<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 June 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 August 12, 1996: 4,493,871
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
--------- ---------
1996 1995
<S> <C> <C>
Assets:
Cash and due from banks ............................................ $ 30,572 $ 39,673
Federal funds sold ................................................. -- 25,600
Securities held-to-maturity
(approximate fair value $104,643 and $116,576) .................... 108,279 116,865
Securities available-for-sale, net of
unrealized (loss) of $(1,849) and $(236) .......................... 75,529 76,246
Loans, net of allowance for loan losses of $(5,234) and $(5,580) ... 367,684 313,186
Premises and equipment, net ........................................ 14,293 13,189
Investment in real estate properties ............................... 1,173 1,173
Other real estate owned ............................................ 747 631
Accrued interest receivable ........................................ 4,686 4,609
Other assets ....................................................... 13,973 12,382
--------- ---------
Total assets .................................................. $ 616,936 $ 603,554
========= =========
Liabilities:
Deposits
Noninterest-bearing demand ........................................ $ 81,744 $ 90,308
Interest-bearing demand ........................................... 84,361 84,314
Savings ........................................................... 155,198 161,479
Time certificates ................................................. 169,706 180,092
--------- ---------
Total deposits ................................................ 491,009 516,193
Fed funds purchased ................................................ 30,000 --
Repurchase agreements .............................................. 9,828 --
Accrued interest payable and other liabilities ..................... 6,742 7,856
Long term borrowings ............................................... 24,458 26,292
--------- ---------
Total liabilities ............................................. 562,037 550,341
Shareholders' equity:
Common stock ....................................................... 44,627 44,315
Retained earnings .................................................. 11,757 9,548
Unrealized loss on securities available for sale ................... (1,485) (650)
--------- ---------
Total shareholders' equity .................................... 54,899 53,213
--------- ---------
Total liabilities and shareholders' equity .................... $ 616,936 $ 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 six months
ended June 30, ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans ..................... $ 9,030 $ 8,244 $ 17,593 $ 16,281
Interest on investment
securities-taxable ............................ 2,641 2,975 5,339 6,105
Interest on investment
securities-tax exempt ......................... 30 43 63 87
Interest on federal funds sold ................. 21 40 332 130
------- ------- ------- -------
Total interest income ....................... 11,722 11,302 23,327 22,603
------- ------- ------- -------
Interest expense:
Interest on deposits ........................... 3,946 4,111 8,099 7,861
Interest on federal funds purchased ............ 144 47 144 57
Interest on other borrowings ................... 408 283 790 896
------- ------- ------- -------
Total interest expense ...................... 4,498 4,441 9,033 8,814
------- ------- ------- -------
Net interest income ......................... 7,224 6,861 14,294 13,789
Provision for loan losses ........................ 50 35 90 75
------- ------- ------- -------
Net interest income after
provision for loan losses ................... 7,174 6,826 14,204 13,714
Noninterest income:
Service charges and fees ....................... 1,176 1,015 2,295 2,036
Other income ................................... 404 602 751 1,044
Securities gains (losses), net ................. -- 21 -- (10)
------- ------- ------- -------
Total noninterest income .................... 1,580 1,638 3,046 3,070
------- ------- ------- -------
Noninterest expenses:
Salaries and related expenses .................. 3,005 2,724 5,964 5,534
Other, net ..................................... 2,819 2,747 5,365 5,493
------- ------- ------- -------
Total noninterest expenses .................. 5,824 5,471 11,329 11,027
------- ------- ------- -------
Net income before income taxes ................... 2,930 2,993 5,921 5,757
Income taxes ................................... 1,226 1,229 2,473 2,363
------- ------- ------- -------
Net income .................................. 1,704 1,764 3,448 3,394
Preferred stock dividends ........................ -- 105 -- 210
------- ------- ------- -------
Net income available to
common shareholders ............................. $ 1,704 $ 1,659 $ 3,448 $ 3,184
Primary earnings per common sh$re ................ $ 0.37 $ 0.36 $ 0.74 $ 0.69
======= ======= ======= =======
Fully diluted earnings per com$on share .......... $ 0.37 $ 0.36 $ 0.74 $ 0.69
======= ======= ======= =======
</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 26,169 290 $ 290
Repurchase of common stock (8,285) (82) (64) $ (146)
Common stock cash
dividends (1,175) $ (1,175)
Change in unrealized
loss on securities (835) $ (835)
Stock option amortization 104 $ 104
Net income, June 30, 1996 3,448 $ 3,448
---------- ---------- ----------- ---------- ----------
Balance,
June 30, 1996 4,482,712 $ 44,627 $ 11,757 $ (1,485) $ 54,899
========== ========== =========== ========== ==========
</TABLE>
<PAGE>
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the six months
ended June 30,
1996 1995
<S> <C> <C>
Operating activities:
Net income .................................................... $ 3,448 $ 3,394
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses ................................. 90 75
Provision for losses on other real estate owned ........... -- 35
Depreciation and amortization ............................. 856 780
Amortization of investment security discounts ............. 30 59
Deferred income taxes ..................................... 106 --
Investment security (gains) losses (net) .................. -- 10
(Gain) loss on sale of OREO (net) ......................... (31) (66)
(Gain) loss on sale of loans (net) ........................ 6 (23)
Origination of loans held for sale ........................ (13,896) (4,923)
Proceeds from loan sales .................................. 5,256 3,822
Amortization of stock options ............................. 104 104
(Increase) decrease in interest receivable ................ (77) 193
Increase (decrease) in interest payable ................... (818) 919
(Increase) decrease in other assets and liabilities (1,532) (517)
-------- --------
Net cash provided (used) by operating activities ........ (6,458) 3,862
Investing activities:
Proceeds from maturities of securities held-to-maturity 14,256 6,789
Purchases of securities held-to-maturity .................. (5,516) --
Proceeds from maturities of securities available-for-sale 12,677 6,101
Proceeds from sales of securities available-for-sale ...... -- 6,993
Purchases of securities available-for-sale ................ (13,587) (3,080)
Net (increase) decrease in loans .......................... (46,485) (605)
Purchases of premises and equipment ....................... (1,813) (720)
Proceeds from the sale of OREO ............................ 446 900
-------- --------
Net cash provided (used) by investing activities ........ (40,022) 16,378
Financing activities:
Net increase (decrease) in deposits ....................... (25,184) (3,363)
Fed funds purchased ....................................... 30,000 --
Repayment of repurchase agreements ........................ -- (30,457)
Borrowings under long-term debt agreements ................ 10,000 --
Payments of principal on long-term debt agreements ........ (2,006) (2,020)
Cash dividends - Preferred ................................ -- (210)
Cash dividends - Common ................................... (1,175) (704)
Repurchase of common stock ................................ (146) --
Sale of Common Stock ...................................... 290 196
-------- --------
Net cash provided (used) by financing activities ........ 11,779 (36,558)
-------- --------
Increase (decrease) in cash and cash equivalents (34,701) (16,318)
Cash and cash equivalents at beginning of period ........ 65,273 39,709
-------- --------
Cash and cash equivalents at end of period ............ $ 30,572 $ 23,391
======== ========
Supplemental information:
Cash paid for taxes ....................................... $ 3,182 $ 2,264
Cash paid for interest expense ............................ $ 9,329 $ 7,895
</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 six months ended June 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 six months ended June 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 $1,704,000 for the second quarter ended June 30, 1996 versus
$1,764,000 for the same period in 1995. Fully diluted earnings per share for the
second quarter periods were $0.37 and $0.36, respectively. Earnings for the six
months ended June 30, 1996 were $3,448,000 versus year ago results of
$3,394,000. The fully diluted earnings per share were $.74 and $.69 for the
respective six 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.
A combination of factors in the second quarter 1996 resulted in the $63,000 or
2.1% decline in pretax earnings over the same period in 1995. Interest income
was up $410,000 or 3.6% as average loans outstanding were $47.7 million (15.9%)
higher than in the second quarter of 1995. The effect on interest income from
the higher loan balances was offset in part by a 59 basis point decline in the
average yield on loans to 10.4% and a reduction of $21.9 million (10.3%) in the
average balances of securities and Federal funds sold. Interest expense was
modestly higher with a 1.2% increase of $57,000 resulting from higher balances
of interest-bearing liabilities offset in part by an 11 basis point decline in
the average rate paid on these liabilities.
Noninterest income is comprised of "service charges and fees" and "other
income". Service charge and fee income increased 15.9% to $1,176,000 in the
second quarter versus year ago results. The increase is due mainly to an
increase in account volumes as basic fee rates have generally not changed. Other
income was down from $602,000 in 1995 to $404,000 in 1996. In the second quarter
of 1995 the Company had non-recurring miscellaneous income in excess of
$250,000. Overall, noninterest income decreased $58,000 or 3.5% for the quarter.
Noninterest expenses increased $353,000 to $5,824,000 in the second quarter 1996
versus 1995. Due to the virtual elimination of FDIC insurance premiums for the
year 1996, this expense decreased $282,000 from the 1995 second quarter level.
This cost savings was offset in part by a $281,000 or 10.3% increase in salary
and benefit expenses, which reflects costs for additional employees at two new
in-store branches, two loan production offices, fringe benefits and normal
salary increases. Advertising costs were up $200,000 as the Company ran two
television advertising campaigns during the second quarter of 1996, Net
increases in various other expenses made up the remaining differences.
<PAGE>
Assets of the Company totaled $616,936,000 at June 30, 1996 which was up
$13,382,000 from the 1995 ending balances. Changes in assets from year end
balances included: an increase in loans of $54,152,000 to $372,918,000; a
decrease in securities of $9,303,000 to $183,808,000; and a decrease in cash and
near cash items of $34,701,000 to $30,572,000. Loan balances were up $64,219,000
or 20.8% at June 30, 1996 versus the same date in 1995. The loan to deposit
ratio at June 30, 1996 was 76.5% versus 63.2% a year ago.
For the second quarter of 1996 the Company had an annualized return on assets of
1.16% and a return on equity of 12.7% versus 1.18% and 13.5% in 1995. TriCo
Bancshares ended the quarter with a leverage ratio of 9.0% (based on ending
assets), a Tier 1 capital ratio of 12.9% and a total risk-based capital ratio of
14.1%.
On June 15, 1996 TriCo Bancshares signed an Acquisition Agreement and Plan of
Merger with Sutter Buttes Savings Bank. At March 31 1996, Sutter Buttes had
assets totaling $67,000,000 of which $58,000,000 were loans. On July 25, 1996
the Securities and Exchange Commission approved the Company's Form S-4
Registration Statement relating to this acquisition and on August 5, 1996 the
Registration Statement became effective. The acquisition agreement is still
pending approval of the Sutter Buttes shareholders, the California State
Department of Banking and the Federal Deposit Insurance Corporation. Management
estimates the closing date will be late third quarter or early fourth quarter
this year. As soon as possible after the acquisition closing date, the
operations of Sutter Buttes will be absorbed into the Yuba City branches of Tri
Counties Bank and the Sutter Buttes branches will be closed. The acquisition
will be recorded using the purchase method of accounting.
The following tables provide a summary of the major elements of income and
expense for the second quarter of 1996 compared with the second quarter of 1995
and for the first six months of 1996 compared with the first six months of 1995.
<PAGE>
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
<TABLE>
<CAPTION>
Three months
ended June 30, Percentage
1996 1995 Change
(in thousands, except increase
earnings per share) (decrease)
<S> <C> <C> <C>
Interest income $ 11,744 $ 11,334 3.6%
Interest expense 4,498 4,441 1.3%
------------- ------------
Net interest income 7,246 6,893 5.1%
Provision for loan losses 50 35 42.9%
------------- ------------
Net interest income after 7,196 6,858 4.9%
provision for loan losses
Noninterest income 1,580 1,638 -3.5%
Noninterest expenses 5,824 5,471 6.5%
------------- ------------
Net income before income taxes 2,952 3,025 -2.4%
Income taxes 1,226 1,229 -0.2%
Tax equivalent adjustment1 22 32 -32.5%
------------- ------------
Net income 1,704 1,764 -3.4%
============= ============
Preferred stock dividends (105) -100.0%
Net income available to 1,704 1,659 2.7%
common shareholders'
Primary earnings per common share 0.37 0.36 2.8%
</TABLE>
1 Interest on tax-free securities is reported on a tax equivalent basis of 1.72
and 1.75 for June 30, 1996 and 1995.
<PAGE>
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
<TABLE>
<CAPTION>
Six months
ended June 30, Percentage
1996 1995 Change
(in thousands, except increase
earnings per share) (decrease)
<S> <C> <C> <C>
Interest income $ 23,372 $ 22,668 3.1%
Interest expense 9,033 8,814 2.5%
------------ ------------
Net interest income 14,339 13,854 3.5%
Provision for loan losses 90 75 20.0%
------------ ------------
Net interest income after 14,249 13,779 3.4%
provision for loan losses
Noninterest income 3,046 3,070 -0.8%
Noninterest expenses 11,329 11,027 2.7%
------------ ------------
Net income before income taxes 5,966 5,822 2.5%
Income taxes 2,473 2,363 4.7%
Tax equivalent adjustment1 45 65 -30.2%
------------ ------------
Net income 3,448 3,394 1.6%
============ ============
Preferred stock dividends (210) -100.0%
Net income available to 3,448 3,184 8.3%
common shareholders'
Primary earnings per common share 0.74 0.69 7.6%
</TABLE>
1 Interest on tax-free securities is reported on a tax equivalent basis of 1.72
and 1.75 for June 30, 1996 and 1995.
<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 June 30, 1996, interest income increased $410,000 or 3.6
percent over the same period in 1995. Average loans outstanding were 15.9% or
$47,747,000 higher in the second quarter of 1996 compared to the second quarter
of 1995. Interest income due to this increase totaled $1,308,000. The loan
growth was funded by growth in liabilities and capital and reductions in
investment securities and Federal funds sold. The lower balances in the
investment securities and Federal funds sold resulted in a $319,000 reduction in
interest income from these sources for the second quarter of 1996 as compared to
the same period in 1995. Additionally, average rates received on all earning
assets were lower with loan rates decreasing 59 basis points or 5.4%. The lower
rates on all earning assets reduced interest income by $579,000 in the second
quarter of 1996 as compared to the same period in 1995. Since the second quarter
of 1995, the Bank's base lending rate has decreased 75 basis points in parallel
with rate reductions by the Federal Reserve.
For the second quarter of 1996, interest expense increased by $57,000 or 1.3%
over the year earlier period. Average balances of interest bearing liabilities
were $17,816,000 (4.1%) higher in the second quarter of 1996. These higher
balances resulted in a $256,000 increase in interest expense in the second
quarter of 1996 as compared to the same period in 1995. Second quarter 1996
average balances of Federal funds purchased and short-term debt were $11,490,000
and $19,656,000 respectively, as compared to $2,983,000 and $3,103,000 in the
second quarter of 1995. Interest recorded on the increased volume of these two
items amounted to $369,000. For the same periods, the average balance of
long-term debt decreased $8,240,000 or 50% which resulted in a $119,000 decrease
in interest expense. Average rates paid on all interest bearing liabilities
decreased from 4.08% in the second quarter of 1995 to 3.97% in the second
quarter of 1996. This accounted for a decrease in interest expense of $199,000.
The lower average rate paid on interest-bearing liabilities was reflective of
the general reduction in market rates of interest from the second quarter of
1995 to the second quarter of 1996.
The combined effect of the increase in both interest income and interest expense
for the second quarter of 1996 versus the same period in 1995 resulted in an
increase of $353,000 (5.1%) in net interest income. Net interest margin of 5.38%
was flat between the two periods.
<PAGE>
For the six month period ending June 30, 1996, interest income increased
$704,000 or 3.1% 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 $2,034,000. It was offset by an
$810,000 decrease in interest income on investment securities for volume changes
and $520,000 in decreases due to lower average rates on loans and 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 six month period ended June 30, 1996 increased 6 basis points to 8.7% from
that for the same period in 1995.
Interest expense for the six month period increased $219,000 from that for the
same period in 1995. This 2.5% increase was mostly due to volume and rate
increases in time deposits as interest recorded on those instruments increased
$453,000 or 10.8%. Reductions in average balances of savings accounts and
short-term debt coupled with slightly lower rates helped offset $299,000 of the
increase. The higher rates paid on time deposits caused customers to move funds
from savings accounts. Overall average rates paid on interest-bearing
liabilities in the first six months of 1996 increased 3 basis points to 3.99%
from the same period in 1995.
The combined effect of the increase in both interest income and interest expense
for the first six months of 1996 versus 1995 resulted in an increase of $485,000
or 3.5% in net interest income. Net interest margin increased 6 basis points
from 5.28% to 5.34%.
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 six month periods ended June 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
6/30/96 6/30/95
Average Income/ Yield/ Average Income/ Yield/
Balance1 Expense Rate Balance1 Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Loan 2,3 $ 348,779 $ 9,030 10.36% $ 301,032 $ 8,244 10.95%
Securities4 188,276 2,693 5.72% 208,963 3,050 5.84%
Federal funds sold 1,592 21 5.28% 2,796 40 5.72%
----------- --------- ----------- ---------
Total earning assets 538,647 11,744 8.72% 512,791 11,334 8.84%
--------- ---------
Cash and due from bank 29,113 28,065
Premises and equipment 14,121 13,315
Other assets,net 18,486 21,675
Less: allowance
for loan losses (5,383) (5,619)
----------- -----------
Total $ 594,984 $ 570,227
=========== ===========
Liabilities
and shareholders' equity
Interest-bearing
Demand deposits $ 84,062 477 2.27% $ 79,640 490 2.46%
Savings deposits 160,453 1,226 3.06% 164,733 1,273 3.09%
Time deposits 169,516 2,243 5.29% 168,662 2,348 5.57%
Federal funds purchased 11,490 144 5.01% 2,983 47 6.30%
Short-term debt 19,656 291 5.92% 3,103 44 5.67%
Long-term debt 8,252 117 5.67% 16,492 239 5.80%
----------- --------- ----------- ---------
Total interest-bearing
liabilities 453,429 4,498 3.97% 435,613 4,441 4.08%
--------- ---------
Noninterest-bearing deposits 77,941 74,739
Other liabilities 8,842 8,455
Shareholders' equity 54,772 51,420
----------- -----------
Total liabilities
and shareholders' equity $ 594,984 $ 570,227
=========== ===========
Net interest rate spread5 4.75% 4.76%
========= =========
Net interest income/net $ 7,246 $ 6,893
========= =========
interest margin6 5.38% 5.38%
========= =========
</TABLE>
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 $498,000 in 1996 and
$428,000 in 1995.
4 Interest income is stated on a tax equivalent basis of 1.72 and 1.75 at June
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.
<PAGE>
TRICO BANCSHARES
ANALYSIS OF CHANGE IN NET INTEREST
MARGIN ON EARNING ASSETS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
6/30/96 6/30/95
Average Income/ Yield/ Average Income/ Yield/
Balance1 Expense Rate Balance1 Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Loan 2,3 $ 334,190 $ 17,593 10.53% $ 300,748 $ 16,281 10.83%
Securities4 190,735 5,447 5.71% 219,095 6,257 5.71%
Federal funds sold 12,620 332 5.26% 4,630 130 5.62%
----------- ----------- ----------- -----------
Total earning assets 537,545 23,372 8.70% 524,473 22,668 8.64%
----------- -----------
Cash and due from bank 29,387 29,494
Premises and equipment 13,729 13,285
Other assets,net 18,127 15,444
Less: allowance
for loan losses (5,488) (5,634)
----------- -----------
Total $ 593,300 $ 577,062
=========== ===========
Liabilities
and shareholders' equity
Interest-bearing
Demand deposits $ 84,362 953 2.26% $ 80,548 984 2.44%
Savings deposits 163,248 2,492 3.05% 174,140 2,676 3.07%
Time deposits 172,495 4,654 5.40% 157,350 4,201 5.34%
Federal funds purchased 5,745 144 5.01% 1,819 57 6.27%
Short-term debt 9,828 291 5.92% 13,402 406 6.06%
Long-term debt 17,153 499 5.82% 17,370 490 5.64%
----------- ----------- ----------- ----------
Total interest-bearing
liabilities 452,831 9,033 3.99% 444,629 8,814 3.96%
----------- ----------
Noninterest-bearing deposits 77,358 74,318
Other liabilities 8,720 7,655
Shareholders' equity 54,391 50,460
----------- -----------
Total liabilities
and shareholders' equity $ 593,300 $ 577,062
=========== ===========
Net interest rate spread5 4.71% 4.68%
========== ==========
Net interest income/net $ 14,339 $ 13,854
=========== ===========
interest margin6 5.34% 5.28%
=========== ===========
</TABLE>
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 $905,000 in 1996 and
$810,000 in 1995.
4 Interest income is stated on a tax equivalent basis of 1.72 and 1.75 at June
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.
<PAGE>
TRICO BANCSHARES
ANALYSIS OF VOLUME AND RATE CHANGES
ON NET INTEREST INCOME AND EXPENSE
(in thousands)
For the three months ended June 30,
1996 over 1995
Yield/
Volume Rate4 Total
--------------- ----------- -------------
Increase (decrease) in
interest income:
Loans 1,2 $ 1,308 $ (522) $ 786
Investment securities3 (302) (55) (357)
Federal funds sold (17) (2) (19)
--------------- ----------- -------------
Total 989 (579) 410
--------------- ----------- -------------
Increase (decrease) in
interest expense:
Demand deposits
(interest-bearing) 27 (40) (13)
Savings deposits (33) (14) (47)
Time deposits 12 (117) (105)
Federal funds purchased 134 (37) 97
Short-term debt 235 12 247
Long-term debt (119) (3) (122)
--------------- ----------- -------------
Total 256 (199) 57
--------------- ----------- -------------
Increase (decrease) in
net interest income $ 733 $ (380) $ 353
=============== =========== =============
1 Nonaccrual loans are included.
2 Interest income on loans includes fee income on loans of $498,000 in 1996 and
$428,000 in 1995.
3 Interest income is stated on a tax equivalent basis of 1.72 and 1.75 for June
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)
For the six months ended June 30,
1996 over 1995
Yield/
Volume Rate4 Total
-------------- ---------- --------------
Increase (decrease) in
interest income:
Loans 1,2 $ 1,810 $ (498) $ 1,312
Investment securities3 (810) 0 (810)
Federal funds sold 224 (22) 202
-------------- ---------- --------------
Total 1,224 (520) 704
-------------- ---------- --------------
Increase (decrease) in
interest expense:
Demand deposits
(interest-bearing) 47 (78) (31)
Savings deposits (167) (17) (184)
Time deposits 404 49 453
Federal funds purchased 123 (36) 87
Short-term debt (108) (7) (115)
Long-term debt (6) 15 9
-------------- ---------- --------------
Total 293 (74) 219
-------------- ---------- --------------
Increase (decrease) in
net interest income $ 931 $ (446) $ 485
============== ========== ==============
1 Nonaccrual loans are included.
2 Interest income on loans includes fee income on loans of $905,000 in 1996 and
$810,000 in 1995.
3 Interest income is stated on a tax equivalent basis of 1.72 and 1.75 for June
30, 1996 and 1995.
4 The rate/volume variance has been included in the rate variance.
<PAGE>
Provision for Loan Losses
In the first six months of 1996, the Bank provided $90,000 for loan losses
versus $75,000 in 1995. The allowance for loan losses at June 30, 1996 was 1.40%
of outstanding loans versus 1.75% at December 31,1995. Management's ongoing
analysis of the loan portfolio determined that the remaining balance of
$5,234,000 in the allowance for loan losses should be adequate to cover known or
potential problem loans.
Noninterest Income
Noninterest income is comprised of "service charges and fees", "other income"
and "securities gains and losses". Noninterest income for the second quarter
1996 was down $58,000 or 3.5% from the second quarter of 1995. Service charges
and fee income increased 15.9% or $161,000. This increase was due mainly to a
change in account volumes as basic fee rates had not changed. This was offset by
a decrease in other income from $602,000 in 1995 to $404,000 in 1996. There was
over $250,000 in non recurring items recorded in the second quarter of 1995.
Commissions on the sales of annuities and mutual funds helped offset this
decrease as they increased $95,000 or 38.9% in the second quarter of 1996 as
compared to the same period in 1995. Other miscellaneous items accounted for the
remaining unfavorable variance.
Results for the first six months were consistent with the second quarter.
Overall, noninterest income decreased $24,000 or .8% in the first six months of
1996 versus the same period in 1995. Service charges and fee income reflected a
12.7% increase to $2,295,000 and were the result of volume changes. In the other
income category, commissions on annuities and mutual funds were up $179,000 or
37.8%. The reduction in non recurring income items as detailed above offset this
favorable trend. These items account for the significant changes within the
noninterest income category.
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 increased $353,000 to $5,824,000 in the second quarter of 1996 versus
1995.
For the quarter, salaries and benefits increased $281,000 or 10.3% which
reflects costs for additional employees at two new in-store branches, two loan
production offices, increases in fringe benefits and normal salary increases.
Other expenses increased $72,000 or 2.6% in the second quarter 1996 versus 1995.
The magnitude of this increase was favorably impacted by a $282,000 reduction in
FDIC insurance expense because of the virtual elimination of the premium for
1996. Factors contributing to the increase included: a television advertising
campaign for $200,000; costs associated with the out-sourcing of the internal
audit function which started in July 1995; and a mix of other various operating
items.
<PAGE>
For the six month period noninterest expenses increased $302,000 or 2.7% in 1996
over 1995. Salaries and related expenses were up $430,000 or 7.8% due to the
issues discussed for the quarter. Other expenses decreased $128,000 or 2.3%.
Premise and equipment expenses were down slightly as several computer related
equipment leases expired. FDIC insurance costs were down $569,000. Costs
relating to maintenance of premium deposit accounts and credit cards increased
$154,000 or 73.9% due to increased activity. These costs were offset by
increases in service charge and fee income related those products. The Company
has run two television advertising campaigns in the first half of 1996 versus
one in the same period of 1995. Because of this costs for advertising increased
$105,000 or 63.9%. The second advertising campaign will run into the third
quarter. When it is completed, no other major advertising projects are planned
for the balance of the year. The balance of the increases are spread throughout
the expense categories.
The overhead efficiency ratio for the first six months of 1996 was 65.3% versus
65.4% in the like period of 1995. This is about 3% higher than the first quarter
1996 average for California peer banks. Management is focused on improving this
ratio.
Provision for Income Taxes
The effective tax rate for the six months ended June 30, 1996 is 41.8%. 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 second quarter of 1996, loan balances increased $43,343,000 or 13.2% from
the ending balances at March 31, 1996. Loan balances were higher in all
categories. The balances also exceeded year end balances by $54,142,000 and 1995
second quarter ending balances by $64,219,000. The year over year gains suggest
that the Bank has been successful in marketing its loan products. Management has
made a concerted effort to develop a more highly refined sales culture among its
loan officers. A new Chief Credit Officer who has significant experience with
California middle market companies was brought on board to manage the credit
function. Loan underwriting standards have been maintained, but pricing has been
more competitive. Management believes loan growth should continue through the
third quarter.
Securities
At June 30, 1996, securities held-to-maturity had a cost basis of $108,279,000
and a fair value of $104,643,000. This portfolio contained mortgage-backed
securities totaling $85,722,000 of which $35,580,000 were CMO's. The securities
available-for-sale portfolio had a fair market value of $75,529,000 with a cost
basis of $77,378,000. This portfolio contained mortgage-backed securities with
fair market values totaling $30,504,000 of which $21,439,000 were CMO's. During
the first six months of 1996, maturities of securities exceeded purchases by
$7,830,000. As long as loan demand continues to increase, management intends to
continue to move funds from maturing securities into loans.
<PAGE>
Nonperforming Loans
As shown in the following table, total nonperforming assets increased $1,607,000
to $4,671,000 during the first six months of 1996. Non performing assets
represent only 0.76% of total assets at June 30, 1996. The increase in
nonperforming loans was attributable to several borrowers and is not considered
to be indicative of a general trend. All nonaccrual loans are considered to be
impaired when determining any valuation allowance under SFAS 114.
1996 1995
Nonaccrual loans $ 3,904 $ 2,213
Accruing loans past due 90 days or more 20 220
Restructured loans (in compliance with
modified terms) 0 0
------------ ------------
Total nonperforming loans 3,924 2,433
Other real estate owned 747 631
------------ ------------
Total nonperforming assets $ 4,671 $ 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 1.05% 0.76%
Allowance for loan losses to
nonperforming loans 133% 229%
Nonperforming assets to total assets 0.76% 0.51%
Allowance for loan losses to
nonperforming assets 112% 182%
<PAGE>
Allowance for Loan Loss
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.
1996 1995
(in thousands)
Balance, Beginning of period $ 5,580 $ 5,608
Provision charged to operations 90 75
Loans charged off (697) (173)
Recoveries of loans previously
charged off 261 99
Balance, end of period $ 5,234 $ 5,609
================ ================
Ending loan portfolio $ 372,918 $ 308,699
================ ================
Allowance for loan losses as a
percentage of ending loan portfolio 1.40% 1.82%
================ ================
<PAGE>
Equity
The following table indicates the amounts of regulatory capital of the Company.
Tier I Total Risk- Leverage
Based
---------------------------------------------------
(dollars in thousands)
June 30,1996
Company's % 12.9% 14.1% 9.0%
Regulatory minimum % 4.0% 8.0% 4.0%
Company's capital $ $ 55,728 $ 60,962 $ 55,728
Regulatory minimum $ 17,320 34,640 24,677
-------------- -------------- --------------
Computed excess $ 38,408 $ 26,322 $ 31,051
============== ============== ==============
<PAGE>
PART II
Other Information
Item 5. Exhibits Index Page
a. Exhibits
Computations of Earnings Per Share 24
b. Reports on Form 8-K:
None
<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 August 12, 1996 /s/ Robert H. Steveson
Robert H. Steveson
President and
Chief Executive Officer
Date August 12, 1996 /s/ Robert M. Stanberry
Robert M. Stanberry
Vice President and
Chief Financial Officer
<PAGE>
<PAGE>
EXHIBIT 11
COMPUTATIONS OF EARNINGS PER SHARE
(in thousands
except earnings per share)
(unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 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 4,463,891 4,414,639 4,464,909 4,405,528
Shares used in the computation of
primary earnings per shares 4,651,031 4,624,785 4,648,761 4,611,545
============= ============ ============= ===========
Shares used in the computation of
fully diluted earnings per share 4,660,819 4,627,564 4,664,660 4,619,674
============= ============ ============= ===========
Net income used in the computation
of earnings per common share:
Net income, as reported $ 1,704 $ 1,764 $ 3,448 $ 3,394
Adjustment for preferred
stock dividend (105) (210)
------------- ------------ ------------- -----------
Net income, as adjusted $ 1,704 $ 1,659 $ 3,448 $ 3,184
============= ============ ============= ===========
Primary earnings per share $ 0.37 $ 0.36 $ 0.74 $ 0.69
============= ============ ============= ===========
Fully diluted earnings per share $ 0.37 $ 0.36 $ 0.74 $ 0.69
============= ============ ============= ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000356171
<NAME> TRICO BANCSHARES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 30,572
<INT-BEARING-DEPOSITS> 409,265
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 75,529
<INVESTMENTS-CARRYING> 108,279
<INVESTMENTS-MARKET> 104,643
<LOANS> 372,918
<ALLOWANCE> 5,234
<TOTAL-ASSETS> 616,936
<DEPOSITS> 491,009
<SHORT-TERM> 39,828
<LIABILITIES-OTHER> 6,742
<LONG-TERM> 24,458
0
0
<COMMON> 44,627
<OTHER-SE> 10,272
<TOTAL-LIABILITIES-AND-EQUITY> 616,936
<INTEREST-LOAN> 17,593
<INTEREST-INVEST> 5,402
<INTEREST-OTHER> 332
<INTEREST-TOTAL> 23,327
<INTEREST-DEPOSIT> 8,099
<INTEREST-EXPENSE> 9,033
<INTEREST-INCOME-NET> 14,294
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,329
<INCOME-PRETAX> 5,921
<INCOME-PRE-EXTRAORDINARY> 3,448
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,448
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.74
<YIELD-ACTUAL> 8.70
<LOANS-NON> 3,904
<LOANS-PAST> 20
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,580
<CHARGE-OFFS> 697
<RECOVERIES> 261
<ALLOWANCE-CLOSE> 5,234
<ALLOWANCE-DOMESTIC> 5,234
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
