TriCo Bancshares Announces First Quarter 2022 Results

Notable Items for First Quarter 2022

  • Completed the merger and system conversion of Valley Republic Bancorp ("VRB") effective March 25, 2022
  • Organic loan growth, excluding PPP, for the quarter of $187.9 million or 15.5% annualized
  • Increase in net interest margin less acquired loan discount accretion and PPP loan yield of 0.04% to 3.29%
  • Quarterly pre-tax pre-provision net revenues of $36.6 million, inclusive of $4.0 million in merger expenses, as compared to $39.6 million, inclusive of $0.9 million in merger expenses, in the trailing quarter and $40.9 million in the same quarter of the prior year
  • A reduction in nonperforming assets of $15.9 million or 48.4% to $17.0 million

"With the legal close, system conversion and substantially all of the integration of the merger behind us, our banking team can be fully focused on growth across our California footprint", noted Rick Smith, President and Chief Executive Officer. Peter Wiese, EVP and Chief Financial Officer added, "Financially speaking, there are a number of metrics that began moving in our favor during late December and we believe those positive trends continued into the first quarter of 2022, the results of which are evidenced in the financial metrics that we have the pleasure of sharing with you today."

CHICO, Calif.--()--TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $20,374,000 for the quarter ended March 31, 2022, compared to $28,222,000 during the trailing quarter ended December 31, 2021, and $33,649,000 during the quarter ended March 31, 2021. Diluted earnings per share were $0.67 for the first quarter of 2022, compared to $0.94 for the fourth quarter of 2021 and $1.13 for the first quarter of 2021.

Financial Highlights

Performance highlights and other developments for the Company as of or for the three months ended March 31, 2022, included the following:

  • For the three months ended March 31, 2022, the Company’s return on average assets was 0.94%, and the return on average equity was 8.19%.
  • Organic loan growth, excluding PPP and acquired loans, totaled $187.9 million (15.5% annualized) for the current quarter and $437.3 million (9.5% annualized) for the trailing twelve-month period.
  • For the current quarter, net interest margin, less effect of acquired loan discount accretion and PPP yields (non-GAAP), on a tax equivalent basis was 3.29%, an increase of 4 basis points from 3.25% in the trailing quarter.
  • The efficiency ratio was 55.95% for the three months ended March 31, 2022, as compared to 54.10% for the trailing quarter.
  • As of March 31, 2022, the Company reported total loans, total assets and total deposits of $5.9 billion, $10.1 billion and $8.7 billion, respectively. As a direct result of significant deposit growth in the last year, the loan to deposit ratio has declined to 67.15% as of March 31, 2022, as compared to 72.37% at March 31, 2021.
  • The average rate of interest paid on deposits, including non-interest-bearing deposits, equaled 0.04% during the first quarter of 2022, consistent with 0.04% during the trailing quarter, and representing a decrease of 2 basis points from the average rate paid of 0.06% during the same quarter of the prior year.
  • Noninterest income related to service charges and fees was $11.7 million for the three month period ended March 31, 2022, an increase of 11.6% when compared to the same period in 2021.
  • The provision for credit losses for loans and debt securities was approximately $8.3 million during the quarter ended March 31, 2022, as compared to a provision expense of $1.0 million during the trailing quarter ended December 31, 2021, and a reversal of provision expense totaling $6.1 million for the three month period ended March 31, 2021.
  • The allowance for credit losses to total loans was 1.64% as of March 31, 2022, compared to 1.74% as of the trailing quarter end, and 1.73% as of March 31, 2021. Non-performing assets to total assets were 0.17% at March 31, 2022, as compared to 0.38% as of December 31, 2021, and 0.39% at March 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-Q for the period ended March 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

 

 

 

March 31,

December 31,

 

 

(dollars and shares in thousands, except per share data)

2022

2021

$ Change

% Change

Net interest income

$

67,924

 

$

69,783

 

$

(1,859

)

(2.7

)%

(Provision for) reversal of credit losses

 

(8,330

)

 

(980

)

 

(7,350

)

750.0

%

Noninterest income

 

15,096

 

 

16,502

 

 

(1,406

)

(8.5

)%

Noninterest expense

 

(46,447

)

 

(46,679

)

 

232

 

(0.5

)%

Provision for income taxes

 

(7,869

)

 

(10,404

)

 

2,535

 

(24.4

)%

Net income

$

20,374

 

$

28,222

 

$

(7,848

)

(27.8

)%

Diluted earnings per share

$

0.67

 

$

0.94

 

$

(0.27

)

(28.7

)%

Dividends per share

$

0.25

 

$

0.25

 

$

 

%

Average common shares

 

30,050

 

 

29,724

 

 

326

 

1.1

%

Average diluted common shares

 

30,202

 

 

29,870

 

 

332

 

1.1

%

Return on average total assets

 

0.94

%

 

1.31

%

 

 

Return on average equity

 

8.19

%

 

11.20

%

 

 

Efficiency ratio

 

55.95

%

 

54.10

%

 

 

 

Three months ended
March 31,

 

 

(dollars and shares in thousands, except per share data)

2022

2021

$ Change

% Change

Net interest income

$

67,924

 

$

66,440

 

$

1,484

 

2.2

%

(Provision for) reversal of credit losses

 

(8,330

)

 

6,060

 

 

(14,390

)

(237.5

)%

Noninterest income

 

15,096

 

 

16,110

 

 

(1,014

)

(6.3

)%

Noninterest expense

 

(46,447

)

 

(41,618

)

 

(4,829

)

11.6

%

Provision for income taxes

 

(7,869

)

 

(13,343

)

 

5,474

 

(41.0

)%

Net income

$

20,374

 

$

33,649

 

$

(13,275

)

(39.5

)%

Diluted earnings per share

$

0.67

 

$

1.13

 

$

(0.46

)

(40.7

)%

Dividends per share

$

0.25

 

$

0.25

 

$

 

%

Average common shares

 

30,050

 

 

29,727

 

 

323

 

1.1

%

Average diluted common shares

 

30,202

 

 

29,905

 

 

297

 

1.0

%

Return on average total assets

 

0.94

%

 

1.75

%

 

 

Return on average equity

 

8.19

%

 

14.51

%

 

 

Efficiency ratio

 

55.95

%

 

50.42

%

 

 

Merger Update

On March 25, 2022, the Company completed its acquisition of Valley Republic Bancorp, including the merger of Valley Republic Bank (collectively "VRB") into Tri Counties Bank, with Tri Counties Bank as the surviving entity, in accordance with the terms of the merger agreement dated as of July 27, 2021. The cash and stock transaction was valued at approximately $174.0 million in aggregate, based on TriCo's closing stock price of $42.48 on March 25, 2022. Under the terms of the merger agreement, the Company issued approximately 4.1 million shares, in addition to approximately $431,000 in cash paid for the settlement of stock option awards at VRB.

As a result of the merger with VRB, the Company acquired assets consisting primarily of cash totaling $427.3 million, investment securities of $109.7 million, loans totaling $771.4 million (inclusive of $21.4 million in PPP and fair value discounts of $20.4 million), core deposit intangibles of $10.7 million, and liabilities consisting primarily of $1.2 billion in deposits and $47.3 million in subordinated debt (of which $4.4 million was retired as TriCo Bancshares was the counter party).

VRB was headquartered in Bakersfield, California, and had four branch locations in and around Bakersfield, which all now operate as branches for Tri Counties Bank, and a loan production office in Fresno, California. The Company anticipates that Tri Counties Bank's previously existing Bakersfield branch and the VRB loan production office in Fresno will be consolidated, subject to regulatory approval, into the overlapping locations in the near future.

Balance Sheet

Total loans outstanding, excluding PPP, grew to $5.80 billion as of March 31, 2022, an increase of 25.8% over the prior year, of which 9.5% was related to organic loan growth. Investments increased to $2.57 billion as of March 31, 2022, an increase of 30.9% annualized over the prior year. Average earning assets to total average assets remained flat at 92.9% at March 31, 2022, as compared to 93.0% and 92.7% at December 31, 2021, and March 31, 2021, respectively. The loan to deposit ratio was 67.2% at March 31, 2022, as compared to 66.7% and 72.4% at December 31, 2021, and March 31, 2021, respectively.

Total shareholders' equity increased by $108,998,000 during the quarter ended March 31, 2022, as a result of issuing $173,585,000 in common stock associated with the VRB merger and net income of $20,374,000, which was partially offset by a decrease in accumulated other comprehensive income of $78,339,000 and $7,433,000 in cash dividends paid on common stock. As a result, the Company’s book value was $32.78 per share at March 31, 2022 as compared to $33.64 and $31.71 at December 31, 2021, and March 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 $23.04 per share at March 31, 2022, as compared to $25.80 and $23.72 at December 31, 2021, and March 31, 2021, respectively.

Trailing Quarter Balance Sheet Change

Ending balances

March 31,

December 31,

 

Acquired
Balances

Organic
$ Change

Annualized
Organic
% Change

(dollars in thousands)

2022

2021

$ Change

Total assets

$

10,118,328

$

8,614,787

$

1,503,541

$

1,363,529

$

140,012

6.5

%

Total loans

 

5,851,975

 

4,916,624

 

935,351

 

773,390

 

161,961

13.2

 

Total loans, excluding PPP

 

5,795,370

 

4,855,477

 

939,893

 

751,978

 

187,915

15.5

 

Total investments

 

2,569,706

 

2,427,885

 

141,821

 

109,716

 

32,105

5.3

 

Total deposits

$

8,714,477

$

7,367,159

$

1,347,318

$

1,215,479

$

131,839

7.2

%

Organic loan growth, excluding PPP, of $187,915,000 or 15.5% on an annualized basis was realized during the quarter ended March 31, 2022, primarily within commercial real estate and commercial and industrial. In addition, investment security organic growth was $32,105,000 or 5.3% on an annualized basis as excess liquidity, driven by continued strong deposit growth, was put to use in higher yielding earning assets. Deposit balances continue to increase, with an organic change of $131,839,000 or 7.2% annualized during the period, which provides management with opportunities to deploy excess cash within the investment portfolio or other interest earnings assets. During the three months ended March 31, 2022 and excluding PPP balance changes, loan originations totaled approximately $396 million while payoffs of loans totaled $225 million which compares to origination and payoff activity during the three months ended December 31, 2021 of $412 million and $297 million, respectively. Investment securities increased to $2,569,706,000 at March 31, 2022, an organic change of $497,210,000 or 25.3% from the prior year.

Average Trailing Quarter Balance Sheet Change

Quarterly average balances for the period ended

March 31,

December 31,

 

Annualized
% Change

(dollars in thousands)

2022

2021

$ Change

Total assets

$

8,778,256

$

8,546,004

$

232,252

10.9

%

Total loans

 

4,988,560

 

4,862,457

 

126,103

10.4

 

Total loans, excluding PPP

 

4,937,865

 

4,759,294

 

178,571

15.0

 

Total investments

 

2,457,077

 

2,402,582

 

54,495

9.1

 

Total deposits

$

7,521,930

$

7,304,659

$

217,271

11.9

%

As a result of the timing of the merger with VRB being close to quarter end, there was an immaterial impact from the acquired balances on the quarterly averages reflected above, therefore the average balance impact of the acquired balances have not been provided.

Year Over Year Balance Sheet Change

Ending balances

As of March 31,

 

Acquired

Organic
$ Change

Organic
% Change

(dollars in thousands)

2022

2021

$ Change

Balances

Total assets

$

10,118,328

$

8,031,612

$

2,086,716

$

1,363,529

$

723,187

9.0

%

Total loans

 

5,851,975

 

4,966,977

 

884,998

 

773,390

 

111,608

2.2

 

Total loans, excluding PPP

 

5,795,370

 

4,606,133

 

1,189,237

 

751,978

 

437,259

9.5

 

Total investments

 

2,569,706

 

1,962,780

 

606,926

 

109,716

 

497,210

25.3

 

Total deposits

$

8,714,477

$

6,863,400

$

1,851,077

$

1,215,479

$

635,598

9.3

%

PPP loan balances outstanding, net of related deferred fees, have declined by $304,239,000 during the twelve months ended March 31, 2022, meanwhile, non-PPP loan balances have increased as a result of organic activities by approximately $437,259,000 during the same period. This has led to a long-term beneficial and meaningful shift in the makeup of the loan portfolio, despite total loan balances increasing modestly during the 12 month period ended March 31, 2022, by $111,608,000 or 2.2%. The Company's non-PPP loan originations have increased significantly over the past year but have also been challenged by an acceleration in payoffs. Specifically, during the twelve months ended March 31, 2022 and excluding PPP balance changes, loan originations totaled approximately $1.40 billion while payoffs of loans totaled $0.91 billion. Investment securities increased to $2,569,706,000 at March 31, 2022, an organic change of $497,210,000 or 25.3% from the prior year.

Net Interest Income and Net Interest Margin

The following is a summary of the components of net interest income for the periods indicated:

 

Three months ended

 

 

 

March 31,

December 31,

 

 

(dollars in thousands)

2022

2021

Change

% Change

Interest income

$

69,195

 

$

71,024

 

$

(1,829

)

(2.6

)%

Interest expense

 

(1,271

)

 

(1,241

)

 

(30

)

2.4

%

Fully tax-equivalent adjustment (FTE) (1)

 

283

 

 

274

 

 

9

 

3.3

%

Net interest income (FTE)

$

68,207

 

$

70,057

 

$

(1,850

)

(2.6

)%

Net interest margin (FTE)

 

3.39

%

 

3.50

%

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

Amount (included in interest income)

$

1,323

 

$

1,780

 

$

(457

)

(25.7

)%

Net interest margin less effect of acquired loan discount accretion(1)

 

3.32

%

 

3.41

%

 

(0.09

)%

 

PPP loans yield, net:

 

 

 

 

Amount (included in interest income)

$

1,097

 

$

4,094

 

$

(2,997

)

(73.2

)%

Net interest margin less effect of PPP loan yield (1)

 

3.36

%

 

3.34

%

 

0.02

%

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

Amount (included in interest income)

$

2,420

 

$

5,874

 

$

(3,454

)

(58.8

)%

Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)

 

3.29

%

 

3.25

%

 

0.04

%

 

 

Three months ended
March 31,

 

 

(dollars in thousands)

2022

2021

Change

% Change

Interest income

$

69,195

 

$

67,916

 

$

1,279

 

1.9

%

Interest expense

 

(1,271

)

 

(1,476

)

 

205

 

(13.9

)%

Fully tax-equivalent adjustment (FTE) (1)

 

283

 

 

277

 

 

6

 

2.2

%

Net interest income (FTE)

$

68,207

 

$

66,717

 

$

1,490

 

2.2

%

Net interest margin (FTE)

 

3.39

%

 

3.74

%

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

Amount (included in interest income)

$

1,323

 

$

1,712

 

$

(389

)

(22.7

)%

Net interest margin less effect of acquired loan discount accretion(1)

 

3.32

%

 

3.64

%

 

(0.32

)%

 

PPP loans yield, net:

 

 

 

 

Amount (included in interest income)

$

1,097

 

$

5,863

 

$

(4,766

)

(81.3

)%

Net interest margin less effect of PPP loan yield (1)

 

3.36

%

 

3.59

%

 

(0.23

)%

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

Amount (included in interest income)

$

2,420

 

$

7,575

 

$

(5,155

)

(68.1

) %

Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)

 

3.29

%

 

3.48

%

 

(0.19

)%

 

(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 the first quarter of 2022. During the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, purchased loan discount accretion was $1,323,000, $1,780,000, and $1,712,000, 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

 

March 31, 2022

December 31, 2021

March 31, 2021

 

Average
Balance

Income/
Expense

Yield/
Rate

Average
Balance

Income/
Expense

Yield/
Rate

Average
Balance

Income/
Expense

Yield/
Rate

Assets

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

4,937,865

$

56,648

4.65

%

$

4,759,294

$

56,710

4.73

%

$

4,407,150

$

54,573

5.02

%

PPP loans

 

50,695

 

1,097

8.78

%

 

103,163

 

4,094

15.74

%

 

355,875

 

5,863

6.68

%

Investments-taxable

 

2,313,204

 

10,223

1.79

%

 

2,261,161

 

9,028

1.58

%

 

1,649,980

 

6,394

1.57

%

Investments-nontaxable (1)

 

143,873

 

1,225

3.45

%

 

141,421

 

1,186

3.33

%

 

125,055

 

1,200

3.89

%

Total investments

 

2,457,077

 

11,448

1.89

%

 

2,402,582

 

10,214

1.69

%

 

1,775,035

 

7,594

1.74

%

Cash at Federal Reserve and other banks

 

707,563

 

285

0.16

%

 

682,759

 

280

0.16

%

 

701,666

 

163

0.09

%

Total earning assets

 

8,153,200

 

69,478

3.46

%

 

7,947,798

 

71,298

3.56

%

 

7,239,726

 

68,193

3.82

%

Other assets, net

 

625,056

 

 

 

598,206

 

 

 

569,186

 

 

Total assets

$

8,778,256

 

 

$

8,546,004

 

 

$

7,808,912

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,597,309

$

84

0.02

%

$

1,544,176

$

58

0.01

%

$

1,430,943

$

76

0.02

%

Savings deposits

 

2,571,023

 

327

0.05

%

 

2,486,532

 

291

0.05

%

 

2,228,281

 

329

0.06

%

Time deposits

 

301,499

 

268

0.36

%

 

315,953

 

349

0.44

%

 

336,605

 

532

0.64

%

Total interest-bearing deposits

 

4,469,831

 

679

0.06

%

 

4,346,661

 

698

0.06

%

 

3,995,829

 

937

0.10

%

Other borrowings

 

44,731

 

5

0.05

%

 

50,667

 

7

0.05

%

 

32,709

 

4

0.05

%

Junior subordinated debt

 

60,971

 

587

3.90

%

 

58,004

 

536

3.67

%

 

57,688

 

535

3.76

%

Total interest-bearing liabilities

 

4,575,533

 

1,271

0.11

%

 

4,455,332

 

1,241

0.11

%

 

4,086,226

 

1,476

0.15

%

Noninterest-bearing deposits

 

3,052,099

 

 

 

2,957,998

 

 

 

2,657,925

 

 

Other liabilities

 

141,400

 

 

 

132,910

 

 

 

123,986

 

 

Shareholders’ equity

 

1,009,224

 

 

 

999,764

 

 

 

940,775

 

 

Total liabilities and shareholders’ equity

$

8,778,256

 

 

$

8,546,004

 

 

$

7,808,912

 

 

Net interest rate spread (1) (2)

 

 

3.35

%

 

 

3.45

%

 

 

3.67

%

Net interest income and margin (1) (3)

 

$

68,207

3.39

%

 

$

70,057

3.50

%

 

$

66,717

3.74

%

(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 March 31, 2022 decreased $1,850,000 or 2.6% to $68,207,000 compared to $70,057,000 during the three months ended December 31, 2021. Over the same period, net interest margin declined 11 basis points to 3.39%, as compared to the trailing quarter. The decline in net interest income is attributed to a reduction of $2,997,000 in the revenues recognized from PPP loans, partially offset by increases in average volume and rates on investment securities which increased interest income by $1,234,000 over the trailing quarter.

As compared to the same quarter in the prior year, average loan yields, excluding PPP, decreased 37 basis points from 5.02% during the three months ended March 31, 2021, to 4.65% during the three months ended March 31, 2022. The accretion of discounts from acquired loans added 7 and 10 basis points to loan yields during the quarters ended March 31, 2022 and March 31, 2021, respectively. Therefore, of the 37 basis point decrease in yields on loans during the comparable three month periods ended March 31, 2022 and 2021, 34 basis points was attributable to decreases in market rates, while 3 basis points resulted from less accretion of discounts.

The rates paid on interest bearing liabilities generally remained flat during the quarter ended March 31, 2022 compared to the trailing quarter. The decline in interest expense when compared to the same quarter from the prior year, however, was primarily attributed to reductions in the rates offered on deposit products. As a result, the cost of interest-bearing deposits decreased by 4 basis points during the quarter ended March 31, 2022, to 0.06% from 0.10% during the same quarter of the prior year. In addition, the level of noninterest-bearing deposits continues to benefit the average cost of total deposits which remained flat at 0.04% in both the current and trailing quarter, compared to 0.6% in the first quarter of the prior year. Specifically, the ratio of average total noninterest-bearing deposits to total average deposits was 40.6% and 40.5% as of March 31, 2022 and December 31, 2021, respectively, as compared to 39.9% for the quarter ended March 31, 2021.

Interest Rates and Loan Portfolio Composition

During the quarter ended March 31, 2022, market interest rates, including many rates that serve as reference indices for variable rate loans, increased modestly. However, the loan portfolio yield continues to have a downward bias due to the repricing of loans at lower rates and increased market competition stemming from loan to deposit ratios being at historic lows. As of March 31, 2022, the Company's loan portfolio consisted of approximately $5.9 billion in outstanding principal with a weighted average coupon rate of 4.24%, inclusive of the PPP program loans. Excluding PPP loans, the Company's loan portfolio has approximately $5.8 billion outstanding with a weighted average coupon rate of 4.27% as of March 31, 2022. Included in the March 31, 2022 loan total, exclusive of PPP loans, are variable rate loans totaling $3.4 billion, of which, $800 million are considered floating based on the Wall Street Prime index.

Asset Quality and Credit Loss Provisioning

During the three months ended March 31, 2022, the Company recorded a provision for credit losses of $8,330,000, as compared to a $980,000 provision during the trailing quarter, and a reversal of provision expense of $6,060,000 during the first quarter of 2021.

The following table presents details of the provision for credit losses for the periods indicated:

 

Three months ended

(dollars in thousands)

March 31, 2022

December 31, 2021

March 31, 2021

Addition to (reversal of) allowance for credit losses

$

8,205

$

715

$

(6,240

)

Addition to reserve for unfunded loan commitments

 

125

 

265

 

180

 

Total provision for (reversal of) credit losses

$

8,330

$

980

$

(6,060

)

The following table presents the activity in the allowance for credit losses on loans for the periods indicated:

 

Three months ended

(dollars in thousands)

March 31, 2022

March 31, 2021

Balance, beginning of period

$

85,376

 

$

91,847

 

ACL at acquisition for PCD loans

 

2,037

 

 

 

Provision for (reversal of) credit losses

 

8,205

 

 

(6,240

)

Loans charged-off

 

(743

)

 

(226

)

Recoveries of previously charged-off loans

 

1,174

 

 

560

 

Balance, end of period

$

96,049

 

$

85,941

 

The allowance for credit losses (ACL) was $96,049,000 as of March 31, 2022, a net increase of $10,108,000 over the immediately preceding quarter. The provision for credit losses of $8,205,000 during the quarter was the net effect of increases in required reserves totaling $10,820,000 related to the loan portfolio acquired from VRB totaling $703,848,000, which is net of $68,513,000 in purchase credit deteriorated loans (PCD) and $21,412,000 in PPP loans as of the merger date, partially offset by a decline in required reserves from the Company's organic loan portfolio totaling $2,615,000.

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ACL on the date of acquisition using both a discounted cash flow model, and the same methodology as other loans and leases held-for-investment. The ACL recorded as of the VRB merger date for PCD loans totaled $2,037,000.

The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date. This forecast data continues to evolve and included improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date, particularly CA unemployment trends. However, management notes that the majority of economic forecasts utilized in the ACL calculation have remained directionally consistent with preceding quarters, as general economic conditions continue to improve, albeit at a pace slower than expected due to unforeseen disruptions in the supply chain and increasing energy prices. In addition, management notes that the actual and forecast increases in inflation that were previously identified by the Federal Reserve Board as "transitory", combined with overseas conflicts and leading to the likely rise in short-term interest rates and flattening or inversion of the yield curve, may be further indication of future economic contraction. 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 $4,070,000 during the quarter ended March 31, 2022 to $8,402,000, as compared to $4,332,000 at December 31, 2021. Non-performing loans were $14,088,000 at March 31, 2022, a decrease of $16,262,000 and $14,853,000 from $30,350,000 and $28,941,000 as of December 31, 2021 and March 31, 2021, respectively.

The following table illustrates the total loans by risk rating and their respective percentage of total loans for the periods presented.

 

March 31,

 

% of Total
Loans

 

December 31,

 

% of Total
Loans

 

March 31

 

% of Total
Loans

(dollars in thousands)

2022

 

 

2021

 

 

2021

 

Risk Rating:

 

 

 

 

 

 

Pass

$

5,682,026

 

97.1

%

$

4,787,077

 

97.4

%

$

4,765,180

 

95.9

%

Special Mention

 

120,684

 

2.1

%

 

77,461

 

1.5

%

 

143,677

 

2.9

%

Substandard

 

49,265

 

0.8

%

 

52,086

 

1.1

%

 

58,120

 

1.2

%

Total

$

5,851,975

 

 

$

4,916,624

 

 

$

4,966,977

 

 

 

 

 

 

 

 

 

Classified loans to total loans

 

0.84

%

 

 

1.06

%

 

 

1.17

%

 

Loans past due 30+ days to total loans

 

0.14

%

 

 

0.09

%

 

 

0.21

%

 

The ratio of classified loans to total loans improved to 0.84% as of March 31, 2022 as compared to both 1.06% and 1.17% for the trailing quarter and same quarter of the prior year, respectively. The Company's criticized loan balances increased during the current quarter by approximately $40,402,000 to $169,949,000 as of March 31, 2022, primarily from the merger with VRB which added approximately $65,556,000 in criticized loans, net of $2,957,000 in purchase discounts. All of the criticized loans acquired from VRB were identified by management as PCD as of the acquisition date. The Company's organic criticized loan balances outstanding improved by approximately $19,100,000 during the quarter ended March 31, 2022, the majority of which was attributed to a sale of substandard loans totaling approximately $12,043,000.

There was one property added to other real estate owned totaling $313,000 during the quarter ended March 31, 2022, and no disposals. As of March 31, 2022, other real estate owned consisted of seven properties with a carrying value of approximately $2,907,000.

Non-performing assets of $16,995,000 at March 31, 2022 represented 0.17% of total assets, a substantial decrease from the $32,944,000 or 0.38% and $31,250,000 or 0.39% as of December 31, 2021 and March 31, 2021, respectively. The improvement in non-performing assets relates primarily to the loan sale discussed above.

Allocation of Credit Loss Reserves by Loan Type

 

As of March 31, 2022

As of December 31, 2021

As of March 31, 2021

(dollars in thousands)

Amount

% of Loans
Outstanding

Amount

% of Loans
Outstanding

Amount

% of Loans
Outstanding

Commercial real estate:

 

 

 

 

 

 

CRE - Non Owner Occupied

$

28,055

1.48

%

$

25,739

1.61

%

$

26,434

1.70

%

CRE - Owner Occupied

 

12,071

1.42

%

 

10,691

1.51

%

 

9,874

1.54

%

Multifamily

 

11,987

1.43

%

 

12,395

1.51

%

 

12,371

1.62

%

Farmland

 

2,879

1.15

%

 

2,315

1.34

%

 

1,724

1.17

%

Total commercial real estate loans

 

54,992

1.43

%

 

51,140

1.55

%

 

50,403

1.62

%

Consumer:

 

 

 

 

 

 

SFR 1-4 1st Liens

 

10,669

1.50

%

 

10,723

1.60

%

 

10,665

1.66

%

SFR HELOCs and Junior Liens

 

10,843

2.99

%

 

10,510

3.11

%

 

11,079

3.34

%

Other

 

2,340

3.73

%

 

2,241

3.34

%

 

2,860

3.99

%

Total consumer loans

 

23,852

2.10

%

 

23,474

2.19

%

 

24,604

2.36

%

 

 

 

 

 

 

 

Commercial and Industrial

 

8,869

1.77

%

 

3,862

1.49

%

 

4,464

0.81

%

Construction

 

7,437

2.45

%

 

5,667

2.55

%

 

5,476

2.47

%

Agricultural Production

 

883

1.27

%

 

1,215

2.39

%

 

988

2.49

%

Leases

 

16

0.20

%

 

18

0.27

%

 

6

0.13

%

Allowance for credit losses

 

96,049

1.64

%

 

85,376

1.74

%

 

85,941

1.73

%

Reserve for unfunded loan commitments

 

3,915

 

 

3,790

 

 

3,586

 

Total allowance for credit losses

$

99,964

1.71

%

$

89,166

1.81

%

$

89,527

1.80

%

For the periods presented in the table above and for purposes of calculating the "% of Loans Outstanding", PPP loans are included in the segment "Commercial and Industrial." PPP loans are fully guaranteed and therefore would not require any loss reserve allocation. Excluding the net outstanding balances of PPP loans from the ratio of the ACL to total loans results in a reserve ratio of approximately 1.66% as of March 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 March 31, 2022, the unamortized discount associated with acquired loans totaled $34,908,000 and, if aggregated with the ACL, would collectively represent 2.22% of total gross loans and 2.26% 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)

March 31, 2022

December 31, 2021

March 31, 2021

Total number of PPP loans outstanding

 

243

 

450

 

2,484

 

 

 

 

PPP loan balance (TCBK round 1 origination), gross

$

1,323

$

2,544

$

193,958

PPP loan balance (TCBK round 2 origination), gross

 

37,305

 

60,767

 

176,316

Acquired PPP loan balance (VRB origination), gross

 

19,167

 

 

Total PPP loans, gross outstanding

$

57,795

$

63,311

$

370,274

 

 

 

 

PPP deferred loan fees (Round 1 origination)

 

 

1

 

2,358

PPP deferred loan fees (Round 2 origination)

 

1,190

 

2,163

 

7,072

Total PPP deferred loan fees (costs) outstanding

$

1,190

$

2,164

$

9,430

As of March 31, 2022, there was approximately $1,190,000 in net deferred fee income remaining to be recognized. During the three months ended March 31, 2022, the Company recognized $974,000 in fees on PPP loans as compared with $3,482,000 and $4,978,000 for the three months ended December 31, 2021 and March 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)

March 31, 2022

December 31, 2021

$ Change

% Change

ATM and interchange fees

$

6,243

 

$

6,421

 

$

(178

)

(2.8

)%

Service charges on deposit accounts

 

3,834

 

 

3,674

 

 

160

 

4.4

%

Other service fees

 

882

 

 

888

 

 

(6

)

(0.7

)%

Mortgage banking service fees

 

463

 

 

475

 

 

(12

)

(2.5

)%

Change in value of mortgage servicing rights

 

274

 

 

(181

)

 

455

 

(251.4

)%

Total service charges and fees

 

11,696

 

 

11,277

 

 

419

 

3.7

%

Increase in cash value of life insurance

 

638

 

 

713

 

 

(75

)

(10.5

)%

Asset management and commission income

 

887

 

 

930

 

 

(43

)

(4.6

)%

Gain on sale of loans

 

1,246

 

 

1,672

 

 

(426

)

(25.5

)%

Lease brokerage income

 

158

 

 

204

 

 

(46

)

(22.5

)%

Sale of customer checks

 

104

 

 

117

 

 

(13

)

(11.1

)%

Gain on sale of investment securities

 

 

 

 

 

 

n/m

 

Loss on marketable equity securities

 

(137

)

 

(27

)

 

(110

)

407.4

%

Other

 

504

 

 

1,616

 

 

(1,112

)

(68.8

)%

Total other non-interest income

 

3,400

 

 

5,225

 

 

(1,825

)

(34.9

)%

Total non-interest income

$

15,096

 

$

16,502

 

$

(1,406

)

(8.5

)%

Non-interest income decreased $1,406,000 or 8.5% to $15,096,000 during the three months ended March 31, 2022, compared to $16,502,000 during the quarter ended December 31, 2021. This was largely the result of two items recorded within other non-interest income during the trailing quarter which included, death benefits on life insurance totaling $702,000 and an increase in the fair value of certain equity investments of approximately $804,000 as compared to $225,000 in the current quarter. In addition, a gain on debt extinguishment of $235,000 was recorded in the current quarter. The change in gain on sale of mortgage loans declined by $426,000 or 25.5% during the quarter ended March 31, 2022, with an offset in the change in value or mortgage servicing rights increasing by $455,000 or 251.4%, both attributed to the rapidly rising rate environment.

The following table presents the key components of non-interest income for the current and prior year periods indicated:

 

Three months ended March 31,

 

 

(dollars in thousands)

2022

2021

$ Change

% Change

ATM and interchange fees

$

6,243

 

$

5,861

 

$

382

 

6.5

%

Service charges on deposit accounts

 

3,834

 

 

3,269

 

 

565

 

17.3

%

Other service fees

 

882

 

 

871

 

 

11

 

1.3

%

Mortgage banking service fees

 

463

 

 

463

 

 

 

%

Change in value of mortgage servicing rights

 

274

 

 

12

 

 

262

 

2,183.3

%

Total service charges and fees

 

11,696

 

 

10,476

 

 

1,220

 

11.6

%

Increase in cash value of life insurance

 

638

 

 

673

 

 

(35

)

(5.2

)%

Asset management and commission income

 

887

 

 

834

 

 

53

 

6.4

%

Gain on sale of loans

 

1,246

 

 

3,247

 

 

(2,001

)

(61.6

)%

Lease brokerage income

 

158

 

 

110

 

 

48

 

43.6

%

Sale of customer checks

 

104

 

 

119

 

 

(15

)

(12.6

)%

Gain on sale of investment securities

 

 

 

 

 

 

n/m

 

Loss on marketable equity securities

 

(137

)

 

(53

)

 

(84

)

158.5

%

Other

 

504

 

 

704

 

 

(200

)

(28.4

)%

Total other non-interest income

 

3,400

 

 

5,634

 

 

(2,234

)

(39.7

)%

Total non-interest income

$

15,096

 

$

16,110

 

$

(1,014

)

(6.3

)%

In addition to the discussion above within the non-interest income for the three months ended March 31, 2022, ATM and interchange fees improved $382,000 or 6.5%, as did service charges on deposit accounts totaling $565,000 or 17.3%, both as a result of increased usage due to relaxed social distancing guidelines during the quarter March 31, 2022 when compared to the same period in the prior year.

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)

March 31, 2022

December 31, 2021

$ Change

% Change

Base salaries, net of deferred loan origination costs

$

18,216

 

$

19,123

 

$

(907

)

(4.7

)%

Incentive compensation

 

2,583

 

 

3,932

 

 

(1,349

)

(34.3

)%

Benefits and other compensation costs

 

5,972

 

 

4,611

 

 

1,361

 

29.5

%

Total salaries and benefits expense

 

26,771

 

 

27,666

 

 

(895

)

(3.2

)%

Occupancy

 

3,575

 

 

3,713

 

 

(138

)

(3.7

)%

Data processing and software

 

3,513

 

 

3,893

 

 

(380

)

(9.8

)%

Equipment

 

1,333

 

 

1,298

 

 

35

 

2.7

%

Intangible amortization

 

1,228

 

 

1,193

 

 

35

 

2.9

%

Advertising

 

637

 

 

819

 

 

(182

)

(22.2

)%

ATM and POS network charges

 

1,375

 

 

1,551

 

 

(176

)

(11.3

)%

Professional fees

 

876

 

 

927

 

 

(51

)

(5.5

)%

Telecommunications

 

521

 

 

534

 

 

(13

)

(2.4

)%

Regulatory assessments and insurance

 

720

 

 

678

 

 

42

 

6.2

%

Merger and acquisition expenses

 

4,032

 

 

872

 

 

3,160

 

362.4

%

Postage

 

228

 

 

232

 

 

(4

)

(1.7

)%

Operational (gain) loss

 

(183

)

 

299

 

 

(482

)

(161.2

)%

Courier service

 

414

 

 

346

 

 

68

 

19.7

%

Gain on sale or acquisition of foreclosed assets

 

 

 

(23

)

 

23

 

(100.0

)%

(Gain) loss on disposal of fixed assets

 

(1,078

)

 

6

 

 

(1,084

)

(18,066.7

)%

Other miscellaneous expense

 

2,485

 

 

2,675

 

 

(190

)

(7.1

)%

Total other non-interest expense

 

19,676

 

 

19,013

 

 

663

 

3.5

%

Total non-interest expense

$

46,447

 

$

46,679

 

$

(232

)

(0.5

)%

Average full-time equivalent staff

 

1,084

 

 

1,074

 

 

10

 

0.9

%

Non-interest expense for the quarter ended March 31, 2022 decreased $232,000 or 0.5% to $46,447,000 as compared to $46,679,000 during the trailing quarter ended December 31, 2021. Total salaries and benefits expense decreased by $895,000 or 3.2%, led by wage related decreases of $907,000 or 4.7% to $18,216,000, despite an increase of 10 full-time equivalent positions. As disclosed previously, the trailing quarter wage was elevated partially due to transitory items caused by the COVID-19 pandemic, overtime and non-incentive stipends associated with special projects that did not persist into the three months ended March 31, 2022. Incentive compensation decreased $1,349,000 or 34.3%, attributed to lower commissions and incentive accruals on loan origination activities; meanwhile, benefits and other compensation costs increased by $1,361,000 or 29.5%, respectively, during the quarter ended March 31, 2022, due to the expected seasonal impacts associated with the start of any new fiscal year as well as increases in expenses associated with projected benefit obligations and group insurance costs. Merger and acquisition expenses associated with the merger with Valley Republic Bancorp totaled $4,032,000 during the current quarter. The Company sold a former administrative building and relocated a branch during the quarter resulting in a net gain of approximately $1,078,000 as noted above.

The following table presents the key components of non-interest expense for the current and prior year quarterly periods indicated:

 

Three months ended March 31,

 

 

(dollars in thousands)

2022

2021

$ Change

% Change

Base salaries, net of deferred loan origination costs

$

18,216

 

$

15,511

 

$

2,705

 

17.4

%

Incentive compensation

 

2,583

 

 

3,580

 

 

(997

)

(27.8

)%

Benefits and other compensation costs

 

5,972

 

 

6,239

 

 

(267

)

(4.3

)%

Total salaries and benefits expense

 

26,771

 

 

25,330

 

 

1,441

 

5.7

%

Occupancy

 

3,575

 

 

3,726

 

 

(151

)

(4.1

)%

Data processing and software

 

3,513

 

 

3,202

 

 

311

 

9.7

%

Equipment

 

1,333

 

 

1,517

 

 

(184

)

(12.1

)%

Intangible amortization

 

1,228

 

 

1,431

 

 

(203

)

(14.2

)%

Advertising

 

637

 

 

380

 

 

257

 

67.6

%

ATM and POS network charges

 

1,375

 

 

1,246

 

 

129

 

10.4

%

Professional fees

 

876

 

 

594

 

 

282

 

47.5

%

Telecommunications

 

521

 

 

581

 

 

(60

)

(10.3

)%

Regulatory assessments and insurance

 

720

 

 

612

 

 

108

 

17.6

%

Merger and acquisition expenses

 

4,032

 

 

 

 

4,032

 

n/m

 

Postage

 

228

 

 

198

 

 

30

 

15.2

%

Operational (gain) loss

 

(183

)

 

209

 

 

(392

)

(187.6

)%

Courier service

 

414

 

 

294

 

 

120

 

40.8

%

Gain on sale or acquisition of foreclosed assets

 

 

 

(51

)

 

51

 

(100.0

)%

(Gain) loss on disposal of fixed assets

 

(1,078

)

 

 

 

(1,078

)

n/m

 

Other miscellaneous expense

 

2,485

 

 

2,349

 

 

136

 

5.8

%

Total other non-interest expense

 

19,676

 

 

16,288

 

 

3,388

 

20.8

%

Total non-interest expense

$

46,447

 

$

41,618

 

$

4,829

 

11.6

%

Average full-time equivalent staff

 

1,084

 

 

1,024

 

 

60

 

5.9

%

Provision for Income Taxes

The Company’s effective tax rate was 27.9% for the three months ended March 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 on the Company's business condition and financial operating results; the impact of changes in financial services policies, laws and regulations; technological changes; weather, natural disasters and other catastrophic events that may or may not be caused by climate change and their effects on economic and business environments in which the Company operates; the continuing adverse impact on the U.S. economy, including the markets in which we operate due to the COVID-19 global pandemic, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products; adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages on the economic recovery and our business; the impacts of international hostilities or geopolitical events; the costs or effects of mergers, acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such mergers, acquisitions or dispositions, and/or our ability to realize the contemplated financial business benefits associated with any such activities; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the ability to execute our business plan in new lending markets; the future operating or financial performance of the Company, including our outlook for future growth and changes in the level of our nonperforming assets and charge-offs; the appropriateness of the allowance for credit losses, including the timing and effects of the implementation of the current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting standards and practices; possible other-than-temporary impairment of securities held by us; changes in consumer spending, borrowing and savings habits; our ability to attract and maintain deposits and other sources of liquidity; changes in the financial performance and/or condition of our borrowers; our noninterest expense and the efficiency ratio; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; the challenges of integrating and retaining key employees; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks and the cost to defend against such attacks; change to U.S. tax policies, including our effective income tax rate; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the discontinuation of the London Interbank Offered Rate and other reference rates; and our ability to manage the risks involved in the foregoing. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2021, which has been filed with the Securities and Exchange Commission (the “SEC”) and are 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

 

March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Revenue and Expense Data

 

 

 

 

 

Interest income

$

69,195

 

$

71,024

 

$

69,628

 

$

68,479

 

$

67,916

 

Interest expense

 

1,271

 

 

1,241

 

 

1,395

 

 

1,396

 

 

1,476

 

Net interest income

 

67,924

 

 

69,783

 

 

68,233

 

 

67,083

 

 

66,440

 

Provision for (benefit from) credit losses

 

8,330

 

 

980

 

 

(1,435

)

 

(260

)

 

(6,060

)

Noninterest income:

 

 

 

 

 

Service charges and fees

 

11,696

 

 

11,277

 

 

11,265

 

 

10,930

 

 

10,476

 

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

 

Other income

 

3,400

 

 

5,225

 

 

3,830

 

 

5,027

 

 

5,634

 

Total noninterest income

 

15,096

 

 

16,502

 

 

15,095

 

 

15,957

 

 

16,110

 

Noninterest expense (2):

 

 

 

 

 

Salaries and benefits

 

28,597

 

 

27,666

 

 

26,274

 

 

27,081

 

 

25,330

 

Occupancy and equipment

 

4,925

 

 

5,011

 

 

5,107

 

 

4,907

 

 

5,243

 

Data processing and network

 

5,089

 

 

5,444

 

 

5,381

 

 

4,752

 

 

4,448

 

Other noninterest expense

 

7,836

 

 

8,558

 

 

9,045

 

 

7,431

 

 

6,597

 

Total noninterest expense

 

46,447

 

 

46,679

 

 

45,807

 

 

44,171

 

 

41,618

 

Total income before taxes

 

28,243

 

 

38,626

 

 

38,956

 

 

39,129

 

 

46,992

 

Provision for income taxes

 

7,869

 

 

10,404

 

 

11,534

 

 

10,767

 

 

13,343

 

Net income

$

20,374

 

$

28,222

 

$

27,422

 

$

28,362

 

$

33,649

 

Share Data

 

 

 

 

 

Basic earnings per share

$

0.68

 

$

0.95

 

$

0.92

 

$

0.95

 

$

1.13

 

Diluted earnings per share

$

0.67

 

$

0.94

 

$

0.92

 

$

0.95

 

$

1.13

 

Dividends per share

$

0.25

 

$

0.25

 

$

0.25

 

$

0.25

 

$

0.25

 

Book value per common share

$

32.78

 

$

33.64

 

$

33.05

 

$

32.53

 

$

31.71

 

Tangible book value per common share (1)

$

23.04

 

$

25.80

 

$

25.16

 

$

24.60

 

$

23.72

 

Shares outstanding

 

33,837,935

 

 

29,730,424

 

 

29,714,609

 

 

29,716,294

 

 

29,727,122

 

Weighted average shares

 

30,049,919

 

 

29,723,791

 

 

29,713,558

 

 

29,718,603

 

 

29,727,182

 

Weighted average diluted shares

 

30,201,698

 

 

29,870,059

 

 

29,850,530

 

 

29,903,560

 

 

29,904,974

 

Credit Quality

 

 

 

 

 

Allowance for credit losses to gross loans

 

1.64

%

 

1.74

%

 

1.72

%

 

1.74

%

 

1.73

%

Loans past due 30 days or more

$

8,402

 

$

4,332

 

$

10,539

 

$

9,292

 

$

10,550

 

Total nonperforming loans

$

14,088

 

$

30,350

 

$

28,790

 

$

32,705

 

$

28,941

 

Total nonperforming assets

$

16,995

 

$

32,944

 

$

31,440

 

$

24,952

 

$

31,250

 

Loans charged-off

$

743

 

$

197

 

$

1,582

 

$

387

 

$

226

 

Loans recovered

$

1,174

 

$

552

 

$

1,321

 

$

653

 

$

560

 

Selected Financial Ratios

 

 

 

 

 

Return on average total assets

 

0.94

%

 

1.31

%

 

1.30

%

 

1.40

%

 

1.75

%

Return on average equity

 

8.19

%

 

11.20

%

 

11.02

%

 

11.85

%

 

14.51

%

Average yield on loans, excluding PPP

 

4.65

%

 

4.73

%

 

4.85

%

 

4.93

%

 

5.02

%

Average yield on interest-earning assets

 

3.46

%

 

3.56

%

 

3.57

%

 

3.65

%

 

3.82

%

Average rate on interest-bearing deposits

 

0.06

%

 

0.06

%

 

0.08

%

 

0.08

%

 

0.10

%

Average cost of total deposits

 

0.04

%

 

0.04

%

 

0.05

%

 

0.05

%

 

0.06

%

Average rate on borrowings & subordinated debt

 

2.27

%

 

1.98

%

 

2.02

%

 

2.31

%

 

2.42

%

Average rate on interest-bearing liabilities

 

0.11

%

 

0.11

%

 

0.13

%

 

0.13

%

 

0.15

%

Net interest margin (fully tax-equivalent) (1)

 

3.39

%

 

3.50

%

 

3.50

%

 

3.58

%

 

3.74

%

Loans to deposits

 

67.15

%

 

66.74

%

 

67.54

%

 

70.72

%

 

72.37

%

Efficiency ratio

 

55.95

%

 

54.10

%

 

54.97

%

 

53.19

%

 

50.42

%

Supplemental Loan Interest Income Data

 

 

 

 

 

Discount accretion on acquired loans

$

1,323

 

$

1,780

 

$

2,034

 

$

2,566

 

$

1,712

 

All other loan interest income (excluding PPP) (1)

$

55,325

 

$

54,930

 

$

55,184

 

$

54,559

 

$

52,861

 

Total loan interest income (excluding PPP) (1)

$

56,648

 

$

56,710

 

$

57,218

 

$

57,125

 

$

54,573

 

(1)

Non-GAAP measure

(2)

Inclusive of merger related expenses

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands)

 

 

Balance Sheet Data

March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Cash and due from banks

$

1,035,683

 

$

768,421

 

$

740,236

 

$

639,740

 

$

609,522

 

Securities, available for sale, net

 

2,365,708

 

 

2,210,876

 

 

2,098,786

 

 

1,850,547

 

 

1,685,076

 

Securities, held to maturity, net

 

186,748

 

 

199,759

 

 

216,979

 

 

235,778

 

 

260,454

 

Restricted equity securities

 

17,250

 

 

17,250

 

 

17,250

 

 

17,250

 

 

17,250

 

Loans held for sale

 

1,030

 

 

3,466

 

 

3,072

 

 

5,723

 

 

3,995

 

Loans:

 

 

 

 

 

Commercial real estate

 

3,832,974

 

 

3,306,054

 

 

3,222,737

 

 

3,194,336

 

 

3,108,624

 

Consumer

 

1,136,712

 

 

1,071,551

 

 

1,053,653

 

 

1,050,609

 

 

1,041,213

 

Commercial and industrial

 

500,882

 

 

259,355

 

 

345,027

 

 

452,069

 

 

551,077

 

Construction

 

303,960

 

 

222,281

 

 

216,680

 

 

200,714

 

 

221,613

 

Agriculture production

 

69,339

 

 

50,811

 

 

44,410

 

 

41,967

 

 

39,753

 

Leases

 

8,108

 

 

6,572

 

 

4,989

 

 

5,199

 

 

4,697

 

Total loans, gross

 

5,851,975

 

 

4,916,624

 

 

4,887,496

 

 

4,944,894

 

 

4,966,977

 

Allowance for credit losses

 

(96,049

)

 

(85,376

)

 

(84,306

)

 

(86,062

)

 

(85,941

)

Total loans, net

 

5,755,926

 

 

4,831,248

 

 

4,803,190

 

 

4,858,832

 

 

4,881,036

 

Premises and equipment

 

73,692

 

 

78,687

 

 

78,968

 

 

79,178

 

 

82,338

 

Cash value of life insurance

 

132,104

 

 

117,857

 

 

120,932

 

 

120,287

 

 

119,543

 

Accrued interest receivable

 

22,769

 

 

19,292

 

 

18,425

 

 

18,923

 

 

19,442

 

Goodwill

 

307,942

 

 

220,872

 

 

220,872

 

 

220,872

 

 

220,872

 

Other intangible assets

 

21,776

 

 

12,369

 

 

13,562

 

 

14,971

 

 

16,402

 

Operating leases, right-of-use

 

28,404

 

 

25,665

 

 

26,815

 

 

26,365

 

 

27,540

 

Other assets

 

169,296

 

 

109,025

 

 

98,943

 

 

81,899

 

 

88,142

 

Total assets

$

10,118,328

 

$

8,614,787

 

$

8,458,030

 

$

8,170,365

 

$

8,031,612

 

Deposits:

 

 

 

 

 

Noninterest-bearing demand deposits

$

3,583,269

 

$

2,979,882

 

$

2,943,016

 

$

2,843,783

 

$

2,766,510

 

Interest-bearing demand deposits

 

1,788,639

 

 

1,568,682

 

 

1,519,426

 

 

1,486,321

 

 

1,465,915

 

Savings deposits

 

2,993,873

 

 

2,521,011

 

 

2,447,706

 

 

2,337,557

 

 

2,302,927

 

Time certificates

 

348,696

 

 

297,584

 

 

326,674

 

 

324,392

 

 

328,048

 

Total deposits

 

8,714,477

 

 

7,367,159

 

 

7,236,822

 

 

6,992,053

 

 

6,863,400

 

Accrued interest payable

 

653

 

 

928

 

 

1,056

 

 

1,026

 

 

970

 

Operating lease liability

 

30,500

 

 

26,280

 

 

27,290

 

 

26,707

 

 

27,780

 

Other liabilities

 

126,348

 

 

112,070

 

 

107,282

 

 

85,388

 

 

102,955

 

Other borrowings

 

36,184

 

 

50,087

 

 

45,601

 

 

40,559

 

 

36,226

 

Junior subordinated debt

 

100,984

 

 

58,079

 

 

57,965

 

 

57,852

 

 

57,742

 

Total liabilities

 

9,009,146

 

 

7,614,603

 

 

7,476,016

 

 

7,203,585

 

 

7,089,073

 

Common stock

 

706,672

 

 

532,244

 

 

531,339

 

 

531,038

 

 

531,367

 

Retained earnings

 

479,868

 

 

466,959

 

 

446,948

 

 

427,575

 

 

408,211

 

Accum. other comprehensive income (loss)

 

(77,358

)

 

981

 

 

3,727

 

 

8,167

 

 

2,961

 

Total shareholders’ equity

$

1,109,182

 

$

1,000,184

 

$

982,014

 

$

966,780

 

$

942,539

 

Quarterly Average Balance Data

 

 

 

 

 

Average loans, excluding PPP

$

4,937,865

 

$

4,759,294

 

$

4,684,492

 

$

4,646,188

 

$

4,407,150

 

Average interest-earning assets

$

8,153,200

 

$

7,947,798

 

$

7,758,169

 

$

7,544,581

 

$

7,239,726

 

Average total assets

$

8,778,256

 

$

8,546,004

 

$

8,348,111

 

$

8,128,674

 

$

7,808,912

 

Average deposits

$

7,521,930

 

$

7,304,659

 

$

7,137,263

 

$

6,943,081

 

$

6,653,754

 

Average borrowings and subordinated debt

$

105,702

 

$

108,671

 

$

106,221

 

$

98,774

 

$

90,397

 

Average total equity

$

1,009,224

 

$

999,764

 

$

987,026

 

$

960,145

 

$

940,775

 

Capital Ratio Data

 

 

 

 

 

Total risk-based capital ratio

 

15.0

%

 

15.4

%

 

15.4

%

 

15.3

%

 

15.1

%

Tier 1 capital ratio

 

13.1

%

 

14.2

%

 

14.2

%

 

14.1

%

 

13.9

%

Tier 1 common equity ratio

 

12.3

%

 

13.2

%

 

13.2

%

 

13.0

%

 

12.9

%

Tier 1 leverage ratio

 

10.8

%

 

9.9

%

 

9.9

%

 

9.9

%

 

10.0

%

Tangible capital ratio (1)

 

8.0

%

 

9.2

%

 

9.1

%

 

9.2

%

 

9.1

%

(1)

Non-GAAP measure

TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES
(Unaudited. Dollars in thousands)

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this press release because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results, and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:

 

Three months ended

(dollars in thousands)

March 31,
2022

December 31,
2021

March 31,
2021

Net interest margin

 

 

 

Acquired loans discount accretion, net:

 

 

 

Amount (included in interest income)

$

1,323

 

$

1,780

 

$

1,712

 

Effect on average loan yield

 

0.11

%

 

0.15

%

 

0.16

%

Effect on net interest margin (FTE)

 

0.07

%

 

0.09

%

 

0.10

%

Net interest margin (FTE)

 

3.39

%

 

3.50

%

 

3.74

%

Net interest margin less effect of acquired loan discount accretion (Non-GAAP)

 

3.32

%

 

3.41

%

 

3.64

%

PPP loans yield, net:

 

 

 

Amount (included in interest income)

$

1,097

 

$

4,094

 

$

5,863

 

Effect on net interest margin (FTE)

 

0.03

%

 

0.16

%

 

0.15

%

Net interest margin less effect of PPP loan yield (Non-GAAP)

 

3.36

%

 

3.34

%

 

3.59

%

Acquired loan discount accretion and PPP loan yield, net:

 

 

 

Amount (included in interest income)

$

2,420

 

$

5,874

 

$

7,575

 

Effect on net interest margin (FTE)

 

0.10

%

 

0.25

%

 

0.25

%

Net interest margin less effect of acquired loan discount accretion and PPP yields, net (Non-GAAP)

 

3.29

%

 

3.25

%

 

3.48

%

 

Three months ended

(dollars in thousands)

March 31,
2022

December 31,
2021

March 31,
2021

Pre-tax pre-provision return on average assets or equity

 

 

 

Net income (GAAP)

$

20,374

 

$

28,222

 

$

33,649

 

Exclude income tax expense

 

7,869

 

 

10,404

 

 

13,343

 

Exclude provision (benefit) for credit losses

 

8,330

 

 

980

 

 

(6,060

)

Net income before income tax and provision expense (Non-GAAP)

$

36,573

 

$

39,606

 

$

40,932

 

 

 

 

 

Average assets (GAAP)

$

8,778,256

 

$

8,546,004

 

$

7,808,912

 

Average equity (GAAP)

$

1,009,224

 

$

999,764

 

$

940,775

 

 

 

 

 

Return on average assets (GAAP) (annualized)

 

0.94

%

 

1.31

%

 

1.75

%

Pre-tax pre-provision return on average assets (Non-GAAP) (annualized)

 

1.69

%

 

1.84

%

 

2.13

%

Return on average equity (GAAP) (annualized)

 

8.19

%

 

11.20

%

 

14.51

%

Pre-tax pre-provision return on average equity (Non-GAAP) (annualized)

 

14.70

%

 

15.72

%

 

17.65

%

 

Three months ended

(dollars in thousands)

March 31,
2022

December 31,
2021

March 31,
2021

Return on tangible common equity

 

 

 

Average total shareholders' equity

$

1,009,224

 

$

999,764

 

$

940,775

 

Exclude average goodwill

 

226,676

 

 

220,872

 

 

220,872

 

Exclude average other intangibles

 

12,604

 

 

12,966

 

 

17,118

 

Average tangible common equity (Non-GAAP)

$

769,944

 

$

765,926

 

$

702,785

 

 

 

 

 

Net income (GAAP)

$

20,374

 

$

28,222

 

$

33,649

 

Exclude amortization of intangible assets, net of tax effect

 

865

 

 

840

 

 

1,008

 

Tangible net income available to common shareholders (Non-GAAP)

$

21,239

 

$

29,062

 

$

34,657

 

 

 

 

 

Return on average equity

 

8.19

%

 

11.20

%

 

14.51

%

Return on average tangible common equity (Non-GAAP)

 

11.19

%

 

15.05

%

 

20.00

%

 

Three months ended

(dollars in thousands)

March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Tangible common shareholders' equity to tangible assets

 

 

 

 

 

Shareholders' equity (GAAP)

$

1,109,182

 

$

1,000,184

 

$

982,014

 

$

966,780

 

$

942,539

 

Exclude goodwill and other intangible assets, net

 

329,718

 

 

233,241

 

 

234,434

 

 

235,843

 

 

237,274

 

Tangible shareholders' equity (Non-GAAP)

$

779,464

 

$

766,943

 

$

747,580

 

$

730,937

 

$

705,265

 

 

 

 

 

 

 

Total assets (GAAP)

$

10,118,328

 

$

8,614,787

 

$

8,458,030

 

$

8,170,365

 

$

8,031,612

 

Exclude goodwill and other intangible assets, net

 

329,718

 

 

233,241

 

 

234,434

 

 

235,843

 

 

237,274

 

Total tangible assets (Non-GAAP)

$

9,788,610

 

$

8,381,546

 

$

8,223,596

 

$

7,934,522

 

$

7,794,338

 

 

 

 

 

 

 

Common s/h equity to total assets (GAAP)

 

10.96

%

 

11.61

%

 

11.61

%

 

11.83

%

 

11.74

%

Tangible common shareholders' equity to tangible assets (Non-GAAP)

 

7.96

%

 

9.15

%

 

9.09

%

 

9.21

%

 

9.05

%

 

Three months ended

(dollars in thousands)

March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Tangible common shareholders' equity per share

 

 

 

 

 

Tangible s/h equity (Non-GAAP)

$

779,464

$

766,943

$

747,580

$

730,937

$

705,265

Tangible assets (Non-GAAP)

 

9,788,610

 

8,381,546

 

8,223,596

 

7,934,522

 

7,794,338

 

 

 

 

 

 

Common shares outstanding at end of period

 

33,837,935

 

29,730,424

 

29,714,609

 

29,716,294

 

29,727,122

 

 

 

 

 

 

Common s/h equity (book value) per share (GAAP)

$

32.78

$

33.64

$

33.05

$

32.53

$

31.71

Tangible common shareholders' equity (tangible book value) per share (Non-GAAP)

$

23.04

$

25.80

$

25.16

$

24.60

$

23.72

 

Contacts

Peter G. Wiese, EVP & CFO, (530) 898-0300