UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2005 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)
530-898-0300
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(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
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
----- -----
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
----- -----
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 October 25, 2005: 15,717,035
TABLE OF CONTENTS
Page
Forward Looking Statements 1
PART I - FINANCIAL INFORMATION 2
Item 1 - Financial Statements 2
Notes to Unaudited Condensed Consolidated Financial Statements 6
Financial Summary 15
Item 2 - Management's Discussion and Analysis of Financial 16
Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 27
Item 4 - Controls and Procedures 28
PART II - OTHER INFORMATION 29
Item 1 - Legal Proceedings 29
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 29
Item 6 - Exhibits 29
Signatures 31
Exhibits 32
FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains forward-looking statements about TriCo
Bancshares (the "Company") for which it claims the protection of the safe harbor
provisions contained in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are based on Management's current knowledge and
belief and include information concerning the Company's possible or assumed
future financial condition and results of operations. When you see any of the
words "believes", "expects", "anticipates", "estimates", or similar expressions,
mean making forward-looking statements. A number of factors, some of which are
beyond the Company's ability to predict or control, could cause future results
to differ materially from those contemplated. These factors include but are not
limited to:
- a slowdown in the national and California economies;
- the prospect of additional terrorist attacks in the United States
and the uncertain effect of these events on the national and regional
economies;
- changes in the interest rate environment and interest rate policies of
the Federal Reserve Board;
- changes in the regulatory environment;
- significantly increasing competitive pressure in the banking industry;
- operational risks including data processing system failures or fraud;
- volatility of rate sensitive deposits;
- asset/liability matching risks and liquidity risks;
- changes in the level of nonperforming assets and charge-offs;
- acts of war and political instability;
- inflation, interest rate, securities market and monetary fluctuations;
- changes in the financial performance or condition of the Company's
borrowers;
- changes in the competitive environment among financial holding
companies;
- changes in accounting policies as may be adopted by regulatory
agencies, as well as the Public Company Accounting Oversight Board,
the Financial Accounting Standards Board and other accounting standard
setters; and
- changes in the Company's compensation and benefit plans.
The reader is directed to the Company's annual report on Form 10-K for the year
ended December 31, 2004, for further discussion of factors which could affect
the Company's business and cause actual results to differ materially from those
expressed in any forward-looking statement made in this report.
-1-
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TRICO BANCSHARES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data; unaudited)
At September 30, At December 31,
2005 2004 2004
------------------------------- -----------------
Assets:
Cash and due from banks $85,413 $64,318 $70,037
Federal funds sold 218 - -
------------------------------- -----------------
Cash and cash equivalents 85,631 64,318 70,037
Securities available for sale 271,134 286,067 286,013
Federal Home Loan Bank stock, at cost 7,516 6,719 6,781
Loans, net of allowance for loan losses
of $15,796, $15,167 and $14,525 1,312,294 1,111,256 1,158,442
Foreclosed assets, net of allowance for losses
of $180, $180 and $180 - - -
Premises and equipment, net 21,223 20,118 19,853
Cash value of life insurance 41,519 40,196 40,479
Accrued interest receivable 7,080 6,177 6,473
Goodwill 15,519 15,519 15,519
Other intangible assets 4,373 5,070 5,408
Other assets 20,567 19,106 18,501
------------------------------- -----------------
Total Assets $1,786,856 $1,574,546 $1,627,506
=============================== =================
Liabilities and Shareholders' Equity:
Liabilities:
Deposits:
Noninterest-bearing demand $346,456 $298,319 $311,275
Interest-bearing 1,091,843 993,822 1,037,558
------------------------------- -----------------
Total deposits 1,438,299 1,292,141 1,348,833
Federal funds purchased 103,200 57,300 46,400
Accrued interest payable 3,960 2,706 3,281
Reserve for unfunded commitments 1,674 1,049 1,532
Other liabilities 20,452 17,265 19,938
Other borrowings 31,711 27,159 28,152
Junior subordinated debt 41,238 41,238 41,238
------------------------------- -----------------
Total Liabilities 1,640,534 1,438,858 1,489,374
------------------------------- -----------------
Commitments and contingencies
Shareholders' Equity:
Common stock, no par value: 50,000,000 shares authorized;
issued and outstanding:
15,728,106 at September 30, 2005 71,412
15,697,817 at September 30, 2004 70,375
15,723,317 at December 31, 2004 70,699
Retained earnings 77,448 64,158 67,785
Accumulated other comprehensive (loss) income, net (2,538) 1,155 (352)
------------------------------- -----------------
Total Shareholders' Equity 146,322 135,688 138,132
------------------------------- -----------------
Total Liabilities and Shareholders' Equity $1,786,856 $1,574,546 $1,627,506
=============================== =================
See accompanying notes to unaudited condensed consolidated financial statements.
-2-
TRICO BANCSHARES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share data; unaudited)
Three months ended September 30, Nine months ended September 30,
2005 2004 2005 2004
----------------------------------------------------------------
Interest and dividend income:
Loans, including fees $22,254 $18,867 $62,482 $53,157
Debt securities:
Taxable 2,528 2,564 7,865 7,829
Tax exempt 468 432 1,297 1,312
Dividends 80 87 218 181
Federal funds sold 4 1 18 12
----------------------------------------------------------------
Total interest income 25,334 21,951 71,880 62,491
----------------------------------------------------------------
Interest expense:
Deposits 3,824 2,497 10,526 7,333
Federal funds purchased 696 221 1,117 405
Other borrowings 351 327 1,007 967
Junior subordinated debt 648 449 1,779 890
----------------------------------------------------------------
Total interest expense 5,519 3,494 14,429 9,595
----------------------------------------------------------------
Net interest income 19,815 18,457 57,451 52,896
----------------------------------------------------------------
Provision for loan losses 947 1,166 1,608 3,084
----------------------------------------------------------------
Net interest income after provision for
loan losses 18,868 17,291 5,843 9,812
----------------------------------------------------------------
Noninterest income:
Service charges and fees 4,795 4,436 13,362 13,427
Gain on sale of loans 474 258 1,195 1,316
Commissions on sale of non-deposit
investment products 535 578 1,727 1,707
Increase in cash value of life insurance 420 352 1,040 1,216
Other 408 737 945 1,392
----------------------------------------------------------------
Total noninterest income 6,632 6,361 18,269 19,058
----------------------------------------------------------------
Noninterest expense:
Salaries and related benefits 8,584 8,319 25,361 24,926
Other 7,096 6,904 20,949 20,087
----------------------------------------------------------------
Total noninterest expense 15,680 15,223 46,310 45,013
----------------------------------------------------------------
Income before income taxes 9,820 8,429 27,802 23,857
Provision for income taxes 3,859 3,226 10,865 9,030
----------------------------------------------------------------
Net income 5,961 5,203 16,937 14,827
----------------------------------------------------------------
Other comprehensive (loss) income:
Change in unrealized (loss) gain on securities
available for sale, net (1,070) 3,139 (2,186) (659)
----------------------------------------------------------------
Comprehensive income $4,891 $8,342 $14,751 $14,168
================================================================
Average shares outstanding 15,687,547 15,672,300 15,706,380 15,642,799
Diluted average shares outstanding 16,330,035 16,254,005 16,328,489 16,227,259
Per share data:
Basic earnings $0.38 $0.33 $1.08 $0.95
Diluted earnings $0.37 $0.32 $1.04 $0.91
Dividends paid $0.11 $0.11 $0.33 $0.32
See accompanying notes to unaudited condensed consolidated financial
statements.
-3-
TRICO BANCSHARES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except per share data; unaudited)
Accumulated
Shares of Other
Common Common Retained Comprehensive
Stock Stock Earnings (Loss) Income Total
-------------------------------------------------------------
Balance at December 31, 2003 15,668,248 $69,767 $56,379 $1,814 $127,960
Comprehensive income: ----------
Net income 14,827 14,827
Change in net unrealized gain on
Securities available for sale, net (659) (659)
----------
Total comprehensive income 14,168
Stock options exercised 197,169 1,133 1,133
Tax benefit of stock options exercised 221 221
Repurchase of common stock (167,600) (746) (2,047) (2,793)
Dividends paid ($0.32 per share) (5,001) (5,001)
-------------------------------------------------------------
Balance at September 30, 2004 15,697,817 $70,375 $64,158 $1,155 $135,688
=============================================================
Balance at December 31, 2004 15,723,317 $70,699 $67,785 ($352) $138,132
Comprehensive income: ----------
Net income 16,937 16,937
Change in net unrealized gain on
Securities available for sale, net (2,186) (2,186)
----------
Total comprehensive income 14,751
Stock options exercised 133,289 949 949
Tax benefit of stock options exercised 342 342
Repurchase of common stock (128,500) (578) (2,085) (2,663)
Dividends paid ($0.33 per share) (5,189) (5,189)
-------------------------------------------------------------
Balance at September 30, 2005 15,728,106 $71,412 $77,448 ($2,538) $146,322
=============================================================
See accompanying notes to unaudited condensed consolidated financial statements.
-4-
TRICO BANCSHARES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands; unaudited)
For the nine months ended September 30,
2005 2004
---------------------------------------
Operating activities:
Net income $16,937 $14,827
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of property and equipment, and amortization 2,818 2,431
Amortization of intangible assets 1,035 1,016
Provision for loan losses 1,608 3,084
Amortization of investment securities premium, net 973 1,448
Originations of loans for resale (59,861) (70,670)
Proceeds from sale of loans originated for resale 60,396 71,352
Gain on sale of loans (1,195) (1,316)
Amortization of mortgage servicing rights 490 562
Recovery of mortgage servicing rights valuation allowance - (600)
Gain on sale of other real estate owned - (566)
Loss (gain) on sale of fixed assets 95 (20)
Increase in cash value of life insurance (1,040) (1,216)
Change in:
Interest receivable (607) (150)
Interest payable 679 68
Other assets and liabilities, net 234 (2,002)
---------------------------------------
Net cash provided by operating activities 22,562 18,248
---------------------------------------
Investing activities:
Proceeds from maturities of securities available-for-sale 45,147 62,476
Purchases of securities available-for-sale (35,013) (39,580)
Purchases of Federal Home Loan Bank stock (735) (1,935)
Loan originations and principal collections, net (155,460) (145,989)
Proceeds from sale of premises and equipment 24 541
Purchases of premises and equipment (3,853) (3,210)
Proceeds from sale of other real estate owned - 1,490
---------------------------------------
Net cash used by investing activities (149,890) (126,207)
---------------------------------------
Financing activities:
Net increase in deposits 89,466 55,318
Net increase in Federal funds purchased 56,800 17,800
Issuance of junior subordinated debt - 20,619
Payments of principal on long-term other borrowings (38) (32)
Net change in short-term other borrowings 3,597 4,304
Repurchase of common stock (2,663) (2,793)
Dividends paid (5,189) (5,001)
Exercise of stock options 949 1,133
---------------------------------------
Net cash provided by financing activities 142,922 91,348
---------------------------------------
Net change in cash and cash equivalents 15,594 (16,611)
---------------------------------------
Cash and cash equivalents and beginning of period 70,037 80,929
---------------------------------------
Cash and cash equivalents at end of period $85,631 $64,318
=======================================
Supplemental disclosure of noncash activities:
Unrealized loss on securities available for sale ($3,772) ($1,061)
Income tax benefit from stock option exercises $342 $221
Supplemental disclosure of cash flow activity:
Cash paid for interest expense $13,750 $9,527
Cash paid for income taxes $11,030 $11,030
See accompanying notes to unaudited condensed consolidated financial statements
-5-
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: General Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. The results of operations reflect interim
adjustments, all of which are of a normal recurring nature and which, in the
opinion of management, are necessary for a fair presentation of the results for
the interim periods presented. The interim results for the three and nine month
periods ended September 30, 2005 and 2004 are not necessarily indicative of the
results expected for the full year. These unaudited condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and accompanying notes as well as other information
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2004.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, and
its wholly-owned subsidiary, Tri Counties Bank (the "Bank"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
Nature of Operations
The Company operates 32 branch offices and 15 in-store branch offices in the
California counties of Butte, Contra Costa, Del Norte, Fresno, Glenn, Kern,
Lake, Lassen, Madera, Mendocino, Merced, Nevada, Placer, Sacramento, Shasta,
Siskiyou, Stanislaus, Sutter, Tehama, Tulare, Yolo 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 accounting principles
generally accepted in the United States of America 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. On an on-going basis, the Company evaluates its
estimates, including those related to the adequacy of the allowance for loan
losses, investments, intangible assets, income taxes and contingencies. The
Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. The allowance for loan losses, goodwill and other intangible assets,
income taxes, and the valuation of mortgage servicing rights, are the only
accounting estimates that materially affect the Company's consolidated financial
statements.
Significant Group Concentration of Credit Risk
The Company grants agribusiness, commercial, consumer, and residential loans to
customers located throughout the northern San Joaquin Valley, the Sacramento
Valley and northern mountain regions of California. The Company has a
diversified loan portfolio within the business segments located in this
geographical area.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and federal funds sold.
Investment 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.
During the nine months ended September 30, 2005, and throughout 2004, the
Company did not have any securities classified as either held-to-maturity or
trading.
-6-
Available-for-sale securities are recorded at fair value. Unrealized gains and
losses, net of the related tax effect, on available-for-sale securities are
reported as a separate component of accumulated other comprehensive income
(loss) in 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.
Unrealized losses due to fluctuations in fair value of securities held to
maturity or available for sale are recognized through earnings when it is
determined that an other than temporary decline in value has occurred.
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at
the lower of aggregate cost or fair value, as determined by aggregate
outstanding commitments from investors of current investor yield requirements.
Net unrealized losses are recognized through a valuation allowance by charges to
income. At September 30, 2005 and 2004, and December 31, 2004, the Company had
no loans held for sale.
Mortgage loans held for sale are generally sold with the mortgage servicing
rights retained by the Company. The carrying value of mortgage loans sold is
reduced by the cost allocated to the associated mortgage servicing rights. Gains
or losses on sales of mortgage loans are recognized based on the difference
between the selling price and the carrying value of the related mortgage loans
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 be classified as accrual. 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.
All impaired loans are classified as nonaccrual loans.
Reserve for Unfunded Commitments
The reserve for unfunded commitments is established through a provision for
losses - unfunded commitments charged to noninterest expense. The reserve for
unfunded commitments is an amount that Management believes will be adequate to
absorb probable losses inherent in existing commitments, including unused
portions of revolving lines of credits and other loans, standby letters of
credits, and unused deposit account overdraft privilege. The reserve for
unfunded commitments is based on evaluations of the collectibility, and prior
loss experience of unfunded commitments. The evaluations take into consideration
such factors as changes in the nature and size of the loan portfolio, overall
loan portfolio quality, loan concentrations, specific problem loans and related
unfunded commitments, and current economic conditions that may affect the
borrower's or depositor's ability to pay.
-7-
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans and deposit related overdrafts 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 and leases, based on evaluations of the collectibility,
impairment and prior loss experience of loans and leases. 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, and current 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. 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.
Credit risk is inherent in the business of lending. As a result, the Company
maintains an allowance for loan losses to absorb losses inherent in the
Company's loan portfolio. This is maintained through periodic charges to
earnings. These charges are shown in the Consolidated Income Statements as
provision for loan losses. All specifically identifiable and quantifiable losses
are immediately charged off against the allowance. However, for a variety of
reasons, not all losses are immediately known to the Company and, of those that
are known, the full extent of the loss may not be quantifiable at that point in
time. The balance of the Company's allowance for loan losses is meant to be an
estimate of these unknown but probable losses inherent in the portfolio. For
purposes of this discussion, "loans" shall include all loans and lease contracts
that are part of the Company's portfolio.
The Company formally assesses the adequacy of the allowance on a quarterly
basis. Determination of the adequacy is based on ongoing assessments of the
probable risk in the outstanding loan portfolio, and to a lesser extent the
Company's loan commitments. These assessments include the periodic re-grading of
credits based on changes in their individual credit characteristics including
delinquency, seasoning, recent financial performance of the borrower, economic
factors, changes in the interest rate environment, growth of the portfolio as a
whole or by segment, and other factors as warranted. Loans are initially graded
when originated. They are re-graded as they are renewed, when there is a new
loan to the same borrower, when identified facts demonstrate heightened risk of
nonpayment, or if they become delinquent. Re-grading of larger problem loans
occur at least quarterly. Confirmation of the quality of the grading process is
obtained by independent credit reviews conducted by consultants specifically
hired for this purpose and by various bank regulatory agencies.
The Company's method for assessing the appropriateness of the allowance for loan
losses and the reserve for unfunded commitments 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, 2004.
Based on the current conditions of the loan portfolio, Management believes that
the allowance for loan losses and the reserve for unfunded commitments, which
collectively stand at $17,470,000 at September 30, 2005, are adequate to absorb
probable losses inherent in the Company's loan portfolio. No assurance can be
given, however, that adverse economic conditions or other circumstances will not
result in increased losses in the portfolio.
-8-
The following tables summarize the activity in the allowance for loan losses,
reserve for unfunded commitments, and allowance for losses (which is comprised
of the allowance for loan losses and the reserve for unfunded commitments) for
the periods indicated (dollars in thousands):
Three months ended Nine months ended
September 30, September 30,
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------
Allowance for loan losses:
Balance at beginning of period $14,892 $14,613 $14,525 $12,890
Provision for loan losses 947 1,166 1,608 3,084
Loans charged off (479) (687) (1,287) (1,053)
Recoveries of previously
charged-off loans 436 75 950 246
----------------------------------------------------
Net charge-offs (43) (612) (337) (807)
----------------------------------------------------
Balance at end of period $15,796 $15,167 $15,796 $15,167
====================================================
Reserve for unfunded commitments:
Balance at beginning of period $1,671 $916 $1,532 $883
Provision for losses -
Unfunded commitments 3 133 142 166
----------------------------------------------------
Balance at end of period $1,674 $1,049 $1,674 $1,049
====================================================
Balance at end of period:
Allowance for loan losses $15,796 $15,167
Reserve for unfunded commitments 1,674 1,049
------------------------
Allowance for losses $17,470 $16,216
========================
As a percentage of total loans:
Allowance for loan losses 1.19% 1.35%
Reserve for unfunded commitments 0.13% 0.09%
------------------------
Allowance for losses 1.32% 1.44%
========================
Servicing
Servicing assets are recognized as separate assets when rights are acquired
through purchase or through sale of financial assets. Generally, purchased
servicing rights are capitalized at the cost to acquire the rights. For sales of
mortgage loans, a portion of the cost of originating the loan is allocated to
the servicing right based on relative fair value. Fair value is based on market
prices for comparable mortgage servicing contracts, when available, or
alternatively, is based on a valuation model that calculates the present value
of estimated future net servicing income. The valuation model incorporates
assumptions that market participants would use in estimating future net
servicing income, such as the cost to service, the discount rate, the custodial
earnings rate, an inflation rate, ancillary income, prepayment speeds and
default rates and losses. Capitalized servicing rights are reported in other
assets and are amortized into non-interest income in proportion to, and over the
period of, the estimated future servicing income of the underlying financial
assets.
Servicing assets are evaluated for impairment based upon the fair value of the
rights as compared to amortized cost. Impairment is determined by stratifying
rights into tranches based on predominant risk characteristics, such as interest
rate, loan type and investor type. Impairment is recognized through a valuation
allowance for an individual tranche, to the extent that fair value is less than
the capitalized amount for the tranche. If the Company later determines that all
or a portion of the impairment no longer exists for a particular tranche, a
reduction of the allowance may be recorded as an increase to income.
Servicing fee income is recorded for fees earned for servicing loans. The fees
are based on a contractual percentage of the outstanding principal; or a fixed
amount per loan and are recorded as income when earned. The amortization of
mortgage servicing rights is netted against loan servicing fee income.
-9-
The following table summarizes the Company's mortgage servicing rights recorded
in other assets as of September 30, 2005 and December 31, 2004.
December 31, September 30,
(Dollars in thousands) 2004 Additions Reductions 2005
-----------------------------------------------
Mortgage Servicing Rights $3,476 $659 ($490) $3,645
Valuation allowance - - - -
-----------------------------------------------
Mortgage servicing rights, net
of valuation allowance $3,476 $659 ($490) $3,645
===============================================
At September 30, 2005 and December 31, 2004, the Company serviced real estate
mortgage loans for others of $369 million and $368 million, respectively. At
September 30, 2005 and December 31, 2004, the fair value of the Company's
mortgage servicing rights assets was $3,812,000 and $3,568,000, respectively.
Off-Balance Sheet Credit Related Financial Instruments
In the ordinary course of business, the Company has entered into commitments to
extend credit, including commitments under credit card arrangements, commercial
letters of credit, standby letters of credit, and deposit account overdraft
privilege. Such financial instruments are recorded when they are funded.
Premises and Equipment
Land is carried at cost. Buildings 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.
Foreclosed Assets
Assets acquired through, or in lieu of, loan foreclosure are held for sale and
are initially recorded at fair value at the date of foreclosure, establishing a
new cost basis. Subsequent to foreclosure, management periodically performs
valuations and the assets are carried at the lower of carrying amount or fair
value less cost to sell. Revenue and expenses from operations and changes in the
valuation allowance are included in other noninterest expense.
Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over fair value of assets of businesses
acquired. The Company adopted the provisions of Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standard No. 142, Goodwill and
Other Intangible Assets (SFAS 142), as of January 1, 2002. Pursuant to SFAS 142,
goodwill and other intangible assets acquired in a purchase business combination
and determined to have an indefinite useful life are not amortized, but instead
tested for impairment at least annually in accordance with the provisions of
SFAS 142. SFAS 142 also requires that intangible assets with estimable useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with FASB
Statement of Financial Accounting Standard No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets (SFAS 144).
As of the date of adoption, the Company had identifiable intangible assets
consisting of core deposit premiums and minimum pension liability. Core deposit
premiums are amortized using an accelerated method over a period of ten years.
Intangible assets related to minimum pension liability are adjusted annually
based upon actuarial estimates.
The following table summarizes the Company's core deposit intangibles as of
September 30, 2005 and December 31, 2004.
December 31, September 30,
(Dollar in Thousands) 2004 Additions Reductions 2005
-----------------------------------------------
Core deposit intangibles $13,643 - - $13,643
Accumulated amortization (9,201) - ($1,035) (10,236)
-----------------------------------------------
Core deposit intangibles, net $4,442 - ($1,035) $3,407
===============================================
Core deposit intangibles are amortized over their expected useful lives. Such
lives are periodically reassessed to determine if any amortization period
adjustments are indicated.
-10-
The following table summarizes the Company's estimated core deposit intangible
amortization for each of the five succeeding years from December 31, 2004:
Estimated Core Deposit
Intangible Amortization
Years Ended (Dollar in thousands)
----------- -----------------------
2005 $1,381
2006 1,395
2007 490
2008 523
2009 328
Thereafter 325
------
$4,442
======
The following table summarizes the Company's minimum pension liability
intangible as of September 30, 2005 and December 31, 2004.
December 31, September 30,
(Dollar in Thousands) 2004 Additions Reductions 2005
----------------------------------------------
Minimum pension liability
intangible $966 - - $966
==============================================
Intangible assets related to minimum pension liability are adjusted annually
based upon actuarial estimates.
The following table summarizes the Company's goodwill intangible as of September
30, 2005 and December 31, 2004.
December 31, September 30,
(Dollar in Thousands) 2004 Additions Reductions 2005
----------------------------------------------
Goodwill 15,519 - - 15,519
==============================================
Impairment of Long-Lived Assets and Goodwill
Long-lived assets, such as property, plant, and equipment, and purchased
intangibles subject to amortization, are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be separately presented
in the balance sheet and reported at the lower of the carrying amount or fair
value less costs to sell, and are no longer depreciated. The assets and
liabilities of a disposed group classified as held for sale would be presented
separately in the appropriate asset and liability sections of the balance sheet.
On December 31 of each year, goodwill is tested for impairment, and is tested
for impairment more frequently if events and circumstances indicate that the
asset might be impaired. An impairment loss is recognized to the extent that the
carrying amount exceeds the asset's fair value. This determination is made at
the reporting unit level and consists of two steps. First, the Company
determines the fair value of a reporting unit and compares it to its carrying
amount. Second, if the carrying amount of a reporting unit exceeds its fair
value, an impairment loss is recognized for any excess of the carrying amount of
the reporting unit's goodwill over the implied fair value of that goodwill. The
implied fair value of goodwill is determined by allocating the fair value of the
reporting unit in a manner similar to a purchase price allocation. The residual
fair value after this allocation is the implied fair value of the reporting unit
goodwill.
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.
-11-
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 (see Recent Accounting Pronouncements).
Had compensation cost for the Company's option plans been determined in
accordance with SFAS 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per share amounts) 2005 2004 2005 2004
---- ---- ---- ----
Net income As reported $5,961 $5,203 $16,937 $14,827
Pro forma $5,865 $5,101 $16,642 $14,458
Basic earnings per share As reported $0.38 $0.33 $1.08 $0.95
Pro forma $0.37 $0.33 $1.06 $0.92
Diluted earnings per share As reported $0.37 $0.32 $1.04 $0.91
Pro forma $0.36 $0.31 $1.02 $0.89
Stock-based employee compensation
cost, net of related tax effects,
included in net income As reported $0 $0 $0 $0
Pro forma $96 $102 $295 $369
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing.
Earnings Per Share
Basic earnings per share represents income available to common shareholders
divided by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share reflects additional common shares that would
have been outstanding if dilutive potential common shares had been issued, as
well as any adjustments to income that would result from assumed issuance.
Potential common shares that may be issued by the Company relate solely from
outstanding stock options, and are determined using the treasury stock method.
Earnings per share have been computed based on the following:
Three Months Nine Months
Ended September 30, Ended September 30,
(in thousands) 2005 2004 2005 2004
------------------- -------------------
Net income $5,961 $5,203 $16,937 $14,827
Average number of common shares outstanding 15,688 15,672 15,706 15,643
Effect of dilutive stock options 642 582 622 584
------------------- -------------------
Average number of common shares outstanding
used to calculate diluted earnings per share 16,330 16,254 16,328 16,227
=================== ===================
-12-
Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available-for-sale
securities, are reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of
comprehensive income.
The components of other comprehensive income (loss) and related tax effects are
as follows:
Three months ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2005 2004 2005 2004
-------------------------------- -------------------------------
(in thousands)
Unrealized holding gains (losses) on
available-for-sale securities ($1,846) $5,416 ($3,772) ($1,061)
Tax effect 776 (2,277) 1,586 402
-------------------------------- -------------------------------
Unrealized holding gains (losses) on
available-for-sale securities, net of tax ($1,070) 3,139 ($2,186) ($659)
================================ ===============================
The components of accumulated other comprehensive loss, included in
shareholders' equity, are as follows:
September 30, December 31,
2005 2004
-----------------------------
(in thousands)
Net unrealized (losses) gains on available-for-sale
securities ($2,765) $1,007
Tax effect 1,162 (424)
-----------------------------
Unrealized holding (losses) gains on
available-for-sale securities, net of tax (1,603) 583
-----------------------------
Minimum pension liability (1,559) (1,559)
Tax effect 624 624
-----------------------------
Minimum pension liability, net of tax (935) (935)
-----------------------------
Accumulated other comprehensive loss ($2,538) ($352)
=============================
Retirement Plans
The Company has supplemental retirement plans covering directors and key
executives. These plans are non-qualified defined benefit plans and are
unsecured and unfunded. The Company has purchased insurance on the lives of the
participants and intends to use the cash values of these policies to pay the
retirement obligations.
The following table sets forth the net periodic benefit cost recognized for the
plans:
Three Months Nine Months
Ended September 30, Ended September 30,
(in thousands) 2005 2004 2005 2004
---- ---- ---- ----
Net pension cost included the following components:
Service cost-benefits earned during the period $104 $76 $313 $227
Interest cost on projected benefit obligation 134 123 402 371
Amortization of net obligation at transition 56 3 168 8
Amortization of prior service cost 24 27 72 81
Recognized net actuarial loss 0 27 2 82
----------------------------------------
Net periodic pension cost $318 $256 $957 $769
========================================
During the nine months ended September 30, 2005 and 2004, the Company
contributed and paid out as benefits $393,000 and $378,000, respectively, to
participants under the plans. For the year ending December 31, 2005, the Company
expects to contribute and pay out as benefits $517,000 to participants under the
plans.
-13-
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (FASB) issued FASB
Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based
Payment (SFAS 123R), which replaces SFAS No. 123, Accounting for Stock-Based
Compensation, (SFAS 123) and supercedes APB Opinion No. 25, Accounting for Stock
Issued to Employees. SFAS 123R requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial
statements based on their fair values beginning with the first interim reporting
period of the Company's fiscal year beginning after June 15, 2005, with early
adoption encouraged. The pro forma disclosures previously permitted under SFAS
123 no longer will be an alternative to financial statement recognition. The
Company is required to adopt SFAS 123R on January 1, 2006. Under SFAS 123R, the
Company must determine the appropriate fair value model to be used for valuing
share-based payments, the amortization method for compensation cost and the
transition method to be used at date of adoption. The transition methods include
prospective and retroactive adoption options. Under the retroactive option,
prior periods may be restated either as of the beginning of the year of adoption
or for all periods presented. The prospective method requires that compensation
expense be recorded for all unvested stock options at the beginning of the first
quarter of adoption of SFAS 123R, while the retroactive methods would record
compensation expense for all unvested stock options and restricted stock
beginning with the first period restated. The Company is evaluating the
requirements of SFAS 123R and expects that the adoption of SFAS 123R will not
have a material impact on the Company's consolidated results of operations and
earnings per share. The Company has not yet determined the method of adoption or
the effect of adopting SFAS 123R, and it has not determined whether the adoption
will result in amounts that are similar to the current pro forma disclosures
under SFAS 123.
In May 2005, the FASB issued FASB Statement of Financial Accounting Standard No.
154, Accounting Changes and Error Corrections, (SFAS 154) a Replacement of APB
Opinion No. 20 and FASB Statement No. 3. SFAS 154 establishes, unless
impracticable, retrospective application as the required method for reporting a
change in accounting principle in the absence of explicit transition
requirements specific to a newly adopted accounting principle. Previously, most
changes in accounting principle were recognized by including the cumulative
effect of changing to the new accounting principle in net income of the period
of the change. Under SFAS 154, retrospective application requires (i) the
cumulative effect of the change to the new accounting principle on periods prior
to those presented to be reflected in the carrying amounts of assets and
liabilities as of the beginning of the first period presented, (ii) an
offsetting adjustment, if any, to be made to the opening balance of retained
earnings (or other appropriate components of equity) for that period, and (iii)
financial statements for each individual prior period presented to be adjusted
to reflect the direct period-specific effects of applying the new accounting
principle. Special retroactive application rules apply in situations where it is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. Indirect effects of a change in accounting principle are
required to be reported in the period in which the accounting change is made.
SFAS 154 carries forward the guidance in APB Opinion 20 "Accounting Changes,"
requiring justification of a change in accounting principle on the basis of
preferability. SFAS 154 also carries forward without change the guidance
contained in APB Opinion 20, for reporting the correction of an error in
previously issued financial statements and for a change in accounting estimate.
SFAS 154 is effective for accounting changes and corrections of errors made in
fiscal years beginning after December 15, 2005. The Company does not expect SFAS
154 will significantly impact its financial statements upon its adoption on
January 1, 2006.
Reclassifications
Certain amounts previously reported in the 2004 financial statements have been
reclassified to conform to the 2005 presentation. Additionally, in the first
quarter of 2005, the Company reclassified the reserve for unfunded commitments
from the allowance for loan losses to other liabilities, and reclassified the
provision for unfunded commitments from the provision for loan losses to other
noninterest expense. These reclassifications did not affect previously reported
net income or total shareholders' equity.
-14-
TRICO BANCSHARES
Financial Summary
(dollars in thousands, except per share amounts; unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------
Net Interest Income (FTE) $20,086 $18,712 $58,203 $53,670
Provision for loan losses 947 1,166 1,608 3,084
Noninterest income 6,632 6,361 18,269 19,058
Noninterest expense 15,680 15,223 46,310 45,013
Provision for income taxes (FTE) 4,130 3,481 11,617 9,804
------------------------------------------------------------
Net income $5,961 $5,203 $16,937 $14,827
============================================================
Earnings per share:
Basic $0.38 $0.33 $1.08 $0.95
Diluted $0.37 $0.32 $1.04 $0.91
Per share:
Dividends paid $0.11 $0.11 $0.33 $0.32
Book value at period end $9.30 $8.64
Tangible book value at period end $8.04 $7.33
Average common shares outstanding 15,688 15,672 15,706 15,643
Average diluted shares outstanding 16,330 16,254 16,328 16,227
Shares outstanding at period end 15,728 15,698
At period end:
Loans, net $1,312,294 $1,111,256
Total assets 1,786,856 1,574,546
Total deposits 1,438,299 1,292,141
Other borrowings 31,711 27,159
Junior subordinated debt 41,238 41,238
Shareholders' equity $146,322 $135,688
Financial Ratios:
During the period (annualized):
Return on assets 1.37% 1.34% 1.34% 1.32%
Return on equity 16.26% 15.57% 15.71% 15.12%
Net interest margin1 5.10% 5.35% 5.12% 5.32%
Net loan charge-offs to average loans 0.01% 0.22% 0.04% 0.10%
Efficiency ratio1 58.69% 60.71% 60.56% 61.89%
At Period End:
Equity to assets 8.19% 8.62%
Total capital to risk assets 11.19% 12.36%
Allowance for losses to loans2 1.32% 1.44%
1 Fully taxable equivalent (FTE)
2 Allowance for losses includes allowance for loan losses and reserve for
unfunded commitments.
-15-
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
As TriCo Bancshares (the "Company") has not commenced any business operations
independent of Tri Counties Bank (the "Bank"), the following discussion pertains
primarily to the Bank. Average balances, including such balances used in
calculating certain financial ratios, are generally comprised of average daily
balances for the Company. Within Management's Discussion and Analysis of
Financial Condition and Results of Operations, interest income and net interest
income are generally presented on a fully tax-equivalent (FTE) basis.
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 of America. 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 Consolidated Financial Statements of the Company and the Notes thereto.
Following is a summary of the components of fully taxable equivalent ("FTE") net
income for the periods indicated (dollars in thousands):
Three months ended Nine months ended
Spetember 30, September 30,
------------------------------------------------
2005 2004 2005 2004
------------------------------------------------
Net Interest Income (FTE) $20,086 $18,712 $58,203 $53,670
Provision for loan losses 947 1,166 1,608 3,084
Noninterest income 6,632 6,361 18,269 19,058
Noninterest expense 15,680 15,223 46,310 45,013
Provision for income taxes (FTE) 4,130 3,481 11,617 9,804
------------------------------------------------
Net income $5,961 $5,203 $16,937 $14,827
================================================
The Company had quarterly earnings of $5,961,000, or $0.37 per diluted share,
for the three months ended September 30, 2005. These results represent a 15.6%
increase from the $0.32 earnings per diluted share reported for the three months
ended September 30, 2004 on earnings of $5,203,000. The improvement in results
from the year-ago quarter was due to a $1,374,000 (7.3%) increase in fully
tax-equivalent net interest income to $20,086,000, a $219,000 (18.8%) decrease
in provision for loan losses to $947,000, and a $271,000 (4.3%) increase in
noninterest income to $6,632,000. These contributing factors were partially
offset by a $457,000 (3.0%) increase in noninterest expense to $15,680,000 for
the quarter ended September 30, 2005.
The Company reported earnings of $16,937,000, or $1.04 per diluted share, for
the nine months ended September 30, 2005. These results represent a 14.3%
increase from the $0.91 earnings per diluted share reported for the nine months
ended September 30, 2004 on earnings of $14,827,000. The improvement in results
from the year-ago period was due to a $4,533,000 (8.5%) increase in fully
tax-equivalent net interest income to $58,203,000, and a $1,476,000 (47.9%)
decrease in provision for loan losses to $1,608,000. These contributing factors
were partially offset by a $789,000 (4.1%) decrease in noninterest income to
$18,269,000 and a $1,297,000 (2.9%) increase in noninterest expense to
$46,310,000 for the nine months ended September 30, 2005.
-16-
Net Interest Income
Following is a summary of the components of net interest income for the periods
indicated (dollars in thousands):
Three months ended Nine months ended
September 30, September 30,
-------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------
Interest income $25,334 $21,951 $71,880 $62,491
Interest expense (5,519) (3,494) (14,429) (9,595)
FTE adjustment 271 255 752 774
-------------------------------------------------------
Net interest income (FTE) $20,086 $18,712 $58,203 $53,670
=======================================================
Average interest-earning assets $1,574,392 $1,399,342 $1,517,013 $1,344,353
Net interest margin (FTE) 5.10% 5.35% 5.12% 5.32%
The Company's primary source of revenue is net interest income, or the
difference between interest income on interest-earning assets and interest
expense in interest-bearing liabilities. Net interest income (FTE) during the
third quarter of 2005 increased $1,374,000 (7.3%) from the same period in 2004
to $20,086,000. The increase in net interest income (FTE) was due to a
$175,050,000 (12.5%) increase in average balances of interest-earning assets to
$1,574,392,000 offset by a 0.25% decrease in net interest margin (FTE) to 5.10%.
Net interest income (FTE) during the first nine months of 2005 increased
$4,533,000 (8.5%) from the same period in 2004 to $58,203,000. The increase in
net interest income (FTE) was due to a $172,660,000 (12.8%) increase in average
balances of interest-earning assets to $1,517,013,000 offset by a 0.20% decrease
in net interest margin (FTE) to 5.12%.
Interest and Fee Income
Interest and fee income (FTE) for the third quarter of 2005 increased $3,399,000
(15.3%) from the third quarter of 2004. The increase was the net effect of a
$175,050,000 (12.5%) increase in average balances of interest-earning assets to
$1,574,392,000 and a 0.16% increase in the yield on those average
interest-earning assets to 6.51%. The growth in interest-earning assets was
comprised of a $186,535,000 (17.0%) increase in average loan balances to
$1,284,977,000 that was partially offset by a decrease of $11,572,000 (3.9%) in
average balances of investments to $288,963,000. The increase in the yield on
average interest-earning assets was mainly due to the change in the mix of
interest-earning assets as the average balance of loans increased while the
average balance of lower earning investments decreased compared to the year-ago
quarter. Also helping to increase the yield on average earning assets was a
0.06% increase in the yield on loans to 6.93% and a 0.19% increase in the yield
on investments to 4.63% from the year-ago quarter. The relative flatness in
yield in loans from the year-ago quarter, despite a 2.75% increase in the prime
rate from June 30, 2004 to September 30, 2005, is due to long-term rates having
generally held steady or fallen over this period, and new prime based loans such
as home equity lines of credit being offered at spreads to the prime rate that
are lower than they were in the year-ago period. The increase in yields on
investments was mainly due to maturities of shorter-term, lower yielding
investments.
Interest and fee income (FTE) for the nine months ended September 30, 2005
increased $9,367,000 (14.8%) from the same period of 2004. The increase was the
net effect of a $172,660,000 (12.8%) increase in average interest-earning assets
to $1,517,013,000 and a 0.11% increase in the yield on those average
interest-earning assets to 6.38%. The growth in interest-earning assets was due
to a $187,467,000 (18.1%) increase in average loan balances to $1,220,714,000
that was partially offset by a decrease of $13,925,000 (4.5%) in average
balances of investments to $295,457,000. The increase in the yield on average
interest-earning assets was mainly due to the change in the mix of
interest-earning assets as the average balance of loans increased while the
average balance of lower earning investments decreased compared to the year-ago
quarter. Compared to the year-ago nine-month period, the yield on loans
decreased 0.04% to 6.82% and the yield on investments increased 0.22% to 4.57%.
The decrease in yield in loans from the year-ago period, despite a 2.75%
increase in the prime rate from June 30, 2004 to September 30, 2005, is due to
long-term rates having generally held steady or fallen over this period, and new
prime based loans such as home equity lines of credit being offered at spreads
to the prime rate that are lower than they were in the year-ago period. The
increase in yields on investments was mainly due to maturities of shorter-term,
lower yielding investments.
-17-
Interest Expense
Interest expense increased $2,025,000 (58.0%) to $5,519,000 in the third quarter
of 2005 compared to the year-ago quarter. The average balance of
interest-bearing liabilities increased $117,740,000 (10.6%) to $1,233,412,000 in
the third quarter compared to the year-ago quarter. The increase in the average
balance of interest-bearing liabilities was concentrated in time deposits (up
$93,009,000 or 32.4%), interest-bearing demand deposits (up $12,907,000 or
5.6%), other borrowings (up $5,029,000 or 19.3%), Federal funds purchased (up
$19,062,000 or 33.3%), and junior subordinated debt (up $2,574,000 or 6.7%). The
average balance of savings deposits was down $14,841,000 (3.1%) from the
year-ago quarter. In addition, the average balance of noninterest-bearing
deposits increased $54,381,000 (19.3%) from the year-ago quarter. The average
rate paid on interest-bearing liabilities in the quarter ended September 30,
2005 increased 0.54% to 1.79% compared to the year-ago quarter. The average rate
paid for all categories of interest-bearing liabilities except other borrowings
increased from the average rate paid in the year-ago quarter as a result of
general market interest rate changes.
Interest expense increased $4,834,000 (50.4%) to $14,429,000 for the nine months
ended September 30, 2005 compared to $9,595,000 in the year-ago period. The
average balance of interest-bearing liabilities increased $117,128,000 (10.9%)
to $1,190,081,000 for the nine months ended September 30, 2005 compared to the
year-ago period. The increase in interest-bearing liabilities was concentrated
in time deposits (up $84,457,000 or 30.6%), interest-bearing demand deposits (up
$13,735,000 or 6.0%), other borrowings (up $5,031,000 or 21.0%), Federal funds
purchased (up $3,797,000 or 9.0%), and junior subordinated debt (up $13,905,000
or 50.9%). The average balance of savings deposits was down $3,797,000 (0.8%)
from the year-ago period. In addition, the average balance of
noninterest-bearing deposits increased $49,573,000 (18.1%) from the year-ago
period. The average rate paid on interest-bearing liabilities in the nine month
period ended September 30, 2005 increased 0.43% to 1.62% compared to the
year-ago period as a result of general market interest rate changes.
Net Interest Margin (FTE)
The following table summarizes the components of the Company's net interest
margin for the periods indicated:
Three months ended Nine months ended
September 30, September 30,
---------------------------------------------
2005 2004 2005 2004
---------------------------------------------
Yield on interest-earning assets 6.51% 6.35% 6.38% 6.27%
Rate paid on interest-bearing
Liabilities 1.79% 1.25% 1.62% 1.19%
---------------------------------------------
Net interest spread 4.72% 5.10% 4.76% 5.08%
Impact of all other net
noninterest-bearing funds 0.38% 0.25% 0.36% 0.24%
---------------------------------------------
Net interest margin 5.10% 5.35% 5.12% 5.32%
=============================================
Net interest margin in the third quarter of 2005 decreased 0.25% compared to the
third quarter of 2004. This decrease in net interest margin was mainly due to
0.06% increase in average yield on loans, a 0.19% increase in average yield on
investments, and a 0.54% increase in the average rate paid on interest-bearing
liabilities. As a result, the average yield on total interest-earning assets
increased only 0.16%, while the average rate paid on interest-bearing
liabilities increased 0.54%.
Net interest margin for the nine months ended September 30, 2005 decreased 0.20%
compared to the nine months ended September 30, 2004. This decrease in net
interest margin was mainly due to a 0.04% decrease in average yield on loans, a
0.22% increase in average yield on investments, and a 0.43% increase in the
average rate paid on interest-bearing liabilities. As a result, the average
yield on total interest-earning assets increased only 0.11%, while the average
rate paid on interest-bearing liabilities increased 0.43%.
-18
Summary of Average Balances, Yields/Rates and Interest Differential
The following tables present, 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
----------------------------------------------------------------
September 30, 2005 September 30, 2004
----------------------------- ------------------------------
Interest Rates Interest Rates
Average Income/ Earned Average Income/ Earned
Balance Expense Paid Balance Expense Paid
----------------------------- -------------------------------
Assets:
Loans $1,284,977 $22,254 6.93% $1,098,442 $18,867 6.87%
Investment securities - taxable 252,547 2,608 4.13% 266,714 2,651 3.98%
Investment securities - nontaxable 36,416 739 8.12% 33,821 687 8.12%
Federal funds sold 452 4 3.54% 365 1 1.10%
----------------------------- -------------------------------
Total interest-earning assets 1,574,392 25,605 6.51% 1,399,342 22,206 6.35%
Other assets 169,623 -------- 153,401 --------
---------- ----------
Total assets $1,744,015 $1,552,743
========== ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits $244,821 124 0.20% $231,914 107 0.18%
Savings deposits 460,204 861 0.75% 475,045 805 0.68%
Time deposits 379,686 2,839 2.99% 286,677 1,585 2.21%
Federal funds purchased 76,372 696 3.65% 57,310 221 1.54%
Other borrowings 31,091 351 4.52% 26,062 327 5.02%
Junior subordinated debt 41,238 648 6.29% 38,664 449 4.65%
----------------------------- -------------------------------
Total interest-bearing liabilities 1,233,412 5,519 1.79% 1,115,672 3,494 1.25%
Noninterest-bearing deposits 336,344 -------- 281,963 --------
Other liabilities 27,599 21,480
Shareholders' equity 146,660 133,628
---------- ----------
Total liabilities and shareholders'
equity $1,744,015 $1,552,743
========== ==========
Net interest spread(1) 4.72% 5.10%
Net interest income and interest margin(2) $20,086 5.10% $18,712 5.35%
================= ====================
(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.
-19-
For the nine months ended
----------------------------------------------------------------
September 30, 2005 September 30, 2004
----------------------------- ------------------------------
Interest Rates Interest Rates
Average Income/ Earned Average Income/ Earned
Balance Expense Paid Balance Expense Paid
----------------------------- -------------------------------
Assets:
Loans $1,220,714 $62,482 6.82% $1,033,247 $53,157 6.86%
Investment securities - taxable 261,542 8,083 4.12% 274,666 8,010 3.89%
Investment securities - nontaxable 33,915 2,049 8.06% 34,716 2,086 8.01%
Federal funds sold 842 18 2.85% 1,724 12 0.93%
----------------------------- -------------------------------
Total interest-earning assets 1,517,013 72,632 6.38% 1,344,353 63,265 6.27%
Other assets 167,481 -------- 155,591 --------
----------- -----------
Total assets $1,684,494 $1,499,944
=========== ===========
Liabilities and shareholders' equity:
Interest-bearing demand deposits $241,856 366 0.20% $228,121 312 0.18%
Savings deposits 471,396 2,600 0.74% 475,193 2,569 0.72%
Time deposits 360,612 7,560 2.80% 276,155 4,452 2.15%
Federal funds purchased 45,999 1,117 3.24% 42,202 405 1.28%
Other borrowings 28,980 1,007 4.63% 23,949 967 5.38%
Junior subordinated debt 41,238 1,779 5.75% 27,333 890 4.34%
----------------------------- -------------------------------
Total interest-bearing liabilities 1,190,081 14,429 1.62% 1,072,953 9,595 1.19%
Noninterest-bearing deposits 323,485 -------- 273,912 --------
Other liabilities 27,205 22,316
Shareholders' equity 143,723 130,763
----------- -----------
Total liabilities and shareholders'
equity $1,684,494 $1,499,944
=========== ===========
Net interest spread(1) 4.76% 5.08%
Net interest income and interest margin(2) $58,203 5.12% $53,670 5.32%
================= ====================
(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.
-20-
Summary of Changes in Interest Income and Expense due to Changes in Average
Asset & Liability Balances and Yields Earned & 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 September 30, 2005
compared with three months
ended September 30, 2004
-------------------------------------
Volume Rate Total
-------------------------------------
Increase (decrease) in interest income:
Loans $3,204 $183 $3,387
Investment securities (88) 97 9
Federal funds sold - 3 3
-------------------------------------
Total interest-earning assets 3,116 283 3,399
-------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits 6 11 17
Savings deposits (25) 81 56
Time deposits 514 740 1,254
Federal funds purchased 73 402 475
Other borrowings 63 (39) 24
Junior subordinated debt 30 169 199
-------------------------------------
Total interest-bearing liabilities 661 1,364 2,025
-------------------------------------
Increase (decrease) in Net Interest Income $2,455 ($1,081) $1,374
=====================================
Nine months ended September 30, 2005
compared with nine months
ended September 30, 2004
-------------------------------------
Volume Rate Total
-------------------------------------
Increase (decrease) in interest income:
Loans $9,645 ($320) $9,325
Investment securities (431) 467 36
Federal funds sold (6) 12 6
-------------------------------------
Total interest-earning assets 9,208 159 9,367
-------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits 19 35 54
Savings deposits (21) 52 31
Time deposits 1,362 1,746 3,108
Federal funds purchased 36 676 712
Other borrowings 203 (163) 40
Junior subordinated debt 453 436 889
-------------------------------------
Total interest-bearing liabilities 2,052 2,782 4,834
-------------------------------------
Increase (decrease) in Net Interest Income $7,156 ($2,623) $4,533
=====================================
-21-
Provision for Loan Losses
The Company provided $947,000 for loan losses in the third quarter of 2005
versus $1,166,000 in the third quarter of 2004. During the third quarter of
2005, the Company recorded $43,000 of net loan charge-offs versus $612,000 of
net loan charge-offs in the year earlier quarter.
The Company provided $1,608,000 for loan losses during the nine months ended
September 30, 2005 versus $3,084,000 during the nine months ended September 30,
2004. During the nine months ended September 30, 2005, the Company recorded
$337,000 of net loan charge-offs versus $807,000 of net loan charge-offs in the
year earlier nine-month period.
Noninterest Income
The following table summarizes the components of noninterest income for the
periods indicated (dollars in thousands).
Three months ended Nine months ended
September 30, September 30,
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------
Service charges on deposit accounts $3,653 $3,399 $10,030 $10,005
ATM fees and interchange 822 693 2,315 1,939
Other service fees 504 500 1,507 1,445
Amortization of mortgage servicing rights (184) (156) (490) (562)
Recovery of mortgage servicing
rights valuation allowance - - - 600
Gain on sale of loans 474 258 1,195 1,316
Commissions on sale of
nondeposit investment products 535 578 1,727 1,707
(Loss) Gain on sale of fixed assets (16) 8 (95) 20
Gain on sale of other real estate - 384 - 566
Increase in cash value of life insurance 420 352 1,040 1,216
Other noninterest income 424 345 1,040 806
----------------------------------------------------
Total noninterest income $6,632 $6,361 $18,269 $19,058
====================================================
Noninterest income for the third quarter of 2005 increased $271,000 (4.3%) to
$6,632,000 from $6,361,000 in the year-ago quarter. Included in the results for
the quarter ended September 30, 2004 was $384,000 from gain on sale of other
real estate. Excluding this item, noninterest income for the quarter ended
September 30, 2004 would have been $5,977,000, and the $6,632,000 of noninterest
income for the quarter ended September 30, 2005 would have represented a
$655,000 (11.0%) increase.
Noninterest income for the nine months ended September 30, 2005 decreased
$789,000 (4.1%) to $18,269,000 from $19,058,000 in the same period in 2004.
Included in the results for the nine months ended September 30, 2004 was a
$600,000 recovery of mortgage servicing rights valuation allowance, and $566,000
from gain on sale of other real estate. Excluding these items, noninterest
income for the nine months ended September 30, 2004 would have been $17,892,000,
and the $18,269,000 of noninterest income for the nine months ended September
30, 2005 would have represented a $377,000 (2.1%) increase.
-22-
Noninterest Expense
The following table summarizes the components of noninterest expense for the
periods indicated (dollars in thousands).
Three months ended Nine months ended
September 30, September 30,
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------
Salaries & benefits $8,584 $8,319 $25,361 $24,926
Occupancy 1,034 1,001 3,019 2,947
Equipment 1,023 913 3,092 2,763
Advertising and marketing 561 268 1,283 693
ATM network charges 430 344 1,209 964
Data processing and software 419 413 1,203 1,196
Intangible amortization 346 343 1,035 1,016
Telecommunications 344 426 1,137 1,222
Courier service 292 255 860 786
Professional fees 287 695 968 1,802
Postage 263 201 734 668
Assessments 80 76 233 221
Operational losses 25 126 97 278
Other 1,992 1,843 6,079 5,531
----------------------------------------------------
Total $15,680 $15,223 $46,310 $45,013
====================================================
Average full time equivalent staff 592 533 577 535
Noninterest expense to revenue (FTE) 58.69% 60.71% 60.56% 61.89%
Noninterest expense for the third quarter of 2005 increased $457,000 (3.0%) to
$15,680,000 from $15,223,000 in the third quarter of 2004. The increase in
noninterest expense was the result of a $265,000 (3.2%) increase in salary and
benefit expense to $8,584,000 and a $192,000 (2.8%) net increase in other
noninterest expense categories to $7,096,000. The increase in salary and
benefits expense was the net result of annual salary increases, new employees
from the opening of de-novo branches in Woodland (November 2004), and Lincoln
(February 2005), offset by reduced incentive commissions, overtime, and workers
compensation expense. Included in the $192,000 net increase in other noninterest
income categories was a $293,000 increase in advertising expense, and a $408,000
decrease in professional fees. The decrease in professional fees was mainly due
to the expiration of consulting services related to the Company's overdraft
privilege product, the expiration of which is not expected to have an impact on
revenue from the overdraft privilege product.
Noninterest expense for the first nine months of 2005 increased $1,297,000
(2.9%) to $46,310,000 from $45,013,000 in the first nine months of 2004. The
increase in noninterest expense was due to a $435,000 (1.8%) increase in salary
and benefit expense to $25,361,000 and a $862,000 (4.3%) net increase in other
noninterest expense categories to $20,949,000. The increase in salary and
benefits expense was the net result of annual salary increases, and new
employees from the opening of de-novo branches in Woodland (November 2004), and
Lincoln (February 2005) that was partially offset by reduced incentive
commissions, overtime, and workers compensation expense. Included in the
$862,000 net increase in other noninterest income categories was a $590,000
increase in advertising expense, and a $834,000 decrease in professional fees.
The decrease in professional fees was mainly due to the expiration of consulting
services related to the Company's overdraft privilege product, the expiration of
which is not expected to have an impact on revenue from the overdraft privilege
product.
Provision for Income Tax
The effective tax rate for the three months ended September 30, 2005 was 39.3%
and reflects an increase from 38.3% for the three months ended September 30,
2004. The effective tax rate for the nine months ended September 30, 2005 was
39.1% and reflects an increase from 37.9% for the nine months ended September
30, 2004. The provision for income taxes for all periods presented is primarily
attributable to the respective level of earnings and the incidence of allowable
deductions, particularly from increase in cash value of life insurance,
tax-exempt loans and state and municipal securities.
-23-
Classified Assets
The Company closely monitors the markets in which it conducts its lending
operations and continues its strategy to control exposure to loans with high
credit risk. Asset reviews are performed using grading standards and criteria
similar to those employed by bank regulatory agencies. Assets receiving lesser
grades fall under the "classified assets" category, which includes all
nonperforming assets and potential problem loans, and receive an elevated level
of attention to ensure collection.
The following is a summary of classified assets on the dates indicated (dollars
in thousands):
At September 30, 2005 At December 31, 2004
------------------------- ------------------------
Gross Guaranteed Net Gross Guaranteed Net
-----------------------------------------------------
Classified loans $13,463 $7,288 $6,175 $22,337 $9,436 $12,901
Other classified assets - - - - - -
-----------------------------------------------------
Total classified assets $13,463 $7,288 $6,175 $22,337 $9,436 $12,901
=====================================================
Allowance for losses/classified loans 282.9% 124.5%
Allowance for loan losses/classified loans 255.8% 112.6%
Classified assets, net of guarantees of the U.S. Government, including its
agencies and its government-sponsored agencies at September 30, 2005, decreased
$6,726,000 (52.1%) to $6,175,000 from $12,901,000 at December 31, 2004.
Nonperforming Loans
Loans are reviewed on an individual basis for reclassification to nonaccrual
status when any one of the following occurs: the loan becomes 90 days past due
as to interest or principal, the full and timely collection of additional
interest or principal becomes uncertain, the loan is classified as doubtful by
internal credit review or bank regulatory agencies, a portion of the principal
balance has been charged off, or the Company takes possession of the collateral.
Loans that are placed on nonaccrual even though the borrowers continue to repay
the loans as scheduled are classified as "performing nonaccrual" and are
included in total nonperforming loans. The reclassification of loans as
nonaccrual does not necessarily reflect Management's judgment as to whether they
are collectible.
Interest income is not accrued on loans where Management has determined that the
borrowers will be unable to meet contractual principal and/or interest
obligations, unless the loan is well secured and in the process of collection.
When a loan is placed on nonaccrual, any previously accrued but unpaid interest
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.
Interest income on nonaccrual loans, which would have been recognized during the
nine months, ended September 30, 2005, if all such loans had been current in
accordance with their original terms, totaled $727,000. Interest income actually
recognized on these loans during the nine months ended September 30, 2005 was
$596,000.
The Company's policy is to place loans 90 days or more past due on nonaccrual
status. In some instances when a loan is 90 days past due Management does not
place it on nonaccrual status because the loan is well secured and in the
process of collection. A loan is considered to be in the process of collection
if, based on a probable specific event, it is expected that the loan will be
repaid or brought current. Generally, this collection period would not exceed 30
days. Loans where the collateral has been repossessed are classified as OREO or,
if the collateral is personal property, the loan is classified as other assets
on the Company's consolidated financial statements.
Management considers both the adequacy of the collateral and the other resources
of the borrower in determining the steps to be taken to collect nonaccrual
loans. Alternatives that are considered are foreclosure, collecting on
guarantees, restructuring the loan or collection lawsuits.
-24-
As shown in the following table, total nonperforming assets net of guarantees of
the U.S. Government, including its agencies and its government-sponsored
agencies, decreased $1,858,000 (37.9%) to $3,048,000 during the first nine
months of 2005. Nonperforming assets net of guarantees represent 0.17% of total
assets. All nonaccrual loans are considered to be impaired when determining the
need for a specific valuation allowance. The Company continues to make a
concerted effort to work problem and potential problem loans to reduce risk of
loss.
(dollars in thousands):
At September 30, 2005 At December 31, 2004
------------------------- -------------------------
Gross Guaranteed Net Gross Guaranteed Net
------------------------------------------------------
Performing nonaccrual loans $8,922 $7,028 $1,894 $11,043 $7,442 $3,601
Nonperforming, nonaccrual loans 1,121 1,121 1,418 174 1,244
Total nonaccrual loans 10,043 7,028 3,015 12,461 7,616 4,845
Loans 90 days past due and still accruing 33 33 61 - 61
Total nonperforming loans 10,076 7,028 3,048 12,522 7,616 4,906
Other real estate owned - - - - - -
Total nonperforming assets $10,076 $7,028 $3,048 $12,522 $7,616 $4,906
Nonperforming loans/total loans 0.23% 0.42%
Nonperforming assets/total assets 0.17% 0.30%
Allowance for losses/nonperforming loans 573% 327%
Allowance for loan losses/nonperforming loans 518% 296%
Capital Resources
The current and projected capital position of the Company and the impact of
capital plans and long-term strategies are reviewed regularly by Management.
On March 11, 2004, the Company's Board of Directors approved a two-for-one stock
split of its common stock. The stock split was effected in the form of a stock
dividend that entitled each shareholder of record at the close of business on
April 9, 2004 to receive one additional share for every share of TriCo common
stock held on that date. Shares resulting from the split were distributed on
April 30, 2004.
Also at its meeting on March 11, 2004, the Board of Directors approved an
increase in the maximum number of shares to be repurchased under the Company's
stock repurchase plan originally announced on July 31, 2003 from 250,000 to
500,000 effective on April 9, 2004, solely to conform with the two-for-one stock
split noted above. The 250,000 shares originally authorized for repurchase under
this plan represented approximately 3.2% of the Company's approximately
7,852,000 common shares outstanding as of July 31, 2003. This plan has no stated
expiration date for the repurchases, which may occur from time to time as market
conditions allow. As of September 30, 2005, the Company had repurchased 351,100
shares under this plan as adjusted for the 2-for-1 stock split paid on April 30,
2004, which left 148,900 shares available for repurchase under the plan.
The Company's primary capital resource is shareholders' equity, which was
$146,322,000 at September 30, 2005. This amount represents an increase of
$8,190,000 from December 31, 2004, the net result of comprehensive income of
$14,751,000 for the period and $1,291,000 reflecting the issuance of common
shares via the exercise of stock options, partially offset by $2,663,000 to
repurchase of common stock and dividends paid of $5,189,000. The Company's ratio
of equity to total assets was 8.19%, 8.62%, and 8.49% as of September 30, 2005,
September 30, 2004, and December 31, 2004, respectively. The following
summarizes the ratios of capital to risk-adjusted assets for the periods
indicated:
At September 30, At Minimum
---------------- December 31, Regulatory
2005 2004 2004 Requirement
-------------------------------------------------
Tier I Capital 10.13% 11.00% 10.67% 4.00%
Total Capital 11.19% 12.36% 11.86% 8.00%
Leverage ratio 9.83% 9.81% 9.86% 4.00%
-25-
Off-Balance Sheet Items
The Bank has certain ongoing commitments under operating and capital leases.
These commitments do not significantly impact operating results. As of September
30, 2005 commitments to extend credit and commitments related to the Bank's
deposit overdraft privilege product were the Bank's only financial instruments
with off-balance sheet risk. The Bank has not entered into any contracts for
financial derivative instruments such as futures, swaps, options, etc.
Commitments to extend credit were $541,310,000 and $445,054,000 at September 30,
2005 and December 31, 2004, respectively, and represent 40.8% of the total loans
outstanding at September 30, 2005 versus 38.0% at December 31, 2004. Commitments
related to the Bank's deposit overdraft privilege product totaled $34,965,000
and $28,815,000 at September 30, 2005 and December 31, 2004, respectively.
Certain Contractual Obligations
The following chart summarizes certain contractual obligations of the Company as
of December 31, 2004:
Less than 1-3 3-5 More than
(dollars in thousands) Total one year years years 5 years
-------------------------------------------------------------
Federal funds purchased $46,400 $46,400 $ - $ - $ -
FHLB loan, fixed rate of 5.41%
payable on April 7, 2008, callable
in its entirety by FHLB on a quarterly
basis beginning April 7, 2003 20,000 - - 20,000 -
FHLB loan, fixed rate of 5.35%
payable on December 9, 2008 1,500 - - 1,500 -
FHLB loan, fixed rate of 5.77%
payable on February 23, 2009 1,000 - - $1,000 -
Capital lease obligation on premises,
effective rate of 13% payable
monthly in varying amounts
through December 1, 2009 344 - - 344 -
Other collateralized borrowings,
fixed rate of 0.91% payable on January 2, 2005 5,308 5,308 - - -
Junior subordinated debt, adjustable rate
of three-month LIBOR plus 3.05%,
callable in whole or in part by the
Company on a quarterly basis beginning
October 7, 2008, matures October 7, 2033 20,619 - - - 20,619
Junior subordinated debt, adjustable rate
of three-month LIBOR plus 2.55%,
callable in whole or in part by the
Company on a quarterly basis beginning
July 23, 2009, matures July 23, 2034 20,619 - - - 20,619
Operating lease obligations 6,806 1,327 2,202 1,662 1,615
Deferred compensation plans(1) 1,544 262 462 427 393
Supplemental retirement plans(1) 4,996 488 956 926 2,626
Employment agreements 233 115 118 - -
-------------------------------------------------------------
Total contractual obligations $129,369 $53,900 $3,738 $25,859 $45,872
=============================================================
(1) These amounts represent known certain payments to participants under the
Company's deferred compensation and supplemental retirement plans.
-26-
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Asset and Liability Management
The goal for managing the assets and liabilities of the Company is to maximize
shareholder value and earnings while maintaining a high quality balance sheet
without exposing the Company to undue interest rate risk. The Board of Directors
has overall responsibility for the Company's interest rate risk management
policies. The Company has an Asset and Liability Management Committee (ALCO)
which establishes and monitors guidelines to control the sensitivity of earnings
to changes in interest rates.
Activities involved in asset/liability management include but are not limited to
lending, accepting and placing deposits, investing in securities and issuing
debt. Interest rate risk is the primary market risk associated with
asset/liability management. Sensitivity of earnings to interest rate changes
arises when yields on assets change in a different time period or in a different
amount from that of interest costs on liabilities. To mitigate interest rate
risk, the structure of the balance sheet is managed with the goal that movements
of interest rates on assets and liabilities are correlated and contribute to
earnings even in periods of volatile interest rates. The asset/liability
management policy sets limits on the acceptable amount of variance in net
interest margin, net income and market value of equity under changing interest
environments. Market value of equity is the net present value of estimated cash
flows from the Company's assets, liabilities and off-balance sheet items. The
Company uses simulation models to forecast net interest margin, net income and
market value of equity.
Simulation of net interest margin, net income and market value of equity under
various interest rate scenarios is the primary tool used to measure interest
rate risk. Using computer-modeling techniques, the Company is able to estimate
the potential impact of changing interest rates on net interest margin, net
income and market value of equity. A balance sheet forecast is prepared using
inputs of actual loan, securities and interest-bearing liability (i.e.
deposits/borrowings) positions as the beginning base.
In the simulation of net interest margin and net income under various interest
rate scenarios, the forecast balance sheet is processed against seven interest
rate scenarios. These seven interest rate scenarios include a flat rate
scenario, which assumes interest rates are unchanged in the future, and six
additional rate ramp scenarios ranging from +300 to -300 basis points around the
flat scenario in 100 basis point increments. These ramp scenarios assume that
interest rates increase or decrease evenly (in a "ramp" fashion) over a
twelve-month period and remain at the new levels beyond twelve months.
In the simulation of market value of equity under various interest rate
scenarios, the forecast balance sheet is processed against seven interest rate
scenarios. These seven interest rate scenarios include the flat rate scenario
described above, and six additional rate shock scenarios ranging from +300 to
-300 basis points around the flat scenario in 100 basis point increments. These
rate shock scenarios assume that interest rates increase or decrease immediately
(in a "shock" fashion) and remain at the new level in the future.
At September 30, 2005, the results of the simulations noted above indicate that
given a "flat" balance sheet scenario, and if deposit rates track general
interest rate changes by approximately 50%, the Company's balance sheet is
slightly liability sensitive. "Liability sensitive" implies that earnings
decrease when interest rates rise, and increase when interest rates decrease.
The magnitude of all the simulation results noted above is within the Bank's
policy guidelines. The asset liability management policy limits aggregate market
risk, as measured in this fashion, to an acceptable level within the context of
risk-return trade-offs.
The simulation results noted above do not incorporate any management actions,
which might moderate the negative consequences of interest rate deviations.
Therefore, they do not reflect likely actual results, but serve as conservative
estimates of interest rate risk.
At September 30, 2005 and 2004, the Company had no derivative financial
instruments.
-27-
Liquidity
The Company's principal source of asset liquidity is federal funds sold and
marketable investment securities available for sale. At September 30, 2005,
federal funds sold and investment securities available for sale totaled
$271,352,000, representing a decrease of $14,661,000 (5.1%) from December 31,
2004, and a decrease of $14,715,000 (5.1%) from September 30, 2004. In addition,
the Company generates additional liquidity from its operating activities. The
Company's profitability during the first nine months of 2005 generated cash
flows from operations of $22,562,000 compared to $18,248,000 during the first
nine months of 2004. Additional cash flows may be provided by financing
activities, primarily the acceptance of deposits and borrowings from banks.
Maturities of investment securities produced cash inflows of $45,147,000 during
the nine months ended September 30, 2005 compared to $62,476,000 for the nine
months ended September 30, 2004. During the nine months ended September 30,
2005, the Company invested $35,013,000 and $155,460,000 in securities and net
loan growth, respectively, compared to $39,580,000 and $145,989,000 in
securities and net loan growth, respectively, during the first nine months of
2004. These changes in investment and loan balances contributed to net cash used
for investing activities of $149,890,000 during the nine months ended September
30, 2005, compared to net cash used for investing activities of $126,207,000
during the nine months ended September 30, 2004. Financing activities provided
net cash of $142,922,000 during the nine months ended September 30, 2005,
compared to net cash provided by financing activities of $91,348,000 during the
nine months ended September 30, 2004. Increases in deposit balances and Federal
funds borrowed accounted for $89,466,000 and $56,800,000 of financing sources of
funds, respectively, during the nine months ended September 30, 2005, compared
to increases in deposit balances and Federal funds borrowed of $55,318,000 and
$17,800,000, respectively, during the nine months ended September 30, 2004. The
Company raised $20,619,000 through the issuance of junior subordinated debt
during the nine months ended September 30, 2004. Dividends paid used $5,189,000
and $5,001,000 of cash during the nine months ended September 30, 2005 and
September 30, 2004, respectively. Repurchase of common stock used $2,663,000 and
$2,793,000 of cash during the nine months ended September 30, 2005 and September
30, 2004, respectively. Also, the Company's liquidity is dependent on dividends
received from the Bank. Dividends from the Bank are subject to certain
regulatory restrictions.
Item 4. Controls and Procedures
The Chief Executive Officer, Richard Smith, and the Chief Financial Officer,
Thomas Reddish, evaluated the effectiveness of the Company's disclosure controls
and procedures as of September 30, 2005 ("Evaluation Date"). Based on that
evaluation, they concluded that as of the Evaluation Date the Company's
disclosure controls and procedures are effective to allow timely communication
to them of information relating to the Company and the Bank required to be
disclosed in its filings with the Securities and Exchange Commission ("SEC")
under the Securities Exchange Act of 1934, as amended ("Exchange Act").
Disclosure controls and procedures are Company controls and other procedures
that are designed to ensure that information required to be disclosed by the
Company in the reports that it files under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms.
No changes in the Company's internal control over financial reporting occurred
during the first nine months of 2005 that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
-28-
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Due to the nature of the banking business, the Bank is at times party to various
legal actions; all such actions are of a routine nature and arise in the normal
course of business of the Bank.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
The following table shows information concerning the common stock repurchased by
the Company during the third quarter of 2005 pursuant to the Company's stock
repurchase plan originally announced on July 31, 2003, as amended effective
April 9, 2004, to conform with the Company's two-for-one stock split paid on
April 30, 2004, which is discussed in more detail under "Capital Resources" in
this annual report on Form 10-K:
Period (a) Total number (b) Average price (c) Total number of (d) Maximum number
of Shares purchased paid per share shares purchased as of shares that may yet
part of publicly be purchased under the
announced plans or plans or programs
programs
-----------------------------------------------------------------------------------------------------------
July 1-31, 2005 10,000 $21.26 10,000 148,900
August 1-31, 2005 - - - 148,900
September 1-30, 2005 - - - 148,900
-----------------------------------------------------------------------------------------------------------
Total 10,000 $21.26 10,000 148,900
Item 6 - Exhibits
3.1* Restated Articles of Incorporation dated May 9, 2003, filed as
Exhibit 3.1 to TriCo's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003.
3.2* Bylaws of TriCo Bancshares, as amended, filed as Exhibit 3.2 to
TriCo's Form S-4 Registration Statement dated January 16, 2003
(No. 333-102546).
4* Certificate of Determination of Preferences of Series AA Junior
Participating Preferred Stock filed as Exhibit 3.3 to TriCo's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2001.
10.1* Rights Agreement dated June 25, 2001, between TriCo and Mellon
Investor Services LLC filed as Exhibit 1 to TriCo's Form 8-A
dated July 25, 2001.
10.2 Form of Change of Control Agreement dated as of August 23, 2005,
between TriCo, Tri Counties Bank and each of Bruce Belton, Craig
Carney, Gary Coelho, W.R. Hagstrom, Andrew Mastorakis, Rick
Miller, Richard O'Sullivan, Thomas Reddish, and Ray Rios.
10.4* TriCo's Non-Qualified Stock Option Plan filed as Exhibit 4.2 to
TriCo's Form S-8 Registration Statement dated January 18, 1995
(No. 33-88704).
10.5* TriCo's Incentive Stock Option Plan filed as Exhibit 4.3 to
TriCo's Form S-8 Registration Statement dated January 18, 1995
(No. 33-88704).
10.6* TriCo's 1995 Incentive Stock Option Plan filed as Exhibit 4.1 to
TriCo's Form S-8 Registration Statement dated August 23, 1995
(No. 33-62063).
10.7* TriCo's 2001 Stock Option Plan, as amended filed as Exhibit 10.7
to TriCo's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2005.
-29-
10.8 Amended Employment Agreement between TriCo and Richard Smith
dated as of August 23, 2005.
10.9 Tri Counties Bank Executive Deferred Compensation Plan restated
April 1, 1992, and January 1, 2005.
10.10 Tri Counties Bank Deferred Compensation Plan for Directors
effective January 1, 2005.
10.11 2005 Tri Counties Bank Deferred Compensation Plan for Executives
and Directors effective January 1, 2005.
10.13* Tri Counties Bank Supplemental Retirement Plan for Directors
dated September 1, 1987, as restated January 1, 2001, and amended
and restated January 1, 2004 filed as Exhibit 10.12 to TriCo's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2004.
10.14* 2004 TriCo Bancshares Supplemental Retirement Plan for Directors
effective January 1, 2004 filed as Exhibit 10.13 to TriCo's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2004.
10.15* Tri Counties Bank Supplemental Executive Retirement Plan
effective September 1, 1987, as amended and restated January 1,
2004 filed as Exhibit 10.14 to TriCo's Quarterly Report on Form
10-Q for the quarter ended June 30, 2004.
10.16* 2004 TriCo Bancshares Supplemental Executive Retirement Plan
effective January 1, 2004 filed as Exhibit 10.15 to TriCo's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2004.
10.17* Form of Joint Beneficiary Agreement effective March 31, 2003
between Tri Counties Bank and each of George Barstow, Dan Bay,
Ron Bee, Craig Carney, Robert Elmore, Greg Gill, Richard Miller,
Andrew Mastorakis, Richard O'Sullivan, Thomas Reddish, Jerald
Sax, and Richard Smith, filed as Exhibit 10.14 to TriCo's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2003.
10.18* Form of Joint Beneficiary Agreement effective March 31, 2003
between Tri Counties Bank and each of Don Amaral, William Casey,
Craig Compton, John Hasbrook, Michael Koehnen, Wendell Lundberg,
Donald Murphy, Carroll Taresh, and Alex Vereshagin, filed as
Exhibit 10.15 to TriCo's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2003.
10.19* Form of Tri-Counties Bank Executive Long Term Care Agreement
effective June 10, 2003 between Tri Counties Bank and each of
Craig Carney, Andrew Mastorakis, Richard Miller, Richard
O'Sullivan, and Thomas Reddish, filed as Exhibit 10.16 to TriCo's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2003.
10.20* Form of Tri-Counties Bank Director Long Term Care Agreement
effective June 10, 2003 between Tri Counties Bank and each of Don
Amaral, William Casey, Craig Compton, John Hasbrook, Michael
Koehnen, Donald Murphy, Carroll Taresh, and Alex Verischagin,
filed as Exhibit 10.17 to TriCo's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2003.
10.21* Form of Indemnification Agreement between TriCo Bancshares/Tri
Counties Bank and each of the directors of TriCo Bancshares/Tri
Counties Bank effective on the date that each director is first
elected, filed as Exhibit 10.18 to TriCo'S Annual Report on Form
10-K for the year ended December 31, 2003.
-30-
10.22* Form of Indemnification Agreement between TriCo Bancshares/Tri
Counties Bank and each of Craig Carney, W.R. Hagstrom, Andrew
Mastorakis, Rick Miller, Richard O'Sullivan, Thomas Reddish, Ray
Rios, and Richard Smith filed as Exhibit 10.21 to TriCo's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2004.
31.1 Rule 13a-14(a)/15d-14(a) Certification of CEO
31.2 Rule 13a-14(a)/15d-14(a) Certification of CFO
32.1 Section 1350 Certification of CEO
32.2 Section 1350 Certification of CFO
* Previously filed and incorporated by reference.
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 hereunto duly authorized.
TRICO BANCSHARES
(Registrant)
Date: October 25, 2005 /s/ Thomas J. Reddish
-----------------------------------
Thomas J. Reddish
Executive Vice President and
Chief Financial Officer
-31-
Exhibit 10.2
Form of Change of Control Agreement dated as of August 23, 2005, between TriCo,
Tri Counties Bank and each of Bruce Belton, Craig Carney, Gary Coelho, W.R.
Hagstrom, Andrew Mastorakis, Rick Miller, Richard O'Sullivan, Thomas Reddish,
and Ray Rios.
This Change of Control Agreement ("Agreement") is dated as of August 23,
2005, and is by and among TRI COUNTIES BANK, a California banking corporation
having its principal place of business at 63 Constitution Drive, Chico,
California 95973, TRICO BANCSHARES, a California corporation ("TriCo"), and
_________________ ("Employee").
WHEREAS, Tri Counties Bank desires to retain and assure Employee's services
and loyalty during any pending Change of Control, as defined herein, and is
willing to provide severance benefits in excess of its regular severance
benefits in such event;
WHEREAS, Employee desires to continue in the employ of Tri Counties Bank
under the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. TERM OF AGREEMENT. Unless sooner terminated pursuant to the provisions
of Section 5 hereof, the initial term of this Agreement shall be for twelve (12)
months. On each one-year anniversary of this Agreement thereafter, this
Agreement shall automatically renew for an additional one (1) year period,
unless terminated by either party ninety (90) days prior to such anniversary
date; provided, however this Agreement may not be terminated pursuant to this
Section 1 at any time there is a pending or threatened "Change of Control" (as
defined herein).
2. DUTIES OF EMPLOYMENT. Employee hereby agrees to devote his full and
exclusive time and attention to the business of Tri Counties Bank, TriCo and
their subsidiaries (collectively, "Employer"), to faithfully perform the duties
assigned to him by the Board of Directors consistent with his office, and to
conduct himself in such a way as shall best serve the interests of Employer.
3. CHANGE OF CONTROL.
3.1 In the event of a Change of Control of Employer and in the event
that, within one year following the Change of Control, either: (i)
Employee's employment is terminated by Employer other than for "cause" as
defined in Section 5.2, or (ii) Employee terminates his employment with
Employer after a substantial and material negative change occurs in
Employee's title, compensation and/or responsibilities, then, subject to
the provisions of Section 3.3, Employee shall be entitled to receive his
salary at the rate then in effect for a period of twenty-four (24) months
following the occurrence of the events set forth herein, as well as an
amount equal to 200% of the annual bonuses earned by Employee for the last
complete calendar year or year of employment, whichever is greater, paid in
twenty-four equal monthly installments; provided, however, that the present
value of said payments shall not be more than two hundred ninety-nine
percent (299%) of Employee's compensation as defined by Section 280G of the
Internal Revenue Code of 1954, as amended. Employer shall be relieved of
its obligation to make payments under this Section 3.1 if, at the time it
is to make such payment, it is insolvent, in conservatorship or
receivership, is in a troubled condition, is operating under a supervisory
agreement with any regulatory agency having jurisdiction, has been given a
financial soundness rating of "4" or "5," or is subject to a proceeding to
terminate or suspend federal deposit insurance.
3.2 For purposes of this Agreement, a "Change of Control" of Employer
shall occur:
(a) upon Employer's knowledge that any person (as such term is
used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) is or becomes "the beneficial owner" (as defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, of shares
representing 40% or more of the combined voting power of the then
outstanding securities of Employer; or
(b) upon the first purchase of the common stock of Employer
pursuant to a tender or exchange offer (other than a tender or
exchange offer made by Employer); or
(c) upon the approval by the stockholders of Employer of a merger
or consolidation (other than a merger of consolidation in which
Employer is the surviving corporation and which does not result in any
reclassification or reorganization of Employer's then outstanding
securities), a sale or disposition of all or substantially all of the
assets of Employer, or a plan of liquidation or dissolution of
Employer; or
(d) if, during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors
of Employer cease for any reason to constitute at least a majority
thereof, unless the election or nomination for the election by the
stockholders of Employer of each new director was approved by a vote
of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3.3 Anything in this Agreement to the contrary notwithstanding, prior
to the payment of any compensation or benefits payable under Section 3.1
hereof, the certified public accountants of Employer who served as
accountants immediately prior to a Change of Control (the "Certified Public
Accountants") shall determine as promptly as practical and in any event
within 20 business days following a Change of Control whether any payment
or distribution by Employer to or for the benefit of Employee (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement, any other agreements or otherwise) (a "Payment") would more
likely than not be nondeductible by Employer for Federal income purposes
because of section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), and if it is, then the aggregate present value of amounts
payable or distributable to or for the benefit of Employee pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
thereinafter referred to as "Agreement Payments") shall be reduced (but not
below zero) to the Reduced Amount. For purposes of this Section 3.3, the
"Reduced Amount" shall be an amount expressed in present value, which
maximizes the aggregate present value of Agreement Payments without causing
any payment to be nondeductible by Employer because of said Section 280G of
the Code.
If under this Section the Certified Public Accountants determine that
any payment would more likely than not be nondeductible by Employer because
of Section 280G of the Code, Employer shall promptly give Employee notice
to the effect and a copy of the detailed calculation thereof and of the
Reduced Amount, and the Employee may then elect, in his sole discretion,
which and how much of the Agreement Payments or any other payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments or any other payments equals the Reduced
Amount), and shall advise the Employer in writing of his election within 20
business days of his receipt of notice. If no such election is made by
Employee within such 20-day period, Employer may elect which and how much
of the Agreement Payments or any other payments shall be eliminated or
reduced (as long as after such election the aggregate present value of the
Agreement Payments equals the Reduced Amount) and shall notify Employee
promptly of such election. For purposes of this Section 3.3, present value
shall be determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by the Certified Public Accountants shall be binding
upon Employer and Employee and the payment to Employee shall be made within
20 days of a Change of Control. Employer may suspend for a period of up to
30 days after a Change of Control the Payment and any other payments or
benefits due to Employee until the Certified Public Accountants finish the
determination and Employee (or Employer, as the case may be) elects how to
reduce the Agreement Payments or any other payments, if necessary. As
promptly as practicable following such determination and the elections
hereunder, Employer shall pay to or distribute to or for the benefit of
Employee such amounts as are then due to Employee under this Agreement.
As a result of the uncertainty in the application of Section 280G of
the Code, it is possible that Agreement Payments may have been made by
Employer, which should not have been made ("Overpayment"), in each case,
consistent with the calculation of the Reduced Amount hereunder. In the
event that the Certified Public Accountants, based upon the assertion of a
deficiency by the Internal Revenue Service against Employer or Employee
which said Certified Public Accountants believe has a high probability of
success, determines that an Overpayment has been made, any such Overpayment
shall be treated for all purposes as a loan to Employee which Employee
shall repay to Employer together with interest at the applicable Federal
rate provided for in Section 7872(f)(2)(A) of the Code; provided, however,
that no amount shall be payable by Employee to Employer in and to the
extent such payment would not reduce the amount which is subject to
taxation under Section 4999 of the Code. In the event that the Certified
Public Accountants, based upon controlling precedent, determine that an
Underpayment has occurred, any such Underpayment shall be promptly paid by
Employer to or for the benefit of Employee together with interest at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.
3.4 Continuing Obligations. The triggering of this Section 3 shall not
relieve Employee or Employer of their obligations pursuant to the
provisions of Section 4 hereof, which contains independent agreements and
obligations.
4. COVENANT TO PROTECT TRADE SECRETS.
4.1 The parties hereto recognize that the services performed and to be
performed by Employee are special and unique and that by reason of this
employment Employee has acquired and will continue to acquire confidential
information regarding the strategic plans, business plans, trade secrets,
policies, finances, customers and other business affairs of Employer
(collectively "Trade Secrets"). Employee hereby agrees not to divulge such
Trade Secrets to anyone, either during his employment with Employer or for
a period of three (3) years following the termination of his employment.
Employee further agrees that all memoranda, notes, records, reports,
letters, and other documents made, compiled, received, held, or used by
Employee while employed by Employer concerning any phase of the business of
Employer shall be Employer's property and shall be delivered by Employee to
Employer on the termination of his employment, or at any earlier time on
the request of the Board of Directors.
4.2 Employee and Employer agree that in consideration of the payment
of the amounts payable to Employee hereunder, Employee specifically
covenants to comply with all of the restrictions and obligations contained
in this Section 4 except as otherwise specifically provided for herein.
Employee and Employer further agree that they have discussed the
restrictions and obligations contained in this Section 4 and stipulate that
they are reasonable.
4.3 The agreement of Employee regarding the provisions contained in
this Section 4 shall be enforceable both at law and in equity, by
injunction and otherwise; and the rights and remedies of Employer hereunder
with respect thereto shall be cumulative and not alternative and shall not
be exhausted by any one or more uses thereof.
5. TERMINATION.
This Agreement is terminable as follows:
5.1 By Employer, upon the voluntary retirement or voluntary
resignation of Employee, or upon the death or permanent physical or mental
disability of Employee. (For purposes hereof, permanent physical or mental
disability shall be deemed to have occurred when Employee has been unable,
with reasonable accommodation, to perform the essential functions of his
job (i) for a period of six (6) consecutive months or (ii) on 80% or more
of the normal working days during any nine (9) consecutive months.)
5.2 By Employer, effective immediately upon providing Employee with
notice of his dismissal, for "cause," which shall mean:
1 Employee's dishonesty, disloyalty, willful misconduct,
dereliction of duty or conviction of a felony or other crime the
subject matter of which is related to his duties for Employer;
2 Employee's commission of an act of fraud or bad faith upon
Employer;
3 Employee's willful misappropriation of any funds or property of
Employer; or
4 Employee's willful, continued and unreasonable failure to
perform his duties or obligations under this Agreement.
5.3 By Employer, upon ninety (90) days prior written notice to
Employee, not for cause (as defined in Section 5.2); provided, however,
this Agreement may not be terminated pursuant to this Section 5.3 at any
time there is a pending or threatened Change of Control of Employer.
6. SCOPE OF AGREEMENT: WAIVERS AND AMENDMENTS.
The scope of this Agreement is limited to the specific provisions set forth
herein and is not intended to encompass all the terms and conditions of the
relationship between Employee and Employer and any and all matters related
thereto. The effects of the termination of Employee's employment under
circumstances other than after a Change of Control and as specifically set forth
herein shall be subject to the policies of Employer and any other written
agreement between Employee and Employer. Neither this Agreement nor any term or
condition hereof, including without limitation, the terms and conditions of this
Section, may be waived or modified in whole or in part as against Employer or
Employee, as the case may be, except by written instrument signed by an
authorized officer of Employer and by Employee, expressly stating that it is
intended to operate as a waiver or modification of this Agreement, and any such
written waiver by either party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach hereof.
7. NOTICE.
Any notice hereunder shall be in writing and shall be deemed effective five
(5) days after it has been mailed, by certified mail, in the case of Employer
addressed to the address above written, or such other address as Employee knows
to be the then corporate office of Employer, to the attention of the President
of Employer and, in the case of Employee, to Employee's address as contained in
the personnel records of Employer. Either party may from time to time, in
writing by certified mail, designate another address, which shall become his or
its effective address for the purposes of this Section 7.
8. SEVERABILITY.
If any term or provision of this Agreement or the application thereof to
any person, property or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement or the application of such term
or provision to persons, property or circumstances other than those as to which
it is invalid or unenforceable, shall not be effected thereby, and each term
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
9. NO RESTRICTIONS.
Employee hereby represents and warrants that he is not now and will not be
subject to any agreement, restriction, lien, encumbrance, or right, title or
interest in any one of the foregoing, limiting in any way the scope of this
Agreement or in any way inconsistent with this Agreement.
10. NO ASSIGNMENT: BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of Employer,
its successors or assigns. Except as to the obligation of Employee to render
personal services which shall be non-assignable, this Agreement shall be binding
upon and inure to the heirs, executors, administrators, and assigns of Employee.
11. ARBITRATION.
EXCEPT AS TO ANY ACTION BROUGHT TO ENFORCE THE PROVISIONS OF SECTION 4
ABOVE, ANY CONTROVERSY, DISPUTE OR CLAIM ARISING OUT OF OR RELATING TO THE
TERMINATION OF THE EMPLOYEE'S EMPLOYMENT, AND THE INTERPRETATION OF THIS
AGREEMENT, AND ANY AND ALL CLAIMS INCLUDING ANY STATUTORY CLAIMS OF
DISCRIMINATION, SHALL BE RESOLVED BY BINDING ARBITRATION UNDER THE EMPLOYMENT
DISPUTE RESOLUTION RULES OF THE AMERICAN ARBITRATION ASSOCIATION PROVISIONS OF
THE FEDERAL UNIFORM ARBITRATION ACT.
The parties agree that arbitration shall be the exclusive forum to resolve
any and all claims between the parties, their agents and employees regarding the
termination of employment, or of this Agreement, including any claims of
discrimination under any state or federal statute, wrongful discharge theory, or
any other claim whether based on specific state or federal statute or common
law.
ANY CLAIM MADE UNDER THIS PROVISION MAY BE SUBMITTED IN WRITING WITHIN 60
DAYS AFTER THE TERMINATION OF EMPLOYMENT OR THIS AGREEMENT. THE WRITTEN CLAIM
MUST DETAIL THE FACTS WHICH SUPPORT THE CLAIM ALONG WITH ANY LEGAL THEORIES OR
STATUS UPON WHICH THE CLAIM IS BASED.
The parties agree to abide by any determination of the arbitrator as to
which party is to be responsible for the costs and attorneys' fees in any such
proceeding. It is agreed that the arbitrator shall be empowered to hear all
legal and equitable claims, including claims for discrimination. The arbitrator
shall be governed by the law applicable to any claims based upon any state or
federal statute, and will also be empowered to award any remedies appropriate
under any such statutes.
This provision shall survive the termination of Employee's employment and
this Agreement.
12. HEADINGS.
The captions and headings contained herein have been inserted for
convenience or reference only and shall not affect the meaning or interpretation
of this Agreement.
13. GOVERNING LAW AND CHOICE OF FORUM.
This Agreement shall be construed and enforced in accordance with the laws
of the State of California and shall be enforced in the State or Federal Courts
sitting in California.
------------------------------------------------
TRICO BANCSHARES
TRI COUNTIES BANK
By:
------------------------------------------------
Exhibit 10.8
Amended Employment Agreement between TriCo and Richard Smith dated August 23,
2005.
This AMENDED EMPLOYMENT AGREEMENT ("Agreement") is entered into as of
August 23, 2005 between TRICO BANCSHARES ("EMPLOYER"), having its principal
place of business at 63 Constitution Drive, Chico, California 95926 and Richard
P. Smith ("Employee"), and replaces in its entirety the Employment Agreement
dated April 20, 2004, between EMPLOYER and Employee.
WITNESSETH
WHEREAS, EMPLOYER desires to continue to employ Employee pursuant to the
terms of this Agreement and Employee is desirous of and wishes to continue in
such employment, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. EMPLOYMENT
EMPLOYER hereby employs Employee, and Employee hereby accepts appointment,
as President and Chief Executive Officer. Employee shall report to and be under
the supervision of the Board of Directors of EMPLOYER and Employee hereby agrees
to devote his full and exclusive time and attention to the business of EMPLOYER,
to faithfully perform the duties assigned to him by the Board of Directors
consistent with his office, and to conduct himself in such a way as shall best
serve the interests of EMPLOYER.
2. TERM OF AGREEMENT
Unless sooner terminated by EMPLOYER or the Employee pursuant to the
provisions of Sections 4 or 6 hereof, the employment provisions of this
Agreement shall terminate on the first (1st) anniversary of the date of this
Agreement. This Agreement shall automatically be extended for an additional year
on the first anniversary of this Agreement and each anniversary thereafter
unless a party notifies the other party to the contrary in writing 90 days prior
to an anniversary date; provided, however, this Agreement may not be terminated
pursuant to this Section 2 at any time there is a pending or threatened "Change
of Control" (as defined herein).
3. COMPENSATION
For and in consideration of the performance by the Employee of the
services, terms, conditions, covenants and promises herein recited, EMPLOYER
agrees and promises to pay to the Employee at the times and in the manner herein
stated, the following:
3.1 Salary. As the compensation for the services to be performed by
the Employee hereunder during the employment period, the Employee shall
receive, as gross salary before any withholding of whatever sort, the sum
of $410,000.00 per year, payable in the manner in which EMPLOYER's payroll
is customarily handled. Additionally, Employee will be eligible for such
annual increases in salary as EMPLOYER's Compensation Committee shall from
time to time decide.
3.2 Bonus/Incentive Plan. Employee shall participate in a
bonus/incentive plan to be agreed upon between Employee and EMPLOYER and
approved by the EMPLOYER's Compensation Committee.
3.3 Stock Options. Employee will be granted options annually to
purchase shares of TRICO BANCSHARES ("TRICO") common stock pursuant to and
under the terms of TRICO's stock option plans in amounts determined by
EMPLOYER's Compensation Committee.
3.4 Employee Benefits. In addition to the above, EMPLOYER shall
provide Employee with the following:
(a) participation for the Employee and his dependents, in any present
or future disability, health, dental or other insurance plan
generally available to all employees of EMPLOYER, such
participation to be on the same basis as such other
executives/employees, except that the 90 day waiting period for
inclusion shall be waived;
(b) participation for the Employee in any present or future employee
savings plans, including, but not limited to EMPLOYER's 401(k)
Savings Plan; Employee Stock Ownership Plan; Executive Deferred
Compensation Plan; and Supplemental Executive Retirement Plan;
(c) twenty (20) paid vacation days annually; and
(d) a car allowance of $1,000.00 per month and reimbursement of other
reasonable out-of-pocket expenses, including $0.30 per mile,
incurred by the Employee in the performance of the duties
hereunder in accordance with the policies of EMPLOYER.
4. EARLY TERMINATION OF EMPLOYMENT
4.1 Termination For Cause. EMPLOYER may at any time, in its sole
discretion, terminate the employment provisions of this Agreement for
"cause," effective immediately upon providing the Employee with notice of
his dismissal. The only occurrences which shall constitute "cause" within
the meaning of this paragraph shall be the following:
(a) Employee's dishonesty, disloyalty, willful misconduct,
dereliction of duty or conviction of a felony or other crime the
subject matter of which is related to his duties for EMPLOYER;
(b) the commission by the Employee of an act of fraud or bad faith
upon EMPLOYER;
(c) the willful misappropriation of any funds or property of EMPLOYER
by the Employee;
(d) the willful, continued and unreasonable failure by the Employee
to perform his duties or obligations under this Agreement; or
(e) the breach of any material provisions hereof or the engagement by
the Employee, without the prior written approval of EMPLOYER, in
any activity which would violate the provisions of Section 7 of
this Agreement.
4.2 Termination Without Cause. EMPLOYER may at any time upon 90 days'
written notice given to Employee, in its sole discretion, terminate the
employment provisions of this Agreement without "cause," which term is
defined in Section 4.1 hereof; provided, however, this Agreement may not be
terminated pursuant to this Section 4.2 at any time there is a pending or
threatened change of control of EMPLOYER.
4.3 Voluntary Termination. The employment provisions of this Agreement
shall also terminate upon:
(a) the death or permanent physical or mental disability of the
Employee;
(b) the voluntary retirement of the Employee; or
(c) the voluntary resignation of the Employee.
For purposes hereof, permanent physical or mental disability shall be
deemed to have occurred when Employee has been unable, with reasonable
accommodation, to perform the essential functions of his job (i) for a period of
six (6) consecutive months or (ii) on 80% or more of the normal working days
during any nine (9) consecutive months.
5. RIGHTS UPON EARLY TERMINATION OF EMPLOYMENT
5.1 Termination Pursuant to Section 4.1 or 4.3. If Employee's
employment is terminated pursuant to paragraph 4.1 or 4.3 hereof, then
EMPLOYER will have no obligation to pay any amount to the Employee other
than amounts earned or accrued pursuant to the provisions of Section 3, but
which have not yet been paid as of the date of the termination of the
Employee, and the Employee shall have no further claims against EMPLOYER or
its subsidiaries with respect to this Agreement (except with respect to
payments due and payable under this paragraph 5.1).
5.2 Termination Pursuant to Section 4.2. If Employee's employment is
terminated pursuant to paragraph 4.2 hereof, then EMPLOYER shall pay to the
Employee all amounts earned or accrued pursuant to the provisions of
Section 3 hereof, but which have not yet been paid as of the date of the
termination of the Employee. In addition, EMPLOYER shall pay Employee a
prorated amount of Employee's minimum guaranteed annual bonus (as set forth
in Section 3.2) through the date of termination. In addition, EMPLOYER
shall pay through the then remaining term of this Agreement, the amount of
salary that would be payable pursuant to paragraph 3.1 if the Employee's
employment had not been terminated, at such times and in such amounts that
would have been paid if Employee's employment had not been terminated.
6. CHANGE OF CONTROL
6.1 Benefits. In the event of a Change of Control of EMPLOYER and in
the event that, within one year following the Change of Control, either:
(i) Employee's employment is terminated by EMPLOYER other than for "cause"
as defined in Section 5.2, or (ii) Employee terminates his employment with
EMPLOYER after a substantial and material negative change occurs in
Employee's title, compensation and/or responsibilities, then, subject to
the provisions of Section 6.3, Employee shall be entitled to receive his
salary at the rate then in effect for a period of twenty-four (24) months
following the occurrence of the events set forth herein, as well as an
amount equal to 200% of the annual bonuses earned by Employee for the last
complete calendar year or year of employment, whichever is greater, paid in
twenty-four equal monthly installments; provided, however, that the present
value of said payments shall not be more than two hundred ninety-nine
percent (299%) of Employee's compensation as defined by Section 280G of the
Internal Revenue Code of 1954, as amended. EMPLOYER shall be relieved of
its obligation to make payments under this Section 6.1 if, at the time it
is to make such payment, it is insolvent, in conservatorship or
receivership, is in a troubled condition, is operating under a supervisory
agreement with any regulatory agency having jurisdiction, has been given a
financial soundness rating of "4" or "5," or is subject to a proceeding to
terminate or suspend federal deposit insurance.
6.2 Defined. For purposes of this Section 6, a "Change of Control" of
EMPLOYER shall occur:
(a) upon EMPLOYER's knowledge that any person (as such term is
used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) is or becomes "the beneficial owner" (as defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, of shares
representing 40% or more of the combined voting power of the then
outstanding securities of EMPLOYER or Tri Counties Bank; or
(b) upon the first purchase of the common stock of EMPLOYER
pursuant to a tender or exchange offer (other than a tender or
exchange offer made by EMPLOYER); or
(c) upon the approval by the stockholders of EMPLOYER of a merger
or consolidation (other than a merger of consolidation in which
EMPLOYER is the surviving corporation and which does not result in any
reclassification or reorganization of EMPLOYER's then outstanding
securities), a sale or disposition of all or substantially all of
EMPLOYER's assets, or a plan of liquidation or dissolution of
EMPLOYER; or
(d) if, during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors
of EMPLOYER cease for any reason to constitute at least a majority
thereof, unless the election or nomination for the election by the
stockholders of EMPLOYER of each new director was approved by a vote
of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
6.3 Limitations. Anything in this Agreement to the contrary
notwithstanding, prior to the payment of any compensation or benefits
payable under Section 6.1 hereof, the certified public accountants of
EMPLOYER who served as accountants immediately prior to a Change of Control
(the "Certified Public Accountants") shall determine as promptly as
practical and in any event within 20 business days following a Change of
Control whether any payment or distribution by EMPLOYER to or for the
benefit of Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, any other agreements
or otherwise) (a "Payment") would more likely than not be nondeductible by
EMPLOYER for Federal income tax purposes because of section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and if it is, then
the aggregate present value of amounts payable or distributable to or for
the benefit of EMPLOYEE pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are thereinafter referred to as
"Contract Payments") shall be reduced (but not below zero) to the Reduced
Amount. For purposes of this Section 6.3, the "Reduced Amount" shall be an
amount expressed in present value which maximizes the aggregate present
value of Contract Payments without causing any payment to be nondeductible
by EMPLOYER because of said Section 280G of the Code.
If under this Section the Certified Public Accountants determine that any
payment would more likely than not be nondeductible by EMPLOYER because of
Section 280G of the Code, EMPLOYER shall promptly give Employee notice to that
effect and a copy of the detailed calculation thereof and of the Reduced Amount,
and the Employee may then elect, in his sole discretion, which and how much of
the Contract Payments or any other payments shall be eliminated or reduced (as
long as after such election the aggregate present value of the Contract Payments
or any other payments equals the Reduced Amount), and shall advise the EMPLOYER
in writing of his election within 20 business days of his receipt of notice. If
no such election is made by Employee within such 20-day period, EMPLOYER may
elect which and how much of the Contract Payments or any other payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Contract Payments equals the Reduced Amount) and shall notify
Employee promptly of such election. For purposes of this Section 6.3, present
value shall be determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by the Certified Public Accountants shall be binding upon
EMPLOYER and Employee and the payment to Employee shall be made within 20 days
of a Change of Control. EMPLOYER may suspend for a period of up to 30 days after
a Change of Control the Payment and any other payments or benefits due to
Employee until the Certified Public Accountants finish the determination and
Employee (or EMPLOYER, as the case may be) elects how to reduce the Contract
Payments or any other payments, if necessary. As promptly as practicable
following such determination and the elections hereunder, EMPLOYER shall pay to
or distribute to or for the benefit of Employee such amounts as are then due to
Employee under this Agreement.
As a result of the uncertainty in the application of Section 280G of the
Code, it is possible that Contract Payments may have been made by EMPLOYER which
should not have been made ("Overpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that the Certified
Public Accountants, based upon the assertion of a deficiency by the Internal
Revenue Service against EMPLOYER or Employee which said Certified Public
Accountants believe has a high probability of success, determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to Employee which Employee shall repay to EMPLOYER together
with interest at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code; provided, however, that no amount shall be payable by
Employee to EMPLOYER in and to the extent such payment would not reduce the
amount which is subject to taxation under Section 4999 of the Code. In the event
that the Certified Public Accountants, based upon controlling precedent,
determine that an Underpayment has occurred, any such Underpayment shall be
promptly paid by EMPLOYER to or for the benefit of Employee together with
interest at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Code.
6.4 Continuing Obligations. The triggering of this Section 6 shall
not relieve Employee or EMPLOYER of their obligations pursuant to the
provisions of Section 7 hereof, which contains independent agreements and
obligations.
7. COVENANTS
7.1 Non-disturbance with Employees. Employee hereby agrees that (a)
during the term of his employment with EMPLOYER and for a period of twelve
(12) months following the termination of his employment, he will not
directly or indirectly solicit, cause any other person to solicit or assist
any other person with soliciting, the employment of any person who is, at
the time of such solicitation, or who was within 30 days of such
solicitation, an employee of EMPLOYER or its subsidiaries or employees.
Employment for purposes of this Section shall include consulting,
performing services for commissions or otherwise performing services for
cash or other compensation.
7.2 Confidential Information. The parties hereto recognize that the
services performed and to be performed by Employee are special and unique
and that by reason of this employment Employee has acquired and will
continue to acquire information regarding the strategic plans, business
plans, policies, finances and customers and trade secrets of EMPLOYER
("Confidential Information"). Employee hereby agrees not to divulge such
Confidential Information to anyone, either during his employment with
EMPLOYER or for a period of three (3) years following the termination of
his employment. Employee further agrees that all memoranda, notes, records,
reports, letters, and other documents made, compiled, received, held, or
used by Employee while employed by EMPLOYER concerning any phase of the
business of EMPLOYER shall be EMPLOYER's property and shall be delivered by
Employee to EMPLOYER on the termination of his employment, or at any
earlier time on the request of the Board of Directors.
7.3 Non-use of Confidential Information. Employee hereby agrees that
(a) during the term of his employment with EMPLOYER; and (b) for a period
of one year following the termination of his employment, he will not use
any Confidential Information, and especially information concerning
EMPLOYER's customers to directly or indirectly solicit, cause any other
person to solicit or assist any other person with soliciting any customer,
depositor or borrower of EMPLOYER or its subsidiaries or affiliates to
become a customer, depositor or borrower of another bank, savings and loan,
or financial institution.
7.4 Enforcement. The agreement of Employee regarding the provisions
contained in this Section 7 shall be enforceable both at law and in equity,
by injunction and otherwise; and the rights and remedies of EMPLOYER
hereunder with respect thereto shall be cumulative and not alternative and
shall not be exhausted by any one or more uses thereof.
8. ENTIRE AGREEMENT: WAIVERS AND AMENDMENTS
This Agreement sets forth the entire agreement between the parties with
respect to the terms and conditions of the relationship between Employee and
EMPLOYER and any and all matters related thereto, and any and all prior
agreements with respect to any thereof, whether oral or written, are superseded
hereby. Neither this Agreement nor any term or condition hereof, including
without limitation, the terms and conditions of this Section, may be waived or
modified in whole or in part as against EMPLOYER or Employee, as the case may
be, except by written instrument signed by an authorized officer of EMPLOYER and
by Employee, expressly stating that it is intended to operate as a waiver or
modification of this Agreement, and any such written waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach hereof.
9. NOTICE
Any notices, consents or other communication required to be sent or given
hereunder by any of the parties shall in every case be in writing and shall be
deemed properly served if (a) delivered personally, (b) sent by registered or
certified mail, in all such cases with first class postage prepaid, return
receipt requested, or (c) delivered by a recognized overnight courier service,
if to EMPLOYER at the address of its main office to the attention of its
President and, if to Employee, at his last address on the personnel records of
EMPLOYER or at such other addresses as may be furnished by a party in writing
according to the provisions of this Section 9, except that either party may from
time to time, in writing by certified mail, designate another address which
shall thereupon become his or its effective address for the purposes of this
Section 9.
10. SEVERABILITY
If any term or provision of this Agreement or the application thereof to
any person, property or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement or the application of such term
or provision to persons, property or circumstances other than those as to which
it is invalid or unenforceable, shall not be effected thereby, and each term
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
11. NO RESTRICTIONS
Employee hereby represents and warrants that he is not now and will not be
subject to any agreement, restriction, lien, encumbrance, or right, title or
interest in any one of the foregoing, limiting in any way the scope of this
Agreement or in any way inconsistent with this Agreement.
12. NO ASSIGNMENT: BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of EMPLOYER,
its successors or assigns. Except as to the obligation of Employee to render
personal services which shall be non-assignable, this Agreement shall be binding
upon and inure to the heirs, executors, administrators, and assigns of Employee.
13. ARBITRATION
EXCEPT AS TO ANY ACTION BROUGHT TO ENFORCE THE PROVISIONS OF SECTION 7
ABOVE, ANY CONTROVERSY, DISPUTE OR CLAIM ARISING OUT OF OR RELATING TO THE
TERMINATION OF THE EMPLOYEE'S EMPLOYMENT, AND THE INTERPRETATION OF THIS
AGREEMENT, AND ANY AND ALL CLAIMS INCLUDING ANY STATUTORY CLAIMS OF
DISCRIMINATION, SHALL BE RESOLVED BY BINDING ARBITRATION UNDER THE EMPLOYMENT
DISPUTE RESOLUTION RULES OF THE AMERICAN ARBITRATION ASSOCIATION PROVISIONS OF
THE FEDERAL UNIFORM ARBITRATION ACT.
The parties agree that arbitration shall be the exclusive forum to resolve
any and all claims between the parties, their agents and employees regarding the
termination of employment, or of this Agreement, including any claims of
discrimination under any state or federal statute, wrongful discharge theory, or
any other claim whether based on specific state or federal statute or common
law.
ANY CLAIM MADE UNDER THIS PROVISION MAY BE SUBMITTED IN WRITING WITHIN 60
DAYS AFTER THE TERMINATION OF EMPLOYMENT OR THIS AGREEMENT. THE WRITTEN CLAIM
MUST DETAIL THE FACTS WHICH SUPPORT THE CLAIM ALONG WITH ANY LEGAL THEORIES OR
STATUS UPON WHICH THE CLAIM IS BASED.
The parties agree to abide by any determination of the arbitrator as to
which party is to be responsible for the costs and attorneys' fees in any such
proceeding. It is agreed that the arbitrator shall be empowered to hear all
legal and equitable claims, including claims for discrimination. The arbitrator
shall be governed by the law applicable to any claims based upon any state or
federal statute, and will also be empowered to award any remedies appropriate
under any such statues.
This provision shall survive the termination of Employee's employment and
this Agreement.
14. HEADINGS
The captions and headings contained herein have been inserted for
convenience or reference only and shall not affect the meaning or interpretation
of this Agreement.
15. GOVERNING LAW AND CHOICE OF FORUM
This Agreement shall be construed and enforced in accordance with the laws
of the State of California and shall be enforced in the State or Federal Courts
sitting in California.
EMPLOYEE
/s/ Richard P. Smith
-----------------------------------
Richard P. Smith
ATTEST:
/s/ Thomas J. Reddish
---------------------------------
Thomas J. Reddish, Vice President
& CFO
TRICO BANCSHARES
By: /s/ William J. Casey
-----------------------------------
William J. Casey, Chairman of
the Board
ATTEST:
/s/ Thomas J. Reddish
---------------------------------
Thomas J. Reddish, Vice President
& CFO
Exhibit 10.9
Tri Counties Bank Executive Deferred Compensation Plan restated April 1, 1992,
and January 1, 2005
TABLE OF CONTENTS
PAGE
ARTICLE I--PURPOSE 5
ARTICLE II--DEFINITIONS 5
2.1 Actuarial Equivalent 5
2.2 Account 5
2.3 Beneficiary 5
2.4 Board 5
2.5 Change in Control 6
2.6 Committee 6
2.7 Compensation 6
2.8 Deferral Commitment 6
2.9 Deferral Period 6
2.10 Determination Date 7
2.11 Disability 7
2.12 Distribution Election 7
2.13 Elective Deferred Compensation 7
2.14 Employer 7
2.15 Financial Hardship 7
2.16 Base Interest Rate 7
2.17 Bonus Interest Rate 7
2.18 Participant 8
2.19 Plan Benefit 8
2.20 Qualified Plans 8
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS 8
3.1 Eligibility and Participation 8
3.2 Form of Deferral; Minimum Deferral 8
3.3 Limitation on Deferral 8
3.4 Modification of Deferral Commitment 9
3.5 Change in Employment Status 9
3.6 Involuntary Termination 9
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT 9
4.1 Accounts 9
4.2 Elective Deferred Compensation 9
4.3 Employer Discretionary Contributions 10
4.4 Qualified Plan Make-Up Credit 10
4.5 Interest 10
4.6 Determination of Accounts 10
4.7 Vesting of Accounts 10
4.8 Disability 11
4.9 Statement of Accounts 11
TABLE OF CONTENTS
PAGE
ARTICLE V--PLAN BENEFITS 11
5.1 Plan Benefit 11
5.2 Death Benefit 11
5.3 Hardship Distributions 11
5.4 Accelerated Distribution 11
5.5 Form of Benefit Payment 11
5.6 Withholding; Payroll Taxes 12
5.7 Commencement of Payments 12
5.8 Payment to Guardian 12
ARTICLE VI--BENEFICIARY DESIGNATION 12
6.1 Beneficiary Designation 12
6.2 Amendments 12
6.3 No Beneficiary Designation 13
6.4 Effect of Payment 13
ARTICLE VII--ADMINISTRATION 13
7.1 Committee; Duties 13
7.2 Agents 13
7.3 Binding Effect of Decisions 13
7.4 Indemnity of Committee 13
ARTICLE VIII--CLAIMS PROCEDURE 13
8.1 Claim 13
8.2 Denial of Claim 14
8.3 Review of Claim 14
8.4 Final Decision 14
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN 14
9.1 Amendment 14
9.2 Employer's Right to Terminate 14
ARTICLE X--MISCELLANEOUS 15
10.1 Unfunded Plan 15
10.2 Unsecured General Creditor 15
10.3 Trust Fund 15
10.4 Nonassignability 15
10.5 Not a Contract of Employment 16
10.6 Protective Provisions 16
10.7 Terms 16
10.8 Captions 16
10.9 Governing Law 16
10.10 Validity 16
TABLE OF CONTENTS
PAGE
10.11 Notice 16
10.12 Successors 17
EXHIBIT 1: Deferral Commitment Agreement 18
EXHIBIT 2: Distribution Election 19
EXHIBIT 3: Beneficiary Designation 20
TRI COUNTIES BANK
EXECUTIVE DEFERRED COMPENSATION PLAN
RESTATED APRIL 1, 1992 AND JANUARY 1, 2005
This restatement of the Tri Counties Bank Executive Deferred Compensation Plan,
effective January 1, 2005 applies only to those Participants in the Plan who are
actively employed by the TriCo Bancshares or its affiliates or subsidiaries as
of this date. Any retired Participant in this Plan will continue to receive
benefits pursuant to the terms of the Plan as restated on April 1, 1992.
ARTICLE I--PURPOSE
The purpose of this Executive Deferred Compensation Plan (the "Plan") is to
provide current tax planning opportunities as well as supplemental funds for
retirement or death for selected employees of TriCo Bancshares ("Bank") and
subsidiaries or affiliates thereof. It is intended that the Plan will aid in
retaining and attracting employees of exceptional ability by providing them with
these benefits. This Plan will be effective as of September 1, 1987.
ARTICLE II--DEFINITIONS
For the purposes of this Plan, the following terms shall have the meanings
indicated, unless the context clearly indicates otherwise:
2.1 Actuarial Equivalent
"Actuarial Equivalent" means equivalence in value between two (2) or more
forms and/or times of payment based on a determination by an actuary chosen by
the Bank, using sound actuarial assumptions at the time of such determination.
2.2 Account
"Account" means the Account as maintained by the Employer in accordance
with Article IV with respect to any deferral of Compensation pursuant to this
Plan. A Participant's Account shall be utilized solely as a device for the
determination and measurement of the amounts to be paid to the Participant
pursuant to the Plan. A Participant's Account shall not constitute or be treated
as a trust fund of any kind.
2.3 Beneficiary
"Beneficiary" means the person, person or entity entitled under Article VI
to receive any Plan benefits payable after a Participant's death.
2.4 Board
"Board" means the Board of Directors of the Employer.
2.5 Change in Control
A "Change in Control" shall occur:
(a) Upon TriCo Bancshares' knowledge that any person (as such term is used
in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended) is or becomes "the beneficial owner" (as defined in Rule 13(d)(3)
of the Exchange Act), directly or indirectly, of TriCo Bancshares' shares
representing forty percent (40%) or more of the combined voting power of
the then outstanding securities; or
(b) Upon the first purchase of the Common Stock of TriCo Bancshares
pursuant to a tender or exchange offer (other than a tender or exchange
offer made by TriCo Bancshares); or
(c) Upon the approval by the stockholders of TriCo Bancshares of a merger
or consolidation (other than a merger or consolidation in which TriCo
Bancshares is the surviving corporation and which does not result in any
reclassification or reorganization of TriCo Bancshares' then outstanding
securities), a sale or disposition of all or substantially all of TriCo
Bancshares' assets or a plan of liquidation or dissolution of TriCo
Bancshares; or
(d) If, during any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of TriCo
Bancshares cease for any reason to constitute at least a majority thereof,
unless the election or nomination for the election by the stockholders of
TriCo Bancshares of each new director was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who were directors
at the beginning of the period.
2.6 Committee
"Committee means the Compensation and benefits Committee of the Board of
Directors of TriCo Bancshares.
2.7 Compensation
"Compensation" means the salary and bonuses payable to Participant during
the calendar year and considered to be "wages" for purposes of federal income
tax withholding, before reduction for amounts deferred under this Plan.
Compensation does not include expense reimbursements, any form of noncash
compensation or benefits.
2.8 Deferral Commitment
"Deferral Commitment" means an election to defer Compensation made by a
Participant pursuant to Article III and for which a separate Deferral Commitment
Agreement has been submitted by the Participant to the Committee.
2.9 Deferral Period
"Deferral Period" means the period over which a Participant has elected to
defer a portion of his Compensation. Each calendar year shall be a separate
Deferral Period, provided that the Deferral Period may be modified pursuant to
paragraph 3.4 or 3.5.
2.10 Determination Date
"Determination Date" means the last day of each calendar month.
2.11 Disability
"Disability" means a physical or mental condition which, in the opinion of
the Committee, permanently prevents an employee from satisfactorily performing
employee's usual duties for Employer. The Committee's decision as to Disability
will be based upon medical reports and/or other evidence satisfactory to the
Committee. In no event shall a Disability be deemed to occur or to continue
after a Participant's Normal Retirement Date.
2.12 Distribution Election
The term "Distribution Election" shall mean the form of distribution of the
Account selected by the Participant on most recent Distribution Election
provided such Distribution Election has been made at least one full calendar
year prior to the date of the Participant's first Plan Distribution.
2.13 Elective Deferred Compensation
The amount of Compensation that a Participant elects to defer pursuant to a
Deferral Commitment.
2.14 Employer
"Employer" means TriCo Bancshares, Tri Counties Bank, and any affiliated or
subsidiary corporation designated by the Board of TriCo Bancshares or any
successors to the business thereof.
2.15 Financial Hardship
"Financial Hardship" means an immediate and heavy financial need of the
Participant, determined by the Committee on the basis of information supplied by
the Participant in accordance with the standards set forth in the applicable
treasury regulations promulgated under Section 401(k) of the Internal Revenue
Code, or such other standards as are, from time to time, established by the
Committee.
2.16 Base Interest Rate
"Interest Rate" means, with respect to any calendar month, the monthly
equivalent of the annual yield of the Moody's Average Corporate Bond Yield Index
for the preceding calendar month as published by Moody's Investor Service, Inc.
(or any successor thereto) or, if such index is no longer published, a
substantially similar index selected by the Board.
2.17 Bonus Interest Rate
Until December 31, 2008, the term "Bonus Interest Rate" means, with respect
to any calendar month, the monthly equivalent of three (3) percentage points
greater than the annual yield of the Moody's Average Corporate Bond Yield Index
for the preceding calendar month as published by Moody's Investor Service, Inc.
(or any successor thereto) or, if such index is no longer published, a
substantially similar index selected by the Board. Thereafter, the Bonus
Interest Rate applied to the Account balance shall be defined as: the monthly
equivalent of one (1) percentage points greater than the annual yield of the
Moody's Average Corporate Bond Yield Index for the preceding calendar month as
published by Moody's Investor Service, Inc. (or any successor thereto) or, if
such index is no longer published, a substantially similar index selected by the
Board. The Bonus Interest Rate shall be applied to all deferrals of compensation
made under this Plan provided the Executive is employed by the Bank.
2.18 Participant
"Participant" means any individual who is participating or has participated
in this Plan as provided in Article III.
2.19 Plan Benefit
"Plan Benefit" means the benefit payable to a Participant as calculated in
Article V.
2.20 Qualified Plans
"Qualified Plans" means the TriCo Bancshares Employee Stock Option Plan
and/or the Profit Sharing Plan of the Tri Counties Bank and/or any successor of
either Plan.
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 Eligibility and Participation
(a) Eligibility. Eligibility to participate in the Plan shall be limited to
those key employees of the Employer who are designated, from time to time,
by the Board of TriCo Bancshares and who have not made prior deferrals to
the Plan in excess of $250,000.
(b) Participation. An eligible employee may elect to participate in the
Plan with respect to any Deferral Period by submitting a Deferral
Commitment Agreement to the Committee by December 1 of the calendar year
immediately preceding the Deferral Period.
(c) Part-Year Participation. In the event that an employee first becomes
eligible to participate during a Deferral Period, a Deferral Commitment
Agreement must be submitted to the Committee no later than thirty (30) days
following notification of the employee of eligibility to participate, and
such Deferral Commitment Agreement shall be effective only with regard to
Compensation earned or payable following the submission of the Deferral
Commitment Agreement to the Committee.
3.2 Form of Deferral; Minimum Deferral
(a) Deferral Commitment. A Participant may elect in the Deferral Commitment
Agreement to defer any portion of his Compensation for the calendar year
following the calendar year in which the Deferral Commitment Agreement is
submitted. The amount to be deferred shall be stated and must not be less
than two thousand four hundred dollars ($2,400) during the Deferral Period.
(b) Participants Entering After January 1. In the event an employee enters
this Plan at any time other than January 1 of any calendar year, he or she
must defer at least two hundred dollars ($200) times the number of months
remaining in the Deferral Period.
3.3 Limitation on Deferral
A Participant may defer up to one hundred percent (100%) of the
Participant's Compensation until December 31, 2004. Thereafter, no future
deferrals of compensation shall be permitted under this Plan.
3.4 Modification of Deferral Commitment
Deferral Commitment shall be irrevocable except that the Committee may
permit a Participant to reduce the amount to be deferred, or waive the remainder
of the Deferral Commitment upon a finding that the Participant has suffered a
Financial Hardship.
3.5 Change in Employment Status
If the Board determines that a Participant's employment performance is no
longer at a level that deserves reward through participation in this Plan, but
does not terminate the Participant's employment with the Employer, no Deferral
Commitments may be made by such Participant after the date designated by the
Board of TriCo Bancshares.
3.6 Involuntary Termination
If a Participant is terminated for any reason identified in (a) (b) (c) or (d)
below, the Participant shall be paid all contributions made to the Plan by the
Participant. The Plan Administrator shall retain the sole discretion to
determine whether the interest on such contributions will be forfeited.
(a) Gross negligence or gross neglect
(b) The commission of a felony, misdemeanor, or any other act involving
moral turpitude, fraud, or dishonesty which has a material adverse
impact on the Bank.
(c) The willful and intentional disclosure, without authority, of any
secret or confidential information concerning the Bank which has a
material adverse impact on the Bank.
(d) The willful and intentional violation of the rules or regulations of
any regulatory agency or government authority having jurisdiction over
the Bank, which has a material adverse impact on the Bank
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT
4.1 Accounts
For record keeping purposes only, an Account shall be maintained for each
Participant. Separate subaccounts shall be maintained to the extent necessary to
properly reflect the Participant's total vested Account balance. The initial
Account balance shall be equal to the Account balance as of September 1, 1987,
of any prior or preexisting Deferral arrangement. The Committee shall inform the
Participant in writing of such arrangement's account balance as of September 1,
1987.
4.2 Elective Deferred Compensation
A Participant's Elective Deferred Compensation shall be credited to the
Participant's Account as the corresponding nondeferred portion of the
Compensation becomes or would have become payable. Any withholding of taxes or
other amounts with respect to deferred Compensation that is required by state,
federal or local law shall be withheld from the Participant's nondeferred
Compensation to the maximum extent possible with any excess being withheld from
the Participant's Account.
4.3 Employer Discretionary Contributions
Employer may make Discretionary Contributions to Participants' Accounts.
Discretionary Contributions shall be credited at such times and in such amounts
as the Board in its sole discretion shall determine. The amount of the
Discretionary Contributions shall be evidenced in a special Deferral Commitment
Agreement approved by the Board.
4.4 Qualified Plan Make-Up Credit
The Employer shall credit to each Participant's Account on the last day of
each year the difference between:
(a) The amount which would have been contributed to the Qualified
Plans if no deferrals had been made under this Plan; and
(b) The amounts actually contributed to the Qualified Plans for
such Participant.
4.5 Interest
Beginning September 1, 1987, the Accounts shall be credited monthly with
interest earned based on the Bonus Interest Rate specified in Section 2.17 if
the Participant is employed by the Bank or the Base Interest Rate specified in
Section 2.16 if the Participant is no longer employed by the Bank. Interest
earned shall be calculated as of each Determination Date based upon the average
daily balance of the Account since the preceding Determination Date and shall be
credited to the Participant's Account at that time.
4.6 Determination of Accounts
Each Participant's Account as of each Determination Date shall consist of
the balance of the Participant's Account as of the immediately preceding
Determination Date, plus the Participant's Elective Deferred Compensation
credited, any Employer Discretionary Contributions and Qualified Plan Make-Up
Credits and any interest earned, minus the amount of any distributions made
since the immediately preceding Determination Date.
4.7 Vesting of Accounts
Each Participant shall be vested in the amounts credited to such
Participant's Account and earnings thereon as follows:
(a) Amounts Deferred. A Participant shall be one hundred percent
(100%) vested at all times in the amount of Compensation elected to be
deferred under this Plan and Interest thereon, except as provided for
in Section 3.7.
(b) Employer Discretionary Contributions. Employer Discretionary
Contributions and Interest thereon shall be vested as set forth in the
special Deferral Commitment, except as provided for in Section 3.7.
(c) Qualified Plan Make-Up Credits. Qualified Plan Make-Up
Credits and Interest thereon shall be vested to the same extent that
amounts received from the underlying qualified plan are vested except
as provided for in Section 3.7.
4.8 Disability
If a Participant suffers a Disability during a Deferral Period, the
Employer will contribute all scheduled deferrals to the Participant's Account
for the remainder of the Deferral Period.
4.9 Statement of Accounts
The Committee shall submit to each Participant, within thirty (30) days
after the close of each calendar year and at such other time as determined by
the Committee, a statement setting forth the balance to the credit of the
Account maintained for a Participant.
ARTICLE V--PLAN BENEFITS
5.1 Plan Benefit
If a Participant terminates employment for any reason other than death, the
Employer shall pay a Plan Benefit equal to the Participant's Account, as
determined in accordance with Article V.
5.2 Death Benefit
Upon the death of a Participant, the Employer shall pay to the
Participant's Beneficiary an amount determined as follows:
(a) If the Participant dies after termination of employment with
the Employer, the remaining unpaid balance of the Participant's
Account, shall be paid in the same form that payments were being made
prior to the Participant's death.
(b) If the Participant dies prior to termination of employment
with the Employer, the amount payable shall be the Participant's
Account balance.
5.3 Hardship Distributions
Upon a finding that a Participant has suffered a Financial Hardship, the
Committee may, in its sole discretion, make distributions from the Participant's
Account prior to the time specified for payment of benefits under the Plan. The
amount of such distribution shall be limited to the amount reasonably necessary
to meet the Participant's requirements during the Financial Hardship.
5.4 Accelerated Distribution
Notwithstanding any other provision of the Plan, at any time after a Change
in Control or at any time following termination of Employment, a Participant
shall be entitled to receive, upon written request to the Committee, a lump sum
distribution equal to ninety percent (90%) of the vested Account balance as of
the Determination Date immediately preceding the date on which the Committee
receives the written request. The remaining balance shall be forfeited by the
Participant. The amount payable under this section shall be paid in a lump sum
within sixty-five (65) days following the receipt of the notice by the Committee
from the Participant.
5.5 Form of Benefit Payment
All Plan Benefits other than Hardship Withdrawals or Plan Benefits
attributable to Deferral Commitments after September 1, 1987, shall be paid in
the form of the Basic Benefit provided below, unless the Committee, in its sole
discretion, selects an alternative form. Any form requested by the Participant
or a Beneficiary shall be considered by the Committee, but shall not be binding.
Plan Benefits with respect to Deferral Periods before September 1, 1987, shall
be paid in the form selected by the Participant in the Deferral Commitment
submitted for such Deferral Periods. The basic and alternative methods of
payment are as follows:
(a) A single sum amount which is equal to the Account balance
payable.
(b) A period certain annuity calculated based on the balance of
the Account and the average Base Interest Rate for the twelve (12)
months immediately prior to the Retirement Date of either sixty (60),
one hundred twenty (120) or one hundred eighty (180) months duration
as specified by the Participant on the Distribution Election.
(c) Any other method which is the Actuarial Equivalent of the
Participant's Account balance.
5.6 Withholding; Payroll Taxes
The Employer shall withhold from payments made hereunder any taxes required
to be withheld from such payments under federal, state or local law. However, a
Beneficiary may elect not to have withholding for federal income tax pursuant to
Section 3405(a)(2) of Internal Revenue Code, or any successor provision thereto.
5.7 Commencement of Payments
Payment shall commence on the day selected by the Participant in the
Deferral Commitment, at the discretion of the Committee, but not later than
sixty (60) days after the end of the month in which the Participant terminates
employment with the Employer, or service on the Board. All payments shall be
made as of the first day of the month.
5.8 Payment to Guardian
If a Plan benefit is payable to a minor or a person declared incompetent or
to a person incapable of handling the disposition of his property, the Committee
may direct payment of such Plan Benefit to the guardian, legal representative or
person having the care and custody of such minor, incompetent or person. The
Committee may require proof of incompetency, minority, incapacity or
guardianship as it may deem appropriate prior to distribution of the Plan
benefit. Such distribution shall completely discharge the Committee from all
liability with respect to the benefit.
ARTICLE VI--BENEFICIARY DESIGNATION
6.1 Beneficiary Designation
Each Participant shall have the right, at any time, to designate any person
or persons as his Beneficiary or Beneficiaries (both primary as well as
secondary) to whom benefits under this Plan shall be paid in the event of
Participant's death prior to complete distribution of the benefits due under the
Plan. Each beneficiary designation shall be in written form prescribed by the
Committee and will be effective only when filed with the Committee during the
Participant's lifetime.
6.2 Amendments
Any Beneficiary designation may be changed by a Participant without the
consent of any designated Beneficiary by the filing of a new Beneficiary
Designation with the Committee. The filing of a new Beneficiary Designation form
will cancel all Beneficiary Designations previously filed. If a Participant's
Compensation is community property, any Beneficiary designation shall be valid
or effective only as permitted under applicable law.
6.3 No Beneficiary Designation
In the absence of an effective Beneficiary designation, or if all
designated Beneficiaries predecease the Participant or die prior to complete
distribution of the Participant's benefits, then the Participant's designated
Beneficiary shall be deemed to be the Participant's estate.
6.4 Effect of Payment
The payment to the deemed Beneficiary shall completely discharge Employer's
obligations under this Plan.
ARTICLE VII--ADMINISTRATION
7.1 Committee; Duties
This Plan shall be administered by the Committee, which shall consist of
not less than three (3) persons appointed by the Chairman of the Board. Any
member of the Committee may be removed at any time by the Board. Any member may
resign by delivering his written resignation to the Board. Upon the existence of
any vacancy, the Board may appoint a successor. The Committee shall have the
authority to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and decide or resolve any and
all questions including interpretations of this Plan, as may arise in connection
with the Plan. A majority of the members of the Committee shall constitute a
quorum for the transaction of business. A majority vote of the Committee members
constituting a quorum shall control any decision. Members of the Committee may
be Participants under this Plan.
7.2 Agents
The Committee may, from time to time, employ other agents and delegate to
them such administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Employer.
7.3 Binding Effect of Decisions
The decision or action of the Committee in respect of any question arising
out of or in connection with the administration, interpretation, and application
of the Plan and the rules and regulations promulgated hereunder shall be final
and conclusive and binding upon all persons having any interest in the Plan.
7.4 Indemnity of Committee
The Employer shall indemnify and hold harmless the members of the Committee
against any and all claims, loss, damage, expense, or liability arising from any
action or failure to act with respect to this Plan, except in the case of gross
negligence or willful misconduct.
ARTICLE VIII - CLAIMS PROCEDURE
8.1 Claim
Any person claiming a benefit, requesting an interpretation or ruling under
the Plan, or requesting information under the Plan shall present the request in
writing to the Committee, which shall respond in writing within thirty (30)
days.
8.2 Denial of Claim
If the claim or request is denied, the written notice of denial shall
state:
(a) The reasons for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
8.3 Review of Claim
Any person whose claim or request is denied or who has not received a
response within thirty (30) days may request review by notice given in writing
to the Committee. The claim or request shall be reviewed by the Committee who
may, but shall not be required to, grant the claimant a hearing. On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.
8.4 Final Decision
The decision on review shall normally be made within sixty (60) days. If an
extension of time is required for a hearing or other specified circumstances,
the claimant shall be notified and the time limit shall be one hundred twenty
(120) days. The decision shall be in writing and shall state the reasons and the
relevant plan provisions. All decisions on review shall be final and bind all
parties concerned.
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment
The Board may at any time amend the Plan in whole or in part, provided,
however, that no amendment shall be effective to decrease or restrict the amount
accrued to the date of Amendment in any Account or to change the Interest Rate
credited to amounts already held in an Account under the Plan. Upon a change in
the Interest Rate, thirty (30) days' advance written notice shall be given to
each Participant and any deferral after the effective date of the change shall
be held in a separate Account which shall be credited with the new Interest
Rate.
9.2 Employer's Right to Terminate
The Board may at any time partially or completely terminate the Plan if, in
its judgment, the tax, accounting, or other effects of the continuance of the
Plan, or potential payments thereunder would not be in the best interests of the
Employer.
(a) Partial Termination. The Board may partially terminate the
Plan by instructing the Committee not to accept any additional
Deferral Commitments. In the event of such a Partial Termination, the
Plan shall continue to operate and be effective with regard to
Deferral Commitments entered into prior to the effective date of such
Partial Termination.
(b) Complete Termination. The Board may completely terminate the
Plan by instructing the Committee not to accept any additional
Deferral Commitments, and by terminating all ongoing Deferral
Commitments. In the event of Complete Termination, the Plan shall
cease to operate and the Employer shall pay out to each Participant
their Account as if that Participant had terminated service as of the
effective date of the Complete Termination. Payments shall be made in
equal annual installments over the period listed below, based on the
Account balance:
Appropriate Account Balance Payout Period
----------------------------- -------------
Less than $10,000 1 Year
$10,000 but less than $50,000 3 Years
More than $50,000 5 Years
Interest earned on the unpaid balance in each Participant's Account shall
be the interest Rate in effect on the Determination Date immediately preceding
the effective date of the Complete Termination.
ARTICLE X--MISCELLANEOUS
10.1 Unfunded Plan
This Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly-compensated employees" within the meaning of Sections 201, 301 and 401 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
therefore to be exempt from the provisions of Parts 2, 3, and 4 of Title I of
ERISA. Accordingly, the Plan shall terminate and no further benefits shall
accrue hereunder in the event it is determined by a court of competent
jurisdiction or by an opinion of counsel that the Plan constitutes an employee
pension benefit plan within the meaning of Section 3(2) of ERISA which is not so
exempt. In the event of a termination under this Section 10.1, all ongoing
Deferral Commitments shall terminate, no additional Deferral Commitments will be
accepted by the Committee, and the amount of each Participant's vested Account
balance shall be distributed to such Participant at such time and in such manner
as the Committee, in its sole discretion, determines.
10.2 Unsecured General Creditor
In the event of Employer's insolvency, Participants and their
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of Employer, nor shall they
be Beneficiaries of, or have any rights, claims or interests in any life
insurance policies, annuity contracts or the proceeds therefrom owned or which
may be acquired by Employer. In that event, any and all of Employer's assets and
policies shall be, and remain, the general, un-pledged, unrestricted assets of
Employer. Employer's obligation under the Plan shall be that of an unfunded and
unsecured promise of Employer to pay money in the future.
10.3 Trust Fund
The Employer shall be responsible for the payment of all benefits provided
under the Plan. At its discretion, the Employer may establish one (1) or more
trusts, with such trustees as the Board may approve, for the purpose of
providing for the payment of such benefits. Such trust or trust may be
irrevocable, but the assets thereof shall be subject to the claims of the
Employer's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto, but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Employer.
10.4 Nonassignability
Neither a Participant nor any other person shall have any right to commute,
sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber,
transfer, hypothecate or convey in advance of actual receipt the amounts, if
any, payable hereunder, or any part thereof, which are, and all rights to which
are, expressly declared to be unassignable and nontransferable. No part of the
amounts payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.
10.5 Not a Contract of Employment
The terms and conditions of this Plan shall not be deemed to constitute a
contract of employment between the Employer and the Participant, and the
Participant (or his Beneficiary) shall have no rights against the Employer
except as may otherwise be specifically provided herein. Moreover, nothing in
this Plan shall be deemed to give a Participant the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discipline or discharge him at any time.
10.6 Protective Provisions
A Participant will cooperate with the Employer by furnishing any and all
information requested by the Employer, in order to facilitate the payment of
benefits hereunder, and by taking such physical examinations as the Employer may
deem necessary and taking such other actions as may be requested by the
Employer.
10.7 Terms
Whenever any words are used herein the masculine, they shall be construed
as though they were used in the feminine in all cases where they would so apply;
and wherever any words are used herein in the singular or in the plural, they
shall be construed as though they were used in the plural or the singular, as
the case may be, in all cases where they would so apply.
10.8 Captions
The captions of the articles, sections, and paragraphs of this Plan are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
10.9 Governing Law
The provisions of this Plan shall be construed, interpreted, and governed
in all respects in accordance with applicable federal law and, to the extent not
preempted by such federal law, in accordance with the laws of the State of
California.
10.10 Validity
In case any provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts
hereof, but this Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
10.11 Notice
Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, to any member of the Committee or the Secretary of
the Employer. Such notice shall be deemed given as of the date of delivery or,
if such delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
10.12 Successors
The provisions of this Plan shall bind and inure to the benefit of the
Employer and its successors and assigns. The term successors as used herein
shall include any corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or substantially all of
the business and assets of TriCo Bancshares, and successors of any such
corporation or other business entity.
This Amendment is made and effective as of January 1, 2005.
TRI COUNTIES BANK and TRICO BANCSHARES
By: /s/ William J. Casey
-----------------------------------------
William Casey, Chairman
By:
-----------------------------------------
Secretary
EXHIBIT 1
Deferral Commitment Agreement
The 1987 Tri Counties Bank Executive Deferred Compensation Plan
(as restated January 1, 2005)
--------------------------------------------------------------------------------
No Deferrals May be Made Under This Plan After 12/31/04
---------------------------------- ----------------------
Name (Last, First, Middle Initial) Social Security Number
I acknowledge that I have been offered an opportunity to participate in the
Deferred Compensation Plan (the "Plan"). I will participate in the Plan and
irrevocably authorize the Bank to make the appropriate deductions, as indicated
on this Agreement from my compensation. Capitalized terms in this Agreement
shall have the same meanings as defined in the Tri Counties Bank Executive
Deferred Compensation Plan as restated January 1, 2005).
DEFERRAL ELECTION
I elect to participate in the Plan as follows:
Salary I elect to defer (complete one blank only) $______ or_____%
of my Salary earned in _______ (insert year).
Bonus I elect to defer $_____ or _____% of my Bonus, earned in
_______ (insert year), not to exceed $--------.
Commissions I elect to defer $ _____ or _____% of my Commissions, earned
in _______ (insert year), not to exceed $________.
No Participation I elect to not participate in the _______ (insert year) Plan
Year ___________.
ACKNOWLEDGED AND ACCEPTED:
------------------------------------ -------------------------------
Participant Signature Date Print Name
------------------------------------- -------------------------------
Signature of Bank Officer Date Print Name
EXHIBIT 2
Distribution Election
The 1987 Tri Counties Bank Executive Deferred Compensation Plan
(as restated January 1, 2005)
Pursuant to the Provisions of the Plan (as restated effective January 1, 2005),
I hereby elect to have the balance in my Deferred Compensation Account paid to
me as designated below:
In lump sum on __________ (insert date).
------
In an annuity payable in sixty (60) equal monthly installments
------ commencing __________ (insert date) calculated at the time of
distribution based on the average Base Interest Rate in the
twelve months immediately preceding the commencement of payments.
In an annuity payable in one hundred twenty (120) equal monthly
------ installments commencing __________ (insert date) calculated at
the time of distribution based on the average Base Interest Rate
in the twelve months immediately preceding the commencement of
payments.
In an annuity payable in one hundred eighty (180) equal monthly
------ installments commencing __________ (insert date) calculated at
the time of distribution based on the average Base Interest Rate
in the twelve months immediately preceding the commencement
Signed: ; Print Name
----------------------- -----------------------
Dated: ,
----------------
EXHIBIT 3
Beneficiary Designation Form
The 1987 Tri Counties Bank Executive Deferred Compensation Plan
I. PRIMARY DESIGNATION
(You may refer to the beneficiary designation information prior to
completion of this form.)
A. Person(s) as a Primary Designation:
(Please indicate the percentage for each beneficiary.)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
B. Estate as a Primary Designation:
My Primary Beneficiary is The Estate of
--------------------------------------
as set forth in the last will and testament dated the day of
-----
, and any codicils thereto.
------------- -----
C. Trust as a Primary Designation:
Name of the Trust:
------------------------------------------------------------
Execution Date of the Trust: / /
----- ----- ---------
Name of the Trustee:
-----------------------------------------------------------
Beneficiary(ies) of the Trust (please indicate the percentage for each
beneficiary):
-------------------------------------------------------------------
--------------------------------------------------------------------------------
Is this an Irrevocable Life Insurance Trust? Yes No
-------- --------
(If yes and this designation is for a Split Dollar agreement, an Assignment of
Rights form should be completed.)
II. SECONDARY (CONTINGENT) DESIGNATION
A. Person(s) as a Secondary (Contingent)Designation:
(Please indicate the percentage for each beneficiary.)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
B. Estate as a Secondary (Contingent) Designation:
My Secondary Beneficiary is The Estate of
--------------------------------------
as set forth in my last will and testament dated the day of
-----
, and any codicils thereto.
------------- -----
C. Trust as a Secondary (Contingent) Designation:
Name of the Trust:
------------------------------------------------------------
Execution Date of the Trust: / /
----- ----- ---------
Name of the Trustee:
-----------------------------------------------------------
Beneficiary(ies) of the Trust (please indicate the percentage for each
beneficiary):
-------------------------------------------------------------------
--------------------------------------------------------------------------------
All sums payable under this Agreement by reason of my death shall be paid to the
Primary Beneficiary(ies), if he or she survives me, and if no Primary
Beneficiary(ies) shall survive me, then to the Secondary (Contingent)
Beneficiary(ies). This beneficiary designation is valid until the participant
notifies the bank in writing.
--------------------------------------- ----------------------
Participant Signature Date
Exhibit 10.10
Tri Counties Bank Deferred Compensation Plan for Directors effective January 1,
2005.
TABLE OF CONTENTS
PAGE
ARTICLE I--PURPOSE 5
ARTICLE II--DEFINITIONS 5
2.1 Actuarial Equivalent 5
2.2 Account 5
2.3 Beneficiary 5
2.4 Board 5
2.5 Change in Control 5
2.6 Committee 6
2.7 Compensation 6
2.8 Deferral Commitment 6
2.9 Deferral Period 6
2.10 Determination Date 6
2.11 Disability 6
2.12 Distribution Election 7
2.13 Elective Deferred Compensation 7
2.14 Financial Hardship 7
2.15 Base Interest Rate 7
2.16 Bonus Interest Rate
2.17 Participant 7
2.18 Plan Benefit 7
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS 8
3.1 Eligibility and Participation 8
3.2 Form of Deferral; Minimum Deferral 8
3.3 Limitation on Deferral 8
3.4 Modification of Deferral Commitment 8
3.5 Involuntary Removal 8
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT 9
4.1 Accounts 9
4.2 Elective Deferred Compensation 9
4.3 Employer Discretionary Contributions 9
4.4 Interest 9
4.5 Determination of Accounts 9
4.6 Vesting of Accounts 10
4.7 Statement of Accounts 10
TABLE OF CONTENTS
PAGE
ARTICLE V--PLAN BENEFITS 10
5.1 Plan Benefit 10
5.2 Death Benefit 10
5.3 Hardship Distributions 11
5.4 Accelerated Distribution 11
5.5 Form of Benefit Payment 11
5.6 Withholding; Payroll Taxes 11
5.7 Commencement of Payments 11
5.8 Payment to Guardian 11
ARTICLE VI--BENEFICIARY DESIGNATION 12
6.1 Beneficiary Designation 12
6.2 Amendments 12
6.3 No Beneficiary Designation 12
6.4 Effect of Payment 12
ARTICLE VII--ADMINISTRATION 12
7.1 Committee; Duties 12
7.2 Agents 12
7.3 Binding Effect of Decisions 13
7.4 Indemnity of Committee 13
ARTICLE VIII--CLAIMS PROCEDURE 13
8.1 Claim 13
8.2 Denial of Claim 13
8.3 Review of Claim 13
8.4 Final Decision 13
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN 14
9.1 Amendment 14
9.2 Employer's Right to Terminate 14
TABLE OF CONTENTS
PAGE
ARTICLE X--MISCELLANEOUS 14
10.1 Unfunded Plan 14
10.2 Unsecured General Creditor 15
10.3 Trust Fund 15
10.4 Nonassignability 15
10.5 Not a Contract of Employment 15
1.6 Protective Provisions 15
10.7 Terms 16
10.8 Captions 16
10.9 Governing Law 16
10.10 Validity 16
10.11 Notice 16
10.12 Successors 16
EXHIBIT 1: Deferral Commitment Agreement 18
EXHIBIT 2. Distribution Election 19
EXHIBIT 3: Beneficiary Designation Form 20
TRI COUNTIES BANK
DEFERRED COMPENSATION PLAN FOR DIRECTORS
This restatement of the Tri Counties Bank Deferred Compensation Plan for
Directors, effective January 1, 2005 applies only to those Participants in the
Plan who serve as Directors of TriCo Bancshares or its affiliates or
subsidiaries as of this date. Any retired Participant in this Plan will continue
to receive benefits pursuant to the terms of the Plan as adopted on April 1,
1992.
ARTICLE I--PURPOSE
The purpose of this Deferred Compensation Plan for Directors (the "Plan")
is to provide current tax planning opportunities as well as supplemental funds
for retirement or death for directors of TriCo Bancshares ("Bank"). It is
intended that the Plan will aid in retaining and attracting directors of
exceptional ability by providing them with these benefits. This Plan will be
effective as of April 1, 1992.
ARTICLE II--DEFINITIONS
For the purposes of this Plan, the following terms shall have the meanings
indicated, unless the context clearly indicates otherwise:
2.1 Actuarial Equivalent
"Actuarial Equivalent" means equivalence in value between two (2) or more
forms and/or times of payment based on a determination by an actuary chosen by
the Bank, using sound actuarial assumptions at the time of such determination.
2.2 Account
"Account" means the Account as maintained by the Employer in accordance
with Article IV with respect to any deferral of Compensation pursuant to this
Plan. A Participant's Account shall be utilized solely as a device for the
determination and measurement of the amounts to be paid to the Participant
pursuant to the Plan. A Participant's Account shall not constitute or be treated
as a trust fund of any kind.
2.3 Beneficiary
"Beneficiary" means the person, persons or entity entitled under Article VI
to receive any Plan benefits payable after a Participant's death.
2.4 Board
"Board" means the Board of Directors of the Employer.
2.5 Change in Control
A "Change in Control" shall occur:
(a) Upon TriCo Bancshares' knowledge that any person (as such
term is used in Sections 13(d) and 14(d) (2) of the Securities
Exchange Act of 1934, as amended) is or becomes "the beneficial owner"
(as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of TriCo Bancshares' shares representing forty percent
(40%) or more of the combined voting power of the then outstanding
securities; or
(b) Upon the first purchase of the Common Stock of TriCo
Bancshares pursuant to a tender or exchange offer (other than a tender
or exchange offer made by TriCo Bancshares); or
(c) Upon the approval by the stockholders of TriCo Bancshares of
a merger or con-solidation (other than a merger or consolidation in
which TriCo Bancshares is the surviving corporation and which does not
result in any reclassification or reorganization of TriCo Bancshares'
then outstanding securities), a sale or disposition of all or
substantially all of TriCo Bancshares' assets or a plan of liquidation
or dissolution of TriCo Bancshares; or
(d) If, during any period of two (2) consecutive years,
individuals who at the begin-ning of such period constitute the Board
of Directors of TriCo Bancshares cease for any reason to constitute at
least a majority thereof, unless the election or nomination for the
election by the stockholders of TriCo Bancshares of each new director
was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who were directors at the beginning of the
period.
2.6 Committee
"Committee" means the Compensation and Benefits Committee of the Board of
Directors of TriCo Bancshares.
2.7 Compensation
"Compensation" means the retainer, meeting and Committee chairmanship fees
paid to Participant by the Employer during the calendar year with respect to
duties performed as a member of the Board before reduction for any amounts
deferred pursuant to this Plan. Compensation does not include expense
reimbursements, any form of noncash compensation or benefits.
2.8 Deferral Commitment
"Deferral Commitment" means an election to defer Compensation made by a
Participant pursuant to Article III and for which a separate Deferral Commitment
Agreement has been submitted by the Participant to the Committee.
2.9 Deferral Period
"Deferral Period" means the period over which a Participant has elected to
defer a portion of his Compensation. Each calendar year shall be a separate
Deferral Period, provided that the Deferral Period may be modified pursuant to
paragraph 3.4.
2.10 Determination Date
"Determination Date" means the last day of each calendar month.
2.11 Disability
"Disability" means a physical or mental condition which, in the opinion of
the Committee, permanently prevents the Director from satisfactorily performing
the Director's usual duties for the Bank. The Committee's decision as to
Disability will be based upon medical reports and/or other evidence satisfactory
to the Committee. In no event shall a Disability be deemed to occur or to
continue after a Participant's Normal Retirement Date.
2.12 Distribution Election
The term "Distribution Election" shall mean the form of distribution of the
Account selected by the Participant on most recent Distribution Election
provided such Distribution Election has been made at least one full calendar
year prior to the date of the Participant's first Plan Distribution.
2.13 Elective Deferred Compensation
The amount of Compensation that a Participant elects to defer pursuant to a
Deferral Commitment.
2.14 Financial Hardship
"Financial Hardship" means an immediate and heavy financial need of the
Participant, determined by the Committee on the basis of information supplied by
the Participant in accordance with the standards set forth in the applicable
treasury regulations promulgated under Section 401(k) of the Internal Revenue
Code, or such other standards as are, from time to time, established by the
Committee.
2.15 Base Interest Rate
"Base Interest Rate" means, with respect to any calendar month, the monthly
equivalent of the annual yield of the Moody's Average Corporate Bond Yield Index
for the preceding calendar month as published by Moody's Investor Service, Inc.
(or any successor thereto) or, if such index is no longer published, a
substantially similar index selected by the Board.
2.16 Bonus Interest Rate
Until December 31, 2008, the term "Bonus Interest Rate" means, with respect
to any calendar month, the monthly equivalent of three (3) percentage points
greater than the annual yield of the Moody's Average Corporate Bond Yield Index
for the preceding calendar month as published by Moody's Investor Service, Inc.
(or any successor thereto) or, if such index is no longer published, a
substantially similar index selected by the Board. Thereafter, the Bonus
Interest Rate applied to the Account balance shall be defined as: the monthly
equivalent of one (1) percentage points greater than the annual yield of the
Moody's Average Corporate Bond Yield Index for the preceding calendar month as
published by Moody's Investor Service, Inc. (or any successor thereto) or, if
such index is no longer published, a substantially similar index selected by the
Board. The Bonus Interest Rate shall be applied to all deferrals of compensation
made under this Plan provided the Participant continues to serve as a Director
of the Bank.
2.17 Participant
"Participant" means any individual who is participating or has participated
in this Plan as provided in Article III.
2.18 Plan Benefit
"Plan Benefit" means the benefit payable to a Participant as
calculated in Article V.
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 Eligibility and Participation
(a) Eligibility. Eligibility to participate in the Plan shall be
limited to directors of the Employer.
(b) Participation. A director may elect to participate in the
Plan with respect to any Deferral Period by submitting a Deferral
Commitment Agreement to the Committee by December 1 of the calendar
year immediately preceding the Deferral Period.
(c) Part-Year Participation. In the event that a director first
becomes eligible to participate during a Deferral Period, a Deferral
Commitment Agreement must be submitted to the Committee no later than
thirty (30) days following notification of the director of eligibility
to participate, and such Agreement shall be effective only with regard
to Compensation earned or payable following the submission of the
Agreement to the Committee.
3.2 Form of Deferral; Minimum Deferral
(a) Deferral Commitment. A Participant may elect in the Deferral
Commitment Agreement to defer any portion of his Compensation for the
calendar year following the calendar year in which the Agreement is
submitted. The amount to be deferred shall be stated as a percentage
and must not be less than two thousand four hundred dollars ($2,400)
during the Deferral Period.
(b) Participants Entering After January 1. In the event a
director enters this Plan at any time other than January 1 of any
calendar year, he or she must defer at least two hundred dollars
($200) times the number of months remaining in the Deferral Period.
3.3 Limitation on Deferral
Until December 31, 2004, a Participant may defer up to one hundred percent
(100%) of the Participant's Compensation to the Plan. Thereafter, no future
deferrals of Compensation can be made to this Plan.
3.4 Modification of Deferral Commitment
Deferral Commitment shall be irrevocable except that the Committee may
permit a Participant to reduce the amount to be deferred, or waive the remainder
of the Deferral Commitment upon a finding that the Participant has suffered a
Financial Hardship.
3.5 Involuntary Removal
If a Participant's service is terminated as a member of the Board of
Directors of TriCo Bancshares or an affiliate or subsidiary for any reason
identified in (a) (b) (c) or (d) below, the Participant shall be paid all
contributions made to the Plan by the Participant. The Plan Administrator shall
retain the sole discretion to determine whether the interest on such
contributions will be forfeited.
(a) Gross negligence or gross neglect
(b) The commission of a felony, misdemeanor, or any other act
involving moral turpitude, fraud, or dishonesty which has a
material adverse impact on the Bank.
(c) The willful and intentional disclosure, without authority, of any
secret or confidential information concerning the Bank which has
a material adverse impact on the Bank.
(d) The willful and intentional violation of the rules or regulations
of any regulatory agency or government authority having
jurisdiction over the Bank, which has a material adverse impact
on the Bank
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT
4.1 Accounts
For record keeping purposes only, an Account shall be maintained for each
Participant. For each Participant the initial Account balance shall be equal to
the Account balance, if any, immediately preceding the effective date of this
Plan, under the Tri Counties Bank Deferred Compensation Plan for Directors as
restated January 1, 2004.
4.2 Elective Deferred Compensation
A Participant's Elective Deferred Compensation shall be credited to the
Participant's Account as the corresponding nondeferred portion of the
Compensation becomes or would have become payable. Any withholding of taxes or
other amounts with respect to deferred Compensation that is required by state,
federal or local law shall be withheld from the Participant's nondeferred
Compensation to the maximum extent possible with any excess being withheld from
the Participant's Account.
4.3 Employer Discretionary Contributions
Employer may make Discretionary Contributions to Participants' Accounts.
Discretionary Contributions shall be credited at such times and in such amounts
as the Board in its sole discretion shall determine. The amount of the
Discretionary Contributions shall be evidenced in a special Deferral Commitment
Agreement approved by the Board.
4.4 Interest
Beginning April 1, 1992, the Accounts shall be credited monthly with
interest earned based on the Bonus Interest Rate specified in Section 2.16 if
the Participant continues to serve as a Director of the Bank or the Base
Interest Rate specified in Section 2.15 if the Participant is no longer a
Director of the Bank. Interest earned shall be calculated as of each
Determination Date based upon the average daily balance of the Account since the
preceding Determination Date and shall be credited to the Participant's Account
at that time.
4.5 Determination of Accounts
Each Participant's Account as of each Determination Date shall consist of
the balance of the Participant's Account as of the immediately preceding
Determination Date, plus the Participant's Elective Deferred Compensation
credited and any Employer Discretionary Contributions and any interest earned,
minus the amount of any distributions made since the immediately preceding
Determination Date.
4.6 Vesting of Accounts
Each Participant shall be vested in the amounts credited to such
Participant's Account and earnings thereon as follows:
(a) Amounts Deferred. A Participant shall be one hundred percent
(100%) vested at all times in the amount of Compensation elected to be
deferred under this Plan and Interest thereon, except as provided for
in Section 3.5.
(b) Employer Discretionary Contributions. Employer Discretionary
Contributions and Interest thereon shall be vested as set forth in the
special Deferral Commitment Agreement, except as provided for in
Section 3.5.
4.7 Statement of Accounts
The Committee shall submit to each Participant, within thirty (30) days
after the close of each calendar year and at such other time as determined by
the Committee, a statement setting forth the balance to the credit of the
Account maintained for a Participant.
ARTICLE V--PLAN BENEFITS
5.1 Plan Benefit
If a Participant terminates service on the Board, for any reason other than
death, the Employer shall pay a Plan Benefit equal to the Participant's Account,
as determined in accordance with Article IV.
5.2 Death Benefit
Upon the death of a Participant, the Employer shall pay to the
Participant's Beneficiary an amount determined as follows:
(a) If the Participant dies after termination of service with the
Employer, the remaining unpaid balance of the Participant's Account,
shall be paid in the same form that payments were being made prior to
the Participant's death.
(b) If the Participant dies prior to termination of service with
the Employer, the amount payable shall be the Participant's Account
balance.
5.3 Hardship Distributions
Upon a finding that a Participant has suffered a Financial Hardship, the
Committee may, in its sole discretion, make distributions from the Participant's
Account prior to the time specified for payment of benefits under the Plan. The
amount of such distribution shall be limited to the amount reasonably necessary
to meet the Participant's requirements during the Financial Hardship.
5.4 Accelerated Distribution
Notwithstanding any other provision of the Plan, at any time after a Change
in Control or at any time following termination of service on the Board, a
Participant shall be entitled to receive, upon written request to the Committee,
a lump sum distribution equal to ninety percent (90%) of the vested Account
balance as of the Determination Date.
5.5 Form of Benefit Payment
All Plan Benefits other than Hardship or Plan Benefits attributable to
Deferral Commitments after April 1, 1992, shall be paid in the form of the Basic
Benefit provided below, unless the Committee, in its sole discretion, selects an
alternative form. Any form requested by the Participant or a Beneficiary shall
be considered by the Committee, but shall not be binding. Plan Benefits with
respect to Deferral Periods before April 1, 1992, shall be paid in the form
selected by the Participant in the Distribution Election submitted for such
Deferral Periods. The basic and alternative methods of payment are as follows:
(a) A single sum amount which is equal to the Account balance
payable.
(b) A period certain annuity calculated based on the balance of
the Account and the average Base Interest Rate for the twelve (12)
months immediately prior to the Retirement Date of either sixty (60),
one hundred twenty (120) or one hundred eighty (180) months duration
as specified by the Participant on the Distribution Election.
(c) Any other method which is the Actuarial Equivalent of the
Participant's Account balance. The basic and alternative methods of
payment are as follows:
5.6 Withholding Payroll Taxes
The Employer shall withhold from payments made hereunder any taxes required
to be withheld from such payments under federal, state or local law. However, a
Beneficiary may elect not to have withholding for federal income tax pursuant to
Section 3405(a)(2) of Internal Revenue Code, or any successor provision thereto.
5.7 Commencement of Payments
Payment shall commence on the day selected by the Participant in the
Distribution Election, at the discretion of the Committee, but not later than
sixty (60) days after the end of the month in which the Participant terminates
employment with the Employer, or service on the Board. All payments shall be
made as of the first day of the month.
5.8 Payment to Guardian
If a Plan benefit is payable to a minor or a person declared incompetent or
to a person incapable of handling the disposition of his property, the Committee
may direct payment of such Plan Benefit to the guardian, legal representative or
person having the care and custody of such minor, incompetent or person. The
Committee may require proof of incompetency, minority, incapacity or
guardianship as it may deem appropriate prior to distribution of the Plan
benefit. Such distribution shall completely discharge the Committee from all
liability with respect to the benefit.
ARTICLE VI--BENEFICIARY DESIGNATION
6.1 Beneficiary Designation
Each Participant shall have the right, at any time, to designate any person
or persons as his Beneficiary or Beneficiaries (both primary as well as
secondary) to whom benefits under this Plan shall be paid in the event of
Participant's death prior to complete distribution of the benefits due under the
Plan. Each beneficiary designation shall be in written form prescribed by the
Committee and will be effective only when filed with the Committee during the
Participant's lifetime.
6.2 Amendments
Any Beneficiary designation may be changed by a Participant without the
consent of any designated Beneficiary by the filing of a new Beneficiary
Designation with the Committee. The filing of a new Beneficiary Designation form
will cancel all Beneficiary Designations previously filed. If a Participant's
Compensation is community property, any Beneficiary designation shall be valid
or effective only as permitted under applicable law.
6.3 No Beneficiary Designation
In the absence of an effective Beneficiary designation, or if all
designated Beneficiaries predecease the Participant or die prior to complete
distribution of the Participant's benefits, then the Participant's designated
Beneficiary shall be deemed to be the Participant's estate.
6.4 Effect of Payment
The payment to the deemed Beneficiary shall completely discharge Employer's
obligations under this Plan.
ARTICLE VII--ADMINISTRATION
7.1 Committee; Duties
This Plan shall be administered by the Committee, which shall consist of
not less than three (3) persons appointed by the Chairman of the Board. Any
member of the Committee may be removed at any time by the Board. Any member may
resign by delivering his written resignation to the Board. Upon the existence of
any vacancy, the Board may appoint a successor. The Committee shall have the
authority to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and decide or resolve any and
all questions including interpretations of this Plan, as may arise in connection
with the Plan. A majority of the members of the Committee shall constitute a
quorum for the transaction of business. A majority vote of the Committee members
constituting a quorum shall control any decision. Members of the Committee may
be Participants under this Plan.
7.2 Agents
The Committee may, from time to time, employ other agents and delegate to
them such administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Employer.
7.3 Binding Effect of Decisions
The decision or action of the Committee in respect of any question arising
out of or in connection with the administration, interpretation, and application
of the Plan and the rules and regulations promulgated hereunder shall be final
and conclusive and binding upon all persons having any interest in the Plan.
7.4 Indemnity of Committee
The Employer shall indemnify and hold harmless the members of the Committee
against any and all claims, loss, damage, expense, or liability arising from any
action or failure to act with respect to this Plan, except in the case of gross
negligence or willful misconduct.
ARTICLE VIII--CLA1MS PROCEDURE
8.1 Claim
Any person claiming a benefit, requesting an interpretation or ruling under
the Plan, or requesting information under the Plan shall present the request in
writing to the Committee, which shall respond in writing within thirty (30)
days.
8.2 Denial of Claim
If the claim or request is denied, the written notice of denial shall
state:
(a) The reasons for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
8.3 Review of Claim
Any person whose claim or request is denied or who has not received a
response within thirty (30) days may request review by notice given in writing
to the Committee. The claim or request shall be reviewed by the Committee who
may, but shall not be required to, grant the claimant a hearing. On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.
8.4 Final Decision
The decision on review shall normally be made within sixty (60) days. If an
extension of time is required for a hearing or other specified circumstances,
the claimant shall be notified and the time limit shall be one hundred twenty
(120) days. The decision shall be in writing and shall state the reasons and the
relevant plan provisions. All decisions on review shall be final and bind all
parties concerned.
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment
The Board may at any time amend the Plan in whole or in part, provided,
however, that no amendment shall be effective to decrease or restrict the amount
accrued to the date of Amendment in any Account or to change the Interest Rate
credited to amounts already held in an Account under the Plan. Upon a change in
the Interest Rate, thirty (30) days' advance written notice shall be given to
each Participant and any deferral after the effective date of the change shall
be held in a separate Account which shall be credited with the new Interest
Rate.
9.2 Bank's Right to Terminate
The Board may at any time partially or completely terminate the Plan if, in
its judgment, the tax, accounting, or other effects of the continuance of the
Plan, or potential payments thereunder would not be in the best interests of the
Employer.
(a) Partial Termination. The Board may partially terminate the
Plan by instructing the Committee not to accept any additional
Deferral Commitments. In the event of such a Partial Termination, the
Plan shall continue to operate and be effective with regard to
Deferral Commitments entered into prior to the effective date of such
Partial Termination.
(b) Complete Termination. The Board may completely terminate the
Plan by instructing the Committee not to accept any additional
Deferral Commitments, and by terminating all ongoing Deferral
Commitments. In the event of Complete Termination, the Plan shall
cease to operate and the Employer shall pay out to each Participant
their Account as if that Participant had terminated service as of the
effective date of the Complete Termination. Payments shall be made in
equal annual installments over the period listed below, based on the
Account balance:
Appropriate Account Balance Payout Period
------------------------------------------------------------------
Less than $10,000 1 Year
$10,000 put less than $50,000 3 Years
More than $50,000 5 Years
------------------------------------------------------------------
Interest earned on the unpaid balance in each Participant's Account shall
be the Interest Rate in effect on the Determination Date immediately preceding
the effective date of the Complete Termination.
ARTICLE X--MISCELLANEOUS
10.1 Unfunded Plan
This Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly-compensated employees" within the meaning of Sections 201, 301 and 401 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
therefore to be exempt from the provisions of Parts 2, 3, and 4 of Title I of
ERISA. Accordingly, the Plan shall terminate and no further benefits shall
accrue hereunder in the event it is determined by a court of competent
jurisdiction or by an opinion of counsel that the Plan constitutes an employee
pension benefit plan within the meaning of Section 3(2) of ERISA which is not so
exempt. In the event of a termination under this Section 10.1, all ongoing
Deferral Commitments shall terminate, no additional Deferral Commitments will be
accepted by the Committee, and the amount of each Participant's vested Account
balance shall be distributed to such Participant at such time and in such manner
as the Committee, in its sole discretion, determines.
10.2 Unsecured General Creditor
In the event of Employer's insolvency, Participants and their
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of Employer, nor shall they
be Beneficiaries of, or have any rights, claims or interests in any life
insurance policies, annuity contracts or the proceeds therefrom owned or which
may be acquired by Employer. In that event, any and all of Employer's assets and
policies shall be, and remain, the general, unpledged, unrestricted assets of
Employer. Employer's obligation under the Plan shall be that of an unfunded and
unsecured promise of Employer to pay money in the future.
10.3 Trust Fund
The Employer shall be responsible for the payment of all benefits provided
under the Plan. At its discretion, the Employer may establish one (1) or more
trusts, with such trustees as the Board may approve, for the purpose of
providing for the payment of such benefits. Such trust or trusts maybe
irrevocable, but the assets thereof shall be subject to the claims of the
Employer's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto, but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Employer.
10.4 Nonassignability
Neither a Participant nor any other person shall have any right to commute,
sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber,
transfer, hypothecate or convey in advance of actual receipt the amounts, if
any, payable hereunder, or any part thereof, which are, and all rights to which
are, expressly declared to be unassignable and nontransferable. No part of the
amounts payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.
10.5 Not a Contract of Employment
The terms and conditions of this Plan shall not be deemed to constitute a
contract of employment between the Employer and the Participant, and the
Participant (or his Beneficiary) shall have no rights against the Employer
except as may otherwise be specifically provided herein. Moreover, nothing in
this Plan shall be deemed to give a Participant the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discipline or discharge him at any time.
10.6 Protective Provisions
A Participant will cooperate with the Employer by furnishing any and all
information requested by the Employer, in order to facilitate the payment of
benefits hereunder, and by taking such physical examinations as the Employer may
deem necessary and taking such other actions as may be requested by the
Employer.
10.7 Terms
Whenever any words are used herein the masculine, they shall be construed
as though they were used in the feminine in all cases where they would so apply;
and wherever any words are used herein in the singular or in the plural, they
shall be construed as though they were used in the plural or the singular, as
the case may be, in all cases where they would so apply.
10.8 Captions
The captions of the articles, sections, and paragraphs of this Plan are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
10.9 Governing Law
The provisions of this Plan shall be construed, interpreted, and governed
in all respects in accordance with applicable federal law and, to the extent not
preempted by such federal law, in accordance with the laws of the State of
California.
10.10 Validity
In case any provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts
hereof, but this Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
10.11 Notice
Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient in writing and hand delivered, or sent by
registered or certified mail, to any member of the Committee or the Secretary of
the Employer. Such notice shall be deemed given as of the date of delivery or,
if such delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
10.12 Successors
The provisions of this Plan shall bind and inure to the benefit of the
Employer and its successors and assigns. The term successors as used herein
shall include any corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or substantially all of
the business and assets of TriCo Bancshares, and successors of any such
corporation or other business entity.
TRICO BANCSHARES
By:
--------------------------------------
Chairman
By:
--------------------------------------
Secretary
Dated:
------------------------
EXHIBIT 1
Deferral Commitment Agreement
The 1992 Tri Counties Bank Deferred Compensation Plan for Directors
(as restated January 1, 2005)
--------------------------------------------------------------------------------
No Deferrals May be Made Under This Plan After 12/31/04
---------------------------------- ----------------------
Name (Last, First, Middle Initial) Social Security Number
I acknowledge that I have been offered an opportunity to participate in the
Deferred Compensation Plan (the "Plan"). I will participate in the Plan and
irrevocably authorize the Bank to make the appropriate deductions, as indicated
on this Agreement from my compensation. Capitalized terms in this Agreement
shall have the same meanings as defined in the Tri Counties Bank Deferred
Compensation Plan for Directors as restated January 1, 2005).
DEFERRAL ELECTION
I elect to participate in the Plan as follows:
Fees I elect to defer (complete one blank only) $______ or
_____% of my ______ (insert year) Fees.
No Participation I elect to not participate in the ______ (insert year)
Plan Year _______ (initial).
ACKNOWLEDGED AND ACCEPTED:
----------------------------------------
Participant Name Print Name
---------------------------------------- ----------------------------------
Signature of Participant Date Signature of Bank Officer Date
EXHIBIT 2
Distribution Election
The 1992 Tri Counties Bank Deferred Compensation Plan for Directors
(as restated January 1, 2005)
Pursuant to the Provisions of the Plan (as restated effective January 1, 2005),
I hereby elect to have the balance in my Deferred Compensation Account paid to
me as designated below:
In Lump sum on __________ (insert date).
------
In an annuity payable in sixty (60) equal monthly
------ installments commencing __________ (insert date) calculated
at the time of distribution based on the average Base
Interest Rate in the twelve months immediately preceding the
commencement of payments.
In an annuity payable in one hundred twenty (120) equal
------ monthly installments commencing __________ (insert date)
calculated at the time of distributution based on the
average Base Interest Rate in the twelve months immediately
preceding the commencement of payments.
In an annuity payable in one hundred eighty (180) equal
------ monthly installments commencing __________ (insert date)
calculated at the time of distribution based on the average
Base Interest Rate in the twelve months immediately
preceding the commencement
Signed: ; Print Name
-------------------------- --------------------
Dated: ,
----------------
Exhibit 3
Beneficiary Designation Form
The 1992 Tri Counties Bank Deferred Compensation Plan For Directors
I. PRIMARY DESIGNATION
(You may refer to the beneficiary designation information prior to
completion of this form.)
A. Person(s) as a Primary Designation:
(Please indicate the percentage for each beneficiary.)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
B. Estate as a Primary Designation:
My Primary Beneficiary is The Estate of
--------------------------------------
as set forth in the last will and testament dated the day of
-----
, and any codicils thereto.
------------- -----
C. Trust as a Primary Designation:
Name of the Trust:
------------------------------------------------------------
Execution Date of the Trust: / /
----- ----- ---------
Name of the Trustee:
-----------------------------------------------------------
Beneficiary(ies) of the Trust (please indicate the percentage for each
beneficiary):
-------------------------------------------------------------------
--------------------------------------------------------------------------------
Is this an Irrevocable Life Insurance Trust? Yes No
-------- --------
(If yes and this designation is for a Split Dollar agreement, an Assignment of
Rights form should be completed.)
II. SECONDARY (CONTINGENT) DESIGNATION
A. Person(s) as a Secondary (Contingent)Designation:
(Please indicate the percentage for each beneficiary.)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
B. Estate as a Secondary (Contingent) Designation:
My Secondary Beneficiary is The Estate of
--------------------------------------
as set forth in my last will and testament dated the day of
-----
, and any codicils thereto.
------------- -----
C. Trust as a Secondary (Contingent) Designation:
Name of the Trust:
------------------------------------------------------------
Execution Date of the Trust: / /
----- ----- ---------
Name of the Trustee:
-----------------------------------------------------------
Beneficiary(ies) of the Trust (please indicate the percentage for each
beneficiary):
-------------------------------------------------------------------
--------------------------------------------------------------------------------
All sums payable under this Agreement by reason of my death shall be paid to the
Primary Beneficiary(ies), if he or she survives me, and if no Primary
Beneficiary(ies) shall survive me, then to the Secondary (Contingent)
Beneficiary(ies). This beneficiary designation is valid until the participant
notifies the bank in writing.
--------------------------------------- ----------------------
Participant Date
Exhibit 10.11
The 2005 Tri Counties Bank Deferred Compensation Plan for Executives and
Directors Effective January 1, 2005
TABLE OF CONTENTS
PAGE
ARTICLE I--PURPOSE 5
ARTICLE II--DEFINITIONS 5
2.1 Participant 5
2.2 Plan Benefit 5
2.3 Board 5
2.4 Committee 6
2.5 Compensation 6
2.6 Elective Deferred Compensation 6
2.7 Deferral Election 6
2.8 Deferral Period 6
2.9 Account 6
2.10 Distribution Election 7
2.11 Actuarial Equivalent 7
2.12 Determination Date 7
2.13 Interest Rate 7
2.14 Bonus Interest Rate 7
2.15 Change in Control 7
2.16 Disability 8
2.17 Termination or Removal For Cause 8
2.18 Unforeseeable Emergency 9
2.19 Lifetime Deferral Limit 9
2.20 Beneficiary 9
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS 9
3.1 Eligibility and Participation 9
3.2 Form of Deferral and Minimum Deferral 9
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT 10
4.1 Accounts 10
4.2 Elective Deferred Compensation 10
4.3 Employer Discretionary Contributions 10
4.4 Interest 10
4.5 Determination of Accounts 10
4.6 Vesting of Accounts 11
4.7 Statement of Accounts 11
TABLE OF CONTENTS CONTINUED
PAGE
ARTICLE V--PLAN BENEFITS 11
5.1 Plan Benefit 11
5.2 Death Benefit 11
5.3 Unforeseeable Emergency Distribution 12
5.4 Distribution Following a Separation From Service 12
5.5 Distribution Upon a Change in Control 12
5.6 Form of Benefit Payment and Subsequent Modifications Thereto 12
5.7 Withholding Payroll Taxes 13
5.8 Commencement of Payments 13
5.9 Payment to Guardian 13
ARTICLE VI--BENEFICIARY DESIGNATION 13
6.1 BeneficiaryDesignation 13
6.2 Amendments 13
6.3 No Beneficiary Designation 14
6.4 Effect of Payment 14
ARTICLE VII--ADMINISTRATION 14
7.1 Committee and Duties 14
7.2 Agents 14
7.3 Binding Effect of Decisions 14
7.4 Indemnity of Committee 15
ARTICLE VIII--CLAIMS PROCEDURE 15
8.1 Claim 15
8.2 Denial of Claim 15
8.3 Review of Claim 15
8.4 Final Decision 15
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN 15
9.1 Amendment 15
9.2 Bank's Right to Terminate 16
TABLE OF CONTENTS CONTINUED
PAGE
ARTICLE X--MISCELLANEOUS 16
10.1 Unfunded Plan 16
10.2 Unsecured General Creditor 17
10.3 Trust Fund 17
10.4 Nonassignability 17
10.5 Not a Contract of Employment 17
10.6 Protective Provisions 17
10.7 Terms 18
10.8 Captions 18
10.9 Governing Law 18
10.10 Validity 18
10.11 Notice 18
10.12 Successors 18
SIGNATURE PAGE 19
EXHIBIT 1: Deferral Election Form 20
EXHIBIT 2. Distribution Election 21
EXHIBIT 3: Beneficiary Designation Form 22
THE 2005 TRI COUNTIES BANK
DEFERRED COMPENSATION PLAN FOR EXECUTIVES AND DIRECTORS
This Tri Counties Bank Deferred Compensation Plan for Executives and
Directors is effective January 1, 2005 and applies only to those Participants in
the Plan who serve as certain key Executives of TriCo Bancshares, Tri Counties
Bank, and subsidiaries or affiliates thereof (hereinafter, these entities shall
be referred to as the "Bank" or the "Employer") who are employed by TriCo on, or
after January 1, 2005, and those Directors of TriCo Bancshares or its affiliates
or subsidiaries as of this date. It is intended that the Plan will aid in
retaining and attracting individuals of exceptional ability by providing them
with these benefits.
ARTICLE I--PURPOSE
The purpose of this Deferred Compensation Plan for Executives and Directors
(the "Plan") is to provide current tax planning opportunities, as well as
supplemental funds for retirement or death, for Executives and Directors of
TriCo Bancshares. It is also intended that the Plan will aid in retaining and
attracting Executives and Directors of exceptional ability by providing them
with these benefits. This Plan will be effective as of January 1, 2005.
ARTICLE II--DEFINITIONS
For the purposes of this Plan, the following terms shall have the meanings
indicated, unless the context clearly indicates otherwise:
2.1 Participant
The term "participant" shall mean those certain key employees or Directors
of TriCo who are participating in this Plan as provided in Article III.
2.2 Plan Benefit
"Plan Benefit" means the benefit payable to a Participant as calculated
pursuant to Articles IV through V.
2.3 Board
"Board" means the Board of Directors of the Employer.
2.4 Committee
"Committee" means the Compensation and Benefits Committee of the Board of
Directors of TriCo Bancshares.
2.5 Compensation
As it applies to an Executive, the term "Compensation" shall refer to the
salary, bonuses or commissions paid to the Executive during his employment with
Employer during a given Deferral Period. As it applies to a Director,
"Compensation" shall mean the retainer, meeting and Committee chairmanship fees
paid to a Director by the Employer during the calendar year with respect to
duties performed as a member of the Board, before reduction for any amounts
deferred pursuant to this Plan. Compensation does not include expense
reimbursements, any form of non-cash compensation or benefits.
2.6 Elective Deferred Compensation
The term "Elective Deferred Compensation" shall mean the amount of
Compensation that a Participant elects to defer pursuant to a Deferral Election
Form (See Exhibit A).
2.7 Deferral Election
"Deferral Election" means an election to defer Compensation made by a
Participant pursuant to Article III and for which a separate Deferral Election
Form has been submitted by the Participant to the Committee. A Deferral Election
Form has been attached hereto as Exhibit A.
2.8 Deferral Period
"Deferral Period" means the period over which a Participant has elected to
defer a portion of his Compensation. Each calendar year shall be a separate
Deferral Period, however, the prior Deferral Election Form shall remain
effective in the event that Participant fails to file a timely or subsequent
Deferral Election Form.
2.9 Account
"Account" means the Account as maintained by the Bank in accordance with
Article IV with respect to any deferral of Compensation pursuant to this Plan. A
Participant's Account shall be utilized solely as a device for the determination
and measurement of the amounts to be paid to the Participant pursuant to the
Plan. A Participant's Account shall not constitute or be treated as a trust fund
of any kind.
2.10 Distribution Election
The term "Distribution Election" shall mean the form of distribution of the
Account selected by the Participant on the most recent valid Distribution
Election Form (See Exhibit B attached hereto).
2.11 Actuarial Equivalent
"Actuarial Equivalent" means equivalence in value between two (2) or more
forms and/or times of payment based on a determination by an actuary chosen by
the Bank, using sound actuarial assumptions at the time of such determination.
2.12 Determination Date
"Determination Date" means the last day of each calendar month.
2.13 Interest Rate
"Interest Rate" means, with respect to any calendar month, the monthly
equivalent of the annual yield of the Moody's Average Corporate Bond Yield Index
for the preceding calendar month as published by Moody's Investor Service, Inc.
(or any successor thereto) or, if such index is no longer published, a
substantially similar index selected by the Board.
2.14 Bonus Interest Rate
"Bonus Interest Rate" means, with respect to any calendar month, the
monthly equivalent of three (3) percentage points greater than the annual yield
of the Moody's Average Corporate Bond Yield Index for the preceding calendar
month as published by Moody's Investor Service, Inc. (or any successor thereto)
or, if such index is no longer published, a substantially similar index selected
by the Board. The Bonus Interest Rate shall be applied to all deferrals of
compensation provided the Participant remains a Director or Executive of the
Company until December 31, 2008. Thereafter, the Bonus Interest Rate applied to
all subsequent deferrals and the Account balance shall be defined as: the
monthly equivalent of one (1) percentage points greater than the annual yield of
the Moody's Average Corporate Bond Yield Index for the preceding calendar month
as published by Moody's Investor Service, Inc. (or any successor thereto) or, if
such index is no longer published, a substantially similar index selected by the
Board.
2.15 Change in Control
A "Change in Control" shall be defined as follows:
(a) The acquisition of more than fifty percent (50%) of the value
or voting power of the Employer's stock by a person or group;
(b) The acquisition in a period of twelve (12) months or less of
at least thirty-five percent (35%) of the Employer's stock by a person
or group;
(c) The replacement of a majority of the Employer's board in a
period of twelve (12) months or less by Directors who were not
endorsed by a majority of the current board members; or
(d) The acquisition in a period of twelve (12) months or less of
forty percent (40%) or more of the Employer's assets by an unrelated
entity.
For the purpose of this Agreement, transfers made on account of deaths or
gifts, transfers between family members or transfers to a qualified retirement
plan maintained by the Employer shall not be considered in determining whether
there has been a Change in Control.
2.16 Disability
For the purpose of this Plan, the Participant will be considered disabled
if:
A. He is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve
(12) months, or
B. He is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve
(12) months, receiving income replacement benefits for a period
of not less than three (3) months under an accident and health
plan covering employees of Participant's employer.
In no event shall a Disability be deemed to occur or to continue after a
Participant's Normal Retirement Date, if applicable.
2.17 Termination or Removal For Cause
A Termination of an Executive's employment or a Removal of a Director shall
be "For Cause" if for any of the following reasons:
(a) Gross negligence or gross neglect;
(b) The commission of a felony, misdemeanor, or any other act
involving moral turpitude, fraud, or dishonesty which has a material
adverse impact on the Bank;
(c) The willful and intentional disclosure, without authority, of
any secret or confidential information concerning the Bank that has a
material adverse impact on the Bank; or
(d) The willful and intentional violation of the rules or
regulations of any regulatory agency or government authority having
jurisdiction over the Bank, which has a material adverse impact on the
Bank.
2.18 Unforeseeable Emergency
For the purposes of this Plan, an "Unforeseeable Emergency" shall mean a
severe financial hardship to the Participant resulting from an illness or
accident of the Participant, the Participant's spouse, or a dependent (as
defined in IRC 152(a)) of the Participant, loss of the Participant's property
due to casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant.
2.19 Lifetime Deferral Limit
Total deferred compensation is subject to a lifetime limit of one million
five hundred thousand dollars ($1,500,000.00) and includes all deferred
compensation under this Plan or any prior Tri Counties Bank deferred
compensation plan.
2.20 Beneficiary
"Beneficiary" means the person, persons or entity entitled under Article VI
to receive any Plan benefits payable after a Participant's death.
ARTICLE III--PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 Eligibility and Participation
(a) Eligibility. Eligibility to participate in the Plan shall be
limited to key Executives and Directors of the Employer.
(b) Participation. A Participant may elect to participate in the
Plan with respect to any Deferral Period by submitting a Deferral
Commitment Agreement to the Committee by December 1 of the calendar
year immediately preceding the Deferral Period.
(c) Part-Year Participation. In the case of the first year in
which a Participant becomes eligible to participate in the Plan, a
Deferral Election Form must be submitted to the Committee within
thirty (30) days after the Participant becomes eligible to participate
in such Plan. In addition, such Deferral Election Form shall be
effective only with regard to Compensation earned or payable following
the submission of the Deferral Election Form to the Committee.
3.2 Form of Deferral and Minimum Deferral
(a) Deferral Election. A Participant may elect in the Deferral
Election Form to defer any portion of his Compensation for the
calendar year following the calendar year in which the Agreement is
submitted. The amount to be deferred shall be stated as a percentage
of Compensation and must not be less than two thousand four hundred
dollars ($2,400) during the Deferral Period.
(b) Deferrals in the Event of Part-Year Participation. In the
case of the first year in which a Participant becomes eligible to
participate in the Plan (see paragraph 3.1(c)) he must defer at least
two hundred dollars ($200) per month for each of the months remaining
in the Deferral Period ($200 x number of months remaining).
ARTICLE IV--DEFERRED COMPENSATION ACCOUNT
4.1 Accounts
For record keeping purposes only, an Account shall be maintained for each
Participant.
4.2 Elective Deferred Compensation
A Participant's Elective Deferred Compensation shall be credited to the
Participant's Account as the corresponding non-deferred portion of the
Compensation becomes or would have become payable. Any withholding of taxes or
other amounts with respect to deferred Compensation that is required by state,
federal or local law shall be withheld from the Participant's non-deferred
Compensation to the maximum extent possible with any excess being withheld from
the Participant's Account.
4.3 Employer Discretionary Contributions
Employer may make Discretionary Contributions to Participants' Accounts.
Discretionary Contributions shall be credited at such times and in such amounts
as the Board in its sole discretion shall determine. The amount of the
Discretionary Contributions shall be evidenced in a special Deferral Commitment
Agreement approved by the Board.
4.4 Interest
Beginning January 1, 2005, the Accounts shall be credited monthly with
bonus interest earned based on the Bonus Interest Rate specified in Section
2.14. Interest earned shall be calculated as of each Determination Date based
upon the average daily balance of the Account since the preceding Determination
Date and shall be credited to the Participant's Account at that time. Bonus
Interest shall be credited to the Account until the Participant's Retirement.
4.5 Determination of Accounts
Each Participant's Account as of each Determination Date shall consist of
the balance of the Participant's Account as of the immediately preceding
Determination Date, plus the Participant's Elective Deferred Compensation
credited and any Employer Discretionary Contributions and any interest earned,
minus the amount of any distributions made since the immediately preceding
Determination Date.
4.6 Vesting of Accounts
Each Participant shall be vested in the amounts credited to such
Participant's Account and earnings thereon as follows:
(a) Amounts Deferred. A Participant shall be one hundred percent
(100%) vested at all times in the amount of Compensation elected to be
deferred under this Plan and Interest thereon, except as provided for
in Section 5.6.
(b) Employer Discretionary Contributions. Employer Discretionary
Contributions and Interest thereon shall be vested as set forth in the
special Deferral Commitment Agreement, except as provided for in
Section 5.6.
4.7 Statement of Accounts
The Bank shall submit to each Participant, within thirty (30) days after
the close of each calendar year and at such other time as determined by the
Bank, a statement setting forth the balance to the credit of the Account
maintained for a Participant.
ARTICLE V--PLAN BENEFITS
5.1 Plan Benefit
If a Participant terminates service as an Executive or on the Board, for
any reason other than death, the Employer shall pay a Plan Benefit equal to the
Participant's Account, as determined in accordance with Article IV.
5.2 Death Benefit
Upon receiving notice of the death of a Participant, the Employer shall pay
to the Participant's Beneficiary(ies) an amount determined as follows:
(a) If the Participant dies after Deferral Payments have begun
pursuant to the terms of this Plan, then the remaining
unpaid balance of the Participant's Account, shall be paid
in the same form as payments were being made prior to the
Participant's death.
(b) If the Participant dies while serving as an Executive or
Director of the Employer, or before Deferral Payments have
begun pursuant to the terms of this Plan, then the amount
payable shall be the Participant's Account balance as of the
Determination Date immediately preceding the death of the
Participant. Payment of the Account Balance shall be made
within sixty (60) days of the Bank receiving notice of the
death.
Any notice required under this provision shall be in writing and shall
include an original death certificate.
5.3 Unforeseeable Emergency Distributions
Upon a finding that a Participant has suffered an Unforeseeable Emergency,
the Committee may, in its sole discretion, make distributions from the
Participant's Account prior to the time specified for payment of benefits under
the Plan. Any distribution made pursuant to this provision must be made in
accordance with the regulations of the Secretary, and must not exceed amounts
necessary satisfy such emergency plus the amounts necessary to pay taxes
reasonably anticipated as a result of the distribution, taking into account the
extent to which such hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participant's
assets (to the extent the liquidation of such assets would not itself cause
severe financial hardship).
5.4 Distribution Following a Separation From Service
Following a Participant's "separation from service" (as determined by the
Secretary), a Participant shall be entitled to receive a lump sum distribution
of the Participant's Account as of the Determination Date immediately preceding
the effective date of the "separation from service", and shall be made within
sixty (60) days following such separation. In the event of a Termination for
Cause, the Plan Administrator shall retain the sole discretion to determine
whether the interest on such contributions will be forfeited.
Because of the recent implementation of IRC 409A and future rulings
regarding deferred compensation in general, as well as clarification regarding
the definition of "separation from service", it may become necessary to modify
this agreement as is relates to this provision. It is nonetheless the intent of
the parties to comply with IRC 409A. Based on the forgoing, "separation from
service" shall be broadly interpreted and shall include both Voluntary and
Involuntary Terminations.
In the event, however, that the Participant is a Key Employee, as defined
by the Internal Revenue Service, and the Employer is publicly traded at the time
of "separation from service" (as defined by IRC 409A), any such benefit payment
described hereinafter shall be withheld for six (6) months following such
separation from service in order to comply with IRC 409A.
5.5.1 Distribution Upon a Change in Control
Upon a Change in Control, a Participant's Plan Benefit shall be paid
pursuant to the effective Distribution Election Form.
5.6 Form of Benefit Payment and Subsequent Modifications Thereto
Other than for those circumstances specifically addressed and which provide
to the contrary, all Plan Benefits shall be paid in accordance with the most
recent valid
Distribution Election Form submitted by the Participant. A Participant may
modify the form of Benefit Payment, however any such modification (1) may not
take effect until at least twelve (12) months after the date on which the
election is made, and (ii) the first payment to which such election is made must
be deferred for a period of at least five (5) years from the date the payment
would otherwise have been made.
5.7 Withholding Payroll Taxes
The Employer shall withhold from payments made hereunder any taxes required
to be withheld from such payments under federal, state or local law. However, a
Beneficiary(ies) may elect not to have withholding for federal income tax
pursuant to Section 3405(a)(2) of Internal Revenue Code, or any successor
provision thereto.
5.8 Commencement of Payments
Payment shall commence on the day selected by the Participant in the
Distribution Election Form, but not later than sixty (60) days after the end of
the month in which the Participant terminates Employment with the Employer, or
service on the Board. All payments shall be made as of the first day of the
month.
5.9 Payment to Guardian
If a Plan benefit is payable to a minor or a person declared incompetent or
to a person incapable of handling the disposition of his property, the Committee
may direct payment of such Plan Benefit to the guardian, legal representative or
person having the care and custody of such minor, incompetent or person. The
Committee may require proof of incompetency, minority, incapacity or
guardianship as it may deem appropriate prior to distribution of the Plan
benefit. Such distribution shall completely discharge the Committee from all
liability with respect to the benefit.
ARTICLE VI--BENEFICIARY DESIGNATION
6.1 Beneficiary Designation
Each Participant shall have the right, at any time, to designate any person
or persons as his Beneficiary or Beneficiaries (both primary as well as
secondary) to whom benefits under this Plan shall be paid in the event of
Participant's death prior to complete distribution of the benefits due under the
Plan. Each beneficiary designation shall be in written form prescribed by the
Committee and will be effective only when filed with the Committee during the
Participant's lifetime.
6.2 Amendments
Any Beneficiary designation may be changed by a Participant without the
consent of any designated Beneficiary by the filing of a new Beneficiary
Designation with the Committee. The filing of a new Beneficiary Designation form
will cancel all Beneficiary Designations previously filed. If a Participant's
Compensation is community property, any Beneficiary designation shall be valid
or effective only as permitted under applicable law.
6.3 No Beneficiary Designation
In the absence of an effective Beneficiary designation, or if all
designated Beneficiaries predecease the Participant or die prior to complete
distribution of the Participant's benefits, then the Participant's designated
Beneficiary shall be deemed to be the Participant's estate.
6.4 Effect of Payment
The payment to the deemed Beneficiary shall completely discharge Employer's
obligations under this Plan.
ARTICLE VII--ADMINISTRATION
7.1 Committee and Duties
This Plan shall be administered by the Committee, which shall consist of
not less than three (3) persons appointed by the Chairman of the Board. Any
member of the Committee may be removed at any time by the Board. Any member may
resign by delivering his written resignation to the Board. Upon the existence of
any vacancy, the Board may appoint a successor. The Committee shall have the
authority to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and decide or resolve any and
all questions including interpretations of this Plan, as may arise in connection
with the Plan. A majority of the members of the Committee shall constitute a
quorum for the transaction of business. A majority vote of the Committee members
constituting a quorum shall control any decision. Members of the Committee may
be Participants under this Plan.
7.2 Agents
The Committee may, from time to time, employ other agents and delegate to
them such administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Employer.
7.3 Binding Effect of Decisions
The decision or action of the Committee in respect of any question arising
out of or in connection with the administration, interpretation, and application
of the Plan and the rules and regulations promulgated hereunder shall be final
and conclusive and binding upon all persons having any interest in the Plan.
7.4 Indemnity of Committee
The Employer shall indemnify and hold harmless the members of the Committee
against any and all claims, loss, damage, expense, or liability arising from any
action or failure to act with respect to this Plan, except in the case of gross
negligence or willful misconduct.
ARTICLE VIII--CLA1MS PROCEDURE
8.1 Claim
Any person claiming a benefit, requesting an interpretation or ruling under
the Plan, or requesting information under the Plan shall present the request in
writing to the Committee, which shall respond in writing within thirty (30)
days.
8.2 Denial of Claim
If the claim or request is denied, the written notice of denial shall
state:
(a) The reasons for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
8.3 Review of Claim
Any person whose claim or request is denied or who has not received a
response within thirty (30) days may request review by notice given in writing
to the Committee. The claim or request shall be reviewed by the Committee who
may, but shall not be required to, grant the claimant a hearing. On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.
8.4 Final Decision
The decision on review shall normally be made within sixty (60) days. If an
extension of time is required for a hearing or other specified circumstances,
the claimant shall be notified and the time limit shall be one hundred twenty
(120) days. The decision shall be in writing and shall state the reasons and the
relevant plan provisions. All decisions on review shall be final and bind all
parties concerned.
ARTICLE IX--AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment
The Board may at any time amend the Plan in whole or in part, provided,
however, that no amendment shall be effective to decrease or restrict the amount
accrued to the date of Amendment in any Account or to change the Interest Rate
credited to amounts already held in an Account under the Plan. Upon a change in
the Interest Rate, thirty (30) days' advance written notice shall be given to
each Participant and any deferral after the effective date of the change shall
be held in a separate Account which shall be credited with the new Interest
Rate.
9.2 Bank's Right to Terminate
The Board may at any time partially or completely terminate the Plan if, in
its judgment, the tax, accounting, or other effects of the continuance of the
Plan, or potential payments thereunder would not be in the best interests of the
Employer.
(a) Partial Termination. The Board may partially terminate the
Plan by instructing the Committee not to accept any additional
Deferrals. In the event of such a Partial Termination, the Plan shall
continue to operate and be effective with regard to Deferral Elections
entered into prior to the effective date of such Partial Termination.
(b) Complete Termination. The Board may completely terminate the
Plan by instructing the Committee not to accept any additional
Deferral Elections, and by terminating all ongoing Deferral Elections.
In the event of Complete Termination, the Plan shall cease to operate
and the Employer shall pay out to each Participant their Account as if
that Participant had terminated service as of the effective date of
the Complete Termination. Payments shall be made in equal annual
installments over the period listed below, based on the Account
balance:
Appropriate Account Balance Payout Period
------------------------------------------------------------------
Less than $10,000 1 Year
$10,000 put less than $50,000 3 Years
More than $50,000 5 Years
------------------------------------------------------------------
Interest earned on the unpaid balance in each Participant's Account shall
be the Interest Rate in effect on the Determination Date immediately preceding
the effective date of the Complete Termination.
ARTICLE X--MISCELLANEOUS
10.1 Unfunded Plan
This Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly-compensated employees" within the meaning of Sections 201, 301 and 401 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
therefore to be exempt from the provisions of Parts 2, 3, and 4 of Title I of
ERISA. Accordingly, the Plan shall terminate and no further benefits shall
accrue hereunder in the event it is determined by a court of competent
jurisdiction or by an opinion of counsel that the Plan constitutes an employee
pension benefit plan within the meaning of Section 3(2) of ERISA which is not so
exempt. In the event of a termination under this Section 10.1, all ongoing
Deferral Commitments shall terminate, no additional Deferral Commitments will be
accepted by the Committee, and the amount of each Participant's vested Account
balance shall be distributed to such Participant at such time and in such manner
as the Committee, in its sole discretion, determines.
10.2 Unsecured General Creditor
In the event of Employer's insolvency, Participants and their
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of Employer, nor shall they
be Beneficiaries of, or have any rights, claims or interests in any life
insurance policies, annuity contracts or the proceeds therefrom owned or which
may be acquired by Employer. In that event, any and all of Employer's assets and
policies shall be, and remain, the general, unpledged, unrestricted assets of
Employer. Employer's obligation under the Plan shall be that of an unfunded and
unsecured promise of Employer to pay money in the future.
10.3 Trust Fund
The Employer shall be responsible for the payment of all benefits provided
under the Plan. At its discretion, the Employer may establish one (1) or more
trusts, with such trustees as the Board may approve, for the purpose of
providing for the payment of such benefits. Such trust or trusts maybe
irrevocable, but the assets thereof shall be subject to the claims of the
Employer's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto, but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Employer.
10.4 Nonassignability
Neither a Participant nor any other person shall have any right to commute,
sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber,
transfer, hypothecate or convey in advance of actual receipt the amounts, if
any, payable hereunder, or any part thereof, which are, and all rights to which
are, expressly declared to be unassignable and nontransferable. No part of the
amounts payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.
10.5 Not a Contract of Employment
The terms and conditions of this Plan shall not be deemed to constitute a
contract of employment between the Employer and the Participant, and the
Participant (or his Beneficiary) shall have no rights against the Employer
except as may otherwise be specifically provided herein. Moreover, nothing in
this Plan shall be deemed to give a Participant the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discipline or discharge him at any time.
10.6 Protective Provisions
A Participant will cooperate with the Employer by furnishing any and all
information requested by the Employer, in order to facilitate the payment of
benefits hereunder, and by taking such physical examinations as the Employer may
deem necessary and taking such other actions as may be requested by the
Employer.
10.7 Terms
Whenever any words are used herein the masculine, they shall be construed
as though they were used in the feminine in all cases where they would so apply;
and wherever any words are used herein in the singular or in the plural, they
shall be construed as though they were used in the plural or the singular, as
the case may be, in all cases where they would so apply.
10.8 Captions
The captions of the articles, sections, and paragraphs of this Plan are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
10.9 Governing Law
The provisions of this Plan shall be construed, interpreted, and governed
in all respects in accordance with applicable federal law and, to the extent not
preempted by such federal law, in accordance with the laws of the State of
California.
10.10 Validity
In case any provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts
hereof, but this Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
10.11 Notice
Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient in writing and hand delivered, or sent by
registered or certified mail, to any member of the Committee or the Secretary of
the Employer. Such notice shall be deemed given as of the date of delivery or,
if such delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
10.12 Successors
The provisions of this Plan shall bind and inure to the benefit of the
Employer and its successors and assigns. The term successors as used herein
shall include any corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or substantially all of
the business and assets of TriCo Bancshares, and successors of any such
corporation or other business entity.
SIGNATURE PAGE
The 2005 Tri Counties Bank Deferred Compensation Plan
for Executives and Directors
TRICO BANCSHARES
By:
--------------------------------------
Chairman
By:
--------------------------------------
Secretary
Dated:
------------------------
EXHIBIT 1
Deferral Election Form
The 2005 Tri Counties Bank Deferred Compensation Plan for Executives and
Directors
(Effective as of January 1, 2005)
--------------------------------------------------------------------------------
---------------------------------- ----------------------
Name (Last, First, Middle Initial) Social Security Number
I acknowledge that I have been offered an opportunity to participate in the
Deferred Compensation Plan (the "Plan"). I will participate in the Plan and
irrevocably authorize the Bank to make the appropriate deductions, as indicated
on this Agreement from my compensation. Capitalized terms in this Agreement
shall have the same meanings as defined in The 2005 Tri Counties Bank Deferred
Compensation Plan For Executives and Directors, effective as of January 1,
2005).
DEFERRAL ELECTION
I elect to participate in the Plan as follows:
Fees I elect to defer (complete one blank only) $______ or_____%
of my ______ (insert year) Fees.
No Participation I elect to not participate in the ______ (insert year) Plan
Year _______ (initial).
ACKNOWLEDGED AND ACCEPTED:
----------------------------------------------
Participant Name Print Name
------------------------------------- --------------------------------
Signature of Participant Date Signature of Bank Officer Date
EXHIBIT 2
Distribution Election
The 2005 Tri Counties Bank Deferred Compensation Plan For Executives and
Directors
(effective as of January 1, 2005)
Pursuant to the Provisions of The 2005 Tri Counties Bank Deferred Compensation
Plan for Executives and Directors, I hereby elect to have the balance in my
Deferred Compensation Account (brokerage account) paid to me as designated
below:
In addition, I understand the significance of, and want to comply with, all
applicable Internal Revenue Code Sections, including, but not limited to, IRC
409A. Thus, for any benefits payable pursuant to this Plan, if I am a Key
Employee, as defined by the Internal Revenue Service, and the Employer is
publicly traded at the time of "separation from service" (as defined by IRC
409A), any such benefit payment to be made pursuant to this Plan shall be
withheld for six (6) months following such separation from service, in order to
comply with IRC 409A.
In Lump sum on __________ (insert date).
------
In an annuity payable in sixty (60) equal monthly
------ installments commencing __________ (insert date) calculated
at the time of distribution based on the average Interest
Rate in the twelve months immediately preceding the
commencement of payments.
In an annuity payable in one hundred twenty (120) equal
------ monthly installments commencing __________ (insert date)
calculated at the time of distribution based on the average
Interest Rate in the twelve months immediately preceding the
commencement of payments.
In an annuity payable in one hundred eighty (180) equal
------ monthly installments commencing __________ (insert date)
calculated at the time of distribution based on the average
Interest Rate in the twelve months immediately preceding the
commencement of payments.
Signed: ; Print Name
-------------------------- --------------------
Dated: ,
----------------
EXHIBIT 3
Beneficiary Designation Form
The 2005 Tri Counties Bank Deferred Compensation Plan for Executives and
Directors
(Effective as of January 1, 2005)
I. PRIMARY DESIGNATION
(You may refer to the beneficiary designation information prior to
completion of this form.)
A. Person(s) as a Primary Designation:
(Please indicate the percentage for each beneficiary.)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
B. Estate as a Primary Designation:
My Primary Beneficiary is The Estate of
--------------------------------------
as set forth in the last will and testament dated the day of
-----
, and any codicils thereto.
------------- -----
C. Trust as a Primary Designation:
Name of the Trust:
------------------------------------------------------------
Execution Date of the Trust: / /
----- ----- ---------
Name of the Trustee:
-----------------------------------------------------------
Beneficiary(ies) of the Trust (please indicate the percentage for each
beneficiary):
-------------------------------------------------------------------
--------------------------------------------------------------------------------
Is this an Irrevocable Life Insurance Trust? Yes No
-------- --------
(If yes and this designation is for a Split Dollar agreement, an Assignment of
Rights form should be completed.)
II. SECONDARY (CONTINGENT) DESIGNATION
A. Person(s) as a Secondary (Contingent)Designation:
(Please indicate the percentage for each beneficiary.)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
Name Relationship / %
------------------------------ ------------------- -------
Address:
------------------------------------------------------------------------
(Street) (City) (State) (Zip)
B. Estate as a Secondary (Contingent) Designation:
My Secondary Beneficiary is The Estate of
--------------------------------------
as set forth in my last will and testament dated the day of
-----
, and any codicils thereto.
------------- -----
C. Trust as a Secondary (Contingent) Designation:
Name of the Trust:
------------------------------------------------------------
Execution Date of the Trust: / /
----- ----- ---------
Name of the Trustee:
-----------------------------------------------------------
Beneficiary(ies) of the Trust (please indicate the percentage for each
beneficiary):
-------------------------------------------------------------------
--------------------------------------------------------------------------------
All sums payable under this Agreement by reason of my death shall be paid to the
Primary Beneficiary(ies), if he or she survives me, and if no Primary
Beneficiary(ies) shall survive me, then to the Secondary (Contingent)
Beneficiary(ies). This beneficiary designation is valid until the participant
notifies the bank in writing.
--------------------------------------- ----------------------
Participant Date
Exhibit 31.1
Rule 13a-14/15d-14 Certification of CEO
I, Richard P. Smith, certify that;
1. I have reviewed this quarterly report on Form 10-Q of TriCo
Bancshares;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) and internal control
over financial reporting (as defined in Exchange Act Rules 13-d-15(f)
and 15d-15(f)) for the registrant and we have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiary, is made known
to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this quarterly report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this quarterly report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors;
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial data;
and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: October 25, 2005 /s/ Richard P. Smith
----------------------------------------
Richard P. Smith
President and Chief Executive Officer
Exhibit 31.2
Rule 13a-14/15d-14 Certification of CFO
I, Thomas J. Reddish, certify that;
1. I have reviewed this quarterly report on Form 10-Q of TriCo
Bancshares;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) and internal control
over financial reporting (as defined in Exchange Act Rules 13-d-15(f)
and 15d-15(f)) for the registrant and we have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiary, is made known
to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this quarterly report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this quarterly report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors;
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial data;
and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: October 25, 2005 /s/ Thomas J. Reddish
----------------------------------------
Thomas J. Reddish
Executive Vice President and Chief
Financial Officer
Exhibit 32.1
Section 1350 Certification of CEO
In connection with the Quarterly Report of TriCo Bancshares (the "Company") on
Form 10-Q for the period ended September 30, 2005 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Richard P. Smith,
President and Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ Richard P. Smith
-------------------------------------
Richard P. Smith
President and Chief Executive Officer
A signed original of this written statement required by Section 906 has been
provided to TriCo Bancshares and will be retained by TriCo Bancshares and
furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Section 1350 Certification of CFO
In connection with the Quarterly Report of TriCo Bancshares (the "Company") on
Form 10-Q for the period ended September 30, 2005 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Thomas J. Reddish,
Vice President and Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ Thomas J. Reddish
-------------------------------------
Thomas J. Reddish
Executive Vice President and Chief Financial Officer
A signed original of this written statement required by Section 906 has been
provided to TriCo Bancshares and will be retained by TriCo Bancshares and
furnished to the Securities and Exchange Commission or its staff upon request.