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TriCo Bancshares Announces Second Quarter 2022 Results

Notable Items for Second Quarter 2022

  • Results for the quarter reflect the full operational impact of the March 25, 2022 merger with Valley Republic Bancorp.
  • Organic loan growth, excluding PPP, for the quarter of $300.3 million or 20.7% annualized and credit quality continued to show improvement, while organic deposit growth for the quarter was $42.3 million or 1.9% annualized
  • Net interest margin, excluding the benefit from acquired loan discount accretion and PPP loan yield, increased 0.28% to 3.57%
  • Quarterly pre-tax pre-provision net revenues grew to $45.2 million, inclusive of $2.2 million in merger expenses, as compared to $36.6 million, inclusive of $4.0 million in merger expenses, in the trailing quarter and $38.9 million in the same quarter of the prior year

"While we continue to build on the strength of our core franchise, we are cautiously optimistic despite the potential volatility which may be forthcoming for the financial services industry," noted Rick Smith, President and Chief Executive Officer.  Peter Wiese, EVP and Chief Financial Officer added, "We are pleased with the increase in rates, as well as the mix shift of our average earning assets, which facilitated meaningful expansion of net interest margin and the growth in revenues for the quarter."

TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $31,364,000 for the quarter ended June 30, 2022, compared to $20,374,000 during the trailing quarter ended March 31, 2022, and $28,362,000 during the quarter ended June 30, 2021. Diluted earnings per share were $0.93 for the second quarter of 2022, compared to $0.67 for the first quarter of 2022 and $0.95 for the second quarter of 2021.

Financial Highlights

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

  • For the three and six months ended June 30, 2022, the Company’s return on average assets was 1.24% and 1.10%, while the return on average equity was 11.53% and 9.93%, respectively. These ratios were impacted by merger related expenses of $2,221,000 and $6,253,000 for the respective periods in 2022.
  • Organic loan growth, excluding PPP and acquired loans, totaled $300.3 million (20.7% annualized) for the current quarter and $638.4 million (13.6% annualized) for the trailing twelve-month period.
  • For the current quarter, net interest margin, less the effect of acquired loan discount accretion and PPP yields (non-GAAP), on a tax equivalent basis was 3.57%, an increase of 28 basis points from 3.29% in the trailing quarter.
  • The efficiency ratio was 55.45% for the three months ended June 30, 2022, as compared to 55.95% for the trailing quarter.
  • As of June 30, 2022, the Company reported total loans, total assets and total deposits of $6.1 billion, $10.1 billion and $8.8 billion, respectively. As a direct result of organic loan growth during the quarter, the loan to deposit ratio has increased to 69.8% as of June 30, 2022, as compared to 67.2% as of the trailing quarter.
  • The average rate of interest paid on deposits, including non-interest-bearing deposits, equaled 0.04% during the second quarter of 2022, consistent with 0.04% during the trailing quarter, and representing a decrease of one basis point from the average rate paid of 0.05% during the same quarter of the prior year.
  • Noninterest income related to service charges and fees was $13.0 million for the three month period ended June 30, 2022, an increase of 19.3% when compared to the same period in 2021.
  • The provision for credit losses for loans and debt securities was approximately $2.1 million during the quarter ended June 30, 2022, as compared to a provision expense of $8.3 million during the trailing quarter ended March 31, 2022, and a reversal of provision expense totaling $0.3 million for the three month period ended June 30, 2021.
  • The allowance for credit losses to total loans was 1.60% as of June 30, 2022, compared to 1.64% as of the trailing quarter end, and 1.74% as of June 30, 2021. Non-performing assets to total assets were 0.15% at June 30, 2022, as compared to 0.17% as of March 31, 2022, and 0.43% at June 30, 2021.

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

Summary Results

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

 

Three months ended

 

 

 

 

 

June 30,

 

March 31,

 

 

 

 

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

2022

 

2022

 

$ Change

 

% Change

Net interest income

$

85,046

 

 

$

67,924

 

 

$

17,122

 

 

25.2

%

Provision for credit losses

 

(2,100

)

 

 

(8,330

)

 

 

6,230

 

 

(74.8

) %

Noninterest income

 

16,430

 

 

 

15,096

 

 

 

1,334

 

 

8.8

%

Noninterest expense

 

(56,264

)

 

 

(46,447

)

 

 

(9,817

)

 

21.1

%

Provision for income taxes

 

(11,748

)

 

 

(7,869

)

 

 

(3,879

)

 

49.3

%

Net income

$

31,364

 

 

$

20,374

 

 

$

10,990

 

 

53.9

%

Diluted earnings per share

$

0.93

 

 

$

0.67

 

 

$

0.26

 

 

38.8

%

Dividends per share

$

0.25

 

 

$

0.25

 

 

$

 

 

%

Average common shares

 

33,561

 

 

 

30,050

 

 

 

3,511

 

 

11.7

%

Average diluted common shares

 

33,705

 

 

 

30,202

 

 

 

3,503

 

 

11.6

%

Return on average total assets

 

1.24

%

 

 

0.94

%

 

 

 

 

Return on average equity

 

11.53

%

 

 

8.19

%

 

 

 

 

Efficiency ratio

 

55.45

%

 

 

55.95

%

 

 

 

 

 

Three months ended

June 30,

 

 

 

 

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

2022

 

2021

 

$ Change

 

% Change

Net interest income

$

85,046

 

 

$

67,083

 

 

$

17,963

 

 

26.8

%

(Provision for) reversal of credit losses

 

(2,100

)

 

 

260

 

 

 

(2,360

)

 

(907.7

) %

Noninterest income

 

16,430

 

 

 

15,957

 

 

 

473

 

 

3.0

%

Noninterest expense

 

(56,264

)

 

 

(44,171

)

 

 

(12,093

)

 

27.4

%

Provision for income taxes

 

(11,748

)

 

 

(10,767

)

 

 

(981

)

 

9.1

%

Net income

$

31,364

 

 

$

28,362

 

 

$

3,002

 

 

10.6

%

Diluted earnings per share

$

0.93

 

 

$

0.95

 

 

$

(0.02

)

 

(2.1

) %

Dividends per share

$

0.25

 

 

$

0.25

 

 

$

 

 

%

Average common shares

 

33,561

 

 

 

29,719

 

 

 

3,842

 

 

12.9

%

Average diluted common shares

 

33,705

 

 

 

29,904

 

 

 

3,801

 

 

12.7

%

Return on average total assets

 

1.24

%

 

 

1.40

%

 

 

 

 

Return on average equity

 

11.53

%

 

 

11.85

%

 

 

 

 

Efficiency ratio

 

55.45

%

 

 

53.19

%

 

 

 

 

 

Six months ended

June 30,

 

 

(dollars and shares in thousands)

2022

 

2021

 

$ Change

 

% Change

Net interest income

$

152,970

 

 

$

133,523

 

 

$

19,447

 

 

14.6

%

Reversal of (provision for) credit losses

 

(10,430

)

 

 

6,320

 

 

 

(16,750

)

 

(265.0

) %

Noninterest income

 

31,526

 

 

 

32,067

 

 

 

(541

)

 

(1.7

) %

Noninterest expense

 

(102,711

)

 

 

(85,789

)

 

 

(16,922

)

 

19.7

%

Provision for income taxes

 

(19,617

)

 

 

(24,110

)

 

 

4,493

 

 

(18.6

) %

Net income

$

51,738

 

 

$

62,011

 

 

$

(10,273

)

 

(16.6

) %

Diluted earnings per share

$

1.62

 

 

$

2.07

 

 

$

(0.45

)

 

(21.7

) %

Dividends per share

$

0.50

 

 

$

0.50

 

 

$

 

 

%

Average common shares

 

31,815

 

 

 

29,723

 

 

 

2,092

 

 

7.0

%

Average diluted common shares

 

31,963

 

 

 

29,904

 

 

 

2,059

 

 

6.9

%

Return on average total assets

 

1.10

%

 

 

1.57

%

 

 

 

 

Return on average equity

 

9.93

%

 

 

13.16

%

 

 

 

 

Efficiency ratio

 

55.67

%

 

 

51.81

%

 

 

 

 

Balance Sheet

Total loans outstanding, excluding PPP, grew to $6.10 billion as of June 30, 2022, an increase of 29.5% over the prior twelve months, of which 13.6% was related to organic loan growth. Investments increased to $2.80 billion as of June 30, 2022, an increase of 33.2% annualized over the prior twelve months. Quarterly average earning assets to quarterly total average assets were generally unchanged at 92.2% at June 30, 2022, as compared to 92.9% and 92.8% at March 31, 2022, and June 30, 2021, respectively. The loan to deposit ratio was 69.8% at June 30, 2022, as compared to 67.2% and 70.7% at March 31, 2022, and June 30, 2021, respectively.

Total shareholders' equity decreased by $67,005,000 during the quarter ended June 30, 2022, as a result of an increase in accumulated other comprehensive losses of $68,611,000, share repurchases totaling approximately $21,750,000, and cash dividend payments on common stock of $8,360,000, partially offset by net income of $31,364,000. As a result, the Company’s book value was $31.25 per share at June 30, 2022 as compared to $32.78 and $32.53 at March 31, 2022, and June 30, 2021, respectively. The Company’s tangible book value per share, a non-GAAP measure, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $21.41 per share at June 30, 2022, as compared to $23.04 and $24.60 at March 31, 2022, and June 30, 2021, respectively.

Trailing Quarter Balance Sheet Change

Ending balances

June 30,

 

March 31,

 

 

 

Annualized

% Change

(dollars in thousands)

2022

 

2022

 

$ Change

Total assets

$

10,120,611

 

$

10,118,328

 

$

2,283

 

0.1

%

Total loans

 

6,113,421

 

 

5,851,975

 

 

261,446

 

17.9

 

Total loans, excluding PPP

 

6,095,667

 

 

5,795,370

 

 

300,297

 

20.7

 

Total investments

 

2,802,815

 

 

2,569,706

 

 

233,109

 

36.3

 

Total deposits

$

8,756,775

 

$

8,714,477

 

$

42,298

 

1.9

%

Organic loan growth, excluding PPP, of $300,297,000 or 20.7% on an annualized basis was realized during the quarter ended June 30, 2022, primarily within commercial real estate. During the quarter, and exclusive of PPP balance changes, loan originations totaled approximately $697 million while payoffs of loans totaled $397 million, which compares to origination and payoff activity during the three months ended March 31, 2022 of $396 million and $225 million, respectively. While management believes that loan pipelines are robust, loan activity during the quarter is reflective of increased customer awareness of the rising interest rate environment. Investment security growth was $233,109,000 or 36.3% on an annualized basis as excess liquidity from strong deposit growth during the trailing 12 month period was put to use in higher yielding earning assets. Deposit balances increased, with an organic change of $42,298,000 or 1.9% annualized during the period.

Average Trailing Quarter Balance Sheet Change

Quarterly average balances for the period ended

June 30,

 

March 31,

 

 

 

Acquired

Balances

 

Organic

$ Change

 

Organic

% Change

(dollars in thousands)

2022

 

2022

 

$ Change

 

 

 

Total assets

$

10,121,714

 

$

8,778,256

 

$

1,343,458

 

$

1,302,928

 

$

40,530

 

1.8

%

Total loans

 

5,928,430

 

 

4,988,560

 

 

939,870

 

 

739,017

 

 

200,853

 

16.1

 

Total loans, excluding PPP

 

5,890,578

 

 

4,937,865

 

 

952,713

 

 

718,557

 

 

234,156

 

19.0

 

Total investments

 

2,732,466

 

 

2,457,077

 

 

275,389

 

 

104,840

 

 

170,549

 

27.8

 

Total deposits

$

8,743,320

 

$

7,521,930

 

$

1,221,390

 

$

1,161,458

 

$

59,932

 

3.2

%

Year Over Year Balance Sheet Change

Ending balances

As of June 30,

 

 

 

Acquired

Balances

 

Organic

$ Change

 

Organic

% Change

(dollars in thousands)

2022

 

2021

 

$ Change

 

 

Total assets

$

10,120,611

 

$

8,170,365

 

$

1,950,246

 

$

1,363,529

 

$

586,717

 

7.2

%

Total loans

 

6,113,421

 

 

4,944,894

 

 

1,168,527

 

 

773,390

 

 

395,137

 

8.0

 

Total loans, excluding PPP

 

6,095,667

 

 

4,705,302

 

 

1,390,365

 

 

751,978

 

 

638,387

 

13.6

 

Total investments

 

2,802,815

 

 

2,103,575

 

 

699,240

 

 

109,716

 

 

589,524

 

28.0

 

Total deposits

$

8,756,775

 

$

6,992,053

 

$

1,764,722

 

$

1,215,479

 

$

549,243

 

7.9

%

Non-PPP loan balances have increased as a result of organic activities by approximately $638,387,000 during the twelve month period ending June 30, 2022. This, combined with earning assets acquired in the merger with Valley Republic Bank, has led to a long-term beneficial and meaningful shift in the makeup of the loan portfolio. Specifically, during the twelve months ended June 30, 2022 and excluding PPP balance changes, loan originations totaled approximately $2.2 billion while payoffs of loans totaled $1.6 billion. Investment securities increased to $2,802,815,000 at June 30, 2022, an organic change of $589,524,000 or 28.0% from the prior year.

Net Interest Income and Net Interest Margin

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

 

Three months ended

 

 

 

 

 

June 30,

 

March 31,

 

 

 

 

(dollars in thousands)

2022

 

2022

 

Change

 

% Change

Interest income

$

86,955

 

 

$

69,195

 

 

$

17,760

 

 

25.7

%

Interest expense

 

(1,909

)

 

 

(1,271

)

 

 

(638

)

 

50.2

%

Fully tax-equivalent adjustment (FTE) (1)

 

397

 

 

 

283

 

 

 

114

 

 

40.3

%

Net interest income (FTE)

$

85,443

 

 

$

68,207

 

 

$

17,236

 

 

25.3

%

Net interest margin (FTE)

 

3.67

%

 

 

3.39

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,677

 

 

$

1,323

 

 

$

354

 

 

26.8

%

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

 

3.60

%

 

 

3.32

%

 

 

0.28

%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

964

 

 

$

1,097

 

 

$

(133

)

 

(12.1

) %

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

 

3.65

%

 

 

3.36

%

 

 

0.29

%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2,641

 

 

$

2,420

 

 

$

221

 

 

9.1

%

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

 

3.57

%

 

 

3.29

%

 

 

0.28

%

 

 

 

Three months ended

June 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

Interest income

$

86,955

 

 

$

68,479

 

 

$

18,476

 

 

27.0

%

Interest expense

 

(1,909

)

 

 

(1,396

)

 

 

(513

)

 

36.7

%

Fully tax-equivalent adjustment (FTE) (1)

 

397

 

 

 

255

 

 

 

142

 

 

55.7

%

Net interest income (FTE)

$

85,443

 

 

$

67,338

 

 

$

18,105

 

 

26.9

%

Net interest margin (FTE)

 

3.67

%

 

 

3.58

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,677

 

 

$

2,566

 

 

$

(889

)

 

(34.6

) %

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

 

3.60

%

 

 

3.44

%

 

 

0.16

%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

964

 

 

$

3,179

 

 

$

(2,215

)

 

(69.7

) %

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

 

3.65

%

 

 

3.57

%

 

 

0.08

%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2,641

 

 

$

5,745

 

 

$

(3,104

)

 

(54.0

) %

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

 

3.57

%

 

 

3.43

%

 

 

0.14

%

 

 

 

Six months ended

June 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

Interest income

$

156,150

 

 

$

136,395

 

 

$

19,755

 

 

14.5

%

Interest expense

 

(3,180

)

 

 

(2,872

)

 

 

(308

)

 

10.7

%

Fully tax-equivalent adjustment (FTE) (1)

 

680

 

 

 

532

 

 

 

148

 

 

27.8

%

Net interest income (FTE)

$

153,650

 

 

$

134,055

 

 

$

19,595

 

 

14.6

%

Net interest margin (FTE)

 

3.54

%

 

 

3.66

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

3,000

 

 

$

4,278

 

 

$

(1,278

)

 

(29.9

) %

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

 

3.51

%

 

 

3.54

%

 

 

(0.03

) %

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2,061

 

 

$

9,042

 

 

$

(6,981

)

 

(77.2

) %

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

 

3.51

%

 

 

3.59

%

 

 

(0.08

) %

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

5,061

 

 

$

13,320

 

 

$

(8,259

)

 

(62.0

) %

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

 

3.44

%

 

 

3.46

%

 

 

(0.02

) %

 

 

(1)

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

Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. Generally, as time goes on, the dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. As a result of the increase in interest rates, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, declined during the first two quarters of 2022. During the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, purchased loan discount accretion was $1,677,000, $1,323,000, and $2,566,000, 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

 

June 30, 2022

 

March 31, 2022

 

June 30, 2021

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

5,890,578

 

$

68,954

 

4.70

%

 

$

4,937,865

 

$

56,648

 

4.65

%

 

$

4,646,188

 

$

57,125

 

4.93

%

PPP loans

 

37,852

 

 

964

 

10.22

%

 

 

50,695

 

 

1,097

 

8.78

%

 

 

332,277

 

 

3,179

 

3.84

%

Investments-taxable

 

2,536,362

 

 

14,350

 

2.27

%

 

 

2,313,204

 

 

10,223

 

1.79

%

 

 

1,875,056

 

 

7,189

 

1.54

%

Investments-nontaxable (1)

 

196,104

 

 

1,720

 

3.52

%

 

 

143,873

 

 

1,225

 

3.45

%

 

 

132,034

 

 

1,106

 

3.36

%

Total investments

 

2,732,466

 

 

16,070

 

2.36

%

 

 

2,457,077

 

 

11,448

 

1.89

%

 

 

2,007,090

 

 

8,295

 

1.66

%

Cash at Federal Reserve and other banks

 

669,163

 

 

1,364

 

0.82

%

 

 

707,563

 

 

285

 

0.16

%

 

 

559,026

 

 

135

 

0.10

%

Total earning assets

 

9,330,059

 

 

87,352

 

3.76

%

 

 

8,153,200

 

 

69,478

 

3.46

%

 

 

7,544,581

 

 

68,734

 

3.65

%

Other assets, net

 

791,655

 

 

 

 

 

 

625,056

 

 

 

 

 

 

584,093

 

 

 

 

Total assets

$

10,121,714

 

 

 

 

 

$

8,778,256

 

 

 

 

 

$

8,128,674

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,799,205

 

$

99

 

0.02

%

 

$

1,597,309

 

$

84

 

0.02

%

 

$

1,490,247

 

$

77

 

0.02

%

Savings deposits

 

3,003,337

 

 

529

 

0.07

%

 

 

2,571,023

 

 

327

 

0.05

%

 

 

2,316,889

 

 

308

 

0.05

%

Time deposits

 

337,007

 

 

220

 

0.26

%

 

 

301,499

 

 

268

 

0.36

%

 

 

324,867

 

 

443

 

0.55

%

Total interest-bearing deposits

 

5,139,549

 

 

848

 

0.07

%

 

 

4,469,831

 

 

679

 

0.06

%

 

 

4,132,003

 

 

828

 

0.08

%

Other borrowings

 

35,253

 

 

5

 

0.06

%

 

 

44,731

 

 

5

 

0.05

%

 

 

40,986

 

 

5

 

0.05

%

Junior subordinated debt

 

100,991

 

 

1,056

 

4.19

%

 

 

60,971

 

 

587

 

3.90

%

 

 

57,788

 

 

563

 

3.91

%

Total interest-bearing liabilities

 

5,275,793

 

 

1,909

 

0.15

%

 

 

4,575,533

 

 

1,271

 

0.11

%

 

 

4,230,777

 

 

1,396

 

0.13

%

Noninterest-bearing deposits

 

3,603,771

 

 

 

 

 

 

3,052,099

 

 

 

 

 

 

2,811,078

 

 

 

 

Other liabilities

 

150,696

 

 

 

 

 

 

141,400

 

 

 

 

 

 

126,674

 

 

 

 

Shareholders’ equity

 

1,091,454

 

 

 

 

 

 

1,009,224

 

 

 

 

 

 

960,145

 

 

 

 

Total liabilities and shareholders’ equity

$

10,121,714

 

 

 

 

 

$

8,778,256

 

 

 

 

 

$

8,128,674

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

3.61

%

 

 

 

 

 

3.35

%

 

 

 

 

 

3.52

%

Net interest income and margin (1) (3)

 

 

$

85,443

 

3.67

%

 

 

 

$

68,207

 

3.39

%

 

 

 

$

67,338

 

3.58

%

(1)

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

(2)

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

(3)

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

Net interest income (FTE) during the three months ended June 30, 2022 increased $17,236,000 or 25.3% to $85,443,000 compared to $68,207,000 during the three months ended March 31, 2022. In addition, net interest margin improved 28 basis points to 3.67%, as compared to the trailing quarter. The increase in net interest income is primarily attributed to an additional $4,622,000 in investment revenues and $1,079,000 in revenues on cash balances due to increases in average volume and rates, respectively. As a partial offset, increases in the average balance and rates on subordinated debt resulted in an increase in interest expense of $469,000 over the trailing quarter.

As compared to the same quarter in the prior year, average loan yields, excluding PPP, decreased 23 basis points from 4.93% during the three months ended June 30, 2021, to 4.70% during the three months ended June 30, 2022. The accretion of discounts from acquired loans added 11 and 22 basis points to loan yields during the quarters ended June 30, 2022 and June 30, 2021, respectively. Therefore, of the 23 basis point decrease in yields on loans during the comparable three month periods ended June 30, 2022 and 2021, 12 basis points was attributable to changes in competitive market rates, while 11 basis points resulted from less accretion of discounts.

The rates paid on interest bearing deposits generally remained flat during the quarter ended June 30, 2022 compared to the trailing quarter. The cost of interest-bearing deposits decreased by 1 basis point during the quarter ended June 30, 2022, to 0.07% from 0.08% during the same quarter of the prior year. In addition, the level of noninterest-bearing deposits continues to benefit the average cost of total deposits which remained flat at 0.04% in both the current and trailing quarter, compared to 0.5% in the second quarter of the prior year. Specifically, the ratio of average total noninterest-bearing deposits to total average deposits was 41.2% and 40.6% as of June 30, 2022 and March 31, 2022, respectively, as compared to 40.5% for the quarter ended June 30, 2021.

 

Six months ended June 30, 2022

 

Six months ended June 30, 2021

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Income/

Expense

 

Yield/

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

5,416,854

 

$

125,602

 

4.68

%

 

$

4,527,329

 

$

111,698

 

4.98

%

PPP loans

 

44,238

 

 

2,061

 

9.40

%

 

 

344,011

 

 

9,042

 

5.30

%

Investments-taxable

 

2,434,045

 

 

24,573

 

2.04

%

 

 

1,763,140

 

 

13,583

 

1.55

%

Investments-nontaxable (1)

 

170,132

 

 

2,945

 

3.49

%

 

 

128,564

 

 

2,306

 

3.62

%

Total investments

 

2,604,177

 

 

27,518

 

2.13

%

 

 

1,891,704

 

 

15,889

 

1.69

%

Cash at Federal Reserve and other banks

 

688,257

 

 

1,649

 

0.48

%

 

 

629,952

 

 

298

 

0.10

%

Total earning assets

 

8,753,526

 

 

156,830

 

3.61

%

 

 

7,392,996

 

 

136,927

 

3.73

%

Other assets, net

 

700,170

 

 

 

 

 

 

575,138

 

 

 

 

Total assets

$

9,453,696

 

 

 

 

 

$

7,968,134

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,698,815

 

$

183

 

0.02

%

 

$

1,461,377

 

$

153

 

0.02

%

Savings deposits

 

2,788,374

 

 

856

 

0.06

%

 

 

2,272,830

 

 

637

 

0.06

%

Time deposits

 

319,351

 

 

488

 

0.31

%

 

 

330,703

 

 

975

 

0.59

%

Total interest-bearing deposits

 

4,806,540

 

 

1,527

 

0.06

%

 

 

4,064,910

 

 

1,765

 

0.09

%

Other borrowings

 

39,966

 

 

10

 

0.05

%

 

 

36,870

 

 

9

 

0.05

%

Junior subordinated debt

 

81,092

 

 

1,643

 

4.09

%

 

 

57,739

 

 

1,098

 

3.83

%

Total interest-bearing liabilities

 

4,927,598

 

 

3,180

 

0.13

%

 

 

4,159,519

 

 

2,872

 

0.14

%

Noninterest-bearing deposits

 

3,329,459

 

 

 

 

 

 

2,734,922

 

 

 

 

Other liabilities

 

146,073

 

 

 

 

 

 

123,233

 

 

 

 

Shareholders’ equity

 

1,050,566

 

 

 

 

 

 

950,460

 

 

 

 

Total liabilities and shareholders’ equity

$

9,453,696

 

 

 

 

 

$

7,968,134

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

3.48

%

 

 

 

 

 

3.59

%

Net interest income and margin (1) (3)

 

 

$

153,650

 

3.54

%

 

 

 

$

134,055

 

3.66

%

(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 June 30, 2022, market interest rates, including many rates that serve as reference indices for variable rate loans, increased modestly. However, the loan portfolio yield continues to have a temporary downward bias due to the timing associated with the repricing of variable rate loans and continued market competition. As of June 30, 2022, the Company's loan portfolio consisted of approximately $6.1 billion in outstanding principal with a weighted average coupon rate of 4.39%, inclusive of PPP loans. Excluding PPP loans, the Company's loan portfolio has approximately $6.09 billion outstanding loan balances with a weighted average coupon rate of 4.40% as of June 30, 2022. Included in the June 30, 2022 loan total are variable rate loans totaling $3.5 billion, of which, $875 million are considered floating based on the Wall Street Prime index.

Asset Quality and Credit Loss Provisioning

During the three months ended June 30, 2022, the Company recorded a provision for credit losses of $2,100,000, as compared to a $8,330,000 provision during the trailing quarter, and a reversal of provision expense of $260,000 during the first quarter of 2021.

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

 

Three months ended

(dollars in thousands)

June 30, 2022

 

March 31, 2022

 

December 31, 2021

 

June 30, 2021

Addition to (reversal of) allowance for credit losses

$

1,940

 

$

8,205

 

$

715

 

$

(145

)

Addition to (reversal of) reserve for unfunded loan commitments

 

160

 

 

125

 

 

265

 

 

(115

)

Total provision for (reversal of) credit losses

$

2,100

 

$

8,330

 

$

980

 

$

(260

)

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

 

Three months ended

 

Six months ended

(dollars in thousands)

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

Balance, beginning of period

$

96,049

 

 

$

85,941

 

 

$

85,376

 

 

$

91,847

 

ACL at acquisition for PCD loans

 

 

 

 

 

 

 

2,037

 

 

 

 

Provision for (reversal of) credit losses

 

1,940

 

 

 

(145

)

 

 

10,145

 

 

 

(6,385

)

Loans charged-off

 

(401

)

 

 

(387

)

 

 

(1,144

)

 

 

(613

)

Recoveries of previously charged-off loans

 

356

 

 

 

653

 

 

 

1,530

 

 

 

1,213

 

Balance, end of period

$

97,944

 

 

$

86,062

 

 

$

97,944

 

 

$

86,062

 

The allowance for credit losses (ACL) was $97,944,000 as of June 30, 2022, a net increase of $1,895,000 over the immediately preceding quarter. The provision for credit losses of $1,940,000 during the quarter was the net effect of increases in required reserves due to loan growth and net charge-offs totaling $45,000. By comparison, the provision for credit losses of $10,145,000 during the six-months ended June 30, 2022 was generally comprised of $10,820,000 in association with the loans acquired from Valley Republic Bank and a net reversal of credit losses of $675,000. The qualitative components of the ACL resulted in a net decline in required reserves due to continued improvement in US employment rates and tempered by a weaker outlook of US GDP. Meanwhile, the quantitative component of the ACL increased reserve requirements over the trailing quarter due to loan volume growth partially offset by decreases in reserves associated with specifically evaluated loans.

The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date. This forecast data continues to evolve and included improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date, particularly CA unemployment trends. However, management notes that the majority of economic forecasts utilized in the ACL calculation have remained directionally consistent with preceding quarters, as general economic conditions continue to improve, albeit at a pace slower than expected due to unforeseen disruptions in the supply chain and increasing energy prices. In addition, management notes that the actual and forecast increases in inflation that were previously identified by the Federal Reserve Board as "transitory", combined with overseas conflicts and leading to the rise in short-term interest rates and flattening or inversion of the yield curve, may be further indication of future economic contraction. As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors.

Loans past due 30 days or more decreased by $2,482,000 during the quarter ended June 30, 2022 to $5,920,000, as compared to $8,402,000 at March 31, 2022. Non-performing loans were $11,925,000 at June 30, 2022, a decrease of $2,163,000 and $20,780,000 from $14,088,000 and $32,705,000 as of March 31, 2022 and June 30, 2021, respectively.

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

 

June 30,

% of Total

Loans

 

March 31,

% of Total

Loans

 

June 30,

% of Total

Loans

(dollars in thousands)

2022

 

2022

 

2021

Risk Rating:

 

 

 

 

 

 

 

 

Pass

$

5,960,781

 

97.5

%

 

$

5,682,026

 

97.1

%

 

$

4,756,381

 

96.2

%

Special Mention

 

105,819

 

1.7

%

 

 

120,684

 

2.1

%

 

 

130,232

 

2.6

%

Substandard

 

46,821

 

0.8

%

 

 

49,265

 

0.8

%

 

 

58,281

 

1.2

%

Total

$

6,113,421

 

 

 

$

5,851,975

 

 

 

$

4,944,894

 

 

 

 

 

 

 

 

 

 

 

Classified loans to total loans

 

0.77

%

 

 

 

0.84

%

 

 

 

1.18

%

 

Loans past due 30+ days to total loans

 

0.10

%

 

 

 

0.14

%

 

 

 

0.19

%

 

The ratio of classified loans to total loans improved to 0.77% as of June 30, 2022 as compared to both 0.84% and 1.18% for the trailing quarter and same quarter of the prior year, respectively. The Company's criticized loan balances decreased during the current quarter by approximately $17,309,000 to $152,640,000 as of June 30, 2022. The improvement in criticized loans was the result of active management by the credit department, as there were no loan sales during the period. The five largest criticized credits upgraded or paid off totaled approximately $8,800,000, and there were no charge-offs incurred in connection with the successful management of these credits.

There was one property added to other real estate owned totaling $375,000 during the quarter ended June 30, 2022, and no disposals. As of June 30, 2022, other real estate owned consisted of nine properties with a carrying value of approximately $3,379,000.

Non-performing assets of $15,304,000 at June 30, 2022 represented 0.15% of total assets, a decrease from the $16,995,000 or 0.17% and $34,952,000 or 0.43% as of March 31, 2022 and June 30, 2021, respectively. The improvement in non-performing assets during the current quarter was spread amongst several lending relationships.

Allocation of Credit Loss Reserves by Loan Type

 

As of June 30, 2022

As of December 31, 2021

 

As of June 30, 2021

(dollars in thousands)

 

Amount

 

% of Loans

Outstanding

 

Amount

 

% of Loans

Outstanding

 

Amount

 

% of Loans

Outstanding

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

CRE - Non Owner Occupied

 

$

28,081

 

1.41

%

 

$

25,739

 

1.61

%

 

$

26,028

 

1.70

%

CRE - Owner Occupied

 

 

12,620

 

1.35

%

 

 

10,691

 

1.51

%

 

 

10,463

 

1.59

%

Multifamily

 

 

11,795

 

1.36

%

 

 

12,395

 

1.51

%

 

 

13,196

 

1.59

%

Farmland

 

 

2,954

 

1.17

%

 

 

2,315

 

1.34

%

 

 

1,950

 

1.13

%

Total commercial real estate loans

 

 

55,450

 

1.37

%

 

 

51,140

 

1.55

%

 

 

51,637

 

1.62

%

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

SFR 1-4 1st Liens

 

 

10,311

 

1.43

%

 

 

10,723

 

1.60

%

 

 

10,629

 

1.61

%

SFR HELOCs and Junior Liens

 

 

11,591

 

3.01

%

 

 

10,510

 

3.11

%

 

 

10,701

 

3.29

%

Other

 

 

2,029

 

3.41

%

 

 

2,241

 

3.34

%

 

 

2,620

 

3.73

%

Total consumer loans

 

 

23,931

 

2.06

%

 

 

23,474

 

2.19

%

 

 

23,950

 

2.27

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

 

9,979

 

1.97

%

 

 

3,862

 

1.49

%

 

 

4,511

 

1.00

%

Construction

 

 

7,522

 

2.40

%

 

 

5,667

 

2.55

%

 

 

4,951

 

2.47

%

Agricultural Production

 

 

1,046

 

1.47

%

 

 

1,215

 

2.39

%

 

 

1,007

 

2.40

%

Leases

 

 

16

 

0.20

%

 

 

18

 

0.27

%

 

 

6

 

0.12

%

Allowance for credit losses

 

 

97,944

 

1.60

%

 

 

85,376

 

1.74

%

 

 

86,062

 

1.74

%

Reserve for unfunded loan commitments

 

 

4,075

 

 

 

 

3,790

 

 

 

 

3,465

 

 

Total allowance for credit losses

 

$

102,019

 

1.67

%

 

$

89,166

 

1.81

%

 

$

89,527

 

1.81

%

For the periods presented in the table above and for purposes of calculating the "% of Loans Outstanding", PPP loans are included in the segment "Commercial and Industrial." PPP loans are fully guaranteed and therefore would not require any loss reserve allocation. Excluding the net outstanding balances of PPP loans from the ratio of the ACL to total loans results in a reserve ratio of approximately 1.61% as of June 30, 2022. In addition to the allowance for credit losses above, the Company has acquired various performing loans whose fair value as of the acquisition date was determined to be less than the principal balance owed on those loans. This difference represents the collective discount of credit, interest rate and liquidity measurements which is expected to be amortized over the life of the loans. As of June 30, 2022, the unamortized discount associated with acquired loans totaled $33,100,000 and, if aggregated with the ACL, would collectively represent 2.13% of total gross loans and 2.15% of total loans less PPP loans.

SBA Paycheck Protection Program

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

(dollars in thousands)

June 30, 2022

 

December 31, 2021

 

June 30, 2021

Total number of PPP loans outstanding

 

90

 

 

450

 

 

2,209

 

 

 

 

 

 

PPP loan balance (TCBK round 1 origination), gross

$

1,183

 

$

2,544

 

$

51,547

PPP loan balance (TCBK round 2 origination), gross

 

9,442

 

 

60,767

 

 

197,035

Acquired PPP loan balance (VRB origination), gross

 

7,447

 

 

 

 

Total PPP loans, gross outstanding

$

18,072

 

$

63,311

 

$

248,582

 

 

 

 

 

 

PPP deferred loan fees (Round 1 origination)

 

 

 

1

 

 

477

PPP deferred loan fees (Round 2 origination)

 

318

 

 

2,163

 

 

8,513

Total PPP deferred loan fees (costs) outstanding

$

318

 

$

2,164

 

$

8,990

As of June 30, 2022, there was approximately $318,000 in net deferred fee income remaining to be recognized. During the three months ended June 30, 2022, the Company recognized $872,000 in fees on PPP loans as compared with $974,000 and $2,334,000 for the three months ended March 31, 2022 and June 30, 2021, respectively. Based on the payment guarantee provided by the SBA as well as the expected short-term duration of the PPP loans acquired from VRB, the fair value of these loans approximates the principal balance outstanding as of the merger date, and therefore, no purchase discount was recorded.

Non-interest Income

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

 

Three months ended

 

 

 

 

(dollars in thousands)

June 30, 2022

 

March 31, 2022

 

Change

 

% Change

ATM and interchange fees

$

6,984

 

 

$

6,243

 

 

$

741

 

 

11.9

%

Service charges on deposit accounts

 

4,163

 

 

 

3,834

 

 

 

329

 

 

8.6

%

Other service fees

 

1,279

 

 

 

882

 

 

 

397

 

 

45.0

%

Mortgage banking service fees

 

482

 

 

 

463

 

 

 

19

 

 

4.1

%

Change in value of mortgage servicing rights

 

136

 

 

 

274

 

 

 

(138

)

 

(50.4

) %

Total service charges and fees

 

13,044

 

 

 

11,696

 

 

 

1,348

 

 

11.5

%

Increase in cash value of life insurance

 

752

 

 

 

638

 

 

 

114

 

 

17.9

%

Asset management and commission income

 

1,039

 

 

 

887

 

 

 

152

 

 

17.1

%

Gain on sale of loans

 

542

 

 

 

1,246

 

 

 

(704

)

 

(56.5

) %

Lease brokerage income

 

238

 

 

 

158

 

 

 

80

 

 

50.6

%

Sale of customer checks

 

441

 

 

 

104

 

 

 

337

 

 

324.0

%

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

n/m

Loss on marketable equity securities

 

(94

)

 

 

(137

)

 

 

43

 

 

(31.4

) %

Other

 

468

 

 

 

504

 

 

 

(36

)

 

(7.1

) %

Total other non-interest income

 

3,386

 

 

 

3,400

 

 

 

(14

)

 

(0.4

) %

Total non-interest income

$

16,430

 

 

$

15,096

 

 

$

1,334

 

 

8.8

%

Non-interest income increased $1,334,000 or 8.8% to $16,430,000 during the three months ended June 30, 2022, compared to $15,096,000 during the quarter ended March 31, 2022. Generally, the quarter over quarter changes reflect the VRB merger timing of March 25, 2022, and therefore, had minimal benefit in the trailing quarter but are captured fully within the current quarter ended June 30, 2022. As an outlier, the gain on sale of mortgage loans declined by $704,000 or 56.5% during the quarter ended June 30, 2022, attributed to the rapidly rising rate environment and resulting decline in mortgage application and origination volumes.

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

 

Three months ended June 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

ATM and interchange fees

$

6,984

 

 

$

6,558

 

 

$

426

 

 

6.5

%

Service charges on deposit accounts

 

4,163

 

 

 

3,462

 

 

 

701

 

 

20.2

%

Other service fees

 

1,279

 

 

 

914

 

 

 

365

 

 

39.9

%

Mortgage banking service fees

 

482

 

 

 

467

 

 

 

15

 

 

3.2

%

Change in value of mortgage servicing rights

 

136

 

 

 

(471

)

 

 

607

 

 

(128.9

) %

Total service charges and fees

 

13,044

 

 

 

10,930

 

 

 

2,114

 

 

19.3

%

Increase in cash value of life insurance

 

752

 

 

 

745

 

 

 

7

 

 

0.9

%

Asset management and commission income

 

1,039

 

 

 

947

 

 

 

92

 

 

9.7

%

Gain on sale of loans

 

542

 

 

 

2,847

 

 

 

(2,305

)

 

(81.0

) %

Lease brokerage income

 

238

 

 

 

249

 

 

 

(11

)

 

(4.4

) %

Sale of customer checks

 

441

 

 

 

116

 

 

 

325

 

 

280.2

%

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

n/m

(Loss) gain on marketable equity securities

 

(94

)

 

 

8

 

 

 

(102

)

 

(1,275.0

) %

Other

 

468

 

 

 

115

 

 

 

353

 

 

307.0

%

Total other non-interest income

 

3,386

 

 

 

5,027

 

 

 

(1,641

)

 

(32.6

) %

Total non-interest income

$

16,430

 

 

$

15,957

 

 

$

473

 

 

3.0

%

In addition to the discussion above, within the non-interest income for the three months ended June 30, 2022, ATM and interchange fees improved $426,000 or 6.5%, as did service charges on deposit accounts totaling $701,000 or 20.2%, both as a result of increased usage due to relaxed social distancing guidelines and growth in deposit customers during the six months ended June 30, 2022, when compared to the same period in the prior year. Further, changes in the value of mortgage service rights, while lesser in magnitude, typically have an inverse relationship with changes in mortgage banking activities.

 

Six months ended June 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

ATM and interchange fees

$

13,227

 

 

$

12,419

 

 

$

808

 

 

6.5

%

Service charges on deposit accounts

 

7,997

 

 

 

6,731

 

 

 

1,266

 

 

18.8

%

Other service fees

 

2,161

 

 

 

1,785

 

 

 

376

 

 

21.1

%

Mortgage banking service fees

 

945

 

 

 

930

 

 

 

15

 

 

1.6

%

Change in value of mortgage servicing rights

 

410

 

 

 

(459

)

 

 

869

 

 

(189.3

) %

Total service charges and fees

 

24,740

 

 

 

21,406

 

 

 

3,334

 

 

15.6

%

Increase in cash value of life insurance

 

1,390

 

 

 

1,418

 

 

 

(28

)

 

(2.0

) %

Asset management and commission income

 

1,926

 

 

 

1,781

 

 

 

145

 

 

8.1

%

Gain on sale of loans

 

1,788

 

 

 

6,094

 

 

 

(4,306

)

 

(70.7

) %

Lease brokerage income

 

396

 

 

 

359

 

 

 

37

 

 

10.3

%

Sale of customer checks

 

545

 

 

 

235

 

 

 

310

 

 

131.9

%

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

n/m

Loss on marketable equity securities

 

(231

)

 

 

(45

)

 

 

(186

)

 

413.3

%

Other

 

972

 

 

 

819

 

 

 

153

 

 

18.7

%

Total other non-interest income

 

6,786

 

 

 

10,661

 

 

 

(3,875

)

 

(36.3

) %

Total non-interest income

$

31,526

 

 

$

32,067

 

 

$

(541

)

 

(1.7

) %

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

Non-interest Expense

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

 

Three months ended

 

 

 

 

(dollars in thousands)

June 30, 2022

 

March 31, 2022

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

22,169

 

 

$

18,216

 

 

$

3,953

 

 

21.7

%

Incentive compensation

 

4,282

 

 

 

2,583

 

 

 

1,699

 

 

65.8

%

Benefits and other compensation costs

 

6,491

 

 

 

5,972

 

 

 

519

 

 

8.7

%

Total salaries and benefits expense

 

32,942

 

 

 

26,771

 

 

 

6,171

 

 

23.1

%

Occupancy

 

3,996

 

 

 

3,575

 

 

 

421

 

 

11.8

%

Data processing and software

 

3,596

 

 

 

3,513

 

 

 

83

 

 

2.4

%

Equipment

 

1,453

 

 

 

1,333

 

 

 

120

 

 

9.0

%

Intangible amortization

 

1,702

 

 

 

1,228

 

 

 

474

 

 

38.6

%

Advertising

 

818

 

 

 

637

 

 

 

181

 

 

28.4

%

ATM and POS network charges

 

1,781

 

 

 

1,375

 

 

 

406

 

 

29.5

%

Professional fees

 

1,233

 

 

 

876

 

 

 

357

 

 

40.8

%

Telecommunications

 

564

 

 

 

521

 

 

 

43

 

 

8.3

%

Regulatory assessments and insurance

 

779

 

 

 

720

 

 

 

59

 

 

8.2

%

Merger and acquisition expenses

 

2,221

 

 

 

4,032

 

 

 

(1,811

)

 

(44.9

) %

Postage

 

313

 

 

 

228

 

 

 

85

 

 

37.3

%

Operational (gain) loss

 

456

 

 

 

(183

)

 

 

639

 

 

(349.2

) %

Courier service

 

486

 

 

 

414

 

 

 

72

 

 

17.4

%

Gain on sale or acquisition of foreclosed assets

 

(98

)

 

 

 

 

 

(98

)

 

n/m

(Gain) loss on disposal of fixed assets

 

5

 

 

 

(1,078

)

 

 

1,083

 

 

(100.5

) %

Other miscellaneous expense

 

4,017

 

 

 

2,485

 

 

 

1,532

 

 

61.6

%

Total other non-interest expense

 

23,322

 

 

 

19,676

 

 

 

3,646

 

 

18.5

%

Total non-interest expense

$

56,264

 

 

$

46,447

 

 

$

9,817

 

 

21.1

%

Average full-time equivalent staff

 

1,183

 

 

 

1,084

 

 

 

99

 

 

9.1

%

Non-interest expense for the quarter ended June 30, 2022 increased $9,817,000 or 21.1% to $56,264,000 as compared to $46,447,000 during the trailing quarter ended March 31, 2022. Total salaries and benefits expense increased by $6,171,000 or 23.1%, led by wage related increases of $3,953,000 or 21.7% to $22,169,000 due to a net increase of 99 full-time equivalent positions following the aforementioned merger with VRB, an increase in vacation accruals which management believes are partially seasonal, and annual merit increases which averaged 3.1% and were effective March 28, 2022. Incentive compensation increased by $1,699,000 or 65.8% to $4,282,000 compared to the trailing quarter due to strong overall Company performance and elevated levels of loan production and growth. Merger and acquisition expenses associated with the VRB merger totaled $2,221,000 during the current quarter and are not expected to be significant in future periods. Included in the current quarter's merger and acquisition expenses are costs associated with the contractual obligations owed to a former VRB executive whom recently resigned from the Company to accept employment outside of the banking industry.

During the three months ended March 31, 2022, the Company sold a former administrative building and relocated a branch during the previous quarter resulting in a net gain on disposal of approximately $1,078,000 as noted above.

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

 

Three months ended June 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

22,169

 

 

$

17,537

 

 

$

4,632

 

 

26.4

%

Incentive compensation

 

4,282

 

 

 

4,322

 

 

 

(40

)

 

(0.9

) %

Benefits and other compensation costs

 

6,491

 

 

 

5,222

 

 

 

1,269

 

 

24.3

%

Total salaries and benefits expense

 

32,942

 

 

 

27,081

 

 

 

5,861

 

 

21.6

%

Occupancy

 

3,996

 

 

 

3,700

 

 

 

296

 

 

8.0

%

Data processing and software

 

3,596

 

 

 

3,201

 

 

 

395

 

 

12.3

%

Equipment

 

1,453

 

 

 

1,207

 

 

 

246

 

 

20.4

%

Intangible amortization

 

1,702

 

 

 

1,431

 

 

 

271

 

 

18.9

%

Advertising

 

818

 

 

 

734

 

 

 

84

 

 

11.4

%

ATM and POS network charges

 

1,781

 

 

 

1,551

 

 

 

230

 

 

14.8

%

Professional fees

 

1,233

 

 

 

1,046

 

 

 

187

 

 

17.9

%

Telecommunications

 

564

 

 

 

564

 

 

 

 

 

%

Regulatory assessments and insurance

 

779

 

 

 

618

 

 

 

161

 

 

26.1

%

Merger and acquisition expenses

 

2,221

 

 

 

 

 

 

2,221

 

 

n/m

Postage

 

313

 

 

 

124

 

 

 

189

 

 

152.4

%

Operational loss

 

456

 

 

 

212

 

 

 

244

 

 

115.1

%

Courier service

 

486

 

 

 

288

 

 

 

198

 

 

68.8

%

Gain on sale or acquisition of foreclosed assets

 

(98

)

 

 

(15

)

 

 

(83

)

 

553.3

%

(Gain) loss on disposal of fixed assets

 

5

 

 

 

(426

)

 

 

431

 

 

(101.2

) %

Other miscellaneous expense

 

4,017

 

 

 

2,855

 

 

 

1,162

 

 

40.7

%

Total other non-interest expense

 

23,322

 

 

 

17,090

 

 

 

6,232

 

 

36.5

%

Total non-interest expense

$

56,264

 

 

$

44,171

 

 

$

12,093

 

 

27.4

%

Average full-time equivalent staff

 

1,183

 

 

 

1,020

 

 

 

163

 

 

16.0

%

Total non-interest expense increased $12,093,000 or 27.4% to $56,264,000 during the three months ended June 30, 2022 as compared to $44,171,000 for the trailing quarter ended, for reasons similar to those referenced above.

 

Six months ended June 30,

 

 

 

 

(dollars in thousands)

2022

 

2021

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

40,385

 

 

$

33,048

 

 

$

7,337

 

 

22.2

%

Incentive compensation

 

6,865

 

 

 

7,902

 

 

 

(1,037

)

 

(13.1

) %

Benefits and other compensation costs

 

12,463

 

 

 

11,461

 

 

 

1,002

 

 

8.7

%

Total salaries and benefits expense

 

59,713

 

 

 

52,411

 

 

 

7,302

 

 

13.9

%

Occupancy

 

7,571

 

 

 

7,426

 

 

 

145

 

 

2.0

%

Data processing and software

 

7,109

 

 

 

6,403

 

 

 

706

 

 

11.0

%

Equipment

 

2,786

 

 

 

2,724

 

 

 

62

 

 

2.3

%

Intangible amortization

 

2,930

 

 

 

2,862

 

 

 

68

 

 

2.4

%

Advertising

 

1,455

 

 

 

1,114

 

 

 

341

 

 

30.6

%

ATM and POS network charges

 

3,156

 

 

 

2,797

 

 

 

359

 

 

12.8

%

Professional fees

 

2,109

 

 

 

1,640

 

 

 

469

 

 

28.6

%

Telecommunications

 

1,085

 

 

 

1,145

 

 

 

(60

)

 

(5.2

) %

Regulatory assessments and insurance

 

1,499

 

 

 

1,230

 

 

 

269

 

 

21.9

%

Merger and acquisition expenses

 

6,253

 

 

 

 

 

 

6,253

 

 

n/m

Postage

 

541

 

 

 

322

 

 

 

219

 

 

68.0

%

Operational loss

 

273

 

 

 

421

 

 

 

(148

)

 

(35.2

) %

Courier service

 

900

 

 

 

582

 

 

 

318

 

 

54.6

%

Gain on sale or acquisition of foreclosed assets

 

(98

)

 

 

(66

)

 

 

(32

)

 

48.5

%

Gain on disposal of fixed assets

 

(1,073

)

 

 

(426

)

 

 

(647

)

 

151.9

%

Other miscellaneous expense

 

6,502

 

 

 

5,204

 

 

 

1,298

 

 

24.9

%

Total other non-interest expense

 

42,998

 

 

 

33,378

 

 

 

9,620

 

 

28.8

%

Total non-interest expense

$

102,711

 

 

$

85,789

 

 

$

16,922

 

 

19.7

%

Average full-time equivalent staff

 

1,133

 

 

 

1,022

 

 

 

111

 

 

10.9

%

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

Provision for Income Taxes

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

About TriCo Bancshares

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

Forward-Looking Statement

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

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands, except share data)

 

 

Three months ended

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

June 30,

2021

Revenue and Expense Data

 

 

 

 

 

 

 

 

 

Interest income

$

86,955

 

 

$

69,195

 

 

$

71,024

 

 

$

69,628

 

 

$

68,479

 

Interest expense

 

1,909

 

 

 

1,271

 

 

 

1,241

 

 

 

1,395

 

 

 

1,396

 

Net interest income

 

85,046

 

 

 

67,924

 

 

 

69,783

 

 

 

68,233

 

 

 

67,083

 

Provision for (benefit from) credit losses

 

2,100

 

 

 

8,330

 

 

 

980

 

 

 

(1,435

)

 

 

(260

)

Noninterest income:

 

 

 

 

 

 

 

 

 

Service charges and fees

 

13,044

 

 

 

11,696

 

 

 

11,277

 

 

 

11,265

 

 

 

10,930

 

Gain on sale of investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

3,386

 

 

 

3,400

 

 

 

5,225

 

 

 

3,830

 

 

 

5,027

 

Total noninterest income

 

16,430

 

 

 

15,096

 

 

 

16,502

 

 

 

15,095

 

 

 

15,957

 

Noninterest expense (2):

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

34,370

 

 

 

28,597

 

 

 

27,666

 

 

 

26,274

 

 

 

27,081

 

Occupancy and equipment

 

5,449

 

 

 

4,925

 

 

 

5,011

 

 

 

5,107

 

 

 

4,907

 

Data processing and network

 

5,468

 

 

 

5,089

 

 

 

5,444

 

 

 

5,381

 

 

 

4,752

 

Other noninterest expense

 

10,977

 

 

 

7,836

 

 

 

8,558

 

 

 

9,045

 

 

 

7,431

 

Total noninterest expense

 

56,264

 

 

 

46,447

 

 

 

46,679

 

 

 

45,807

 

 

 

44,171

 

Total income before taxes

 

43,112

 

 

 

28,243

 

 

 

38,626

 

 

 

38,956

 

 

 

39,129

 

Provision for income taxes

 

11,748

 

 

 

7,869

 

 

 

10,404

 

 

 

11,534

 

 

 

10,767

 

Net income

$

31,364

 

 

$

20,374

 

 

$

28,222

 

 

$

27,422

 

 

$

28,362

 

Share Data

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.93

 

 

$

0.68

 

 

$

0.95

 

 

$

0.92

 

 

$

0.95

 

Diluted earnings per share

$

0.93

 

 

$

0.67

 

 

$

0.94

 

 

$

0.92

 

 

$

0.95

 

Dividends per share

$

0.25

 

 

$

0.25

 

 

$

0.25

 

 

$

0.25

 

 

$

0.25

 

Book value per common share

$

31.25

 

 

$

32.78

 

 

$

33.64

 

 

$

33.05

 

 

$

32.53

 

Tangible book value per common share (1)

$

21.41

 

 

$

23.04

 

 

$

25.80

 

 

$

25.16

 

 

$

24.60

 

Shares outstanding

 

33,350,974

 

 

 

33,837,935

 

 

 

29,730,424

 

 

 

29,714,609

 

 

 

29,716,294

 

Weighted average shares

 

33,561,389

 

 

 

30,049,919

 

 

 

29,723,791

 

 

 

29,713,558

 

 

 

29,718,603

 

Weighted average diluted shares

 

33,705,280

 

 

 

30,201,698

 

 

 

29,870,059

 

 

 

29,850,530

 

 

 

29,903,560

 

Credit Quality

 

 

 

 

 

 

 

 

 

Allowance for credit losses to gross loans

 

1.60

%

 

 

1.64

%

 

 

1.74

%

 

 

1.72

%

 

 

1.74

%

Loans past due 30 days or more

$

5,920

 

 

$

8,402

 

 

$

4,332

 

 

$

10,539

 

 

$

9,292

 

Total nonperforming loans

$

11,925

 

 

$

14,088

 

 

$

30,350

 

 

$

28,790

 

 

$

32,705

 

Total nonperforming assets

$

15,304

 

 

$

16,995

 

 

$

32,944

 

 

$

31,440

 

 

$

34,952

 

Loans charged-off

$

401

 

 

$

743

 

 

$

197

 

 

$

1,582

 

 

$

387

 

Loans recovered

$

356

 

 

$

1,174

 

 

$

552

 

 

$

1,321

 

 

$

653

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

Return on average total assets

 

1.24

%

 

 

0.94

%

 

 

1.31

%

 

 

1.30

%

 

 

1.40

%

Return on average equity

 

11.53

%

 

 

8.19

%

 

 

11.20

%

 

 

11.02

%

 

 

11.85

%

Average yield on loans, excluding PPP

 

4.70

%

 

 

4.65

%

 

 

4.73

%

 

 

4.85

%

 

 

4.93

%

Average yield on interest-earning assets

 

3.76

%

 

 

3.46

%

 

 

3.56

%

 

 

3.57

%

 

 

3.65

%

Average rate on interest-bearing deposits

 

0.07

%

 

 

0.06

%

 

 

0.06

%

 

 

0.08

%

 

 

0.08

%

Average cost of total deposits

 

0.04

%

 

 

0.04

%

 

 

0.04

%

 

 

0.05

%

 

 

0.05

%

Average rate on borrowings & subordinated debt

 

3.12

%

 

 

2.27

%

 

 

1.98

%

 

 

2.02

%

 

 

2.31

%

Average rate on interest-bearing liabilities

 

0.15

%

 

 

0.11

%

 

 

0.11

%

 

 

0.13

%

 

 

0.13

%

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

 

3.67

%

 

 

3.39

%

 

 

3.50

%

 

 

3.50

%

 

 

3.58

%

Loans to deposits

 

69.81

%

 

 

67.15

%

 

 

66.74

%

 

 

67.54

%

 

 

70.72

%

Efficiency ratio

 

55.45

%

 

 

55.95

%

 

 

54.10

%

 

 

54.97

%

 

 

53.19

%

Supplemental Loan Interest Income Data

 

 

 

 

 

 

 

 

 

Discount accretion on acquired loans

$

1,677

 

 

$

1,323

 

 

$

1,780

 

 

$

2,034

 

 

$

2,566

 

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

$

67,277

 

 

$

55,325

 

 

$

54,930

 

 

$

55,184

 

 

$

54,559

 

Total loan interest income (excluding PPP) (1)

$

68,954

 

 

$

56,648

 

 

$

56,710

 

 

$

57,218

 

 

$

57,125

 

(1) Non-GAAP measure

(2) Inclusive of merger related expenses

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands)

 

 

Balance Sheet Data

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

June 30,

2021

Cash and due from banks

$

488,868

 

 

$

1,035,683

 

 

$

768,421

 

 

$

740,236

 

 

$

639,740

 

Securities, available for sale, net

 

2,608,771

 

 

 

2,365,708

 

 

 

2,210,876

 

 

 

2,098,786

 

 

 

1,850,547

 

Securities, held to maturity, net

 

176,794

 

 

 

186,748

 

 

 

199,759

 

 

 

216,979

 

 

 

235,778

 

Restricted equity securities

 

17,250

 

 

 

17,250

 

 

 

17,250

 

 

 

17,250

 

 

 

17,250

 

Loans held for sale

 

1,216

 

 

 

1,030

 

 

 

3,466

 

 

 

3,072

 

 

 

5,723

 

Loans:

 

 

 

 

 

 

 

 

 

Commercial real estate

 

4,049,893

 

 

 

3,832,974

 

 

 

3,306,054

 

 

 

3,222,737

 

 

 

3,194,336

 

Consumer

 

1,162,989

 

 

 

1,136,712

 

 

 

1,071,551

 

 

 

1,053,653

 

 

 

1,050,609

 

Commercial and industrial

 

507,685

 

 

 

500,882

 

 

 

259,355

 

 

 

345,027

 

 

 

452,069

 

Construction

 

313,646

 

 

 

303,960

 

 

 

222,281

 

 

 

216,680

 

 

 

200,714

 

Agriculture production

 

71,373

 

 

 

69,339

 

 

 

50,811

 

 

 

44,410

 

 

 

41,967

 

Leases

 

7,835

 

 

 

8,108

 

 

 

6,572

 

 

 

4,989

 

 

 

5,199

 

Total loans, gross

 

6,113,421

 

 

 

5,851,975

 

 

 

4,916,624

 

 

 

4,887,496

 

 

 

4,944,894

 

Allowance for credit losses

 

(97,944

)

 

 

(96,049

)

 

 

(85,376

)

 

 

(84,306

)

 

 

(86,062

)

Total loans, net

 

6,015,477

 

 

 

5,755,926

 

 

 

4,831,248

 

 

 

4,803,190

 

 

 

4,858,832

 

Premises and equipment

 

73,811

 

 

 

73,692

 

 

 

78,687

 

 

 

78,968

 

 

 

79,178

 

Cash value of life insurance

 

132,857

 

 

 

132,104

 

 

 

117,857

 

 

 

120,932

 

 

 

120,287

 

Accrued interest receivable

 

25,861

 

 

 

22,769

 

 

 

19,292

 

 

 

18,425

 

 

 

18,923

 

Goodwill

 

307,942

 

 

 

307,942

 

 

 

220,872

 

 

 

220,872

 

 

 

220,872

 

Other intangible assets

 

20,074

 

 

 

21,776

 

 

 

12,369

 

 

 

13,562

 

 

 

14,971

 

Operating leases, right-of-use

 

27,154

 

 

 

28,404

 

 

 

25,665

 

 

 

26,815

 

 

 

26,365

 

Other assets

 

224,536

 

 

 

169,296

 

 

 

109,025

 

 

 

98,943

 

 

 

81,899

 

Total assets

$

10,120,611

 

 

$

10,118,328

 

 

$

8,614,787

 

 

$

8,458,030

 

 

$

8,170,365

 

Deposits:

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

$

3,604,237

 

 

$

3,583,269

 

 

$

2,979,882

 

 

$

2,943,016

 

 

$

2,843,783

 

Interest-bearing demand deposits

 

1,796,580

 

 

 

1,788,639

 

 

 

1,568,682

 

 

 

1,519,426

 

 

 

1,486,321

 

Savings deposits

 

3,028,787

 

 

 

2,993,873

 

 

 

2,521,011

 

 

 

2,447,706

 

 

 

2,337,557

 

Time certificates

 

327,171

 

 

 

348,696

 

 

 

297,584

 

 

 

326,674

 

 

 

324,392

 

Total deposits

 

8,756,775

 

 

 

8,714,477

 

 

 

7,367,159

 

 

 

7,236,822

 

 

 

6,992,053

 

Accrued interest payable

 

755

 

 

 

653

 

 

 

928

 

 

 

1,056

 

 

 

1,026

 

Operating lease liability

 

29,283

 

 

 

30,500

 

 

 

26,280

 

 

 

27,290

 

 

 

26,707

 

Other liabilities

 

155,529

 

 

 

126,348

 

 

 

112,070

 

 

 

107,282

 

 

 

85,388

 

Other borrowings

 

35,089

 

 

 

36,184

 

 

 

50,087

 

 

 

45,601

 

 

 

40,559

 

Junior subordinated debt

 

101,003

 

 

 

100,984

 

 

 

58,079

 

 

 

57,965

 

 

 

57,852

 

Total liabilities

 

9,078,434

 

 

 

9,009,146

 

 

 

7,614,603

 

 

 

7,476,016

 

 

 

7,203,585

 

Common stock

 

696,441

 

 

 

706,672

 

 

 

532,244

 

 

 

531,339

 

 

 

531,038

 

Retained earnings

 

491,705

 

 

 

479,868

 

 

 

466,959

 

 

 

446,948

 

 

 

427,575

 

Accum. other comprehensive income (loss)

 

(145,969

)

 

 

(77,358

)

 

 

981

 

 

 

3,727

 

 

 

8,167

 

Total shareholders’ equity

$

1,042,177

 

 

$

1,109,182

 

 

$

1,000,184

 

 

$

982,014

 

 

$

966,780

 

Quarterly Average Balance Data

 

 

 

 

 

 

 

 

 

Average loans, excluding PPP

$

5,890,578

 

 

$

4,937,865

 

 

$

4,759,294

 

 

$

4,684,492

 

 

$

4,646,188

 

Average interest-earning assets

$

9,330,059

 

 

$

8,153,200

 

 

$

7,947,798

 

 

$

7,758,169

 

 

$

7,544,581

 

Average total assets

$

10,121,714

 

 

$

8,778,256

 

 

$

8,546,004

 

 

$

8,348,111

 

 

$

8,128,674

 

Average deposits

$

8,743,320

 

 

$

7,521,930

 

 

$

7,304,659

 

 

$

7,137,263

 

 

$

6,943,081

 

Average borrowings and subordinated debt

$

136,244

 

 

$

105,702

 

 

$

108,671

 

 

$

106,221

 

 

$

98,774

 

Average total equity

$

1,091,454

 

 

$

1,009,224

 

 

$

999,764

 

 

$

987,026

 

 

$

960,145

 

Capital Ratio Data

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

14.1

%

 

 

15.0

%

 

 

15.4

%

 

 

15.4

%

 

 

15.3

%

Tier 1 capital ratio

 

12.3

%

 

 

13.1

%

 

 

14.2

%

 

 

14.2

%

 

 

14.1

%

Tier 1 common equity ratio

 

11.5

%

 

 

12.3

%

 

 

13.2

%

 

 

13.2

%

 

 

13.0

%

Tier 1 leverage ratio

 

9.3

%

 

 

10.8

%

 

 

9.9

%

 

 

9.9

%

 

 

9.9

%

Tangible capital ratio (1)

 

7.3

%

 

 

8.0

%

 

 

9.2

%

 

 

9.1

%

 

 

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

 

Six months ended

(dollars in thousands)

June 30,

2022

 

March 31,

2022

 

June 30,

2021

 

June 30,

2022

 

June 30,

2021

Net interest margin

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$1,677

 

$1,323

 

$2,566

 

$3,000

 

$4,278

Effect on average loan yield

0.11 %

 

0.11 %

 

0.22 %

 

0.11 %

 

0.18 %

Effect on net interest margin (FTE)

0.07 %

 

0.07 %

 

0.14 %

 

0.03 %

 

0.12 %

Net interest margin (FTE)

3.67 %

 

3.39 %

 

3.58 %

 

3.54 %

 

3.66 %

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

3.60 %

 

3.32 %

 

3.44 %

 

3.51 %

 

3.54 %

PPP loans yield, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$964

 

$1,097

 

$3,179

 

$2,061

 

$9,042

Effect on net interest margin (FTE)

0.03 %

 

0.03 %

 

0.01 %

 

0.03 %

 

0.07 %

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

3.65 %

 

3.36 %

 

3.57 %

 

3.51 %

 

3.59 %

Acquired loan discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$2,641

 

$2,420

 

$5,745

 

$5,061

 

$13,320

Effect on net interest margin (FTE)

0.10 %

 

0.10 %

 

0.15 %

 

0.10 %

 

0.19 %

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

3.57 %

 

3.29 %

 

3.43 %

 

3.44 %

 

3.46 %

 

Three months ended

 

Six months ended

(dollars in thousands)

June 30,

2022

 

March 31,

2022

 

June 30,

2021

 

June 30,

2022

 

June 30,

2021

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

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$31,364

 

$20,374

 

$28,362

 

$51,738

 

$62,011

Exclude income tax expense

11,748

 

7,869

 

10,767

 

19,617

 

24,110

Exclude provision (benefit) for credit losses

2,100

 

8,330

 

(260)

 

10,430

 

(6,320)

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

$45,212

 

$36,573

 

$38,869

 

$81,785

 

$79,801

 

 

 

 

 

 

 

 

 

 

Average assets (GAAP)

$10,121,714

 

$8,778,256

 

$8,128,674

 

$9,453,696

 

$7,968,134

Average equity (GAAP)

$1,091,454

 

$1,009,224

 

$960,145

 

$1,050,566

 

$950,460

 

 

 

 

 

 

 

 

 

 

Return on average assets (GAAP) (annualized)

1.24 %

 

0.94 %

 

1.40 %

 

1.10 %

 

1.57 %

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

1.79 %

 

1.69 %

 

1.92 %

 

1.74 %

 

2.03 %

Return on average equity (GAAP) (annualized)

11.53 %

 

8.19 %

 

11.85 %

 

9.93 %

 

13.16 %

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

16.61 %

 

14.70 %

 

16.24 %

 

15.70 %

 

16.98 %

 

Three months ended

 

Six months ended

(dollars in thousands)

June 30,

2022

 

March 31,

2022

 

June 30,

2021

 

June 30,

2022

 

June 30,

2021

Return on tangible common equity

 

 

 

 

 

 

 

 

 

Average total shareholders' equity

$1,091,454

 

$1,009,224

 

$960,145

 

$1,050,566

 

$950,460

Exclude average goodwill

307,942

 

226,676

 

220,872

 

267,533

 

220,872

Exclude average other intangibles

21,040

 

12,604

 

15,687

 

16,845

 

19,264

Average tangible common equity (Non-GAAP)

$762,472

 

$769,944

 

$723,586

 

$766,188

 

$710,324

 

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$31,364

 

$20,374

 

$28,362

 

$51,738

 

$62,011

Exclude amortization of intangible assets, net of tax effect

1,199

 

865

 

1,008

 

2,064

 

2,016

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

$32,563

 

$21,239

 

$29,370

 

$53,802

 

$64,027

 

 

 

 

 

 

 

 

 

 

Return on average equity

11.53 %

 

8.19 %

 

11.85 %

 

9.93 %

 

13.16 %

Return on average tangible common equity (Non-GAAP)

17.13 %

 

11.19 %

 

16.28 %

 

14.16 %

 

18.18 %

 

Three months ended

(dollars in thousands)

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

June 30,

2021

Tangible shareholders' equity to tangible assets

 

 

 

 

 

 

 

 

 

Shareholders' equity (GAAP)

$1,042,177

 

$1,109,182

 

$1,000,184

 

$982,014

 

$966,780

Exclude goodwill and other intangible assets, net

328,016