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TriCo Bancshares Announces Fourth Quarter 2022 Results

Notable Items for Fourth Quarter 2022

  • Net interest margin increased by 0.32% to 4.34% from the third quarter of 2022 and, excluding the benefit from PPP and acquired loan discount accretion, increased by 0.29% to 4.27%
  • The average cost of total deposits grew to 0.10% for the quarter as compared to 0.04% in the trailing quarter and the same quarter of the prior year
  • Organic loan growth was $136.2 million for the quarter or 8.6% annualized and $760.4 million for the year or 15.5%
  • Deposit balances declined by $326.8 million for the quarter or 15.1% and $253.6 million for the year or 3.4%, which led to the Company remaining under $10.0 billion in total assets as of year end
  • Inclusive of $2.1 million in retirement benefit expenses recorded in the current quarter, pre-tax pre-provision net revenue remained flat at $55.3 million compared to the trailing quarter, and increased by $15.7 million compared to $39.6 million in the same quarter of the prior year

"We are pleased with the record performance and growth that the 2022 year represents for TriCo, and our capital ratios, loss reserves, and sources of liquidity allow us to remain confident that we will continue to thrive through whatever challenges 2023 may bring," noted Rick Smith, President and Chief Executive Officer. Peter Wiese, EVP and Chief Financial Officer added, "Through 2022, TriCo maintained its best in class Betas for the cost of total deposits. Looking forward, the pace of margin and net interest income growth may slow through the course of 2023. Despite the potential challenges ahead, it is appropriate to celebrate our team driven success and to thank the many stakeholders whom continue to make that success possible."

TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $36,343,000 for the quarter ended December 31, 2022, compared to $37,338,000 during the trailing quarter ended September 30, 2022, and $28,222,000 during the quarter ended December 31, 2021. Diluted earnings per share were $1.09 for the fourth quarter of 2022, compared to $1.12 for the third quarter of 2022 and $0.94 during the fourth quarter of 2021.

Financial Highlights

Performance highlights for the Company as of or for the three and twelve months ended December 31, 2022, included the following:

  • For the three and twelve months ended December 31, 2022, the Company’s return on average assets was 1.45% and 1.28%, while the return on average equity was 14.19% and 11.67%, respectively. The twelve month ratio was impacted by merger related expenses of $6,253,000 during 2022.
  • Organic loan growth, excluding PPP and acquired loans, totaled $136.5 million (8.6% annualized) for the current quarter and $841.4 million (17.3% annualized) for the trailing twelve-month period.
  • As of December 31, 2022, the Company reported total loans, total assets and total deposits of $6.5 billion, $9.9 billion and $8.3 billion, respectively. The combination of organic loan growth and deposit contraction during the quarter resulted in the loan to deposit ratio increasing to 77.4% as of December 31, 2022, as compared to 73.0% as of the trailing quarter.
  • The quarterly average rate of interest paid on deposits, including non-interest-bearing deposits, of 0.10% represents an increase of 6 basis points from both the trailing quarter and same quarter of the prior year.
  • Noninterest income related to service charges and fees was $12.3 million for the three month period ended December 31, 2022, an increase of 9.5% when compared to the same period in 2021.
  • The provision for credit losses for loans and debt securities was approximately $4.2 million during the quarter ended December 31, 2022, as compared to a provision expense of $3.8 million during the trailing quarter ended September 30, 2022, and a reversal of provision expense totaling $1.0 million for the three month period ended December 31, 2021.
  • The allowance for credit losses to total loans was 1.64% as of December 31, 2022, compared to 1.61% as of the trailing quarter end, and 1.74% as of December 31, 2021. Non-performing assets to total assets were 0.25% at December 31, 2022, as compared to 0.21% as of September 30, 2022, and 0.38% at December 31, 2021.

Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Annual Report on Form 10-K for the period ended December 31, 2022, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

Summary Results

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

 

Three months ended

 

 

 

 

 

December 31,

 

September 30,

 

 

 

 

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

 

2022

 

 

 

2022

 

 

$ Change

 

% Change

Net interest income

$

98,900

 

 

$

94,106

 

 

$

4,794

 

 

5.1

%

Provision for credit losses

 

(4,245

)

 

 

(3,795

)

 

 

(450

)

 

11.9

%

Noninterest income

 

15,880

 

 

 

15,640

 

 

 

240

 

 

1.5

%

Noninterest expense

 

(59,469

)

 

 

(54,465

)

 

 

(5,004

)

 

9.2

%

Provision for income taxes

 

(14,723

)

 

 

(14,148

)

 

 

(575

)

 

4.1

%

Net income

$

36,343

 

 

$

37,338

 

 

$

(995

)

 

(2.7

) %

Diluted earnings per share

$

1.09

 

 

$

1.12

 

 

$

(0.03

)

 

(2.7

) %

Dividends per share

$

0.30

 

 

$

0.30

 

 

$

 

 

%

Average common shares

 

33,330

 

 

 

33,348

 

 

 

(18

)

 

(0.1

) %

Average diluted common shares

 

33,467

 

 

 

33,463

 

 

 

4

 

 

%

Return on average total assets

 

1.45

%

 

 

1.46

%

 

 

 

 

Return on average equity

 

14.19

%

 

 

13.78

%

 

 

 

 

Efficiency ratio

 

51.81

%

 

 

49.63

%

 

 

 

 

 

Three months ended

December 31,

 

 

 

 

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

 

2022

 

 

 

2021

 

 

$ Change

 

% Change

Net interest income

$

98,900

 

 

$

69,783

 

 

$

29,117

 

 

41.7

%

(Provision for) reversal of credit losses

 

(4,245

)

 

 

(980

)

 

 

(3,265

)

 

333.2

%

Noninterest income

 

15,880

 

 

 

16,502

 

 

 

(622

)

 

(3.8

) %

Noninterest expense

 

(59,469

)

 

 

(46,679

)

 

 

(12,790

)

 

27.4

%

Provision for income taxes

 

(14,723

)

 

 

(10,404

)

 

 

(4,319

)

 

41.5

%

Net income

$

36,343

 

 

$

28,222

 

 

$

8,121

 

 

28.8

%

Diluted earnings per share

$

1.09

 

 

$

0.94

 

 

$

0.15

 

 

16.0

%

Dividends per share

$

0.30

 

 

$

0.25

 

 

$

0.05

 

 

20.0

%

Average common shares

 

33,330

 

 

 

29,724

 

 

 

3,606

 

 

12.1

%

Average diluted common shares

 

33,467

 

 

 

29,870

 

 

 

3,597

 

 

12.0

%

Return on average total assets

 

1.45

%

 

 

1.31

%

 

 

 

 

Return on average equity

 

14.19

%

 

 

11.20

%

 

 

 

 

Efficiency ratio

 

51.81

%

 

 

54.10

%

 

 

 

 

 

Twelve months ended

December 31,

 

 

(dollars and shares in thousands)

 

2022

 

 

 

2021

 

 

$ Change

 

% Change

Net interest income

$

345,976

 

 

$

271,539

 

 

$

74,437

 

 

27.4

%

Reversal of (provision for) credit losses

 

(18,470

)

 

 

6,775

 

 

 

(25,245

)

 

(372.6

) %

Noninterest income

 

63,046

 

 

 

63,664

 

 

 

(618

)

 

(1.0

) %

Noninterest expense

 

(216,645

)

 

 

(178,275

)

 

 

(38,370

)

 

21.5

%

Provision for income taxes

 

(48,488

)

 

 

(46,048

)

 

 

(2,440

)

 

5.3

%

Net income

$

125,419

 

 

$

117,655

 

 

$

7,764

 

 

6.6

%

Diluted earnings per share

$

3.83

 

 

$

3.94

 

 

$

(0.11

)

 

(2.8

) %

Dividends per share

$

1.10

 

 

$

1.00

 

 

$

0.10

 

 

10.0

%

Average common shares

 

32,584

 

 

 

29,721

 

 

 

2,863

 

 

9.6

%

Average diluted common shares

 

32,721

 

 

 

29,882

 

 

 

2,839

 

 

9.5

%

Return on average total assets

 

1.28

%

 

 

1.43

%

 

 

 

 

Return on average equity

 

11.67

%

 

 

12.10

%

 

 

 

 

Efficiency ratio

 

52.97

%

 

 

53.18

%

 

 

 

 

Balance Sheet

Total loans outstanding, excluding PPP, grew to $6.45 billion as of December 31, 2022, an increase of 32.8% over the prior twelve months, of which 17.3% was related to organic loan growth. Investments increased to $2.63 billion as of December 31, 2022, an increase of 8.5% annualized over the prior year quarter end. Quarterly average earning assets to quarterly total average assets were generally unchanged at 91.4% at December 31, 2022, as compared to 92.0% and 93.0% at September 30, 2022, and December 31, 2021, respectively. The loan to deposit ratio was 77.4% at December 31, 2022, as compared to 73.0% and 66.7% at September 30, 2022, and December 31, 2021, respectively.

Total shareholders' equity increased by $56.1 million during the quarter ended December 31, 2022, as a result of an improvement in accumulated other comprehensive losses of $28.8 million and net income of $36.3 million, partially offset by cash dividend payments on common stock of approximately $9,999,000. As a result, the Company’s book value was $31.39 per share at December 31, 2022 as compared to $29.71 and $33.64 at September 30, 2022, and December 31, 2021, respectively. The Company’s tangible book value per share, a non-GAAP measure, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $21.76 per share at December 31, 2022, as compared to $19.92 and $25.80 at September 30, 2022, and December 31, 2021, respectively.

Trailing Quarter Balance Sheet Change

Ending balances

December 31,

 

September 30,

 

 

 

Annualized

% Change

(dollars in thousands)

 

2022

 

 

2022

 

$ Change

Total assets

$

9,930,986

 

$

9,976,879

 

$

(45,893

)

 

(1.8

) %

Total loans

 

6,450,447

 

 

6,314,290

 

 

136,157

 

 

8.6

 

Total loans, excluding PPP

 

6,448,845

 

 

6,312,348

 

 

136,497

 

 

8.6

 

Total investments

 

2,633,269

 

 

2,668,145

 

 

(34,876

)

 

(5.2

)

Total deposits

 

8,329,013

 

 

8,655,769

 

 

(326,756

)

 

(15.1

)

Total other borrowings

$

264,605

 

$

47,068

 

$

217,537

 

 

1,848.7

%

Organic loan growth, excluding PPP, of $136.5 million or 8.6% on an annualized basis was realized during the quarter ended December 31, 2022, primarily within commercial real estate. During the quarter, and exclusive of PPP balance changes, loan originations/draws totaled approximately $479.0 million while payoffs/repayments of loans totaled $343.0 million, which compares to origination/draws and payoff/repayments activity during the three months ended September 30, 2022 of $737.0 million and $536.0 million, respectively. While management believes the loan pipeline remain sufficient to support projected loan growth, loan pipeline activity has moderated due to customer sensitivity from the rising interest rate environment and Company's continued focus on disciplined underwriting. Investment security balances decreased $34.9 million or 5.2% on an annualized basis as the result of prepayments/maturities totaling approximating $62.0 million, partially offset by increases in the market value of securities. Management seeks to utilize excess cash flows from the investment security portfolio to support loan growth or reduce borrowings thus resulting in an improved the mix of earning assets. Deposit balances also decreased, with a change of $326.8 million or 15.1% annualized during the period. Cash flow needs were supported by net short-term FHLB advances totaling $216.7 million as of and for the quarter ended December 31, 2022.

Average Trailing Quarter Balance Sheet Change

Quarterly average balances for the period ended

December 31,

 

September 30,

 

 

 

Annualized

% Change

(dollars in thousands)

 

2022

 

 

2022

 

$ Change

 

Total assets

$

9,932,931

 

$

10,131,118

 

$

(198,187

)

 

(7.8

) %

Total loans

 

6,358,998

 

 

6,171,042

 

 

187,956

 

 

12.2

 

Total loans, excluding PPP

 

6,357,250

 

 

6,162,267

 

 

194,983

 

 

12.7

 

Total investments

 

2,624,062

 

 

2,802,119

 

 

(178,057

)

 

(25.4

)

Total deposits

 

8,545,172

 

 

8,752,215

 

 

(207,043

)

 

(9.5

)

Total other borrowings

$

85,927

 

$

38,908

 

$

47,019

 

 

483.4

%

Year Over Year Balance Sheet Change

Ending balances

As of December 31,

 

 

 

Acquired Balances

 

Organic

$ Change

 

Organic

% Change

(dollars in thousands)

 

2022

 

 

2021

 

$ Change

 

 

Total assets

$

9,930,986

 

$

8,614,787

 

$

1,316,199

 

$

1,363,529

 

$

(47,330

)

 

(0.5

) %

Total loans

 

6,450,447

 

 

4,916,624

 

 

1,533,823

 

 

773,390

 

 

760,433

 

 

15.5

 

Total loans, excluding PPP

 

6,448,845

 

 

4,855,477

 

 

1,593,368

 

 

751,978

 

 

841,390

 

 

17.3

 

Total investments

 

2,633,269

 

 

2,427,885

 

 

205,384

 

 

109,716

 

 

95,668

 

 

3.9

 

Total deposits

 

8,329,013

 

 

7,367,159

 

 

961,854

 

 

1,215,479

 

 

(253,625

)

 

(3.4

)

Total other borrowings

$

264,605

 

$

50,087

 

$

214,518

 

$

 

$

214,518

 

 

428.3

%

Non-PPP loan balances increased as a result of organic activities by approximately $841.4 million or 17.3% during the twelve month period ending December 31, 2022. Investment securities increased to $2.6 billion at December 31, 2022, an organic change of $95.7 million or 3.9% from the prior year. When combined with balances acquired from Valley Republic Bank, this represents an increase of approximately $1.7 billion in earning assets during the last twelve months and an increase of more than $1.1 billion in average earning assets during the same period.

Net Interest Income and Net Interest Margin

During the year ended December 31, 2022 the Federal Open Market Committee's (FOMC) actions have resulted in seven rate hike events for a cumulative increase in the Fed Funds Rate of 4.25%. During the same period the Company's yield on total loans (excluding PPP) increased 37 basis points to 5.10% for the three months ended December 31, 2022, from 4.73% for the three months ended December 31, 2021. Moreover, the tax equivalent yield on the Company's investment security portfolio increased by 1.44% to 3.13% during the year ended December 31, 2022. The cost of total interest-bearing deposits and total interest-bearing liabilities increased by 12 basis points and 21 basis points respectively between the three month periods ended December 31, 2022 and 2021.

As is common within the banking industry and more specific to the Company's history of deposit cost changes in a rising rate environment, management has observed a lagging or delayed reaction to changes in its deposit costs, particularly during periods of time when the Fed Funds Rate is 3.50% or less. The Company is able to better manage its cost of deposits through the use of exception based pricing strategies and delayed changes to the deposit rates offered to the general public. More specifically, the Company only recently, during December 2022, increased certain of the rates offered to deposit customers. Since FOMC rate actions began, the Company's total cost of deposits have increased 6 basis points which translates to a cycle to date deposit Beta of 1.41%.

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

 

Three months ended

 

 

 

 

 

December 31,

 

September 30,

 

 

 

 

(dollars in thousands)

 

2022

 

 

 

2022

 

 

Change

 

% Change

Interest income

$

102,989

 

 

$

96,366

 

 

$

6,623

 

 

6.9

%

Interest expense

 

(4,089

)

 

 

(2,260

)

 

 

(1,829

)

 

80.9

%

Fully tax-equivalent adjustment (FTE) (1)

 

440

 

 

 

440

 

 

 

 

 

%

Net interest income (FTE)

$

99,340

 

 

$

94,546

 

 

$

4,794

 

 

5.1

%

Net interest margin (FTE)

 

4.34

%

 

 

4.02

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,751

 

 

$

714

 

 

$

1,037

 

 

145.2

%

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

 

4.27

%

 

 

3.99

%

 

 

0.28

%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

16

 

 

$

313

 

 

$

(297

)

 

(94.9

) %

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

 

4.34

%

 

 

4.02

%

 

 

0.32

%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,767

 

 

$

1,027

 

 

$

740

 

 

72.1

%

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

 

4.27

%

 

 

3.98

%

 

 

0.29

%

 

 

 

Three months ended

December 31,

 

 

 

 

(dollars in thousands)

 

2022

 

 

 

2021

 

 

Change

 

% Change

Interest income

$

102,989

 

 

$

71,024

 

 

$

31,965

 

 

45.0

%

Interest expense

 

(4,089

)

 

 

(1,241

)

 

 

(2,848

)

 

229.5

%

Fully tax-equivalent adjustment (FTE) (1)

 

440

 

 

 

274

 

 

 

166

 

 

60.6

%

Net interest income (FTE)

$

99,340

 

 

$

70,057

 

 

$

29,283

 

 

41.8

%

Net interest margin (FTE)

 

4.34

%

 

 

3.50

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,751

 

 

$

1,780

 

 

$

(29

)

 

(1.6

) %

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

 

4.27

%

 

 

3.41

%

 

 

0.86

%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

16

 

 

$

4,094

 

 

$

(4,078

)

 

(99.6

) %

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

 

4.34

%

 

 

3.34

%

 

 

1.00

%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,767

 

 

$

5,874

 

 

$

(4,107

)

 

(69.9

) %

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

 

4.27

%

 

 

3.25

%

 

 

1.02

%

 

 

 

Twelve months ended

December 31,

 

 

 

 

(dollars in thousands)

 

2022

 

 

 

2021

 

 

Change

 

% Change

Interest income

$

355,505

 

 

$

277,047

 

 

$

78,458

 

 

28.3

%

Interest expense

 

(9,529

)

 

 

(5,508

)

 

 

(4,021

)

 

73.0

%

Fully tax-equivalent adjustment (FTE) (1)

 

1,560

 

 

 

1,071

 

 

 

489

 

 

45.7

%

Net interest income (FTE)

$

347,536

 

 

$

272,610

 

 

$

74,926

 

 

27.5

%

Net interest margin (FTE)

 

3.88

%

 

 

3.58

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

5,465

 

 

$

8,091

 

 

$

(2,626

)

 

(32.5

) %

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

 

3.81

%

 

 

3.47

%

 

 

0.34

%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2,390

 

 

$

16,643

 

 

$

(14,253

)

 

(85.6

) %

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

 

3.86

%

 

 

3.48

%

 

 

0.38

%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

7,855

 

 

$

24,734

 

 

$

(16,879

)

 

(68.2

) %

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

 

3.80

%

 

 

3.37

%

 

 

0.43

%

 

 

(1)

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

Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. Generally, as time goes on, the dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. As a result of the increase in interest rates, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, declined during 2022 as compared to 2021. During the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, purchased loan discount accretion was $1,751,000, $714,000, and $1,780,000, respectively.

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

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

 

 

Three months ended

 

Three months ended

 

Three months ended

 

December 31, 2022

 

September 30, 2022

 

December 31, 2021

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

6,357,250

 

$

81,740

 

5.10

%

 

$

6,162,267

 

$

75,643

 

4.87

%

 

$

4,759,294

 

$

56,710

 

4.73

%

PPP loans

 

1,748

 

 

16

 

3.63

%

 

 

8,775

 

 

313

 

14.15

%

 

 

103,163

 

 

4,094

 

15.74

%

Investments-taxable

 

2,414,236

 

 

18,804

 

3.09

%

 

 

2,591,513

 

 

17,122

 

2.62

%

 

 

2,261,161

 

 

9,028

 

1.58

%

Investments-nontaxable (1)

 

209,826

 

 

1,906

 

3.60

%

 

 

210,606

 

 

1,908

 

3.59

%

 

 

141,421

 

 

1,186

 

3.33

%

Total investments

 

2,624,062

 

 

20,710

 

3.13

%

 

 

2,802,119

 

 

19,030

 

2.69

%

 

 

2,402,582

 

 

10,214

 

1.69

%

Cash at Federal Reserve and other banks

 

93,390

 

 

963

 

4.09

%

 

 

346,991

 

 

1,820

 

2.08

%

 

 

682,759

 

 

280

 

0.16

%

Total earning assets

 

9,076,450

 

 

103,429

 

4.52

%

 

 

9,320,152

 

 

96,806

 

4.12

%

 

 

7,947,798

 

 

71,298

 

3.56

%

Other assets, net

 

856,481

 

 

 

 

 

 

810,966

 

 

 

 

 

 

598,206

 

 

 

 

Total assets

$

9,932,931

 

 

 

 

 

$

10,131,118

 

 

 

 

 

$

8,546,004

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,709,494

 

$

150

 

0.03

%

 

$

1,775,884

 

$

119

 

0.03

%

 

$

1,544,176

 

$

58

 

0.01

%

Savings deposits

 

2,921,935

 

 

1,815

 

0.25

%

 

 

3,011,145

 

 

685

 

0.09

%

 

 

2,486,532

 

 

291

 

0.05

%

Time deposits

 

251,218

 

 

205

 

0.32

%

 

 

321,100

 

 

188

 

0.23

%

 

 

315,953

 

 

349

 

0.44

%

Total interest-bearing deposits

 

4,882,647

 

 

2,170

 

0.18

%

 

 

5,108,129

 

 

992

 

0.08

%

 

 

4,346,661

 

 

698

 

0.06

%

Other borrowings

 

85,927

 

 

406

 

1.87

%

 

 

38,908

 

 

5

 

0.05

%

 

 

50,667

 

 

7

 

0.05

%

Junior subordinated debt

 

101,030

 

 

1,513

 

5.94

%

 

 

101,011

 

 

1,263

 

4.96

%

 

 

58,004

 

 

536

 

3.67

%

Total interest-bearing liabilities

 

5,069,604

 

 

4,089

 

0.32

%

 

 

5,248,048

 

 

2,260

 

0.17

%

 

 

4,455,332

 

 

1,241

 

0.11

%

Noninterest-bearing deposits

 

3,662,525

 

 

 

 

 

 

3,644,086

 

 

 

 

 

 

2,957,998

 

 

 

 

Other liabilities

 

184,334

 

 

 

 

 

 

164,208

 

 

 

 

 

 

132,910

 

 

 

 

Shareholders’ equity

 

1,016,468

 

 

 

 

 

 

1,074,776

 

 

 

 

 

 

999,764

 

 

 

 

Total liabilities and shareholders’ equity

$

9,932,931

 

 

 

 

 

$

10,131,118

 

 

 

 

 

$

8,546,004

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

4.20

%

 

 

 

 

 

3.95

%

 

 

 

 

 

3.45

%

Net interest income and margin (1) (3)

 

 

$

99,340

 

4.34

%

 

 

 

$

94,546

 

4.02

%

 

 

 

$

70,057

 

3.50

%

(1)

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

(2)

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

(3)

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

Net interest income (FTE) during the three months ended December 31, 2022 increased $4.8 million or 5.1% to $99.3 million compared to $94.5 million during the three months ended September 30, 2022. In addition, net interest margin improved 32 basis points to 4.34%, as compared to the trailing quarter. The increase in net interest income is primarily attributed to an additional $5.8 million in loan interest and fee income and $1.7 million in investment income, due to increases in average volume and rates as compared to the trailing quarter, respectively. As a partial offset, increases in interest rates on deposits and subordinated debt led to an increase of $1.2 million and $250,000, respectively, in interest expense over the same period.

As compared to the same quarter in the prior year, average loan yields, excluding PPP, increased 37 basis points from 4.73% during the three months ended December 31, 2021, to 5.10% during the three months ended December 31, 2022. The accretion of discounts from acquired loans added 11 and 15 basis points to loan yields during the quarters ended December 31, 2022 and December 31, 2021, respectively. Therefore, the 37 basis point increase in yields on loans during the comparable three month periods ended December 31, 2022 and 2021 was the net effect of a 41 basis point increase in market loan rates, partially offset by a 4 basis point decline in the accretion of discounts.

The rates paid on interest bearing deposits increased by 10 basis points during the quarter ended December 31, 2022 compared to the trailing quarter. The cost of interest-bearing deposits increased by 12 basis points between the quarter ended December 31, 2022 and the same quarter of the prior year. In addition, the level of noninterest-bearing deposits increased by approximately $18.0 million quarter over quarter and continues to benefit the average cost of total deposits, which increased by 6 basis points as compared to the trailing quarter, and fourth quarter of prior year. As of December 31, 2022, the ratio of average total noninterest-bearing deposits to total average deposits was 42.9%.

 

Twelve months ended December 31, 2022

 

Twelve months ended December 31, 2021

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

5,841,770

 

$

282,985

 

4.84

%

 

$

4,625,410

 

$

225,626

 

4.88

%

PPP loans

 

24,590

 

 

2,390

 

9.72

%

 

 

250,391

 

 

16,643

 

6.65

%

Investments-taxable

 

2,459,032

 

 

60,499

 

2.46

%

 

 

1,914,788

 

 

30,352

 

1.59

%

Investments-nontaxable (1)

 

190,339

 

 

6,759

 

3.55

%

 

 

160,863

 

 

4,639

 

2.88

%

Total investments

 

2,649,371

 

 

67,258

 

2.54

%

 

 

2,075,651

 

 

34,991

 

1.69

%

Cash at Federal Reserve and other banks

 

452,300

 

 

4,432

 

0.98

%

 

 

663,801

 

 

858

 

0.13

%

Total earning assets

 

8,968,031

 

 

357,065

 

3.98

%

 

 

7,615,253

 

 

278,118

 

3.65

%

Other assets, net

 

803,570

 

 

 

 

 

 

594,420

 

 

 

 

Total assets

$

9,771,601

 

 

 

 

 

$

8,209,673

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,720,932

 

$

452

 

0.03

%

 

$

1,493,922

 

$

327

 

0.02

%

Savings deposits

 

2,878,189

 

 

3,356

 

0.12

%

 

 

2,360,605

 

 

1,256

 

0.05

%

Time deposits

 

302,619

 

 

881

 

0.29

%

 

 

324,636

 

 

1,735

 

0.53

%

Total interest-bearing deposits

 

4,901,740

 

 

4,689

 

0.10

%

 

 

4,179,163

 

 

3,318

 

0.08

%

Other borrowings

 

33,410

 

 

421

 

1.26

%

 

 

43,236

 

 

22

 

0.05

%

Junior subordinated debt

 

91,138

 

 

4,419

 

4.85

%

 

 

57,844

 

 

2,168

 

3.75

%

Total interest-bearing liabilities

 

5,026,288

 

 

9,529

 

0.19

%

 

 

4,280,243

 

 

5,508

 

0.13

%

Noninterest-bearing deposits

 

3,492,713

 

 

 

 

 

 

2,837,745

 

 

 

 

Other liabilities

 

178,163

 

 

 

 

 

 

119,471

 

 

 

 

Shareholders’ equity

 

1,074,437

 

 

 

 

 

 

972,214

 

 

 

 

Total liabilities and shareholders’ equity

$

9,771,601

 

 

 

 

 

$

8,209,673

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

3.79

%

 

 

 

 

 

3.52

%

Net interest income and margin (1) (3)

 

 

$

347,536

 

3.88

%

 

 

 

$

272,610

 

3.58

%

(1)

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

(2)

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

(3)

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

Interest Rates and Earning Asset Composition

During the quarter ended December 31, 2022, market interest rates, including many rates that serve as reference indices for variable rate loans and investment securities continued to increase. As noted above, these rate increases have continued to benefit growth in total interest income. As of December 31, 2022, the Company's loan portfolio consisted of approximately $6.4 billion in outstanding principal with a weighted average coupon rate of 4.89%. During the three month periods ending December 31, 2022, September 30, 2022 and June 20, 2022, the weighted average coupon on loan production in the quarter was 6.25%, 5.24% and 4.45%, respectively. Included in the December 31, 2022 loan total are variable rate loans totaling $3.6 billion, of which, $875 million are considered floating based on the Wall Street Prime index. In addition, the Company holds certain investment securities totaling $408 million which are subject to repricing on not less than a quarterly basis.

Asset Quality and Credit Loss Provisioning

During the three months ended December 31, 2022, the Company recorded a provision for credit losses of $4,245,000, as compared to $3,795,000 during the trailing quarter, and $980,000 during the fourth quarter of 2021.

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

 

Three months ended

(dollars in thousands)

December 31, 2022

 

September 30, 2022

 

June 30, 2022

 

December 31, 2021

Addition to allowance for credit losses

$

4,300

 

 

$

3,500

 

$

1,940

 

$

715

Addition to (reversal of) reserve for unfunded loan commitments

 

(55

)

 

 

295

 

 

160

 

 

265

Total provision for credit losses

$

4,245

 

 

$

3,795

 

$

2,100

 

$

980

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

 

Three months ended

 

Twelve months ended

(dollars in thousands)

December 31, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

Balance, beginning of period

$

101,488

 

 

$

84,306

 

 

$

85,376

 

 

$

91,847

 

ACL at acquisition for PCD loans

 

 

 

 

 

 

 

2,037

 

 

 

 

Provision for (reversal of) credit losses

 

4,300

 

 

 

715

 

 

 

17,945

 

 

 

(7,165

)

Loans charged-off

 

(174

)

 

 

(197

)

 

 

(1,585

)

 

 

(2,392

)

Recoveries of previously charged-off loans

 

66

 

 

 

552

 

 

 

1,907

 

 

 

3,086

 

Balance, end of period

$

105,680

 

 

$

85,376

 

 

$

105,680

 

 

$

85,376

 

The allowance for credit losses (ACL) was $105,680,000 as of December 31, 2022, a net increase of $4,192,000 over the immediately preceding quarter. The provision for credit losses of $4,300,000 during the quarter was the net effect of increases in required reserves due to qualitative factors, individually analyzed credits and quantitative reserves under the cohort model. In addition to the aforementioned quarterly increase, the provision for credit losses of $17,945,000 during the year ended December 31, 2022 was largely comprised of $10,820,000 in day 1 required reserves from loans acquired in connection with the Valley Republic Bank merger in the first quarter of 2022. For the quarter, the qualitative components of the ACL resulted in a net increase in required reserves totaling approximately $2,950,000, despite continued improvement in US employment rates, due to increased uncertainty in the global economic markets, US economic policy uncertainty, and the continued rise in corporate debt yields. Meanwhile, the quantitative component of the ACL increased reserve requirements by approximately $1,240,000 over the trailing quarter due to loan volume growth and increases in specific reserves.

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

Loans past due 30 days or more decreased by $1,524,000 during the quarter ended December 31, 2022 to $4,947,000, as compared to $6,471,000 at September 30, 2022. Non-performing loans were $21,321,000 at December 31, 2022, an increase of $3,850,000 from $17,471,000 as of September 30, 2022, and a decrease of $9,029,000 from $30,350,000 as of December 31, 2021. Of the $21,321,000 loans designated as non-performing, approximately $19,500,000 are less than 30 days past due as of December 31, 2022. The current quarter change in non-performing assets is nearly entirely attributed to a single CRE relationship, which is considered well-secured as of the current period end.

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

 

December 31,

% of Total Loans

 

September 30,

% of Total Loans

 

December 31,

% of Total Loans

(dollars in thousands)

 

2022

 

 

 

2022

 

 

 

2021

 

Risk Rating:

 

 

 

 

 

 

 

 

Pass

$

6,251,945

 

96.9

%

 

$

6,133,805

 

97.1

%

 

$

4,787,077

 

97.4

%

Special Mention

 

127,000

 

2.0

%

 

 

126,273

 

2.0

%

 

 

77,461

 

1.5

%

Substandard

 

71,502

 

1.1

%

 

 

54,212

 

0.9

%

 

 

52,086

 

1.1

%

Total

$

6,450,447

 

 

 

$

6,314,290

 

 

 

$

4,916,624

 

 

 

 

 

 

 

 

 

 

 

Classified loans to total loans

 

1.11

%

 

 

 

0.86

%

 

 

 

1.06

%

 

Loans past due 30+ days to total loans

 

0.08

%

 

 

 

0.10

%

 

 

 

0.09

%

 

The ratio of classified loans increased to 1.11% as of December 31, 2022 as compared to 0.86% in the trailing quarter, and increased by 5 basis points from the equivalent period in 2021. The Company's criticized loan balances increased during the current quarter by $18,017,000 to $198,502,000 as of December 31, 2022. This change was primarily driven by one newly criticized relationship totaling approximately $22,400,000 that is performing as agreed and believed by management to be well-secured but was downgraded to substandard during the quarter.

There was one property added to Other Real Estate Owned totaling $311,000 during the quarter ended December 31, 2022, and one disposal totaling $394,000. As of December 31, 2022, other real estate owned consisted of nine properties with a carrying value of approximately $3,439,000.

Non-performing assets of $24,760,000 at December 31, 2022 represented 0.25% of total assets, generally in line with the $20,912,000 or 0.21% and $32,944,000 or 0.38% as of September 30, 2022 and December 31, 2021, respectively.

Allocation of Credit Loss Reserves by Loan Type

 

 

As of December 31, 2022

 

As of December 31, 2021

(dollars in thousands)

 

Amount

 

% of Loans Outstanding

 

Amount

 

% of Loans Outstanding

Commercial real estate:

 

 

 

 

 

 

 

 

CRE - Non Owner Occupied

 

$

30,962

 

1.44

%

 

$

25,739

 

1.61

%

CRE - Owner Occupied

 

 

14,014

 

1.42

%

 

 

10,691

 

1.51

%

Multifamily

 

 

13,132

 

1.39

%

 

 

12,395

 

1.51

%

Farmland

 

 

3,273

 

1.17

%

 

 

2,315

 

1.34

%

Total commercial real estate loans

 

 

61,381

 

1.41

%

 

 

51,140

 

1.55

%

Consumer:

 

 

 

 

 

 

 

 

SFR 1-4 1st Liens

 

 

11,268

 

1.43

%

 

 

10,723

 

1.60

%

SFR HELOCs and Junior Liens

 

 

11,413

 

2.90

%

 

 

10,510

 

3.11

%

Other

 

 

1,958

 

3.45

%

 

 

2,241

 

3.34

%

Total consumer loans

 

 

24,639

 

1.99

%

 

 

23,474

 

2.19

%

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

 

13,597

 

2.39

%

 

 

3,862

 

1.49

%

Construction

 

 

5,142

 

2.43

%

 

 

5,667

 

2.55

%

Agricultural Production

 

 

906

 

1.48

%

 

 

1,215

 

2.39

%

Leases

 

 

15

 

0.19

%

 

 

18

 

0.27

%

Allowance for credit losses

 

 

105,680

 

1.64

%

 

 

85,376

 

1.74

%

Reserve for unfunded loan commitments

 

 

4,315

 

 

 

 

3,790

 

 

Total allowance for credit losses

 

$

109,995

 

1.71

%

 

$

89,166

 

1.81

%

For the periods presented in the table above and for purposes of calculating the "% of Loans Outstanding", PPP loans are included in the segment "Commercial and Industrial." PPP loans are fully guaranteed and therefore would not require any loss reserve allocation. Excluding the net outstanding balances of PPP loans from the ratio of the ACL to total loans results in a reserve ratio of approximately 1.64% as of December 31, 2022. In addition to the allowance for credit losses above, the Company has acquired various performing loans whose fair value as of the acquisition date was determined to be less than the principal balance owed on those loans. This difference represents the collective discount of credit, interest rate and liquidity measurements which is expected to be amortized over the life of the loans. As of December 31, 2022, the unamortized discount associated with acquired loans totaled $30.5 million and, if aggregated with the ACL, would collectively represent 2.10% of total gross loans and 2.11% of total loans less PPP loans.

SBA Paycheck Protection Program

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

(dollars in thousands)

December 31, 2022

 

December 31, 2021

Total number of PPP loans outstanding

 

10

 

 

450

 

 

 

 

PPP loan balance (TCBK round 1 origination), gross

$

396

 

$

2,544

PPP loan balance (TCBK round 2 origination), gross

 

235

 

 

60,767

Acquired PPP loan balance (VRB origination), gross

 

986

 

 

Total PPP loans, gross outstanding

$

1,617

 

$

63,311

 

 

 

 

PPP deferred loan fees (Round 1 origination)

 

 

 

1

PPP deferred loan fees (Round 2 origination)

 

15

 

 

2,163

Total PPP deferred loan fees (costs) outstanding

$

15

 

$

2,164

As of December 31, 2022, there was approximately $15,000 in net deferred fee income remaining to be recognized. During the three months ended December 31, 2022, the Company recognized $12,000 in fees on PPP loans as compared with $291,000 and $3,842,000 for the three months ended September 30, 2022 and December 31, 2021, respectively. Based on the payment guarantee provided by the SBA as well as the expected short-term duration of the PPP loans acquired from VRB, the fair value of these loans approximates the principal balance outstanding as of the merger date, and therefore, no purchase discount was recorded.

Non-interest Income

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

 

Three months ended

 

 

 

 

(dollars in thousands)

December 31, 2022

 

September 30, 2022

 

Change

 

% Change

ATM and interchange fees

$

6,826

 

 

$

6,714

 

 

$

112

 

 

1.7

%

Service charges on deposit accounts

 

4,103

 

 

 

4,436

 

 

 

(333

)

 

(7.5

) %

Other service fees

 

1,091

 

 

 

1,022

 

 

 

69

 

 

6.8

%

Mortgage banking service fees

 

465

 

 

 

477

 

 

 

(12

)

 

(2.5

) %

Change in value of mortgage servicing rights

 

(142

)

 

 

33

 

 

 

(175

)

 

(530.3

) %

Total service charges and fees

 

12,343

 

 

 

12,682

 

 

 

(339

)

 

(2.7

) %

Increase in cash value of life insurance

 

809

 

 

 

659

 

 

 

150

 

 

22.8

%

Asset management and commission income

 

1,040

 

 

 

1,020

 

 

 

20

 

 

2.0

%

Gain on sale of loans

 

197

 

 

 

357

 

 

 

(160

)

 

(44.8

) %

Lease brokerage income

 

172

 

 

 

252

 

 

 

(80

)

 

(31.7

) %

Sale of customer checks

 

296

 

 

 

326

 

 

 

(30

)

 

(9.2

) %

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

n/m

 

Gain (loss) on marketable equity securities

 

6

 

 

 

(115

)

 

 

121

 

 

(105.2

) %

Other income

 

1,017

 

 

 

459

 

 

 

558

 

 

121.6

%

Total other non-interest income

 

3,537

 

 

 

2,958

 

 

 

579

 

 

19.6

%

Total non-interest income

$

15,880

 

 

$

15,640

 

 

$

240

 

 

1.5

%

Non-interest income increased $240,000 or 1.5% to $15,880,000 during the three months ended December 31, 2022, compared to $15,640,000 during the quarter ended September 30, 2022. Other income increased by $558,000 largely from an increase in fees earned from the sale of deposits, but partially offset by a decline in service charges on deposits accounts totaling $333,000, which is directly related to the Company's decision to no longer charge fees for returned check items.

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

 

Three months ended December 31,

 

 

 

 

(dollars in thousands)

 

2022

 

 

 

2021

 

 

Change

 

% Change

ATM and interchange fees

$

6,826

 

 

$

6,421

 

 

$

405

 

 

6.3

%

Service charges on deposit accounts

 

4,103

 

 

 

3,674

 

 

 

429

 

 

11.7

%

Other service fees

 

1,091

 

 

 

888

 

 

 

203

 

 

22.9

%

Mortgage banking service fees

 

465

 

 

 

475

 

 

 

(10

)

 

(2.1

) %

Change in value of mortgage servicing rights

 

(142

)

 

 

(181

)

 

 

39

 

 

(21.5

) %

Total service charges and fees

 

12,343

 

 

 

11,277

 

 

 

1,066

 

 

9.5

%

Increase in cash value of life insurance

 

809

 

 

 

713

 

 

 

96

 

 

13.5

%

Asset management and commission income

 

1,040

 

 

 

930

 

 

 

110

 

 

11.8

%

Gain on sale of loans

 

197

 

 

 

1,672

 

 

 

(1,475

)

 

(88.2

) %

Lease brokerage income

 

172

 

 

 

204

 

 

 

(32

)

 

(15.7

) %

Sale of customer checks

 

296

 

 

 

117

 

 

 

179

 

 

153.0

%

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

n/m

 

Gain (loss) on marketable equity securities

 

6

 

 

 

(27

)

 

��

33

 

 

(122.2

) %

Other income

 

1,017

 

 

 

1,616

 

 

 

(599

)

 

(37.1

) %

Total other non-interest income

 

3,537

 

 

 

5,225

 

 

 

(1,688

)

 

(32.3

) %

Total non-interest income

$

15,880

 

 

$

16,502

 

 

$

(622

)

 

(3.8

) %

Generally, the increases in recurring non-interest income service charges and fees reflects the VRB merger closing in March of 2022, and therefore, related income for the combined entities are only being captured within the most recent three months ended December 31, 2022. As noted above, decreasing mortgage related activity resulting from elevated interest rates reduced the gain on sale of loans recorded during the quarter by $1,475,000 or 88.2%, as compared to the three months ended December 31, 2021. Further, other non-interest income declined by $599,000 or 37.1% during the quarter ended December 31, 2022 as the last quarter of 2021 included non-recurring death benefit proceeds of $702,000.

 

Twelve months ended December 31,

 

 

 

 

(dollars in thousands)

 

2022

 

 

 

2021

 

 

Change

 

% Change

ATM and interchange fees

$

26,767

 

 

$

25,356

 

 

$

1,411

 

 

5.6

%

Service charges on deposit accounts

 

16,536

 

 

 

14,013

 

 

 

2,523

 

 

18.0

%

Other service fees

 

4,274

 

 

 

3,570

 

 

 

704

 

 

19.7

%

Mortgage banking service fees

 

1,887

 

 

 

1,881

 

 

 

6

 

 

0.3

%

Change in value of mortgage servicing rights

 

301

 

 

 

(872

)

 

 

1,173

 

 

(134.5

) %

Total service charges and fees

 

49,765

 

 

 

43,948

 

 

 

5,817

 

 

13.2

%

Increase in cash value of life insurance

 

2,858

 

 

 

2,775

 

 

 

83

 

 

3.0

%

Asset management and commission income

 

3,986

 

 

 

3,668

 

 

 

318

 

 

8.7

%

Gain on sale of loans

 

2,342

 

 

 

9,580

 

 

 

(7,238

)

 

(75.6

) %

Lease brokerage income

 

820

 

 

 

746

 

 

 

74

 

 

9.9

%

Sale of customer checks

 

1,167

 

 

 

459

 

 

 

708

 

 

154.2

%

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

n/m

 

Loss on marketable equity securities

 

(340

)

 

 

(86

)

 

 

(254

)

 

295.3

%

Other income

 

2,448

 

 

 

2,574

 

 

 

(126

)

 

(4.9

) %

Total other non-interest income

 

13,281

 

 

 

19,716

 

 

 

(6,435

)

 

(32.6

) %

Total non-interest income

$

63,046

 

 

$

63,664

 

 

$

(618

)

 

(1.0

) %

The changes in non-interest income for the twelve months ended December 31, 2022 and 2021 are generally consistent with changes in the three month periods discussed above.

Non-interest Expense

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

 

Three months ended

 

 

 

 

(dollars in thousands)

December 31, 2022

 

September 30, 2022

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

22,099

 

 

$

22,377

 

 

$

(278

)

 

(1.2

) %

Incentive compensation

 

6,211

 

 

 

4,832

 

 

 

1,379

 

 

28.5

%

Benefits and other compensation costs

 

8,301

 

 

 

6,319

 

 

 

1,982

 

 

31.4

%

Total salaries and benefits expense

 

36,611

 

 

 

33,528

 

 

 

3,083

 

 

9.2

%

Occupancy

 

3,957

 

 

 

3,965

 

 

 

(8

)

 

(0.2

) %

Data processing and software

 

4,102

 

 

 

3,449

 

 

 

653

 

 

18.9

%

Equipment

 

1,525

 

 

 

1,422

 

 

 

103

 

 

7.2

%

Intangible amortization

 

1,702

 

 

 

1,702

 

 

 

 

 

%

Advertising

 

1,249

 

 

 

990

 

 

 

259

 

 

26.2

%

ATM and POS network charges

 

2,134

 

 

 

1,694

 

 

 

440

 

 

26.0

%

Professional fees

 

1,111

 

 

 

1,172

 

 

 

(61

)

 

(5.2

) %

Telecommunications

 

638

 

 

 

575

 

 

 

63

 

 

11.0

%

Regulatory assessments and insurance

 

815

 

 

 

828

 

 

 

(13

)

 

(1.6

) %

Merger and acquisition expenses

 

 

 

 

 

 

 

 

 

n/m

 

Postage

 

319

 

 

 

287

 

 

 

32

 

 

11.1

%

Operational loss

 

235

 

 

 

492

 

 

 

(257

)

 

(52.2

) %

Courier service

 

616

 

 

 

497

 

 

 

119

 

 

23.9

%

Gain on sale or acquisition of foreclosed assets

 

(235

)

 

 

(148

)

 

 

(87

)

 

58.8

%

(Gain) loss on disposal of fixed assets

 

(1

)

 

 

4

 

 

 

(5

)

 

(125.0

) %

Other miscellaneous expense

 

4,691

 

 

 

4,008

 

 

 

683

 

 

17.0

%

Total other non-interest expense

 

22,858

 

 

 

20,937

 

 

 

1,921

 

 

9.2

%

Total non-interest expense

$

59,469

 

 

$

54,465

 

 

$

5,004

 

 

9.2

%

Average full-time equivalent staff

 

1,210

 

 

 

1,198

 

 

 

12

 

 

1.0

%

Non-interest expense for the quarter ended December 31, 2022 increased $5.0 million or 9.2% to $59.5 million as compared to $54.5 million during the trailing quarter ended September 30, 2022. Total salaries and benefits expense increased by $3.1 million or 9.2%, led primarily by an expense of approximately $2.1 million in benefits and other compensation costs, related to the previously announced amendments to certain of the Company's retirement plans. Additionally, incentive compensation related expenses increased by $1.4 million or 28.5% compared to the trailing quarter, due to strong overall Company performance. Advertising costs increased $259,000 or 26.2% during the quarter, connected to an increase in media advertising for promotional campaigns. ATM and point of service network charges increased $440,000 or 26.0% to $2,134,000, linked with card processing equipment conversion expenses of $256,000 in the current quarter. Finally, other miscellaneous expenses increased $683,000 or 17.0% to $4,691,000, resulting largely from $517,000 in additional appraisal costs during the most recent quarter.

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

 

Three months ended December 31,

 

 

 

 

(dollars in thousands)

 

2022

 

 

 

2021

 

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

22,099

 

 

$

19,123

 

 

$

2,976

 

 

15.6

%

Incentive compensation

 

6,211

 

 

 

3,932

 

 

 

2,279

 

 

58.0

%

Benefits and other compensation costs

 

8,301

 

 

 

4,611

 

 

 

3,690

 

 

80.0

%

Total salaries and benefits expense

 

36,611

 

 

 

27,666

 

 

 

8,945

 

 

32.3

%

Occupancy

 

3,957

 

 

 

3,713

 

 

 

244

 

 

6.6

%

Data processing and software

 

4,102

 

 

 

3,893

 

 

 

209

 

 

5.4

%

Equipment

 

1,525

 

 

 

1,298

 

 

 

227

 

 

17.5

%

Intangible amortization

 

1,702

 

 

 

1,193

 

 

 

509

 

 

42.7

%

Advertising

 

1,249

 

 

 

819

 

 

 

430

 

 

52.5

%

ATM and POS network charges

 

2,134

 

 

 

1,551

 

 

 

583

 

 

37.6

%

Professional fees

 

1,111

 

 

 

927

 

 

 

184

 

 

19.8

%

Telecommunications

 

638

 

 

 

534

 

 

 

104

 

 

19.5

%

Regulatory assessments and insurance

 

815

 

 

 

678

 

 

 

137

 

 

20.2

%

Merger and acquisition expenses

 

 

 

 

872

 

 

 

(872

)

 

n/m

 

Postage

 

319

 

 

 

232

 

 

 

87

 

 

37.5

%

Operational loss

 

235

 

 

 

299

 

 

 

(64

)

 

(21.4

) %

Courier service

 

616

 

 

 

346

 

 

 

270

 

 

78.0

%

Gain on sale or acquisition of foreclosed assets

 

(235

)

 

 

(23

)

 

 

(212

)

 

921.7

%

(Gain) loss on disposal of fixed assets

 

(1

)

 

 

6

 

 

 

(7

)

 

(116.7

) %

Other miscellaneous expense

 

4,691

 

 

 

2,675

 

 

 

2,016

 

 

75.4

%

Total other non-interest expense

 

22,858

 

 

 

19,013

 

 

 

3,845

 

 

20.2

%

Total non-interest expense

$

59,469

 

 

$

46,679

 

 

$

12,790

 

 

27.4

%

Average full-time equivalent staff

 

1,210

 

 

 

1,074

 

 

 

136

 

 

12.7

%

Generally, the increases in recurring non-interest expense items reflect the VRB merger closing in March of 2022, and therefore, related expenses for the combined entities, less certain realized cost savings, are only being captured within the most recent three months ended December 31, 2022. Total non-interest expense increased $12.8 million or 27.4% to $59.5 million during the three months ended December 31, 2022 as compared to $46.7 million for the quarter ended December 31, 2021. Total salaries and benefits expense increased by $8.9 million or 32.3% to $36.6 million, largely from a net increase of 99 full-time equivalent positions following the aforementioned merger with VRB, the build out of other loan production and compliance teams, and the continued strength of organic growth within the loan portfolio driving incentive compensation expense. As noted above, amendments to certain of the Company's retirement plans, contributed to approximately $2.1 million of the $3.7 million increase associated with benefits and other compensation costs. Management believes that these amendments will result in better alignment of compensation costs and the Company's strategic goals as management anticipates that the future service costs associated with these amended retirement plans will be substantially reduced.

 

Twelve months ended December 31,

 

 

 

 

(dollars in thousands)

 

2022

 

 

 

2021

 

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

84,861

 

 

$

69,844

 

 

$

15,017

 

 

21.5

%

Incentive compensation

 

17,908

 

 

 

14,957

 

 

 

2,951

 

 

19.7

%

Benefits and other compensation costs

 

27,083

 

 

 

21,550

 

 

 

5,533

 

 

25.7

%

Total salaries and benefits expense

 

129,852

 

 

 

106,351

 

 

 

23,501

 

 

22.1

%

Occupancy

 

15,493

 

 

 

14,910

 

 

 

583

 

 

3.9

%

Data processing and software

 

14,660

 

 

 

13,985

 

 

 

675

 

 

4.8

%

Equipment

 

5,733

 

 

 

5,358

 

 

 

375

 

 

7.0

%

Intangible amortization

 

6,334

 

 

 

5,464

 

 

 

870

 

 

15.9

%

Advertising

 

3,694

 

 

 

2,899

 

 

 

795

 

 

27.4

%

ATM and POS network charges

 

6,984

 

 

 

6,040

 

 

 

944

 

 

15.6

%

Professional fees

 

4,392

 

 

 

3,657

 

 

 

735

 

 

20.1

%

Telecommunications

 

2,298

 

 

 

2,253

 

 

 

45

 

 

2.0

%

Regulatory assessments and insurance

 

3,142

 

 

 

2,581

 

 

 

561

 

 

21.7

%

Merger and acquisition expenses

 

6,253

 

 

 

1,523

 

 

 

4,730

 

 

310.6

%

Postage

 

1,147

 

 

 

710

 

 

 

437

 

 

61.5

%

Operational loss

 

1,000

 

 

 

964

 

 

 

36

 

 

3.7

%

Courier service

 

2,013

 

 

 

1,214

 

 

 

799

 

 

65.8

%

Gain on sale or acquisition of foreclosed assets

 

(481

)

 

 

(233

)

 

 

(248

)

 

106.4

%

Gain on disposal of fixed assets

 

(1,070

)

 

 

(439

)

 

 

(631

)

 

143.7

%

Other miscellaneous expense

 

15,201

 

 

 

11,038

 

 

 

4,163

 

 

37.7

%

Total other non-interest expense

 

86,793

 

 

 

71,924

 

 

 

14,869

 

 

20.7

%

Total non-interest expense

$

216,645

 

 

$

178,275

 

 

$

38,370

 

 

21.5

%

Average full-time equivalent staff

 

1,169

 

 

 

1,039

 

 

 

130

 

 

12.5

%

The changes in non-interest expense for the twelve months ended December 31, 2022 and 2021 are generally consistent with changes in the comparable three month periods discussed above.

Provision for Income Taxes

The Company’s effective tax rate was 27.9% for the year ended December 31, 2022, as compared to 28.1% for the year ended December 31, 2021. Differences between the Company's effective tax rate and applicable federal and state blended statutory rate of approximately 29.6% are due to the proportion of non-taxable revenues, non-deductible expenses, and benefits from tax credits as compared to the levels of pre-tax earnings.

About TriCo Bancshares

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

Forward-Looking Statement

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

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands, except share data)

 

 

Three months ended

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

Revenue and Expense Data

 

 

 

 

 

 

 

 

 

Interest income

$

102,989

 

 

$

96,366

 

 

$

86,955

 

 

$

69,195

 

 

$

71,024

 

Interest expense

 

4,089

 

 

 

2,260

 

 

 

1,909

 

 

 

1,271

 

 

 

1,241

 

Net interest income

 

98,900

 

 

 

94,106

 

 

 

85,046

 

 

 

67,924

 

 

 

69,783

 

Provision for credit losses

 

4,245

 

 

 

3,795

 

 

 

2,100

 

 

 

8,330

 

 

 

980

 

Noninterest income:

 

 

 

 

 

 

 

 

 

Service charges and fees

 

12,343

 

 

 

12,682

 

 

 

13,044

 

 

 

11,696

 

 

 

11,277

 

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

3,537

 

 

 

2,958

 

 

 

3,386

 

 

 

3,400

 

 

 

5,225

 

Total noninterest income

 

15,880

 

 

 

15,640

 

 

 

16,430

 

 

 

15,096

 

 

 

16,502

 

Noninterest expense (2):

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

36,611

 

 

 

33,528

 

 

 

34,370

 

 

 

28,597

 

 

 

27,666

 

Occupancy and equipment

 

5,482

 

 

 

5,387

 

 

 

5,449

 

 

 

4,925

 

 

 

5,011

 

Data processing and network

 

6,236

 

 

 

5,143

 

 

 

5,468

 

 

 

5,089

 

 

 

5,444

 

Other noninterest expense

 

11,140

 

 

 

10,407

 

 

 

10,977

 

 

 

7,836

 

 

 

8,558

 

Total noninterest expense

 

59,469

 

 

 

54,465

 

 

 

56,264

 

 

 

46,447

 

 

 

46,679

 

Total income before taxes

 

51,066

 

 

 

51,486

 

 

 

43,112

 

 

 

28,243

 

 

 

38,626

 

Provision for income taxes

 

14,723

 

 

 

14,148

 

 

 

11,748

 

 

 

7,869

 

 

 

10,404

 

Net income

$

36,343

 

 

$

37,338

 

 

$

31,364

 

 

$

20,374

 

 

$

28,222

 

Share Data

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

1.09

 

 

$

1.12

 

 

$

0.93

 

 

$

0.68

 

 

$

0.95

 

Diluted earnings per share

$

1.09

 

 

$

1.12

 

 

$

0.93

 

 

$

0.67

 

 

$

0.94

 

Dividends per share

$

0.30

 

 

$

0.30

 

 

$

0.25

 

 

$

0.25

 

 

$

0.25

 

Book value per common share

$

31.39

 

 

$

29.71

 

 

$

31.25

 

 

$

32.78

 

 

$

33.64

 

Tangible book value per common share (1)

$

21.76

 

 

$

19.92

 

 

$

21.41

 

 

$

23.04

 

 

$

25.80

 

Shares outstanding

 

33,331,513

 

 

 

33,332,189

 

 

 

33,350,974

 

 

 

33,837,935

 

 

 

29,730,424

 

Weighted average shares

 

33,330,029

 

 

 

33,348,322

 

 

 

33,561,389

 

 

 

30,049,919

 

 

 

29,723,791

 

Weighted average diluted shares

 

33,467,393

 

 

 

33,463,364

 

 

 

33,705,280

 

 

 

30,201,698

 

 

 

29,870,059

 

Credit Quality

 

 

 

 

 

 

 

 

 

Allowance for credit losses to gross loans

 

1.64

%

 

 

1.61

%

 

 

1.60

%

 

 

1.64

%

 

 

1.74

%

Loans past due 30 days or more

$

4,947

 

 

$

6,471

 

 

$

5,920

 

 

$

8,402

 

 

$

4,332

 

Total nonperforming loans

$

21,321

 

 

$

17,471

 

 

$

11,925

 

 

$

14,088

 

 

$

30,350

 

Total nonperforming assets

$

24,760

 

 

$

20,912

 

 

$

15,304

 

 

$

16,995

 

 

$

32,944

 

Loans charged-off

$

174

 

 

$

267

 

 

$

401

 

 

$

743

 

 

$

197

 

Loans recovered

$

66

 

 

$

311

 

 

$

356

 

 

$

1,174

 

 

$

552

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

Return on average total assets

 

1.45

%

 

 

1.46

%

 

 

1.24

%

 

 

0.94

%

 

 

1.31

%

Return on average equity

 

14.19

%

 

 

13.78

%

 

 

11.53

%

 

 

8.19

%

 

 

11.20

%

Average yield on loans, excluding PPP

 

5.10

%

 

 

4.87

%

 

 

4.70

%

 

 

4.65

%

 

 

4.73

%

Average yield on interest-earning assets

 

4.52

%

 

 

4.12

%

 

 

3.76

%

 

 

3.46

%

 

 

3.56

%

Average rate on interest-bearing deposits

 

0.18

%

 

 

0.08

%

 

 

0.07

%

 

 

0.06

%

 

 

0.06

%

Average cost of total deposits

 

0.10

%

 

 

0.04

%

 

 

0.04

%

 

 

0.04

%

 

 

0.04

%

Average cost of total deposits and other borrowings

 

0.12

%

 

 

0.04

%

 

 

0.02

%

 

 

0.02

%

 

 

0.04

%

Average rate on borrowings & subordinated debt

 

4.07

%

 

 

3.60

%

 

 

3.12

%

 

 

2.27

%

 

 

1.98

%

Average rate on interest-bearing liabilities

 

0.32

%

 

 

0.17

%

 

 

0.15

%

 

 

0.11

%

 

 

0.11

%

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

 

4.34

%

 

 

4.02

%

 

 

3.67

%

 

 

3.39

%

 

 

3.50

%

Loans to deposits

 

77.45

%

 

 

72.95

%

 

 

69.81

%

 

 

67.15

%

 

 

66.74

%

Efficiency ratio

 

51.81

%

 

 

49.63

%

 

 

55.45

%

 

 

55.95

%

 

 

54.10

%

Supplemental Loan Interest Income Data

 

 

 

 

 

 

 

 

 

Discount accretion on acquired loans

$

1,751

 

 

$

714

 

 

$

1,677

 

 

$

1,323

 

 

$

1,780

 

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

$

79,989

 

 

$

74,929

 

 

$

67,277

 

 

$

55,325

 

 

$

54,930

 

Total loan interest income (excluding PPP) (1)

$

81,740

 

 

$

75,643

 

 

$

68,954

 

 

$

56,648

 

 

$

56,710

 

(1)

Non-GAAP measure

(2)

Inclusive of merger related expenses

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands)

 

 

 

Balance Sheet Data

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

Cash and due from banks

$

107,230

 

 

$

246,509

 

 

$

488,868

 

 

$

1,035,683

 

 

$

768,421

 

Securities, available for sale, net

 

2,455,036

 

 

 

2,482,857

 

 

 

2,608,771

 

 

 

2,365,708

 

 

 

2,210,876

 

Securities, held to maturity, net

 

160,983

 

 

 

168,038

 

 

 

176,794

 

 

 

186,748

 

 

 

199,759

 

Restricted equity securities

 

17,250

 

 

 

17,250

 

 

 

17,250

 

 

 

17,250

 

 

 

17,250

 

Loans held for sale

 

1,846

 

 

 

247

 

 

 

1,216

 

 

 

1,030

 

 

 

3,466

 

Loans:

 

 

 

 

 

 

 

 

 

Commercial real estate

 

4,359,083

 

 

 

4,238,930

 

 

 

4,049,893

 

 

 

3,832,974

 

 

 

3,306,054

 

Consumer

 

1,240,743

 

 

 

1,217,297

 

 

 

1,162,989

 

 

 

1,136,712

 

 

 

1,071,551

 

Commercial and industrial

 

569,921

 

 

 

534,960

 

 

 

507,685

 

 

 

500,882

 

 

 

259,355

 

Construction

 

211,560

 

 

 

243,571

 

 

 

313,646

 

 

 

303,960

 

 

 

222,281

 

Agriculture production

 

61,414

 

 

 

71,599

 

 

 

71,373

 

 

 

69,339

 

 

 

50,811

 

Leases

 

7,726

 

 

 

7,933

 

 

 

7,835

 

 

 

8,108

 

 

 

6,572

 

Total loans, gross

 

6,450,447

 

 

 

6,314,290

 

 

 

6,113,421

 

 

 

5,851,975

 

 

 

4,916,624

 

Allowance for credit losses

 

(105,680

)

 

 

(101,488

)

 

 

(97,944

)

 

 

(96,049

)

 

 

(85,376

)

Total loans, net

 

6,344,767

 

 

 

6,212,802

 

 

 

6,015,477

 

 

 

5,755,926

 

 

 

4,831,248

 

Premises and equipment

 

72,327

 

 

 

73,266

 

 

 

73,811

 

 

 

73,692

 

 

 

78,687

 

Cash value of life insurance

 

133,742

 

 

 

132,933

 

 

 

132,857

 

 

 

132,104

 

 

 

117,857

 

Accrued interest receivable

 

31,856

 

 

 

27,070

 

 

 

25,861

 

 

 

22,769

 

 

 

19,292

 

Goodwill

 

304,442

 

 

 

307,942

 

 

 

307,942

 

 

 

307,942

 

 

 

220,872

 

Other intangible assets

 

16,670

 

 

 

18,372

 

 

 

20,074

 

 

 

21,776

 

 

 

12,369

 

Operating leases, right-of-use

 

26,862

 

 

 

26,622

 

 

 

27,154

 

 

 

28,404

 

 

 

25,665

 

Other assets

 

257,975

 

 

 

262,971

 

 

 

224,536

 

 

 

169,296

 

 

 

109,025

 

Total assets

$

9,930,986

 

 

$

9,976,879

 

 

$

10,120,611

 

 

$

10,118,328

 

 

$

8,614,787

 

Deposits:

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

$

3,502,095

 

 

$

3,678,202

 

 

$

3,604,237

 

 

$

3,583,269

 

 

$

2,979,882

 

Interest-bearing demand deposits

 

1,718,541

 

 

 

1,749,123

 

 

 

1,796,580

 

 

 

1,788,639

 

 

 

1,568,682

 

Savings deposits

 

2,884,378

 

 

 

2,924,674

 

 

 

3,028,787

 

 

 

2,993,873

 

 

 

2,521,011

 

Time certificates

 

223,999

 

 

 

303,770

 

 

 

327,171

 

 

 

348,696

 

 

 

297,584

 

Total deposits

 

8,329,013

 

 

 

8,655,769

 

 

 

8,756,775

 

 

 

8,714,477

 

 

 

7,367,159

 

Accrued interest payable

 

1,167

 

 

 

853

 

 

 

755

 

 

 

653

 

 

 

928

 

Operating lease liability

 

29,004

 

 

 

28,717

 

 

 

29,283

 

 

 

30,500

 

 

 

26,280

 

Other liabilities

 

159,741

 

 

 

153,110

 

 

 

155,529

 

 

 

126,348

 

 

 

112,070

 

Other borrowings

 

264,605

 

 

 

47,068

 

 

 

35,089

 

 

 

36,184

 

 

 

50,087

 

Junior subordinated debt

 

101,040

 

 

 

101,024

 

 

 

101,003

 

 

 

100,984

 

 

 

58,079

 

Total liabilities

 

8,884,570

 

 

 

8,986,541

 

 

 

9,078,434

 

 

 

9,009,146

 

 

 

7,614,603

 

Common stock

 

697,448

 

 

 

696,348

 

 

 

696,441

 

 

 

706,672

 

 

 

532,244

 

Retained earnings

 

542,873

 

 

 

516,699

 

 

 

491,705

 

 

 

479,868

 

 

 

466,959

 

Accum. other comprehensive income (loss)

 

(193,905

)

 

 

(222,709

)

 

 

(145,969

)

 

 

(77,358

)

 

 

981

 

Total shareholders’ equity

$

1,046,416

 

 

$

990,338

 

 

$

1,042,177

 

 

$

1,109,182

 

 

$

1,000,184

 

Quarterly Average Balance Data

 

 

 

 

 

 

 

 

 

Average loans, excluding PPP

$

6,357,250

 

 

$

6,162,267

 

 

$

5,890,578

 

 

$

4,937,865

 

 

$

4,759,294

 

Average interest-earning assets

$

9,076,450

 

 

$

9,320,152

 

 

$

9,330,059

 

 

$

8,153,200

 

 

$

7,947,798

 

Average total assets

$

9,932,931

 

 

$

10,131,118

 

 

$

10,121,714

 

 

$

8,778,256

 

 

$

8,546,004

 

Average deposits

$

8,545,172

 

 

$

8,752,215

 

 

$

8,743,320

 

 

$

7,521,930

 

 

$

7,304,659

 

Average borrowings and subordinated debt

$

186,957

 

 

$

139,919

 

 

$

136,244

 

 

$

105,702

 

 

$

108,671

 

Average total equity

$

1,016,468

 

 

$

1,074,776

 

 

$

1,091,454

 

 

$

1,009,224

 

 

$

999,764

 

Capital Ratio Data

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

14.2

%

 

 

14.0

%

 

 

14.1

%

 

 

15.0

%

 

 

15.4

%

Tier 1 capital ratio

 

12.4

%

 

 

12.2

%

 

 

12.3

%

 

 

13.1

%

 

 

14.2

%

Tier 1 common equity ratio

 

11.7

%

 

 

11.4

%

 

 

11.5

%

 

 

12.3

%

 

 

13.2

%

Tier 1 leverage ratio

 

10.1

%

 

 

9.6

%

 

 

9.3

%

 

 

10.8

%

 

 

9.9

%

Tangible capital ratio (1)

 

7.6

%

 

 

6.9

%

 

 

7.3

%

 

 

8.0

%

 

 

9.2

%

(1)

Non-GAAP measure

TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES

(Unaudited. Dollars in thousands)

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

 

Three months ended

 

Twelve months ended

(dollars in thousands)

December 31,

2022

 

September 30,

2022

 

December 31,

2021

 

December 31,

2022

 

December 31,

2021

Net interest margin

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,751

 

 

$

714

 

 

$

1,780

 

 

$

5,465

 

 

$

8,091

 

Effect on average loan yield

 

0.11

%

 

 

0.05

%

 

 

0.15

%

 

 

0.09

%

 

 

0.17

%

Effect on net interest margin (FTE)

 

0.07

%

 

 

0.03

%

 

 

0.09

%

 

 

0.06

%

 

 

0.11

%

Net interest margin (FTE)

 

4.34

%

 

 

4.02

%

 

 

3.50

%

 

 

3.88

%

 

 

3.58

%

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

 

4.27

%

 

 

3.99

%

 

 

3.41

%

 

 

3.81

%

 

 

3.47

%

PPP loans yield, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$

16

 

 

$

313

 

 

$

4,094

 

 

$

2,390

 

 

$

16,643

 

Effect on net interest margin (FTE)

 

n/m

 

 

 

0.01

%

 

 

0.16

%

 

 

0.02

%

 

 

0.10

%

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

 

4.34

%

 

 

4.02

%

 

 

3.34

%

 

 

3.86

%

 

 

3.48

%

Acquired loan discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,767

 

 

$

1,027

 

 

$

5,874

 

 

$

7,855

 

 

$

24,734

 

Effect on net interest margin (FTE)

 

0.07

%

 

 

0.04

%

 

 

0.25

%

 

 

0.08

%

 

 

0.21

%

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

 

4.27

%

 

 

3.98

%

 

 

3.25

%

 

 

3.80

%

 

 

3.37

%

 

Three months ended

 

Twelve months ended

(dollars in thousands)

December 31,

2022

 

September 30,

2022

 

December 31,

2021

 

December 31,

2022

 

December 31,

2021

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

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$

36,343

 

 

$

37,338

 

 

$

28,222

 

 

$

125,419

 

 

$

117,655

 

Exclude income tax expense

 

14,723

 

 

 

14,148

 

 

 

10,404

 

 

 

48,488

 

 

 

46,048

 

Exclude provision (benefit) for credit losses

 

4,245

 

 

 

3,795

 

 

 

980

 

 

 

18,470

 

 

 

(6,775

)

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

$

55,311

 

 

$

55,281

 

 

$

39,606

 

 

$

192,377

 

 

$

156,928

 

 

 

 

 

 

 

 

 

 

 

Average assets (GAAP)

$

9,932,931

 

 

$

10,131,118

 

 

$

8,546,004

 

 

$

9,771,601

 

 

$

8,209,673

 

Average equity (GAAP)

$

1,016,468

 

 

$

1,074,776

 

 

$

999,764

 

 

$

1,074,437

 

 

$

972,214

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (GAAP) (annualized)

 

1.45

%

 

 

1.46

%

 

 

1.31

%

 

 

1.28

%

 

 

1.43

%

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

 

2.21

%

 

 

2.16

%

 

 

1.84

%

 

 

1.97

%

 

 

1.91

%

Return on average equity (GAAP) (annualized)

 

14.19

%

 

 

13.78

%

 

 

11.20

%

 

 

11.67

%

 

 

12.10

%

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

 

21.59

%

 

 

20.41

%

 

 

15.72

%

 

 

17.90

%

 

 

16.14

%

 

Three months ended

 

Twelve months ended

(dollars in thousands)

December 31,

2022

 

September 30,

2022

 

December 31,

2021

 

December 31,

2022

 

December 31,

2021

Return on tangible common equity

 

 

 

 

 

 

 

 

 

Average total shareholders' equity

$

1,016,468

 

 

$

1,074,776

 

 

$

999,764

 

 

$

1,074,437

 

 

$

972,214

 

Exclude average goodwill

 

306,192

 

 

 

307,942

 

 

 

220,872

 

 

 

287,904

 

 

 

220,872

 

Exclude average other intangibles

 

18

 

 

 

19,433

 

 

 

12,966

 

 

 

16

 

 

 

15,131

 

Average tangible common equity (Non-GAAP)

$

710,258

 

 

$

747,401

 

 

$

765,926

 

 

$

786,517

 

 

$

736,211

 

 

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$

36,343

 

 

$

37,338

 

 

$

28,222

 

 

$

125,419

 

 

$

117,655

 

Exclude amortization of intangible assets, net of tax effect

 

1,199

 

 

 

1,199

 

 

 

840

 

 

 

4,461

 

 

 

3,849

 

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

$

37,542

 

 

$

38,537

 

 

$

29,062

 

 

$

129,880

 

 

$

121,504

 

 

 

 

 

 

 

 

 

 

 

Return on average equity

 

14.19

%

 

 

13.78

%

 

 

11.20

%

 

 

11.67

%

 

 

12.10

%

Return on average tangible common equity (Non-GAAP)

 

20.97

%

 

 

20.46

%

 

 

15.05

%

 

 

16.51

%

 

 

16.50

%

 

Three months ended

(dollars in thousands)

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

Tangible shareholders' equity to tangible assets

 

 

 

 

 

 

 

 

 

Shareholders' equity (GAAP)

$

1,046,416

 

 

$

990,338

 

 

$

1,042,177

 

 

$

1,109,182

 

 

$

1,000,184

 

Exclude goodwill and other intangible assets, net

 

321,112

 

 

 

326,314

 

 

 

328,016

 

 

 

329,718

 

 

 

233,241

 

Tangible shareholders' equity (Non-GAAP)

$

725,304

 

 

$

664,024

 

 

$