Interest income $ 20,212 $ 17,850 13.2% Interest expense 7,641 6,237 22.5% --------------- --------------- Net interest income 12,571 11,613 8.2% Provision for loan losses 1,800 875 105.7% --------------- --------------- Net interest income after 10,771 10,738 0.3% provision for loan losses Noninterest income 3,334 2,848 17.1% Noninterest expenses 9,305 8,640 7.7% --------------- --------------- Net income before income taxes 4,800 4,946 (3.0%) Income taxes 1,653 1,721 (4.0%) Tax equivalent adjustment1 300 292 2.7% --------------- --------------- Net income $ 2,847 $ 2,933 (2.9%) =============== =============== Diluted earnings per common share $ 0.39 $ 0.40 (2.5%) 1Interest on tax-free securities is reported on a tax equivalent basis of 1.52 for September 30, 2000 and 1999.
TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Nine months ended September 30, Percentage 2000 1999 Change increase (decrease) Interest income $ 57,634 $ 51,366 12.2% Interest expense 20,959 17,928 16.9% --------------- --------------- Net interest income 36,675 33,438 9.7% Provision for loan losses 3,500 2,585 35.4% --------------- --------------- Net interest income after 33,175 30,853 7.5% provision for loan losses Noninterest income 11,200 9,178 22.0% Noninterest expenses 27,779 26,013 6.8% --------------- --------------- Net income before income taxes 16,596 14,018 18.4% Income taxes 5,809 4,831 20.2% Tax equivalent adjustment1 868 869 (0.1%) --------------- --------------- Net income $ 9,919 $ 8,318 19.2% =============== =============== Diluted earnings per common share $ 1.35 $ 1.14 18.4% 1Interest on tax-free securities is reported on a tax equivalent basis of 1.52 for September 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 September 30, 2000, interest income increased $2,362,000 (13.2%) over the same period in 1999. The average balance of total earning assets was higher by $45,502,000 (5.5%). Average loan balances were up $63,964,000 (10.9%) which resulted in a $1,522,000 increase in interest income while average balances of securities and fed funds sold were down $19,260,000 (8.1%) which resulted in an $312,000 decrease in interest income. The average yield on loans was higher by 60 basis points while the average yield on securities and fed funds sold increased 30 and 140 basis points, respectively. The overall yield on average earning assets increased 64 basis points to 9.30% which increased interest income by $1,141,000. For the third quarter of 2000, interest expense increased $1,404,000 (22.5%) over the year earlier period. Average balances of interest-bearing liabilities were up $31,131,000 (4.5%) which resulted in a $388,000 increase in interest expense. The average rate paid on time deposits and long-term debt increased 104, and 95 basis points respectively, and accounted for $732,000, and $139,000 of the increase in interest expense, respectively. The average rate paid on interest bearing liabilities increased 62 basis points to 4.25% and resulted in a $1,016,000 increase in interest expense. The combined effect of the increase in interest income and increase in interest expense for the third quarter of 2000 versus 1999 resulted in an increase of $958,000 (8.2%) in net interest income. Net interest margin was up 14 basis points to 5.78% from 5.64% for the same period a year ago. The nine-month period ending September 30, 2000, reflects an interest income increase of $6,268,000 (12.2%) over the same period in 1999. An increase of $61,373,000 (11.0%) in average balances of loans accounted for a $4,313,000 increase in interest income while a decrease of $32,820,000 (13.0%) in average balances of securities accounted for a $1,561,000 decrease in interest income. The average yield received on all earning assets for the nine-month period ended September 30, 2000 was up 65 basis points to 9.07%, and resulted in a $3,336,000 increase in interest income. Interest expense for the nine-month period increased $3,031,000 (16.9%) from that for the same period in 1999. Average balances of interest-bearing liabilities were up $26,111,000 (3.9%) and resulted in a $905,000 increase in interest expense. A $21,814,000 (8.7%) increase in the average balance of time deposits accounted for $769,000 of the $905,000 increase in interest expense due to balance increases. The average rate paid on time deposits and long-term debt increased 81, and 50 basis points respectively, and accounted for $1,662,000, and $188,000 of the increase in interest expense, respectively. The average rate paid on interest bearing liabilities increased 44 basis points to 3.98% and resulted in a $2,126,000 increase in interest expense. The combined effect of the increases in interest income and interest expense for the first nine months of 2000 versus 1999 resulted in an increase of $3,237,000 (9.7%) in net interest income. Net interest margin increased 29 basis points to 5.77% from 5.48%. The following four tables provide summaries of the components of the interest income, interest expense and net interest margins on earning assets for the quarter and nine month periods ended September 30, 2000 versus the same periods in 1999.
TRICO BANCSHARES ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS (in thousands) Three Months Ended 30-Sep-00 30-Sep-99 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning assets Loans 2,3 $651,049 $ 16,470 10.12% $587,085 $ 13,978 9.52% Securities4 215,746 3,696 6.85% 233,997 3,832 6.55% Federal funds sold 2,184 35 6.41% 3,195 40 5.01% Deposits in banks 800 11 5.50% - - 5.01% ------------- ----------- ------------- ---------- Total earning assets 869,779 20,212 9.30% 824,277 17,850 8.66% ----------- ---------- Cash and due from bank 38,693 36,571 Premises and equipment 17,244 16,384 Other assets, net 41,610 40,407 Less: allowance for loan losses (11,866) (9,888) ------------- ------------- Total $955,460 $907,751 ============= ============= Liabilities and shareholders' equity Interest-bearing Demand deposits $148,728 590 1.59% $144,455 572 1.58% Savings deposits 214,663 1,725 3.21% 219,793 1,686 3.07% Time deposits 279,355 4,067 5.82% 263,933 3,151 4.78% Federal funds purchased 17,131 295 6.89% 4,129 56 5.43% Repurchase agreements 804 14 5.16% 217 2 5.16% Long-term debt 58,489 950 6.50% 55,512 770 5.55% ------------- ----------- ------------- ---------- Total interest-bearing liabilities 719,170 7,641 4.25% 688,039 6,237 3.63% ----------- ---------- Noninterest-bearing deposits 142,767 133,577 Other liabilities 13,039 13,885 Shareholders' equity 80,484 72,250 ------------- ------------- Total liabilities and shareholders' equity $955,460 $907,751 ============= ============= Net interest rate spread5 5.05% 5.03% Net interest income $ 12,571 $ 11,613 =========== ========== net interest margin6 5.78% 5.64% =========== ==========
1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $829,000 in 2000 and $706,000 in 1999. 4Interest income is stated on a tax equivalent basis of 1.52 at September 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) Nine Months Ended 30-Sep-00 30-Sep-99 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning assets Loans 2,3 $ 619,624 $ 45,918 9.88% $ 558,251 $ 39,251 9.37% Securities4 220,188 11,404 6.91% 253,008 12,032 6.34% Federal funds sold 6,331 278 5.85% 2,296 83 4.82% Deposits in banks 800 34 5.67% - - ------------- ------------- ------------ ------------ Total earning assets 846,943 57,634 9.07% 813,555 51,366 8.42% ------------- ------------ Cash and due from bank 37,456 35,762 Premises and equipment 16,471 16,272 Other assets, net 41,681 36,576 Less: allowance for loan losses (11,776) (9,198) ------------- ------------ Total $ 930,775 $ 892,967 ============= ============ Liabilities and shareholders' equity Interest-bearing Demand deposits $ 148,195 1,752 1.58% $ 144,364 1,697 1.57% Savings deposits 218,015 5,060 3.09% 222,323 5,046 3.03% Time deposits 272,670 11,272 5.51% 250,856 8,841 4.70% Federal funds purchased 10,129 512 6.74% 9,287 351 5.04% Repurchase agreements 2,014 99 6.55% 821 30 4.87% Long-term debt 50,423 2,264 5.99% 47,684 1,963 5.49% ------------- ------------- ------------ ------------ Total interest-bearing liabilities 701,446 20,959 3.98% 675,335 17,928 3.54% ------------- ------------ Noninterest-bearing deposits 139,117 131,942 Other liabilities 13,147 12,696 Shareholders' equity 77,065 72,994 ------------- ------------ Total liabilities and shareholders' equity $ 930,775 $ 892,967 ============= ============ Net interest rate spread5 5.09% 4.88% Net interest income $ 36,675 $ 33,438 ============= ============ net interest margin6 5.77% 5.48% ============= ============
1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $2,150,000 in 2000 and $2,194,000 in 1999. 4Interest income is stated on a tax equivalent basis of 1.52 at September 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 thousands) For the three months ended Septemer 30, 2000 over 1999 Yield/ Volume Rate4 Total ---------- ---------- ---------- Increase (decrease) in interest income: Loans 1,2 $ 1,522 $ 970 $ 2,492 Investment securities3 (299) 163 (136) Federal funds sold (13) 8 (5) Deposits in banks 11 - 11 ---------- ---------- ---------- Total 1,221 1,141 2,362 ---------- ---------- ---------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 17 1 18 Savings deposits (39) 78 39 Time deposits 184 732 916 Federal funds purchased 177 62 239 Short-term debt 8 4 12 Long-term debt 41 139 180 ---------- ---------- ---------- Total 388 1,016 1,404 ---------- ---------- ---------- Increase (decrease) in net interest income $ 833 $ 125 $ 958 ========== ========== ========== 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $829,000 in 2000 and $706,000 in 1999. 3Interest income is stated on a tax equivalent basis of 1.52 for September 30, 2000 and 1999. 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 Nine Months Ended September 30, 2000 over 1999 Yield/ Volume Rate4 Total ---------- ---------- ---------- Increase (decrease) in interest income: Loans 1,2 $ 4,313 $ 2,354 $ 6,667 Investment securities3 (1,561) 933 (628) Federal funds sold 146 49 195 Deposits in banks 34 - 34 ---------- ---------- ---------- Total 2,932 3,336 6,268 ---------- ---------- ---------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 45 10 55 Savings deposits (98) 112 14 Time deposits 769 1,662 2,431 Federal funds purchased 32 129 161 Short-term debt 44 25 69 Long-term debt 113 188 301 ---------- ---------- ---------- Total 905 2,126 3,031 ---------- ---------- ---------- Increase (decrease) in net interest income $ 2,027 $ 1,210 $ 3,237 ========== ========== ========== 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $2,150,000 in 2000 and $2,194,000 in 1999. 3Interest income is stated on a tax equivalent basis of 1.52 for September 30, 2000 and 1999. 4The rate/volume variance has been included in the rate variance. Provision for Loan Losses The Bank provided $1,800,000 for loan losses in the third quarter of 2000 versus $875,000 in 1999. Net charge-offs for all loans in the third quarter of 2000 totaled $3,174,000 versus $206,000 in the year earlier period. Excluding the effect of the $3,000,000 charge-off related to the one borrower noted above, net charge-offs for the third quarter of 2000 would have been $174,000. Noninterest Income Noninterest income for the third quarter of 2000 increased $486,000 (17.1%) to $3,334,000 from the same period in 1999. Gains on the sale of loans were up $67,000 (48%) to $205,000. Commissions on the sale of non-deposit investment products were up $170,000 (33%) to $681,000. ATM fee income was up $72,000 (28%) to $328,000. For the nine months ended September 30, noninterest income was up $2,022,000 (22.0%) 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 nine months ended September 30, 2000 would have increased $512,000 (5.6%). Service charges and fee income was up $284,000 (5.4%) to 5,563,000 mainly due to increased ATM fees. Other income increased $1,738,000 (44.6%) to $5,637,000. Significant changes in the following items contributed to the net increase: $1,510,000 from the receipt of common stock noted above, commissions on non-deposit investment product sales increased $454,000 to $2,166,000, gain on sale of loans decreased $308,000 to $385,000, and gain on sale of other real estate owned decreased $106,000 to $68,000. Noninterest Expense Noninterest expense increased $665,000 (7.7%) to $9,305,000 in the third quarter 2000 versus the same period in 1999. Salary and benefit expense increased $492,000 (11.1%) to $4,946,000. The Company's Paradise, Modesto, and Visalia branches, which were opened in August 2000, January 2000, and August 1999, respectively, accounted for $103,000 of the increase in salaries and benefits expense. Increases in personnel and commission payments related to the sale of non-deposit investment products accounted for an additional $136,000 of the increase in salaries and benefits expense noted above. Excluding the increases due to the recently opened branches and non-deposit investment products noted above, salaries and benefits expense would have increased 5.7% from the year early quarter. Other expenses increased $173,000 (4.1%) to $4,359,000. For the first nine months noninterest expenses increased $1,766,000 (6.8%) in 2000 compared to 1999. Salary and benefit expense increased $1,361,000 (10.2%) on a year-over-year basis. Base salaries increased $953,000 (10.5%). Other expenses increased $405,000 (3.2%). There was no significant single item that contributed to the 3.2% increase in other expenses. Provision for Income Taxes The effective tax rate for the nine months ended September 30, 2000 is 36.9% and reflects an increase from 36.7% in the year earlier period. The tax rate is lower than the statutory rate of 40.4% due primarily to nontaxable earnings from municipal bonds. Loans At September 30, 2000, loan balances were $49,466,000 (8.2%) higher than the ending balances at September 30, 1999 and $62,828,000 (10.7%) higher than the ending balances at December 31, 1999. On a year-over-year basis at September 30, commercial, real estate mortgage, and consumer loan balances were higher by $24,215,000 (8.6%), $13,948,000 (6.7%), and $18,843,000 (24.4%), respectively. Real estate construction loan balances were lower by $7,540,000 (20.9%). Securities At September 30, 2000, securities available-for-sale had a fair value of $214,063,000 and an amortized cost of $219,939,000. This portfolio contained mortgage-backed securities with an amortized cost of $121,833,000 of which $15,794,000 were CMOs. Nonperforming Loans As shown in the following table, total nonperforming assets have increased $12,287,000 (357%) to $15,728,000 in the first nine months of 2000. As noted above, $10,000,000 of the $15,728,000 nonperforming asset balance at September 30, 2000 was due to a single borrower relationship that was classified as nonaccrual in the third quarter of 2000. Nonperforming assets represent 1.63% of total assets, compared to 0.37% at year-end 1999. All nonaccrual loans are considered to be impaired when determining the valuation allowance under SFAS 114. The Bank continues to make a concerted effort to work problem and potential problem loans to reduce risk of loss. September 30, December 31, 2000 1999 Nonaccrual loans $ 14,082 $ 1,758 Accruing loans past due 90 days or more 865 923 Restructured loans (in compliance with modified terms) - - ---------- ---------- Total nonperforming loans 14,947 2,681 Other real estate owned 781 760 ---------- ---------- Total nonperforming assets $ 15,728 $ 3,441 ========== ========== Nonperforming loans to total loans 2.30% 0.46% Allowance for loan losses to nonperforming loans 75% 412% Nonperforming assets to total assets 1.63% 0.37% Allowance for loan losses to nonperforming assets 71% 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. For the Nine Months Ended September 30, 2000 1999 (in thousands) Balance, Beginning of period $ 11,037 $ 8,206 Provision charged to operations 3,500 2,585 Loans charged off (3,626) (514) Recoveries of loans previously charged off 307 108 ------------ ------------ Balance, end of period $ 11,218 $ 10,385 ============ ============ Ending loan portfolio $ 650,807 $ 601,341 ============ ============ Allowance as a percentage of ending loan portfolio 1.72% 1.73% ============ ============ Equity The following table indicates the amounts of regulatory capital of the Company.
To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio As of September 30, 2000: Total Capital to Risk Weighted Assets: Consolidated $88,332 11.93% =>$59,227 =>8.0% =>$74,034 =>10.0% Tri Counties Bank $86,622 11.72% =>$59,115 =>8.0% =>$73,894 =>10.0% Tier I Capital to Risk Weighted Assets: Consolidated $79,078 10.68% =>$29,613 =>4.0% =>$44,420 => 6.0% Tri Counties Bank $77,361 10.47% =>$29,558 =>4.0% =>$44,337 => 6.0% Tier I Capital to Average Assets: Consolidated $79,078 8.32% =>$37,999 =>4.0% =>$47,499 => 5.0% Tri Counties Bank $77,361 8.16% =>$37,945 =>4.0% =>$47,431 => 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, 1999. PART II Other Information (a) Item 6. Exhibits Filed Herewith Exhibit No. Exhibits 3.1 Articles of Incorporation, as amended to date, filed as Exhibit 3.1 to Registrant's Report on Form 10-K, filed for the year ended December 31, 1989, are incorporated herein by reference. 3.2 Bylaws, as amended to 1992, filed as Exhibit 3.2 to Registrant's Report on Form 10-K, filed for the year ended December 31, 1992, are incorporated herein by reference. 4.2 Certificate of Determination of Preferences of Series B Preferred Stock, filed as Appendix A to Registrant's Registration Statement on Form S-1 (No. 33-22738), is incorporated herein by reference. 10.1 Lease for Park Plaza Branch premises entered into as of September 29, 1978, by and between Park Plaza Limited Partnership as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.9 to the TriCo Bancshares Registration Statement on Form S-14 (Registration No. 2-74796) is incorporated herein by reference. 10.2 Lease for Administration Headquarters premises entered into as of April 25, 1986, by and between Fortress-Independence Partnership (A California Limited Partnership) as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.6 to Registrant's Report on Form 10-K filed for the year ended December 31, 1986, is incorporated herein by reference. 10.3 Lease for Data Processing premises entered into as of April 25, 1986, by and between Fortress-Independence Partnership (A California Limited Partnership) as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.7 to Registrant's Report on Form 10-K filed for the year ended December 31, 1986, is incorporated herein by reference. 10.4 Lease for Chico Mall premises entered into as of March 11, 1988, by and between Chico Mall Associates as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.4 to Registrant's Report on Form 10-K filed for the year ended December 31, 1988, is incorporated by reference. 10.5 First amendment to lease entered into as of May 31, 1988 by and between Chico Mall Associates and Tri Counties Bank, filed as Exhibit 10.5 to Registrant's Report on Form 10-K filed for the year ended December 31, 1988, is incorporated by reference. 10.9 Employment Agreement of Robert H. Steveson, dated December 12, 1989 between Tri Counties Bank and Robert H. Steveson, filed as Exhibit 10.9 to Registrant's Report on Form 10-K filed for the year ended December 31, 1989, is incorporated by reference. 10.11 Lease for Purchasing and Printing Department premises entered into as of February 1, 1990, by and between Dennis M. Casagrande as lessor and Tri Counties Bank as lessee, filed as Exhibit 10.11 to Registrant's Report on Form 10-K filed for the year ended December 31, 1991, is incorporated herein by reference. 10.12 Addendum to Employment Agreement of Robert H. Steveson, dated April 9, 1991, filed as Exhibit 10.12 to Registrant's Report on Form 10-K filed for the year ended December 31, 1991, is incorporated herein by reference. 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 November 7, 2000 /s/ Richard P. Smith ---------------------- ----------------------- President and Chief Executive Officer Date November 7, 2000 /s/ Thomas J. Reddish ---------------------- ----------------------- Vice President and Chief Financial Officer EX-27 2 0002.txt EX-27
9 0000356171 TRICO BANCSHARES 1,000 9-MOS DEC-31-2000 SEP-30-2000 43,948 800 6,400 0 0 214,063 214,063 650,807 11,218 961,981 808,610 13,600 13,194 45,488 0 0 50,627 30,462 961,981 45,918 10,536 312 56,766 18,084 20,959 35,807 3,500 0 27,779 15,728 15,728 0 0 9,919 1.38 1.35 9.07 14,082 865 0 0 11,037 3,626 307 11,218 11,218 0 0
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