<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 September 30, 1999, 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: 1,713,694 shares outstanding (September 30, 1999)
<PAGE>
INDEX
TEHAMA BANCORP
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets: September 30, 1999 and December
31, 1998
Consolidated Statements of Income: Three months ended
September 30, 1999 and 1998; and nine months ended September
30, 1999 and 1998
Consolidated Statement of Changes in Shareholder Equity:
December 31, 1996 through September 30, 1999
Consolidated Statements of Cash Flows: Nine months ended
September 30, 1999 and 1998
Notes to Consolidated Financial Statements:
September 30, 1999
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEHAMA BANCORP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS September 30, 1999 December 31, 1998
------------------------ -------------------------
<S> <C> <C>
Cash and due from banks $ 13,687,517 $ 8,362,664
Federal funds sold 800,000 14,400,000
Investment securities (market value of $40,713,748 at
Sept. 30, 1999 and $47,440,300 at Dec. 31, 1998) 40,718,094 47,092,556
Loans, less allowance for loan losses of $1,879,086 as
of Sept. 30, 1999 and $2,080,831 as of Dec. 31, 1998 135,615,016 119,009,536
Bank premises and equipment, net
2,541,567 2,337,327
Other real estate
35,148 49,981
Accrued interest receivable and other assets
9,726,180 8,529,900
------------------------ -------------------------
TOTAL ASSETS $ 203,123,522 $ 199,781,964
======================== =========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 47,302,099 $ 39,191,013
Interest bearing 135,643,332 141,319,598
------------------------ -------------------------
Total deposits 182,945,431 180,510,611
Accrued interest payable and other liabilities 2,312,398 1,560,096
------------------------ -------------------------
Total liabilities 185,257,829 182,070,707
------------------------ -------------------------
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; 1,713,694 shares issued and outstanding
as at Sept. 30, 1999 (1,672,129 at Dec. 31, 1998) 13,189,875 12,824,202
Retained earnings 5,538,097 4,908,485
Unrealized (loss) gain on available-for-sale investment
securities, net of taxes (862,279) (21,430)
------------------------ -------------------------
Total stockholders' equity 17,865,693 17,711,257
------------------------ -------------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 203,123,522 $ 199,781,964
======================== =========================
</TABLE>
See notes to consolidated financial statements (unaudited)
<PAGE>
<TABLE>
<CAPTION>
TEHAMA BANCORP
CONSOLIDATED STATEMENTS OF INCOME
Three months ended Nine months ended,
September 30, September 30,
---------------------------------- ----------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 2,840,121 $ 2,863,151 $ 8,079,580 $ 8,403,118
Interest on Federal funds sold 50,975 305,581 332,618 774,633
Interest on investment securities:
Taxable 438,560 234,147 1,411,750 733,840
Exempt from Federal income taxes 148,485 147,580 464,903 427,001
---------------- --------------- --------------- ----------------
Total interest income 3,478,141 3,550,459 10,288,851 10,338,592
Interest expense on deposits 1,209,324 1,454,445 3,800,032 4,120,995
---------------- --------------- --------------- ----------------
Net interest income 2,268,817 2,096,014 6,488,819 6,217,597
Provision for loan losses 300,000 218,000 1,025,000 913,000
---------------- --------------- --------------- ----------------
Net interest income after
provision for loan losses 1,968,817 1,878,014 5,463,819 5,304,597
---------------- --------------- --------------- ----------------
Non-interest income:
Service charges 202,778 180,378 573,405 523,608
Merchant processing fees 250,000 337,311 832,419 1,004,281
Loan servicing fees 10,549 13,111 37,414 44,912
Gain on sale of loans 115,000 33,038 168,261 94,124
Other income 452,774 114,300 1,098,271 340,956
---------------- --------------- --------------- ----------------
Total non-interest income 1,031,101 678,138 2,709,770 2,007,881
Non-interest expense:
Salaries and employee benefits 1,054,139 990,397 3,143,336 2,725,007
Occupancy 273,169 235,162 760,258 673,780
Other 844,069 626,676 2,219,504 1,786,333
---------------- --------------- --------------- ----------------
Total non-interest expense 2,171,377 1,852,235 6,123,098 5,185,120
---------------- --------------- --------------- ----------------
Income before income taxes 828,541 703,917 2,050,491 2,127,358
Income taxes 233,400 210,609 566,900 659,667
---------------- --------------- --------------- ----------------
Net income $ 595,141 $ 493,308 $ 1,483,591 $ 1,467,691
================ =============== =============== ================
Basic earnings per share $ 0.35 $ 0.29 $ 0.87 $ 0.86
================ =============== =============== ================
Diluted earnings per share $ 0.35 $ 0.29 $ 0.87 $ 0.86
================ =============== =============== ================
Weighted average number of
shares outstanding 1,712,313 1,674,301 1,697,772 1,657,446
================ =============== =============== ================
Weighted average number of shares
outstanding including common
stock equivalents 1,712,313 1,714,992 1,697,772 1,715,831
================ =============== =============== ================
</TABLE>
See notes to consolidated financial statements (unaudited)
<PAGE>
<TABLE>
<CAPTION>
TEHAMA BANCORP
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER EQUITY
Unrealized
Loss on
Avail.-for-Sale Comprehensive
Retained Investment Income
Shares Amount Earnings Securities Total (Loss)
---------- ------------ ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
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 1,300,766
Cash dividend - $.40 per share (644,376) (644,376)
Unrealized Gain (Loss) on Available-
for-Sale Investment Securities 28,070 28,070 28,070
----------- ------------ ----------- ------- ---------------- -------------
Balance at December 31, 1997 1,628,291 12,337,764 3,562,034 9,880 15,909,678 $ 1,328,836
----------- ------------ ----------- ------- ---------------- =============
Stock Options Exercised and Tax
Related Benefit 62,641 746,997 746,997
Retirement of Common Stock (18,803) (260,559) (260,559)
Net Income 2,008,670 2,008,670 2,008,670
Cash dividend - $.40 per share (662,219) (662,219)
Unrealized Gain (Loss) on Available-
for-Sale Investment Securities (31,310) (31,310) (31,310)
----------- ------------ ----------- ------- ---------------- -------------
Balance at December 31, 1998 1,672,129 12,824,202 4,908,485 (21,430) 17,711,257 $ 1,977,360
----------- ------------ ----------- ------- ---------------- =============
Stock Options Exercised and Tax
Related Benefit 60,249 602,320 602,320
Retirement of Common Stock (18,684) (236,647) (236,647)
Net Income 1,483,591 1,483,591 1,483,591
Cash dividend - $.50 per share (853,979) (853,979)
Unrealized Gain (Loss) on Available-
for-Sale Investment Securities (840,849) (840,849) (840,849)
----------- ------------ ----------- ------- ---------------- -------------
Balance at September 30, 1999 1,713,694 $13,189,875 $5,538,097 $(982,279) $ 17,865,693 $ 642,742
=========== ============ =========== ======= ================ =============
</TABLE>
See notes to consolidated financial statements (unaudited)
<PAGE>
TEHAMA BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,483,591 $ 1,467,691
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 1,025,000 913,000
Depreciation and amortization 305,303 246,975
Disqualifying disposition of incentive stock options - 82,103
Increase (decrease) net deferred loan origination fees & costs 309,744 554,452
(Increase) decrease in Interest Receivable and Other Assets (1,563,719) (590,236)
(Decrease) increase in Interest Payable and Other Liabilities 752,302 (248,182)
---------------- -----------------
---------------- -----------------
Net cash provided by operating activities 2,312,221 2,425,803
---------------- -----------------
Cash flows from investing activities:
Net (increase) decrease in maturities, purchases and sales of
investment securities 5,533,613 3,138,792
Net (increase) decrease in loans (17,940,224) (4,728,091)
Purchases of premises and equipment (490,690) (534,132)
Proceeds from sale of other real estate - 260,000
---------------- -----------------
Net cash used in investing activities (12,897,301) (1,863,431)
---------------- -----------------
Cash flows from financing activities:
Net increase (decrease) in demand deposits, interest-bearing
and savings accounts 12,512,159 13,115,397
Increase (decrease) in time deposits (10,077,339) 5,380,815
Payments of cash dividends (853,979) (662,219)
Retirement of Common Stock 236,647 -
Proceeds from exercise of stock options 492,445 121,043
---------------- -----------------
Net cash provided by financing activities 2,309,933 17,955,036
---------------- -----------------
(Decrease) increase in cash and cash equivalents (8,275,147) 18,517,408
---------------- -----------------
Cash and cash equivalents at beginning of year 22,762,664 12,927,578
---------------- -----------------
Cash and cash equivalents at September 30, $14,487,517 $31,444,986
================ =================
</TABLE>
See notes to consolidated financial statements (unaudited)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A Basis of Presentation
The financial information included herein is unaudited (although the
12/31/98 data is derived from audited financial statements), but has been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. 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, changes in shareholder equity, and cash flows for the
interim periods presented.
Tehama Bancorp was incorporated on January 15, 1997 and consumated a
merger with Tehama Bank on June 30, 1997. The information contained in the
Consolidated Statement of Changes in Shareholder Equity that refers to 1996,
therefore naturally refers to information of the Bank only. All other
information refers to the consolidated entity, Tehama Bancorp.
Certain information and footnotes required by generally accepted
accounting principles for annual financial statements are not included in
these interim financial statements. Accordingly, the accompanying unaudited
interim consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's 1998
Annual Report on Form 10-K. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary Tehama Bank, and a 50% interest in
Bancorp Financial Services, Inc. All material intercompany accounts and
transactions have been eliminated in consolidation.
Note B Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130). This
statement establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. For the
Company, comprehensive income includes net income reported on the statement
of income and changes in the fair value of its available-for-sale investments
reported as other comprehensive income.
Note C Earnings per Share
Basic earnings per share is computed by dividing net income by the
weighted average common shares outstanding for the period. Diluted earnings
per share reflects the potential dilution that could occur if options or
other contracts to issue common stock were exercised and converted into
common stock. Diluted earnings per share is computed by dividing net income
by the weighted average of common shares outstanding including common stock
equivalents of options.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Tehama Bancorp (the "Company") is the bank holding company for
Tehama Bank (the "Bank"), a state chartered, Federal Reserve member-bank. The
following is management's discussion and analysis of the financial condition
and results of operations of the Company for the quarter and nine-month
period ending September 30, 1999, with comparative data from the quarter and
nine-month period ending September 30, 1998. Some discussion may naturally
focus solely on the Bank as that entity comprises the substantial majority of
the consolidated company. 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.
The Bank operates out of its main office located at 333 Main Street,
Red Bluff, Tehama County, CA 96080, and five other community branch offices
located in: Los Molinos (Tehama County), Chico (Butte County), Orland and
Willows (Glenn County) and Redding (Shasta County). The Bank's administrative
offices are located at 239 South Main Street, Red Bluff, Tehama County, CA
96080. The Bank operates as one business segment providing banking services
to the Company's clients primarily in the Northern California counties noted
above. The Bank's principal business consists of attracting deposits from the
general public and using the funds to originate commercial, real estate and
installment loans to both consumers and businesses. The Bank's primary source
of revenue is interest income from its loan and investment portfolios. In
addition to the Bank, the Company maintains a 50% ownership interest in
Bancorp Financial Services, Inc. ("BFS"), a leasing company located in
Sacramento, CA. BFS concentrates on small ticket business equipment and
automobile leases over a broader service area encompassing numerous western
states.
In addition to the historical information contained herein, this
Form 10-Q quarterly report may contain certain forward-looking statements,
within the meaning of the Securities Act of 1933 and the Securities Exchange
Act of 1934, as amended, and Regulations issued thereunder. Readers of this
quarterly report should understand that these forward-looking statements
involve certain risks and uncertainties that could cause actual results to
differ materially from those suggested in the forward-looking statements.
Forward looking statements use phrases such as "expected to" and "on target
to" Risks and uncertainties in forward looking statements include, but are
not limited to, the following factors: competitive pressure in the banking
industry, changes in the regulatory environment, changes in the interest rate
environment and/or volatility in interest sensitive deposits, general
economic conditions in the Bank's major service areas, a deterioration in
credit quality resulting in an increase to the provision for loan losses,
operational risks including data processing or other technological system
failures, asset / liability matching risks and liquidity risks, and changes
in the securities markets.
EARNINGS SUMMARY
The Company's net income in the third quarter 1999 totaled $595,141
contributing toward a year-to-date net income of $1,483,591. The third
quarter's net income increased 16% over the second quarter and 58% over the
first quarter of 1999. The third quarter also reflects an increase of 20%
over the same period in 1998. Year-to-date net income as of September 30,
1999 increased 1% over the September 30, 1998 year-to-date net income. Both
basic and diluted earnings per share for the third quarter 1999 totaled $0.35
compared to $0.29 for the third quarter 1998. Both basic and
<PAGE>
diluted earnings per share on a year-to-date basis totaled $0.87 in 1999
compared to $0.89 for basic and $0.86 for diluted earnings per share for the
same period in 1998.
The third quarter's growth in net income is the result of several business
strategies initiated earlier in the year. Increasing the resources and focus
on business banking relationships throughout the Bank's service area resulted
in significant growth in commercial and commercial real estate loan bookings
during the third quarter. Additionally, the Bank's dealer lending business
continues to provide steady growth in the consumer loan portfolio. Other
income, predominantly loan processing/brokered loan fees and ATM cash
servicing fees, along with gains on sale of loans reflect increases of 222%
and 79%, respectively, from September 1998 to September 1999. The Bank's
Manufactured Housing Department, established in December 1998, is responsible
for the majority of the increase attributed to loan processing or brokered
loan fees. The primary function of this department is to generate fee income
by originating manufactured housing loans that are then funded by or sold to
investors. The Bank's ATM Cash Servicing Department, also established in
December 1998 also contributed significantly to the growth in other income.
Meanwhile, merchant card fee income reflects a decrease of 26% in a
comparison of third quarter 1999 to third quarter 1998, and a 17% decrease in
a year-to-date comparison. This business unit's contract with the outside
vendor that generates its volume was re-negotiated and includes planned
decreases in income, but extends the time period by five years for this
business units continued contribution to earnings for the Bank.
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 and other borrowings taken by the Bank to fund
these assets. Changes in net interest income can be attributed to changes in
the yield on interest-earning assets and to changes in the rate paid on
interest-bearing liabilities. It can also be attributed to changes in the
volume of interest-earning assets and interest-bearing liabilities. Net
interest income for the quarter ending September 30, 1999 totaled $2,268,817,
an 8.2% increase over the $2,096,014 for the third quarter in 1998.
Year-to-date net interest income totals $6,488,819, a 4.36% increase over the
$6,217,597 for the prior year.
BALANCE SHEET ANALYSIS
Total assets of $203,123,522 at September 30, 1999 represent an
increase of $3,341,558 or 1.7% from the 1998 year-end figure of $199,781,964.
During this same period net loans increased $16,605,480 or 14.0% while total
investments and fed funds sold decreased by $19,974,462 or 32.5%. Total
deposits of $182,945,431 at September 30, 1999 represent an increase of
$2,434,820 or 1.3% from the 1998 year-end figure of $180,510,611. As a
component of total deposits, non-interest bearing deposits increased from 22%
at December 31, 1998 to 26% at September 30, 1999.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses decreased $201,745 from December 31,
1998 to September 30, 1999. The decrease is primarily attributed to one
lending relationship for which additional allowance for loan loss was
provided for at year-end 1998, with the loans subsequently being charged off
in the six months ended June 30, 1999. 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
<PAGE>
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 Bank for both deposit
accounts and loans, gain on sale of loans and fee income generated by the
processing of merchant credit card transactions. Non-interest income for the
quarter ending September 30, 1999 totaled $1,031,101, an increase of 52% over
the $678,138 for the third quarter 1998. Year to date non-interest income
totals $2,709,770 and increase of 35% over the $2,007,881 for the prior year.
Deposit account service charges for the quarter ended September 30,
1999 increased 12% from the same period in 1998. Year to date account service
charges increased 9.5% over the prior year. Contributing to the third
quarter's increase in the gain on sale of loans was income of approximately
$95,000, before taxes, from the sale of a block of SBA guaranteed loans. This
planned strategy provided increased liquidity from the cash generated by the
sale and allows the Bank to continue to receive income from the ongoing
servicing of these loans. The primary contributors of non-interest income in
the "Other Income" category include the Company's share of net income from
its joint venture in a leasing company (BFS), processing fees on brokered
loan transactions, and fee income from the Bank's ATM cash servicing program.
Income from BFS increased to $287,799 from $187,186 for the nine months ended
September 30, 1999 and 1998, respectively. Year-to-date processing fees on
brokered loans, attributed to the Bank's newly established Manufactured
Housing Department, and fees generated by the Bank's newly established ATM
Cash Servicing Department combined for a total of $505,594 year-to-date.
NON-INTEREST EXPENSE
Non-interest expense consists of salaries and related benefits,
occupancy and equipment expense and other expenses. Non-interest expense
totaled $6,123,098 for the nine months ended September 30, 1999, an increase
of 18% over the same period in 1998. For the third quarter non-interest
expenses totaled $2,171,377 an increase of 17% over the same period in 1998.
Most of the increase in non-interest expense is attributed to personnel and
other start up expenses associated with the newer departments and new Redding
branch.
INCOME TAXES
Income taxes accrued for the nine-months ended September 30, 1999
totaled $566,900 or 28% of net income before taxes. Income taxes through the
same period in 1998 totaled $659,667 or 31% of net income before taxes.
Variations in volumes of tax-exempt securities, loans and leases, and their
respective income, and the income from BFS which is taxed at a lower level
than the rest of the Company's income, are primarily responsible for the
change in the tax rate.
<PAGE>
LIQUIDITY AND CAPITAL
The Bank manages its liquidity to ensure that sufficient funds are
available to support asset growth and satisfy cash flow requirements created
by fluctuations in deposits. Primary sources of liquidity include cash and
amounts due from correspondent banks, federal funds sold, and unpledged
available-for-sale investments. The Bank's primary liquidity ratio, the ratio
of liquid assets to total assets, was 21.2% at September 30, 1999 compared to
28.8% at December 31, 1998 and 23.5% at September 30, 1998. Another
indication of a company's liquidity is its 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
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 September 30, 1999 was 74.1% compared to a ratio
of 69.12% at June 30, 1999 and 65.93% ratio at December 31, 1998.
Capital adequacy is generally quantified by measures established by
regulatory agencies and requires the Company and the Bank to maintain minimum
amounts of capital and ratios of capital to assets. Overall capital is
monitored by management on a daily basis and reported to the Company's Board
of Directors on a monthly basis. The following table reflects the Company's
capital ratios as of September 30, 1999 compared to the minimum regulatory
requirement and the minimum requirement for "well-capitalized" institutions.
<TABLE>
<CAPTION>
Company Minimum Well Capitalized
--------- --------- ------------------
<S> <C> <C> <C>
Leverage Ratio 9.1% 4.0% 5.0%
Tier 1 Risk-Based Capital Ratio 12.7% 4.0% 6.0%
Total Risk Based Capital Ratio 14.0% 8.0% 10.0%
</TABLE>
YEAR 2000 READINESS
The Bank established a Year 2000 Task Force comprised of senior
managers representing all units within the organization. The objective of the
task force is to ensure that the Bank is fully prepared for the change in the
century date. The Task Force has accomplished its goal in that all computer
modifications, replacements and necessary changes have been completed. The
service provider of the Bank's main computer system has tested and certified
that the system is ready for the year 2000 change of date.
Listed below are some of the key accomplishments:
- - The Bank's business and technology operations have been reviewed to
determine the impact of the Year 2000 change of date.
- - The risk to bank operations of computer hardware and software impacted by
the century change has been assessed.
- - Critical systems, software and networks have been upgraded to Year 2000
readiness.
- - All hardware and software systems (including interfaces) have been tested
and certified.
- - Contingency plans have been developed for all mission-critical
applications.
<PAGE>
In any project involving the identification, testing and
modification of hardware and software there is a risk that all potential
problems will not be satisfactorily addressed on time. To mitigate this risk,
the Bank has formulated contingency plans for all mission critical operations
to reduce the impact of any unexpected failure resulting from the century
change. Furthermore, the Bank has updated its business continuity plans for
the entire organization and has addressed both liquidity and cash management
as directed by the "Interagency Statement on Year 2000 Project Management
Awareness". Interdependencies with other parties makes it impossible to
guarantee that disruptions will not occur. Management believes that its
efforts will minimize significant problems and enable it to respond quickly
and to maintain high levels of customer service.
The Bank will continue an ongoing vendor management program to
obtain information about the Year 2000 readiness of all our vendors and
service providers.
Ultimately, the potential impact of Year 2000 issues will depend not
only on the corrective measures the Bank undertakes, but also on the way in
which the Year 2000 issues are addressed by government, other businesses, and
any entity that provides data to, or receives data from, the Bank, or whose
financial condition or operational capability is important to the Bank, such
as suppliers or customers. The Bank, therefore, has contacted vendors, and
clients with whom significant loan or deposit relationships are maintained,
to try and ascertain their Year 2000 readiness and the extent to which the
Bank may be vulnerable to any third party issues. It is possible that if all
aspects of the Year 2000 issues are not adequately resolved by these parties,
the Bank's future business operations could be negatively impacted.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or any of its
subsidiaries is a party or of which any of their property is subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - None
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) Form 8-K, pertaining to the adoption of a Shareholders'
Protection Rights Agreement was filed on July 28, 1999.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BY: TEHAMA BANK
---------------------------------
(Registrant)
November 15, 1999 BY: /s/ William M. Jenkins .
- -------------------------------- ---------------------------------
Date William M. Jenkins
Vice President & Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description
- ------------ -------------
<S> <C>
27 Financial Data Schedule Worksheet -- Article 9
</TABLE>
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,687
<INT-BEARING-DEPOSITS> 135,643
<FED-FUNDS-SOLD> 800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,987
<INVESTMENTS-CARRYING> 11,731
<INVESTMENTS-MARKET> 11,726
<LOANS> 137,494
<ALLOWANCE> 1,879
<TOTAL-ASSETS> 203,124
<DEPOSITS> 182,945
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,313
<LONG-TERM> 0
0
0
<COMMON> 13,190
<OTHER-SE> 4,676
<TOTAL-LIABILITIES-AND-EQUITY> 203,124
<INTEREST-LOAN> 8,079
<INTEREST-INVEST> 2,209
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 10,288
<INTEREST-DEPOSIT> 3,789
<INTEREST-EXPENSE> 3,800
<INTEREST-INCOME-NET> 6,488
<LOAN-LOSSES> 1,025
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,123
<INCOME-PRETAX> 2,051
<INCOME-PRE-EXTRAORDINARY> 2,051
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,484
<EPS-BASIC> 0.87
<EPS-DILUTED> 0.87
<YIELD-ACTUAL> 4.91
<LOANS-NON> 553
<LOANS-PAST> 177
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,705
<CHARGE-OFFS> 1,337
<RECOVERIES> 110
<ALLOWANCE-CLOSE> 1,879
<ALLOWANCE-DOMESTIC> 1,879
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
