TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company
of Tri Counties Bank (the “Bank”), today announced earnings of
$6,325,000, or $0.39 per diluted share, for the three months ended
June 30, 2013. These results compare to earnings of $5,321,000, or
$0.33 per diluted share reported by the Company for the three
months ended June 30, 2012.
Total assets of the Company increased $62,313,000 (2.5%) to
$2,587,931,000 at June 30, 2013 from $2,525,618,000 at June 30,
2012. Total loans increased $99,558,000 (6.4%) to $1,652,040,000 at
June 30, 2013 from $1,552,482,000 at June 30, 2012. Total
investment securities increased $10,313,000 (5.1%) to $213,162,000
at June 30, 2013 from $202,849,000 at June 30, 2012. Total deposits
increased $100,925,000 (4.7%) to $2,266,702,000 at June 30, 2013
from $2,165,777,000 at June 30, 2012. Other borrowings decreased
$54,256,000 (89.2%) to $6,575,000 at June 30, 2013 from $60,831,000
at June 30, 2012.
The following is a summary of the components of the Company’s
consolidated net income for the periods indicated:
Three months ended
June 30, (dollars in thousands) 2013
2012
$ Change
% Change Net Interest Income $ 24,589 $ 25,934
($1,345 ) (5.2 %) Provision for loan losses (614 ) (3,371 ) 2,757
(81.8 %) Noninterest income 10,131 10,577 (446 ) (4.2 %)
Noninterest expense (23,509 ) (24,367 ) 858 (3.5 %) Provision for
income taxes (4,272 ) (3,452 ) (820 ) 23.8 %
Net income $ 6,325 $ 5,321 $ 1,004 18.9 %
The following table shows the components of net interest income
and net interest margin on a fully tax-equivalent (FTE) basis for
the 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
June 30,
2013
March 31,
2013
June 30,
2012
Average Income/ Yield/ Average
Income/ Yield/ Average Income/
Yield/ Balance Expense Rate Balance Expense Rate
Balance Expense Rate Assets Earning assets Loans $ 1,608,511 $
23,883 5.94 % $ 1,548,565 $ 24,072 6.22 % $ 1,534,006 $ 25,792 6.73
% Investments - taxable 164,907 1,229 2.98 % 156,057 1,187 3.04 %
208,417 1,615 3.10 % Investments - nontaxable 17,108 240 5.61 %
8,884 162 7.29 % 9,561 171 7.15 % Federal funds sold 632,292
494 0.31 % 721,424
446 0.25 % 579,164 430
0.30 % Total earning assets 2,422,818 25,846
4.27 % 2,434,930 25,867 4.25 % 2,331,148
28,008 4.81 % Other assets, net 161,916
174,864 177,951 Total assets $ 2,584,734 $ 2,609,794 $
2,509,099 Liabilities and shareholders' equity Interest-bearing
Demand deposits $ 518,961 125 0.10 % $ 520,507 141 0.11 % $ 473,124
197 0.17 % Savings deposits 782,339 246 0.13 % 782,173 271 0.14 %
731,988 296 0.16 % Time deposits 322,668 484 0.60 % 333,556 513
0.62 % 380,943 584 0.61 % Other borrowings 7,596 1 0.05 % 8,188 1
0.05 % 62,300 601 3.86 % Trust preferred securities 41,238
311 3.02 % 41,238
311 3.02 % 41,238 332
3.22 % Total interest-bearing liabilities 1,672,802
1,167 0.28 % 1,685,662 1,237 0.29 % 1,689,593
2,010 0.48 % Noninterest-bearing deposits 635,503
651,303 562,909 Other liabilities 36,444 39,150 33,569
Shareholders' equity 239,985 233,679 223,028
Total liabilities and shareholders' equity $ 2,584,734 $ 2,609,794
$ 2,509,099 Net interest rate spread 3.99 % 3.96 % 4.33 % Net
interest income/net interest margin (FTE) 24,679 4.07
% 24,630 4.05 % 25,998 4.46 % FTE
adjustment (90 ) (61 ) (64 ) Net interest
income (not FTE) $ 24,589 $ 24,569 $ 25,934
Net interest income (FTE) during the second quarter of 2013
decreased $1,319,000 (5.1%) from the same period in 2012 to
$24,679,000. The decrease in net interest income (FTE) was due
primarily to a 79 basis point decrease in average yield on loans
that was partially offset by a $74,505,000 increase in the average
balance of loans, and a $54,704,000 decrease in the average balance
of other borrowings. The 79 basis point decrease in average loan
yields reduced net interest income by $3,163,000 from the year ago
period. The increase in average loan balances added $1,254,000 to
net interest income, and the decrease in average other borrowings
added $528,000 to net interest income when compared to the year ago
period. Accretion of loan purchase discounts totaling $1,676,000
and $2,385,000 are included in net interest income for the three
months ended June, 2013 and 2012, respectively. The Company
purchased $60,647,000 of residential real estate mortgage loans
during the second quarter of 2013.
Loans acquired through purchase or acquisition of other banks
are classified as Purchased Not Credit Impaired (PNCI), Purchased
Credit Impaired – cash basis (PCI – cash basis), or Purchased
Credit Impaired – other (PCI – other). Loans not acquired in an
acquisition or otherwise “purchased” are classified as
“originated”. Often, such purchased loans are purchased at a
discount to face value, and part of this discount is accreted into
(added to) interest income over the remaining life of the loan.
Generally, as time goes on, the effect of this discount accretion
becomes less and less as these purchased loans mature or payoff
early. Further details regarding interest income from loans,
including fair value discount accretion, may be found under the
heading “Supplemental Loan Interest Income Data” in the
Consolidated Financial Data table at the end of this
announcement.
The Company provided $614,000 for loan losses in the second
quarter of 2013 versus a benefit of $1,108,000 in the first quarter
of 2013, and a $3,371,000 provision for loan losses in the second
quarter of 2012. The level of provision for loan losses during the
second quarter of 2013 was due primarily to a decrease in the
required allowance for loan losses as of June 30, 2013 when
compared to the required allowance for loan losses as of March 31,
2013 less net charge-offs during the three months ended June 30,
2013, and the effect of a change in the methodology for calculating
the allowance for loan losses that occurred during the three months
ended June 30, 2013. The decrease in the required allowance for
loan losses during the quarter ended June 30, 2013 was due
primarily to reduced impaired loans, improvements in estimated cash
flows and collateral values for the remaining and new impaired
loans, and reductions in historical loss factors that, in part,
determine the required loan loss allowance for performing loans in
accordance with the Company’s allowance for loan losses
methodology.
During the three months ended June 30, 2013, the Company
modified its loss migration analysis methodology used in its
allowance for loan loss calculation. When the Company originally
established its loss migration analysis methodology during the
quarter ended March 31, 2012, it reviewed the loss experience of
each quarter over the most recent three years in order to calculate
an annualized loss rate by loan category and risk rating. The use
of three years of loss experience data was originally used because
that was the extent of the detailed loss data by loan category and
risk rating that was available at the time. This three year
historical look-back period was used until this most recent quarter
ended June 30, 2013. Starting with the quarter ended June 30, 2013
the Company will review all available detailed loss experience
data, and not limit it to the most recent three years of historical
loss data. This change in methodology resulted in the allowance for
loan losses as of June 30, 2013 being $1,314,000 more than it would
have been without this change in methodology. Excluding the effect
of this change in allowance methodology, the provision for loan
losses during the three months ended June 30, 2013 would have been
a benefit of $700,000.
The following table presents the key components of noninterest
income for the periods indicated:
Three months ended
June 30, (dollars in thousands) 2013
2012
$ Change
% Change Service charges on deposit accounts 3,277
3,644 ($367 ) (10.1 %) ATM fees and interchange 2,233 2,026 207
10.2 % Other service fees 562 570 (8 ) (1.4 %) Mortgage banking
service fees 430 379 51 13.5 % Change in value of mortgage
servicing rights 191 (464 ) 655 (141.2 %)
Total service charges and fees 6,693 6,155 538
8.7 % Gain on sale of loans 1,590 1,237 353 28.5 %
Commission on NDIP 841 842 (1 ) (0.1 %) Increase in cash value of
life insurance 380 450 (70 ) (15.6 %) Change in indemnification
asset (314 ) 662 (976 ) (147.4 %) Gain on sale of foreclosed assets
615 304 311 102.3 % Other noninterest income 326 927
(601 ) (64.8 %) Total other noninterest income 3,438
4,422 (984 ) (22.3 %) Total noninterest income 10,131
10,577 ($446 ) (4.2 %)
Noninterest income decreased $446,000 (4.2%) to $10,131,000 in
the three months ended June 30, 2013 when compared to the three
months ended June 30, 2012. The decrease in noninterest income was
due primarily to a $976,000 decrease in change in indemnification
asset to a loss of $314,000, and a $600,000 decrease in gain on
life insurance death benefit, included in other noninterest income,
to zero that were partially offset by a $655,000 increase in change
in value of mortgage servicing rights to $191,000, a $353,000
increase in gain on sale of loans to $1,590,000, and a $311,000
increase in gain on sale of foreclosed assets to $615,000. The
decrease in change in indemnification asset was due to increased
real estate collateral values that resulted in lower expected
losses on covered impaired loans. The increase in change in value
of mortgage servicing rights was due to a sharp increase in
mortgage rates that occurred near the end of the quarter ended June
30, 2013 that reduced the rate of mortgage refinancing that in turn
increased the expected future life and cash flow stream of our
existing mortgage servicing portfolio. The increase in gain on sale
of loans was due to decreased mortgage rates that existed for much
of the quarter ended June 30, 2013 when compared to the quarter
ended June 30, 2012, and our focus of additional resources in this
area when compared to the year-ago quarter. The increase in gain on
sale of foreclosed assets was due to increased real estate
values.
The following table presents the key components of the Company’s
noninterest expense for the periods indicated:
Three months ended
June 30, (dollars in thousands) 2013
2012
$ Change
% Change Salaries $ 8,508 $ 8,273 $ 235 2.8 %
Commissions and incentives 1,299 1,347 (48 ) (3.6 %) Employee
benefits 3,083 2,870 213 7.4 % Total
salaries and benefits expense 12,890 12,490
400 3.2 % Occupancy 1,753 1,857 (104 ) (5.6 %)
Equipment 913 1,126 (213 ) (18.9 %) Change in reserve for unfunded
commitments 35 40 (5 ) (12.5 %) Data processing and software 1,280
1,278 2 0.2 % Telecommunications 587 567 20 3.5 % ATM network
charges 679 532 147 27.6 % Professional fees 658 691 (33 ) (4.8 %)
Advertising and marketing 415 863 (448 ) (51.9 %) Postage 133 218
(85 ) (39.0 %) Courier service 255 256 (1 ) (0.4 %) Intangible
amortization 53 52 1 1.9 % Operational losses 122 143 (21 ) (14.7
%) Provision for foreclosed asset losses 546 1,004 (458 ) (45.6 %)
Foreclosed asset expense 163 267 (104 ) (39.0 %) Assessments 543
590 (47 ) (8.0 %) Other 2,484 2,393 91
3.8 % Total other noninterest expense 10,619 11,877
(1,258 ) (10.6 %) Total noninterest expense $ 23,509 $
24,367 ($858 ) (3.5 %)
Salary and benefit expenses increased $400,000 (3.2%) to
$12,890,000 during the three months ended June 30, 2013 compared to
the three months ended June 30, 2012. Base salaries increased
$235,000 (2.8%) to $8,508,000 due mainly to annual merit increases.
Incentive and commission related salary expenses decreased $48,000
(3.6%) to $1,299,000 due primarily to decreases in production
related incentives. Benefits expense, including retirement, medical
and workers’ compensation insurance, and taxes, increased $213,000
(7.4%) to $3,083,000 due primarily to increased health and workers’
compensation insurance expenses.
Other noninterest expenses decreased $1,258,000 (10.6%) to
$10,619,000 during the three months ended June 30, 2013 when
compared to the three months ended June 30, 2012. The decrease in
other noninterest expense was due primarily a $562,000 (44.2%)
decrease in the provision for, and expenses related to, foreclosed
assets, a $448,000 (51.9%) decrease in advertising and marketing
expense, and a $317,000 (10.6%) decrease in occupancy and equipment
expenses. The decrease in foreclosed asset provision and expenses
was due to increased property values and a reduction in foreclosed
assets from $12,743,000 at June 30, 2012 to $5,054,000 at June 30,
2013. The decrease in advertising and marketing expense from the
year ago period was due to cost savings efforts in this area. The
decrease in occupancy and equipment expense was primarily due to
reduced furniture and equipment expense as the Bank focused on its
new campus and operations center that came into service at the end
of June 2013.
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, 2012. 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 38-year history in the
banking industry. It operates 41 traditional branch locations and
25 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 72 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, 2013 2013
2012 2012
2012
Statement of Income
Data Interest income $ 25,756 $ 25,806 $ 26,143 $ 27,465 $
27,944
Interest expense 1,167 1,237 1,372 1,834 2,010
Net interest income 24,589 24,569 24,771 25,631 25,934
(Benefit from) provision for loan losses 614 (1,108 ) 1,524 532
3,371
Noninterest income: Service charges and fees 6,693 5,929 6,035
5,783 6,155
Other income 3,438 4,289 3,976 3,344 4,422
Total noninterest income 10,131 10,218 10,011 9,127 10,577
Noninterest expense: Base salaries net of deferred loan origination
costs 8,508 8,348 8,324 8,337 8,273
Incentive compensation expense 1,299 1,286 1,162 1,254 1,347
Employee benefits and other compensation expense 3,083 3,327 2,852
2,771 2,870
Total salaries and benefits expense 12,890 12,961 12,338 12,362
12,490
Other noninterest expense 10,619 8,640 12,788 13,228 11,877
Total noninterest expense 23,509 21,601 25,126 25,590 24,367
Income before taxes 10,597 14,294 8,132 8,636 8,773
Net income $ 6,325 $ 8,477 $ 4,722 $ 5,020 $ 5,321
Share Data
Basic earnings per share $ 0.39 $ 0.53 $ 0.30 $ 0.31 $ 0.33
Diluted earnings per share $ 0.39 $ 0.53 $ 0.29 $ 0.31 $ 0.33
Book value per common share $ 14.90 $ 14.75 $ 14.33 $ 14.21 $ 13.96
Tangible book value per common share $ 13.87 $ 13.71 $ 13.30 $
13.16 $ 12.91
Shares outstanding 16,065,469 16,005,191 16,000,838 15,992,893
15,992,893
Weighted average shares 16,027,557 16,002,482 15,996,137 15,992,893
15,985,922
Weighted average diluted shares 16,134,510 16,091,150 16,064,685
16,051,876 16,047,344
Credit Quality Nonperforming originated loans $ 52,661 $
54,763 $ 61,769 $ 66,654 $ 69,749
Total nonperforming loans 61,466 63,963 72,516 81,611 82,877
Guaranteed portion of nonperforming loans 106 108 131 218 218
Foreclosed assets, net of allowance 5,054 6,124 7,498 10,185 12,743
Loans charged-off 1,947 2,771 4,006 3,368 4,188
Loans recovered 1,065 1,098 983 1,133 1,214
Selected Financial Ratios
Return on average total assets 0.98 % 1.30 % 0.74 % 0.80 % 0.85 %
Return on average equity 10.54 % 14.51 % 8.20 % 8.85 % 9.54 %
Average yield on loans 5.94 % 6.22 % 6.16 % 6.49 % 6.73 % Average
yield on interest-earning assets 4.27 % 4.25 % 4.40 % 4.68 % 4.81 %
Average rate on interest-bearing liabilities 0.28 % 0.29 % 0.33 %
0.44 % 0.48 % Net interest margin (fully tax-equivalent) 4.07 %
4.05 % 4.17 % 4.37 % 4.46 %
Supplemental Loan Interest Income
Data: Discount accretion PCI - cash basis loans 129 167 42 24
108 Discount accretion PCI - other loans 732 597 979 1,192 886
Discount accretion PNCI loans 815 766 841 591 1,391 Regular
interest Purchased loans 3,234 3,074 3,226 3,251 3,439 All other
loan interest income 18,973 19,468 19,157 20,472 19,968 Total loan
interest income 23,883 24,072 24,245 25,530 25,792
TRICO
BANCSHARES - CONSOLIDATED FINANCIAL DATA (Unaudited. Dollars in
thousands) Three months ended
June 30, March 31, December 31,
September 30, June 30,
Balance Sheet
Data 2013 2013
2012 2012
2012 Cash and due from banks $ 592,155 $
802,271 $ 748,899 $ 622,494 $ 644,102 Securities, available for
sale 127,519 144,454 163,027 183,432 202,849 Securities, held to
maturity 85,643 - - - - Federal Home Loan Bank Stock 9,163 9,647
9,647 9,647 9,990 Loans held for sale 6,582 7,931 12,053 14,937
5,321 Loans: Commercial loans 128,410 115,483 135,528 145,469
139,733 Consumer loans 387,217 376,063 386,111 388,844 393,248 Real
estate mortgage loans 1,097,446 1,010,249 1,010,130 1,007,432
984,147 Real estate construction loans 38,967 30,567 33,054 33,902
35,354 Total loans, gross 1,652,040 1,532,362 1,564,823 1,575,647
1,552,482 Allowance for loan losses (39,599 ) (39,867 ) (42,648 )
(44,146 ) (45,849 ) Foreclosed assets 5,054 6,124 7,498 10,185
12,743 Premises and equipment 31,194 29,468 26,985 24,083 22,595
Cash value of life insurance 51,388 51,008 50,582 50,742 50,292
Goodwill 15,519 15,519 15,519 15,519 15,519 Intangible assets 987
1,040 1,092 1,144 1,196 Mortgage servicing rights 5,571 4,984 4,552
4,485 4,757 FDIC indemnification asset 1,441 1,807 1,997 2,485
4,046 Accrued interest receivable 7,339 7,201 6,636 7,638 7,545
Other assets 35,935 38,484 38,607 37,189 38,030 Total assets $
2,587,931 2,612,433 2,609,269 2,515,481 2,525,618 Deposits:
Noninterest-bearing demand deposits 645,461 639,420 684,833 592,529
578,010 Interest-bearing demand deposits 514,088 531,695 503,465
483,557 480,337 Savings deposits 791,978 786,352 762,919 767,244
737,433 Time certificates 315,175 328,083 338,485 358,309 369,997
Total deposits 2,266,702 2,285,550 2,289,702 2,201,639 2,165,777
Accrued interest payable 944 975 1,036 1,139 1,415 Reserve for
unfunded commitments 3,210 3,175 3,615 2,555 2,590 Other
liabilities 29,936 37,340 35,122 32,449 30,538 Other borrowings
6,575 8,125 9,197 9,264 60,831 Junior subordinated debt 41,238
41,238 41,238 41,238 41,238 Total liabilities 2,348,605 2,376,403
2,379,910 2,288,284 2,302,389 Total shareholders' equity 239,326
236,030 229,359 227,197 223,229 Accumulated other comprehensive
gain 49 1,538 2,159 3,635 3,537 Average loans 1,608,511 1,548,565
1,574,329 1,573,816 1,534,006 Average interest-earning assets
2,422,818 2,434,920 2,383,226 2,351,164 2,331,148 Average total
assets 2,584,734 2,609,794 2,565,307 2,519,259 2,509,099 Average
deposits 2,259,471 2,287,539 2,247,776 2,174,085 2,148,964 Average
total equity $ 239,985 $ 233,679 $ 230,296 $ 226,857 $ 223,028
Total risk based capital ratio 14.7 % 15.2 % 14.5 % 14.4 % 14.3 %
Tier 1 capital ratio 13.5 % 13.9 % 13.3 % 13.1 % 13.0 % Tier 1
leverage ratio 10.2 % 9.9 % 9.8 % 9.9 % 9.7 % Tangible capital
ratio 8.7 % 8.5 % 8.2 % 8.4 % 8.2 %
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