<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, 1998, 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): (530) 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: 1,662,504 shares outstanding (July 1, 1998)
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEHAMA BANCORP
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Cash and due from banks $ 6,134,280 $ 5,927,578
Federal funds sold 18,000,000 7,000,000
Investment securities (market value of $26,071,517 at
June 30, 1998 and $28,723,500 at December 31, 1997) 26,176,061 28,426,765
Loans, less allowance for loan losses of $1,937,424 at
June 30, 1998 ($1,705,200 at December 31, 1997) 118,674,793 118,731,801
Bank premises and equipment, net 1,930,881 1,955,630
Other real estate 78,957 338,957
Accrued interest receivable and other assets 7,468,614 7,341,297
------------ ------------
TOTAL ASSETS $178,463,586 $169,722,028
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 36,238,602 $ 34,810,231
Interest bearing 124,309,968 117,860,826
------------ ------------
Total deposits 160,548,570 152,671,057
Accrued interest payable and other liabilities 1,304,762 1,141,293
------------ ------------
Total liabilities 161,853,332 153,812,350
------------ ------------
Commitments
Stockholders' equity
Preferred stock - no par value; 2,000,000 shares
authorized; none issued - -
Common stock - no par value; 4,000,000 shares
authorized; 1,662,504 shares issued and outstanding
at June 30, 1998 (1,628,291 at December 31, 1997) 12,716,611 12,337,764
Retained earnings 3,874,198 3,562,034
Unrealized (loss) gain on available-for-sale investment
securities, net of taxes 19,445 9,880
------------ ------------
Total stockholders' equity 16,610,254 15,909,678
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $178,463,586 $169,722,028
------------ ------------
------------ ------------
</TABLE>
The financial information included herein is unaudited, although the 12/31/97
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.
<PAGE>
TEHAMA BANCORP
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three months ended Six months ended,
June 30, June 30,
-------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $2,766,404 $2,430,003 $5,539,967 $4,614,238
Interest on Federal funds sold 262,904 185,194 469,052 350,343
Interest on investment securities:
Taxable 246,542 146,660 499,693 680,221
Exempt from Federal income taxes 137,957 356,455 279,421 294,164
---------- ---------- ---------- ----------
Total interest income 3,413,807 3,118,312 6,788,133 5,938,966
Interest expense on deposits 1,352,983 1,315,663 2,666,550 2,516,473
---------- ---------- ---------- ----------
Net interest income 2,060,824 1,802,649 4,121,583 3,422,493
Provision for loan losses 320,000 190,000 695,000 360,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,740,824 1,612,649 3,426,583 3,062,493
---------- ---------- ---------- ----------
Non-interest income:
Service charges 174,315 133,262 343,230 235,272
Merchant processing fees 336,899 330,643 666,970 647,830
Loan servicing fees 14,890 17,810 31,801 37,485
Gain on sale of loans 28,303 8,653 61,086 20,403
Other income 131,325 37,591 226,656 27,646
---------- ---------- ---------- ----------
Total non-interest income 685,732 527,959 1,329,743 968,636
Non-interest expense:
Salaries and employee benefits 875,855 670,255 1,734,610 1,297,589
Occupancy 222,471 218,485 438,618 380,211
Other 632,781 571,033 1,159,657 1,016,354
---------- ---------- ---------- ----------
Total non-interest expense 1,731,107 1,459,773 3,332,885 2,694,154
---------- ---------- ---------- ----------
Income before income taxes 695,449 680,835 1,423,441 1,336,975
Income taxes 221,285 232,272 449,058 465,391
---------- ---------- ---------- ----------
Net income $ 474,164 $ 448,563 $ 974,383 $ 871,584
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic earnings per share $ 0.29 $ 0.28 $ 0.59 $ 0.54
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted earnings per share $ 0.28 $ 0.27 $ 0.57 $ 0.52
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding 1,657,298 1,610,940 1,648,879 1,610,940
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of shares
outstanding including common
stock equivalents 1,714,112 1,662,670 1,713,921 1,662,670
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The financial information included herein is unaudited, although the 12/31/97
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.
<PAGE>
TEHAMA BANCORP
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 974,383 $ 871,584
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 695,000 360,000
Depreciation and amortization 160,134 121,125
Increase (decrease) net deferred loan origination fees & costs (48,845) 65,767
(Increase) decrease in Interest Receivable and Other Assets (483,880) (629,162)
(Decrease) increase in Interest Payable and Other Liabilities 163,469 75,538
Change in Unrealized Gain (Loss) on Securities 9,565 (57,620)
----------- ------------
Net cash provided by operating activities 1,469,826 807,232
----------- ------------
Cash flows from investing activities:
Net (increase) decrease in maturities, purchases and sales of
investment securities 2,250,704 (2,397,973)
Net (increase) decrease in loans (175,216) (15,728,504)
772 Investment - Leasing Company - (2,000,000)
Purchases of premises and equipment (112,845) (811,790)
Proceeds from sale of equipment - -
Proceeds from sale of other real estate 260,000 -
----------- ------------
Net cash used in investing activities 2,222,643 (20,938,267)
----------- ------------
Cash flows from financing activities:
Net increase (decrease) in demand deposits, interest-bearing
and savings accounts 6,588,323 17,548,609
Net increase in time deposits 1,289,190 9,544,139
Payments for fractional shares - -
Payments of cash dividends (662,219) (644,376)
Proceeds from exercise of stock options 298,939 -
----------- ------------
Net cash provided by financing activities 7,514,233 26,448,372
----------- ------------
(Decrease) increase in cash and cash equivalents 11,206,702 6,317,337
Cash and cash equivalents at beginning of year 12,927,578 9,388,685
----------- ------------
Cash and cash equivalents at June 30, $24,134,280 $ 15,706,022
----------- ------------
</TABLE>
<PAGE>
TEHAMA BANCORP
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 December 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 December 31, 1996 1,610,940 $12,225,722 $ 2,905,644 $(18,190) $15,113,176
--------- ----------- ----------- -------- -----------
Stock Options Exercised and Tax
Related Benefit 17,351 112,042 112,042
Net Income 1,300,766 1,300,766
Cash dividend - $.40 per share (644,376) (644,376)
Unrealized Loss on Available-for-Sale
Investment Securities 28,070 28,070
-----------
--------- ----------- ----------- -------- -----------
Balance at December 31, 1997 1,628,291 $12,337,764 $ 3,562,034 $ 9,880 $15,909,678
--------- ----------- ----------- -------- -----------
Stock Options Exercised and Tax
Related Benefit 34,213 378,847 378,847
Net Income 974,383 974,383
Unrealized Loss on Available-for-Sale
Investment Securities 9,565 9,565
Cash dividend - $.40 per share (662,219) (662,219)
--------- ----------- ----------- -------- -----------
Balance at June 30, 1998 1,662,504 12,716,611 3,874,198 19,445 16,610,254
--------- ----------- ----------- -------- -----------
</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 Bancorp (the "Company") for the
quarter ending June 30, 1998, with comparative data from the quarter ending
June 30, 1997. Since Tehama Bancorp, the holding company, was not operational
until July 1, 1997, the comparative data from 1997 is for Tehama Bank only.
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.
<PAGE>
EARNINGS OVERVIEW
The Company's net income in the second quarter 1998 totaled $474,164
contributing toward a year-to-date net income of $974,383. The second
quarter's net income decreased 5.21% over the first quarter of 1998, and
represents a 5.71% increase over the same period in 1997. Year-to-date net
income as of June 30, 1998 has increased 4.79% from June 30, 1997
year-to-date net income. Earnings per share for the second quarter 1998
totaled $0.29 ($0.28 diluted) compared to $0.28 ($0.27 diluted) for the
second quarter 1997. Earnings per share year-to-date 1998 totaled $0.59
($0.57 diluted) compared to $0.54 ($0.52 diluted) for the same period in 1997.
NET INTEREST INCOME
The primary source of income for the Company is net interest income, the
difference between interest earned on assets (loans and investments) and
interest paid on deposits taken by the Company to fund these assets. Net
interest income for the quarter ending June 30, 1998 totaled $2,060,824, a
14.32% increase over the $1,802,649 for the second quarter in 1997.
Year-to-date net interest income totals $4,121,583, a 20.43% increase over
the prior year.
BALANCE SHEET ANALYSIS
Total assets of $178,463,586 at June 30, 1998 represent an increase of
$8,741,558 or 5.15% from the 1997 year-end figure of $169,722,028. Net loans
decreased $57,008 or 0.05% from December 31, 1997. Total deposits of
$160,548,570 at June 30, 1998 represent an increase of $7,877,513 or 5.16%
from the 1997 year-end figure of $152,671,057. As a component of total
deposits, non-interest bearing deposits decreased from 22.8% to 22.6%.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses, as a percentage of outstanding loans as
of June 30, 1998 was 1.61%, compared to 1.42% as of December 31, 1997 and
0.98% as of June 30, 1997. 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.
NON-INTEREST INCOME
Non-interest income consists primarily of service charges on deposit
accounts, other fees and charges collected by the Company for both deposit
accounts and loans, gain on sale of loans and fee income generated by the
Company's Merchant Bankcard department. Non-interest income totaled
$1,329,743 as of June 30, 1998, an increase of 37.3% over the same period in
1997. Income generated by the Merchant Bankcard department contributed 50%
and 67% of total non-interest income during the first two quarters of 1998
and 1997, respectively.
The Company's share of net income from its joint venture in a leasing
company (Bancorp Financial Services, Inc.) increased to $109,020 from $44,278
for the six months ended June 30, 1998 and 1997, respectively.
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense consists of salaries and related benefits,
occupancy and equipment expense and other expenses. Non-interest expense
totaled $3,332,885 as of June 30, 1998, an increase of 23.7% over the same
period in 1997. For the second quarter non-interest expenses totaled
$1,731,107 an increase of 18.6% over the same period in 1997. This category
of expense was impacted by additional personnel to staff a new branch opening
in September 1998, and the acquisition of the two new branches earlier in 1997
INCOME TAXES
Income taxes through June 30, 1998 totaled $449,058 or 32% of net income
before taxes. Income taxes through the same period in 1997 totaled $465,391
or 34% of net income before taxes. Variations in volumes of tax-exempt
securities, loans and leases, and their respective income, are primarily
responsible for the change in the tax rate.
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 Company's current position. However, since loans are generally the
highest yielding earning asset, the Company 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,
1998 was 73.9%, a decrease from the 77.8% ratio at December 31, 1997. For
additional reference, this ratio was 75.4% at December 31, 1996 and 71.7% at
December 31, 1995. 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 requires the Company to maintain minimum amounts of
capital and ratios of capital to assets. The Company's total risk-based
capital ratio as of June 30, 1998 was 12.37%, compared to 13.9% at December 31,
1997 and a regulatory minimum of 10.0 for "Well-Capitalized" banking
institutions.
COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted SFAS 130, REPORTING COMPREHENSIVE
INCOME, which establishes standards for the reporting and display of
comprehensive income and its components in a full set of financial
statements. The Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income,
but are normally excluded from net income, be reported. Other comprehensive
(loss)/income, net of taxes, was comprised of the unrealized (loss)/gain on
available-for-sale investment securities for the six months ended June 30,
1998 and 1997 and totaled $9,565 and $(57,620), respectively. Total
comprehensive income, net of taxes, (actual net income adjusted by the
unrealized (loss)/gain on securities) was $983,948 and $813,964 for the six
months ended June 30, 1998 and 1997, respectively.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of Tehama Bancorp was held on April 24,
1998. Shareholders 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:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
NAME VOTES FOR VOTES WITHHELD
- -------------------------------------------------------------
<S> <C> <C>
Henry Clay Arnest, III 1,251,476 3,054
- -------------------------------------------------------------
Louis J. Bosetti 1,253,526 1,004
- -------------------------------------------------------------
Harry Dudley 1,248,079 6,451
- -------------------------------------------------------------
William P. Ellison 1,253,889 641
- -------------------------------------------------------------
Garry D. Fish 1,253,260 1,270
- -------------------------------------------------------------
Max Muller Froome 1,235,210 19,320
- -------------------------------------------------------------
Orville K. Jacobs 1,243,615 10,915
- -------------------------------------------------------------
Gary C. Katz 1,248,735 5,795
- -------------------------------------------------------------
John W. Koeberer 1,252,622 1,908
- -------------------------------------------------------------
Raymond C. Lieberenz 1,250,752 3,778
- -------------------------------------------------------------
Gary L. Napier 1,248,603 5,927
- -------------------------------------------------------------
Eugene F. Penne 1,253,889 641
- -------------------------------------------------------------
Terrance A. Rust 1,252,026 2,504
- -------------------------------------------------------------
</TABLE>
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 by reference.
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
<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 12, 1998 BY: /s/ William M. Jenkins .
- ------------------------- ---------------------------------------
Date William M. Jenkins
Vice President &
Chief Financial Officer
August 12, 1998 BY: /s/ William P. Ellison .
- ------------------------- ---------------------------------------
Date William P. Ellison
President & Chief Executive Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,134
<INT-BEARING-DEPOSITS> 124,310
<FED-FUNDS-SOLD> 18,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,080
<INVESTMENTS-CARRYING> 11,096
<INVESTMENTS-MARKET> 11,342
<LOANS> 118,675
<ALLOWANCE> 1,937
<TOTAL-ASSETS> 178,464
<DEPOSITS> 160,549
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,305
<LONG-TERM> 0
0
0
<COMMON> 12,717
<OTHER-SE> 3,893
<TOTAL-LIABILITIES-AND-EQUITY> 16,610
<INTEREST-LOAN> 5,540
<INTEREST-INVEST> 1,248
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 6,788
<INTEREST-DEPOSIT> 2,667
<INTEREST-EXPENSE> 2,667
<INTEREST-INCOME-NET> 4,121
<LOAN-LOSSES> 695
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,333
<INCOME-PRETAX> 1,423
<INCOME-PRE-EXTRAORDINARY> 1,423
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 974
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.57
<YIELD-ACTUAL> 3,980
<LOANS-NON> 328
<LOANS-PAST> 522
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,757
<ALLOWANCE-OPEN> 1,705
<CHARGE-OFFS> 566
<RECOVERIES> 103
<ALLOWANCE-CLOSE> 1,937
<ALLOWANCE-DOMESTIC> 1,937
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
