TriCo Bancshares (NASDAQ: TCBK):
Notable Items from the
Quarter
- Net income was $26.1 million compared to $30.6 million in
the trailing quarter, and compared to $36.3 million in the same
quarter of the prior year; Pre-tax pre-provision net revenue was
$42.4 million compared to $46.2 million in the trailing quarter,
and compared to $55.3 million in the same quarter of the prior
year
- Cash flows generated from the investment securities
portfolio and use of borrowing capacities continue to support the
overall balance sheet with the loan to deposit ratio reaching
86.7%
- Proceeds of $46.9 million from the sale of
available-for-sale investment securities resulted in a pre-tax
realized loss of $120,000 and an expected earn back period of less
than 9-months
- Average yield on earning assets was 5.10%, an increase of 16
basis points over the 4.94% in the trailing quarter, and an
increase of 58 basis points over the 4.52% from the same quarter in
the prior year
- Net interest margin was 3.81% in the recent quarter,
narrowing 7 basis points from 3.88% in the trailing quarter. Over
the past several quarters the pace of margin compression has
continued to slow, which is consistent with management's
expectation that net interest margin will reach an inflection point
by mid-2024
- We continue to operate without the utilization of brokered
deposits or FRB's Bank Term Funding Program
- Loan balances increased $85.8 million or 1.3% while deposit
balances declined $175.6 million or 2.2% from the trailing
quarter
- The average cost of total deposits was 1.05% for the quarter
as compared to 0.86% in the trailing quarter and 0.10% in the same
quarter of the prior year and, as a result, the Company's total
cost of deposits have increased 101 basis points since FOMC rate
actions began in March 2022, which translates to a cycle-to-date
deposit beta of 19.2%
"The cumulative impact of the FOMC’s series of rate increases,
along with the overall level of higher interest rates appears to be
slowing the rate of inflation and, just as importantly, reducing
borrowers’ overall demand for credit. As consumers and businesses
adjust to a ‘higher for longer’ rate cycle, our focus will continue
to be on driving new customer acquisition opportunities. We
continue to be cautious and diligent in our approach to our
allowance and the management of our loan portfolio but are not
seeing systemic weakness and overall levels of non-performing loans
remain historically low," explained Rick Smith, President and Chief
Executive Officer. Peter Wiese, EVP and Chief Financial Officer
added, "2023 was eventful and challenging for TriCo and the
industry alike as the continued higher interest rate environment
caused compression on margins while cyber costs and the regulatory
response to bank failures caused pressure on non-interest expenses.
As we look forward to 2024, we are confident that continuing to
maintain a fortress balance sheet, along with effective execution
of long-term strategies will drive organic and acquisitive revenue
growth."
TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company
of Tri Counties Bank, today announced net income of $26.1 million
for the quarter ended December 31, 2023, compared to $30.6 million
during the trailing quarter ended September 30, 2023, and $36.3
million during the quarter ended December 31, 2022. Diluted
earnings per share were $0.78 for the fourth quarter of 2023,
compared to $0.92 for the trailing quarter and $1.09 during the
fourth quarter of 2022.
Financial Highlights
Performance highlights for the Company included the
following:
- For the quarter ended December 31, 2023, the Company’s return
on average assets was 1.05%, while the return on average equity was
9.43%. For the year ended December 31, 2023, the Company’s return
on average assets was 1.19%, while the return on average equity was
10.65%.
- The loan to deposit ratio increased to 86.7% as of December 31,
2023, as compared to 83.8% as of the trailing quarter.
- The efficiency ratio was 55.8% and 53.0% for the twelve-months
ended December 31, 2023 and 2022, respectively.
- The provision for credit losses was approximately $6.0 million
during the quarter ended December 31, 2023, as compared to a
provision for credit losses of $4.2 million during the trailing
quarter ended September 30, 2023, and a provision for credit losses
of $4.2 million for the three-month period ended December 31,
2022.
- The allowance for credit losses to total loans was 1.79% as of
December 31, 2023, compared to 1.73% as of the trailing quarter
end, and 1.64% as of December 31, 2022. Non-performing assets to
total assets were 0.35% on December 31, 2023, as compared to 0.33%
as of September 30, 2023, and 0.25% at December 31, 2022.
Financial results reported in this document are preliminary and
unaudited. Final financial results and other disclosures will be
reported in our Annual Report on Form 10-K for the period ended
December 31, 2023, and may differ materially from the results and
disclosures in this document due to, among other things, the
completion of final review procedures, the occurrence of subsequent
events, or the discovery of additional information.
Summary Results
The following is a summary of the components of the Company’s
operating results and performance ratios for the periods
indicated:
Three months ended
December 31,
September 30,
(dollars and shares in thousands, except
per share data)
2023
2023
$ Change
% Change
Net interest income
$
86,617
$
88,123
$
(1,506
)
(1.7
) %
Provision for credit losses
(5,990
)
(4,155
)
(1,835
)
44.2
%
Noninterest income
16,040
15,984
56
0.4
%
Noninterest expense
(60,267
)
(57,878
)
(2,389
)
4.1
%
Provision for income taxes
(10,325
)
(11,484
)
1,159
(10.1
) %
Net income
$
26,075
$
30,590
$
(4,515
)
(14.8
) %
Diluted earnings per share
$
0.78
$
0.92
$
(0.14
)
(15.2
) %
Dividends per share
$
0.30
$
0.30
$
—
—
%
Average common shares
33,267
33,263
4
—
%
Average diluted common shares
33,352
33,319
33
0.1
%
Return on average total assets
1.05
%
1.23
%
Return on average equity
9.43
%
10.91
%
Efficiency ratio
58.71
%
55.59
%
Three months ended December
31,
(dollars and shares in thousands, except
per share data)
2023
2022
$ Change
% Change
Net interest income
$
86,617
$
98,900
$
(12,283
)
(12.4
) %
Provision for credit losses
(5,990
)
(4,245
)
(1,745
)
41.1
%
Noninterest income
16,040
15,880
160
1.0
%
Noninterest expense
(60,267
)
(59,469
)
(798
)
1.3
%
Provision for income taxes
(10,325
)
(14,723
)
4,398
(29.9
) %
Net income
$
26,075
$
36,343
$
(10,268
)
(28.3
) %
Diluted earnings per share
$
0.78
$
1.09
$
(0.31
)
(28.4
) %
Dividends per share
$
0.30
$
0.30
$
—
—
%
Average common shares
33,267
33,330
(63
)
(0.2
) %
Average diluted common shares
33,352
33,467
(115
)
(0.3
) %
Return on average total assets
1.05
%
1.45
%
Return on average equity
9.43
%
14.19
%
Efficiency ratio
58.71
%
51.81
%
Twelve months ended December
31,
(dollars and shares in thousands)
2023
2022
$ Change
% Change
Net interest income
$
356,677
$
345,976
$
10,701
3.1
%
Provision for credit losses
(23,990
)
(18,470
)
(5,520
)
29.9
%
Noninterest income
61,400
63,046
(1,646
)
(2.6
) %
Noninterest expense
(233,182
)
(216,645
)
(16,537
)
7.6
%
Provision for income taxes
(43,515
)
(48,488
)
4,973
(10.3
) %
Net income
$
117,390
$
125,419
$
(8,029
)
(6.4
) %
Diluted earnings per share
$
3.52
$
3.83
$
(0.31
)
(8.1
) %
Dividends per share
$
1.20
$
1.10
$
0.10
9.1
%
Average common shares
33,261
32,584
677
2.1
%
Average diluted common shares
33,355
32,721
634
1.9
%
Return on average total assets
1.19
%
1.28
%
Return on average equity
10.65
%
11.67
%
Efficiency ratio
55.77
%
52.97
%
Balance Sheet
Total loans outstanding grew to $6.8 billion as of December 31,
2023, an organic increase of 5.3% over December 31, 2022. As
compared to September 30, 2023, total loans outstanding increased
during the quarter by $85.8 million or 5.1% annualized. Investments
decreased to $2.31 billion as of December 31, 2023, an annualized
decrease of 12.4% over December 31, 2022. Quarterly average earning
assets to quarterly total average assets was 91.6% on December 31,
2023, compared to 91.4% at December 31, 2022. The loan-to-deposit
ratio was 86.7% on December 31, 2023, as compared to 77.4% at
December 31, 2022. The Company did not utilized brokered deposits
during 2023 or 2022 and has relied solely on short-term borrowings
to fund cash flow timing differences.
Total shareholders' equity increased by $89.3 million during the
quarter ended December 31, 2023, as a result of accumulated other
comprehensive losses decreasing by $72.2 million and net income of
$26.1 million, offset partially by cash dividend payments on common
stock of approximately $10.0 million. As a result, the Company’s
book value grew to $34.86 per share at December 31, 2023, compared
to $31.39 at December 31, 2022. 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 $25.39 per share
at December 31, 2023, as compared to $21.76 at December 31, 2022.
As noted above, changes in the fair value of available-for-sale
investment securities, net of deferred taxes continue to create
moderate levels of volatility in tangible book value per share.
Trailing Quarter Balance Sheet Change
Ending balances
December 31,
September 30,
Annualized
% Change
(dollars in thousands)
2023
2023
$ Change
Total assets
$
9,910,089
$
9,897,006
$
13,083
0.5
%
Total loans
6,794,470
6,708,666
85,804
5.1
Total investments
2,305,882
2,333,162
(27,280
)
(4.7
)
Total deposits
7,834,038
8,009,643
(175,605
)
(8.8
)
Total other borrowings
632,582
537,975
94,607
70.3
Loans outstanding increased by $85.8 million or 5.1% on an
annualized basis during the quarter ended December 31, 2023. During
the quarter, loan originations/draws totaled approximately $450.0
million while payoffs/repayments of loans totaled $368.0 million,
which compares to originations/draws and payoffs/repayments during
the trailing quarter ended of $495.0 million and $308.0 million,
respectively. While origination volume decreased from the previous
quarter, activity levels continue to be lower relative to the
comparative period in 2022 due in part to disciplined pricing and
underwriting, as well as decreased borrower appetite given economic
uncertainties. Investment security balances decreased $27.3 million
or 4.7% on an annualized basis as the result of net prepayments,
maturities, and sales totaling approximating $130.7 million, offset
by net increases in the market value of securities of $103.6
million. Management intends to utilize excess cash flows from the
investment security portfolio to support loan growth or reduce
borrowings, thus driving an improved mix of earning assets. Deposit
balances decreased by $175.6 million or 8.8% annualized during the
period. Funding for the net cash outflows of loans, investment
securities and deposits during the quarter were supported by a net
increase of $94.6 million in short-term borrowings, which totaled
$632.6 million at December 31, 2023.
Average Trailing Quarter Balance Sheet Change
Quarterly average balances for the period
ended
December 31,
September 30,
Annualized
% Change
(dollars in thousands)
2023
2023
$ Change
Total assets
$
9,879,355
$
9,874,240
$
5,115
0.2
%
Total loans
6,746,153
6,597,400
148,753
9.0
Total investments
2,277,985
2,429,335
(151,350
)
(24.9
)
Total deposits
7,990,993
8,043,101
(52,108
)
(2.6
)
Total other borrowings
515,959
449,274
66,685
59.4
Year Over Year Balance Sheet Change
Ending balances
As of December 31,
% Change
(dollars in thousands)
2023
2022
$ Change
Total assets
$
9,910,089
$
9,930,986
$
(20,897
)
(0.2
) %
Total loans
6,794,470
6,450,447
344,023
5.3
Total loans, excluding PPP
6,793,388
6,448,845
344,543
5.3
Total investments
2,305,882
2,633,269
(327,387
)
(12.4
)
Total deposits
7,834,038
8,329,013
(494,975
)
(5.9
)
Total other borrowings
632,582
264,605
367,977
139.1
Loan balances increased as a result of organic activities by
approximately $344.5 million or 5.3% during the twelve-month period
ending December 31, 2023. Over the same period deposit balances
have declined by $495.0 million or 5.9%. The Company has offset
these declines through the deployment of excess cash balances,
runoff of investment security balances, and proceeds from
short-term Federal Home Loan Bank (FHLB) borrowings. As of December
31, 2023 and December 31, 2022, short-term borrowings from the FHLB
totaled $600.0 million and $216.7 million and had a weighted
average interest rate of 5.38% and 4.65%, respectively.
Liquidity
The Company's primary sources of liquidity include the following
for the periods indicated:
(dollars in thousands)
December 31, 2023
September 30, 2023
December 31, 2022
Borrowing capacity at correspondent banks
and FRB
$
2,921,525
$
2,927,065
$
2,815,574
Less: borrowings outstanding
(600,000
)
(500,000
)
(216,700
)
Unpledged available-for-sale (AFS)
investment securities
1,558,506
1,702,265
1,990,451
Cash held or in transit with FRB
51,253
72,049
56,910
Total primary liquidity
$
3,931,284
$
4,201,379
$
4,646,235
Estimated uninsured deposit balances
$
2,371,000
$
2,407,000
$
2,701,000
At December 31, 2023, the Company's primary sources of liquidity
represented 50% of total deposits and 166% of estimated total
uninsured (excluding collateralized municipal deposits and
intercompany balances) deposits, respectively. As secondary sources
of liquidity, the Company's held-to-maturity investment securities
had a fair value of $125.1 million, including approximately $8.3
million in net unrealized losses. The Company did not utilize any
brokered deposits during 2023 or 2022.
Net Interest Income and Net Interest
Margin
During the twelve-month period ended December 31, 2023, the
Federal Open Market Committee's (FOMC) actions have resulted in an
increase in the Fed Funds Rate by approximately 100 basis points.
During the same period the Company's yield on total loans
(excluding PPP) increased 54 basis points to 5.64% for the three
months ended December 31, 2023, from 5.10% for the three months
ended December 31, 2022. Moreover, the tax equivalent yield on the
Company's investment security portfolio was 3.50% for the quarter
ended December 31, 2023, an increase of 37 basis points from the
3.13% for the three months ended December 31, 2022. The cost of
total interest-bearing deposits and total interest-bearing
liabilities increased by 144 basis points and 169 basis points,
respectively, between the three month periods ended December 31,
2023 and 2022. Since FOMC rate actions began in March 2022, the
Company's cost of total deposits has increased 101 basis points
which translates to a cycle to date deposit beta of 19.2%.
The Company continues to manage its cost of deposits through the
use of various pricing and product mix strategies. As of December
31, 2023, September 30, 2023, and December 31, 2022, deposits
priced utilizing these strategies totaled $1.3 billion, $1.2
billion and $579.1 million, respectively, and carried weighted
average rates of 3.60%, 3.53%, and 1.64%, respectively.
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)
2023
2023
Change
% Change
Interest income
$
115,909
$
112,380
$
3,529
3.1
%
Interest expense
(29,292
)
(24,257
)
(5,035
)
20.8
%
Fully tax-equivalent adjustment (FTE)
(1)
360
405
(45
)
(11.1
) %
Net interest income (FTE)
$
86,977
$
88,528
$
(1,551
)
(1.8
) %
Net interest margin (FTE)
3.81
%
3.88
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
1,459
$
1,324
$
135
10.2
%
Net interest margin less effect of
acquired loan discount accretion(1)
3.75
%
3.82
%
(0.07
) %
PPP loans yield, net:
Amount (included in interest income)
$
1
$
2
$
(1
)
(50.0
) %
Net interest margin less effect of PPP
loan yield (1)
3.81
%
3.88
%
(0.07
) %
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
1,460
$
1,326
$
134
10.1
%
Net interest margin less effect of
acquired loan discount accretion and PPP loan yield (1)
3.75
%
3.82
%
(0.07
) %
Three months ended December
31,
(dollars in thousands)
2023
2022
Change
% Change
Interest income
$
115,909
$
102,989
$
12,920
12.5
%
Interest expense
(29,292
)
(4,089
)
(25,203
)
616.4
%
Fully tax-equivalent adjustment (FTE)
(1)
360
440
(80
)
(18.2
) %
Net interest income (FTE)
$
86,977
$
99,340
$
(12,363
)
(12.4
) %
Net interest margin (FTE)
3.81
%
4.34
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
1,459
$
1,751
$
(292
)
(16.7
) %
Net interest margin less effect of
acquired loan discount accretion(1)
3.75
%
4.27
%
(0.52
) %
PPP loans yield, net:
Amount (included in interest income)
$
1
$
16
$
(15
)
(93.8
) %
Net interest margin less effect of PPP
loan yield (1)
3.81
%
4.34
%
(0.53
) %
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
1,460
$
1,767
$
(307
)
(17.4
) %
Net interest margin less effect of
acquired loan discount accretion and PPP loan yield (1)
3.75
%
4.27
%
(0.52
) %
Twelve months ended December
31,
(dollars in thousands)
2023
2022
Change
% Change
Interest income
$
438,354
$
355,505
$
82,849
23.3
%
Interest expense
(81,677
)
(9,529
)
(72,148
)
757.1
%
Fully tax-equivalent adjustment (FTE)
(1)
1,536
1,560
(24
)
(1.5
) %
Net interest income (FTE)
$
358,213
$
347,536
$
10,677
3.1
%
Net interest margin (FTE)
3.96
%
3.88
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
5,651
$
5,465
$
186
3.4
%
Net interest margin less effect of
acquired loan discount accretion(1)
3.90
%
3.81
%
0.09
%
PPP loans yield, net:
Amount (included in interest income)
$
12
$
2,390
$
(2,378
)
(99.5
) %
Net interest margin less effect of PPP
loan yield (1)
3.96
%
3.86
%
0.10
%
Acquired loans discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
5,663
$
7,855
$
(2,192
)
(27.9
) %
Net interest margin less effect of
acquired loans discount and PPP loan yield (1)
3.90
%
3.80
%
0.10
%
(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. 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. Despite the elevated
rate environment, the prepayment rate of portfolio loans, inclusive
of those acquired at a premium or discount, increased during 2023
as compared to 2022. During the year ended December 31, 2023 and
December 31, 2022, the purchased loan discount accretion was $5.7
million and $5.5 million, respectively.
The following table shows the components of net interest income
and net interest margin on a fully tax-equivalent (FTE) basis for
the quarterly periods indicated:
ANALYSIS OF CHANGE IN NET
INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in
thousands)
Three months ended
Three months ended
Three months ended
December 31, 2023
September 30, 2023
December 31, 2022
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans, excluding PPP
$
6,745,040
$
95,840
5.64
%
$
6,596,116
$
91,705
5.52
%
$
6,357,250
$
81,740
5.10
%
PPP loans
1,113
1
0.36
%
1,284
2
0.62
%
1,748
16
3.63
%
Investments-taxable
2,104,402
18,522
3.49
%
2,246,569
18,990
3.35
%
2,414,236
18,804
3.09
%
Investments-nontaxable (1)
173,583
1,561
3.57
%
182,766
1,755
3.81
%
209,826
1,906
3.60
%
Total investments
2,277,985
20,083
3.50
%
2,429,335
20,745
3.39
%
2,624,062
20,710
3.13
%
Cash at Fed Reserve and other banks
23,095
345
5.93
%
26,654
333
4.96
%
93,390
963
4.09
%
Total earning assets
9,047,233
116,269
5.10
%
9,053,389
112,785
4.94
%
9,076,450
103,429
4.52
%
Other assets, net
832,122
820,851
856,481
Total assets
$
9,879,355
$
9,874,240
$
9,932,931
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,755,900
$
4,714
1.07
%
$
1,751,625
$
3,916
0.89
%
$
1,709,494
$
150
0.03
%
Savings deposits
2,765,679
10,828
1.55
%
2,790,197
9,526
1.35
%
2,921,935
1,815
0.25
%
Time deposits
652,709
5,564
3.38
%
535,715
3,937
2.92
%
251,218
205
0.32
%
Total interest-bearing deposits
5,174,288
21,106
1.62
%
5,077,537
17,379
1.36
%
4,882,647
2,170
0.18
%
Other borrowings
515,959
6,394
4.92
%
449,274
5,106
4.51
%
85,927
406
1.87
%
Junior subordinated debt
101,087
1,792
7.03
%
101,070
1,772
6.96
%
101,030
1,513
5.94
%
Total interest-bearing liabilities
5,791,334
29,292
2.01
%
5,627,881
24,257
1.71
%
5,069,604
4,089
0.32
%
Noninterest-bearing deposits
2,816,705
2,965,564
3,662,525
Other liabilities
173,885
168,391
184,334
Shareholders’ equity
1,097,431
1,112,404
1,016,468
Total liabilities and shareholders’
equity
$
9,879,355
$
9,874,240
$
9,932,931
Net interest rate spread (1) (2)
3.09
%
3.23
%
4.20
%
Net interest income and margin (1) (3)
$
86,977
3.81
%
$
88,528
3.88
%
$
99,340
4.34
%
(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, 2023, decreased $1.6 million or 1.8% to $87.0 million compared
to $88.5 million during the three months ended September 30, 2023.
In addition, net interest margin declined 7 basis points to 3.81%,
compared to the trailing quarter. The decrease in net interest
income is primarily attributed to an additional $3.7 million or
21.4% in deposit interest expense due to changes in product mix as
customers continue to be drawn towards higher paying accounts.
Deposit cost increases during the current quarter were also
influenced by continued competitive pricing pressures. As a partial
offset, total interest income increased $3.5 million or 3.1% as
compared to the trailing quarter.
As compared to the same quarter in the prior year, average loan
yields, excluding PPP, increased 54 basis points from 5.10% during
the three months ended December 31, 2022, to 5.64% during the three
months ended December 31, 2023. The accretion of discounts from
acquired loans added 9 and 11 basis points to loan yields during
the quarters ended December 31, 2023 and December 31, 2022,
respectively.
The rates paid on interest bearing deposits increased by 26
basis points during the quarter ended December 31, 2023, compared
to the trailing quarter. The cost of interest-bearing deposits
increased by 144 basis points between the quarter ended December
31, 2023, and the same quarter of the prior year. In addition, the
average balance of noninterest-bearing deposits decreased by $148.9
million quarter over quarter and decreased by $845.8 million from
three month average for the period ended December 31, 2022 amidst a
continued migration of customer funds to interest-bearing products.
As of December 31, 2023, the ratio of average total
noninterest-bearing deposits to total average deposits was 35.2%,
as compared to 36.9% and 42.9% at September 30, 2023 and December
31, 2022, respectively.
Twelve months ended December 31,
2023
Twelve months ended December 31,
2022
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans, excluding PPP
$
6,555,886
$
356,698
5.44
%
$
5,841,770
$
282,985
4.84
%
PPP loans
1,360
12
0.88
%
24,590
2,390
9.72
%
Investments-taxable
2,272,301
75,203
3.31
%
2,459,032
60,499
2.46
%
Investments-nontaxable (1)
181,766
6,656
3.66
%
190,339
6,759
3.55
%
Total investments
2,454,067
81,859
3.34
%
2,649,371
67,258
2.54
%
Cash at Fed Reserve and other banks
26,469
1,321
4.99
%
452,300
4,432
0.98
%
Total earning assets
9,037,782
439,890
4.87
%
8,968,031
357,065
3.98
%
Other assets, net
832,407
803,570
Total assets
$
9,870,189
$
9,771,601
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,709,930
$
11,190
0.65
%
$
1,720,932
$
452
0.03
%
Savings deposits
2,805,424
31,444
1.12
%
2,878,189
3,356
0.12
%
Time deposits
473,688
12,453
2.63
%
302,619
881
0.29
%
Total interest-bearing deposits
4,989,042
55,087
1.10
%
4,901,740
4,689
0.10
%
Other borrowings
430,736
19,712
4.58
%
33,410
421
1.26
%
Junior subordinated debt
101,064
6,878
6.81
%
91,138
4,419
4.85
%
Total interest-bearing liabilities
5,520,842
81,677
1.48
%
5,026,288
9,529
0.19
%
Noninterest-bearing deposits
3,068,839
3,492,713
Other liabilities
178,072
178,163
Shareholders’ equity
1,102,436
1,074,437
Total liabilities and shareholders’
equity
$
9,870,189
$
9,771,601
Net interest rate spread (1) (2)
3.39
%
3.79
%
Net interest income and margin (1) (3)
$
358,213
3.96
%
$
347,536
3.88
%
(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
Throughout 2023 market interest rates, including many rates that
serve as reference indices for variable rate loans and investment
securities increased. As noted above, these rate increases have
continued to benefit growth in total interest income. As of
December 31, 2023, the Company's loan portfolio consisted of
approximately $6.8 billion in outstanding principal with a weighted
average coupon rate of 5.44%. During the three-month periods ending
December 31, 2023, September 30, 2023, and December 31, 2022, the
weighted average coupon on loan production in the quarter was
7.54%, 7.14% and 6.25%, respectively. Included in the December 31,
2023 loan total are adjustable rate loans totaling $3.5 billion, of
which, $985.0 million are considered floating based on the Wall
Street Prime index. In addition, the Company holds certain
investment securities with fair values totaling $355.4 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, 2023, the Company
recorded a provision for credit losses of $6.0 million, as compared
to $4.2 million during the trailing quarter, and $4.2 million
during the fourth quarter of 2022.
The following table presents details of the provision for credit
losses for the periods indicated:
Three months ended
Twelve months ended
(dollars in thousands)
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Addition to allowance for credit
losses
$
6,040
$
4,300
$
22,455
$
17,945
Addition to reserve for unfunded loan
commitments
(50
)
(55
)
1,535
525
Total provision for credit losses
$
5,990
$
4,245
$
23,990
$
18,470
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, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Balance, beginning of period
$
115,812
$
101,488
$
105,680
$
85,376
ACL at acquisition for PCD loans
—
—
—
2,037
Provision for credit losses
6,040
4,300
22,455
17,945
Loans charged-off
(749
)
(174
)
(8,140
)
(1,585
)
Recoveries of previously charged-off
loans
419
66
1,527
1,907
Balance, end of period
$
121,522
$
105,680
$
121,522
$
105,680
The allowance for credit losses (ACL) was $121.5 million or
1.79% of total loans as of December 31, 2023. The provision for
credit losses on loans of $6.0 million during the recent quarter
was the net effect of charge-offs and increases in reserves for
qualitative factors and quantitative reserves under the cohort
model from loan growth as well as a $1.5 million increase in
specific reserves for individually evaluated credits. On a
comparative basis, the provision for credit losses of $4.3 million
during the three months ended December 31, 2022, was attributed to
both loan growth and qualitative components of the ACL model. For
the current quarter, the qualitative components of the ACL resulted
in a net increase in required reserves due primarily to year over
year increases in BBB US Corporate bond yields. The quantitative
component of the ACL increased reserve requirements by
approximately $3.4 million over the trailing quarter, primarily
attributed to increases in specific reserves and to a lesser
extent, organic loan growth.
The Company utilizes a forecast period of approximately eight
quarters and obtains the forecast data from publicly available
sources as of the balance sheet date. This forecast data continues
to evolve and includes improving shifts in the magnitude of changes
for both the unemployment and GDP factors leading up to the balance
sheet date. Despite continued declines on a year over year
comparative basis, core inflation remains elevated from wage
pressures, and higher living costs such as housing, energy and food
prices resulting in a rising rate environment for nearly all of
2023. Management notes the rapid intervals of rate increases by the
Federal Reserve may create repricing risk for certain borrowers and
continued inversion of the yield curve, creates informed
expectations of the US potentially entering a recession within 12
months. While projected cuts in interest rates from the Federal
Reserve during 2024 may improve this outlook, the uncertainty
associated with the extent and timing of these potential reductions
has inhibited a material benefit to forecasted reserve levels. As a
result, management continues to believe that certain credit
weaknesses are likely present in the overall economy and that it is
appropriate to cautiously maintain a reserve level that
incorporates such risk factors.
Loans past due 30 days or more increased by $11.3 million during
the quarter ended December 31, 2023, to $19.4 million, as compared
to $8.1 million at September 30, 2023. Of the total $19.4 million
in loans identified as past due, approximately $12.9 million is
less than 90 days past due, the majority of which is well-secured.
Non-performing loans were $31.9 million at December 31, 2023, an
increase of $2.1 million from $29.8 million as of September 30,
2023, and an increase of $10.6 million from $21.3 million as of
December 31, 2022. The increase in non-performing loans as compared
to the trailing quarter is largely concentrated within agriculture
lending, and specifically the result of declines in commodity
pricing and therefore, expected revenue available to borrowers from
harvest proceeds. Management continues to proactively work with
these borrowers to identify actionable and appropriate resolution
strategies which are customary for the industry. Of the $31.9
million loans designated as non-performing as of December 31, 2023,
approximately $18.4 million are current with respect to payments
required under their original loan agreements.
The following table illustrates the total loans by risk rating
and their respective percentage of total loans for the periods
presented:
December 31,
% of Loans Outstanding
September 30,
% of Loans Outstanding
December 31,
% of Loans Outstanding
(dollars in thousands)
2023
2023
2022
Risk Rating:
Pass
$
6,603,161
97.2
%
$
6,532,424
97.4
%
$
6,251,945
96.9
%
Special Mention
103,812
1.5
%
94,614
1.4
%
127,000
2.0
%
Substandard
87,497
1.3
%
81,628
1.2
%
71,502
1.1
%
Total
$
6,794,470
$
6,708,666
$
6,450,447
Classified loans to total loans
1.29
%
1.22
%
1.11
%
Loans past due 30+ days to total loans
0.29
%
0.12
%
0.08
%
The ratio of classified loans of 1.29% as of December 31, 2023
increased 7 basis points from September 30, 2023 and increased 18
basis points from the comparative quarter ended 2022. The newly
classified credits are spread amongst several agriculture
relationships. As a percentage of total loans outstanding,
classified assets remain consistent with volumes experienced prior
to the recent quantitative easing cycle spurred by the COVID
pandemic, and reflects management's historically conservative
approach to credit risk monitoring. The Company's combined
criticized loan balances increased during the quarter by $15.1
million to $191.3 million as of December 31, 2023 and Management
believes any credit risk has been adequately reserved against.
As of December 31, 2023, other real estate owned consisted of
nine properties with a carrying value of approximately $2.7
million, an increase of $0.2 million from the trailing quarter
ended.
Non-performing assets of $34.6 million at December 31, 2023,
represented 0.35% of total assets, a change from the $32.7 million
or 0.33% and $24.8 million or 0.25% as of September 30, 2023 and
December 30, 2022, respectively.
Allocation of Credit Loss Reserves by
Loan Type
As of December 31, 2023
As of September 30, 2023
As of December 31, 2022
(dollars in thousands)
Amount
% of Loans Outstanding
Amount
% of Loans Outstanding
Amount
% of Loans Outstanding
Commercial real estate:
CRE - Non Owner Occupied
$
35,077
1.58
%
$
33,723
1.55
%
$
30,962
1.44
%
CRE - Owner Occupied
15,081
1.58
%
14,503
1.51
%
14,014
1.42
%
Multifamily
14,418
1.52
%
14,239
1.48
%
13,132
1.39
%
Farmland
4,288
1.58
%
4,210
1.51
%
3,273
1.17
%
Total commercial real estate loans
68,864
66,675
1.53
%
61,381
1.41
%
Consumer:
SFR 1-4 1st Liens
14,009
1.59
%
13,535
1.56
%
11,268
1.43
%
SFR HELOCs and Junior Liens
10,273
2.88
%
10,163
2.88
%
11,413
2.90
%
Other
3,171
4.34
%
2,920
4.44
%
1,958
3.45
%
Total consumer loans
27,453
26,618
2.07
%
24,639
1.99
%
Commercial and Industrial
12,750
2.17
%
12,290
2.05
%
13,597
2.39
%
Construction
8,856
2.55
%
8,097
2.52
%
5,142
2.43
%
Agricultural Production
3,589
2.48
%
2,125
1.72
%
906
1.48
%
Leases
10
0.12
%
7
0.09
%
15
0.19
%
Allowance for credit losses
121,522
1.79
%
115,812
1.73
%
105,680
1.64
%
Reserve for unfunded loan commitments
5,850
5,900
4,315
Total allowance for credit losses
$
127,372
1.87
%
$
121,712
1.81
%
$
109,995
1.71
%
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, 2023, the unamortized discount associated
with acquired loans totaled $24.6 million.
Non-interest Income
The following table presents the key components of non-interest
income for the current and trailing quarterly periods
indicated:
Three months ended
(dollars in thousands)
December 31, 2023
September 30, 2023
Change
% Change
ATM and interchange fees
$
6,531
$
6,728
$
(197
)
(2.9
) %
Service charges on deposit accounts
4,732
4,851
(119
)
(2.5
) %
Other service fees
1,432
1,142
290
25.4
%
Mortgage banking service fees
444
445
(1
)
(0.2
) %
Change in value of mortgage servicing
rights
(291
)
(91
)
(200
)
219.8
%
Total service charges and fees
12,848
13,075
(227
)
(1.7
) %
Increase in cash value of life
insurance
876
684
192
28.1
%
Asset management and commission income
1,284
1,141
143
12.5
%
Gain on sale of loans
283
382
(99
)
(25.9
) %
Lease brokerage income
109
160
(51
)
(31.9
) %
Sale of customer checks
292
396
(104
)
(26.3
) %
Loss on sale of investment securities
(120
)
—
(120
)
n/a
(Loss) gain on marketable equity
securities
117
(81
)
198
(244.4
) %
Other income
351
227
124
54.6
%
Total other non-interest income
3,192
2,909
283
9.7
%
Total non-interest income
$
16,040
$
15,984
$
56
0.4
%
Non-interest income increased $0.1 million or 0.4% to $16.0
million during the three months ended December 31, 2023, compared
to $16.0 million during the quarter ended September 30, 2023. Other
service fees increased by $0.3 million or 25.4% resulting from
improved profitability on small business account services. This was
partially offset by a decline of $0.2 million or 219.8% in the
value of mortgage servicing rights attributed to a decrease in the
reference rates during the quarter. A loss on the sale of
investment securities totaling $0.1 million was recorded during the
quarter in connection with the Company's strategic sale of $46.9
million in available for sale securities.
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)
2023
2022
Change
% Change
ATM and interchange fees
$
6,531
$
6,826
$
(295
)
(4.3
) %
Service charges on deposit accounts
4,732
4,103
629
15.3
%
Other service fees
1,432
1,091
341
31.3
%
Mortgage banking service fees
444
465
(21
)
(4.5
) %
Change in value of mortgage servicing
rights
(291
)
(142
)
(149
)
104.9
%
Total service charges and fees
12,848
12,343
505
4.1
%
Increase in cash value of life
insurance
876
809
67
8.3
%
Asset management and commission income
1,284
1,040
244
23.5
%
Gain on sale of loans
283
197
86
43.7
%
Lease brokerage income
109
172
(63
)
(36.6
) %
Sale of customer checks
292
296
(4
)
(1.4
) %
Loss on sale of investment securities
(120
)
—
(120
)
n/a
Gain on marketable equity securities
117
6
111
1,850.0
%
Other income
351
1,017
(666
)
(65.5
) %
Total other non-interest income
3,192
3,537
(345
)
(9.8
) %
Total non-interest income
$
16,040
$
15,880
$
160
1.0
%
Non-interest income increased $0.2 million or 1.0% to $16.0
million during the three months ended December 31, 2023, compared
to $15.9 million during the comparative quarter ended December 31,
2022. Service charges on deposit accounts increased by $0.6 million
or 15.3% from improved profitability on commercial deposit account
activity. Other income declined by $0.7 million or 65.5% following
the non-recurring income of $0.6 million earned from the sale of
deposits during the fourth quarter in 2022.
Twelve months ended December
31,
(dollars in thousands)
2023
2022
Change
% Change
ATM and interchange fees
$
26,459
$
26,767
$
(308
)
(1.2
) %
Service charges on deposit accounts
17,595
16,536
1,059
6.4
%
Other service fees
4,732
4,274
458
10.7
%
Mortgage banking service fees
1,808
1,887
(79
)
(4.2
) %
Change in value of mortgage servicing
rights
(506
)
301
(807
)
(268.1
) %
Total service charges and fees
50,088
49,765
323
0.6
%
Increase in cash value of life
insurance
3,150
2,858
292
10.2
%
Asset management and commission income
4,517
3,986
531
13.3
%
Gain on sale of loans
1,166
2,342
(1,176
)
(50.2
) %
Lease brokerage income
441
820
(379
)
(46.2
) %
Sale of customer checks
1,383
1,167
216
18.5
%
Loss on sale of investment securities
(284
)
—
(284
)
n/a
Gain (loss) on marketable equity
securities
36
(340
)
376
(110.6
) %
Other income
903
2,448
(1,545
)
(63.1
) %
Total other non-interest income
11,312
13,281
(1,969
)
(14.8
) %
Total non-interest income
$
61,400
$
63,046
$
(1,646
)
(2.6
) %
Non-interest income decreased $1.6 million or 2.6% to $61.4
million during the year ended December 31, 2023, as compared to
$63.0 million during the year ended December 31, 2022. During 2023,
total service charges and fees increased $323,000, which is net of
approximately $930,000 in waived or reversed fees related to the
network outage that occurred in the first quarter of the year.
Mortgage origination related activity has declined year over year
from elevated interest rates, as the income recorded from the sale
of loans is down $1.2 million or 50.2%. Changes in interest rates
also led to a decline in fair value of mortgage servicing rights
during the twelve months ended December 31, 2023, which decreased
by $0.8 million or 268.1%, as compared to the trailing twelve month
period ended. Other income declined $1.5 million or 63.1%, $0.7
million of which is attributed to the sale of deposits mentioned
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, 2023
September 30, 2023
Change
% Change
Base salaries, net of deferred loan
origination costs
$
23,889
$
23,616
$
273
1.2
%
Incentive compensation
3,894
4,391
(497
)
(11.3
) %
Benefits and other compensation costs
6,272
6,456
(184
)
(2.9
) %
Total salaries and benefits expense
34,055
34,463
(408
)
(1.2
) %
Occupancy
4,036
3,948
88
2.2
%
Data processing and software
5,017
5,246
(229
)
(4.4
) %
Equipment
1,322
1,503
(181
)
(12.0
) %
Intangible amortization
1,216
1,590
(374
)
(23.5
) %
Advertising
875
881
(6
)
(0.7
) %
ATM and POS network charges
1,863
1,606
257
16.0
%
Professional fees
2,032
1,752
280
16.0
%
Telecommunications
576
567
9
1.6
%
Regulatory assessments and insurance
1,297
1,194
103
8.6
%
Postage
320
306
14
4.6
%
Operational loss
445
474
(29
)
(6.1
) %
Courier service
537
492
45
9.1
%
Loss (gain) on sale or acquisition of
foreclosed assets
19
(152
)
171
(112.5
) %
Loss on disposal of fixed assets
1
4
(3
)
(75.0
) %
Other miscellaneous expense
6,656
4,004
2,652
66.2
%
Total other non-interest expense
26,212
23,415
2,797
11.9
%
Total non-interest expense
$
60,267
$
57,878
$
2,389
4.1
%
Average full-time equivalent staff
1,211
1,215
(4
)
(0.3
) %
Non-interest expense for the quarter ended December 31, 2023,
increased $2.4 million or 4.1% to $60.3 million as compared to
$57.9 million during the trailing quarter ended September 30, 2023.
Total salaries and benefits expense decreased by $0.4 million or
1.2%, largely reflecting the reduction in incentive compensation
paid on production and sales volumes. Other changes in non-interest
expenses were primarily the result of expense timing and other
operational activities.
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)
2023
2022
Change
% Change
Base salaries, net of deferred loan
origination costs
$
23,889
$
22,099
$
1,790
8.1
%
Incentive compensation
3,894
6,211
(2,317
)
(37.3
) %
Benefits and other compensation costs
6,272
8,301
(2,029
)
(24.4
) %
Total salaries and benefits expense
34,055
36,611
(2,556
)
(7.0
) %
Occupancy
4,036
3,957
79
2.0
%
Data processing and software
5,017
4,102
915
22.3
%
Equipment
1,322
1,525
(203
)
(13.3
) %
Intangible amortization
1,216
1,702
(486
)
(28.6
) %
Advertising
875
1,249
(374
)
(29.9
) %
ATM and POS network charges
1,863
2,134
(271
)
(12.7
) %
Professional fees
2,032
1,111
921
82.9
%
Telecommunications
576
638
(62
)
(9.7
) %
Regulatory assessments and insurance
1,297
815
482
59.1
%
Postage
320
319
1
0.3
%
Operational loss
445
235
210
89.4
%
Courier service
537
616
(79
)
(12.8
) %
Loss (gain) on sale or acquisition of
foreclosed assets
19
(235
)
254
(108.1
) %
Loss (gain) on disposal of fixed
assets
1
(1
)
2
(200.0
) %
Other miscellaneous expense
6,656
4,691
1,965
41.9
%
Total other non-interest expense
26,212
22,858
3,354
14.7
%
Total non-interest expense
$
60,267
$
59,469
$
798
1.3
%
Average full-time equivalent staff
1,211
1,210
1
0.1
%
Non-interest expense increased $0.8 million or 1.3% to $60.3
million during the three months ended December 31, 2023, as
compared to $59.5 million for the quarter ended December 31, 2022.
Total salaries and benefits expense decreased by $2.6 million or
7.0% to $34.1 million, largely from a reduction in incentive
compensation, and the absence of a non-recurring charge of $2.1
million in the comparative 2022 period following amendments to
certain of the Company's retirement plans. Data processing and
software expenses increased by $0.9 million or 22.3% related to
ongoing investments in the Company's data management and security
infrastructure. The increase in professional fees of $0.9 million
was directly associated with various legal and consulting projects
during the period.
Twelve months ended December
31,
(dollars in thousands)
2023
2022
Change
% Change
Base salaries, net of deferred loan
origination costs
$
94,564
$
84,861
$
9,703
11.4
%
Incentive compensation
15,557
17,908
(2,351
)
(13.1
) %
Benefits and other compensation costs
25,674
27,083
(1,409
)
(5.2
) %
Total salaries and benefits expense
135,795
129,852
5,943
4.6
%
Occupancy
16,135
15,493
642
4.1
%
Data processing and software
18,933
14,660
4,273
29.1
%
Equipment
5,644
5,733
(89
)
(1.6
) %
Intangible amortization
6,118
6,334
(216
)
(3.4
) %
Advertising
3,531
3,694
(163
)
(4.4
) %
ATM and POS network charges
7,080
6,984
96
1.4
%
Professional fees
7,358
4,392
2,966
67.5
%
Telecommunications
2,547
2,298
249
10.8
%
Regulatory assessments and insurance
5,276
3,142
2,134
67.9
%
Merger and acquisition expenses
—
6,253
(6,253
)
(100.0
) %
Postage
1,236
1,147
89
7.8
%
Operational loss
2,444
1,000
1,444
144.4
%
Courier service
1,851
2,013
(162
)
(8.0
) %
Gain on sale or acquisition of foreclosed
assets
(133
)
(481
)
348
(72.3
) %
Loss (gain) on disposal of fixed
assets
23
(1,070
)
1,093
(102.1
) %
Other miscellaneous expense
19,344
15,201
4,143
27.3
%
Total other non-interest expense
97,387
86,793
10,594
12.2
%
Total non-interest expense
$
233,182
$
216,645
$
16,537
7.6
%
Average full-time equivalent staff
1,214
1,169
45
3.8
%
Total non-interest expense increased $16.5 million or 7.6% to
$233.2 million during the year ended December 31, 2023, as compared
to $216.6 million for the comparative period in 2022, for reasons
primarily associated with the acquisition of Valley Republic Bank
in March of 2022 which resulted in expense increases for nearly
every identified category. Merger and acquisition expenses
associated with this acquisition totaled $6.2 million for the
twelve-month period ended 2022. The reasons for additional specific
changes in various costs identified above, including data
processing and professional fees are consistent with the
discussions provided above for the most recent three months ended
December 31, 2023 as compared with the trailing quarter ended
September 30, 2023. Regulatory assessment charges also increased by
approximately $1.2 million during the year as a result of increases
in assessment rates. Other miscellaneous expenses also increased by
$4.1 million in 2023 due to, among other things, changes in
regulatory requirements which resulted in an estimated $0.8 million
in refunds to customers previously charged non-sufficient funds
fees, changes in the valuation of other real estate owned which
contributed to $0.9 million in variance from the prior year, and
other increases generally associated with increased operational
costs.
Provision for Income
Taxes
The Company’s effective tax rate was 28.4% and 27.0% for the
quarter and year ended December 31, 2023, respectively, as compared
to 27.3% for the period ended September 30, 2023, and 27.9% for the
year ended December 31, 2022. Differences between the Company's
effective tax rate and applicable federal and state blended
statutory rate of approximately 29.6% are due to the proportion of
non-taxable revenues, non-deductible expenses, and benefits from
tax credits as compared to the levels of pre-tax earnings.
About TriCo Bancshares
Established in 1975, Tri Counties Bank is a wholly-owned
subsidiary of TriCo Bancshares (NASDAQ: TCBK) headquartered in
Chico, California, providing a unique brand of customer Service
with Solutions available in traditional stand-alone and in-store
bank branches and loan production offices in communities throughout
California. Tri Counties Bank provides an extensive and competitive
breadth of consumer, small business and commercial banking
financial services, along with convenient around-the-clock ATMs,
online and mobile banking access. Brokerage services are provided
by Tri Counties Advisors through affiliation with Raymond James
Financial Services, Inc. Visit www.TriCountiesBank.com to learn
more.
Forward-Looking
Statements
The statements contained herein that are not historical facts
are forward-looking statements based on management’s current
expectations and beliefs concerning future developments and their
potential effects on the Company. Such statements involve inherent
risks and uncertainties, many of which are difficult to predict and
are generally beyond our control. We caution readers that a number
of important factors could cause actual results to differ
materially from those expressed in, or implied or projected by,
such forward-looking statements. These risks and uncertainties
include, but are not limited to, the following: the conditions of
the United States economy in general and the strength of the local
economies in which we conduct operations; the impact of any future
federal government shutdown and uncertainty regarding the federal
government’s debt limit or changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the Board of
Governors of the Federal Reserve System; the impacts of inflation,
interest rate, market and monetary fluctuations on the Company's
business condition and financial operating results; the impact of
changes in financial services industry policies, laws and
regulations; regulatory restrictions affecting our ability to
successfully market and price our products to consumers; the risks
related to the development, implementation, use and management of
emerging technologies, including artificial intelligence and
machine learning; extreme weather, natural disasters and other
catastrophic events that may or may not be caused by climate change
and their effects on the Company's customers and the economic and
business environments in which the Company operates; the impact of
a slowing U.S. economy and decreases in housing and commercial real
estate prices, potentially increased unemployment on the
performance of our loan portfolio, the market value of our
investment securities and possible other-than-temporary impairment
of securities held by us due to changes in credit quality or rates;
the availability of, and cost of, sources of funding and the demand
for our products; adverse developments with respect to U.S. or
global economic conditions and other uncertainties, including the
impact of supply chain disruptions, commodities prices,
inflationary pressures and labor shortages on the economic recovery
and our business; the impacts of international hostilities, wars,
terrorism or geopolitical events; adverse developments in the
financial services industry generally such as the recent bank
failures and any related impact on depositor behavior or investor
sentiment; risks related to the sufficiency of liquidity; the
possibility that our recorded goodwill could become impaired, which
may have an adverse impact on our earnings and capital; the costs
or effects of mergers, acquisitions or dispositions we may make, as
well as whether we are able to obtain any required governmental
approvals in connection with any such activities, or identify and
complete favorable transactions in the future, and/or realize the
anticipated financial and business benefits; the regulatory and
financial impacts associated with exceeding $10 billion in total
assets; the negative impact on our reputation and profitability in
the event customers experience economic harm or in the event that
regulatory violations are identified; the ability to execute our
business plan in new markets; the future operating or financial
performance of the Company, including our outlook for future growth
and changes in the level and direction of our nonperforming assets
and charge-offs; the appropriateness of the allowance for credit
losses, including the assumptions made under our current expected
credit losses model; any deterioration in values of California real
estate, both residential and commercial; the effectiveness of the
Company's asset management activities managing the mix of earning
assets and in improving, resolving or liquidating lower-quality
assets; the effect of changes in the financial performance and/or
condition of our borrowers; changes in accounting standards and
practices; changes in consumer spending, borrowing and savings
habits; our ability to attract and maintain deposits and other
sources of liquidity; the effects of changes in the level or cost
of checking or savings account deposits on our funding costs and
net interest margin; increasing noninterest expense and its impact
on our financial performance; competition and innovation with
respect to financial products and services by banks, financial
institutions and non-traditional competitors including retail
businesses and technology companies; the challenges of attracting,
integrating and retaining key employees; the vulnerability of the
Company's operational or security systems or infrastructure, the
systems of third-party vendors or other service providers with whom
the Company contracts, and the Company's customers to unauthorized
access, computer viruses, phishing schemes, spam attacks, human
error, natural disasters, power loss and data/security breaches and
the cost to defend against and respond to such incidents; the
impact of the recent cyber security ransomware incident on our
operations and reputation; increased data security risks due to
work from home arrangements and email vulnerability; failure to
safeguard personal information, and any resulting litigation; the
effect of a fall in stock market prices on our brokerage and wealth
management businesses; the transition from the LIBOR to new
interest rate benchmarks; the emergence or continuation of
widespread health emergencies or pandemics; the costs and effects
of litigation and of unexpected or adverse outcomes in such
litigation; and our ability to manage the risks involved in the
foregoing. There can be no assurance that future developments
affecting us will be the same as those anticipated by management.
Additional factors that could cause results to differ materially
from those described above can be found in our Annual Report on
Form 10-K for the year ended December 31, 2022, which has been
filed with the Securities and Exchange Commission (the “SEC”) and
all subsequent filings with the SEC under Sections 13(a), 13(c),
14, and 15(d) of the Securities Act of 1934, as amended. Such
filings are also available in the “Investor Relations” section of
our website, https://www.tcbk.com/investor-relations and in
other documents we file with the SEC. Annualized, pro forma,
projections and estimates are not forecasts and may not reflect
actual results. We undertake no obligation (and expressly disclaim
any such obligation) to update or alter our forward-looking
statements, whether as a result of new information, future events,
or otherwise, except as required by law.
TRICO BANCSHARES—CONDENSED
CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands,
except share data)
Three months ended
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Revenue and Expense Data
Interest income
$
115,909
$
112,380
$
107,158
$
102,907
$
102,989
Interest expense
29,292
24,257
18,557
9,571
4,089
Net interest income
86,617
88,123
88,601
93,336
98,900
Provision for credit losses
5,990
4,155
9,650
4,195
4,245
Noninterest income:
Service charges and fees
12,848
13,075
12,968
11,197
12,343
Loss on sale of investment securities
(120
)
—
—
(164
)
—
Other income
3,312
2,909
2,773
2,602
3,537
Total noninterest income
16,040
15,984
15,741
13,635
15,880
Noninterest expense:
Salaries and benefits
34,055
34,463
34,714
32,563
36,611
Occupancy and equipment
5,358
5,451
5,427
5,543
5,482
Data processing and network
6,880
6,852
6,540
5,741
6,236
Other noninterest expense
13,974
11,112
14,562
9,947
11,140
Total noninterest expense
60,267
57,878
61,243
53,794
59,469
Total income before taxes
36,400
42,074
33,449
48,982
51,066
Provision for income taxes
10,325
11,484
8,557
13,149
14,723
Net income
$
26,075
$
30,590
$
24,892
$
35,833
$
36,343
Share Data
Basic earnings per share
$
0.78
$
0.92
$
0.75
$
1.08
$
1.09
Diluted earnings per share
$
0.78
$
0.92
$
0.75
$
1.07
$
1.09
Dividends per share
$
0.30
$
0.30
$
0.30
$
0.30
$
0.30
Book value per common share
$
34.86
$
32.18
$
32.86
$
32.84
$
31.39
Tangible book value per common share
(1)
$
25.39
$
22.67
$
23.30
$
23.22
$
21.76
Shares outstanding
33,268,102
33,263,324
33,259,260
33,195,250
33,331,513
Weighted average shares
33,266,959
33,262,798
33,219,168
33,295,750
33,330,029
Weighted average diluted shares
33,351,737
33,319,291
33,301,548
33,437,680
33,467,393
Credit Quality
Allowance for credit losses to gross
loans
1.79
%
1.73
%
1.80
%
1.69
%
1.64
%
Loans past due 30 days or more
$
19,415
$
8,072
$
9,483
$
7,891
$
4,947
Total nonperforming loans
$
31,891
$
29,799
$
37,592
$
16,025
$
21,321
Total nonperforming assets
$
34,595
$
32,651
$
40,506
$
19,464
$
24,760
Loans charged-off
$
749
$
5,357
$
276
$
1,758
$
174
Loans recovered
$
419
$
720
$
218
$
170
$
66
Selected Financial Ratios
Return on average total assets
1.05
%
1.23
%
1.01
%
1.47
%
1.45
%
Return on average equity
9.43
%
10.91
%
8.98
%
13.36
%
14.19
%
Average yield on loans, excluding PPP
5.64
%
5.52
%
5.38
%
5.21
%
5.10
%
Average yield on interest-earning
assets
5.10
%
4.94
%
4.78
%
4.64
%
4.52
%
Average rate on interest-bearing
deposits
1.62
%
1.36
%
0.95
%
0.43
%
0.18
%
Average cost of total deposits
1.05
%
0.86
%
0.58
%
0.25
%
0.10
%
Average cost of total deposits and other
borrowings
1.28
%
1.05
%
0.80
%
0.38
%
0.12
%
Average rate on borrowings &
subordinated debt
5.26
%
4.96
%
4.92
%
4.74
%
4.07
%
Average rate on interest-bearing
liabilities
2.01
%
1.71
%
1.37
%
0.74
%
0.32
%
Net interest margin (fully tax-equivalent)
(1)
3.81
%
3.88
%
3.96
%
4.21
%
4.34
%
Loans to deposits
86.73
%
83.76
%
80.55
%
80.02
%
77.45
%
Efficiency ratio
58.71
%
55.59
%
58.69
%
50.29
%
51.81
%
Supplemental Loan Interest Income
Data
Discount accretion on acquired loans
$
1,459
$
1,324
$
1,471
$
1,397
$
1,751
All other loan interest income (excluding
PPP) (1)
$
94,381
$
90,381
$
85,272
$
81,013
$
79,989
Total loan interest income (excluding PPP)
(1)
$
95,840
$
91,705
$
86,743
$
82,410
$
81,740
(1) Non-GAAP measure
TRICO BANCSHARES—CONDENSED
CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in
thousands)
Balance Sheet Data
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Cash and due from banks
$
98,701
$
111,099
$
118,792
$
110,335
$
107,230
Securities, available for sale, net
2,155,138
2,176,854
2,323,011
2,408,452
2,455,036
Securities, held to maturity, net
133,494
139,058
145,117
152,067
160,983
Restricted equity securities
17,250
17,250
17,250
17,250
17,250
Loans held for sale
458
644
1,058
226
1,846
Loans:
Commercial real estate
4,394,802
4,367,445
4,343,924
4,353,959
4,359,083
Consumer
1,313,268
1,288,810
1,252,225
1,233,797
1,240,743
Commercial and industrial
586,455
599,757
576,247
553,098
569,921
Construction
347,198
320,963
278,425
225,996
211,560
Agriculture production
144,497
123,472
61,337
47,062
61,414
Leases
8,250
8,219
8,582
8,509
7,726
Total loans, gross
6,794,470
6,708,666
6,520,740
6,422,421
6,450,447
Allowance for credit losses
(121,522
)
(115,812
)
(117,329
)
(108,407
)
(105,680
)
Total loans, net
6,672,948
6,592,854
6,403,411
6,314,014
6,344,767
Premises and equipment
71,347
71,760
72,619
72,096
72,327
Cash value of life insurance
136,892
136,016
135,332
134,544
133,742
Accrued interest receivable
36,768
34,595
32,835
31,388
31,856
Goodwill
304,442
304,442
304,442
304,442
304,442
Other intangible assets
10,552
11,768
13,358
15,014
16,670
Operating leases, right-of-use
26,133
27,363
29,140
30,000
26,862
Other assets
245,966
273,303
257,056
252,566
257,975
Total assets
$
9,910,089
$
9,897,006
$
9,853,421
$
9,842,394
$
9,930,986
Deposits:
Noninterest-bearing demand deposits
$
2,722,689
$
2,857,512
$
3,073,353
$
3,236,696
$
3,502,095
Interest-bearing demand deposits
1,731,814
1,746,882
1,751,998
1,635,706
1,718,541
Savings deposits
2,682,068
2,816,816
2,778,118
2,807,796
2,884,378
Time certificates
697,467
588,433
491,896
345,667
223,999
Total deposits
7,834,038
8,009,643
8,095,365
8,025,865
8,329,013
Accrued interest payable
8,445
6,688
3,655
1,643
1,167
Operating lease liability
28,261
29,527
31,377
32,228
29,004
Other liabilities
145,982
141,692
136,464
157,222
159,741
Other borrowings
632,582
537,975
392,714
434,140
264,605
Junior subordinated debt
101,099
101,080
101,065
101,051
101,040
Total liabilities
8,750,407
8,826,605
8,760,640
8,752,149
8,884,570
Common stock
697,349
696,369
695,305
695,168
697,448
Retained earnings
615,502
599,448
578,852
564,538
542,873
Accum. other comprehensive loss, net of
tax
(153,169
)
(225,416
)
(181,376
)
(169,461
)
(193,905
)
Total shareholders’ equity
$
1,159,682
$
1,070,401
$
1,092,781
$
1,090,245
$
1,046,416
Quarterly Average Balance Data
Average loans, excluding PPP
$
6,745,040
$
6,596,116
$
6,465,903
$
6,412,386
$
6,357,250
Average interest-earning assets
$
9,047,233
$
9,053,389
$
9,022,064
$
9,028,061
$
9,076,450
Average total assets
$
9,879,355
$
9,874,240
$
9,848,191
$
9,878,927
$
9,932,931
Average deposits
$
7,990,993
$
8,043,101
$
7,981,515
$
8,218,576
$
8,545,172
Average borrowings and subordinated
debt
$
617,046
$
550,344
$
578,312
$
378,676
$
186,957
Average total equity
$
1,097,431
$
1,112,404
$
1,112,223
$
1,087,473
$
1,016,468
Capital Ratio Data
Total risk-based capital ratio
14.7
%
14.5
%
14.5
%
14.5
%
14.2
%
Tier 1 capital ratio
12.9
%
12.7
%
12.7
%
12.7
%
12.4
%
Tier 1 common equity ratio
12.2
%
12.0
%
12.0
%
12.0
%
11.7
%
Tier 1 leverage ratio
10.7
%
10.6
%
10.4
%
10.2
%
10.1
%
Tangible capital ratio (1)
8.8
%
7.9
%
8.1
%
8.1
%
7.6
%
(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, 2023
September 30, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net interest margin
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
1,459
$
1,324
$
1,751
$
5,651
$
5,465
Effect on average loan yield
0.09
%
0.08
%
0.11
%
0.09
%
0.09
%
Effect on net interest margin (FTE)
0.06
%
0.06
%
0.07
%
0.06
%
0.06
%
Net interest margin (FTE)
3.81
%
3.88
%
4.34
%
3.96
%
3.88
%
Net interest margin less effect of
acquired loan discount accretion (Non-GAAP)
3.75
%
3.82
%
4.27
%
3.90
%
3.81
%
PPP loans yield, net:
Amount (included in interest income)
$
1
$
2
$
16
$
12
$
2,390
Effect on net interest margin (FTE)
—
%
—
%
—
%
—
%
0.02
%
Net interest margin less effect of PPP
loan yield (Non-GAAP)
3.81
%
3.88
%
4.34
%
3.96
%
3.86
%
Acquired loan discount accretion and PPP
loan yield, net:
Amount (included in interest income)
$
1,460
$
1,326
$
1,767
$
5,663
$
7,855
Effect on net interest margin (FTE)
0.06
%
0.06
%
0.07
%
0.06
%
0.08
%
Net interest margin less effect of
acquired loan discount accretion and PPP yields, net (Non-GAAP)
3.75
%
3.82
%
4.27
%
3.90
%
3.80
%
Three months ended
Twelve months ended
(dollars in thousands)
December 31, 2023
September 30, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Pre-tax pre-provision return on average
assets or equity
Net income (GAAP)
$
26,075
$
30,590
$
36,343
$
117,390
$
125,419
Exclude provision for income taxes
10,325
11,484
14,723
43,515
48,488
Exclude provision for credit losses
5,990
4,155
4,245
23,990
18,470
Net income before income tax and provision
expense (Non-GAAP)
$
42,390
$
46,229
$
55,311
$
184,895
$
192,377
Average assets (GAAP)
$
9,879,355
$
9,874,240
$
9,932,931
$
9,870,189
$
9,771,601
Average equity (GAAP)
$
1,097,431
$
1,112,404
$
1,016,468
$
1,102,436
$
1,074,437
Return on average assets (GAAP)
(annualized)
1.05
%
1.23
%
1.45
%
1.19
%
1.28
%
Pre-tax pre-provision return on average
assets (Non-GAAP) (annualized)
1.70
%
1.86
%
2.21
%
1.87
%
1.97
%
Return on average equity (GAAP)
(annualized)
9.43
%
10.91
%
14.19
%
10.65
%
11.67
%
Pre-tax pre-provision return on average
equity (Non-GAAP) (annualized)
15.32
%
16.49
%
21.59
%
16.77
%
17.90
%
Three months ended
Twelve months ended
(dollars in thousands)
December 31, 2023
September 30, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Return on tangible common
equity
Average total shareholders' equity
$
1,097,431
$
1,112,404
$
1,016,468
$
1,102,436
$
1,074,437
Exclude average goodwill
304,442
304,442
306,192
304,442
287,904
Exclude average other intangibles
11,160
12,563
17,521
13,611
15,901
Average tangible common equity
(Non-GAAP)
$
781,829
$
795,399
$
692,755
$
784,383
$
770,632
Net income (GAAP)
$
26,075
$
30,590
$
36,343
$
117,390
$
125,419
Exclude amortization of intangible assets,
net of tax effect
857
1,120
1,199
4,309
4,461
Tangible net income available to common
shareholders (Non-GAAP)
$
26,932
$
31,710
$
37,542
$
121,699
$
129,880
Return on average equity
9.43
%
10.91
%
14.19
%
10.65
%
11.67
%
Return on average tangible common equity
(Non-GAAP)
13.67
%
15.82
%
21.50
%
15.52
%
16.85
%
Three months ended
(dollars in thousands)
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Tangible shareholders' equity to
tangible assets
Shareholders' equity (GAAP)
$
1,159,682
$
1,070,401
$
1,092,781
$
1,090,245
$
1,046,416
Exclude goodwill and other intangible
assets, net
314,994
316,210
317,800
319,456
321,112
Tangible shareholders' equity
(Non-GAAP)
$
844,688
$
754,191
$
774,981
$
770,789
$
725,304
Total assets (GAAP)
$
9,910,089
$
9,897,006
$
9,853,421
$
9,842,394
$
9,930,986
Exclude goodwill and other intangible
assets, net
314,994
316,210
317,800
319,456
321,112
Total tangible assets (Non-GAAP)
$
9,595,095
$
9,580,796
$
9,535,621
$
9,522,938
$
9,609,874
Shareholders' equity to total assets
(GAAP)
11.70
%
10.82
%
11.09
%
11.08
%
10.54
%
Tangible shareholders' equity to tangible
assets (Non-GAAP)
8.80
%
7.87
%
8.13
%
8.09
%
7.55
%
Three months ended
(dollars in thousands)
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Tangible common shareholders' equity
per share
Tangible shareholders' equity
(Non-GAAP)
$
844,688
$
754,191
$
774,981
$
770,789
$
725,304
Common shares outstanding at end of
period
33,268,102
33,263,324
33,259,260
33,195,250
33,331,513
Common shareholders' equity (book value)
per share (GAAP)
$
34.86
$
32.18
$
32.86
$
32.84
$
31.39
Tangible common shareholders' equity
(tangible book value) per share (Non-GAAP)
$
25.39
$
22.67
$
23.30
$
23.22
$
21.76
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240125739421/en/
Peter G. Wiese, EVP & CFO, (530) 898-0300
Grafico Azioni TriCo Bancshares (NASDAQ:TCBK)
Storico
Da Gen 2025 a Feb 2025
Grafico Azioni TriCo Bancshares (NASDAQ:TCBK)
Storico
Da Feb 2024 a Feb 2025
