TriCo Bancshares (NASDAQ:TCBK) (the "Company"), parent company
of Tri Counties Bank (the “Bank”), today announced quarterly
earnings of $1,320,000 for the quarter ended June 30, 2010. This
represents a decrease of $1,192,000 (48%) when compared with
earnings of $2,512,000 for the quarter ended June 30, 2009. Diluted
earnings per share for the quarter ended June 30, 2010 decreased
50% to $0.08 compared to $0.16 for the quarter ended June 30, 2009.
Diluted earnings per share for the six months ended June 30, 2010
and 2009 were $0.18 and $0.34, respectively, on earnings of
$2,878,000 and $5,394,000, respectively.
Total assets of the Company increased $136,804,000 (6.6%) to
$2,224,645,000 at June 30, 2010 from $2,087,841,000 at June 30,
2009. Total loans of the Company decreased $47,142,000 (3.0%) to
$1,505,093,000 at June 30, 2010 from $1,552,235,000 at June 30,
2009. Total deposits of the Company increased $152,564,000 (8.8%)
to $1,889,949,000 at June 30, 2010 from $1,737,385,000 at June 30,
2009.
Included in the Company’s results for the three and six month
periods ended June 30, 2010 is the acquisition by Tri Counties Bank
of the banking operations of Granite Community Bank (“Granite”),
Granite Bay, California from the FDIC under a whole bank purchase
and assumption agreement with loss sharing on May 28, 2010. With
this acquisition, Tri Counties Bank added one traditional bank
branch in each of Granite Bay, Roseville and Auburn, California.
This acquisition is consistent with the Company’s community banking
expansion strategy and provides further opportunity to fill in the
Company’s market presence in the greater Sacramento, California
market. Additional information regarding the Granite acquisition is
presented near the end of this announcement.
The following is a summary of the components of fully taxable
equivalent (“FTE”) net income for the periods indicated (dollars in
thousands):
Three months ended June 30, 2010
2009 Net Interest Income (FTE) $ 22,245 $ 23,288
Provision for loan losses (10,000 ) (7,850 ) Noninterest income
8,104 7,996 Noninterest expense (18,408 ) (19,344 ) Provision for
income taxes (FTE) (621 ) (1,578 ) Net income
$ 1,320 $ 2,512
For the three months ended June 30, 2010, net income was
$1,320,000, or $0.08 per diluted share, as compared to net income
of $2,512,000, or $0.16 per diluted share for the three months
ended June 30, 2009. The decrease in net income for the three
months ended June 30, 2010 compared to the same period of the prior
year was the result of decreased net interest income, and increased
provision for loan losses that were partially offset by increased
noninterest income and decreased noninterest expense. Noninterest
income for the three month period ended June 30, 2010 includes a
bargain purchase gain on acquisition of $232,000 relating to the
acquisition of Granite. The Bank assumed certain assets and
liabilities of Granite on May 28, 2010, and the results of the
acquired operations are included in the Company’s financial results
starting on May 28, 2010.
Net interest income (FTE) for the three months ended June 30,
2010 was $22,245,000, a decrease of $1,043,000 or 4.5% compared to
the same period in 2009. The results for the three month period
ended June 30, 2010 as compared to the same period in 2009 are
attributable to a change in the mix of interest-earning assets,
with average loan balances decreasing and other categories of lower
yielding assets increasing. Net interest margin (net interest
income as a percentage of average interest-earning assets) on a
fully tax-equivalent basis was 4.41% for the three months ended
June 30, 2010, a decrease of 41 basis points as compared to the
same period in 2009. The decrease in net interest margin for the
three months ended June 30, 2010 as compared to same period in 2009
was mainly due to a lower average yield earned on loans and a
change in the mix of interest-earning assets away from loans and
towards lower yielding interest-earning cash at the Federal Reserve
Bank combined with continued deposit growth despite extremely low
rates being offered by the Company for those deposits. The Company
is attempting to balance new customer acquisition and deposit
growth with the opportunities it has, in the current economic
environment, to invest or loan that deposit growth without undue
risk and in a profitable manner.
The following table details the components of the net interest
income and net interest margin on a fully tax-equivalent (FTE)
basis for the quarters ended June 30, 2010 and 2009:
Quarter ended June 30, 2010 Quarter
ended June 30, 2009 (Dollars in thousands)
AverageBalance
Income Yield/Rate AverageBalance
Income Yield/Rate Assets:
Loans $ 1,463,475 $ 22,701 6.20 % $ 1,555,778
$ 25,218 6.48 % Securities 294,301 3,032 4.12 % 267,896 3,301 4.93
% Cash at Fed and other banks 261,910 154 0.24
% 109,959 55 0.20 % Total earning assets
2,019,686 25,887 5.13 % 1,933,633 28,574
5.91 % Other assets 171,974 155,242 Total
assets 2,191,660 2,088,875 Liabilities and
shareholders' equity: Interest-bearing demand deposits $ 386,788 $
586 0.61 % $ 283,777 $ 444 0.63 % Savings deposits 541,710 613 0.45
% 425,759 759 0.71 % Time deposits 544,320 1,528 1.12 % 664,863
3,575 2.15 % Junior sub debt 41,238 313 3.04 % 41,238 396 3.84 %
Other borrowings 61,629 602 3.91 %
73,565 112 0.61 % Total interest-bearing liabilities
$ 1,575,685 3,642 0.92 % $ 1,489,202 5,286
1.42 % Noninterest-bearing deposits 376,300 361,035 Other
liabilities 36,147 35,042 Shareholders' equity 203,528
203,596
Total liabilities and
shareholders' equity
$ 2,191,660 $ 2,088,875 Net interest rate spread 4.21 % 4.49 % Net
interest income/net interest margin FTE 22,245 4.41 %
23,288 4.82 % FTE adjustment (111 )
(142 ) Net interest income before FTE adjustment 22,134
$ 23,146
The provision for loan losses was $10,000,000 for the three
months ended June 30, 2010, compared to $7,850,000 for the same
period in 2009. The increases in the provision for loan losses for
the three month period ended June 30, 2010 as compared to the same
period in 2009 were primarily the result of changes in the make-up
of the loan portfolio and the Bank’s loss factors in reaction to
increased losses in the construction, commercial real estate,
commercial & industrial (C&I), home equity and auto
indirect loan portfolios. Management re-evaluates its loss ratios
and assumptions quarterly and makes changes as appropriate based
upon, among other things, changes in loss rates experienced,
collateral support for underlying loans, changes and trends in the
economy, and changes in the loan mix.
Noninterest income for the three months ended June 30, 2010 was
$8,104,000, an increase of $108,000, or 1%, as compared to the same
period in 2009. The following table presents the key components of
noninterest income for the three months ended June 30, 2010 and
2009:
Three months ended June 30,
(dollars in thousands)
2010 2009
ChangeAmount
ChangePercent
Service charges on deposit accounts $ 4,443 $ 4,136 $
307 7 % ATM fees and interchange revenue 1,531 1,222 309 25
% Other service fees 678 553 125 23 % Change in value of mortgage
servicing rights (569 ) 271 (840 ) (310 %) Gain on sale of loans
577 948 (371 ) (39 %) Commissions on sale of nondeposit investment
products 362 492 (130 ) (26 %) Increase in cash value of life
insurance 426 270 156 58 % Gain (loss) on disposition of foreclosed
assets 310 (4 ) 314 Bargain purchase gain on acquisition 232 - 232
Other noninterest income 114 108
6 6 % Total noninterest income $ 8,104
$ 7,996 $ 108 1 %
The increase in service charges in the three months ended June
30, 2010 over the same period in 2009 is mainly due to an increase
in nonsufficient funds per item fees that took effect in April
2009. ATM fees and interchange revenue increased due to increased
customer point-of-sale transactions that are the result of
incentives for such usage. Other service fees increase mainly due
to increased loan servicing fees from higher balances of loans
being serviced. Change in value of mortgage servicing rights
decreased primarily due to decreased residential mortgage rates
that are expected to increase the pace of future mortgage
refinancing that in turn adversely effect the value of mortgage
servicing rights. Gain on sale of loans decreased due to decreased
mortgage refinancing when compared to prior year similar periods.
The improvement in increase in cash value of life insurance is due
to increased earnings rates from such insurance policies.
Noninterest expense for the three months ended June 30, 2010 was
$18,408,000, a decrease of $936,000, or 5%, as compared to the same
period in 2009. The following table presents the key components of
noninterest expense for the three months ended June 30, 2010 and
2009:
Three months ended June 30, (dollars in thousands)
2010 2009
ChangeAmount
ChangePercent
Base salaries, net of deferred loan origination costs $ 6,990
$ 6,676 $ 314 5 % Incentive compensation 526
916 (390 ) (43 %) Benefits and other compensation costs
2,469 2,477 (8 ) (1 %)
Total salaries and related benefits 9,985
10,069 (84 ) (1 %) Occupancy 1,407
1,269 138 11 % Equipment 1,060 905 155 17 % Telecommunications 461
433 28 7 % Data processing and software 661 664 (3 ) (1 %)
Provisions for losses – unfunded commitments (800 ) 400 (1,200 )
(300 %) ATM network charges 446 589 (143 ) (24 %) Professional fees
704 423 281 66 % Advertising and marketing 627 514 113 22 % Courier
service 201 212 (11 ) (5 %) Postage 311 228 83 36 % Intangible
amortization 72 64 8 13 % Operational losses 120 90 30 33 %
Provision for foreclosed asset losses 55 - 55 Foreclosed asset
expense 66 33 33 100 % Assessments 812 1,288 (476 ) (37 %) Other
2,220 2,163 57
3 % Total other noninterest expense 8,423
9,275 (852 ) (9 %) Total
noninterest expense $ 18,408 $ 19,344
($936 ) (5 %) Average full time equivalent staff 655 639
Salaries and related benefits decreased $84,000, or 1% in the
three months ending June 30, 2010, as compared to the same period
in the prior year. The increase was due to a two percent increase
in average full time equivalent staff, primarily in new branches
and loan collection functions, and annual salary merit increases
that were substantially offset by reduced incentive compensation in
all product lines. The May 28, 2010 acquisition of Granite added
$80,000 to salaries and benefits expense through June 30, 2010.
Occupancy and equipment expenses increased for the three months
ended June 30, 2010, as compared to the same period in the prior
year, primarily due to four new branch openings, one each in the
third and fourth quarters of 2009 and one each in the first and
second quarters of 2010, and three branches and one admin facility
acquired in the Granite acquisition on May 28, 2010. The decrease
in provision for losses – unfunded commitments was due to reduced
estimates of future uses of such commitments and reduced estimates
of loss rates on such future commitments. The increase in
professional fees is mainly due to legal fees related to loan
collection efforts. The May 28, 2010 acquisition of Granite added
expenses totaling $77,000 in various categories other noninterest
expense through June 30, 2010.
The effective tax rate for the three months ended June 30, 2010
was 27.9% and reflects a decrease from 36.4% for the three months
ended June 30, 2009. 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.
The assets acquired and liabilities assumed in the Granite
acquisition have been accounted for under the acquisition method of
accounting (formerly the purchase method). The acquired loan
portfolio and foreclosed assets are referred to as “covered loans”
and “covered foreclosed assets”, respectively, and are presented as
separate line items in the Company’s consolidated balance sheet.
Collectively these balances are referred to as “covered
assets”.
The Company did not immediately acquire all the real estate,
banking facilities, furniture or equipment of Granite as part of
the purchase and assumption agreement. However, the Bank has the
option to purchase or lease the real estate and furniture and
equipment from the FDIC. The term of this option expires 90 days
from the acquisition dates, unless extended by the FDIC.
Acquisition costs of the real estate and furniture and equipment
that the Bank may purchase from the FDIC will be based on current
appraisals and determined at a later date.
The operations of Granite are included in the Company’s
operating results from May 28, 2010, and added revenue of $595,000,
including a bargain purchase gain of $232,000, and noninterest
expense of $157,000, that resulted in a contribution to net income
after-tax of $254,000 for the second quarter of 2010. Such
operating results are not necessarily indicative of future
operating results. Granite’s results of operations prior to the
acquisition are not included in the Company’s operating results.
The assets acquired and liabilities assumed in the Granite
acquisition, both tangible and intangible, were recorded on the
Company’s balance sheet at their estimated fair values on the
acquisition date as follows (in thousands):
Asset acquired: May 28, 2010 Cash and cash equivalents $
18,764 Investment securities 3,650 Covered loans 64,802 Premises
and equipment 17 Core deposit intangible 562 Covered foreclosed
assets 4,629 FDIC indemnification asset 7,466 Other assets
392 Total assets acquired $ 100,282 Liabilities assumed: Deposits $
95,001 Other borrowings 5,000 Other liabilities 49 Total
liabilities assumed 100,050 Net assets acquired/bargain
purchase gain $ 232
The fair value amounts for assets acquired and liabilities
assumed in the Granite acquisition are subject to change for up to
one year after the closing date of the acquisition as additional
information relating to closing date fair values becomes available.
The amounts are also subject to adjustments based upon final
settlement with the FDIC. In addition, the tax treatment of FDIC
assisted acquisitions is complex and subject to interpretations
that may result in future adjustments of deferred taxes as of the
acquisition date.
In addition to the historical information contained herein, this
press release may contain certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. The reader of this press release should understand that all
such forward-looking statements are subject to various
uncertainties and risks that could affect their outcome. The
Company’s actual results could differ materially from those
suggested by such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not
limited to, variances in the actual versus projected growth in
assets, return on assets, interest rate fluctuations, economic
conditions in the Company's primary market area, demand for loans,
regulatory and accounting changes, loan losses, expenses, rates
charged on loans and earned on securities investments, rates paid
on deposits, competition effects, fee and other noninterest income
earned as well as other factors detailed in the Company's reports
filed with the Securities and Exchange Commission which are
incorporated herein by reference, including the Form 10-K for the
year ended December 31, 2009. These reports and this entire press
release should be read to put such forward-looking statements in
context and to gain a more complete understanding of the
uncertainties and risks involved in the Company's business. Any
forward-looking statement may turn out to be wrong and cannot be
guaranteed. The Company does not intend to update any of the
forward-looking statements after the date of this release.
TriCo Bancshares and Tri Counties Bank are headquartered in
Chico, California. Tri Counties Bank has a 35-year history in the
banking industry. It operates 35 traditional branch locations and
27 in-store branch locations in 23 California counties. Tri
Counties Bank offers financial services and provides a diversified
line of products and services to consumers and businesses, which
include demand, savings and time deposits, consumer finance, online
banking, mortgage lending, and commercial banking throughout its
market area. It operates a network of 70 ATMs and a 24-hour, seven
days-a-week telephone customer service center. Brokerage services
are provided by the Bank’s investment services affiliate, Raymond
James Financial Services, Inc. For further information please visit
the Tri Counties Bank web site at
http://www.tricountiesbank.com.
TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA (Unaudited.
Dollars in thousands, except share data) Three
months ended June 30, March 31, December 31,
September 30, June 30, 2010 2010 2009
2009 2009
Statement of Income Data Interest income $
25,776 $ 25,936 $ 27,130 $ 27,889 $ 28,432 Interest expense 3,642
3,958 4,661 4,784 5,286 Net interest income 22,134 21,978 22,469
23,105 23,146 Provision for loan losses 10,000 8,500 7,800 8,000
7,850 Noninterest income: Service charges and fees 6,082 5,735
5,943 5,645 6,182 Other income 2,022 1,812 1,982 2,148 1,814 Total
noninterest income 8,104 7,547 7,925 7,793 7,996 Noninterest
expense:
Base salaries net of deferred loan
origination costs
6,990 6,974 7,031 6,827 6,676 Incentive compensation expense 526
546 308 980 916
Employee benefits and other
compensation expense
2,469 2,630 2,350 2,456 2,477 Total salaries and benefits expense
9,985 10,150 9,689 10,263 10,069 Intangible amortization 72 65 65
65 64
Provision for losses - unfunded
commitments
(800 ) - - 500 400 Other expense 9,151 8,588 9,774 8,549 8,811
Total noninterest expense 18,408 18,803 19,528 19,377 19,344 Income
before taxes 1,830 2,222 3,066 3,521 3,948 Net income $ 1,320 $
1,558 $ 2,313 $ 2,255 $ 2,512
Share Data Basic earnings per
share $ 0.08 $ 0.10 $ 0.15 $ 0.14 $ 0.16 Diluted earnings per share
$ 0.08 $ 0.10 $ 0.14 $ 0.14 $ 0.16 Book value per common share $
12.76 $ 12.63 $ 12.71 $ 12.79 $ 12.67 Tangible book value per
common share $ 11.74 $ 11.63 $ 11.71 $ 11.78 $ 11.66 Shares
outstanding 15,860,138 15,860,138 15,787,753 15,787,753 15,782,753
Weighted average shares 15,860,138 15,822,789 15,787,753 15,787,264
15,782,753 Weighted average diluted shares 16,107,909 16,073,875
16,012,078 16,015,952 15,997,437
Credit Quality
Non-performing non-covered loans,
net of government agency guarantees
$ 68,034 $ 65,431 $ 44,896 $ 46,607 $ 43,373 Non-covered foreclosed
assets, net of allowance 5,621 5,579 3,726 2,372 2,622 Loans
charged-off 8,424 8,101 7,258 7,471 7,308 Loans recovered $ 513 $
468 $ 380 $ 398 $ 308 Allowance for losses to total non-covered
loans(1) 2.87 % 2.75 % 2.61 % 2.49 % 2.37 % Allowance for losses to
non-covered NPLs(1) 61 % 61 % 87 % 82 % 85 % Allowance for losses
to non-covered NPAs(1) 56 % 56 % 80 % 78 % 80 %
Selected
Financial Ratios Return on average total assets 0.24 % 0.29 %
0.43 % 0.43 % 0.48 % Return on average equity 2.61 % 3.05 % 4.51 %
4.43 % 4.94 % Average yield on loans 6.20 % 6.21 % 6.46 % 6.48 %
6.48 % Average yield on interest-earning assets 5.13 % 5.19 % 5.48
% 5.70 % 5.91 % Average rate on interest-bearing liabilities 0.92 %
1.02 % 1.22 % 1.27 % 1.42 % Net interest margin (fully
tax-equivalent) 4.41 % 4.40 % 4.55 % 4.72 % 4.82 %
(1) Allowance for
losses includes allowance for loan losses and reserve for unfunded
commitments.
TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands) Three months
ended
Balance Sheet Data June 30,2010 March 31,2010
December 31,2009 September 30,2009 June
30,2009 Cash and due from banks $ 322,644 $ 308,664 $
346,589 $ 234,570 $ 182,923 Securities,
available-for-sale 275,783 292,065 211,622 230,962 252,104 Federal
Home Loan Bank Stock 9,523 9,274 9,274 9,274 9,274 Loans held for
sale 4,153 - - - - Loans Commercial loans 151,349 147,988 163,181
171,583 172,732 Consumer loans 436,598 444,831 458,083 473,411
486,548 Real estate mortgage loans 810,469 813,770 820,016 814,132
813,898 Real estate construction loans 40,116 48,600 58,931 72,086
79,057 Total non-covered loans, gross 1,438,532 1,455,189 1,500,211
1,531,212 1,552,235 Allowance for loan losses (38,430 ) (36,340 )
(35,473 ) (34,551 ) (33,624 ) Covered loans 62,408 - - - -
Non-covered foreclosed assets 5,621 5,579 3,726 2,372 2,622 Covered
foreclosed assets 4,324 - - - - Premises and equipment 19,001
19,178 18,742 18,102 18,208 Cash value of life insurance 49,546
49,120 48,694 47,635 47,365 Goodwill 15,519 15,519 15,519 15,519
15,519 Intangible assets 750 260 325 389 454 Mortgage servicing
rights 4,033 4,310 4,089 4,033 3,895 FDIC indemnification asset
7,515 - - - - Accrued interest receivable 7,472 7,715 7,763 7,666
7,575 Other assets 36,251 39,054 39,439 28,483 29,291 Total assets
2,224,645 2,169,587 2,170,520 2,095,666 2,087,841 Deposits
Noninterest-bearing demand deposits 386,617 378,695 377,334 349,949
358,618 Interest-bearing demand deposits 383,578 375,313 359,179
314,160 291,641 Savings deposits 552,616 533,115 511,671 473,915
431,424 Time certificates 567,138 546,174 580,328 613,871 655,702
Total deposits 1,889,949 1,833,297 1,828,512 1,751,895 1,737,385
Accrued interest payable 2,487 3,064 3,614 4,136 5,094 Reserve for
unfunded commitments 2,840 3,640 3,640 3,640 3,140 Other
liabilities 25,257 27,112 26,114 26,623 27,107 Other borrowings
60,452 60,952 66,753 66,197 73,898 Junior subordinated debt 41,238
41,238 41,238 41,238 41,238 Total liabilities 2,022,223 1,969,303
1,969,871 1,893,729 1,887,862 Total shareholders' equity 202,422
200,284 200,649 201,937 199,979
Accumulated other comprehensive
gain (loss)
4,132 2,053 2,278 3,934 2,322 Average loans 1,463,473 1,469,685
1,508,472 1,538,239 1,555,778 Average interest-earning assets
2,019,684 2,008,896 1,988,011 1,969,043 1,933,633 Average total
assets 2,191,660 2,169,138 2,135,622 2,099,053 2,088,875 Average
deposits 1,849,118 1,825,190 1,784,271 1,744,336 1,735,434 Average
total equity $ 203,528 $ 204,200 $ 205,256 $ 203,452 $ 203,596
Total risk based capital ratio 13.6 % 13.5 % 13.4 % 13.2 % 12.9 %
Tier 1 capital ratio 12.3 % 12.3 % 12.1 % 11.9 % 11.6 % Tier 1
leverage ratio 10.2 % 10.3 % 10.5 % 10.6 % 10.7 % Tangible capital
ratio 8.4 % 8.6 % 8.6 % 8.9 % 8.9 %
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