TriCo Bancshares Announces Third Quarter 2022 Results
TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $37,338,000 for the quarter ended September 30, 2022, compared to $31,364,000 during the trailing quarter ended June 30, 2022, and $27,422,000 during the quarter ended September 30, 2021. Diluted earnings per share were $1.12 for the third quarter of 2022, compared to $0.93 for the second quarter of 2022 and $0.92 for the third quarter of 2021.
Financial Highlights
Performance highlights and other developments for the Company as of or for the three and nine months ended September 30, 2022, included the following:
For the three and nine months ended September 30, 2022, the Company’s return on average assets was 1.46% and 1.23%, while the return on average equity was 13.78% and 11.25%, respectively. The nine-month ratio was impacted by merger related expenses of $6,253,000 during the 2022 period. Organic loan growth, excluding PPP and acquired loans, totaled $216.7 million (14.2% annualized) for the current quarter and $824.3 million (17.4% annualized) for the trailing twelve-month period. As of September 30, 2022, the Company reported total loans, total assets and total deposits of $6.3 billion, $10.0 billion and $8.7 billion, respectively. As a direct result of organic loan growth during the quarter, the loan to deposit ratio has increased to 72.9% as of September 30, 2022, as compared to 69.8% as of the trailing quarter. The average rate of interest paid on deposits, including non-interest-bearing deposits, of 0.04% has remained unchanged during each of the prior four quarters, and represents a decrease of one basis point from the average rate paid of 0.05% during the same quarter of the prior year. Noninterest income related to service charges and fees was $12.7 million for the three month period ended September 30, 2022, an increase of 12.6% when compared to the same period in 2021. The provision for credit losses for loans and debt securities was approximately $3.8 million during the quarter ended September 30, 2022, as compared to a provision expense of $2.1 million during the trailing quarter ended June 30, 2022, and a reversal of provision expense totaling $1.4 million for the three month period ended September 30, 2021. The allowance for credit losses to total loans was 1.61% as of September 30, 2022, compared to 1.60% as of the trailing quarter end, and 1.72% as of September 30, 2021. Non-performing assets to total assets were 0.21% at September 30, 2022, as compared to 0.15% as of June 30, 2022, and 0.37% at September 30, 2021.Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Annual Report on Form 10-Q for the period ended September 30, 2022, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.
Summary Results
The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:
Three months ended
September 30,
June 30,
(dollars and shares in thousands, except per share data)
2022
2022
$ Change
% Change
Net interest income
$
94,106
$
85,046
$
9,060
10.7
%
Provision for credit losses
(3,795
)
(2,100
)
(1,695
)
80.7
%
Noninterest income
15,640
16,430
(790
)
(4.8
) %
Noninterest expense
(54,465
)
(56,264
)
1,799
(3.2
) %
Provision for income taxes
(14,148
)
(11,748
)
(2,400
)
20.4
%
Net income
$
37,338
$
31,364
$
5,974
19.0
%
Diluted earnings per share
$
1.12
$
0.93
$
0.19
20.4
%
Dividends per share
$
0.30
$
0.25
$
0.05
20.0
%
Average common shares
33,348
33,561
(213
)
(0.6
) %
Average diluted common shares
33,463
33,705
(242
)
(0.7
) %
Return on average total assets
1.46
%
1.24
%
Return on average equity
13.78
%
11.53
%
Efficiency ratio
49.63
%
55.45
%
Three months ended
September 30,
(dollars and shares in thousands, except per share data)
2022
2021
$ Change
% Change
Net interest income
$
94,106
$
68,233
$
25,873
37.9
%
(Provision for) reversal of credit losses
(3,795
)
1,435
(5,230
)
(364.5
) %
Noninterest income
15,640
15,095
545
3.6
%
Noninterest expense
(54,465
)
(45,807
)
(8,658
)
18.9
%
Provision for income taxes
(14,148
)
(11,534
)
(2,614
)
22.7
%
Net income
$
37,338
$
27,422
$
9,916
36.2
%
Diluted earnings per share
$
1.12
$
0.92
$
0.20
21.7
%
Dividends per share
$
0.30
$
0.25
$
0.05
20.0
%
Average common shares
33,348
29,714
3,634
12.2
%
Average diluted common shares
33,463
29,851
3,612
12.1
%
Return on average total assets
1.46
%
1.30
%
Return on average equity
13.78
%
11.02
%
Efficiency ratio
49.63
%
54.97
%
Nine months ended
September 30,
(dollars and shares in thousands)
2022
2021
$ Change
% Change
Net interest income
$
247,076
$
201,756
$
45,320
22.5
%
Reversal of (provision for) credit losses
(14,225
)
7,755
(21,980
)
(283.4
) %
Noninterest income
47,166
47,162
4
—
%
Noninterest expense
(157,176
)
(131,596
)
(25,580
)
19.4
%
Provision for income taxes
(33,765
)
(35,644
)
1,879
(5.3
) %
Net income
$
89,076
$
89,433
$
(357
)
(0.4
) %
Diluted earnings per share
$
2.74
$
2.99
$
(0.25
)
(8.4
) %
Dividends per share
$
0.80
$
0.75
$
0.05
6.7
%
Average common shares
32,332
29,720
2,612
8.8
%
Average diluted common shares
32,469
29,887
2,582
8.6
%
Return on average total assets
1.23
%
1.48
%
Return on average equity
11.25
%
12.42
%
Efficiency ratio
53.42
%
52.87
%
Balance Sheet
Total loans outstanding, excluding PPP, grew to $6.31 billion as of September 30, 2022, an increase of 33.3% over the prior twelve months, of which 17.4% was related to organic loan growth. Investments increased to $2.67 billion as of September 30, 2022, an increase of 14.4% annualized over the prior twelve months. Quarterly average earning assets to quarterly total average assets were generally unchanged at 92.0% at September 30, 2022, as compared to 92.2% and 92.9% at June 30, 2022, and September 30, 2021, respectively. The loan to deposit ratio was 72.9% at September 30, 2022, as compared to 69.8% and 67.5% at June 30, 2022, and September 30, 2021, respectively.
Total shareholders' equity decreased by $51,839,000 during the quarter ended September 30, 2022, as a result of an increase in accumulated other comprehensive losses of $76,740,000, share repurchases totaling approximately $2,059,000 and cash dividend payments on common stock of $10,004,000, partially offset by net income of $37,338,000. As a result, the Company’s book value was $29.71 per share at September 30, 2022 as compared to $31.25 and $33.05 at June 30, 2022, and September 30, 2021, respectively. The Company’s tangible book value per share, a non-GAAP measure, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $19.92 per share at September 30, 2022, as compared to $21.41 and $25.16 at June 30, 2022, and September 30, 2021, respectively.
Trailing Quarter Balance Sheet Change
Ending balances
September 30,
June 30,
Annualized
% Change
(dollars in thousands)
2022
2022
$ Change
Total assets
$
9,976,879
$
10,120,611
$
(143,732
)
(5.7
) %
Total loans
6,314,290
6,113,421
200,869
13.1
Total loans, excluding PPP
6,312,348
6,095,667
216,681
14.2
Total investments
2,668,145
2,802,815
(134,670
)
(19.2
)
Total deposits
$
8,655,769
$
8,756,775
$
(101,006
)
(4.6
) %
Organic loan growth, excluding PPP, of $216,681,000 or 14.2% on an annualized basis was realized during the quarter ended September 30, 2022, primarily within commercial real estate. During the quarter, and exclusive of PPP balance changes, loan originations/draws totaled approximately $737.0 million while payoffs/repayments of loans totaled $536.0 million, which compares to origination/draws and payoff/repayments activity during the three months ended June 30, 2022 of $697.0 million and $397.0 million, respectively. While management believes that loan pipelines remain sufficient to support loan growth, loan pipeline activity may moderate as customer awareness of the rising interest rate environment weighs more heavily on their decision making criteria. Investment security balances decreased $134,670,000 or 19.2% on an annualized basis as the result of declines in market values grew, and prepayments or maturities from the portfolio were utilized to augment the Company's overall balance sheet position. Deposit balances also decreased, with a change of $101,006,000 or 4.6% annualized during the period. These deposit balance changes are partially the result of approximately $51.6 million in FDIC insured money market account balances being placed with partner institutions.
Average Trailing Quarter Balance Sheet Change
Quarterly average balances for the period ended
September 30,
June 30,
Annualized
% Change
(dollars in thousands)
2022
2022
$ Change
Total assets
$
10,131,118
$
10,121,714
$
9,404
0.4
%
Total loans
6,171,042
5,928,430
242,612
16.4
Total loans, excluding PPP
6,162,267
5,890,578
271,689
18.4
Total investments
2,802,119
2,732,466
69,653
10.2
Total deposits
$
8,752,215
$
8,743,320
$
8,895
0.4
%
Year Over Year Balance Sheet Change
Ending balances
As of September 30,
Acquired
Balances
Organic
$ Change
Organic
% Change
(dollars in thousands)
2022
2021
$ Change
Total assets
$
9,976,879
$
8,458,030
$
1,518,849
$
1,363,529
$
155,320
1.8
%
Total loans
6,314,290
4,887,496
1,426,794
773,390
653,404
13.4
Total loans, excluding PPP
6,312,348
4,736,048
1,576,300
751,978
824,322
17.4
Total investments
2,668,145
2,333,015
335,130
109,716
225,414
9.7
Total deposits
$
8,655,769
$
7,236,822
$
1,418,947
$
1,215,479
$
203,468
2.8
%
Non-PPP loan balances have increased as a result of organic activities by approximately $824.3 million during the twelve month period ending September 30, 2022. Investment securities increased to $2.7 billion at September 30, 2022, an organic change of $225.4 million or 9.7% from the prior year. When combined with balances acquired from Valley Republic Bank, this represents an increase of nearly $1.8 billion in earning assets during the last twelve months.
Net Interest Income and Net Interest Margin
The following is a summary of the components of net interest income for the periods indicated:
Three months ended
September 30,
June 30,
(dollars in thousands)
2022
2022
Change
% Change
Interest income
$
96,366
$
86,955
$
9,411
10.8
%
Interest expense
(2,260
)
(1,909
)
(351
)
18.4
%
Fully tax-equivalent adjustment (FTE) (1)
440
397
43
10.8
%
Net interest income (FTE)
$
94,546
$
85,443
$
9,103
10.7
%
Net interest margin (FTE)
4.02
%
3.67
%
Acquired loans discount accretion, net:
Amount (included in interest income)
$
714
$
1,677
$
(963
)
(57.4
) %
Net interest margin less effect of acquired loan discount accretion(1)
3.99
%
3.60
%
0.39
%
PPP loans yield, net:
Amount (included in interest income)
$
313
$
964
$
(651
)
(67.5
) %
Net interest margin less effect of PPP loan yield (1)
4.02
%
3.65
%
0.37
%
Acquired loans discount accretion and PPP loan yield, net:
Amount (included in interest income)
$
1,027
$
2,641
$
(1,614
)
(61.1
) %
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)
3.98
%
3.57
%
0.41
%
Three months ended
September 30,
(dollars in thousands)
2022
2021
Change
% Change
Interest income
$
96,366
$
69,628
$
26,738
38.4
%
Interest expense
(2,260
)
(1,395
)
(865
)
62.0
%
Fully tax-equivalent adjustment (FTE) (1)
440
265
175
66.0
%
Net interest income (FTE)
$
94,546
$
68,498
$
26,048
38.0
%
Net interest margin (FTE)
4.02
%
3.50
%
Acquired loans discount accretion, net:
Amount (included in interest income)
$
714
$
2,034
$
(1,320
)
(64.9
) %
Net interest margin less effect of acquired loan discount accretion(1)
3.99
%
3.40
%
0.59
%
PPP loans yield, net:
Amount (included in interest income)
$
313
$
3,507
$
(3,194
)
(91.1
) %
Net interest margin less effect of PPP loan yield (1)
4.02
%
3.42
%
0.60
%
Acquired loans discount accretion and PPP loan yield, net:
Amount (included in interest income)
$
1,027
$
5,541
$
(4,514
)
(81.5
) %
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)
3.98
%
3.31
%
0.67
%
Nine months ended
September 30,
(dollars in thousands)
2022
2021
Change
% Change
Interest income
$
252,516
$
206,023
$
46,493
22.6
%
Interest expense
(5,440
)
(4,267
)
(1,173
)
27.5
%
Fully tax-equivalent adjustment (FTE) (1)
1,120
797
323
40.5
%
Net interest income (FTE)
$
248,196
$
202,553
$
45,643
22.5
%
Net interest margin (FTE)
3.71
%
3.61
%
Acquired loans discount accretion, net:
Amount (included in interest income)
$
3,714
$
6,311
$
(2,597
)
(41.2
) %
Net interest margin less effect of acquired loan discount accretion(1)
3.65
%
3.50
%
0.15
%
PPP loans yield, net:
Amount (included in interest income)
$
2,374
$
12,549
$
(10,175
)
(81.1
) %
Net interest margin less effect of PPP loan yield (1)
3.69
%
3.53
%
0.16
%
Acquired loans discount accretion and PPP loan yield, net:
Amount (included in interest income)
$
6,088
$
18,860
$
(12,772
)
(67.7
) %
Net interest margin less effect of acquired loans discount and PPP loan yield (1)
3.63
%
3.41
%
0.22
%
(1)
Certain information included herein is presented on a fully tax-equivalent (FTE) basis and / or to present additional financial details which may be desired by users of this financial information. The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provide additional clarity in assessing its results, and the presentation of these measures are common practice within the banking industry. See additional information related to non-GAAP measures at the back of this document.
Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. Generally, as time goes on, the dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. As a result of the increase in interest rates, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, declined throughout 2022. During the three months ended September 30, 2022, June 30, 2022, and September 30, 2021, purchased loan discount accretion was $714,000, $1,677,000, and $2,034,000, respectively.
The following table shows the components of net interest income and net interest margin on a fully tax-equivalent (FTE) basis for the quarterly periods indicated:
ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in thousands)
Three months ended
Three months ended
Three months ended
September 30, 2022
June 30, 2022
September 30, 2021
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans, excluding PPP
$
6,162,267
$
75,643
4.87
%
$
5,890,578
$
68,954
4.70
%
$
4,684,492
$
57,218
4.85
%
PPP loans
8,775
313
14.15
%
37,852
964
10.22
%
213,430
3,507
6.52
%
Investments-taxable
2,591,513
17,122
2.62
%
2,536,362
14,350
2.27
%
2,019,283
7,741
1.52
%
Investments-nontaxable (1)
210,606
1,908
3.59
%
196,104
1,720
3.52
%
130,028
1,147
3.50
%
Total investments
2,802,119
19,030
2.69
%
2,732,466
16,070
2.36
%
2,149,311
8,888
1.64
%
Cash at Federal Reserve and other banks
346,991
1,820
2.08
%
669,163
1,364
0.82
%
710,936
280
0.16
%
Total earning assets
9,320,152
96,806
4.12
%
9,330,059
87,352
3.76
%
7,758,169
69,893
3.57
%
Other assets, net
810,966
791,655
589,942
Total assets
$
10,131,118
$
10,121,714
$
8,348,111
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,775,884
$
119
0.03
%
$
1,799,205
$
99
0.02
%
$
1,507,697
$
116
0.03
%
Savings deposits
3,011,145
685
0.09
%
3,003,337
529
0.07
%
2,407,368
328
0.05
%
Time deposits
321,100
188
0.23
%
337,007
220
0.26
%
321,381
411
0.51
%
Total interest-bearing deposits
5,108,129
992
0.08
%
5,139,549
848
0.07
%
4,236,446
855
0.08
%
Other borrowings
38,908
5
0.05
%
35,253
5
0.06
%
48,330
6
0.05
%
Junior subordinated debt
101,011
1,263
4.96
%
100,991
1,056
4.19
%
57,891
534
3.66
%
Total interest-bearing liabilities
5,248,048
2,260
0.17
%
5,275,793
1,909
0.15
%
4,342,667
1,395
0.13
%
Noninterest-bearing deposits
3,644,086
3,603,771
2,900,817
Other liabilities
164,208
150,696
117,601
Shareholders’ equity
1,074,776
1,091,454
987,026
Total liabilities and shareholders’ equity
$
10,131,118
$
10,121,714
$
8,348,111
Net interest rate spread (1) (2)
3.95
%
3.61
%
3.45
%
Net interest income and margin (1) (3)
$
94,546
4.02
%
$
85,443
3.67
%
$
68,498
3.50
%
(1)
Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.
(2)
Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.
(3)
Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.
Net interest income (FTE) during the three months ended September 30, 2022 increased $9,103,000 or 10.7% to $94,546,000 compared to $85,443,000 during the three months ended June 30, 2022. In addition, net interest margin improved 35 basis points to 4.02%, as compared to the trailing quarter. The increase in net interest income is primarily attributed to an additional $6,038,000 in loan interest and fee income and $2,960,000 in investment income, due to increases in average volume and rates as compared to the trailing quarter, respectively. As a partial offset, increases in interest rates on subordinated debt resulted in an increase in interest expense of $207,000 over the same period.
As compared to the same quarter in the prior year, average loan yields, excluding PPP, increased 2 basis points from 4.85% during the three months ended September 30, 2021, to 4.87% during the three months ended September 30, 2022. The accretion of discounts from acquired loans added 5 and 17 basis points to loan yields during the quarters ended September 30, 2022 and September 30, 2021, respectively. Therefore, the 2 basis point increase in yields on loans during the comparable three month periods ended September 30, 2022 and 2021 was the net effect of a 14 basis point increase in market loan rates, partially offset by a 12 basis point decline in the accretion of discounts.
The rates paid on interest bearing deposits increased by 1 basis point during the quarter ended September 30, 2022 compared to the trailing quarter. The cost of interest-bearing deposits remained flat at 8 basis points between the quarter ended September 30, 2022 and the same quarter of the prior year. In addition, the level of noninterest-bearing deposits continues to benefit the average cost of total deposits which remained flat at 0.04% in both the current and trailing quarter, compared to 0.5% in the third quarter of the prior year. Non-interest bearing deposit balances grew $74.0 million during the three months ended September 30, 2022. As of September 30, 2022, the ratio of average total noninterest-bearing deposits to total average deposits was 41.6% .
Nine months ended September 30, 2022
Nine months ended September 30, 2021
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans, excluding PPP
$
5,668,055
$
201,245
4.75
%
$
4,580,292
$
168,916
4.93
%
PPP loans
32,287
2,374
9.83
%
300,006
12,549
5.59
%
Investments-taxable
2,487,111
41,695
2.24
%
1,838,023
21,324
1.55
%
Investments-nontaxable (1)
183,772
4,853
3.53
%
129,057
3,453
3.58
%
Total investments
2,670,883
46,548
2.33
%
1,967,080
24,777
1.68
%
Cash at Federal Reserve and other banks
573,252
3,469
0.81
%
656,912
578
0.12
%
Total earning assets
8,944,477
253,636
3.79
%
7,504,290
206,820
3.68
%
Other assets, net
737,721
591,983
Total assets
$
9,682,198
$
8,096,273
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,724,787
$
302
0.02
%
$
1,476,987
$
269
0.02
%
Savings deposits
2,863,447
1,541
0.07
%
2,318,169
965
0.06
%
Time deposits
319,940
676
0.28
%
327,562
1,386
0.57
%
Total interest-bearing deposits
4,908,174
2,519
0.07
%
4,122,718
2,620
0.08
%
Other borrowings
39,609
15
0.05
%
40,732
15
0.05
%
Junior subordinated debt
87,804
2,906
4.42
%
57,790
1,632
3.78
%
Total interest-bearing liabilities
5,035,587
5,440
0.14
%
4,221,240
4,267
0.14
%
Noninterest-bearing deposits
3,435,487
2,790,828
Other liabilities
152,186
121,334
Shareholders’ equity
1,058,938
962,871
Total liabilities and shareholders’ equity
$
9,682,198
$
8,096,273
Net interest rate spread (1) (2)
3.65
%
3.54
%
Net interest income and margin (1) (3)
$
248,196
3.71
%
$
202,553
3.61
%
(1)
Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.
(2)
Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.
(3)
Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.
Interest Rates and Earning Asset Composition
During the quarter ended September 30, 2022, market interest rates, including many rates that serve as reference indices for variable rate loans and investment securities continued to increase. As noted above, these rate increases have continued to benefit growth in total interest income. As of September 30, 2022, the Company's loan portfolio consisted of approximately $6.4 billion in outstanding principal with a weighted average coupon rate of 4.65%. Included in the September 30, 2022 loan total are variable rate loans totaling $3.6 billion, of which, $862 million are considered floating based on the Wall Street Prime index. In addition, the Company holds certain investment securities totaling $402 million which are subject to repricing on not less than a quarterly basis.
Asset Quality and Credit Loss Provisioning
During the three months ended September 30, 2022, the Company recorded a provision for credit losses of $3,795,000, as compared to a $2,100,000 provision during the trailing quarter, and a reversal of provision expense of $1,435,000 during the third quarter of 2021.
The following table presents details of the provision for credit losses for the periods indicated:
Three months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
March 31, 2022
September 30, 2021
Addition to (reversal of) allowance for credit losses
$
3,500
$
1,940
$
8,205
$
(1,495
)
Addition to reserve for unfunded loan commitments
295
160
125
60
Total provision for (reversal of) credit losses
$
3,795
$
2,100
$
8,330
$
(1,435
)
The following table presents the activity in the allowance for credit losses on loans for the periods indicated:
Three months ended
Nine months ended
(dollars in thousands)
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Balance, beginning of period
$
97,944
$
86,062
$
85,376
$
91,847
ACL at acquisition for PCD loans
—
—
2,037
—
Provision for (reversal of) credit losses
3,500
(1,495
)
13,645
(7,880
)
Loans charged-off
(267
)
(1,582
)
(1,411
)
(2,195
)
Recoveries of previously charged-off loans
311
1,321
1,841
2,534
Balance, end of period
$
101,488
$
84,306
$
101,488
$
84,306
The allowance for credit losses (ACL) was $101,488,000 as of September 30, 2022, a net increase of $3,544,000 over the immediately preceding quarter. The provision for credit losses of $3,500,000 during the quarter was the net effect of increases in required reserves due to qualitative factors and individually analyzed credits. In addition to the aforementioned quarterly increase, the provision for credit losses of $13,645,000 during the nine months ended September 30, 2022 was comprised of $10,820,000 in association with the loans acquired from Valley Republic Bank in the first quarter of 2022, and a net provision for credit losses of $2,825,000 associated with organic loan portfolio growth and the net changes in quantitative and qualitative factors associated with overall borrower performance. For the quarter, the qualitative components of the ACL resulted in a net increase in required reserves, despite continued improvement in US employment rates, due to increased uncertainty in the global economic markets, concentration risks in commercial lending and the rapid rise in interest rates. Meanwhile, the quantitative component of the ACL increased reserve requirements over the trailing quarter due to loan volume growth and increases in specific reserves totaling approximately $1,237,000.
The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date. This forecast data continues to evolve and included improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date, particularly CA unemployment trends. Inflation remains elevated from continued disruptions in the supply chain and high energy prices Despite the expected continued benefit to the net interest income of the Company from the elevated rate environment, Management notes the rapid intervals of rate increases by the Federal Reserve and flattening or inversion of the yield curve, have boosted expectations of the US entering a recession within 12 months and has led to the lowest levels of consumer sentiment in decades. As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors.
Loans past due 30 days or more increased by $551,000 during the quarter ended September 30, 2022 to $6,471,000, as compared to $5,920,000 at June 30, 2022. Non-performing loans were $17,471,000 at September 30, 2022, an increase of $5,546,000 from $11,925,000 as of June 30, 2022, and a decrease of $11,319,000 from $28,790,000 as of September 30, 2021. The current quarter change in non-performing assets is nearly entirely attributed to a single agriculture production relationship, which also was the primary contributor to the increase in specific reserves for the quarter.
The following table illustrates the total loans by risk rating and their respective percentage of total loans for the periods presented.
September 30,
% of Total
Loans
June 30,
% of Total
Loans
September 30,
% of Total
Loans
(dollars in thousands)
2022
2022
2021
Risk Rating:
Pass
$
6,133,805
97.1
%
$
5,960,781
97.5
%
$
4,698,475
96.1
%
Special Mention
126,273
2.0
%
105,819
1.7
%
138,699
2.9
%
Substandard
54,212
0.9
%
46,821
0.8
%
50,322
1.0
%
Total
$
6,314,290
$
6,113,421
$
4,887,496
Classified loans to total loans
0.86
%
0.77
%
1.03
%
Loans past due 30+ days to total loans
0.10
%
0.10
%
0.22
%
The ratio of classified loans increased to 0.86% as of September 30, 2022 as compared to 0.77% in the trailing quarter, but improved by 17 basis points from the equivalent period in 2021. The Company's criticized loan balances increased during the current quarter by approximately $27,846,000 to $180,486,000 as of September 30, 2022. There were no charge-offs incurred in connection with these loans and management continues to work toward resolution with the borrowers.
There were two properties added to other real estate owned totaling $443,000 during the quarter ended September 30, 2022, and two disposals totaling $394,000. As of September 30, 2022, other real estate owned consisted of nine properties with a carrying value of approximately $3,441,000.
Non-performing assets of $20,912,000 at September 30, 2022 represented 0.21% of total assets, a slight change but generally in line with the $15,304,000 or 0.15% and $31,440,000 or 0.37% as of June 30, 2022 and September 30, 2021, respectively.
Allocation of Credit Loss Reserves by Loan Type
As of September 30, 2022
As of December 31, 2021
As of September 30, 2021
(dollars in thousands)
Amount
% of Loans
Outstanding
Amount
% of Loans
Outstanding
Amount
% of Loans
Outstanding
Commercial real estate:
CRE - Non Owner Occupied
$
29,244
1.42
%
$
25,739
1.61
%
$
25,221
1.65
%
CRE - Owner Occupied
13,525
1.39
%
10,691
1.51
%
10,730
1.53
%
Multifamily
12,749
1.36
%
12,395
1.51
%
12,876
1.55
%
Farmland
3,122
1.12
%
2,315
1.34
%
1,902
1.15
%
Total commercial real estate loans
58,640
1.38
%
51,140
1.55
%
50,729
1.57
%
Consumer:
SFR 1-4 1st Liens
10,671
1.39
%
10,723
1.60
%
10,618
1.60
%
SFR HELOCs and Junior Liens
11,383
2.89
%
10,510
3.11
%
10,431
3.23
%
Other
1,878
3.23
%
2,241
3.34
%
2,442
3.59
%
Total consumer loans
23,932
1.97
%
23,474
2.19
%
23,491
2.22
%
Commercial and Industrial
10,400
1.94
%
3,862
1.49
%
3,427
0.99
%
Construction
6,132
2.52
%
5,667
2.55
%
5,528
2.55
%
Agricultural Production
2,368
3.31
%
1,215
2.39
%
1,119
2.52
%
Leases
16
0.20
%
18
0.27
%
12
0.24
%
Allowance for credit losses
101,488
1.61
%
85,376
1.74
%
84,306
1.72
%
Reserve for unfunded loan commitments
4,370
3,790
3,525
Total allowance for credit losses
$
105,858
1.68
%
$
89,166
1.81
%
$
87,831
1.80
%
For the periods presented in the table above and for purposes of calculating the "% of Loans Outstanding", PPP loans are included in the segment "Commercial and Industrial." PPP loans are fully guaranteed and therefore would not require any loss reserve allocation. Excluding the net outstanding balances of PPP loans from the ratio of the ACL to total loans results in a reserve ratio of approximately 1.61% as of September 30, 2022. In addition to the allowance for credit losses above, the Company has acquired various performing loans whose fair value as of the acquisition date was determined to be less than the principal balance owed on those loans. This difference represents the collective discount of credit, interest rate and liquidity measurements which is expected to be amortized over the life of the loans. As of September 30, 2022, the unamortized discount associated with acquired loans totaled $32,256,000 and, if aggregated with the ACL, would collectively represent 2.11% of total gross loans and 2.12% of total loans less PPP loans.
SBA Paycheck Protection Program
In March 2020 (Round 1) and subsequently in December 2020 (Round 2), the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") was created to help small businesses keep workers employed during the COVID-19 crisis. Tri Counties Bank, through its online portal, facilitated the ability for borrowers to open a new deposit account and submit PPP applications during the entirety of the Programs. The SBA ended PPP and did not accept new borrowing applications, effective May 31, 2021. The following is a summary of PPP loan related information as of the periods indicated:
(dollars in thousands)
September 30, 2022
December 31, 2021
September 30, 2021
Total number of PPP loans outstanding
16
450
1,449
PPP loan balance (TCBK round 1 origination), gross
$
433
$
2,544
$
9,302
PPP loan balance (TCBK round 2 origination), gross
533
60,767
148,159
Acquired PPP loan balance (VRB origination), gross
1,003
—
—
Total PPP loans, gross outstanding
$
1,969
$
63,311
$
157,461
PPP deferred loan fees (Round 1 origination)
—
1
40
PPP deferred loan fees (Round 2 origination)
27
2,163
5,973
Total PPP deferred loan fees (costs) outstanding
$
27
$
2,164
$
6,013
As of September 30, 2022, there was approximately $27,000 in net deferred fee income remaining to be recognized. During the three months ended September 30, 2022, the Company recognized $291,000 in fees on PPP loans as compared with $872,000 and $2,984,000 for the three months ended June 30, 2022 and September 30, 2021, respectively. Based on the payment guarantee provided by the SBA as well as the expected short-term duration of the PPP loans acquired from VRB, the fair value of these loans approximates the principal balance outstanding as of the merger date, and therefore, no purchase discount was recorded.
Non-interest Income
The following table presents the key components of non-interest income for the current and trailing quarterly periods indicated:
Three months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
Change
% Change
ATM and interchange fees
$
6,714
$
6,984
$
(270
)
(3.9
) %
Service charges on deposit accounts
4,436
4,163
273
6.6
%
Other service fees
1,022
1,279
(257
)
(20.1
) %
Mortgage banking service fees
477
482
(5
)
(1.0
) %
Change in value of mortgage servicing rights
33
136
(103
)
(75.7
) %
Total service charges and fees
12,682
13,044
(362
)
(2.8
) %
Increase in cash value of life insurance
659
752
(93
)
(12.4
) %
Asset management and commission income
1,020
1,039
(19
)
(1.8
) %
Gain on sale of loans
357
542
(185
)
(34.1
) %
Lease brokerage income
252
238
14
5.9
%
Sale of customer checks
326
441
(115
)
(26.1
) %
Gain on sale of investment securities
—
—
—
n/m
Loss on marketable equity securities
(115
)
(94
)
(21
)
22.3
%
Other
459
468
(9
)
(1.9
) %
Total other non-interest income
2,958
3,386
(428
)
(12.6
) %
Total non-interest income
$
15,640
$
16,430
$
(790
)
(4.8
) %
Non-interest income decreased $790,000 or 4.8% to $15,640,000 during the three months ended September 30, 2022, compared to $16,430,000 during the quarter ended June 30, 2022. Gain on sale of mortgage loans declined by $185,000 or 34.1% during the quarter ended September 30, 2022, attributed to the continued rising rate environment and resulting decline in overall mortgage application and origination volumes. The decrease in total service charges and fees is wholly attributable to changes in customer use activities and the ongoing integration of customers acquired from Valley Republic Bank (VRB). Looking forward, during the fourth quarter of 2022, the Company will no longer charge personal and business customers a non-sufficient funds fee for returned checks.
The following table presents the key components of non-interest income for the current and prior year periods indicated:
Three months ended September 30,
(dollars in thousands)
2022
2021
Change
% Change
ATM and interchange fees
$
6,714
$
6,516
$
198
3.0
%
Service charges on deposit accounts
4,436
3,608
828
22.9
%
Other service fees
1,022
897
125
13.9
%
Mortgage banking service fees
477
476
1
0.2
%
Change in value of mortgage servicing rights
33
(232
)
265
(114.2
) %
Total service charges and fees
12,682
11,265
1,417
12.6
%
Increase in cash value of life insurance
659
644
15
2.3
%
Asset management and commission income
1,020
957
63
6.6
%
Gain on sale of loans
357
1,814
(1,457
)
(80.3
) %
Lease brokerage income
252
183
69
37.7
%
Sale of customer checks
326
107
219
204.7
%
Gain on sale of investment securities
—
—
—
n/m
Loss on marketable equity securities
(115
)
(14
)
(101
)
721.4
%
Other
459
139
320
230.2
%
Total other non-interest income
2,958
3,830
(872
)
(22.8
) %
Total non-interest income
$
15,640
$
15,095
$
545
3.6
%
Generally, the increases in recurring non-interest income items reflects the VRB merger timing. As noted above, decreasing mortgage related activity reduced the gain on sale of loans recorded during the quarter by $1,457,000 or 80.3%, as compared to the three months ended September 30, 2021. Further, changes in the value of mortgage service rights, while lesser in magnitude, typically have an inverse relationship with changes in mortgage banking activities.
Nine months ended September 30,
(dollars in thousands)
2022
2021
Change
% Change
ATM and interchange fees
$
19,941
$
18,935
$
1,006
5.3
%
Service charges on deposit accounts
12,433
10,339
2,094
20.3
%
Other service fees
3,183
2,682
501
18.7
%
Mortgage banking service fees
1,422
1,406
16
1.1
%
Change in value of mortgage servicing rights
443
(691
)
1,134
(164.1
) %
Total service charges and fees
37,422
32,671
4,751
14.5
%
Increase in cash value of life insurance
2,049
2,062
(13
)
(0.6
) %
Asset management and commission income
2,946
2,738
208
7.6
%
Gain on sale of loans
2,145
7,908
(5,763
)
(72.9
) %
Lease brokerage income
648
542
106
19.6
%
Sale of customer checks
871
342
529
154.7
%
Gain on sale of investment securities
—
—
—
n/m
Loss on marketable equity securities
(346
)
(59
)
(287
)
486.4
%
Other
1,431
958
473
49.4
%
Total other non-interest income
9,744
14,491
(4,747
)
(32.8
) %
Total non-interest income
$
47,166
$
47,162
$
4
—
%
The changes in non-interest income for the nine months ended September 30, 2022 and 2021 are generally consistent with changes in the three month periods discussed above.
Non-interest Expense
The following table presents the key components of non-interest expense for the current and trailing quarterly periods indicated:
Three months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
Change
% Change
Base salaries, net of deferred loan origination costs
$
22,377
$
22,169
$
208
0.9
%
Incentive compensation
4,832
4,282
550
12.8
%
Benefits and other compensation costs
6,319
6,491
(172
)
(2.6
) %
Total salaries and benefits expense
33,528
32,942
586
1.8
%
Occupancy
3,965
3,996
(31
)
(0.8
) %
Data processing and software
3,449
3,596
(147
)
(4.1
) %
Equipment
1,422
1,453
(31
)
(2.1
) %
Intangible amortization
1,702
1,702
—
—
%
Advertising
990
818
172
21.0
%
ATM and POS network charges
1,694
1,781
(87
)
(4.9
) %
Professional fees
1,172
1,233
(61
)
(4.9
) %
Telecommunications
575
564
11
2.0
%
Regulatory assessments and insurance
828
779
49
6.3
%
Merger and acquisition expenses
—
2,221
(2,221
)
(100.0
) %
Postage
287
313
(26
)
(8.3
) %
Operational loss
492
456
36
7.9
%
Courier service
497
486
11
2.3
%
Gain on sale or acquisition of foreclosed assets
(148
)
(98
)
(50
)
51.0
%
Loss on disposal of fixed assets
4
5
(1
)
(20.0
) %
Other miscellaneous expense
4,008
4,017
(9
)
(0.2
) %
Total other non-interest expense
20,937
23,322
(2,385
)
(10.2
) %
Total non-interest expense
$
54,465
$
56,264
$
(1,799
)
(3.2
) %
Average full-time equivalent staff
1,198
1,183
15
1.3
%
Non-interest expense for the quarter ended September 30, 2022 decreased $1,799,000 or 3.2% to $54,465,000 as compared to $56,264,000 during the trailing quarter ended June 30, 2022. Total salaries and benefits expense increased by $586,000 or 1.8%, led by incentive compensation related expenses of $550,000 or 12.8% compared to the trailing quarter, due to strong overall Company performance and continued loan production and growth. The merger and acquisition expenses from the trailing quarter were entirely associated with the VRB merger, which are not expected to be incurred in future periods.
The following table presents the key components of non-interest expense for the current and prior year quarterly periods indicated:
Three months ended September 30,
(dollars in thousands)
2022
2021
Change
% Change
Base salaries, net of deferred loan origination costs
$
22,377
$
17,673
$
4,704
26.6
%
Incentive compensation
4,832
3,123
1,709
54.7
%
Benefits and other compensation costs
6,319
5,478
841
15.4
%
Total salaries and benefits expense
33,528
26,274
7,254
27.6
%
Occupancy
3,965
3,771
194
5.1
%
Data processing and software
3,449
3,689
(240
)
(6.5
) %
Equipment
1,422
1,336
86
6.4
%
Intangible amortization
1,702
1,409
293
20.8
%
Advertising
990
966
24
2.5
%
ATM and POS network charges
1,694
1,692
2
0.1
%
Professional fees
1,172
1,090
82
7.5
%
Telecommunications
575
574
1
0.2
%
Regulatory assessments and insurance
828
673
155
23.0
%
Merger and acquisition expenses
—
651
(651
)
n/m
Postage
287
156
131
84.0
%
Operational loss
492
244
248
101.6
%
Courier service
497
286
211
73.8
%
Gain on sale or acquisition of foreclosed assets
(148
)
(144
)
(4
)
2.8
%
(Gain) loss on disposal of fixed assets
4
(19
)
23
(121.1
) %
Other miscellaneous expense
4,008
3,159
849
26.9
%
Total other non-interest expense
20,937
19,533
1,404
7.2
%
Total non-interest expense
$
54,465
$
45,807
$
8,658
18.9
%
Average full-time equivalent staff
1,198
1,049
149
14.2
%
Generally, the increases in recurring non-interest expense items reflect the VRB merger timing of March 25, 2022, and therefore, related expenses for the combined entities, less certain realized cost savings, are only being captured within the most recent three months ended September 30, 2022. Total non-interest expense increased $8,658,000 or 18.9% to $54,465,000 during the three months ended September 30, 2022 as compared to $45,807,000 for the quarter ended September 30, 2021. Total salaries and benefits expense increased by $7,254,000 or 27.6% to $33,528,000, largely from a net increase of 99 full-time equivalent positions following the aforementioned merger with VRB, the build out of other loan production and compliance teams, and the continued strength of organic growth within the loan portfolio driving incentive compensation expense.
Nine months ended September 30,
(dollars in thousands)
2022
2021
Change
% Change
Base salaries, net of deferred loan origination costs
$
62,762
$
50,721
$
12,041
23.7
%
Incentive compensation
11,697
11,025
672
6.1
%
Benefits and other compensation costs
18,782
16,939
1,843
10.9
%
Total salaries and benefits expense
93,241
78,685
14,556
18.5
%
Occupancy
11,536
11,197
339
3.0
%
Data processing and software
10,558
10,092
466
4.6
%
Equipment
4,208
4,060
148
3.6
%
Intangible amortization
4,632
4,271
361
8.5
%
Advertising
2,445
2,080
365
17.5
%
ATM and POS network charges
4,850
4,489
361
8.0
%
Professional fees
3,281
2,730
551
20.2
%
Telecommunications
1,660
1,719
(59
)
(3.4
) %
Regulatory assessments and insurance
2,327
1,903
424
22.3
%
Merger and acquisition expenses
6,253
651
5,602
860.5
%
Postage
828
478
350
73.2
%
Operational loss
765
665
100
15.0
%
Courier service
1,397
868
529
60.9
%
Gain on sale or acquisition of foreclosed assets
(246
)
(210
)
(36
)
17.1
%
Gain on disposal of fixed assets
(1,069
)
(445
)
(624
)
140.2
%
Other miscellaneous expense
10,510
8,363
2,147
25.7
%
Total other non-interest expense
63,935
52,911
11,024
20.8
%
Total non-interest expense
$
157,176
$
131,596
$
25,580
19.4
%
Average full-time equivalent staff
1,155
1,031
124
12.0
%
The changes in non-interest expense for the nine months ended September 30, 2022 and 2021 are generally consistent with changes in the comparable three month periods discussed above.
Provision for Income Taxes
The Company’s effective tax rate was 27.5% for the nine months ended September 30, 2022, as compared to 28.1% for the year ended December 31, 2021. Differences between the Company's effective tax rate and applicable federal and state blended statutory rate of approximately 29.6% are due to the proportion of non-taxable revenues, non-deductible expenses, and benefits from tax credits as compared to the levels of pre-tax earnings.
About TriCo Bancshares
Established in 1975, Tri Counties Bank is a wholly-owned subsidiary of TriCo Bancshares (NASDAQ: TCBK) headquartered in Chico, California, providing a unique brand of customer Service with Solutions available in traditional stand-alone and in-store bank branches and loan production offices in communities throughout California. Tri Counties Bank provides an extensive and competitive breadth of consumer, small business and commercial banking financial services, along with convenient around-the-clock ATMs, online and mobile banking access. Brokerage services are provided by Tri Counties Advisors through affiliation with Raymond James Financial Services, Inc. Visit www.TriCountiesBank.com to learn more.
Forward-Looking Statement
The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. There can be no assurance that future developments affecting us will be the same as those anticipated by management. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations on the Company's business condition and financial operating results; the impact of changes in financial services industry policies, laws and regulations; technological changes; weather, natural disasters and other catastrophic events that may or may not be caused by climate change and their effects on economic and business environments in which the Company operates; the continuing adverse impact on the U.S. economy, including the markets in which we operate due to the COVID-19 global pandemic; the impact of a slowing U.S. economy and increased unemployment on the performance of our loan portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products; adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages on the economic recovery and our business; the impacts of international hostilities or geopolitical events; the costs or effects of mergers, acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such mergers, acquisitions or dispositions, and/or our ability to realize the contemplated financial business benefits associated with any such activities; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the negative impact on our reputation and profitability in the event customers experience economic harm or in the event that regulatory violations are identified; the ability to execute our business plan in new lending markets; the future operating or financial performance of the Company, including our outlook for future growth and changes in the level of our nonperforming assets and charge-offs; the appropriateness of the allowance for credit losses, including the timing and effects of the implementation of the current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting standards and practices; possible other-than-temporary impairment of securities held by us due to changes in credit quality or rates; changes in consumer spending, borrowing and savings habits; our ability to attract and maintain deposits and other sources of liquidity; the effects of changes in the level or cost of checking or savings account deposits on our funding costs and net interest margin; changes in the financial performance and/or condition of our borrowers; our noninterest expense and the efficiency ratio; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; the challenges of integrating and retaining key employees; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks and the cost to defend against such attacks; breaches in data security, including as a result of work from home arrangements; failure to safeguard personal information; change to U.S. tax policies, including our effective income tax rate; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the discontinuation of the London Interbank Offered Rate and other reference rates; and our ability to manage the risks involved in the foregoing. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2021, which has been filed with the Securities and Exchange Commission (the “SEC”) and all subsequent filings with the SEC under Sections 13(a), 13(c), 14, and 15(d) of the Securities Act of 1934, as amended. Such filings are also available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. We undertake no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)
Three months ended
September 30,
2022
June 30,
2022
March 31,
2022
December 31,
2021
September 30,
2021
Revenue and Expense Data
Interest income
$
96,366
$
86,955
$
69,195
$
71,024
$
69,628
Interest expense
2,260
1,909
1,271
1,241
1,395
Net interest income
94,106
85,046
67,924
69,783
68,233
Provision for (benefit from) credit losses
3,795
2,100
8,330
980
(1,435
)
Noninterest income:
Service charges and fees
12,682
13,044
11,696
11,277
11,265
Gain on sale of investment securities
—
—
—
—
—
Other income
2,958
3,386
3,400
5,225
3,830
Total noninterest income
15,640
16,430
15,096
16,502
15,095
Noninterest expense (2):
Salaries and benefits
33,528
34,370
28,597
27,666
26,274
Occupancy and equipment
5,387
5,449
4,925
5,011
5,107
Data processing and network
5,143
5,468
5,089
5,444
5,381
Other noninterest expense
10,407
10,977
7,836
8,558
9,045
Total noninterest expense
54,465
56,264
46,447
46,679
45,807
Total income before taxes
51,486
43,112
28,243
38,626
38,956
Provision for income taxes
14,148
11,748
7,869
10,404
11,534
Net income
$
37,338
$
31,364
$
20,374
$
28,222
$
27,422
Share Data
Basic earnings per share
$
1.12
$
0.93
$
0.68
$
0.95
$
0.92
Diluted earnings per share
$
1.12
$
0.93
$
0.67
$
0.94
$
0.92
Dividends per share
$
0.30
$
0.25
$
0.25
$
0.25
$
0.25
Book value per common share
$
29.71
$
31.25
$
32.78
$
33.64
$
33.05
Tangible book value per common share (1)
$
19.92
$
21.41
$
23.04
$
25.80
$
25.16
Shares outstanding
33,332,189
33,350,974
33,837,935
29,730,424
29,714,609
Weighted average shares
33,348,322
33,561,389
30,049,919
29,723,791
29,713,558
Weighted average diluted shares
33,463,364
33,705,280
30,201,698
29,870,059
29,850,530
Credit Quality
Allowance for credit losses to gross loans
1.61
%
1.60
%
1.64
%
1.74
%
1.72
%
Loans past due 30 days or more
$
6,471
$
5,920
$
8,402
$
4,332
$
10,539
Total nonperforming loans
$
17,471
$
11,925
$
14,088
$
30,350
$
28,790
Total nonperforming assets
$
20,912
$
15,304
$
16,995
$
32,944
$
31,440
Loans charged-off
$
267
$
401
$
743
$
197
$
1,582
Loans recovered
$
311
$
356
$
1,174
$
552
$
1,321
Selected Financial Ratios
Return on average total assets
1.46
%
1.24
%
0.94
%
1.31
%
1.30
%
Return on average equity
13.78
%
11.53
%
8.19
%
11.20
%
11.02
%
Average yield on loans, excluding PPP
4.87
%
4.70
%
4.65
%
4.73
%
4.85
%
Average yield on interest-earning assets
4.12
%
3.76
%
3.46
%
3.56
%
3.57
%
Average rate on interest-bearing deposits
0.08
%
0.07
%
0.06
%
0.06
%
0.08
%
Average cost of total deposits
0.04
%
0.04
%
0.04
%
0.04
%
0.05
%
Average rate on borrowings & subordinated debt
3.60
%
3.12
%
2.27
%
1.98
%
2.02
%
Average rate on interest-bearing liabilities
0.17
%
0.15
%
0.11
%
0.11
%
0.13
%
Net interest margin (fully tax-equivalent) (1)
4.02
%
3.67
%
3.39
%
3.50
%
3.50
%
Loans to deposits
72.95
%
69.81
%
67.15
%
66.74
%
67.54
%
Efficiency ratio
49.63
%
55.45
%
55.95
%
54.10
%
54.97
%
Supplemental Loan Interest Income Data
Discount accretion on acquired loans
$
714
$
1,677
$
1,323
$
1,780
$
2,034
All other loan interest income (excluding PPP) (1)
$
74,929
$
67,277
$
55,325
$
54,930
$
55,184
Total loan interest income (excluding PPP) (1)
$
75,643
$
68,954
$
56,648
$
56,710
$
57,218
(1)
Non-GAAP measure
(2)
Inclusive of merger related expenses
TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)
Balance Sheet Data
September 30,
2022
June 30,
2022
March 31,
2022
December 31,
2021
September 30,
2021
Cash and due from banks
$
246,509
$
488,868
$
1,035,683
$
768,421
$
740,236
Securities, available for sale, net
2,482,857
2,608,771
2,365,708
2,210,876
2,098,786
Securities, held to maturity, net
168,038
176,794
186,748
199,759
216,979
Restricted equity securities
17,250
17,250
17,250
17,250
17,250
Loans held for sale
247
1,216
1,030
3,466
3,072
Loans:
Commercial real estate
4,238,930
4,049,893
3,832,974
3,306,054
3,222,737
Consumer
1,217,297
1,162,989
1,136,712
1,071,551
1,053,653
Commercial and industrial
534,960
507,685
500,882
259,355
345,027
Construction
243,571
313,646
303,960
222,281
216,680
Agriculture production
71,599
71,373
69,339
50,811
44,410
Leases
7,933
7,835
8,108
6,572
4,989
Total loans, gross
6,314,290
6,113,421
5,851,975
4,916,624
4,887,496
Allowance for credit losses
(101,488
)
(97,944
)
(96,049
)
(85,376
)
(84,306
)
Total loans, net
6,212,802
6,015,477
5,755,926
4,831,248
4,803,190
Premises and equipment
73,266
73,811
73,692
78,687
78,968
Cash value of life insurance
132,933
132,857
132,104
117,857
120,932
Accrued interest receivable
27,070
25,861
22,769
19,292
18,425
Goodwill
307,942
307,942
307,942
220,872
220,872
Other intangible assets
18,372
20,074
21,776
12,369
13,562
Operating leases, right-of-use
26,622
27,154
28,404
25,665
26,815
Other assets
262,971
224,536
169,296
109,025
98,943
Total assets
$
9,976,879
$
10,120,611
$
10,118,328
$
8,614,787
$
8,458,030
Deposits:
Noninterest-bearing demand deposits
$
3,678,202
$
3,604,237
$
3,583,269
$
2,979,882
$
2,943,016
Interest-bearing demand deposits
1,749,123
1,796,580
1,788,639
1,568,682
1,519,426
Savings deposits
2,924,674
3,028,787
2,993,873
2,521,011
2,447,706
Time certificates
303,770
327,171
348,696
297,584
326,674
Total deposits
8,655,769
8,756,775
8,714,477
7,367,159
7,236,822
Accrued interest payable
853
755
653
928
1,056
Operating lease liability
28,717
29,283
30,500
26,280
27,290
Other liabilities
153,110
155,529
126,348
112,070
107,282
Other borrowings
47,068
35,089
36,184
50,087
45,601
Junior subordinated debt
101,024
101,003
100,984
58,079
57,965
Total liabilities
8,986,541
9,078,434
9,009,146
7,614,603
7,476,016
Common stock
696,348
696,441
706,672
532,244
531,339
Retained earnings
516,699
491,705
479,868
466,959
446,948
Accum. other comprehensive income (loss)
(222,709
)
(145,969
)
(77,358
)
981
3,727
Total shareholders’ equity
$
990,338
$
1,042,177
$
1,109,182
$
1,000,184
$
982,014
Quarterly Average Balance Data
Average loans, excluding PPP
$
6,162,267
$
5,890,578
$
4,937,865
$
4,759,294
$
4,684,492
Average interest-earning assets
$
9,320,152
$
9,330,059
$
8,153,200
$
7,947,798
$
7,758,169
Average total assets
$
10,131,118
$
10,121,714
$
8,778,256
$
8,546,004
$
8,348,111
Average deposits
$
8,752,215
$
8,743,320
$
7,521,930
$
7,304,659
$
7,137,263
Average borrowings and subordinated debt
$
139,919
$
136,244
$
105,702
$
108,671
$
106,221
Average total equity
$
1,074,776
$
1,091,454
$
1,009,224
$
999,764
$
987,026
Capital Ratio Data
Total risk-based capital ratio
14.0
%
14.1
%
15.0
%
15.4
%
15.4
%
Tier 1 capital ratio
12.2
%
12.3
%
13.1
%
14.2
%
14.2
%
Tier 1 common equity ratio
11.4
%
11.5
%
12.3
%
13.2
%
13.2
%
Tier 1 leverage ratio
9.6
%
9.3
%
10.8
%
9.9
%
9.9
%
Tangible capital ratio (1)
6.9
%
7.3
%
8.0
%
9.2
%
9.1
%
(1)
Non-GAAP measure
TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES
(Unaudited. Dollars in thousands)
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this press release because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results, and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:
Three months ended
Nine months ended
(dollars in thousands)
September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Net interest margin
Acquired loans discount accretion, net:
Amount (included in interest income)
$
714
$
1,677
$
2,034
$
3,714
$
6,311
Effect on average loan yield
0.05
%
0.11
%
0.17
%
0.09
%
0.18
%
Effect on net interest margin (FTE)
0.03
%
0.07
%
0.10
%
0.06
%
0.11
%
Net interest margin (FTE)
4.02
%
3.67
%
3.50
%
3.71
%
3.61
%
Net interest margin less effect of acquired loan discount accretion (Non-GAAP)
3.99
%
3.60
%
3.40
%
3.65
%
3.50
%
PPP loans yield, net:
Amount (included in interest income)
$
313
$
964
$
3,507
$
2,374
$
12,549
Effect on net interest margin (FTE)
0.01
%
0.02
%
0.09
%
0.02
%
0.08
%
Net interest margin less effect of PPP loan yield (Non-GAAP)
4.02
%
3.65
%
3.42
%
3.69
%
3.53
%
Acquired loan discount accretion and PPP loan yield, net:
Amount (included in interest income)
$
1,027
$
2,641
$
5,541
$
6,088
$
18,860
Effect on net interest margin (FTE)
0.04
%
0.10
%
0.19
%
0.08
%
0.20
%
Net interest margin less effect of acquired loan discount accretion and PPP yields, net (Non-GAAP)
3.98
%
3.57
%
3.31
%
3.63
%
3.41
%
Three months ended
Nine months ended
(dollars in thousands)
September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Pre-tax pre-provision return on average assets or equity
Net income (GAAP)
$
37,338
$
31,364
$
27,422
$
89,076
$
89,433
Exclude income tax expense
14,148
11,748
11,534
33,765
35,644
Exclude provision (benefit) for credit losses
3,795
2,100
(1,435
)
14,225
(7,755
)
Net income before income tax and provision expense (Non-GAAP)
$
55,281
$
45,212
$
37,521
$
137,066
$
117,322
Average assets (GAAP)
$
10,131,118
$
10,121,714
$
8,348,111
$
9,682,198
$
8,096,273
Average equity (GAAP)
$
1,074,776
$
1,091,454
$
987,026
$
1,058,938
$
962,871
Return on average assets (GAAP) (annualized)
1.46
%
1.24
%
1.30
%
1.23
%
1.48
%
Pre-tax pre-provision return on average assets (Non-GAAP) (annualized)
2.16
%
1.79
%
1.78
%
1.89
%
1.94
%
Return on average equity (GAAP) (annualized)
13.78
%
11.53
%
11.02
%
11.25
%
12.42
%
Pre-tax pre-provision return on average equity (Non-GAAP) (annualized)
20.41
%
16.61
%
15.08
%
17.31
%
16.29
%
Three months ended
Nine months ended
(dollars in thousands)
September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Return on tangible common equity
Average total shareholders' equity
$
1,074,776
$
1,091,454
$
987,026
$
1,058,938
$
962,871
Exclude average goodwill
307,942
307,942
220,872
281,151
220,872
Exclude average other intangibles
19,433
21,040
14,267
17,717
19,264
Average tangible common equity (Non-GAAP)
$
747,401
$
762,472
$
751,887
$
760,070
$
722,735
Net income (GAAP)
$
37,338
$
31,364
$
27,422
$
89,076
$
89,433
Exclude amortization of intangible assets, net of tax effect
1,199
1,199
992
3,263
3,008
Tangible net income available to common shareholders (Non-GAAP)
$
38,537
$
32,563
$
28,414
$
92,339
$
92,441
Return on average equity
13.78
%
11.53
%
11.02
%
11.25
%
12.42
%
Return on average tangible common equity (Non-GAAP)
20.46
%
17.13
%
14.99
%
16.24
%
17.10
%
Three months ended
(dollars in thousands)
September 30,
2022
June 30,
2022
March 31,
2022
December 31,
2021
September 30,
2021
Tangible shareholders' equity to tangible assets
Shareholders' equity (GAAP)
$
990,338
$
1,042,177
$
1,109,182
$
1,000,184
$
982,014
Exclude goodwill and other intangible assets, net
326,314
328,016
329,718
233,241
234,434
Tangible shareholders' equity (Non-GAAP)
$
664,024
$
714,161
$
779,464
$
766,943
$
747,580
Total assets (GAAP)
$
9,976,879
$
10,120,611
$
10,118,328
$
8,614,787
$
8,458,030
Exclude goodwill and other intangible assets, net
326,314
328,016
329,718
233,241
234,434
Total tangible assets (Non-GAAP)
$
9,650,565
$
9,792,595
$
9,788,610
$
8,381,546
$
8,223,596
Shareholders' equity to total assets (GAAP)
9.93
%
10.30
%
10.96
%
11.61
%
11.61
%
Tangible shareholders' equity to tangible assets (Non-GAAP)
6.88
%
7.29
%
7.96
%
9.15
%
9.09
%
Three months ended
(dollars in thousands)
September 30,
2022
June 30,
2022
March 31,
2022
December 31,
2021
September 30,
2021
Tangible common shareholders' equity per share
Tangible s/h equity (Non-GAAP)
$
664,024
$
714,161
$
779,464
$
766,943
$
747,580
Common shares outstanding at end of period
33,332,189
33,350,974
33,837,935
29,730,424
29,714,609
Common s/h equity (book value) per share (GAAP)
$
29.71
$
31.25
$
32.78
$
33.64
$
33.05
Tangible common shareholders' equity (tangible book value) per share (Non-GAAP)
$
19.92
$
21.41
$
23.04
$
25.80
$
25.16
View source version on businesswire.com: https://www.businesswire.com/news/home/20221026005147/en/