Notable Items for Third Quarter
2022
- Net interest margin, excluding the benefit from acquired
loan discount accretion and PPP loan yield, increased 0.41% to
3.98%
- Efficiency ratio improved to 49.6%, largely as a result of
revenue growth as non-interest expenses, excluding merger related
costs, were relatively unchanged as compared with the prior
quarter
- Organic loan growth (excluding PPP) for the quarter of
$216.7 million or 14.2% annualized, with continued strength in
credit quality
- Quarterly pre-tax pre-provision net revenues grew to $55.3
million, as compared to $45.2 million inclusive of $2.2 million in
merger expenses in the trailing quarter, and $37.5 million in the
same quarter of the prior year inclusive of $0.6 million in merger
expenses
"Despite the potential for increasing volatility in interest
rates and the general economy, the core franchise value of Tri
Counties Bank, being anchored in our credit culture and low costs
of funds, continues to drive our financial performance," noted Rick
Smith, President and Chief Executive Officer. Peter Wiese,
EVP and Chief Financial Officer added, "Non-interest bearing
deposits increased by nearly $74 million during the quarter and, to
date during the current rising rate cycle, we have been able to
maintain a low deposit Beta. Looking forward, we anticipate
deposit Betas will be further pressured due to continued rate
increases by the Federal Reserve. These rate increases could
also decrease loan pipelines as borrowers reconsider the impact of
higher rates on proposed projects."
TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company
of Tri Counties Bank, today announced net income of $37,338,000 for
the quarter ended September 30, 2022, compared to $31,364,000
during the trailing quarter ended June 30, 2022, and $27,422,000
during the quarter ended September 30, 2021. Diluted earnings per
share were $1.12 for the third quarter of 2022, compared to $0.93
for the second quarter of 2022 and $0.92 for the third quarter of
2021.
Financial Highlights
Performance highlights and other developments for the Company as
of or for the three and nine months ended September 30, 2022,
included the following:
- For the three and nine months ended September 30, 2022, the
Company’s return on average assets was 1.46% and 1.23%, while the
return on average equity was 13.78% and 11.25%, respectively. The
nine-month ratio was impacted by merger related expenses of
$6,253,000 during the 2022 period.
- Organic loan growth, excluding PPP and acquired loans, totaled
$216.7 million (14.2% annualized) for the current quarter and
$824.3 million (17.4% annualized) for the trailing twelve-month
period.
- As of September 30, 2022, the Company reported total loans,
total assets and total deposits of $6.3 billion, $10.0 billion and
$8.7 billion, respectively. As a direct result of organic loan
growth during the quarter, the loan to deposit ratio has increased
to 72.9% as of September 30, 2022, as compared to 69.8% as of the
trailing quarter.
- The average rate of interest paid on deposits, including
non-interest-bearing deposits, of 0.04% has remained unchanged
during each of the prior four quarters, and represents a decrease
of one basis point from the average rate paid of 0.05% during the
same quarter of the prior year.
- Noninterest income related to service charges and fees was
$12.7 million for the three month period ended September 30, 2022,
an increase of 12.6% when compared to the same period in 2021.
- The provision for credit losses for loans and debt securities
was approximately $3.8 million during the quarter ended September
30, 2022, as compared to a provision expense of $2.1 million during
the trailing quarter ended June 30, 2022, and a reversal of
provision expense totaling $1.4 million for the three month period
ended September 30, 2021.
- The allowance for credit losses to total loans was 1.61% as of
September 30, 2022, compared to 1.60% as of the trailing quarter
end, and 1.72% as of September 30, 2021. Non-performing assets to
total assets were 0.21% at September 30, 2022, as compared to 0.15%
as of June 30, 2022, and 0.37% at September 30, 2021.
Financial results reported in this document are preliminary.
Final financial results and other disclosures will be reported in
our Annual Report on Form 10-Q for the period ended September 30,
2022, and may differ materially from the results and disclosures in
this document due to, among other things, the completion of final
review procedures, the occurrence of subsequent events, or the
discovery of additional information.
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,
June 30,
(dollars and shares in thousands, except
per share data)
2022
2022
$ Change
% Change
Net interest income
$
94,106
$
85,046
$
9,060
10.7
%
Provision for credit losses
(3,795
)
(2,100
)
(1,695
)
80.7
%
Noninterest income
15,640
16,430
(790
)
(4.8
) %
Noninterest expense
(54,465
)
(56,264
)
1,799
(3.2
) %
Provision for income taxes
(14,148
)
(11,748
)
(2,400
)
20.4
%
Net income
$
37,338
$
31,364
$
5,974
19.0
%
Diluted earnings per share
$
1.12
$
0.93
$
0.19
20.4
%
Dividends per share
$
0.30
$
0.25
$
0.05
20.0
%
Average common shares
33,348
33,561
(213
)
(0.6
) %
Average diluted common shares
33,463
33,705
(242
)
(0.7
) %
Return on average total assets
1.46
%
1.24
%
Return on average equity
13.78
%
11.53
%
Efficiency ratio
49.63
%
55.45
%
Three months ended September
30,
(dollars and shares in thousands, except
per share data)
2022
2021
$ Change
% Change
Net interest income
$
94,106
$
68,233
$
25,873
37.9
%
(Provision for) reversal of credit
losses
(3,795
)
1,435
(5,230
)
(364.5
) %
Noninterest income
15,640
15,095
545
3.6
%
Noninterest expense
(54,465
)
(45,807
)
(8,658
)
18.9
%
Provision for income taxes
(14,148
)
(11,534
)
(2,614
)
22.7
%
Net income
$
37,338
$
27,422
$
9,916
36.2
%
Diluted earnings per share
$
1.12
$
0.92
$
0.20
21.7
%
Dividends per share
$
0.30
$
0.25
$
0.05
20.0
%
Average common shares
33,348
29,714
3,634
12.2
%
Average diluted common shares
33,463
29,851
3,612
12.1
%
Return on average total assets
1.46
%
1.30
%
Return on average equity
13.78
%
11.02
%
Efficiency ratio
49.63
%
54.97
%
Nine months ended September
30,
(dollars and shares in thousands)
2022
2021
$ Change
% Change
Net interest income
$
247,076
$
201,756
$
45,320
22.5
%
Reversal of (provision for) credit
losses
(14,225
)
7,755
(21,980
)
(283.4
) %
Noninterest income
47,166
47,162
4
—
%
Noninterest expense
(157,176
)
(131,596
)
(25,580
)
19.4
%
Provision for income taxes
(33,765
)
(35,644
)
1,879
(5.3
) %
Net income
$
89,076
$
89,433
$
(357
)
(0.4
) %
Diluted earnings per share
$
2.74
$
2.99
$
(0.25
)
(8.4
) %
Dividends per share
$
0.80
$
0.75
$
0.05
6.7
%
Average common shares
32,332
29,720
2,612
8.8
%
Average diluted common shares
32,469
29,887
2,582
8.6
%
Return on average total assets
1.23
%
1.48
%
Return on average equity
11.25
%
12.42
%
Efficiency ratio
53.42
%
52.87
%
Balance Sheet
Total loans outstanding, excluding PPP, grew to $6.31 billion as
of September 30, 2022, an increase of 33.3% over the prior twelve
months, of which 17.4% was related to organic loan growth.
Investments increased to $2.67 billion as of September 30, 2022, an
increase of 14.4% annualized over the prior twelve months.
Quarterly average earning assets to quarterly total average assets
were generally unchanged at 92.0% at September 30, 2022, as
compared to 92.2% and 92.9% at June 30, 2022, and September 30,
2021, respectively. The loan to deposit ratio was 72.9% at
September 30, 2022, as compared to 69.8% and 67.5% at June 30,
2022, and September 30, 2021, respectively.
Total shareholders' equity decreased by $51,839,000 during the
quarter ended September 30, 2022, as a result of an increase in
accumulated other comprehensive losses of $76,740,000, share
repurchases totaling approximately $2,059,000 and cash dividend
payments on common stock of $10,004,000, partially offset by net
income of $37,338,000. As a result, the Company’s book value was
$29.71 per share at September 30, 2022 as compared to $31.25 and
$33.05 at June 30, 2022, and September 30, 2021, respectively. The
Company’s tangible book value per share, a non-GAAP measure,
calculated by subtracting goodwill and other intangible assets from
total shareholders’ equity and dividing that sum by total shares
outstanding, was $19.92 per share at September 30, 2022, as
compared to $21.41 and $25.16 at June 30, 2022, and September 30,
2021, respectively.
Trailing Quarter Balance Sheet Change
Ending balances
September 30,
June 30,
Annualized % Change
(dollars in thousands)
2022
2022
$ Change
Total assets
$
9,976,879
$
10,120,611
$
(143,732
)
(5.7
) %
Total loans
6,314,290
6,113,421
200,869
13.1
Total loans, excluding PPP
6,312,348
6,095,667
216,681
14.2
Total investments
2,668,145
2,802,815
(134,670
)
(19.2
)
Total deposits
$
8,655,769
$
8,756,775
$
(101,006
)
(4.6
) %
Organic loan growth, excluding PPP, of $216,681,000 or 14.2% on
an annualized basis was realized during the quarter ended September
30, 2022, primarily within commercial real estate. During the
quarter, and exclusive of PPP balance changes, loan
originations/draws totaled approximately $737.0 million while
payoffs/repayments of loans totaled $536.0 million, which compares
to origination/draws and payoff/repayments activity during the
three months ended June 30, 2022 of $697.0 million and $397.0
million, respectively. While management believes that loan
pipelines remain sufficient to support loan growth, loan pipeline
activity may moderate as customer awareness of the rising interest
rate environment weighs more heavily on their decision making
criteria. Investment security balances decreased $134,670,000 or
19.2% on an annualized basis as the result of declines in market
values grew, and prepayments or maturities from the portfolio were
utilized to augment the Company's overall balance sheet position.
Deposit balances also decreased, with a change of $101,006,000 or
4.6% annualized during the period. These deposit balance changes
are partially the result of approximately $51.6 million in FDIC
insured money market account balances being placed with partner
institutions.
Average Trailing Quarter Balance Sheet Change
Quarterly average balances for the period
ended
September 30,
June 30,
Annualized % Change
(dollars in thousands)
2022
2022
$ Change
Total assets
$
10,131,118
$
10,121,714
$
9,404
0.4
%
Total loans
6,171,042
5,928,430
242,612
16.4
Total loans, excluding PPP
6,162,267
5,890,578
271,689
18.4
Total investments
2,802,119
2,732,466
69,653
10.2
Total deposits
$
8,752,215
$
8,743,320
$
8,895
0.4
%
Year Over Year Balance Sheet Change
Ending balances
As of September 30,
Acquired Balances
Organic $ Change
Organic % Change
(dollars in thousands)
2022
2021
$ Change
Total assets
$
9,976,879
$
8,458,030
$
1,518,849
$
1,363,529
$
155,320
1.8
%
Total loans
6,314,290
4,887,496
1,426,794
773,390
653,404
13.4
Total loans, excluding PPP
6,312,348
4,736,048
1,576,300
751,978
824,322
17.4
Total investments
2,668,145
2,333,015
335,130
109,716
225,414
9.7
Total deposits
$
8,655,769
$
7,236,822
$
1,418,947
$
1,215,479
$
203,468
2.8
%
Non-PPP loan balances have increased as a result of organic
activities by approximately $824.3 million during the twelve month
period ending September 30, 2022. Investment securities increased
to $2.7 billion at September 30, 2022, an organic change of $225.4
million or 9.7% from the prior year. When combined with balances
acquired from Valley Republic Bank, this represents an increase of
nearly $1.8 billion in earning assets during the last twelve
months.
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,
June 30,
(dollars in thousands)
2022
2022
Change
% Change
Interest income
$
96,366
$
86,955
$
9,411
10.8
%
Interest expense
(2,260
)
(1,909
)
(351
)
18.4
%
Fully tax-equivalent adjustment (FTE)
(1)
440
397
43
10.8
%
Net interest income (FTE)
$
94,546
$
85,443
$
9,103
10.7
%
Net interest margin (FTE)
4.02
%
3.67
%
Acquired loans discount accretion,
net:
Amount (included in interest
income)
$
714
$
1,677
$
(963
)
(57.4
) %
Net interest margin less effect
of acquired loan discount accretion(1)
3.99
%
3.60
%
0.39
%
PPP loans yield, net:
Amount (included in interest
income)
$
313
$
964
$
(651
)
(67.5
) %
Net interest margin less effect
of PPP loan yield (1)
4.02
%
3.65
%
0.37
%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest
income)
$
1,027
$
2,641
$
(1,614
)
(61.1
) %
Net interest margin less effect
of acquired loan discount accretion and PPP loan yield (1)
3.98
%
3.57
%
0.41
%
Three months ended September
30,
(dollars in thousands)
2022
2021
Change
% Change
Interest income
$
96,366
$
69,628
$
26,738
38.4
%
Interest expense
(2,260
)
(1,395
)
(865
)
62.0
%
Fully tax-equivalent adjustment (FTE)
(1)
440
265
175
66.0
%
Net interest income (FTE)
$
94,546
$
68,498
$
26,048
38.0
%
Net interest margin (FTE)
4.02
%
3.50
%
Acquired loans discount accretion,
net:
Amount (included in interest
income)
$
714
$
2,034
$
(1,320
)
(64.9
) %
Net interest margin less effect
of acquired loan discount accretion(1)
3.99
%
3.40
%
0.59
%
PPP loans yield, net:
Amount (included in interest
income)
$
313
$
3,507
$
(3,194
)
(91.1
) %
Net interest margin less effect
of PPP loan yield (1)
4.02
%
3.42
%
0.60
%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest
income)
$
1,027
$
5,541
$
(4,514
)
(81.5
) %
Net interest margin less effect
of acquired loan discount accretion and PPP loan yield (1)
3.98
%
3.31
%
0.67
%
Nine months ended September
30,
(dollars in thousands)
2022
2021
Change
% Change
Interest income
$
252,516
$
206,023
$
46,493
22.6
%
Interest expense
(5,440
)
(4,267
)
(1,173
)
27.5
%
Fully tax-equivalent adjustment (FTE)
(1)
1,120
797
323
40.5
%
Net interest income (FTE)
$
248,196
$
202,553
$
45,643
22.5
%
Net interest margin (FTE)
3.71
%
3.61
%
Acquired loans discount accretion,
net:
Amount (included in interest
income)
$
3,714
$
6,311
$
(2,597
)
(41.2
) %
Net interest margin less effect
of acquired loan discount accretion(1)
3.65
%
3.50
%
0.15
%
PPP loans yield, net:
Amount (included in interest
income)
$
2,374
$
12,549
$
(10,175
)
(81.1
) %
Net interest margin less effect
of PPP loan yield (1)
3.69
%
3.53
%
0.16
%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest
income)
$
6,088
$
18,860
$
(12,772
)
(67.7
) %
Net interest margin less effect
of acquired loans discount and PPP loan yield (1)
3.63
%
3.41
%
0.22
%
(1)
Certain information included herein is
presented on a fully tax-equivalent (FTE) basis and / or to present
additional financial details which may be desired by users of this
financial information. The Company believes the use of these
non-generally accepted accounting principles (non-GAAP) measures
provide additional clarity in assessing its results, and the
presentation of these measures are common practice within the
banking industry. See additional information related to non-GAAP
measures at the back of this document.
Loans may be acquired at a premium or discount to par value, in
which case, the premium is amortized (subtracted from) or the
discount is accreted (added to) interest income over the remaining
life of the loan. Generally, as time goes on, the dollar impact 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. As
a result of the increase in interest rates, the prepayment rate of
portfolio loans, inclusive of those acquired at a premium or
discount, declined throughout 2022. During the three months ended
September 30, 2022, June 30, 2022, and September 30, 2021,
purchased loan discount accretion was $714,000, $1,677,000, and
$2,034,000, respectively.
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
September 30, 2022
June 30, 2022
September 30, 2021
Average Balance
Income/ Expense
Yield/ Rate
Average Balance
Income/ Expense
Yield/ Rate
Average Balance
Income/ Expense
Yield/ Rate
Assets
Loans, excluding PPP
$
6,162,267
$
75,643
4.87
%
$
5,890,578
$
68,954
4.70
%
$
4,684,492
$
57,218
4.85
%
PPP loans
8,775
313
14.15
%
37,852
964
10.22
%
213,430
3,507
6.52
%
Investments-taxable
2,591,513
17,122
2.62
%
2,536,362
14,350
2.27
%
2,019,283
7,741
1.52
%
Investments-nontaxable (1)
210,606
1,908
3.59
%
196,104
1,720
3.52
%
130,028
1,147
3.50
%
Total investments
2,802,119
19,030
2.69
%
2,732,466
16,070
2.36
%
2,149,311
8,888
1.64
%
Cash at Federal Reserve and other
banks
346,991
1,820
2.08
%
669,163
1,364
0.82
%
710,936
280
0.16
%
Total earning assets
9,320,152
96,806
4.12
%
9,330,059
87,352
3.76
%
7,758,169
69,893
3.57
%
Other assets, net
810,966
791,655
589,942
Total assets
$
10,131,118
$
10,121,714
$
8,348,111
Liabilities and shareholders’ equity
Interest-bearing demand
deposits
$
1,775,884
$
119
0.03
%
$
1,799,205
$
99
0.02
%
$
1,507,697
$
116
0.03
%
Savings deposits
3,011,145
685
0.09
%
3,003,337
529
0.07
%
2,407,368
328
0.05
%
Time deposits
321,100
188
0.23
%
337,007
220
0.26
%
321,381
411
0.51
%
Total interest-bearing
deposits
5,108,129
992
0.08
%
5,139,549
848
0.07
%
4,236,446
855
0.08
%
Other borrowings
38,908
5
0.05
%
35,253
5
0.06
%
48,330
6
0.05
%
Junior subordinated debt
101,011
1,263
4.96
%
100,991
1,056
4.19
%
57,891
534
3.66
%
Total interest-bearing
liabilities
5,248,048
2,260
0.17
%
5,275,793
1,909
0.15
%
4,342,667
1,395
0.13
%
Noninterest-bearing
deposits
3,644,086
3,603,771
2,900,817
Other liabilities
164,208
150,696
117,601
Shareholders’ equity
1,074,776
1,091,454
987,026
Total liabilities and shareholders’
equity
$
10,131,118
$
10,121,714
$
8,348,111
Net interest rate spread (1) (2)
3.95
%
3.61
%
3.45
%
Net interest income and margin (1) (3)
$
94,546
4.02
%
$
85,443
3.67
%
$
68,498
3.50
%
(1)
Fully taxable equivalent (FTE). All yields
and rates are calculated using specific day counts for the period
and year as applicable.
(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, 2022 increased $9,103,000 or 10.7% to $94,546,000
compared to $85,443,000 during the three months ended June 30,
2022. In addition, net interest margin improved 35 basis points to
4.02%, as compared to the trailing quarter. The increase in net
interest income is primarily attributed to an additional $6,038,000
in loan interest and fee income and $2,960,000 in investment
income, due to increases in average volume and rates as compared to
the trailing quarter, respectively. As a partial offset, increases
in interest rates on subordinated debt resulted in an increase in
interest expense of $207,000 over the same period.
As compared to the same quarter in the prior year, average loan
yields, excluding PPP, increased 2 basis points from 4.85% during
the three months ended September 30, 2021, to 4.87% during the
three months ended September 30, 2022. The accretion of discounts
from acquired loans added 5 and 17 basis points to loan yields
during the quarters ended September 30, 2022 and September 30,
2021, respectively. Therefore, the 2 basis point increase in yields
on loans during the comparable three month periods ended September
30, 2022 and 2021 was the net effect of a 14 basis point increase
in market loan rates, partially offset by a 12 basis point decline
in the accretion of discounts.
The rates paid on interest bearing deposits increased by 1 basis
point during the quarter ended September 30, 2022 compared to the
trailing quarter. The cost of interest-bearing deposits remained
flat at 8 basis points between the quarter ended September 30, 2022
and the same quarter of the prior year. In addition, the level of
noninterest-bearing deposits continues to benefit the average cost
of total deposits which remained flat at 0.04% in both the current
and trailing quarter, compared to 0.5% in the third quarter of the
prior year. Non-interest bearing deposit balances grew $74.0
million during the three months ended September 30, 2022. As of
September 30, 2022, the ratio of average total noninterest-bearing
deposits to total average deposits was 41.6% .
Nine months ended September 30,
2022
Nine months ended September 30,
2021
Average Balance
Income/ Expense
Yield/ Rate
Average Balance
Income/ Expense
Yield/ Rate
Assets
Loans, excluding PPP
$
5,668,055
$
201,245
4.75
%
$
4,580,292
$
168,916
4.93
%
PPP loans
32,287
2,374
9.83
%
300,006
12,549
5.59
%
Investments-taxable
2,487,111
41,695
2.24
%
1,838,023
21,324
1.55
%
Investments-nontaxable (1)
183,772
4,853
3.53
%
129,057
3,453
3.58
%
Total investments
2,670,883
46,548
2.33
%
1,967,080
24,777
1.68
%
Cash at Federal Reserve and other
banks
573,252
3,469
0.81
%
656,912
578
0.12
%
Total earning assets
8,944,477
253,636
3.79
%
7,504,290
206,820
3.68
%
Other assets, net
737,721
591,983
Total assets
$
9,682,198
$
8,096,273
Liabilities and shareholders’ equity
Interest-bearing demand
deposits
$
1,724,787
$
302
0.02
%
$
1,476,987
$
269
0.02
%
Savings deposits
2,863,447
1,541
0.07
%
2,318,169
965
0.06
%
Time deposits
319,940
676
0.28
%
327,562
1,386
0.57
%
Total interest-bearing
deposits
4,908,174
2,519
0.07
%
4,122,718
2,620
0.08
%
Other borrowings
39,609
15
0.05
%
40,732
15
0.05
%
Junior subordinated debt
87,804
2,906
4.42
%
57,790
1,632
3.78
%
Total interest-bearing
liabilities
5,035,587
5,440
0.14
%
4,221,240
4,267
0.14
%
Noninterest-bearing
deposits
3,435,487
2,790,828
Other liabilities
152,186
121,334
Shareholders’ equity
1,058,938
962,871
Total liabilities and shareholders’
equity
$
9,682,198
$
8,096,273
Net interest rate spread (1) (2)
3.65
%
3.54
%
Net interest income and margin (1) (3)
$
248,196
3.71
%
$
202,553
3.61
%
(1)
Fully taxable equivalent (FTE). All yields
and rates are calculated using specific day counts for the period
and year as applicable.
(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.
Interest Rates and Earning Asset
Composition
During the quarter ended September 30, 2022, market interest
rates, including many rates that serve as reference indices for
variable rate loans and investment securities continued to
increase. As noted above, these rate increases have continued to
benefit growth in total interest income. As of September 30, 2022,
the Company's loan portfolio consisted of approximately $6.4
billion in outstanding principal with a weighted average coupon
rate of 4.65%. Included in the September 30, 2022 loan total are
variable rate loans totaling $3.6 billion, of which, $862 million
are considered floating based on the Wall Street Prime index. In
addition, the Company holds certain investment securities totaling
$402 million which are subject to repricing on not less than a
quarterly basis.
Asset Quality and Credit Loss
Provisioning
During the three months ended September 30, 2022, the Company
recorded a provision for credit losses of $3,795,000, as compared
to a $2,100,000 provision during the trailing quarter, and a
reversal of provision expense of $1,435,000 during the third
quarter of 2021.
The following table presents details of the provision for credit
losses for the periods indicated:
Three months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
March 31, 2022
September 30, 2021
Addition to (reversal of) allowance for
credit losses
$
3,500
$
1,940
$
8,205
$
(1,495
)
Addition to reserve for unfunded loan
commitments
295
160
125
60
Total provision for (reversal
of) credit losses
$
3,795
$
2,100
$
8,330
$
(1,435
)
The following table presents the activity in the allowance for
credit losses on loans for the periods indicated:
Three months ended
Nine months ended
(dollars in thousands)
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Balance, beginning of period
$
97,944
$
86,062
$
85,376
$
91,847
ACL at acquisition for PCD
loans
—
—
2,037
—
Provision for (reversal of)
credit losses
3,500
(1,495
)
13,645
(7,880
)
Loans charged-off
(267
)
(1,582
)
(1,411
)
(2,195
)
Recoveries of previously
charged-off loans
311
1,321
1,841
2,534
Balance, end of period
$
101,488
$
84,306
$
101,488
$
84,306
The allowance for credit losses (ACL) was $101,488,000 as of
September 30, 2022, a net increase of $3,544,000 over the
immediately preceding quarter. The provision for credit losses of
$3,500,000 during the quarter was the net effect of increases in
required reserves due to qualitative factors and individually
analyzed credits. In addition to the aforementioned quarterly
increase, the provision for credit losses of $13,645,000 during the
nine months ended September 30, 2022 was comprised of $10,820,000
in association with the loans acquired from Valley Republic Bank in
the first quarter of 2022, and a net provision for credit losses of
$2,825,000 associated with organic loan portfolio growth and the
net changes in quantitative and qualitative factors associated with
overall borrower performance. For the quarter, the qualitative
components of the ACL resulted in a net increase in required
reserves, despite continued improvement in US employment rates, due
to increased uncertainty in the global economic markets,
concentration risks in commercial lending and the rapid rise in
interest rates. Meanwhile, the quantitative component of the ACL
increased reserve requirements over the trailing quarter due to
loan volume growth and increases in specific reserves totaling
approximately $1,237,000.
The Company utilizes a forecast period of approximately eight
quarters and obtains the forecast data from publicly available
sources as of the balance sheet date. This forecast data continues
to evolve and included improving shifts in the magnitude of changes
for both the unemployment and GDP factors leading up to the balance
sheet date, particularly CA unemployment trends. Inflation remains
elevated from continued disruptions in the supply chain and high
energy prices Despite the expected continued benefit to the net
interest income of the Company from the elevated rate environment,
Management notes the rapid intervals of rate increases by the
Federal Reserve and flattening or inversion of the yield curve,
have boosted expectations of the US entering a recession within 12
months and has led to the lowest levels of consumer sentiment in
decades. As a result, management continues to believe that certain
credit weakness are likely present in the overall economy and that
it is appropriate to cautiously maintain a reserve level that
incorporates such risk factors.
Loans past due 30 days or more increased by $551,000 during the
quarter ended September 30, 2022 to $6,471,000, as compared to
$5,920,000 at June 30, 2022. Non-performing loans were $17,471,000
at September 30, 2022, an increase of $5,546,000 from $11,925,000
as of June 30, 2022, and a decrease of $11,319,000 from $28,790,000
as of September 30, 2021. The current quarter change in
non-performing assets is nearly entirely attributed to a single
agriculture production relationship, which also was the primary
contributor to the increase in specific reserves for the
quarter.
The following table illustrates the total loans by risk rating
and their respective percentage of total loans for the periods
presented.
September 30,
% of Total Loans
June 30,
% of Total Loans
September 30,
% of Total Loans
(dollars in thousands)
2022
2022
2021
Risk Rating:
Pass
$
6,133,805
97.1
%
$
5,960,781
97.5
%
$
4,698,475
96.1
%
Special Mention
126,273
2.0
%
105,819
1.7
%
138,699
2.9
%
Substandard
54,212
0.9
%
46,821
0.8
%
50,322
1.0
%
Total
$
6,314,290
$
6,113,421
$
4,887,496
Classified loans to total loans
0.86
%
0.77
%
1.03
%
Loans past due 30+ days to total loans
0.10
%
0.10
%
0.22
%
The ratio of classified loans increased to 0.86% as of September
30, 2022 as compared to 0.77% in the trailing quarter, but improved
by 17 basis points from the equivalent period in 2021. The
Company's criticized loan balances increased during the current
quarter by approximately $27,846,000 to $180,486,000 as of
September 30, 2022. There were no charge-offs incurred in
connection with these loans and management continues to work toward
resolution with the borrowers.
There were two properties added to other real estate owned
totaling $443,000 during the quarter ended September 30, 2022, and
two disposals totaling $394,000. As of September 30, 2022, other
real estate owned consisted of nine properties with a carrying
value of approximately $3,441,000.
Non-performing assets of $20,912,000 at September 30, 2022
represented 0.21% of total assets, a slight change but generally in
line with the $15,304,000 or 0.15% and $31,440,000 or 0.37% as of
June 30, 2022 and September 30, 2021, respectively.
Allocation of Credit Loss Reserves by
Loan Type
As of September 30, 2022
As of December 31, 2021
As of September 30, 2021
(dollars in thousands)
Amount
% of Loans Outstanding
Amount
% of Loans Outstanding
Amount
% of Loans Outstanding
Commercial real estate:
CRE - Non Owner Occupied
$
29,244
1.42
%
$
25,739
1.61
%
$
25,221
1.65
%
CRE - Owner Occupied
13,525
1.39
%
10,691
1.51
%
10,730
1.53
%
Multifamily
12,749
1.36
%
12,395
1.51
%
12,876
1.55
%
Farmland
3,122
1.12
%
2,315
1.34
%
1,902
1.15
%
Total commercial real estate
loans
58,640
1.38
%
51,140
1.55
%
50,729
1.57
%
Consumer:
SFR 1-4 1st Liens
10,671
1.39
%
10,723
1.60
%
10,618
1.60
%
SFR HELOCs and Junior Liens
11,383
2.89
%
10,510
3.11
%
10,431
3.23
%
Other
1,878
3.23
%
2,241
3.34
%
2,442
3.59
%
Total consumer loans
23,932
1.97
%
23,474
2.19
%
23,491
2.22
%
Commercial and Industrial
10,400
1.94
%
3,862
1.49
%
3,427
0.99
%
Construction
6,132
2.52
%
5,667
2.55
%
5,528
2.55
%
Agricultural Production
2,368
3.31
%
1,215
2.39
%
1,119
2.52
%
Leases
16
0.20
%
18
0.27
%
12
0.24
%
Allowance for credit losses
101,488
1.61
%
85,376
1.74
%
84,306
1.72
%
Reserve for unfunded loan commitments
4,370
3,790
3,525
Total allowance for credit
losses
$
105,858
1.68
%
$
89,166
1.81
%
$
87,831
1.80
%
For the periods presented in the table above and for purposes of
calculating the "% of Loans Outstanding", PPP loans are included in
the segment "Commercial and Industrial." PPP loans are fully
guaranteed and therefore would not require any loss reserve
allocation. Excluding the net outstanding balances of PPP loans
from the ratio of the ACL to total loans results in a reserve ratio
of approximately 1.61% as of September 30, 2022. In addition to the
allowance for credit losses above, the Company has acquired various
performing loans whose fair value as of the acquisition date was
determined to be less than the principal balance owed on those
loans. This difference represents the collective discount of
credit, interest rate and liquidity measurements which is expected
to be amortized over the life of the loans. As of September 30,
2022, the unamortized discount associated with acquired loans
totaled $32,256,000 and, if aggregated with the ACL, would
collectively represent 2.11% of total gross loans and 2.12% of
total loans less PPP loans.
SBA Paycheck Protection
Program
In March 2020 (Round 1) and subsequently in December 2020 (Round
2), the Small Business Administration ("SBA") Paycheck Protection
Program ("PPP") was created to help small businesses keep workers
employed during the COVID-19 crisis. Tri Counties Bank, through its
online portal, facilitated the ability for borrowers to open a new
deposit account and submit PPP applications during the entirety of
the Programs. The SBA ended PPP and did not accept new borrowing
applications, effective May 31, 2021. The following is a summary of
PPP loan related information as of the periods indicated:
(dollars in thousands)
September 30, 2022
December 31, 2021
September 30, 2021
Total number of PPP loans outstanding
16
450
1,449
PPP loan balance (TCBK round 1
origination), gross
$
433
$
2,544
$
9,302
PPP loan balance (TCBK round 2
origination), gross
533
60,767
148,159
Acquired PPP loan balance (VRB
origination), gross
1,003
—
—
Total PPP loans, gross
outstanding
$
1,969
$
63,311
$
157,461
PPP deferred loan fees (Round 1
origination)
—
1
40
PPP deferred loan fees (Round 2
origination)
27
2,163
5,973
Total PPP deferred loan fees
(costs) outstanding
$
27
$
2,164
$
6,013
As of September 30, 2022, there was approximately $27,000 in net
deferred fee income remaining to be recognized. During the three
months ended September 30, 2022, the Company recognized $291,000 in
fees on PPP loans as compared with $872,000 and $2,984,000 for the
three months ended June 30, 2022 and September 30, 2021,
respectively. Based on the payment guarantee provided by the SBA as
well as the expected short-term duration of the PPP loans acquired
from VRB, the fair value of these loans approximates the principal
balance outstanding as of the merger date, and therefore, no
purchase discount was recorded.
Non-interest Income
The following table presents the key components of non-interest
income for the current and trailing quarterly periods
indicated:
Three months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
Change
% Change
ATM and interchange fees
$
6,714
$
6,984
$
(270
)
(3.9
) %
Service charges on deposit accounts
4,436
4,163
273
6.6
%
Other service fees
1,022
1,279
(257
)
(20.1
) %
Mortgage banking service fees
477
482
(5
)
(1.0
) %
Change in value of mortgage servicing
rights
33
136
(103
)
(75.7
) %
Total service charges and
fees
12,682
13,044
(362
)
(2.8
) %
Increase in cash value of life
insurance
659
752
(93
)
(12.4
) %
Asset management and commission income
1,020
1,039
(19
)
(1.8
) %
Gain on sale of loans
357
542
(185
)
(34.1
) %
Lease brokerage income
252
238
14
5.9
%
Sale of customer checks
326
441
(115
)
(26.1
) %
Gain on sale of investment securities
—
—
—
n/m
Loss on marketable equity securities
(115
)
(94
)
(21
)
22.3
%
Other
459
468
(9
)
(1.9
) %
Total other non-interest
income
2,958
3,386
(428
)
(12.6
) %
Total non-interest income
$
15,640
$
16,430
$
(790
)
(4.8
) %
Non-interest income decreased $790,000 or 4.8% to $15,640,000
during the three months ended September 30, 2022, compared to
$16,430,000 during the quarter ended June 30, 2022. Gain on sale of
mortgage loans declined by $185,000 or 34.1% during the quarter
ended September 30, 2022, attributed to the continued rising rate
environment and resulting decline in overall mortgage application
and origination volumes. The decrease in total service charges and
fees is wholly attributable to changes in customer use activities
and the ongoing integration of customers acquired from Valley
Republic Bank (VRB). Looking forward, during the fourth quarter of
2022, the Company will no longer charge personal and business
customers a non-sufficient funds fee for returned checks.
The following table presents the key components of non-interest
income for the current and prior year periods indicated:
Three months ended September
30,
(dollars in thousands)
2022
2021
Change
% Change
ATM and interchange fees
$
6,714
$
6,516
$
198
3.0
%
Service charges on deposit accounts
4,436
3,608
828
22.9
%
Other service fees
1,022
897
125
13.9
%
Mortgage banking service fees
477
476
1
0.2
%
Change in value of mortgage servicing
rights
33
(232
)
265
(114.2
) %
Total service charges and
fees
12,682
11,265
1,417
12.6
%
Increase in cash value of life
insurance
659
644
15
2.3
%
Asset management and commission income
1,020
957
63
6.6
%
Gain on sale of loans
357
1,814
(1,457
)
(80.3
) %
Lease brokerage income
252
183
69
37.7
%
Sale of customer checks
326
107
219
204.7
%
Gain on sale of investment securities
—
—
—
n/m
Loss on marketable equity securities
(115
)
(14
)
(101
)
721.4
%
Other
459
139
320
230.2
%
Total other non-interest
income
2,958
3,830
(872
)
(22.8
) %
Total non-interest income
$
15,640
$
15,095
$
545
3.6
%
Generally, the increases in recurring non-interest income items
reflects the VRB merger timing. As noted above, decreasing mortgage
related activity reduced the gain on sale of loans recorded during
the quarter by $1,457,000 or 80.3%, as compared to the three months
ended September 30, 2021. Further, changes in the value of mortgage
service rights, while lesser in magnitude, typically have an
inverse relationship with changes in mortgage banking
activities.
Nine months ended September
30,
(dollars in thousands)
2022
2021
Change
% Change
ATM and interchange fees
$
19,941
$
18,935
$
1,006
5.3
%
Service charges on deposit accounts
12,433
10,339
2,094
20.3
%
Other service fees
3,183
2,682
501
18.7
%
Mortgage banking service fees
1,422
1,406
16
1.1
%
Change in value of mortgage servicing
rights
443
(691
)
1,134
(164.1
) %
Total service charges and
fees
37,422
32,671
4,751
14.5
%
Increase in cash value of life
insurance
2,049
2,062
(13
)
(0.6
) %
Asset management and commission income
2,946
2,738
208
7.6
%
Gain on sale of loans
2,145
7,908
(5,763
)
(72.9
) %
Lease brokerage income
648
542
106
19.6
%
Sale of customer checks
871
342
529
154.7
%
Gain on sale of investment securities
—
—
—
n/m
Loss on marketable equity securities
(346
)
(59
)
(287
)
486.4
%
Other
1,431
958
473
49.4
%
Total other non-interest
income
9,744
14,491
(4,747
)
(32.8
) %
Total non-interest income
$
47,166
$
47,162
$
4
—
%
The changes in non-interest income for the nine months ended
September 30, 2022 and 2021 are generally consistent with changes
in the three month periods discussed above.
Non-interest Expense
The following table presents the key components of non-interest
expense for the current and trailing quarterly periods
indicated:
Three months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
Change
% Change
Base salaries, net of deferred loan
origination costs
$
22,377
$
22,169
$
208
0.9
%
Incentive compensation
4,832
4,282
550
12.8
%
Benefits and other compensation costs
6,319
6,491
(172
)
(2.6
) %
Total salaries and benefits
expense
33,528
32,942
586
1.8
%
Occupancy
3,965
3,996
(31
)
(0.8
) %
Data processing and software
3,449
3,596
(147
)
(4.1
) %
Equipment
1,422
1,453
(31
)
(2.1
) %
Intangible amortization
1,702
1,702
—
—
%
Advertising
990
818
172
21.0
%
ATM and POS network charges
1,694
1,781
(87
)
(4.9
) %
Professional fees
1,172
1,233
(61
)
(4.9
) %
Telecommunications
575
564
11
2.0
%
Regulatory assessments and insurance
828
779
49
6.3
%
Merger and acquisition expenses
—
2,221
(2,221
)
(100.0
) %
Postage
287
313
(26
)
(8.3
) %
Operational loss
492
456
36
7.9
%
Courier service
497
486
11
2.3
%
Gain on sale or acquisition of foreclosed
assets
(148
)
(98
)
(50
)
51.0
%
Loss on disposal of fixed assets
4
5
(1
)
(20.0
) %
Other miscellaneous expense
4,008
4,017
(9
)
(0.2
) %
Total other non-interest
expense
20,937
23,322
(2,385
)
(10.2
) %
Total non-interest expense
$
54,465
$
56,264
$
(1,799
)
(3.2
) %
Average full-time equivalent staff
1,198
1,183
15
1.3
%
Non-interest expense for the quarter ended September 30, 2022
decreased $1,799,000 or 3.2% to $54,465,000 as compared to
$56,264,000 during the trailing quarter ended June 30, 2022. Total
salaries and benefits expense increased by $586,000 or 1.8%, led by
incentive compensation related expenses of $550,000 or 12.8%
compared to the trailing quarter, due to strong overall Company
performance and continued loan production and growth. The merger
and acquisition expenses from the trailing quarter were entirely
associated with the VRB merger, which are not expected to be
incurred in future periods.
The following table presents the key components of non-interest
expense for the current and prior year quarterly periods
indicated:
Three months ended September
30,
(dollars in thousands)
2022
2021
Change
% Change
Base salaries, net of deferred loan
origination costs
$
22,377
$
17,673
$
4,704
26.6
%
Incentive compensation
4,832
3,123
1,709
54.7
%
Benefits and other compensation costs
6,319
5,478
841
15.4
%
Total salaries and benefits
expense
33,528
26,274
7,254
27.6
%
Occupancy
3,965
3,771
194
5.1
%
Data processing and software
3,449
3,689
(240
)
(6.5
) %
Equipment
1,422
1,336
86
6.4
%
Intangible amortization
1,702
1,409
293
20.8
%
Advertising
990
966
24
2.5
%
ATM and POS network charges
1,694
1,692
2
0.1
%
Professional fees
1,172
1,090
82
7.5
%
Telecommunications
575
574
1
0.2
%
Regulatory assessments and insurance
828
673
155
23.0
%
Merger and acquisition expenses
—
651
(651
)
n/m
Postage
287
156
131
84.0
%
Operational loss
492
244
248
101.6
%
Courier service
497
286
211
73.8
%
Gain on sale or acquisition of foreclosed
assets
(148
)
(144
)
(4
)
2.8
%
(Gain) loss on disposal of fixed
assets
4
(19
)
23
(121.1
) %
Other miscellaneous expense
4,008
3,159
849
26.9
%
Total other non-interest
expense
20,937
19,533
1,404
7.2
%
Total non-interest expense
$
54,465
$
45,807
$
8,658
18.9
%
Average full-time equivalent staff
1,198
1,049
149
14.2
%
Generally, the increases in recurring non-interest expense items
reflect the VRB merger timing of March 25, 2022, and therefore,
related expenses for the combined entities, less certain realized
cost savings, are only being captured within the most recent three
months ended September 30, 2022. Total non-interest expense
increased $8,658,000 or 18.9% to $54,465,000 during the three
months ended September 30, 2022 as compared to $45,807,000 for the
quarter ended September 30, 2021. Total salaries and benefits
expense increased by $7,254,000 or 27.6% to $33,528,000, largely
from a net increase of 99 full-time equivalent positions following
the aforementioned merger with VRB, the build out of other loan
production and compliance teams, and the continued strength of
organic growth within the loan portfolio driving incentive
compensation expense.
Nine months ended September
30,
(dollars in thousands)
2022
2021
Change
% Change
Base salaries, net of deferred loan
origination costs
$
62,762
$
50,721
$
12,041
23.7
%
Incentive compensation
11,697
11,025
672
6.1
%
Benefits and other compensation costs
18,782
16,939
1,843
10.9
%
Total salaries and benefits
expense
93,241
78,685
14,556
18.5
%
Occupancy
11,536
11,197
339
3.0
%
Data processing and software
10,558
10,092
466
4.6
%
Equipment
4,208
4,060
148
3.6
%
Intangible amortization
4,632
4,271
361
8.5
%
Advertising
2,445
2,080
365
17.5
%
ATM and POS network charges
4,850
4,489
361
8.0
%
Professional fees
3,281
2,730
551
20.2
%
Telecommunications
1,660
1,719
(59
)
(3.4
) %
Regulatory assessments and insurance
2,327
1,903
424
22.3
%
Merger and acquisition expenses
6,253
651
5,602
860.5
%
Postage
828
478
350
73.2
%
Operational loss
765
665
100
15.0
%
Courier service
1,397
868
529
60.9
%
Gain on sale or acquisition of foreclosed
assets
(246
)
(210
)
(36
)
17.1
%
Gain on disposal of fixed assets
(1,069
)
(445
)
(624
)
140.2
%
Other miscellaneous expense
10,510
8,363
2,147
25.7
%
Total other non-interest
expense
63,935
52,911
11,024
20.8
%
Total non-interest expense
$
157,176
$
131,596
$
25,580
19.4
%
Average full-time equivalent staff
1,155
1,031
124
12.0
%
The changes in non-interest expense for the nine months ended
September 30, 2022 and 2021 are generally consistent with changes
in the comparable three month periods discussed above.
Provision for Income
Taxes
The Company’s effective tax rate was 27.5% for the nine months
ended September 30, 2022, as compared to 28.1% for the year ended
December 31, 2021. Differences between the Company's effective tax
rate and applicable federal and state blended statutory rate of
approximately 29.6% are due to the proportion of non-taxable
revenues, non-deductible expenses, and benefits from tax credits as
compared to the levels of pre-tax earnings.
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 and loan production offices in communities throughout
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 ATMs,
online and mobile banking access. Brokerage services are provided
by Tri Counties Advisors 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
on the Company's business condition and financial operating
results; the impact of changes in financial services industry
policies, laws and regulations; technological changes; weather,
natural disasters and other catastrophic events that may or may not
be caused by climate change and their effects on economic and
business environments in which the Company operates; the continuing
adverse impact on the U.S. economy, including the markets in which
we operate due to the COVID-19 global pandemic; the impact of a
slowing U.S. economy and increased unemployment on the performance
of our loan portfolio, the market value of our investment
securities, the availability of sources of funding and the demand
for our products; adverse developments with respect to U.S. or
global economic conditions and other uncertainties, including the
impact of supply chain disruptions, inflationary pressures and
labor shortages on the economic recovery and our business; the
impacts of international hostilities or geopolitical events; the
costs or effects of mergers, acquisitions or dispositions we may
make, whether we are able to obtain any required governmental
approvals in connection with any such mergers, acquisitions or
dispositions, and/or our ability to realize the contemplated
financial business benefits associated with any such activities;
the regulatory and financial impacts associated with exceeding $10
billion in total assets; the negative impact on our reputation and
profitability in the event customers experience economic harm or in
the event that regulatory violations are identified; the ability to
execute our business plan in new lending markets; the future
operating or financial performance of the Company, including our
outlook for future growth and changes in the level of our
nonperforming assets and charge-offs; the appropriateness of the
allowance for credit losses, including the timing and effects of
the implementation of the current expected credit losses model; 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 due to changes in credit quality or rates; changes in
consumer spending, borrowing and savings habits; our ability to
attract and maintain deposits and other sources of liquidity; the
effects of changes in the level or cost of checking or savings
account deposits on our funding costs and net interest margin;
changes in the financial performance and/or condition of our
borrowers; our noninterest expense and the efficiency ratio;
competition and innovation with respect to financial products and
services by banks, financial institutions and non-traditional
providers including retail businesses and technology companies; the
challenges of integrating and retaining key employees; the costs
and effects of litigation and of unexpected or adverse outcomes in
such litigation; a failure in or breach of our operational or
security systems or infrastructure, or those of our third-party
vendors or other service providers, including as a result of
cyber-attacks and the cost to defend against such attacks; breaches
in data security, including as a result of work from home
arrangements; failure to safeguard personal information; change to
U.S. tax policies, including our effective income tax rate; the
effect of a fall in stock market prices on our brokerage and wealth
management businesses; the discontinuation of the London Interbank
Offered Rate and other reference rates; 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, 2021, which has been filed with the Securities and
Exchange Commission (the “SEC”) and all subsequent filings with the
SEC under Sections 13(a), 13(c), 14, and 15(d) of the Securities
Act of 1934, as amended. Such filings are also 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. We undertake no obligation (and expressly disclaim
any such obligation) to update or alter our forward-looking
statements, whether as a result of new information, future events,
or otherwise, except as required by law.
TRICO BANCSHARES—CONDENSED
CONSOLIDATED FINANCIAL DATA (Unaudited. Dollars in thousands,
except share data)
Three months ended
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
September 30, 2021
Revenue and Expense Data
Interest income
$
96,366
$
86,955
$
69,195
$
71,024
$
69,628
Interest expense
2,260
1,909
1,271
1,241
1,395
Net interest income
94,106
85,046
67,924
69,783
68,233
Provision for (benefit from) credit
losses
3,795
2,100
8,330
980
(1,435
)
Noninterest income:
Service charges and fees
12,682
13,044
11,696
11,277
11,265
Gain on sale of investment
securities
—
—
—
—
—
Other income
2,958
3,386
3,400
5,225
3,830
Total noninterest income
15,640
16,430
15,096
16,502
15,095
Noninterest expense (2):
Salaries and benefits
33,528
34,370
28,597
27,666
26,274
Occupancy and equipment
5,387
5,449
4,925
5,011
5,107
Data processing and network
5,143
5,468
5,089
5,444
5,381
Other noninterest expense
10,407
10,977
7,836
8,558
9,045
Total noninterest expense
54,465
56,264
46,447
46,679
45,807
Total income before taxes
51,486
43,112
28,243
38,626
38,956
Provision for income taxes
14,148
11,748
7,869
10,404
11,534
Net income
$
37,338
$
31,364
$
20,374
$
28,222
$
27,422
Share Data
Basic earnings per share
$
1.12
$
0.93
$
0.68
$
0.95
$
0.92
Diluted earnings per share
$
1.12
$
0.93
$
0.67
$
0.94
$
0.92
Dividends per share
$
0.30
$
0.25
$
0.25
$
0.25
$
0.25
Book value per common share
$
29.71
$
31.25
$
32.78
$
33.64
$
33.05
Tangible book value per common share
(1)
$
19.92
$
21.41
$
23.04
$
25.80
$
25.16
Shares outstanding
33,332,189
33,350,974
33,837,935
29,730,424
29,714,609
Weighted average shares
33,348,322
33,561,389
30,049,919
29,723,791
29,713,558
Weighted average diluted shares
33,463,364
33,705,280
30,201,698
29,870,059
29,850,530
Credit Quality
Allowance for credit losses to gross
loans
1.61
%
1.60
%
1.64
%
1.74
%
1.72
%
Loans past due 30 days or more
$
6,471
$
5,920
$
8,402
$
4,332
$
10,539
Total nonperforming loans
$
17,471
$
11,925
$
14,088
$
30,350
$
28,790
Total nonperforming assets
$
20,912
$
15,304
$
16,995
$
32,944
$
31,440
Loans charged-off
$
267
$
401
$
743
$
197
$
1,582
Loans recovered
$
311
$
356
$
1,174
$
552
$
1,321
Selected Financial Ratios
Return on average total assets
1.46
%
1.24
%
0.94
%
1.31
%
1.30
%
Return on average equity
13.78
%
11.53
%
8.19
%
11.20
%
11.02
%
Average yield on loans, excluding PPP
4.87
%
4.70
%
4.65
%
4.73
%
4.85
%
Average yield on interest-earning
assets
4.12
%
3.76
%
3.46
%
3.56
%
3.57
%
Average rate on interest-bearing
deposits
0.08
%
0.07
%
0.06
%
0.06
%
0.08
%
Average cost of total deposits
0.04
%
0.04
%
0.04
%
0.04
%
0.05
%
Average rate on borrowings &
subordinated debt
3.60
%
3.12
%
2.27
%
1.98
%
2.02
%
Average rate on interest-bearing
liabilities
0.17
%
0.15
%
0.11
%
0.11
%
0.13
%
Net interest margin (fully tax-equivalent)
(1)
4.02
%
3.67
%
3.39
%
3.50
%
3.50
%
Loans to deposits
72.95
%
69.81
%
67.15
%
66.74
%
67.54
%
Efficiency ratio
49.63
%
55.45
%
55.95
%
54.10
%
54.97
%
Supplemental Loan Interest Income
Data
Discount accretion on acquired loans
$
714
$
1,677
$
1,323
$
1,780
$
2,034
All other loan interest income (excluding
PPP) (1)
$
74,929
$
67,277
$
55,325
$
54,930
$
55,184
Total loan interest income (excluding PPP)
(1)
$
75,643
$
68,954
$
56,648
$
56,710
$
57,218
(1)
Non-GAAP measure
(2)
Inclusive of merger related expenses
TRICO BANCSHARES—CONDENSED
CONSOLIDATED FINANCIAL DATA (Unaudited. Dollars in
thousands)
Balance Sheet Data
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
September 30, 2021
Cash and due from banks
$
246,509
$
488,868
$
1,035,683
$
768,421
$
740,236
Securities, available for sale, net
2,482,857
2,608,771
2,365,708
2,210,876
2,098,786
Securities, held to maturity, net
168,038
176,794
186,748
199,759
216,979
Restricted equity securities
17,250
17,250
17,250
17,250
17,250
Loans held for sale
247
1,216
1,030
3,466
3,072
Loans:
Commercial real estate
4,238,930
4,049,893
3,832,974
3,306,054
3,222,737
Consumer
1,217,297
1,162,989
1,136,712
1,071,551
1,053,653
Commercial and industrial
534,960
507,685
500,882
259,355
345,027
Construction
243,571
313,646
303,960
222,281
216,680
Agriculture production
71,599
71,373
69,339
50,811
44,410
Leases
7,933
7,835
8,108
6,572
4,989
Total loans, gross
6,314,290
6,113,421
5,851,975
4,916,624
4,887,496
Allowance for credit losses
(101,488
)
(97,944
)
(96,049
)
(85,376
)
(84,306
)
Total loans, net
6,212,802
6,015,477
5,755,926
4,831,248
4,803,190
Premises and equipment
73,266
73,811
73,692
78,687
78,968
Cash value of life insurance
132,933
132,857
132,104
117,857
120,932
Accrued interest receivable
27,070
25,861
22,769
19,292
18,425
Goodwill
307,942
307,942
307,942
220,872
220,872
Other intangible assets
18,372
20,074
21,776
12,369
13,562
Operating leases, right-of-use
26,622
27,154
28,404
25,665
26,815
Other assets
262,971
224,536
169,296
109,025
98,943
Total assets
$
9,976,879
$
10,120,611
$
10,118,328
$
8,614,787
$
8,458,030
Deposits:
Noninterest-bearing demand
deposits
$
3,678,202
$
3,604,237
$
3,583,269
$
2,979,882
$
2,943,016
Interest-bearing demand
deposits
1,749,123
1,796,580
1,788,639
1,568,682
1,519,426
Savings deposits
2,924,674
3,028,787
2,993,873
2,521,011
2,447,706
Time certificates
303,770
327,171
348,696
297,584
326,674
Total deposits
8,655,769
8,756,775
8,714,477
7,367,159
7,236,822
Accrued interest payable
853
755
653
928
1,056
Operating lease liability
28,717
29,283
30,500
26,280
27,290
Other liabilities
153,110
155,529
126,348
112,070
107,282
Other borrowings
47,068
35,089
36,184
50,087
45,601
Junior subordinated debt
101,024
101,003
100,984
58,079
57,965
Total liabilities
8,986,541
9,078,434
9,009,146
7,614,603
7,476,016
Common stock
696,348
696,441
706,672
532,244
531,339
Retained earnings
516,699
491,705
479,868
466,959
446,948
Accum. other comprehensive income
(loss)
(222,709
)
(145,969
)
(77,358
)
981
3,727
Total shareholders’ equity
$
990,338
$
1,042,177
$
1,109,182
$
1,000,184
$
982,014
Quarterly Average Balance Data
Average loans, excluding PPP
$
6,162,267
$
5,890,578
$
4,937,865
$
4,759,294
$
4,684,492
Average interest-earning assets
$
9,320,152
$
9,330,059
$
8,153,200
$
7,947,798
$
7,758,169
Average total assets
$
10,131,118
$
10,121,714
$
8,778,256
$
8,546,004
$
8,348,111
Average deposits
$
8,752,215
$
8,743,320
$
7,521,930
$
7,304,659
$
7,137,263
Average borrowings and subordinated
debt
$
139,919
$
136,244
$
105,702
$
108,671
$
106,221
Average total equity
$
1,074,776
$
1,091,454
$
1,009,224
$
999,764
$
987,026
Capital Ratio Data
Total risk-based capital ratio
14.0
%
14.1
%
15.0
%
15.4
%
15.4
%
Tier 1 capital ratio
12.2
%
12.3
%
13.1
%
14.2
%
14.2
%
Tier 1 common equity ratio
11.4
%
11.5
%
12.3
%
13.2
%
13.2
%
Tier 1 leverage ratio
9.6
%
9.3
%
10.8
%
9.9
%
9.9
%
Tangible capital ratio (1)
6.9
%
7.3
%
8.0
%
9.2
%
9.1
%
(1)
Non-GAAP measure
TRICO BANCSHARES—NON-GAAP FINANCIAL
MEASURES
(Unaudited. Dollars in thousands)
In addition to results presented in accordance with generally
accepted accounting principles in the United States of America
(GAAP), this press release contains certain non-GAAP financial
measures. Management has presented these non-GAAP financial
measures in this press release because it believes that they
provide useful and comparative information to assess trends in the
Company's core operations reflected in the current quarter's
results, and facilitate the comparison of our performance with the
performance of our peers. However, these non-GAAP financial
measures are supplemental and are not a substitute for any analysis
based on GAAP. Where applicable, comparable earnings information
using GAAP financial measures is also presented. Because not all
companies use the same calculations, our presentation may not be
comparable to other similarly titled measures as calculated by
other companies. For a reconciliation of these non-GAAP financial
measures, see the tables below:
Three months ended
Nine months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Net interest margin
Acquired loans discount accretion,
net:
Amount (included in interest
income)
$
714
$
1,677
$
2,034
$
3,714
$
6,311
Effect on average loan
yield
0.05
%
0.11
%
0.17
%
0.09
%
0.18
%
Effect on net interest margin
(FTE)
0.03
%
0.07
%
0.10
%
0.06
%
0.11
%
Net interest margin (FTE)
4.02
%
3.67
%
3.50
%
3.71
%
3.61
%
Net interest margin less effect
of acquired loan discount accretion (Non-GAAP)
3.99
%
3.60
%
3.40
%
3.65
%
3.50
%
PPP loans yield, net:
Amount (included in interest
income)
$
313
$
964
$
3,507
$
2,374
$
12,549
Effect on net interest margin
(FTE)
0.01
%
0.02
%
0.09
%
0.02
%
0.08
%
Net interest margin less effect
of PPP loan yield (Non-GAAP)
4.02
%
3.65
%
3.42
%
3.69
%
3.53
%
Acquired loan discount accretion and PPP
loan yield, net:
Amount (included in interest
income)
$
1,027
$
2,641
$
5,541
$
6,088
$
18,860
Effect on net interest margin
(FTE)
0.04
%
0.10
%
0.19
%
0.08
%
0.20
%
Net interest margin less effect
of acquired loan discount accretion and PPP yields, net
(Non-GAAP)
3.98
%
3.57
%
3.31
%
3.63
%
3.41
%
Three months ended
Nine months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Pre-tax pre-provision return on average
assets or equity
Net income (GAAP)
$
37,338
$
31,364
$
27,422
$
89,076
$
89,433
Exclude income tax expense
14,148
11,748
11,534
33,765
35,644
Exclude provision (benefit) for
credit losses
3,795
2,100
(1,435
)
14,225
(7,755
)
Net income before income tax
and provision expense (Non-GAAP)
$
55,281
$
45,212
$
37,521
$
137,066
$
117,322
Average assets (GAAP)
$
10,131,118
$
10,121,714
$
8,348,111
$
9,682,198
$
8,096,273
Average equity (GAAP)
$
1,074,776
$
1,091,454
$
987,026
$
1,058,938
$
962,871
Return on average assets (GAAP)
(annualized)
1.46
%
1.24
%
1.30
%
1.23
%
1.48
%
Pre-tax pre-provision return on
average assets (Non-GAAP) (annualized)
2.16
%
1.79
%
1.78
%
1.89
%
1.94
%
Return on average equity (GAAP)
(annualized)
13.78
%
11.53
%
11.02
%
11.25
%
12.42
%
Pre-tax pre-provision return on
average equity (Non-GAAP) (annualized)
20.41
%
16.61
%
15.08
%
17.31
%
16.29
%
Three months ended
Nine months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Return on tangible common
equity
Average total shareholders'
equity
$
1,074,776
$
1,091,454
$
987,026
$
1,058,938
$
962,871
Exclude average goodwill
307,942
307,942
220,872
281,151
220,872
Exclude average other
intangibles
19,433
21,040
14,267
17,717
19,264
Average tangible common equity
(Non-GAAP)
$
747,401
$
762,472
$
751,887
$
760,070
$
722,735
Net income (GAAP)
$
37,338
$
31,364
$
27,422
$
89,076
$
89,433
Exclude amortization of
intangible assets, net of tax effect
1,199
1,199
992
3,263
3,008
Tangible net income available
to common shareholders (Non-GAAP)
$
38,537
$
32,563
$
28,414
$
92,339
$
92,441
Return on average equity
13.78
%
11.53
%
11.02
%
11.25
%
12.42
%
Return on average tangible
common equity (Non-GAAP)
20.46
%
17.13
%
14.99
%
16.24
%
17.10
%
Three months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
September 30, 2021
Tangible shareholders' equity to
tangible assets
Shareholders' equity (GAAP)
$
990,338
$
1,042,177
$
1,109,182
$
1,000,184
$
982,014
Exclude goodwill and other
intangible assets, net
326,314
328,016
329,718
233,241
234,434
Tangible shareholders' equity
(Non-GAAP)
$
664,024
$
714,161
$
779,464
$
766,943
$
747,580
Total assets (GAAP)
$
9,976,879
$
10,120,611
$
10,118,328
$
8,614,787
$
8,458,030
Exclude goodwill and other
intangible assets, net
326,314
328,016
329,718
233,241
234,434
Total tangible assets
(Non-GAAP)
$
9,650,565
$
9,792,595
$
9,788,610
$
8,381,546
$
8,223,596
Shareholders' equity to total
assets (GAAP)
9.93
%
10.30
%
10.96
%
11.61
%
11.61
%
Tangible shareholders' equity
to tangible assets (Non-GAAP)
6.88
%
7.29
%
7.96
%
9.15
%
9.09
%
Three months ended
(dollars in thousands)
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
September 30, 2021
Tangible common shareholders' equity
per share
Tangible s/h equity
(Non-GAAP)
$
664,024
$
714,161
$
779,464
$
766,943
$
747,580
Common shares outstanding at
end of period
33,332,189
33,350,974
33,837,935
29,730,424
29,714,609
Common s/h equity (book value)
per share (GAAP)
$
29.71
$
31.25
$
32.78
$
33.64
$
33.05
Tangible common shareholders'
equity (tangible book value) per share (Non-GAAP)
$
19.92
$
21.41
$
23.04
$
25.80
$
25.16
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221026005147/en/
Peter G. Wiese, EVP & CFO, (530) 898-0300
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