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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year Commission File Number 0-10661
ended December 31, 1997
TriCo Bancshares
(Exact name of registrant as specified in its charter)
California 94-2792841
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
63 Constitution Drive, Chico, California 95973
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(530) 898-0300
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
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(Title of Class)
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 periods 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
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The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of March 10, 1998, was approximately $98,856,000. This
computation excludes a total of 1,369,451 shares which are beneficially owned by
the officers and directors of Registrant who may be deemed to be the affiliates
of Registrant under applicable rules of the Securities and Exchange Commission.
The number of shares outstanding of Registrant's classes of common stock, as of
March 10, 1998, was 4,664,649 shares of Common Stock, without par value.
The following documents are incorporated herein by reference into the parts of
Form 10-K indicated: Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1997, for Item 7 and Registrant's Proxy Statement for
use in connection with its 1998 Annual Meeting of Shareholders for Part III.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K.
PART I
1. BUSINESS
Formation of Bank Holding Company
TriCo Bancshares (hereinafter the "Company" or "Registrant") was
incorporated under the laws of the State of California on October 13, 1981. It
was organized at the direction of the Board of Directors of Tri Counties Bank
(the "Bank") for the purpose of forming a bank holding company. On September 7,
1982, a wholly-owned subsidiary of the Company was merged with and into the Bank
resulting in the shareholders of the Bank becoming the shareholders of the
Company and the Bank becoming the wholly-owned subsidiary of the Company. (The
merger of the wholly-owned subsidiary of the Company with and into the Bank is
hereafter referred to as the "Reorganization.") At the time of the
Reorganization, the Company became a bank holding company subject to the
supervision of the Board of Governors of the Federal Reserve System (the
"Board") in accordance with the Bank Holding Company Act of 1956, as amended.
The Bank remains subject to the supervision of the California State Banking
Department and the Federal Deposit Insurance Corporation (the "FDIC"). The Bank
currently is the only subsidiary of the Company and the Company has not yet
commenced any business operations independent of the Bank.
Provision of Banking Services
The Bank was incorporated as a California banking corporation on June
26, 1974, and received its Certificate of Authority to begin banking operations
on March 11, 1975.
The Bank engages in the general commercial banking business in the
California counties of Butte, Del Norte, Glenn, Lake, Lassen, Madera, Mendocino,
Merced, Nevada, Shasta, Siskiyou, Stanislaus, Sutter, Tehama and Yuba. It has
loan production offices in Kern and Sacramento counties. The Bank currently has
24 traditional branches, 7 in-store branches and two loan production offices. It
opened its first banking office in Chico, California in 1975, followed by branch
offices in Willows, Durham and Orland, California. The Bank opened its fifth
banking office at an additional location in Chico in 1980. On March 27, 1981,
the Bank acquired the assets of Shasta County Bank and thereby acquired six
additional offices. These offices are located in the communities of Bieber,
Burney, Cottonwood, Fall River Mills, Palo Cedro and Redding, California. On
November 7, 1987, the Bank purchased the deposits and premises of the Yreka
Branch of Wells Fargo Bank, thereby acquiring an additional branch office. On
August 1, 1988, the Bank opened a new office in Chico at East 20th Street and
Forest Avenue. The Bank opened a branch office in Yuba City on September 10,
1990. The Bank opened four supermarket branches in 1994. These supermarket
branches were opened on March 7, March 28, June 6 and June 13, 1994 in Red
Bluff, Yuba City, and two in Redding respectively. The Bank added one
conventional branch in Redding through its acquisition of Country National Bank
on July 21, 1994. On November 7, 1995, the Bank opened a supermarket branch in
Chico. In March 1996 the Bank opened its sixth supermarket branch in Grass
Valley. The acquisition of Sutter Buttes Savings Bank in October 1996 added a
branch in Marysville. Loan production offices were established in Bakersfield
and Sacramento in 1996. On February 21, 1997, the Bank purchased nine branches
from Wells Fargo Bank, N.A. The acquired branches are located in Crescent City,
Weed, Mt. Shasta, Susanville, Covelo, Middletown, Patterson, Gustine and
Chowchilla. This acquisition expanded the Bank's market area from the Sacramento
Valley and intermountain areas to include parts of the northern coastal region
and the northern San Joaquin Valley.
General Banking Services. The Bank conducts a commercial banking
business including accepting demand, savings and time deposits and making
commercial, real estate, and consumer loans. It also offers installment note
collection, issues cashier's checks and money orders, sells travelers checks and
provides safe deposit boxes and other customary banking services. Brokerage
services are provided at the Bank's offices by the Bank's association with
INVEST Financial Corporation. The Bank does not offer trust services or
international banking services.
The Bank's operating policy since its inception has emphasized retail
banking. Most of the Bank's customers are retail customers and small to
medium-sized businesses. The business of the Bank emphasizes serving the needs
of local businesses, farmers and ranchers, retired individuals and wage earners.
The majority of the Bank's loans are direct loans made to individuals and
businesses in the area. At December 31, 1997, the total of the Bank's consumer
installment loans outstanding was $87,950,000 (19.6%), the total of commercial
loans outstanding was $165,813,000 (36.9%), and the total of real estate loans
including construction loans of $34,250,000 was $195,204,000 (43.5%). The Bank
takes real estate, listed and unlisted securities, savings and time deposits,
automobiles, machinery, equipment, inventory, accounts receivable and notes
receivable secured by property as collateral for loans.
Most of the Bank's deposits are attracted from individuals and
business-related sources. No single person or group of persons provides a
material portion of the Bank's deposits, the loss of any one or more of which
would have a materially adverse effect on the business of the Bank, nor is a
material portion of the Bank's loans concentrated within a single industry or
group of related industries.
In order to attract loan and deposit business from individuals and
small to medium-sized businesses, branches of the Bank set lobby hours to
accommodate local demands. In general, lobby hours are from 9:00 a.m. to 5:00
p.m. Monday through Thursday, and from 9:00 a.m. to 6:00 p.m. on Friday. Certain
branches with less activity open later and close earlier. Some Bank offices also
utilize drive-up facilities operating from 9:00 a.m. to 7:00 p.m. The
supermarket branches are open from 9:00 a.m. to 7:00 p.m. Monday through
Saturday and 11:00 a.m. to 5:00 p.m. on Sunday.
The Bank offers 24 hour ATMs at all branch locations. The ATMs are
linked to several national and regional networks such as CIRRUS and STAR. In
addition, banking by telephone on a 24 hour toll-free number is available to all
customers. This service allows a customer to inquire for account balances and
most recent transactions, transfer moneys between accounts, make loan payments,
and obtain interest rate information.
In February 1998, the Bank became the first bank in the Northern
Sacramento Valley to offer banking services on the Internet. This banking
service provides customers one more tool for anywhere, anytime access to their
accounts.
Other activities. The Bank presently offers the banking services
referred to above and pursuant to California legislation, TCB Real Estate
Corporation, a wholly-owned subsidiary of the Bank, engages in limited real
estate investment. Such investment consists of holding certain real property for
the purpose of development or as income earning assets. The amount of the Bank's
assets committed to such investment does not exceed the total of the Bank's
capital and surplus. In 1996 the FDIC directed the Bank to divest the properties
held by TCB Real Estate Corp. and to terminate its operations. The Bank and FDIC
have agreed to a plan that will accomplish the divestiture by June 30, 1999.
The Bank may in the future engage in other businesses either directly
or indirectly through subsidiaries acquired or formed by the Bank subject to
regulatory constraints. See "Regulation, Supervision and Permitted Activities of
the Company."
Employees. At December 31, 1997, the Company and the Bank employed 467
persons, including four executive officers. Full time equivalent employees were
calculated at 381. No employees of the Company or the Bank are presently
represented by a union or covered under a collective bargaining agreement.
Management believes that its employee relations are excellent.
Competition. The banking business in California generally, and in the
Bank's primary service area specifically, is highly competitive with respect to
both loans and deposits. It is dominated by a relatively small number of major
banks with many offices operating over a wide geographic area. Among the
advantages such major banks have over the Bank are their ability to finance wide
ranging advertising campaigns and to allocate their investment assets to regions
of high yield and demand. By virtue of their greater total capitalization such
institutions have substantially higher lending limits than does the Bank since
legal lending limits to an individual customer are limited to a percentage of a
Bank's total capital accounts.
In addition to competing with savings institutions, commercial banks
compete with other financial markets for funds. Yields on corporate and
government debt securities and other commercial paper affect the ability of
commercial banks to attract and hold deposits. Commercial banks also compete for
available funds with money market instruments and mutual funds. During past
periods of high interest rates, money market funds have provided substantial
competition to banks for deposits and they may continue to do so in the future.
In today's stock market environment mutual funds have become a major source of
competition for savings dollars.
The Bank relies substantially on local promotional activity, personal
contacts by its officers, directors, employees and shareholders, extended hours,
personalized service and its reputation in the communities it services to
compete effectively.
Regulation and Supervision
As a registered bank holding company under the Bank Holding Company Act
of 1956 (the "BHC Act"), the Company is subject to the regulations and
supervision of the Board of Governors of the Federal Reserve System ("FRB"). The
BHC Act requires the Company to file reports with the FRB and provide additional
information requested by the FRB. The Company must receive the approval of the
FRB before it may acquire all or substantially all of the assets of any bank, or
ownership or control of the voting shares of any bank if, after giving effect to
such acquisition of shares, the Company would own or control more than 5 percent
of the voting shares of such bank.
The Company and any subsidiaries it may acquire or organize will be
deemed to be affiliates of the Bank within the Federal Reserve Act. That Act
establishes certain restrictions which limit the extent to which the Bank can
supply its funds to the Company and other affiliates. The Company is also
subject to restrictions on the underwriting and the public sale and distribution
of securities. It is prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, sale or lease of property, or
furnishing of services.
The Company is prohibited from engaging in, or acquiring direct or
indirect control of any company engaged in non-banking activities, unless the
FRB by order or regulation has found such activities to be closely related to
banking or managing or controlling banks as to be a proper incident thereto.
Under California law, dividends and other distributions by the Company
are subject to declaration by the Board of Directors at its discretion out of
net assets. Dividends cannot be declared and paid when such payment would make
the Company insolvent.
FRB policy prohibits a bank holding company from declaring or paying a
cash dividend which would impose undue pressure on the capital of subsidiary
banks or would be funded only through borrowings or other arrangements that
might adversely affect the holding company's financial position. The policy
further declares that a bank holding company should not continue its existing
rate of cash dividends on its common stock unless its net income is sufficient
to fully fund each dividend and its prospective rate of earnings retention
appears consistent with its capital needs, asset quality and overall financial
condition. Other FRB policies forbid the payment by bank subsidiaries to their
parent companies of management fees which are unreasonable in amount or exceed a
fair market value of the services rendered (or, if no market exists, actual
costs plus a reasonable profit).
In addition, the FRB has authority to prohibit banks that it regulates
from engaging in practices which in the opinion of the FRB are unsafe or
unsound. Such practices may include the payment of dividends under some
circumstances. Moreover, the payment of dividends may be inconsistent with
capital adequacy guidelines. The Company may be subject to assessment to restore
the capital of the Bank should it become impaired.
Federal Reserve Regulation "Y" (12 C.F.R. Part 225) sets forth those
activities which are regarded as closely related to banking or managing or
controlling banks and, thus, are permissible activities that may be engaged in
by bank holding companies subject to approval in individual cases by the FRB.
Litigation has challenged the validity of certain activities authorized by the
FRB for bank holding companies, and the FRB has various regulations and
applications in this regard still under consideration.
The Company is subject to the minimum capital requirements of the FRB.
As a result of these requirements, the growth in assets of the Company is
limited by the amount of its capital accounts as defined by the FRB. Capital
requirements may have an affect on profitability and the payment of
distributions by the Company. If the Company is unable to increase its assets
without violating the minimum capital requirements, or is forced to reduce
assets, its ability to generate earnings would be reduced. Furthermore, earnings
may need to be retained rather than paid as distributions to shareholders.
The FRB has adopted guidelines utilizing a risk-based capital
structure. These guidelines apply on a consolidated basis to bank holding
companies with consolidated assets of $150 million or more. For bank holding
companies with less than $150 million in consolidated assets, the guidelines
apply on a bank-only basis unless the holding company is engaged in non-bank
activity involving significant leverage or has a significant amount of
outstanding debt that is held by the general public. The Company currently has
consolidated assets of more than $150 million; accordingly, the risk-based
capital guidelines apply to the Company.
Qualifying capital is divided into two tiers. Tier 1 capital consists
generally of common stockholder's equity, qualifying noncumulative perpetual
preferred stock, qualifying cumulative perpetual preferred stock (up to 25
percent of total Tier 1 capital) and minority interests in the equity accounts
of consolidated subsidiaries less goodwill and certain other intangible assets.
Tier 2 capital consists of, among other things, allowance for loan and lease
losses up to 1.25 percent of weighted risk assets, perpetual preferred stock,
hybrid capital instruments, perpetual debt, mandatory convertible debt
securities, subordinated debt and intermediate-term preferred stock. Tier 2
capital qualifies as part of total capital up to a maximum of 100 percent of
Tier 1 capital. Amounts in excess of these limits may be issued but are not
included in the calculation of risk-based capital ratios. As of December 31,
1997 the Company must have a minimum ratio of qualifying total capital to
weighted risk assets of 8 percent, of which at least 4 percent must be in the
form of Tier 1 capital.
The Federal regulatory agencies have adopted a minimum Tier 1 leverage
ratio which is intended to supplement risk-based capital requirements and to
ensure that all financial institutions, even those that invest predominantly in
low-risk assets, continue to maintain a minimum level of Tier 1 capital. These
regulations provide that a banking organization's minimum Tier 1 leverage ratio
be determined by dividing its Tier 1 capital by its quarterly average total
assets, less goodwill and certain other intangible assets. Under the current
rules, the Company is required to maintain a minimum Tier 1 leverage ratio of 4
percent.
Insurance of Deposits.
The Bank's deposit accounts are insured up to a maximum of $100,000 per
depositor by the Federal Deposit Insurance Corporation ("FDIC"). The FDIC issues
regulations and generally supervises the operations of its insured banks. This
supervision and regulation is intended primarily for the protection of
depositors.
Effective January 1, 1996, the deposit insurance rate was reduced to
$0.00 per $100.00. This rate will remain in effect as long as the Bank Insurance
Fund is capitalized at its legal limit. In November 1990, federal legislation
was passed which removed the cap on the amount of deposit insurance premiums
that can be charged by the FDIC. Under this legislation, the FDIC is able to
increase deposit insurance premiums as it sees fit. This could result in a
significant increase in the cost of doing business for the Bank in the future.
The FDIC now has authority to adjust deposit insurance premiums paid by insured
banks every six months.
Risk-Based Capital Requirements.
The Bank is subject to the minimum capital requirements of the FDIC. As
a result of these requirements, the growth in assets of the Bank is limited by
the amount of its capital accounts as defined by the FRB. Capital requirements
may have an effect on profitability and the payment of dividends on the common
stock of the Bank. If the Bank is unable to increase its assets without
violating the minimum capital requirements or is forced to reduce assets, its
ability to generate earnings would be reduced. Further, earnings may need to be
retained rather than paid as dividends to the Company.
Federal banking law requires the federal banking regulators to take
"prompt corrective action" with respect to banks that do not meet minimum
capital requirements. In response to this requirement, the FDIC adopted final
rules based upon the five capital tiers defined by the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA); well capitalized, adequately
capitalized, under capitalized, significantly under capitalized and critically
under capitalized. For example, the FDIC's rules provide that an institution is
"well-capitalized" if its risk-based capital ratio is 10 percent or greater; its
Tier 1 risk-based capital ratio is 6 percent or greater; its leverage ratio is 5
percent or greater; and the institution is not subject to a capital directive or
an enforceable written agreement or order. A bank is "adequately capitalized" if
its risk-based capital ratio is 8 percent or greater; its Tier 1 risk-based
capital ratio is 4 percent or greater; and its leverage ratio is 4 percent or
greater (3 percent or greater for "one" rated institutions). An institution is
"significantly undercapitalized" if its risk-based capital ratio is less than 6
percent; its Tier 1 risk-based capital ratio is less than 3 percent; or its
tangible equity (Tier 1 capital) to total assets is equal to or less than 2
percent. An institution may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if it engages in unsafe
or unsound banking practices.
No sanctions apply to institutions which are "well" or "adequately"
capitalized under the prompt corrective action requirements. Undercapitalized
institutions are required to submit a capital restoration plan for improving
capital. In order to be accepted, such plan must include a financial guaranty
from the institution's holding company that the institution will return to
capital compliance. If such a guarantee were deemed to be a commitment to
maintain capital under the federal Bankruptcy Code, a claim for a subsequent
breach of the obligations under such guarantee in a bankruptcy proceeding
involving the holding company would be entitled to a priority over third-party
general unsecured creditors of the holding company. Undercapitalized
institutions are prohibited from making capital distributions or paying
management fees to controlling persons; may be subject to growth limitations;
and acquisitions, branching and entering into new lines of business are
restricted. Finally, the institution's regulatory agency has discretion to
impose certain of the restrictions generally applicable to significantly
undercapitalized institutions.
In the event an institution is deemed to be significantly
undercapitalized, it may be required to: sell stock; merge or be acquired;
restrict transactions with affiliates; restrict interest rates paid; divest a
subsidiary; or dismiss specified directors or officers. If the institution is a
bank holding company, it may be prohibited from making any capital distributions
without prior approval of the FRB and may be required to divest a subsidiary. A
critically undercapitalized institution is generally prohibited from making
payments on subordinated debt and may not, without the approval of the FDIC,
enter into a material transaction other than in the ordinary course of business;
engage in any covered transaction; or pay excessive compensation or bonuses.
Critically undercapitalized institutions are subject to appointment of a
receiver or conservator.
Bank Regulation.
The federal regulatory agencies are required to adopt regulations which
will establish safety and soundness standards which will apply to banks and bank
holding companies. These standards must address bank operations, management,
asset quality, earnings, stock valuation and employee compensation. A bank
holding company or bank failing to meet established standards will face
mandatory regulatory enforcement action.
The grounds upon which a conservator or receiver of a bank can be
appointed have been expanded. For example, a conservator or receiver can be
appointed for a bank which fails to maintain minimum capital levels and has no
reasonable prospect of becoming adequately capitalized.
Federal law also requires, with some exception, that each bank have an
annual examination performed by its primary federal regulatory agency, and an
outside independent audit. The outside audit must consider bank regulatory
compliance in addition to financial statement reporting.
Federal law also restricts the acceptance of brokered deposits by
insured depository institutions and contains a number of consumer banking
provisions, including disclosure requirements and substantive contractual
limitations with respect to deposit accounts.
Recent Legislation
As a consequence of the extensive regulation of commercial banking
activities in the United States, the business of the Company and its
subsidiaries are particularly susceptible to being affected by enactment of
federal and state legislation which may have the effect of increasing or
decreasing the cost of doing business, modifying permissible activities or
enhancing the competitive position of other financial institutions.
In 1994 the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 was enacted by Congress. Under the act, beginning on September 29, 1995,
bank holding companies may acquire banks in any state, notwithstanding contrary
state law, and all banks commonly owned by a bank holding company may act as
agents for one another. An agent bank may receive deposits, renew time deposits,
accept payments, and close and service loans for its principal banks but will
not be considered to be a branch of the principal banks.
In response to the Riegle-Neal Act, California enacted the California
Interstate Banking and Branching Act of 1995. This act became effective
September 29, 1995. Under this act, an out-of-state bank can only enter into
interstate branch banking within California by acquiring an existing bank
operating within California. The California bank must have been in existence for
five years at the time of acquisition.
Governmental Monetary Policies and Economic Conditions
The principal sources of funds essential to the business of banks and
bank holding companies are deposits, stockholder's equity and borrowed funds.
The availability of these various sources of funds and other potential sources,
such as preferred stock or commercial paper, and the extent to which they are
utilized, depends on many factors, the most important of which are the FRB's
monetary policies and the relative costs of different types of funds. An
important function of the FRB is to regulate the national supply of bank credit
in order to combat recession and curb inflationary pressure. Among the
instruments of monetary policy used by the Federal Reserve Board to implement
these objections are open market operations in United States Government
securities, changes in the discount rate on bank borrowings, and changes in
reserve requirements against bank deposits. The monetary policies of the FRB
have had a significant effect on the operating results of commercial banks in
the past and are expected to continue to do so in the future. In view of the
recent changes in regulations affecting commercial banks and other actions and
proposed actions by the federal government and its monetary and fiscal
authorities, including proposed changes in the structure of banking in the
United States, no prediction can be made as to future changes in interest rates,
credit availability, deposit levels, the overall performance of banks generally
or the Company and its subsidiaries in particular.
General
The Company conducts all of its business operations within a single
geographic area and within a single industry segment.
2. PROPERTIES
As the Company has not yet acquired any properties independent of the
Bank, its only subsidiary, the properties of the Bank and the Bank's
subsidiaries comprise all of the properties of the Company.
Bank Properties
The Bank owns and leases properties which house administrative and data
processing functions and 31 banking offices. Major owned and leased facilities
are listed below.
Park Plaza Branch Pillsbury Branch
780 Mangrove Avenue 2171 Pillsbury Road
Chico, CA 95926 Chico, CA 95926
10,000 square feet 5,705 square feet
Leased - term expires 2010 Owned
Purchasing and Printing Department Hilltop Branch
2560-C Dominic Drive 1250 Hilltop Drive
Chico, CA 95928 Redding, CA 96049
8,400 square feet 6,252 square feet
Leased - term expires 1995 Owned
Burney Branch Cottonwood Branch
37093 Main Street 3349 Main Street
Burney, CA 96013 Cottonwood, CA 96022
3,500 square feet 4,900 square feet
Owned Owned
Information Administration1 Fall River Mills Branch
110 Independence Circle 43308 Highway 299 East
Chico, CA 95973 Fall River Mills, CA 96028
7,480 square feet 2,200 square feet
Owned Owned
Orland Branch Durham Branch
100 E. Walker Street 9411 Midway
Orland, CA 95963 Durham, CA 95938
3,000 square feet 2,150 square feet
Owned Owned
Redding Branch(2) Willows Branch
1810 Market Street 210 North Tehama Street
Redding, CA 96001 Willows, CA 95988
14,000 square feet 4,800 square feet
Owned Owned
Palo Cedro Branch Yuba City Branch
9125 Deschutes Road 1441 Colusa Avenue
Palo Cedro, CA 96073 Yuba City, CA 9599
34,000 square feet 6,900 square feet
Owned Owned
Chowchilla Branch Covelo Branch
305 Trinity Street 76405 Covelo Road
Chowchilla, CA 93610 Covelo, Ca 95428
6,000 square feet 3,000 square feet
Leased - term expires 2009 Leased - term expires 1997
Crescent City Branch Gustine Branch
936 Third Street 319 Fifth Street
Crescent City, CA 95531 Gustine, CA 95322
4,700 square feet 5,100 square feet
Owned Owned
Marysville Branch Middletown Branch
729 E Street 21097 Calistoga Street
Marysville, CA 95901 Middletown, CA 95461
1,600 square feet 2,600 square feet
Leased - term expires 2001 Leased - term expires 2002
Mt. Shasta Branch Patterson Branch
204 Chestnut Street 17 Plaza
Mt. Shasta, CA 96067 Patterson, CA 95363
6,500 square feet 4,000 square feet
Leased - term expires 2007 Owned
Susanville Branch Weed Branch
1605 Main Street 303 Main Street
Susanville, CA 96130 Weed, CA 96094
7,200 square feet 6,200 square feet
Leased - term expires 2002 Owned
TriCo Offices(3) Yreka Branch
15 Independence Circle 165 South Broadway
Chico, CA 95973 Yreka, CA 96097
7,000 square feet 6,000 square feet
Leased - term expires 2011 Owned
Administration Offices(1) Data Processing Center
40 Philadelphia Drive 1103 Fortress
Chico, CA 95973 Chico, CA 95926
7,000 square feet 13,600 square feet
Owned Leased - term expires 2011
Headquarters Building Redding Downtown Branch
63 Constitution Drive 1845 California Street
Chico, CA 95973 Redding, CA 96001
30,000 square feet Owned
Owned
(1) These two buildings were sold subsequent to December 31, 1997.
(2) This building was vacant at December 31, 1997 and is available for lease..
(3) This leased building was vacated subsequent to December 31, 1997 and is
available for sublease.
3. LEGAL PROCEEDINGS
Neither the Company nor the Bank is a party to any material legal
proceedings, other than ordinary routine litigation incidental to the business
of the Company and the Bank, nor is any of their property the subject of any
such proceedings.
4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Common Stock of the Company trades on the NASDAQ National Market under
the symbol "TCBK." The shares were first listed in the NASDAQ Stock Market in
April 1993.
The following table summarizes the Common Stock high and low trading prices
and volume of shares traded by quarter as reported by NASDAQ.
Prices of the Approximate
Company's Common Trading
Stock Volume
Quarter Ended:(1) High Low (in shares)
March 31, 1996 $ 18.50 $ 15.75 579,810
June 30, 1996 18.75 16.88 266,608
September 30, 1996 22.25 17.00 478,820
December 31, 1996 22.50 19.50 365,032
March 31, 1997 27.00 21.25 323,607
June 30, 1997 28.75 22.14 344,839
September 30, 1997 29.25 24.25 223,892
December 31, 1997 34.00 25.63 225,956
(1) Quarterly trading activity has been compiled from NASDAQ trading reports.
Holders
As of December 31, 1997, there were approximately 1,925 holders of record
of the Company's Common Stock.
Dividends
The Company has paid quarterly dividends since March 1990. In 1997 the
Company paid quarterly dividends of $0.16 per share for all four quarters. For
each of the first two quarters of 1996, the Company paid dividends of $0.13 per
share. A quarterly dividend of $0.16 per share was paid in the third and fourth
quarters of 1996. The holders of Common Stock of the Company are entitled to
receive cash dividends when and as declared by the Board of Directors, out of
funds legally available therefor, subject to the restrictions set forth in the
California General Corporation Law (the "Corporation Law"). The Corporation Law
provides that a corporation may make a distribution to its shareholders if the
corporation's retained earnings equal at least the amount of the proposed
distribution.
The Company, as sole shareholder of the Bank, is entitled to dividends when
and as declared by the Bank's Board of Directors, out of funds legally available
therefore, subject to the powers of the Federal Deposit Insurance Corporation
(the "FDIC") and the restrictions set forth in the California Financial Code
(the "Financial Code"). The Financial Code provides that a bank may not make any
distributions in excess of the lessor of: (i) the bank's retained earnings, or
(ii) the bank's net income for the last three fiscal years, less the amount of
any distributions made by the bank to its shareholders during such period.
However, a bank may, with the prior approval of the California Superintendent of
Banks (the "Superintendent"), make a distribution to its shareholders of up to
the greater of (A) the bank's retained earnings, (B) the bank's net income for
its last fiscal year, or (C) the bank's net income for its current fiscal year.
If the Superintendent determines that the shareholders' equity of a bank is
inadequate or that a distribution by the bank to its shareholders would be
unsafe or unsound, the Superintendent may order a bank to refrain from making a
proposed distribution. The FDIC may also order a bank to refrain from making a
proposed distribution when, in its opinion, the payment of such would be an
unsafe or unsound practice. The Bank paid dividends totaling $3,000,000 to the
Company in 1997. As of December 31, 1997 and subject to the limitations and
restrictions under applicable law, the Bank had funds available for dividends in
the amount of $9,695,000.
The Federal Reserve Act limits the loans and advances that the Bank may
make to its affiliates. For purposes of such Act, the Company is an affiliate of
the Bank. The Bank may not make any loans, extensions of credit or advances to
the Company if the aggregate amount of such loans, extensions of credit,
advances and any repurchase agreements and investments exceeds 10% of the
capital stock and surplus of the Bank. Any such permitted loan or advance by the
Bank must be secured by collateral of a type and value set forth in the Federal
Reserve Act.
6. FIVE YEAR SELECTED FINANCIAL DATA
(in thousands, except share data)
1997 1996 1995 1994 1993(4)
Statement of Operations Data:(1)
Interest income $59,877 $49,148 $46,011 $43,240 $40,947
Interest expense 23,935 19,179 17,988 15,680 13,996
Net interest income 35,942 29,969 28,023 27,560 26,951
Provision for loan losses 3,000 777 335 316 1,858
Net interest income after
provision for loan losses 32,942 29,192 27,688 27,244 25,093
Noninterest income 9,566 6,636 5,933 5,025 6,726
Noninterest expense 32,932 23,485 21,661 22,058 20,225
Income before income taxes 9,576 12,343 11,960 10,211 11,594
Provision for income taxes 3,707 5,037 4,915 4,350 4,779
Net income $5,869 $7,306 $7,045 $5,861 $6,815
Share Data:(2)
Diluted earnings per share $1.21 $ 1.56 $1.46 $1.18 $1.42
Cash dividend paid per share 0.64 0.59 0.37 0.32 0.31
Common shareholders' equity
at year end 13.97 13.10 11.92 10.10 10.05
Balance Sheet Data at year end(5):
Total loans, gross $448,967 $439,218 $318,766 $307,103 $305,902
Total assets 826,165 694,859 603,554 593,834 575,897
Total deposits 724,094 595,621 516,193 491,172 515,999
Total shareholders' equity 65,124 60,777 53,213 48,231 47,068
Selected Financial Ratios:
Return on average assets 0.75 % 1.18 % 1.22 % .99 % 1.25 %
Return on average common
shareholders' equity 9.34 % 13.03 % 13.95 % 12.42 % 15.81%
Total risk-based capital ratio 11.90 % 13.58 % 15.17 % 14.65 % 14.02 %
Net interest margin(3) 5.16 % 5.37 % 5.36 % 5.18 % 5.49 %
Allowance for loan losses to total
loans outstanding at end of year 1.44 % 1.39 % 1.75 % 1.83 % 1.95 %
1 Tax-exempt securities are presented on an actual yield basis.
2 Retroactively adjusted to reflect 5-for-4 stock split effected in 1995, and 12% stock
dividend declared in 1993.
3 Calculated on a tax equivalent basis.
4 Restated on a historical basis to reflect the July 21, 1994 acquisition of Country National Bank on a
pooling-of-interests basis.
5 The 1996 data reflects changes due to the purchase of Sutter Buttes Savings
Bank. See Note S of Registrant's 1997 Annual Report to Shareholders.
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
Management's Discussion and Analysis of Financial Condition and Results
of Operations, included in Registrant's 1997 Annual Report to Shareholders,
(pages through of Exhibit 13.1 as electronically filed) is incorporated
herein by reference.
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Discussion is included Management's Discussion and Analysis (pages 29
through 48 of Exhibit 13.1 as electronically filed) and is incorporated herein
by reference.
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and independent auditor's report,
included in Registrant's 1997 Annual Report to Shareholders, are incorporated
herein by reference:
Pages of Exhibit 13.1
as Electronically Filed
Report of Independent Public Accountants 28
Consolidated Balance Sheets as of
December 31, 1997 and 1996 1
Consolidated Statements of Income
for the three years ended December 31,
1997, 1996 and 1995 2
Consolidated Statements of Changes in
Shareholders' Equity for the three
years ended December 31, 1997,
1996 and 1995 3
Consolidated Statements of Cash Flows
for the years ended December 31, 1997,
1996 and 1995 4
Notes to Consolidated Financial
Statements 6
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding Registrant's directors and executive officers
will be set forth under the caption, "Proposal No. 1 - Election of Directors of
the Company" in Registrant's Proxy Statement for use in connection with the
Annual Meeting of Shareholders to be held on or about May 19, 1998. Said
information is incorporated herein by reference.
11. EXECUTIVE COMPENSATION
Information regarding compensation of Registrant's directors and
executive officers will be set forth under the caption, "Proposal No. 1 -
Election of Directors of the Company" in Registrant's Proxy Statement for use in
connection with the Annual Meeting of Shareholders to be held on or about May
19, 1998. Said information is incorporated herein by reference.
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners,
directors and executive officers of Registrant will be set forth under the
caption, "Information Concerning the Solicitation" in Registrant's Proxy
Statement for use in connection with the Annual Meeting of Shareholders to be
held on or about May 19, 1998. Said information is incorporated herein by
reference.
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
set forth under the caption, "Proposal No. 1 - Election of Directors of the
Company" in Registrant's Proxy Statement for use in connection with the Annual
Meeting of Shareholders to be held on or about May 19, 1998. Said information is
incorporated herein by reference.
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Index to Financial Statements:
A list of the consolidated financial statements of
Registrant incorporated herein is included in Item 8 of this Report.
2. Financial Statement Schedules:
Schedules have been omitted because they are not
applicable or are not required under the instructions contained in Regulation
S-X or because the information required to be set forth therein is included in
the consolidated financial statements or notes thereto.
3. Exhibits Filed herewith:
Exhibit No. 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.
4.2 Certificate of Determination of Preferences of Series B
Preferred Stock, filed as Appendix A to Registrant's
Registration Statement on Form S-1 (No. 33-22738), is
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.
10.9 Employment Agreement of Robert H. Steveson, dated December
12, 1989 between Tri Counties Bank and Robert H. Steveson,
filed as Exhibit 10.9 to Registrant's Report on Form 10-K
filed for the year ended December 31, 1989, is incorporated
by reference.
10.11 Lease for Purchasing and Printing Department premises
entered into as of February 1, 1990, by and between Dennis
M. Casagrande as lessor and Tri Counties Bank as lessee,
filed as Exhibit 10.11 to Registrant's Report on Form 10-K
filed for the year ended December 31, 1991, is incorporated
herein by reference.
10.12 Addendum to Employment Agreement of Robert H. Steveson,
dated April 9, 1991, filed as Exhibit 10.12 to Registrant's
Report on Form 10-K filed for the year ended December 31,
1991, is incorporated herein by reference.
10.13 The 1993 Non-Qualified Stock Option Plan filed as Exhibit
4.1, the Non-Qualified Stock Option Plan filed as Exhibit
4.2 and the Incentive Stock Option Plan filed as Exhibit
4.3 to Registrant's Form S-8 Registration No. 33-88704
dated January 19, 1995 and the 1995 Incentive Stock Option
Plan filed as Exhibit 4.1 to Registrant's Form S-8,
Registration No. 33-62063 dated August 23, 1995, are
incorporated herein by reference.
11.1 Computation of earnings per share.
13.1 TriCo Bancshares 1997 Annual Report to Shareholders.*
21.1 Tri Counties Bank, a California banking corporation, is the
only subsidiary of Registrant.
23.1 Consent of Arthur Andersen LLP
* Deemed filed only with respect to those portions thereof incorporated
herein by reference.
(b) Reports on Form 8-K:
1. 8-K filed February 21, 1997 for the acquisition of
deposit liabilities and fixed assets of nine Northern
California branches from Wells Fargo Bank N.A., San
Francisco.
No financial statements were required to be filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 10, 1998 TRICO BANCSHARES
By: /s/ Robert H. Steveson
Robert H. Steveson, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 10, 1998 /s/ Robert H. Steveson
--------------------------------
Robert H. Steveson, President, Chief Executive
Officer and Director (Principal Executive Officer)
Date: March 10, 1998 /s/ Robert M. Stanberry
--------------------------------
Robert M. Stanberry, Vice President and Chief
Financial Officer (Principal Financial and Accounting
Officer)
Date: March 10, 1998 /s/ Everett B. Beich
--------------------------------
Everett B. Beich, Director and Vice Chairman of
the Board
Date: March 10, 1998 /s/ William J. Casey
--------------------------------
William J. Casey, Director
Date: March 10, 1998 /s/ Craig S. Compton
--------------------------------
Craig S. Compton, Director
Date: March 10, 1998
--------------------------------
Richard C. Guiton, Director
Date: March 10, 1998 /s/ Douglas F. Hignell
--------------------------------
Douglas F. Hignell, Secretary and Director
Date: March 10, 1998 /s/ Brian D. Leidig
--------------------------------
Brian D. Leidig, Director
Date: March 10, 1998 /s/ Wendell J. Lundberg
--------------------------------
Wendell J. Lundberg, Director
Date: March 10, 1998 /s/ Donald E. Murphy
--------------------------------
Donald E. Murphy, Director
Date: March 10, 1998
--------------------------------
Rodney W. Peterson, Director
Date: March 10, 1998 /s/ Alex A. Vereschagin, Jr.
--------------------------------
Alex A. Vereschagin, Jr., Director and
Chairman of the Board
EXHIBIT 11.1
COMPUTATIONS OF EARNINGS PER SHARE
Years ended December 31
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Shares used in the
computation of
earnings per share(1)
Weighted daily average
of shares outstanding 4,652,059 4,513,157 4,430,092 4,389,802 4,094,009
Shares used in the
computation of diluted
earnings per shares 4,830,674 4,689,751 4,656,893 4,641,383 4,338,255
========= ========= ========= ========= =========
Net income used in the
computation of earnings
per common stock:
Income before adjustment
for interest expense on
convertible capital $5,869 $7,306 $7,045 $5,861 $6,815
Adjustment for preferred
stock dividend 0 0 (245) (420) (630)
Net income, as adjusted $5,869 $7,306 $6,800 $5,441 $6,185
========= ========= ========= ========= =========
Basic earnings per share $ 1.26 $ 1.62 $ 1.53 $ 1.24 $ 1.51
========= ========= ========= ========= =========
Diluted earnings per share $ 1.21 $ 1.56 $ 1.46 $ 1.18 $ 1.42
========= ========= ========= ========= =========
(1) Retroactively adjusted for stock dividends and stock splits.
EXHIBIT 13.1
TRICO BANCSHARES CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31,
Assets 1997 1996
Cash and due from banks $ 48,476 $ 52,231
Repurchase agreements 15,000 --
------------------------------
Cash and cash equivalents 63,476 52,231
Securities held-to-maturity (approximate fair value $88,950 and $103,488), respectively 90,764 104,713
Securities available-for-sale 175,753 65,316
Loans:
Commercial 165,813 176,868
Consumer 87,950 75,498
Real estate mortgages 160,954 160,575
Real estate construction 34,250 26,348
------------------------------
448,967 439,289
Less: Allowance for loan losses 6,459 6,097
------------------------------
Net loans 442,508 433,192
Premises and equipment, net 18,901 14,717
Investment in real estate properties 856 1,173
Other real estate owned 2,230 1,389
Accrued interest receivable 5,701 4,572
Deferred income taxes 4,132 4,267
Intangible assets 8,902 1,036
Other assets 12,942 12,253
------------------------------
Total assets $826,165 $694,859
==============================
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand $122,069 $100,879
Interest-bearing demand 130,958 97,178
Savings 216,402 172,789
Time certificates, $100,000 and over 48,907 32,889
Other time certificates 205,758 191,886
------------------------------
Total deposits 724,094 595,621
Federal funds purchased 15,300 4,900
Accrued interest payable 4,039 3,047
Other liabilities 6,168 6,233
Long-term debt and other borrowings 11,440 24,281
------------------------------
Total liabilities 761,041 634,082
Commitments and contingencies (Note H)
Shareholders' equity:
Common stock, no par value: Authorized 20,000,000 shares;
issued and outstanding 4,662,649 and 4,641,223 shares, respectively 48,161 47,652
Retained earnings 16,956 14,076
Unrealized gain/(loss) on securities available-for-sale, net 7 (951)
------------------------------
Total shareholders' equity 65,124 60,777
------------------------------
Total liabilities and shareholders' equity $826,165 $694,859
==============================
See Notes to Consolidated Financial Statements
Exhibit 13.1
TRICO BANCSHARES CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except earnings per share)
Years Ended December 31,
1997 1996 1995
Interest income:
Interest and fees on loans $ 44,903 $ 38,227 $ 33,776
Interest on investment securities--taxable 13,791 10,409 11,706
Interest on investment securities--tax exempt 630 120 158
Interest on federal funds sold 553 392 371
--------------------------------------------------
Total interest income 59,877 49,148 46,011
Interest expense:
Interest on interest-bearing demand deposits 2,781 2,226 2,000
Interest on savings 6,400 5,032 5,167
Interest on time certificates of deposit 11,481 8,820 8,736
Interest on time certificates of deposit, $100,000 and over 2,020 1,123 328
Interest on short-term borrowing 537 359 526
Interest on long-term debt 716 1,619 1,231
--------------------------------------------------
Total interest expense 23,935 19,179 17,988
--------------------------------------------------
Net interest income 35,942 29,969 28,023
Provision for loan losses 3,000 777 335
--------------------------------------------------
Net interest income after provision for loan losses 32,942 29,192 27,688
Noninterest income:
Service charges and fees 6,745 4,924 4,163
Other income 2,821 1,712 1,770
--------------------------------------------------
Total noninterest income 9,566 6,636 5,933
Noninterest expenses:
Salaries and related expenses 15,671 11,989 10,787
Other, net 17,261 11,496 10,874
--------------------------------------------------
Total noninterest expenses 32,932 23,485 21,661
--------------------------------------------------
Net income before income taxes 9,576 12,343 11,960
Income taxes 3,707 5,037 4,915
--------------------------------------------------
Net income $ 5,869 $ 7,306 $ 7,045
Preferred stock dividends -- -- 245
--------------------------------------------------
Net income available to common shareholders $ 5,869 $ 7,306 $ 6,800
==================================================
Basic earnings per common share $ 1.26 $ 1.62 $ 1.53
Diluted earnings per common share $ 1.21 $ 1.56 $ 1.46
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1997, 1996 and 1995
(in thousands, except share amounts)
Series B
Preferred Stock Common Stock
Number Number Unrealized
of of Retained Gain/(Loss) on
Shares Amount Shares Amount Earnings Securities, NetTotal
------------------------------------------------------------------------
Balance, December 31, 1994 8,000 $3,899 3,513,707 $43,552 $4,488 $(3,708) $48,231
Redemption of Preferred Stock (8,000) (3,899) -- -- (101) -- (4,000)
Exercise of Common Stock options -- -- 72,694 554 -- -- 554
5-for-4 Common Stock split -- -- 878,427 -- -- -- --
Series B Preferred Stock cash
dividends -- -- -- -- (245) -- (245)
Common Stock cash dividends -- -- -- -- (1,639) -- (1,639)
Change in unrealized holding loss
on securities -- -- -- -- -- 3,058 3,058
Stock option amortization -- -- -- 209 -- -- 209
Net income -- -- -- -- 7,045 -- 7,045
------------------------------------------------------------------------
Balance, December 31, 1995 -- -- 4,464,828 44,315 9,548 (650) 53,213
Issuance of Common Stock -- -- 102,868 2,134 -- -- 2,134
Exercise of Common Stock options -- -- 89,950 1,157 -- -- 1,157
Repurchase of Common Stock -- -- (16,423) (163) (132) -- (295)
Common Stock cash dividends -- -- -- -- (2,646) -- (2,646)
Change in unrealized loss
on securities -- -- -- -- -- (301) (301)
Stock option amortization -- -- -- 209 -- -- 209
Net income -- -- -- -- 7,306 -- 7,306
------------------------------------------------------------------------
Balance, December 31, 1996 -- -- 4,641,223 47,652 14,076 (951) 60,777
Exercise of Common Stock options -- -- 22,526 332 -- -- 332
Repurchase of Common Stock -- -- (1,100) (11) (19) -- (30)
Common Stock cash dividends -- -- -- -- (2,970) -- (2,970)
Change in unrealized gain/(loss)
on securities -- -- -- -- -- 958 958
Stock option amortization -- -- -- 188 -- -- 188
Net income -- -- -- -- 5,869 -- 5,869
------------------------------------------------------------------------
Balance, December 31, 1997 -- $-- 4,662,649 $48,161 $16,956 $ 7 $65,124
========================================================================
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years ended December 31,
1997 1996 1995
Operating activities:
Net income $ 5,869 $ 7,306 $ 7,045
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 3,000 777 335
Provision for losses on other real estate owned 169 202 99
Provision for premises impairment and lease loss 300 -- --
Depreciation and amortization 2,438 1,809 1,600
Amortization of intangible assets 1,342 34 --
(Accretion) amortization of investment
security (discounts) premiums, net (273) 28 117
Deferred income taxes (601) (930) (134)
Investment security (gains)losses, net (18) -- 10
(Gain) loss on sale of loans (260) 3 (56)
(Gain) loss on sale of other real estate owned, net 11 (5) (78)
Amortization of stock options 188 209 209
Change in assets and liabilities net of effects from purchase of Sutter
Buttes (1996 only):
(Increase) decrease in interest receivable (1,129) 344 139
Increase (decrease) in interest payable 992 (495) 1,402
(Increase) decrease in other assets and liabilities (10,078) (6,273) (876)
-------------------------------------------
Net cash provided by operating activities 1,950 3,009 9,812
Investing activities :
Proceeds from maturities of securities held-to-maturity 14,116 19,179 19,516
Purchases of securities held-to-maturity -- (5,516) (2,740)
Proceeds from maturities of securities available-for-sale 35,604 24,353 12,427
Proceeds from sales of securities available-for-sale 29,033 -- 6,993
Purchases of securities available-for-sale (173,327) (13,704) (5,638)
Net decrease in loans (13,915) (62,104) (12,360)
Purchases of premises and equipment (5,968) (2,526) (1,335)
Proceeds from sale of other real estate owned 838 673 1,862
Purchases and additions to real estate properties (288) -- --
Purchase of Sutter Buttes net of cash acquired -- (997) --
-------------------------------------------
Net cash provided (used) by investing activities (113,907) (40,642) 18,725
Financing activities:
Net increase (decrease) in deposits 128,473 23,486 25,021
Net increase in federal funds borrowed 10,400 4,900 --
Borrowings (payments) under repurchase agreements -- -- (30,457)
Borrowings under long-term debt agreements -- -- 9,828
Payments of principal on long-term debt agreements (12,841) (2,011) (2,035)
Redemption of Preferred Stock -- -- (4,000)
Repurchase of Common Stock (30) (295) --
Cash dividends-- Preferred -- -- (245)
Cash dividends-- Common (2,970) (2,646) (1,639)
Issuance of Common Stock 170 1,157 554
-------------------------------------------
Net cash provided (used) by financing activities 123,202 24,591 (2,973)
-------------------------------------------
Increase (decrease) in cash and cash equivalents 11,245 (13,042) 25,564
Cash and cash equivalents at beginning of year 52,231 65,273 39,709
-------------------------------------------
Cash and cash equivalents at end of year $ 63,476 $ 52,231 $ 65,273
===========================================
Supplemental information
Cash paid for taxes $ 3,907 $ 5,727 $ 5,240
Cash paid for interest expense $ 22,943 $ 19,908 $ 16,586
Non-cash assets acquired through foreclosure $ 1,859 $ 1,628 $ 390
Supplemental schedule of non-cash investing and financing activities:
On October 16, 1996, the Company purchased all of the capital stock of Sutter
Buttes Savings Bank in exchange for cash of approximately $2,036,000 and
approximately 102,900 shares of the Company's stock. Based on the average value
of the Company's stock for the ten days preceding the transaction, the total
purchase price was approximately $4,171,000. In conjunction with the
acquisition, liabilities were assumed as follows:
(in thousands)
Fair value of assets acquired $64,931
Cash and stock paid for capital stock (4,171)
Liabilities assumed $60,760
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 1997, 1996
and 1995
Note A - General Summary of Significant Accounting Policies
The accounting and reporting policies of TriCo Bancshares (the "Company")
conform to generally accepted accounting principles and general practices within
the banking industry. The following are descriptions of the more significant
accounting and reporting policies.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiary, Tri Counties Bank (the "Bank"), and the
wholly-owned subsidiaries of the Bank. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Nature of Operations
The Company operates twenty four branch offices, seven in-store branches
and two loan production offices in the California counties of Butte, Del Norte,
Glenn, Kern, Lake, Lassen, Madera, Mendocino, Merced, Nevada, Sacramento,
Shasta, Siskiyou, Stanislaus, Sutter, Tehama and Yuba. The Company's operating
policy since its inception has emphasized retail banking. Most of the Company's
customers are retail customers and small to medium sized businesses.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Securities
The Company classifies its debt and marketable equity securities into one
of three categories: trading, available-for-sale or held-to-maturity. Trading
securities are bought and held principally for the purpose of selling in the
near term. Held-to-maturity securities are those securities which the Company
has the ability and intent to hold until maturity. All other securities not
included in trading or held-to-maturity are classified as available-for-sale.
In 1997 and 1996 the Company did not have any securities classified as trading.
Available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or
accretion of premiums or discounts. Unrealized gains and losses, net of the
related tax effect, on available-for-sale securities are reported as a separate
component of shareholders' equity until realized.
Premiums and discounts are amortized or accreted over the life of the
related investment security as an adjustment to yield using the effective
interest method. Dividend and interest income are recognized when earned.
Realized gains and losses for securities are included in earnings and are
derived using the specific identification method for determining the cost of
securities sold.
Loans
Loans are reported at the principal amount outstanding, net of unearned
income and the allowance for loan losses. Loan origination and commitment fees
and certain direct loan origination costs are deferred, and the net amount is
amortized as an adjustment of the related loan's yield over the estimated life
of the loan. Loans on which the accrual of interest has been discontinued are
designated as nonaccrual loans. Accrual of interest on loans is generally
discontinued either when reasonable doubt exists as to the full, timely
collection of interest or principal or when a loan becomes contractually past
due by 90 days or more with respect to interest or principal. When loans are 90
days past due, but in Management's judgment are well secured and in the process
of collection, they may not be classified as nonaccrual. When a loan is placed
on nonaccrual status, all interest previously accrued but not collected is
reversed. Income on such loans is then recognized only to the extent that cash
is received and where the future collection of principal is probable. Interest
accruals are resumed on such loans only when they are brought fully current with
respect to interest and principal and when, in the judgment of Management, the
loans are estimated to be fully collectible as to both principal and interest.
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when Management believes that the collectibility of the principal is
unlikely or, with respect to consumer installment loans, according to an
established delinquency schedule. The allowance is an amount that Management
believes will be adequate to absorb probable losses inherent in existing loans,
leases and commitments to extend credit, based on evaluations of the
collectibility, impairment and prior loss experience of loans, leases and
commitments to extend credit. The evaluations take into consideration such
factors as changes in the nature and size of the portfolio, overall portfolio
quality, loan concentrations, specific problem loans, commitments, and current
and anticipated economic conditions that may affect the borrower's ability to
pay.
The Company defines a loan as impaired when it is probable the Company will
be unable to collect all amounts due according to the contractual terms of the
loan agreement. Certain impaired loans are measured based on the present value
of expected future cash flows discounted at the loan's original effective
interest rate. As a practical expedient, impairment may be measured based on the
loan's observable market price or the fair value of the collateral if the loan
is collateral dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a valuation
allowance.
Mortgage Operations
The Company sold substantially all of its conforming long term residential
mortgage loans originated during 1997, 1996 and 1995 for cash proceeds equal to
the fair value of the loans. Statement of Financial Accounting Standards No.
122, Accounting for Mortgage Servicing Rights (SFAS 122) requires the
recognition of originated mortgage servicing rights as assets by allocating the
total costs incurred between the loan and the servicing right based on their
relative fair values. Historically, the cost of the originated servicing rights
was not recognized as an asset and was charged to earnings when the related loan
was sold.
The cost of mortgage servicing rights is amortized in proportion to, and
over the period of, estimated net servicing revenues. SFAS 122 requires the
Company to assess capitalized mortgage servicing rights for impairment based
upon the fair value of those rights at each reporting date. For purposes of
measuring impairment, the rights are stratified based upon the product type,
term and interest rates. Fair value is determined by discounting estimated net
future cash flows from mortgage servicing activities using discount rates that
approximate current market rates and estimated prepayment rates, among other
assumptions. The amount of impairment recognized is the amount by which the
capitalized mortgage servicing rights for a stratum exceeds their fair value.
Impairment, if any, is recognized through a valuation allowance for each
individual stratum.
The Company adopted SFAS 122 on January 1, 1996. The overall impact of
adopting this Statement on the Company's 1996 financial statements was not
material. At December 31, 1997, the Company had no mortgage loans held for sale.
At December 31, 1997 and 1996, the Company serviced real estate mortgage loans
for others of $147 million and $148 million, respectively.
Premises and Equipment
Premises and equipment, including those acquired under capital lease, are
stated at cost less accumulated depreciation and amortization. Depreciation and
amortization expenses are computed using the straight-line method over the
estimated useful lives of the related assets or lease terms. Asset lives range
from 3-10 years for furniture and equipment and 15-40 years for land
improvements and buildings.
Investment in Real Estate Properties
Investment in real estate properties is stated at the lower of cost or
market value and consists of properties either acquired directly or transferred
from other real estate owned for the purpose of development or to be held as
income-earning assets.
Subsequent to acquisition or transfer, properties included in the
investment in real estate properties account are periodically evaluated. Any
decline in market value below the carrying amount of a property is included in
other expenses. Income and expenses on the investment in real estate properties
are included in other expenses.
Other Real Estate Owned
Real estate acquired by foreclosure is carried at the lower of the recorded
investment in the property or its fair value less estimated disposition costs.
Prior to foreclosure, the value of the underlying loan is written down to the
fair value of the real estate to be acquired less estimated disposition costs by
a charge to the allowance for loan losses, when necessary. Any subsequent
write-downs are recorded as a valuation allowance with a charge to other
expenses in the income statement. Expenses related to such properties, net of
related income, and gains and losses on their disposition, are included in other
expenses.
Identifiable Intangible Assets
Identifiable intangible assets are included in other assets and are
amortized using an accelerated method over a period of ten years.
Income Taxes
The Company's accounting for income taxes is based on an asset and
liability approach. The Company recognizes the amount of taxes payable or
refundable for the current year, and deferred tax assets and liabilities for the
future tax consequences that have been recognized in its financial statements or
tax returns. The measurement of tax assets and liabilities is based on the
provisions of enacted tax laws.
Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and Federal funds sold.
Stock-based Compensation
The Company uses the intrinsic value method to account for its stock option
plans (in accordance with the provisions of Accounting Principles Board Opinion
No. 25). Under this method, compensation expense is recognized for awards of
options to purchase shares of common stock to employees under compensatory plans
only if the fair market value of the stock at the option grant date (or other
measurement date, if later) is greater than the amount the employee must pay to
acquire the stock. Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123) permits companies to continue
using the intrinsic value method or to adopt a fair value based method to
account for stock option plans. The fair value based method results in
recognizing as expense over the vesting period the fair value of all stock-based
awards on the date of grant. The Company has elected to continue to use the
intrinsic value method and the pro forma disclosures required by SFAS 123 are
included in Note J.
Reclassifications
Certain amounts previously reported in the 1996 and 1995 financial
statements have been reclassified to conform to the 1997 presentation.
Note B - Restricted Cash Balances
Reserves (in the form of deposits with the Federal Reserve Bank) of
$500,000 and $8,345,000 were maintained to satisfy Federal regulatory
requirements at December 31, 1997 and December 31, 1996. These reserves are
included in cash and due from banks in the accompanying balance sheet.
Note C - Investment Securities
The amortized cost and estimated fair values of investments in debt securities
are summarized in the following tables:
December 31, 1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
Securities Held-to-Maturity
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 21,805 $ 179 $ (16) $ 21,968
Obligations of states and political subdivisions 530 1 -- 531
Mortgage-backed securities 68,429 281 (2,259) 66,451
---------------------------------------------------------------
Totals $ 90,764 $ 461 $(2,275) $ 88,950
Securities Available-for-Sale
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 100,886 $ 263 $ -- $ 101,149
Obligations of states and political subdivisions 13,218 582 (1) 13,799
Mortgage-backed securities 36,557 56 (429) 36,184
Short-term corporate obligations 19,960 -- -- 19,960
Other securities 4,661 -- -- 4,661
---------------------------------------------------------------
Totals $ 175,282 $ 901 $ (430) $ 175,753
December 31, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
Securities Held-to-Maturity
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 22,792 $ 223 $ (33) $ 22,982
Obligations of states and political subdivisions 719 -- (5) 714
Mortgage-backed securities 81,202 349 (1,759) 79,792
---------------------------------------------------------------
Totals $ 104,713 $ 572 $ (1,797) $ 103,488
Securities Available-for-Sale
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 30,219 $ 101 $ (9) $ 30,311
Obligations of states and political subdivisions 1,453 27 -- 1,480
Mortgage-backed securities 30,260 93 (1,203) 29,150
Other securities 4,375 -- -- 4,375
---------------------------------------------------------------
Totals $ 66,307 $ 221 $ (1,212) $ 65,316
The amortized cost and estimated fair value of debt securities at December
31, 1997 by contractual maturity are shown below. Actual maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Fair
Cost Value
(in thousands)
Securities Held-to-Maturity
Due in one year $ 3,000 $ 2,984
Due after one year through five years 23,089 23,259
Due after five years through ten years 8,652 8,708
Due after ten years 56,023 53,999
------------------------------------
Totals $ 90,764 $ 88,950
Securities Available-for-Sale
Due in one year $ 56,729 $ 56,787
Due after one year through five years 65,818 66,047
Due after five years through ten years 7,149 7,142
Due after ten years 40,925 41,116
------------------------------------
170,612 171,092
Other Securities 4,661 4,661
------------------------------------
Totals $175,282 $175,753
Proceeds from sales of securities available for sale were as follows:
Gross Gross Gross
For the Year Proceeds Gains Losses
(in thousands)
1997 $ 29,033 $ 19 $ 1
1996 $ -- $ -- $ --
1995 $ 6,993 $ 40 $ 50
Investment securities with an aggregate carrying value of $109,967,000 and
$75,125,000 at December 31, 1997 and 1996, respectively, were pledged as
collateral for specific borrowings, lines of credit and local agency deposits.
Note D - Allowance for Loan Losses
Activity in the allowance for loan losses was as follows:
Years Ended December 31,
1997 1996 1995
(in thousands)
Balance, beginning of year $6,097 $5,580 $5,608
Balance acquired from Sutter Buttes -- 623 --
Provision for loan losses 3,000 777 335
Loans charged off (2,840) (1,192) (581)
Recoveries of loans previously charged off 202 309 218
----------------------------------
Balance, end of year $6,459 $6,097 $5,580
Loans classified as nonaccrual amounted to approximately $4,721,000,
$9,044,000, and $2,213,000 at December 31, 1997, 1996 and 1995, respectively.
These nonaccrual loans were classified as impaired and are included in the
recorded balance in impaired loans for the respective years shown below. If
interest on those loans had been accrued, such income would have been
approximately $460,000, $902,000, and $166,000 in 1997, 1996 and 1995,
respectively.
As of December 31, the Company's recorded investment in impaired loans and
the related valuation allowance were as follows:
1997
Recorded Valuation
Investment Allowance
Impaired loans -
Valuation allowance required $ 1,476 $162
No valuation allowance required 11,739 --
----------------------------------
Total impaired loans $13,215 $162
1996
Recorded Valuation
Investment Allowance
Impaired loans -
Valuation allowance required $ 2,525 $605
No valuation allowance required 13,829 --
----------------------------------
Total impaired loans $16,354 $605
This valuation allowance is included in the allowance for loan losses
shown above for the respective year. The average recorded investment in impaired
loans was $ 14,784,000, $10,720,000 and $3,579,000 for the years ended December
31, 1997, 1996 and 1995, respectively. The Company recognized interest income on
impaired loans of $1,118,000, $729,000 and $345,000 for the years ended December
31, 1997, 1996 and 1995, respectively.
Note E - Premises and Equipment
Premises and equipment were comprised of:
December 31,
1997 1996
(in thousands)
Premises $13,973 $11,227
Furniture and equipment 12,912 11,036
---------------------------------
26,885 22,263
Less:
Accumulated depreciation
and amortization (11,836) (10,369)
---------------------------------
15,049 11,894
Land and land improvements 3,852 2,823
---------------------------------
$18,901 $14,717
Depreciation and amortization of premises and equipment amounted to
$2,100,000, $1,497,000, and $1,344,000 in 1997, 1996 and 1995, respectively. In
1997, the Company provided $300,000 for the impairment of certain properties and
leaseholds which it vacated and is in the process of disposing.
Note F - Time Deposits
At December 31, 1997, the scheduled maturities of time deposits were as
follows (in thousands):
Scheduled
Maturities
1998 $239,305
1999 7,438
2000 7,081
2001 600
2002 and thereafter 241
----------
Total $254,665
Note G - Long-Term Debt and Other Borrowings
Long-term debt is as follows:
December 31,
1997 1996
(in thousands)
FHLB loan, fixed rate of 5.53% payable on March 21, 1997 -- $ 3,000
FHLB loan, effective rate of 5.13% payable on April 28, 1998 $ 5,000 5,000
FHLB loan, fixed rate of 5.62% payable on February 4, 1999 400 400
FHLB loan, fixed rate of 6.14% payable on March 21, 1999 3,000 3,000
FHLB loan, fixed rate of 5.84% payable on November 6, 2000 1,500 1,500
FHLB loan, fixed rate of 5.90% payable January 16, 2001 1,000 1,000
FHLB repurchase agreements, fixed rate of 5.85% payable on July 17, 1997 -- 9,828
Capital lease obligation on premises, effective rate of 13% payable
monthly in varying amounts through December 1, 2009 540 553
--------------------------
Total long-term debt $11,440 $24,281
The Company maintains a collateralized line of credit with the Federal Home
Loan Bank of San Francisco. Based on the FHLB stock requirements at December 31,
1997, this line provided for maximum borrowings of $78,335,000 of which
$10,900,000 was outstanding, leaving $67,435,000 available. The maximum
month-end outstanding balances of short term reverse repurchase agreements in
1997 and 1996 were $16,300,000 and $0, respectively. The Company has available
unused lines of credit totaling $49,700,000 for Federal funds transactions.
Note H - Commitments and Contingencies (See also Note O)
At December 31, 1997, future minimum commitments under non-cancelable
capital and operating leases with initial or remaining terms of one year or more
are as follows:
Capital Operating
Leases Leases
(in thousands)
1998 $ 85 $ 843
1999 86 644
2000 87 357
2001 88 238
2002 89 221
Thereafter 652 1,988
----------------------------
Future minimum lease payments 1,087 $4,291
Less amount representing interest 547
-------
Present value of future lease payments $ 540
Rent expense under operating leases was $1,059,000 in 1997, $799,000 in
1996, and $887,000 in 1995.
The Company is a defendant in legal actions arising from normal business
activities. Management believes that these actions are without merit or that the
ultimate liability, if any, resulting from them will not materially affect the
Company's financial position.
Note I - Dividend Restrictions
The Bank paid to the Company cash dividends in the aggregate amounts of
$3,000,000, $4,800,000, and $3,200,000 in 1997, 1996 and 1995, respectively. The
Bank is regulated by the Federal Deposit Insurance Corporation (FDIC) and the
California State Banking Department. California banking laws limit the Bank's
ability to pay dividends to the lesser of (1) retained earnings or (2) net
income for the last three fiscal years, less cash distributions paid during such
period. Under this regulation, at December 31, 1997, the Bank may pay dividends
of $9,695,000.
Note J - Stock Options
In May 1995, the Company adopted the TriCo Bancshares 1995 Incentive Stock
Option Plan (`95 Plan) covering key employees. Under the `95 Plan 187,500 shares
as adjusted for the September 1995 5-for-4 stock split were reserved for
issuance. The option price cannot be less than the fair market value of the
Common Stock at the date of grant. Options for the `95 Plan expire on the tenth
anniversary of the grant date.
The Company also has outstanding options under one plan approved in 1993
and two plans approved in 1989. Options under the 1993 plan were granted at an
exercise price less than the fair market value of the common stock and vest over
a six year period. Options under the 1989 plan vest 20% annually. Unexercised
options for the 1993 and 1989 plans terminate 10 years from the date of the
grant.
Stock option activity is summarized in the following table:
Weighted Weighted
Average Average
Number Option Price Exercise Fair Value
of Shares* Per Share Price of Grants
Outstanding at December 31, 1994 560,274 $ 7.43 to $ 7.86 $ 7.72
Options granted 31,250 7.86 to 13.20 10.81 $5.07
Options exercised (72,694) 7.43 to 7.86 7.60
Outstanding at December 31, 1995 518,830 7.43 to 13.20 7.93
Options granted 20,000 18.38 to 18.38 18.38 5.35
Options exercised (89,950) 7.43 to 7.86 7.63
Options forfeited (23,030) 7.86 to 7.86 7.86
Outstanding at December 31, 1996 425,850 7.43 to 18.38 8.48
Options granted 56,000 21.25 to 27.38 26.28 $8.39
Options exercised (22,526) 7.43 to 7.86 7.55
Options forfeited (12,600) 7.86 to 7.86 7.86
Outstanding at December 31, 1997 446,724 $ 7.43 to $27.38 $ 8.48
*1995 activity is adjusted for the 5-for-4 Common Stock split effected September 22, 1995
Of the stock options outstanding as of December 31, 1997, options on
327,376 shares were exercisable at a weighted average price of $8.79.
The Company has stock options outstanding under the four option plans
described above. The Company accounts for these plans under APB Opinion No. 25,
under which no compensation cost has been recognized except for the options
granted under the 1993 plan. The Company recognized expense of $188,000,
$209,000 and $209,000 for the 1993 Plan options in 1997, 1996 and 1995
respectively. Had compensation cost for these plans been determined in
accordance SFAS 123, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
1997 1996 1995
Net income As reported $5,869 $7,306 $7,045
Pro forma $5,829 $7,285 $7,037
Basic earnings per share As reported $1.26 $1.62 $1.54
Pro forma $1.25 $1.61 $1.53
Diluted earnings per share As reported $1.21 $1.56 $1.46
Pro forma $1.21 $1.55 $1.46
However, because the Statement 123 method of accounting has not been
applied to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997, 1996, and 1995, respectively: risk-free
interest rates of 6.06, 6.76, and 5.92 percent; expected dividend yields of
2.46, 3.48, and 2.46 percent; expected lives of 6, 6, and 6 years; expected
volatility of 30.49, 30.22, and 31.38 percent, respectively.
Note K - Other Noninterest Expenses and Income
The components of other noninterest expenses were as follows:
Years Ended December 31,
1997 1996 1995
(in thousands)
Equipment and data processing $ 3,390 $ 2,483 $ 2,508
Occupancy 2,214 1,682 1,573
Intangible amortization 1,342 34 --
Professional fees 998 901 593
Telecommunications 922 653 361
Advertising 753 713 563
Postage 535 436 405
Provision for premises impairment and lease loss 300 -- --
Net other real estate owned expense 277 261 201
Assessments 155 80 727
Other 6,375 4,253 3,943
------------------------------
Total other operating expenses $17,261 $11,496 $10,874
Commissions on sales of annuities and mutual funds in the amounts of
$1,963,000, $1,255,000, and $900,000 for the years 1997, 1996 and 1995 are
included in other income.
Note L - Income Taxes
The current and deferred components of the income tax provision were
comprised of:
Years Ended December 31,
1997 1996 1995
(in thousands)
Current Tax Provision:
Federal $ 3,360 $ 4,439 $ 3,640
State 948 1,528 1,409
--------------------------------------------
Total current 4,308 5,967 5,049
Deferred Tax Benefit:
Federal (614) (769) (36)
State