-----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, TiHAcf4E/qSNVK8/YtpEchW19Y7px8g8fkQUpnO4hnARwSF4BjVjNirlhUULnY1j 99SMivk4lzFAnykwVeSnRQ== 0000356171-02-000030.txt : 20020813 0000356171-02-000030.hdr.sgml : 20020813 20020813164747 ACCESSION NUMBER: 0000356171-02-000030 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRICO BANCSHARES / CENTRAL INDEX KEY: 0000356171 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 942792841 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10661 FILM NUMBER: 02730275 BUSINESS ADDRESS: STREET 1: TRICO BANCSHARES STREET 2: 63 CONSTITUTION DRIVE CITY: CHICO STATE: CA ZIP: 95973 BUSINESS PHONE: 5308980300 MAIL ADDRESS: STREET 1: TRICO BANCSHARES STREET 2: 63 CONSTITUTION DRIVE CITY: CHICO STATE: CA ZIP: 95973 10-Q 1 tcb10q2q02.txt TCBK - 06/30/02 FORM 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, 2002 Commission file number 0-10661 - ------------------------------- ------------------------------ TRICO BANCSHARES (Exact name of registrant as specified in its charter) California 94-2792841 - ------------------------------ ------------------- (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification No.) 63 Constitution Drive, Chico, California 95973 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 530/898-0300 - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of Class: Common stock, no par value Outstanding shares as of August 12, 2002: 7,025,690
TRICO BANCSHARES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) June 30, December 31, ------------------ ------------------ 2002 2001 Assets: Cash and due from banks $ 54,094 $ 59,264 Federal funds sold and repurchase agreements 27,800 18,700 ------------------ ------------------ Cash and cash equivalents 81,894 77,964 Securities available-for-sale 234,544 224,590 Loans, net of allowance for loan losses of $13,613 and $13,058, respectively 658,187 645,674 Premises and equipment, net 16,195 16,457 Cash Value of Life Insurance 14,927 14,602 Other real estate owned 71 71 Accrued interest receivable 5,419 5,522 Intangible assets 4,615 5,070 Other assets 13,709 15,497 ------------------ ------------------ Total assets $ 1,029,561 $ 1,005,447 ================== ================== Liabilities: Deposits: Noninterest-bearing demand $ 188,546 $ 190,386 Interest-bearing demand 169,343 165,542 Savings 255,264 247,399 Time certificates 284,757 277,066 ------------------ ------------------ Total deposits 897,910 880,393 Accrued interest payable and other liabilities 15,589 15,165 Long term borrowings 22,940 22,956 ------------------ ------------------ Total liabilities 936,439 918,514 Shareholders' equity: Common stock 50,047 49,679 Retained earnings 41,682 37,909 Accumulated other comprehensive income (loss) 1,393 (655) ------------------ ------------------ Total shareholders' equity 93,122 86,933 ------------------ ------------------ Total liabilities and shareholders' equity $ 1,029,561 $ 1,005,447 ================== ================== See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
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, 2002 2001 2002 2001 Interest income: Interest and fees on loans $ 13,046 $ 14,968 $ 26,054 $ 29,861 Interest on investment securities-taxable 2,309 2,258 4,539 4,956 Interest on investment securities-tax exempt 553 554 1,107 1,111 Interest on federal funds sold 167 547 333 951 ---------------- --------------- -------------- -------------- Total interest income 16,075 18,327 32,033 36,879 ---------------- --------------- -------------- -------------- Interest expense: Interest on deposits 2,857 5,816 5,801 12,506 Interest on other borrowings 322 507 641 1,012 ---------------- --------------- -------------- -------------- Total interest expense 3,179 6,323 6,442 13,518 ---------------- --------------- -------------- -------------- Net interest income 12,896 12,004 25,591 23,361 Provision for loan losses 500 775 1,300 2,650 ---------------- --------------- -------------- -------------- Net interest income after provision for loan losses 12,396 11,229 24,291 20,711 Noninterest income: Service charges and fees 2,141 2,097 4,114 3,970 Gain on sale of insurance company stock - - - 1,756 Other income 1,802 1,480 3,655 2,879 ---------------- --------------- -------------- -------------- Total noninterest income 3,943 3,577 7,769 8,605 ---------------- --------------- -------------- -------------- Noninterest expenses: Salaries and related expenses 5,773 5,207 11,512 10,334 Other, net 5,190 5,026 9,853 9,638 ---------------- --------------- -------------- -------------- Total noninterest expenses 10,963 10,233 21,365 19,972 ---------------- --------------- -------------- -------------- Net income before income taxes 5,376 4,573 10,695 9,344 Income taxes 2,011 1,736 4,001 3,528 ---------------- --------------- -------------- -------------- Net income $ 3,365 $ 2,837 $ 6,694 $ 5,816 ================ =============== ============== ============== Basic earnings per common share $ 0.48 $ 0.40 $ 0.96 $ 0.82 ================ =============== ============== ============== Diluted earnings per common share $ 0.47 $ 0.39 $ 0.93 $ 0.80 ================ =============== ============== ============== See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
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, 2001 7,000,980 $49,679 $37,909 ($655) $86,933 Exercise of Common Stock options 34,710 439 439 Repurchase of Common Stock (10,000) (71) (119) (190) Common stock cash dividends (2,802) (2,802) Comprehensive income: Net income 6,694 6,694 $6,694 Other comprehensive income: Change in unrealized loss on securities, net of tax 2,048 2,048 2,048 ----------------- Comprehensive income $8,742 ----------------------------------------------------------------------------------- Balance, June 30, 2002 7,025,690 $50,047 $41,682 $1,393 $93,122 ------------------------------------------------------------------ See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
TRICO BANCSHARES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) For the six months ended June 30, 2002 2001 -------------- -------------- Operating activities: Net income $ 6,694 $ 5,816 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 1,300 2,650 Provision for losses on other real estate owned - 18 Depreciation and amortization 1,316 1,349 Amortization of intangible assets 455 455 Accretion and amortization of investment securities discounts and premiums, net 702 100 Deferred income taxes (66) 169 Investment security (gains) losses, net - (1,756) Gain on sale of OREO - (31) Gain on sale of loans (1,502) (798) Loss on sale of fixed assets 19 8 Decrease in interest receivable 103 994 (Decrease) increase in interest payable (849) 304 Decrease (increase) in other assets and liabilities 1,674 (1,386) -------------- -------------- Net cash provided by operating activities 9,846 7,892 -------------- -------------- Investing activities: Proceeds from maturities of securities available-for-sale 60,067 43,044 Proceeds from sales of securities available-for-sale - 3,265 Purchases of securities available-for-sale (67,448) (127) Proceeds from sale of fixed assets 8 9 Net increase in loans (12,311) (24,297) Purchases of premises and equipment (942) (1,221) Proceeds from sale of OREO - 784 -------------- -------------- Net cash provided by (used in) investing activities (20,626) 21,457 -------------- -------------- Financing activities: Net increase in deposits 17,517 6,891 Net decrease in Fed funds purchased - (500) Payments of principal on long-term debt agreements (16) (1,014) Repurchase of common stock (190) (2,710) Cash dividends - Common (2,802) (2,831) Exercise of common stock options 201 318 -------------- -------------- Net cash provided by financing activities 14,710 154 -------------- -------------- Increase in cash and cash equivalents 3,930 29,503 Cash and cash equivalents at beginning of period 77,964 58,190 -------------- -------------- Cash and cash equivalents at end of period $ 81,894 $ 87,693 ============== ============== Supplemental information Cash paid for taxes $ 2,000 $ 3,100 Cash paid for interest $ 7,291 $ 13,214 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
Item 1. Notes to Unaudited 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 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, 2002 and 2001 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, 2001. Certain amounts previously reported in the 2001 financial statements have been reclassified to conform to the 2002 presentation. These reclassifications did not affect previously reported net income or total shareholders' equity. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 141, "Business Combinations" (SFAS 141), and Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized after 2001, but instead be periodically evaluated for impairment. Intangible assets with definite useful lives are required to be amortized over their respective estimated useful lives to their estimated residual values, and also reviewed for impairment. Effective January 1, 2002, the Company was required to adopt the provisions of SFAS 142. Accordingly, any goodwill and any intangible asset determined to have an indefinite useful life that are acquired in a purchase business combination will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate accounting literature. The Company was also required to reassess the useful lives and residual values of all such intangible assets and make any necessary amortization period adjustments by March 31, 2002. No such adjustments were required to be made. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company was required to test the intangible asset for impairment in the first quarter of 2002. The Company has no intangibles with indefinite useful life. As of the date of adoption, the Company had identifiable intangible assets consisting of core deposit premiums and minimum pension liability. Core deposit premiums are amortized using an accelerated method over a period of ten years. Intangible assets related to minimum pension liability are adjusted annually based upon actuarial estimates. The Company has no goodwill (unidentifiable intangible assets). As of June 30, 2002 and December 31, 2001, the Company had unamortized core deposit premiums of $4,097,000 and $4,553,000, respectively. Amortization of core deposit premiums was $454,000 during the first six months of 2002 and 2001. Core deposit premiums are scheduled to amortize at a rate of $228,000 per quarter through the quarter ended December 31, 2006. Note B - Comprehensive Income For the Company, comprehensive income includes net income reported on the statement of income, changes in the fair value of its available-for-sale investments and changes in minimum pension liability reported as other comprehensive income. The following table presents net income adjusted by these elements to determine total comprehensive income (in thousands). Three months ended Six months ended June 30, June 30, 2002 2001 2002 2001 Net income $ 3,365 $ 2,837 $ 6,694 $ 5,816 Net change in unrealized gains (losses) on securities available-for-sale 2,004 (172) 2,048 284 Net change in minimum pension liability - (360) - (360) -------- -------- -------- -------- Comprehensive income $ 5,369 $ 2,305 $ 8,742 $ 5,740 ======== ======== ======== ======== 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, 2002 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $3,365 7,011,306 $0.48 Common stock options outstanding -- 202,494 --------- Diluted Earnings per Share Net income available to common shareholders $3,365 7,213,800 $0.47 ====== ========= Three Months Ended June 30, 2001 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $2,837 7,078,085 $0.40 Common stock options outstanding -- 132,268 --------- Diluted Earnings per Share Net income available to common shareholders $2,837 7,210,353 $0.39 ====== ========= Six Months Ended June 30, 2002 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $6,694 7,001,945 $0.96 Common stock options outstanding -- 163,908 --------- Diluted Earnings per Share Net income available to common shareholders $6,694 7,165,853 $0.93 ====== ========= Six Months Ended June 30, 2001 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share Net income available to common shareholders $5,816 7,109,299 $0.82 Common stock options outstanding -- 130,553 --------- Diluted Earnings per Share Net income available to common shareholders $5,816 7,239,852 $0.80 ====== ========= 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 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 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, 2002 Net interest income $12,643 $253 $12,896 Noninterest income 3,064 879 3,943 Noninterest expense 10,401 562 10,963 Net income 3,011 354 3,365 Assets $1,012,726 $16,835 $1,029,561 Three Months Ended June 30, 2001 Net interest income $11,749 $255 $12,004 Noninterest income 2,944 633 3,577 Noninterest expense 9,787 446 10,233 Net income 2,623 214 2,837 Assets $965,400 $14,893 $980,293 Six Months Ended June 30, 2002 Net interest income $25,105 $486 $25,591 Noninterest income 6,275 1,494 7,769 Noninterest expense 20,304 1,061 21,365 Net income 6,124 570 6,694 Assets $1,012,726 $16,835 $1,029,561 Six Months Ended June 30, 2001 Net interest income $22,910 $451 $23,361 Noninterest income 7,279 1,326 8,605 Noninterest expense 19,057 915 19,972 Net income 5,400 416 5,816 Assets $965,400 $14,893 $980,293 Note E - Noninterest Income Included in the results for the six months ended June 30, 2001 and the three months ended March 31, 2001 is a one-time pre-tax income item of $1,756,000. This one-time item represents the realized gain recorded by the Company upon the sale of 88,796 common shares of John Hancock Financial Services, Inc. (JHF) for proceeds of $3,265,000. Note F - Stock Repurchase Plan On March 15, 2001, the Company announced the completion of its stock repurchase plan initially announced on July 20, 2000. Under this repurchase plan, the Company repurchased a total of 150,000 shares of which 110,000 shares were repurchased since December 31, 2000. On October 19, 2001, the Company announced the completion of its stock repurchase plan initially announced on March 15, 2001. Under this repurchase plan, the Company repurchased a total of 150,000 shares. Also on October 19, 2001, the Company announced that its Board of Directors approved a new plan to repurchase, as conditions warrant, up to 150,000 additional 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 150,000 shares covered by this repurchase plan represent approximately 2.2% of the Company's 6,992,080 common shares outstanding on October 19, 2001. As of December 31, 2001, the Company repurchased 108,800 shares under this new plan. During the quarters ended March 31, 2002 and June 30, 2002, the Company repurchased 10,000 and 0 shares under this new plan, respectively. Note G - Shareholder Rights Plan On June 25, 2001, the Company announced that its Board of Directors adopted and entered into a Shareholder Rights Plan designed to protect and maximize shareholder value and to assist the Board of Directors in ensuring fair and equitable benefit to all shareholders in the event of a hostile bid to acquire the Company. The Company adopted this Rights Plan to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, the Rights Plan imposes a significant penalty upon any person or group that acquires 15% or more of the Company's outstanding common stock without the approval of the Company's Board of Directors. The Rights Plan was not adopted in response to any known attempt to acquire control of the Company. Under the Rights Plan, a dividend of one Preferred Stock Purchase Right was declared for each common share held of record as of the close of business on July 10, 2001. No separate certificates evidencing the Rights will be issued unless and until they become exercisable. The Rights generally will not become exercisable unless an acquiring entity accumulates or initiates a tender offer to purchase 15% or more of the Company's common stock. In that event, each Right will entitle the holder, other than the unapproved acquirer and its affiliates, to purchase either the Company's common stock or shares in an acquiring entity at one-half of market value. The Right's initial exercise price, which is subject to adjustment, is $49.00. The Company's Board of Directors generally will be entitled to redeem the Rights at a redemption price of $.01 per Right until an acquiring entity acquires a 15% position. The Rights expire on July 10, 2011. 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. Within Management's Discussion and Analysis of Financial Condition and Results of Operations, interest income and net interest income are generally presented on a fully tax-equivalent (FTE) 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. The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to the adequacy of the allowance for loan losses, investments, intangible assets, income taxes and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. (See caption "Allowance for Loan Losses" for a more detailed discussion). The following discussion and analysis is designed to provide a better understanding of the significant changes and trends related to the Company and its subsidiaries' financial condition, operating results, asset and liability management, liquidity and capital resources and should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto. Overview The Company had earnings of $3,365,000 for the quarter ended June 30, 2002. The quarterly earnings represent an 18.6% increase over the $2,837,000 reported for the same period of 2001. Diluted earnings per share for the second quarter of 2002 were $0.47 versus $0.39 in the year earlier period. Earnings for the six months ended June 30, 2002 were $6,694,000 versus year ago results of $5,816,000, and represented a 15.1% increase. The diluted earnings per share were $0.93 and $0.80 for the respective six-month periods. Included in the results for the three months ended March 31, 2001 and the six months ended June 30, 2001, was a one-time pre-tax gain of $1,756,000 from the sale of insurance company stock. Excluding the one-time gain noted above, the Company would have reported diluted earnings per share of $0.93 and $0.65 in the six month periods ended June 30, 2002 and 2001, respectively. The improvement in results from the year-ago quarter was due to a $930,000 (7.6%) increase in fully tax-equivalent net interest income to $13,222,000, a $275,000 (35.5%) decrease in provision for loan losses to $500,000, and a $366,000 (10.2%) increase in noninterest income to $3,943,000. These contributing factors were partially offset by a $730,000 (7.1%) increase in noninterest expense to $10,963,000 for the quarter ended June 30, 2002. The improvement in results for the six month period ended June 30, 2002 compared to the results for the six month period ended June 30, 2001 was due to a $2,283,000 (9.5%) increase in fully tax-equivalent net interest income to $26,222,000, a $1,350,000 (50.9%) decrease in provision for loan losses to $1,300,000, and a $920,000 (13.4%) increase in noninterest income to $7,769,000 from $6,849,000 for the six months ended June 30, 2001, and excluding the one-time gain of $1,756,000 from the sale of insurance company stock in the six months ended June 30, 2001. These contributing factors were partially offset by a $1,393,000 (7.0%) increase in noninterest expense to $21,365,000 for the six months ended June 30, 2002. During the quarters ended June 30, 2002 and 2001, the Company's net interest margin was 5.74% and 5.59%, respectively, on interest-earning asset balances averaging $921,486,000 and $880,068,000, respectively. These improvements in both net interest margin and interest earning asset balances resulted in a $930,000 (7.6%) increase in fully tax-equivalent net interest income to $13,222,000 in the quarter ended June 30, 2002 compared to $12,292,000 in the quarter ended June 30, 2001. During the six months ended June 30, 2002 and 2001, the Company's net interest margin was 5.75% and 5.45%, respectively, on interest-earning asset balances averaging $912,041,000 and $878,299,000, respectively. These improvements in both net interest margin and interest earning asset balances resulted in a $2,283,000 (9.5%) increase in fully tax-equivalent net interest income to $26,222,000 in the six months ended June 30, 2002 compared to $23,939,000 in the six months ended June 30, 2001. Provision for loan losses for the second quarter of 2002 was $500,000 versus $775,000 in the same quarter in 2001. The Company had net loan charge-offs of $224,000 in the second quarter of 2002 compared to $196,000 of net loan charge-offs in the same period of 2001. Nonperforming loans were $9,533,000, $6,050,000, and $5,994,000 as of June 30, 2002, December 31, 2001, and June 30, 2001, respectively, net of U.S. Government and U.S. Government sponsored agency guarantees of $8,801,000, $387,000, and $950,000, respectively. As of June 30, 2002 and 2001, the ratio of allowance for loan losses to total loans was 2.03% and 1.80%, respectively. Provision for loan losses for the six months ended June 30, 2002 was $1,300,000 versus $2,650,000 in the six months ended June 30, 2001. The Company had net loan charge-offs of $745,000 in the first half of 2002 compared to $2,400,000 of net loan charge-offs in the same period of 2001. Noninterest income increased $366,000 (10.2%) to $3,943,000 in the quarter ended June 30, 2002 from $3,577,000 in the quarter ended June 30, 2001. The increase in noninterest income from the year-ago quarter was mainly due to a $190,000 (34.6%) increase in commissions on sales of non-deposit investment products to $738,000, an $83,000 (23.4%) increase in ATM fees to $438,000, and a $61,000 (12.7%) increase in gain on sale of loans to $539,000. For the six months ended June 30, 2002, noninterest income was down $836,000 (9.7%) over the same period for 2001. Included in the results of the six months ended June 30, 2001, and the three months ended March 31, 2001 was a one-time pre-tax income item of $1,756,000 from the sale of insurance company stock. Excluding this one-time event, noninterest income for the six months ended June 30, 2002 would have increased $920,000 (13.4%) to $7,769,000 from 6,849,000 for the six months ended June 30, 2001. Service charges and fee income was up $144,000 (3.6%) to $4,114,000 mainly due to increased ATM fees. Other income increased $776,000 (27.0%) to $3,655,000. Accounting for the increase in other income was a $704,000 (88.2%) increase in gain on sale of loans from $798,000 to $1,502,000, and a $92,000 (7.8%) increase in commissions on the sale of insurance, mutual funds and annuities from $1,185,000 to $1,277,000. Noninterest expense increased $730,000 (7.1%) to $10,963,000 in the quarter ended June 30, 2002 from $10,233,000 in the quarter ended June 30, 2001. This increase in noninterest expense was mainly due to a $566,000 (10.9%) increase in salary and benefit expense to $5,773,000. Compared to the year-ago quarter, base salaries were up $163,000 (4.6%) to $3,704,000 while commissions and other sales incentives were up $305,000 (57.0%) to $839,000, and benefits including retirement expense, insurance, and payroll taxes were up $97,000 (8.9%) to $1,189,000 in the quarter ended June 30, 2002. Average full-time equivalent employees were up 30 (7.5%) to 428 during the quarter ended June 30, 2002 from 398 during the year-ago quarter. For the first six months of 2002, noninterest expenses increased $1,393,000 (7.0%) to $21,365,000 compared to $19,972,000 for the six months ended June 30, 2001. Salary and benefit expense increased $1,178,000 (11.4%) to $11,512,000. Base salary expense increased $315,000 (4.5%) due to a 27 (6.8%) increase in average full-time equivalent employees to 422. Commissions and other sales incentives were up $541,000 (47.1%) to $1,690,000, and benefits including retirement expense, insurance, and payroll taxes were up $321,000 (15.2%) to $2,431,000 in the six months ended June 30, 2002. Other noninterest expenses increased $215,000 (2.2%) to $9,853,000. Assets of the Company totaled $1,029,561,000 at June 30, 2002, and represents increases of $24,114,000 (2.4%) from $1,005,447 at December 31, 2001, and $49,268,000 (5.0%) from $980,293,000 at June 30, 2001. As of June 30, 2002, on an annualized basis, the Company realized a return on assets of 1.34% and a return on equity of 14.80% versus 1.21% and 13.48% in the first half of 2001. As of June 30, 2002, TriCo Bancshares had a Tier 1 capital ratio of 10.8% and a total risk-based capital ratio of 12.0%. The following tables provide a summary of the major elements of income and expense for the second quarter of 2002 compared with the second quarter of 2001 and for the first six months of 2002 compared with the first six months of 2001. TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Three months ended June 30, Percentage 2002 2001 Change increase (decrease) Interest income $ 16,401 $ 18,615 -11.9% Interest expense 3,179 6,323 -49.7% ----------- ----------- Net interest income 13,222 12,292 7.6% Provision for loan losses 500 775 -35.5% ----------- ----------- Net interest income after provision for loan losses 12,722 11,517 10.5% Noninterest income 3,943 3,577 10.2% Noninterest expenses 10,963 10,233 7.1% ----------- ----------- Net income before income taxes 5,702 4,861 17.3% Income taxes 2,011 1,736 15.8% Tax equivalent adjustment1 326 288 13.2% ----------- ----------- Net income $ 3,365 $ 2,837 18.6% =========== =========== Diluted earnings per common share $ 0.47 $ 0.39 20.5% 1Interest on tax-free securities is reported on a tax equivalent basis of 1.57 and 1.52 for June 30, 2002 and 2001, respectively. TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (in thousands, except earnings per common share) Six months ended June 30, Percentage 2002 2001 Change increase (decrease) Interest income $ 32,664 $ 37,457 -12.8% Interest expense 6,442 13,518 -52.3% ----------- ----------- Net interest income 26,222 23,939 9.5% Provision for loan losses 1,300 2,650 -50.9% ----------- ----------- Net interest income after provision for loan losses 24,922 21,289 17.1% Noninterest income 7,769 8,605 -9.7% Noninterest expenses 21,365 19,972 7.0% ----------- ----------- Net income before income taxes 11,326 9,922 14.2% Income taxes 4,001 3,528 13.4% Tax equivalent adjustment1 631 578 9.2% ----------- ----------- Net income $ 6,694 $ 5,816 15.1% =========== =========== Diluted earnings per common share $ 0.93 $ 0.80 16.3% 1Interest on tax-free securities is reported on a tax equivalent basis of 1.57 and 1.52 for June 30, 2002 and 2001, respectively. Net Interest Income / Net Interest Margin Net interest income represents the excess of interest and fees earned on interest-earning assets (loans, securities and Federal Funds sold) over the interest paid on deposits and borrowed funds. Net interest margin is net interest income expressed as a percentage of average earning assets. Net interest income comprises the major portion of the Bank's income. Throughout the first six months of 2002, the Fed Reserve Bank maintained the Fed funds target rate 1.75%. In comparison, the Fed funds target rate fell from 6.50% to 3.75% during the first six months of 2001. The Fed funds target rate is an important rate because the prime lending rate generally tracks the Fed funds rate, and the interest rates on most of the Company's variable rate loans are tied to the prime lending rate. When the Fed funds target rate changes as drastically as it has, the Company must be able to appropriately adjust the rate it pays on its deposits, or the mix of its deposits, if it is to maintain its net interest margin at a high level. Through out 2001, and during the first six months of 2002, the Company has been successful in adjusting its deposit rates and the mix of its deposit in order to maintain its net interest margin at a relatively high level. For the three months ended June 30, 2002, interest income on a fully tax-equivalent basis decreased $2,214,000 (11.9%) over the same period in 2001. The average balance of total earning assets was higher by $41,418,000 (4.7%). Average loan and securities balances were up $9,933,000 (1.6%) and $42,741,000 (22.3%), respectively, while average Fed funds sold balances were down $11,256,000 (22.6%). The average yield on loans, securities and Fed funds sold was lower by 132, 104 and 265 basis points respectively. The overall yield on average earning assets decreased 134 basis points to 7.12%. For the second quarter of 2001, interest expense decreased $3,144,000 (49.7%) over the year earlier period. The average balance of interest-bearing liabilities was up $20,772,000 (2.9%). The average rate paid on interest bearing liabilities decreased 182 basis points to 1.74% from the year-ago quarter. The combined effect of the decreases in interest income and interest expense for the second quarter of 2002 versus 2001 resulted in an increase of $930,000 (7.6%) in fully tax-equivalent net interest income. Fully tax-equivalent net interest margin was up 15 basis points to 5.74% from 5.59% for the same periods in 2002 and 2001. The six-month period ending June 30, 2002, reflects a fully tax-equivalent interest income decrease of $4,793,000 (12.8%) over the same period in 2001. The average balance of total earning assets was higher by $33,742,000 (3.8%). Average loan and securities balances were up $9,637,000 (1.53%) and $25,057,000 (12.4%), respectively, while average fed funds sold balances were down $952,000 (2.4%). The average yield on loans, securities and Fed funds sold was lower by 132, 104 and 304 basis points respectively. The overall yield on average earning assets decreased 137 basis points to 7.16%. Interest expense for the six-month period end June 30, 2002 decreased $7,076,000 (52.4%) from the same period in 2001. The average balance of total interest-bearing liabilities increased $13,678,000 (1.9%). The average rate paid on total interest-bearing liabilities decreased 202 basis points to 1.78%. The net effect of the decreases in fully tax-equivalent interest income and interest expense for the first six months of 2002 versus 2001 was an increase of $2,283,000 (9.5%) in fully tax-equivalent net interest income. Fully tax-equivalent net interest margin increased 30 basis points to 5.75% from 5.45%. The following four tables provide summaries of the components of the fully tax-equivalent interest income, interest expense and fully tax-equivalent net interest margin on earning assets for the quarter and six month periods ended June 30, 2002 versus the same periods in 2001.
TRICO BANCSHARES ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS (in thousands) Three Months Ended June 30, 2002 June 30, 2001 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning assets Loan 2,3 $ 648,618 $ 13,046 8.05% $638,685 $ 14,968 9.37% Securities4 234,216 3,188 5.44% 191,475 3,100 6.48% Federal funds sold 38,652 167 1.73% 49,908 547 4.38% -------------- ------------ ----------- ------------- ------------ ----------- Total earning assets 921,486 16,401 7.12% 880,068 18,615 8.46% ------------ ------------ Cash and due from bank 45,100 39,940 Premises and equipment 16,260 16,955 Other assets,net 40,443 40,965 Less: allowance for loan losses (13,562) (11,605) -------------- ------------- Total $ 1,009,727 $966,323 ============== ============= Liabilities and shareholders' equity Interest-bearing Demand deposits $ 173,782 114 0.26% $150,471 435 1.16% Savings deposits 256,153 675 1.05% 216,534 1,163 2.15% Time deposits 277,202 2,068 2.98% 309,439 4,218 5.45% Long-term debt 23,109 322 5.57% 33,030 507 6.14% -------------- ------------ ----------- ------------- ------------ ----------- Total interest-bearing liabilities 730,246 3,179 1.74% 709,474 6,323 3.56% ------------ ------------ Noninterest-bearing deposits 172,442 154,336 Other liabilities 15,610 16,172 Shareholders' equity 91,429 86,341 -------------- ------------- Total liabilities and shareholders' equity $ 1,009,727 $966,323 ============== ============= Net interest rate spread5 5.38% 4.90% Net interest income/net $ 13,222 $ 12,292 ============ ============ interest margin6 5.74% 5.59% ============ ============
1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $997,000 in 2002 and $772,000 in 2001. 4Interest income is stated on a tax equivalent basis of 1.57 and 1.52 at June 30, 2002 and 2001, respectively. 5Net interest rate spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. 6Net interest margin is computed by dividing net interest income by total average earning assets.
TRICO BANCSHARES ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS (in thousands) Six Months Ended June 30, 2002 June 30, 2001 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate Assets Earning assets Loan 2,3 $ 645,350 $26,054 8.07% $ 635,713 $29,861 9.39% Securities4 227,504 6,277 5.52% 202,447 6,645 6.56% Federal funds sold 39,187 333 1.70% 40,139 951 4.74% -------------- ------------ ---------- ------------- ------------ ----------- Total earning assets 912,041 32,664 7.16% 878,299 37,457 8.53% ------------ ------------ Cash and due from bank 44,504 40,229 Premises and equipment 16,309 16,923 Other assets,net 40,646 40,388 Less: allowance for loan losses (13,401) (12,020) -------------- ------------- Total $ 1,000,099 $ 963,819 ============== ============= Liabilities and shareholders' equity Interest-bearing Demand deposits $ 172,694 235 0.27% $ 151,428 957 1.26% Savings deposits 254,916 1,355 1.06% 217,418 2,787 2.56% Time deposits 273,947 4,211 3.07% 308,959 8,762 5.67% Long-term debt 23,030 641 5.57% 33,109 1,012 6.11% -------------- ------------ ---------- ------------- ------------ ----------- Total interest-bearing liabilities 724,587 6,442 1.78% 710,914 13,518 3.80% ------------ ------------ Noninterest-bearing deposits 169,747 150,978 Other liabilities 15,298 15,610 Shareholders' equity 90,467 86,317 -------------- ------------- Total liabilities and shareholders' equity $ 1,000,099 $ 963,819 ============== ============= Net interest rate spread5 5.38% 4.73% Net interest income/net $26,222 $23,939 ============ ============ interest margin6 5.75% 5.45% ============ ============
1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $1,973,000 in 2002 and $1,474,000 in 2001. 4Interest income is stated on a tax equivalent basis of 1.57 and 1.52 at June 30, 2002 and 2001, respectively. 5Net interest rate spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. 6Net interest margin is computed by dividing net interest income by total average earning assets. TRICO BANCSHARES ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSE (in thousands) For the three months ended June30, 2002 over 2001 Yield/ Volume Rate4 Total ---------- --------- -------- Increase (decrease) in interest income: Loans 1,2 $ 233 $ (2,155) (1,922) Investment securities3 692 (604) 88 Federal funds sold (123) (257) (380) ---------- --------- -------- Total 802 (3,016) (2,214) ---------- --------- -------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 67 (388) (321) Savings deposits 213 (701) (488) Time deposits (439) (1,711) (2,150) Long-term debt (152) (33) (185) ---------- --------- -------- Total (311) (2,833) (3,144) ---------- --------- -------- Increase in net interest income $ 1,113 $ (183) $ 930 ========== ========= ======== 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $997,000 in 2002 and $772,000 in 2001. 3Interest income is stated on a tax equivalent basis of 1.57 and 1.52 for June 30, 2002 and 2001, respectively. 4The rate/volume variance has been included in the rate variance. TRICO BANCSHARES ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSE (in thousands) For the six months ended June 30, 2002 over 2001 Yield/ Volume Rate4 Total --------- ----------- ----------- Increase (decrease) in interest income: Loans 1,2 $ 453 $ (4,260) $ (3,807) Investment securities3 822 (1,190) (368) Federal funds sold (23) (595) (618) --------- ----------- ----------- Total 1,252 (6,045) (4,793) --------- ----------- ----------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 134 (856) (722) Savings deposits 481 (1,913) (1,432) Time deposits (993) (3,558) (4,551) Long-term debt (308) (63) (371) --------- ----------- ----------- Total (686) (6,390) (7,076) --------- ----------- ----------- Increase in net interest income $ 1,938 $ 345 $ 2,283 ========= =========== =========== 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $1,973,000 in 2002 and $1,474,000 in 2001. 3Interest income is stated on a tax equivalent basis of 1.57 and 1.52 for June 30, 2002 and 2001, respectively. 4The rate/volume variance has been included in the rate variance. Provision for Loan Losses The Bank provided $500,000 for loan losses in the second quarter of 2002 versus $775,000 in 2001. Net charge-offs for all loans in the second quarter of 2002 totaled $224,000 versus $196,000 in the year earlier period. For the six months ended June 30, 2002 and 2001, the Bank provided $1,300,000 and $2,650,000 for loan losses, respectively. Net charge-offs for all loans during the six months ended June 30, 2002 and 2001 were $745,000 and $2,400,000, respectively. Included in the net charge-offs during the six months ended June 30, 2001 is $2,000,000 of charge offs related to a single borrower. Noninterest Income Noninterest income increased $366,000 (10.2%) to $3,943,000 in the quarter ended June 30, 2002 from $3,577,000 in the quarter ended June 30, 2001. The increase in noninterest income from the year-ago quarter was mainly due to a $190,000 (34.6%) increase in commissions on sales of non-deposit investment products to $738,000, an $83,000 (23.4%) increase in ATM fees to $438,000, and a $61,000 (12.7%) increase in gain on sale of loans to $539,000. For the six months ended June 30, 2002, noninterest income was down $836,000 (9.7%) over the same period for 2001. Included in the results of the six months ended June 30, 2001, and the three months ended March 31, 2001 was a one-time pre-tax income item of $1,756,000 from the sale of insurance company stock. Excluding this one-time event, noninterest income for the six months ended June 30, 2002 would have increased $920,000 (13.4%) to $7,769,000 from 6,849,000 for the six months ended June 30, 2001. Service charges and fee income was up $144,000 (3.6%) to $4,114,000 mainly due to increased ATM fees. Other income increased $776,000 (27.0%) to $3,655,000. Accounting for the increase in other income was a $704,000 (88.2%) increase in gain on sale of loans from $798,000 to $1,502,000, and a $92,000 (7.8%) increase in commissions on the sale of insurance, mutual funds and annuities from $1,185,000 to $1,277,000. Noninterest Expense Noninterest expense increased $730,000 (7.1%) to $10,963,000 in the quarter ended June 30, 2002 from $10,233,000 in the quarter ended June 30, 2001. This increase in noninterest expense was mainly due to a $566,000 (10.9%) increase in salary and benefit expense to $5,773,000. Compared to the year-ago quarter, base salaries were up $163,000 (4.6%) to $3,704,000 while commissions and other sales incentives were up $305,000 (57.0%) to $839,000, and benefits including retirement expense, insurance, and payroll taxes were up $97,000 (8.9%) to $1,189,000 in the quarter ended June 30, 2002. Average full-time equivalent employees were up 30 (7.5%) to 428 during the quarter ended June 30, 2002 from 398 during the year-ago quarter. Compared to the year-ago quarter, other noninterest expenses increased $164,000 (3.3%) to $5,190,000 during the quarter ended June 30, 2002. For the first six months of 2002, noninterest expenses increased $1,393,000 (7.0%) to $21,365,000 compared to $19,972,000 for the six months ended June 30, 2001. Salary and benefit expense increased $1,178,000 (11.4%) to $11,512,000. Base salary expense increased $315,000 (4.5%) due to a 27 (6.8%) increase in average full-time equivalent employees to 422. Commissions and other sales incentives were up $541,000 (47.1%) to $1,690,000, and benefits including retirement expense, insurance, and payroll taxes were up $321,000 (15.2%) to $2,431,000 in the six months ended June 30, 2002. Other noninterest expenses increased $215,000 (2.2%) to $9,853,000. Provision for Income Taxes The effective tax rate for the six months ended June 30, 2002 was 37.4% and reflects a decrease from 37.8% in the year earlier period. Loans At June 30, 2002, loan balances were $9,042,000 (1.4%) higher than the ending balances at June 30, 2001 and $13,068,000 (2.0%) higher than the ending balances at December 31, 2001. On a year-over-year basis at June 30, consumer and real estate construction loan balances were higher by $35,150,000 (25.8%) and $840,000 (2.1%), respectively. Commercial and real estate mortgage loan balances were lower by $12,547,000 (8.3%) and $14,401,000 (4.3%), respectively. Securities At June 30, 2002, securities available-for-sale had a fair value of $234,544,000 and an amortized cost of $231,082,000. This portfolio contained mortgage-backed securities with an amortized cost of $137,693,000 of which $8,964,000 were CMOs. At June 30, 2002, the Company had no securities classified as held-to-maturity. Nonperforming Loans As shown in the following table, total nonperforming assets net of guarantees of the U.S. Government, including its agencies and its government-sponsored agencies, have increased $3,483,000 (56.9%) to $9,604,000 in the first six months of 2002. Nonperforming assets net of guarantees represent 0.93% of total assets. Included in the balance of nonaccrual loans at June 30, 2002, are loans to one agriculture related borrower totaling $10,952,000 of which $8,444,000 is guaranteed by a U.S. Government sponsored agency as to principal and ninety days of interest. To date, the borrower has paid principal and interest in accordance with the terms of the loans, however, due to the financial condition of the borrower the Company has placed the loans in nonaccrual status. All nonaccrual loans are considered to be impaired when determining the need for a specific valuation allowance. The Company continues to make a concerted effort to work problem and potential problem loans to reduce risk of loss.
June 30, 2002 December 31, 2001 (in thousands) Gross Guaranteed Net Gross Guaranteed Net ---------------------------- --------------------------- Nonaccrual loans $17,599 $ 8,801 $ 8,798 $ 5,853 $ 387 $ 5,466 Accruing loans past due 90 days or more 735 - 735 584 - 584 ---------------------------- --------------------------- Total nonperforming loans 18,334 8,801 9,533 6,437 387 6,050 Other real estate owned 71 - 71 71 - 71 ---------------------------- --------------------------- Total nonperforming assets $18,405 $ 8,801 $ 9,604 $ 6,508 $ 387 $ 6,121 ============================ =========================== Nonperforming loans to total loans 1.44% 0.92% Allowance for loan losses to nonperforming loans 125% 216% Nonperforming assets to total assets 0.96% 0.61% Allowance for loan losses to nonperforming assets 124% 213%
Allowance for Loan Loss Credit risk is inherent in the business of lending. As a result, the Company maintains an Allowance for Loan Losses to absorb losses inherent in the Company's loan 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 Losses is meant to be an estimate of these unknown but probable losses inherent in the portfolio. For purposes of this discussion, "loans" shall include all loans and lease contracts, that are part of the Company'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 portfolio, and to a lesser extent the Company's loan 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 SFAS 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 SFAS 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, 2001. The following table presents information concerning the allowance and provision for loan losses for the six months ended. June 30, June 30, 2002 2001 (in thousands) Balance, beginning of period $ 13,058 $ 11,670 Provision charged to operations 1,300 2,650 Loans charged off (843) (2,537) Recoveries of loans previously charged off 98 137 ----------- ----------- Balance, end of period $ 13,613 $ 11,920 =========== =========== Ending loan portfolio $ 671,800 $ 662,758 =========== =========== Allowance to loans as a percentage of ending loan portfolio 2.03% 1.80% =========== =========== 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, 2002 (amounts in thousands): Total Capital to Risk Weighted Assets: Consolidated $96,188 12.01% =>$64,093 =>8.0% =>$80,116 =>10.0% Tri Counties Bank $94,099 11.77% =>$63,993 =>8.0% =>$79,917 =>10.0% Tier I Capital to Risk Weighted Assets: Consolidated $86,129 10.75% =>$32,046 =>4.0% =>$48,069 =>6.0% Tri Counties Bank $84,065 10.52% =>$31,967 =>4.0% =>$47,949 =>6.0% Tier I Capital to Average Assets: Consolidated $86,129 8.55% =>$40,282 =>4.0% =>$50,352 =>5.0% Tri Counties Bank $84,065 8.36% =>$40,204 =>4.0% =>$50,255 =>5.0%
Liquidity The Company's principal source of asset liquidity is fed funds sold and marketable investment securities available for sale. At June 30, 2002, fed funds sold and investment securities available for sale totaled $262 million, representing an increase of $19 million from December 31, 2001. In addition, the Company generates additional liquidity from its operating activities. The Company's profitability during the first six months of 2002 and 2001 generated cash flows from operations of $9.8 million and $7.9 million, respectively. Additional cash flows may be provided by financing activities, primarily the acceptance of deposits and borrowings from banks. During the six months ended June 30, 2002, sales & maturities of investment securities produced cash inflows of $60.1 million. Also, during the six months ended June 30, 2002, the Company invested $67.4 million and $12.3 million in securities and net loan growth. These changes in investment and loan balances contributed to net cash used for investing activities of $20.6 million during the six months ended June 30, 2002. Financing activities provided net cash of $14.7 million during the six months ended June 30, 2002. Deposit balance increases, and exercise of common stock options, accounted for $17.5 million and $201,000 of financing sources of funds, respectively. Dividends paid and the repurchase of common stock used $2.8 million and $190,000 of cash during the six months ended June 30, 2002, respectively. Also, the Holding Company's liquidity is dependent on dividends received from the Bank. Dividends from the Bank are subject to certain regulatory restrictions. Item 3. Qualitative and Quantitative Disclosures about Market Risk There have not been any significant changes in the market risk profile of the Bank since December 31, 2001. PART II Other Information Item 4. Submission of Matters to a Vote of Security Holders (a.) Annual Meeting held May 14, 2002. Number of shares represented in person or by proxy and constituting a quorum: 5,833,207 83% --------- --- (b.) Election of directors FOR --- William J. Casey 5,503,829 Craig S. Compton 5,505,231 Brian D. Leidig 5,505,191 Wendell J. Lundberg 5,505,393 Donald E. Murphy 5,505,431 Richard P. Smith 5,358,632 Robert H. Steveson 5,351,761 Carroll Taresh 5,494,826 Alex A. Vereschagin, Jr. 5,505,431 (c.) Ratify the appointment of KPMG LLP as independent public accountants of the Company for 2002. Votes: FOR 5,750,857, AGAINST 1,866, ABSTAIN 80,484 --------- ----- ------ Item 6. Exhibits and Reports on Form 8-K (a) 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. 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. 21.1 Tri Counties Bank, a California banking corporation, is the only subsidiary of Registrant. 99.1 CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * Previously filed (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 08/13/02 /s/ Richard P. Smith -------------------- ----------------------- Richard P. Smith President and Chief Executive Officer Date 08/13/02 /s/ Thomas J. Reddish -------------------- ----------------------- Thomas J. Reddish Vice President and Chief Financial Officer Exhibits: --------- 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. In connection with the Quarterly Report of TriCo Bancshares (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard P. Smith, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Richard P. Smith ------------------------------------- Richard P. Smith President and Chief Executive Officer 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. In connection with the Quarterly Report of TriCo Bancshares (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas J. Reddish, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Thomas J. Reddish ------------------------------------- Thomas J. Reddish Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----