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, 2002 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.)
63 Constitution Drive, Chico, California 95973
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 530/898-0300
- --------------------------------------------------------------------------------
(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, 2002: 7,025,690
TRICO BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
June 30, December 31,
------------------ ------------------
2002 2001
Assets:
Cash and due from banks $ 54,094 $ 59,264
Federal funds sold and repurchase agreements 27,800 18,700
------------------ ------------------
Cash and cash equivalents 81,894 77,964
Securities available-for-sale 234,544 224,590
Loans, net of allowance for loan losses
of $13,613 and $13,058, respectively 658,187 645,674
Premises and equipment, net 16,195 16,457
Cash Value of Life Insurance 14,927 14,602
Other real estate owned 71 71
Accrued interest receivable 5,419 5,522
Intangible assets 4,615 5,070
Other assets 13,709 15,497
------------------ ------------------
Total assets $ 1,029,561 $ 1,005,447
================== ==================
Liabilities:
Deposits:
Noninterest-bearing demand $ 188,546 $ 190,386
Interest-bearing demand 169,343 165,542
Savings 255,264 247,399
Time certificates 284,757 277,066
------------------ ------------------
Total deposits 897,910 880,393
Accrued interest payable and other liabilities 15,589 15,165
Long term borrowings 22,940 22,956
------------------ ------------------
Total liabilities 936,439 918,514
Shareholders' equity:
Common stock 50,047 49,679
Retained earnings 41,682 37,909
Accumulated other comprehensive income (loss) 1,393 (655)
------------------ ------------------
Total shareholders' equity 93,122 86,933
------------------ ------------------
Total liabilities and shareholders' equity $ 1,029,561 $ 1,005,447
================== ==================
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands except earnings per common share)
For the three months For the six months
ended June 30, ended June 30,
2002 2001 2002 2001
Interest income:
Interest and fees on loans $ 13,046 $ 14,968 $ 26,054 $ 29,861
Interest on investment
securities-taxable 2,309 2,258 4,539 4,956
Interest on investment
securities-tax exempt 553 554 1,107 1,111
Interest on federal funds sold 167 547 333 951
---------------- --------------- -------------- --------------
Total interest income 16,075 18,327 32,033 36,879
---------------- --------------- -------------- --------------
Interest expense:
Interest on deposits 2,857 5,816 5,801 12,506
Interest on other borrowings 322 507 641 1,012
---------------- --------------- -------------- --------------
Total interest expense 3,179 6,323 6,442 13,518
---------------- --------------- -------------- --------------
Net interest income 12,896 12,004 25,591 23,361
Provision for loan losses 500 775 1,300 2,650
---------------- --------------- -------------- --------------
Net interest income after
provision for loan losses 12,396 11,229 24,291 20,711
Noninterest income:
Service charges and fees 2,141 2,097 4,114 3,970
Gain on sale of insurance company stock - - - 1,756
Other income 1,802 1,480 3,655 2,879
---------------- --------------- -------------- --------------
Total noninterest income 3,943 3,577 7,769 8,605
---------------- --------------- -------------- --------------
Noninterest expenses:
Salaries and related expenses 5,773 5,207 11,512 10,334
Other, net 5,190 5,026 9,853 9,638
---------------- --------------- -------------- --------------
Total noninterest expenses 10,963 10,233 21,365 19,972
---------------- --------------- -------------- --------------
Net income before income taxes 5,376 4,573 10,695 9,344
Income taxes 2,011 1,736 4,001 3,528
---------------- --------------- -------------- --------------
Net income $ 3,365 $ 2,837 $ 6,694 $ 5,816
================ =============== ============== ==============
Basic earnings per common share $ 0.48 $ 0.40 $ 0.96 $ 0.82
================ =============== ============== ==============
Diluted earnings per common share $ 0.47 $ 0.39 $ 0.93 $ 0.80
================ =============== ============== ==============
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
(in thousands, except number of shares)
Common stock Accumulated
------------------------- Other
Number Retained Comprehensive Comprehensive
of shares Amount earnings Income (Loss) Total Income
-----------------------------------------------------------------------------------
Balance, December 31, 2001 7,000,980 $49,679 $37,909 ($655) $86,933
Exercise of Common Stock options 34,710 439 439
Repurchase of Common Stock (10,000) (71) (119) (190)
Common stock cash dividends (2,802) (2,802)
Comprehensive income:
Net income 6,694 6,694 $6,694
Other comprehensive income:
Change in unrealized loss
on securities, net of tax 2,048 2,048 2,048
-----------------
Comprehensive income $8,742
-----------------------------------------------------------------------------------
Balance, June 30, 2002 7,025,690 $50,047 $41,682 $1,393 $93,122
------------------------------------------------------------------
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
TRICO BANCSHARES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
For the six months
ended June 30,
2002 2001
-------------- --------------
Operating activities:
Net income $ 6,694 $ 5,816
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 1,300 2,650
Provision for losses on other real estate owned - 18
Depreciation and amortization 1,316 1,349
Amortization of intangible assets 455 455
Accretion and amortization of investment
securities discounts and premiums, net 702 100
Deferred income taxes (66) 169
Investment security (gains) losses, net - (1,756)
Gain on sale of OREO - (31)
Gain on sale of loans (1,502) (798)
Loss on sale of fixed assets 19 8
Decrease in interest receivable 103 994
(Decrease) increase in interest payable (849) 304
Decrease (increase) in other assets and liabilities 1,674 (1,386)
-------------- --------------
Net cash provided by operating activities 9,846 7,892
-------------- --------------
Investing activities:
Proceeds from maturities of securities available-for-sale 60,067 43,044
Proceeds from sales of securities available-for-sale - 3,265
Purchases of securities available-for-sale (67,448) (127)
Proceeds from sale of fixed assets 8 9
Net increase in loans (12,311) (24,297)
Purchases of premises and equipment (942) (1,221)
Proceeds from sale of OREO - 784
-------------- --------------
Net cash provided by (used in) investing activities (20,626) 21,457
-------------- --------------
Financing activities:
Net increase in deposits 17,517 6,891
Net decrease in Fed funds purchased - (500)
Payments of principal on long-term debt agreements (16) (1,014)
Repurchase of common stock (190) (2,710)
Cash dividends - Common (2,802) (2,831)
Exercise of common stock options 201 318
-------------- --------------
Net cash provided by financing activities 14,710 154
-------------- --------------
Increase in cash and cash equivalents 3,930 29,503
Cash and cash equivalents at beginning of period 77,964 58,190
-------------- --------------
Cash and cash equivalents at end of period $ 81,894 $ 87,693
============== ==============
Supplemental information
Cash paid for taxes $ 2,000 $ 3,100
Cash paid for interest $ 7,291 $ 13,214
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
Item 1. Notes to Unaudited 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 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, 2002 and 2001 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, 2001.
Certain amounts previously reported in the 2001 financial statements have been
reclassified to conform to the 2002 presentation. These reclassifications did
not affect previously reported net income or total shareholders' equity.
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 141, "Business Combinations" (SFAS 141),
and Statement of Financial Accounting Standard No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142). SFAS 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001
and specifies criteria that intangible assets acquired in a purchase method
business combination must meet to be recognized and reported apart from
goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized after 2001, but instead be periodically
evaluated for impairment. Intangible assets with definite useful lives are
required to be amortized over their respective estimated useful lives to their
estimated residual values, and also reviewed for impairment.
Effective January 1, 2002, the Company was required to adopt the provisions of
SFAS 142. Accordingly, any goodwill and any intangible asset determined to have
an indefinite useful life that are acquired in a purchase business combination
will not be amortized, but will continue to be evaluated for impairment in
accordance with the appropriate accounting literature. The Company was also
required to reassess the useful lives and residual values of all such intangible
assets and make any necessary amortization period adjustments by March 31, 2002.
No such adjustments were required to be made.
In addition, to the extent an intangible asset is identified as having an
indefinite useful life, the Company was required to test the intangible asset
for impairment in the first quarter of 2002. The Company has no intangibles with
indefinite useful life.
As of the date of adoption, the Company had identifiable intangible assets
consisting of core deposit premiums and minimum pension liability. Core deposit
premiums are amortized using an accelerated method over a period of ten years.
Intangible assets related to minimum pension liability are adjusted annually
based upon actuarial estimates. The Company has no goodwill (unidentifiable
intangible assets). As of June 30, 2002 and December 31, 2001, the Company had
unamortized core deposit premiums of $4,097,000 and $4,553,000, respectively.
Amortization of core deposit premiums was $454,000 during the first six months
of 2002 and 2001. Core deposit premiums are scheduled to amortize at a rate of
$228,000 per quarter through the quarter ended December 31, 2006.
Note B - Comprehensive Income
For the Company, comprehensive income includes net income reported on the
statement of income, changes in the fair value of its available-for-sale
investments and changes in minimum pension liability reported as other
comprehensive income. The following table presents net income adjusted by these
elements to determine total comprehensive income (in thousands).
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
Net income $ 3,365 $ 2,837 $ 6,694 $ 5,816
Net change in unrealized gains (losses)
on securities available-for-sale 2,004 (172) 2,048 284
Net change in minimum
pension liability - (360) - (360)
-------- -------- -------- --------
Comprehensive income $ 5,369 $ 2,305 $ 8,742 $ 5,740
======== ======== ======== ========
Note C - Earnings per Share
The Company's basic and diluted earnings per share are as follows (in thousands
except per share data):
Three Months Ended June 30, 2002
Weighted
Average Per-Share
Income Shares Amount
Basic Earnings per Share
Net income available to common shareholders $3,365 7,011,306 $0.48
Common stock options outstanding -- 202,494
---------
Diluted Earnings per Share
Net income available to common shareholders $3,365 7,213,800 $0.47
====== =========
Three Months Ended June 30, 2001
Weighted
Average Per-Share
Income Shares Amount
Basic Earnings per Share
Net income available to common shareholders $2,837 7,078,085 $0.40
Common stock options outstanding -- 132,268
---------
Diluted Earnings per Share
Net income available to common shareholders $2,837 7,210,353 $0.39
====== =========
Six Months Ended June 30, 2002
Weighted
Average Per-Share
Income Shares Amount
Basic Earnings per Share
Net income available to common shareholders $6,694 7,001,945 $0.96
Common stock options outstanding -- 163,908
---------
Diluted Earnings per Share
Net income available to common shareholders $6,694 7,165,853 $0.93
====== =========
Six Months Ended June 30, 2001
Weighted
Average Per-Share
Income Shares Amount
Basic Earnings per Share
Net income available to common shareholders $5,816 7,109,299 $0.82
Common stock options outstanding -- 130,553
---------
Diluted Earnings per Share
Net income available to common shareholders $5,816 7,239,852 $0.80
====== =========
Note D - Business Segments
The Company is principally engaged in traditional community banking activities
provided through its twenty-nine branches and eight in-store branches located
throughout Northern California. Community banking activities include the Bank's
commercial and retail lending, deposit gathering and investment and liquidity
management activities. In addition to its community banking services, the Bank
offers investment brokerage and leasing services.
The results of the separate branches have been aggregated into a single
reportable segment, Community Banking. The Company's leasing, investment
brokerage and real estate segments do not meet prescribed aggregation or
materiality criteria and, therefore, are reported as "Other" in the following
table.
Summarized financial information concerning the Bank's reportable segments is as
follows (in thousands):
Community
Banking Other Total
Three Months Ended June 30, 2002
Net interest income $12,643 $253 $12,896
Noninterest income 3,064 879 3,943
Noninterest expense 10,401 562 10,963
Net income 3,011 354 3,365
Assets $1,012,726 $16,835 $1,029,561
Three Months Ended June 30, 2001
Net interest income $11,749 $255 $12,004
Noninterest income 2,944 633 3,577
Noninterest expense 9,787 446 10,233
Net income 2,623 214 2,837
Assets $965,400 $14,893 $980,293
Six Months Ended June 30, 2002
Net interest income $25,105 $486 $25,591
Noninterest income 6,275 1,494 7,769
Noninterest expense 20,304 1,061 21,365
Net income 6,124 570 6,694
Assets $1,012,726 $16,835 $1,029,561
Six Months Ended June 30, 2001
Net interest income $22,910 $451 $23,361
Noninterest income 7,279 1,326 8,605
Noninterest expense 19,057 915 19,972
Net income 5,400 416 5,816
Assets $965,400 $14,893 $980,293
Note E - Noninterest Income
Included in the results for the six months ended June 30, 2001 and the three
months ended March 31, 2001 is a one-time pre-tax income item of $1,756,000.
This one-time item represents the realized gain recorded by the Company upon the
sale of 88,796 common shares of John Hancock Financial Services, Inc. (JHF) for
proceeds of $3,265,000.
Note F - Stock Repurchase Plan
On March 15, 2001, the Company announced the completion of its stock repurchase
plan initially announced on July 20, 2000. Under this repurchase plan, the
Company repurchased a total of 150,000 shares of which 110,000 shares were
repurchased since December 31, 2000.
On October 19, 2001, the Company announced the completion of its stock
repurchase plan initially announced on March 15, 2001. Under this repurchase
plan, the Company repurchased a total of 150,000 shares.
Also on October 19, 2001, the Company announced that its Board of Directors
approved a new plan to repurchase, as conditions warrant, up to 150,000
additional shares of the Company's stock on the open market or in privately
negotiated transactions. The timing of purchases and the exact number of shares
to be purchased will depend on market conditions. The 150,000 shares covered by
this repurchase plan represent approximately 2.2% of the Company's 6,992,080
common shares outstanding on October 19, 2001. As of December 31, 2001, the
Company repurchased 108,800 shares under this new plan. During the quarters
ended March 31, 2002 and June 30, 2002, the Company repurchased 10,000 and 0
shares under this new plan, respectively.
Note G - Shareholder Rights Plan
On June 25, 2001, the Company announced that its Board of Directors adopted and
entered into a Shareholder Rights Plan designed to protect and maximize
shareholder value and to assist the Board of Directors in ensuring fair and
equitable benefit to all shareholders in the event of a hostile bid to acquire
the Company.
The Company adopted this Rights Plan to protect stockholders from coercive or
otherwise unfair takeover tactics. In general terms, the Rights Plan imposes a
significant penalty upon any person or group that acquires 15% or more of the
Company's outstanding common stock without the approval of the Company's Board
of Directors. The Rights Plan was not adopted in response to any known attempt
to acquire control of the Company.
Under the Rights Plan, a dividend of one Preferred Stock Purchase Right was
declared for each common share held of record as of the close of business on
July 10, 2001. No separate certificates evidencing the Rights will be issued
unless and until they become exercisable.
The Rights generally will not become exercisable unless an acquiring entity
accumulates or initiates a tender offer to purchase 15% or more of the Company's
common stock. In that event, each Right will entitle the holder, other than the
unapproved acquirer and its affiliates, to purchase either the Company's common
stock or shares in an acquiring entity at one-half of market value.
The Right's initial exercise price, which is subject to adjustment, is $49.00.
The Company's Board of Directors generally will be entitled to redeem the Rights
at a redemption price of $.01 per Right until an acquiring entity acquires a 15%
position. The Rights expire on July 10, 2011.
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. Within Management's Discussion and Analysis of
Financial Condition and Results of Operations, interest income and net interest
income are generally presented on a fully tax-equivalent (FTE) basis.
In addition to the historical information contained herein, this Quarterly
Report contains certain forward-looking statements. The reader of this Quarterly
Report should understand that all such forward-looking statements are subject to
various uncertainties and risks that could affect their outcome. The Company's
actual results could differ materially from those suggested by such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, variances in the actual versus
projected growth in assets, return on assets, loan losses, expenses, rates
charged on loans and earned on securities investments, rates paid on deposits,
competition effects, fee and other noninterest income earned as well as other
factors. This entire Quarterly Report should be read to put such forward-looking
statements in context and to gain a more complete understanding of the
uncertainties and risks involved in the Company's business.
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to the adequacy of the allowance for loan
losses, investments, intangible assets, income taxes and contingencies. The
Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. (See caption "Allowance for Loan Losses" for a more detailed
discussion).
The following discussion and analysis is designed to provide a better
understanding of the significant changes and trends related to the Company and
its subsidiaries' financial condition, operating results, asset and liability
management, liquidity and capital resources and should be read in conjunction
with the Consolidated Financial Statements of the Company and the Notes thereto.
Overview
The Company had earnings of $3,365,000 for the quarter ended June 30, 2002. The
quarterly earnings represent an 18.6% increase over the $2,837,000 reported for
the same period of 2001. Diluted earnings per share for the second quarter of
2002 were $0.47 versus $0.39 in the year earlier period. Earnings for the six
months ended June 30, 2002 were $6,694,000 versus year ago results of
$5,816,000, and represented a 15.1% increase. The diluted earnings per share
were $0.93 and $0.80 for the respective six-month periods. Included in the
results for the three months ended March 31, 2001 and the six months ended June
30, 2001, was a one-time pre-tax gain of $1,756,000 from the sale of insurance
company stock. Excluding the one-time gain noted above, the Company would have
reported diluted earnings per share of $0.93 and $0.65 in the six month periods
ended June 30, 2002 and 2001, respectively.
The improvement in results from the year-ago quarter was due to a $930,000
(7.6%) increase in fully tax-equivalent net interest income to $13,222,000, a
$275,000 (35.5%) decrease in provision for loan losses to $500,000, and a
$366,000 (10.2%) increase in noninterest income to $3,943,000. These
contributing factors were partially offset by a $730,000 (7.1%) increase in
noninterest expense to $10,963,000 for the quarter ended June 30, 2002.
The improvement in results for the six month period ended June 30, 2002 compared
to the results for the six month period ended June 30, 2001 was due to a
$2,283,000 (9.5%) increase in fully tax-equivalent net interest income to
$26,222,000, a $1,350,000 (50.9%) decrease in provision for loan losses to
$1,300,000, and a $920,000 (13.4%) increase in noninterest income to $7,769,000
from $6,849,000 for the six months ended June 30, 2001, and excluding the
one-time gain of $1,756,000 from the sale of insurance company stock in the six
months ended June 30, 2001. These contributing factors were partially offset by
a $1,393,000 (7.0%) increase in noninterest expense to $21,365,000 for the six
months ended June 30, 2002.
During the quarters ended June 30, 2002 and 2001, the Company's net interest
margin was 5.74% and 5.59%, respectively, on interest-earning asset balances
averaging $921,486,000 and $880,068,000, respectively. These improvements in
both net interest margin and interest earning asset balances resulted in a
$930,000 (7.6%) increase in fully tax-equivalent net interest income to
$13,222,000 in the quarter ended June 30, 2002 compared to $12,292,000 in the
quarter ended June 30, 2001.
During the six months ended June 30, 2002 and 2001, the Company's net interest
margin was 5.75% and 5.45%, respectively, on interest-earning asset balances
averaging $912,041,000 and $878,299,000, respectively. These improvements in
both net interest margin and interest earning asset balances resulted in a
$2,283,000 (9.5%) increase in fully tax-equivalent net interest income to
$26,222,000 in the six months ended June 30, 2002 compared to $23,939,000 in the
six months ended June 30, 2001.
Provision for loan losses for the second quarter of 2002 was $500,000 versus
$775,000 in the same quarter in 2001. The Company had net loan charge-offs of
$224,000 in the second quarter of 2002 compared to $196,000 of net loan
charge-offs in the same period of 2001. Nonperforming loans were $9,533,000,
$6,050,000, and $5,994,000 as of June 30, 2002, December 31, 2001, and June 30,
2001, respectively, net of U.S. Government and U.S. Government sponsored agency
guarantees of $8,801,000, $387,000, and $950,000, respectively. As of June 30,
2002 and 2001, the ratio of allowance for loan losses to total loans was 2.03%
and 1.80%, respectively.
Provision for loan losses for the six months ended June 30, 2002 was $1,300,000
versus $2,650,000 in the six months ended June 30, 2001. The Company had net
loan charge-offs of $745,000 in the first half of 2002 compared to $2,400,000 of
net loan charge-offs in the same period of 2001.
Noninterest income increased $366,000 (10.2%) to $3,943,000 in the quarter ended
June 30, 2002 from $3,577,000 in the quarter ended June 30, 2001. The increase
in noninterest income from the year-ago quarter was mainly due to a $190,000
(34.6%) increase in commissions on sales of non-deposit investment products to
$738,000, an $83,000 (23.4%) increase in ATM fees to $438,000, and a $61,000
(12.7%) increase in gain on sale of loans to $539,000.
For the six months ended June 30, 2002, noninterest income was down $836,000
(9.7%) over the same period for 2001. Included in the results of the six months
ended June 30, 2001, and the three months ended March 31, 2001 was a one-time
pre-tax income item of $1,756,000 from the sale of insurance company stock.
Excluding this one-time event, noninterest income for the six months ended June
30, 2002 would have increased $920,000 (13.4%) to $7,769,000 from 6,849,000 for
the six months ended June 30, 2001. Service charges and fee income was up
$144,000 (3.6%) to $4,114,000 mainly due to increased ATM fees. Other income
increased $776,000 (27.0%) to $3,655,000. Accounting for the increase in other
income was a $704,000 (88.2%) increase in gain on sale of loans from $798,000 to
$1,502,000, and a $92,000 (7.8%) increase in commissions on the sale of
insurance, mutual funds and annuities from $1,185,000 to $1,277,000.
Noninterest expense increased $730,000 (7.1%) to $10,963,000 in the quarter
ended June 30, 2002 from $10,233,000 in the quarter ended June 30, 2001. This
increase in noninterest expense was mainly due to a $566,000 (10.9%) increase in
salary and benefit expense to $5,773,000. Compared to the year-ago quarter, base
salaries were up $163,000 (4.6%) to $3,704,000 while commissions and other sales
incentives were up $305,000 (57.0%) to $839,000, and benefits including
retirement expense, insurance, and payroll taxes were up $97,000 (8.9%) to
$1,189,000 in the quarter ended June 30, 2002. Average full-time equivalent
employees were up 30 (7.5%) to 428 during the quarter ended June 30, 2002 from
398 during the year-ago quarter.
For the first six months of 2002, noninterest expenses increased $1,393,000
(7.0%) to $21,365,000 compared to $19,972,000 for the six months ended June 30,
2001. Salary and benefit expense increased $1,178,000 (11.4%) to $11,512,000.
Base salary expense increased $315,000 (4.5%) due to a 27 (6.8%) increase in
average full-time equivalent employees to 422. Commissions and other sales
incentives were up $541,000 (47.1%) to $1,690,000, and benefits including
retirement expense, insurance, and payroll taxes were up $321,000 (15.2%) to
$2,431,000 in the six months ended June 30, 2002. Other noninterest expenses
increased $215,000 (2.2%) to $9,853,000.
Assets of the Company totaled $1,029,561,000 at June 30, 2002, and represents
increases of $24,114,000 (2.4%) from $1,005,447 at December 31, 2001, and
$49,268,000 (5.0%) from $980,293,000 at June 30, 2001.
As of June 30, 2002, on an annualized basis, the Company realized a return on
assets of 1.34% and a return on equity of 14.80% versus 1.21% and 13.48% in the
first half of 2001. As of June 30, 2002, TriCo Bancshares had a Tier 1 capital
ratio of 10.8% and a total risk-based capital ratio of 12.0%.
The following tables provide a summary of the major elements of income and
expense for the second quarter of 2002 compared with the second quarter of 2001
and for the first six months of 2002 compared with the first six months of 2001.
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
Three months
ended June 30, Percentage
2002 2001 Change
increase
(decrease)
Interest income $ 16,401 $ 18,615 -11.9%
Interest expense 3,179 6,323 -49.7%
----------- -----------
Net interest income 13,222 12,292 7.6%
Provision for loan losses 500 775 -35.5%
----------- -----------
Net interest income after
provision for loan losses 12,722 11,517 10.5%
Noninterest income 3,943 3,577 10.2%
Noninterest expenses 10,963 10,233 7.1%
----------- -----------
Net income before income taxes 5,702 4,861 17.3%
Income taxes 2,011 1,736 15.8%
Tax equivalent adjustment1 326 288 13.2%
----------- -----------
Net income $ 3,365 $ 2,837 18.6%
=========== ===========
Diluted earnings per common share $ 0.47 $ 0.39 20.5%
1Interest on tax-free securities is reported on a tax equivalent basis of 1.57
and 1.52 for June 30, 2002 and 2001, respectively.
TRICO BANCSHARES
CONDENSED COMPARATIVE
INCOME STATEMENT
(in thousands, except earnings per common share)
Six months
ended June 30, Percentage
2002 2001 Change
increase
(decrease)
Interest income $ 32,664 $ 37,457 -12.8%
Interest expense 6,442 13,518 -52.3%
----------- -----------
Net interest income 26,222 23,939 9.5%
Provision for loan losses 1,300 2,650 -50.9%
----------- -----------
Net interest income after
provision for loan losses 24,922 21,289 17.1%
Noninterest income 7,769 8,605 -9.7%
Noninterest expenses 21,365 19,972 7.0%
----------- -----------
Net income before income taxes 11,326 9,922 14.2%
Income taxes 4,001 3,528 13.4%
Tax equivalent adjustment1 631 578 9.2%
----------- -----------
Net income $ 6,694 $ 5,816 15.1%
=========== ===========
Diluted earnings per common share $ 0.93 $ 0.80 16.3%
1Interest on tax-free securities is reported on a tax equivalent basis of 1.57
and 1.52 for June 30, 2002 and 2001, respectively.
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.
Throughout the first six months of 2002, the Fed Reserve Bank maintained the Fed
funds target rate 1.75%. In comparison, the Fed funds target rate fell from
6.50% to 3.75% during the first six months of 2001. The Fed funds target rate is
an important rate because the prime lending rate generally tracks the Fed funds
rate, and the interest rates on most of the Company's variable rate loans are
tied to the prime lending rate. When the Fed funds target rate changes as
drastically as it has, the Company must be able to appropriately adjust the rate
it pays on its deposits, or the mix of its deposits, if it is to maintain its
net interest margin at a high level. Through out 2001, and during the first six
months of 2002, the Company has been successful in adjusting its deposit rates
and the mix of its deposit in order to maintain its net interest margin at a
relatively high level.
For the three months ended June 30, 2002, interest income on a fully
tax-equivalent basis decreased $2,214,000 (11.9%) over the same period in 2001.
The average balance of total earning assets was higher by $41,418,000 (4.7%).
Average loan and securities balances were up $9,933,000 (1.6%) and $42,741,000
(22.3%), respectively, while average Fed funds sold balances were down
$11,256,000 (22.6%). The average yield on loans, securities and Fed funds sold
was lower by 132, 104 and 265 basis points respectively. The overall yield on
average earning assets decreased 134 basis points to 7.12%.
For the second quarter of 2001, interest expense decreased $3,144,000 (49.7%)
over the year earlier period. The average balance of interest-bearing
liabilities was up $20,772,000 (2.9%). The average rate paid on interest bearing
liabilities decreased 182 basis points to 1.74% from the year-ago quarter.
The combined effect of the decreases in interest income and interest expense for
the second quarter of 2002 versus 2001 resulted in an increase of $930,000
(7.6%) in fully tax-equivalent net interest income. Fully tax-equivalent net
interest margin was up 15 basis points to 5.74% from 5.59% for the same periods
in 2002 and 2001.
The six-month period ending June 30, 2002, reflects a fully tax-equivalent
interest income decrease of $4,793,000 (12.8%) over the same period in 2001. The
average balance of total earning assets was higher by $33,742,000 (3.8%).
Average loan and securities balances were up $9,637,000 (1.53%) and $25,057,000
(12.4%), respectively, while average fed funds sold balances were down $952,000
(2.4%). The average yield on loans, securities and Fed funds sold was lower by
132, 104 and 304 basis points respectively. The overall yield on average earning
assets decreased 137 basis points to 7.16%.
Interest expense for the six-month period end June 30, 2002 decreased $7,076,000
(52.4%) from the same period in 2001. The average balance of total
interest-bearing liabilities increased $13,678,000 (1.9%). The average rate paid
on total interest-bearing liabilities decreased 202 basis points to 1.78%.
The net effect of the decreases in fully tax-equivalent interest income and
interest expense for the first six months of 2002 versus 2001 was an increase of
$2,283,000 (9.5%) in fully tax-equivalent net interest income. Fully
tax-equivalent net interest margin increased 30 basis points to 5.75% from
5.45%.
The following four tables provide summaries of the components of the fully
tax-equivalent interest income, interest expense and fully tax-equivalent net
interest margin on earning assets for the quarter and six month periods ended
June 30, 2002 versus the same periods in 2001.
TRICO BANCSHARES
ANALYSIS OF CHANGE IN NET INTEREST
MARGIN ON EARNING ASSETS
(in thousands)
Three Months Ended
June 30, 2002 June 30, 2001
Average Income/ Yield/ Average Income/ Yield/
Balance1 Expense Rate Balance1 Expense Rate
Assets
Earning assets
Loan 2,3 $ 648,618 $ 13,046 8.05% $638,685 $ 14,968 9.37%
Securities4 234,216 3,188 5.44% 191,475 3,100 6.48%
Federal funds sold 38,652 167 1.73% 49,908 547 4.38%
-------------- ------------ ----------- ------------- ------------ -----------
Total earning assets 921,486 16,401 7.12% 880,068 18,615 8.46%
------------ ------------
Cash and due from bank 45,100 39,940
Premises and equipment 16,260 16,955
Other assets,net 40,443 40,965
Less: allowance
for loan losses (13,562) (11,605)
-------------- -------------
Total $ 1,009,727 $966,323
============== =============
Liabilities
and shareholders' equity
Interest-bearing
Demand deposits $ 173,782 114 0.26% $150,471 435 1.16%
Savings deposits 256,153 675 1.05% 216,534 1,163 2.15%
Time deposits 277,202 2,068 2.98% 309,439 4,218 5.45%
Long-term debt 23,109 322 5.57% 33,030 507 6.14%
-------------- ------------ ----------- ------------- ------------ -----------
Total interest-bearing
liabilities 730,246 3,179 1.74% 709,474 6,323 3.56%
------------ ------------
Noninterest-bearing deposits 172,442 154,336
Other liabilities 15,610 16,172
Shareholders' equity 91,429 86,341
-------------- -------------
Total liabilities
and shareholders' equity $ 1,009,727 $966,323
============== =============
Net interest rate spread5 5.38% 4.90%
Net interest income/net $ 13,222 $ 12,292
============ ============
interest margin6 5.74% 5.59%
============ ============
1Average balances are computed principally on the basis of daily balances.
2Nonaccrual loans are included.
3Interest income on loans includes fees on loans of $997,000 in 2002 and
$772,000 in 2001.
4Interest income is stated on a tax equivalent basis of 1.57 and 1.52 at June
30, 2002 and 2001, respectively.
5Net interest rate spread represents the average yield earned on
interest-earning assets less the average rate paid on interest-bearing
liabilities.
6Net interest margin is computed by dividing net interest income by total
average earning assets.
TRICO BANCSHARES
ANALYSIS OF CHANGE IN NET INTEREST
MARGIN ON EARNING ASSETS
(in thousands)
Six Months Ended
June 30, 2002 June 30, 2001
Average Income/ Yield/ Average Income/ Yield/
Balance1 Expense Rate Balance1 Expense Rate
Assets
Earning assets
Loan 2,3 $ 645,350 $26,054 8.07% $ 635,713 $29,861 9.39%
Securities4 227,504 6,277 5.52% 202,447 6,645 6.56%
Federal funds sold 39,187 333 1.70% 40,139 951 4.74%
-------------- ------------ ---------- ------------- ------------ -----------
Total earning assets 912,041 32,664 7.16% 878,299 37,457 8.53%
------------ ------------
Cash and due from bank 44,504 40,229
Premises and equipment 16,309 16,923
Other assets,net 40,646 40,388
Less: allowance
for loan losses (13,401) (12,020)
-------------- -------------
Total $ 1,000,099 $ 963,819
============== =============
Liabilities
and shareholders' equity
Interest-bearing
Demand deposits $ 172,694 235 0.27% $ 151,428 957 1.26%
Savings deposits 254,916 1,355 1.06% 217,418 2,787 2.56%
Time deposits 273,947 4,211 3.07% 308,959 8,762 5.67%
Long-term debt 23,030 641 5.57% 33,109 1,012 6.11%
-------------- ------------ ---------- ------------- ------------ -----------
Total interest-bearing
liabilities 724,587 6,442 1.78% 710,914 13,518 3.80%
------------ ------------
Noninterest-bearing deposits 169,747 150,978
Other liabilities 15,298 15,610
Shareholders' equity 90,467 86,317
-------------- -------------
Total liabilities
and shareholders' equity $ 1,000,099 $ 963,819
============== =============
Net interest rate spread5 5.38% 4.73%
Net interest income/net $26,222 $23,939
============ ============
interest margin6 5.75% 5.45%
============ ============
1Average balances are computed principally on the basis of daily balances.
2Nonaccrual loans are included.
3Interest income on loans includes fees on loans of $1,973,000 in 2002 and
$1,474,000 in 2001.
4Interest income is stated on a tax equivalent basis of 1.57 and 1.52 at June
30, 2002 and 2001, respectively.
5Net interest rate spread represents the average yield earned on
interest-earning assets less the average rate paid on interest-bearing
liabilities.
6Net interest margin is computed by dividing net interest income by total
average earning assets.
TRICO BANCSHARES
ANALYSIS OF VOLUME AND RATE CHANGES
ON NET INTEREST INCOME AND EXPENSE
(in thousands)
For the three months ended June30,
2002 over 2001
Yield/
Volume Rate4 Total
---------- --------- --------
Increase (decrease) in
interest income:
Loans 1,2 $ 233 $ (2,155) (1,922)
Investment securities3 692 (604) 88
Federal funds sold (123) (257) (380)
---------- --------- --------
Total 802 (3,016) (2,214)
---------- --------- --------
Increase (decrease) in
interest expense:
Demand deposits
(interest-bearing) 67 (388) (321)
Savings deposits 213 (701) (488)
Time deposits (439) (1,711) (2,150)
Long-term debt (152) (33) (185)
---------- --------- --------
Total (311) (2,833) (3,144)
---------- --------- --------
Increase in net interest income $ 1,113 $ (183) $ 930
========== ========= ========
1Nonaccrual loans are included.
2Interest income on loans includes fee income on loans of $997,000 in 2002 and
$772,000 in 2001.
3Interest income is stated on a tax equivalent basis of 1.57 and 1.52 for June
30, 2002 and 2001, respectively.
4The rate/volume variance has been included in the rate variance.
TRICO BANCSHARES
ANALYSIS OF VOLUME AND RATE CHANGES
ON NET INTEREST INCOME AND EXPENSE
(in thousands)
For the six months ended June 30,
2002 over 2001
Yield/
Volume Rate4 Total
--------- ----------- -----------
Increase (decrease) in
interest income:
Loans 1,2 $ 453 $ (4,260) $ (3,807)
Investment securities3 822 (1,190) (368)
Federal funds sold (23) (595) (618)
--------- ----------- -----------
Total 1,252 (6,045) (4,793)
--------- ----------- -----------
Increase (decrease) in
interest expense:
Demand deposits
(interest-bearing) 134 (856) (722)
Savings deposits 481 (1,913) (1,432)
Time deposits (993) (3,558) (4,551)
Long-term debt (308) (63) (371)
--------- ----------- -----------
Total (686) (6,390) (7,076)
--------- ----------- -----------
Increase in net interest income $ 1,938 $ 345 $ 2,283
========= =========== ===========
1Nonaccrual loans are included.
2Interest income on loans includes fee income on loans of $1,973,000 in 2002 and
$1,474,000 in 2001.
3Interest income is stated on a tax equivalent basis of 1.57 and 1.52 for June
30, 2002 and 2001, respectively.
4The rate/volume variance has been included in the rate variance.
Provision for Loan Losses
The Bank provided $500,000 for loan losses in the second quarter of 2002 versus
$775,000 in 2001. Net charge-offs for all loans in the second quarter of 2002
totaled $224,000 versus $196,000 in the year earlier period.
For the six months ended June 30, 2002 and 2001, the Bank provided $1,300,000
and $2,650,000 for loan losses, respectively. Net charge-offs for all loans
during the six months ended June 30, 2002 and 2001 were $745,000 and $2,400,000,
respectively. Included in the net charge-offs during the six months ended June
30, 2001 is $2,000,000 of charge offs related to a single borrower.
Noninterest Income
Noninterest income increased $366,000 (10.2%) to $3,943,000 in the quarter ended
June 30, 2002 from $3,577,000 in the quarter ended June 30, 2001. The increase
in noninterest income from the year-ago quarter was mainly due to a $190,000
(34.6%) increase in commissions on sales of non-deposit investment products to
$738,000, an $83,000 (23.4%) increase in ATM fees to $438,000, and a $61,000
(12.7%) increase in gain on sale of loans to $539,000.
For the six months ended June 30, 2002, noninterest income was down $836,000
(9.7%) over the same period for 2001. Included in the results of the six months
ended June 30, 2001, and the three months ended March 31, 2001 was a one-time
pre-tax income item of $1,756,000 from the sale of insurance company stock.
Excluding this one-time event, noninterest income for the six months ended June
30, 2002 would have increased $920,000 (13.4%) to $7,769,000 from 6,849,000 for
the six months ended June 30, 2001. Service charges and fee income was up
$144,000 (3.6%) to $4,114,000 mainly due to increased ATM fees. Other income
increased $776,000 (27.0%) to $3,655,000. Accounting for the increase in other
income was a $704,000 (88.2%) increase in gain on sale of loans from $798,000 to
$1,502,000, and a $92,000 (7.8%) increase in commissions on the sale of
insurance, mutual funds and annuities from $1,185,000 to $1,277,000.
Noninterest Expense
Noninterest expense increased $730,000 (7.1%) to $10,963,000 in the quarter
ended June 30, 2002 from $10,233,000 in the quarter ended June 30, 2001. This
increase in noninterest expense was mainly due to a $566,000 (10.9%) increase in
salary and benefit expense to $5,773,000. Compared to the year-ago quarter, base
salaries were up $163,000 (4.6%) to $3,704,000 while commissions and other sales
incentives were up $305,000 (57.0%) to $839,000, and benefits including
retirement expense, insurance, and payroll taxes were up $97,000 (8.9%) to
$1,189,000 in the quarter ended June 30, 2002. Average full-time equivalent
employees were up 30 (7.5%) to 428 during the quarter ended June 30, 2002 from
398 during the year-ago quarter. Compared to the year-ago quarter, other
noninterest expenses increased $164,000 (3.3%) to $5,190,000 during the quarter
ended June 30, 2002.
For the first six months of 2002, noninterest expenses increased $1,393,000
(7.0%) to $21,365,000 compared to $19,972,000 for the six months ended June 30,
2001. Salary and benefit expense increased $1,178,000 (11.4%) to $11,512,000.
Base salary expense increased $315,000 (4.5%) due to a 27 (6.8%) increase in
average full-time equivalent employees to 422. Commissions and other sales
incentives were up $541,000 (47.1%) to $1,690,000, and benefits including
retirement expense, insurance, and payroll taxes were up $321,000 (15.2%) to
$2,431,000 in the six months ended June 30, 2002. Other noninterest expenses
increased $215,000 (2.2%) to $9,853,000.
Provision for Income Taxes
The effective tax rate for the six months ended June 30, 2002 was 37.4% and
reflects a decrease from 37.8% in the year earlier period.
Loans
At June 30, 2002, loan balances were $9,042,000 (1.4%) higher than the ending
balances at June 30, 2001 and $13,068,000 (2.0%) higher than the ending balances
at December 31, 2001. On a year-over-year basis at June 30, consumer and real
estate construction loan balances were higher by $35,150,000 (25.8%) and
$840,000 (2.1%), respectively. Commercial and real estate mortgage loan balances
were lower by $12,547,000 (8.3%) and $14,401,000 (4.3%), respectively.
Securities
At June 30, 2002, securities available-for-sale had a fair value of $234,544,000
and an amortized cost of $231,082,000. This portfolio contained mortgage-backed
securities with an amortized cost of $137,693,000 of which $8,964,000 were CMOs.
At June 30, 2002, the Company had no securities classified as held-to-maturity.
Nonperforming Loans
As shown in the following table, total nonperforming assets net of guarantees of
the U.S. Government, including its agencies and its government-sponsored
agencies, have increased $3,483,000 (56.9%) to $9,604,000 in the first six
months of 2002. Nonperforming assets net of guarantees represent 0.93% of total
assets. Included in the balance of nonaccrual loans at June 30, 2002, are loans
to one agriculture related borrower totaling $10,952,000 of which $8,444,000 is
guaranteed by a U.S. Government sponsored agency as to principal and ninety days
of interest. To date, the borrower has paid principal and interest in accordance
with the terms of the loans, however, due to the financial condition of the
borrower the Company has placed the loans in nonaccrual status. All nonaccrual
loans are considered to be impaired when determining the need for a specific
valuation allowance. The Company continues to make a concerted effort to work
problem and potential problem loans to reduce risk of loss.
June 30, 2002 December 31, 2001
(in thousands) Gross Guaranteed Net Gross Guaranteed Net
---------------------------- ---------------------------
Nonaccrual loans $17,599 $ 8,801 $ 8,798 $ 5,853 $ 387 $ 5,466
Accruing loans past
due 90 days or more 735 - 735 584 - 584
---------------------------- ---------------------------
Total nonperforming loans 18,334 8,801 9,533 6,437 387 6,050
Other real estate owned 71 - 71 71 - 71
---------------------------- ---------------------------
Total nonperforming assets $18,405 $ 8,801 $ 9,604 $ 6,508 $ 387 $ 6,121
============================ ===========================
Nonperforming loans to total loans 1.44% 0.92%
Allowance for loan losses to
nonperforming loans 125% 216%
Nonperforming assets to total assets 0.96% 0.61%
Allowance for loan losses to
nonperforming assets 124% 213%
Allowance for Loan Loss
Credit risk is inherent in the business of lending. As a result, the Company
maintains an Allowance for Loan Losses to absorb losses inherent in the
Company's loan portfolio. This is maintained through periodic charges to
earnings. These charges are shown in the Consolidated Income Statements as
provision for loan losses. All specifically identifiable and quantifiable losses
are immediately charged off against the allowance. However, for a variety of
reasons, not all losses are immediately known to the Company and, of those that
are known, the full extent of the loss may not be quantifiable at that point in
time. The balance of the Company's Allowance for Loan Losses is meant to be an
estimate of these unknown but probable losses inherent in the portfolio. For
purposes of this discussion, "loans" shall include all loans and lease
contracts, that are part of the Company's portfolio.
The Company formally assesses the adequacy of the allowance on a quarterly
basis. Determination of the adequacy is based on ongoing assessments of the
probable risk in the outstanding loan portfolio, and to a lesser extent the
Company's loan commitments. These assessments include the periodic re-grading of
credits based on changes in their individual credit characteristics including
delinquency, seasoning, recent financial performance of the borrower, economic
factors, changes in the interest rate environment, growth of the portfolio as a
whole or by segment, and other factors as warranted. Loans are initially graded
when originated. They are re-graded as they are renewed, when there is a new
loan to the same borrower, when identified facts demonstrate heightened risk of
nonpayment, or if they become delinquent. Re-grading of larger problem loans
occur at least quarterly. Confirmation of the quality of the grading process is
obtained by independent credit reviews conducted by consultants specifically
hired for this purpose and by various bank regulatory agencies.
The Company's method for assessing the appropriateness of the allowance includes
specific allowances for identified problem loans and leases as determined by
SFAS 114, formula allowance factors for pools of credits, and allowances for
changing environmental factors (e.g., interest rates, growth, economic
conditions, etc.). Allowance factors for loan pools are based on the previous 5
years historical loss experience by product type. Allowances for specific loans
are based on SFAS 114 analysis of individual credits. Allowances for changing
environmental factors are Management's best estimate of the probable impact
these changes have had on the loan portfolio as a whole. This process is
explained in detail in the notes to the Company's Consolidated Financial
Statements in its Annual Report on Form 10-K for the year ended December 31,
2001.
The following table presents information concerning the allowance and provision
for loan losses for the six months ended.
June 30, June 30,
2002 2001
(in thousands)
Balance, beginning of period $ 13,058 $ 11,670
Provision charged to operations 1,300 2,650
Loans charged off (843) (2,537)
Recoveries of loans previously
charged off 98 137
----------- -----------
Balance, end of period $ 13,613 $ 11,920
=========== ===========
Ending loan portfolio $ 671,800 $ 662,758
=========== ===========
Allowance to loans as a
percentage of ending loan portfolio 2.03% 1.80%
=========== ===========
Equity
The following table indicates the amounts of regulatory capital of the Company.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of June 30, 2002 (amounts in thousands):
Total Capital to Risk Weighted Assets:
Consolidated $96,188 12.01% =>$64,093 =>8.0% =>$80,116 =>10.0%
Tri Counties Bank $94,099 11.77% =>$63,993 =>8.0% =>$79,917 =>10.0%
Tier I Capital to Risk Weighted Assets:
Consolidated $86,129 10.75% =>$32,046 =>4.0% =>$48,069 =>6.0%
Tri Counties Bank $84,065 10.52% =>$31,967 =>4.0% =>$47,949 =>6.0%
Tier I Capital to Average Assets:
Consolidated $86,129 8.55% =>$40,282 =>4.0% =>$50,352 =>5.0%
Tri Counties Bank $84,065 8.36% =>$40,204 =>4.0% =>$50,255 =>5.0%
Liquidity
The Company's principal source of asset liquidity is fed funds sold and
marketable investment securities available for sale. At June 30, 2002, fed funds
sold and investment securities available for sale totaled $262 million,
representing an increase of $19 million from December 31, 2001. In addition, the
Company generates additional liquidity from its operating activities. The
Company's profitability during the first six months of 2002 and 2001 generated
cash flows from operations of $9.8 million and $7.9 million, respectively.
Additional cash flows may be provided by financing activities, primarily the
acceptance of deposits and borrowings from banks. During the six months ended
June 30, 2002, sales & maturities of investment securities produced cash inflows
of $60.1 million. Also, during the six months ended June 30, 2002, the Company
invested $67.4 million and $12.3 million in securities and net loan growth.
These changes in investment and loan balances contributed to net cash used for
investing activities of $20.6 million during the six months ended June 30, 2002.
Financing activities provided net cash of $14.7 million during the six months
ended June 30, 2002. Deposit balance increases, and exercise of common stock
options, accounted for $17.5 million and $201,000 of financing sources of funds,
respectively. Dividends paid and the repurchase of common stock used $2.8
million and $190,000 of cash during the six months ended June 30, 2002,
respectively. Also, the Holding Company's liquidity is dependent on dividends
received from the Bank. Dividends from the Bank are subject to certain
regulatory restrictions.
Item 3. Qualitative and Quantitative Disclosures about Market Risk
There have not been any significant changes in the market risk profile of the
Bank since December 31, 2001.
PART II
Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a.) Annual Meeting held May 14, 2002. Number of shares
represented in person or by proxy and constituting a quorum:
5,833,207 83%
--------- ---
(b.) Election of directors
FOR
---
William J. Casey 5,503,829
Craig S. Compton 5,505,231
Brian D. Leidig 5,505,191
Wendell J. Lundberg 5,505,393
Donald E. Murphy 5,505,431
Richard P. Smith 5,358,632
Robert H. Steveson 5,351,761
Carroll Taresh 5,494,826
Alex A. Vereschagin, Jr. 5,505,431
(c.) Ratify the appointment of KPMG LLP as independent public
accountants of the Company for 2002. Votes:
FOR 5,750,857, AGAINST 1,866, ABSTAIN 80,484
--------- ----- ------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1* Articles of Incorporation, as amended to date, filed as
Exhibit 3.1 to Registrant's Report on Form 10-K, filed for
the year ended December 31, 1989, are incorporated herein by
reference.
3.2* Bylaws, as amended to 1992, filed as Exhibit 3.2 to
Registrant's Report on Form 10-K, filed for the year ended
December 31, 1992, are incorporated herein by reference.
10.1* Lease for Park Plaza Branch premises entered into as of
September 29, 1978, by and between Park Plaza Limited
Partnership as lessor and Tri Counties Bank as lessee, filed
as Exhibit 10.9 to the TriCo Bancshares Registration
Statement on Form S-14 (Registration No. 2-74796) is
incorporated herein by reference.
10.2* Lease for Administration Headquarters premises entered into
as of April 25, 1986, by and between Fortress-Independence
Partnership (A California Limited Partnership) as lessor and
Tri Counties Bank as lessee, filed as Exhibit 10.6 to
Registrant's Report on Form 10-K filed for the year ended
December 31, 1986, is incorporated herein by reference.
10.3* Lease for Data Processing premises entered into as of April
25, 1986, by and between Fortress-Independence Partnership
(A California Limited Partnership) as lessor and Tri
Counties Bank as lessee, filed as Exhibit 10.7 to
Registrant's Report on Form 10-K filed for the year ended
December 31, 1986, is incorporated herein by reference.
10.4* Lease for Chico Mall premises entered into as of March 11,
1988, by and between Chico Mall Associates as lessor and Tri
Counties Bank as lessee, filed as Exhibit 10.4 to
Registrant's Report on Form 10-K filed for the year ended
December 31, 1988, is incorporated by reference.
10.5* First amendment to lease entered into as of May 31, 1988 by
and between Chico Mall Associates and Tri Counties Bank,
filed as Exhibit 10.5 to Registrant's Report on Form 10-K
filed for the year ended December 31, 1988, is incorporated
by reference.
21.1 Tri Counties Bank, a California banking corporation, is the
only subsidiary of Registrant.
99.1 CEO Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 CEO Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
* Previously filed
(b) Reports on Form 8-K:
None.
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 08/13/02 /s/ Richard P. Smith
-------------------- -----------------------
Richard P. Smith
President and Chief
Executive Officer
Date 08/13/02 /s/ Thomas J. Reddish
-------------------- -----------------------
Thomas J. Reddish
Vice President and
Chief Financial Officer
Exhibits:
---------
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
In connection with the Quarterly Report of TriCo Bancshares (the
"Company") on Form 10-Q for the period ending June 30, 2002 as
filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Richard P. Smith, President and Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Company.
/s/ Richard P. Smith
-------------------------------------
Richard P. Smith
President and Chief Executive Officer
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
In connection with the Quarterly Report of TriCo Bancshares (the
"Company") on Form 10-Q for the period ending June 30, 2002 as
filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Thomas J. Reddish, Vice President and
Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Company.
/s/ Thomas J. Reddish
-------------------------------------
Thomas J. Reddish
Vice President and Chief Financial Officer