SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Quarter Ended September 30, 2001 Commission file number 0-10661 - ------------------------------------ ------------------------------ TRICO BANCSHARES (Exact name of registrant as specified in its charter) California 94-2792841 ------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification No.) 63 Constitution Drive, Chico, California 95973 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 530/898-0300 - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of Class: Common stock, no par value Outstanding shares as of November 9, 2001: 7,034,580
PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS TRICO BANCSHARES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) September 30, December 31, ------------- ------------ 2001 2000 Assets: Cash and due from banks $ 48,317 $ 58,190 Federal funds sold 27,000 - ------------- ------------ Cash and cash equivalents 75,317 58,190 Securities available-for-sale 210,789 229,110 Loans, net of allowance for loan losses of $12,437 and $11,670, respectively 655,720 628,721 Premises and equipment, net 16,510 16,772 Cash Value of Life Insurance 14,559 13,753 Other real estate owned 723 1,441 Accrued interest receivable 6,087 6,935 Intangible Assets 5,262 5,464 Other assets 11,183 11,685 ------------- ------------ Total assets $ 996,150 $ 972,071 ============= ============ Liabilities: Deposits Noninterest-bearing demand $ 177,970 $ 168,542 Interest-bearing demand 155,304 150,749 Savings 228,367 214,158 Time certificates 297,839 304,383 ------------- ------------ Total deposits 859,480 837,832 Fed funds purchased - 500 Accrued interest payable and other liabilities 15,327 14,523 Long term borrowings 32,963 33,983 ------------- ------------ Total liabilities 907,770 886,838 Shareholders' equity: Common stock 49,395 50,428 Retained earnings 37,974 35,129 Accumulated other comprehensive income (loss) 1,011 (324) ------------- ------------ Total shareholders' equity 88,380 85,233 ------------- ------------ Total liabilities and shareholders' equity $ 996,150 $ 972,071 ============= ============
<TABLE> <CAPTION> TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands except earnings per common share) For the three months For the nine months ended September 30, ended September 30, 2001 2000 2001 2000 <S> <C> <C> <C> <C> Interest income: Interest and fees on loans $ 15,486 $ 16,470 $ 45,943 $ 45,918 Interest on investment securities-taxable 2,202 2,852 7,158 8,901 Interest on investment securities-tax exempt 555 555 1,666 1,669 Interest on federal funds sold 370 35 1,321 278 -------------- ------------ ------------- ------------- Total interest income 18,613 19,912 56,088 56,766 -------------- ------------ ------------- ------------- Interest expense: Interest on deposits 5,097 6,382 17,603 18,084 Interest on federal funds purchased 3 295 4 512 Interest on repurchase agreements - 14 - 99 Interest on other borrowings 512 950 1,523 2,264 -------------- ------------ ------------- ------------- Total interest expense 5,612 7,641 19,130 20,959 -------------- ------------ ------------- ------------- Net interest income 13,001 12,271 36,958 35,807 Provision for loan losses 600 1,800 3,250 3,500 -------------- ------------ ------------- ------------- Net interest income after provision for loan losses 12,401 10,471 33,708 32,307 Noninterest income: Service charges and fees 2,045 1,870 6,015 5,563 Gain on sale of insurance company stock - - 1,756 - Gain on receipt of insurance company stock - - - 1,510 Other income 1,366 1,464 3,731 4,127 -------------- ------------ ------------- ------------- Total noninterest income 3,411 3,334 11,502 11,200 -------------- ------------ ------------- ------------- Noninterest expenses: Salaries and related expenses 5,483 4,946 15,899 14,728 Other, net 5,034 4,359 14,672 13,051 -------------- ------------ ------------- ------------- Total noninterest expenses 10,517 9,305 30,571 27,779 -------------- ------------ ------------- ------------- Net income before income taxes 5,295 4,500 14,639 15,728 Income taxes 2,050 1,653 5,578 5,809 -------------- ------------ ------------- ------------- Net income $ 3,245 $ 2,847 $ 9,061 $ 9,919 ============== ============ ============= ============= Basic earnings per common share $ 0.46 $ 0.40 $ 1.28 $ 1.38 ============== ============ ============= ============= Diluted earnings per common share $ 0.45 $ 0.39 $ 1.25 $ 1.35 ============== ============ ============= ============= </TABLE>
<TABLE> <CAPTION> TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) (in thousands, except number of shares) Common stock Accumulated ------------------------ Other Change in Number Retained Comprehensive Unrealized of shares Amount earnings Income/(Loss) Total Gain/(Loss) ----------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Balance, December 31, 2000 7,181,226 $50,428 $35,129 ($324) $85,233 Exercise of Common Stock options 38,830 386 386 Repurchase of Common Stock (201,976) (1,419) (1,979) (3,398) Common Stock cash dividends (4,237) (4,237) Comprehensive income: Net income 9,061 9,061 $9,061 Other comprehensive income: Change in unrealized gain/(loss) on securities, net of tax 1,695 1,695 1,695 Change in minimum pension liability, net of tax (360) (360) (360) --------------- Comprehensive income $10,396 ------------------------------------------------------------------ --------------- Balance, September 30, 2001 7,018,080 $49,395 $37,974 $1,011 $88,380 ------------------------------------------------------------------ </TABLE>
<TABLE> <CAPTION> TRICO BANCSHARES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) For the nine months ended September 30, 2001 2000 ------------- ------------- <S> <C> <C> Operating activities: Net income $ 9,061 $ 9,919 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 3,250 3,500 Provision for losses on other real estate owned 18 25 Depreciation and amortization 1,891 1,875 Amortization of intangible assets 683 724 Accretion of investment security discounts 139 200 Deferred income taxes (551) (245) Investment security (gains) losses (net) (1,791) - (Gain) loss on sale of OREO (48) (68) (Gain) loss on sale of loans (476) (385) (Gain) loss on sale of fixed assets (4) 52 Amortization of stock options - 69 (Increase) decrease in interest receivable 848 (285) Increase (decrease) in interest payable (895) 429 (Increase) decrease in other assets and liabilities (162) (773) ------------- ------------- Net cash provided (used) by operating activities 11,963 15,037 Investing activities: Proceeds from maturities of securities available-for-sale 63,331 29,309 Proceeds from sale of securities available-for-sale 14,120 - Purchases of securities available-for-sale (54,738) (9,023) Net (increase) decrease in loans (30,100) (66,654) Proceeds from sales of fixed assets 23 32 Purchases of premises and equipment (1,426) (2,872) Proceeds from the sale of OREO 1,075 914 ------------- ------------- Net cash provided (used) by investing activities (7,715) (48,294) Financing activities: Net increase (decrease) in deposits 21,648 14,500 Net increase (decrease) in Fed funds purchased (500) 13,600 Borrowings under long-term debt agreements - 35,000 Payments of principal on long-term debt agreements (1,020) (35,017) Cash dividends - Common (4,237) (4,243) Repurchase of common stock (3,398) (235) Exercise of common stock options 386 364 ------------- ------------- Net cash provided (used) by financing activities 12,879 23,969 ------------- ------------- Increase (decrease) in cash and cash equivalents 17,127 (9,288) Cash and cash equivalents at beginning of year 58,190 59,636 ------------- ------------- Cash and cash equivalents at end of period $ 75,317 $ 50,348 ============= ============= Supplemental information: Cash paid for taxes $ 5,775 $ 6,573 Cash paid for interest expense $ 20,025 $ 20,530 </TABLE>
Notes to Condensed Consolidated Financial Statements Note A - Basis of Presentation The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and in Management's opinion, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of results for such interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to SEC rules or regulations; however, the Company believes that the disclosures made are adequate to make the information presented not misleading. The interim results for the three and nine months ended September 30, 2001 and 2000 are not necessarily indicative of results for the full year. It is suggested that these financial statements be read in conjunction with the financial statements and the notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. Note B - Comprehensive Income For the Company, comprehensive income includes net income reported on the statement of income, changes in the fair value of its available-for-sale investments and changes in minimum pension liability reported as other comprehensive income. The following table presents net income adjusted by these elements to determine total comprehensive income (in thousands): Three months ended Nine months ended September 30, September 30, 2001 2000 2001 2000 Net income $3,245 $ 2,847 $ 9,061 $ 9,919 Net change in unrealized gains/(losses) on securities available-for-sale 1,411 1,555 1,695 1,838 Net change in minimum pension liability - - (360) - ------- -------- ------- ------- Comprehensive income $4,656 $ 4,402 $10,396 $11,757 ====== ======= ======= =======
Note C - Earnings per Share The Company's basic and diluted earnings per share are as follows (dollars in thousands except per share data): Three Months Ended September 30, 2001 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share: Net income available to common shareholders $3,245 7,044,156 $0.46 Common stock options outstanding -- 186,767 Diluted Earnings per Share: Net income available to common shareholders $3,245 7,230,923 $0.45 ====== ========= Three Months Ended September 30, 2000 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share: Net income available to common shareholders $2,847 7,203,004 $0.40 Common stock options outstanding -- 146,398 Diluted Earnings per Share: Net income available to common shareholders $2,847 7,349,402 $0.39 ====== ========= Nine Months Ended September 30, 2001 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share: Net income available to common shareholders $9,061 7,087,346 $1.28 Common stock options outstanding -- 149,497 Diluted Earnings per Share: Net income available to common shareholders $9,061 7,236,843 $1.25 ====== ========= Nine Months Ended September 30, 2000 Weighted Average Per-Share Income Shares Amount Basic Earnings per Share: Net income available to common shareholders $9,919 7,187,655 $1.38 Common stock options outstanding -- 155,010 Diluted Earnings per Share: Net income available to common shareholders $9,919 7,342,665 $1.35 ====== =========
Note D - Business Segments The Company is principally engaged in traditional community banking activities provided by the Company's wholly-owned subsidiary, Tri Counties Bank (the "Bank") through its thirty branches and seven in-store branches located throughout Northern California from the Oregon boarder to Bakersfield. Community banking activities include the Bank's commercial and retail lending, deposit gathering and investment and liquidity management activities. In addition to its community banking services, the Bank offers investment brokerage and leasing services. The results of the Bank's separate branches have been aggregated into a single reportable segment, "Community Banking". The Company's leasing, investment brokerage and real estate segments do not meet the prescribed aggregation or materiality criteria and, therefore, are reported as "Other" in the following table. Summarized financial information concerning the Bank's reportable segments is as follows (in thousands): Community Banking Other Total Three Months Ended September 30, 2001 Net interest income $ 12,832 $ 169 $ 13,001 Noninterest income 2,652 759 3,411 Noninterest expense 9,878 639 10,517 Net income 3,066 179 3,245 Assets $980,270 $ 15,880 $996,150 Three Months Ended September 30, 2000 Net interest income $ 12,059 $ 212 $ 12,271 Noninterest income 2,507 827 3,334 Noninterest expense 8,792 513 9,305 Net income 2,552 295 2,847 Assets $947,064 $ 14,917 $961,981 Nine Months Ended September 30, 2001 Net interest income $ 36,338 $ 620 $ 36,958 Noninterest income 9,417 2,085 11,502 Noninterest expense 28,826 1,745 30,571 Net income 8,466 595 9,061 Assets $980,270 $15,880 $996,150 Nine Months Ended September 30, 2000 Net interest income $ 35,190 $ 617 $ 35,807 Noninterest income 8,837 2,363 11,200 Noninterest expense 26,295 1,484 27,779 Net income 9,088 831 9,919 Assets $947,064 $ 14,917 $961,981
Note E - Other Income Included in the results for the nine months ended September 30, 2001 is a one-time pre-tax income item of $1,756,000. This one-time item represents the realized gain recorded by the Company upon the sale of 88,796 common shares of John Hancock Financial Services, Inc. (JHF) for proceeds of $3,265,000. Included in the results for the nine months ended September 30, 2000 was a one-time pre-tax income item of $1,510,000. This one-time item represents the initial value of 88,796 common shares of JHF which the Bank received as a consequence of its ownership of certain insurance policies through John Hancock Mutual Life Insurance Company and JHF's conversion from a mutual company to a stock company. Note F - Stock Repurchase Plans On March 15, 2001, the Company announced the completion of its first stock repurchase plan initially announced on July 20, 2000. Under this repurchase plan, the Company repurchased a total of 150,000 shares of which 110,000 shares were repurchased since December 31, 2000. On October 19, 2001, the Company announced the completion of its second stock repurchase plan initially announced on March 15, 2001. Under this repurchase plan, the Company repurchased a total of 150,000 shares. Also on October 19, 2001, the Company announced that its Board of Directors approved a new plan to repurchase, as conditions warrant, up to 150,000 additional shares of the Company's stock on the open market or in privately negotiated transactions. The timing of purchases and the exact number of shares to be purchased will depend on market conditions. The 150,000 shares covered by this repurchase plan represent approximately 2.2% of the Company's 6,992,080 then outstanding common shares. As of November 9, 2001, the Company had repurchased 68,500 shares under this new plan. Note G - Shareholder Rights Plan On June 25, 2001, the Company announced that its Board of Directors adopted and entered into a Shareholder Rights Plan designed to protect and maximize shareholder value and to assist the Board of Directors in ensuring fair and equitable benefit to all shareholders in the event of a hostile bid to acquire the Company. The Company adopted this Rights Plan to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, the Rights Plan imposes a significant penalty upon any person or group that acquires 15% or more of the Company's outstanding common stock without approval of the Company's Board of Directors. The Rights Plan was not adopted in response to any known attempt to acquire control of the Company. Under the Rights Plan, a dividend of one Preferred Stock Purchase Right was declared for each common share held of record as of the close of business on July 10, 2001. No separate certificates evidencing the Rights will be issued unless and until they become exercisable. The Rights generally will not become exercisable unless an acquiring entity accumulates or initiates a tender offer to purchase 15% or more of the Company's common stock. In that event, each Right will entitle the holder, other than the unapproved acquirer and its affiliates, to purchase either the Company's common stock or shares in an acquiring entity at one-half of market value. The Right's initial exercise price, which is subject to adjustment, is $49.00 per Right. The Company's Board of Directors generally will be entitled to redeem the Rights at a redemption price of $.01 per Right until an acquiring entity acquires a 15% position. The Rights expire on July 10, 2011.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As TriCo Bancshares (the "Company") has not commenced any business operations independent of Tri Counties Bank (the "Bank"), the following discussion pertains primarily to the Bank. Average balances, including such balances used in calculating certain financial ratios, are generally comprised of average daily balances for the Company. Except within the "overview" section, interest income and net interest income are presented on a tax equivalent basis. In addition to the historical information contained herein, this Quarterly Report contains certain forward-looking statements. The reader of this Quarterly Report should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome. The Company's actual results could differ materially from those suggested by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, loan losses, expenses, rates charged on loans and earned on securities investments, rates paid on deposits, competition effects, fee and other noninterest income earned as well as other factors. This entire Quarterly Report should be read to put such forward-looking statements in context and to gain a more complete understanding of the uncertainties and risks involved in the Company's business. Overview The Company had earnings of $3,245,000 for the quarter ended September 30, 2001. The quarterly earnings represented a 14.0% increase from the $2,847,000 reported for the same period of 2000. Diluted earnings per share for the third quarter of 2001 were $0.45 versus $0.39 in the year earlier period. Earnings for the nine months ended September 30, 2001 were $9,061,000 versus year ago results of $9,919,000, and represented an 8.7% decrease. The diluted earnings per share were $1.25 and $1.35 for the respective nine-month periods. Included in the results for the nine months ended September 30, 2001 was a $1,756,000 pretax gain on the sale of the Company's equity investment in John Hancock Financial Services, Inc. (JHF). In the nine months ended September 30, 2000, the Company recorded a $1,510,000 pretax gain from the initial receipt of its investment in JHF. Excluding the gains associated with the shares of JHF, the Company would have reported diluted earnings per share of $1.10 and $1.23 in the nine months ended September 30, 2001 and 2000, respectively. The increase in third quarter operating results was due to a $730,000 (6.0%) increase in net interest income, a $1,200,000 (67%) decrease in provision for loan losses offset by a $1,212,000 (13.0%) increase in noninterest expense. The 6.0% increase in net interest income was primarily due to a 2.8% increase in the average balance of interest earning assets and a 16 basis point increase in net interest margin. The 67% decrease in the quarterly provision for loan losses was due to a 97% decrease in quarterly net loan charge offs. The 13.0% increase in noninterest expense was due to increased salary expense from annual salary increases and additional headcount, and increased other operational expenses due to new branch locations and sales volume related expenses.
Net interest income for the quarter ended September 30, 2001 grew $718,000 (5.7%) to $13,289,000 on a fully tax equivalent basis. Interest income was down $1,311,000 (6.5%) mainly due to Federal Reserve interest rate cuts totaling 400 basis points since December 31, 2000. This was partially offset by a 2.8% increase in the quarter-over-quarter volume of earning assets ($894,670,000 versus $869,779,000). The average yield on earning assets decreased 85 basis points to 8.45%. Interest expense decreased $2,029,000 (26.6%) as a result of a 110 basis point decrease in the average rate paid on interest-bearing liabilities to 3.15% and a 0.8% decrease in average balances of interest-bearing liabilities to $713,356,000. The average balance of noninterest-bearing deposits increased 15.3% to $164,583,000 from the year-ago quarter. Net interest margin was 5.94% for the third quarter of 2001 versus 5.78% in the same quarter of the prior year. Noninterest income for the third quarter of 2001 increased $77,000 (2.3%) to $3,411,000 from the same period in 2000. Service charge and fee income was up $175,000 (9.4%) to $2,045,000 mainly due to increased deposit account service charges and fees. Other noninterest income decreased $98,000 (6.7%) to $1,366,000. The decrease in other noninterest income was comprised of a $2,000 (0.3%) decrease in commissions on nondeposit investment product sales to $678,000, a $14,000 (6.8%) decrease in gain on sale of loans and loan servicing to $191,000, a $105,000 (72%) decrease in miscellaneous noninterest income to $41,000, and a $35,000 (100%) increase in gain on sale of investments. Noninterest expense increased $1,212,000 (13.0%) to $10,517,000 in the third quarter of 2001 versus the same period in 2000. Salary and benefit expense increased $537,000 (10.9%) to $5,483,000 due to a $175,000 (5.1%) increase in base salaries to $3,606,000, a $205,000 (42%) increase in sales commissions and incentives to $699,000, and a $72,000 (27%) increase in employee retirement expense to $336,000. Average full-time equivalent employees increased 2.1% from the year-ago quarter to 487. Other expenses increased $675,000 (15.5%) to $5,034,000. Expenses contributing to this increase included a $109,000 (45%) increase in telephone expense to $350,000, a $58,000 (30%) increase in ATM network charges, an $84,000 (6%) increase in premises and equipment expense to $1,415,000, and a $138,000 (46%) increase in loan production and maintenance expenses. Assets of the Company totaled $996,150,000 at September 30, 2001 and represented increases of $24,079,000 (2.5%) and $34,169,000 (3.6%) from the December 31, 2000 and September 30, 2000 ending balances, respectively. Changes in average earning assets from the prior year third quarter-end balances included an increase in loans of $10,581,000 (1.6%) to $661,630,000, a decrease in securities of $25,250,000 (11.7%) to $191,296,000, and an increase in Federal funds sold of $39,560,000 to $41,744,000. From year-end 2000 balances, nonperforming assets have decreased $8,141,000 (55.5%) and total $6,527,000 at September 30, 2001. Nonperforming assets were 0.66% and 1.51% of total assets at September 30, 2001 and December 31, 2000, respectively. Nonperforming assets were $6,992,000, $7,790,000, and $14,668,000 at June 30, 2001, March 31, 2001, and December 31, 2000, respectively. Year-to-date 2001, on an annualized basis, the Company realized a return on assets of 1.25% and a return on equity of 13.90% versus 1.42% and 17.16%, respectively, in the nine months ended September 30, 2000. TriCo Bancshares ended the quarter with a Tier 1 capital ratio of 10.44% and a total risk-based capital ratio of 11.69%.
The following tables provide a summary of the major elements of income and expense for the third quarter of 2001 compared with the third quarter of 2000 and for the first nine months of 2001 compared with the first nine months of 2000: TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (unaudited) Three months ended September 30, Percentage 2001 2000 Change (in thousands, except increase earnings per share) (decrease) Interest income $ 18,901 $ 20,212 (6.5%) Interest expense 5,612 7,641 (26.6%) -------- -------- Net interest income 13,289 12,571 5.7% Provision for loan losses 600 1,800 (66.7%) -------- -------- Net interest income after 12,689 10,771 17.8% provision for loan losses Noninterest income 3,411 3,334 2.3% Noninterest expenses 10,517 9,305 13.0% -------- -------- Net income before income taxes 5,583 4,800 16.3% Income taxes 2,050 1,653 24.0% Tax equivalent adjustment1 288 300 (4.0%) -------- -------- Net income 3,245 2,847 14.0% ======== ======== Diluted earnings per common share $ 0.45 $ 0.39 15.4% 1Interest on tax-free securities is reported on a tax equivalent basis of 1.52 for September 30, 2001 and 2000.
TRICO BANCSHARES CONDENSED COMPARATIVE INCOME STATEMENT (unaudited) Nine months ended September 30, Percentage 2001 2000 Change (in thousands, except increase earnings per share) (decrease) Interest income $ 56,954 $ 57,634 (1.2%) Interest expense 19,130 20,959 (8.7%) -------- -------- Net interest income 37,824 36,675 3.1% Provision for loan losses 3,250 3,500 (7.1%) -------- -------- Net interest income after 34,574 33,175 4.2% provision for loan losses Noninterest income 11,502 11,200 2.7% Noninterest expenses 30,571 27,779 10.1% -------- -------- Net income before income taxes 15,505 16,596 (6.6%) Income taxes 5,578 5,809 (4.0%) Tax equivalent adjustment1 866 868 (0.2%) -------- -------- Net income 9,061 9,919 (8.7%) ======== ======== Diluted earnings per common share $ 1.25 $ 1.35 (7.4%) 1Interest on tax-free securities is reported on a tax equivalent basis of 1.52 for September 30, 2001 and 2000.
Net Interest Income / Net Interest Margin Net interest income represents the excess of interest and fees earned on interest-earning assets (loans, securities and Federal Funds sold) over the interest paid on deposits and borrowed funds. Net interest margin is net interest income expressed as a percentage of average earning assets. Net interest income comprises the major portion of the Bank's income. For the three months ended September 30, 2001, interest income decreased $1,311,000 (6.5%) over the same period in 2000. The average balance of total earning assets was higher by $24,891,000 (2.9%). Average loan and Federal funds sold balances were up $10,581,000 (1.6%) and $39,560,000 (1,811%), respectively, and resulted in increases on interest income of $268,000 and $634,000, respectively. Average balances of securities were down $25,250,000 (11.7%) which resulted in a $432,000 decrease in interest income. The average yield on loans was lower by 76 basis points while the average yield on securities and Fed funds sold decreased 48 and 286 basis points, respectively. The overall yield on average earning assets decreased 85 basis points to 8.45% which decreased interest income by $1,781,000. For the third quarter of 2001, interest expense decreased $2,029,000 (26.6%) over the year earlier period. Average balances of interest-bearing liabilities were down $5,814,000 (0.8%), and resulted in a $325,000 decrease in interest expense. The average rate paid on interest- bearing liabilities decreased 110 basis points to 3.15% and resulted in a $1,704,000 decrease in interest expense. The combined effect of the decrease in interest income and decrease in interest expense for the third quarter of 2001 versus the third quarter of 2000 resulted in an increase of $718,000 (5.7%) in net interest income. Net interest margin was up 16 basis points to 5.94% from 5.78% for the same period a year ago. The nine-month period ending September 30, 2001, reflects an interest income decrease of $680,000 (1.2%) over the same period in 2000. Increases of $24,823,000 (4.0%) and $34,349,000 (543%) in average balances of loans and Federal funds sold, respectively, accounted for increases in interest income of $1,839,000 and $1,507,000, respectively. A decrease of $22,299,000 (10.1%) in average balances of securities accounted for a $1,154,000 decrease in interest income. The average yield received on all earning assets for the nine-month period ended September 30, 2001 was down 48 basis points to 8.59%, and resulted in a $2,872,000 decrease in interest income. Interest expense for the nine-month period decreased $1,829,000 (8.7%) from that for the same period in 2000. Average balances of interest-bearing liabilities were up $10,291,000 (1.5%) and resulted in a $69,000 increase in interest expense. The average rate paid on interest- bearing liabilities decreased 40 basis points to 3.58% and resulted in a $1,898,000 decrease in interest expense. The combined effect of the decreases in interest income and interest expense for the first nine months of 2001 versus 2000 resulted in an increase of $1,149,000 (3.1%) in net interest income. Net interest margin decreased 6 basis points to 5.71% from 5.77%.
Historically, the Bank's net interested margin has exhibited an asset-sensitive nature, meaning when market interest rates increased the Bank's net interest margin generally increased, and when rates decreased the Bank's net interest margin decreased. During 2000, the Federal Reserve was raising interest rates, and the Bank's margin improved. In January 2001, the Federal Reserve started a historic series of interest rate reductions which caused the Bank's net interest margin to contract in the quarter ended March 31, 2001. The Bank then began aggressively cutting its deposit rates that despite continued Federal Reserve rate reductions lead to significant improvements in net interest margin in the quarters ended June 30, and September 30, 2001. The Federal Reserve has continued to aggressively decrease interest rates, and as it does it becomes increasingly difficult for the Bank to maintain its current relatively high net interest margin. The following four tables provide summaries of the components of the interest income, interest expense and net interest margins on earning assets for the quarter and nine month periods ended September 30, 2001 versus the same periods in 2000:
<TABLE> <CAPTION> TRICO BANCSHARES ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS (unaudited, in thousands) Three Months Ended 30-Sep-01 30-Sep-00 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate <S> <C> <C> <C> <C> <C> <C> Assets Earning assets Loans 2,3 $661,630 $ 15,486 9.36% $651,049 $ 16,470 10.12% Securities4 191,296 3,045 6.37% 216,546 3,707 6.85% Federal funds sold 41,744 370 3.55% 2,184 35 6.41% ------------- ----------- ------------- ---------- Total earning assets 894,670 18,901 8.45% 869,779 20,212 9.30% ----------- ---------- Cash and due from bank 42,680 38,693 Premises and equipment 16,760 17,244 Other assets, net 40,367 41,610 Less: allowance for loan losses (12,090) (11,866) ------------- ------------- Total $982,387 $955,460 ============= ============= Liabilities and shareholders' equity Interest-bearing Demand deposits $157,315 368 0.94% $148,728 590 1.59% Savings deposits 224,338 1,111 1.98% 214,663 1,725 3.21% Time deposits 298,505 3,618 4.85% 279,355 4,067 5.82% Federal funds purchased 235 3 5.11% 17,131 295 6.89% Repurchase agreements - - 804 14 5.16% Long-term debt 32,963 512 6.21% 58,489 950 6.50% ------------- ----------- ------------- ---------- Total interest-bearing liabilities 713,356 5,612 3.15% 719,170 7,641 4.25% ----------- ---------- Noninterest-bearing deposits 164,583 142,767 Other liabilities 16,441 13,039 Shareholders' equity 88,005 80,484 ------------- ------------- Total liabilities and shareholders' equity $982,385 $955,460 ============= ============= Net interest rate spread5 5.30% 5.05% Net interest income/net $ 13,289 $ 12,571 =========== ========== interest margin6 5.94% 5.78% =========== ========== 1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $1,406,000 in 2001 and $829,000 in 2000. 4Interest income is stated on a tax equivalent basis of 1.52 at September 30, 2001 and 2000. 5Net interest rate spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. 6Net interest margin is computed by dividing net interest income by total average earning assets. </TABLE>
<TABLE> <CAPTION> TRICO BANCSHARES ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS (unaudited, in thousands) Nine Months Ended 30-Sep-01 30-Sep-00 Average Income/ Yield/ Average Income/ Yield/ Balance1 Expense Rate Balance1 Expense Rate <S> <C> <C> <C> <C> <C> <C> Assets Earning assets Loans 2,3 $ 644,447 $ 45,943 9.51% $ 619,624 $ 45,918 9.88% Securities4 198,689 9,690 6.50% 220,988 11,438 6.90% Federal funds sold 40,680 1,321 4.33% 6,331 278 5.85% ------------- ------------- ------------ ------------ Total earning assets 883,816 56,954 8.59% 846,943 57,634 9.07% ------------- ------------ Cash and due from bank 41,055 37,456 Premises and equipment 16,868 16,471 Other assets, net 40,381 41,681 Less: allowance for loan losses (12,044) (11,776) ------------- ------------ Total $ 970,076 $ 930,775 ============= ============ Liabilities and shareholders' equity Interest-bearing Demand deposits $ 153,412 1,325 1.15% $ 148,195 1,752 1.58% Savings deposits 219,750 3,898 2.37% 218,015 5,060 3.09% Time deposits 305,436 12,380 5.40% 272,670 11,272 5.51% Federal funds purchased 113 4 4.25% 10,129 512 6.74% Repurchase agreements - - 2,014 99 6.55% Long-term debt 33,026 1,523 6.15% 50,423 2,264 5.99% ------------- ------------- ------------ ------------ Total interest-bearing liabilities 711,737 19,130 3.58% 701,446 20,959 3.98% ------------- ------------ Noninterest-bearing deposits 155,563 139,117 Other liabilities 15,890 13,147 Shareholders' equity 86,886 77,065 ------------- ------------ Total liabilities and shareholders' equity $ 970,076 $ 930,775 ============= ============ Net interest rate spread5 5.01% 5.09% Net interest income/net $ 37,825 $ 36,675 ============= ============ interest margin6 5.71% 5.77% ============= ============ 1Average balances are computed principally on the basis of daily balances. 2Nonaccrual loans are included. 3Interest income on loans includes fees on loans of $3,475,000 in 2001 and $2,150,000 in 2000. 4Interest income is stated on a tax equivalent basis of 1.52 at September 30, 2001 and 2000. 5Net interest rate spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. 6Net interest margin is computed by dividing net interest income by total average earning assets. </TABLE>
<TABLE> <CAPTION> TRICO BANCSHARES ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSE (unaudited, in thousands) For the three months ended September 30, 2001 over 2000 Yield/ Volume Rate4 Total ------------------ ------------------ -------------------- <S> <C> <C> <C> Increase (decrease) in interest income: Loans 1,2 $ 268 $ (1,252) $ (984) Investment securities3 (432) (230) (662) Federal funds sold 634 (299) 335 ------------------ ------------------ -------------------- Total 470 (1,781) (1,311) ------------------ ------------------ -------------------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 34 (256) (222) Savings deposits 78 (692) (614) Time deposits 279 (728) (449) Federal funds purchased (291) (1) (292) Short-term debt (10) (4) (14) Long-term debt (415) (23) (438) ------------------ ------------------ -------------------- Total (325) (1,704) (2,029) ------------------ ------------------ -------------------- Increase (decrease) in net interest income $ 795 $ (77) $ 718 ================== ================== ==================== 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $1,406,000 in 2001 and $829,000 in 2000. 3Interest income is stated on a tax equivalent basis of 1.52 for September 30, 2001 and 2000. 4The rate/volume variance has been included in the rate variance. </TABLE>
<TABLE> <CAPTION> TRICO BANCSHARES ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME AND EXPENSE (unaudited, in thousands) For the nine months ended September 30, 2001 over 2000 Yield/ Volume Rate4 Total ----------------- ----------------- ----------------- <S> <C> <C> <C> Increase (decrease) in interest income: Loans 1,2 $ 1,839 $ (1,814) $ 25 Investment securities3 (1,154) (594) (1,748) Federal funds sold 1,507 (464) 1,043 ----------------- ----------------- ----------------- Total 2,192 (2,872) (680) ----------------- ----------------- ----------------- Increase (decrease) in interest expense: Demand deposits (interest-bearing) 62 (489) (427) Savings deposits 40 (1,202) (1,162) Time deposits 1,354 (246) 1,108 Federal funds purchased (506) (2) (508) Short-term debt (99) - (99) Long-term debt (782) 41 (741) ----------------- ----------------- ----------------- Total 69 (1,898) (1,829) ----------------- ----------------- ----------------- Increase (decrease) in net interest income $ 2,123 $ (973) $ 1,150 ================= ================= ================= 1Nonaccrual loans are included. 2Interest income on loans includes fee income on loans of $3,475,000 in 2001 and $2,150,000 in 2000. 3Interest income is stated on a tax equivalent basis of 1.52 for September 30, 2001 and 2000. 4The rate/volume variance has been included in the rate variance. </TABLE>
Provision for Loan Losses The Bank provided $600,000 for loan losses in the third quarter of 2001 versus $1,800,000 in 2000. Net charge-offs for all loans in the third quarter of 2001 totaled $83,000 versus $3,174,000 in the year earlier period. Of the $3,174,000 net charge-offs in the third quarter of 2000, $3,000,000 was related to one borrower. This significant charge-off activity in the quarter ended September 30, 2000 also contributed to the significant provision for loan losses in that period. Noninterest Income Noninterest income for the third quarter of 2001 increased $77,000 (2.3%) to $3,411,000 from the same period in 2000. Service charge and fee income was up $175,000 (9.4%) to $2,045,000 mainly due to increased deposit account service charges and fees. Other noninterest income decreased $98,000 (6.7%) to $1,366,000. The decrease in other noninterest income was comprised of a $2,000 (0.3%) decrease in commissions on nondeposit investment product sales to $678,000, a $14,000 (6.8%) decrease in gain on sale of loans and loan servicing to $191,000, a $105,000 (72%) decrease in miscellaneous noninterest income to $41,000, and a $35,000 (100%) increase in gain on sale of investments. For the nine months ended September 30, noninterest income was up $302,000 (2.7%) over the same period for 2000. As described above, during the quarters ended March 31, 2001 and 2000, the Company recorded one-time pre-tax income items of $1,756,000 and $1,510,000, respectively from the receipt and sale of John Hancock Financial Services, Inc. common stock. Excluding these one-time events, noninterest income for the nine months ended September 30, 2001 would have increased $56,000 (0.6%) to $9,746,000. Service charges and fee income was up $452,000 (8.1%) to $6,015,000 mainly due to increased deposit account service charges and fees. Other income decreased $396,000 (9.6%) to $3,731,000 primarily due to a $300,000 (14%) decrease in commissions earned on the sale of nondeposit investment products to $1,864,000. Noninterest Expense Noninterest expense increased $1,212,000 (13.0%) to $10,517,000 in the third quarter of 2001 versus the same period in 2000. Salary and benefit expense increased $537,000 (10.9%) to $5,483,000 due to a $175,000 (5.1%) increase in base salaries to $3,606,000, a $205,000 (42%) increase in sales commissions and incentives to $699,000, and a $72,000 (27%) increase in employee retirement expense to $336,000. Average full-time equivalent employees increased 2.1% from the year-ago quarter to 487. Other expenses increased $675,000 (15.5%) to $5,034,000. Expenses contributing to this increase included a $109,000 (45%) increase in telephone expense to $350,000, a $58,000 (30%) increase in ATM network charges to $250,000, an $84,000 (6%) increase in premises and equipment expense to $1,415,000, and a $138,000 (46%) increase in loan production and maintenance expenses to $437,000.
For the first nine months noninterest expenses increased $2,792,000 (10.1%) in 2001 compared to 2000. Salary and benefit expense increased $1,171,000 (8.0%) on a year-over-year basis to $15,899,000. Base salaries increased $587,000 (5.9%) to $10,596,000. Other expenses increased $1,621,000 (12.4%) to $14,672,000. Expenses contributing to this increase included a $183,000 (26%) increase in telephone expense to $895,000, a $128,000 (23%) increase in ATM network charges to $689,000, an $219,000 (6%) increase in premises and equipment expense to $4,126,000, and a $196,000 (29%) increase in loan production and maintenance expenses to $882,000. The increases in telephone, ATM network, and premises and equipment expenses are mainly due to the Company's efforts to upgrade, combine, and expand its ATM and communications networks. The increase in loan production and maintenance expenses is mainly due to increased production of consumer loans, including home equity loans and real estate mortgage loans, and are offset by increased fee income and net interest income. Provision for Income Taxes The effective tax rate for the nine months ended September 30, 2001 is 38.1% and reflects an increase from 36.9% in the year earlier period. Loans At September 30, 2001, loan balances were $17,350,000 (2.7%) higher than the ending balances at September 30, 2000 and $27,766,000 (4.3%) higher than the ending balances at December 31, 2000. On a year-over-year basis at September 30, consumer and real estate construction loan balances were higher by $35,571,000 (31.3%), and $16,478,000 (57.7%), respectively. Commercial and real estate mortgage loan balances were lower by $15,610,000 (9.3%), and $19,089,000 (5.6%), respectively. Securities At September 30, 2001, securities available-for-sale had a fair value of $210,789,000 and an amortized cost of $208,561,000. This portfolio contained mortgage-backed securities with an amortized cost of $131,111,000 of which $8,276,000 were CMOs.
Nonperforming Loans As shown in the following table, total nonperforming assets have decreased $8,141,000 (56%) to $6,527,000 in the first nine months of 2001. Included in the nonaccrual loans balance at December 31, 2000 was approximately $8,400,000 related to a single borrower that was subsequently sold in the quarter ended March 31, 2001 without recourse to the Company. Nonperforming assets represent 0.66% of total assets, compared to 1.51% at year-end 2000. All nonaccrual loans are considered to be impaired under SFAS 114 Accounting by Creditors for Impairment of a Loan. The Bank continues to make a concerted effort to work problem and potential problem loans to reduce risk of loss. September 30, December 31, 2001 2000 (unaudited, in thousands) Nonaccrual loans $ 5,587 $ 12,262 Accruing loans past due 90 days or more 217 965 Restructured loans (in compliance with modified terms) - - --------- ---------- Total nonperforming loans 5,804 13,227 Other real estate owned 723 1,441 --------- ---------- Total nonperforming assets $ 6,527 $ 14,668 ========= ========== Nonperforming loans to total loans 0.87% 2.07% Allowance for loan losses to nonperforming loans 214% 88% Nonperforming assets to total assets 0.66% 1.51% Allowance for loan losses to nonperforming assets 191% 80% Allowance for Loan Loss Credit risk is inherent in the business of lending. As a result, the Company maintains an Allowance for Loan and Leases Losses to absorb losses inherent in the Company's loan and lease portfolio. This is maintained through periodic charges to earnings. These charges are shown in the Consolidated Income Statements as provision for loan losses. All specifically identifiable and quantifiable losses are immediately charged off against the allowance. However, for a variety of reasons, not all losses are immediately known to the Company and, of those that are known, the full extent of the loss may not be quantifiable at that point in time. The balance of the Company's Allowance for Loan and Lease Losses is meant to be an estimate of these unknown but probable losses inherent in the portfolio. For the remainder of this discussion, "loans" shall include all loans and lease contracts, which are a part of the Bank's portfolio.
The Company formally assesses the adequacy of the allowance on a quarterly basis. Determination of the adequacy is based on ongoing assessments of the probable risk in the outstanding loan and lease portfolio, and to a lesser extent the Company's loan and lease commitments. These assessments include the periodic re-grading of credits based on changes in their individual credit characteristics including delinquency, seasoning, recent financial performance of the borrower, economic factors, changes in the interest rate environment, growth of the portfolio as a whole or by segment, and other factors as warranted. Loans are initially graded when originated. They are re-graded as they are renewed, when there is a new loan to the same borrower, when identified facts demonstrate heightened risk of nonpayment, or if they become delinquent. Re-grading of larger problem loans occur at least quarterly. Confirmation of the quality of the grading process is obtained by independent credit reviews conducted by consultants specifically hired for this purpose and by various bank regulatory agencies. The Company's method for assessing the appropriateness of the allowance includes specific allowances for identified problem loans and leases as determined by SFAS 114, formula allowance factors for pools of credits, and allowances for changing environmental factors (e.g., interest rates, growth, economic conditions, etc.). Allowance factors for loan pools are based on the previous 5 years historical loss experience by product type. Allowances for specific loans are based on SFAS 114 analysis of individual credits. Allowances for changing environmental factors are Management's best estimate of the probable impact these changes have had on the loan portfolio as a whole. This process is explained in detail in the notes to the Company's Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2000. The following table presents information concerning the allowance and provision for loan losses: For the nine months ended September 30, 2001 2000 (unaudited, in thousands) Balance, Beginning of period $ 11,670 $ 11,037 Provision charged to operations 3,250 3,500 Loans charged off (2,647) (3,626) Recoveries of loans previously charged off 164 307 ------------- ------------- Balance, end of period $ 12,437 $ 11,218 ============= ============= Ending loan portfolio $ 668,157 $ 650,807 ============= ============= Allowance as a percentage of ending loan portfolio 1.86% 1.72% ============= =============
Equity The following table indicates the amounts of regulatory capital of the Company (unaudited, in thousands): <TABLE> <CAPTION> To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio <S> <C> <C> <C> <C> <C> <C> As of September 30, 2001: Total Capital to Risk Weighted Assets: Consolidated $91,433 11.69% =>$62,543 =>8.0% =>$78,179 =>10.0% Tri Counties Bank $89,253 11.44% =>$62,407 =>8.0% =>$78,008 =>10.0% Tier I Capital to Risk Weighted Assets: Consolidated $81,625 10.44% =>$31,271 =>4.0% =>$46,908 => 6.0% Tri Counties Bank $79,469 10.19% =>$31,203 =>4.0% =>$46,805 => 6.0% Tier I Capital to Average Assets: Consolidated $81,625 8.35% =>$39,087 =>4.0% =>$48,859 => 5.0% Tri Counties Bank $79,469 8.15% =>$39,014 =>4.0% =>$48,768 => 5.0% </TABLE> Item 3. MARKET RISK MANAGEMENT There have not been any significant changes in the risk management profile of the Bank since December 31, 2000.
PART II Other Information Item 2. Changes in Securities and Use of Proceeds (a) & (b) On July 10, 2001, the Company declared a dividend of one Preferred Stock Purchase Right for each common share held of record at the close of business on such date, pursuant to the Company's Shareholder Rights Plan. In general terms, the Rights Plan imposes a significant penalty upon any person or group that acquires 15% or more of the Company's outstanding common stock without approval of the Company's Board of Directors. The Rights generally will not become exercisable unless an acquiring entity accumulates or initiates a tender offer to purchase 15% or more of the Company's common stock. In that event, each right will entitle the holder, other than the unapproved acquirer and its affiliates, to purchase either the Company's common stock or shares in an acquiring entity at one-half of market value. Item 6. Exhibits and Reports on Form 8-K (a) 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. 3.3 Certificate of Determination of Preferences of series AA Junior Participating Preferred Stock filed with the California Secretary of State on June 28, 2001, is attached here to. 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. 10.6 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. 10.7 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. 10.8 Rights Agreement dated June 25, 2001, by and between TriCo Bancshares and Mellon Investor Services LLC, as Rights Agent, filed a Exhibit 1 to the Registrant's Form 8-A filed on July 5, 2001, is incorporated herein by reference. 10.9 Form of Change of Control Agreement dated April 10, 2001, by and between the Registrant and each of Craig Carney, Richard O'Sullivan, Thomas Reddish, Ray Rios and Richard Smith, is attached here to. 21.1 Tri Counties Bank, a California banking corporation, is the only subsidiary of Registrant. (b) Reports on Form 8-K: None
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRICO BANCSHARES Date November 13, 2001 /s/ Richard P. Smith ---------------------------- ----------------------------- Richard P. Smith President and Chief Executive Officer Date November 13, 2001 /s/ Thomas J. Reddish ---------------------------- ----------------------------- Thomas J. Reddish Vice President and Chief Financial Officer