<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, 1996 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 11, 1996: 4,641,223
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1996
--------- ---------
<S> <C> <C>
Assets:
Cash and due from banks ................................................................. $ 36,190 $ 39,673
Federal funds sold ...................................................................... -- 25,600
Securities held-to-maturity
(approximate fair value $103,339 and $116,576) ......................................... 105,949 116,865
Securities available-for-sale, net of
unrealized (loss) of $(2,145) and $(236) ............................................... 68,148 76,246
Loans, net of allowance for loan losses of $(5,571) and $(5,580) ........................ 374,379 313,186
Premises and equipment, net ............................................................. 14,130 13,189
Investment in real estate properties .................................................... 1,173 1,173
Other real estate owned ................................................................. 1,582 631
Accrued interest receivable ............................................................. 4,082 4,609
Other assets ............................................................................ 15,406 12,382
--------- ---------
Total assets ....................................................................... $ 621,039 $ 603,554
========= =========
Liabilities:
Deposits
Noninterest-bearing demand ............................................................. $ 83,009 $ 90,308
Interest-bearing demand ................................................................ 89,352 84,314
Savings ................................................................................ 159,853 161,479
Time certificates ....................................................................... 193,405 180,092
--------- ---------
Total deposits ..................................................................... 525,619 516,193
Fed funds purchased ..................................................................... 7,500 --
Accrued interest payable and other liabilities .......................................... 7,579 7,856
Long term borrowings .................................................................... 24,284 26,292
--------- ---------
Total liabilities .................................................................. 564,982 550,341
Shareholders' equity:
Common stock ............................................................................ 44,745 44,315
Retained earnings ....................................................................... 12,974 9,548
Unrealized loss on securities available for sale ........................................ (1,662) (650)
--------- ---------
Total shareholders' equity ......................................................... 56,057 53,213
--------- ---------
Total liabilities and shareholders' equity ......................................... $ 621,039 $ 603,554
========= =========
</TABLE>
<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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans ...................................... $ 9,955 $ 8,724 $ 27,548 $ 25,005
Interest on investment
securities-taxable ............................................. 2,577 2,857 7,916 8,962
Interest on investment
securities-tax exempt .......................................... 30 38 93 125
Interest on federal funds sold .................................. -- 10 332 140
-------- -------- -------- --------
Total interest income ........................................ 12,562 11,629 35,889 34,232
-------- -------- -------- --------
Interest expense:
Interest on deposits ............................................ 4,196 4,127 12,295 11,988
Interest on federal funds purchased ............................. 204 49 348 106
Interest on other borrowings .................................... 456 353 1,246 1,249
-------- -------- -------- --------
Total interest expense ....................................... 4,856 4,529 13,889 13,343
-------- -------- -------- --------
Net interest income .......................................... 7,706 7,100 22,000 20,889
Provision for loan losses ......................................... 537 160 627 235
-------- -------- -------- --------
Net interest income after
provision for loan losses .................................... 7,169 6,940 21,373 20,654
Noninterest income:
Service charges and fees ........................................ 1,296 1,067 3,591 3,103
Other income .................................................... 449 375 1,200 1,419
Securities gains (losses), net .................................. -- -- -- (10)
-------- -------- -------- --------
Total noninterest income ..................................... 1,745 1,442 4,791 4,512
-------- -------- -------- --------
Noninterest expenses:
Salaries and related expenses ................................... 2,941 2,652 8,905 8,186
Other, net ...................................................... 2,876 2,600 8,241 8,093
-------- -------- -------- --------
Total noninterest expenses ................................... 5,817 5,252 17,146 16,279
-------- -------- -------- --------
Net income before income taxes .................................... 3,097 3,130 9,018 8,887
Income taxes .................................................... 1,276 1,286 3,749 3,649
-------- -------- -------- --------
Net income ................................................... 1,821 1,844 5,269 5,238
Preferred stock dividends ......................................... -- 35 -- 245
-------- -------- -------- --------
Net income available to
common shareholders .............................................. 1,821 1,809 5,269 4,993
-------- -------- -------- --------
Primary earnings per common share ................................. $ 0.39 $ 0.39 $ 1.13 $ 1.08
======== ======== ======== ========
Fully diluted earnings per common share $ ......................... 0.39 $ 0.38 $ 1.13 $ 1.06
======== ======== ======== ========
</TABLE>
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
(in thousands, except number of shares)
<TABLE>
<CAPTION>
Common stock Unrealized
--------------------------------- ------------
securities
------------
Number Retained holding
-------------- ------------- ------------
of shares Amount earnings gain (loss) Total
-------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 4,464,828 $ 44,315 $ 9,548 $ (650) $ 53,213
Exercise of common stock
options 62,862 356 $ 356
Repurchase of common stock (8,285) (82) (64) $ (146)
Common stock cash
dividends (1,779) $ (1,779)
Change in securities
loss on securities (1,012) $ (1,012)
Stock option amortization 156 $ 156
Net income, September 30, 1996 5,269 $ 5,269
-------------- ------------- ------------- ------------ ------------
Balance, September 30, 1996 4,519,405 $ 44,745 $ 12,974 $ (1,662) $ 56,057
============== ============= ============= ============ ============
</TABLE>
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1996 1995
<S> <C> <C>
Operating activities:
Net income ...................................................... $ 5,269 $5,238
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses ................................... 627 235
Provision for losses on OREO ................................ -- 35
Depreciation and amortization ............................... 1,328 1,202
Amortization of investment security discounts ............... 42 89
Deferred income taxes ....................................... 107 (112)
Investment security losses (net) ............................ -- 10
(Gain) loss on sale of other real estate owned .............. (5) (73)
(Gain) loss on sale of premises and equipment ............... (7) --
(Gain) loss on sale of loans ................................ (8) (23)
Proceeds from loan sales .................................... 13,217 5,819
Origination of loans held for sale .......................... (20,483) (6,794)
Amortization of stock options ............................... 156 157
(Increase) decrease in interest receivable .................. 527 335
Increase (decrease) in interest payable ..................... (729) 959
(Increase) decrease in other assets and liabilities ......... (2,195) (1,346)
-------- --------
Net cash provided (used) by operating activities .......... (2,154) 5,731
-------- --------
Investing activities:
Proceeds from maturities of securities held-to-maturity ..... 14,256 11,191
Purchases of securities held-to-maturity .................... (5,516) --
Proceeds from maturities of securities available-for-sale ... 12,677 8,554
Proceeds from sales of securities available-for-sale ........ -- 6,993
Purchases of securities available-for-sale .................. (13,644) (5,720)
Net (increase) decrease in loans ............................ (56,007) (12,077)
Purchases of premises and equipment ......................... (2,030) (852)
Proceeds from sale of other real estate owned ............... 515 1,180
-------- --------
Net cash provided (used) by investing activities .......... 40,278 9,269
-------- --------
</TABLE>
<PAGE>
(continued)
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(unaudited)
(in thousands)
(continued)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1996 1995
<S> <C> <C>
Financing activities:
Net increase (decrease) in deposits ......................... 9,426 (8,160)
Net increase in federal funds purchased ..................... 7,500 7,700
Repayment of repurchase agreements .......................... -- (20,629)
Payments of principal on long-term debt agreements .......... (2,008) (2,033)
Redemption of preferred stock ............................... -- (4,000)
Repurchase of common stock .................................. (146) --
Cash dividends - Preferred .................................. -- (245)
Cash dividends - Common ..................................... (1,779) (1,061)
Exercise of common stock options ............................ 356 513
-------- --------
Net cash provided (used) by financing activities .......... 13,349 (27,915)
-------- --------
Increase (decrease) in cash and cash equivalents .......... (29,083) (12,915)
Cash and cash equivalents at beginning of year ............ 65,273 39,709
-------- --------
Cash and cash equivalents at end of period ................ $ 36,190 $ 26,794
======== ========
Supplemental information:
Cash paid for taxes ......................................... $ 4,097 $ 3,540
Cash paid for interest expense .............................. $ 14,618 $ 12,384
</TABLE>
<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, 1996 and 1995, 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, 1995.
Note B - Mortgage Servicing
As of January 1, 1996, the Company adopted FASB Statement of Financial
Accounting Standards No 122, Accounting for Mortgage Servicing Rights, (SFAS
122). SFAS 122 requires a mortgage banking enterprise to recognize the rights to
service mortgage loans for others as a separate asset. SFAS 122 also requires
that a mortgage banking enterprise assess its capitalized mortgage servicing
rights for impairment based on the fair value of those rights and recognize
impairment through a valuation allowance.
The adoption of SFAS 122 did not have a material impact on the Company's
financial position or results of operations for the nine months ended September
30, 1996.
<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 $1,821,000 for the third quarter ended September 30, 1996
versus $1,844,000 for the same period in 1995. Fully diluted earnings per share
for the third quarter periods were $0.39 and $0.38, respectively. Earnings for
the nine months ended September 30, 1996 were $5,269,000 versus year ago results
of $5,238,000. The fully diluted earnings per share were $1.13 and $1.06 for the
respective nine month periods. Earnings per common share in 1996 have benefited
from the redemption of all outstanding preferred stock in the third quarter of
1995, as the Company paid preferred stock dividends totaling $35,000 and
$245,000 for the third quarter and nine month periods respectively in 1995.
For the quarter net interest income was up $599,000 or 8.4% as average loans
outstanding were $64.6 million (20.6%) higher than in the third quarter of 1995.
The effect on interest income from the higher loan balances was offset in part
by a 60 basis point decline in the average yield on loans to 10.52% and a
reduction of $22.6 million (11.0%) in the average balances of securities and
Federal funds sold. Interest expense was higher with a 7.2% increase of $327,000
resulting from higher balances of interest-bearing liabilities offset in part by
a 12 basis point decline in the average rate paid on these liabilities.
The Company provided $537,000 for loan losses in the third quarter of 1996
versus $160,000 in the same period last year. For these periods, net loans
charged off were $200,000 and $111,000 respectively. Because of continuing loan
growth in 1996 Management determined that additions to the allowance for loan
losses were warranted. At this time Management anticipates the loan loss
provision in the fourth quarter will exceed the $100,000 provided in the fourth
quarter of 1995.
Noninterest income is comprised of "service charges and fees" and "other
income". Service charge and fee income increased 21.5% to $1,296,000 in the
third quarter versus year ago results. Both higher account volumes and higher
fee rates contributed to the increase in this category. Other income was up from
$375,000 in 1995 to $449,000 in 1996. Several non-recurring items accounted for
this increase. Overall, noninterest income increased $303,000 or 21.0% for the
quarter.
<PAGE>
Noninterest expenses increased $565,000 to $5,817,000 in the third quarter 1996
versus 1995. Salary and benefit expenses were up $289,000 or 10.9% which
reflects costs for additional employees at two new in-store branches, two loan
production offices, fringe benefits and normal salary increases. Costs relating
to customer deposit services, ATM networks, credit card servicing and
telecommunications accounted for $207,000 of the increase as they were up 34.2%.
These costs reflect higher volumes related to the products. Net increases in
various other expenses made up the remaining difference.
Assets of the Company totaled $621,039,000 at September 30, 1996 which was up
$17,485,000 from the 1995 ending balances. Changes in assets from year end
balances included: an increase in loans of $61,184,000 to $379,950,000; a
decrease in securities of $19,014,000 to $174,097,000; and a decrease in cash
and near cash items of $29,083,000 to $36,190,000. Loan balances were up
$66,066,000 or 18.8% at September 30, 1996 versus the same date in 1995. The
increase in loans outstanding is reflective of a stronger economy and some
additions to and reorganization of the loan production staff. The loan to
deposit ratio at September 30, 1996 was 72.3% versus 66.2% a year ago.
For the third quarter of 1996 the Company had an annualized return on assets of
1.17% and a return on equity of 12.8% versus 1.21% and 13.94% in 1995. TriCo
Bancshares ended the quarter with a leverage ratio of 9.3% (based on ending
assets), a Tier 1 capital ratio of 12.9% and a total risk-based capital ratio of
14.2%.
The previously announced acquisition of Sutter Buttes Savings Bank closed at
5:00pm, October 16, 1996. At closing Sutter Buttes Savings Bank had total assets
of $64.2 million, $60.8 million in loans, $56.0 million in deposits and common
shareholders' equity of $3.4 million. The acquisition will be accounted for
under the purchase method which will result in the recognition of approximately
$850,000 of core deposit and other intangibles.
On October 16, 1996 the Company announced that it had reached a definitive
agreement with Wells Fargo Bank to purchase nine of Wells' branches located in
Northern California. The purchase includes deposit accounts and facilities and
is scheduled to close in the first quarter of 1997 subject to regulatory
approval.
The following tables provide a summary of the major elements of income and
expense for the third quarter of 1996 compared with the third quarter of 1995
and for the first nine months of 1996 compared with the first nine months of
1995.
<PAGE>
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
<TABLE>
<CAPTION>
Three months
ended September 30, Percentage
1996 1995 Change
(in thousands, except increase
earnings per share) (decrease)
<S> <C> <C> <C>
Interest income ............................................................ $ 12,584 $ 11,658 7.9%
Interest expense ........................................................... 4,856 4,529 7.2%
-------- --------
Net interest income ........................................................ 7,728 7,129 8.4%
Provision for loan losses .................................................. 537 160 235.6%
-------- --------
Net interest income after .................................................. 7,191 6,969 3.2%
provision for loan losses
Noninterest income ......................................................... 1,745 1,442 21.0%
Noninterest expenses ....................................................... 5,817 5,252 10.8%
-------- --------
Net income before income taxes ............................................. 3,119 3,159 -1.3%
Income taxes ............................................................... 1,276 1,286 -0.8%
Tax equivalent adjustment1 ................................................. 22 29 -24.2%
-------- --------
Net income ................................................................. 1,821 1,844 -1.2%
======== ========
Preferred stock dividends .................................................. -- (35) -100.0%
Net income available to .................................................... 1,821 1,809 0.7%
common shareholders'
Primary earnings per common share .......................................... 0.39 0.39 0.0%
</TABLE>
1 Interest on tax-free securities is reported on a tax equivalent basis of
1.72 and 1.75 for September 30, 1996 and 1995 respectively.
<PAGE>
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
<TABLE>
<CAPTION>
Nine months
ended September 30, Percentage
1996 1995 Change
(in thousands, except increase
earnings per share) (decrease)
<S> <C> <C> <C>
Interest income ............................................................ $ 35,956 $ 34,326 4.7%
Interest expense ........................................................... 13,889 13,343 4.1%
-------- --------
Net interest income ........................................................ 22,067 20,983 5.2%
Provision for loan losses .................................................. 627 235 166.8%
-------- --------
Net interest income after .................................................. 21,440 20,748 3.3%
provision for loan losses
Noninterest income ......................................................... 4,791 4,512 6.2%
Noninterest expenses ....................................................... 17,146 16,279 5.3%
-------- --------
Net income before income taxes ............................................. 9,085 8,981 1.2%
Income taxes ............................................................... 3,749 3,649 2.7%
Tax equivalent adjustment1 ................................................. 67 94 -28.6%
-------- --------
Net income ................................................................. 5,269 5,238 0.6%
======== ========
Preferred stock dividends .................................................. -- (245) -100.0%
Net income available to .................................................... 5,269 4,993 5.5%
common shareholders'
Primary earnings per common share .......................................... 1.13 1.08 4.6%
</TABLE>
1 Interest on tax-free securities is reported on a tax equivalent basis of 1.72
and 1.75 for September 30, 1996 and 1995 respectively.
<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, 1996, interest income increased $926,000 or
7.9% over the same period in 1995. Average loans outstanding were 20.6% or
$64,591,000 higher in the third quarter of 1996 compared to the third quarter of
1995. Interest income due to this increase totaled $1,795,000. The loan growth
was funded by growth in liabilities and capital and reductions in investment
securities and Federal funds sold. The increase in interest income due to the
growth in loans was offset in part by lower average balances in investment
securities and Federal funds sold which resulted in a $322,000 reduction in
interest income in the third quarter of 1996 as compared to the same period in
1995. Additionally, average rates received on loans decreased 60 basis points or
5.4%. The lower loan rates reduced interest income by $564,000 in the third
quarter of 1996 as compared to the same period in 1995. Since the beginning of
the third quarter of 1995, the Bank's base lending rate has decreased 75 basis
points in parallel with rate reductions by the Federal Reserve.
Interest expense was higher by $327,000 or 7.2% in the third quarter of 1996
over the year earlier period. Most all of the increase was due to higher average
balances of interest bearing liabilities as average rates paid on these
liabilities decreased 12 basis points to 4.05%. Time deposit average balances
were up $18,695,000 (11.1%) and accounted for $265,000 of additional interest
expense. Federal Funds purchased average balances were up $10,291,000 (301%) and
accounted for $148,000 of additional interest expense. In total the higher
average balances resulted in a $563,000 increase in interest expense. The lower
average rates paid on these liabilities offset $276,000 of the increase in the
third quarter of 1996 as compared to the same period in 1995.
The combined effect of the increase in both interest income and interest expense
for the third quarter of 1996 versus the same period in 1995 resulted in an
increase of $599,000 (8.4%) in net interest income. Net interest margin improved
2 basis points to 5.51% for the third quarter of 1996.
For the nine month period ending September 30, 1996, interest income increased
$1,630,000 or 4.8% over the same period in 1995. All of the increase resulted
from higher average balances on loans and Federal funds sold. Interest income
from the volume increase for these two items totaled $3,805,000. It was offset
by an $1,122,000 decrease in interest income on investment securities for volume
changes and $1,070,000 in decreases due to lower average rates on loans and
<PAGE>
Federal funds sold. However, because of the increased volume of loans (which
have higher rates than investment securities), the average rate received on all
earning assets for the nine month period ended September 30, 1996 increased 3
basis points to 8.79% from that for the same period in 1995.
Interest expense for the nine month period increased $546,000 (4.1%) from that
for the same period in 1995. The average balance of time deposits was up
$16,328,000 or 10.1% which accounted for a $668,000 increase in interest
expense. Since the average rate paid on those instruments was down 12 basis
points to 5.34%, it resulted in an offsetting decrease of $157,000 in interest
expense. A reduction in the average balance of savings accounts coupled with
slightly lower rates resulted in a 4.8% decrease of $191,000 in interest expense
for that item. Increases in both the average balance and interest rates paid on
long term debt added $266,000 (31.6%) to total interest expense for the nine
month period in 1996 versus the same period in 1995. Overall average rates paid
on interest-bearing liabilities in the first nine months of 1996 decreased 2
basis points to 4.01% from the same period in 1995. The combined effect of the
increase in both interest income and interest expense for the first nine months
of 1996 versus 1995 resulted in an increase of $599,000 or 2.8% in net interest
income. Net interest margin increased 4 basis points from 5.35% to 5.39%.
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, 1996 versus the same periods
in 1995.
<PAGE>
TRICO BANCSHARES
ANALYSIS OF CHANGE IN NET INTEREST
MARGIN ON EARNING ASSETS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
30-Sep-96 30-Sep-95
Average Income/ Yield/ Average Income/ Yield/
Balance1 Expense Rate Balance1 Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Loans 2,3 $ 378,449 $ 9,955 10.52% $ 313,858 $ 8,724 11.12%
Securities4 182,899 2,629 5.75% 204,748 2,924 5.71%
Federal funds sold - - 721 10 5.55%
------------ ----------- ------------ -----------
Total earning assets 561,348 12,584 8.97% 519,327 11,658 8.98%
----------- -----------
Cash and due from bank 33,374 26,552
Premises and equipment 14,293 13,170
Other assets, net 18,603 17,018
Less: allowance
for loan losses (5,338) (5,633)
------------ ------------
Total $ 622,280 $ 570,434
============ ============
Liabilities
and shareholders' equity
Interest-bearing
Demand deposits $ 90,215 519 2.30% $ 80,546 501 2.49%
Savings deposits 158,640 1,229 3.10% 157,844 1,236 3.13%
Time deposits 187,129 2,448 5.23% 168,434 2,390 5.68%
Federal funds purchased 13,701 204 5.96% 3,410 49 5.75%
Short-term debt 6,196 88 5.68% - - -
Long-term debt 24,310 368 6.06% 24,606 353 5.74%
------------ ----------- ------------ -----------
Total interest-bearing
liabilities 480,191 4,856 4.05% 434,840 4,529 4.17%
----------- -----------
Noninterest-bearing deposits 78,999 76,457
Other liabilities 7,166 9,630
Shareholders' equity 55,924 49,507
------------ ------------
Total liabilities
and shareholders' equity $ 622,280 $ 570,434
============ ============
Net interest rate spread5 4.92% 4.81%
=========== ===========
Net interest income/net $ 7,728 $ 7,129
=========== ===========
interest margin6 5.51% 5.49%
=========== ===========
1 Average balances are computed principally on the basis of daily balances.
Average balance of securities is based on amortized cost.
2 Nonaccrual loans are included.
3 Interest income on loans includes fees on loans of $502,000 in 1996 and $395,000 in 1995.
4 Interest income is stated on a tax equivalent basis of 1.72 and 1.75 at September 30, 1996 and 1995.
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.
</TABLE>
<PAGE>
TRICO BANCSHARES
ANALYSIS OF CHANGE IN NET INTEREST
MARGIN ON EARNING ASSETS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
30-Sep-96 30-Sep-95
Average Income/ Yield/ Average Income/ Yield/
Balance1 Expense Rate Balance1 Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Loans 2,3 $ 348,943 $ 27,548 10.53% $ 305,118 $ 25,005 10.93%
Securities4 188,123 8,076 5.72% 214,313 9,181 5.71%
Federal funds sold 8,383 332 5.28% 3,327 140 5.61%
------------- ------------ ------------ -------------
Total earning assets 545,449 35,956 8.79% 522,758 34,326 8.76%
------------ -------------
Cash and due from bank 30,716 28,513
Premises and equipment 13,917 13,247
Other assets, net 18,316 15,968
Less: allowance
for loan losses (5,438) (5,634)
------------- ------------
Total $ 602,960 $ 574,852
============= ============
Liabilities
and shareholders' equity
Interest-bearing
Demand deposits $ 86,313 1,472 2.27% $ 80,547 1,485 2.46%
Savings deposits 161,712 3,721 3.07% 168,708 3,912 3.09%
Time deposits 177,373 7,102 5.34% 161,045 6,591 5.46%
Federal funds purchased 8,397 348 5.53% 2,349 106 6.02%
Short-term debt 3,285 137 5.56% 8,827 406 6.13%
Long-term debt 24,871 1,109 5.95% 19,890 843 5.65%
------------- ------------ ------------ -------------
Total interest-bearing
liabilities 461,951 13,889 4.01% 441,366 13,343 4.03%
------------ -------------
Noninterest-bearing deposits 77,905 75,030
Other liabilities 8,202 8,311
Shareholders' equity 54,902 50,145
------------- ------------
Total liabilities
and shareholders' equity $ 602,960 $ 574,852
============= ============
Net interest rate spread5 4.78% 4.72%
=========== ===========
Net interest income/net $ 22,067 $ 20,983
============ =============
interest margin6 5.39% 5.35%
============ =============
1 Average balances are computed principally on the basis of daily balances.
Average balance of securities is based on amortized cost.
2 Nonaccrual loans are included.
3 Interest income on loans includes fees on loans of $1,407,000 in 1996 and $1,205,000 in 1995.
4 Interest income is stated on a tax equivalent basis of 1.72 and 1.75 at September 30, 1996 and 1995.
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.
</TABLE>
<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,
1996 over 1995
Yield/
Volume Rate4 Total
------------------ ------------------- ---------------------
<S> <C> <C> <C>
Increase (decrease) in interest income:
Loans 1,2 $ 1,795 $ (564) $ 1,231
Investment securities3 (312) 17 (295)
Federal funds sold (10) - (10)
------------------ ------------------- ---------------------
Total 1,473 (547) 926
------------------ ------------------- ---------------------
Increase (decrease) in interest expense:
Demand deposits
(interest-bearing) 60 (42) 18
Savings deposits 6 (13) (7)
Time deposits 265 (207) 58
Federal funds purchased 148 7 155
Short-term debt 88 - 88
Long-term debt (4) 19 15
------------------ ------------------- ---------------------
Total 563 (236) 327
------------------ ------------------- ---------------------
Increase (decrease) in
net interest income $ 910 $ (311) $ 599
================== =================== =====================
</TABLE>
1 Nonaccrual loans are included.
2 Interest income on loans includes fees on loans of $502,000 in 1996 and
$395,000 in 1995. 3 Interest income is stated on a tax equivalent basis of 1.72
and 1.75 at September 30, 1996 and 1995.
4 The rate/volume variance has been included in the rate variance.
<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,
1996 over 1995
Yield/
Volume Rate4 Total
------------------ ----------------- ------------------
<S> <C> <C> <C>
Increase (decrease) in interest income:
Loans 1,2 $ 3,592 $ (1,049) $ 2,543
Investment securities3 (1,122) 17 (1,105)
Federal funds sold 213 (21) 192
------------------ ----------------- ------------------
Total 2,683 (1,053) 1,630
------------------ ----------------- ------------------
Increase (decrease) in interest expense:
Demand deposits
(interest-bearing) 106 (119) (13)
Savings deposits (162) (29) (191)
Time deposits 668 (157) 511
Federal funds purchased 273 (31) 242
Short-term debt (255) (14) (269)
Long-term debt 211 55 266
------------------ ----------------- ------------------
Total 841 (295) 546
------------------ ----------------- ------------------
Increase (decrease) in
net interest income $ 1,842 $ (758) $ 1,084
================== ================= ==================
</TABLE>
1 Nonaccrual loans are included.
2 Interest income on loans includes fee income on loans of $1,407,000 in 1996
and $1,205,000 in 1995. 3 Interest income is stated on a tax equivalent basis of
1.72 and 1.75 at September 30, 1996 and 1995.
4 The rate/volume variance has been included in the rate variance.
<PAGE>
Provision for Loan Losses
In the first nine months of 1996, the Bank provided $627,000 for loan losses
versus $235,000 in 1995. The provision mostly offset the $636,000 in net loans
charged off during the first nine months of 1996. The Bank experienced a higher
level of credit card charge offs than had been the case in prior years. The
allowance for loan losses at September 30, 1996 was 1.47% of outstanding loans
versus 1.77% at September 30, 1995. Management's ongoing analysis of the loan
portfolio determined that the remaining balance of $5,571,000 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 1996 increased $303,000 or
21.0% from the same period in 1995. Selective rate increases in service charges
which took effect July 1, 1996 as well as increased volumes in some fee
categories added approximately $228,000 to noninterest income. Other income was
up from $375,000 to $449,000 in 1996. Several non recurring items accounted for
this increase. No other individual items had significant changes.
Results for the nine months were mixed. Overall, noninterest income increased
$279,000 or 6.2% in 1996 versus 1995. Service charges and fee income were up
$488,000 or 15.7%. This increase resulted from the same factors as detailed
above. In the other income category commissions on sales of annuities and mutual
funds increased by $305,000 (24.3%) during the first nine months of 1995.
However, overall other income decreased by $219,000 (15.4%) for the first nine
months of 1996 as compared the same period in 1995. Fewer favorable non
recurring items accounted for the decrease.
Noninterest Expense
Noninterest expense is comprised of operating expenses of the Company and the
Bank, plus the total noninterest (income) expenses of the Bank's real estate
development subsidiary. These expenses increased $565,000 or 10.8% in the third
quarter of 1996 versus the same period last year.
For the quarter, salaries and benefits were up $289,000 or 10.9% from the prior
year. This increase reflects costs for additional employees at two new in-store
branches, two loan production offices, fringe benefits and normal salary
increases.
Other expenses increased $276,000 or 10.6% in the third quarter . Costs relating
to customer deposit services, ATM networks, credit card servicing and
telecommunications accounted for $207,000 of the increase as they were up 34.2%.
These costs reflect higher volumes related to the products. Net increases in
various other expense categories made up the remaining difference.
<PAGE>
For the nine month period noninterest expenses increased $867,000 or 5.3% in
1996 over 1995. Expense increases for the nine month period are fairly
reflective of those for the quarter as detailed in the previous paragraph
especially as related to salaries and benefits.
Management continually reviews these expenses and expense controls. Management
expects noninterest expenses to increase from current levels in the fourth
quarter of 1996 and the first quarter of 1997 as the Bank prepares to support
the additional nine branches to be purchased from Wells Fargo Bank.
Provision for Income Taxes
The effective tax rate for the nine months ended September 30, 1996 is 41.6%.
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.
Loans
In the third quarter of 1996, loan balances increased $7,032,000 or 1.9% from
the ending balances at June 30, 1996. The third quarter growth slowed as
agricultural borrowers typically lock up their credit needs in the first and
second quarters. The third quarter growth was about evenly split between real
estate construction and consumer loans. The balances of $379,950,000 at
September 30, 1996 exceeded year end balances by $61,184,000 and 1995 third
quarter ending balances by $60,066,000. The year over year gain is reflective of
an improved economy and the Bank's success in marketing its loan products.
Management has made a concerted effort to develop a more highly refined sales
culture among its loan officers while maintaining its credit underwriting
standards. Because of the inherent seasonality in the Bank's loan portfolio
where agricultural production loans paydown in the fourth quarter, Management
believes loan growth will be modest to flat through the fourth quarter.
Securities
At September 30, 1996, securities held-to-maturity had a cost basis of
$105,945,000 and a fair value of $103,339,000. This portfolio contained
mortgage-backed securities totaling $83,367,000 of which $34,665,000 were CMO's.
The securities available-for-sale portfolio had a fair market value of
$68,148,000 and an amortized cost basis of $70,293,000. This portfolio contained
mortgage-backed securities with fair market values totaling $29,056,000 of which
$20,896,000 were CMO's. At December 31, 1996 the cost basis of the two
<PAGE>
portfolios was $196,914,000. The Bank has continued to re-deploy funds from
matured securities into the loan portfolio.
Nonperforming Loans
As shown in the following table, total nonperforming assets have increased
$3,230,000 to $6,294,000 in the first nine months of 1996. Approximately $2.0
million of the increase in nonperforming loans are loans secured by commercial
real estate and are related to one borrower. Non performing assets represent
1.01% of total assets. All nonaccrual loans are considered to be impaired when
determining any valuation allowance under SFAS 114.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Nonaccrual loans $ 4,692 $ 2,213
Accruing loans past due 90 days or more 20 220
Restructured loans (in compliance with
modified terms) - -
------------------ ------------------
Total nonperforming loans 4,712 2,433
Other real estate owned 1,582 631
------------------ ------------------
Total nonperforming assets $ 6,294 $ 3,064
================== ==================
Nonincome producing investments in real
estate held by Bank's real estate
development subsidiary $ 1,173 $ 1,173
================== ==================
Nonperforming loans to total loans 1.24% 0.76%
Allowance for loan losses to
nonperforming loans 118% 229%
Nonperforming assets to total assets 1.01% 0.51%
Allowance for loan losses to
nonperforming assets 89% 182%
</TABLE>
<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, September 30,
1996 1995
(in thousands)
<S> <C> <C>
Balance, Beginning of period $ 5,580 $ 5,608
Provision charged to operations 627 235
Loans charged off (919) (361)
Recoveries of loans previously
charged off 283 176
Balance, end of period $ 5,571 $ 5,658
=================== ==================
Ending loan portfolio $ 379,950 $ 319,884
=================== ==================
Allowance for loans as a
percentage of ending loan portfolio 1.47% 1.77%
=================== ==================
</TABLE>
<PAGE>
Equity
The following table indicates the amounts of regulatory capital of the Company.
Tier I Total Risk- Leverage
Based
-----------------------------------------------------------
(dollars in thousands)
September 30, 1995
Company's % 12.9% 14.2% 9.3%
Regulatory minimum % 4.0% 8.0% 4.0%
Company's capital $ $ 57,719 $ 63,290 $ 57,719
Regulatory minimum $ 17,865 35,729 24,842
----------------- ----------------- -----------------
Computed excess $ 39,854 $ 27,561 $ 32,877
================= ================= =================
<PAGE>
PART II
Other Information
Item 5. Exhibits Index Page
a. Exhibits
Computations of Earnings Per Share 25
b. Reports on Form 8-K:
A Form 8-K, for Item 2 was filed on October 16, 1996 which
reported the acquisition of Sutter Buttes Savings Bank.
Financial statements for this transaction have not yet been
filed.
<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 11, 1996 /s/ Robert H. Steveson
Robert H. Steveson
President and
Chief Executive Officer
Date November 11, 1996 /s/ Robert M. Stanberry
Robert M. Stanberry
Vice President and
Chief Financial Officer
<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,
1996 1995 1996 1995
Shares used in the computation of earnings per share:
<S> <C> <C> <C> <C>
Weighted daily average
of shares outstanding 4,498,831 4,445,341 4,476,299 4,419,078
Shares used in the computation of
primary earnings per shares 4,673,451 4,685,485 4,657,051 4,636,191
================ ================ ============== ==============
Shares used in the computation of
fully diluted earnings per share 4,713,229 4,721,841 4,680,967 4,695,576
================ ================ ============== ==============
Net income used in the computation
of earnings per common share:
Net income, as reported $ 1,821 $ 1,844 $ 5,269 $ 5,238
Adjustment for preferred
stock dividend - (35) - (245)
---------------- ---------------- -------------- --------------
Net income, as adjusted $ 1,821 $ 1,809 $ 5,269 $ 4,993
================ ================ ============== ==============
Primary earnings per share $ 0.39 $ 0.39 $ 1.13 $ 1.08
================ ================ ============== ==============
Fully diluted earnings per share $ 0.39 $ 0.38 $ 1.13 $ 1.06
================ ================ ============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000356171
<NAME> TRICO BANCSHARES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 36,190
<INT-BEARING-DEPOSITS> 442,610
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,148
<INVESTMENTS-CARRYING> 105,949
<INVESTMENTS-MARKET> 103,339
<LOANS> 379,950
<ALLOWANCE> 5,571
<TOTAL-ASSETS> 621,039
<DEPOSITS> 525,619
<SHORT-TERM> 7,500
<LIABILITIES-OTHER> 7,579
<LONG-TERM> 24,284
0
0
<COMMON> 44,745
<OTHER-SE> 11,312
<TOTAL-LIABILITIES-AND-EQUITY> 621,039
<INTEREST-LOAN> 27,548
<INTEREST-INVEST> 8,009
<INTEREST-OTHER> 332
<INTEREST-TOTAL> 35,889
<INTEREST-DEPOSIT> 12,295
<INTEREST-EXPENSE> 13,889
<INTEREST-INCOME-NET> 22,000
<LOAN-LOSSES> 627
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 17,146
<INCOME-PRETAX> 9,018
<INCOME-PRE-EXTRAORDINARY> 5,269
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,269
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.13
<YIELD-ACTUAL> 8.97
<LOANS-NON> 4,692
<LOANS-PAST> 20
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,580
<CHARGE-OFFS> 919
<RECOVERIES> 283
<ALLOWANCE-CLOSE> 5,571
<ALLOWANCE-DOMESTIC> 5,571
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
