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| TCBK > SEC Filings for TCBK > Form 10-Q on 11-Aug-2009 | All Recent SEC Filings |
11-Aug-2009
Quarterly Report
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. The presentation of interest income and net interest income on a FTE basis is a common practice within the banking industry. Interest income and net interest income are shown on a non-FTE basis in the Part I - Financial Information section of this Form 10-Q, and a reconciliation of the FTE and non-FTE presentations is provided below in the discussion of net interest income.
Critical Accounting Policies and Estimates 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, intangible assets, 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).
Results of Operations
The following discussion and analysis is designed to provide a better
understanding of the significant changes and trends related to the Company and
the Bank's financial condition, operating results, asset and liability
management, liquidity and capital resources and should be read in conjunction
with the Condensed Consolidated Financial Statements of the Company and the
Notes thereto located at Item 1 of this report.
Following is a summary of the components of fully taxable equivalent ("FTE") net income for the periods indicated (dollars in thousands):
Three months ended Six months ended
June 30, June 30,
---------------------------------------------
2009 2008 2009 2008
---------------------------------------------
Net Interest Income (FTE) $23,288 $23,029 $46,439 $44,575
Provision for loan losses (7,850) (8,800) (15,650) (12,900)
Noninterest income 7,996 7,280 14,611 14,130
Noninterest expense (19,344) (17,844) (36,545) (35,417)
Provision for income taxes (FTE) (1,578) (1,391) (3,461) (4,066)
---------------------------------------------
Net income $2,512 $2,274 $5,394 $6,322
=============================================
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The Company had quarterly earnings of $2,512,000, or $0.16 per diluted share, for the three months ended June 30, 2009. This represents an increase of $238,000 (10.5%) when compared with earnings of $2,274,000 for the quarter ended June 30, 2008. Diluted earnings per share for the quarter ended June 30, 2009 increased 14.3% to $0.16 compared to $0.14 for the quarter ended June 30, 2008.
The Company reported earnings of $5,394,000, or $0.34 per diluted share, for the six months ended June 30, 2009. These results represent a decrease of $928,000 (14.7%) when compared with earnings of $6,322,000 for the six months ended June 30, 2008. Diluted earnings per share for the six months ended June 30, 2009 decreased 12.8% to $0.34 compared to $0.39 for the six months ended June 30, 2008.
Net Interest Income
The Company's primary source of revenue is net interest income, or the
difference between interest income on interest-earning assets and interest
expense on interest-bearing liabilities. Following is a summary of the
components of net interest income for the periods indicated (dollars in
thousands):
Three months ended Six months ended
June 30, June 30,
-----------------------------------------------------
2009 2008 2009 2008
-----------------------------------------------------
Interest income $28,432 $30,332 $57,314 $61,462
Interest expense (5,286) (7,471) (11,170) (17,236)
FTE adjustment 142 168 295 349
------------------------------------------------------
Net interest income (FTE) $23,288 $23,029 $46,439 $44,575
======================================================
Average interest-earning assets $1,933,633 $1,819,222 $1,910,377 $1,818,217
Net interest margin (FTE) 4.82% 5.06% 4.86% 4.90%
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Net interest income (FTE) during the second quarter of 2009 increased $259,000 (1.1%) from the same period in 2008 to $23,288,000. The increase in net interest income (FTE) was due to an $114,411,000 (6.3%) increase in average balances of interest-earning assets to $1,933,633,000 that was partially offset by a 0.24% decrease in net interest margin (FTE) to 4.82% from the quarter ended June 30, 2008.
Net interest income (FTE) during the first six months of 2009 increased $1,864,000 (4.2%) from the same period in 2008 to $46,439,000. The increase in net interest income (FTE) was due to a $92,160,000 (5.1%) increase in average balances of interest-earning assets to $1,910,377,000 that was partially offset by a 0.04% decrease in net interest margin (FTE) to 4.86% from 4.90% from the six month period ended June 30, 2008.
Interest and Fee Income
Interest and fee income (FTE) for the second quarter of 2009 decreased
$1,926,000 (6.3%) from the second quarter of 2008. The decrease was due to a
0.80% decrease in the yield on average interest-earning assets to 5.91% that was
partially offset by a $114,411,000 (6.3%) increase in average interest-earning
assets to $1,933,633,000. The growth in average interest-earning assets was
mainly due to a $109,805,000 increase in average balance of interest-earning
cash at the Federal Reserve and other banks. The decrease in the yield on
average interest-earning assets was mainly due to a 0.51% decrease in yield on
loans to 6.48% and the large increase in interest-bearing cash balances that
earned only 0.20% during the quarter.
Interest and fee income (FTE) for the six months ended June 30, 2009 decreased $4,202,000 (6.8%) from the same period of 2008. The decrease was due to a 0.77% decrease in the yield on average interest-earning assets to 6.03% that was partially offset by a $92,160,000 (5.1%) increase in average interest-earning assets to $1,910,377,000. The growth in interest-earning assets was primarily due to a $20,257,000 (1.3%) increase in average loan balances to $1,561,064,000, and a $77,592,000 increase in average balance of interest-earning cash at the Federal Reserve and other banks. The decrease in the yield on average interest-earning assets was mainly due to a 0.61% decrease in yield on loans to 6.50% and the large increase in interest-bearing cash balances that earned only 0.20% during the six months ended June 30, 2009. The decrease in loan yields from the six months ended June 30, 2009 was mainly due to a 4.00% decrease in the prime lending rate from 7.25% at December 31, 2007 to 3.25% at June 30, 2009.
Interest Expense
Interest expense decreased $2,185,000 (29.2%) to $5,286,000 in the second
quarter of 2009 compared to the second quarter of 2008. The average balance of
interest-bearing liabilities increased $72,837,000 (5.1%) to $1,489,202,000 in
the second quarter of 2009 compared to the second quarter of 2008. The increase
in the average balance of interest-bearing liabilities was due primarily to
increased deposits of $214,226,000 (18.5%) offset by a decrease of $141,389,000
in the average balances of Federal funds purchased and other borrowings,
respectively, from the second quarter of 2008. The average rate paid on
interest-bearing liabilities in the quarter ended June 30, 2009 decreased 0.69%
to 1.42% compared to the quarter ended June 30, 2008 as a result of lower market
rates for almost all types of interest-bearing liabilities.
Interest expense decreased $6,066,000 (35.2%) to $11,170,000 for the six months ended June 30, 2009 compared to $17,236,000 for the six months ended June 30, 2008. The average balance of interest-bearing liabilities increased $53,730,000 (3.8%) to $1,465,509,000 for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. The increase in the average balance of interest-bearing liabilities was due primarily to increased deposits of $189,529,000 (16.4%) offset by a decrease of $135,799,000 in the average balances of Federal funds purchased and other borrowings from the six months ended June 30, 2008. The average rate paid on interest-bearing liabilities in the six month period ended June 30, 2009 decreased 0.92% to 1.52% compared to the six months ended June 30, 2008 as a result of lower market rates for almost all types of interest-bearing liabilities.
Net Interest Margin (FTE)
The following table summarizes the components of the Company's net interest
margin for the periods indicated:
Three months ended Six months ended
June 30, June 30,
------------------------------------------
2009 2008 2009 2008
------------------------------------------
Yield on interest-earning assets 5.91% 6.71% 6.03% 6.80%
Rate paid on interest-bearing
Liabilities 1.42% 2.11% 1.52% 2.44%
------------------------------------------
Net interest spread 4.49% 4.60% 4.51% 4.36%
Impact of all other net
noninterest-bearing funds 0.33% 0.46% 0.35% 0.54%
------------------------------------------
Net interest margin 4.82% 5.06% 4.86% 4.90%
==========================================
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Net interest margin for the three months ended June 30, 2009 decreased 0.24% compared to the three months ended June 30, 2008. This decrease in net interest margin was mainly due to a 0.13% decrease in the impact of net noninterest-bearing funds to 0.33% and a decrease of 0.11% in net interest spread compared to the three months ended June 30, 2008. The average yield on interest-earning assets decreased 0.80% while the average rate paid on interest-bearing liabilities decreased 0.69% from the three months ended June 30, 2008.
Net interest margin for the six months ended June 30, 2009 decreased 0.04% compared to the six months ended June 30, 2008. This decrease in net interest margin was mainly due to a 0.19% decrease in the impact of net noninterest-bearing funds to 0.35% offset by an increase of 0.15% in net interest spread compared to the six months ended June 30, 2008. The average yield on interest-earning assets decreased 0.77% while the average rate paid on interest-bearing liabilities decreased 0.92% from the six months ended June 30, 2008.
Summary of Average Balances, Yields/Rates and Interest Differential The
following table presents, for the periods indicated, information regarding the
Company's consolidated average assets, liabilities and shareholders' equity, the
amounts of interest income from average interest-earning assets and resulting
yields, and the amount of interest expense paid on interest-bearing liabilities.
Average loan balances include nonperforming loans. Interest income includes
proceeds from loans on nonaccrual loans only to the extent cash payments have
been received and applied to interest income. Yields on securities and certain
loans have been adjusted upward to reflect the effect of income thereon exempt
from federal income taxation at the current statutory tax rate (dollars in
thousands).
For the three months ended
------------------------------------------------------------------
June 30, 2009 June 30, 2008
------------------------------ -----------------------------
Interest Rates Interest Rates
Average Income/ Earned Average Income/ Earned
Balance Expense Paid Balance Expense Paid
------------------------------ ------------------------------
Assets:
Loans $1,555,778 $25,218 6.48% $1,546,257 $27,015 6.99%
Investment securities - taxable 245,489 2,896 4.72% 247,508 3,017 4.88%
Investment securities - nontaxable 22,407 405 7.23% 25,303 467 7.38%
Cash at Federal Reserve and other banks 109,959 55 0.20% 154 1 1.71%
----------------------------- ------------------------------
Total interest-earning assets 1,933,633 28,574 5.91% 1,819,222 30,500 6.71%
------ ------
Other assets 155,242 167,452
------- -------
Total assets $2,088,875 $1,986,674
========== ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits $283,777 $444 0.63% $215,661 $134 0.25%
Savings deposits 425,759 759 0.71% 392,938 1,172 1.19%
Time deposits 664,863 3,575 2.15% 551,574 4,344 3.15%
Federal funds purchased - - - 130,263 711 2.18%
Other borrowings 73,565 112 0.61% 84,691 524 2.47%
Junior subordinated debt 41,238 396 3.84% 41,238 586 5.68%
---------------------------- ------------------------------
Total interest-bearing liabilities 1,489,202 5,286 1.42% 1,416,365 7,471 2.11%
----- -----
Noninterest-bearing deposits 361,035 347,079
Other liabilities 35,042 31,225
Shareholders' equity 203,596 192,005
---------- ----------
Total liabilities and shareholders' equity $2,088,875 $1,986,674
========== ==========
Net interest spread(1) 4.49% 4.60%
Net interest income and interest margin(2) $23,288 4.82% $23,029 5.06%
================ =================
(1) Net interest spread represents the average yield earned on interest-earning
assets minus the average rate paid on interest-bearing liabilities.
(2) Net interest margin is computed by calculating the difference between
interest income and expense, divided by the average balance of
interest-earning assets.
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For the six months ended
------------------------------------------------------------------
June 30, 2009 June 30, 2008
------------------------------ -----------------------------
Interest Rates Interest Rates
Average Income/ Earned Average Income/ Earned
Balance Expense Paid Balance Expense Paid
------------------------------ ------------------------------
Assets:
Loans $1,561,064 $50,731 6.50% $1,540,807 $54,741 7.11%
Investment securities - taxable 248,960 5,979 4.80% 251,143 6,095 4.85%
Investment securities - nontaxable 22,508 822 7.31% 26,014 972 7.47%
Cash at Federal Reserve and other banks 77,845 77 0.20% 253 3 2.37%
----------------------------- ------------------------------
Total interest-earning assets 1,910,377 57,609 6.03% 1,818,217 61,811 6.80%
------ ------
Other assets 158,657 169,453
------- -------
Total assets $2,069,034 $1,987,670
========== ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits $270,957 $786 0.58% $217,074 $221 0.20%
Savings deposits 417,254 1,652 0.79% 390,214 2,674 1.37%
Time deposits 660,103 7,542 2.29% 551,497 9,932 3.60%
Federal funds purchased - - - 116,914 1,523 2.61%
Other borrowings 75,957 354 0.93% 94,842 1,587 3.35%
Junior subordinated debt 41,238 836 4.05% 41,238 1,299 6.30%
---------------------------- ------------------------------
Total interest-bearing liabilities 1,465,509 11,170 1.52% 1,411,779 17,236 2.44%
------ ------
Noninterest-bearing deposits 363,755 350,643
Other liabilities 36,909 32,521
Shareholders' equity 202,861 192,727
------- -------
Total liabilities and shareholders' equity $2,069,034 $1,987,670
========== ==========
Net interest spread(1) 4.51% 4.36%
Net interest income and interest margin(2) $46,439 4.86% $44,575 4.90%
================ =================
(1) Net interest spread represents the average yield earned on interest-earning
assets minus the average rate paid on interest-bearing liabilities.
(2) Net interest margin is computed by calculating the difference between
interest income and expense, divided by the average balance of
interest-earning assets.
|
Summary of Changes in Interest Income and Expense due to Changes in Average
Asset and Liability Balances and Yields Earned and Rates Paid
The following tables set forth a summary of the changes in interest income (FTE)
and interest expense from changes in average asset and liability balances
(volume) and changes in average interest rates for the periods indicated.
Changes not solely attributable to volume or rates have been allocated in
proportion to the respective volume and rate components (dollars in thousands).
Three months ended June 30, 2009
compared with three months
ended June 30, 2008
--------------------------------
Volume Rate Total
--------------------------------
Increase (decrease) in interest income:
Loans $166 $(1,963) $(1,797)
Investment securities (63) (120) (183)
Cash at Federal Reserve and other banks 469 (415) 54
--------------------------------
Total interest-earning assets 572 (2,498) (1,926)
--------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits 43 267 310
Savings deposits 98 (511) (413)
Time deposits 892 (1,661) (769)
Federal funds purchased (711) - (711)
Other borrowings (69) (343) (412)
Junior subordinated debt - (190) (190)
-------------------------------
Total interest-bearing liabilities 254 (2,439) (2,185)
-------------------------------
Increase in Net Interest Income $318 $(59) $259
===============================
Six months ended June 30, 2009
compared with six months
ended June 30, 2008
-------------------------------
Volume Rate Total
-------------------------------
Increase (decrease) in interest income:
Loans $720 $(4,730) $(4,010)
Investment securities (145) (121) (266)
Cash at Federal Reserve and other banks 919 (845) 74
-------------------------------
Total interest-earning assets 1,494 (5,696) (4,202)
-------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits 54 511 565
Savings deposits 185 (1,207) (1,022)
Time deposits 1,955 (4,345) (2,390)
Federal funds purchased (1,523) - (1,523)
Other borrowings (316) (917) (1,233)
Junior subordinated debt - (463) (463)
-------------------------------
Total interest-bearing liabilities 352 (6,418) (6,066)
-------------------------------
Increase in Net Interest Income $1,142 $722 $1,864
===============================
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Provision for Loan Losses
The Company provided $7,850,000 for loan losses in the second quarter of 2009
versus $8,800,000 in the second quarter of 2008. In the second quarter of 2009,
the Company recorded $7,000,000 of net loan charge-offs versus $3,902,000 of net
loan charge-offs in the second quarter of 2008. In addition, net charge-offs of
$2,236,000 on home equity lines and loans and $504,000 on auto indirect loans
were taken during the second quarter of 2009. During the second quarter of 2009,
the Company also increased its allowance for loan losses by $850,000 from the
first quarter of 2009 with such additional reserves allocated primarily to
consumer loans, residential real estate and construction lending.
The Company provided $15,650,000 for loan losses during the six months ended June 30, 2009 versus $12,900,000 during the six months ended June 30, 2008. In the six months ended June 30, 2009, the Company recorded $9,616,000 of net loan charge-offs versus $5,950,000 of net loan charge-offs in the six months ended June 30, 2008. A total net of $3,644,000 in home equity lines and loans and $1,033,000 on auto indirect loans have been charged-off during the six months ended June 30, 2009. During the six months ended June 30, 2009, the Company increased its allowance for loan losses by $6,034,000 from December 31, 2008 with such additional reserves allocated primarily to consumer loans, residential real estate and construction lending.
Noninterest Income The following table summarizes the components of noninterest income for the periods indicated (dollars in thousands). . . . |
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