TCBK TriCo Bancshares

TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company of Tri Counties Bank, today announced earnings of $8,336,000, or $0.36 per diluted share, for the three months ended March 31, 2015. For the three months ended March 31, 2014 the Company reported earnings of $7,365,000, or $0.45 per diluted share. Diluted shares outstanding were 22,949,902 and 16,322,295 for the three months ended March 31, 2015 and 2014, respectively.

On October 3, 2014, TriCo completed its acquisition of North Valley Bancorp. North Valley Bancorp was headquartered in Redding, California, and was the parent of North Valley Bank that had approximately $935 million in assets and 22 commercial banking offices in Shasta, Humboldt, Del Norte, Mendocino, Yolo, Sonoma, Placer and Trinity Counties in Northern California. In connection with the acquisition, North Valley Bank was merged into Tri Counties Bank. Beginning on October 4, 2014, the effect of revenue and expenses from the operations of North Valley Bancorp, and 6,575,550 shares of TriCo Bancshares common shares issued in consideration of the merger are included in the results of the Company.

On October 25, 2014, North Valley Bank’s electronic customer service and other data processing systems were converted into Tri Counties Bank’s systems. Between January 7, 2015 and January 21, 2015, four Tri Counties Bank branches and four former North Valley Bank branches were consolidated into other Tri Counties Bank or other former North Valley Bank branches.

Included in the results of the Company for the three months ended March 31, 2015 and 2014 were $586,000 and $225,000, respectively, of nonrecurring noninterest expenses related to the merger with North Valley Bancorp of which $0 and $109,000, respectively, were not deductible for income tax purposes. Excluding these nonrecurring merger related expenses, but including the revenue and other expenses from the operations of North Valley Bancorp from January 1, 2015 to March 31, 2015, diluted earnings per share for the three months ended March 31, 2015 and 2014 would have been $0.38 and $0.46, respectively, on earnings of $8,676,000 and $7,541,000, respectively.

The following is a summary of certain of the Company’s consolidated assets and deposits as of the dates indicated:

  As of March 31,     (dollars in thousands) 2015   2014

$ Change

% Change Total assets $3,895,860 $2,755,184 $1,140,676 41.4 % Total loans 2,320,883 1,687,052 $633,831 37.6 % Total investments 1,044,564 450,955 $593,609 131.6 % Total deposits $3,349,488 $2,411,120 $938,368 38.9 %  

Included in the changes in the Company’s assets and deposits from March 31, 2014 to March 31, 2015 is the effect of those assets and deposits acquired as part of the North Valley Bancorp acquisition on October 3, 2014. The following table discloses the fair value of consideration transferred, the total identifiable net assets acquired and the resulting goodwill related to the North Valley Bancorp acquisition:

  North Valley Bancorp

(in thousands)

October 3, 2014 Fair value of consideration transferred: Fair value of shares issued $151,303 Cash consideration 7 Total fair value of consideration transferred 151,310 Asset acquired: Cash and cash equivalents 141,142 Securities available for sale 17,288 Securities held to maturity 189,950 Restricted equity securities 8,279 Loans 499,327 Foreclosed assets 695 Premises and equipment 11,936 Cash value of life insurance 38,075 Core deposit intangible 6,614 Other assets 18,540 Total assets acquired 932,116 Liabilities assumed: Deposits 801,956 Other liabilities 10,104 Junior subordinated debt 14,987 Total liabilities assumed 827,047 Total net assets acquired 105,069 Goodwill recognized $46,241  

The following is a summary of the components of the Company’s consolidated net income, average common shares, and average diluted common shares outstanding for the periods indicated:

  Three months ended     March 31, (dollars and shares in thousands) 2015   2014

$ Change

% Change Net Interest Income $36,343 $26,072 $10,271 39.4 %

Benefit from (provision for) loan losses

(197 ) 1,355 (1,552 ) Noninterest income 10,180 8,295 1,885 22.7 % Noninterest expense (32,282 ) (23,317 ) (8,965 ) 38.4 % Provision for income taxes (5,708 ) (5,040 ) (668 ) 13.3 % Net income $8,336   $7,365   $971   13.2 %   Average common shares 22,727 16,137 6,590 40.8 % Average diluted common shares 22,950 16,331 6,619 40.5 %  

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

March 31, 2015

December 31, 2014

March 31, 2014

Average   Income/   Yield/ Average   Income/   Yield/ Average   Income/   Yield/ Balance Expense Rate Balance Expense Rate Balance Expense Rate Assets Earning assets Loans $ 2,283,622 $ 31,165 5.46 % $ 2,253,025 $ 30,736 5.46 % $ 1,671,231 $ 23,738 5.68 % Investments - taxable 906,366 6,135 2.71 % 763,131 5,197 2.72 % 390,230 2,976 3.05 % Investments - nontaxable 21,512 258 4.80 % 18,506 219 4.73 % 17,618 218 4.95 % Cash at Federal Reserve and other banks   345,603     264   0.31 %   477,958     337   0.28 %   473,833     309   0.26 % Total earning assets 3,557,103   37,822   4.25 % 3,512,620   36,489   4.16 % 2,552,912   27,241   4.27 % Other assets, net   335,373   293,429   184,852 Total assets $ 3,892,476 $ 3,806,049 $ 2,737,764 Liabilities and shareholders' equity Interest-bearing Demand deposits $ 792,204 125 0.06 % $ 767,103 137 0.07 % $ 546,998 121 0.09 % Savings deposits 1,156,710 357 0.12 % 1,140,817 360 0.13 % 840,221 257 0.12 % Time deposits 353,616 417 0.47 % 360,788 455 0.50 % 280,968 404 0.58 % Other borrowings 9,614 1 0.04 % 10,536 2 0.08 % 6,461 1 0.06 % Trust preferred securities   56,296     482   3.42 %   53,750     483   3.59 %   41,238     304   2.95 % Total interest-bearing liabilities 2,368,440   1,382   0.23 % 2,332,994   1,437   0.25 % 1,715,886   1,087   0.25 % Noninterest-bearing deposits 1,047,840 1,007,762 731,731 Other liabilities 51,495 41,791 35,262 Shareholders' equity   424,701   423,502   254,885

 

Total liabilities and shareholders' equity

$ 3,892,476

 

$ 3,806,049 $ 2,737,764 Net interest rate spread 4.02 % 3.91 % 4.02 % Net interest income/net interest margin (FTE)   36,440   4.10 %   35,052   3.99 %   26,154   4.10 % FTE adjustment   (97 )   (82 )   (82 ) Net interest income (not FTE) $ 36,343   $ 34,970   $ 26,072    

Net interest income (FTE) during the first quarter of 2015 increased $10,286,000 (39.3%) from the same period in 2014 to $36,440,000. The increase in net interest income (FTE) was due primarily to a $612,391,000 (36.6%) increase in the average balance of loans to $2,283,622,000, and a $520,030,000 (127.5%) increase in the average balance of investments to $927,878,000 that were partially offset by a 22 basis point decrease in the average yield on loans from 5.68% during the three months ended March 31, 2014 to 5.46% during the three months ended March 31, 2015, and a 38 basis point decrease in the average yield on investments from 3.13% during the three months ended March 31, 2014 to 2.76% during the three months ended March 31, 2015. The $612,391,000 increase in average loan balances from the year ago quarter was primarily due to the addition of $499,327,000 of loans through the acquisition of North Valley Bancorp on October 4, 2014. The $520,030,000 increase in average investment balances from the year-ago quarter was primarily due to the use of cash at the Federal Reserve and other banks to purchase investments and the addition of $212,616,000 of investments through the acquisition of North Valley Bancorp on October 4, 2014. The decrease in average loan yields is due primarily to declines in market yields on new and renewed loans compared to yields on repricing, maturing, and paid off loans. The decrease in average investment yields is due primarily to declines in market yields on new investments compared to yields on existing investments. The increases in average loan and investment balances added $8,696,000 and $3,984,000, respectively, to net interest income (FTE) while the decreases in average loan and investment yields reduced net interest income (FTE) by $1,269,000 and $777,000, respectively, compared to the year-ago quarter.

Loans acquired through purchase or acquisition of other banks are classified by the Company 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 decreases as these purchased loans mature or pay off 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 press release.

The Company recorded a provision for loan losses of $197,000 during the three months ended March 31, 2015 compared to a $1,421,000 benefit from reversal of provision for loan losses during the three months ended March 31, 2014. The increase in provision for loan losses from the year-ago period was primarily due to $38 million of net loan growth during the three months ended March 31, 2015.

The following table presents the key components of noninterest income for the periods indicated:

  Three months ended     March 31, (dollars in thousands) 2015   2014

$ Change

% Change Service charges on deposit accounts $3,600 $2,690 $910 33.8 % ATM fees and interchange 3,002 2,013 989 49.1 % Other service fees 714 520 194 37.3 % Mortgage banking service fees 534 420 114 27.1 % Change in value of mortgage servicing rights (506 ) (181 ) (325 ) 179.6 % Total service charges and fees 7,344   5,462   1,882   34.5 %   Gain on sale of loans 622 464 158 34.1 % Commission on NDIP 965 771 194 25.2 % Increase in cash value of life insurance 675 397 278 70.0 % Change in indemnification asset (65 ) (412 ) 347 (84.2 %) Gain on sale of foreclosed assets 311 1,227 (916 ) (74.7 %) Other noninterest income 328   386   (58 ) (15.0 %) Total other noninterest income 2,836   2,833   3   0.1 % Total noninterest income $10,180   $8,295   $1,885   22.7 %  

Noninterest income increased $1,885,000 (22.7%) to $10,180,000 during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. The increase in noninterest income was due primarily to an increase in service charges on deposit accounts of $910,000 (33.8%) to $3,600,000, and an increase in ATM fees and interchange revenue of 989,000 (49.1%) to $3,002,000. These increases, and the increases in other categories of noninterest income noted in the table above, are primarily the result of the acquisition of North Valley Bancorp on October 4, 2014. Partially offsetting these increases were decreases of $325,000 and $916,000 in change in value of mortgage servicing rights and gain on sale of foreclosed assets, respectively, to $(506,000) and $311,000, respectively. The decrease in change in value of mortgage servicing rights is primarily due to a larger increase in estimated prepayment speeds of serviced loans during the three months ended March 31, 2015 than the three months ended March 31, 2014. An increase in prepayment speeds of serviced loans results in reduced expected servicing cash flows, and thus, a lower value of such servicing rights. The decrease in gain on sale foreclosed assets is due to decreased foreclosed asset sales during the three months ended March 31, 2015 compared to the year-ago period.

The following table presents the key components of the Company’s noninterest expense for the periods indicated:

  Three months ended     March 31, (dollars in thousands) 2015   2014

$ Change

% Change Salaries $11,744 $8,866 $2,878 32.5 % Commissions and incentives 1,596 1,123 473 42.1 % Employee benefits 4,760   3,314   1,446   43.6 % Total salaries and benefits expense 18,100   13,303   4,797   36.1 %   Occupancy 2,417 1,962 455 23.2 % Equipment 1,414 1,036 378 36.5 % Change in reserve for unfunded commitments (130 ) (185 ) 55 (29.7 %) Data processing and software 1,952 1,178 774 65.7 % Telecommunications 886 580 306 52.8 % ATM network charges 770 643 127 19.8 % Professional fees 1,119 614 505 82.2 % Advertising and marketing 808 342 466 136.3 % Postage 312 227 85 37.4 % Courier service 248 234 14 6.0 % Intangible amortization 289 52 237 455.8 % Operational losses 124 177 (53 ) (29.9 %) Provision for foreclosed asset losses 67 36 31 86.1 % Foreclosed asset expense 98 158 (60 ) (38.0 %) Assessments 651 521 130 25.0 % Merger related expense 586 225 361 160.4 % Other 2,571   2,214   357   16.1 % Total other noninterest expense 14,182   10,014   4,168   41.6 % Total noninterest expense $32,282   $23,317   $8,965   38.4 %   Average full time equivalent employees 966 732 234 32.0 %   Merger expense: Data processing and software 108 - Professional fees 120 225 Other 358   -   Total merger expense $586   $225    

Salary and benefit expenses increased $4,797,000 (36.1%) to $18,100,000 during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. Base salaries, incentive compensation and benefits & other compensation expense increased $2,878,000 (32.5%), 473,000 (42.1%), and 1,446,000 (43.6%), respectively, to $11,744,000, $1,596,000 and $4,760,000, respectively, during the three months ended March 31, 2015. The increases in these categories of salary and benefits expense are primarily due to the Company’s acquisition of North Valley Bancorp on October 4, 2014. The average number of full-time equivalent staff increased 234 (32.0%) from 732 during the three months ended March 31, 2014 to 966 for the three months ended March 31, 2015.

Other noninterest expense increased $4,168,000 (38.4%) to $14,182,000 during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. The increase in other noninterest expense was primarily due to the Company’s acquisition of North Valley Bancorp on October 4, 2014. Nonrecurring merger expenses related to the North Valley Bancorp acquisition totaling $586,000 are included in noninterest expense for the three months ended March 31, 2015. These nonrecurring merger related expenses include $108,000 of data processing expense, $120,000 of professional fees, and $358,000 of lease contract resolution, leasehold improvement write-off and facility restoration, and moving expenses related to the consolidation of four former North Valley Bank and four Tri Counties Bank branches during the three months ended March 31, 2015, six of which were leased. As of March 31, 2015, the Company had substantially completed all of its previously planned facility consolidations related to the North Valley Bancorp acquisition. The annualized run rate of noninterest expense for the three months ended March 31, 2015, excluding the nonrecurring merger expenses noted above, is within 4% of management’s goal for noninterest expense in 2015 for the combined company following the North Valley acquisition. Following a thorough analysis of profitability and market opportunity, the bank has identified five additional branches for closure. Two of those branches are former North Valley Bank branches. The bank expects that all five branches will close by September 30, 2015.

Richard Smith, President and CEO of the Company commented, “We continue to make progress integrating the banking operations of Tri Counties Bank and North Valley Bank. With the data systems conversion behind us, we are now seeing our commercial lending teams from North Valley Bank increasing lending activity in our newly acquired markets. The North Valley commercial teams played a significant role in contributing to our commercial loan growth in the quarter.”

Smith added, “While we continue to see improved lending opportunities in our markets, we remain focused upon improvements in bank efficiency efforts as a result of our combination with North Valley Bank.”

In addition to the historical information contained herein, this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to various uncertainties and risks that could affect their outcome. The Company’s actual results could differ materially. 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, the Company’s ability to effectively integrate the business of North Valley Bancorp, 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, 2014. 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. The Company does not intend to update any of the forward-looking statements after the date of this release.

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 in communities throughout Northern and Central 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 ATM, online and mobile banking access. Brokerage services are provided by the Bank’s investment services through affiliation with Raymond James Financial Services, Inc. Visit www.TriCountiesBank.com to learn more.

  TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA (Unaudited. Dollars in thousands, except share data)     Three months ended March 31,   December 31,   September 30,   June 30,   March 31, 2015   2014   2014   2014   2014 Statement of Income Data Interest income $37,725 $36,407 $29,131 $28,418 $27,159 Interest expense 1,382 1,437 1,082 1,075 1,087 Net interest income 36,343 34,970 28,049 27,343 26,072 Provision for (benefit from) loan losses 197 (1,421 ) (2,977 ) 1,708 (1,355 ) Noninterest income: Service charges and fees 7,344 7,165 6,090 5,519 5,462 Other income 2,836 2,590 2,499 2,358 2,833 Total noninterest income 10,180 9,755 8,589 7,877 8,295 Noninterest expense:

Base salaries net of deferred loan origination costs

11,744 12,402 9,066 9,008 8,866 Incentive compensation expense 1,596 1,475 1,265 1,205 1,123

Employee benefits and other compensation expense

4,760 3,678 3,038 3,104 3,314 Total salaries and benefits expense 18,100 17,555 13,369 13,317 13,303 Other noninterest expense 14,182 19,011 12,011 11,799 10,014 Total noninterest expense 32,282 36,566 25,380 25,116 23,317 Income before taxes 14,044 9,580 14,235 8,396 12,405 Net income $8,336 $5,650 $8,234 $4,859 $7,365 Share Data Basic earnings per share $0.37 $0.25 $0.51 $0.30 $0.46 Diluted earnings per share $0.36 $0.25 $0.50 $0.30 $0.45 Book value per common share $18.68 $18.42 $16.57 $16.17 $15.94 Tangible book value per common share $15.59 $15.39 $15.56 $15.16 $14.93 Shares outstanding 22,740,503 22,714,964 16,139,414 16,133,414 16,120,297 Weighted average shares 22,727,038 22,500,544 16,136,675 16,128,550 16,096,569 Weighted average diluted shares 22,949,902 22,726,795 16,330,746 16,310,463 16,322,295 Credit Quality Nonperforming originated loans $34,576 $32,529 $33,849 $37,164 $44,334 Total nonperforming loans 49,217 47,954 40,643 44,200 51,968 Foreclosed assets, net of allowance 5,892 4,894 5,096 5,785 3,215 Loans charged-off 1,235 419 345 1,028 766 Loans recovered $508 $505 $1,274 $967 $2,197 Selected Financial Ratios Return on average total assets 0.86 % 0.59 % 1.19 % 0.71 % 1.08 % Return on average equity 7.85 % 5.34 % 12.39 % 7.45 % 11.56 % Average yield on loans 5.46 % 5.46 % 5.70 % 5.70 % 5.68 % Average yield on interest-earning assets 4.25 % 4.16 % 4.56 % 4.45 % 4.27 % Average rate on interest-bearing liabilities 0.23 % 0.25 % 0.25 % 0.25 % 0.25 % Net interest margin (fully tax-equivalent) 4.10 % 3.99 % 4.39 % 4.28 % 4.10 % Supplemental Loan Interest Income Data: Discount accretion PCI - cash basis loans $172 $107 $290 $69 $203 Discount accretion PCI - other loans 1,274 919 822 811 984 Discount accretion PNCI loans 1,348 827 402 624 379 All other loan interest income $28,371 28,883 23,466 22,929 22,172 Total loan interest income $31,165 $30,736 $24,980 $24,433 $23,738   TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA (Unaudited. Dollars in thousands)     Three months ended March 31,   December 31,   September 30,   June 30,   March 31, Balance Sheet Data 2015   2014   2014   2014   2014 Cash and due from banks $281,228 $610,728 $369,679 $344,383 $502,251 Securities, available for sale 225,126 83,205 84,962 91,514 97,269 Securities, held to maturity 802,482 676,426 443,509 422,502 344,523 Restricted equity securities 16,956 16,956 11,582 11,582 9,163 Loans held for sale 5,413 3,579 2,724 1,671 1,119 Loans: Commercial loans 177,540 174,945 135,085 137,341 119,418 Consumer loans 410,727 417,084 373,620 377,143 381,786 Real estate mortgage loans 1,646,863 1,615,359 1,214,153 1,167,856 1,126,298 Real estate construction loans 85,753 75,136 43,013 56,246 59,550 Total loans, gross 2,320,883 2,282,524 1,765,871 1,738,586 1,687,052 Allowance for loan losses (36,055 ) (36,585 ) (37,920 ) (39,968 ) (38,322 ) Foreclosed assets 5,892 4,894 5,096 5,785 3,215 Premises and equipment 42,846 43,493 32,181 31,880 32,004 Cash value of life insurance 93,012 92,337 53,596 53,106 52,706 Goodwill 63,462 63,462 15,519 15,519 15,519 Other intangible assets 6,762 7,051 726 779 831 Mortgage servicing rights 7,057 7,378 5,985 5,909 6,107 Accrued interest receivable 9,794 9,275 6,862 7,008 6,690 Other assets 51,002 51,735 34,571 34,225 35,057 Total assets 3,895,860 3,916,458 2,794,943 2,724,481 2,755,184 Deposits: Noninterest-bearing demand deposits 1,034,012 1,083,900 762,452 720,743 728,492 Interest-bearing demand deposits 795,471 782,385 553,053 547,110 554,296 Savings deposits 1,172,257 1,156,126 872,432 854,127 856,811 Time certificates 347,748 358,012 249,419 263,216 271,521 Total deposits 3,349,488 3,380,423 2,437,356 2,385,196 2,411,120 Accrued interest payable 852 978 753 849 865 Reserve for unfunded commitments 2,015 2,145 2,220 2,045 2,230 Other liabilities 53,256 49,192 33,331 28,135 36,035 Other borrowings 9,096 9,276 12,665 6,075 6,719 Junior subordinated debt 56,320 56,272 41,238 41,238 41,238 Total liabilities 3,471,027 3,498,286 2,527,563 2,463,538 2,498,207 Total shareholders' equity 424,833 418,172 267,380 260,943 256,977 Accumulated other comprehensive gain (loss) (2,083 ) (2,203 ) 1,796 2,188 1,802 Average loans 2,283,622 2,253,025 1,752,026 1,714,061 1,671,231 Average interest-earning assets 3,557,103 3,512,620 2,561,398 2,559,296 2,552,912 Average total assets 3,892,476 3,806,049 2,771,972 2,737,634 2,737,764 Average deposits 3,350,370 3,276,470 2,424,968 2,395,146 2,399,918 Average total equity $424,701 $423,502 $265,848 $260,817 $254,885 Total risk based capital ratio 15.2 % 15.6 % 14.8 % 14.6 % 14.8 % Tier 1 capital ratio 14.0 % 14.4 % 13.5 % 13.4 % 13.6 % Tier 1 common equity ratio 12.1 % n/a n/a n/a n/a Tier 1 leverage ratio 10.7 % 10.8 % 10.5 % 10.4 % 10.2 % Tangible capital ratio 9.3 % 9.1 % 9.0 % 9.0 % 8.8 %

TriCo BancsharesRichard P. Smith, 530-898-0300President & CEO