TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company
of Tri Counties Bank, today announced net income of $23,211,000 for
the quarter ended December 31, 2018, compared to $2,989,000 for the
fourth quarter of 2017. Diluted earnings per share were $0.76 for
the fourth quarter of 2018, compared to $0.13 for the fourth
quarter of 2017. Net income was $68,320,000 for the year ended
December 31, 2018, compared to $40,554,000 for the year ended
December 31, 2017. Diluted earnings per share were $2.54 for the
year ended December 31, 2018, compared to $1.74 for the year ended
December 31, 2017.
Net income for the twelve months ended December 31, 2018 and
2017 includes $5,227,000 and $530,000, respectively, of the FNB
Bancorp (FNBB) related merger and acquisition expenses. Excluding
the impact of the FNBB merger expenses, net of income taxes, net
income totaled $72,327,000 for the year ended December 31, 2018, or
$2.69 per diluted share. Net income for the fourth quarter of 2017
includes income tax expense of $7,416,000 due to the re-measurement
of the Company’s net deferred tax asset (“DTA”) resulting from the
Tax Cuts and Jobs Act of 2017. Excluding the impact of the FNBB
related merger expenses, net of tax, and the DTA re-measurement,
net income totaled $48,462,000 for the year ended December 31,
2017, or $2.08 per diluted share.
Financial Highlights
Performance highlights and other developments for the Company
during the three and twelve months ended December 31, 2018 included
the following:
- For the three and twelve months ended
December 31, 2018, the Company’s return on average assets was 1.47%
and 1.24% and the return on average equity was 11.40% and
10.75%.
- As of December 31, 2018, the Company
reached record levels of total assets and total deposits which were
$6.35 billion and $5.37 billion, respectively.
- The loan to deposit ratio remained
stable at 74.9% at December 31, 2018 as compared to 75.2% at
December 31, 2017.
- Net interest margin grew 14 basis
points to 4.46% on a tax equivalent basis as compared to 4.32% in
the trailing quarter.
- Non-interest bearing deposits as a
percentage of total deposits were 32.8% at December 31, 2018 as
compared to 34.1% at December 31, 2017.
- The average rate of interest paid on
deposits, including noninterest-bearing deposits, remained low at
0.20%, an increase of 4 basis points from the trailing
quarter.
- Non-performing assets to total assets
were 0.47% as of December 31, 2018 as compared to 0.46% and 0.58%
at September 30, 2018 and December 31, 2017, respectively.
- Revenue growth and operational changes
resulted in notable improvement in the efficiency ratio which was
59.1% for the quarter ended December 31, 2018 as compared to 65.2%
in the trailing quarter and 66.1% in the same quarter of the prior
year.
President and CEO, Rick Smith commented, “We are very pleased
with the Bank’s strong financial results for 2018. In addition to
consistent organic loan and deposit growth, the completion of the
acquisition of First National Bank of Northern California in July
of this year provided meaningful scale that drove improvement in
both our net interest margin and operational efficiency.”
Smith continued, “While TriCo’s franchise covers twenty nine
counties across Northern California and the Central Valley, we
remain mindful of the communities that were impacted by natural
disasters. Our Company and our employees will continue to play a
leadership role in driving the restoration efforts and we are
continually thankful to those who have partnered with us and who
have been so generous with their support.”
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 December 31, (dollars and
shares in thousands) 2018 2017
$ Change
% Change
Net interest income $ 64,002 $ 45,093 $ 18,909 41.9% Provision for
loan losses (806 ) (1,677 ) 871 nm Noninterest income 12,634 12,478
156 1.3% Noninterest expense (45,285 ) (38,076 ) (7,209 ) 18.9%
Provision for income taxes (7,334 ) (14,829 )
7,495 (50.5%) Net income $ 23,211 $ 2,989 $
20,222 676.5% Diluted earnings per share $ 0.76 $
0.13 $ 0.63 484.6% Dividends per share $ 0.19 $ 0.17 $ 0.02 11.8%
Average common shares 30,423 22,945 7,478 32.6% Average diluted
common shares 30,672 23,290 7,382 31.7% Return on average
total assets 1.47 % 0.26 % Return on average equity 11.40 % 2.33 %
Efficiency ratio 59.09 % 66.14 % Three months ended
December 31, September 30, (dollars and shares
in thousands) 2018 2018 $ Change
% Change
Net interest income $ 64,002 $ 60,489 $ 3,513 5.8% Provision for
loan losses (806 ) (2,651 ) 1,845 nm Noninterest income 12,634
12,186 448 3.7% Noninterest expense (45,285 ) (47,378 ) 2,093
(4.4%) Provision for income taxes (7,334 ) (6,476 )
(858 ) 13.2% Net income $ 23,211 $ 16,170 $
7,041 43.5% Diluted earnings per share $ 0.76 $ 0.53
$ 0.23 42.4% Dividends per share $ 0.19 $ 0.17 $ 0.02 11.8% Average
common shares 30,423 30,011 412 1.4% Average diluted common shares
30,672 30,291 381 1.3% Return on average total assets 1.47 %
1.05 % Return on average equity 11.40 % 9.11 % Efficiency ratio
59.09 % 65.19 % Twelve months ended
December 31, (dollars and shares in thousands) 2018 2017 $
Change % Change Net interest income $ 215,346 $ 174,604 $ 40,742
23.3 % Provision for loan losses (2,583 ) (89 ) (2,494 ) nm
Noninterest income 49,284 50,021 (737 ) (1.5 %) Noninterest expense
(168,695 ) (147,024 ) (21,671 ) 14.7 % Provision for income taxes
(25,032 ) (36,958 ) 11,926 (32.3 %) Net
income $ 68,320 $ 40,554 $ 27,766 68.5 %
Diluted earnings per share $ 2.54 $ 1.74 $ 0.80 46.0 %
Dividends per share $ 0.70 $ 0.66 $ 0.04 6.1 % Average common
shares 26,593 22,912 3,681 16.1 % Average diluted common shares
26,881 23,250 3,631 15.6 % Return on average total assets
1.24 % 0.89 % Return on average equity 10.75 % 8.10 % Efficiency
ratio 63.75 % 65.45 %
The following is a summary of certain of the Company’s
consolidated assets and deposits as of the dates indicated:
Ending balances As of
December 31, Acquired Organic Organic ($'s in thousands) 2018 2017
$ Change Balances $ Change % Change Total assets $ 6,352,441 $
4,761,315 $ 1,591,126 $ 1,463,200 $ 127,926 2.7 % Total loans
4,022,014 3,015,165 1,006,849 834,683 172,166 5.7 % Total
investments 1,580,096 1,262,683 317,413 335,667 (18,254 ) (1.4 %)
Total deposits $ 5,366,466 $ 4,009,131 $ 1,357,335 $ 991,935 $
365,400 9.1 % Qtrly avg balances As of December 31,
Acquired Organic Organic ($'s in thousands) 2018 2017 $ Change
Balances
$ Change
% Change Total assets $ 6,325,130 $ 4,658,677 $ 1,666,453 $
1,463,200 $ 203,253 4.4 % Total loans 4,022,651 2,948,277 1,074,374
834,683 239,691 8.1 % Total investments 1,523,094 1,254,868 268,226
335,667 (67,441 ) (5.4 %) Total deposits $ 5,253,123 $ 3,961,422 $
1,291,701 $ 991,935 $ 299,766 7.6 %
Overall results for the three and twelve months ended December
31, 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 twelve
month periods ended December 31, 2018 total non-interest expenses
increased by $7,209,000 (18.9%) and $21,671,000 (14.7%) as compared
to the same periods in 2017. There were no merger related costs
incurred in the fourth quarter of 2018. Costs related to the merger
were $5,227,000 for the twelve months ended December 31, 2018, as
compared to $530,000 during the year ended December 31, 2017.
In addition to the $834,683,000 in loans acquired, recorded net
of a $33,417,000 discount, organic loan growth totaled $172,166,000
(5.7%) during 2018. Organic deposit growth for 2018 was
$365,400,000 (9.1%) in addition to the $991,935,000 in acquired
deposits. 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 December 31,
(dollars in thousands) 2018 2017 $ Change % Change Interest
income $ 68,065 $ 46,961 $ 21,104 44.9 % Interest expense (4,063 )
(1,868 ) (2,195 ) 117.5 % FTE adjustment 322
625 (303 ) (48.5 %) Net interest income (FTE) $
64,324 $ 45,718 $ 18,606 40.7 % Net interest
margin (FTE) 4.46 % 4.26 % Acquired loans discount
accretion: Amount (included in interest income) $ 1,982 $ 1,498 $
484 32.3 % Effect on average loan yield 0.20 % 0.20 % Effect on net
interest margin (FTE) 0.14 % 0.14 %
Twelve months ended December 31, (dollars in
thousands) 2018 2017 $ Change % Change Interest income $
228,218 $ 181,402 $ 46,816 25.8 % Interest expense (12,872 ) (6,798
) (6,074 ) 89.3 % FTE adjustment 1,304 2,499
(1,195 ) (47.8 %) Net interest income (FTE) $ 216,650
$ 177,103 $ 39,547 22.3 % Net interest margin
(FTE) 4.28 % 4.22 % Acquired loans discount
accretion: Amount (included in interest income) $ 5,271 $ 6,564 $
(1,293 ) (19.7 %) Effect on average loan yield 0.15 % 0.23 % Effect
on net interest margin (FTE) 0.10 % 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 twelve months ended December 31, 2018,
purchased loan discount accretion was $1,982,000 and $5,271,000,
respectively; for the three and twelve months ended December 31,
2017, purchased loan accretion was $1,498,000 and $6,564,000,
respectively. The changes in volume of interest earning assets and
interest bearing liabilities contributed an additional $15,601,000
in interest income while the changes in rates contributed
$3,005,000 during the current quarter as compared to the quarter
ended December 31, 2017. The decreases in Federal tax equivalent
yield adjustment are due to 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
December 31,
2018
September 30,
2018
December 31,
2017
Average Income/ Yield/ Average Income/
Yield/ Average Income/ Yield/ Balance Expense Rate
Balance Expense Rate Balance Expense Rate Assets Loans $ 4,022,651
$ 55,662 5.53 % $ 4,028,462 $ 53,102 5.27 % $ 2,948,277 $ 38,194
5.18 % Investments - taxable 1,380,693 8,955 2.59 % 1,336,361 9,648
2.89 % 1,118,547 7,459 2.67 % Investments - nontaxable (1)
142,401 1,395 3.92 % 153,704 1,546 4.02 %
136,321 1,666 4.89 % Total investments 1,523,094
10,350 2.72 % 1,490,065 11,194 3.00 % 1,254,868 9,125 2.91 % Cash
at Federal Reserve and other banks 220,317 2,375 4.31
% 119,635 615 2.06 % 86,211 267 1.24 %
Total earning assets 5,766,062 68,387 4.74 % 5,638,162 64,911 4.61
% 4,289,356 47,586 4.44 % Other assets, net 559,068
530,182 369,021 Total assets $ 6,325,130 $ 6,168,344 $
4,658,377 Liabilities and shareholders' equity Interest-bearing
demand deposits $ 1,184,999 272 0.09 % $ 1,125,159 248 0.09 % $
964,827 210 0.09 % Savings deposits 1,868,664 1,132 0.24 %
1,803,022 833 0.18 % 1,380,384 430 0.12 % Time deposits
460,555 1,190 1.03 % 430,286 991 0.92 %
307,446 422 0.55 % Total interest-bearing deposits 3,514,218
2,594 0.30 % 3,358,467 2,072 0.25 % 2,652,657 1,062 0.16 % Other
borrowings 122,410 639 2.09 % 246,637 1,178 1.91 % 61,769 141 0.91
% Junior subordinated debt 57,016 830 5.82 %
56,973 815 5.72 % 56,837 665 4.68 % Total
interest-bearing liabilities 3,693,644 4,063 0.44 %
3,662,077 4,065 0.44 % 2,771,263 1,868 0.27 %
Noninterest-bearing deposits 1,738,905 1,710,374 1,308,765 Other
liabilities 78,136 86,131 65,642 Shareholders' equity
814,445 709,762 513,007 Total liabilities and
shareholders' equity $ 6,325,130 $ 6,168,344 $ 4,658,677
Net interest rate spread (1) (2)
4.30 % 4.17 % 4.17 %
Net interest income and net interest
margin (1) (3)
$ 64,324 4.46 % $ 60,846 4.32 % $ 45,718 4.26 % (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 December
31, 2018 increased $3,478,000 or 5.7% to $64,324,000 compared to
$60,846,000 during the three months ended September 30, 2018. The
increase in net interest income (FTE) was due primarily to an
increase in the average rates on loans which increased 26 basis
points.
The index utilized in a significant portion of the Company’s
variable rate loans, Wall Street Journal Prime, has increased by
1.00% to 5.50% at December 31, 2018 as compared to 4.50% at
December 31, 2017. The 35 basis point increase in loan yields from
5.18% during the three months ended December 31, 2017 to 5.53%
during the three months ended December 31, 2018 was due to
increases in market rates. More specifically, there was no change
on the effect purchased loan discount accretion had to net interest
margin between the three months ended December 31, 2018 and
September 30, 2018. More importantly, yields on loans increased 26
basis points as compared to the prior quarter from 5.27% for the
three months ended September 30, 2018, of which 28 basis points
were contributed by changes in the coupon rate associated with
loans, offset by a decrease of 2 basis points attributed to the
decreased impact from accretion of purchased loans.
The impact of changes in rates and volumes of interest bearing
liabilities resulted in neutral impact as interest expense declined
by $2,000 during the quarter. Comparing the quarter ended December
31, 2018 to the trailing quarter the total cost of interest bearing
liabilities remained unchanged at 0.44% but increased 17 basis
points from the same quarter in the prior year 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 average rate paid on other
borrowings was 2.09% at December 31, 2018 as compared to 1.91% and
0.91% as of the trailing quarter and the same quarter in the prior
year, respectively.
ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in thousands)
Twelve Months
Ended
Twelve Months
Ended
December 31,
2018
December 31,
2017
Average Income/ Yield/ Average Income/
Yield/ Balance Expense Rate Balance Expense Rate Assets Loans $
3,548,498 $ 186,117 5.24 % $ 2,842,659 $ 146,794 5.16 % Investments
- taxable 1,241,829 33,997 2.74 % 1,087,302 29,096 2.68 %
Investments - nontaxable (1) 142,146 5,649 3.97 %
136,240 6,664 4.89 % Total investments 1,383,975
39,646 2.86 % 1,223,542 35,760 2.92 % Cash at Federal Reserve and
other banks 131,496 3,759 2.86 % 126,432
1,347 1.07 % Total earning assets 5,063,969 229,522 4.53 %
4,192,633 183,901 4.39 % Other assets, net 452,157
361,872 Total assets $ 5,516,126 $ 4,554,505 Liabilities and
shareholders' equity Interest-bearing demand deposits $ 1,075,331
945 0.09 % $ 939,516 744 0.08 % Savings deposits 1,610,202 2,803
0.17 % 1,368,705 1,683 0.12 % Time deposits 378,058
3,248 0.86 % 317,724 1,531 0.48 % Total
interest-bearing deposits 3,063,591 6,996 0.23 % 2,625,945 3,958
0.15 % Other borrowings 154,372 2,745 1.78 % 41,252 305 0.74 %
Junior subordinated debt 56,950 3,131 5.50 %
56,762 2,535 4.47 % Total interest-bearing liabilities
3,274,913 12,872 0.39 % 2,723,959 6,798 0.25 %
Noninterest-bearing deposits 1,531,383 1,262,592 Other liabilities
74,113 67,301 Shareholders' equity 635,717 500,653
Total liabilities and shareholders' equity $ 5,516,126 $ 4,554,505
Net interest rate spread (1) (2) 4.14 % 4.14 % Net interest income
and net interest margin (1) (3) $ 216,650 4.28 % $ 177,103 4.22 %
(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 year ended December 31,
2018 increased $39,547,000 or 22.3% to $216,650,000 compared to
$177,103,000 during the year ended December 31, 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 14 basis point increase in the average rate paid on
interest-bearing liabilities.
During the twelve months ended December 31, 2018, the average
balance of loans increased by $705,839,000 (24.8%) to
$3,548,498,000. The increase in net interest income was partially
offset by a decrease in the year-to-date purchased loan discount
accretion from $6,564,000 during the year ended December 31, 2017
to $5,271,000 during the year ended December 31, 2018. This
decrease in purchased loan discount accretion reduced loan yields
by 8 basis points, and net interest margin by 6 basis points. The
14 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 twelve
months ended December 31, 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 2017 to 3.97% during
2018.
Asset Quality and Loan Loss
Provisioning
The Company recorded provision for loan losses of $806,000
during the three months ended December 31, 2018 as compared to a
provision of $1,677,000 in the prior year quarter. While the
Company did record net recoveries of $172,000 during the fourth
quarter of 2018 as compared to net charge-offs of $101,000 in the
2017 quarter, the primary cause for the increase in provision for
loan losses was due to estimated losses related to the Camp Fire.
As of December 31, 2018 the Company had established reserves
totaling $3,250,000 related to the Camp Fire. While the Company
remains cautious about the risks associated with trends in
California real estate prices and the affordability of housing in
the markets served by the Company, changes in affordability and
energy related index rates improved during the quarter ended
December 31, 2018. The qualitative factors associated with these
two measures reduced the level of calculated required reserves by
approximately $2,000,000.
During the twelve months ended December 31, 2018 the Company
recorded a loan loss provision of $2,583,000 as compared to a loan
loss provision of $89,000 during the twelve months ended December
31, 2017. Nonperforming loans were $27,494,000, or 0.68% of loans
outstanding as of December 31, 2018, compared to $27,148,000, or
0.67% of loans outstanding as of September 30, 2018 and $24,394,000
or 0.81% of loans outstanding as of December 31, 2017.
Provision for Income
Taxes
The Company’s effective tax rate was 24.0% and 26.8%,
respectively, for the quarter and year ended December 31, 2018.
During the quarter ended December 31, 2018, the Company made
certain tax method elections in order to benefit from the change in
corporate tax rates associated with the Tax Cut and Jobs Act of
2017. As a result, the provision for income taxes was benefited by
approximately $1,058,000. Absent this benefit, the Company’s
effective tax rate would have been 27.5% and 27.9% for the quarter
and year ended December 31, 2018, respectively.
Non-interest Income
The following table presents the key components of noninterest
income for the periods indicated:
Three months ended December 31, (dollars in
thousands) 2018 2017 $ Change % Change ATM fees and
interchange $ 4,914 $ 4,255 $ 659 15.5 % Service charges on deposit
accounts 4,059 3,954 105 2.7 % Other service fees 832 761 71 9.3 %
Mortgage banking service fees 511 515 (4 ) (0.8 %) Change in value
of mortgage servicing rights (184 ) 77 (261 )
(339.0 %) Total service charges and fees 10,132
9,562 570 6.0 % Commission on
nondeposit investment products 737 745 (8 ) (1.1 %) Increase in
cash value of life insurance 722 642 80 12.5 % Gain on sale of
loans 540 816 (276 ) (33.8 %) Lease brokerage income 164 181 (17 )
(9.4 %) Gain on sale of foreclosed assets 18 403 (385 ) (95.5 %)
Other noninterest income 321 129 192
148.8 % Total other noninterest income 2,502
2,916 (414 ) (14.2 %) Total noninterest income $
12,634 $ 12,478 $ 156 1.3 %
Noninterest income increased $156,000 (1.3%) to $12,634,000
during the three months ended December 31, 2018 compared to the
three months ended December 31, 2017. The increase in noninterest
income was due primarily to a $659,000 (15.5%) increase in ATM fees
and interchange and a $105,000 (2.7%) increase in service charges
on deposit accounts. The increases in noninterest income as
compared to the prior year quarter were offset by decreases in gain
on sale of loans of $276,000 (33.8%) and gain on sale of foreclosed
assets of $385,000 (95.5%). The $276,000 decrease in gain on sale
of loans was due primarily to decreased residential mortgage
refinance activity compared to the year-ago quarter during a rising
rate environment.
Twelve months ended December 31, (dollars in
thousands) 2018 2017 $ Change % Change ATM fees and
interchange $ 18,249 $ 16,727 $ 1,522 9.1 % Service charges on
deposit accounts 15,467 16,056 (589 ) (3.7 %) Other service fees
2,852 3,282 (430 ) (13.1 %) Mortgage banking service fees 2,038
2,076 (38 ) (1.8 %) Change in value of mortgage servicing rights
(146 ) (718 ) 572 (79.7 %) Total
service charges and fees 38,460 37,423
1,037 2.8 % Commission on nondeposit
investment products 3,151 2,729 422 15.5 % Increase in cash value
of life insurance 2,718 2,685 33 1.2 % Gain on sale of loans 2,371
3,109 (738 ) (23.7 %) Gain on sale of investment securities 207 961
(754 ) (78.5 %) Lease brokerage income 678 782 (104 ) (13.3 %) Gain
on sale of foreclosed assets 408 711 (303 ) (42.6 %) Other
noninterest income 1,291 1,621
(330 ) (20.4 %) Total other noninterest income 10,824
12,598 (1,774 ) (14.1 %) Total noninterest
income $ 49,284 $ 50,021 $ (737 ) (1.5 %)
Noninterest income decreased $737,000 (1.5%) to $49,284,000
during the twelve months ended December 31, 2018 compared to the
twelve months ended December 31, 2017. The decrease in noninterest
income was due primarily to decreases in gain on sale of loans of
$738,000 (23.7%), gain on sale of investment securities of $754,000
(78.5%), gain on sale of foreclosed assets of $303,000 (42.6%), and
decreases of $330,000 (20.4%) in miscellaneous income which were
partially offset by an increase in commissions on non-deposit
investment products of $422,000 (15.5%). Additionally, service
charges and fees increased by $1,037,000 (2.8%). The increase in
service charges and fees was driven by an increase in ATM fees and
interchange of $1,522,000 (9.1%).
The following table presents the key components of the Company’s
noninterest expense for the periods indicated:
Three months ended December 31, (dollars in
thousands) 2018 2017 $ Change % Change Base salaries,
overtime and temporary help, net of deferred loan origination costs
$ 16,980 $ 13,942 $ 3,038 21.8 % Commissions and incentives 3,313
2,247 1,066 47.4 % Employee benefits 4,721 4,421
300 6.8 % Total salaries and benefits expense
25,014 20,610 4,404 21.4 % Occupancy
3,565 2,698 867 32.1 % Data processing and software 3,042 3,116 (74
) (2.4 %) Equipment 1,713 1,797 (84 ) (4.7 %) ATM and POS network
charges 1,413 1,399 14 1.0 % Advertising 1,364 928 436 47.0 %
Intangible amortization 1,431 339 1,092 322.1 % Professional fees
1,071 1,388 (317 ) (22.8 %) Telecommunications 822 686 136 19.8 %
Regulatory assessments and insurance 522 424 98 23.1 % Courier
service 518 283 235 83.0 % Operational losses 497 228 269 118.0 %
Postage 220 238 (18 ) (7.6 %) Merger and acquisition expense - 530
(530 ) (100.0 %) Other miscellaneous expense 4,093
3,412 681 20.0 % Total other noninterest expense
20,271 17,466 2,805 16.1 % Total
noninterest expense $ 45,285 $ 38,076 $ 7,209 18.9 %
Average full time equivalent employees 1,134 985 149 15.1 %
Salary and benefit expenses increased $4,404,000 (21.4%) to
$25,014,000 during the three months ended December 31, 2018
compared to $20,610,000 during the three months ended December 31,
2017. Base salaries, net of deferred loan origination costs
increased $3,038,000 (21.8%) to $16,980,000. The increase in base
salaries was due primarily to a 15.1% increase in average full time
equivalent employees to 1,134 from 985 in the year-ago quarter.
Commissions and incentive compensation increased $1,066,000 (47.4%)
to $3,313,000 during the three months ended December 31, 2018
compared to the year-ago quarter due primarily to organic loan and
deposit growth. Benefits & other compensation expense increased
$300,000 (6.8%) to $4,721,000 during the three months ended
December 31, 2018 due primarily to increases in the average full
time equivalent employees, as mentioned above.
Other noninterest expense increased $2,805,000 (16.1%) to
$20,271,000 during the three months ended December 31, 2018
compared to the three months ended December 31, 2017. The increase
in other noninterest expense was due primarily to increased costs
related to the merger of FNBB. Highlighting those increases were
intangible amortization, occupancy, and advertising, which
increased by $1,092,000, $867,000 and $436,000, respectively, as
compared to the prior year quarter. The increases in noninterest
expenses were partially offset by decreased professional fees and
merger & acquisition expenses of $317,000 and $530,000,
respectively.
Twelve months ended December 31, (dollars in
thousands) 2018 2017 $ Change % Change Base salaries,
overtime and temporary help, net of deferred loan origination costs
$ 62,422 $ 54,589 $ 7,833 14.3 % Commissions and incentives 11,147
9,227 1,920 20.8 % Employee benefits 20,373 19,114
1,259 6.6 % Total salaries and benefits expense
93,942 82,930 11,012 13.3 %
Occupancy 12,139 10,894 1,245 11.4 % Data processing and software
11,021 10,448 573 5.5 % Equipment 6,651 7,141 (490 ) (6.9 %) Merger
and acquisition expense 5,227 530 4,697 886.2 % ATM and POS network
charges 5,271 4,752 519 10.9 % Advertising 4,578 4,101 477 11.6 %
Professional fees 3,546 3,745 (199 ) (5.3 %) Intangible
amortization 3,499 1,389 2,110 151.9 % Telecommunications 3,023
2,713 310 11.4 % Regulatory assessments and insurance 1,906 1,676
230 13.7 % Courier service 1,287 1,035 252 24.3 % Operational
losses 1,260 1,394 (134 ) (9.6 %) Postage 1,154 1,296 (142 ) (11.0
%) Other miscellaneous expense 14,191 12,980
1,211 9.3 % Total other noninterest expense 74,753
64,094 10,659 16.6 % Total noninterest expense
$ 168,695 $ 147,024 $ 21,671 14.7 % Average full time
equivalent employees 1,071 1,000 71 7.1 %
Salary and benefit expenses increased $11,012,000 (13.3%) to
$93,942,000 during the twelve months ended December 31, 2018
compared to $82,930,000 during the prior twelve months ended
December 31, 2017. Base salaries, net of deferred loan origination
costs increased $7,833,000 (14.3%) to $62,422,000. The increase in
base salaries was due primarily to a 7.1% increase in average full
time equivalent employees to 1,071 from 1,000 in the prior
year-to-date period. Also affecting the increase in base salaries
were annual merit increases and a higher wage base from the
acquired employees of FNBB due to the Bay Area region’s higher cost
of living. Commissions and incentive compensation increased
$1,920,000 (20.8%) to $11,147,000 during 2018 compared to 2017
primarily due to organic growth of loans and deposits. Benefits
& other compensation expense increased $1,259,000 (6.6%) to
$20,373,000 during the year ended December 31, 2018 due primarily
to increases in the average full time equivalent employees, as
mentioned above.
Other noninterest expense increased $10,659,000 (16.6%) to
$74,753,000 during the year ended December 31, 2018 compared to the
year ended December 31, 2017. The increase in other noninterest
expense was due primarily to increased costs related to the merger
of FNBB. Highlighting some of those increases were merger expenses,
increases in intangible amortization, occupancy, data processing,
and advertising, which increased by $4,697,000, $2,110,000,
$1,245,000, $573,000, and $477,000, respectively, as compared to
the prior year. The increases in noninterest expenses were
partially offset by decreased equipment expenses and professional
fees of $490,000 and $199,000, respectively.
Balance Sheet
In addition to the balance sheet changes which resulted from the
acquisition of FNB Bancorp, total assets grew by $127,926,000
between December 2017 and December 2018. This growth was led by
$172,166,000 related to organic loan growth which was funded by
$365,400,000 in organic deposit growth. Total equity increased to
$827,373,000 at December 31, 2018 as compared to $802,115,000 at
the close of the trailing quarter and inclusive of $17,879,000 and
$26,959,000 in accumulated other comprehensive loss at the same
periods. As a result, the Company’s book value per share increased
to $27.20 at December 31, 2018 from $26.37 per share at September
30, 2018. The Company’s tangible book value, calculated by
subtracting goodwill and other intangible assets from total
shareholders’ equity and dividing that sum by total shares
outstanding, increased to $18.97 per share at December 31, 2018
from $18.10 per share at September 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 - CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data) Three
months ended December 31, September 30, June 30,
March 31, December 31, 2018 2018 2018 2018 2017
Revenue and Expense Data Interest income $ 68,065 $ 64,554 $
48,478 $ 47,121 $ 46,961 Interest expense 4,063 4,065
2,609 2,135 1,868 Net interest income
64,002 60,489 45,869 44,986 45,093 Provision for (benefit from)
loan losses 806 2,651 (638 ) (236 ) 1,677 Noninterest income:
Service charges and fees 10,132 9,743 9,228 9,356 9,562 Gain on
sale of investment securities - 207 - - - Other income 2,502
2,236 2,946 2,934 2,916 Total
noninterest income 12,634 12,186 12,174 12,290 12,478 Noninterest
expense: Salaries and benefits 25,014 25,823 21,453 21,652 20,610
Occupancy and equipment 5,278 5,056 4,357 4,232 4,495 Data
processing and network 4,455 3,981 4,116 3,740 4,515 Other
noninterest expense 10,538 12,518 7,944
8,538 8,456 Total noninterest expense 45,285
47,378 37,870 38,162 38,076
Total income before taxes 30,545 22,646 20,811
19,350 17,818 Net income $ 23,211 $ 16,170 $
15,029 $ 13,910 $ 2,989
Share Data Basic earnings per
share $ 0.76 $ 0.54 $ 0.65 $ 0.61 $ 0.13 Diluted earnings per share
$ 0.76 $ 0.53 $ 0.65 $ 0.60 $ 0.13 Dividends per share $ 0.19 $
0.17 $ 0.17 $ 0.17 $ 0.17 Book value per common share $ 27.20 $
26.37 $ 22.27 $ 22.01 $ 22.03
Tangible book value per common share
(1)
$ 18.97 $ 18.10 $ 19.28 $ 19.00 $ 19.01 Shares outstanding
30,417,223 30,417,818 23,004,153 22,956,323 22,955,963 Weighted
average shares 30,422,687 30,011,307 22,983,439 22,956,239
22,944,523 Weighted average diluted shares 30,671,723 30,291,225
23,276,471 23,283,127 23,289,545
Credit Quality Past due
greater than 30 days $ 17,368 $ 13,218 $ 11,626 $ 20,416 $ 11,609
Nonperforming originated loans 19,416 17,087 17,077 16,080 15,463
Total nonperforming loans 27,494 27,148 25,420 24,381 24,394 Total
nonperforming assets 29,774 28,980 26,794 25,945 27,620 Loans
charged-off 424 1,142 318 480 627 Loans recovered $ 596 $ 570 $ 507
$ 366 $ 526
Selected Financial Ratios Return on average
total assets 1.47 % 1.05 % 1.25 % 1.17 % 0.26 % Return on average
equity 11.40 % 9.11 % 11.78 % 11.00 % 2.33 % Average yield on loans
5.53 % 5.27 % 5.06 % 5.03 % 5.18 % Average yield on
interest-earning assets 4.74 % 4.61 % 4.38 % 4.33 % 4.44 % Average
rate on interest-bearing deposits 0.30 % 0.25 % 0.18 % 0.16 % 0.16
% Average cost of total deposits 0.20 % 0.16 % 0.12 % 0.11 % 0.11 %
Average rate on borrowings and subordiated debt 3.27 % 2.63 % 2.80
% 2.52 % 2.72 % Average rate on interest-bearing liabilities 0.44 %
0.44 % 0.36 % 0.30 % 0.27 % Net interest margin (fully
tax-equivalent) 4.46 % 4.32 % 4.14 % 4.14 % 4.26 % Loans to
deposits 74.95 % 79.08 % 77.17 % 75.16 % 75.21 % Efficiency ratio
59.09 % 65.19 % 65.24 % 66.63 % 66.14 %
Supplemental Loan
Interest Income Data Discount accretion on acquired loans $
1,982 $ 2,098 $ 559 $ 632 $ 1,489 All other loan interest income
53,680 51,004 38,745 37,417 36,705 Total loan interest income $
55,662 $ 53,102 $ 39,304 $ 38,049 $ 38,194 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 - CONDENSED CONSOLIDATED FINANCIAL
DATA (Unaudited. Dollars in thousands) Three months
ended December 31, September 30, June 30,
March 31, December 31,
Balance Sheet Data 2018 2018
2018 2018 2017 Cash and due from banks $ 227,533 $ 226,543 $
184,062 $ 182,979 $ 205,428 Securities, available for sale
1,117,910 1,058,806 757,075 738,785 730,883 Securities, held to
maturity 444,936 459,897 477,745 496,035 514,844 Restricted equity
securities 17,250 17,250 16,956 16,956 16,956 Loans held for sale
3,687 3,824 3,601 2,149 4,616 Loans: Commercial loans 276,548
289,645 237,619 216,015 220,500 Consumer loans 418,982 421,287
350,925 348,789 365,113 Real estate mortgage loans 3,143,100
3,132,202 2,401,040 2,359,379 2,291,995 Real estate construction
loans 183,384 184,302 156,729 145,550 137,557 Total loans, gross
4,022,014 4,027,436 3,146,313 3,069,733 3,015,165 Allowance for
loan losses (32,582) (31,603) (29,524) (29,973) (30,323)
Total loans, net
3,989,432
3,995,833
3,116,789
3,039,760
2,984,842 Foreclosed assets 2,280 1,832 1,374 1,564 3,226 Premises
and equipment 89,347 89,290 59,014 58,558 57,742 Cash value of life
insurance 117,318 116,596 99,047 98,391 97,783 Goodwill 220,972
220,972 64,311 64,311 64,311 Other intangible assets 29,280 30,711
4,496 4,835 5,174 Accrued interest receivable 19,412 19,592 14,253
12,407 13,772 Other assets 73,084 77,719 64,430 63,227 61,738 Total
assets $ 6,352,441 $ 6,318,865 $ 4,863,153 $ 4,779,957 $ 4,761,315
Deposits: Noninterest-bearing demand deposits $ 1,760,580 $
1,710,505 $ 1,369,834 $ 1,359,996 $ 1,368,218 Interest-bearing
demand deposits 1,252,366 1,152,705 1,006,331 1,022,299 971,459
Savings deposits 1,921,324 1,801,087 1,385,268 1,395,481 1,364,518
Time certificates 432,196 428,820 315,789 306,628 304,936 Total
deposits 5,366,466 5,093,117 4,077,222 4,084,404 4,009,131 Accrued
interest payable 1,997 1,729 1,175 958 930 Other liabilities 83,724
82,077 62,623 67,393 66,422 Other borrowings 15,839 282,831 152,839
65,041 122,166 Junior subordinated debt 57,042 56,996 56,950 56,905
56,858 Total liabilities $ 5,525,068 $ 5,516,750 $ 4,350,809 $
4,274,701 $ 4,255,507 Common stock 541,762 541,519 256,590 256,226
255,836 Retained earnings 303,490 287,555 276,877 266,235 255,200
Accumulated other comprehensive loss (17,879) (26,959) (21,123)
(17,205) (5,228) Total shareholders' equity $ 827,373 $ 802,115 $
512,344 $ 505,256 $ 505,808
Average Balance Data Average
loans $ 4,022,651 $ 4,028,462 $ 3,104,126 $ 3,028,178 $ 2,948,277
Average interest-earning assets $ 5,766,062 $ 5,638,162 $ 4,457,660
$ 4,380,596 $ 4,289,656 Average total assets $ 6,325,130 $
6,168,344 $ 4,814,523 $ 4,741,227 $ 4,658,677 Average deposits $
5,253,123 $ 5,068,841 $ 4,042,110 $ 4,004,332 $ 3,961,422 Average
borrowings and subordinated debt $ 179,426 $ 303,610 $ 196,235 $
164,663 $ 118,606 Average total equity $ 814,445 $ 709,762 $
510,433 $ 506,013 $ 513,007
Capital Ratio Data Total risk
based capital ratio 14.4% 13.9% 13.9% 13.9% 14.1% Tier 1 capital
ratio 13.7% 13.2% 13.1% 13.0% 13.2% Tier 1 common equity ratio
12.5% 12.0% 11.7% 11.6% 11.7% Tier 1 leverage ratio 10.7% 10.7%
10.9% 10.8% 10.8% Tangible capital ratio 9.5% 9.1% 9.3% 9.3% 9.3%
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version on businesswire.com: https://www.businesswire.com/news/home/20190129005919/en/
Richard P. SmithPresident & CEO (530) 898-0300
TriCo Bancshares (NASDAQ:TCBK)
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