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TriCo Bancshares Announces Quarterly Results

CHICO, Calif.--(BUSINESS WIRE)--

TriCo Bancshares (TCBK) (the "Company"), parent company of Tri Counties Bank, today announced net income of $22,726,000 for the quarter ended March 31, 2019, compared to $23,211,000 during the trailing quarter December 31, 2018 and $13,910,000 during the quarter ended March 31, 2018. Diluted earnings per share were $0.74 for the first quarter of 2019, compared to $0.76 for the fourth quarter of 2018 and $0.60 for the first quarter of 2018.

Financial Highlights

Performance highlights and other developments for the Company during the three months ended March 31, 2019 included the following:

  • For the three months ended March 31, 2019, the Company’s return on average assets was 1.41% and the return on average equity was 10.78%.
  • As of March 31, 2019, the Company reached record levels of total loans, total assets and total deposits which were $4.03 billion, $6.47 billion and $5.43 billion, respectively.
  • The loan to deposit ratio remained stable at 74.3% at March 31, 2019 as compared to 75.0% at December 31, 2018 and 75.2% at March 31, 2018.
  • Net interest margin grew 32 basis points to 4.46% on a tax equivalent basis as compared to 4.14% in the quarter ended March 31, 2018 and decreased by 7 basis points from the trailing quarter.
  • Non-interest bearing deposits as a percentage of total deposits were 32.4% at March 31, 2019, as compared to 32.8% at December 31, 2018 and 33.3% at March 31, 2018.
  • The average rate of interest paid on deposits, including noninterest-bearing deposits, remained low at 0.20%, with no change from the trailing quarter and an increase of 9 basis points from the average rate paid during the same quarter of the prior year.
  • Non-performing assets to total assets were 0.34% as of March 31, 2019 as compared to 0.47% and 0.54% at December 31, 2018 and March 31, 2018, respectively.
  • The balance of nonperforming loans decreased by $7.9 million and recoveries on previously charged-off loans significantly contributed to the $1.6 million reversal of the allowance for loan losses during the period.
  • The efficiency ratio increased slightly to 60.1% as compared to the trailing quarter, which had an efficiency ratio of 59.1%.

President and CEO, Rick Smith commented, “Our strategic focus on process improvement and efficiency through the use of technology, investments in the next generation of our leadership teams, and our commitment to delivering service with solutions to our customers remain as the keys to the continued success of the Company. With the storm filled weeks of winter behind us, we remain optimistic about the growth possibilities throughout the markets that we serve.”

Smith continued, “Regardless of the local, national or global economic and political volatility that transpires, we believe that TriCo’s strengths including our low cost of funds, overall credit quality and access to liquidity provide us with significant competitive advantages.”

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    
March 31,   December 31,
(dollars and shares in thousands) 2019 2018

$ Change

% Change

Net interest income $ 63,870 $ 64,002 $ (132) (0.2%)
Benefit from reversal of (provision

for) loan losses

1,600 (806) 2,406 nm
Noninterest income 11,864 12,634 (770) (6.1%)
Noninterest expense (45,513) (45,285) (228) 0.5%
Provision for income taxes   (9,095)   (7,334)   (1,761) 24.0%
Net income $ 22,726 $ 23,211 $ (485) (2.1%)
 
Diluted earnings per share $ 0.74 $ 0.76 $ (0.02) (2.2%)
Dividends per share $ 0.19 $ 0.19 - 0.0%
Average common shares 30,424 30,423 1 0.0%
Average diluted common shares 30,658 30,672 (14) (0.0%)
 
Return on average total assets 1.41% 1.47%
Return on average equity 10.78% 11.43%
Efficiency ratio 60.10% 59.09%
 
 
  Three months ended March 31,    
(dollars and shares in thousands) 2019   2018

$ Change

% Change
Net interest income $ 63,870 $ 44,986 $ 18,884 42.0%
Benefit from reversal of provision

for loan losses

1,600 236 1,364 nm
Noninterest income 11,864 12,290 (426) (3.5%)
Noninterest expense (45,513) (38,162) (7,351) 19.3%
Provision for income taxes   (9,095)   (5,440)   (3,655) 67.2%
Net income $ 22,726 $ 13,910 $ 8,816 63.4%
 
Diluted earnings per share $ 0.74 $ 0.60 $ 0.14 23.3%
Dividends per share $ 0.19 $ 0.17 $ 0.02 11.8%
Average common shares 30,424 22,956 7,468 32.5%
Average diluted common shares 30,658 23,283 7,375 31.7%
 
Return on average total assets 1.41% 1.17%
Return on average equity 10.78% 11.00%
Efficiency ratio 60.10% 66.63%
 

Balance Sheet

Deposit growth of $63,796,000 or 4.8% on an annualized basis during the first quarter of 2019 continued to provide benefit to the overall organic growth in total assets of $88,469,000 (5.6% annualized).

Trailing Quarter Balance Sheet Change
            Annualized
Ending balances As of March 31, As of December 31, Impact of Organic Organic
($'s in thousands) 2019 2018

$ Change

ASU 2016-02 (1)

$ Change

% Change
 
Total assets $ 6,471,852 $ 6,352,441 $ 119,411 $ 30,942 $ 88,469 5.6%
Total loans 4,034,331

 

4,022,014 12,317 - 12,317 1.2%
Total investments 1,564,692

 

1,580,096 (15,404) - (15,404) (3.9%)
Total deposits $ 5,430,262

 

$ 5,366,466 $ 63,796 - $ 63,796 4.8%

Total average assets increased by $78,473,000 (5.0% annualized) to $6,426,227,000 and total average deposits increased by $151,049,000 (11.5% annualized) to $5,393,188,000 as compared to the trailing quarter.

Average Trailing Quarter Balance Sheet Change
  Annualized
Qtrly avg balances   As of March 31,   As of December 31,     Impact of   Organic Organic
($'s in thousands) 2019 2018

$ Change

ASU 2016-02 (1)

$ Change

% Change
 
Total assets $ 6,426,227 $ 6,316,337 $ 109,890 $ 31,417 $ 78,473 5.0 %
Total loans 4,023,864 4,026,569 (2,705 ) - (2,705 ) (0.3 %)
Total investments 1,567,584 1,521,780 45,804 - 45,804 12.0 %
Total deposits $ 5,393,188 $ 5,242,139 $ 151,049 - $ 151,049 11.5 %

(1)

 

On January 1, 2019, the Company recorded on its consolidated balance sheet a right-of-use asset for operating leases and a corresponding liability for payment obligations in conjunction with the adoption and implementation of the Accounting Standard Update ("ASU") 2016-02: Leases, as issued by the Financial Accounting Standards Board ("FASB").

In addition to the balance sheet changes which resulted from the acquisition of FNB Bancorp, total assets grew by $228,695,000 (4.8%) between March 2018 and March 2019. This growth was led by $129,915,000 (4.2%) of organic loan growth which was funded by $353,923,000 (8.7%) in organic deposit growth.

Year Over Year Balance Sheet Change
           
Ending balances As of March 31, Acquired Organic Organic
($'s in thousands) 2019 2018

$ Change

Balances

$ Change

% Change
 
Total assets $ 6,471,852 $ 4,779,957 $ 1,691,895 $ 1,463,200 $ 228,695 4.8%
Total loans 4,034,331 3,069,733 964,598 834,683 129,915 4.2%
Total investments 1,564,692 1,251,776 312,916 335,667 (22,751) (1.8%)
Total deposits $ 5,430,262 $ 4,084,404 $ 1,345,858 $ 991,935 $ 353,923 8.7%

Total equity increased to $853,278,000 at March 31, 2019 as compared to $827,373,000 at the close of the trailing quarter and inclusive of $8,927,000 and $17,879,000 in accumulated other comprehensive loss at the same periods, respectively. As a result, the Company’s book value per share increased to $28.04 at March 31, 2019 from $27.20 per share at December 31, 2018. The Company’s tangible book value per share, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, increased to $19.86 per share at March 31, 2019 from $18.97 per share at December 31, 2018. Excluding accumulated other comprehensive losses from total equity for both quarters, tangible book value per share increased to $20.16 at March 31, 2019 from $19.56 at December 31, 2018.

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    
March 31,   December 31,
(dollars in thousands) 2019 2018

$ Change

% Change
Interest income $ 67,457 $ 68,065 $ (608) (0.9%)
Interest expense (3,587) (4,063) 476 (11.7%)
Fully tax-equivalent adjustment (FTE) (1)   322   322   0 0.0%
Net interest income (FTE) $ 64,192 $ 64,324 $ (132) (0.2%)
Net interest margin (FTE)   4.46%   4.53%
Acquired loans discount accretion, net:
Amount (included in interest income) $ 1,655 $ 1,982 $ (327) (16.5%)
Effect on average loan yield 0.17% 0.20%
Effect on net interest margin (FTE) 0.12% 0.14%
 
 
  Three months ended March 31,    
(dollars in thousands) 2019   2018

$ Change

% Change
Interest income $ 67,457 $ 47,121 $ 20,336 43.2%
Interest expense (3,587) (2,135) (1,452) 68.0%
Fully tax-equivalent adjustment (FTE) (1)   322   312   10 3.2%
Net interest income (FTE) $ 64,192 $ 45,298 $ 18,894 41.7%
Net interest margin (FTE)   4.46%   4.14%
Acquired loans discount accretion, net:
Amount (included in interest income) $ 1,655 $ 632 $ 1,023 161.9%
Effect on average loan yield 0.17% 0.09%
Effect on net interest margin (FTE) 0.12% 0.06%

(1)

  Information is presented on a fully tax-equivalent (FTE) basis. The Company believes the use of this non-generally accepted accounting principles (non-GAAP) measure provides additional clarity in assessing its results, and the presentation of these measures on a FTE basis is a common practice within the banking industry.

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 effects 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. During the three months ended March 31, 2019, December 31, 2018 and March 31, 2018, purchased loan discount accretion was $1,655,000, $1,982,000, and $632,000, respectively. During the three months ended March 31, 2019, loans purchased at net premiums several years ago were repaid prior to expected maturity resulting in approximately $259,000 of accelerated amortization.

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

March 31, 2019

December 31, 2018

March 31, 2018

Average   Income/   Yield/ Average   Income/   Yield/ Average   Income/   Yield/
Balance Expense Rate Balance (4) Expense Rate Balance Expense Rate
Assets
Loans $ 4,023,864 $ 54,398 5.41% $ 4,026,569 $ 55,662 5.53% $ 3,028,178 $ 38,049 5.03%
Investments - taxable 1,425,352 10,915 3.06% 1,378,182 10,660 3.09% 1,125,394 7,658 2.72%
Investments - nontaxable (1)   142,232   1,395 3.92%   143,598   1,395 3.89%   136,160   1,353 3.97%
Total investments 1,567,584 12,310 3.14% 1,521,780 12,055 3.17% 1,261,554 9,011 2.86%
Cash at Federal Reserve and other banks   168,518   1,071 2.54%   131,496   670 2.04%   90,864 373 1.64%
Total earning assets 5,759,966 67,779 4.71% 5,679,845 68,387 4.82% 4,380,596 47,433 4.33%
Other assets, net   666,261   636,492   360,631
Total assets $ 6,426,227 $ 6,316,337 $ 4,741,227
Liabilities and shareholders' equity
Interest-bearing demand deposits $ 1,279,639 287 0.09% $ 1,183,805 272 0.09% $ 994,206 $ 211 0.08%
Savings deposits 1,926,339 1,133 0.24% 1,849,788 1,132 0.24% 1,371,377 411 0.12%
Time deposits   441,778   1,299 1.18%   459,658   1,190 1.04%   306,514   474 0.62%
Total interest-bearing deposits 3,647,756 2,719 0.30% 3,493,251 2,594 0.30% 2,672,097 1,096 0.16%
Other borrowings 15,509 13 0.34% 122,755 639 2.08% 107,781 342 1.27%
Junior subordinated debt   56,950   855 6.01%   57,019   830 5.82%   56,882   697 4.90%
Total interest-bearing liabilities 3,720,215   3,587 0.39% 3,673,025   4,063 0.44% 2,836,760   2,135 0.30%
Noninterest-bearing deposits 1,745,432 1,748,888 1,332,235
Other liabilities 117,490 81,899 66,219
Shareholders' equity   843,090   812,525   506,013
Total liabilities and shareholders' equity $ 6,426,227 $ 6,316,337 $ 4,741,227
Net interest rate spread (1) (2) 4.32% 4.38% 4.03%
Net interest income and net interest margin (1) (3) $ 64,192 4.46% $ 64,324 4.53%   45,298 4.14%

(1)

 

Fully taxable equivalent (FTE)

(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.

(4)

The reported amounts of average balances for the three months ended December 31, 2018 have been corrected for immaterial differences that were identified subsequent to the prior period's earnings release and for purposes of ensuring that reclassifications of these amounts are presented on a comparable basis. These changes in average balances had no impact on the aggregate amounts of income or expense previously reported but did have an immaterial impact on the calculated rates and yields.

Net interest income (FTE) during the three months ended March 31, 2019 decreased $132,000 or 0.2% to $64,192,000 compared to $64,324,000 during the three months ended December 31, 2018. The generally static level of net interest income (FTE) was due primarily to negligible changes in the average balances and mix of interest earnings assets and interest bearing liabilities during the quarter but negatively impacted by the repayment of loans prior to anticipated maturity that were acquired for net premiums.

The index utilized in a significant portion of the Company’s variable rate loans, Wall Street Journal Prime, has increased by 1.50% to 5.50% at March 31, 2019 as compared to 4.00% at March 31, 2018. The most recent increase of the index was during December 2018, with an increase of 25 basis points. As such, there were minimal changes to loan yields as compared to the trailing quarter. However, as compared to the same quarter in the prior year, average loan yields increased 38 basis points from 5.03% during the three months ended March 31, 2018 to 5.41% during the three months ended March 31, 2019. Of the 38 basis point increase in yields on loans, 30 basis points was attributable to increases in market rates while 8 basis points was from increased accretion of purchased loans.

The impact of changes in rates and volumes of interest bearing liabilities resulted in a decrease in interest expense of $476,000 during the current quarter. Declines in interest expense on other borrowings contributed to $626,000 of the decrease which was partially offset by a $109,000 increase in interest expense on time deposits and an additional $25,000 in expense on variable rate junior subordinated debt. Comparing the quarter ended March 31, 2019 to the trailing quarter, the total cost of interest bearing liabilities decreased by 5 basis points to 0.39% but increased 9 basis points from the same quarter in the prior year due in part to differences in market rates associated with deposits acquired from First National Bank of Northern California and to increases in the variable rates paid on other borrowings and subordinated debt.

Asset Quality and Loan Loss Provisioning

The Company recorded a benefit from the reversal of provision for loan losses of $1,600,000 during the three months ended March 31, 2019 as compared to a benefit from the reversal of provision of $236,000 in the same quarter of the prior year. The benefit from the reversal of the provision was necessitated in part by $1,082,000 in net recoveries on previously charged-off loans during the first quarter of 2019 as compared to net charge-offs of $114,000 in the first quarter of 2018. Additionally, while the Company remains cautious about the risks associated with trends in California real estate prices and the affordability of housing in the markets served by the Company, changes in affordability and energy related index rates improved during the quarter ended March 31, 2019. The qualitative factors associated with these two measures reduced the level of calculated required reserves by approximately $1,059,000.

Provision for Income Taxes

The Company’s effective tax rate was 28.6% for the quarter ended March 31, 2019 as compared to 28.1% for the same quarter in the prior year. As previously reported, the Company’s effective tax rate was 24.0% for the quarter ended December 31, 2018 which was benefited by certain tax method elections. Absent the benefits made possible through these elections, the Company’s effective tax rate would have been 27.5% for the quarter ended December 31, 2018.

Non-interest Income

The following table presents the key components of noninterest income for the periods indicated:

 
  Three months ended March 31,  
(dollars in thousands) 2019   2018

$ Change

  % Change
ATM and interchange fees $ 4,581 $ 4,235 $ 346 8.2%
Service charges on deposit accounts 3,880 3,779 101 2.7%
Other service fees 771 714 57 8.0%
Mortgage banking service fees 483 517 (34) (6.6%)
Change in value of mortgage servicing rights   (645)   111   (756) (681.1%)
 
Total service charges and fees   9,070   9,356   (286) (3.1%)
 
Increase in cash value of life insurance 775 608 167 27.5%
Asset management and commission income 642 876 (234) (26.7%)
Gain on sale of loans 412 626 (214) (34.2%)
Lease brokerage income 220 128 92 71.9%
Sale of customer checks 140 101 39 38.6%
Gain on sale of foreclosed assets 99 371 (272) (73.3%)
Gain (loss) on marketable equity securities 36 (47) 83 (176.6%)
Loss on disposal of fixed assets (38) (13) (25) 192.3%
Other   508   284   224 78.9%
 
Total other noninterest income   2,794   2,934   (140) (4.8%)
 
Total noninterest income $ 11,864 $ 12,290 $ (426) (3.5%)

Noninterest income decreased $426,000 (3.5%) to $11,864,000 during the three months ended March 31, 2019 compared to the three months ended March 31, 2018. The decrease in noninterest income was due primarily to a $756,000 (681.1%) decrease in the fair value of mortgage servicing rights, $234,000 (26.7%) decrease in asset management and commission income, $214,000 (34.2%) decrease in gain on sale of loans, and a $272,000 (73.3%) decrease on the gain on sale of foreclosed assets. Offsetting the decreases in non-interest income was an increase in ATM and interchange fees of $346,000 (8.2%), an increase in service charges on deposit accounts of $101,000 (2.7%), and an increase in the cash value of life insurance of $167,000 (27.5%). The fair value of the mortgage servicing asset decreased as compared to the first quarter in the prior year due to changes in the assumptions utilized in determining the fair value. Specifically, increased prepayment speeds and decreases in the 15 and 30 year mortgage rates were the largest contributors to the decline in fair value of the mortgage servicing asset.

 
  Three months ended  
March 31,   December 31,
(dollars in thousands) 2019 2018

$ Change

  % Change
ATM and interchange fees $ 4,581 $ 4,914 $ (333) (6.8%)
Service charges on deposit accounts 3,880 4,059 (179) (4.4%)
Other service fees 771 832 (61) (7.3%)
Mortgage banking service fees 483 511 (28) (5.5%)
Change in value of mortgage servicing rights   (645)   (184)   (461) 250.5%
 
Total service charges and fees   9,070   10,132   (1,062) (10.5%)
 
Increase in cash value of life insurance 775 722 53 7.3%
Asset management and commission income 642 737 (95) (12.9%)
Gain on sale of loans 412 540 (128) (23.7%)
Lease brokerage income 220 164 56 34.1%
Sale of customer checks 140 122 18 14.8%
Gain on sale of foreclosed assets 99 18 81 450.0%
Gain on marketable equity securities 36 28 8 28.6%
(Loss) gain on disposal of fixed assets (38) 21 (59) (281.0%)
Other   508   150   358 238.7%
 
Total other noninterest income   2,794   2,502   292 11.7%
 
Total noninterest income $ 11,864 $ 12,634 $ (770) (6.1%)
 

Noninterest income decreased $770,000 (6.1%) to $11,864,000 during the three months ended March 31, 2019 compared to the three months ended December 31, 2018. The decrease in noninterest income was due primarily to a $1,062,000 (10.5%) decrease in total service charges and fees, which comprised primarily of a $461,000 (250.5%) decrease in the fair value of the mortgage servicing rights and $333,000 (6.8%) decrease in ATM and interchange fees. Partially offsetting the decreases in non-interest income was an increase in other miscellaneous income of $358,000 (238.7%).

Non-interest Expense

The following table presents the key components of the Company’s noninterest expense for the periods indicated:

 
  Three months ended March 31,  
2019   2018

$ Change

  % Change
Base salaries, net of deferred loan

origination costs

$ 16,757 $ 13,962 $ 2,795 20.0%
Incentive compensation 2,567 2,452 115 4.7%
Benefits and other compensation costs   5,804   5,238   566 10.8%
 
Total salaries and benefits expense   25,128   21,652   3,476 16.1%
 
Occupancy 3,774 2,681 1,093 40.8%
Data processing and software 3,349 2,514 835 33.2%
Equipment 1,867 1,551 316 20.4%
Intangible amortization 1,431 339 1,092 322.1%
Advertising 1,331 838 493 58.8%
ATM and POS network charges 1,323 1,226 97 7.9%
Professional fees 839 773 66 8.6%
Telecommunications 797 701 96 13.7%
Regulatory assessments and insurance 511 430 81 18.8%
Merger and acquisition expense - 476 (476) (100.0%)
Postage 310 358 (48) (13.4%)
Operational losses 225 294 (69) (23.5%)
Courier service 270 267 3 1.1%
Other miscellaneous expense   4,358   4,062   296 7.3%
 
Total other noninterest expense   20,385   16,510   3,875 23.5%
 
Total noninterest expense $ 45,513 $ 38,162 $ 7,351 19.3%
 
Average full time equivalent staff 1,138 1,002
 

Salary and benefit expenses increased $3,476,000 (16.1%) to $25,128,000 during the three months ended March 31, 2019 compared to $21,652,000 during the three months ended March 31, 2018. Base salaries, net of deferred loan origination costs increased $2,795,000 (20.0%) to $16,757,000. The increase in base salaries was due primarily to a 13.6% increase in average full time equivalent employees to 1,138 from 1,002 in the year-ago quarter. Commissions and incentive compensation increased $115,000 (4.7%) to $2,567,000 during the three months ended March 31, 2019 compared to the year-ago quarter due primarily to organic loan and deposit growth. Benefits & other compensation expense increased $566,000 (10.8%) to $5,804,000 during the three months ended March 31, 2019 due primarily to increases in the average full time equivalent employees, as mentioned above.

Other noninterest expense increased $3,875,000 (23.5%) to $20,385,000 during the three months ended March 31, 2019 compared to the three months ended March 31, 2018. The increase in other noninterest expense was due primarily to increased overhead operating costs related to the additional branches as a result of the prior year acquisition of FNB Bancorp. Highlighting those increases were intangible amortization, occupancy, data processing and software, and advertising expenses, which increased by $1,092,000, $1,093,000, $835,000 and $493,000, respectively, as compared to the prior year quarter. The increases in noninterest expenses were partially offset by decreased merger & acquisition expenses of $476,000.

 
  Three months ended  
March 31,   December 31,
2019 2018

$ Change

  % Change
Base salaries, net of deferred loan

origination costs

$ 16,757 $ 16,980 $ (223) (1.3%)
Incentive compensation 2,567 3,313 (746) (22.5%)
Benefits and other compensation costs   5,804   4,721   1,083 22.9%
 
Total salaries and benefits expense   25,128   25,014   114 0.5%
 
Occupancy 3,774 3,565 209 5.9%
Data processing and software 3,349 3,042 307 10.1%
Equipment 1,867 1,713 154 9.0%
Intangible amortization 1,431 1,431 - 0.0%
Advertising 1,331 1,364 (33) (2.4%)
ATM and POS network charges 1,323 1,413 (90) (6.4%)
Professional fees 839 1,071 (232) (21.7%)
Telecommunications 797 822 (25) (3.0%)
Regulatory assessments and insurance 511 522 (11) (2.1%)
Postage 310 220 90 40.9%
Operational losses 225 497 (272) (54.7%)
Courier service 270 518 (248) (47.9%)
Other miscellaneous expense   4,358   4,093   265 6.5%
 
Total other noninterest expense   20,385   20,271   114 0.6%
 
Total noninterest expense $ 45,513 $ 45,285 $ 228 0.5%
 
Average full time equivalent staff 1,138 1,134
 

Salary and benefit expenses increased $114,000 (0.5%) to $25,128,000 during the three months ended March 31, 2019 compared to $25,014,000 during the three months ended December 31, 2018. Base salaries, net of deferred loan origination costs decreased $223,000 (1.3%) to $16,757,000. Commissions and incentive compensation decreased $746,000 (22.5%) to $2,567,000 during the three months ended March 31, 2019 compared to the trailing quarter due primarily to lack of organic loan and deposit growth. Benefits & other compensation expense increased $1,083,000 (22.9%) to $5,804,000 during the three months ended March 31, 2019 due primarily to increases in group insurance and employer taxes.

Other noninterest expense increased $114,000 (0.6%) to $20,385,000 during the three months ended March 31, 2019 compared to the trailing quarter. Increases in occupancy, data processing and software, and equipment were offset by decrease in professional fees, operational losses, and courier service.

About TriCo Bancshares

Established in 1975, Tri Counties Bank is a wholly-owned subsidiary of TriCo Bancshares (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 ATM, online and mobile banking access. Brokerage services are provided by the Bank’s investment services 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; mergers and acquisitions; changes in the level of our nonperforming assets and charge-offs; 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 deposits and other sources of liquidity; changes in the financial performance and/or condition of our borrowers; the impact of competition from other financial service providers; the possibility that any of the anticipated benefits of our recent merger with FNBB will not be realized or will not be realized within the expected time period, or that integration of FNBB’s operations will be more costly or difficult than expected; the challenges of integrating and retaining key employees; unanticipated regulatory or judicial proceedings; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and our ability to manage the risks involved in the foregoing. 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, 2018, which is on file with the Securities and Exchange Commission (the “SEC”) and 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.

 
TRICO BANCSHARES - CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)
  Three months ended
March 31,   December 31,   September 30,   June 30,   March 31,
2019 2018 2018 2018 2018
Revenue and Expense Data
Interest income $ 67,457 $ 68,065 $ 64,554 $ 48,478 $ 47,121
Interest expense   3,587   4,063   4,065   2,609   2,135
Net interest income 63,870 64,002 60,489 45,869 44,986
Provision for (benefit from) loan losses (1,600) 806 2,651 (638) (236)
Noninterest income:
Service charges and fees 9,070 10,132 9,743 9,228 9,356
Gain on sale of investment securities - - 207 - -
Other income   2,794   2,502   2,236   2,946   2,934
Total noninterest income 11,864 12,634 12,186 12,174 12,290
Noninterest expense:
Salaries and benefits 25,128 25,014 25,823 21,453 21,652
Occupancy and equipment 5,641 5,278 5,056 4,357 4,232
Data processing and network 4,672 4,455 3,981 4,116 3,740
Other noninterest expense   10,072   10,538   12,518   7,944   8,538
Total noninterest expense   45,513   45,285   47,378   37,870   38,162
Total income before taxes   31,821   30,545   22,646   20,811   19,350
Provision for income taxes   9,095   7,334   6,476   5,782   5,440
Net income $ 22,726 $ 23,211 $ 16,170 $ 15,029 $ 13,910
Share Data
Basic earnings per share $ 0.75 $ 0.76 $ 0.54 $ 0.65 $ 0.61
Diluted earnings per share $ 0.74 $ 0.76 $ 0.53 $ 0.65 $ 0.60
Dividends per share $ 0.19 $ 0.19 $ 0.17 $ 0.17 $ 0.17
Book value per common share $ 28.04 $ 27.20 $ 26.37 $ 22.27 $ 22.01
Tangible book value per common share (1) $ 19.86 $ 18.97 $ 18.10 $ 19.28 $ 19.00
Shares outstanding 30,432,419 30,417,223 30,417,818 23,004,153 22,956,323
Weighted average shares 30,424,184 30,422,687 30,011,307 22,983,439 22,956,239
Weighted average diluted shares 30,657,833 30,671,723 30,291,225 23,276,471 23,283,127
Credit Quality
Loans past due 30 days or more $ 16,761 $ 17,368 $ 13,218 $ 11,626 $ 20,416
Nonperforming originated loans 13,737 19,416 17,087 17,077 16,080
Total nonperforming loans 19,565 27,494 27,148 25,420 24,381
Total nonperforming assets 21,880 29,774 28,980 26,794 25,945
Loans charged-off 726 424 1,142 318 480
Loans recovered $ 1,808 $ 596 $ 570 $ 507 $ 366
Selected Financial Ratios
Return on average total assets 1.41% 1.47% 1.05% 1.25% 1.17%
Return on average equity 10.78% 11.43% 9.11% 11.78% 11.00%
Average yield on loans 5.41% 5.53% 5.27% 5.06% 5.03%
Average yield on interest-earning assets 4.71% 4.82% 4.61% 4.38% 4.33%
Average rate on interest-bearing deposits 0.30% 0.30% 0.25% 0.18% 0.16%
Average cost of total deposits 0.20% 0.20% 0.16% 0.12% 0.11%

Average rate on borrowings and subordinated debt

4.79% 3.27% 2.63% 2.80% 2.52%
Average rate on interest-bearing liabilities 0.39% 0.44% 0.44% 0.36% 0.30%
Net interest margin (fully tax-equivalent) 4.46% 4.53% 4.32% 4.14% 4.14%
Loans to deposits 74.29% 74.95% 79.08% 77.17% 75.16%
Efficiency ratio 60.10% 59.09% 65.19% 65.24% 66.63%
Supplemental Loan Interest Income Data
Discount accretion on acquired loans $ 1,655 $ 1,982 $ 2,098 $ 559 $ 632
All other loan interest income 52,743 53,680 51,004 38,745 37,417
Total loan interest income $ 54,398 $ 55,662 $ 53,102 $ 39,304 $ 38,049

(1)

  Tangible book value per share is calculated by subtracting goodwill and other intangible assets from total shareholders' equity and dividing that result by the shares outstanding at the end of the period. Management believes that tangible book value per common share is meaningful because it is a measure that the Company and investors commonly use to assess shareholder value.
 
TRICO BANCSHARES - CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)
  Three months ended
March 31,   December 31,   September 30,   June 30,   March 31,
Balance Sheet Data 2019 2018 2018 2018 2018
Cash and due from banks $ 318,708 $ 227,533 $ 226,543 $ 184,062 $ 182,979
Securities, available for sale 1,116,426 1,117,910 1,058,806 757,075 738,785
Securities, held to maturity 431,016 444,936 459,897 477,745 496,035
Restricted equity securities 17,250 17,250 17,250 16,956 16,956
Loans held for sale 5,410 3,687 3,824 3,601 2,149
Loans:
Commercial loans 269,163 276,548 289,645 237,619 216,015
Consumer loans 418,352 418,982 421,287 350,925 348,789
Real estate mortgage loans 3,129,339 3,143,100 3,132,202 2,401,040 2,359,379
Real estate construction loans   217,477   183,384   184,302   156,729   145,550
Total loans, gross 4,034,331 4,022,014 4,027,436 3,146,313 3,069,733
Allowance for loan losses   (32,064)   (32,582)   (31,603)   (29,524)   (29,973)
Total loans, net 4,002,267 3,989,432 3,995,833# 3,116,789 3,039,760
Premises and equipment 89,275 89,347 89,290 59,014 58,558
Cash value of life insurance 117,841 117,318 116,596 99,047 98,391
Accrued interest receivable 20,431 19,412 19,592 14,253 12,407
Goodwill 220,972 220,972 220,972 64,311 64,311
Other intangible assets 27,849 29,280 30,711 4,496 4,835
Operating leases, right-of-use 30,942 - - - -
Other assets   73,465   75,364   79,551   65,804   64,791
Total assets $ 6,471,852 $ 6,352,441 $ 6,318,865 $ 4,863,153 $ 4,779,957
Deposits:
Noninterest-bearing demand deposits $ 1,761,559 $ 1,760,580 $ 1,710,505 $ 1,369,834 $ 1,359,996
Interest-bearing demand deposits 1,297,672 1,252,366 1,152,705 1,006,331 1,022,299
Savings deposits 1,925,168 1,921,324 1,801,087 1,385,268 1,395,481
Time certificates   445,863   432,196   428,820   315,789   306,628
Total deposits 5,430,262 5,366,466 5,093,117 4,077,222 4,084,404
Accrued interest payable 2,195 1,997 1,729 1,175 958
Operating lease liability 30,204 - - - -
Other liabilities 86,362 83,724 82,077 62,623 67,393
Other borrowings 12,466 15,839 282,831 152,839 65,041
Junior subordinated debt   57,085   57,042   56,996   56,950   56,905
Total liabilities $ 5,618,574 $ 5,525,068 $ 5,516,750 $ 4,350,809 $ 4,274,701
Common stock 542,340 541,762 541,519 256,590 256,226
Retained earnings 319,865 303,490 287,555 276,877 266,235
Accumulated other comprehensive loss   (8,927)   (17,879)   (26,959)   (21,123)   (17,205)
Total shareholders' equity $ 853,278 $ 827,373 $ 802,115 $ 512,344 $ 505,256
Average Balance Data
Average loans $ 4,023,864 $ 4,026,569 $ 4,028,462 $ 3,104,126 $ 3,028,178
Average interest-earning assets $ 5,759,966 $ 5,679,845 $ 5,638,162 $ 4,457,660 $ 4,380,596
Average total assets $ 6,426,227 $ 6,316,337 $ 6,168,344 $ 4,814,523 $ 4,741,227
Average deposits $ 5,393,188 $ 5,242,139 $ 5,068,841 $ 4,042,110 $ 4,004,332
Average borrowings and subordinated debt $ 72,459 $ 179,774 $ 303,610 $ 196,235 $ 164,663
Average total equity $ 843,090 $ 812,525 $ 709,762 $ 510,433 $ 506,013
Capital Ratio Data
Total risk based capital ratio 14.4% 14.4% 13.9% 13.9% 13.9%
Tier 1 capital ratio 13.6% 13.7% 13.2% 13.1% 13.0%
Tier 1 common equity ratio 12.5% 12.5% 12.0% 11.7% 11.6%
Tier 1 leverage ratio 10.6% 10.7% 10.7% 10.9% 10.8%
Tangible capital ratio (1) 9.7% 9.5% 9.1% 9.3% 9.3%

(1)

  Tangible capital ratio is calculated by subtracting goodwill and other intangible assets from total shareholders' equity and total assets and then dividing the adjusted assets by the adjusted equity. Management believes that the tangible capital ratio is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.

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