TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company
of Tri Counties Bank, today announced net income of $23,061,000 for
the quarter ended June 30, 2019, compared to $22,726,000 during the
trailing quarter ended March 31, 2019 and $15,029,000 during the
quarter ended June 30, 2018. Diluted earnings per share were $0.75
for the second quarter of 2019, compared to $0.74 for the first
quarter of 2019 and $0.65 for the second quarter of 2018.
Financial Highlights
Performance highlights and other developments for the Company as
of or for the three and six months ended June 30, 2019 included the
following:
- For the three and six months ended June 30, 2019, the Company’s
return on average assets was 1.44% and 1.43%, respectively, and the
return on average equity was 10.65% and 10.71%, respectively.
- As of June 30, 2019, the Company reported total loans, total
assets and total deposits of $4.10 billion, $6.40 billion and $5.34
billion, respectively.
- The loan to deposit ratio was 76.8% as of June 30, 2019 as
compared to 74.3% at March 31, 2019 and 77.2% at June 30,
2018.
- Net interest margin grew 34 basis points to 4.48% on a tax
equivalent basis as compared to 4.14% in the quarter ended June 30,
2018 and increased 2 basis points from the trailing quarter.
- Non-interest bearing deposits as a percentage of total deposits
were 33.3% at June 30, 2019, as compared to 32.4% at March 31, 2019
and 33.6% at June 30, 2018.
- The average rate of interest paid on deposits, including
noninterest-bearing deposits, remained low but increased slightly
to 0.22% for the second quarter of 2019 as compared with 0.20% for
the trailing quarter, and an increase of 10 basis points from the
average rate paid during the same quarter of the prior year.
- Non-performing assets to total assets were 0.35% at June 30,
2019 as compared to 0.34% as of March 31, 2019 and 0.47% at
December 31, 2018.
- The balance of nonperforming loans increased by $1.0 million,
however recoveries on previously charged-off loans were $0.3
million and loans past due thirty days or more decreased by $2.18
million during the quarter.
- The efficiency ratio remained flat at 60.15% as compared to the
trailing quarter, which had an efficiency ratio of 60.10%.
President and CEO, Rick Smith commented, “We are pleased with
our second quarter operating results which were benefited by
organic loan growth of nearly 7.0% on an annualized basis as well
as our ability to hold operating costs not associated with
incentive compensation flat. The strength and depth of our lending
team continues to grow and we look forward to further expansion of
both new and existing markets. We previously announced that Richard
O’Sullivan, our EVP Chief Commercial Lending Officer, will be
retiring after 35 years of dedicated service this month. I would
like to thank Richard for all that he has done for the Bank, our
shareholders and our customers. As part of our succession
management efforts we now look toward Dan Bailey, our EVP Chief
Banking Officer, to continue to drive our positive momentum and
performance levels into the future.”
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
June 30,
March 31,
(dollars and shares in thousands)
2019
2019
$ Change
% Change
Net interest income
$
64,315
$
63,870
$
445
0.7%
(Provision for) reversal of loan losses
(537)
1,600
(2,137)
nm Noninterest income
13,578
11,864
1,714
14.4%
Noninterest expense
(46,852)
(45,513)
(1,339)
2.9%
Provision for income taxes
(7,443)
(9,095)
1,652
(18.2%)
Net income
$
23,061
$
22,726
$
335
1.5%
Diluted earnings per share
$
0.75
$
0.74
$
0.01
1.4%
Dividends per share
$
0.19
$
0.19
-
0.0%
Average common shares
30,458
30,424
34
0.1%
Average diluted common shares
30,643
30,658
(15)
(0.0%)
Return on average total assets
1.44%
1.41%
Return on average equity
10.65%
10.78%
Efficiency ratio
60.15%
60.10%
Three months ended June 30,
(dollars and shares in thousands)
2019
2018
$ Change
% Change
Net interest income
$
64,315
$
45,869
$
18,446
40.2%
(Provision for) reversal of loan losses
(537)
638
(1,175)
nm Noninterest income
13,578
12,174
1,404
11.5%
Noninterest expense
(46,852)
(37,870)
(8,982)
23.7%
Provision for income taxes
(7,443)
(5,782)
(1,661)
28.7%
Net income
$
23,061
$
15,029
$
8,032
53.4%
Diluted earnings per share
$
0.75
$
0.65
$
0.10
15.4%
Dividends per share
$
0.19
$
0.17
$
0.02
11.8%
Average common shares
30,458
22,983
7,475
32.5%
Average diluted common shares
30,643
23,276
7,367
31.7%
Return on average total assets
1.44%
1.25%
Return on average equity
10.65%
11.78%
Efficiency ratio
60.15%
65.24%
Six months ended June 30, (dollars and shares in thousands)
2019
2018
$ Change % Change Net interest income
$
128,185
$
90,855
$
37,330
41.1%
Benefit from reversal of provisionfor loan losses
1,063
874
189
nm
Noninterest income
25,442
24,464
978
4.0%
Noninterest expense
(92,365)
(76,032)
(16,333)
21.5%
Provision for income taxes
(16,538)
(11,222)
(5,316)
47.4%
Net income
$
45,787
$
28,939
$
16,848
58.2%
Diluted earnings per share
$
1.49
$
1.24
$
0.25
20.2%
Dividends per share
$
0.19
$
0.17
$
0.02
11.8%
Average common shares
30,441
22,970
7,471
32.5%
Average diluted common shares
30,650
23,280
7,370
31.7%
Return on average total assets
1.43%
1.21%
Return on average equity
10.71%
11.39%
Efficiency ratio
60.12%
65.93%
Balance Sheet
Loan growth of $69,356,000 or 6.9% on an annualized basis during
the second quarter of 2019 provided benefit to the yield on earning
assets and net interest margin as excess liquidity maintained at
the Federal Reserve was utilized to fund loans and facilitate
seasonal fluctuations in interest-bearing deposit balances.
Trailing Quarter Balance Sheet Change
Annualized
Ending balances
As of June 30,
As of March 31,
Organic
Organic
($'s in thousands)
2019
2019
$ Change
% Change
Total assets
$
6,395,172
$
6,471,852
$
(76,680
)
(4.7
%)
Total loans
4,103,687
4,034,331
69,356
6.9
%
Total investments
1,566,720
1,564,692
2,028
0.5
%
Total deposits
$
5,342,173
$
5,430,262
$
(88,089
)
(6.5
%)
The growth in average loans of $20,180,000 or 2.0% on an
annualized basis during the second quarter was less than the end of
period growth as nearly all of the quarterly growth occurred during
the last month of the quarter.
Average Trailing Quarter
Balance Sheet Change
Annualized
Qtrly avg balances
As of June 30,
As of March 31,
Organic
Organic
($'s in thousands)
2019
2019
$ Change
% Change
Total assets
$
6,385,889
$
6,426,227
$
(40,338
)
(2.5
%)
Total loans
4,044,044
4,023,864
20,180
2.0
%
Total investments
1,573,112
1,567,584
5,528
1.4
%
Total deposits
$
5,370,879
$
5,387,079
$
(16,200
)
(1.2
%)
In addition to the balance sheet changes which resulted from the
acquisition of FNB Bancorp in July 2018, total assets have grown by
$68,819,000 or 1.4% between June 2018 and June 2019. This growth
was led by $122,691,000 or 3.9% in organic loan growth which was
funded by $273,016,000 or 6.7% in organic deposit growth.
Year Over Year Balance Sheet Change Ending balances
As of June 30,
Acquired
Organic
Organic
($'s in thousands)
2019
2018
$ Change
Balances
$ Change
% Change
Total assets
$
6,395,172
$
4,863,153
$
1,532,019
$
1,463,200
$
68,819
1.4
%
Total loans
4,103,687
3,146,313
957,374
834,683
122,691
3.9
%
Total investments
1,566,720
1,251,776
314,944
335,667
(20,723
)
(1.7
%)
Total deposits
$
5,342,173
$
4,077,222
$
1,264,951
$
991,935
$
273,016
6.7
%
Total equity increased to $875,886,000 at June 30, 2019 as
compared to $853,278,000 at March 31, 2019 and inclusive of
$2,198,000 and $8,927,000 in accumulated other comprehensive loss
at the same periods, respectively. As a result, the Company’s book
value per share increased to $28.71 at June 30, 2019 from $28.04
per share at March 31, 2019. The Company’s tangible book value per
share, calculated by subtracting goodwill and other intangible
assets from total shareholders’ equity and dividing that sum by
total shares outstanding, increased to $20.60 per share at June 30,
2019 from $19.86 per share March 31, 2019. Excluding accumulated
other comprehensive losses from total equity for both quarters,
tangible book value per share increased to $20.68 at June 30, 2019
from $20.16 at March 31, 2019.
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
June 30,
March 31,
(dollars in thousands)
2019
2019
$ Change
% Change
Interest income
$
68,180
$
67,457
$
723
1.1
%
Interest expense
(3,865
)
(3,587
)
(278
)
7.8
%
Fully tax-equivalent adjustment (FTE) (1)
298
322
(24
)
(7.5
%)
Net interest income (FTE)
$
64,613
$
64,192
$
421
0.7
%
Net interest margin (FTE)
4.48
%
4.46
%
Acquired loans discount accretion, net: Amount (included in
interest income)
$
1,904
$
1,655
$
249
15.0
%
Effect on average loan yield
0.19
%
0.17
%
0.02
%
Effect on net interest margin (FTE)
0.13
%
0.12
%
0.01
%
Three months ended June 30,
(dollars in thousands)
2019
2018
$ Change
% Change
Interest income
$
68,180
$
48,478
$
19,702
40.6
%
Interest expense
(3,865
)
(2,609
)
(1,256
)
48.1
%
Fully tax-equivalent adjustment (FTE) (1)
298
313
(15
)
(4.8
%)
Net interest income (FTE)
$
64,613
$
46,182
$
18,431
39.9
%
Net interest margin (FTE)
4.48
%
4.14
%
Acquired loans discount accretion, net: Amount (included in
interest income)
$
1,904
$
559
$
1,345
240.6
%
Effect on average loan yield
0.19
%
0.07
%
0.12
%
Effect on net interest margin (FTE)
0.13
%
0.05
%
0.08
%
Six months ended June 30,
(dollars in thousands)
2019
2018
$ Change
% Change
Interest income
$
135,637
$
95,599
$
40,038
41.9
%
Interest expense
(7,452
)
(4,744
)
(2,708
)
57.1
%
Fully tax-equivalent adjustment (FTE) (1)
619
625
(6
)
(1.0
%)
Net interest income (FTE)
$
128,804
$
91,480
$
37,324
40.8
%
Net interest margin (FTE)
4.47
%
4.14
%
Acquired loans discount accretion, net: Amount (included in
interest income)
$
3,559
$
1,191
$
2,368
198.8
%
Effect on average loan yield
0.18
%
0.08
%
0.10
%
Effect on net interest margin (FTE)
0.12
%
0.05
%
0.07
%
(1) Information is presented on a fully tax-equivalent (FTE) basis.
The Company believes the use of this non-generally accepted
accounting principles (non-GAAP) measure provides additional
clarity in assessing its results, and the presentation of these
measures on a FTE basis is a common practice within the banking
industry.
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 months ended June 30, 2019, March 31, 2019 and
December 31, 2018, purchased loan discount accretion was
$1,904,000, $1,655,000, and $1,982,000, respectively. During the
three months ended March 31, 2019, loans purchased at net premiums
several years ago were repaid prior to expected maturity resulting
in approximately $259,000 of accelerated amortization.
The following table shows the components of net interest income
and net interest margin on a fully tax-equivalent (FTE) basis for
the quarterly periods indicated:
ANALYSIS OF CHANGE IN NET
INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in
thousands)
Three
Months Ended
Three
Months Ended
Three
Months Ended
June 30,
2019
March 31,
2019
June 30,
2018
Average
Income/
Yield/
Average
Income/
Yield/
Average
Income/
Yield/
Balance
Expense
Rate
Balance
Expense
Rate
Balance
Expense
Rate
Assets Loans
$
4,044,044
$
55,491
5.49
%
$
4,023,864
$
54,398
5.41
%
$
3,104,126
$
39,304
5.06
%
Investments - taxable
1,432,550
10,762
3.00
%
1,425,352
10,915
3.06
%
1,122,534
7,736
2.76
%
Investments - nontaxable (1)
140,562
1,358
3.86
%
142,232
1,395
3.92
%
136,126
1,355
3.98
%
Total investments
1,573,112
12,120
3.08
%
1,567,584
12,310
3.14
%
1,258,660
9,091
2.89
%
Cash at Federal Reserve and other banks
147,810
866
2.34
%
168,518
1,071
2.54
%
94,874
396
1.67
%
Total earning assets
5,764,966
68,477
4.75
%
5,759,966
67,779
4.71
%
4,457,660
48,791
4.38
%
Other assets, net
620,923
666,261
356,863
Total assets
$
6,385,889
$
6,426,227
$
4,814,523
Liabilities and shareholders' equity Interest-bearing demand
deposits
$
1,276,388
289
0.09
%
$
1,273,376
287
0.09
%
$
995,528
$
214
0.09
%
Savings deposits
1,888,234
1,306
0.28
%
1,927,120
1,133
0.24
%
1,393,121
427
0.12
%
Time deposits
441,116
1,403
1.27
%
441,778
1,299
1.18
%
313,556
593
0.76
%
Total interest-bearing deposits
3,605,738
2,998
0.33
%
3,642,274
2,719
0.30
%
2,702,205
1,234
0.18
%
Other borrowings
17,963
37
0.82
%
15,509
13
0.34
%
139,307
586
1.68
%
Junior subordinated debt
57,222
829
5.79
%
56,950
855
6.01
%
56,928
789
5.54
%
Total interest-bearing liabilities
3,680,923
3,864
0.42
%
3,714,733
3,587
0.39
%
2,898,440
2,609
0.36
%
Noninterest-bearing deposits
1,765,141
1,744,805
1,339,905
Other liabilities
73,541
123,599
65,745
Shareholders' equity
866,284
843,090
510,433
Total liabilities and shareholders' equity
$
6,385,889
$
6,426,227
$
4,814,523
Net interest rate spread (1) (2)
4.33
%
4.32
%
4.02
%
Net interest income and net interest margin (1) (3)
$
64,613
4.48
%
$
64,192
4.46
%
$
46,182
4.14
%
(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 June 30,
2019 increased $421,000 or 0.7% to $64,613,000 compared to
$64,192,000 during the three months ended March 31, 2019. The
increase in net interest income (FTE) was due primarily to a shift
in average balances from excess liquidity maintained with the
Federal Reserve yielding 2.34% during the second quarter to loans
which yielded 5.49% during the same period. The yield on interest
earning assets was 4.75% for the quarter ended June 30, 2019, which
represents an increase of 4 basis points over the trailing quarter
and an increase of 37 basis points over the same quarter in the
prior year.
The index utilized in a significant portion of the Company’s
variable rate loans, Wall Street Journal Prime, has increased by 50
basis points to 5.50% at June 30, 2019 as compared to 5.00% at June
30, 2018. The most recent increase of the index was during December
2018, with an increase of 25 basis points. As such, there were
minimal changes to loan yields as compared to the trailing quarter.
However, as compared to the same quarter in the prior year, average
loan yields increased 43 basis points from 5.06% during the three
months ended June 30, 2018 to 5.49% during the three months ended
June 30, 2019. Of the 43 basis point increase in yields on loans,
31 basis points was attributable to increases in market rates while
12 basis points was from increased accretion of purchased
loans.
Despite decreases in the average balances of savings deposits,
these benefits to interest income were partially offset by a 3
basis point increase in the cost of interest bearing liabilities
which were 0.42% for the second quarter of 2019. The impact of
changes in rates and volumes of interest bearing liabilities
resulted in an increase in interest expense of $278,000 during the
current quarter. Comparing the quarter ended June 30, 2019 to the
trailing quarter, the cost of interest bearing deposits increased
by 3 basis points to 0.33% and increased 15 basis points from the
same quarter in the prior year due in part to differences in market
rates associated with deposits acquired from FNB Bancorp and also
due to ongoing competitive pressures associated with deposit
accounts in many of the markets we serve.
The following table shows the components of net interest income
and net interest margin on a fully tax-equivalent (FTE) basis for
the year-to-date periods indicated:
ANALYSIS OF CHANGE IN NET
INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in
thousands)
Six Months
Ended
Six Months
Ended
June 30,
2019
June 30,
2018
Average
Income/
Yield/
Average
Income/
Yield/
Balance
Expense
Rate
Balance
Expense
Rate
Assets Loans
$
4,033,954
$
109,889
5.45
%
$
3,066,152
$
77,353
5.05
%
Investments - taxable
1,428,951
21,677
3.03
%
1,123,964
15,394
2.74
%
Investments - nontaxable (1)
141,397
2,753
3.89
%
136,143
2,708
3.98
%
Total investments
1,570,348
24,430
3.11
%
1,260,107
18,102
2.87
%
Cash at Federal Reserve and other banks
158,164
1,937
2.45
%
92,869
769
1.66
%
Total earning assets
5,762,466
136,256
4.73
%
4,419,128
96,224
4.35
%
Other assets, net
643,592
358,747
Total assets
$
6,406,058
$
4,777,875
Liabilities and shareholders' equity Interest-bearing demand
deposits
$
1,274,882
576
0.09
%
$
994,867
425
0.09
%
Savings deposits
1,907,677
2,439
0.26
%
1,382,249
838
0.12
%
Time deposits
441,447
2,703
1.22
%
310,035
1,067
0.69
%
Total interest-bearing deposits
3,624,006
5,718
0.32
%
2,687,151
2,330
0.17
%
Other borrowings
16,736
50
0.60
%
123,544
928
1.50
%
Junior subordinated debt
57,086
1,684
5.90
%
56,905
1,486
5.22
%
Total interest-bearing liabilities
3,697,828
7,452
0.40
%
2,867,600
4,744
0.33
%
Noninterest-bearing deposits
1,754,973
1,336,070
Other liabilities
98,570
65,982
Shareholders' equity
854,687
508,223
Total liabilities and shareholders' equity
$
6,406,058
$
4,777,875
Net interest rate spread (1) (2)
4.33
%
4.02
%
Net interest income and net interest margin (1) (3)
$
128,804
4.47
%
$
91,480
4.14
%
(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 six months ended June 30,
2019 increased $37,324,000 or 40.8% to $128,804,000 compared to
$91,480,000 during the six months ended June 30, 2018. The
increases were nearly all attributable to changes in volume of
earning assets which were acquired from FNB Bancorp in July 2018.
The yield on interest earning assets was 4.73% and 4.35% for the
six months ended June 30, 2019 and 2018, respectively. This 38
basis point increase in earning asset yields were primarily
attributable to a 40 basis point increase in loan yields and a 24
basis point increase in yields on investments. Of the 40 basis
point increase in yields on loans, 30 basis points was attributable
to increases in market rates while 10 basis points was from
increased accretion of purchased loans.
The increases in yields on earning assets were partially offset
by increased funding costs as the costs of total interest bearing
liabilities increased 7 basis points to 0.40% for the first half of
2019 as compared to 0.33% for the first half of 2018. During the
same period, costs associated with interest bearing deposits
increased by 15 basis points to 0.32% as compared to 0.17% in the
prior year. The decline in interest expense for the first half of
2019 as compared to the prior period was due entirely to the
decreases in volume associated with overnight borrowings.
Asset Quality and Loan Loss
Provisioning
The Company recorded provision for loan losses of $537,000
during the three months ended June 30, 2019 as compared to benefits
from the reversal of provisions of $1,600,000 for the trailing
quarter as well as $638,000 in the same quarter of the prior year.
The need for a provision for loan losses during the quarter ended
June 30, 2019 was driven by loan growth of $69,356,000 and a slight
increase in total nonperforming loans of $1,020,000 but partially
offset by net recoveries of $267,000 and a decline in past due
loans of $2,181,000. For the six month ended June 30, 2019 the
Company recorded a benefit from the reversal of loan losses of
$1,063,000. While year to date loan growth in 2019 totaled
$81,673,000, nonperforming loans decreased by $6,909,000, past due
loans decreased by $2,788,000 and net recoveries were $1,349,000
during the same period.
Provision for Income
Taxes
The Company’s effective tax rate was 24.4% for the quarter ended
June 30, 2019 as compared to 27.8% for the same quarter in the
prior year. During the second quarter of 2019 the Company received
a $696,000 non-taxable death benefit from life insurance proceeds.
In addition, the ratio of non-deductible expenses to pre-tax income
declined in the year over year comparable second quarter
periods.
Non-interest Income
The following table presents the key components of noninterest
income for the periods indicated:
Three months ended
June 30,
March 31,
(dollars in thousands)
2019
2019
$ Change
% Change
ATM and interchange fees
$
5,404
$
4,581
$
823
18.0
%
Service charges on deposit accounts
4,182
3,880
302
7.8
%
Other service fees
619
771
(152
)
(19.7
%)
Mortgage banking service fees
475
483
(8
)
(1.7
%)
Change in value of mortgage servicing rights
(552
)
(645
)
93
(14.4
%)
Total service charges and fees
10,128
9,070
1,058
11.7
%
Increase in cash value of life insurance
746
775
(29
)
(3.7
%)
Asset management and commission income
739
642
97
15.1
%
Gain on sale of loans
575
412
163
39.6
%
Lease brokerage income
239
220
19
8.6
%
Sale of customer checks
135
140
(5
)
(3.6
%)
Gain on sale of foreclosed assets
197
99
98
99.0
%
Gain (loss) on marketable equity securities
42
36
6
16.7
%
Loss on disposal of fixed assets
(42
)
(38
)
(4
)
10.5
%
Other
819
508
311
61.2
%
Total other noninterest income
3,450
2,794
656
23.5
%
Total noninterest income
$
13,578
$
11,864
$
1,714
14.4
%
Noninterest income increased $1,714,000 (14.4%) to $13,578,000
during the three months ended June 30, 2019 compared to the
trailing quarter March 31, 2019. The increase in noninterest income
was due primarily to a $823,000 (18.0%) increase in ATM and
interchange fees which was the result of increased usage. Other
noninterest income includes $696,000 and $32,000 in death benefit
insurance proceeds during the second and first quarters of 2019,
respectively. The declining interest rate environment provided a
$163,000 benefit associated with loan sale gains in the second
quarter of 2019 as compared to the trailing quarter. However, the
fair value of the mortgage servicing asset continued to decrease
during the second quarter due to changes in the assumptions
utilized in determining the fair value. Specifically, further
increases in prepayment speeds resulting from decreases in the 15
and 30 year mortgage rates continued to be the largest contributors
to the decline in fair value of the mortgage servicing asset.
Three months ended June 30,
(dollars in thousands)
2019
2018
$ Change
% Change
ATM and interchange fees
$
5,404
$
4,510
$
894
19.8
%
Service charges on deposit accounts
4,182
3,613
569
15.7
%
Other service fees
619
630
(11
)
(1.7
%)
Mortgage banking service fees
475
511
(36
)
(7.0
%)
Change in value of mortgage servicing rights
(552
)
(36
)
(516
)
1433.3
%
Total service charges and fees
10,128
9,228
900
9.8
%
Increase in cash value of life insurance
746
656
90
13.7
%
Asset management and commission income
739
810
(71
)
(8.8
%)
Gain on sale of loans
575
666
(91
)
(13.7
%)
Lease brokerage income
239
200
39
19.5
%
Sale of customer checks
135
138
(3
)
(2.2
%)
Gain on sale of foreclosed assets
197
17
180
1058.8
%
Gain (loss) on marketable equity securities
42
(23
)
65
(282.6
%)
Loss on disposal of fixed assets
(42
)
(41
)
(1
)
2.4
%
Other
819
523
296
56.6
%
Total other noninterest income
3,450
2,946
504
17.1
%
Total noninterest income
$
13,578
$
12,174
$
1,404
11.5
%
With the exception of the following items the differences in
noninterest income for the three months ended June 30, 2019 and
2018 were largely attributable to the acquisition of FNB Bancorp in
July 2018. As noted previously, other noninterest income includes
$696,000 and $32,000 in death benefit insurance proceeds during the
second and first quarters of 2019, respectively.
Six months ended June 30,
(dollars in thousands)
2019
2018
$ Change
% Change
ATM and interchange fees
$
9,985
$
8,745
$
1,240
14.2
%
Service charges on deposit accounts
8,062
7,392
670
9.1
%
Other service fees
1,390
1,344
46
3.4
%
Mortgage banking service fees
958
1,028
(70
)
(6.8
%)
Change in value of mortgage servicing rights
(1,197
)
75
(1,272
)
(1696.0
%)
Total service charges and fees
19,198
18,584
614
3.3
%
Increase in cash value of life insurance
1,521
1,264
257
20.3
%
Asset management and commission income
1,381
1,686
(305
)
(18.1
%)
Gain on sale of loans
987
1,292
(305
)
(23.6
%)
Lease brokerage income
459
328
131
39.9
%
Sale of customer checks
275
239
36
15.1
%
Gain on sale of foreclosed assets
296
388
(92
)
(23.7
%)
Gain (loss) on marketable equity securities
78
(70
)
148
(211.4
%)
Loss on disposal of fixed assets
(80
)
(54
)
(26
)
48.1
%
Other
1,327
807
520
64.4
%
Total other noninterest income
6,244
5,880
364
6.2
%
Total noninterest income
$
25,442
$
24,464
$
978
4.0
%
Noninterest income increased $978,000 (4.0%) to $25,442,000
during the six months ended June 30, 2019 compared to the
comparable six month period in 2018. In addition to the impacts
resulting from the FNB Bancorp acquisition, noninterest income for
the first half of 2019 as compared to the first half of 2018 were
impacted by changes in the fair value of the Company’s mortgage
servicing assets which contributed to a $1,272,000 decline, death
benefits from life insurance policies contributed to a $728,000
increase in other, and changes in the value of equity securities
contributed to a $148,000 increase in noninterest income.
Non-interest Expense
The following table presents the key components of the Company’s
noninterest expense for the periods indicated:
Three months ended
June 30,
March 31,
2019
2019
$ Change
% Change
Base salaries, net of deferred loan origination costs
$
17,211
$
16,757
$
454
2.7
%
Incentive compensation
3,706
2,567
1,139
44.4
%
Benefits and other compensation costs
5,802
5,804
(2
)
(0.0
%)
Total salaries and benefits expense
26,719
25,128
1,591
6.3
%
Occupancy
3,738
3,774
(36
)
(1.0
%)
Data processing and software
3,354
3,349
5
0.1
%
Equipment
1,752
1,867
(115
)
(6.2
%)
Intangible amortization
1,431
1,431
-
0.0
%
Advertising
1,533
1,331
202
15.2
%
ATM and POS network charges
1,270
1,323
(53
)
(4.0
%)
Professional fees
1,057
839
218
26.0
%
Telecommunications
773
797
(24
)
(3.0
%)
Regulatory assessments and insurance
490
511
(21
)
(4.1
%)
Merger and acquisition expense
-
-
-
nm
Postage
315
310
5
1.6
%
Operational losses
226
225
1
0.4
%
Courier service
412
270
142
52.6
%
Other miscellaneous expense
3,782
4,358
(576
)
(13.2
%)
Total other noninterest expense
20,133
20,385
(252
)
(1.2
%)
Total noninterest expense
$
46,852
$
45,513
$
1,339
2.9
%
Average full time equivalent staff
1,138
1,138
-
0.0
%
Noninterest expense for the quarter ended June 30, 2019
increased $1,339,000 or 2.9% to $46,852,000 as compared to
$45,513,000 for the quarter ended March 31, 2019. Increases in
salaries were primarily attributable to annual merit increases, and
to a lesser extent temporary labor also contributed to the $454,000
or 2.7% increase over the trailing quarter. The increase in
incentive compensation cost contributed a $1,139,000 increase in
noninterest expense as compared to the trailing quarter and relates
directly to loan originations and net loan growth realized the
latter half of the second quarter. While other miscellaneous
expenses declined by $576,000 in the second quarter of 2019 as
compared to the trailing quarter, there were no singularly
significant items other than donations expense which decreased by
$125,000 during the current period.
Three months ended June 30,
2019
2018
$ Change
% Change
Base salaries, net of deferred loan origination costs
$
17,211
$
14,429
$
2,782
19.3
%
Incentive compensation
3,706
2,159
1,547
71.7
%
Benefits and other compensation costs
5,802
4,865
937
19.3
%
Total salaries and benefits expense
26,719
21,453
5,266
24.5
%
Occupancy
3,738
2,720
1,018
37.4
%
Data processing and software
3,354
2,679
675
25.2
%
Equipment
1,752
1,637
115
7.0
%
Intangible amortization
1,431
339
1,092
322.1
%
Advertising
1,533
1,035
498
48.1
%
ATM and POS network charges
1,270
1,437
(167
)
(11.6
%)
Professional fees
1,057
774
283
36.6
%
Telecommunications
773
681
92
13.5
%
Regulatory assessments and insurance
490
417
73
17.5
%
Merger and acquisition expense
-
601
(601
)
(100.0
%)
Postage
315
301
14
4.7
%
Operational losses
226
252
(26
)
(10.3
%)
Courier service
412
224
188
83.9
%
Other miscellaneous expense
3,782
3,320
462
13.9
%
Total other noninterest expense
20,133
16,417
3,716
22.6
%
Total noninterest expense
$
46,852
$
37,870
$
8,982
23.7
%
Average full time equivalent staff
1,138
1,001
137
13.7
%
Salary and benefit expenses increased $5,266,000 (24.5%) to
$26,719,000 during the three months ended June 30, 2019 compared to
$21,453,000 during the three months ended June 30, 2018. Base
salaries, net of deferred loan origination costs increased
$2,782,000 (19.3%) to $17,211,000. The increase in base salaries
was due primarily to a 13.6% increase in average full time
equivalent employees to 1,138 from 1,002 in the year-ago quarter.
Commissions and incentive compensation increased $1,547,000 (71.7%)
to $3,706,000 during the three months ended June 30, 2019 compared
to the year-ago quarter due primarily to organic loan and deposit
growth. Benefits and other compensation expense increased $937,000
(19.3%) to $5,802,000 during the three months ended June 30, 2019
due primarily to increases in the average full time equivalent
employees, related to the acquisition of FNB Bancorp in July
2018.
Six months ended June 30,
2019
2018
$ Change
% Change
Base salaries, net of deferred loan origination costs
$
33,968
$
28,391
$
5,577
19.6%
Incentive compensation
6,273
4,611
1,662
36.0%
Benefits and other compensation costs
11,606
10,103
1,503
14.9%
Total salaries and benefits expense
51,847
43,105
8,742
20.3%
Occupancy
7,512
5,401
2,111
39.1%
Data processing and software
6,703
5,193
1,510
29.1%
Equipment
3,619
3,188
431
13.5%
Intangible amortization
2,862
678
2,184
322.1%
Advertising
2,864
1,873
991
52.9%
ATM and POS network charges
2,593
2,663
(70)
(2.6%)
Professional fees
1,896
1,546
350
22.6%
Telecommunications
1,570
1,382
188
13.6%
Regulatory assessments and insurance
1,001
847
154
18.2%
Merger and acquisition expense
-
1,077
(1,077)
(100.0%)
Postage
625
659
(34)
(5.2%)
Operational losses
451
546
(95)
(17.4%)
Courier service
682
491
191
38.9%
Other miscellaneous expense
8,140
7,383
757
10.3%
Total other noninterest expense
40,518
32,927
7,591
23.1%
Total noninterest expense
$
92,365
$
76,032
$
16,333
21.5%
Average full time equivalent staff
1,138
1,001
137
13.7%
Noninterest expense increased by $16,333,000 or 21.5% to
$92,365,000 during the six months ended June 30, 2019 as compared
to the $76,032,000 for the six months ended June 30, 2018. Nearly
all of this increase was due to the acquisition of FNB Bancorp, in
addition to the aforementioned annual merit increases and incentive
compensation costs.
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, 2018, 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
June 30,
March 31,
December 31,
September 30,
June 30,
2019
2019
2018
2018
2018
Revenue and Expense Data Interest income
$
68,180
$
67,457
$
68,065
$
64,554
$
48,478
Interest expense
3,865
3,587
4,063
4,065
2,609
Net interest income
64,315
63,870
64,002
60,489
45,869
Provision for (benefit from) loan losses
537
(1,600
)
806
2,651
(638
)
Noninterest income: Service charges and fees
10,128
9,070
10,132
9,743
9,228
Gain on sale of investment securities
-
-
-
207
-
Other income
3,450
2,794
2,502
2,236
2,946
Total noninterest income
13,578
11,864
12,634
12,186
12,174
Noninterest expense: Salaries and benefits
26,719
25,128
25,014
25,823
21,453
Occupancy and equipment
5,490
5,641
5,278
5,056
4,357
Data processing and network
4,624
4,672
4,455
3,981
4,116
Other noninterest expense
10,019
10,072
10,538
12,518
7,944
Total noninterest expense
46,852
45,513
45,285
47,378
37,870
Total income before taxes
30,504
31,821
30,545
22,646
20,811
Provision for income taxes
7,443
9,095
7,334
6,476
5,782
Net income
$
23,061
$
22,726
$
23,211
$
16,170
$
15,029
Share Data Basic earnings per share
$
0.76
$
0.75
$
0.76
$
0.54
$
0.65
Diluted earnings per share
$
0.75
$
0.74
$
0.76
$
0.53
$
0.65
Dividends per share
$
0.19
$
0.19
$
0.19
$
0.17
$
0.17
Book value per common share
$
28.71
$
28.04
$
27.20
$
26.37
$
22.27
Tangible book value per common share (1)
$
20.60
$
19.86
$
18.97
$
18.10
$
19.28
Shares outstanding
30,502,757
30,432,419
30,417,223
30,417,818
23,004,153
Weighted average shares
30,458,427
30,424,184
30,422,687
30,011,307
22,983,439
Weighted average diluted shares
30,642,518
30,657,833
30,671,723
30,291,225
23,276,471
Credit Quality Loans past due 30 days or more
$
14,580
$
16,761
$
17,368
$
13,218
$
11,626
Nonperforming originated loans
14,087
13,737
19,416
17,087
17,077
Total nonperforming loans
20,585
19,565
27,494
27,148
25,420
Total nonperforming assets
22,133
21,880
29,774
28,980
26,794
Loans charged-off
293
726
424
1,142
318
Loans recovered
$
560
$
1,808
$
596
$
570
$
507
Selected Financial Ratios Return on average total assets
1.44
%
1.41
%
1.47
%
1.05
%
1.25
%
Return on average equity
10.65
%
10.78
%
11.43
%
9.11
%
11.78
%
Average yield on loans
5.49
%
5.41
%
5.53
%
5.27
%
5.06
%
Average yield on interest-earning assets
4.75
%
4.71
%
4.82
%
4.61
%
4.38
%
Average rate on interest-bearing deposits
0.33
%
0.30
%
0.30
%
0.25
%
0.18
%
Average cost of total deposits
0.22
%
0.20
%
0.20
%
0.16
%
0.12
%
Average rate on borrowings and subordinated debt
4.61
%
4.79
%
3.27
%
2.63
%
2.80
%
Average rate on interest-bearing liabilities
0.42
%
0.39
%
0.44
%
0.44
%
0.36
%
Net interest margin (fully tax-equivalent)
4.48
%
4.46
%
4.53
%
4.32
%
4.14
%
Loans to deposits
76.82
%
74.29
%
74.95
%
79.08
%
77.17
%
Efficiency ratio
60.15
%
60.10
%
59.09
%
65.19
%
65.24
%
Supplemental Loan Interest Income Data Discount accretion on
acquired loans
$
1,904
$
1,655
$
1,982
$
2,098
$
559
All other loan interest income
53,587
52,743
53,680
51,004
38,745
Total loan interest income
$
55,491
$
54,398
$
55,662
$
53,102
$
39,304
(1) Tangible book value per share is calculated by subtracting
goodwill and other intangible assets from total shareholders'
equity anddividing that result by the shares outstanding at the end
of the period. Management believes that tangible book value per
common shareis meaningful because it is a measure that the Company
and investors commonly use to assess shareholder value.
TRICO BANCSHARES - CONDENSED
CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in
thousands)
Three months ended
June 30,
March 31,
December 31,
September 30,
June 30,
Balance Sheet Data
2019
2019
2018
2018
2018
Cash and due from banks
$
175,582
$
318,708
$
227,533
$
226,543
$
184,062
Securities, available for sale
1,136,946
1,116,426
1,117,910
1,058,806
757,075
Securities, held to maturity
412,524
431,016
444,936
459,897
477,745
Restricted equity securities
17,250
17,250
17,250
17,250
16,956
Loans held for sale
5,875
5,410
3,687
3,824
3,601
Loans: Commercial loans
276,045
269,163
276,548
289,645
237,619
Consumer loans
434,388
418,352
418,982
421,287
350,925
Real estate mortgage loans
3,178,730
3,129,339
3,143,100
3,132,202
2,401,040
Real estate construction loans
214,524
217,477
183,384
184,302
156,729
Total loans, gross
4,103,687
4,034,331
4,022,014
4,027,436
3,146,313
Allowance for loan losses
(32,868
)
(32,064
)
(32,582
)
(31,603
)
(29,524
)
Total loans, net
4,070,819
4,002,267
3,989,432
3,995,833
3,116,789
Premises and equipment
88,534
89,275
89,347
89,290
59,014
Cash value of life insurance
116,606
117,841
117,318
116,596
99,047
Accrued interest receivable
20,990
20,431
19,412
19,592
14,253
Goodwill
220,972
220,972
220,972
220,972
64,311
Other intangible assets
26,418
27,849
29,280
30,711
4,496
Operating leases, right-of-use
30,030
30,942
-
-
-
Other assets
72,626
73,465
75,364
79,551
65,804
Total assets
$
6,395,172
$
6,471,852
$
6,352,441
$
6,318,865
$
4,863,153
Deposits: Noninterest-bearing demand deposits
$
1,780,339
$
1,761,559
$
1,760,580
$
1,710,505
$
1,369,834
Interest-bearing demand deposits
1,263,635
1,297,672
1,252,366
1,152,705
1,006,331
Savings deposits
1,856,749
1,925,168
1,921,324
1,801,087
1,385,268
Time certificates
441,450
445,863
432,196
428,820
315,789
Total deposits
5,342,173
5,430,262
5,366,466
5,093,117
4,077,222
Accrued interest payable
2,665
2,195
1,997
1,729
1,175
Operating lease liability
29,434
30,204
-
-
-
Other liabilities
74,590
86,362
83,724
82,077
62,623
Other borrowings
13,292
12,466
15,839
282,831
152,839
Junior subordinated debt
57,132
57,085
57,042
56,996
56,950
Total liabilities
$
5,519,286
$
5,618,574
$
5,525,068
$
5,516,750
$
4,350,809
Common stock
542,939
542,340
541,762
541,519
256,590
Retained earnings
335,145
319,865
303,490
287,555
276,877
Accumulated other comprehensive loss
(2,198
)
(8,927
)
(17,879
)
(26,959
)
(21,123
)
Total shareholders' equity
$
875,886
$
853,278
$
827,373
$
802,115
$
512,344
Average Balance Data Average loans
$
4,044,044
$
4,023,864
$
4,026,569
$
4,028,462
$
3,104,126
Average interest-earning assets
$
5,764,966
$
5,759,966
$
5,679,845
$
5,638,162
$
4,457,660
Average total assets
$
6,385,889
$
6,426,227
$
6,316,337
$
6,168,344
$
4,814,523
Average deposits
$
5,370,879
$
5,387,079
$
5,242,139
$
5,068,841
$
4,042,110
Average borrowings and subordinated debt
$
75,185
$
72,459
$
179,774
$
303,610
$
196,235
Average total equity
$
866,284
$
843,090
$
812,525
$
709,762
$
510,433
Capital Ratio Data Total risk based capital ratio
14.9
%
14.4
%
14.4
%
13.9
%
13.9
%
Tier 1 capital ratio
14.2
%
13.6
%
13.7
%
13.2
%
13.1
%
Tier 1 common equity ratio
13.0
%
12.5
%
12.5
%
12.0
%
11.7
%
Tier 1 leverage ratio
11.1
%
10.6
%
10.7
%
10.7
%
10.9
%
Tangible capital ratio (1)
10.2
%
9.7
%
9.5
%
9.1
%
9.3
%
(1) Tangible capital ratio is calculated by subtracting goodwill
and other intangible assets from total shareholders' equity and
total assetsand then dividing the adjusted assets by the adjusted
equity. Management believes that the tangible capital ratio is
meaningfulbecause it is a measure that the Company and investors
commonly use to assess capital adequacy.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190725005114/en/
Richard P. Smith President & CEO (530) 898-0300
TriCo Bancshares (NASDAQ:TCBK)
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