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TriCo Bancshares Announces Quarterly Results

TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $27,422,000 for the quarter ended September 30, 2021, compared to $28,362,000 during the trailing quarter ended June 30, 2021 and $17,606,000 during the quarter ended September 30, 2020. Diluted earnings per share were $0.92 for the third quarter of 2021, compared to $0.95 for the second quarter of 2021 and $0.59 for the third quarter of 2020.

Financial Highlights

Performance highlights and other developments for the Company as of or for the three and nine months ended September 30, 2021 included the following:

  • For the three and nine months ended September 30, 2021, the Company’s return on average assets was 1.30% and 1.48%, respectively, and the return on average equity was 11.02% and 12.42%, respectively.
  • Organic loan growth, excluding PPP, totaled $30.7 million (2.6% annualized) for the current quarter and $335.7 million (7.6%) for the trailing twelve-month period.
  • For the current quarter, net interest margin was 3.50% on a tax equivalent basis as compared to 3.72% in the quarter ended September 30, 2020, and a decrease of 8 basis points from 3.58% in the trailing quarter.
  • The efficiency ratio was 52.87% for the nine months ended September 30, 2021, as compared to 59.59% for the same period of the prior year.
  • As of September 30, 2021, the Company reported total loans, total assets and total deposits of $4.89 billion, $8.46 billion and $7.24 billion, respectively. As a direct result of significant deposit growth in the last year, the loan to deposit ratio was 67.54% as of September 30, 2021, as compared to 73.21% at December 31, 2020 and 76.12% at September 30, 2020.
  • The average rate of interest paid on deposits, including non-interest-bearing deposits, remained at 0.05% for the third quarter of 2021 as compared with 0.05% for the trailing quarter, and decreased by 4 basis points from the average rate paid of 0.09% during the same quarter of the prior year.
  • The balance of PPP loans outstanding at September 30, 2021 totaled $157.5 million and the balance of SBA fees remaining to be accreted totaled $6.0 million. Approximately 98% of all round one and 25% of all round two PPP loans have been forgiven and repaid by the SBA.
  • Noninterest income related to service charges and fees was $11.3 million and $32.7 million for the three and nine month periods ended September 30, 2021, an increase of 7.6% and 17.7% when compared to the same periods in 2020.
  • Gains generated from the origination and sale of mortgage loans were $1,814,000 in the third quarter of 2021 as compared with $2,847,000 and $3,035,000 during the trailing quarter and same quarter of the prior year.
  • The reversal of provision for credit losses for loans and debt securities was $1.4 million during the quarter ended September 30, 2021, as compared to a reversal of provision expense of $0.3 million during the trailing quarter ended June 30, 2021, and a provision expense totaling $7.6 million for the three month period ended September 30, 2020.
  • The allowance for credit losses to total loans was 1.72% as of September 30, 2021, compared to 1.93% as of December 31, 2020, and 1.81% as of September 30, 2020. Non-performing assets to total assets were 0.37% at September 30, 2021, as compared to 0.43% as of June 30, 2021, and 0.34% at September 30, 2020.

“Our ability to grow and shift the mix of our earning assets continues to benefit increases in net interest income. While we maintain a positive outlook on the impacts that possible rate increases and Fed balance sheet tapering will have on our asset sensitive structure, our production teams continue to drive increases in the level of organic loan originations and our operational team members remain vigilant in their efforts to create efficiencies," commented Peter Wiese, EVP and Chief Financial Officer. Rick Smith, President and Chief Executive Officer, added: "We are very pleased with the open and transparent lines of communication that have already formed between our legacy employees and the employees of Valley Republic Bank. As we seek to complete the formal close of the merger in the coming months, our excitement and confidence about the benefits this union will provide to our collective communities, customers, and shareholders continues to grow."

Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the period ended September 30, 2021, 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

For the three and nine months ended September 30, 2021, the Company’s return on average assets was 1.30% and 1.48%, respectively, while the return on average equity was 11.02% and 12.42%, respectively. For the three and nine months ended September 30, 2020, the Company’s return on average assets was 0.95% and 0.79%, respectively, while the return on average equity was 7.79% and 6.13%, respectively.

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

 

Three months ended

 

 

 

September 30,

June 30,

 

 

(dollars and shares in thousands)

2021

2021

$ Change

% Change

Net interest income

$

68,233

 

$

67,083

 

$

1,150

 

1.7

%

Reversal of credit losses

1,435

 

260

 

1,175

 

451.9

%

Noninterest income

15,095

 

15,957

 

(862

)

(5.4

)%

Noninterest expense

(45,807

)

(44,171

)

(1,636

)

3.7

%

Provision for income taxes

(11,534

)

(10,767

)

(767

)

7.1

%

Net income

$

27,422

 

$

28,362

 

$

(940

)

(3.3

)%

Diluted earnings per share

$

0.92

 

$

0.95

 

$

(0.03

)

(3.2

)%

Dividends per share

$

0.25

 

$

0.25

 

$

 

%

Average common shares

29,714

 

29,719

 

(5

)

(0.00

)%

Average diluted common shares

29,851

 

29,904

 

(53

)

(0.02

)%

Return on average total assets

1.30

%

1.40

%

 

 

Return on average equity

11.02

%

11.85

%

 

Efficiency ratio

54.97

%

53.19

%

 

 

 

Three months ended

September 30,

 

 

(dollars and shares in thousands)

2021

2020

$ Change

% Change

Net interest income

$

68,233

 

$

63,454

 

$

4,779

 

7.5

%

Reversal of (provision for) credit losses

1,435

 

(7,649

)

9,084

 

(118.8

)%

Noninterest income

15,095

 

15,137

 

(42

)

(0.3

)%

Noninterest expense

(45,807

)

(46,714

)

907

 

(1.9

)%

Provision for income taxes

(11,534

)

(6,622

)

(4,912

)

74.2

%

Net income

$

27,422

 

$

17,606

 

$

9,816

 

55.8

%

Diluted earnings per share

$

0.92

 

$

0.59

 

$

0.33

 

55.9

%

Dividends per share

$

0.25

 

$

0.22

 

$

0.03

 

13.6

%

Average common shares

29,714

 

29,764

 

(50

)

(0.2

)%

Average diluted common shares

29,851

 

29,844

 

7

 

%

Return on average total assets

1.30

%

0.95

%

 

 

Return on average equity

11.02

%

7.79

%

 

 

Efficiency ratio

54.97

%

59.44

%

 

 

 

Nine months ended

September 30,

 

 

(dollars and shares in thousands)

2021

2020

$ Change

% Change

Net interest income

$

201,756

 

$

191,305

 

$

10,451

 

5.5

%

Reversal of (provision for) credit losses

7,755

 

(37,963

)

45,718

 

(120.4

)%

Noninterest income

47,162

 

38,614

 

8,548

 

22.1

%

Noninterest expense

(131,596

)

(137,013

)

5,417

 

(4.0

)%

Provision for income taxes

(35,644

)

(13,786

)

(21,858

)

158.6

%

Net income

$

89,433

 

$

41,157

 

$

48,276

 

117.3

%

Diluted earnings per share

$

2.99

 

$

1.37

 

$

1.62

 

118.2

%

Dividends per share

$

0.75

 

$

0.66

 

$

0.09

 

13.6

%

Average common shares

29,720

 

29,971

 

(251

)

(0.8

)%

Average diluted common shares

29,887

 

30,083

 

(196

)

(0.7

)%

Return on average total assets

1.48

%

0.79

%

 

 

Return on average equity

12.42

%

6.13

%

 

 

Efficiency ratio

52.87

%

59.59

%

 

 

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 account and submit PPP applications during the entirety of the Programs. The SBA ended PPP and did not accept new borrowing applications, effective May 31, 2021.

The following is a summary of PPP loan related information as of the periods indicated:

(dollars in thousands)

September 30,

2021

 

June 30,

2021

 

March 31,

2021

 

December 31,

2020

 

September 30,

2020

Total number of PPP loans outstanding

1,449

 

 

2,209

 

 

2,484

 

 

2,310

 

 

2,924

 

 

 

 

 

 

 

 

 

 

 

PPP loan balance (Round 1 origination), gross

$

9,302

 

 

$

51,547

 

 

$

193,958

 

 

$

333,982

 

 

$

437,793

 

PPP loan balance (Round 2 origination), gross

148,159

 

 

197,035

 

 

176,316

 

 

n/a

 

n/a

Total PPP loans, gross outstanding

$

157,461

 

 

$

248,582

 

 

$

370,274

 

 

$

333,982

 

 

$

437,793

 

 

 

 

 

 

 

 

 

 

 

PPP deferred loan fees (Round 1 origination)

$

40

 

 

$

477

 

 

$

2,358

 

 

$

7,212

 

 

$

11,846

 

PPP deferred loan fees (Round 2 origination)

5,973

 

 

8,513

 

 

7,072

 

 

n/a

 

n/a

Total PPP deferred loan fees outstanding

$

6,013

 

 

$

8,990

 

 

$

9,430

 

 

$

7,212

 

 

$

11,846

 

As of September 30, 2021, the total gross balance outstanding of PPP loans was $157,461,000 as compared to total PPP originations of $640,410,000. In connection with the origination of these loans, the Company earned approximately $25,299,000 in loan fees, offset by deferred loan costs of approximately $1,245,000, the net of which will be recognized over the earlier of loan maturity (between 24-60 months), repayment or receipt of forgiveness confirmation. As of September 30, 2021, there was approximately $6,013,000 in net deferred fee income remaining to be recognized. During the three and nine months ended September 30, 2021, the Company recognized $2,984,000 and $10,306,000, respectively in fees on PPP loans as compared with $2,603,000 and $4,959,000 for the three and nine months ended September 30, 2020, respectively.

COVID Deferrals

Following the passage of the CARES Act legislation, the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus" was issued by federal bank regulators, which offers temporary relief from troubled debt restructuring accounting for loan payment deferrals for certain customers whose businesses are experiencing economic hardship due to Coronavirus. The applicable period for this relief, originally expected to expire on December 31, 2020, was extended through 2021 by way of the Consolidated Appropriations Act.

The following is a summary of COVID related loan customer modifications with outstanding balances as of September 30, 2021:

 

 

 

 

 

Modification Type

 

Deferral Term

(dollars in thousands)

Modified

Loan

Balances

Outstanding

 

% of Total

Category of

Loans

 

Interest Only

Deferral

 

Principal and

Interest

Deferral

 

90 Days

 

180 Days

 

Other

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

CRE non-owner occupied

$

22,264

 

1.5

%

 

100.0

%

 

%

 

17.4

%

 

65.6

%

 

17.0

%

CRE owner occupied

1,243

 

0.2

 

 

100.0

 

 

 

 

 

 

 

 

100.0

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

Farmland

 

 

 

 

 

 

 

 

 

 

 

 

Total commercial real estate loans

23,507

 

0.7

 

 

 

 

 

 

16.5

 

 

62.2

 

 

21.4

 

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

550

 

0.1

 

 

100.0

 

 

 

 

 

 

 

 

100.0

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture production

 

 

 

 

 

 

 

 

 

 

 

 

Leases

 

 

 

 

 

 

 

 

 

 

 

 

Total modifications

$

24,057

 

0.5

%

 

100.0

%

 

%

 

16.1

%

 

60.8

%

 

23.1

%

Of the remaining balance outstanding as of September 30, 2021, $5,665,000 is related to second deferrals which are expected to conclude their modification period during 2021, and the remainder of deferrals are expected to conclude in the first quarter of 2022. However, as long as the current pandemic and recessionary economic conditions continue, it is possible that additional borrowers may request an initial or subsequent modification to their loan terms.

Balance Sheet

Total loans outstanding, excluding PPP, grew to $4.74 billion as of September 30, 2021, an increase of 7.6% over the same quarter of the prior year, and an annualized increase of 2.6% over the trailing quarter. Investments outstanding increased to $2.33 billion as of September 30, 2021, an increase of 43.6% annualized over the trailing quarter. Average earning assets to total average assets continued to increase to 92.9% at September 30, 2021, as compared to 92.8% and 92.3% at June 30, 2021, and September 30, 2020, respectively. The loan to deposit ratio was 67.5% at September 30, 2021, as compared to 70.7% and 76.1% at June 30, 2021, and September 30, 2020, respectively.

Total shareholders' equity increased by $15,234,000 during the quarter ended September 30, 2021, primarily as a result of net income of $27,422,000, offset by a decrease in accumulated other comprehensive income of $4,440,000, and $7,429,000 in cash dividends paid on common stock. As a result, the Company’s book value increased to $33.05 per share at September 30, 2021 as compared to $32.53 and $30.31 at June 30, 2021, and September 30, 2020, 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 $25.16 per share at September 30, 2021, as compared to $24.60 and $22.24 at June 30, 2021, and September 30, 2020, respectively.

Trailing Quarter Balance Sheet Change

Ending balances

As of September 30,

 

June 30,

 

 

$ Change

 

Annualized

% Change

(dollars in thousands)

2021

 

2021

 

Total assets

$

8,458,030

 

 

$

8,170,365

 

 

$

287,665

 

 

 

14.1

 

%

Total loans

4,887,496

 

 

4,944,894

 

 

(57,398

)

 

 

(4.6

)

%

Total loans, excluding PPP

4,736,048

 

 

4,705,302

 

 

30,746

 

 

 

2.6

 

%

Total investments

2,333,015

 

 

2,103,575

 

 

229,440

 

 

 

43.6

 

%

Total deposits

$

7,236,822

 

 

$

6,992,053

 

 

$

244,769

 

 

 

14.0

 

%

Organic loan growth, excluding PPP, of $30,746,000 or 2.6% on an annualized basis was realized during the quarter ended September 30, 2021, primarily within commercial real estate. In addition, investment security growth was $229,440,000 or 43.6% on an annualized basis as excess liquidity, driven by continued strong deposit growth, was put to use in higher yielding earning assets. Earning asset growth was funded by the continued growth of deposit balances which increased during the third quarter of 2021 by $244,769,000 or 14.0% annualized.

Average Trailing Quarter Balance Sheet Change

Qtrly avg balances for the period ended

September 30,

 

June 30,

 

$ Change

 

Annualized

% Change

(dollars in thousands)

2021

 

2021

 

Total assets

$

8,348,111

 

 

$

8,128,674

 

 

$

219,437

 

 

 

10.8

 

%

Total loans

4,897,922

 

 

4,978,465

 

 

(80,543

)

 

 

(6.5

)

%

Total loans, excluding PPP

4,684,492

 

 

4,646,188

 

 

38,304

 

 

 

3.3

 

%

Total investments

2,149,311

 

 

2,007,090

 

 

142,221

 

 

 

28.3

 

%

Total deposits

$

7,137,263

 

 

$

6,943,081

 

 

$

194,182

 

 

 

11.2

 

%

The decrease in average total loans of $80,543,000, or (6.5)% on an annualized basis, during the third quarter of 2021 was led by the quarter over quarter decline in net PPP loan balances outstanding totaling $88,144,000. As noted above, the significant growth in both ending and average balances of investment securities was a direct result of management's focus on the deployment of excess cash balances which remained elevated due to continued deposit growth during the quarter.

Year Over Year Balance Sheet Change

Ending balances

As of September 30,

 

 

 

 

(dollars in thousands)

2021

 

2020

 

$ Change

 

% Change

Total assets

$

8,458,030

 

 

$

7,449,799

 

 

$

1,008,231

 

 

13.5

%

Total loans

4,887,496

 

 

4,826,338

 

 

61,158

 

 

1.3

%

Total loans, excluding PPP

4,736,048

 

 

4,400,390

 

 

335,658

 

 

7.6

%

Total investments

2,333,015

 

 

1,473,935

 

 

859,080

 

 

58.3

%

Total deposits

$

7,236,822

 

 

$

6,340,588

 

 

$

896,234

 

 

14.1

%

Net PPP loan balances outstanding have declined by $274,499,000 during the twelve months ended September 30, 2021, meanwhile, non-PPP loan balances (both organic and purchased) have increased by $335,658,000 during the same period. This has led to a beneficial and meaningful shift in the makeup of the loan portfolio, despite total loan balances increasing modestly between September 30, 2021 and September 30, 2020, by $61,158,000 or 1.3%. The Company's organic loan production originations have increased meaningfully over the past year but have also been challenged by an acceleration in payoffs. Specifically, during the twelve months ended September 30, 2021 and September 30, 2020 organic loan originations totaled approximately $1.16 billion and $0.89 billion, respectively; while payoffs of loans totaled $0.84 billion and $0.60 billion, respectively. While pipelines continue to grow, loan originations of $4,086,000 relate to the Company's recently opened loan production offices. Investment securities increased to $2,333,015,000 at September 30, 2021, a change of $859,080,000 or 58.3% from $1,473,935,000 at September 30, 2020.

Net Interest Income and Net Interest Margin

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

 

Three months ended

 

 

 

 

 

September 30,

 

June 30,

 

 

 

 

(dollars in thousands)

2021

 

2021

 

$ Change

 

% Change

Interest income

$

69,628

 

 

 

$

68,479

 

 

 

$

1,149

 

 

 

1.7

 

%

Interest expense

(1,395

)

 

 

(1,396

)

 

 

1

 

 

 

(0.1

)

%

Fully tax-equivalent adjustment (FTE) (1)

265

 

 

 

255

 

 

 

10

 

 

 

3.9

 

%

Net interest income (FTE)

$

68,498

 

 

 

$

67,338

 

 

 

$

1,160

 

 

 

1.7

 

%

Net interest margin (FTE)

3.50

 

%

 

3.58

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2,034

 

 

 

$

2,566

 

 

 

$

(532

)

 

 

 

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

3.40

 

%

 

3.44

 

%

 

 

 

(0.04

)

%

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

3,507

 

 

 

$

3,179

 

 

 

$

328

 

 

 

 

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

3.42

 

%

 

3.61

 

%

 

 

 

(0.19

)

%

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

5,541

 

 

 

$

5,745

 

 

 

$

(204

)

 

 

 

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

3.31

 

%

 

3.47

 

%

 

 

 

(0.16

)

%

 

Three months ended

September 30,

 

 

 

 

(dollars in thousands)

2021

 

2020

 

$ Change

 

% Change

Interest income

$

69,628

 

 

 

$

65,438

 

 

 

$

4,190

 

 

6.4

 

%

Interest expense

(1,395

)

 

 

(1,984

)

 

 

589

 

 

(29.7

)

%

Fully tax-equivalent adjustment (FTE) (1)

265

 

 

 

254

 

 

 

11

 

 

4.3

 

%

Net interest income (FTE)

$

68,498

 

 

 

$

63,708

 

 

 

$

4,790

 

 

7.5

 

%

Net interest margin (FTE)

3.50

 

%

 

3.72

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2,034

 

 

 

$

1,876

 

 

 

$

158

 

 

 

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

3.40

 

%

 

3.61

 

%

 

 

 

(0.21

)

%

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

3,507

 

 

 

$

2,603

 

 

 

$

904

 

 

 

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

3.42

 

%

 

3.81

 

%

 

 

 

(0.39

)

%

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

5,541

 

 

 

$

4,479

 

 

 

$

1,062

 

 

 

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

3.31

 

%

 

3.70

 

%

 

 

 

(0.39

)

%

 

Nine months ended

September 30,

 

 

 

 

(dollars in thousands)

2021

 

2020

 

$ Change

 

% Change

Interest income

$

206,023

 

 

 

$

199,103

 

 

 

$

6,920

 

 

 

3.5

 

%

Interest expense

(4,267

)

 

 

(7,798

)

 

 

3,531

 

 

 

(45.3

)

%

Fully tax-equivalent adjustment (FTE) (1)

797

 

 

 

811

 

 

 

(14

)

 

 

(1.7

)

%

Net interest income (FTE)

$

202,553

 

 

 

$

192,116

 

 

 

$

10,437

 

 

 

5.4

 

%

Net interest margin (FTE)

3.61

 

%

 

4.02

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

6,311

 

 

 

$

6,211

 

 

 

$

100

 

 

 

 

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

3.50

 

%

 

3.91

 

%

 

 

 

(0.41

)

%

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

12,549

 

 

 

$

4,959

 

 

 

$

7,590

 

 

 

 

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

3.53

 

%

 

4.07

 

%

 

 

 

(0.54

)

%

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

18,860

 

 

 

$

11,170

 

 

 

$

7,690

 

 

 

 

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

3.41

 

%

 

3.91

 

%

 

 

 

(0.50

)

%

(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 accreted (added to) interest income over the remaining life of the loan. Generally, as time goes on, the dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. As a result of the increase in interest rates, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, declined during the third quarter of 2021. During the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, purchased loan discount accretion was $2,034,000, $2,566,000, and $1,876,000, respectively.

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

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

 

 

Three months ended

 

Three months ended

 

Three months ended

 

September 30, 2021

 

June 30, 2021

 

September 30, 2020

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

4,684,492

 

 

$

57,218

 

 

4.85

%

 

$

4,646,188

 

 

$

57,125

 

 

4.93

%

 

$

4,389,672

 

 

$

55,436

 

 

5.02

%

PPP loans

213,430

 

 

3,507

 

 

6.52

%

 

332,277

 

 

3,179

 

 

3.84

%

 

437,892

 

 

2,603

 

 

2.36

%

Investments-taxable

2,019,283

 

 

7,741

 

 

1.52

%

 

1,875,056

 

 

7,189

 

 

1.54

%

 

1,261,793

 

 

6,376

 

 

2.01

%

Investments-nontaxable (1)

130,028

 

 

1,147

 

 

3.50

%

 

132,034

 

 

1,106

 

 

3.36

%

 

114,419

 

 

1,102

 

 

3.83

%

Total investments

2,149,311

 

 

8,888

 

 

1.64

%

 

2,007,090

 

 

8,295

 

 

1.66

%

 

1,376,212

 

 

7,478

 

 

2.16

%

Cash at Federal Reserve and other banks

710,936

 

 

280

 

 

0.16

%

 

559,026

 

 

135

 

 

0.10

%

 

611,719

 

 

175

 

 

0.11

%

Total earning assets

7,758,169

 

 

69,893

 

 

3.57

%

 

7,544,581

 

 

68,734

 

 

3.65

%

 

6,815,495

 

 

65,692

 

 

3.83

%

Other assets, net

589,942

 

 

 

 

 

 

584,093

 

 

 

 

 

 

565,466

 

 

 

 

 

Total assets

$

8,348,111

 

 

 

 

 

 

$

8,128,674

 

 

 

 

 

 

$

7,380,961

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,507,697

 

 

$

116

 

 

0.03

%

 

$

1,490,247

 

 

$

77

 

 

0.02

%

 

$

1,339,797

 

 

$

56

 

 

0.02

%

Savings deposits

2,407,368

 

 

328

 

 

0.05

%

 

2,316,889

 

 

308

 

 

0.05

%

 

2,075,077

 

 

484

 

 

0.09

%

Time deposits

321,381

 

 

411

 

 

0.51

%

 

324,867

 

 

443

 

 

0.55

%

 

387,922

 

 

872

 

 

0.89

%

Total interest-bearing deposits

4,236,446

 

 

855

 

 

0.08

%

 

4,132,003

 

 

828

 

 

0.08

%

 

3,802,796

 

 

1,412

 

 

0.15

%

Other borrowings

48,330

 

 

6

 

 

0.05

%

 

40,986

 

 

5

 

 

0.05

%

 

33,750

 

 

4

 

 

0.05

%

Junior subordinated debt

57,891

 

 

534

 

 

3.66

%

 

57,788

 

 

563

 

 

3.91

%

 

57,475

 

 

568

 

 

3.93

%

Total interest-bearing liabilities

4,342,667

 

 

1,395

 

 

0.13

%

 

4,230,777

 

 

1,396

 

 

0.13

%

 

3,894,021

 

 

1,984

 

 

0.20

%

Noninterest-bearing deposits

2,900,817

 

 

 

 

 

 

2,811,078

 

 

 

 

 

 

2,475,842

 

 

 

 

 

Other liabilities

117,601

 

 

 

 

 

 

126,674

 

 

 

 

 

 

112,112

 

 

 

 

 

Shareholders’ equity

987,026

 

 

 

 

 

 

960,145

 

 

 

 

 

 

898,986

 

 

 

 

 

Total liabilities and shareholders’ equity

$

8,348,111

 

 

 

 

 

 

$

8,128,674

 

 

 

 

 

 

$

7,380,961

 

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

3.45

%

 

 

 

 

 

3.52

%

 

 

 

 

 

3.63

%

Net interest income and margin (1) (3)

 

 

$

68,498

 

 

3.50

%

 

 

 

$

67,338

 

 

3.58

%

 

 

 

$

63,708

 

 

3.72

%

(1)

 

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

(2)

 

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

(3)

 

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

Net interest income (FTE) during the three months ended September 30, 2021 increased $1,160,000 or 1.7% to $68,498,000 compared to $67,338,000 during the three months ended June 30, 2021. Over the same period, net interest margin decreased 8 basis points to 3.50% as compared to 3.58% in the trailing quarter. The 8 basis point decrease coincides with, and is primarily attributed to, an 8 basis point decrease in non-PPP loan yields. The remaining segments of quarter over quarter changes in yields largely offset each other, which included a 268 basis point improvement in PPP loans to 6.52% at September 30, 2021 from 3.84% at June 30, 2021, attributed to an acceleration of deferred fee accretion stemming from Round 2 PPP loans being forgiven by the SBA and repaid.

As compared to the same quarter in the prior year, average loan yields, excluding PPP, decreased 17 basis points from 5.02% during the three months ended September 30, 2020, to 4.85% during the three months ended September 30, 2021. The accretion of discounts from acquired loans added 17 basis points to loan yields during both quarters ended September 30, 2021 and September 30, 2020. Therefore, the 17 basis point decrease in yields on loans during the comparable three month periods ended September 30, 2021 and 2020 was entirely attributable to decreases in market rates. The index utilized in a significant portion of the Company’s variable rate loans, Wall Street Journal Prime, has remained unchanged at 3.25% since March 15, 2020, when it was reduced from 4.25%.

The rates paid on interest bearing liabilities generally remained flat during the quarter ended September 30, 2021 compared to the trailing quarter. The decline in interest expense when compared to the same quarter from the prior year, however, was primarily attributed to reductions in the rates offered on deposit products. As a result, the cost of interest-bearing deposits decreased by 7 basis points as of September 30, 2021, to 0.08% from 0.15% at September 30, 2020. In addition, the growth of noninterest-bearing deposits continues to benefit the average cost of total deposits as compared to historical periods. Specifically, the ratio of average total noninterest-bearing deposits to total average deposits was 40.6% and 40.5% as of September 30, 2021 and June 30, 2021, respectively, as compared to 39.4% in the quarter ended September 30, 2020. As a result, the average cost of total deposits decreased to 0.05% at September 30, 2021, compared to 0.09% in the same period of 2020.

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

 

 

Nine months ended

September 30, 2021

 

Nine months ended

September 30, 2020

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

4,580,292

 

 

$

168,916

 

 

4.93

%

 

$

4,360,942

 

 

$

167,747

 

 

5.14

%

PPP loans

300,006

 

 

12,549

 

 

5.59

%

 

244,196

 

 

4,959

 

 

2.71

%

Investments-taxable

1,838,023

 

 

21,324

 

 

1.55

%

 

1,249,823

 

 

22,637

 

 

2.42

%

Investments-nontaxable (1)

129,057

 

 

3,453

 

 

3.58

%

 

117,745

 

 

3,515

 

 

3.99

%

Total investments

1,967,080

 

 

24,777

 

 

1.68

%

 

1,367,568

 

 

26,152

 

 

2.55

%

Cash at Federal Reserve and other banks

656,912

 

 

578

 

 

0.12

%

 

403,252

 

 

1,056

 

 

0.35

%

Total earning assets

7,504,290

 

 

206,820

 

 

3.68

%

 

6,375,958

 

 

199,914

 

 

4.19

%

Other assets, net

591,983

 

 

 

 

 

 

595,617

 

 

 

 

 

Total assets

$

8,096,273

 

 

 

 

 

 

$

6,971,575

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,476,987

 

 

$

269

 

 

0.02

%

 

$

1,293,071

 

 

$

289

 

 

0.03

%

Savings deposits

2,318,169

 

 

965

 

 

0.06

%

 

1,971,348

 

 

2,190

 

 

0.15

%

Time deposits

327,562

 

 

1,386

 

 

0.57

%

 

409,005

 

 

3,297

 

 

1.08

%

Total interest-bearing deposits

4,122,718

 

 

2,620

 

 

0.08

%

 

3,673,424

 

 

5,776

 

 

0.21

%

Other borrowings

40,732

 

 

15

 

 

0.05

%

 

26,223

 

 

13

 

 

0.07

%

Junior subordinated debt

57,790

 

 

1,632

 

 

3.78

%

 

57,374

 

 

2,009

 

 

4.68

%

Total interest-bearing liabilities

4,221,240

 

 

4,267

 

 

0.14

%

 

3,757,021

 

 

7,798

 

 

0.28

%

Noninterest-bearing deposits

2,790,828

 

 

 

 

 

 

2,197,315

 

 

 

 

 

Other liabilities

121,334

 

 

 

 

 

 

120,486

 

 

 

 

 

Shareholders’ equity

962,871

 

 

 

 

 

 

896,753

 

 

 

 

 

Total liabilities and shareholders’ equity

$

8,096,273

 

 

 

 

 

 

$

6,971,575

 

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

3.54

%

 

 

 

 

 

3.91

%

Net interest income and margin (1) (3)

 

 

$

202,553

 

 

3.61

%

 

 

 

$

192,116

 

 

4.02

%

(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 Loan Portfolio Composition

During the quarter ended September 30, 2021, market interest rates, including many rates that serve as reference indices for variable rate loans, improved modestly. However, the loan portfolio yield continues to have a downward bias due to the repricing of loans at lower rates and increased market competition stemming from loan to deposit ratios at historic lows. As of September 30, 2021, the Company's loan portfolio consisted of approximately $4.9 billion in outstanding principal with a weighted average coupon rate of 4.28%, inclusive of the PPP program loans. Excluding PPP loans, the Company's loan portfolio has approximately $4.8 billion outstanding with a weighted average coupon rate of 4.38% as of September 30, 2021. Included in the September 30, 2021 loan total, exclusive of PPP loans, are variable rate loans totaling $3.0 billion of which 88.5% or $2.7 billion were at their floor rate. The remaining variable rate loans totaling $351.0 million, which carried a weighted average coupon rate of 4.78% as of September 30, 2021, are subject to further rate adjustment. If those remaining variable rate loans were to collectively, through future rate adjustments, be reduced to their respective floors, they would have a weighted average coupon rate of approximately 4.25% which would result in the reduction of the weighted average coupon rate of the total loan portfolio, exclusive of PPP loans, from 4.38% to approximately 4.30%.

As of December 31, 2020, the Company's loan portfolio consisted of approximately $4.80 billion in outstanding principal with a weighted average coupon rate of 4.35%, inclusive of the PPP program loans. Excluding PPP loans, the Company's loan portfolio has approximately $4.47 billion outstanding with a weighted average coupon rate of 4.60% as of December 31, 2020. Included in the December 31, 2020 loan total, exclusive of PPP loans, are variable rate loans totaling $3.02 billion of which 88.2% or $2.66 billion were at their floor rate. The remaining variable rate loans totaling $357.0 million, which carried a weighted average coupon rate of 5.03% as of December 31, 2020, are subject to further rate adjustment. If those remaining variable rate loans were to collectively, through future rate adjustments, be reduced to their respective floors, they would have a weighted average coupon rate of approximately 4.36% which would result in the reduction of the weighted average coupon rate of the total loan portfolio, exclusive of PPP loans, from 4.60% to approximately 4.55%.

Asset Quality and Credit Loss Provisioning

During the three months ended September 30, 2021, the Company recorded a reversal of provision for credit losses of $1,435,000, as compared to a reversal of provision for credit losses of $260,000 during the trailing quarter, and a provision expense of $7,649,000 during the third quarter of 2020.

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

 

 

Three months ended

(dollars in thousands)

 

September 30,

2021

 

June 30,

2021

 

March 31,

2021

 

December 31,

2020

 

September 30,

2020

Addition to (reversal of) allowance for credit losses

 

$

(1,495

)

 

$

(145

)

 

$

(6,240

)

 

$

4,450

   

$

7,649

 

Addition to (reversal of) reserve for unfunded loan commitments

 

60

 

 

(115

)

 

180

 

 

400

   

 

Total provision for credit losses

 

$

(1,435

)

 

$

(260

)

 

$

(6,060

)

 

$

4,850

   

$

7,649

 

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

 

 

Three months ended

 

Nine months ended

(dollars in thousands)

 

September 30,

2021

 

September 30,

2020

 

September 30,

2021

 

September 30,

2020

Balance, beginning of period

 

$

86,062

 

 

$

79,739

 

 

$

91,847

 

 

$

30,616

 

Impact from adoption of ASU 2016-13

 

 

 

 

 

 

 

18,913

 

Provision for (reversal of) credit losses

 

(1,495

)

 

7,649

 

 

(7,880

)

 

37,738

 

Loans charged-off

 

(1,582

)

 

(194

)

 

(2,195

)

 

(1,195

)

Recoveries of previously charged-off loans

 

1,321

 

 

381

 

 

2,534

 

 

1,503

 

Balance, end of period

 

$

84,306

 

 

$

87,575

 

 

$

84,306

 

 

$

87,575

 

The allowance for credit losses (ACL) was $84,306,000 as of September 30, 2021, a net decrease of $1,756,000 over the immediately preceding quarter. The reversal of allowance for credit losses of $1,495,000 was necessary as net charge-offs totaling $261,000 during the quarter were less than the required changes in quantitative and qualitative reserve components. More specifically, the quantitative reserve required under the cohort model reduced required reserves by $1,762,000, in addition to a decrease in specific reserves on impaired totals of $874,000 as of quarter end.

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. However, management notes that the majority of economic forecasts utilized in the ACL calculation have remained directionally consistent with preceding quarters, as general economic conditions continue to improve, albeit at a pace slower than expected due to unforeseen disruptions in the supply chain and increasing energy prices. In addition, management notes that the level of governmental assistance provided through PPP as well as other programs during the last several quarters has been unprecedented. As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to maintain a reserve level that incorporates such risk factors.

Loans past due 30 days or more increased by $1,247,000 during the quarter ended September 30, 2021 to $10,539,000, as compared to $9,292,000 at June 30, 2021. Non-performing loans were $28,790,000 at September 30, 2021, a decrease of $3,915,000 and $5,827,000, respectively, from $32,705,000 and $22,963,000 as of June 30, 2021, and September 30, 2020, respectively.

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

 

 

September 30,

% of Total

Loans

 

June 30,

% of Total

Loans

 

September 30,

% of Total

Loans

(dollars in thousands)

 

2021

 

2021

 

2020

Risk Rating:

 

 

 

 

 

 

 

 

 

Pass

 

$

4,698,475

 

96.1

%

 

$

4,756,381

 

96.2

%

 

$

4,630,266

 

95.9

%

Special Mention

 

138,699

 

2.9

%

 

130,232

 

2.6

%

 

147,343

 

3.1

%

Substandard

 

50,322

 

1.0

%

 

58,281

 

1.2

%

 

48,729

 

0.9

%

Total

 

$

4,887,496

 

 

 

$

4,944,894

 

 

 

$

4,826,338

 

 

 

 

 

 

 

 

 

 

 

 

Classified loans to total loans

 

1.03

%

 

 

1.18

%

 

 

1.01

%

 

Loans past due 30+ days to total loans

 

0.22

%

 

 

0.19

%

 

 

0.22

%

 

The Company's loan portfolio for non-classified loans (loans graded special mention or better) remains consistent for the quarter ended September 30, 2021, as compared to the trailing quarter June 30, 2021, representing 99.0% and 98.8% of total loans outstanding, respectively. Loans risk graded special mention increased by approximately $8,466,000 during the current quarter as compared to the trailing quarter, while loans risk graded substandard decreased by $8,047,000 over the same period.

There was one addition to other real estate owned totaling $560,000, including a $113,000 fair value benefit, during the quarter ended September 30, 2021 and there was one sale for approximately $189,000, which generated a net gain of $31,000 for the quarter. As of September 30, 2021, other real estate owned consisted of six properties with a carrying value of approximately $2,650,000.

Allocation of Credit Loss Reserves by Loan Type

 

 

As of September 30, 2021

 

As of December 31, 2020

 

As of September 30, 2020

(dollars in thousands)

 

Amount

 

% of Loans

Outstanding

 

Amount

 

% of Loans

Outstanding

 

Amount

 

% of Loans

Outstanding

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRE - Non Owner Occupied

 

$

25,221

 

 

1.65

%

 

$

29,380

 

 

1.91

%

 

$

28,847

 

 

1.80

%

CRE - Owner Occupied

 

10,730

 

 

1.53

%

 

10,861

 

 

1.74

%

 

9,625

 

 

1.66

%

Multifamily

 

12,876

 

 

1.55

%

 

11,472

 

 

1.79

%

 

10,032

 

 

1.67

%

Farmland

 

1,902

 

 

1.15

%

 

1,980

 

 

1.30

%

 

1,790

 

 

1.17

%

Total commercial real estate loans

 

50,729

 

 

1.57

%

 

53,693

 

 

1.82

%

 

50,294

 

 

1.71

%

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SFR 1-4 1st Liens

 

10,618

 

 

1.60

%

 

10,117

 

 

1.83

%

 

8,937

 

 

1.72

%

SFR HELOCs and Junior Liens

 

10,431

 

 

3.23

%

 

11,771

 

 

3.59

%

 

11,676

 

 

3.51

%

Other

 

2,442

 

 

3.59

%

 

3,260

 

 

4.20

%

 

3,394

 

 

4.18

%

Total consumer loans

 

23,491

 

 

2.22

%

 

25,148

 

 

2.62

%

 

24,007

 

 

2.57

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

3,427

 

 

0.99

%

 

4,252

 

 

0.81

%

 

4,534

 

 

72.00

%

Construction

 

5,528

 

 

2.55

%

 

7,540

 

 

2.65

%

 

7,640

 

 

2.68

%

Agricultural Production

 

1,119

 

 

2.52

%

 

1,209

 

 

2.74

%

 

1,093

 

 

2.69

%

Leases

 

12

 

 

0.24

%

 

5

 

 

0.13

%

 

7

 

 

0.19

%

Allowance for credit losses

 

84,306

 

 

1.72

%

 

91,847

 

 

1.93

%

 

87,575

 

 

1.81

%

Reserve for unfunded loan commitments

 

3,525

 

 

 

 

3,400

 

 

 

 

3,000

 

 

 

Total allowance for credit losses

 

$

87,831

 

 

1.80

%

 

$

95,247

 

 

2.00

%

 

$

90,575

 

 

1.88

%

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 1.78% as of September 30, 2021. In addition to the allowance for credit losses above, the Company has acquired various performing loans whose fair value as of the acquisition date was determined to be less than the principal balance owed on those loans. This difference represents the collective discount of credit, interest rate and liquidity measurements which is expected to be amortized over the life of the loans. As of September 30, 2021, the unamortized discount associated with acquired loans totaled $17,984,000 and, if aggregated with the ACL, would collectively represent 2.09% of total gross loans and 2.16% of total loans less PPP loans.

Non-interest Income

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

 

 

Three months ended

 

 

 

 

 

(dollars in thousands)

 

September 30, 2021

 

June 30, 2021

 

$ Change

 

% Change

ATM and interchange fees

 

$

6,516

 

 

 

$

6,558

 

 

 

$

(42

)

 

 

(0.6

)

%

Service charges on deposit accounts

 

3,608

 

 

 

3,462

 

 

 

146

 

 

 

4.2

 

%

Other service fees

 

897

 

 

 

914

 

 

 

(17

)

 

 

(1.9

)

%

Mortgage banking service fees

 

476

 

 

 

467

 

 

 

9

 

 

 

1.9

 

%

Change in value of mortgage servicing rights

 

(232

)

 

 

(471

)

 

 

239

 

 

 

(50.7

)

%

Total service charges and fees

 

11,265

 

 

 

10,930

 

 

 

335

 

 

 

3.1

 

%

Increase in cash value of life insurance

 

644

 

 

 

745

 

 

 

(101

)

 

 

(13.6

)

%

Asset management and commission income

 

957

 

 

 

947

 

 

 

10

 

 

 

1.1

 

%

Gain on sale of loans

 

1,814

 

 

 

2,847

 

 

 

(1,033

)

 

 

(36.3

)

%

Lease brokerage income

 

183

 

 

 

249

 

 

 

(66

)

 

 

(26.5

)

%

Sale of customer checks

 

107

 

 

 

116

 

 

 

(9

)

 

 

(7.8

)

%

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

 

n/m

 

 

Gain (loss) on marketable equity securities

 

(14

)

 

 

8

 

 

 

(22

)

 

 

(275.0

)

%

Other

 

139

 

 

 

115

 

 

 

24

 

 

 

20.9

 

%

Total other non-interest income

 

3,830

 

 

 

5,027

 

 

 

(1,197

)

 

 

(23.8

)

%

Total non-interest income

 

$

15,095

 

 

 

$

15,957

 

 

 

$

(862

)

 

 

(5.4

)

%

Non-interest income decreased $862,000 or 5.4% to $15,095,000 during the three months ended September 30, 2021, compared to $15,957,000 during the trailing quarter June 30, 2021. Gain on sale of mortgage loans declined by $1,033,000 or 36.3% during the recent quarter ended, as interest rates continued to trend higher, contributing to the decline in total mortgage origination and refinance activity during the three months ended September 30, 2021. Changes in ATM and interchange fees as well as service charges were a direct result of changes in usage and depositor requested services.

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

 

 

Three months ended September 30,

 

 

 

 

 

(dollars in thousands)

 

2021

 

2020

 

$ Change

 

% Change

ATM and interchange fees

 

$

6,516

 

 

 

$

5,637

 

 

 

$

879

 

 

 

15.6

 

%

Service charges on deposit accounts

 

3,608

 

 

 

3,334

 

 

 

274

 

 

 

8.2

 

%

Other service fees

 

897

 

 

 

805

 

 

 

92

 

 

 

11.4

 

%

Mortgage banking service fees

 

476

 

 

 

457

 

 

 

19

 

 

 

4.2

 

%

Change in value of mortgage servicing rights

 

(232

)

 

 

236

 

 

 

(468

)

 

 

(198.3

)

%

Total service charges and fees

 

11,265

 

 

 

10,469

 

 

 

796

 

 

 

7.6

 

%

Increase in cash value of life insurance

 

644

 

 

 

773

 

 

 

(129

)

 

 

(16.7

)

%

Asset management and commission income

 

957

 

 

 

667

 

 

 

290

 

 

 

43.5

 

%

Gain on sale of loans

 

1,814

 

 

 

3,035

 

 

 

(1,221

)

 

 

(40.2

)

%

Lease brokerage income

 

183

 

 

 

175

 

 

 

8

 

 

 

4.6

 

%

Sale of customer checks

 

107

 

 

 

91

 

 

 

16

 

 

 

17.6

 

%

Gain on sale of investment securities

 

 

 

 

7

 

 

 

(7

)

 

 

n/m

 

 

Gain on marketable equity securities

 

(14

)

 

 

 

 

 

(14

)

 

 

n/m

 

 

Other

 

139

 

 

 

(80

)

 

 

219

 

 

 

(273.8

)

%

Total other non-interest income

 

3,830

 

 

 

4,668

 

 

 

(838

)

 

 

(18.0

)

%

Total non-interest income

 

$

15,095

 

 

 

$

15,137

 

 

 

$

(42

)

 

 

(0.3

)

%

In addition to the discussion above within the non-interest income for the three months ended September 30, 2021, ATM and interchange fees improved $879,000 or 15.6% as a result of increased usage due to relaxed social distancing guidelines during the quarter September 30, 2021 when compared to the same period in the prior year. Changes in the value of mortgage servicing rights and gain on sale of mortgage loans declined by $468,000 and $1,221,000, respectively, related to the aforementioned interest rate increases during the most recent two quarters. Included in other non-interest income for the three months ended September 30, 2021 and 2020 are earnings (losses) from the changes in fair value of acquired deferred compensation plans of $23,000 and ($241,000), respectively.

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

 

 

Nine months ended September 30,

 

 

 

 

 

(dollars in thousands)

 

2021

 

2020

 

$ Change

 

% Change

ATM and interchange fees

 

$

18,935

 

 

 

$

15,913

 

 

 

$

3,022

 

 

 

19.0

 

%

Service charges on deposit accounts

 

10,339

 

 

 

10,426

 

 

 

(87

)

 

 

(0.8

)

%

Other service fees

 

2,682

 

 

 

2,296

 

 

 

386

 

 

 

16.8

 

%

Mortgage banking service fees

 

1,406

 

 

 

1,386

 

 

 

20

 

 

 

1.4

 

%

Change in value of mortgage servicing rights

 

(691

)

 

 

(2,258

)

 

 

1,567

 

 

 

(69.4

)

%

Total service charges and fees

 

32,671

 

 

 

27,763

 

 

 

4,908

 

 

 

17.7

 

%

Increase in cash value of life insurance

 

2,062

 

 

 

2,203

 

 

 

(141

)

 

 

(6.4

)

%

Asset management and commission income

 

2,738

 

 

 

2,244

 

 

 

494

 

 

 

22.0

 

%

Gain on sale of loans

 

7,908

 

 

 

5,662

 

 

 

2,246

 

 

 

39.7

 

%

Lease brokerage income

 

542

 

 

 

495

 

 

 

47

 

 

 

9.5

 

%

Sale of customer checks

 

342

 

 

 

303

 

 

 

39

 

 

 

12.9

 

%

Gain on sale of investment securities

 

 

 

 

7

 

 

 

(7

)

 

 

n/m

 

 

Gain (loss) on marketable equity securities

 

(59

)

 

 

72

 

 

 

(131

)

 

 

(181.9

)

%

Other

 

958

 

 

 

(135

)

 

 

1,093

 

 

 

(809.6

)

%

Total other non-interest income

 

14,491

 

 

 

10,851

 

 

 

3,640

 

 

 

33.5

 

%

Total non-interest income

 

$

47,162

 

 

 

$

38,614

 

 

 

$

8,548

 

 

 

22.1

 

%

Total non-interest income increased by $8,548,000 or 22.1% to $47,162,000 during the nine months ended September 30, 2021, compared to $38,614,000 during the trailing quarter September 30, 2020. Other non-interest income increased by $1,093,000 or 809.6% for the nine months ended September 30, 2021. Most notably, the nine months ended 2020 period included a reduction of income totaling $577,000 attributed decreases in the fair value of assets used to fund acquired deferred compensation plans, as compared to an increase in income totaling $370,000 during the same period in 2021. The remaining changes in non-interest income for the nine months ended September 30, 2021 and 2020 are generally consistent with the changes discussed above.

Non-interest Expense

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

 

 

Three months ended

 

 

 

 

 

(dollars in thousands)

 

September 30,

2021

 

June 30,

2021

 

$ Change

 

% Change

Base salaries, net of deferred loan origination costs

 

$

17,673

 

 

 

$

17,537

 

 

 

$

136

 

 

 

0.8

 

%

Incentive compensation

 

3,123

 

 

 

4,322

 

 

 

(1,199

)

 

 

(27.7

)

%

Benefits and other compensation costs

 

5,478

 

 

 

5,222

 

 

 

256

 

 

 

4.9

 

%

Total salaries and benefits expense

 

26,274

 

 

 

27,081

 

 

 

(807

)

 

 

(3.0

)

%

Occupancy

 

3,771

 

 

 

3,700

 

 

 

71

 

 

 

1.9

 

%

Data processing and software

 

3,689

 

 

 

3,201

 

 

 

488

 

 

 

15.2

 

%

Equipment

 

1,336

 

 

 

1,207

 

 

 

129

 

 

 

10.7

 

%

Intangible amortization

 

1,409

 

 

 

1,431

 

 

 

(22

)

 

 

(1.5

)

%

Advertising

 

966

 

 

 

734

 

 

 

232

 

 

 

31.6

 

%

ATM and POS network charges

 

1,692

 

 

 

1,551

 

 

 

141

 

 

 

9.1

 

%

Professional fees

 

1,090

 

 

 

1,046

 

 

 

44

 

 

 

4.2

 

%

Telecommunications

 

574

 

 

 

564

 

 

 

10

 

 

 

1.8

 

%

Regulatory assessments and insurance

 

673

 

 

 

618

 

 

 

55

 

 

 

8.9

 

%

Merger and acquisition expenses

 

651

 

 

 

 

 

 

651

 

 

 

n/m

 

 

Postage

 

156

 

 

 

124

 

 

 

32

 

 

 

25.8

 

%

Operational losses

 

244

 

 

 

212

 

 

 

32

 

 

 

15.1

 

%

Courier service

 

286

 

 

 

288

 

 

 

(2

)

 

 

(0.7

)

%

Gain on sale or acquisition of foreclosed assets

 

(144

)

 

 

(15

)

 

 

(129

)

 

 

860.0

 

%

Gain on disposal of fixed assets

 

(19

)

 

 

(426

)

 

 

407

 

 

 

(95.5

)

%

Other miscellaneous expense

 

3,159

 

 

 

2,855

 

 

 

304

 

 

 

10.6

 

%

Total other non-interest expense

 

19,533

 

 

 

17,090

 

 

 

2,443

 

 

 

14.3

 

%

Total non-interest expense

 

$

45,807

 

 

 

$

44,171

 

 

 

$

1,636

 

 

 

3.7

 

%

Average full-time equivalent staff

 

1,049

 

 

 

1,020

 

 

 

29

 

 

 

2.8

 

%

Non-interest expense for the quarter ended September 30, 2021 increased $1,636,000 or 3.7% to $45,807,000 as compared to $44,171,000 during the trailing quarter ended June 30, 2021. Merger and acquisition expenses of $651,000 were recorded during the quarter in connection with the merger agreement with Valley Republic Bancorp entered on July 27, 2021. A non-recurring gain on disposal of fixed assets related to the sale of a former branch totaling $426,000 was recorded during the trailing quarter. Additionally, as a result of various event postponements that resulted from COVID distancing requirements as well as normal seasonality in not-for-profit event sponsorships, expenses associated with these activities fluctuated significantly between periods and were $203,000, $3,000, and $386,000 in each of the first three quarters of 2021 and $124,000 in the third quarter of 2020 and are included in other miscellaneous expenses. As a partial offset, total salaries and benefits expense declined by $807,000 or 3.0%, led by incentive compensation declines of $1,199,000 or 27.7% to $3,123,000 during the quarter ended September 30, 2021 as compared to the trailing period. Costs associated with the Company's recently opened loan production offices, inclusive of salaries, benefits and occupancy, totaled approximately $710,000 during the third quarter and $235,000 in the second quarter.

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

 

 

Three months ended September 30,

 

 

 

 

 

(dollars in thousands)

 

2021

 

 

2020

 

$ Change

 

% Change

Base salaries, net of deferred loan origination costs

 

$

17,673

 

 

 

$

18,754

 

 

$

(1,081

)

 

 

(5.8

)

%

Incentive compensation

 

3,123

 

 

 

2,184

 

 

939

 

 

 

43.0

 

%

Benefits and other compensation costs

 

5,478

 

 

 

8,383

 

 

(2,905

)

 

 

(34.7

)

%

Total salaries and benefits expense

 

26,274

 

 

 

29,321

 

 

(3,047

)

 

 

(10.4

)

%

Occupancy

 

3,771

 

 

 

3,440

 

 

331

 

 

 

9.6

 

%

Data processing and software

 

3,689

 

 

 

3,561

 

 

128

 

 

 

3.6

 

%

Equipment

 

1,336

 

 

 

1,549

 

 

(213

)

 

 

(13.8

)

%

Intangible amortization

 

1,409

 

 

 

1,431

 

 

(22

)

 

 

(1.5

)

%

Advertising

 

966

 

 

 

869

 

 

97

 

 

 

11.2

 

%

ATM and POS network charges

 

1,692

 

 

 

1,314

 

 

378

 

 

 

28.8

 

%

Professional fees

 

1,090

 

 

 

955

 

 

135

 

 

 

14.1

 

%

Telecommunications

 

574

 

 

 

619

 

 

(45

)

 

 

(7.3

)

%

Regulatory assessments and insurance

 

673

 

 

 

538

 

 

135

 

 

 

25.1

 

%

Merger and acquisition expenses

 

651

 

 

 

 

 

651

 

 

 

n/m

 

 

Postage

 

156

 

 

 

118

 

 

38

 

 

 

32.2

 

%

Operational losses

 

244

 

 

 

154

 

 

90

 

 

 

58.4

 

%

Courier service

 

286

 

 

 

345

 

 

(59

)

 

 

(17.1

)

%

Gain on sale or acquisition of foreclosed assets

 

(144

)

 

 

 

 

(144

)

 

 

n/m

 

 

(Gain) loss on disposal of fixed assets

 

(19

)

 

 

22

 

 

(41

)

 

 

(186.4

)

%

Other miscellaneous expense

 

3,159

 

 

 

2,478

 

 

681

 

 

 

27.5

 

%

Total other non-interest expense

 

19,533

 

 

 

17,393

 

 

2,140

 

 

 

12.3

 

%

Total non-interest expense

 

$

45,807

 

 

 

$

46,714

 

 

$

(907

)

 

 

(1.9

)

%

Average full-time equivalent staff

 

1,049

 

 

 

1,105

 

 

(56

)

 

 

(5.1

)

%

Non-interest expense decreased by $907,000 or 1.9% to $45,807,000 during the three months ended September 30, 2021 as compared to $46,714,000 for the three months ended September 30, 2020. Salaries, net of deferred loan origination costs, decreased by $1,081,000 to $17,673,000 for the three months ended September 30, 2021. The comparative period in 2020 included approximately $400,000 in non-recurring severance costs from reductions in personnel and a reduction of nearly $745,000 in deferred loan origination costs following a taper of the first round of PPP loan origination volume. Benefits and other compensation expense decreased by $2,905,000 during the three months ended September 30, 2021, primarily the result of decreases in expenses associated with retirement obligations and group insurance costs. Approximately $95,000 of the increase in occupancy expense is attributable to the Company's recently opened loan production offices.

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

 

 

Nine months ended September 30,

 

 

 

 

 

(dollars in thousands)

 

2021

 

2020

 

$ Change

 

% Change

Base salaries, net of deferred loan origination costs

 

$

50,721

 

 

 

$

53,654

 

 

 

$

(2,933

)

 

 

(5.5

)

%

Incentive compensation

 

11,025

 

 

 

7,680

 

 

 

3,345

 

 

 

43.6

 

%

Benefits and other compensation costs

 

16,939

 

 

 

22,314

 

 

 

(5,375

)

 

 

(24.1

)

%

Total salaries and benefits expense

 

78,685

 

 

 

83,648

 

 

 

(4,963

)

 

 

(5.9

)

%

Occupancy

 

11,197

 

 

 

10,713

 

 

 

484

 

 

 

4.5

 

%

Data processing and software

 

10,092

 

 

 

10,585

 

 

 

(493

)

 

 

(4.7

)

%

Equipment

 

4,060

 

 

 

4,411

 

 

 

(351

)

 

 

(8.0

)

%

Intangible amortization

 

4,271

 

 

 

4,293

 

 

 

(22

)

 

 

(0.5

)

%

Advertising

 

2,080

 

 

 

2,065

 

 

 

15

 

 

 

0.7

 

%

ATM and POS network charges

 

4,489

 

 

 

3,897

 

 

 

592

 

 

 

15.2

 

%

Professional fees

 

2,730

 

 

 

2,399

 

 

 

331

 

 

 

13.8

 

%

Telecommunications

 

1,719

 

 

 

1,983

 

 

 

(264

)

 

 

(13.3

)

%

Regulatory assessments and insurance

 

1,903

 

 

 

993

 

 

 

910

 

 

 

91.6

 

%

Merger and acquisition expenses

 

651

 

 

 

 

 

 

651

 

 

 

n/m

 

 

Postage

 

478

 

 

 

691

 

 

 

(213

)

 

 

(30.8

)

%

Operational losses

 

665

 

 

 

559

 

 

 

106

 

 

 

19.0

 

%

Courier service

 

868

 

 

 

1,013

 

 

 

(145

)

 

 

(14.3

)

%

Gain on sale or acquisition of foreclosed assets

 

(210

)

 

 

(57

)

 

 

(153

)

 

 

268.4

 

%

(Gain) loss on disposal of fixed assets

 

(445

)

 

 

37

 

 

 

(482

)

 

 

(1302.7

)

%

Other miscellaneous expense

 

8,363

 

 

 

9,783

 

 

 

(1,420

)

 

 

(14.5

)

%

Total other non-interest expense

 

52,911

 

 

 

53,365

 

 

 

(454

)

 

 

(0.9

)

%

Total non-interest expense

 

$

131,596

 

 

 

$

137,013

 

 

 

$

(5,417

)

 

 

(4.0

)

%

Average full-time equivalent staff

 

1,031

 

 

 

1,129

 

 

 

(98

)

 

 

(8.7

)

%

The changes in non-interest expense for the nine months ended September 30, 2021 and 2020 are generally consistent with the changes in the comparable three month periods discussed above. During the nine months ended September 30, 2021, approximately $944,000 is attributable to the Company's recently opened loan production offices, of which approximately $824,000 relates to salaries and benefits. Regulatory assessment and insurance expense increased in the current year to date period primarily due to the expiration of credits during the 2020 year and to a lesser extent, the overall balance sheet growth of the bank.

Provision for Income Taxes

The Company’s effective tax rate was 28.5% for the nine months ended September 30, 2021, as compared to 25.8% for the year ended December 31, 2020. The reduced effective tax rate in the prior year was made possible through the provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which provided the Company with an opportunity to file amended tax returns and generate proposed refunds of approximately $805,000. While the Company has initiated several tax strategies in anticipation of future tax rate increases, it is not anticipated that any will directly impact the Company's effective tax rate until such rate changes have been legislatively approved. Other differences between the Company's effective tax rate and applicable federal and state statutory rates are due to the proportion of non-taxable revenue and low income housing 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 in communities throughout Northern and Central 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; the impact of changes in financial services policies, laws and regulations; technological changes; weather, natural disasters and other catastrophic events that may or may not be caused by climate change and their effects on economic and business environments in which the Company operates; the continuing adverse impact on the U.S. economy, including the markets in which we operate due to the COVID-19 global pandemic, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products; the costs or effects of mergers, acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such mergers, acquisitions or dispositions, and/or our ability to realize the contemplated financial business benefits associated with any such activities; the ability to execute our business plan in new lending markets, the future operating or financial performance of the Company, including our outlook for future growth and changes in the level of our nonperforming assets and charge-offs; the appropriateness of the allowance for credit losses, including the timing and effects of the implementation of the current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting standards and practices; possible other-than-temporary impairment of securities held by us; changes in consumer spending, borrowing and savings habits; our ability to attract and maintain deposits and other sources of liquidity; changes in the financial performance and/or condition of our borrowers; our noninterest expense and the efficiency ratio; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; the challenges of integrating and retaining key employees; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks and the cost to defend against such attacks; change to U.S. tax policies, including our effective income tax rate; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the discontinuation of the London Interbank Offered Rate and other reference rates; and our ability to manage the risks involved in the foregoing. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2020, which has been filed with the Securities and Exchange Commission (the “SEC”) and are available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands, except share data)

   

 

 

Three months ended

 

 

September 30,

2021

 

June 30,

2021

 

March 31,

2021

 

December 31,

2020

 

September 30,

2020

Revenue and Expense Data

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

69,628

 

 

$

68,479

 

 

$

67,916

 

 

$

68,081

 

 

$

65,438

 

Interest expense

 

1,395

 

 

1,396

 

 

1,476

 

 

1,659

 

 

1,984

 

Net interest income

 

68,233

 

 

67,083

 

 

66,440

 

 

66,422

 

 

63,454

 

Provision for (benefit from) credit losses

 

(1,435)

 

 

(260)

 

 

(6,060)

 

 

4,850

 

 

7,649

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

Service charges and fees

 

11,265

 

 

10,930

 

 

10,476

 

 

10,218

 

 

10,469

 

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

7

 

Other income

 

3,830

 

 

5,027

 

 

5,634

 

 

6,362

 

 

4,661

 

Total noninterest income

 

15,095

 

 

15,957

 

 

16,110

 

 

16,580

 

 

15,137

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

26,274

 

 

27,081

 

 

25,330

 

 

28,473

 

 

29,321

 

Occupancy and equipment

 

5,107

 

 

4,907

 

 

5,243

 

 

5,108

 

 

4,989

 

Data processing and network

 

5,381

 

 

4,752

 

 

4,448

 

 

4,455

 

 

4,875

 

Other noninterest expense

 

9,045

 

 

7,431

 

 

6,597

 

 

7,709

 

 

7,529

 

Total noninterest expense

 

45,807

 

 

44,171

 

 

41,618

 

 

45,745

 

 

46,714

 

Total income before taxes

 

38,956

 

 

39,129

 

 

46,992

 

 

32,407

 

 

24,228

 

Provision for income taxes

 

11,534

 

 

10,767

 

 

13,343

 

 

8,750

 

 

6,622

 

Net income

 

$

27,422

 

 

$

28,362

 

 

$

33,649

 

 

$

23,657

 

 

$

17,606

 

Share Data

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.92

 

 

$

0.95

 

 

$

1.13

 

 

$

0.80

 

 

$

0.59

 

Diluted earnings per share

 

$

0.92

 

 

$

0.95

 

 

$

1.13

 

 

$

0.79

 

 

$

0.59

 

Dividends per share

 

$

0.25

 

 

$

0.25

 

 

$

0.25

 

 

$

0.22

 

 

$

0.22

 

Book value per common share

 

$

33.05

 

 

$

32.53

 

 

$

31.71

 

 

$

31.12

 

 

$

30.31

 

Tangible book value per common share (1)

 

$

25.16

 

 

$

24.60

 

 

$

23.72

 

 

$

23.09

 

 

$

22.24

 

Shares outstanding

 

29,714,609

 

 

29,716,294

 

 

29,727,122

 

 

29,727,214

 

 

29,769,389

 

Weighted average shares

 

29,713,558

 

 

29,718,603

 

 

29,727,182

 

 

29,756,831

 

 

29,763,898

 

Weighted average diluted shares

 

29,850,530

 

 

29,903,560

 

 

29,904,974

 

 

29,863,478

 

 

29,844,396

 

Credit Quality

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses to gross loans

 

1.72

%

 

1.74

%

 

1.73

%

 

1.93

%

 

1.81

%

Loans past due 30 days or more

 

$

10,539

 

 

$

9,292

 

 

$

10,550

 

 

$

6,767

 

 

$

10,522

 

Total nonperforming loans

 

$

28,790

 

 

$

32,705

 

 

$

28,941

 

 

$

26,864

 

 

$

22,963

 

Total nonperforming assets

 

$

31,440

 

 

$

34,952

 

 

$

31,250

 

 

$

29,708

 

 

$

25,020

 

Loans charged-off

 

$

1,582

 

 

$

387

 

 

$

226

 

 

$

560

 

 

$

194

 

Loans recovered

 

$

1,321

 

 

$

653

 

 

$

560

 

 

$

382

 

 

$

381

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

 

Return on average total assets

 

1.30

%

 

1.40

%

 

1.75

%

 

1.24

%

 

0.95

%

Return on average equity

 

11.02

%

 

11.85

%

 

14.51

%

 

10.37

%

 

7.79

%

Average yield on loans, excluding PPP

 

4.85

%

 

4.93

%

 

5.02

%

 

5.04

%

 

5.02

%

Average yield on interest-earning assets

 

3.57

%

 

3.65

%

 

3.82

%

 

3.88

%

 

3.83

%

Average rate on interest-bearing deposits

 

0.08

%

 

0.08

%

 

0.10

%

 

0.12

%

 

0.15

%

Average cost of total deposits

 

0.05

%

 

0.05

%

 

0.06

%

 

0.07

%

 

0.09

%

Average rate on borrowings & subordinated debt

 

2.02

%

 

2.31

%

 

2.42

%

 

2.43

%

 

2.49

%

Average rate on interest-bearing liabilities

 

0.13

%

 

0.13

%

 

0.15

%

 

0.17

%

 

0.20

%

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

 

3.50

%

 

3.58

%

 

3.74

%

 

3.79

%

 

3.72

%

Loans to deposits

 

67.54

%

 

70.72

%

 

72.37

%

 

73.21

%

 

76.12

%

Efficiency ratio

 

54.97

%

 

53.19

%

 

50.42

%

 

55.11

%

 

59.44

%

Supplemental Loan Interest Income Data

 

 

 

 

 

 

 

 

 

 

Discount accretion on acquired loans

 

$

2,034

 

 

$

2,566

 

 

$

1,712

 

 

$

1,960

 

 

$

1,876

 

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

 

$

55,184

 

 

$

54,559

 

 

$

52,861

 

 

$

53,379

 

 

$

53,560

 

Total loan interest income (excluding PPP) (1)

 

$

57,218

 

 

$

57,125

 

 

$

54,573

 

 

$

55,339

 

 

$

55,436

 

(1) Non-GAAP measure.

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands)

   

Balance Sheet Data

 

September 30,

2021

 

June 30,

2021

 

March 31,

2021

 

December 31,

2020

 

September 30,

2020

Cash and due from banks

 

$

740,236

 

 

$

639,740

 

 

$

609,522

 

 

$

669,551

 

 

$

652,582

 

Securities, available for sale, net

 

2,098,786

 

 

1,850,547

 

 

1,685,076

 

 

1,417,289

 

 

1,145,989

 

Securities, held to maturity, net

 

216,979

 

 

235,778

 

 

260,454

 

 

284,563

 

 

310,696

 

Restricted equity securities

 

17,250

 

 

17,250

 

 

17,250

 

 

17,250

 

 

17,250

 

Loans held for sale

 

3,072

 

 

5,723

 

 

3,995

 

 

6,268

 

 

6,570

 

Loans:

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

3,222,737

 

 

3,194,336

 

 

3,108,624

 

 

2,951,902

 

 

2,936,422

 

Consumer

 

1,053,653

 

 

1,050,609

 

 

1,041,213

 

 

952,108

 

 

926,835

 

Commercial and industrial

 

345,027

 

 

452,069

 

 

551,077

 

 

526,327

 

 

633,897

 

Construction

 

216,680

 

 

200,714

 

 

221,613

 

 

284,842

 

 

284,933

 

Agriculture production

 

44,410

 

 

41,967

 

 

39,753

 

 

44,164

 

 

40,613

 

Leases

 

4,989

 

 

5,199

 

 

4,697

 

 

3,784

 

 

3,638

 

Total loans, gross

 

4,887,496

 

 

4,944,894

 

 

4,966,977

 

 

4,763,127

 

 

4,826,338

 

Allowance for credit losses

 

(84,306)

 

 

(86,062)

 

 

(85,941)

 

 

(91,847)

 

 

(87,575)

 

Total loans, net

 

4,803,190

 

 

4,858,832

 

 

4,881,036

 

 

4,671,280

 

 

4,738,763

 

Premises and equipment

 

78,968

 

 

79,178

 

 

82,338

 

 

83,731

 

 

84,856

 

Cash value of life insurance

 

120,932

 

 

120,287

 

 

119,543

 

 

118,870

 

 

120,026

 

Accrued interest receivable

 

18,425

 

 

18,923

 

 

19,442

 

 

20,004

 

 

19,557

 

Goodwill

 

220,872

 

 

220,872

 

 

220,872

 

 

220,872

 

 

220,872

 

Other intangible assets

 

13,562

 

 

14,971

 

 

16,402

 

 

17,833

 

 

19,264

 

Operating leases, right-of-use

 

26,815

 

 

26,365

 

 

27,540

 

 

27,846

 

 

28,879

 

Other assets

 

98,943

 

 

81,899

 

 

88,142

 

 

84,172

 

 

84,495

 

Total assets

 

$

8,458,030

 

 

$

8,170,365

 

 

$

8,031,612

 

 

$

7,639,529

 

 

$

7,449,799

 

Deposits:

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

2,943,016

 

 

$

2,843,783

 

 

$

2,766,510

 

 

$

2,581,517

 

 

$

2,517,819

 

Interest-bearing demand deposits

 

1,519,426

 

 

1,486,321

 

 

1,465,915

 

 

1,414,908

 

 

1,346,716

 

Savings deposits

 

2,447,706

 

 

2,337,557

 

 

2,302,927

 

 

2,164,942

 

 

2,099,780

 

Time certificates

 

326,674

 

 

324,392

 

 

328,048

 

 

344,567

 

 

376,273

 

Total deposits

 

7,236,822

 

 

6,992,053

 

 

6,863,400

 

 

6,505,934

 

 

6,340,588

 

Accrued interest payable

 

1,056

 

 

1,026

 

 

970

 

 

1,362

 

 

1,571

 

Operating lease liability

 

27,290

 

 

26,707

 

 

27,780

 

 

27,973

 

 

28,894

 

Other liabilities

 

107,282

 

 

85,388

 

 

102,955

 

 

94,597

 

 

91,902

 

Other borrowings

 

45,601

 

 

40,559

 

 

36,226

 

 

26,914

 

 

27,055

 

Junior subordinated debt

 

57,965

 

 

57,852

 

 

57,742

 

 

57,635

 

 

57,527

 

Total liabilities

 

7,476,016

 

 

7,203,585

 

 

7,089,073

 

 

6,714,415

 

 

6,547,537

 

Common stock

 

531,339

 

 

531,038

 

 

531,367

 

 

530,835

 

 

531,075

 

Retained earnings

 

446,948

 

 

427,575

 

 

408,211

 

 

381,999

 

 

365,611

 

Accum. other comprehensive income

 

3,727

 

 

8,167

 

 

2,961

 

 

12,280

 

 

5,576

 

Total shareholders’ equity

 

$

982,014

 

 

$

966,780

 

 

$

942,539

 

 

$

925,114

 

 

$

902,262

 

Quarterly Average Balance Data

 

 

 

 

 

 

 

 

 

 

Average loans, excluding PPP

 

$

4,684,492

 

 

$

4,646,188

 

 

$

4,407,150

 

 

$

4,363,873

 

 

$

4,389,672

 

Average interest-earning assets

 

$

7,758,169

 

 

$

7,544,581

 

 

$

7,239,726

 

 

$

6,998,582

 

 

$

6,815,495

 

Average total assets

 

$

8,348,111

 

 

$

8,128,674

 

 

$

7,808,912

 

 

$

7,570,952

 

 

$

7,380,961

 

Average deposits

 

$

7,137,263

 

 

$

6,943,081

 

 

$

6,653,754

 

 

$

6,341,175

 

 

$

6,278,638

 

Average borrowings and subordinated debt

 

$

106,221

 

 

$

98,774

 

 

$

90,397

 

 

$

90,085

 

 

$

91,225

 

Average total equity

 

$

987,026

 

 

$

960,145

 

 

$

940,775

 

 

$

907,468

 

 

$

898,986

 

Capital Ratio Data

 

 

 

 

 

 

 

 

 

 

Total risk based capital ratio

 

15.4

%

 

15.3

%

 

15.1

%

 

15.2

%

 

15.2

%

Tier 1 capital ratio

 

14.2

%

 

14.1

%

 

13.9

%

 

14.0

%

 

14.0

%

Tier 1 common equity ratio

 

13.2

%

 

13.0

%

 

12.9

%

 

12.9

%

 

12.9

%

Tier 1 leverage ratio

 

9.9

%

 

9.9

%

 

10.0

%

 

9.9

%

 

10.0

%

Tangible capital ratio (1)

 

9.1

%

 

9.2

%

 

9.1

%

 

9.3

%

 

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

 

Nine months ended

(dollars in thousands)

 

September 30,

2021

 

June 30,

2021

 

September 30,

2020

 

September 30,

2021

 

September 30,

2020

Net interest margin

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

 

$

2,034

 

 

$

2,566

 

 

$

1,876

 

 

$

6,311

 

 

$

6,211

 

Effect on average loan yield

 

0.17

%

 

0.17

%

 

0.17

%

 

0.18

%

 

0.19

%

Effect on net interest margin (FTE)

 

0.10

%

 

0.14

%

 

0.11

%

 

0.11

%

 

0.13

%

Net interest margin (FTE)

 

3.50

%

 

3.58

%

 

3.72

%

 

3.61

%

 

4.02

%

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

 

3.40

%

 

3.44

%

 

3.61

%

 

3.50

%

 

3.89

%

PPP loans yield, net:

 

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

 

$

3,507

 

 

$

3,179