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TriCo Bancshares Announces Third Quarter 2022 Results

Notable Items for Third Quarter 2022

  • Net interest margin, excluding the benefit from acquired loan discount accretion and PPP loan yield, increased 0.41% to 3.98%
  • Efficiency ratio improved to 49.6%, largely as a result of revenue growth as non-interest expenses, excluding merger related costs, were relatively unchanged as compared with the prior quarter
  • Organic loan growth (excluding PPP) for the quarter of $216.7 million or 14.2% annualized, with continued strength in credit quality
  • Quarterly pre-tax pre-provision net revenues grew to $55.3 million, as compared to $45.2 million inclusive of $2.2 million in merger expenses in the trailing quarter, and $37.5 million in the same quarter of the prior year inclusive of $0.6 million in merger expenses

"Despite the potential for increasing volatility in interest rates and the general economy, the core franchise value of Tri Counties Bank, being anchored in our credit culture and low costs of funds, continues to drive our financial performance," noted Rick Smith, President and Chief Executive Officer.  Peter Wiese, EVP and Chief Financial Officer added, "Non-interest bearing deposits increased by nearly $74 million during the quarter and, to date during the current rising rate cycle, we have been able to maintain a low deposit Beta.  Looking forward, we anticipate deposit Betas will be further pressured due to continued rate increases by the Federal Reserve.  These rate increases could also decrease loan pipelines as borrowers reconsider the impact of higher rates on proposed projects."

TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $37,338,000 for the quarter ended September 30, 2022, compared to $31,364,000 during the trailing quarter ended June 30, 2022, and $27,422,000 during the quarter ended September 30, 2021. Diluted earnings per share were $1.12 for the third quarter of 2022, compared to $0.93 for the second quarter of 2022 and $0.92 for the third quarter of 2021.

Financial Highlights

Performance highlights and other developments for the Company as of or for the three and nine months ended September 30, 2022, included the following:

  • For the three and nine months ended September 30, 2022, the Company’s return on average assets was 1.46% and 1.23%, while the return on average equity was 13.78% and 11.25%, respectively. The nine-month ratio was impacted by merger related expenses of $6,253,000 during the 2022 period.
  • Organic loan growth, excluding PPP and acquired loans, totaled $216.7 million (14.2% annualized) for the current quarter and $824.3 million (17.4% annualized) for the trailing twelve-month period.
  • As of September 30, 2022, the Company reported total loans, total assets and total deposits of $6.3 billion, $10.0 billion and $8.7 billion, respectively. As a direct result of organic loan growth during the quarter, the loan to deposit ratio has increased to 72.9% as of September 30, 2022, as compared to 69.8% as of the trailing quarter.
  • The average rate of interest paid on deposits, including non-interest-bearing deposits, of 0.04% has remained unchanged during each of the prior four quarters, and represents a decrease of one basis point from the average rate paid of 0.05% during the same quarter of the prior year.
  • Noninterest income related to service charges and fees was $12.7 million for the three month period ended September 30, 2022, an increase of 12.6% when compared to the same period in 2021.
  • The provision for credit losses for loans and debt securities was approximately $3.8 million during the quarter ended September 30, 2022, as compared to a provision expense of $2.1 million during the trailing quarter ended June 30, 2022, and a reversal of provision expense totaling $1.4 million for the three month period ended September 30, 2021.
  • The allowance for credit losses to total loans was 1.61% as of September 30, 2022, compared to 1.60% as of the trailing quarter end, and 1.72% as of September 30, 2021. Non-performing assets to total assets were 0.21% at September 30, 2022, as compared to 0.15% as of June 30, 2022, and 0.37% at September 30, 2021.

Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Annual Report on Form 10-Q for the period ended September 30, 2022, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

Summary Results

The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:

 

Three months ended

 

 

 

 

 

September 30,

 

June 30,

 

 

 

 

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

2022

 

2022

 

$ Change

 

% Change

Net interest income

$

94,106

 

 

$

85,046

 

 

$

9,060

 

 

10.7

%

Provision for credit losses

 

(3,795

)

 

 

(2,100

)

 

 

(1,695

)

 

80.7

%

Noninterest income

 

15,640

 

 

 

16,430

 

 

 

(790

)

 

(4.8

) %

Noninterest expense

 

(54,465

)

 

 

(56,264

)

 

 

1,799

 

 

(3.2

) %

Provision for income taxes

 

(14,148

)

 

 

(11,748

)

 

 

(2,400

)

 

20.4

%

Net income

$

37,338

 

 

$

31,364

 

 

$

5,974

 

 

19.0

%

Diluted earnings per share

$

1.12

 

 

$

0.93

 

 

$

0.19

 

 

20.4

%

Dividends per share

$

0.30

 

 

$

0.25

 

 

$

0.05

 

 

20.0

%

Average common shares

 

33,348

 

 

 

33,561

 

 

 

(213

)

 

(0.6

) %

Average diluted common shares

 

33,463

 

 

 

33,705

 

 

 

(242

)

 

(0.7

) %

Return on average total assets

 

1.46

%

 

 

1.24

%

 

 

 

 

Return on average equity

 

13.78

%

 

 

11.53

%

 

 

 

 

Efficiency ratio

 

49.63

%

 

 

55.45

%

 

 

 

 

 

Three months ended

September 30,

 

 

 

 

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

2022

 

2021

 

$ Change

 

% Change

Net interest income

$

94,106

 

 

$

68,233

 

 

$

25,873

 

 

37.9

%

(Provision for) reversal of credit losses

 

(3,795

)

 

 

1,435

 

 

 

(5,230

)

 

(364.5

) %

Noninterest income

 

15,640

 

 

 

15,095

 

 

 

545

 

 

3.6

%

Noninterest expense

 

(54,465

)

 

 

(45,807

)

 

 

(8,658

)

 

18.9

%

Provision for income taxes

 

(14,148

)

 

 

(11,534

)

 

 

(2,614

)

 

22.7

%

Net income

$

37,338

 

 

$

27,422

 

 

$

9,916

 

 

36.2

%

Diluted earnings per share

$

1.12

 

 

$

0.92

 

 

$

0.20

 

 

21.7

%

Dividends per share

$

0.30

 

 

$

0.25

 

 

$

0.05

 

 

20.0

%

Average common shares

 

33,348

 

 

 

29,714

 

 

 

3,634

 

 

12.2

%

Average diluted common shares

 

33,463

 

 

 

29,851

 

 

 

3,612

 

 

12.1

%

Return on average total assets

 

1.46

%

 

 

1.30

%

 

 

 

 

Return on average equity

 

13.78

%

 

 

11.02

%

 

 

 

 

Efficiency ratio

 

49.63

%

 

 

54.97

%

 

 

 

 

 

Nine months ended

September 30,

 

 

(dollars and shares in thousands)

2022

 

2021

 

$ Change

 

% Change

Net interest income

$

247,076

 

 

$

201,756

 

 

$

45,320

 

 

22.5

%

Reversal of (provision for) credit losses

 

(14,225

)

 

 

7,755

 

 

 

(21,980

)

 

(283.4

) %

Noninterest income

 

47,166

 

 

 

47,162

 

 

 

4

 

 

%

Noninterest expense

 

(157,176

)

 

 

(131,596

)

 

 

(25,580

)

 

19.4

%

Provision for income taxes

 

(33,765

)

 

 

(35,644

)

 

 

1,879

 

 

(5.3

) %

Net income

$

89,076

 

 

$

89,433

 

 

$

(357

)

 

(0.4

) %

Diluted earnings per share

$

2.74

 

 

$

2.99

 

 

$

(0.25

)

 

(8.4

) %

Dividends per share

$

0.80

 

 

$

0.75

 

 

$

0.05

 

 

6.7

%

Average common shares

 

32,332

 

 

 

29,720

 

 

 

2,612

 

 

8.8

%

Average diluted common shares

 

32,469

 

 

 

29,887

 

 

 

2,582

 

 

8.6

%

Return on average total assets

 

1.23

%

 

 

1.48

%

 

 

 

 

Return on average equity

 

11.25

%

 

 

12.42

%

 

 

 

 

Efficiency ratio

 

53.42

%

 

 

52.87

%

 

 

 

 

Balance Sheet

Total loans outstanding, excluding PPP, grew to $6.31 billion as of September 30, 2022, an increase of 33.3% over the prior twelve months, of which 17.4% was related to organic loan growth. Investments increased to $2.67 billion as of September 30, 2022, an increase of 14.4% annualized over the prior twelve months. Quarterly average earning assets to quarterly total average assets were generally unchanged at 92.0% at September 30, 2022, as compared to 92.2% and 92.9% at June 30, 2022, and September 30, 2021, respectively. The loan to deposit ratio was 72.9% at September 30, 2022, as compared to 69.8% and 67.5% at June 30, 2022, and September 30, 2021, respectively.

Total shareholders' equity decreased by $51,839,000 during the quarter ended September 30, 2022, as a result of an increase in accumulated other comprehensive losses of $76,740,000, share repurchases totaling approximately $2,059,000 and cash dividend payments on common stock of $10,004,000, partially offset by net income of $37,338,000. As a result, the Company’s book value was $29.71 per share at September 30, 2022 as compared to $31.25 and $33.05 at June 30, 2022, and September 30, 2021, respectively. The Company’s tangible book value per share, a non-GAAP measure, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $19.92 per share at September 30, 2022, as compared to $21.41 and $25.16 at June 30, 2022, and September 30, 2021, respectively.

Trailing Quarter Balance Sheet Change

Ending balances

September 30,

 

June 30,

 

 

 

Annualized

% Change

(dollars in thousands)

2022

 

2022

 

$ Change

Total assets

$

9,976,879

 

$

10,120,611

 

$

(143,732

)

 

(5.7

) %

Total loans

 

6,314,290

 

 

6,113,421

 

 

200,869

 

 

13.1

 

Total loans, excluding PPP

 

6,312,348

 

 

6,095,667

 

 

216,681

 

 

14.2

 

Total investments

 

2,668,145

 

 

2,802,815

 

 

(134,670

)

 

(19.2

)

Total deposits

$

8,655,769

 

$

8,756,775

 

$

(101,006

)

 

(4.6

) %

Organic loan growth, excluding PPP, of $216,681,000 or 14.2% on an annualized basis was realized during the quarter ended September 30, 2022, primarily within commercial real estate. During the quarter, and exclusive of PPP balance changes, loan originations/draws totaled approximately $737.0 million while payoffs/repayments of loans totaled $536.0 million, which compares to origination/draws and payoff/repayments activity during the three months ended June 30, 2022 of $697.0 million and $397.0 million, respectively. While management believes that loan pipelines remain sufficient to support loan growth, loan pipeline activity may moderate as customer awareness of the rising interest rate environment weighs more heavily on their decision making criteria. Investment security balances decreased $134,670,000 or 19.2% on an annualized basis as the result of declines in market values grew, and prepayments or maturities from the portfolio were utilized to augment the Company's overall balance sheet position. Deposit balances also decreased, with a change of $101,006,000 or 4.6% annualized during the period. These deposit balance changes are partially the result of approximately $51.6 million in FDIC insured money market account balances being placed with partner institutions.

Average Trailing Quarter Balance Sheet Change

Quarterly average balances for the period ended

September 30,

 

June 30,

 

 

 

Annualized

% Change

(dollars in thousands)

2022

 

2022

 

$ Change

 

Total assets

$

10,131,118

 

$

10,121,714

 

$

9,404

 

0.4

%

Total loans

 

6,171,042

 

 

5,928,430

 

 

242,612

 

16.4

 

Total loans, excluding PPP

 

6,162,267

 

 

5,890,578

 

 

271,689

 

18.4

 

Total investments

 

2,802,119

 

 

2,732,466

 

 

69,653

 

10.2

 

Total deposits

$

8,752,215

 

$

8,743,320

 

$

8,895

 

0.4

%

Year Over Year Balance Sheet Change

Ending balances

As of September 30,

 

 

 

Acquired

Balances

 

Organic

$ Change

 

Organic

% Change

(dollars in thousands)

2022

 

2021

 

$ Change

 

 

Total assets

$

9,976,879

 

$

8,458,030

 

$

1,518,849

 

$

1,363,529

 

$

155,320

 

1.8

%

Total loans

 

6,314,290

 

 

4,887,496

 

 

1,426,794

 

 

773,390

 

 

653,404

 

13.4

 

Total loans, excluding PPP

 

6,312,348

 

 

4,736,048

 

 

1,576,300

 

 

751,978

 

 

824,322

 

17.4

 

Total investments

 

2,668,145

 

 

2,333,015

 

 

335,130

 

 

109,716

 

 

225,414

 

9.7

 

Total deposits

$

8,655,769

 

$

7,236,822

 

$

1,418,947

 

$

1,215,479

 

$

203,468

 

2.8

%

Non-PPP loan balances have increased as a result of organic activities by approximately $824.3 million during the twelve month period ending September 30, 2022. Investment securities increased to $2.7 billion at September 30, 2022, an organic change of $225.4 million or 9.7% from the prior year. When combined with balances acquired from Valley Republic Bank, this represents an increase of nearly $1.8 billion in earning assets during the last twelve months.

Net Interest Income and Net Interest Margin

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

 

Three months ended

 

 

 

 

 

September 30,

 

June 30,

 

 

 

 

(dollars in thousands)

2022

 

2022

 

Change

 

% Change

Interest income

$

96,366

 

 

$

86,955

 

 

$

9,411

 

 

10.8

%

Interest expense

 

(2,260

)

 

 

(1,909

)

 

 

(351

)

 

18.4

%

Fully tax-equivalent adjustment (FTE) (1)

 

440

 

 

 

397

 

 

 

43

 

 

10.8

%

Net interest income (FTE)

$

94,546

 

 

$

85,443

 

 

$

9,103

 

 

10.7

%

Net interest margin (FTE)

 

4.02

%

 

 

3.67

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

714

 

 

$

1,677

 

 

$

(963

)

 

(57.4

) %

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

 

3.99

%

 

 

3.60

%

 

 

0.39

%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

313

 

 

$

964

 

 

$

(651

)

 

(67.5

) %

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

 

4.02

%

 

 

3.65

%

 

 

0.37

%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,027

 

 

$

2,641

 

 

$

(1,614

)

 

(61.1

) %

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

 

3.98

%

 

 

3.57

%

 

 

0.41

%

 

 

 

Three months ended

September 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

Interest income

$

96,366

 

 

$

69,628

 

 

$

26,738

 

 

38.4

%

Interest expense

 

(2,260

)

 

 

(1,395

)

 

 

(865

)

 

62.0

%

Fully tax-equivalent adjustment (FTE) (1)

 

440

 

 

 

265

 

 

 

175

 

 

66.0

%

Net interest income (FTE)

$

94,546

 

 

$

68,498

 

 

$

26,048

 

 

38.0

%

Net interest margin (FTE)

 

4.02

%

 

 

3.50

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

714

 

 

$

2,034

 

 

$

(1,320

)

 

(64.9

) %

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

 

3.99

%

 

 

3.40

%

 

 

0.59

%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

313

 

 

$

3,507

 

 

$

(3,194

)

 

(91.1

) %

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

 

4.02

%

 

 

3.42

%

 

 

0.60

%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,027

 

 

$

5,541

 

 

$

(4,514

)

 

(81.5

) %

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

 

3.98

%

 

 

3.31

%

 

 

0.67

%

 

 

 

Nine months ended

September 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

Interest income

$

252,516

 

 

$

206,023

 

 

$

46,493

 

 

22.6

%

Interest expense

 

(5,440

)

 

 

(4,267

)

 

 

(1,173

)

 

27.5

%

Fully tax-equivalent adjustment (FTE) (1)

 

1,120

 

 

 

797

 

 

 

323

 

 

40.5

%

Net interest income (FTE)

$

248,196

 

 

$

202,553

 

 

$

45,643

 

 

22.5

%

Net interest margin (FTE)

 

3.71

%

 

 

3.61

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

3,714

 

 

$

6,311

 

 

$

(2,597

)

 

(41.2

) %

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

 

3.65

%

 

 

3.50

%

 

 

0.15

%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2,374

 

 

$

12,549

 

 

$

(10,175

)

 

(81.1

) %

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

 

3.69

%

 

 

3.53

%

 

 

0.16

%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

6,088

 

 

$

18,860

 

 

$

(12,772

)

 

(67.7

) %

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

 

3.63

%

 

 

3.41

%

 

 

0.22

%

 

 

(1)

 

Certain information included herein is presented on a fully tax-equivalent (FTE) basis and / or to present additional financial details which may be desired by users of this financial information. The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provide additional clarity in assessing its results, and the presentation of these measures are common practice within the banking industry. See additional information related to non-GAAP measures at the back of this document.

Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. Generally, as time goes on, the dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. As a result of the increase in interest rates, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, declined throughout 2022. During the three months ended September 30, 2022, June 30, 2022, and September 30, 2021, purchased loan discount accretion was $714,000, $1,677,000, and $2,034,000, respectively.

The following table shows the components of net interest income and net interest margin on a fully tax-equivalent (FTE) basis for the quarterly periods indicated:

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

 

 

Three months ended

 

Three months ended

 

Three months ended

 

September 30, 2022

 

June 30, 2022

 

September 30, 2021

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

6,162,267

 

$

75,643

 

4.87

%

 

$

5,890,578

 

$

68,954

 

4.70

%

 

$

4,684,492

 

$

57,218

 

4.85

%

PPP loans

 

8,775

 

 

313

 

14.15

%

 

 

37,852

 

 

964

 

10.22

%

 

 

213,430

 

 

3,507

 

6.52

%

Investments-taxable

 

2,591,513

 

 

17,122

 

2.62

%

 

 

2,536,362

 

 

14,350

 

2.27

%

 

 

2,019,283

 

 

7,741

 

1.52

%

Investments-nontaxable (1)

 

210,606

 

 

1,908

 

3.59

%

 

 

196,104

 

 

1,720

 

3.52

%

 

 

130,028

 

 

1,147

 

3.50

%

Total investments

 

2,802,119

 

 

19,030

 

2.69

%

 

 

2,732,466

 

 

16,070

 

2.36

%

 

 

2,149,311

 

 

8,888

 

1.64

%

Cash at Federal Reserve and other banks

 

346,991

 

 

1,820

 

2.08

%

 

 

669,163

 

 

1,364

 

0.82

%

 

 

710,936

 

 

280

 

0.16

%

Total earning assets

 

9,320,152

 

 

96,806

 

4.12

%

 

 

9,330,059

 

 

87,352

 

3.76

%

 

 

7,758,169

 

 

69,893

 

3.57

%

Other assets, net

 

810,966

 

 

 

 

 

 

791,655

 

 

 

 

 

 

589,942

 

 

 

 

Total assets

$

10,131,118

 

 

 

 

 

$

10,121,714

 

 

 

 

 

$

8,348,111

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,775,884

 

$

119

 

0.03

%

 

$

1,799,205

 

$

99

 

0.02

%

 

$

1,507,697

 

$

116

 

0.03

%

Savings deposits

 

3,011,145

 

 

685

 

0.09

%

 

 

3,003,337

 

 

529

 

0.07

%

 

 

2,407,368

 

 

328

 

0.05

%

Time deposits

 

321,100

 

 

188

 

0.23

%

 

 

337,007

 

 

220

 

0.26

%

 

 

321,381

 

 

411

 

0.51

%

Total interest-bearing deposits

 

5,108,129

 

 

992

 

0.08

%

 

 

5,139,549

 

 

848

 

0.07

%

 

 

4,236,446

 

 

855

 

0.08

%

Other borrowings

 

38,908

 

 

5

 

0.05

%

 

 

35,253

 

 

5

 

0.06

%

 

 

48,330

 

 

6

 

0.05

%

Junior subordinated debt

 

101,011

 

 

1,263

 

4.96

%

 

 

100,991

 

 

1,056

 

4.19

%

 

 

57,891

 

 

534

 

3.66

%

Total interest-bearing liabilities

 

5,248,048

 

 

2,260

 

0.17

%

 

 

5,275,793

 

 

1,909

 

0.15

%

 

 

4,342,667

 

 

1,395

 

0.13

%

Noninterest-bearing deposits

 

3,644,086

 

 

 

 

 

 

3,603,771

 

 

 

 

 

 

2,900,817

 

 

 

 

Other liabilities

 

164,208

 

 

 

 

 

 

150,696

 

 

 

 

 

 

117,601

 

 

 

 

Shareholders’ equity

 

1,074,776

 

 

 

 

 

 

1,091,454

 

 

 

 

 

 

987,026

 

 

 

 

Total liabilities and shareholders’ equity

$

10,131,118

 

 

 

 

 

$

10,121,714

 

 

 

 

 

$

8,348,111

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

3.95

%

 

 

 

 

 

3.61

%

 

 

 

 

 

3.45

%

Net interest income and margin (1) (3)

 

 

$

94,546

 

4.02

%

 

 

 

$

85,443

 

3.67

%

 

 

 

$

68,498

 

3.50

%

(1)

Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.

(2)

Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(3)

Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.

Net interest income (FTE) during the three months ended September 30, 2022 increased $9,103,000 or 10.7% to $94,546,000 compared to $85,443,000 during the three months ended June 30, 2022. In addition, net interest margin improved 35 basis points to 4.02%, as compared to the trailing quarter. The increase in net interest income is primarily attributed to an additional $6,038,000 in loan interest and fee income and $2,960,000 in investment income, due to increases in average volume and rates as compared to the trailing quarter, respectively. As a partial offset, increases in interest rates on subordinated debt resulted in an increase in interest expense of $207,000 over the same period.

As compared to the same quarter in the prior year, average loan yields, excluding PPP, increased 2 basis points from 4.85% during the three months ended September 30, 2021, to 4.87% during the three months ended September 30, 2022. The accretion of discounts from acquired loans added 5 and 17 basis points to loan yields during the quarters ended September 30, 2022 and September 30, 2021, respectively. Therefore, the 2 basis point increase in yields on loans during the comparable three month periods ended September 30, 2022 and 2021 was the net effect of a 14 basis point increase in market loan rates, partially offset by a 12 basis point decline in the accretion of discounts.

The rates paid on interest bearing deposits increased by 1 basis point during the quarter ended September 30, 2022 compared to the trailing quarter. The cost of interest-bearing deposits remained flat at 8 basis points between the quarter ended September 30, 2022 and the same quarter of the prior year. In addition, the level of noninterest-bearing deposits continues to benefit the average cost of total deposits which remained flat at 0.04% in both the current and trailing quarter, compared to 0.5% in the third quarter of the prior year. Non-interest bearing deposit balances grew $74.0 million during the three months ended September 30, 2022. As of September 30, 2022, the ratio of average total noninterest-bearing deposits to total average deposits was 41.6% .

 

Nine months ended September 30, 2022

 

Nine months ended September 30, 2021

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

5,668,055

 

$

201,245

 

4.75

%

 

$

4,580,292

 

$

168,916

 

4.93

%

PPP loans

 

32,287

 

 

2,374

 

9.83

%

 

 

300,006

 

 

12,549

 

5.59

%

Investments-taxable

 

2,487,111

 

 

41,695

 

2.24

%

 

 

1,838,023

 

 

21,324

 

1.55

%

Investments-nontaxable (1)

 

183,772

 

 

4,853

 

3.53

%

 

 

129,057

 

 

3,453

 

3.58

%

Total investments

 

2,670,883

 

 

46,548

 

2.33

%

 

 

1,967,080

 

 

24,777

 

1.68

%

Cash at Federal Reserve and other banks

 

573,252

 

 

3,469

 

0.81

%

 

 

656,912

 

 

578

 

0.12

%

Total earning assets

 

8,944,477

 

 

253,636

 

3.79

%

 

 

7,504,290

 

 

206,820

 

3.68

%

Other assets, net

 

737,721

 

 

 

 

 

 

591,983

 

 

 

 

Total assets

$

9,682,198

 

 

 

 

 

$

8,096,273

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,724,787

 

$

302

 

0.02

%

 

$

1,476,987

 

$

269

 

0.02

%

Savings deposits

 

2,863,447

 

 

1,541

 

0.07

%

 

 

2,318,169

 

 

965

 

0.06

%

Time deposits

 

319,940

 

 

676

 

0.28

%

 

 

327,562

 

 

1,386

 

0.57

%

Total interest-bearing deposits

 

4,908,174

 

 

2,519

 

0.07

%

 

 

4,122,718

 

 

2,620

 

0.08

%

Other borrowings

 

39,609

 

 

15

 

0.05

%

 

 

40,732

 

 

15

 

0.05

%

Junior subordinated debt

 

87,804

 

 

2,906

 

4.42

%

 

 

57,790

 

 

1,632

 

3.78

%

Total interest-bearing liabilities

 

5,035,587

 

 

5,440

 

0.14

%

 

 

4,221,240

 

 

4,267

 

0.14

%

Noninterest-bearing deposits

 

3,435,487

 

 

 

 

 

 

2,790,828

 

 

 

 

Other liabilities

 

152,186

 

 

 

 

 

 

121,334

 

 

 

 

Shareholders’ equity

 

1,058,938

 

 

 

 

 

 

962,871

 

 

 

 

Total liabilities and shareholders’ equity

$

9,682,198

 

 

 

 

 

$

8,096,273

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

3.65

%

 

 

 

 

 

3.54

%

Net interest income and margin (1) (3)

 

 

$

248,196

 

3.71

%

 

 

 

$

202,553

 

3.61

%

(1)

 

Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.

(2)

 

Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(3)

 

Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.

Interest Rates and Earning Asset Composition

During the quarter ended September 30, 2022, market interest rates, including many rates that serve as reference indices for variable rate loans and investment securities continued to increase. As noted above, these rate increases have continued to benefit growth in total interest income. As of September 30, 2022, the Company's loan portfolio consisted of approximately $6.4 billion in outstanding principal with a weighted average coupon rate of 4.65%. Included in the September 30, 2022 loan total are variable rate loans totaling $3.6 billion, of which, $862 million are considered floating based on the Wall Street Prime index. In addition, the Company holds certain investment securities totaling $402 million which are subject to repricing on not less than a quarterly basis.

Asset Quality and Credit Loss Provisioning

During the three months ended September 30, 2022, the Company recorded a provision for credit losses of $3,795,000, as compared to a $2,100,000 provision during the trailing quarter, and a reversal of provision expense of $1,435,000 during the third quarter of 2021.

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

 

Three months ended

(dollars in thousands)

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

September 30, 2021

Addition to (reversal of) allowance for credit losses

$

3,500

 

$

1,940

 

$

8,205

 

$

(1,495

)

Addition to reserve for unfunded loan commitments

 

295

 

 

160

 

 

125

 

 

60

 

Total provision for (reversal of) credit losses

$

3,795

 

$

2,100

 

$

8,330

 

$

(1,435

)

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

 

Three months ended

 

Nine months ended

(dollars in thousands)

September 30, 2022

 

September 30, 2021

 

September 30, 2022

 

September 30, 2021

Balance, beginning of period

$

97,944

 

 

$

86,062

 

 

$

85,376

 

 

$

91,847

 

ACL at acquisition for PCD loans

 

 

 

 

 

 

 

2,037

 

 

 

 

Provision for (reversal of) credit losses

 

3,500

 

 

 

(1,495

)

 

 

13,645

 

 

 

(7,880

)

Loans charged-off

 

(267

)

 

 

(1,582

)

 

 

(1,411

)

 

 

(2,195

)

Recoveries of previously charged-off loans

 

311

 

 

 

1,321

 

 

 

1,841

 

 

 

2,534

 

Balance, end of period

$

101,488

 

 

$

84,306

 

 

$

101,488

 

 

$

84,306

 

The allowance for credit losses (ACL) was $101,488,000 as of September 30, 2022, a net increase of $3,544,000 over the immediately preceding quarter. The provision for credit losses of $3,500,000 during the quarter was the net effect of increases in required reserves due to qualitative factors and individually analyzed credits. In addition to the aforementioned quarterly increase, the provision for credit losses of $13,645,000 during the nine months ended September 30, 2022 was comprised of $10,820,000 in association with the loans acquired from Valley Republic Bank in the first quarter of 2022, and a net provision for credit losses of $2,825,000 associated with organic loan portfolio growth and the net changes in quantitative and qualitative factors associated with overall borrower performance. For the quarter, the qualitative components of the ACL resulted in a net increase in required reserves, despite continued improvement in US employment rates, due to increased uncertainty in the global economic markets, concentration risks in commercial lending and the rapid rise in interest rates. Meanwhile, the quantitative component of the ACL increased reserve requirements over the trailing quarter due to loan volume growth and increases in specific reserves totaling approximately $1,237,000.

The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date. This forecast data continues to evolve and included improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date, particularly CA unemployment trends. Inflation remains elevated from continued disruptions in the supply chain and high energy prices Despite the expected continued benefit to the net interest income of the Company from the elevated rate environment, Management notes the rapid intervals of rate increases by the Federal Reserve and flattening or inversion of the yield curve, have boosted expectations of the US entering a recession within 12 months and has led to the lowest levels of consumer sentiment in decades. As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors.

Loans past due 30 days or more increased by $551,000 during the quarter ended September 30, 2022 to $6,471,000, as compared to $5,920,000 at June 30, 2022. Non-performing loans were $17,471,000 at September 30, 2022, an increase of $5,546,000 from $11,925,000 as of June 30, 2022, and a decrease of $11,319,000 from $28,790,000 as of September 30, 2021. The current quarter change in non-performing assets is nearly entirely attributed to a single agriculture production relationship, which also was the primary contributor to the increase in specific reserves for the quarter.

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

 

September 30,

% of Total

Loans

 

June 30,

% of Total

Loans

 

September 30,

% of Total

Loans

(dollars in thousands)

2022

 

 

2022

 

 

2021

 

Risk Rating:

 

 

 

 

 

 

 

 

Pass

$

6,133,805

 

97.1

%

 

$

5,960,781

 

97.5

%

 

$

4,698,475

 

96.1

%

Special Mention

 

126,273

 

2.0

%

 

 

105,819

 

1.7

%

 

 

138,699

 

2.9

%

Substandard

 

54,212

 

0.9

%

 

 

46,821

 

0.8

%

 

 

50,322

 

1.0

%

Total

$

6,314,290

 

 

 

$

6,113,421

 

 

 

$

4,887,496

 

 

 

 

 

 

 

 

 

 

 

Classified loans to total loans

 

0.86

%

 

 

 

0.77

%

 

 

 

1.03

%

 

Loans past due 30+ days to total loans

 

0.10

%

 

 

 

0.10

%

 

 

 

0.22

%

 

The ratio of classified loans increased to 0.86% as of September 30, 2022 as compared to 0.77% in the trailing quarter, but improved by 17 basis points from the equivalent period in 2021. The Company's criticized loan balances increased during the current quarter by approximately $27,846,000 to $180,486,000 as of September 30, 2022. There were no charge-offs incurred in connection with these loans and management continues to work toward resolution with the borrowers.

There were two properties added to other real estate owned totaling $443,000 during the quarter ended September 30, 2022, and two disposals totaling $394,000. As of September 30, 2022, other real estate owned consisted of nine properties with a carrying value of approximately $3,441,000.

Non-performing assets of $20,912,000 at September 30, 2022 represented 0.21% of total assets, a slight change but generally in line with the $15,304,000 or 0.15% and $31,440,000 or 0.37% as of June 30, 2022 and September 30, 2021, respectively.

Allocation of Credit Loss Reserves by Loan Type

 

 

As of September 30, 2022

 

As of December 31, 2021

 

As of September 30, 2021

(dollars in thousands)

 

Amount

 

% of Loans

Outstanding

 

Amount

 

% of Loans

Outstanding

 

Amount

 

% of Loans

Outstanding

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

CRE - Non Owner Occupied

 

$

29,244

 

1.42

%

 

$

25,739

 

1.61

%

 

$

25,221

 

1.65

%

CRE - Owner Occupied

 

 

13,525

 

1.39

%

 

 

10,691

 

1.51

%

 

 

10,730

 

1.53

%

Multifamily

 

 

12,749

 

1.36

%

 

 

12,395

 

1.51

%

 

 

12,876

 

1.55

%

Farmland

 

 

3,122

 

1.12

%

 

 

2,315

 

1.34

%

 

 

1,902

 

1.15

%

Total commercial real estate loans

 

 

58,640

 

1.38

%

 

 

51,140

 

1.55

%

 

 

50,729

 

1.57

%

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

SFR 1-4 1st Liens

 

 

10,671

 

1.39

%

 

 

10,723

 

1.60

%

 

 

10,618

 

1.60

%

SFR HELOCs and Junior Liens

 

 

11,383

 

2.89

%

 

 

10,510

 

3.11

%

 

 

10,431

 

3.23

%

Other

 

 

1,878

 

3.23

%

 

 

2,241

 

3.34

%

 

 

2,442

 

3.59

%

Total consumer loans

 

 

23,932

 

1.97

%

 

 

23,474

 

2.19

%

 

 

23,491

 

2.22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

 

10,400

 

1.94

%

 

 

3,862

 

1.49

%

 

 

3,427

 

0.99

%

Construction

 

 

6,132

 

2.52

%

 

 

5,667

 

2.55

%

 

 

5,528

 

2.55

%

Agricultural Production

 

 

2,368

 

3.31

%

 

 

1,215

 

2.39

%

 

 

1,119

 

2.52

%

Leases

 

 

16

 

0.20

%

 

 

18

 

0.27

%

 

 

12

 

0.24

%

Allowance for credit losses

 

 

101,488

 

1.61

%

 

 

85,376

 

1.74

%

 

 

84,306

 

1.72

%

Reserve for unfunded loan commitments

 

 

4,370

 

 

 

 

3,790

 

 

 

 

3,525

 

 

Total allowance for credit losses

 

$

105,858

 

1.68

%

 

$

89,166

 

1.81

%

 

$

87,831

 

1.80

%

For the periods presented in the table above and for purposes of calculating the "% of Loans Outstanding", PPP loans are included in the segment "Commercial and Industrial." PPP loans are fully guaranteed and therefore would not require any loss reserve allocation. Excluding the net outstanding balances of PPP loans from the ratio of the ACL to total loans results in a reserve ratio of approximately 1.61% as of September 30, 2022. In addition to the allowance for credit losses above, the Company has acquired various performing loans whose fair value as of the acquisition date was determined to be less than the principal balance owed on those loans. This difference represents the collective discount of credit, interest rate and liquidity measurements which is expected to be amortized over the life of the loans. As of September 30, 2022, the unamortized discount associated with acquired loans totaled $32,256,000 and, if aggregated with the ACL, would collectively represent 2.11% of total gross loans and 2.12% of total loans less PPP loans.

SBA Paycheck Protection Program

In March 2020 (Round 1) and subsequently in December 2020 (Round 2), the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") was created to help small businesses keep workers employed during the COVID-19 crisis. Tri Counties Bank, through its online portal, facilitated the ability for borrowers to open a new deposit account and submit PPP applications during the entirety of the Programs. The SBA ended PPP and did not accept new borrowing applications, effective May 31, 2021. The following is a summary of PPP loan related information as of the periods indicated:

(dollars in thousands)

September 30, 2022

 

December 31, 2021

 

September 30, 2021

Total number of PPP loans outstanding

 

16

 

 

450

 

 

1,449

 

 

 

 

 

 

PPP loan balance (TCBK round 1 origination), gross

$

433

 

$

2,544

 

$

9,302

PPP loan balance (TCBK round 2 origination), gross

 

533

 

 

60,767

 

 

148,159

Acquired PPP loan balance (VRB origination), gross

 

1,003

 

 

 

 

Total PPP loans, gross outstanding

$

1,969

 

$

63,311

 

$

157,461

 

 

 

 

 

 

PPP deferred loan fees (Round 1 origination)

 

 

 

1

 

 

40

PPP deferred loan fees (Round 2 origination)

 

27

 

 

2,163

 

 

5,973

Total PPP deferred loan fees (costs) outstanding

$

27

 

$

2,164

 

$

6,013

As of September 30, 2022, there was approximately $27,000 in net deferred fee income remaining to be recognized. During the three months ended September 30, 2022, the Company recognized $291,000 in fees on PPP loans as compared with $872,000 and $2,984,000 for the three months ended June 30, 2022 and September 30, 2021, respectively. Based on the payment guarantee provided by the SBA as well as the expected short-term duration of the PPP loans acquired from VRB, the fair value of these loans approximates the principal balance outstanding as of the merger date, and therefore, no purchase discount was recorded.

Non-interest Income

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

 

Three months ended

 

 

 

 

(dollars in thousands)

September 30, 2022

 

June 30, 2022

 

Change

 

% Change

ATM and interchange fees

$

6,714

 

 

$

6,984

 

 

$

(270

)

 

(3.9

) %

Service charges on deposit accounts

 

4,436

 

 

 

4,163

 

 

 

273

 

 

6.6

%

Other service fees

 

1,022

 

 

 

1,279

 

 

 

(257

)

 

(20.1

) %

Mortgage banking service fees

 

477

 

 

 

482

 

 

 

(5

)

 

(1.0

) %

Change in value of mortgage servicing rights

 

33

 

 

 

136

 

 

 

(103

)

 

(75.7

) %

Total service charges and fees

 

12,682

 

 

 

13,044

 

 

 

(362

)

 

(2.8

) %

Increase in cash value of life insurance

 

659

 

 

 

752

 

 

 

(93

)

 

(12.4

) %

Asset management and commission income

 

1,020

 

 

 

1,039

 

 

 

(19

)

 

(1.8

) %

Gain on sale of loans

 

357

 

 

 

542

 

 

 

(185

)

 

(34.1

) %

Lease brokerage income

 

252

 

 

 

238

 

 

 

14

 

 

5.9

%

Sale of customer checks

 

326

 

 

 

441

 

 

 

(115

)

 

(26.1

) %

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

n/m

 

Loss on marketable equity securities

 

(115

)

 

 

(94

)

 

 

(21

)

 

22.3

%

Other

 

459

 

 

 

468

 

 

 

(9

)

 

(1.9

) %

Total other non-interest income

 

2,958

 

 

 

3,386

 

 

 

(428

)

 

(12.6

) %

Total non-interest income

$

15,640

 

 

$

16,430

 

 

$

(790

)

 

(4.8

) %

Non-interest income decreased $790,000 or 4.8% to $15,640,000 during the three months ended September 30, 2022, compared to $16,430,000 during the quarter ended June 30, 2022. Gain on sale of mortgage loans declined by $185,000 or 34.1% during the quarter ended September 30, 2022, attributed to the continued rising rate environment and resulting decline in overall mortgage application and origination volumes. The decrease in total service charges and fees is wholly attributable to changes in customer use activities and the ongoing integration of customers acquired from Valley Republic Bank (VRB). Looking forward, during the fourth quarter of 2022, the Company will no longer charge personal and business customers a non-sufficient funds fee for returned checks.

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

 

Three months ended September 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

ATM and interchange fees

$

6,714

 

 

$

6,516

 

 

$

198

 

 

3.0

%

Service charges on deposit accounts

 

4,436

 

 

 

3,608

 

 

 

828

 

 

22.9

%

Other service fees

 

1,022

 

 

 

897

 

 

 

125

 

 

13.9

%

Mortgage banking service fees

 

477

 

 

 

476

 

 

 

1

 

 

0.2

%

Change in value of mortgage servicing rights

 

33

 

 

 

(232

)

 

 

265

 

 

(114.2

) %

Total service charges and fees

 

12,682

 

 

 

11,265

 

 

 

1,417

 

 

12.6

%

Increase in cash value of life insurance

 

659

 

 

 

644

 

 

 

15

 

 

2.3

%

Asset management and commission income

 

1,020

 

 

 

957

 

 

 

63

 

 

6.6

%

Gain on sale of loans

 

357

 

 

 

1,814

 

 

 

(1,457

)

 

(80.3

) %

Lease brokerage income

 

252

 

 

 

183

 

 

 

69

 

 

37.7

%

Sale of customer checks

 

326

 

 

 

107

 

 

 

219

 

 

204.7

%

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

n/m

 

Loss on marketable equity securities

 

(115

)

 

 

(14

)

 

 

(101

)

 

721.4

%

Other

 

459

 

 

 

139

 

 

 

320

 

 

230.2

%

Total other non-interest income

 

2,958

 

 

 

3,830

 

 

 

(872

)

 

(22.8

) %

Total non-interest income

$

15,640

 

 

$

15,095

 

 

$

545

 

 

3.6

%

Generally, the increases in recurring non-interest income items reflects the VRB merger timing. As noted above, decreasing mortgage related activity reduced the gain on sale of loans recorded during the quarter by $1,457,000 or 80.3%, as compared to the three months ended September 30, 2021. Further, changes in the value of mortgage service rights, while lesser in magnitude, typically have an inverse relationship with changes in mortgage banking activities.

 

Nine months ended September 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

ATM and interchange fees

$

19,941

 

 

$

18,935

 

 

$

1,006

 

 

5.3

%

Service charges on deposit accounts

 

12,433

 

 

 

10,339

 

 

 

2,094

 

 

20.3

%

Other service fees

 

3,183

 

 

 

2,682

 

 

 

501

 

 

18.7

%

Mortgage banking service fees

 

1,422

 

 

 

1,406

 

 

 

16

 

 

1.1

%

Change in value of mortgage servicing rights

 

443

 

 

 

(691

)

 

 

1,134

 

 

(164.1

) %

Total service charges and fees

 

37,422

 

 

 

32,671

 

 

 

4,751

 

 

14.5

%

Increase in cash value of life insurance

 

2,049

 

 

 

2,062

 

 

 

(13

)

 

(0.6

) %

Asset management and commission income

 

2,946

 

 

 

2,738

 

 

 

208

 

 

7.6

%

Gain on sale of loans

 

2,145

 

 

 

7,908

 

 

 

(5,763

)

 

(72.9

) %

Lease brokerage income

 

648

 

 

 

542

 

 

 

106

 

 

19.6

%

Sale of customer checks

 

871

 

 

 

342

 

 

 

529

 

 

154.7

%

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

n/m

 

Loss on marketable equity securities

 

(346

)

 

 

(59

)

 

 

(287

)

 

486.4

%

Other

 

1,431

 

 

 

958

 

 

 

473

 

 

49.4

%

Total other non-interest income

 

9,744

 

 

 

14,491

 

 

 

(4,747

)

 

(32.8

) %

Total non-interest income

$

47,166

 

 

$

47,162

 

 

$

4

 

 

%

The changes in non-interest income for the nine months ended September 30, 2022 and 2021 are generally consistent with changes in the three month periods discussed above.

Non-interest Expense

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

 

Three months ended

 

 

 

 

(dollars in thousands)

September 30, 2022

 

June 30, 2022

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

22,377

 

 

$

22,169

 

 

$

208

 

 

0.9

%

Incentive compensation

 

4,832

 

 

 

4,282

 

 

 

550

 

 

12.8

%

Benefits and other compensation costs

 

6,319

 

 

 

6,491

 

 

 

(172

)

 

(2.6

) %

Total salaries and benefits expense

 

33,528

 

 

 

32,942

 

 

 

586

 

 

1.8

%

Occupancy

 

3,965

 

 

 

3,996

 

 

 

(31

)

 

(0.8

) %

Data processing and software

 

3,449

 

 

 

3,596

 

 

 

(147

)

 

(4.1

) %

Equipment

 

1,422

 

 

 

1,453

 

 

 

(31

)

 

(2.1

) %

Intangible amortization

 

1,702

 

 

 

1,702

 

 

 

 

 

%

Advertising

 

990

 

 

 

818

 

 

 

172

 

 

21.0

%

ATM and POS network charges

 

1,694

 

 

 

1,781

 

 

 

(87

)

 

(4.9

) %

Professional fees

 

1,172

 

 

 

1,233

 

 

 

(61

)

 

(4.9

) %

Telecommunications

 

575

 

 

 

564

 

 

 

11

 

 

2.0

%

Regulatory assessments and insurance

 

828

 

 

 

779

 

 

 

49

 

 

6.3

%

Merger and acquisition expenses

 

 

 

 

2,221

 

 

 

(2,221

)

 

(100.0

) %

Postage

 

287

 

 

 

313

 

 

 

(26

)

 

(8.3

) %

Operational loss

 

492

 

 

 

456

 

 

 

36

 

 

7.9

%

Courier service

 

497

 

 

 

486

 

 

 

11

 

 

2.3

%

Gain on sale or acquisition of foreclosed assets

 

(148

)

 

 

(98

)

 

 

(50

)

 

51.0

%

Loss on disposal of fixed assets

 

4

 

 

 

5

 

 

 

(1

)

 

(20.0

) %

Other miscellaneous expense

 

4,008

 

 

 

4,017

 

 

 

(9

)

 

(0.2

) %

Total other non-interest expense

 

20,937

 

 

 

23,322

 

 

 

(2,385

)

 

(10.2

) %

Total non-interest expense

$

54,465

 

 

$

56,264

 

 

$

(1,799

)

 

(3.2

) %

Average full-time equivalent staff

 

1,198

 

 

 

1,183

 

 

 

15

 

 

1.3

%

Non-interest expense for the quarter ended September 30, 2022 decreased $1,799,000 or 3.2% to $54,465,000 as compared to $56,264,000 during the trailing quarter ended June 30, 2022. Total salaries and benefits expense increased by $586,000 or 1.8%, led by incentive compensation related expenses of $550,000 or 12.8% compared to the trailing quarter, due to strong overall Company performance and continued loan production and growth. The merger and acquisition expenses from the trailing quarter were entirely associated with the VRB merger, which are not expected to be incurred in future periods.

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

 

Three months ended September 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

22,377

 

 

$

17,673

 

 

$

4,704

 

 

26.6

%

Incentive compensation

 

4,832

 

 

 

3,123

 

 

 

1,709

 

 

54.7

%

Benefits and other compensation costs

 

6,319

 

 

 

5,478

 

 

 

841

 

 

15.4

%

Total salaries and benefits expense

 

33,528

 

 

 

26,274

 

 

 

7,254

 

 

27.6

%

Occupancy

 

3,965

 

 

 

3,771

 

 

 

194

 

 

5.1

%

Data processing and software

 

3,449

 

 

 

3,689

 

 

 

(240

)

 

(6.5

) %

Equipment

 

1,422

 

 

 

1,336

 

 

 

86

 

 

6.4

%

Intangible amortization

 

1,702

 

 

 

1,409

 

 

 

293

 

 

20.8

%

Advertising

 

990

 

 

 

966

 

 

 

24

 

 

2.5

%

ATM and POS network charges

 

1,694

 

 

 

1,692

 

 

 

2

 

 

0.1

%

Professional fees

 

1,172

 

 

 

1,090

 

 

 

82

 

 

7.5

%

Telecommunications

 

575

 

 

 

574

 

 

 

1

 

 

0.2

%

Regulatory assessments and insurance

 

828

 

 

 

673

 

 

 

155

 

 

23.0

%

Merger and acquisition expenses

 

 

 

 

651

 

 

 

(651

)

 

n/m

 

Postage

 

287

 

 

 

156

 

 

 

131

 

 

84.0

%

Operational loss

 

492

 

 

 

244

 

 

 

248

 

 

101.6

%

Courier service

 

497

 

 

 

286

 

 

 

211

 

 

73.8

%

Gain on sale or acquisition of foreclosed assets

 

(148

)

 

 

(144

)

 

 

(4

)

 

2.8

%

(Gain) loss on disposal of fixed assets

 

4

 

 

 

(19

)

 

 

23

 

 

(121.1

) %

Other miscellaneous expense

 

4,008

 

 

 

3,159

 

 

 

849

 

 

26.9

%

Total other non-interest expense

 

20,937

 

 

 

19,533

 

 

 

1,404

 

 

7.2

%

Total non-interest expense

$

54,465

 

 

$

45,807

 

 

$

8,658

 

 

18.9

%

Average full-time equivalent staff

 

1,198

 

 

 

1,049

 

 

 

149

 

 

14.2

%

Generally, the increases in recurring non-interest expense items reflect the VRB merger timing of March 25, 2022, and therefore, related expenses for the combined entities, less certain realized cost savings, are only being captured within the most recent three months ended September 30, 2022. Total non-interest expense increased $8,658,000 or 18.9% to $54,465,000 during the three months ended September 30, 2022 as compared to $45,807,000 for the quarter ended September 30, 2021. Total salaries and benefits expense increased by $7,254,000 or 27.6% to $33,528,000, largely from a net increase of 99 full-time equivalent positions following the aforementioned merger with VRB, the build out of other loan production and compliance teams, and the continued strength of organic growth within the loan portfolio driving incentive compensation expense.

 

Nine months ended September 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

62,762

 

 

$

50,721

 

 

$

12,041

 

 

23.7

%

Incentive compensation

 

11,697

 

 

 

11,025

 

 

 

672

 

 

6.1

%

Benefits and other compensation costs

 

18,782

 

 

 

16,939

 

 

 

1,843

 

 

10.9

%

Total salaries and benefits expense

 

93,241

 

 

 

78,685

 

 

 

14,556

 

 

18.5

%

Occupancy

 

11,536

 

 

 

11,197

 

 

 

339

 

 

3.0

%

Data processing and software

 

10,558

 

 

 

10,092

 

 

 

466

 

 

4.6

%

Equipment

 

4,208

 

 

 

4,060

 

 

 

148

 

 

3.6

%

Intangible amortization

 

4,632

 

 

 

4,271

 

 

 

361

 

 

8.5

%

Advertising

 

2,445

 

 

 

2,080

 

 

 

365

 

 

17.5

%

ATM and POS network charges

 

4,850

 

 

 

4,489

 

 

 

361

 

 

8.0

%

Professional fees

 

3,281

 

 

 

2,730

 

 

 

551

 

 

20.2

%

Telecommunications

 

1,660

 

 

 

1,719

 

 

 

(59

)

 

(3.4

) %

Regulatory assessments and insurance

 

2,327

 

 

 

1,903

 

 

 

424

 

 

22.3

%

Merger and acquisition expenses

 

6,253

 

 

 

651

 

 

 

5,602

 

 

860.5

%

Postage

 

828

 

 

 

478

 

 

 

350

 

 

73.2

%

Operational loss

 

765

 

 

 

665

 

 

 

100

 

 

15.0

%

Courier service

 

1,397

 

 

 

868

 

 

 

529

 

 

60.9

%

Gain on sale or acquisition of foreclosed assets

 

(246

)

 

 

(210

)

 

 

(36

)

 

17.1

%

Gain on disposal of fixed assets

 

(1,069

)

 

 

(445

)

 

 

(624

)

 

140.2

%

Other miscellaneous expense

 

10,510

 

 

 

8,363

 

 

 

2,147

 

 

25.7

%

Total other non-interest expense

 

63,935

 

 

 

52,911

 

 

 

11,024

 

 

20.8

%

Total non-interest expense

$

157,176

 

 

$

131,596

 

 

$

25,580

 

 

19.4

%

Average full-time equivalent staff

 

1,155

 

 

 

1,031

 

 

 

124

 

 

12.0

%

The changes in non-interest expense for the nine months ended September 30, 2022 and 2021 are generally consistent with changes in the comparable three month periods discussed above.

Provision for Income Taxes

The Company’s effective tax rate was 27.5% for the nine months ended September 30, 2022, as compared to 28.1% for the year ended December 31, 2021. Differences between the Company's effective tax rate and applicable federal and state blended statutory rate of approximately 29.6% are due to the proportion of non-taxable revenues, non-deductible expenses, and benefits from tax credits as compared to the levels of pre-tax earnings.

About TriCo Bancshares

Established in 1975, Tri Counties Bank is a wholly-owned subsidiary of TriCo Bancshares (NASDAQ: TCBK) headquartered in Chico, California, providing a unique brand of customer Service with Solutions available in traditional stand-alone and in-store bank branches and loan production offices in communities throughout California. Tri Counties Bank provides an extensive and competitive breadth of consumer, small business and commercial banking financial services, along with convenient around-the-clock ATMs, online and mobile banking access. Brokerage services are provided by Tri Counties Advisors through affiliation with Raymond James Financial Services, Inc. Visit www.TriCountiesBank.com to learn more.

Forward-Looking Statement

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. There can be no assurance that future developments affecting us will be the same as those anticipated by management. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations on the Company's business condition and financial operating results; the impact of changes in financial services industry policies, laws and regulations; technological changes; weather, natural disasters and other catastrophic events that may or may not be caused by climate change and their effects on economic and business environments in which the Company operates; the continuing adverse impact on the U.S. economy, including the markets in which we operate due to the COVID-19 global pandemic; the impact of a slowing U.S. economy and increased unemployment on the performance of our loan portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products; adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages on the economic recovery and our business; the impacts of international hostilities or geopolitical events; the costs or effects of mergers, acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such mergers, acquisitions or dispositions, and/or our ability to realize the contemplated financial business benefits associated with any such activities; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the negative impact on our reputation and profitability in the event customers experience economic harm or in the event that regulatory violations are identified; the ability to execute our business plan in new lending markets; the future operating or financial performance of the Company, including our outlook for future growth and changes in the level of our nonperforming assets and charge-offs; the appropriateness of the allowance for credit losses, including the timing and effects of the implementation of the current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting standards and practices; possible other-than-temporary impairment of securities held by us due to changes in credit quality or rates; changes in consumer spending, borrowing and savings habits; our ability to attract and maintain deposits and other sources of liquidity; the effects of changes in the level or cost of checking or savings account deposits on our funding costs and net interest margin; changes in the financial performance and/or condition of our borrowers; our noninterest expense and the efficiency ratio; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; the challenges of integrating and retaining key employees; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks and the cost to defend against such attacks; breaches in data security, including as a result of work from home arrangements; failure to safeguard personal information; change to U.S. tax policies, including our effective income tax rate; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the discontinuation of the London Interbank Offered Rate and other reference rates; and our ability to manage the risks involved in the foregoing. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2021, which has been filed with the Securities and Exchange Commission (the “SEC”) and all subsequent filings with the SEC under Sections 13(a), 13(c), 14, and 15(d) of the Securities Act of 1934, as amended. Such filings are also available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. We undertake no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands, except share data)

 

 

Three months ended

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Revenue and Expense Data

 

 

 

 

 

 

 

 

 

Interest income

$

96,366

 

 

$

86,955

 

 

$

69,195

 

 

$

71,024

 

 

$

69,628

 

Interest expense

 

2,260

 

 

 

1,909

 

 

 

1,271

 

 

 

1,241

 

 

 

1,395

 

Net interest income

 

94,106

 

 

 

85,046

 

 

 

67,924

 

 

 

69,783

 

 

 

68,233

 

Provision for (benefit from) credit losses

 

3,795

 

 

 

2,100

 

 

 

8,330

 

 

 

980

 

 

 

(1,435

)

Noninterest income:

 

 

 

 

 

 

 

 

 

Service charges and fees

 

12,682

 

 

 

13,044

 

 

 

11,696

 

 

 

11,277

 

 

 

11,265

 

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

2,958

 

 

 

3,386

 

 

 

3,400

 

 

 

5,225

 

 

 

3,830

 

Total noninterest income

 

15,640

 

 

 

16,430

 

 

 

15,096

 

 

 

16,502

 

 

 

15,095

 

Noninterest expense (2):

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

33,528

 

 

 

34,370

 

 

 

28,597

 

 

 

27,666

 

 

 

26,274

 

Occupancy and equipment

 

5,387

 

 

 

5,449

 

 

 

4,925

 

 

 

5,011

 

 

 

5,107

 

Data processing and network

 

5,143

 

 

 

5,468

 

 

 

5,089

 

 

 

5,444

 

 

 

5,381

 

Other noninterest expense

 

10,407

 

 

 

10,977

 

 

 

7,836

 

 

 

8,558

 

 

 

9,045

 

Total noninterest expense

 

54,465

 

 

 

56,264

 

 

 

46,447

 

 

 

46,679

 

 

 

45,807

 

Total income before taxes

 

51,486

 

 

 

43,112

 

 

 

28,243

 

 

 

38,626

 

 

 

38,956

 

Provision for income taxes

 

14,148

 

 

 

11,748

 

 

 

7,869

 

 

 

10,404

 

 

 

11,534

 

Net income

$

37,338

 

 

$

31,364

 

 

$

20,374

 

 

$

28,222

 

 

$

27,422

 

Share Data

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

1.12

 

 

$

0.93

 

 

$

0.68

 

 

$

0.95

 

 

$

0.92

 

Diluted earnings per share

$

1.12

 

 

$

0.93

 

 

$

0.67

 

 

$

0.94

 

 

$

0.92

 

Dividends per share

$

0.30

 

 

$

0.25

 

 

$

0.25

 

 

$

0.25

 

 

$

0.25

 

Book value per common share

$

29.71

 

 

$

31.25

 

 

$

32.78

 

 

$

33.64

 

 

$

33.05

 

Tangible book value per common share (1)

$

19.92

 

 

$

21.41

 

 

$

23.04

 

 

$

25.80

 

 

$

25.16

 

Shares outstanding

 

33,332,189

 

 

 

33,350,974

 

 

 

33,837,935

 

 

 

29,730,424

 

 

 

29,714,609

 

Weighted average shares

 

33,348,322

 

 

 

33,561,389

 

 

 

30,049,919

 

 

 

29,723,791

 

 

 

29,713,558

 

Weighted average diluted shares

 

33,463,364

 

 

 

33,705,280

 

 

 

30,201,698

 

 

 

29,870,059

 

 

 

29,850,530

 

Credit Quality

 

 

 

 

 

 

 

 

 

Allowance for credit losses to gross loans

 

1.61

%

 

 

1.60

%

 

 

1.64

%

 

 

1.74

%

 

 

1.72

%

Loans past due 30 days or more

$

6,471

 

 

$

5,920

 

 

$

8,402

 

 

$

4,332

 

 

$

10,539

 

Total nonperforming loans

$

17,471

 

 

$

11,925

 

 

$

14,088

 

 

$

30,350

 

 

$

28,790

 

Total nonperforming assets

$

20,912

 

 

$

15,304

 

 

$

16,995

 

 

$

32,944

 

 

$

31,440

 

Loans charged-off

$

267

 

 

$

401

 

 

$

743

 

 

$

197

 

 

$

1,582

 

Loans recovered

$

311

 

 

$

356

 

 

$

1,174

 

 

$

552

 

 

$

1,321

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

Return on average total assets

 

1.46

%

 

 

1.24

%

 

 

0.94

%

 

 

1.31

%

 

 

1.30

%

Return on average equity

 

13.78

%

 

 

11.53

%

 

 

8.19

%

 

 

11.20

%

 

 

11.02

%

Average yield on loans, excluding PPP

 

4.87

%

 

 

4.70

%

 

 

4.65

%

 

 

4.73

%

 

 

4.85

%

Average yield on interest-earning assets

 

4.12

%

 

 

3.76

%

 

 

3.46

%

 

 

3.56

%

 

 

3.57

%

Average rate on interest-bearing deposits

 

0.08

%

 

 

0.07

%

 

 

0.06

%

 

 

0.06

%

 

 

0.08

%

Average cost of total deposits

 

0.04

%

 

 

0.04

%

 

 

0.04

%

 

 

0.04

%

 

 

0.05

%

Average rate on borrowings & subordinated debt

 

3.60

%

 

 

3.12

%

 

 

2.27

%

 

 

1.98

%

 

 

2.02

%

Average rate on interest-bearing liabilities

 

0.17

%

 

 

0.15

%

 

 

0.11

%

 

 

0.11

%

 

 

0.13

%

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

 

4.02

%

 

 

3.67

%

 

 

3.39

%

 

 

3.50

%

 

 

3.50

%

Loans to deposits

 

72.95

%

 

 

69.81

%

 

 

67.15

%

 

 

66.74

%

 

 

67.54

%

Efficiency ratio

 

49.63

%

 

 

55.45

%

 

 

55.95

%

 

 

54.10

%

 

 

54.97

%

Supplemental Loan Interest Income Data

 

 

 

 

 

 

 

 

 

Discount accretion on acquired loans

$

714

 

 

$

1,677

 

 

$

1,323

 

 

$

1,780

 

 

$

2,034

 

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

$

74,929

 

 

$

67,277

 

 

$

55,325

 

 

$

54,930

 

 

$

55,184

 

Total loan interest income (excluding PPP) (1)

$

75,643

 

 

$

68,954

 

 

$

56,648

 

 

$

56,710

 

 

$

57,218

 

(1)

 

Non-GAAP measure

(2)

 

Inclusive of merger related expenses

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands)

 

 

Balance Sheet Data

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Cash and due from banks

$

246,509

 

 

$

488,868

 

 

$

1,035,683

 

 

$

768,421

 

 

$

740,236

 

Securities, available for sale, net

 

2,482,857

 

 

 

2,608,771

 

 

 

2,365,708

 

 

 

2,210,876

 

 

 

2,098,786

 

Securities, held to maturity, net

 

168,038

 

 

 

176,794

 

 

 

186,748

 

 

 

199,759

 

 

 

216,979

 

Restricted equity securities

 

17,250

 

 

 

17,250

 

 

 

17,250

 

 

 

17,250

 

 

 

17,250

 

Loans held for sale

 

247

 

 

 

1,216

 

 

 

1,030

 

 

 

3,466

 

 

 

3,072

 

Loans:

 

 

 

 

 

 

 

 

 

Commercial real estate

 

4,238,930

 

 

 

4,049,893

 

 

 

3,832,974

 

 

 

3,306,054

 

 

 

3,222,737

 

Consumer

 

1,217,297

 

 

 

1,162,989

 

 

 

1,136,712

 

 

 

1,071,551

 

 

 

1,053,653

 

Commercial and industrial

 

534,960

 

 

 

507,685

 

 

 

500,882

 

 

 

259,355

 

 

 

345,027

 

Construction

 

243,571

 

 

 

313,646

 

 

 

303,960

 

 

 

222,281

 

 

 

216,680

 

Agriculture production

 

71,599

 

 

 

71,373

 

 

 

69,339

 

 

 

50,811

 

 

 

44,410

 

Leases

 

7,933

 

 

 

7,835

 

 

 

8,108

 

 

 

6,572

 

 

 

4,989

 

Total loans, gross

 

6,314,290

 

 

 

6,113,421

 

 

 

5,851,975

 

 

 

4,916,624

 

 

 

4,887,496

 

Allowance for credit losses

 

(101,488

)

 

 

(97,944

)

 

 

(96,049

)

 

 

(85,376

)

 

 

(84,306

)

Total loans, net

 

6,212,802

 

 

 

6,015,477

 

 

 

5,755,926

 

 

 

4,831,248

 

 

 

4,803,190

 

Premises and equipment

 

73,266

 

 

 

73,811

 

 

 

73,692

 

 

 

78,687

 

 

 

78,968

 

Cash value of life insurance

 

132,933

 

 

 

132,857

 

 

 

132,104

 

 

 

117,857

 

 

 

120,932

 

Accrued interest receivable

 

27,070

 

 

 

25,861

 

 

 

22,769

 

 

 

19,292

 

 

 

18,425

 

Goodwill

 

307,942

 

 

 

307,942

 

 

 

307,942

 

 

 

220,872

 

 

 

220,872

 

Other intangible assets

 

18,372

 

 

 

20,074

 

 

 

21,776

 

 

 

12,369

 

 

 

13,562

 

Operating leases, right-of-use

 

26,622

 

 

 

27,154

 

 

 

28,404

 

 

 

25,665

 

 

 

26,815

 

Other assets

 

262,971

 

 

 

224,536

 

 

 

169,296

 

 

 

109,025

 

 

 

98,943

 

Total assets

$

9,976,879

 

 

$

10,120,611

 

 

$

10,118,328

 

 

$

8,614,787

 

 

$

8,458,030

 

Deposits:

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

$

3,678,202

 

 

$

3,604,237

 

 

$

3,583,269

 

 

$

2,979,882

 

 

$

2,943,016

 

Interest-bearing demand deposits

 

1,749,123

 

 

 

1,796,580

 

 

 

1,788,639

 

 

 

1,568,682

 

 

 

1,519,426

 

Savings deposits

 

2,924,674

 

 

 

3,028,787

 

 

 

2,993,873

 

 

 

2,521,011

 

 

 

2,447,706

 

Time certificates

 

303,770

 

 

 

327,171

 

 

 

348,696

 

 

 

297,584

 

 

 

326,674

 

Total deposits

 

8,655,769

 

 

 

8,756,775

 

 

 

8,714,477

 

 

 

7,367,159

 

 

 

7,236,822

 

Accrued interest payable

 

853

 

 

 

755

 

 

 

653

 

 

 

928

 

 

 

1,056

 

Operating lease liability

 

28,717

 

 

 

29,283

 

 

 

30,500

 

 

 

26,280

 

 

 

27,290

 

Other liabilities

 

153,110

 

 

 

155,529

 

 

 

126,348

 

 

 

112,070

 

 

 

107,282

 

Other borrowings

 

47,068

 

 

 

35,089

 

 

 

36,184

 

 

 

50,087

 

 

 

45,601

 

Junior subordinated debt

 

101,024

 

 

 

101,003

 

 

 

100,984

 

 

 

58,079

 

 

 

57,965

 

Total liabilities

 

8,986,541

 

 

 

9,078,434

 

 

 

9,009,146

 

 

 

7,614,603

 

 

 

7,476,016

 

Common stock

 

696,348

 

 

 

696,441

 

 

 

706,672

 

 

 

532,244

 

 

 

531,339

 

Retained earnings

 

516,699

 

 

 

491,705

 

 

 

479,868

 

 

 

466,959

 

 

 

446,948

 

Accum. other comprehensive income (loss)

 

(222,709

)

 

 

(145,969

)

 

 

(77,358

)

 

 

981

 

 

 

3,727

 

Total shareholders’ equity

$

990,338

 

 

$

1,042,177

 

 

$

1,109,182

 

 

$

1,000,184

 

 

$

982,014

 

Quarterly Average Balance Data

 

 

 

 

 

 

 

 

 

Average loans, excluding PPP

$

6,162,267

 

 

$

5,890,578

 

 

$

4,937,865

 

 

$

4,759,294

 

 

$

4,684,492

 

Average interest-earning assets

$

9,320,152

 

 

$

9,330,059

 

 

$

8,153,200

 

 

$

7,947,798

 

 

$

7,758,169

 

Average total assets

$

10,131,118

 

 

$

10,121,714

 

 

$

8,778,256

 

 

$

8,546,004

 

 

$

8,348,111

 

Average deposits

$

8,752,215

 

 

$

8,743,320

 

 

$

7,521,930

 

 

$

7,304,659

 

 

$

7,137,263

 

Average borrowings and subordinated debt

$

139,919

 

 

$

136,244

 

 

$

105,702

 

 

$

108,671

 

 

$

106,221

 

Average total equity

$

1,074,776

 

 

$

1,091,454

 

 

$

1,009,224

 

 

$

999,764

 

 

$

987,026

 

Capital Ratio Data

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

14.0

%

 

 

14.1

%

 

 

15.0

%

 

 

15.4

%

 

 

15.4

%

Tier 1 capital ratio

 

12.2

%

 

 

12.3

%

 

 

13.1

%

 

 

14.2

%

 

 

14.2

%

Tier 1 common equity ratio

 

11.4

%

 

 

11.5

%

 

 

12.3

%

 

 

13.2

%

 

 

13.2

%

Tier 1 leverage ratio

 

9.6

%

 

 

9.3

%

 

 

10.8

%

 

 

9.9

%

 

 

9.9

%

Tangible capital ratio (1)

 

6.9

%

 

 

7.3

%

 

 

8.0

%

 

 

9.2

%

 

 

9.1

%

(1)

 

Non-GAAP measure

TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES

(Unaudited. Dollars in thousands)

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

 

Three months ended

 

Nine months ended

(dollars in thousands)

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Net interest margin

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$

714

 

 

$

1,677

 

 

$

2,034

 

 

$

3,714

 

 

$

6,311

 

Effect on average loan yield

 

0.05

%

 

 

0.11

%

 

 

0.17

%

 

 

0.09

%

 

 

0.18

%

Effect on net interest margin (FTE)

 

0.03

%

 

 

0.07

%

 

 

0.10

%

 

 

0.06

%

 

 

0.11

%

Net interest margin (FTE)

 

4.02

%

 

 

3.67

%

 

 

3.50

%

 

 

3.71

%

 

 

3.61

%

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

 

3.99

%

 

 

3.60

%

 

 

3.40

%

 

 

3.65

%

 

 

3.50

%

PPP loans yield, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$

313

 

 

$

964

 

 

$

3,507

 

 

$

2,374

 

 

$

12,549

 

Effect on net interest margin (FTE)

 

0.01

%

 

 

0.02

%

 

 

0.09

%

 

 

0.02

%

 

 

0.08

%

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

 

4.02

%

 

 

3.65

%

 

 

3.42

%

 

 

3.69

%

 

 

3.53

%

Acquired loan discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,027

 

 

$

2,641

 

 

$

5,541

 

 

$

6,088

 

 

$

18,860

 

Effect on net interest margin (FTE)

 

0.04

%

 

 

0.10

%

 

 

0.19

%

 

 

0.08

%

 

 

0.20

%

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

 

3.98

%

 

 

3.57

%

 

 

3.31

%

 

 

3.63

%

 

 

3.41

%

 

Three months ended

 

Nine months ended

(dollars in thousands)

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

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

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$

37,338

 

 

$

31,364

 

 

$

27,422

 

 

$

89,076

 

 

$

89,433

 

Exclude income tax expense

 

14,148

 

 

 

11,748

 

 

 

11,534

 

 

 

33,765

 

 

 

35,644

 

Exclude provision (benefit) for credit losses

 

3,795

 

 

 

2,100

 

 

 

(1,435

)

 

 

14,225

 

 

 

(7,755

)

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

$

55,281

 

 

$

45,212

 

 

$

37,521

 

 

$

137,066

 

 

$

117,322

 

 

 

 

 

 

 

 

 

 

 

Average assets (GAAP)

$

10,131,118

 

 

$

10,121,714

 

 

$

8,348,111

 

 

$

9,682,198

 

 

$

8,096,273

 

Average equity (GAAP)

$

1,074,776

 

 

$

1,091,454

 

 

$

987,026

 

 

$

1,058,938

 

 

$

962,871

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (GAAP) (annualized)

 

1.46

%

 

 

1.24

%

 

 

1.30

%

 

 

1.23

%

 

 

1.48

%

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

 

2.16

%

 

 

1.79

%

 

 

1.78

%

 

 

1.89

%

 

 

1.94

%

Return on average equity (GAAP) (annualized)

 

13.78

%

 

 

11.53

%

 

 

11.02

%

 

 

11.25

%

 

 

12.42

%

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

 

20.41

%

 

 

16.61

%

 

 

15.08

%

 

 

17.31

%

 

 

16.29

%

 

Three months ended

 

Nine months ended

(dollars in thousands)

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Return on tangible common equity

 

 

 

 

 

 

 

 

 

Average total shareholders' equity

$

1,074,776

 

 

$

1,091,454

 

 

$

987,026

 

 

$

1,058,938

 

 

$

962,871

 

Exclude average goodwill

 

307,942

 

 

 

307,942

 

 

 

220,872

 

 

 

281,151

 

 

 

220,872

 

Exclude average other intangibles

 

19,433

 

 

 

21,040

 

 

 

14,267

 

 

 

17,717

 

 

 

19,264

 

Average tangible common equity (Non-GAAP)

$

747,401

 

 

$

762,472

 

 

$

751,887

 

 

$

760,070

 

 

$

722,735

 

 

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$

37,338

 

 

$

31,364

 

 

$

27,422

 

 

$

89,076

 

 

$

89,433

 

Exclude amortization of intangible assets, net of tax effect

 

1,199

 

 

 

1,199

 

 

 

992

 

 

 

3,263

 

 

 

3,008

 

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

$

38,537

 

 

$

32,563

 

 

$

28,414

 

 

$

92,339

 

 

$

92,441

 

 

 

 

 

 

 

 

 

 

 

Return on average equity

 

13.78

%

 

 

11.53

%

 

 

11.02

%

 

 

11.25

%

 

 

12.42

%

Return on average tangible common equity (Non-GAAP)

 

20.46

%

 

 

17.13

%

 

 

14.99

%

 

 

16.24

%

 

 

17.10

%

 

Three months ended

(dollars in thousands)

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Tangible shareholders' equity to tangible assets

 

 

 

 

 

 

 

 

 

Shareholders' equity (GAAP)

$

990,338

 

 

$

1,042,177

 

 

$

1,109,182

 

 

$

1,000,184

 

 

$

982,014

 

Exclude goodwill and other intangible assets, net

 

326,314

 

 

 

328,016

 

 

 

329,718

 

 

 

233,241