Notable Items for Fourth Quarter
2022
- Net interest margin increased by 0.32% to 4.34% from the
third quarter of 2022 and, excluding the benefit from PPP and
acquired loan discount accretion, increased by 0.29% to
4.27%
- The average cost of total deposits grew to 0.10% for the
quarter as compared to 0.04% in the trailing quarter and the same
quarter of the prior year
- Organic loan growth was $136.2 million for the quarter or
8.6% annualized and $760.4 million for the year or 15.5%
- Deposit balances declined by $326.8 million for the quarter
or 15.1% and $253.6 million for the year or 3.4%, which led to the
Company remaining under $10.0 billion in total assets as of year
end
- Inclusive of $2.1 million in retirement benefit expenses
recorded in the current quarter, pre-tax pre-provision net revenue
remained flat at $55.3 million compared to the trailing quarter,
and increased by $15.7 million compared to $39.6 million in the
same quarter of the prior year
"We are pleased with the record performance and growth that the
2022 year represents for TriCo, and our capital ratios, loss
reserves, and sources of liquidity allow us to remain confident
that we will continue to thrive through whatever challenges 2023
may bring," noted Rick Smith, President and Chief Executive
Officer. Peter Wiese, EVP and Chief Financial Officer added,
"Through 2022, TriCo maintained its best in class Betas for the
cost of total deposits. Looking forward, the pace of margin and net
interest income growth may slow through the course of 2023. Despite
the potential challenges ahead, it is appropriate to celebrate our
team driven success and to thank the many stakeholders whom
continue to make that success possible."
TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company
of Tri Counties Bank, today announced net income of $36,343,000 for
the quarter ended December 31, 2022, compared to $37,338,000 during
the trailing quarter ended September 30, 2022, and $28,222,000
during the quarter ended December 31, 2021. Diluted earnings per
share were $1.09 for the fourth quarter of 2022, compared to $1.12
for the third quarter of 2022 and $0.94 during the fourth quarter
of 2021.
Financial Highlights
Performance highlights for the Company as of or for the three
and twelve months ended December 31, 2022, included the
following:
- For the three and twelve months ended December 31, 2022, the
Company’s return on average assets was 1.45% and 1.28%, while the
return on average equity was 14.19% and 11.67%, respectively. The
twelve month ratio was impacted by merger related expenses of
$6,253,000 during 2022.
- Organic loan growth, excluding PPP and acquired loans, totaled
$136.5 million (8.6% annualized) for the current quarter and $841.4
million (17.3% annualized) for the trailing twelve-month
period.
- As of December 31, 2022, the Company reported total loans,
total assets and total deposits of $6.5 billion, $9.9 billion and
$8.3 billion, respectively. The combination of organic loan growth
and deposit contraction during the quarter resulted in the loan to
deposit ratio increasing to 77.4% as of December 31, 2022, as
compared to 73.0% as of the trailing quarter.
- The quarterly average rate of interest paid on deposits,
including non-interest-bearing deposits, of 0.10% represents an
increase of 6 basis points from both the trailing quarter and same
quarter of the prior year.
- Noninterest income related to service charges and fees was
$12.3 million for the three month period ended December 31, 2022,
an increase of 9.5% when compared to the same period in 2021.
- The provision for credit losses for loans and debt securities
was approximately $4.2 million during the quarter ended December
31, 2022, as compared to a provision expense of $3.8 million during
the trailing quarter ended September 30, 2022, and a reversal of
provision expense totaling $1.0 million for the three month period
ended December 31, 2021.
- The allowance for credit losses to total loans was 1.64% as of
December 31, 2022, compared to 1.61% as of the trailing quarter
end, and 1.74% as of December 31, 2021. Non-performing assets to
total assets were 0.25% at December 31, 2022, as compared to 0.21%
as of September 30, 2022, and 0.38% at December 31, 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-K for the period ended December 31,
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
December 31,
September 30,
(dollars and shares in thousands, except
per share data)
2022
2022
$ Change
% Change
Net interest income
$
98,900
$
94,106
$
4,794
5.1
%
Provision for credit losses
(4,245
)
(3,795
)
(450
)
11.9
%
Noninterest income
15,880
15,640
240
1.5
%
Noninterest expense
(59,469
)
(54,465
)
(5,004
)
9.2
%
Provision for income taxes
(14,723
)
(14,148
)
(575
)
4.1
%
Net income
$
36,343
$
37,338
$
(995
)
(2.7
) %
Diluted earnings per share
$
1.09
$
1.12
$
(0.03
)
(2.7
) %
Dividends per share
$
0.30
$
0.30
$
—
—
%
Average common shares
33,330
33,348
(18
)
(0.1
) %
Average diluted common shares
33,467
33,463
4
—
%
Return on average total assets
1.45
%
1.46
%
Return on average equity
14.19
%
13.78
%
Efficiency ratio
51.81
%
49.63
%
Three months ended December
31,
(dollars and shares in thousands, except
per share data)
2022
2021
$ Change
% Change
Net interest income
$
98,900
$
69,783
$
29,117
41.7
%
(Provision for) reversal of credit
losses
(4,245
)
(980
)
(3,265
)
333.2
%
Noninterest income
15,880
16,502
(622
)
(3.8
) %
Noninterest expense
(59,469
)
(46,679
)
(12,790
)
27.4
%
Provision for income taxes
(14,723
)
(10,404
)
(4,319
)
41.5
%
Net income
$
36,343
$
28,222
$
8,121
28.8
%
Diluted earnings per share
$
1.09
$
0.94
$
0.15
16.0
%
Dividends per share
$
0.30
$
0.25
$
0.05
20.0
%
Average common shares
33,330
29,724
3,606
12.1
%
Average diluted common shares
33,467
29,870
3,597
12.0
%
Return on average total assets
1.45
%
1.31
%
Return on average equity
14.19
%
11.20
%
Efficiency ratio
51.81
%
54.10
%
Twelve months ended December
31,
(dollars and shares in thousands)
2022
2021
$ Change
% Change
Net interest income
$
345,976
$
271,539
$
74,437
27.4
%
Reversal of (provision for) credit
losses
(18,470
)
6,775
(25,245
)
(372.6
) %
Noninterest income
63,046
63,664
(618
)
(1.0
) %
Noninterest expense
(216,645
)
(178,275
)
(38,370
)
21.5
%
Provision for income taxes
(48,488
)
(46,048
)
(2,440
)
5.3
%
Net income
$
125,419
$
117,655
$
7,764
6.6
%
Diluted earnings per share
$
3.83
$
3.94
$
(0.11
)
(2.8
) %
Dividends per share
$
1.10
$
1.00
$
0.10
10.0
%
Average common shares
32,584
29,721
2,863
9.6
%
Average diluted common shares
32,721
29,882
2,839
9.5
%
Return on average total assets
1.28
%
1.43
%
Return on average equity
11.67
%
12.10
%
Efficiency ratio
52.97
%
53.18
%
Balance Sheet
Total loans outstanding, excluding PPP, grew to $6.45 billion as
of December 31, 2022, an increase of 32.8% over the prior twelve
months, of which 17.3% was related to organic loan growth.
Investments increased to $2.63 billion as of December 31, 2022, an
increase of 8.5% annualized over the prior year quarter end.
Quarterly average earning assets to quarterly total average assets
were generally unchanged at 91.4% at December 31, 2022, as compared
to 92.0% and 93.0% at September 30, 2022, and December 31, 2021,
respectively. The loan to deposit ratio was 77.4% at December 31,
2022, as compared to 73.0% and 66.7% at September 30, 2022, and
December 31, 2021, respectively.
Total shareholders' equity increased by $56.1 million during the
quarter ended December 31, 2022, as a result of an improvement in
accumulated other comprehensive losses of $28.8 million and net
income of $36.3 million, partially offset by cash dividend payments
on common stock of approximately $9,999,000. As a result, the
Company’s book value was $31.39 per share at December 31, 2022 as
compared to $29.71 and $33.64 at September 30, 2022, and December
31, 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 $21.76 per share
at December 31, 2022, as compared to $19.92 and $25.80 at September
30, 2022, and December 31, 2021, respectively.
Trailing Quarter Balance Sheet Change
Ending balances
December 31,
September 30,
Annualized
% Change
(dollars in thousands)
2022
2022
$ Change
Total assets
$
9,930,986
$
9,976,879
$
(45,893
)
(1.8
) %
Total loans
6,450,447
6,314,290
136,157
8.6
Total loans, excluding PPP
6,448,845
6,312,348
136,497
8.6
Total investments
2,633,269
2,668,145
(34,876
)
(5.2
)
Total deposits
8,329,013
8,655,769
(326,756
)
(15.1
)
Total other borrowings
$
264,605
$
47,068
$
217,537
1,848.7
%
Organic loan growth, excluding PPP, of $136.5 million or 8.6% on
an annualized basis was realized during the quarter ended December
31, 2022, primarily within commercial real estate. During the
quarter, and exclusive of PPP balance changes, loan
originations/draws totaled approximately $479.0 million while
payoffs/repayments of loans totaled $343.0 million, which compares
to origination/draws and payoff/repayments activity during the
three months ended September 30, 2022 of $737.0 million and $536.0
million, respectively. While management believes the loan pipeline
remain sufficient to support projected loan growth, loan pipeline
activity has moderated due to customer sensitivity from the rising
interest rate environment and Company's continued focus on
disciplined underwriting. Investment security balances decreased
$34.9 million or 5.2% on an annualized basis as the result of
prepayments/maturities totaling approximating $62.0 million,
partially offset by increases in the market value of securities.
Management seeks to utilize excess cash flows from the investment
security portfolio to support loan growth or reduce borrowings thus
resulting in an improved the mix of earning assets. Deposit
balances also decreased, with a change of $326.8 million or 15.1%
annualized during the period. Cash flow needs were supported by net
short-term FHLB advances totaling $216.7 million as of and for the
quarter ended December 31, 2022.
Average Trailing Quarter Balance Sheet Change
Quarterly average balances for the period
ended
December 31,
September 30,
Annualized
% Change
(dollars in thousands)
2022
2022
$ Change
Total assets
$
9,932,931
$
10,131,118
$
(198,187
)
(7.8
) %
Total loans
6,358,998
6,171,042
187,956
12.2
Total loans, excluding PPP
6,357,250
6,162,267
194,983
12.7
Total investments
2,624,062
2,802,119
(178,057
)
(25.4
)
Total deposits
8,545,172
8,752,215
(207,043
)
(9.5
)
Total other borrowings
$
85,927
$
38,908
$
47,019
483.4
%
Year Over Year Balance Sheet Change
Ending balances
As of December 31,
Acquired Balances
Organic
$ Change
Organic
% Change
(dollars in thousands)
2022
2021
$ Change
Total assets
$
9,930,986
$
8,614,787
$
1,316,199
$
1,363,529
$
(47,330
)
(0.5
) %
Total loans
6,450,447
4,916,624
1,533,823
773,390
760,433
15.5
Total loans, excluding PPP
6,448,845
4,855,477
1,593,368
751,978
841,390
17.3
Total investments
2,633,269
2,427,885
205,384
109,716
95,668
3.9
Total deposits
8,329,013
7,367,159
961,854
1,215,479
(253,625
)
(3.4
)
Total other borrowings
$
264,605
$
50,087
$
214,518
$
—
$
214,518
428.3
%
Non-PPP loan balances increased as a result of organic
activities by approximately $841.4 million or 17.3% during the
twelve month period ending December 31, 2022. Investment securities
increased to $2.6 billion at December 31, 2022, an organic change
of $95.7 million or 3.9% from the prior year. When combined with
balances acquired from Valley Republic Bank, this represents an
increase of approximately $1.7 billion in earning assets during the
last twelve months and an increase of more than $1.1 billion in
average earning assets during the same period.
Net Interest Income and Net Interest
Margin
During the year ended December 31, 2022 the Federal Open Market
Committee's (FOMC) actions have resulted in seven rate hike events
for a cumulative increase in the Fed Funds Rate of 4.25%. During
the same period the Company's yield on total loans (excluding PPP)
increased 37 basis points to 5.10% for the three months ended
December 31, 2022, from 4.73% for the three months ended December
31, 2021. Moreover, the tax equivalent yield on the Company's
investment security portfolio increased by 1.44% to 3.13% during
the year ended December 31, 2022. The cost of total
interest-bearing deposits and total interest-bearing liabilities
increased by 12 basis points and 21 basis points respectively
between the three month periods ended December 31, 2022 and
2021.
As is common within the banking industry and more specific to
the Company's history of deposit cost changes in a rising rate
environment, management has observed a lagging or delayed reaction
to changes in its deposit costs, particularly during periods of
time when the Fed Funds Rate is 3.50% or less. The Company is able
to better manage its cost of deposits through the use of exception
based pricing strategies and delayed changes to the deposit rates
offered to the general public. More specifically, the Company only
recently, during December 2022, increased certain of the rates
offered to deposit customers. Since FOMC rate actions began, the
Company's total cost of deposits have increased 6 basis points
which translates to a cycle to date deposit Beta of 1.41%.
The following is a summary of the components of net interest
income for the periods indicated:
Three months ended
December 31,
September 30,
(dollars in thousands)
2022
2022
Change
% Change
Interest income
$
102,989
$
96,366
$
6,623
6.9
%
Interest expense
(4,089
)
(2,260
)
(1,829
)
80.9
%
Fully tax-equivalent adjustment (FTE)
(1)
440
440
—
—
%
Net interest income (FTE)
$
99,340
$
94,546
$
4,794
5.1
%
Net interest margin (FTE)
4.34
%
4.02
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
1,751
$
714
$
1,037
145.2
%
Net interest margin less effect of
acquired loan discount accretion(1)
4.27
%
3.99
%
0.28
%
PPP loans yield, net:
Amount (included in interest income)
$
16
$
313
$
(297
)
(94.9
) %
Net interest margin less effect of PPP
loan yield (1)
4.34
%
4.02
%
0.32
%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
1,767
$
1,027
$
740
72.1
%
Net interest margin less effect of
acquired loan discount accretion and PPP loan yield (1)
4.27
%
3.98
%
0.29
%
Three months ended December
31,
(dollars in thousands)
2022
2021
Change
% Change
Interest income
$
102,989
$
71,024
$
31,965
45.0
%
Interest expense
(4,089
)
(1,241
)
(2,848
)
229.5
%
Fully tax-equivalent adjustment (FTE)
(1)
440
274
166
60.6
%
Net interest income (FTE)
$
99,340
$
70,057
$
29,283
41.8
%
Net interest margin (FTE)
4.34
%
3.50
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
1,751
$
1,780
$
(29
)
(1.6
) %
Net interest margin less effect of
acquired loan discount accretion(1)
4.27
%
3.41
%
0.86
%
PPP loans yield, net:
Amount (included in interest income)
$
16
$
4,094
$
(4,078
)
(99.6
) %
Net interest margin less effect of PPP
loan yield (1)
4.34
%
3.34
%
1.00
%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
1,767
$
5,874
$
(4,107
)
(69.9
) %
Net interest margin less effect of
acquired loan discount accretion and PPP loan yield (1)
4.27
%
3.25
%
1.02
%
Twelve months ended December
31,
(dollars in thousands)
2022
2021
Change
% Change
Interest income
$
355,505
$
277,047
$
78,458
28.3
%
Interest expense
(9,529
)
(5,508
)
(4,021
)
73.0
%
Fully tax-equivalent adjustment (FTE)
(1)
1,560
1,071
489
45.7
%
Net interest income (FTE)
$
347,536
$
272,610
$
74,926
27.5
%
Net interest margin (FTE)
3.88
%
3.58
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
5,465
$
8,091
$
(2,626
)
(32.5
) %
Net interest margin less effect of
acquired loan discount accretion(1)
3.81
%
3.47
%
0.34
%
PPP loans yield, net:
Amount (included in interest income)
$
2,390
$
16,643
$
(14,253
)
(85.6
) %
Net interest margin less effect of PPP
loan yield (1)
3.86
%
3.48
%
0.38
%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
7,855
$
24,734
$
(16,879
)
(68.2
) %
Net interest margin less effect of
acquired loans discount and PPP loan yield (1)
3.80
%
3.37
%
0.43
%
(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 during 2022 as compared to 2021. During the
three months ended December 31, 2022, September 30, 2022, and
December 31, 2021, purchased loan discount accretion was
$1,751,000, $714,000, and $1,780,000, 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
December 31, 2022
September 30, 2022
December 31, 2021
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans, excluding PPP
$
6,357,250
$
81,740
5.10
%
$
6,162,267
$
75,643
4.87
%
$
4,759,294
$
56,710
4.73
%
PPP loans
1,748
16
3.63
%
8,775
313
14.15
%
103,163
4,094
15.74
%
Investments-taxable
2,414,236
18,804
3.09
%
2,591,513
17,122
2.62
%
2,261,161
9,028
1.58
%
Investments-nontaxable (1)
209,826
1,906
3.60
%
210,606
1,908
3.59
%
141,421
1,186
3.33
%
Total investments
2,624,062
20,710
3.13
%
2,802,119
19,030
2.69
%
2,402,582
10,214
1.69
%
Cash at Federal Reserve and other
banks
93,390
963
4.09
%
346,991
1,820
2.08
%
682,759
280
0.16
%
Total earning assets
9,076,450
103,429
4.52
%
9,320,152
96,806
4.12
%
7,947,798
71,298
3.56
%
Other assets, net
856,481
810,966
598,206
Total assets
$
9,932,931
$
10,131,118
$
8,546,004
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,709,494
$
150
0.03
%
$
1,775,884
$
119
0.03
%
$
1,544,176
$
58
0.01
%
Savings deposits
2,921,935
1,815
0.25
%
3,011,145
685
0.09
%
2,486,532
291
0.05
%
Time deposits
251,218
205
0.32
%
321,100
188
0.23
%
315,953
349
0.44
%
Total interest-bearing deposits
4,882,647
2,170
0.18
%
5,108,129
992
0.08
%
4,346,661
698
0.06
%
Other borrowings
85,927
406
1.87
%
38,908
5
0.05
%
50,667
7
0.05
%
Junior subordinated debt
101,030
1,513
5.94
%
101,011
1,263
4.96
%
58,004
536
3.67
%
Total interest-bearing liabilities
5,069,604
4,089
0.32
%
5,248,048
2,260
0.17
%
4,455,332
1,241
0.11
%
Noninterest-bearing deposits
3,662,525
3,644,086
2,957,998
Other liabilities
184,334
164,208
132,910
Shareholders’ equity
1,016,468
1,074,776
999,764
Total liabilities and shareholders’
equity
$
9,932,931
$
10,131,118
$
8,546,004
Net interest rate spread (1) (2)
4.20
%
3.95
%
3.45
%
Net interest income and margin (1) (3)
$
99,340
4.34
%
$
94,546
4.02
%
$
70,057
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 December
31, 2022 increased $4.8 million or 5.1% to $99.3 million compared
to $94.5 million during the three months ended September 30, 2022.
In addition, net interest margin improved 32 basis points to 4.34%,
as compared to the trailing quarter. The increase in net interest
income is primarily attributed to an additional $5.8 million in
loan interest and fee income and $1.7 million 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 deposits and subordinated debt led to an increase
of $1.2 million and $250,000, respectively, in interest expense
over the same period.
As compared to the same quarter in the prior year, average loan
yields, excluding PPP, increased 37 basis points from 4.73% during
the three months ended December 31, 2021, to 5.10% during the three
months ended December 31, 2022. The accretion of discounts from
acquired loans added 11 and 15 basis points to loan yields during
the quarters ended December 31, 2022 and December 31, 2021,
respectively. Therefore, the 37 basis point increase in yields on
loans during the comparable three month periods ended December 31,
2022 and 2021 was the net effect of a 41 basis point increase in
market loan rates, partially offset by a 4 basis point decline in
the accretion of discounts.
The rates paid on interest bearing deposits increased by 10
basis points during the quarter ended December 31, 2022 compared to
the trailing quarter. The cost of interest-bearing deposits
increased by 12 basis points between the quarter ended December 31,
2022 and the same quarter of the prior year. In addition, the level
of noninterest-bearing deposits increased by approximately $18.0
million quarter over quarter and continues to benefit the average
cost of total deposits, which increased by 6 basis points as
compared to the trailing quarter, and fourth quarter of prior year.
As of December 31, 2022, the ratio of average total
noninterest-bearing deposits to total average deposits was
42.9%.
Twelve months ended December 31,
2022
Twelve months ended December 31,
2021
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans, excluding PPP
$
5,841,770
$
282,985
4.84
%
$
4,625,410
$
225,626
4.88
%
PPP loans
24,590
2,390
9.72
%
250,391
16,643
6.65
%
Investments-taxable
2,459,032
60,499
2.46
%
1,914,788
30,352
1.59
%
Investments-nontaxable (1)
190,339
6,759
3.55
%
160,863
4,639
2.88
%
Total investments
2,649,371
67,258
2.54
%
2,075,651
34,991
1.69
%
Cash at Federal Reserve and other
banks
452,300
4,432
0.98
%
663,801
858
0.13
%
Total earning assets
8,968,031
357,065
3.98
%
7,615,253
278,118
3.65
%
Other assets, net
803,570
594,420
Total assets
$
9,771,601
$
8,209,673
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,720,932
$
452
0.03
%
$
1,493,922
$
327
0.02
%
Savings deposits
2,878,189
3,356
0.12
%
2,360,605
1,256
0.05
%
Time deposits
302,619
881
0.29
%
324,636
1,735
0.53
%
Total interest-bearing deposits
4,901,740
4,689
0.10
%
4,179,163
3,318
0.08
%
Other borrowings
33,410
421
1.26
%
43,236
22
0.05
%
Junior subordinated debt
91,138
4,419
4.85
%
57,844
2,168
3.75
%
Total interest-bearing liabilities
5,026,288
9,529
0.19
%
4,280,243
5,508
0.13
%
Noninterest-bearing deposits
3,492,713
2,837,745
Other liabilities
178,163
119,471
Shareholders’ equity
1,074,437
972,214
Total liabilities and shareholders’
equity
$
9,771,601
$
8,209,673
Net interest rate spread (1) (2)
3.79
%
3.52
%
Net interest income and margin (1) (3)
$
347,536
3.88
%
$
272,610
3.58
%
(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 December 31, 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 December 31, 2022,
the Company's loan portfolio consisted of approximately $6.4
billion in outstanding principal with a weighted average coupon
rate of 4.89%. During the three month periods ending December 31,
2022, September 30, 2022 and June 20, 2022, the weighted average
coupon on loan production in the quarter was 6.25%, 5.24% and
4.45%, respectively. Included in the December 31, 2022 loan total
are variable rate loans totaling $3.6 billion, of which, $875
million are considered floating based on the Wall Street Prime
index. In addition, the Company holds certain investment securities
totaling $408 million which are subject to repricing on not less
than a quarterly basis.
Asset Quality and Credit Loss
Provisioning
During the three months ended December 31, 2022, the Company
recorded a provision for credit losses of $4,245,000, as compared
to $3,795,000 during the trailing quarter, and $980,000 during the
fourth quarter of 2021.
The following table presents details of the provision for credit
losses for the periods indicated:
Three months ended
(dollars in thousands)
December 31, 2022
September 30, 2022
June 30, 2022
December 31, 2021
Addition to allowance for credit
losses
$
4,300
$
3,500
$
1,940
$
715
Addition to (reversal of) reserve for
unfunded loan commitments
(55
)
295
160
265
Total provision for credit losses
$
4,245
$
3,795
$
2,100
$
980
The following table presents the activity in the allowance for
credit losses on loans for the periods indicated:
Three months ended
Twelve months ended
(dollars in thousands)
December 31, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Balance, beginning of period
$
101,488
$
84,306
$
85,376
$
91,847
ACL at acquisition for PCD loans
—
—
2,037
—
Provision for (reversal of) credit
losses
4,300
715
17,945
(7,165
)
Loans charged-off
(174
)
(197
)
(1,585
)
(2,392
)
Recoveries of previously charged-off
loans
66
552
1,907
3,086
Balance, end of period
$
105,680
$
85,376
$
105,680
$
85,376
The allowance for credit losses (ACL) was $105,680,000 as of
December 31, 2022, a net increase of $4,192,000 over the
immediately preceding quarter. The provision for credit losses of
$4,300,000 during the quarter was the net effect of increases in
required reserves due to qualitative factors, individually analyzed
credits and quantitative reserves under the cohort model. In
addition to the aforementioned quarterly increase, the provision
for credit losses of $17,945,000 during the year ended December 31,
2022 was largely comprised of $10,820,000 in day 1 required
reserves from loans acquired in connection with the Valley Republic
Bank merger in the first quarter of 2022. For the quarter, the
qualitative components of the ACL resulted in a net increase in
required reserves totaling approximately $2,950,000, despite
continued improvement in US employment rates, due to increased
uncertainty in the global economic markets, US economic policy
uncertainty, and the continued rise in corporate debt yields.
Meanwhile, the quantitative component of the ACL increased reserve
requirements by approximately $1,240,000 over the trailing quarter
due to loan volume growth and increases in specific reserves.
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. As compared to
historical norms, inflation remains elevated from continued
disruptions in the supply chain, wage pressures, and higher living
costs such as housing and food 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 decreased by $1,524,000 during
the quarter ended December 31, 2022 to $4,947,000, as compared to
$6,471,000 at September 30, 2022. Non-performing loans were
$21,321,000 at December 31, 2022, an increase of $3,850,000 from
$17,471,000 as of September 30, 2022, and a decrease of $9,029,000
from $30,350,000 as of December 31, 2021. Of the $21,321,000 loans
designated as non-performing, approximately $19,500,000 are less
than 30 days past due as of December 31, 2022. The current quarter
change in non-performing assets is nearly entirely attributed to a
single CRE relationship, which is considered well-secured as of the
current period end.
The following table illustrates the total loans by risk rating
and their respective percentage of total loans for the periods
presented.
December 31,
% of Total Loans
September 30,
% of Total Loans
December 31,
% of Total Loans
(dollars in thousands)
2022
2022
2021
Risk Rating:
Pass
$
6,251,945
96.9
%
$
6,133,805
97.1
%
$
4,787,077
97.4
%
Special Mention
127,000
2.0
%
126,273
2.0
%
77,461
1.5
%
Substandard
71,502
1.1
%
54,212
0.9
%
52,086
1.1
%
Total
$
6,450,447
$
6,314,290
$
4,916,624
Classified loans to total loans
1.11
%
0.86
%
1.06
%
Loans past due 30+ days to total loans
0.08
%
0.10
%
0.09
%
The ratio of classified loans increased to 1.11% as of December
31, 2022 as compared to 0.86% in the trailing quarter, and
increased by 5 basis points from the equivalent period in 2021. The
Company's criticized loan balances increased during the current
quarter by $18,017,000 to $198,502,000 as of December 31, 2022.
This change was primarily driven by one newly criticized
relationship totaling approximately $22,400,000 that is performing
as agreed and believed by management to be well-secured but was
downgraded to substandard during the quarter.
There was one property added to Other Real Estate Owned totaling
$311,000 during the quarter ended December 31, 2022, and one
disposal totaling $394,000. As of December 31, 2022, other real
estate owned consisted of nine properties with a carrying value of
approximately $3,439,000.
Non-performing assets of $24,760,000 at December 31, 2022
represented 0.25% of total assets, generally in line with the
$20,912,000 or 0.21% and $32,944,000 or 0.38% as of September 30,
2022 and December 31, 2021, respectively.
Allocation of Credit Loss Reserves by
Loan Type
As of December 31, 2022
As of December 31, 2021
(dollars in thousands)
Amount
% of Loans Outstanding
Amount
% of Loans Outstanding
Commercial real estate:
CRE - Non Owner Occupied
$
30,962
1.44
%
$
25,739
1.61
%
CRE - Owner Occupied
14,014
1.42
%
10,691
1.51
%
Multifamily
13,132
1.39
%
12,395
1.51
%
Farmland
3,273
1.17
%
2,315
1.34
%
Total commercial real estate loans
61,381
1.41
%
51,140
1.55
%
Consumer:
SFR 1-4 1st Liens
11,268
1.43
%
10,723
1.60
%
SFR HELOCs and Junior Liens
11,413
2.90
%
10,510
3.11
%
Other
1,958
3.45
%
2,241
3.34
%
Total consumer loans
24,639
1.99
%
23,474
2.19
%
Commercial and Industrial
13,597
2.39
%
3,862
1.49
%
Construction
5,142
2.43
%
5,667
2.55
%
Agricultural Production
906
1.48
%
1,215
2.39
%
Leases
15
0.19
%
18
0.27
%
Allowance for credit losses
105,680
1.64
%
85,376
1.74
%
Reserve for unfunded loan commitments
4,315
3,790
Total allowance for credit losses
$
109,995
1.71
%
$
89,166
1.81
%
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 1.64% as of December 31, 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 December 31,
2022, the unamortized discount associated with acquired loans
totaled $30.5 million and, if aggregated with the ACL, would
collectively represent 2.10% of total gross loans and 2.11% 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)
December 31, 2022
December 31, 2021
Total number of PPP loans outstanding
10
450
PPP loan balance (TCBK round 1
origination), gross
$
396
$
2,544
PPP loan balance (TCBK round 2
origination), gross
235
60,767
Acquired PPP loan balance (VRB
origination), gross
986
—
Total PPP loans, gross outstanding
$
1,617
$
63,311
PPP deferred loan fees (Round 1
origination)
—
1
PPP deferred loan fees (Round 2
origination)
15
2,163
Total PPP deferred loan fees (costs)
outstanding
$
15
$
2,164
As of December 31, 2022, there was approximately $15,000 in net
deferred fee income remaining to be recognized. During the three
months ended December 31, 2022, the Company recognized $12,000 in
fees on PPP loans as compared with $291,000 and $3,842,000 for the
three months ended September 30, 2022 and December 31, 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)
December 31, 2022
September 30, 2022
Change
% Change
ATM and interchange fees
$
6,826
$
6,714
$
112
1.7
%
Service charges on deposit accounts
4,103
4,436
(333
)
(7.5
) %
Other service fees
1,091
1,022
69
6.8
%
Mortgage banking service fees
465
477
(12
)
(2.5
) %
Change in value of mortgage servicing
rights
(142
)
33
(175
)
(530.3
) %
Total service charges and fees
12,343
12,682
(339
)
(2.7
) %
Increase in cash value of life
insurance
809
659
150
22.8
%
Asset management and commission income
1,040
1,020
20
2.0
%
Gain on sale of loans
197
357
(160
)
(44.8
) %
Lease brokerage income
172
252
(80
)
(31.7
) %
Sale of customer checks
296
326
(30
)
(9.2
) %
Gain on sale of investment securities
—
—
—
n/m
Gain (loss) on marketable equity
securities
6
(115
)
121
(105.2
) %
Other income
1,017
459
558
121.6
%
Total other non-interest income
3,537
2,958
579
19.6
%
Total non-interest income
$
15,880
$
15,640
$
240
1.5
%
Non-interest income increased $240,000 or 1.5% to $15,880,000
during the three months ended December 31, 2022, compared to
$15,640,000 during the quarter ended September 30, 2022. Other
income increased by $558,000 largely from an increase in fees
earned from the sale of deposits, but partially offset by a decline
in service charges on deposits accounts totaling $333,000, which is
directly related to the Company's decision to no longer charge fees
for returned check items.
The following table presents the key components of non-interest
income for the current and prior year periods indicated:
Three months ended December
31,
(dollars in thousands)
2022
2021
Change
% Change
ATM and interchange fees
$
6,826
$
6,421
$
405
6.3
%
Service charges on deposit accounts
4,103
3,674
429
11.7
%
Other service fees
1,091
888
203
22.9
%
Mortgage banking service fees
465
475
(10
)
(2.1
) %
Change in value of mortgage servicing
rights
(142
)
(181
)
39
(21.5
) %
Total service charges and fees
12,343
11,277
1,066
9.5
%
Increase in cash value of life
insurance
809
713
96
13.5
%
Asset management and commission income
1,040
930
110
11.8
%
Gain on sale of loans
197
1,672
(1,475
)
(88.2
) %
Lease brokerage income
172
204
(32
)
(15.7
) %
Sale of customer checks
296
117
179
153.0
%
Gain on sale of investment securities
—
—
—
n/m
Gain (loss) on marketable equity
securities
6
(27
)
33
(122.2
) %
Other income
1,017
1,616
(599
)
(37.1
) %
Total other non-interest income
3,537
5,225
(1,688
)
(32.3
) %
Total non-interest income
$
15,880
$
16,502
$
(622
)
(3.8
) %
Generally, the increases in recurring non-interest income
service charges and fees reflects the VRB merger closing in March
of 2022, and therefore, related income for the combined entities
are only being captured within the most recent three months ended
December 31, 2022. As noted above, decreasing mortgage related
activity resulting from elevated interest rates reduced the gain on
sale of loans recorded during the quarter by $1,475,000 or 88.2%,
as compared to the three months ended December 31, 2021. Further,
other non-interest income declined by $599,000 or 37.1% during the
quarter ended December 31, 2022 as the last quarter of 2021
included non-recurring death benefit proceeds of $702,000.
Twelve months ended December
31,
(dollars in thousands)
2022
2021
Change
% Change
ATM and interchange fees
$
26,767
$
25,356
$
1,411
5.6
%
Service charges on deposit accounts
16,536
14,013
2,523
18.0
%
Other service fees
4,274
3,570
704
19.7
%
Mortgage banking service fees
1,887
1,881
6
0.3
%
Change in value of mortgage servicing
rights
301
(872
)
1,173
(134.5
) %
Total service charges and fees
49,765
43,948
5,817
13.2
%
Increase in cash value of life
insurance
2,858
2,775
83
3.0
%
Asset management and commission income
3,986
3,668
318
8.7
%
Gain on sale of loans
2,342
9,580
(7,238
)
(75.6
) %
Lease brokerage income
820
746
74
9.9
%
Sale of customer checks
1,167
459
708
154.2
%
Gain on sale of investment securities
—
—
—
n/m
Loss on marketable equity securities
(340
)
(86
)
(254
)
295.3
%
Other income
2,448
2,574
(126
)
(4.9
) %
Total other non-interest income
13,281
19,716
(6,435
)
(32.6
) %
Total non-interest income
$
63,046
$
63,664
$
(618
)
(1.0
) %
The changes in non-interest income for the twelve months ended
December 31, 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)
December 31, 2022
September 30, 2022
Change
% Change
Base salaries, net of deferred loan
origination costs
$
22,099
$
22,377
$
(278
)
(1.2
) %
Incentive compensation
6,211
4,832
1,379
28.5
%
Benefits and other compensation costs
8,301
6,319
1,982
31.4
%
Total salaries and benefits expense
36,611
33,528
3,083
9.2
%
Occupancy
3,957
3,965
(8
)
(0.2
) %
Data processing and software
4,102
3,449
653
18.9
%
Equipment
1,525
1,422
103
7.2
%
Intangible amortization
1,702
1,702
—
—
%
Advertising
1,249
990
259
26.2
%
ATM and POS network charges
2,134
1,694
440
26.0
%
Professional fees
1,111
1,172
(61
)
(5.2
) %
Telecommunications
638
575
63
11.0
%
Regulatory assessments and insurance
815
828
(13
)
(1.6
) %
Merger and acquisition expenses
—
—
—
n/m
Postage
319
287
32
11.1
%
Operational loss
235
492
(257
)
(52.2
) %
Courier service
616
497
119
23.9
%
Gain on sale or acquisition of foreclosed
assets
(235
)
(148
)
(87
)
58.8
%
(Gain) loss on disposal of fixed
assets
(1
)
4
(5
)
(125.0
) %
Other miscellaneous expense
4,691
4,008
683
17.0
%
Total other non-interest expense
22,858
20,937
1,921
9.2
%
Total non-interest expense
$
59,469
$
54,465
$
5,004
9.2
%
Average full-time equivalent staff
1,210
1,198
12
1.0
%
Non-interest expense for the quarter ended December 31, 2022
increased $5.0 million or 9.2% to $59.5 million as compared to
$54.5 million during the trailing quarter ended September 30, 2022.
Total salaries and benefits expense increased by $3.1 million or
9.2%, led primarily by an expense of approximately $2.1 million in
benefits and other compensation costs, related to the previously
announced amendments to certain of the Company's retirement plans.
Additionally, incentive compensation related expenses increased by
$1.4 million or 28.5% compared to the trailing quarter, due to
strong overall Company performance. Advertising costs increased
$259,000 or 26.2% during the quarter, connected to an increase in
media advertising for promotional campaigns. ATM and point of
service network charges increased $440,000 or 26.0% to $2,134,000,
linked with card processing equipment conversion expenses of
$256,000 in the current quarter. Finally, other miscellaneous
expenses increased $683,000 or 17.0% to $4,691,000, resulting
largely from $517,000 in additional appraisal costs during the most
recent quarter.
The following table presents the key components of non-interest
expense for the current and prior year quarterly periods
indicated:
Three months ended December
31,
(dollars in thousands)
2022
2021
Change
% Change
Base salaries, net of deferred loan
origination costs
$
22,099
$
19,123
$
2,976
15.6
%
Incentive compensation
6,211
3,932
2,279
58.0
%
Benefits and other compensation costs
8,301
4,611
3,690
80.0
%
Total salaries and benefits expense
36,611
27,666
8,945
32.3
%
Occupancy
3,957
3,713
244
6.6
%
Data processing and software
4,102
3,893
209
5.4
%
Equipment
1,525
1,298
227
17.5
%
Intangible amortization
1,702
1,193
509
42.7
%
Advertising
1,249
819
430
52.5
%
ATM and POS network charges
2,134
1,551
583
37.6
%
Professional fees
1,111
927
184
19.8
%
Telecommunications
638
534
104
19.5
%
Regulatory assessments and insurance
815
678
137
20.2
%
Merger and acquisition expenses
—
872
(872
)
n/m
Postage
319
232
87
37.5
%
Operational loss
235
299
(64
)
(21.4
) %
Courier service
616
346
270
78.0
%
Gain on sale or acquisition of foreclosed
assets
(235
)
(23
)
(212
)
921.7
%
(Gain) loss on disposal of fixed
assets
(1
)
6
(7
)
(116.7
) %
Other miscellaneous expense
4,691
2,675
2,016
75.4
%
Total other non-interest expense
22,858
19,013
3,845
20.2
%
Total non-interest expense
$
59,469
$
46,679
$
12,790
27.4
%
Average full-time equivalent staff
1,210
1,074
136
12.7
%
Generally, the increases in recurring non-interest expense items
reflect the VRB merger closing in March of 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 December 31, 2022. Total non-interest expense
increased $12.8 million or 27.4% to $59.5 million during the three
months ended December 31, 2022 as compared to $46.7 million for the
quarter ended December 31, 2021. Total salaries and benefits
expense increased by $8.9 million or 32.3% to $36.6 million,
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. As noted above, amendments to
certain of the Company's retirement plans, contributed to
approximately $2.1 million of the $3.7 million increase associated
with benefits and other compensation costs. Management believes
that these amendments will result in better alignment of
compensation costs and the Company's strategic goals as management
anticipates that the future service costs associated with these
amended retirement plans will be substantially reduced.
Twelve months ended December
31,
(dollars in thousands)
2022
2021
Change
% Change
Base salaries, net of deferred loan
origination costs
$
84,861
$
69,844
$
15,017
21.5
%
Incentive compensation
17,908
14,957
2,951
19.7
%
Benefits and other compensation costs
27,083
21,550
5,533
25.7
%
Total salaries and benefits expense
129,852
106,351
23,501
22.1
%
Occupancy
15,493
14,910
583
3.9
%
Data processing and software
14,660
13,985
675
4.8
%
Equipment
5,733
5,358
375
7.0
%
Intangible amortization
6,334
5,464
870
15.9
%
Advertising
3,694
2,899
795
27.4
%
ATM and POS network charges
6,984
6,040
944
15.6
%
Professional fees
4,392
3,657
735
20.1
%
Telecommunications
2,298
2,253
45
2.0
%
Regulatory assessments and insurance
3,142
2,581
561
21.7
%
Merger and acquisition expenses
6,253
1,523
4,730
310.6
%
Postage
1,147
710
437
61.5
%
Operational loss
1,000
964
36
3.7
%
Courier service
2,013
1,214
799
65.8
%
Gain on sale or acquisition of foreclosed
assets
(481
)
(233
)
(248
)
106.4
%
Gain on disposal of fixed assets
(1,070
)
(439
)
(631
)
143.7
%
Other miscellaneous expense
15,201
11,038
4,163
37.7
%
Total other non-interest expense
86,793
71,924
14,869
20.7
%
Total non-interest expense
$
216,645
$
178,275
$
38,370
21.5
%
Average full-time equivalent staff
1,169
1,039
130
12.5
%
The changes in non-interest expense for the twelve months ended
December 31, 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 27.9% for the year ended
December 31, 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
impacts on the Company's business condition and financial operating
results; the impact of changes in financial services industry
policies, laws and regulations; regulatory restrictions on our
ability to successfully market and price our products to consumers;
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, commodities prices, inflationary pressures and labor
shortages on the economic recovery and our business; the impacts of
international hostilities, terrorism or geopolitical events; the
costs or effects of mergers, acquisitions or dispositions we may
make, as well as whether we are able to obtain any required
governmental approvals in connection with any such mergers,
acquisitions or dispositions, identify and complete favorable
transactions in the future, and/or 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 and direction 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 effectiveness of the Company's
asset management activities in improving, resolving or liquidating
lower-quality assets; the effect of changes in the financial
performance and/or condition of our borrowers; 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; 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 attracting, integrating and
retaining key employees; the costs and effects of litigation and of
unexpected or adverse outcomes in such litigation; the
vulnerability of the Company's operational or security systems or
infrastructure, the systems of third-party vendors or other service
providers with whom the Company contracts, and the Company's
customers to unauthorized access, computer viruses, phishing
schemes, spam attacks, human error, natural disasters, power loss
and data/security breaches and the cost to defend against such
incidents; increased data security risks due to work from home
arrangements; failure to safeguard personal information; changes 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 transition away from the London
Interbank Offered Rate toward new interest rate benchmarks; 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
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Revenue and Expense Data
Interest income
$
102,989
$
96,366
$
86,955
$
69,195
$
71,024
Interest expense
4,089
2,260
1,909
1,271
1,241
Net interest income
98,900
94,106
85,046
67,924
69,783
Provision for credit losses
4,245
3,795
2,100
8,330
980
Noninterest income:
Service charges and fees
12,343
12,682
13,044
11,696
11,277
Gain on sale of investment securities
—
—
—
—
—
Other income
3,537
2,958
3,386
3,400
5,225
Total noninterest income
15,880
15,640
16,430
15,096
16,502
Noninterest expense (2):
Salaries and benefits
36,611
33,528
34,370
28,597
27,666
Occupancy and equipment
5,482
5,387
5,449
4,925
5,011
Data processing and network
6,236
5,143
5,468
5,089
5,444
Other noninterest expense
11,140
10,407
10,977
7,836
8,558
Total noninterest expense
59,469
54,465
56,264
46,447
46,679
Total income before taxes
51,066
51,486
43,112
28,243
38,626
Provision for income taxes
14,723
14,148
11,748
7,869
10,404
Net income
$
36,343
$
37,338
$
31,364
$
20,374
$
28,222
Share Data
Basic earnings per share
$
1.09
$
1.12
$
0.93
$
0.68
$
0.95
Diluted earnings per share
$
1.09
$
1.12
$
0.93
$
0.67
$
0.94
Dividends per share
$
0.30
$
0.30
$
0.25
$
0.25
$
0.25
Book value per common share
$
31.39
$
29.71
$
31.25
$
32.78
$
33.64
Tangible book value per common share
(1)
$
21.76
$
19.92
$
21.41
$
23.04
$
25.80
Shares outstanding
33,331,513
33,332,189
33,350,974
33,837,935
29,730,424
Weighted average shares
33,330,029
33,348,322
33,561,389
30,049,919
29,723,791
Weighted average diluted shares
33,467,393
33,463,364
33,705,280
30,201,698
29,870,059
Credit Quality
Allowance for credit losses to gross
loans
1.64
%
1.61
%
1.60
%
1.64
%
1.74
%
Loans past due 30 days or more
$
4,947
$
6,471
$
5,920
$
8,402
$
4,332
Total nonperforming loans
$
21,321
$
17,471
$
11,925
$
14,088
$
30,350
Total nonperforming assets
$
24,760
$
20,912
$
15,304
$
16,995
$
32,944
Loans charged-off
$
174
$
267
$
401
$
743
$
197
Loans recovered
$
66
$
311
$
356
$
1,174
$
552
Selected Financial Ratios
Return on average total assets
1.45
%
1.46
%
1.24
%
0.94
%
1.31
%
Return on average equity
14.19
%
13.78
%
11.53
%
8.19
%
11.20
%
Average yield on loans, excluding PPP
5.10
%
4.87
%
4.70
%
4.65
%
4.73
%
Average yield on interest-earning
assets
4.52
%
4.12
%
3.76
%
3.46
%
3.56
%
Average rate on interest-bearing
deposits
0.18
%
0.08
%
0.07
%
0.06
%
0.06
%
Average cost of total deposits
0.10
%
0.04
%
0.04
%
0.04
%
0.04
%
Average cost of total deposits and other
borrowings
0.12
%
0.04
%
0.02
%
0.02
%
0.04
%
Average rate on borrowings &
subordinated debt
4.07
%
3.60
%
3.12
%
2.27
%
1.98
%
Average rate on interest-bearing
liabilities
0.32
%
0.17
%
0.15
%
0.11
%
0.11
%
Net interest margin (fully tax-equivalent)
(1)
4.34
%
4.02
%
3.67
%
3.39
%
3.50
%
Loans to deposits
77.45
%
72.95
%
69.81
%
67.15
%
66.74
%
Efficiency ratio
51.81
%
49.63
%
55.45
%
55.95
%
54.10
%
Supplemental Loan Interest Income
Data
Discount accretion on acquired loans
$
1,751
$
714
$
1,677
$
1,323
$
1,780
All other loan interest income (excluding
PPP) (1)
$
79,989
$
74,929
$
67,277
$
55,325
$
54,930
Total loan interest income (excluding PPP)
(1)
$
81,740
$
75,643
$
68,954
$
56,648
$
56,710
(1)
Non-GAAP measure
(2)
Inclusive of merger related expenses
TRICO BANCSHARES—CONDENSED
CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in
thousands)
Balance Sheet Data
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Cash and due from banks
$
107,230
$
246,509
$
488,868
$
1,035,683
$
768,421
Securities, available for sale, net
2,455,036
2,482,857
2,608,771
2,365,708
2,210,876
Securities, held to maturity, net
160,983
168,038
176,794
186,748
199,759
Restricted equity securities
17,250
17,250
17,250
17,250
17,250
Loans held for sale
1,846
247
1,216
1,030
3,466
Loans:
Commercial real estate
4,359,083
4,238,930
4,049,893
3,832,974
3,306,054
Consumer
1,240,743
1,217,297
1,162,989
1,136,712
1,071,551
Commercial and industrial
569,921
534,960
507,685
500,882
259,355
Construction
211,560
243,571
313,646
303,960
222,281
Agriculture production
61,414
71,599
71,373
69,339
50,811
Leases
7,726
7,933
7,835
8,108
6,572
Total loans, gross
6,450,447
6,314,290
6,113,421
5,851,975
4,916,624
Allowance for credit losses
(105,680
)
(101,488
)
(97,944
)
(96,049
)
(85,376
)
Total loans, net
6,344,767
6,212,802
6,015,477
5,755,926
4,831,248
Premises and equipment
72,327
73,266
73,811
73,692
78,687
Cash value of life insurance
133,742
132,933
132,857
132,104
117,857
Accrued interest receivable
31,856
27,070
25,861
22,769
19,292
Goodwill
304,442
307,942
307,942
307,942
220,872
Other intangible assets
16,670
18,372
20,074
21,776
12,369
Operating leases, right-of-use
26,862
26,622
27,154
28,404
25,665
Other assets
257,975
262,971
224,536
169,296
109,025
Total assets
$
9,930,986
$
9,976,879
$
10,120,611
$
10,118,328
$
8,614,787
Deposits:
Noninterest-bearing demand deposits
$
3,502,095
$
3,678,202
$
3,604,237
$
3,583,269
$
2,979,882
Interest-bearing demand deposits
1,718,541
1,749,123
1,796,580
1,788,639
1,568,682
Savings deposits
2,884,378
2,924,674
3,028,787
2,993,873
2,521,011
Time certificates
223,999
303,770
327,171
348,696
297,584
Total deposits
8,329,013
8,655,769
8,756,775
8,714,477
7,367,159
Accrued interest payable
1,167
853
755
653
928
Operating lease liability
29,004
28,717
29,283
30,500
26,280
Other liabilities
159,741
153,110
155,529
126,348
112,070
Other borrowings
264,605
47,068
35,089
36,184
50,087
Junior subordinated debt
101,040
101,024
101,003
100,984
58,079
Total liabilities
8,884,570
8,986,541
9,078,434
9,009,146
7,614,603
Common stock
697,448
696,348
696,441
706,672
532,244
Retained earnings
542,873
516,699
491,705
479,868
466,959
Accum. other comprehensive income
(loss)
(193,905
)
(222,709
)
(145,969
)
(77,358
)
981
Total shareholders’ equity
$
1,046,416
$
990,338
$
1,042,177
$
1,109,182
$
1,000,184
Quarterly Average Balance Data
Average loans, excluding PPP
$
6,357,250
$
6,162,267
$
5,890,578
$
4,937,865
$
4,759,294
Average interest-earning assets
$
9,076,450
$
9,320,152
$
9,330,059
$
8,153,200
$
7,947,798
Average total assets
$
9,932,931
$
10,131,118
$
10,121,714
$
8,778,256
$
8,546,004
Average deposits
$
8,545,172
$
8,752,215
$
8,743,320
$
7,521,930
$
7,304,659
Average borrowings and subordinated
debt
$
186,957
$
139,919
$
136,244
$
105,702
$
108,671
Average total equity
$
1,016,468
$
1,074,776
$
1,091,454
$
1,009,224
$
999,764
Capital Ratio Data
Total risk-based capital ratio
14.2
%
14.0
%
14.1
%
15.0
%
15.4
%
Tier 1 capital ratio
12.4
%
12.2
%
12.3
%
13.1
%
14.2
%
Tier 1 common equity ratio
11.7
%
11.4
%
11.5
%
12.3
%
13.2
%
Tier 1 leverage ratio
10.1
%
9.6
%
9.3
%
10.8
%
9.9
%
Tangible capital ratio (1)
7.6
%
6.9
%
7.3
%
8.0
%
9.2
%
(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
Twelve months ended
(dollars in thousands)
December 31, 2022
September 30, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Net interest margin
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
1,751
$
714
$
1,780
$
5,465
$
8,091
Effect on average loan yield
0.11
%
0.05
%
0.15
%
0.09
%
0.17
%
Effect on net interest margin (FTE)
0.07
%
0.03
%
0.09
%
0.06
%
0.11
%
Net interest margin (FTE)
4.34
%
4.02
%
3.50
%
3.88
%
3.58
%
Net interest margin less effect of
acquired loan discount accretion (Non-GAAP)
4.27
%
3.99
%
3.41
%
3.81
%
3.47
%
PPP loans yield, net:
Amount (included in interest income)
$
16
$
313
$
4,094
$
2,390
$
16,643
Effect on net interest margin (FTE)
n/m
0.01
%
0.16
%
0.02
%
0.10
%
Net interest margin less effect of PPP
loan yield (Non-GAAP)
4.34
%
4.02
%
3.34
%
3.86
%
3.48
%
Acquired loan discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
1,767
$
1,027
$
5,874
$
7,855
$
24,734
Effect on net interest margin (FTE)
0.07
%
0.04
%
0.25
%
0.08
%
0.21
%
Net interest margin less effect of
acquired loan discount accretion and PPP yields, net (Non-GAAP)
4.27
%
3.98
%
3.25
%
3.80
%
3.37
%
Three months ended
Twelve months ended
(dollars in thousands)
December 31, 2022
September 30, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Pre-tax pre-provision return on average
assets or equity
Net income (GAAP)
$
36,343
$
37,338
$
28,222
$
125,419
$
117,655
Exclude income tax expense
14,723
14,148
10,404
48,488
46,048
Exclude provision (benefit) for credit
losses
4,245
3,795
980
18,470
(6,775
)
Net income before income tax and provision
expense (Non-GAAP)
$
55,311
$
55,281
$
39,606
$
192,377
$
156,928
Average assets (GAAP)
$
9,932,931
$
10,131,118
$
8,546,004
$
9,771,601
$
8,209,673
Average equity (GAAP)
$
1,016,468
$
1,074,776
$
999,764
$
1,074,437
$
972,214
Return on average assets (GAAP)
(annualized)
1.45
%
1.46
%
1.31
%
1.28
%
1.43
%
Pre-tax pre-provision return on average
assets (Non-GAAP) (annualized)
2.21
%
2.16
%
1.84
%
1.97
%
1.91
%
Return on average equity (GAAP)
(annualized)
14.19
%
13.78
%
11.20
%
11.67
%
12.10
%
Pre-tax pre-provision return on average
equity (Non-GAAP) (annualized)
21.59
%
20.41
%
15.72
%
17.90
%
16.14
%
Three months ended
Twelve months ended
(dollars in thousands)
December 31, 2022
September 30, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Return on tangible common
equity
Average total shareholders' equity
$
1,016,468
$
1,074,776
$
999,764
$
1,074,437
$
972,214
Exclude average goodwill
306,192
307,942
220,872
287,904
220,872
Exclude average other intangibles
18
19,433
12,966
16
15,131
Average tangible common equity
(Non-GAAP)
$
710,258
$
747,401
$
765,926
$
786,517
$
736,211
Net income (GAAP)
$
36,343
$
37,338
$
28,222
$
125,419
$
117,655
Exclude amortization of intangible assets,
net of tax effect
1,199
1,199
840
4,461
3,849
Tangible net income available to common
shareholders (Non-GAAP)
$
37,542
$
38,537
$
29,062
$
129,880
$
121,504
Return on average equity
14.19
%
13.78
%
11.20
%
11.67
%
12.10
%
Return on average tangible common equity
(Non-GAAP)
20.97
%
20.46
%
15.05
%
16.51
%
16.50
%
Three months ended
(dollars in thousands)
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Tangible shareholders' equity to
tangible assets
Shareholders' equity (GAAP)
$
1,046,416
$
990,338
$
1,042,177
$
1,109,182
$
1,000,184
Exclude goodwill and other intangible
assets, net
321,112
326,314
328,016
329,718
233,241
Tangible shareholders' equity
(Non-GAAP)
$
725,304
$
664,024
$
714,161
$
779,464
$
766,943
Total assets (GAAP)
$
9,930,986
$
9,976,879
$
10,120,611
$
10,118,328
$
8,614,787
Exclude goodwill and other intangible
assets, net
321,112
326,314
328,016
329,718
233,241
Total tangible assets (Non-GAAP)
$
9,609,874
$
9,650,565
$
9,792,595
$
9,788,610
$
8,381,546
Shareholders' equity to total assets
(GAAP)
10.54
%
9.93
%
10.30
%
10.96
%
11.61
%
Tangible shareholders' equity to tangible
assets (Non-GAAP)
7.55
%
6.88
%
7.29
%
7.96
%
9.15
%
Three months ended
(dollars in thousands)
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Tangible common shareholders' equity
per share
Tangible s/h equity (Non-GAAP)
$
725,304
$
664,024
$
714,161
$
779,464
$
766,943
Common shares outstanding at end of
period
33,331,513
33,332,189
33,350,974
33,837,935
29,730,424
Common s/h equity (book value) per share
(GAAP)
$
31.39
$
29.71
$
31.25
$
32.78
$
33.64
Tangible common shareholders' equity
(tangible book value) per share (Non-GAAP)
$
21.76
$
19.92
$
21.41
$
23.04
$
25.80
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230125005747/en/
Peter G. Wiese, EVP & CFO, (530) 898-0300
TriCo Bancshares (NASDAQ:TCBK)
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