Notable Items for Third Quarter
2023
- Net income was $30.6 million compared to $24.9 million in
the trailing quarter, and compared to $37.3 million in the same
quarter of the prior year; Pre-tax pre-provision net revenue was
$46.2 million compared to $43.1 million in the trailing quarter,
and compared to $55.3 million in the same quarter of the prior
year
- Return on average assets was 1.23% for the current quarter
as compared to 1.01% in the trailing quarter and 1.46% in the same
quarter of the prior year
- The Bank continues to operate a balance sheet without the
utilization of brokered deposits or FRB borrowings
- Loan balances increased $187.9 million or 2.9% while deposit
balances declined $85.7 million or 1.1% from the trailing
quarter
- The average cost of total deposits was 0.86% for the quarter
as compared to 0.58% in the trailing quarter and 0.04% in the same
quarter of the prior year and, as a result, the Company's total
cost of deposits have increased 82 basis points since FOMC rate
actions began in March 2022, which translates to a cycle-to-date
deposit beta of 15.6%
- Balance sheet flexibility remains anchored in readily
accessible sources of liquidity including undrawn borrowing
capacities, on-balance sheet cash and unpledged investment
securities totaling in excess of $4.1 billion
- Overall credit quality remains within historical norms as
non-performing assets represent approximately 0.33% of total assets
and the ratio of classified loans to total loans remains low and
manageable.
- Average yield on earning assets was 4.94%, an increase of 16
basis points over the 4.78% in the trailing quarter; net interest
margin was 3.88% in the recent quarter, narrowing only 8 basis
points from 3.96% in the trailing quarter
"Led by both margin and non-interest expenses, operating results
for the quarter were improved over both the immediately preceding
quarter and general market expectations," explained Rick Smith,
President and Chief Executive Officer. Peter Wiese, EVP and Chief
Financial Officer added, "We continue to be mindful about the
unique economic circumstances in which we are operating and the
need for long-term strategic perseverance consistent with the
characteristic strengths for which we are known including
consistency in shareholder returns, a conservative credit culture,
expense control and depth and strength of our TriCo Team."
TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company
of Tri Counties Bank, today announced net income of $30.6 million
for the quarter ended September 30, 2023, compared to $24.9 million
during the trailing quarter ended June 30, 2023, and $37.3 million
during the quarter ended September 30, 2022. Diluted earnings per
share were $0.92 for the third quarter of 2023, compared to $0.75
for the second quarter of 2023 and $1.12 during the third quarter
of 2022.
Financial Highlights
Performance highlights for the Company as of or for the three
and nine months ended September 30, 2023, included the
following:
- For the quarter ended September 30, 2023, the Company’s return
on average assets was 1.23%, while the return on average equity was
10.91%.
- The loan to deposit ratio increased to 83.8% as of September
30, 2023, as compared to 80.6% as of the trailing quarter.
- The efficiency ratio was 54.8% and 53.4% for the nine months
ended September 30, 2023 and 2022, respectively.
- The provision for credit losses was approximately $4.2 million
during the quarter ended September 30, 2023, as compared to a
provision for credit losses of $9.7 million during the trailing
quarter ended June 30, 2023, and a provision for credit losses of
$3.8 million for the three-month period ended September 30,
2022.
- The allowance for credit losses to total loans was 1.73% as of
September 30, 2023, compared to 1.80% as of the trailing quarter
end, and 1.61% as of September 30, 2022. Non-performing assets to
total assets were 0.33% on September 30, 2023, as compared to 0.41%
as of June 30, 2023, and 0.21% at September 30, 2022.
- While total classified loans increased to 1.2% of total loans,
criticized loans as a percentage of total loans decreased by 0.8%
($44.6 million) to 2.6% as a result of loan repayments and improved
borrower performance, including a negligible level of past due
loans.
Financial results reported in this document are preliminary and
unaudited. Final financial results and other disclosures will be
reported in our Quarterly Report on Form 10-Q for the period ended
September 30, 2023, 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)
2023
2023
$ Change
% Change
Net interest income
$
88,123
$
88,601
$
(478
)
(0.5
)%
Provision for credit losses
(4,155
)
(9,650
)
5,495
(56.9
)%
Noninterest income
15,984
15,741
243
1.5
%
Noninterest expense
(57,878
)
(61,243
)
3,365
(5.5
)%
Provision for income taxes
(11,484
)
(8,557
)
(2,927
)
34.2
%
Net income
$
30,590
$
24,892
$
5,698
22.9
%
Diluted earnings per share
$
0.92
$
0.75
$
0.17
22.7
%
Dividends per share
$
0.30
$
0.30
$
—
—
%
Average common shares
33,263
33,219
44
0.1
%
Average diluted common shares
33,319
33,302
17
0.1
%
Return on average total assets
1.23
%
1.01
%
Return on average equity
10.91
%
8.98
%
Efficiency ratio
55.59
%
58.69
%
Three months ended September
30,
(dollars and shares in thousands, except
per share data)
2023
2022
$ Change
% Change
Net interest income
$
88,123
$
94,106
$
(5,983
)
(6.4
)%
Provision for credit losses
(4,155
)
(3,795
)
(360
)
9.5
%
Noninterest income
15,984
15,640
344
2.2
%
Noninterest expense
(57,878
)
(54,465
)
(3,413
)
6.3
%
Provision for income taxes
(11,484
)
(14,148
)
2,664
(18.8
)%
Net income
$
30,590
$
37,338
$
(6,748
)
(18.1
)%
Diluted earnings per share
$
0.92
$
1.12
$
(0.20
)
(17.9
)%
Dividends per share
$
0.30
$
0.30
$
—
—
%
Average common shares
33,263
33,348
(85
)
(0.3
)%
Average diluted common shares
33,319
33,463
(144
)
(0.4
)%
Return on average total assets
1.23
%
1.46
%
Return on average equity
10.91
%
13.78
%
Efficiency ratio
55.59
%
49.63
%
Nine months ended September
30,
(dollars and shares in thousands)
2023
2022
$ Change
% Change
Net interest income
$
270,060
$
247,076
$
22,984
9.3
%
Provision for credit losses
(18,000
)
(14,225
)
(3,775
)
26.5
%
Noninterest income
45,360
47,166
(1,806
)
(3.8
)%
Noninterest expense
(172,915
)
(157,176
)
(15,739
)
10.0
%
Provision for income taxes
(33,190
)
(33,765
)
575
(1.7
)%
Net income
$
91,315
$
89,076
$
2,239
2.5
%
Diluted earnings per share
$
2.75
$
2.74
$
0.01
0.4
%
Dividends per share
$
0.90
$
0.80
$
0.10
12.5
%
Average common shares
33,259
32,332
927
2.9
%
Average diluted common shares
33,356
32,469
887
2.7
%
Return on average total assets
1.24
%
1.23
%
Return on average equity
11.06
%
11.25
%
Efficiency ratio
54.82
%
53.42
%
Balance Sheet
Total loans outstanding grew to $6.7 billion as of September 30,
2023, an organic based increase of 6.2% over the prior twelve
months. As compared to June 30, 2023, total loans outstanding
increased by $187.9 million or 11.5% annualized. Investments
decreased to $2.33 billion as of September 30, 2023, an annualized
decrease of 12.6% over the prior year quarter end. Quarterly
average earning assets to quarterly total average assets were 91.7%
on September 30, 2023, as compared to 91.6% and 92.0% at December
31, 2022, and September 30, 2022, respectively. The loan-to-deposit
ratio was 83.8% on September 30, 2023, as compared to 80.6% and
73.0% at December 31, 2022, and September 30, 2022, respectively.
During the current year to date period, and throughout the 2022
fiscal year, the Company held no brokered deposits and relied
solely on short-term borrowings to fund cash flow timing
differences.
Total shareholders' equity decreased by $22.4 million during the
quarter ended September 30, 2023, as a result of accumulated other
comprehensive losses increasing by $44.0 million and cash dividend
payments on common stock of approximately $10.0 million, offset by
net income of $30.6 million. As a result, the Company’s book value
was $32.18 per share at September 30, 2023, as compared to $32.86
and $29.71 at December 31, 2022 and September 30, 2022,
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 $22.67 per share at September
30, 2023, as compared to $23.30 and $19.92 at December 31, 2022,
and September 30, 2022, respectively. As noted above, despite the
consistent retention of earnings in each quarter of the Company's
history, recent changes in the balance of unrealized losses on
available-for-sale investment securities, net of deferred taxes,
has been the primary driver of decreases in tangible book value per
share.
Trailing Quarter Balance Sheet Change
Ending balances
September 30,
June 30,
Annualized % Change
(dollars in thousands)
2023
2023
$ Change
Total assets
$
9,897,006
$
9,853,421
$
43,585
1.8
%
Total loans
6,708,666
6,520,740
187,926
11.5
Total investments
2,333,162
2,485,378
(152,216
)
(24.5
)
Total deposits
8,009,643
8,095,365
(85,722
)
(4.2
)
Total other borrowings
$
537,975
$
392,714
$
145,261
148.0
%
Loans outstanding increased by $187.9 million or 11.5% on an
annualized basis during the quarter ended September 30, 2023.
During the quarter, loan originations/draws totaled approximately
$495.0 million while payoffs/repayments of loans totaled $308.0
million, which compares to originations/draws and
payoffs/repayments during the trailing quarter ended of $456.0
million and $356.0 million, respectively. While origination volume
increased from the previous quarter, activity levels continue to be
lower relative to the comparative period in 2022 due in part to
disciplined pricing and underwriting, as well as decreased borrower
appetite at currently offered lending rates. Investment security
balances decreased $152.2 million or 24.5% on an annualized basis
as the result of net prepayments, maturities, and purchases
totaling approximating $89.7 million and net decreases in the
market value of securities of $62.5 million. Management seeks to
utilize excess cash flows from the investment security portfolio to
support loan growth or reduce borrowings thus resulting in an
improved mix of earning assets. Deposit balances decreased by $85.7
million or 4.2% annualized during the period. Funding for the net
cash outflows of loans, investment securities and deposits during
the quarter were supported by a net increase of $145.3 million in
short-term borrowings, which totaled $538.0 million at September
30, 2023.
Average Trailing Quarter Balance Sheet Change
Quarterly average balances for the period
ended
September 30,
June 30,
Annualized % Change
(dollars in thousands)
2023
2023
$ Change
Total assets
$
9,874,240
$
9,848,191
$
26,049
1.1
%
Total loans
6,597,400
6,467,381
130,019
8.0
Total investments
2,429,335
2,525,334
(95,999
)
(15.2
)
Total deposits
8,043,101
7,981,515
61,586
3.1
Total other borrowings
$
449,274
$
477,256
$
(27,982
)
(23.5
)%
Year Over Year Balance Sheet Change
Ending balances
As of September 30,
% Change
(dollars in thousands)
2023
2022
$ Change
Total assets
$
9,897,006
$
9,976,879
$
(79,873
)
(0.8
)%
Total loans
6,708,666
6,314,290
394,376
6.2
Total loans, excluding PPP
6,707,530
6,312,348
395,182
6.3
Total investments
2,333,162
2,668,145
(334,983
)
(12.6
)
Total deposits
8,009,643
8,655,769
(646,126
)
(7.5
)
Total other borrowings
$
537,975
$
47,068
$
490,907
1,043.0
%
Non-PPP loan balances increased as a result of organic
activities by approximately $395.2 million or 6.3% during the
twelve-month period ending September 30, 2023. Over the same period
deposit balances have declined by $646.1 million or 7.5%. The
Company has offset these declines through the deployment of excess
cash balances, runoff of investment security balances, and proceeds
from short-term FHLB borrowings. As of September 30, 2023 and June
30, 2023, short-term borrowings from the FHLB totaled $500.0 and
$394.1 million and had a weighted average interest rate of 5.14 and
5.11%, respectively.
Liquidity
The Company's primary sources of liquidity include the following
for the periods indicated:
(dollars in thousands)
September 30, 2023
June 30, 2023
September 30, 2022
Borrowing capacity at correspondent banks
and FRB
$
2,927,065
$
2,847,052
$
2,720,468
Less: borrowings outstanding
(500,000
)
(350,000
)
—
Unpledged available-for-sale (AFS)
investment securities
1,702,265
1,813,894
2,040,802
Cash held or in transit with FRB
72,049
79,530
199,994
Total primary liquidity
$
4,201,379
$
4,390,476
$
4,961,264
Estimated uninsured deposit balances
$
2,406,552
$
2,522,718
$
2,898,347
At September 30, 2023, the Company's primary sources of
liquidity represented 52.5% of total deposits and 175% of estimated
total uninsured (excluding collateralized municipal deposits and
intercompany balances) deposits, respectively. As secondary sources
of liquidity, the Company's held-to-maturity investment securities
had a fair value of $124.0 million, including approximately $15.0
million in net unrealized losses. The Company did not utilize any
brokered deposits during 2023 or 2022.
Net Interest Income and Net Interest
Margin
During the twelve-month period ended September 30, 2023, the
Federal Open Market Committee's (FOMC) actions have resulted in an
increase in the Fed Funds Rate by approximately 225 basis points.
During the same period the Company's yield on total loans
(excluding PPP) increased 65 basis points to 5.52% for the three
months ended September 30, 2023, from 4.87% for the three months
ended September 30, 2022. Moreover, the tax equivalent yield on the
Company's investment security portfolio was 3.39%, an increase of
70 basis points from the 2.69% for the three months ended September
30, 2022. The cost of total interest-bearing deposits and total
interest-bearing liabilities increased by 128 basis points and 154
basis points, respectively, between the three month periods ended
September 30, 2023 and 2022. Since FOMC rate actions began in March
2022, the Company's cost of total deposits has increased 82 basis
points which translates to a cycle to date deposit beta of
15.6%.
The Company continues to manage its cost of deposits through the
use of various pricing and product mix strategies. As of September
30, 2023, June 30, 2023, and December 31, 2022, deposits priced
utilizing these strategies totaled $1,232.4 million, $1,070.7
million and $579.1 million, respectively, and carried weighted
average rates of 3.53%, 3.38%, and 1.64%, respectively.
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)
2023
2023
Change
% Change
Interest income
$
112,380
$
107,158
$
5,222
4.9
%
Interest expense
(24,257
)
(18,557
)
(5,700
)
30.7
%
Fully tax-equivalent adjustment (FTE)
(1)
405
379
26
6.9
%
Net interest income (FTE)
$
88,528
$
88,980
$
(452
)
(0.5
)%
Net interest margin (FTE)
3.88
%
3.96
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
1,324
$
1,471
$
(147
)
(10.0
)%
Net interest margin less effect of
acquired loan discount accretion(1)
3.82
%
3.89
%
(0.07
)%
PPP loans yield, net:
Amount (included in interest income)
$
2
$
4
$
(2
)
(50.0
)%
Net interest margin less effect of PPP
loan yield (1)
3.88
%
3.96
%
(0.08
)%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
1,326
$
1,475
$
(149
)
(10.1
)%
Net interest margin less effect of
acquired loan discount accretion and PPP loan yield (1)
3.82
%
3.89
%
(0.07
)%
Three months ended September
30,
(dollars in thousands)
2023
2022
Change
% Change
Interest income
$
112,380
$
96,366
$
16,014
16.6
%
Interest expense
(24,257
)
(2,260
)
(21,997
)
973.3
%
Fully tax-equivalent adjustment (FTE)
(1)
405
440
(35
)
(8.0
)%
Net interest income (FTE)
$
88,528
$
94,546
$
(6,018
)
(6.4
)%
Net interest margin (FTE)
3.88
%
4.02
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
1,324
$
714
$
610
85.4
%
Net interest margin less effect of
acquired loan discount accretion(1)
3.82
%
3.99
%
(0.17
)%
PPP loans yield, net:
Amount (included in interest income)
$
2
$
313
$
(311
)
(99.4
)%
Net interest margin less effect of PPP
loan yield (1)
3.88
%
4.02
%
(0.14
)%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
1,326
$
1,027
$
299
29.1
%
Net interest margin less effect of
acquired loan discount accretion and PPP loan yield (1)
3.82
%
3.98
%
(0.16
)%
Nine months ended September
30,
(dollars in thousands)
2023
2022
Change
% Change
Interest income
$
322,445
$
252,516
$
69,929
27.7
%
Interest expense
(52,385
)
(5,440
)
(46,945
)
863.0
%
Fully tax-equivalent adjustment (FTE)
(1)
1,176
1,120
56
5.0
%
Net interest income (FTE)
$
271,236
$
248,196
$
23,040
9.3
%
Net interest margin (FTE)
4.01
%
3.71
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
4,192
$
3,714
$
478
12.9
%
Net interest margin less effect of
acquired loan discount accretion(1)
3.95
%
3.65
%
0.30
%
PPP loans yield, net:
Amount (included in interest income)
$
11
$
2,374
$
(2,363
)
(99.5
)%
Net interest margin less effect of PPP
loan yield (1)
4.01
%
3.69
%
0.32
%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
4,203
$
6,088
$
(1,885
)
(31.0
)%
Net interest margin less effect of
acquired loans discount and PPP loan yield (1)
3.95
%
3.63
%
0.32
%
- 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. 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 2023 as compared to 2022. During the three months ended
September 30, 2023, June 30, 2023, and September 30, 2022,
purchased loan discount accretion was $1.3 million, $1.5 million,
and $0.7 million, 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, 2023
June 30, 2023
September 30, 2022
Average Balance
Income/ Expense
Yield/ Rate
Average Balance
Income/ Expense
Yield/ Rate
Average Balance
Income/ Expense
Yield/ Rate
Assets
Loans, excluding PPP
$
6,596,116
$
91,705
5.52
%
$
6,465,903
$
86,743
5.38
%
$
6,162,267
$
75,643
4.87
%
PPP loans
1,284
2
0.62
%
1,478
4
1.09
%
8,775
313
14.15
%
Investments-taxable
2,246,569
18,990
3.35
%
2,343,511
18,775
3.21
%
2,591,513
17,122
2.62
%
Investments-nontaxable (1)
182,766
1,755
3.81
%
181,823
1,641
3.62
%
210,606
1,908
3.59
%
Total investments
2,429,335
20,745
3.39
%
2,525,334
20,416
3.24
%
2,802,119
19,030
2.69
%
Cash at Federal Reserve and other
banks
26,654
333
4.96
%
29,349
374
5.11
%
346,991
1,820
2.08
%
Total earning assets
9,053,389
112,785
4.94
%
9,022,064
107,537
4.78
%
9,320,152
96,806
4.12
%
Other assets, net
820,851
826,127
810,966
Total assets
$
9,874,240
$
9,848,191
$
10,131,118
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,751,625
$
3,916
0.89
%
$
1,657,714
$
2,173
0.53
%
$
1,775,884
$
119
0.03
%
Savings deposits
2,790,197
9,526
1.35
%
2,768,981
6,936
1.00
%
3,011,145
685
0.09
%
Time deposits
535,715
3,937
2.92
%
426,689
2,348
2.21
%
321,100
188
0.23
%
Total interest-bearing deposits
5,077,537
17,379
1.36
%
4,853,384
11,457
0.95
%
5,108,129
992
0.08
%
Other borrowings
449,274
5,106
4.51
%
477,256
5,404
4.54
%
38,908
5
0.05
%
Junior subordinated debt
101,070
1,772
6.96
%
101,056
1,696
6.73
%
101,011
1,263
4.96
%
Total interest-bearing liabilities
5,627,881
24,257
1.71
%
5,431,696
18,557
1.37
%
5,248,048
2,260
0.17
%
Noninterest-bearing deposits
2,965,564
3,128,131
3,644,086
Other liabilities
168,391
176,141
164,208
Shareholders’ equity
1,112,404
1,112,223
1,074,776
Total liabilities and shareholders’
equity
$
9,874,240
$
9,848,191
$
10,131,118
Net interest rate spread (1) (2)
3.23
%
3.41
%
3.95
%
Net interest income and margin (1) (3)
$
88,528
3.88
%
$
88,980
3.96
%
$
94,546
4.02
%
- Fully taxable equivalent (FTE). All yields and rates are
calculated using specific day counts for the period and year as
applicable.
- Net interest spread is the average yield earned on
interest-earning assets minus the average rate paid on
interest-bearing liabilities.
- 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, 2023, decreased $0.5 million or 0.5% to $88.5 million
compared to $89.0 million during the three months ended June 30,
2023. In addition, net interest margin declined 8 basis points to
3.88%, compared to the trailing quarter. The decrease in net
interest income is primarily attributed to an additional $5.9
million or 24.3% in deposit interest expense due to increases in
interest rates as compared to the trailing quarter. As a partial
offset, total interest income also increased as compared to the
trailing quarter, up $5.2 million or 4.6%.
As compared to the same quarter in the prior year, average loan
yields, excluding PPP, increased 65 basis points from 4.87% during
the three months ended September 30, 2022, to 5.52% during the
three months ended September 30, 2023. The accretion of discounts
from acquired loans added 8 and 5 basis points to loan yields
during the quarters ended September 30, 2023 and September 30,
2022, respectively.
The rates paid on interest bearing deposits increased by 41
basis points during the quarter ended September 30, 2023, compared
to the trailing quarter. The cost of interest-bearing deposits
increased by 128 basis points between the quarter ended September
30, 2023, and the same quarter of the prior year. In addition, the
average balance of noninterest-bearing deposits decreased by $162.6
million quarter over quarter and decreased by $678.5 million from
three month average for the period ended September 30, 2022. As of
September 30, 2023, the ratio of average total noninterest-bearing
deposits to total average deposits was 36.9%, as compared to 39.2%
and 41.6% at June 30, 2023 and September 30, 2022,
respectively.
Nine months ended September 30,
2023
Nine months ended September 30,
2022
Average Balance
Income/ Expense
Yield/ Rate
Average Balance
Income/ Expense
Yield/ Rate
Assets
Loans, excluding PPP
$
6,492,141
$
260,857
5.37
%
$
5,668,055
$
201,245
4.75
%
PPP loans
1,444
11
1.02
%
32,287
2,374
9.83
%
Investments-taxable
2,328,883
56,681
3.25
%
2,487,111
41,695
2.24
%
Investments-nontaxable (1)
184,524
5,096
3.69
%
183,772
4,853
3.53
%
Total investments
2,513,407
61,777
3.29
%
2,670,883
46,548
2.33
%
Cash at Federal Reserve and other
banks
27,606
976
4.73
%
573,252
3,469
0.81
%
Total earning assets
9,034,598
323,621
4.79
%
8,944,477
253,636
3.79
%
Other assets, net
832,501
737,721
Total assets
$
9,867,099
$
9,682,198
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,694,438
$
6,476
0.51
%
$
1,724,787
$
302
0.02
%
Savings deposits
2,818,817
20,616
0.98
%
2,863,447
1,541
0.07
%
Time deposits
413,359
6,889
2.23
%
319,940
676
0.28
%
Total interest-bearing deposits
4,926,614
33,981
0.92
%
4,908,174
2,519
0.07
%
Other borrowings
402,016
13,318
4.43
%
39,609
15
0.05
%
Junior subordinated debt
101,057
5,086
6.73
%
87,804
2,906
4.42
%
Total interest-bearing liabilities
5,429,687
52,385
1.29
%
5,035,587
5,440
0.14
%
Noninterest-bearing deposits
3,153,807
3,435,487
Other liabilities
179,483
152,186
Shareholders’ equity
1,104,122
1,058,938
Total liabilities and shareholders’
equity
$
9,867,099
$
9,682,198
Net interest rate spread (1) (2)
3.50
%
3.65
%
Net interest income and margin (1) (3)
$
271,236
4.01
%
$
248,196
3.71
%
- Fully taxable equivalent (FTE). All yields and rates are
calculated using specific day counts for the period and year as
applicable.
- Net interest spread is the average yield earned on
interest-earning assets minus the average rate paid on
interest-bearing liabilities.
- 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
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, 2023, the Company's loan portfolio consisted of
approximately $6.7 billion in outstanding principal with a weighted
average coupon rate of 5.33%. During the three-month periods ending
September 30, 2023, June 30, 2023, and December 31, 2022, the
weighted average coupon on loan production in the quarter was
7.31%, 6.85%, and 6.05%, respectively. Included in the September
30, 2023 loan total are adjustable rate loans totaling $3.5
billion, of which, $933.0 million are considered floating based on
the Wall Street Prime index. In addition, the Company holds certain
investment securities with fair values totaling $368.9 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, 2023, the Company
recorded a provision for credit losses of $4.2 million, as compared
to $9.7 million during the trailing quarter, and $3.8 million
during the third quarter of 2022.
The following table presents details of the provision for credit
losses for the periods indicated:
Three months ended
Nine months ended
(dollars in thousands)
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Addition to allowance for credit
losses
$
3,120
$
3,500
$
16,415
$
13,645
Addition to reserve for unfunded loan
commitments
1,035
295
1,585
580
Total provision for credit losses
$
4,155
$
3,795
$
18,000
$
14,225
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, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Balance, beginning of period
$
117,329
$
97,944
$
105,680
$
85,376
ACL at acquisition for PCD loans
—
—
—
2,037
Provision for credit losses
3,120
3,500
16,415
13,645
Loans charged-off
(5,357
)
(267
)
(7,392
)
(1,411
)
Recoveries of previously charged-off
loans
720
311
1,109
1,841
Balance, end of period
$
115,812
$
101,488
$
115,812
$
101,488
The allowance for credit losses (ACL) was $115.8 million or
1.73% of total loans as of September 30, 2023. The provision for
credit losses on loans of $3.1 million during the recent quarter
was the net effect of charge-offs associated with the disposition
of a previously reserved for and individually analyzed relationship
of credits, partially offset by increases in reserves for
qualitative factors and quantitative reserves under the cohort
model from loan growth. On a comparative basis, the provision for
credit losses of $3.5 million during the three months ended
September 30, 2022, was largely the result of loan growth. For the
current quarter, the qualitative components of the ACL resulted in
a net increase in required reserves totaling approximately $2.5
million due primarily to softening of the California employment
data. Meanwhile, the quantitative component of the ACL decreased
reserve requirements by approximately $1.5 million over the
trailing quarter primarily due to decreases in specific reserves,
offset partially by increases attributed to loan growth.
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 includes 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. Despite continued
declines on a year over year comparative basis, core inflation
remains elevated from wage pressures, and higher living costs such
as housing, energy and food prices. Management notes the rapid
intervals of rate increases by the Federal Reserve and flattening
or inversion of the yield curve, have informed expectations of the
US entering a recession within 12 months. As a result, management
continues to believe that certain credit weaknesses 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 $1.4 million during
the quarter ended September 30, 2023, to $8.1 million, as compared
to $9.5 million at June 30, 2023. Non-performing loans were $29.8
million at September 30, 2023, a decrease of $7.8 million from
$37.6 million as of June 30, 2023, and an increase of $12.3 million
from $17.5 million as of September 30, 2022. Of the $29.8 million
loans designated as non-performing as of September 30, 2023,
approximately $26.6 million are current with respect to payments
required under their original loan agreements.
The following table illustrates the total loans by risk rating
and their respective percentage of total loans for the periods
presented:
September 30,
% of Loans Outstanding
June 30,
% of Loans Outstanding
September 30,
% of Loans Outstanding
(dollars in thousands)
2023
2023
2022
Risk Rating:
Pass
$
6,532,424
97.4
%
$
6,299,893
96.6
%
$
6,133,805
97.1
%
Special Mention
94,614
1.4
%
155,678
2.4
%
126,273
2.0
%
Substandard
81,628
1.2
%
65,169
1.0
%
54,212
0.9
%
Total
$
6,708,666
$
6,520,740
$
6,314,290
Classified loans to total loans
1.22
%
1.00
%
0.86
%
Loans past due 30+ days to total loans
0.12
%
0.15
%
0.10
%
The ratio of classified loans of 1.22% as of September 30, 2023
increased 22 basis points from June 30, 2023 and increased 36 basis
points from the comparative quarter ended 2022. The newly
classified credits are spread amongst several CRE and agriculture
relationships. As a percentage of total loans outstanding,
classified assets are consistent with volumes experienced prior to
the recent quantitative easing cycle spurred by the COVID pandemic,
and reflects management's historically conservative approach to
credit risk monitoring. The Company's combined criticized loan
balances improved during the quarter by $44.6 million to $176.2
million as of September 30, 2023. This improvement was driven by
upgrades in several CRE borrower relationships, as well as the
disposition of a credit relationship referenced above.
There was one property added and one disposed within Other Real
Estate Owned during the third quarter of 2023. As of September 30,
2023, other real estate owned consisted of nine properties with a
carrying value of approximately $2.9 million.
Non-performing assets of $32.7 million at September 30, 2023,
represented 0.33% of total assets, a change from the $40.5 million
or 0.41% and $20.9 million or 0.21% as of June 30, 2023 and
September 30, 2022, respectively.
Allocation of Credit Loss Reserves by
Loan Type
As of September 30, 2023
As of June 30, 2023
As of September 30, 2022
(dollars in thousands)
Amount
% of Loans Outstanding
Amount
% of Loans Outstanding
Amount
% of Loans Outstanding
Commercial real estate:
CRE - Non Owner Occupied
$
33,723
1.55
%
$
33,042
1.54
%
$
29,244
1.42
%
CRE - Owner Occupied
14,503
1.51
%
20,208
2.08
%
13,525
1.39
%
Multifamily
14,239
1.48
%
14,075
1.48
%
12,749
1.36
%
Farmland
4,210
1.51
%
3,691
1.33
%
3,122
1.12
%
Total commercial real estate loans
66,675
1.53
%
71,016
1.63
%
58,640
1.38
%
Consumer:
SFR 1-4 1st Liens
13,535
1.56
%
13,134
1.58
%
10,671
1.39
%
SFR HELOCs and Junior Liens
10,163
2.88
%
10,608
2.92
%
11,383
2.89
%
Other
2,920
4.44
%
2,771
4.67
%
1,878
3.23
%
Total consumer loans
26,618
2.07
%
26,513
2.12
%
23,932
1.97
%
Commercial and Industrial
12,290
2.05
%
11,647
2.02
%
10,400
1.94
%
Construction
8,097
2.52
%
7,031
2.53
%
6,132
2.52
%
Agricultural Production
2,125
1.72
%
1,105
1.80
%
2,368
3.31
%
Leases
7
0.09
%
17
0.20
%
16
0.20
%
Allowance for credit losses
115,812
1.73
%
117,329
1.80
%
101,488
1.61
%
Reserve for unfunded loan commitments
5,900
4,865
4,370
Total allowance for credit losses
$
121,712
1.81
%
$
122,194
1.87
%
$
105,858
1.68
%
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, 2023, the unamortized discount
associated with acquired loans totaled $26.1 million.
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, 2023
June 30, 2023
Change
% Change
ATM and interchange fees
$
6,728
$
6,856
$
(128
)
(1.9
)%
Service charges on deposit accounts
4,851
4,581
270
5.9
%
Other service fees
1,142
992
150
15.1
%
Mortgage banking service fees
445
454
(9
)
(2.0
)%
Change in value of mortgage servicing
rights
(91
)
85
(176
)
(207.1
)%
Total service charges and fees
13,075
12,968
107
0.8
%
Increase in cash value of life
insurance
684
788
(104
)
(13.2
)%
Asset management and commission income
1,141
1,158
(17
)
(1.5
)%
Gain on sale of loans
382
295
87
29.5
%
Lease brokerage income
160
74
86
116.2
%
Sale of customer checks
396
407
(11
)
(2.7
)%
Loss on sale of investment securities
—
—
—
—
%
(Loss) gain on marketable equity
securities
(81
)
(42
)
(39
)
92.9
%
Other income
227
93
134
144.1
%
Total other non-interest income
2,909
2,773
136
4.9
%
Total non-interest income
$
15,984
$
15,741
$
243
1.5
%
Non-interest income increased $0.2 million or 1.5% to $16.0
million during the three months ended September 30, 2023, compared
to $15.7 million during the quarter ended June 30, 2023. Service
charges on deposit accounts increased by $0.3 million or 5.9%
resulting from improved profitability on commercial deposit account
activity.
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)
2023
2022
Change
% Change
ATM and interchange fees
$
6,728
$
6,714
$
14
0.2
%
Service charges on deposit accounts
4,851
4,436
415
9.4
%
Other service fees
1,142
1,022
120
11.7
%
Mortgage banking service fees
445
477
(32
)
(6.7
)%
Change in value of mortgage servicing
rights
(91
)
33
(124
)
(375.8
)%
Total service charges and fees
13,075
12,682
393
3.1
%
Increase in cash value of life
insurance
684
659
25
3.8
%
Asset management and commission income
1,141
1,020
121
11.9
%
Gain on sale of loans
382
357
25
7.0
%
Lease brokerage income
160
252
(92
)
(36.5
)%
Sale of customer checks
396
326
70
21.5
%
Loss on sale of investment securities
—
—
—
—
%
Loss on marketable equity securities
(81
)
(115
)
34
(29.6
)%
Other income
227
459
(232
)
(50.5
)%
Total other non-interest income
2,909
2,958
(49
)
(1.7
)%
Total non-interest income
$
15,984
$
15,640
$
344
2.2
%
Non-interest income decreased $0.3 million or 2.2% to $16.0
million during the three months ended September 30, 2023, compared
to $15.6 million during the quarter ended September 30, 2022.
Service charges on deposit accounts increased by $0.4 million or
9.4% for the same reasons noted above.
Nine months ended September
30,
(dollars in thousands)
2023
2022
Change
% Change
ATM and interchange fees
$
19,928
$
19,941
$
(13
)
(0.1
)%
Service charges on deposit accounts
12,863
12,433
430
3.5
%
Other service fees
3,300
3,183
117
3.7
%
Mortgage banking service fees
1,364
1,422
(58
)
(4.1
)%
Change in value of mortgage servicing
rights
(215
)
443
(658
)
(148.5
)%
Total service charges and fees
37,240
37,422
(182
)
(0.5
)%
Increase in cash value of life
insurance
2,274
2,049
225
11.0
%
Asset management and commission income
3,233
2,946
287
9.7
%
Gain on sale of loans
883
2,145
(1,262
)
(58.8
)%
Lease brokerage income
332
648
(316
)
(48.8
)%
Sale of customer checks
1,091
871
220
25.3
%
Loss on sale of investment securities
(164
)
—
(164
)
n/m
Loss on marketable equity securities
(81
)
(346
)
265
(76.6
)%
Other income
552
1,431
(879
)
(61.4
)%
Total other non-interest income
8,120
9,744
(1,624
)
(16.7
)%
Total non-interest income
$
45,360
$
47,166
$
(1,806
)
(3.8
)%
Non-interest income decreased $1.8 million or 3.8% to $45.4
million during the nine months ended September 30, 2023, as
compared to $47.2 million during the nine months ended September
30, 2022. Mortgage origination related activity has declined year
over year from elevated interest rates, as the income recorded from
the sale of loans is down $1.3 million or 58.8%. Changes in
interest rates also led to a decline in fair value of mortgage
servicing rights during the nine months ended September 30, 2023 ,
which decreased by $0.7 million or 148.5%, as compared to the
trailing nine month period ended. Other income declined $0.9
million or 61.4%, $0.3 million of which is attributed to fair value
changes associated with retirement plans, with a corresponding
offset being included within benefits and other compensation
costs.
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, 2023
June 30, 2023
Change
% Change
Base salaries, net of deferred loan
origination costs
$
23,616
$
24,059
$
(443
)
(1.8
)%
Incentive compensation
4,391
4,377
14
0.3
%
Benefits and other compensation costs
6,456
6,278
178
2.8
%
Total salaries and benefits expense
34,463
34,714
(251
)
(0.7
)%
Occupancy
3,948
3,991
(43
)
(1.1
)%
Data processing and software
5,246
4,638
608
13.1
%
Equipment
1,503
1,436
67
4.7
%
Intangible amortization
1,590
1,656
(66
)
(4.0
)%
Advertising
881
1,016
(135
)
(13.3
)%
ATM and POS network charges
1,606
1,902
(296
)
(15.6
)%
Professional fees
1,752
1,985
(233
)
(11.7
)%
Telecommunications
567
809
(242
)
(29.9
)%
Regulatory assessments and insurance
1,194
1,993
(799
)
(40.1
)%
Postage
306
311
(5
)
(1.6
)%
Operational loss
474
1,090
(616
)
(56.5
)%
Courier service
492
483
9
1.9
%
Gain on sale or acquisition of foreclosed
assets
(152
)
—
(152
)
n/m
Loss on disposal of fixed assets
4
18
(14
)
(77.8
)%
Other miscellaneous expense
4,004
5,201
(1,197
)
(23.0
)%
Total other non-interest expense
23,415
26,529
(3,114
)
(11.7
)%
Total non-interest expense
$
57,878
$
61,243
$
(3,365
)
(5.5
)%
Average full-time equivalent staff
1,215
1,210
5
0.4
%
Non-interest expense for the quarter ended September 30, 2023,
decreased $3.4 million or 5.5% to $57.9 million as compared to
$61.2 million during the trailing quarter ended June 30, 2023. Data
processing and software expenses increased by $0.6 million or 13.1%
related to ongoing investments in the Company's data management and
security infrastructure. Regulatory assessments decreased by $0.8
million or 40.1% to a normalized quarterly assessment following
additional charges incurred in the prior quarter. Management
anticipates that these costs may increase further if the economic
environment in which the Company operates deteriorates further.
Operational losses also decreased by $0.6 million or 56.5% during
the quarter, in-line with historical periods. Other miscellaneous
expenses decreased by $1.2 million or 23.0%, following
non-recurring costs in the prior quarter associated with an
estimated $0.8 million in refunds to customers previously charged
non-sufficient funds fees as well as an absence in the current
period of provision expense on real estate owned of $0.5 million in
the trailing quarter.
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)
2023
2022
Change
% Change
Base salaries, net of deferred loan
origination costs
$
23,616
$
22,377
$
1,239
5.5
%
Incentive compensation
4,391
4,832
(441
)
(9.1
)%
Benefits and other compensation costs
6,456
6,319
137
2.2
%
Total salaries and benefits expense
34,463
33,528
935
2.8
%
Occupancy
3,948
3,965
(17
)
(0.4
)%
Data processing and software
5,246
3,449
1,797
52.1
%
Equipment
1,503
1,422
81
5.7
%
Intangible amortization
1,590
1,702
(112
)
(6.6
)%
Advertising
881
990
(109
)
(11.0
)%
ATM and POS network charges
1,606
1,694
(88
)
(5.2
)%
Professional fees
1,752
1,172
580
49.5
%
Telecommunications
567
575
(8
)
(1.4
)%
Regulatory assessments and insurance
1,194
828
366
44.2
%
Postage
306
287
19
6.6
%
Operational loss
474
492
(18
)
(3.7
)%
Courier service
492
497
(5
)
(1.0
)%
Gain on sale or acquisition of foreclosed
assets
(152
)
(148
)
(4
)
2.7
%
Loss on disposal of fixed assets
4
4
—
—
%
Other miscellaneous expense
4,004
4,008
(4
)
(0.1
)%
Total other non-interest expense
23,415
20,937
2,478
11.8
%
Total non-interest expense
$
57,878
$
54,465
$
3,413
6.3
%
Average full-time equivalent staff
1,215
1,198
17
1.4
%
Non-interest expense increased $3.4 million or 6.3% to $57.9
million during the three months ended September 30, 2023, as
compared to $54.5 million for the quarter ended September 30, 2022.
Total salaries and benefits expense increased by $0.9 million or
2.8% to $34.5 million, largely from a net increase of 17 full-time
equivalent positions as well as annual merit increases effective in
March, 2023. Data processing and software expenses increased by
$1.8 million or 52.1% consist with the discussion above. The
increase in professional fees of $0.6 million was directly
associated with third party contract negotiation assistance, the
benefits of which will be realized in future periods.
Nine months ended September
30,
(dollars in thousands)
2023
2022
Change
% Change
Base salaries, net of deferred loan
origination costs
$
70,675
$
62,762
$
7,913
12.6
%
Incentive compensation
11,663
11,697
(34
)
(0.3
)%
Benefits and other compensation costs
19,402
18,782
620
3.3
%
Total salaries and benefits expense
101,740
93,241
8,499
9.1
%
Occupancy
12,099
11,536
563
4.9
%
Data processing and software
13,916
10,558
3,358
31.8
%
Equipment
4,322
4,208
114
2.7
%
Intangible amortization
4,902
4,632
270
5.8
%
Advertising
2,656
2,445
211
8.6
%
ATM and POS network charges
5,217
4,850
367
7.6
%
Professional fees
5,326
3,281
2,045
62.3
%
Telecommunications
1,971
1,660
311
18.7
%
Regulatory assessments and insurance
3,979
2,327
1,652
71.0
%
Merger and acquisition expenses
—
6,253
(6,253
)
(100.0
)%
Postage
916
828
88
10.6
%
Operational loss
1,999
765
1,234
161.3
%
Courier service
1,314
1,397
(83
)
(5.9
)%
Gain on sale or acquisition of foreclosed
assets
(152
)
(246
)
94
(38.2
)%
Loss (gain) on disposal of fixed
assets
22
(1,069
)
1,091
(102.1
)%
Other miscellaneous expense
12,688
10,510
2,178
20.7
%
Total other non-interest expense
71,175
63,935
7,240
11.3
%
Total non-interest expense
$
172,915
$
157,176
$
15,739
10.0
%
Average full-time equivalent staff
1,215
1,155
60
5.2
%
Total non-interest expense increased $15.7 million or 10.0% to
$172.9 million during the nine months ended September 30, 2023, as
compared to $157.2 million for the comparative period in 2022, for
reasons primarily associated with the acquisition of Valley
Republic Bank in March of 2022 which resulted in expense increases
for nearly every identified category. Merger and acquisition
expenses associated with this acquisition totaled $6.2 million for
the nine-month period ended 2022. The reasons for additional and
more specific changes in various costs identified above, and
including but not limited to data processing, regulatory
assessments, operational losses and other miscellaneous expenses
are consistent with the discussions provided above for the most
recent three months ended September 30, 2023 as compared with the
trailing quarter ended June 30, 2023.
Provision for Income
Taxes
The Company’s effective tax rate was 27.3% for the quarter ended
September 30, 2023, as compared to 25.6% for the period ended June
30, 2023, and 28.1% for the year ended December 31, 2022.
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
Statements
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. 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 conditions 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; the impacts of 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; regulatory
restrictions affecting 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 the Company's
customers and the economic and business environments in which the
Company operates; the impact of a slowing U.S. economy and
potentially increased unemployment on the performance of our loan
portfolio, the market value of our investment securities and
possible other-than-temporary impairment of securities held by us
due to changes in credit quality or rates; the availability of, and
cost 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; adverse developments in the financial services industry
generally such as the recent bank failures and any related impact
on depositor behavior or investor sentiment; risks related to the
sufficiency of liquidity; the possibility that our recorded
goodwill could become impaired, which may have an adverse impact on
our earnings and capital; 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 activities, or identify and complete favorable
transactions in the future, and/or realize the anticipated
financial and business benefits; 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 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 assumptions made under our 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 managing the mix of earning
assets and 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; 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; increasing noninterest expense and its impact
on our financial performance; competition and innovation with
respect to financial products and services by banks, financial
institutions and non-traditional competitors including retail
businesses and technology companies; the challenges of attracting,
integrating and retaining key employees; 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 and respond to such incidents; the
impact of the recent cyber security ransomware incident on our
operations and reputation; increased data security risks due to
work from home arrangements and email vulnerability; failure to
safeguard personal information, and any resulting litigation; the
effect of a fall in stock market prices on our brokerage and wealth
management businesses; the transition from the LIBOR to new
interest rate benchmarks; the costs and effects of litigation and
of unexpected or adverse outcomes in such litigation; and our
ability to manage the risks involved in the foregoing. There can be
no assurance that future developments affecting us will be the same
as those anticipated by management. 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, 2022, 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, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
Revenue and Expense Data
Interest income
$
112,380
$
107,158
$
102,907
$
102,989
$
96,366
Interest expense
24,257
18,557
9,571
4,089
2,260
Net interest income
88,123
88,601
93,336
98,900
94,106
Provision for credit losses
4,155
9,650
4,195
4,245
3,795
Noninterest income:
Service charges and fees
13,075
12,968
11,197
12,343
12,682
Loss on sale of investment securities
—
—
(164
)
—
—
Other income
2,909
2,773
2,602
3,537
2,958
Total noninterest income
15,984
15,741
13,635
15,880
15,640
Noninterest expense:
Salaries and benefits
34,463
34,714
32,563
36,611
33,528
Occupancy and equipment
5,451
5,427
5,543
5,482
5,387
Data processing and network
6,852
6,540
5,741
6,236
5,143
Other noninterest expense
11,112
14,562
9,947
11,140
10,407
Total noninterest expense
57,878
61,243
53,794
59,469
54,465
Total income before taxes
42,074
33,449
48,982
51,066
51,486
Provision for income taxes
11,484
8,557
13,149
14,723
14,148
Net income
$
30,590
$
24,892
$
35,833
$
36,343
$
37,338
Share Data
Basic earnings per share
$
0.92
$
0.75
$
1.08
$
1.09
$
1.12
Diluted earnings per share
$
0.92
$
0.75
$
1.07
$
1.09
$
1.12
Dividends per share
$
0.30
$
0.30
$
0.30
$
0.30
$
0.30
Book value per common share
$
32.18
$
32.86
$
32.84
$
31.39
$
29.71
Tangible book value per common share
(1)
$
22.67
$
23.30
$
23.22
$
21.76
$
19.92
Shares outstanding
33,263,324
33,259,260
33,195,250
33,331,513
33,332,189
Weighted average shares
33,262,798
33,219,168
33,295,750
33,330,029
33,348,322
Weighted average diluted shares
33,319,291
33,301,548
33,437,680
33,467,393
33,463,364
Credit Quality
Allowance for credit losses to gross
loans
1.73
%
1.80
%
1.69
%
1.64
%
1.61
%
Loans past due 30 days or more
$
8,072
$
9,483
$
7,891
$
4,947
$
6,471
Total nonperforming loans
$
29,799
$
37,592
$
16,025
$
21,321
$
17,471
Total nonperforming assets
$
32,651
$
40,506
$
19,464
$
24,760
$
20,912
Loans charged-off
$
5,357
$
276
$
1,758
$
174
$
267
Loans recovered
$
720
$
218
$
170
$
66
$
311
Selected Financial Ratios
Return on average total assets
1.23
%
1.01
%
1.47
%
1.45
%
1.46
%
Return on average equity
10.91
%
8.98
%
13.36
%
14.19
%
13.78
%
Average yield on loans, excluding PPP
5.52
%
5.38
%
5.21
%
5.10
%
4.87
%
Average yield on interest-earning
assets
4.94
%
4.78
%
4.64
%
4.52
%
4.12
%
Average rate on interest-bearing
deposits
1.36
%
0.95
%
0.43
%
0.18
%
0.08
%
Average cost of total deposits
0.86
%
0.58
%
0.25
%
0.10
%
0.04
%
Average cost of total deposits and other
borrowings
1.05
%
0.80
%
0.38
%
0.12
%
0.04
%
Average rate on borrowings &
subordinated debt
4.96
%
4.92
%
4.74
%
4.07
%
3.60
%
Average rate on interest-bearing
liabilities
1.71
%
1.37
%
0.74
%
0.32
%
0.17
%
Net interest margin (fully tax-equivalent)
(1)
3.88
%
3.96
%
4.21
%
4.34
%
4.02
%
Loans to deposits
83.76
%
80.55
%
80.02
%
77.45
%
72.95
%
Efficiency ratio
55.59
%
58.69
%
50.29
%
51.81
%
49.63
%
Supplemental Loan Interest Income
Data
Discount accretion on acquired loans
$
1,324
$
1,471
$
1,397
$
1,751
$
714
All other loan interest income (excluding
PPP) (1)
$
90,381
$
85,272
$
81,013
$
79,989
$
74,929
Total loan interest income (excluding PPP)
(1)
$
91,705
$
86,743
$
82,410
$
81,740
$
75,643
(1) Non-GAAP measure
TRICO BANCSHARES—CONDENSED
CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in
thousands)
Balance Sheet Data
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
Cash and due from banks
$
111,099
$
118,792
$
110,335
$
107,230
$
246,509
Securities, available for sale, net
2,176,854
2,323,011
2,408,452
2,455,036
2,482,857
Securities, held to maturity, net
139,058
145,117
152,067
160,983
168,038
Restricted equity securities
17,250
17,250
17,250
17,250
17,250
Loans held for sale
644
1,058
226
1,846
247
Loans:
Commercial real estate
4,367,445
4,343,924
4,353,959
4,359,083
4,238,930
Consumer
1,288,810
1,252,225
1,233,797
1,240,743
1,217,297
Commercial and industrial
599,757
576,247
553,098
569,921
534,960
Construction
320,963
278,425
225,996
211,560
243,571
Agriculture production
123,472
61,337
47,062
61,414
71,599
Leases
8,219
8,582
8,509
7,726
7,933
Total loans, gross
6,708,666
6,520,740
6,422,421
6,450,447
6,314,290
Allowance for credit losses
(115,812
)
(117,329
)
(108,407
)
(105,680
)
(101,488
)
Total loans, net
6,592,854
6,403,411
6,314,014
6,344,767
6,212,802
Premises and equipment
71,760
72,619
72,096
72,327
73,266
Cash value of life insurance
136,016
135,332
134,544
133,742
132,933
Accrued interest receivable
34,595
32,835
31,388
31,856
27,070
Goodwill
304,442
304,442
304,442
304,442
307,942
Other intangible assets
11,768
13,358
15,014
16,670
18,372
Operating leases, right-of-use
27,363
29,140
30,000
26,862
26,622
Other assets
273,303
257,056
252,566
257,975
262,971
Total assets
$
9,897,006
$
9,853,421
$
9,842,394
$
9,930,986
$
9,976,879
Deposits:
Noninterest-bearing demand deposits
$
2,857,512
$
3,073,353
$
3,236,696
$
3,502,095
$
3,678,202
Interest-bearing demand deposits
1,746,882
1,751,998
1,635,706
1,718,541
1,749,123
Savings deposits
2,816,816
2,778,118
2,807,796
2,884,378
2,924,674
Time certificates
588,433
491,896
345,667
223,999
303,770
Total deposits
8,009,643
8,095,365
8,025,865
8,329,013
8,655,769
Accrued interest payable
6,688
3,655
1,643
1,167
853
Operating lease liability
29,527
31,377
32,228
29,004
28,717
Other liabilities
141,692
136,464
157,222
159,741
153,110
Other borrowings
537,975
392,714
434,140
264,605
47,068
Junior subordinated debt
101,080
101,065
101,051
101,040
101,024
Total liabilities
8,826,605
8,760,640
8,752,149
8,884,570
8,986,541
Common stock
696,369
695,305
695,168
697,448
696,348
Retained earnings
599,448
578,852
564,538
542,873
516,699
Accum. other comprehensive loss, net of
tax
(225,416
)
(181,376
)
(169,461
)
(193,905
)
(222,709
)
Total shareholders’ equity
$
1,070,401
$
1,092,781
$
1,090,245
$
1,046,416
$
990,338
Quarterly Average Balance Data
Average loans, excluding PPP
$
6,596,116
$
6,465,903
$
6,412,386
$
6,357,250
$
6,162,267
Average interest-earning assets
$
9,053,389
$
9,022,064
$
9,028,061
$
9,076,450
$
9,320,152
Average total assets
$
9,874,240
$
9,848,191
$
9,878,927
$
9,932,931
$
10,131,118
Average deposits
$
8,043,101
$
7,981,515
$
8,218,576
$
8,545,172
$
8,752,215
Average borrowings and subordinated
debt
$
550,344
$
578,312
$
378,676
$
186,957
$
139,919
Average total equity
$
1,112,404
$
1,112,223
$
1,087,473
$
1,016,468
$
1,074,776
Capital Ratio Data
Total risk-based capital ratio
14.5
%
14.5
%
14.5
%
14.2
%
14.0
%
Tier 1 capital ratio
12.7
%
12.7
%
12.7
%
12.4
%
12.2
%
Tier 1 common equity ratio
12.0
%
12.0
%
12.0
%
11.7
%
11.4
%
Tier 1 leverage ratio
10.6
%
10.4
%
10.2
%
10.1
%
9.6
%
Tangible capital ratio (1)
7.9
%
8.1
%
8.1
%
7.6
%
6.9
%
(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, 2023
June 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Net interest margin
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
1,324
$
1,471
$
714
$
4,192
$
3,714
Effect on average loan yield
0.08
%
0.09
%
0.05
%
0.09
%
0.09
%
Effect on net interest margin (FTE)
0.06
%
0.07
%
0.03
%
0.06
%
0.06
%
Net interest margin (FTE)
3.88
%
3.96
%
4.02
%
4.01
%
3.71
%
Net interest margin less effect of
acquired loan discount accretion (Non-GAAP)
3.82
%
3.89
%
3.99
%
3.95
%
3.65
%
PPP loans yield, net:
Amount (included in interest income)
$
2
$
4
$
313
$
11
$
2,374
Effect on net interest margin (FTE)
—
%
—
%
0.01
%
—
%
0.02
%
Net interest margin less effect of PPP
loan yield (Non-GAAP)
3.88
%
3.96
%
4.02
%
4.01
%
3.69
%
Acquired loan discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
1,326
$
1,475
$
1,027
$
4,203
$
6,088
Effect on net interest margin (FTE)
0.06
%
0.07
%
0.04
%
0.06
%
0.08
%
Net interest margin less effect of
acquired loan discount accretion and PPP yields, net (Non-GAAP)
3.82
%
3.89
%
3.98
%
3.95
%
3.63
%
Three months ended
Nine months ended
(dollars in thousands)
September 30, 2023
June 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Pre-tax pre-provision return on average
assets or equity
Net income (GAAP)
$
30,590
$
24,892
$
37,338
$
91,315
$
89,076
Exclude provision for income taxes
11,484
8,557
14,148
33,190
33,765
Exclude provision for credit losses
4,155
9,650
3,795
18,000
14,225
Net income before income tax and provision
expense (Non-GAAP)
$
46,229
$
43,099
$
55,281
$
142,505
$
137,066
Average assets (GAAP)
$
9,874,240
$
9,848,191
$
10,131,118
$
9,867,099
$
9,682,198
Average equity (GAAP)
$
1,112,404
$
1,112,223
$
1,074,776
$
1,104,122
$
1,058,938
Return on average assets (GAAP)
(annualized)
1.23
%
1.01
%
1.46
%
1.24
%
1.23
%
Pre-tax pre-provision return on average
assets (Non-GAAP) (annualized)
1.86
%
1.76
%
2.16
%
1.93
%
1.89
%
Return on average equity (GAAP)
(annualized)
10.91
%
8.98
%
13.78
%
11.06
%
11.25
%
Pre-tax pre-provision return on average
equity (Non-GAAP) (annualized)
16.49
%
15.54
%
20.41
%
17.26
%
17.31
%
Three months ended
Nine months ended
(dollars in thousands)
September 30, 2023
June 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Return on tangible common
equity
Average total shareholders' equity
$
1,112,404
$
1,112,223
$
1,074,776
$
1,104,122
$
1,058,938
Exclude average goodwill
304,442
304,442
307,942
304,442
281,151
Exclude average other intangibles
12,563
14,716
19,433
14,219
17,717
Average tangible common equity
(Non-GAAP)
$
795,399
$
793,065
$
747,401
$
785,461
$
760,070
Net income (GAAP)
$
30,590
$
24,892
$
37,338
$
91,315
$
89,076
Exclude amortization of intangible assets,
net of tax effect
1,120
1,166
1,199
3,453
3,263
Tangible net income available to common
shareholders (Non-GAAP)
$
31,710
$
26,058
$
38,537
$
94,768
$
92,339
Return on average equity
10.91
%
8.98
%
13.78
%
11.06
%
11.25
%
Return on average tangible common equity
(Non-GAAP)
15.82
%
13.18
%
20.46
%
16.13
%
16.24
%
Three months ended
(dollars in thousands)
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
Tangible shareholders' equity to
tangible assets
Shareholders' equity (GAAP)
$
1,070,401
$
1,092,781
$
1,090,245
$
1,046,416
$
990,338
Exclude goodwill and other intangible
assets, net
316,210
317,800
319,456
321,112
326,314
Tangible shareholders' equity
(Non-GAAP)
$
754,191
$
774,981
$
770,789
$
725,304
$
664,024
Total assets (GAAP)
$
9,897,006
$
9,853,421
$
9,842,394
$
9,930,986
$
9,976,879
Exclude goodwill and other intangible
assets, net
316,210
317,800
319,456
321,112
326,314
Total tangible assets (Non-GAAP)
$
9,580,796
$
9,535,621
$
9,522,938
$
9,609,874
$
9,650,565
Shareholders' equity to total assets
(GAAP)
10.82
%
11.09
%
11.08
%
10.54
%
9.93
%
Tangible shareholders' equity to tangible
assets (Non- GAAP)
7.87
%
8.13
%
8.09
%
7.55
%
6.88
%
Three months ended
(dollars in thousands)
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
Tangible common shareholders' equity
per share
Tangible shareholders' equity
(Non-GAAP)
$
754,191
$
774,981
$
770,789
$
725,304
$
664,024
Common shares outstanding at end of
period
33,263,324
33,259,260
33,195,250
33,331,513
33,332,189
Common shareholders' equity (book value)
per share (GAAP)
$
32.18
$
32.86
$
32.84
$
31.39
$
29.71
Tangible common shareholders' equity
(tangible book value) per share (Non-GAAP)
$
22.67
$
23.30
$
23.22
$
21.76
$
19.92
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025526893/en/
Peter G. Wiese, EVP & CFO, (530) 898-0300
TriCo Bancshares (NASDAQ:TCBK)
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