TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company
of Tri Counties Bank, today announced net income of $16,170,000 for
the quarter ended September 30, 2018, compared to $15,029,000 and
$11,897,000 for the trailing quarter and the three months ended
September 30, 2017, respectively. Diluted earnings per share were
$0.53 for the quarter ended September 30, 2018, compared to $0.65
and $0.51 for the trailing quarter and three months ended September
30, 2017. The growth in net income as compared to the trailing
quarter is primarily related to the acquisition of FNB Bancorp
(“FNBB”) that was completed on July 6, 2018. In addition, the
Company continued to benefit from the reduction in Federal income
tax rate which declined to 21% effective January 1, 2018 as
compared to 35% in prior periods.
Financial Highlights
Performance highlights and other developments for the Company
included the following:
- For the three and nine months ended
September 30, 2018, the Company’s return on average assets was
1.05% and 1.15% and the return on average equity was 9.11% and
10.44%.
- The Company completed the successful
merger of FNBB effective July 6, 2018 with the systems integration
being achieved just two weeks later.
- As of September 30, 2018, the Company
reached record levels of total assets, total loans and total
deposits which were $6.32 billion, $4.03 billion and $5.09 billion,
respectively.
- The loan to deposit ratio increased to
79.1% at September 30, 2018 as compared to 77.2% at June 30, 2018
and 75.2% at December 31, 2017.
- Net interest margin grew 18 basis
points to 4.32% on a tax equivalent basis as compared to 4.14% in
the trailing quarter.
- Annualized organic loan and deposit
growth during the nine months ended September 30, 2018 was 7.9% and
3.1%. During the current quarter, organic loan and deposit growth
was 5.9% and 2.4% on an annualized basis.
- Non-interest bearing deposits as a
percentage of total deposits were 33.6% at September 30, 2018 and
June 30, 2018 as compared to 34.1% at December 31, 2017.
- The average rate of interest paid on
deposits, including noninterest-bearing deposits, remained low and
stable at 0.16%. This incorporates the impact of the FNBB deposit
portfolio which had a 0.24% average cost of total deposits on the
day of acquisition.
- Non-performing assets to total assets
were 0.46% as of September 30, 2018 as compared to 0.55% and 0.58%
at June 30, 2018 and December 31, 2017, respectively.
President and CEO, Rick Smith commented: “This is an exciting
time for Tri Counties Bank. Our entry to the San Francisco
Peninsula, with the acquisition of twelve full service branches and
an experienced management team from First National Bank of Northern
California provides us new and expanded growth opportunities with
both potential and existing relationships in that market. The pace
of integration between Tri Counties Bank and First National Bank of
Northern California demonstrates the commitment of personnel from
both institutions to achieve success and also, the complimentary
nature of the cultures that have been brought together. As of the
end of the quarter, our acquisition related restructuring
activities are nearly complete and the non-recurring costs
associated with those activities are on track with budget. We look
forward to realizing the synergies made possible by bringing a
broader array of financial services with solutions to the deeply
rooted relationships that were established during First National
Bank’s 55 year history.”
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, (dollars and
shares in thousands) 2018 2017
$ Change
% Change Net interest income $ 60,489 $ 44,084 $ 16,405 37.2 %
Provision for loan losses 2,651 765 1,886 Noninterest income 12,186
12,930 (744 ) (5.8 %) Noninterest expense (47,378 ) (37,222 )
(10,156 ) 27.3 % Provision for income taxes (6,476 )
(7,130 ) 654 (9.2 %) Net income $ 16,170 $
11,897 $ 4,273 35.9 % Diluted earnings per
share $ 0.53 $ 0.51 $ 0.02 4.3 % Dividends per share $ 0.17 $ 0.17
$ - 0.0 % Average common shares 30,011 22,932 7,079 30.9 % Average
diluted common shares 30,291 23,244 7,047 30.3 % Return on
average total assets 1.05 % 1.04 % Return on average equity 9.11 %
9.38 % Efficiency ratio 65.19 % 65.29 % Three months
ended
September 30,
June 30, (dollars and shares in thousands) 2018
2018
$ Change
% Change Net interest income $ 60,489 $ 45,869 $ 14,620 31.9 %
Provision for (benefit from) loan losses 2,651 (638 ) 3,289
Noninterest income 12,186 12,174 12 0.1 % Noninterest expense
(47,378 ) (37,870 ) (9,508 ) 25.1 % Provision for income taxes
(6,476 ) (5,782 ) (694 ) 12.0 % Net income $
16,170 $ 15,029 $ 1,141 7.6 % Diluted
earnings per share $ 0.53 $ 0.65 $ (0.11 ) (17.3 %) Dividends per
share $ 0.17 $ 0.17 $ - 0.0 % Average common shares 30,011 22,983
7,028 30.6 % Average diluted common shares 30,291 23,276 7,015 30.1
% Return on average total assets 1.05 % 1.25 % Return on
average equity 9.11 % 11.78 % Efficiency ratio 65.19 % 65.24 %
Nine months ended September 30, (dollars and shares
in thousands) 2018 2017
$ Change
% Change Net interest income $ 151,344 $ 129,511 $ 21,833 16.9 %
Provision for (benefit from) loan losses 1,777 (1,588 ) 3,365
Noninterest income 36,650 37,543 (893 ) (2.4 %) Noninterest expense
(123,410 ) (108,948 ) (14,462 ) 13.3 % Provision for income taxes
(17,698 ) (22,129 ) 4,431 (20.0 %) Net
income $ 45,109 $ 37,565 $ 7,544 20.1 %
Diluted earnings per share $ 1.76 $ 1.62 $ 0.14 8.9 % Dividends per
share $ 0.51 $ 0.49 $ 0.02 4.1 % Average common shares 25,317
22,901 2,416 10.5 % Average diluted common shares 25,617 23,239
2,378 10.2 % Return on average total assets 1.15 % 1.11 %
Return on average equity 10.44 % 10.09 % Efficiency ratio 65.65 %
65.22 %
The following is a summary of certain of the Company’s
consolidated assets and deposits as of the dates indicated:
Ending balances As of
September 30, Acquired Organic Organic ($'s in thousands) 2018 2017
$ Change
Balances
$ Change
% Change Total assets $ 6,318,865 $ 4,656,435 $ 1,662,430 $
1,463,199 $ 199,231 4.3 % Total loans 4,027,436 2,931,613 1,095,823
834,683 261,140 8.9 % Total investments 1,535,953 1,231,759 304,194
335,667 (31,473 ) (2.6 %) Total deposits $ 5,093,117 $ 3,927,456 $
1,165,661 $ 991,935 $ 173,726 4.4 % Qtrly avg
balances As of September 30, Acquired Organic Organic ($'s in
thousands) 2018 2017
$ Change
Balances
$ Change
% Change Total assets $ 6,168,344 $ 4,572,424 $ 1,595,920 $
1,463,199 $ 132,721 2.9 % Total loans 4,028,462 2,878,944 1,149,518
834,683 314,835 10.9 % Total investments 1,490,065 1,250,207
239,858 335,667 (95,809 ) (7.7 %) Total deposits $ 5,068,841 $
3,878,183 $ 1,190,658 $ 991,935 $ 198,723 5.1 %
Overall results for the three and nine months ended September
30, 2018 were primarily benefited by the acquisition of First
National Bank of Northern California, the wholly owned subsidiary
of FNB Bancorp, effective July 6, 2018. In connection with the
acquisition and subsequent integration and restructuring, the
Company incurred a variety of expenses. During the three and nine
month periods ended September 30, 2018 total non-interest expenses
increased by $10,156,000 and $14,462,000 as compared to the same
periods in 2017. The non-recurring costs included in those
increases were $4,150,000 and $5,227,000 for the three and nine
months ended September 30, 2018.
In addition to the $834,683,000 in loans acquired, recorded net
of a $33,417,000 discount, organic loan growth totaled $177,588,000
or an annualized rate of 7.9% during the first nine months of 2018.
In addition to the $991,935,000 in acquired deposits, organic
deposit growth for the first nine months of 2018 was $92,051,000 or
3.1% on an annualized basis. Total assets acquired from FNB Bancorp
totaled $1,306,539,000, inclusive of the core deposit intangible.
Goodwill associated with the acquisition of FNB Bancorp was
$156,661,000 and the core deposit intangible, which will be
amortized over an estimated weighted average life of 6.2 years, was
$27,605,000.
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, (dollars in thousands) 2018 2017
$ Change
% Change Interest income $ 64,554 $ 45,913 $ 18,641 40.6 % Interest
expense (4,065 ) (1,829 ) (2,236 ) 122.3 % FTE adjustment
357 624 (267 ) (42.8 %) Net interest
income (FTE) $ 60,846 $ 44,708 $ 16,138 36.1 %
Net interest margin (FTE) 4.32 % 4.24 %
Acquired loans discount accretion:
Amount (included in interest income) $ 2,098 $ 1,364 $ 734 53.8 %
Effect on average loan yield 0.21 % 0.19 % Effect on net interest
margin (FTE) 0.15 % 0.13 % Three months ended
September 30, June 30, (dollars in thousands) 2018
2018
$ Change
% Change Interest income $ 64,554 $ 48,478 $ 16,076 33.2 % Interest
expense (4,065 ) (2,609 ) (1,456 ) 55.8 % FTE adjustment 357
313 44 14.1 % Net interest
income (FTE) $ 60,846 $ 46,182 $ 14,664 31.8 %
Net interest margin (FTE) 0.25 % 0.16 %
Acquired loans discount accretion:
Amount (included in interest income) $ 2,098 $ 559 $ 1,539 275.3 %
Effect on average loan yield 0.21 % 0.07 % Effect on net interest
margin (FTE) 0.15 % 0.05 % Nine months ended
September 30, (dollars in thousands) 2018 2017
$ Change
% Change Interest income $ 160,153 $ 134,441 $ 25,712 19.1 %
Interest expense (8,809 ) (4,930 ) (3,879 ) 78.7 % FTE adjustment
982 1,874 (892 ) (47.6 %) Net
interest income (FTE) $ 152,326 $ 131,385 $ 20,941
15.9 % Net interest margin (FTE) 4.21 % 4.21 %
Acquired loans discount accretion: Amount (included in interest
income) $ 3,289 $ 5,075 $ (1,786 ) (35.2 %) Effect on average loan
yield 0.13 % 0.24 % Effect on net interest margin (FTE) 0.09 % 0.16
%
Loans may be acquired at a premium or discount to par value, in
which case, the premium is amortized (subtracted from) or accreted
(added to) interest income over the remaining life of the loan.
Generally, as time goes on, the effects 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.
During the three and nine months ended September 30, 2018 purchased
loan discount accretion was $2,098,000 and $3,289,000; for the
three and nine months ended September 30, 2017 purchased loan
accretion was $1,364,000 and $5,075,000. The changes in volume of
interest earning assets and interest bearing liabilities
contributed an additional $15,937,000 in interest income while the
changes in rates contributed $201,000 during the current quarter as
compared to the quarter ended September 30, 2017. The decreases in
Federal tax equivalent yield adjustment are due to the changes in
tax rate changes which became effective on January 1, 2018 whereby
the Federal tax rate was reduced from 35% to 21%.
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
September 30,
2018
June 30,
2018
September 30,
2017
Average Income/ Yield/ Average Income/
Yield/ Average Income/ Yield/ Balance Expense Rate
Balance Expense Rate Balance Expense Rate Assets Loans $ 4,028,462
$ 53,102 5.27 % $ 3,104,126 $ 39,304 5.06 % $ 2,878,944 $ 37,268
5.18 % Investments - taxable 1,336,361 9,648 2.89 % 1,122,534 7,736
2.76 % 1,114,112 7,312 2.63 % Investments - nontaxable (1)
153,704 1,546 4.02 % 136,126 1,355 3.98 %
136,095 1,665 4.89 % Total investments 1,490,065
11,194 3.00 % 1,258,660 9,091 2.89 % 1,250,207 8,977 2.87 % Cash at
Federal Reserve and other banks 119,635 615 2.06 %
94,874 396 1.67 % 85,337 292 1.37 %
Total earning assets 5,638,162 64,911 4.61 % 4,457,660 48,791 4.38
% 4,214,488 46,537 4.42 % Other assets, net 530,182
356,863 357,936 Total assets $ 6,168,344 $ 4,814,523 $
4,572,424 Liabilities and shareholders' equity Interest-bearing
demand deposits $ 1,125,159 248 0.09 % $ 995,528 214 0.09 % $
949,348 206 0.09 % Savings deposits 1,803,022 833 0.18 % 1,393,121
427 0.12 % 1,365,249 419 0.12 % Time deposits 430,286
991 0.92 % 313,556 593 0.76 % 310,325
403 0.52 %
Total interest-bearing deposits
3,358,467 2,072 0.25 % 2,702,205 1,234 0.18 % 2,624,922 1,028 0.16
% Other borrowings 246,637 1,178 1.91 % 139,307 586 1.68 % 65,234
149 0.91 % Junior subordinated debt 56,973 815 5.72 %
56,928 789 5.54 % 56,784 652 4.59 %
Total interest-bearing liabilities 3,662,077 4,065 0.44 % 2,898,440
2,609 0.36 % 2,746,940 1,829 0.27 % Noninterest-bearing deposits
1,710,374 1,339,905 1,253,261 Other liabilities 86,131 65,745
64,834 Shareholders' equity 709,762 510,433
507,389 Total liabilities and shareholders' equity $ 6,168,344 $
4,814,523 $ 4,572,424 Net interest rate spread (1) (2) 4.17 % 4.02
% 4.15 % Net interest income and net interest margin (1) (3) $
60,846 4.32 % $ 46,182 4.14 % $ 44,708 4.24 % (1) Fully
taxable equivalent (FTE) (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, 2018 increased $16,138,000 or 36.1% to $60,846,000
compared to $44,708,000 during the three months ended September 30,
2017. The increase in net interest income (FTE) was due primarily
to an increase in the average balance of loans and a 9 basis point
increase in yield on loans, which was partially offset due to an
increase in the average balance of interest-bearing liabilities and
a 17 basis point increase in the average rate paid on
interest-bearing liabilities.
The index utilized in a significant portion of the Company’s
variable rate loans, Wall Street Journal Prime, has increased by
1.00% to 5.25% at September 30, 2018 as compared to 4.25% at
September 30, 2017. The 9 basis point increase in loan yields from
5.18% during the three months ended September 30, 2017 to 5.27%
during the three months ended September 30, 2018 was primarily due
to increases in market rates. More specifically, increases in
purchased loan discount accretion between the three months ended
September 30, 2018 and 2017 contributed to an increase net interest
margin by only 2 basis points. More importantly, yields on loans
increased 21 basis points as compared to the prior quarter from
5.06% for the three months ended June 30, 2018 of which 14 basis
points were contributed by increases in loan discount accretion and
the remaining 7 basis points were contributed by changes in the
coupon rate associated with loans. On their acquisition date, the
weighted average coupon rate was 4.88% for loans acquired during
the three month period ended September 30, 2018.
The increase in the average rate paid on interest-bearing
liabilities for the trailing and comparable quarters of 8 basis
points and 17 basis points, respectively, was due in part to
differences in market rates associated with deposits acquired from
First National Bank of Northern California and to increases in the
variable rates paid on other borrowings and subordinated debt. The
weighted average rate associated with interest bearing acquired
deposits was 0.29% for non-time deposits and 0.92% for time
deposits on the day of acquisition. The rate paid on other
borrowings was 2.31% at September 30, 2018 as compared to 2.05% and
1.11% as of the trailing quarter and the same quarter in the prior
year, respectively.
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)
Nine Months
Ended
Nine Months
Ended
September 30,
2018
September 30,
2017
Average Income/ Yield/ Average Income/ Yield/ Balance
Expense Rate Balance Expense Rate Assets Loans $ 3,390,447 $
130,455 5.13 % $ 2,807,453 $ 108,600 5.16 % Investments - taxable
1,195,541 25,042 2.79 % 1,076,887 21,637 2.68 % Investments -
nontaxable (1) 142,061 4,254 3.99 % 136,213
4,998 4.89 % Total investments 1,337,602 29,296 2.92 %
1,213,100 26,635 2.93 % Cash at Federal Reserve and other banks
101,889 1,384 1.81 % 139,739 1,080 1.03
% Total earning assets 4,829,938 161,135 4.45 % 4,160,292 136,315
4.37 % Other assets, net 416,520 359,489 Total assets
$ 5,246,458 $ 4,519,781 Liabilities and shareholders' equity
Interest-bearing demand deposits $ 1,038,775 673 0.09 % $ 931,079
534 0.08 % Savings deposits 1,524,048 1,671 0.15 % 1,364,812 1,253
0.12 % Time deposits 350,559 2,058 0.78 %
321,150 1,109 0.46 % Total interest-bearing deposits
2,913,382 4,402 0.20 % 2,617,041 2,896 0.15 % Other borrowings
165,026 2,106 1.70 % 34,413 164 0.64 % Junior subordinated debt
56,928 2,301 5.39 % 56,737 1,870 4.39 %
Total interest-bearing liabilities 3,135,336 8,809 0.37 %
2,708,191 4,930 0.24 % Noninterest-bearing deposits
1,462,209 1,247,201 Other liabilities 72,772 67,854 Shareholders'
equity 576,141 496,535 Total liabilities and
shareholders' equity $ 5,246,458 $ 4,519,781 Net interest rate
spread (1) (2) 4.08 % 4.13 %
Net interest income and net interest
margin (1) (3)
$ 152,326 4.21 % $ 131,385 4.21 % (1) Fully taxable
equivalent (FTE) (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 nine months ended September
30, 2018 increased $20,941,000 or 15.9% to $152,326,000 compared to
$131,385,000 during the nine months ended September 30, 2017. The
increase in net interest income (FTE) was due primarily to an
increase in the average balance of loans, which was partially
offset by an increase in the average balance of interest-bearing
liabilities and a 13 basis point increase in the average rate paid
on interest-bearing liabilities.
During the nine months ended September 30, 2018, the average
balance of loans increased by $582,994,000 or 20.8% to
$3,390,447,000. The increase in net interest income was partially
offset by a decrease in the year-to-date purchased loan discount
accretion from $5,075,000 during the nine months ended September
30, 2017 to $3,289,000 during the nine months ended September 30,
2018. This decrease in purchased loan discount accretion reduced
loan yields by 11 basis points, and net interest margin by 7 basis
points. The 13 basis point increase in the average rate paid on
interest-bearing liabilities was primarily due to increases in
market rates that increased the rates the Company pays on its time
deposits, overnight borrowings, and junior subordinated debt.
Also affecting net interest margin during the three and nine
months ended September 30, 2018, was the decrease in the Federal
tax rate from 35% to 21%. This decrease in the Federal tax rate
caused the fully tax-equivalent (FTE) yield on the Company’s
nontaxable investments to decrease from 4.89% during the nine
months ended September 30, 2017 to 3.99% during the nine months
ended September 30, 2018.
Asset Quality and Loan Loss
Provisioning
The Company recorded provisions for loan losses of $2,651,000
and $765,000 during the three months ended September 30, 2018 and
2017, respectively. While the Company did record net charge-offs of
$572,000 during the third quarter of 2018 as compared to net
charge-offs of $161,000 in the 2017 quarter, the primary cause for
the increase in provision for loan losses was due to changes in the
Company’s analysis of qualitative factors associated with the
California economy. More specifically, the Company has become more
cautious about the risks associated with trends in California real
estate prices and the decrease in affordability of housing in the
markets served by the Company. Loan growth, excluding acquired
loans, also contributed to the need for additional
provisioning.
During the nine months ended September 30, 2018 the Company
recorded a loan loss provision of $1,777,000 as compared to a
reversal of provision for loan losses of $1,588,000 during the nine
months ended September 30, 2017. Nonperforming loans were
$27,148,000, or 0.67% of loans outstanding as of September 30,
2018, compared to $25,420,000, or 0.81% of loans outstanding as of
June 30, 2018 and $24,394,000 or 0.81% of loans outstanding as of
December 31, 2017. The fair value of loans acquired with
deteriorated credit quality during the current quarter totaled
$1,302,000.
The Company continued to experience improvement in the overall
credit quality of its loan portfolio. At September 30, 2018 loans
past due greater than thirty days totaled $13,218,000 or 0.33% of
loans outstanding, as compared to $11,626,000 or 0.37% at June 30,
2018 and $11,609,000 or 0.39% at December 31, 2017. At September
30, 2018, classified loans totaled $45,548,000 (1.13% of total
loans) compared to $44,202,000 (1.40%) and $53,593,000 (1.78%) at
June 30, 2018 and December 31, 2017, respectively.
Non-interest Income
The following table presents the key components of noninterest
income for the periods indicated:
Three months ended September 30, (dollars in
thousands) 2018 2017
$ Change
% Change ATM fees and interchange $ 4,590 $ 4,209 $ 381 9.1 %
Service charges on deposit accounts 4,015 4,160 (145 ) (3.5 %)
Other service fees 676 917 (241 ) (26.3 %) Mortgage banking service
fees 499 514 (15 ) (2.9 %) Change in value of mortgage servicing
rights (37 ) (325 ) 288 (88.6 %) Total
service charges and fees 9,743 9,475
268 2.8 % Commission on nondeposit investment
products 728 672 56 8.3 % Increase in cash value of life insurance
732 732 - 0.0 % Gain on sale of loans 539 606 (67 ) (11.1 %) Lease
brokerage income 186 234 (48 ) (20.5 %) Gain on sale of investment
securities 207 961 (754 ) (78.5 %) Gain on sale of foreclosed
assets 2 37 (35 ) (94.6 %) Other noninterest income 49
213 (164 ) (77.0 %) Total other
noninterest income 2,443 3,455
(1,012 ) (29.3 %) Total noninterest income $ 12,186 $ 12,930
$ (744 ) (5.8 %)
Noninterest income decreased $744,000 (5.8%) to $12,186,000
during the three months ended September 30, 2018 compared to the
three months ended September 30, 2017. The decrease in noninterest
income was due to the changes noted in the table above. The
decrease of $241,000 (26.3%) in other service fees was caused
primarily by a decrease in merchant residual income due to the
lagging effect of transitioning to a new processor, decreasing from
$362,000 during the three months ended September 30, 2017 to
$161,000 during the three months ended September 30, 2018. Gains
from sales of investments securities decreased by $754,000 (78.5%)
due to less sales activity during the three month period ending
September 30, 2018. Offsetting the decreases in non-interest income
was an increase of $288,000 (88.6%) in change in value of mortgage
servicing rights (MSRs) due to slight decreases in estimated
prepayment speeds during the three months ended September 30,
2018.
Nine months ended September 30, (dollars in
thousands) 2018 2017
$ Change
% Change ATM fees and interchange $ 13,301 $ 12,472 $ 829 6.6 %
Service charges on deposit accounts 11,407 12,102 (695 ) (5.7 %)
Other service fees 2,054 2,521 (467 ) (18.5 %) Mortgage banking
service fees 1,527 1,561 (34 ) (2.2 %) Change in value of mortgage
servicing rights 38 (795 ) 833 (104.8
%) Total service charges and fees 28,327 27,861
466 1.7 % Commission on nondeposit
investment products 2,414 1,984 430 21.7 % Increase in cash value
of life insurance 1,996 2,043 (47 ) (2.3 %) Gain on sale of loans
1,831 2,293 (462 ) (20.1 %) Lease brokerage income 514 601 (87 )
(14.5 %) Gain on sale of investment securities 207 961 (754 ) (78.5
%) Gain on sale of foreclosed assets 390 308 82 26.6 % Other
noninterest income 971 1,492 (521 )
(34.9 %) Total other noninterest income 8,323 9,682
(1,359 ) (14.0 %) Total noninterest income $ 36,650 $
37,543 $ (893 ) (2.4 %)
Noninterest income decreased $893,000 (2.4%) to $36,650,000
during the nine months ended September 30, 2018 compared to the
nine months ended September 30, 2017. The decrease in noninterest
income was due to the changes noted in the table above. The
$695,000 (5.7%) decrease in service charges on deposit accounts was
made up of a $688,000 (10%) decrease in nonsufficient fund (NSF)
fees to $6,220,000, and a $7,000 (0.1%) decrease in other deposit
account service charges to $5,188,000. The decrease in NSF fees was
due primarily to continued growth in customer adoption of the
Company’s digital services that improves the ability of customers
to manage funds and avoid overdrafts. The decrease in other deposit
service charges was due primarily to the rapid growth of customer
adoption of e-Statements that reduces statement fees. While both of
these revenue generating activities decreased, the Company has a
net benefit through a reduction in actual operational costs. The
decrease of $467,000 (18.5%) in other service fees was caused
primarily by a decrease in merchant residual income due to the
lagging effect of transitioning to a new processor, decreasing from
$890,000 during the prior nine month period to $471,000 during the
nine months ended September 30, 2018. Gains from sales of
investments securities decreased by $754,000 (78.5%) due to less
sales activity during the nine month period ending September 30,
2018. The $833,000 (104.8%) increase in change in value of mortgage
servicing rights (MSRs) was due to slight decreases in prepayment
speeds during the nine months ended September 30, 2018. During the
nine months ended September 30, 2017, the Company recorded other
non-interest income of $490,000 related to the termination of a
loss sharing agreement with the FDIC.
Non-interest Expense
The following table presents the key components of the Company’s
noninterest expense for the periods indicated:
Three months ended September 30,
(dollars in thousands) 2018 2017
$ Change
% Change Base salaries, overtime and temporary help, net of
deferred loan origination costs $ 17,051 $ 13,600 $ 3,451 25.4 %
Commissions and incentives 3,223 2,609 614 23.5 % Employee benefits
5,549 4,724 825 17.5 % Total salaries
and benefits expense 25,823 20,933 4,890
23.4 % Occupancy 3,173 2,799 374 13.4 % Data
processing and software 2,786 2,495 291 11.7 % Merger and
acquisition expense 4,150 - 4,150 Equipment 1,750 1,816 (66 ) (3.6
%) ATM and POS network charges 1,195 1,425 (230 ) (16.1 %)
Advertising 1,341 1,039 302 29.1 % Professional fees 929 901 28 3.1
% Telecommunications 819 716 103 14.4 % Regulatory assessments and
insurance 537 427 110 25.8 % Intangible amortization 1,390 339
1,051 310.0 % Postage 275 325 (50 ) (15.4 %) Courier service 278
235 43 18.3 % Operational losses 217 301 (84 ) (27.9 %) Other
miscellaneous expense 2,715 3,471 (756 ) (21.8
%) Total other noninterest expense 21,555 16,289
5,266 32.3 % Total noninterest expense $ 47,378 $
37,222 $ 10,156 27.3 % Average full time equivalent
employees 1,146 993 153 15.4 %
Salary and benefit expenses increased $4,890,000 (23.4%) to
$25,823,000 during the three months ended September 30, 2018
compared to $20,933,000 during the three months ended September 30,
2017. Base salaries, net of deferred loan origination costs
increased $3,451,000 (25.4%) to $17,051,000. The increase in base
salaries was primarily due to the additional full-time equivalent
employees acquired with the FNBB merger. Average full-time
equivalent employees increased by 153 or 15.4% during the
comparable quarters. In addition, increases in base salaries due to
annual merit increases and the addition of employees with base
salaries above the average base salary also contributed to the
increase. Commissions and incentive compensation increased $614,000
(23.5%) to $3,223,000 during the three months ended September 30,
2018 compared to the year-ago quarter. Benefits & other
compensation expense increased $825,000 (17.5%) to $5,549,000
during the three months ended September 30, 2018 due primarily to
the increase in full time equivalent employees and to a lesser
extent an increase in health insurance expense. Severance and other
merger related non-recurring compensation costs are included with
“merger and acquisition expense” in the table above.
Other noninterest expense increased $5,266,000 (32.3%) to
$21,555,000 during the three months ended September 30, 2018
compared to the three months ended September 30, 2017. The increase
in other noninterest expense was due to the changes noted in the
table above. During the three months ended September 30, 2018, the
Company incurred $4,150,000 of merger related expense associated
with the merger with FNB Bancorp.
Nine months ended September 30,
(dollars in thousands) 2018 2017
$ Change
% Change Base salaries, overtime and temporary help, net of
deferred loan origination costs $ 45,442 $ 40,647 $ 4,795 11.8 %
Commissions and incentives 7,834 6,980 854 12.2 % Employee benefits
15,652 14,693 959 6.5 % Total salaries
and benefits expense 68,928 62,320 6,608
10.6 % Occupancy 8,574 8,196 378 4.6 % Data
processing and software 7,979 7,332 647 8.8 % Merger and
acquisition expense 5,227 - 5,227 Equipment 4,938 5,344 (406 ) (7.6
%) ATM and POS network charges 3,858 3,353 505 15.1 % Advertising
3,214 3,173 41 1.3 % Professional fees 2,475 2,357 118 5.0 %
Telecommunications 2,201 2,027 174 8.6 % Regulatory assessments and
insurance 1,384 1,252 132 10.5 % Intangible amortization 2,068
1,050 1,018 97.0 % Postage 934 1,058 (124 ) (11.7 %) Courier
service 769 752 17 2.3 % Operational losses 763 1,166 (403 ) (34.6
%) Other miscellaneous expense 10,098 9,568
530 5.5 % Total other noninterest expense 54,482
46,628 7,854 16.8 % Total noninterest expense
$ 123,410 $ 108,948 $ 14,462 13.3 % Average full time
equivalent employees 1,050 1,005 45 4.5 %
Salary and benefit expenses increased $6,608,000 (10.6%) to
$68,928,000 during the nine months ended September 30, 2018
compared to $62,320,000 during the nine months ended September 30,
2017. Base salaries, net of deferred loan origination costs
increased $4,795,000 (11.8%) to $45,442,000. The increase in base
salaries was primarily due to the additional full-time equivalent
employees acquired with the FNBB merger. Average full-time
equivalent employees increased by 45 or 4.5% during the comparable
nine month periods. In addition, increases in base salaries due to
annual merit increases and the addition of employees with base
salaries above the average base salary also contributed to the
increase. Commissions and incentive compensation increased $854,000
(12.2%) to $7,834,000 during the nine months ended September 30,
2018 compared to the prior year-to-date period. Benefits &
other compensation expense increased $959,000 (6.5%) to $15,652,000
during the nine months ended September 30, 2018 due primarily to
the increase in full time equivalent employees and to a lesser
extent an increase in health insurance expense.
Other noninterest expense increased $7,854,000 (16.8%) to
$54,482,000 during the nine months ended September 30, 2018
compared to the nine months ended September 30, 2017. The increase
in other noninterest expense was due to the changes noted in the
table above. During the nine months ended September 30, 2018, the
Company incurred $5,227,000 of merger related expense associated
with the merger with FNB Bancorp.
Balance Sheet
In addition to the balance sheet changes which resulted from the
acquisition of FNB Bancorp, total assets grew by $199,231,000
between September 2017 and September 2018. This growth was led by
$261,140,000 related to organic loan growth which was funded by
$31,473,000 in normally scheduled payments on investment
securities, $173,726,000 in organic deposit growth and an increase
in other borrowings of $19,101,000. Total equity increased to
$802,115,000 at September 30, 2018 as compared to $512,344,000 at
the close of the trailing quarter and inclusive of $26,959,000 and
$21,123,000 in accumulated other comprehensive loss at the same
periods. As a result the Company’s book value per share increased
to $26.37 from $22.27 per share at June 30, 2018. Based on a net
increase in intangible assets of $182,876,000 and an increase in
total shares outstanding of 7,413,655, the Company’s tangible book
value decreased to $18.10 per share from $19.28 per share at June
30, 2018.
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 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.
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;
the impact of changes in financial services policies, laws and
regulations; technological changes; mergers and acquisitions;
changes in the level of our nonperforming assets and charge-offs;
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; changes in consumer spending, borrowing
and savings habits; our ability to attract deposits and other
sources of liquidity; changes in the financial performance and/or
condition of our borrowers; the impact of competition from other
financial service providers; the possibility that any of the
anticipated benefits of our recent merger with FNBB will not be
realized or will not be realized within the expected time period,
or that integration of FNBB’s operations will be more costly or
difficult than expected; the challenges of integrating and
retaining key employees; unanticipated regulatory or judicial
proceedings; the costs and effects of litigation and of unexpected
or adverse outcomes in such litigation; 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, 2017, which is on file with the Securities and
Exchange Commission (the “SEC”) and 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.
TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data) Three
months ended September 30, June 30, March 31,
December 31, September 30, 2018 2018
2018 2017 2017
Revenue and Expense Data Interest income $ 64,554 $ 48,478 $
47,121 $ 46,961 $ 45,913 Interest expense 4,065
2,609 2,135 1,868
1,829 Net interest income 60,489 45,869 44,986 45,093 44,084
Provision for (benefit from) loan losses 2,651 (638 ) (236 ) 1,677
765 Noninterest income: Service charges and fees 9,743 9,228 9,356
9,562 9,475 Gain on sale of investment securities 207 - - - 961
Other income 2,236 2,946 2,934
2,916 2,494 Total noninterest
income 12,186 12,174 12,290 12,478 12,930 Noninterest expense:
Salaries and benefits 25,823 21,453 21,652 20,610 20,933 Occupancy
and equipment 5,056 4,357 4,232 4,495 4,615 Data processing and
network 3,981 4,116 3,740 4,515 3,920 Other noninterest expense
12,518 7,944 8,538
8,456 7,754 Total noninterest expense
47,378 37,870 38,162
38,076 37,222 Total income before taxes
22,646 20,811 19,350
17,818 19,027 Net income $ 16,170 $
15,029 $ 13,910 $ 2,989 $ 11,897
Share Data Basic earnings per share $ 0.54 $ 0.65 $ 0.61 $
0.13 $ 0.52 Diluted earnings per share $ 0.53 $ 0.65 $ 0.60 $ 0.13
$ 0.51 Dividends per share $ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.17 Book
value per common share $ 26.37 $ 22.27 $ 22.01 $ 22.03 $ 22.09
Tangible book value per common share
(1)
$ 18.10 $ 19.28 $ 19.00 $ 19.01 $ 19.04 Shares outstanding
30,417,818 23,004,153 22,956,323 22,955,963 22,941,464 Weighted
average shares 30,011,307 22,983,439 22,956,239 22,944,523
22,931,855 Weighted average diluted shares 30,291,225 23,276,471
23,283,127 23,289,545 23,244,235
Credit Quality Past due
greater than 30 days $ 13,218 $ 11,626 $ 20,416 $ 11,609 $ 11,571
Nonperforming originated loans 17,087 17,077 16,080 15,463 11,689
Total nonperforming loans 27,148 25,420 24,381 24,394 21,955 Total
nonperforming assets 28,980 26,794 25,945 27,620 25,026 Loans
charged-off 1,142 318 480 627 862 Loans recovered $ 570 $ 507 $ 366
$ 526 $ 701
Selected Financial Ratios Return on average
total assets 1.05 % 1.25 % 1.17 % 0.26 % 1.04 % Return on average
equity 9.11 % 11.78 % 11.00 % 2.33 % 9.38 % Average yield on loans
5.27 % 5.06 % 5.03 % 5.18 % 5.18 % Average yield on
interest-earning assets 4.61 % 4.38 % 4.33 % 4.44 % 4.42 % Average
rate on interest-bearing deposits 0.25 % 0.18 % 0.16 % 0.16 % 0.16
% Average cost of total deposits 0.16 % 0.12 % 0.11 % 0.11 % 0.11 %
Average rate on borrowings and
subordinated debt
2.63 % 2.80 % 2.52 % 2.72 % 2.63 % Average rate on interest-bearing
liabilities 0.44 % 0.36 % 0.30 % 0.27 % 0.27 % Net interest margin
(fully tax-equivalent) 4.32 % 4.14 % 4.14 % 4.26 % 4.24 % Loans to
deposits 79.08 % 77.17 % 75.16 % 75.21 % 74.64 % Efficiency ratio
65.19 % 65.24 % 66.63 % 66.14 % 65.29 %
Supplemental Loan
Interest Income Data: Discount accretion on acquired loans $
2,098 $ 559 $ 632 $ 1,489 $ 1,364 All other loan interest income
51,004 38,745 37,417 36,705 35,904 Total loan interest income $
53,102 $ 39,304 $ 38,049 $ 38,194 $ 37,268 NOTE:
(1) Tangible book value per share is
calculated by subtracting Goodwill and Other intangible assets from
Total shareholders' equity and dividing that result by the shares
outstanding at the end of the period.
TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands) Three months ended
September 30, June 30, March 31, December 31,
September 30,
Balance Sheet Data 2018
2018 2018
2017 2017 Cash and due from banks $
226,543 $ 184,062 $ 182,979 $ 205,428 $ 188,034 Securities,
available for sale 1,058,806 757,075 738,785 730,883 678,236
Securities, held to maturity 459,897 477,745 496,035 514,844
536,567 Restricted equity securities 17,250 16,956 16,956 16,956
16,956 Loans held for sale 3,824 3,601 2,149 4,616 2,733 Loans:
Commercial loans 289,645 237,619 216,015 220,500 227,479 Consumer
loans 421,287 350,925 348,789 365,113 361,320 Real estate mortgage
loans 3,132,202 2,401,040 2,359,379 2,291,995 2,194,874 Real estate
construction loans 184,302 156,729
145,550 137,557 147,940
Total loans, gross 4,027,436 3,146,313 3,069,733 3,015,165
2,931,613 Allowance for loan losses (31,603 ) (29,524
) (29,973 ) (30,323 ) (28,747 ) Total loans,
net 3,995,833
3,116,789
3,039,760 2,984,842 2,902,866 Foreclosed assets 1,832 1,374 1,564
3,226 3,071 Premises and equipment 89,290 59,014 58,558 57,742
54,995 Cash value of life insurance 116,596 99,047 98,391 97,783
97,142 Goodwill 220,972 64,311 64,311 64,311 64,311 Other
intangible assets 30,711 4,496 4,835 5,174 5,513 Accrued interest
receivable 19,592 14,253 12,407 13,772 12,656 Other assets
77,719 64,430 63,227
61,738 93,355 Total assets $ 6,318,865 $
4,863,153 $ 4,779,957 $ 4,761,315 $ 4,656,435 Deposits:
Noninterest-bearing demand deposits $ 1,710,505 $ 1,369,834 $
1,359,996 $ 1,368,218 $ 1,283,949 Interest-bearing demand deposits
1,152,705 1,006,331 1,022,299 971,459 965,480 Savings deposits
1,801,087 1,385,268 1,395,481 1,364,518 1,367,597 Time certificates
428,820 315,789 306,628
304,936 310,430 Total deposits
5,093,117 4,077,222 4,084,404 4,009,131 3,927,456 Accrued interest
payable 1,729 1,175 958 930 867 Other liabilities 82,077 62,623
67,393 66,422 65,839 Other borrowings 282,831 152,839 65,041
122,166 98,730 Junior subordinated debt 56,996
56,950 56,905 56,858
56,810 Total liabilities $ 5,516,750 $ 4,350,809 $ 4,274,701
$ 4,255,507 $ 4,149,702 Common stock 541,519 256,590 256,226
255,836 255,231 Retained earnings 287,555 276,877 266,235 255,200
256,114 Accumulated other comprehensive loss (26,959 )
(21,123 ) (17,205 ) (5,228 ) (4,612 )
Total shareholders' equity $ 802,115 $ 512,344 $ 505,256 $ 505,808
$ 506,733
Average Balance Data Average loans $ 4,028,462 $
3,104,126 $ 3,028,178 $ 2,948,277 $ 2,878,944 Average
interest-earning assets $ 5,638,162 $ 4,457,660 $ 4,380,596 $
4,289,656 $ 4,214,488 Average total assets $ 6,168,344 $ 4,814,523
$ 4,741,227 $ 4,658,677 $ 4,572,424 Average deposits $ 5,068,841 $
4,042,110 $ 4,004,332 $ 3,961,422 $ 3,878,183 Average borrowings
and subordinated debt $ 303,610 $ 196,235 $ 164,663 $ 118,606 $
122,018 Average total equity $ 709,762 $ 510,433 $ 506,013 $
513,007 $ 507,389
Capital Ratio Data Total risk based
capital ratio 13.9 % 13.9 % 13.9 % 14.1 % 14.4 % Tier 1 capital
ratio 13.2 % 13.1 % 13.0 % 13.2 % 13.6 % Tier 1 common equity ratio
12.0 % 11.7 % 11.6 % 11.7 % 12.1 % Tier 1 leverage ratio 10.7 %
10.9 % 10.8 % 10.8 % 11.0 % Tangible capital ratio 9.1 % 9.3 % 9.3
% 9.3 % 9.5 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181029005822/en/
TriCo BancsharesRichard P. Smith, 530-898-0300President &
CEO
TriCo Bancshares (NASDAQ:TCBK)
Historical Stock Chart
From Jun 2024 to Jul 2024
TriCo Bancshares (NASDAQ:TCBK)
Historical Stock Chart
From Jul 2023 to Jul 2024