<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
for the quarterly period ended June 30, 1997, OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the Transition Period from______________ to _______________.
Commission File Number: 000-22797
TEHAMA BANCORP
(Exact name of registrant as specified in its charter)
CALIFORNIA 91-1775524
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
239 SOUTH MAIN STREET, RED BLUFF, CALIFORNIA 96080
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (916) 528-3000
______________________________________
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
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, No Par Value: 1,610,940 shares outstanding (July 1, 1997)
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEHAMA BANCORP / TEHAMA BANK
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(CONSOLIDATED) (TEHAMA BANK ONLY)
JUNE 30, 1997 DECEMBER 31, 1996
-------------- ------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,106,022 $ 4,388,685
Federal funds sold 8,600,000 5,000,000
Investment securities (market value of $33,759,151 at
June 30, 1997 and $31,760,800 at December 31, 1996) 33,988,361 31,590,388
Loans, less allowance for loan losses of $1,058,011 as of
June 30, 1997 and $896,733 as of December 31, 1996 107,034,385 91,687,370
Bank premises and equipment, net 1,905,911 1,200,464
Other real estate 470,000 470,000
Accrued interest receivable and other assets 6,355,441 3,785,339
------------ ------------
TOTAL ASSETS $165,460,120 $138,122,246
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 30,799,843 $ 22,938,555
Interest bearing 117,895,611 98,664,151
------------ ------------
Total deposits 148,695,454 121,602,706
Accrued interest payable and other liabilities 1,481,902 1,406,364
------------ ------------
Total liabilities 150,177,356 123,009,070
------------ ------------
Stockholders' equity
Preferred stock - no par value; 2,000,000 shares
authorized; none issued
Common stock - no par value; 4,000,000 shares
authorized; 1,610,940 shares issued and outstanding
as at June 30, 1997 and December 31, 1996 12,225,722 12,225,722
Retained earnings 3,132,852 2,905,644
Unrealized (loss) gain on available-for-sale investment
securities, net of taxes (75,810) (18,190)
------------ ------------
Total stockholders' equity 15,282,764 15,113,176
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $165,460,120 $138,122,246
------------ ------------
------------ ------------
</TABLE>
The financial information included herein is unaudited, although the
December 31, 1996 data is derived from audited financial statements;
however, the information reflects all adjustments (consisting solely of
normal recurring adjustments) that are, in the opinion of management, necessary
to a fair presentation of the financial position, results of operations, and
cash flows for the interim periods presented.
2
<PAGE>
TEHAMA BANCORP / TEHAMA BANK
CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED,
JUNE 30, JUNE 30,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $2,430,003 $1,961,072 $4,614,238 $3,878,693
Interest on Federal funds sold 185,194 166,637 350,343 373,784
Interest on investment securities:
Taxable 146,660 136,799 680,221 416,151
Exempt from Federal income taxes 356,455 216,689 294,164 272,157
---------- ---------- ---------- ----------
Total interest income 3,118,312 2,481,197 5,938,966 4,940,785
Interest expense on deposits 1,315,663 1,051,055 2,516,473 2,117,960
---------- ---------- ---------- ----------
Net interest income 1,802,649 1,430,142 3,422,493 2,822,825
Provision for loan losses 190,000 135,000 360,000 255,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,612,649 1,295,142 3,062,493 2,567,825
---------- ---------- ---------- ----------
Non-interest income:
Service charges 133,262 90,311 235,272 177,223
Merchant processing fees 330,643 309,285 647,830 600,673
Loan servicing fees 17,810 19,376 37,485 38,814
Gain on sale of loans 8,653 3,917 20,403 6,812
Other income 9,714 38,151 27,646 75,626
---------- ---------- ---------- ----------
Total non-interest income 500,082 461,040 968,636 899,148
Non-interest expense:
Salaries and employee benefits 670,255 551,139 1,297,589 1,101,910
Occupancy 218,485 123,010 380,211 235,215
Other 543,156 421,550 1,016,354 791,813
---------- ---------- ---------- ----------
Total non-interest expense 1,431,896 1,095,699 2,694,154 2,128,938
---------- ---------- ---------- ----------
Income before income taxes 680,835 660,483 1,336,975 1,338,035
Income taxes 232,272 215,022 465,391 440,042
---------- ---------- ---------- ----------
Net income $ 448,563 $ 445,461 $ 871,584 $ 897,993
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share $ 0.27 $ 0.27 $ 0.52 $ 0.55
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding 1,662,885 1,643,968 1,662,885 1,643,968
---------- ---------- ---------- ----------
</TABLE>
The financial information included herein is unaudited; however, the
information reflects all adjustments (consisting solely of normal recurring
adjustments) that are, in the opinion of management, necessary to a fair
presentation of the financial position, results of operations, and cash flows
for the interim periods presented.
3
<PAGE>
TEHAMA BANCORP / TEHAMA BANK
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 871,584 $ 897,992
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 360,000 255,000
Depreciation and amortization 121,125 74,684
Increase (decrease) net deferred loan origination fees & costs 65,767 (19,602)
(Increase) decrease in Interest Receivable and Other Assets (629,162) 69,864
(Decrease) increase in Interest Payable and Other Liabilities 75,538 (59,871)
Change in Unrealized Gain (Loss) on Securities (57,620) (306,770)
Net cash provided by operating activities 807,232 911,297
----------- -----------
Cash flows from investing activities:
Net (increase) decrease in maturities, purchases and sales of
investment securities (2,397,973) (1,843,305)
Net (increase) decrease in loans (15,728,504) (4,951,502)
772 Investment - Leasing Company (2,000,000)
Purchases of premises and equipment (811,790) (90,330)
Proceeds from sale of equipment - 1,441
Proceeds from sale of other real estate - 36,000
Net cash used in investing activities (20,938,267) (6,847,696)
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in demand deposits, interest-bearing
and savings accounts 17,548,609 (3,400,707)
Net increase in time deposits 9,544,139 3,815,270
Payments for fractional shares - (2,850)
Payments of cash dividends (644,376) -
Proceeds from exercise of stock options - 62,129
Net cash provided by financing activities 26,448,372 473,842
----------- -----------
(Decrease) increase in cash and cash equivalents 6,317,337 (5,462,557)
----------- -----------
Cash and cash equivalents at beginning of year 9,388,685 20,041,908
----------- -----------
Cash and cash equivalents at June 30, $15,706,022 $14,579,351
----------- -----------
</TABLE>
4
<PAGE>
TEHAMA BANCORP / TEHAMA BANK
STATEMENT OF CHANGES IN SHAREHOLDER EQUITY
<TABLE>
<CAPTION>
UNREALIZED
LOSS ON
AVAIL.-FOR-SALE
RETAINED INVESTMENT
SHARES AMOUNT EARNINGS SECURITIES TOTAL
--------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DEC. 31, 1994 1,283,396 $ 8,105,964 $ 2,779,634 $(127,582) $10,758,016
--------- ----------- ----------- ---------- -----------
Stock Options Exercised and Tax
Related Benefit 36,392 310,839 310,839
Net Income 1,848,679 1,848,679
10% Stock Dividend 130,833 1,700,829 (1,703,790) (2,961)
Unrealized Loss on Available-for-Sale
Investment Securities 171,290 171,290
--------- ----------- ----------- ---------- -----------
BALANCE AT DEC. 31, 1995 1,450,621 $10,117,632 $ 2,924,523 $ 43,708 $13,085,863
--------- ----------- ----------- ---------- -----------
Stock Options Exercised and Tax
Related Benefit 15,468 152,601 152,601
Net Income 1,939,461 1,939,461
10% Stock Dividend 144,851 1,955,489 (1,958,340) (2,851)
Unrealized Loss on Available-for-Sale
Investment Securities (61,898) (61,898)
--------- ----------- ----------- ---------- -----------
BALANCE AT DEC. 31, 1996 1,610,940 $12,225,722 $ 2,905,644 $ (18,190) $15,113,176
--------- ----------- ----------- ---------- -----------
Net Income 871,584 871,584
Unrealized Loss on Available-for-Sale
Investment Securities (57,620) (57,620)
Cash dividend (644,376) (644,376)
--------- ----------- ----------- ---------- -----------
BALANCE AT JUNE 30, 1997 1,610,940 12,225,722 3,132,852 (75,810) 15,282,764
--------- ----------- ----------- ---------- -----------
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
The following is management's discussion and analysis of the financial
condition and results of operations of Tehama Bank (the "Bank") for the
quarter ending June 30, 1997, with comparative data from the quarter ending
June 30, 1996. The focus is on information which is not otherwise apparent
from the financial statements in this quarterly report. Reference should be
made to those statements for a more thorough understanding of the analysis
presented.
In the first quarter of 1997 the Bank acquired two new branches, adding
approximately $18,000,000 in deposits to the Bank's combined balance sheet.
Additional general ledger categories affected by these acquisitions include:
cash, investments, premises and equipment, interest expense, personnel
expense, occupancy and equipment expense and other operating expenses.
Financial statement comparisons of current and prior periods will be somewhat
skewed by these additions.
5
<PAGE>
Effective with the close of business on June 30, 1997 the Bank became a
wholly owned subsidiary of Tehama Bancorp ("Bancorp"), a newly formed holding
company in 1997. With this reorganization comes a change in the Bank's
regulatory reporting requirements for quarterly Form 10-Q reports. Effective
with this report, a consolidated report on Form 10-Q will be filed for the
Bank and Bancorp with the Securities and Exchange Commission; and the Bank's
filings of periodic reports with the Federal Reserve Board will be
discontinued.
EARNINGS OVERVIEW
The Bank's net income in the second quarter 1997 totaled $448,563
contributing toward a year-to-date net income of $871,584. The second
quarter's net income increased 6.04% over the first quarter of 1997, and
represents a 6.96% increase over the same period in 1996. Year-to-date net
income as of June 30, 1997 has decreased 2.94% from June 30, 1996
year-to-date net income. Non-interest expenses associated with the
acquisition of two new branches in the first half of the year, together with
a slowing in deposit growth are the primary factors contributing to the
decrease in year-to-date net income over the prior year. Earnings per share
for the second quarter 1997 totaled $0.27 compared to $0.27 for the second
quarter 1996. Earnings per share year-to-date 1997 totaled $0.52 compared to
$0.55 for the same period in 1996.
NET INTEREST INCOME
The primary source of income for the Bank is net interest income, the
difference between interest earned on assets (loans and investments) and
interest paid on deposits taken by the Bank to fund these assets. Net
interest income for the quarter ending June 30, 1997 totaled $1,802,649, a
26% increase over the $1,430,142 for the second quarter in 1996.
Year-to-date net interest income totals $3,422,493, a 21% increase over the
prior year.
BALANCE SHEET ANALYSIS
Total assets of $165,460,120 at June 30, 1997 represent an increase of
$27,337,874 or 19.8% from the 1996 year-end figure of $138,122,246. Net
loans are the largest component of growth, increasing $15,347,015 or 16.7%
from December 31, 1996. Real estate loans account for approximately 47% of
the total loan growth, installment loans account for approximately 35% and
commercial loans account for approximately 18%. Total deposits of
$148,695,454 at June 30, 1997 represent an increase of $27,092,748 or 22.3%
from the 1996 year-end figure of $121,602,706. The two new branches acquired
in February of 1997 account for $20,329,930 of total deposits, or 75% of the
total increase. As a component of total deposits, non-interest bearing
deposits grew from 18.8% to 20.9%.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses, as a percentage of outstanding loans as
of June 30, 1997 was 0.98%, compared to 0.97% as of December 31, 1996 and
1.09% as of June 30, 1996. The allowance for loan losses reflects
management's judgment as to the level which is considered adequate to absorb
potential losses inherent in the loan portfolio. This allowance is increased
by provisions charged to expense and reduced by loan charge-offs, net of
recoveries. Management determines the provision charged to expense based on
an on-going analysis of the loan portfolio's product mix, delinquency ratios,
losses incurred and other factors.
6
<PAGE>
NON-INTEREST INCOME
Non-interest income consists primarily of service charges on deposit
accounts, other fees and charges collected by the Bank for both deposit
accounts and loans, gain on sale of loans and fee income generated by the
Bank's Merchant Bankcard department. Non-interest income totaled $968,636 as
of June 30, 1997, an increase of 7.7% over the same period in 1996. Income
generated by the Merchant Bankcard department contributed 66% of total
non-interest income during the first two quarters of 1997 and 1996.
Deposit account service charges for the six months ended June 30, 1997
increased 32.7% from the same period in 1996. The combined gain on sale of
loans and servicing fees on loans sold for the six months ended June 30, 1997
increased 26.9% from the same period in 1996. The increases are due
primarily to variations in the volume of loan sales and related servicing
income.
NON-INTEREST EXPENSE
Non-interest expense consists of salaries and related benefits,
occupancy and equipment expense and other expenses. Non-interest expense
totaled $2,694,154 as of June 30, 1997, an increase of 26.5% over the same
period in 1996. For the second quarter non-interest expenses totaled
$1,431,896 an increase of 30.7% over the same period in 1996. This category
of expense was heavily impacted by the acquisition of the two new branches
earlier in the year. Together, the ordinary non-interest expenses of these
branches account for approximately 47% of the total increase in year-to-date
non-interest expense over the prior year-to-date total.
INCOME TAXES
Income taxes accrued through June 30, 1997 totaled $465,391 or 34.8% of
net income before taxes. Accrued income taxes through the same period in
1996 totaled $440,042 or 32.9% of net income before taxes. Variations in
volumes of tax-exempt securities, loans and leases, and their respective
income, are primarily responsible for the increased tax rate compared to the
decreased income before taxes in the two periods.
LIQUIDITY AND CAPITAL
Liquidity, the ability of a company to generate sufficient amounts of
cash to meet its short-term and long-term needs, is commonly measured by the
ratio of net loans to total deposits. The lower the ratio the more liquid
the Bank's current position. However, since loans are generally the highest
yielding earning asset, the Bank attempts to maximize earnings through the
generation of additional loans, while maintaining sufficient liquidity to
meet its obligations. The loan-to-deposit ratio as of June 30, 1997 was
71.7%, a decrease from the 75.4% ratio at December 31, 1996. For additional
reference, this ratio was 71.7% at December 31, 1995 and 78.3% at December
31, 1994. Even with the significant growth in loans during the first two
quarters of 1997, the growth in deposits has helped maintain a low ratio and
satisfactory liquidity position.
Capital adequacy is generally quantified by measures established by
regulatory agencies and regulations require the Bank to maintain minimum
amounts of capital and ratios of capital to assets. The Bank's total
risk-based capital ratio as of June 30, 1997 was 13.76%, compared to 17.7% at
December 31, 1996 and a regulatory minimum of 10.0 for "Well-Capitalized"
banking institutions.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
As of the date of this report, the 100 shares of Tehama Bancorp common
stock previously issued have been repurchased. All of the shares of Tehama
Bank common stock outstanding as of close of business June 30, 1997, totaling
1,610,940 shares, were converted into the same number of shares of common
stock of Tehama Bancorp and represent the current total shares outstanding.
Total dividends of $644,376 were paid to Tehama Bank shareholders in the
second quarter. Market value of Tehama Bancorp stock (formerly Tehama Bank
stock) was $13.625 per share as of June 30, 1997, as reported by the Bank's
primary market maker.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of Tehama Bank was held on May 6,
1997. Shareholders approved a reorganization plan that effectively allowed
the Bank to reorganize with Tehama Bancorp as its holding company and
convert all shares of Tehama Bank stock into shares of Tehama Bancorp stock.
Shareholders also voted on candidates for the board of directors. No
candidates were proposed in opposition to the slate of candidates submitted
by management, and the following incumbent directors were elected by the
votes indicated:
- ------------------------------------------------------------------
NAME VOTES FOR VOTES WITHHELD
- ------------------------------------------------------------------
HENRY CLAY ARNEST, III 1,074,945 3,161
- ------------------------------------------------------------------
LOUIS J. BOSETTI 1,075,875 2,231
- ------------------------------------------------------------------
DANIEL B. CARGILE 1,075,875 2,231
- ------------------------------------------------------------------
HARRY DUDLEY 1,074,339 3,767
- ------------------------------------------------------------------
WILLIAM P. ELLISON 1,075,875 2,231
- ------------------------------------------------------------------
GARRY D. FISH 1,075,875 2,231
- ------------------------------------------------------------------
MAX MULLER FROOME 1,071,464 6,642
- ------------------------------------------------------------------
ORVILLE K. JACOBS 1,075,875 2,231
- ------------------------------------------------------------------
GARY C. KATZ 1,075,875 2,231
- ------------------------------------------------------------------
JOHN W. KOEBERER 1,075,631 2,475
- ------------------------------------------------------------------
RAYMOND C. LIEBERENZ 1,075,495 2,611
- ------------------------------------------------------------------
GARY L. NAPIER 1,074,852 3,254
- ------------------------------------------------------------------
EUGENE F. PENNE 1,075,875 2,231
- ------------------------------------------------------------------
TERRANCE A. RUST 1,075,391 2,715
- ------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed in the Exhibit Index to this report are furnished
herewith and incorporated here by reference.
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company duly caused this report to be signed by the undersigned thereunto duly
authorized.
AUGUST 7, 1997 BY: /S/ WILLIAM M. JENKINS .
- -------------------------------- --------------------------------
Date William M. Jenkins
Vice President
AUGUST 7, 1997 BY: /S/ FRANK S. ONIONS .
- -------------------------------- --------------------------------
Date Frank S. Onions
Senior Vice President
& Chief Financial Officer
AUGUST 7, 1997 BY: /S/ WILLIAM P. ELLISON .
- -------------------------------- --------------------------------
Date William P. Ellison
President & Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2 Plan of Reorganization and Merger Agreement.
Incorporated by reference from Exhibit 2 to the
Company's Registration Statement No. 333-23525 on
Form S-4 filed with the Commission.
27 Financial Data Schedule.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, STATEMENT OF CASH
FLOWS, AND STATEMENT OF CHANGES IN SHAREHOLDER EQUITY, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,106
<INT-BEARING-DEPOSITS> 117,896
<FED-FUNDS-SOLD> 8,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,689
<INVESTMENTS-CARRYING> 10,299
<INVESTMENTS-MARKET> 10,439
<LOANS> 108,092
<ALLOWANCE> 1,058
<TOTAL-ASSETS> 165,460
<DEPOSITS> 148,695
<SHORT-TERM> 466
<LIABILITIES-OTHER> 1,016
<LONG-TERM> 0
0
0
<COMMON> 12,226
<OTHER-SE> 3,133
<TOTAL-LIABILITIES-AND-EQUITY> 165,460
<INTEREST-LOAN> 2,430
<INTEREST-INVEST> 688
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,118
<INTEREST-DEPOSIT> 1,316
<INTEREST-EXPENSE> 1,316
<INTEREST-INCOME-NET> 1,803
<LOAN-LOSSES> 190
<SECURITIES-GAINS> 76
<EXPENSE-OTHER> 1,432
<INCOME-PRETAX> 681
<INCOME-PRE-EXTRAORDINARY> 681
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 449
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.27
<YIELD-ACTUAL> 1.20
<LOANS-NON> 485
<LOANS-PAST> 326
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,056
<CHARGE-OFFS> 189
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1,058
<ALLOWANCE-DOMESTIC> 1,058
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
