<PAGE>
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 SEPTEMBER 30, 1995 Commission file number 0-10661
TRICO BANCSHARES
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2792841
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
15 INDEPENDENCE CIRCLE, CHICO, CALIFORNIA 95973
(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 November 10, 1995: 4,459,445
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
SEPTEMBER 30, DECEMBER 31,
1995 1994
<S> <C> <C>
Assets:
Cash and due from banks $ 26,794 $ 39,709
Securities held-to-maturity
(approximate fair value $130,004 and $131,649) 132,594 143,788
Securities available-for-sale, net of
unrealized (loss) of $(921) and $(5,343) 69,337 74,706
Loans, net of allowance for
loan losses of $(5,658) and $(5,608) 314,226 301,742
Premises and equipment, net 13,036 13,198
Investment in real estate properties 1,173 1,173
Other real estate owned 1,091 1,877
Accrued interest receivable 4,413 4,748
Other assets 12,657 12,893
-------------------- --------------------
Total assets $ 575,321 $ 593,834
-------------------- --------------------
-------------------- --------------------
Liabilities:
Deposits
Noninterest-bearing demand $ 74,018 $ 88,957
Interest-bearing demand 79,273 80,657
Savings 159,198 190,800
Time certificates 170,523 130,758
-------------------- --------------------
Total deposits 483,012 491,172
Fed funds purchased 7,700 0
Repurchase agreements 9,828 30,457
Accrued interest payable and other liabilities 6,865 5,475
Long term borrowings 16,466 18,499
-------------------- --------------------
Total liabilities 523,871 545,603
Shareholders' equity:
Preferred stock 0 3,899
Common stock 44,222 43,552
Retained earnings 8,319 4,488
Securities unrealized holdings (loss), net (1,091) (3,708)
-------------------- --------------------
Total shareholders' equity 51,450 48,231
-------------------- --------------------
Total liabilities and shareholders' equity $ 575,321 $ 593,834
-------------------- --------------------
-------------------- --------------------
</TABLE>
2
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands except earnings per common share)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 8,724 $ 7,854 $ 25,005 $ 22,363
Interest on investment
securities-taxable 2,857 3,127 8,962 9,106
Interest on investment
securities-tax exempt 38 58 125 181
Interest on federal funds sold 10 25 140 116
------------ ------------ ------------ ------------
Total interest income 11,629 11,064 34,232 31,766
------------ ------------ ------------ ------------
Interest expense:
Interest on deposits 4,127 3,516 11,988 10,355
Interest on federal funds purchased 49 53 106 114
Interest on other borrowings 353 477 1,249 1,040
------------ ------------ ------------ ------------
Total interest expense 4,529 4,046 13,343 11,509
------------ ------------ ------------ ------------
Net interest income 7,100 7,018 20,889 20,257
Provision for loan losses 160 200 235 230
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 6,940 6,818 20,654 20,027
Noninterest income:
Service charges and fees 1,067 924 3,103 2,646
Other income 375 318 1,419 1,142
Securities gains (losses), net 0 15 (10) (24)
------------ ------------ ------------ ------------
Total noninterest income 1,442 1,257 4,512 3,764
------------ ------------ ------------ ------------
Noninterest expenses:
Salaries and related expenses 2,652 2,682 8,186 7,960
Other, net 2,600 3,001 8,093 8,673
------------ ------------ ------------ ------------
Total noninterest expenses 5,252 5,683 16,279 16,633
------------ ------------ ------------ ------------
Net income before income taxes 3,130 2,392 8,887 7,158
Income taxes 1,286 1,158 3,649 3,109
------------ ------------ ------------ ------------
Net income 1,844 1,234 5,238 4,049
Preferred stock dividends 35 105 245 315
------------ ------------ ------------ ------------
Net income available to
common shareholders 1,809 1,129 4,993 3,734
------------ ------------ ------------ ------------
Primary earnings per common share $ 0.39 $ 0.24 $ 1.08 $ 0.80
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Fully diluted earnings per common share $ 0.38 $ 0.24 $ 1.06 $ 0.80
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
3
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
(in thousands, except number of shares)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK UNREALIZED
SECURITIES
NUMBER NUMBER RETAINED HOLDING
OF SHARES AMOUNT OF SHARES AMOUNT EARNINGS GAIN (LOSS) TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1995 8,000 $ 3,899 4,392,134 $ 43,552 $ 4,488 $ (3,708) $ 48,231
Preferred stock redemption (8,000) (3,899) 0 0 (101) 0 (4,000)
Exercise of common stock
options 0 0 67,311 513 0 0 513
Preferred stock cash
dividends 0 0 0 0 (245) 0 (245)
Common stock cash
dividends 0 0 0 0 (1,061) 0 (1,061)
Change in securities
unrealized holding gain (loss) 0 0 0 0 0 2,617 2,617
Stock option amortization 0 0 0 157 0 0 157
Net income, September 30, 1995 0 0 0 0 5,238 0 5,238
--------- --------- --------- --------- -------- --------- ---------
Balance, September 30, 1995 0 $ 0 4,459,445 $ 44,222 $ 8,319 $ (1,091) $ 51,450
--------- --------- --------- --------- -------- --------- ---------
--------- --------- --------- --------- -------- --------- ---------
</TABLE>
4
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
1995 1994
---- ----
<S> <C> <C>
Operating activities:
Net income $ 5,238 $ 4,049
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 235 230
Provision for losses on OREO 35 12
Depreciation and amortization 1,202 1,016
Amortization of investment security discounts 89 154
Deferred income taxes (112) 155
Investment security (gains) losses (net) 10 24
(Gain) loss on sale of other real estate owned (73) 10
(Gain) loss on sale of loans (23) -
Proceeds from loan sales 5,819 12,427
Origination of loans held for sale (6,794) (5,851)
Amortization of stock options 157 249
(Increase) decrease in interest receivable 335 (715)
Increase (decrease) in interest payable 959 79
(Increase) decrease in other assets and liabilities (1,346) (1,913)
-------- -------
Net cash provided by operating activities 5,731 9,926
-------- -------
Investing activities:
Proceeds from maturities of securities held-to-maturity 11,191 12,642
Purchases of securities held-to-maturity - (22,439)
Proceeds from maturities of securities available-for-sale 8,554 19,931
Proceeds from sales of securities available-for-sale 6,993 36,861
Purchases of securities available-for-sale (5,720) (73,945)
Net (increase) decrease in loans (12,077) (15,139)
Purchases of premises and equipment (852) (1,821)
Proceeds from sale of other real estate owned 1,180 2,036
Purchases and additions to real estate properties - (1)
-------- -------
Net cash provided (used) by investing activities 9,269 (41,875)
---------- -------
(continued)
5
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(unaudited)
(in thousands)
(continued)
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
1995 1994
---- ----
<S> <C> <C>
Financing activities:
Net increase (decrease) in deposits (8,160) (17,647)
Net increase in federal funds purchased 7,700 -
Borrowings under repurchase agreements - 25,500
Repayment of repurchase agreements (20,629) -
Borrowings under long-term debt agreements - 11,389
Payments of principal on long-term debt agreements (2,033) (22)
Redemption of preferred stock (4,000) -
Cash dividends - Preferred (245) (315)
Cash dividends - Common (1,061) (954)
Exercise of common stock options 513 342
---------- ---------
Net cash provided (used) by financing activities (27,915) 18,293
---------- ---------
Increase (decrease) in cash and cash equivalents (12,915) (13,656)
Cash and cash equivalents at beginning of year 39,709 42,922
---------- ----------
Cash and cash equivalents at end of period $ 26,794 $ 29,266
---------- ----------
---------- ----------
Supplemental information:
Cash paid for taxes $ 3,540 $ 2,841
Cash paid for interest expense $ 12,384 $ 11,430
</TABLE>
6
<PAGE>
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 nine months ended September 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 September 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.
7
<PAGE>
As of September 30, 1995, the Company's recorded investment
in impaired loans and the related valuation allowance calculated under SFAS
114 are as follows:
<TABLE>
<CAPTION>
Recorded Valuation
Investment Allowance
---------- ---------
(in thousands)
<S> <C> <C>
Impaired Loans -
Valuation allowance required $ 391 $ 234
No valuation allowance required 3,732 -
----------- -----------
Total impaired loans $ 4,123 $ 234
----------- -----------
----------- -----------
</TABLE>
The valuation allowance related to impaired loans under SFAS 114 is included
in the allowance for loan losses on the consolidated balance sheet at
September 30, 1995. The average recorded investment in impaired loans for
the nine months ended September 30, 1995 was $3,077,000.
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 $170,000 for the nine months
ended September 30, 1995.
8
<PAGE>
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 $1,844,000 for the third quarter ended September 30, 1995
versus $1,234,000 in 1994. Fully diluted earnings per share for the third
quarter periods were $0.38 and $0.24, respectively. Earnings for the nine
months ended September 30, 1995 were $5,238,000 versus year ago results of
$4,049,000. The fully diluted earnings per share were $1.06 and $.80 for the
respective nine month periods. The earnings per share results have been
adjusted for a five for four (5/4) stock split effected as a stock dividend
in September 1995.
Operating results of the Bank for the third quarter improved on a year over
year basis as well as compared to second quarter 1995 results. Net income
before taxes increased $738,000 or 30.9% in the third quarter of 1995 versus
1994 and $137,000 or 4.6% versus the prior quarter. Net interest income,
noninterest income and noninterest expenses all had favorable changes from
the year ago third quarter. Net interest income increased $82,000 or 1.2%
due to higher average rates received on earning assets and lower average
balances on interest bearing liabilities. These increases in net interest
income were partially offset by lower average balances on earning assets and
higher rates on interest bearing liabilities. Net interest margin for the
third quarter of 1995 was 5.49% versus 5.24% in 1994. Noninterest income
increased $185,000 or 14.7%. Service charges and fee revenues accounted for
most of the increase. Noninterest expenses decreased $431,000 or 7.6%. Of
this amount, approximately $216,000 was attributable to the reduction in the
FDIC deposit insurance premiums. The third quarter of 1994 contained one
time merger costs of approximately $512,000. These reductions were offset in
part by increases in premise and equipment related expenses and other
expenses.
Assets of the Company totaled $575,321,000 at September 30, 1995 which was an
increase of $10,603,000 from the 1995 second quarter ending balances. All of
this increase was reflected in loans as those balances increased $11,185,000
during the quarter. However, total assets were $19,989,000 lower from year
ago balances. Management has generally allowed the investment portfolio to
decrease as securities mature or principal payments on mortgage backed
securities take place. As a result the securities portfolio decreased about
$23,186,000 from year ago balances. Loan
9
<PAGE>
balances increased $6.2 million from the prior year third quarter. These two
items account for most of the changes in assets. Decreases in deposit
liabilities of $15,340,000 and reverse repurchase agreements of $15,672,000
and a $7,700,000 increase in Federal Funds Purchased from year ago levels
mostly offset the changes in the assets.
At September 30, 1995, the year to date annualized ROA was 1.21% and the ROE
was 13.9%. For the same period in 1994 these ratios were .92% and 11.4%
respectively. At the end of the third quarter of 1995, TriCo Bancshares had
a leverage ratio of 9.1% based on ending assets, a Tier 1 capital ratio of
13.5% and a total risk-based capital ratio of 14.7%. These compared to 8.4%,
13.0% and 14.3% in 1994.
The following tables provide a summary of the major elements of income and
expense for the third quarter of 1995 compared with the third quarter of 1994
and for the first nine months of 1995 compared with the first nine months of
1994.
10
<PAGE>
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
<TABLE>
<CAPTION>
Three months
ended September 30, Percentage
1995 1994 Change
---- ---- increase
(in thousands, except (decrease)
earnings per share)
<S> <C> <C> <C>
Interest income $ 11,658 $ 11,109 4.9%
Interest expense 4,529 4,046 11.9%
-------- --------
Net interest income 7,129 7,063 0.9%
Provision for loan losses 160 200 -20.0%
-------- --------
Net interest income after 6,969 6,863 1.5%
provision for loan losses
Noninterest income 1,442 1,257 14.7%
Noninterest expenses 5,252 5,683 -7.6%
-------- --------
Net income before income taxes 3,159 2,437 29.6%
Income taxes 1,286 1,158 11.1%
Tax equivalent adjustment(1) 29 45 -36.7%
-------- --------
Net income 1,844 1,234 49.4%
-------- --------
-------- --------
Preferred stock dividends (35) (105) -66.7%
Net income available to 1,809 1,129 60.2%
common shareholders'
Primary earnings per common share 0.39 0.24 62.5%
</TABLE>
(1) Interest on tax-free securities is reported on a tax equivalent basis of
1.75 and 1.77 for September 30, 1995 and 1994 respectively.
11
<PAGE>
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
<TABLE>
<CAPTION>
Nine months
ended September 30,
1995 1994 Percentage
---- ---- Change
(in thousands, except increase
earnings per share) (decrease)
<S> <C> <C> <C>
Interest income $ 34,326 $ 31,906 7.6%
Interest expense 13,343 11,509 15.9%
-------- --------
Net interest income 20,983 20,397 2.9%
Provision for loan losses 235 230 2.2%
Net interest income after 20,748 20,167 2.9%
provision for loan losses
Noninterest income 4,512 3,764 19.9%
Noninterest expenses 16,279 16,633 -2.1%
-------- --------
Net income before income taxes 8,981 7,298 23.1%
Income taxes 3,649 3,109 17.4%
Tax equivalent adjustment(1) 94 140 -33.0%
-------- --------
Net income 5,238 4,049 29.4%
-------- --------
-------- --------
Preferred stock dividends (245) (315) -22.2%
Net income available to 4,993 3,734 33.7%
common shareholders'
Primary earnings per common share 1.08 0.80 35.0%
</TABLE>
(1) Interest on tax-free securities is reported on a tax equivalent basis of
1.75 and 1.77 for September 30, 1995 and 1994 respectively.
12
<PAGE>
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 September 30, 1995, interest income increased $549,000
or 4.9 percent over the same period in 1994. Higher rates received on loans
and a small increase in average loan balances were the factors contributing
to the interest income increase. Average rates received on loans were 103
basis points or 10.2% higher and reflected the 1994 and early 1995 increases
in prime rate. Average loan balances were $2,490,000 (.8%) higher. These two
items provided an increase of $870,000 in interest income. The interest
income increase for loans was offset in part by a decrease of $297,000 in
interest income from investment securities. For the third quarter of 1995,
the average balance of investment securities was $20,766,000 or 9.2% lower
than for the same period of 1994. This reduction in investment securities
was basically the result of maturities and paydowns received on the portfolio.
For the third quarter of 1995, interest expense increased by $483,000 or
11.9% over the year earlier period. Interest paid on time deposits increased
$1,001,000 or 72.1%. Because of the rate increases precipitated by the
Federal Reserve Bank, average rates paid on time deposits increased from
4.92% in 1994 to 5.75% in 1995. This accounted for an increase in interest
expense of $600,000. 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 $401,000.
This was offset in part by a $401,000 (24.9%) 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 third
quarter in 1994.
The combined effect of the increase in both interest income and interest
expense for the third quarter of 1995 versus 1994 resulted in a slight
increase of $66,000 in net interest income. Net interest margin increased 25
basis points from 5.24% to 5.49%.
For the nine month period ending September 30, 1995, interest income
increased $2,420,000 or 7.6% 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 78 basis
points or 9.8%. Additional interest
13
<PAGE>
earned on a 1.4% increase in loan volume was offset by reduced interest
income on a 5.2% decrease in balances of investment securities.
Interest expense for the nine month period increased $1,834,000 over the 1994
amount. This 15.9% increase was mostly due to rate and volume increases in
time deposits as interest paid on those instruments increased $2,701,000 or
69.4%. The major offsetting item to this increase was a $1,010 (20.6%)
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 nine months of 1995 increased 67 basis points to 4.03% from the same
period in 1994.
The combined effect of the increase in both interest income and interest
expense for the first nine months of 1995 versus 1994 resulted in an increase
of $586,000 in net interest income. Net interest margin increased 25 basis
points from 5.10% to 5.35%.
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 nine month periods ended September 30, 1995 versus the same
periods in 1994.
14
<PAGE>
TRICO BANCSHARES
ANALYSIS OF CHANGE IN NET INTEREST
MARGIN ON EARNING ASSETS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
30-Sep-95 30-Sep-94
--------- ---------
Average Income/ Yield/ Average Income/ Yield/
Balance(1) Expense Rate Balance(1) Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Loans(2)(3) $ 313,858 $ 8,724 11.12% $ 311,368 $ 7,854 10.09%
Securities(4) 204,748 2,924 5.71% 225,514 3,230 5.73%
Federal funds sold 721 10 5.55% 2,639 25 3.79%
--------- ------- -------- -------
Total earning assets 519,327 11,658 8.98% 539,521 11,109 8.24%
------- -------
Cash and due from bank 26,552 31,936
Premises and equipment 13,170 13,747
Other assets,net 17,018 18,791
Less: allowance
for loan losses (5,633) (5,826)
--------- ---------
Total $ 570,434 $ 598,169
--------- ---------
--------- ---------
Liabilities and
shareholders' equity
Interest-bearing
Demand deposits $ 80,546 501 2.49% $ 81,058 518 2.56%
Savings deposits 157,844 1,236 3.13% 210,174 1,609 3.06%
Time deposits 168,434 2,390 5.68% 130,687 1,389 4.25%
Federal funds purchased 3,410 49 5.75% 4,309 53 4.92%
Short-term debt 8,137 116 5.70% 19,510 248 5.08%
Long-term debt 16,469 237 5.76% 18,517 229 4.95%
-------- ----- --------- -----
Total interest-bearing
liabilities 434,840 4,529 4.17% 464,255 4,046 3.49%
----- -----
Noninterest-bearing deposits 76,457 79,963
Other liabilities 9,630 6,227
Shareholders' equity 49,507 47,724
-------- ---------
Total liabilities
and shareholders'
equity $ 570,434 $ 598,169
-------- ---------
-------- ---------
Net interest rate spread(5) 4.81% 4.75%
-----
Net interest income/net $ 7,129 $ 7,063
------- -------
------- -------
interest margin(6) 5.49% 5.24%
------- -------
------- -------
</TABLE>
(1) Average balances are computed principally on the basis of daily balances.
(2) Nonaccrual loans are included.
(3) Interest income on loans includes fees on loans of $395,000 in 1995 and
$565,000 in 1994.
(4) Interest income is stated on a tax equivalent basis of 1.75 and 1.77 at
September 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
<PAGE>
TRICO BANCSHARES
ANALYSIS OF CHANGE IN NET INTEREST
MARGIN ON EARNING ASSETS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
30-Sep-95 30-Sep-94
--------- ---------
Average Income/ Yield/ Average Income/ Yield/
Balance(1) Expense Rate Balance(1) Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Loans(2)(3) $ 305,118 $ 25,005 10.93% $ 300,800 $ 22,363 9.91%
Securities(4) 214,313 9,181 5.71% 227,341 9,427 5.53%
Federal funds sold 3,327 140 5.61% 4,781 116 3.24%
--------- --------- --------- -------
Total earning assets $ 522,758 34,326 8.76% 532,922 31,906 7.98%
--------- -------
Cash and due from bank 28,513 32,060
Premises and equipment 13,247 13,084
Other assets,net 15,968 17,764
Less: allowance
for loan losses (5,634) (5,919)
--------- ---------
Total $ 574,852 $ 589,911
--------- ---------
--------- ---------
Liabilities
and shareholders' equity
Interest-bearing
Demand deposits $ 80,547 1,485 2.46% $ 83,659 1,555 2.48%
Savings deposits 168,708 3,912 3.09% 212,419 4,910 3.08%
Time deposits 161,045 6,591 5.46% 129,155 3,890 4.02%
Federal funds purchased 2,349 106 6.02% 3,549 114 4.28%
Short-term debt 11,647 522 5.98% 12,639 457 4.82%
Long-term debt 17,070 727 5.68% 15,516 583 5.01%
--------- --------- --------- -------
Total interest-bearing
liabilities 441,366 13,343 4.03% 456,937 11,509 3.36%
--------- -------
Noninterest-bearing
deposits 75,030 79,783
Other liabilities 8,311 5,924
Shareholders' equity 50,145 47,267
--------- ---------
Total liabilities
and shareholders'
equity $ 574,852 $ 589,911
--------- ---------
--------- ---------
Net interest rate
spread(5) 4.72% 4.62%
----
----
Net interest income/net $ 20,983 $20,397
-------- -------
-------- -------
interest margin(6) 5.35% 5.10%
-------- -------
-------- -------
</TABLE>
(1) Average balances are computed principally on the basis of daily balances.
(2) Nonaccrual loans are included.
(3) Interest income on loans includes fees on loans of $1,205,000 in 1995
and $1,536,000 in 1994.
(4) Interest income is stated on a tax equivalent basis of 1.75 and 1.77 at
September 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.
16
<PAGE>
TRICO BANCSHARES
ANALYSIS OF VOLUME AND RATE CHANGES
ON NET INTEREST INCOME AND EXPENSE
(in thousands)
<TABLE>
<CAPTION>
For the three months ended September 30
---------------------------------------
1995 over 1994
--------------
Yield/
Volume Rate(4) Total
--------- ---------- ---------
<S> <C> <C> <C>
Increase (decrease) in
interest income:
Loans(1)(2) $ 63 $ 807 $ 870
Investment
securities(3) (297) (10) (307)
Federal funds sold (18) 3 (15)
--------- ---------- ---------
Total (252) 801 549
--------- ---------- ---------
Increase (decrease) in
interest expense:
Demand deposits
(interest-bearing) (3) (14) (17)
Savings deposits (401) 28 (373)
Time deposits 401 600 1,001
Federal funds purchased (11) 7 (4)
Short-term debt (145) 13 (132)
Long-term debt (25) 33 8
--------- ---------- ---------
Total (184) 667 483
--------- ---------- ---------
Increase (decrease) in
net interest income $ (68) $ 134 $ 66
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
(1) Nonaccrual loans are included.
(2) Interest income on loans includes fee income on loans of $395,000 in 1995
and $565,000 in 1994.
(3) Interest income is stated on a tax equivalent basis of 1.75 and 1.77 for
September 30, 1995 and 1994.
(4) The rate/volume variance has been included in the rate variance.
17
<PAGE>
TRICO BANCSHARES
ANALYSIS OF VOLUME AND RATE CHANGES
ON NET INTEREST INCOME AND EXPENSE
(in thousands)
<TABLE>
<CAPTION>
For the nine months ended September 30
--------------------------------------
1995 over 1994
--------------
Yield/
Volume Rate(4) Total
--------- ---------- ---------
<S> <C> <C> <C>
Increase (decrease) in
interest income:
Loans(1)(2) $ 321 $ 2,321 $ 2,642
Investment
securities(3) (540) 294 (246)
Federal funds sold (35) 59 24
--------- --------- ---------
Total (254) 2,674 2,420
--------- --------- ---------
--------- --------- ---------
Increase (decrease) in
interest expense:
Demand deposits
(interest-bearing) (58) (12) (70)
Savings deposits (1,010) 12 (998)
Time deposits 960 1,741 2,701
Federal funds purchased (39) 31 (8)
Short-term debt (36) 101 65
Long-term debt 58 86 144
--------- --------- ---------
Total (125) 1,959 1,834
--------- --------- ---------
Increase (decrease) in
net interest income $ (129) $ 715 $ 586
--------- --------- ---------
--------- --------- ---------
</TABLE>
(1) Nonaccrual loans are included.
(2) Interest income on loans includes fee income on loans of $1,205,000 in
1995 and $1,536,000 in 1994.
(3) Interest income is stated on a tax equivalent basis of 1.75 and 1.77 for
September 30, 1995 and 1994.
(4) The rate/volume variance has been included in the rate variance.
18
<PAGE>
PROVISION FOR LOAN LOSSES
In the first nine months of 1995, the Bank provided $235,000 for loan losses
versus $230,000 in 1994. The provision replenished the net loans charged off
during the first nine months of 1995 and added $50,000 for growth in
outstanding loan balances. The allowance for loan losses was 1.77% of
outstanding loans versus 1.83% at December 31,1994. Management's ongoing
analysis of the loan portfolio determined that the remaining balance of
$5,658,000 in the allowance for loan losses is adequate to cover probable
losses inherent in the loan portfolio.
NONINTEREST INCOME
Total noninterest income for the third quarter of 1995 increased $185,000 or
14.7% from the same period in 1994. Selective rate increases in service
charges which took effect January 1, 1995 as well as increased volumes in
some fee categories added approximately $130,000 to noninterest income.
Commissions on the sale of annuities and mutual funds also contributed to the
increase as they were up $104,000 or 62.9%. This revenue was offset in part
by a $47,000 (80.9%) decline in sale of 1-4 family mortgages as origination's
of these loans have been significantly down in 1995. No other individual
items had significant changes.
Results for the nine months were consistent with the third quarter. Overall,
noninterest income increased $748,000 or 19.9% in 1995 versus 1994. Service
charges and fee income accounted for $458,000 of the increase. This increase
resulted from the same factors as detailed above. In the other income
category non recurring income items increased $295,000 and commissions on the
sale of annuities and mutual funds increased by $75,000 (11.2%) during the
first nine months of 1995. These increases were offset in part by a $137,000
reduction in revenue from the sale of 1-4 family mortgage loans. Mortgage
lending activity has been significantly lower during 1995.
19
<PAGE>
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 $431,000 or 7.6% in the third quarter of 1995 versus the
same period last year.
For the quarter, salaries and benefits reflected a slight decrease from the
prior year. This reduction was due in part to a reduction in staffing levels
as average full time equivalent employees decreased 5.6 from the prior year.
Also, one time merger payments of $178,000 were incurred in 1994.
Other expenses decreased $401,000 or 13.4% in the third quarter . Two major
factors contributed to the decrease. In 1994 merger costs totaling $512,000
were incurred and in 1995 the FDIC insurance premium rate was reduced
resulting in a favorable change of $228,000 for the quarter. These savings
were offset in part by net increases of $120,000 in premise and equipment
expenses and $220,000 in other operating expenses. These increases were
incurred in various expense categories with no significant changes in any one
category.
For the nine month period noninterest expenses decreased $354,000 or 2.1% in
1995 over 1994. Taking the 1994 one time merger costs of $916,000 into
account results in a net increase in noninterest expenses of $562,000 or
3.6%. Salaries and related expenses were up $226,000 or 2.8% due to normal
salary progressions and the full nine month effect of supermarket operations
begun in 1994. Premise and equipment expenses were up $296,000 or 12.2% with
much of the increase related to the supermarket branches. Decreases of
$122,000 (31%) and $231,000 (27%) were realized in advertising and FDIC
insurance expenses. 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 nine months ended September 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.
20
<PAGE>
LOANS
In the third quarter of 1995, loan balances increased $11,185,000 or 3.6%
from the ending balances at June 30, 1995. Loan balances were higher in all
categories. The balances also exceeded year end balances by $12,530,000 and
1994 third quarter ending balances by $6,113,000. 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 modest loan growth
should continue through the fourth quarter.
SECURITIES
At September 30, 1995, securities held-to-maturity had a cost basis of
$132,594,000 and a fair value of $130,004,000. This portfolio contained
mortgage-backed securities totaling $89,026,000 of which $39,832,000 were
CMO's. The securities available-for-sale portfolio had a fair market value
of $69,337,000 with an amortized cost basis of $70,258,000. This portfolio
contained mortgage-backed securities totaling $33,364,000 of which
$26,006,000 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 1995, at September 30 the fair
value of securities reflected an unrealized loss of $3,511,000 or 1.7% of
amortized cost. If loan demand continues to improve, management intends to
continue to move funds from maturing securities into loans.
21
<PAGE>
NONPERFORMING LOANS
As shown in the following table, total nonperforming assets have increased a
modest $7,000 since year end. Nonperforming assets decreased $1,574,000 from
the second quarter balance of $4,604,000. Most of that decrease took place
in the nonaccrual loan category. Non performing assets represent only 0.53%
of total assets. Nonaccrual loans increased while OREO decreased during this
period. 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.
<TABLE>
<CAPTION>
September 30, December 31,
------------- -----------
1995 1994
---- ----
<S> <C> <C>
Nonaccrual loans $ $ 1,919 $ 1,122
Accruing loans past due 90 days or more 20 24
Restructured loans (in compliance with
modified terms) 0 0
------------ -----------
Total nonperforming loans 1,939 1,146
Other real estate owned 1,091 1,877
------------ -----------
Total nonperforming assets $ 3,030 $ 3,023
------------ -----------
------------ -----------
Nonincome producing investments in real
estate held by Bank's real estate
development subsidiary $ 1,173 $ 1,173
------------ -----------
------------ -----------
Nonperforming loans to total loans 0.61% 0.36%
Allowance for loan losses to
nonperforming loans 292% 489%
Nonperforming assets to total assets 0.53% 0.51%
Allowance for loan losses to
nonperforming assets 187% 198%
</TABLE>
22
<PAGE>
ALLOWANCE FOR LOAN LOSSES
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.
<TABLE>
<CAPTION>
September 30, December 31,
------------- -----------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
Balance, Beginning of period $ 5,608 $ 5,973
Provision charged to operations 235 230
Loan charged off (361) (575)
Recoveries of loans previously
charged off 176 260
Balance, end of period $ 5,658 $ 5,888
------------ ------------
------------ ------------
Ending loan portfolio $ 319,884 $ 313,771
------------ ------------
------------ ------------
Allowance to loans as a
percentage of ending loan portfolio 1.77% 1.88%
------------ ------------
------------ ------------
</TABLE>
23
<PAGE>
EQUITY
The following table indicates the amounts of regulatory capital of the
Company.
<TABLE>
<CAPTION>
Tier I Total Risk- Leverage
Based
---------- ---------- ---------
(dollars in thousands)
<S> <C> <C> <C>
September 30, 1995
Company's % 13.5% 14.7% 9.1%
Regulatory minimum % 4.0% 8.0% 4.0%
Company's capital $ $ 52,541 $ 57,421 $ 52,541
Regulatory minimum $ 15,615 31,230 23,013
---------- ---------- ---------
Computed excess $ 36,926 $ 26,191 $ 29,528
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
24
<PAGE>
PART II
<TABLE>
<CAPTION>
OTHER INFORMATION
Item 5. Exhibits Index Page
-------------- ----
<S> <C> <C>
a. Exhibits
--------
Computations of Earnings Per Share 27
b. Reports on Form 8-K:
--------------------
None
</TABLE>
25
<PAGE>
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 November 10, 1995 /s/Robert H. Steveson
-------------------- --------------------------------------
Robert H. Steveson
President and
Chief Executive Officer
Date November 10, 1995 /s/Robert M. Stanberry
-------------------- --------------------------------------
Robert M. Stanberry
Vice President and
Chief Financial Officer
26
<PAGE>
EXHIBIT 11
COMPUTATIONS OF EARNINGS PER SHARE
(in thousands
except earnings per share)
(unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
-------------------- -------------------
ended September 30, ended September 30,
------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Shares used in the computation
of earnings per share:
Weighted daily average
of shares outstanding 4,445,341 4,378,980 4,419,078 4,366,481
Shares used in the computation of
primary earnings per shares 4,685,485 4,640,018 4,636,191 4,665,336
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Shares used in the computation of
fully diluted earnings per share 4,721,841 4,640,018 4,695,576 4,669,863
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Net income used in the computation
of earnings per common share:
Net income, as reported $ 1,844 $ 1,234 $ 5,238 $ 4,049
Adjustment for preferred
stock dividend (35) (105) (245) (315)
--------------- --------------- --------------- ---------------
Net income, as adjusted $ 1,809 $ 1,129 $ 4,993 $ 3,734
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Primary earnings per share $ 0.39 $ 0.24 $ 1.08 $ 0.80
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Fully diluted earnings per share $ 0.38 $ 0.24 $ 1.06 $ 0.80
--------------- --------------- --------------- -----------------
--------------- --------------- --------------- ---------------
</TABLE>
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000356171
<NAME> TRICO BANCSHARES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 12,407
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 69,337
<INVESTMENTS-CARRYING> 132,594
<INVESTMENTS-MARKET> 130,004
<LOANS> 319,884
<ALLOWANCE> 5,658
<TOTAL-ASSETS> 575,321
<DEPOSITS> 483,012
<SHORT-TERM> 17,528
<LIABILITIES-OTHER> 6,865
<LONG-TERM> 16,466
<COMMON> 44,222
0
0
<OTHER-SE> 7,228
<TOTAL-LIABILITIES-AND-EQUITY> 575,321
<INTEREST-LOAN> 25,005
<INTEREST-INVEST> 9,087
<INTEREST-OTHER> 140
<INTEREST-TOTAL> 34,232
<INTEREST-DEPOSIT> 11,988
<INTEREST-EXPENSE> 13,343
<INTEREST-INCOME-NET> 20,889
<LOAN-LOSSES> 235
<SECURITIES-GAINS> (10)
<EXPENSE-OTHER> 8,093
<INCOME-PRETAX> 8,887
<INCOME-PRE-EXTRAORDINARY> 5,238
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,238
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.06
<YIELD-ACTUAL> 5.35
<LOANS-NON> 1,919
<LOANS-PAST> 20
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,608
<CHARGE-OFFS> 361
<RECOVERIES> 176
<ALLOWANCE-CLOSE> 235
<ALLOWANCE-DOMESTIC> 5,658
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
