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, 1995 Commission file number 0-10661
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TRICO BANCSHARES
----------------
(Exact name of registrant as specified in its charter)
California 94-2792841
- -------------------------------- -------------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
15 INDEPENDENCE CIRCLE, CHICO, CALIFORNIA 95926
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 916/898-0300
------------
- ---------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---------- ----------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Title of Class: Common stock, no par value
Outstanding shares as of August 11, 1995: 3,567,556
TRICO BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
June 30, December 31,
----------- -----------
1995 1994
---- ----
Assets:
Cash and due from banks $ 23,391 $ 39,709
Securities held-to-maturity
(approximate fair value $134,688 and $131,649) 136,996 143,788
Securities available-for-sale, net of
unrealized (loss) of $(1,054) and $(5,343) 69,003 74,706
Loans, net 303,090 301,742
Premises and equipment, net 13,251 13,198
Investment in real estate properties 1,173 1,173
Other real estate owned 1,314 1,877
Accrued interest receivable 4,555 4,748
Other assets 11,945 12,893
----------- -----------
Total assets $ 564,718 $ 593,834
----------- -----------
----------- -----------
Liabilities:
Deposits
Noninterest-bearing demand $ 78,559 $ 88,957
Interest-bearing demand 78,167 80,657
Savings 157,609 190,800
Time certificates 173,474 130,758
----------- -----------
Total deposits 487,809 491,172
Repurchase agreements - 30,457
Preferred stock payable 4,000 -
Accrued interest payable and other liabilities 6,907 5,475
Long term borrowings 16,479 18,499
----------- -----------
Total liabilities 515,195 545,603
Shareholders' equity:
Preferred stock - 3,899
Common stock 43,852 43,552
Retained earnings 6,867 4,488
Securities unrealized holdings (loss), net (1,196) (3,708)
----------- -----------
Total shareholders' equity 49,523 48,231
----------- -----------
Total liabilities and shareholders' equity $ 564,718 $ 593,834
----------- -----------
----------- -----------
2
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,
-------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
Interest income:
Interest and fees on loans $ 8,244 $ 7,371 $ 16,281 $ 14,509
Interest on investment
securities-taxable 2,975 3,123 6,105 5,979
Interest on investment
securities-tax exempt 43 62 87 123
Interest on federal funds sold 40 60 130 91
--------- --------- ---------- ----------
Total interest income 11,302 10,616 22,603 20,702
--------- --------- ---------- ----------
Interest expense:
Interest on deposits 4,111 3,375 7,861 6,839
Interest on federal funds purchased 47 41 57 61
Interest on other borrowings 283 440 896 563
--------- --------- ---------- ----------
Total interest expense 4,441 3,856 8,814 7,463
--------- --------- ---------- ----------
Net interest income 6,861 6,760 13,789 13,239
Provision for loan losses 35 15 75 30
--------- --------- ---------- ----------
Net interest income after
provision for loan losses 6,826 6,745 13,714 13,209
Noninterest income:
Service charges and fees 1,015 844 2,036 1,655
Other income 602 547 1,044 891
Securities gains (losses), net 21 19 (10) (39)
--------- --------- ---------- ----------
Total noninterest income 1,638 1,410 3,070 2,507
--------- --------- ---------- ----------
Noninterest expenses:
Salaries and related expenses 2,724 2,632 5,534 5,278
Other, net 2,747 3,017 5,493 5,672
--------- --------- ---------- ----------
Total noninterest expenses 5,471 5,649 11,027 10,950
--------- --------- ---------- ----------
Net income before income taxes 2,993 2,506 5,757 4,766
Income taxes 1,229 1,024 2,363 1,951
--------- --------- ---------- ----------
Net income 1,764 1,482 3,394 2,815
Preferred stock dividends 105 105 210 210
--------- --------- ---------- ----------
Net income available to
common shareholders $ 1,659 $ 1,377 $ 3,184 $ 2,605
Primary earnings per common share $ 0.45 $ 0.37 $ 0.86 $ 0.70
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Fully diluted earnings per common share $ 0.45 $ 0.37 $ 0.86 $ 0.70
--------- --------- ---------- ----------
--------- --------- ---------- ----------
3
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
(in thousands, except number of shares)
Preferred stock Common Stock Unrealized
-------------------- ------------------- ----------
securities
----------
Number Number Retained holding
--------- --------- -------- ----------
of shares Amounts of shares Amount earnings gain (loss) Total
--------- -------- --------- ------- -------- ----------- ---------
Balance
December 31, 1994 8,000 $ 3,899 3,513,707 $43,552 $ 4,488 $ (3,708) $ 48,231
Preferred stock redemption (8,000) (3,899) (101) (4,000)
Exercise common stock
option 0 0 20,715 196 0 0 196
Preferred stock cash
dividends 0 0 0 0 (210) 0 (210)
Common stock cash
dividends 0 0 0 0 (704) 0 (704)
Change in securities
unrealized holding gain (loss) 0 0 0 0 0 2,512 2,512
Stock option amortization 0 0 0 104 0 0 104
Net income, June 30, 1995 0 0 0 0 3,394 0 3,394
--------- -------- --------- ------- -------- --------- --------
Balance,
June 30, 1995 0 $ 0 3,534,422 $43,852 $ 6,867 $ (1,196) $ 49,523
--------- -------- --------- ------- -------- --------- --------
--------- -------- --------- ------- -------- --------- --------
4
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands)
For the six months
------------------
ended June 30
-------------
1995 1994
---- ----
Operating activities:
Net Income $ 3,394 $ 2,815
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 75 30
Provision for losses on OREO 35 22
Depreciation and amortization 780 656
Amortization of investment security discounts 59 60
Deferred Income taxes 0 (193)
Investment security (gains) losses (net) 10 39
(Gain) loss on sale of loans (23) 0
(Gain) loss on sale of other real estate owned (66) (23)
Proceeds from loan sales 3,822 9,262
Origination of loans held for sale (4,923) (3,264)
Amortization of stock options 104 166
(Increase) decrease in interest receivable 193 (698)
Increase (decrease) in interest payable 919 (654)
(Increase) decrease in other assets and liabilities (517) (887)
--------- ---------
Net cash provided by operating activities 3,862 7,331
Investing activities:
Proceeds from maturities of securities held-to-maturity 6,789 9,642
Purchases of securities held-to-maturity 0 (21,957)
Proceeds from maturities of securities available-for-sale 6,101 17,833
Proceeds from sales of securities available-for-sale 6,993 35,705
Purchases of securities available-for-sale (3,080) (66,805)
Net (increase) decrease in loans (605) (7,969)
Purchases of premises and equipment (720) (1,267)
Proceeds from sale of other real estate owned 900 1,071
Purchases and additions in real estate properties 0 (1)
--------- ---------
Net cash provided (used) by investing activities 16,378 (33,748)
Financing activities:
Net increase (decrease) in deposits (3,363) (18,349)
Net increase in federal funds purchased 0 5,400
Borrowings under repurchase agreements 0 20,598
Repayment of borrowings under repurchase agreements (30,457) 0
Borrowings under long-term debt agreements 0 11,389
Payments of principal on long-term debt agreements (2,020) (11)
Cash dividends - Preferred (210) (210)
Cash dividends - Common (704) (604)
Sale of Common Stock 196 185
--------- ---------
Net cash provided (used) by financing activities (36,558) 18,398
--------- ---------
Increase (decrease) in cash and cash equivalents (16,318) (8,019)
Cash and cash equivalents at beginning of period 39,709 42,922
--------- ---------
Cash and cash equivalents at end of period $ 23,391 $ 34,903
--------- ---------
--------- ---------
Supplemental information:
Cash paid for taxes $ 2,264 $ 1,365
Cash paid for interest expenses $ 7,895 $ 8,117
5
Item 1. NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC) and in Management's opinion, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of results for
such interim periods. Certain information and note disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to SEC rules or
regulations; however, the Company believes that the disclosures made are
adequate to make the information presented not misleading.
The interim results for the six months ended June 30, 1995 and 1994, 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, 1994.
Certain reclassifications have been made to the prior year's financial
statements in order to conform with the classifications of the June 30, 1995
financial statements.
NOTE B - IMPAIRED LOANS AND TROUBLED DEBT RESTRUCTURINGS
As of January 1, 1995, the Company adopted the FASB Statement of Financial
Accounting Standards No 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN,
(SFAS 114) and SFAS 118, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN -
INCOME RECOGNITION AND DISCLOSURES. SFAS 114 requires that certain impaired
loans be measured based on the present value of expected future cash flows
discounted at the loan's original effective interest rate. As a practical
expedient, impairment may be measured based on the loan's observable market
price or the fair value of the collateral if the loan is collateral dependent.
When the measure of the impaired loan is less than the recorded investment in
the loan, the impairment is recorded through a valuation allowance.
The Company had previously measured the allowance for loan losses using methods
similar to those prescribed in SFAS 114. As a result of adopting these
statements, no additional allowance for loan losses was required as of January
1, 1995.
6
As of June 30, 1995, the Company's recorded investment in impaired loans and the
related valuation allowance calculated under SFAS 114 are as follows:
Recorded Valuation
Investment Allowance
---------- ---------
(in thousands)
Impaired Loans -
Valuation allowance required $ 394 $ 237
No valuation allowance required 4,305 -
-------- --------
Total impaired loans $ 4,699 $ 237
-------- --------
The valuation allowance related to impaired loans under SFAS 114 is included in
the allowance for loan losses on the consolidated balance sheet at June 30,
1995. The average recorded investment in impaired loans for the six months
ended June 30, 1995 was $2,554,000.
Interest payments received on impaired loans are recorded as interest income
unless collection of the remaining recorded investment is doubtful at which time
payments received are recorded as reductions of principal. The Company
recognized interest income on impaired loans of $75,000 for the six months ended
June 30, 1995.
7
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. Unless otherwise stated, interest income and net
interest income are presented on a tax equivalent basis.
OVERVIEW
The Company earned $1,764,000 for the second quarter ended June 30, 1995 versus
$1,482,000 in 1994. Primary earnings per share for the second quarter periods
were $0.45 and $0.37, respectively. Earnings for the six months ended June 30,
1995 were $3,394,000 versus year ago results of $2,815,000. The primary
earnings per share were $.86 and $.70 for the respective six month periods.
Pretax earnings increased $487,000 or 19% in the second quarter of 1995 versus
1994 due to a combination of factors. Net interest income , noninterest income
and noninterest expenses all had favorable changes from the year ago second
quarter. Net interest income increased $84,000 or 1.2% due to higher average
rates received on earning assets and lower average balances on interest bearing
liabilities. Net interest income was unfavorably impacted by lower average
balances on earning assets and higher rates on interest bearing liabilities.
Net interest margin for the second quarter of 1995 was 5.38% versus 5.06% in
1994. Noninterest income increased $228,000 or 16.2%. Service charges and fee
revenues accounted for most of the increase. Noninterest expenses decreased
$178,000 or 3.2%. Of this amount, approximately $130,000 was attributable to
one time merger costs incurred in 1994. Increases in salaries and premise and
equipment related expenses were offset by reductions in other expenses.
Assets of the Company were $564,718,000 at June 30, 1995 which were slightly
higher than the 1995 first quarter ending balances. However, this was a
reduction of $28,952,000 from a year ago. Management has allowed the investment
portfolio to decrease as securities mature or principal payments on mortgage
backed securities take place. As a result the securities portfolio has
decreased about $18,500,000. Second quarter 1995 balances of cash and Federal
Funds sold was $11,500,000 lower than at June 30, 1994. These two items account
for most of the changes in assets. Decreases in deposit liabilities of
$10,000,000 and reverse repurchase agreements of $20,600,000 from year ago
levels offset the changes in the assets.
8
During the second quarter of 1995, the Board of Directors issued a redemption
notice on the Company's Series B Preferred Stock, with an effective date of
August 1, 1995. Accordingly, the redemption value of $4,000,000 has been
removed from the Company's capital as of June 30, 1995. With this amount
removed from the capital, TriCo Bancshares had a leverage ratio of 8.98 percent
based on ending assets, a Tier 1 capital ratio of 13.57 percent and a total
risk-based capital ratio of 14.82 percent.
Management anticipates opening two or three supermarket branches in the last
half of 1995. The Bank has contracted with Albertson's, Inc. to open branches
in several of their Northern California supermarkets. The first of these will
be in Chico and it should begin operations late in the third quarter. The
building plans and permit approval process delayed its original opening
schedule. The second was to have been in Grass Valley. However, this has been
delayed until the first quarter of 1996 to coincide with Albertson's remodel of
that store. Both of these locations have been approved by the California State
Banking Department. Discussions regarding a third Albertson's location are in
process. Additionally, the Bank is contracting with Safeway, Inc. for several
locations. The first of which will likely be Susanville. Both the Grass Valley
and Susanville locations represent the Bank's expansion into new market areas
via the supermarket strategy. After one year of operations the original four
supermarket branches had deposits totaling $26.8 million in over 5,900 accounts.
These branches are tracking fairly well along original operational projections
which estimated they would be profitable within eighteen months to two years.
The following tables provide a summary of the major elements of income and
expense for the second quarter of 1995 compared with the second quarter of 1994
and for the first six months of 1995 compared with the first six months of 1994.
9
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
Three months
ended June 30,
1995 1994 Percentage
---- ---- Change
(in thousands, except increase
earnings per share) (decrease)
Interest income $ 11,334 $ 10,665 6.3%
Interest expense 4,441 3,856 15.2%
---------- ----------
Net interest income 6,893 6,809 1.2%
Provision for loan losses 35 15 133.3%
---------- ----------
Net interest income after
provision for loan losses 6,858 6,794 0.9%
Noninterest income 1,638 1,410 16.2%
Noninterest expenses 5,471 5,649 -3.2%
---------- ----------
Net income before income taxes 3,025 2,555 18.4%
Income taxes 1,229 1,024 20.0%
Tax equivalent adjustment(1) 32 49 -33.8%
---------- ----------
Net income 1,764 1,482 19.0%
---------- ----------
---------- ----------
Preferred stock dividends (105) (105) 0.0%
Net income available to 1,659 1,377 20.5%
common stockholders'
Primary earnings per common share 0.45 0.37 22.3%
<FN>
(1) Interest on tax-free securities is reported on a tax equivalent basis of
1.75 and 1.77 for June 30, 1995 and 1994.
10
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
Six months
ended June 30,
1995 1994 Percentage
---- ---- Change
(in thousands, except increase
earnings per share) (decrease)
Interest income $ 22,668 $ 20,797 9.0%
Interest expense 8,814 7,463 18.1%
---------- ----------
Net interest income 13,854 13,334 3.9%
Provision for loan losses 75 30 150.0%
---------- ----------
Net interest income after
provision for loan losses 13,779 13,304 3.6%
Noninterest income 3,070 2,507 22.5%
Noninterest expenses 11,027 10,950 0.7%
---------- ----------
Net income before income taxes 5,822 4,861 19.8%
Income taxes 2,363 1,951 21.1%
Tax equivalent adjustment(1) 65 95 -31.5%
---------- ----------
Net income 3,394 2,815 20.6%
---------- ----------
---------- ----------
Preferred stock dividends (210) (210) 0.0%
Net income available to 3,184 2,605 22.2%
common stockholders'
Primary earnings per common share 0.86 0.70 23.2%
<FN>
(1) Interest on tax-free securities is reported on a tax equivalent basis of
1.75 and 1.77 for June 30, 1995 and 1994.
11
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.
In the quarter ended June 30, 1995, interest income increased $669,000 or 6.3
percent over the same period in 1994. Higher rates received on both loans and
investment securities and an increase in average loan balances were the
significant factors contributing to the interest income increase. Average rates
received on loans were 102 basis points or 10.3% higher and reflected the 1994
and early 1995 increases in prime rate. Average loan balances were $4,159,000
(1.4%) higher. These two items provided an increase of $873,000 in interest
income. Rates received on investment securities increased 31 basis points or
5.6% and provided additional income of $163,000. However, this increase was
offset by a decrease of $347,000 in interest income due to a reduction of
$25,150,000 in the average balance of investment securities.
For the second quarter of 1995, interest expense increased by $585,000 or 15.2%
over the year earlier period. Interest paid on time deposits increased
$1,194,000 or 103.5%. Because of the rate increases precipitated by the Federal
Reserve Bank, average rates paid on time deposits increased from 3.93% in 1994
to 5.57% in 1995. This accounted for an increase in interest expense of
$692,000. As the rates paid on time deposits increased deposits shifted from
savings accounts into the time certificates. Increases in the time deposit
balances resulted in additional interest expense of $502,000. This was offset
in part by a $444,000 (25.8%) decrease in interest paid on savings accounts due
to the lower average balances. All other categories of interest bearing
liabilities had lower average balances from the second quarter in 1994.
The combined effect of the increase in both interest income and interest expense
for the second quarter of 1995 versus 1994 resulted in a slight increases of
$84,000 in net interest income. Net interest margin increased 32 basis points
from 5.06% to 5.38%.
For the six month period ending June 30, 1995, interest income increased
$1,871,000 or 9.0% over 1994. Essentially all of the increase was the result of
higher rates earned on all categories of interest earning assets. The average
rate received on earning assets increased 79 basis points or 10.1%. Additional
interest earned on a 1.8% increase in loan volume was offset by reduced interest
income on a 4.0% decrease in balances of investment securities.
12
Interest expense for the six month period increased $1,351,000 over the 1994
amount. This 18.1% increase was mostly due to rate and volume increases in time
deposits as interest paid on those instruments increased $1,700,000 or 68%. The
major offsetting item to this increase was a $637,000 (19.3%) decrease in
interest paid on savings accounts due to lower average balances. The higher
rates paid on time deposits caused customers to move funds from savings
accounts. Overall rates paid on interest-bearing liabilities in the first six
months of 1995 increased 67 basis points to 3.96% from the same period in 1994.
The combined effect of the increase in both interest income and interest expense
for the first six months of 1995 versus 1994 resulted in an increase of $520,000
in net interest income. Net interest margin increased 24 basis points from
5.04% to 5.28%.
The following four tables provide summaries of the components of the interest
income, interest expense and net interest margins on earning assets for the
quarter and six month periods ended June 30, 1995 versus the same periods in
1994.
13
TRICO BANCSHARES
ANALYSIS OF CHANGE IN NET INTEREST
MARGIN ON EARNING ASSETS
(in thousands)
Three Months Ended
------------------
6/30/95 6/30/94
------- -------
Average Income/ Yield/ Average Income/ Yield/
Balance(1) Expense Rate Balance(1) Expense Rate
Assets
Earning assets
Loan(2)(3) $ 301,032 $ 8,244 10.95% $ 296,873 $ 7,371 9.93%
Securities(4) 208,963 3,050 5.84% 234,113 3,234 5.53%
Federal funds sold 2,796 40 5.72% 6,746 60 3.56%
---------- -------- ---------- --------
Total earning assets 512,791 11,334 8.84% 537,732 10,665 7.93%
-------- --------
Cash and due from bank 28,065 32,416
Premises and equipment 13,315 12,911
Other assets, net 21,676 17,637
Less: allowance
for loan losses (5,619) (5,943)
---------- ----------
Total $ 570,227 $ 594,753
---------- ----------
---------- ----------
Liabilities
and shareholders' equity
Interest-bearing
Demand deposits 79,640 490 2.45% 81,885 502 2.45%
Savings deposits 164,733 1,273 3.09% 222,030 1,719 3.10%
Time deposits 168,662 2,348 5.57% 117,525 1,154 3.93%
Federal funds purchased 2,983 47 6.30% 4,465 41 3.67%
Short-term debt 3,103 44 5.67% 17,695 206 4.66%
Long-term debt 16,492 239 5.80% 18,531 234 5.05%
---------- -------- ---------- --------
Total interest-bearing
liabilities 435,613 4,441 4.08% 462,131 3,856 3.34%
-------- --------
Noninterest-bearing deposits 74,739 80,032
Other liabilities 8,454 6,180
Shareholders' equity 51,420 46,410
---------- ----------
Total liabilities
and shareholders' equity $ 570,227 $ 594,753
---------- ----------
---------- ----------
Net interest rate spread(5) 4.76% 4.60%
-----
-----
Net interest income/net $ 6,893 $ 6,809
-------- --------
-------- --------
Interest margin(6) 5.38% 5.06%
-------- --------
-------- --------
<FN>
(1) Average balances are computed principally on the basis of daily balances.
Average balance of securities is based on amortized cost.
(2) Nonaccrual loans are included.
(3) Interest income on loans includes fees on loans of $428,000 in 1995 and
$598,000 in 1994.
(4) Interest income is stated on a tax equivalent basis of 1.75 and 1.77 at
June 30, 1995 and 1994.
(5) Net interest rate spread represents the average yield earned on interest-
earning assets less the average rate paid on interest-bearing liabilities.
(6) Net interest margin is computed by dividing net interest income by total
average earning assets.
14
TRICO BANCSHARES
ANALYSIS OF CHANGE IN NET INTEREST
MARGIN ON EARNING ASSETS
(in thousands)
Six Months Ended
------------------
6/30/95 6/30/94
------- -------
Average Income/ Yield/ Average Income/ Yield/
Balance(1) Expense Rate Balance(1) Expense Rate
Assets
Earning assets
Loan(2)(3) $ 300,748 $16,281 10.83% $ 295,516 $14,509 9.82%
Securities(4) 219,095 6,257 5.71% 228,255 6,197 5.43%
Federal funds sold 4,630 130 5.62% 5,853 91 3.11%
---------- -------- ---------- --------
Total earning assets 524,473 22,668 8.64% 529,624 20,797 7.85%
-------- --------
Cash and due from bank 29,494 32,122
Premises and equipment 13,285 12,752
Other assets, net 15,444 17,247
Less: allowance
for loan losses (5,634) (5,962)
---------- ----------
Total $ 577,062 $ 585,783
---------- ----------
---------- ----------
Liabilities
and shareholders' equity
Interest-bearing
Demand deposits $ 80,548 984 2.44% $ 82,771 1,037 2.51%
Savings deposits 174,140 2,676 3.07% 215,752 3,301 3.06%
Time deposits 157,350 4,201 5.34% 128,367 2,501 3.90%
Federal funds purchased 1,819 57 6.27% 3,169 61 3.85%
Short-term debt 13,402 406 6.06% 9,203 209 4.54%
Long-term debt 17,370 490 5.64% 14,016 354 5.05%
---------- -------- ---------- --------
Total interest-bearing
liabilities 444,629 8,814 3.96% 453,278 7,463 3.29%
-------- --------
Noninterest-bearing deposit 74,318 79,694
Other liabilities 7,655 5,915
Shareholders' equity 50,460 46,896
---------- ----------
Total liabilities
and shareholders' equity $ 577,062 $ 585,783
---------- ----------
---------- ----------
Net interest rate spread(5) 4.68% 4.56%
-----
-----
Net interest income/net $13,854 $13,334
-------- --------
-------- --------
Interest margin(6) 5.28% 5.04%
-------- --------
-------- --------
<FN>
(1) Average balances are computed principally on the basis of daily balances.
Average balance of securities is based on amortized cost.
(2) Nonaccrual loans are included.
(3) Interest income on loans includes fees on loans of $810,000 in 1995 and
$980,000 in 1994.
(4) Interest income is stated on a tax equivalent basis of 1.75 and 1.77 at
June 30, 1995 and 1994.
(5) Net interest rate spread represents the average yield earned on interest-
earning assets less the average rate paid on interest-bearing liabilities.
(6) Net interest margin is computed by dividing net interest income by total
average earning assets.
15
TRICO BANCSHARES
ANALYSIS OF VOLUME AND RATE CHANGES
ON NET INTEREST INCOME AND EXPENSE
(in thousands)
For the three months ended June 30,
-----------------------------------
1995 over 1994
--------------
Yield/
Volume Rate(4) Total
---------- ---------- ----------
Increase (decrease) in
interest income:
Loans(1),(2) $ 103 $ 770 $ 873
Investment securities(3) (347) 163 (184)
Federal funds sold (35) 15 (20)
----------- ----------- ----------
Total (279) 948 669
----------- ----------- ----------
Increase (decrease) in
interest expense:
Demand deposits
(interest-bearing) (14) 2 (12)
Savings deposits (444) (2) (446)
Time deposits 502 692 1,194
Federal funds purchase (14) 20 6
Short-term debt (170) 8 (162)
Long-term debt (26) 31 5
----------- ----------- ----------
Total (166) 751 585
----------- ----------- ----------
Increase (decrease) in
net interest income $ (113) $ 197 $ 84
----------- ----------- ----------
----------- ----------- ----------
<FN>
(1) Nonaccrual loans are included.
(2) Interest income on loans includes fee income on loans of $428,000 in 1995
and $598,000 in 1994.
(3) Interest income is stated on a tax equivalent basis of 1.75 and 1.77 for
June 30, 1995 and 1994.
(4) The rate/volume variance has been included in the rate variance.
16
TRICO BANCSHARES
ANALYSIS OF VOLUME AND RATE CHANGES
ON NET INTEREST INCOME AND EXPENSE
(in thousands)
For the six months ended June 30,
-----------------------------------
1995 over 1994
--------------
Yield/
Volume Rate(4) Total
---------- ---------- ----------
Increase (decrease) in
interest income:
Loans(1),(2) $ 257 $ 1,515 $ 1,772
Investment securities(3) (249) 309 60
Federal funds sold (19) 58 39
----------- ----------- ----------
Total (11) 1,882 1,871
----------- ----------- ----------
Increase (decrease) in
interest expense:
Demand deposits
(interest-bearing) (28) (25) (53)
Savings deposits (637) 12 (625)
Time deposits 565 1,135 1,700
Federal funds purchase (26) 22 (4)
Short-term debt 95 102 197
Long-term debt 85 51 136
----------- ----------- ----------
Total 54 1,297 1,351
----------- ----------- ----------
Increase (decrease) in
net interest income $ (65) $ 585 $ 520
----------- ----------- ----------
----------- ----------- ----------
<FN>
(1) Nonaccrual loans are included.
(2) Interest income on loans includes fee income on loans of $810,000 in 1995
and $980,000 in 1994.
(3) Interest income is stated on a tax equivalent basis of 1.75 and 1.77 for
June 30, 1995 and 1994.
(4) The rate/volume variance has been included in the rate variance.
17
PROVISION FOR LOAN LOSSES
In the first six months of 1995, the Bank provided $75,000 for loan losses
versus $30,000 in 1994. The provision essentially replenished the net loans
charged off during the first six months of 1995. The allowance for loan losses
was 1.82% of outstanding loans versus 1.83% at December 31,1994. Management's
ongoing analysis of the loan portfolio determined that the remaining balance of
$5,609,000 in the allowance for loan losses should be adequate to cover probable
losses inherent in the loan portfolio.
NONINTEREST INCOME
Total noninterest income for the second quarter of 1995 increased $228,000 or
4.1% from the same period in 1994. About 75% of this increase was attributable
to selective rate increases in service charges which took effect January 1, 1995
as well as increased volumes in some fee categories. Other income increased
$73,000 or 13.3% which included $250,000 of additional revenue over the second
quarter prior year income from non recurring items. This revenue was offset in
part by a 23.2% decline in commissions earned on the sale of annuities and
mutual funds. Also there was a net loss on the sale of OREO versus a gain in
the prior year. No other individual items had significant changes.
Results for the first six months were consistent with the second quarter.
Overall, noninterest income increased $563,000 or 22.5% in 1995 versus 1994.
Service charges and fee income accounted for 67.7% of the increase. These
increases resulted from the same factors as detailed above. In the other income
category non recurring income items increased $270,000 during the first six
months of 1995. This increase was offset in part by lower commissions on the
sale of annuities and mutual funds and reduced revenue from sale of mortgage
loans. Mortgage lending activity was significantly lower in the first quarter
of 1995 and continued to be soft during the second quarter.
18
NONINTEREST EXPENSE
Noninterest expense is comprised of operating expenses of the Company and the
Bank, plus the total noninterest (income) expenses (excluding gains or losses
from securities) of the Bank's real estate development subsidiary. These
expenses decreased $178,000 or 3.1% in the second quarter of 1995 versus the
same period last year.
For the quarter, salaries and benefits increased $92,000 or 3.5%. This increase
was due to normal salary progressions, employee sales incentive payments and the
full quarter effect for staffing the supermarket branches that opened in the
second quarter of 1994.
Other expenses decreased $270,000 or 9.0% in the second quarter . A major
factor in the decrease was the absence of merger costs which totaled $130,000 in
1994. Advertising, FDIC insurance, legal fees on loan collections and outside
data processing services all had substantially lower levels of activity from the
prior year quarter. Premise and equipment expenses were generally higher due to
the supermarket branches. Postage expense had a significant increase due to
increased volume and the postal rate hike.
For the six month period noninterest expenses increased $77,000 or .7% in 1995
over 1994. Basically the six month variances parallel the second quarter
variances. Salaries and related expenses were up $256,000 or 4.9% due to the
issues discussed for the quarter. Premise and equipment expenses were up
$187,000 or 12.1% with much of the increase related to the supermarket branches.
These increases were offset in part by the previously mentioned merger costs and
significantly lower advertising costs. Other categories of expenses had
moderate increases or decreases.
Management continually reviews these expenses and expense controls. With the
addition of more supermarket branches the ongoing expenses will probably
continue to show modest increases.
PROVISION FOR INCOME TAXES
The effective tax rate for the six months ended June 30, 1995 is 41.1%. This
rate approximates the combined California and Federal statutory rates. The
actual rate equals the statutory rate as the Bank does not have significant
holdings of tax exempt securities. The Bank does not anticipate increasing its
holdings of tax-free securities in the near term.
19
LOANS
In the second quarter of 1995, loan balances increased $11,988,000 or 4.0% from
the ending balances at March 31, 1995. Loan balances were higher in all
categories except real estate construction which was relatively flat. The
balances also exceeded year end balances by $1,569,000 and 1994 second quarter
ending balances by $1,321,000. While the economy in the Bank's market area has
remained relatively soft, the Bank has been aggressively marketing its loan
products. Loan underwriting standards have been maintained, but pricing has
been more competitive. Some of the growth in commercial loan balances has come
from the normal advances on seasonal agricultural production credit lines.
Management believes loan growth should continue through the third quarter.
SECURITIES
At June 30, 1995, securities held-to-maturity had a cost basis of $136,996,000
and a fair value of $134,669,000. This portfolio contained mortgage-backed
securities totaling $92,921,000 of which $42,338,000 were CMO's. The securities
available-for-sale portfolio had a fair market value of $69,003,000 with a cost
basis of $70,055,000. This portfolio contained mortgage-backed securities
totaling $32,954,000 of which $28,046,000 were CMO's. At December 31, 1994 the
fair value of the two portfolios was $17,482,000 or 7.8% less than amortized
cost. Because of the declining long term interest rates during the first six
months of 1995, at June 30 the decline in the fair value had improved to
$4,356,000 or 2.1% of amortized cost. If loan demand continues to improve,
management intends to continue to move funds from maturing securities into
loans.
20
NONPERFORMING LOANS
As shown in the following table, total nonperforming assets have increased
$1,334,000 to $4,604,000 in the first six months of 1995. Non performing assets
represent only 0.86% of total assets. Nonaccrual loans increased while OREO
decreased during this period. The increase in nonaccrual loans was attributable
to several borrowers and is not considered to be indicative of a general trend.
All nonaccrual loans are considered to be impaired when determining any
valuation allowance under SFAS 114 (see (Note B). The Collections Department
personnel continue to make a concerted effort to work problem and potential
problem loans to reduce risk of loss.
June 30, December 31,
-------- ------------
1995 1994
---- ----
Nonaccrual loans $ 3,270 $ 1,122
Accruing loans past due 90 days or more 20 24
Restructured loans (in compliance with
modified terms) 0 0
------------ ------------
Total nonperforming loans 3,290 1,146
Other real estate owned 1,314 2,124
------------ ------------
Total nonperforming assets $ 4,604 $ 3,270
------------ ------------
------------ ------------
Nonincome producing investments in real
estate held by Bank's real estate
development subsidiary $ 1,173 $ 1,173
------------ ------------
------------ ------------
Nonperforming loans to total loans 1.24% 0.37%
Allowance for loan losses to
nonperforming loans 155% 489%
Nonperforming assets to total assets 0.86% 0.55%
Allowance for loan losses to
nonperforming assets 111% 171%
21
ALLOWANCE FOR LOAN LOSS
The Bank maintains its allowance for loan losses at a level considered by
Management to be adequate to cover the risk of loss in the loan portfolio at a
particular point in time. This determination includes an evaluation and
analysis of historical experience, current loan mix and volume, and projected
economic conditions.
The following table presents information concerning the allowance and provision
for loan losses.
June 30, June 30,
-------- --------
1995 1994
---- ----
(in thousands)
Balance, Beginning of period $ 5,608 $ 5,973
Provision charged to operations 75 30
Loan charged off (173) (360)
Recoveries of loans previously
charged off 99 144
Balance, end of period $ 5,609 $ 5,787
------------ ------------
------------ ------------
Ending loan portfolio $ 308,699 $ 307,378
------------ ------------
------------ ------------
Allowance to loans as a
percentage of ending loan portfolio 1.82% 1.88%
------------ ------------
------------ ------------
22
EQUITY
The following table indicates the amounts of regulatory capital of the Company.
Tier 1 Total Risk- Leverage
Based
---------------------------------------------
(dollars in thousands)
June 30, 1995
Company's % 13.6% 14.8% 9.0%
Regulatory minimum % 4.0% 8.0% 4.0%
Company's capital $ $ 50,719 $ 55,390 $ 50,719
Regulatory minimum $ 14,948 29,895 22,589
------------ ------------ ------------
Computed excess $ 35,771 $ 25,495 $ 28,130
------------ ------------ ------------
------------ ------------ ------------
23
PART II
OTHER INFORMATION
Item 5. Exhibits Index Page
-------------- ----
a. Exhibits
--------
Computations of Earnings Per Share 26
b. Reports on Form 8-K:
--------------------
None
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRICO BANCSHARES
Date August 11, 1995 /s/ Robert H. Steveson
----------------------- ----------------------
Robert H. Steveson
President and
Chief Executive Officer
Date August 11, 1995 /s/ Robert M. Stanberry
----------------------- -----------------------
Robert M. Stanberry
Vice President and
Chief Financial Officer
25