U.S. Markets closed

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 $23,395,000 for the quarter ended September 30, 2019, compared to $23,061,000 during the trailing quarter ended June 30, 2019 and $16,170,000 during the quarter ended September 30, 2018. Diluted earnings per share were $0.76 for the third quarter of 2019, compared to $0.75 for the second quarter of 2019 and $0.53 for the third quarter of 2018.

Financial Highlights

Performance highlights and other developments for the Company as of or for the three and nine months ended September 30, 2019 included the following:

  • For the three and nine months ended September 30, 2019, the Company’s return on average assets was 1.44% and 1.44%, respectively, and the return on average equity was 10.42% and 10.67%, respectively.
  • As of September 30, 2019, the Company reported total loans, total assets and total deposits of $4.18 billion, $6.38 billion and $5.30 billion, respectively.
  • The loan to deposit ratio was 79.0% as of September 30, 2019 as compared to 76.8% at June 30, 2019 and 79.0% at September 30, 2018.
  • For the current quarter, net interest margin was 4.44% on a tax equivalent basis as compared to 4.29% in the quarter ended September 30, 2018 and decreased 6 basis points from the trailing quarter.
  • Non-interest bearing deposits as a percentage of total deposits were 33.6% at September 30, 2019, as compared to 33.3% at June 30, 2019 and 33.6% at September 30, 2018.
  • The average rate of interest paid on deposits, including non-interest-bearing deposits, remained low but increased slightly to 0.23% for the third quarter of 2019 as compared with 0.22% for the trailing quarter, and an increase of 7 basis points from the average rate paid during the same quarter of the prior year.
  • Non-performing assets to total assets were 0.31% at September 30, 2019, as compared to 0.35% as of June 30, 2019, and 0.47% at December 31, 2018.
  • The balance of nonperforming loans decreased by $2.0 million, and was facilitated by the sale of loans and charge-offs. Net charge-offs (recoveries) for the quarter ended September 30, 2019 and 2018 were $1.0 million and ($0.2) million, respectively, while net charge-offs (recoveries) for the nine months ended September 30, 2019 were ($0.3) million and $0.5 million, respectively.
  • The efficiency ratio declined to 58.8%, as compared to 60.1%, in the trailing quarter and 65.3% in the same quarter of the 2018 year. Excluding merger and acquisition costs from the 2018 year results in an efficiency ratio of 59.56%.
  • Non-interest income associated with service charges and fees increased by 4.6% over the trailing quarter and 8.7% over the same quarter in the prior year.

President and CEO, Rick Smith commented, “Our record earnings for the third quarter were a direct result of a full team effort across every department of the Bank. We increased our loan to deposit ratio through a reduction in investment security balances whose proceeds were utilized to fund loan growth. In addition, through asset sales, we accomplished a substantial reduction in nonperforming loans and underperforming municipal investment securities. Our mortgage loan processors pushed forward at near capacity levels resulting in almost a doubling of gains from the sale of loans as compared to the trailing quarter. The market leading cash management services we offer continue to drive growth in transaction volume and the number of customers we serve. Further, we continue to focus on cost containment and increased efficiency measures. We believe that the continued execution of these and other strategies combined with our long history paying quarterly cash dividends, which were recently increased to $0.22 per share, create a noteworthy value proposition for our shareholders.”

Summary Results

For the three and nine months ended September 30, 2019, the Company’s return on average assets was 1.44% and 1.44%, respectively, and the return on average equity was 10.42% and 10.67%, respectively. For the three and nine months ended September 30, 2018, the Company’s return on average assets was 1.05% and 1.15%, respectively, and the return on average equity was 9.11% and 10.44%, respectively. While there were no merger and acquisition expenses incurred during the 2019 periods as compared to $4,150,000 and $5,227,000 during the three and nine months ended September 30, 2018, the increases in return on average assets and average equity were also benefited by increases in net interest income of $4,199,000 and $41,529,000, respectively, during the three and nine months ended September 30, 2019.

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

 

Three months ended

 

 

 

 

 

September 30,

 

June 30,

 

 

 

 

(dollars and shares in thousands)

 

2019

 

 

 

2019

 

 

$ Change

 

% Change

Net interest income

 

64,688

 

 

$

64,315

 

 

$

373

 

 

0.6

%

Reversal of (provision for) loan losses

 

329

 

 

 

(537

)

 

 

866

 

 

nm

Noninterest income

 

14,108

 

 

 

13,423

 

 

 

685

 

 

5.1

%

Noninterest expense

 

(46,344

)

 

 

(46,697

)

 

 

353

 

 

(0.8

)%

Provision for income taxes

 

(9,386

)

 

 

(7,443

)

 

 

(1,943

)

 

26.1

%

Net income

$

23,395

 

 

$

23,061

 

 

$

334

 

 

1.4

%

Diluted earnings per share

$

0.76

 

 

$

0.75

 

 

$

0.01

 

 

1.33

%

Dividends per share

$

0.22

 

 

$

0.19

 

 

$

0.03

 

 

15.80

%

Average common shares

 

30,509

 

 

 

30,458

 

 

 

51

 

 

0.2

%

Average diluted common shares

 

30,629

 

 

 

30,643

 

 

 

(14

)

 

(0.0

)%

Return on average total assets

 

1.44

%

 

 

1.45

%

 

 

 

 

Return on average equity

 

10.42

%

 

 

10.68

%

 

 

 

 

Efficiency ratio

 

58.82

%

 

 

60.07

%

 

 

 

 

 

 

Three months ended
September 30,

 

 

 

 

(dollars and shares in thousands)

 

2019

 

 

 

2018

 

 

$ Change

 

% Change

Net interest income

 

64,688

 

 

$

60,489

 

 

$

4,199

 

 

6.9

%

Reversal of (provision for) loan losses

 

329

 

 

 

(2,651

)

 

 

2,980

 

 

nm

Noninterest income

 

14,108

 

 

 

12,336

 

 

 

1,772

 

 

14.4

%

Noninterest expense

 

(46,344

)

 

 

(47,528

)

 

 

1,184

 

 

(2.5

)%

Provision for income taxes

 

(9,386

)

 

 

(6,476

)

 

 

(2,910

)

 

44.9

%

Net income

$

23,395

 

 

$

16,170

 

 

$

7,225

 

 

44.7

%

Diluted earnings per share

$

0.76

 

 

$

0.53

 

 

$

0.23

 

 

43.4

%

Dividends per share

$

0.22

 

 

$

0.17

 

 

$

0.05

 

 

29.4

%

Average common shares

 

30,509

 

 

 

30,011

 

 

 

498

 

 

1.7

%

Average diluted common shares

 

30,629

 

 

 

30,291

 

 

 

338

 

 

1.1

%

Return on average total assets

 

1.44

%

 

 

1.05

%

 

 

 

 

Return on average equity

 

10.42

%

 

 

9.11

%

 

 

 

 

Efficiency ratio

 

58.82

%

 

 

65.26

%

 

 

 

 

 

 

Nine months ended
September 30,

 

 

 

 

(dollars and shares in thousands)

 

2019

 

 

 

2018

 

 

$ Change

 

% Change

Net interest income

$

192,873

 

 

$

151,344

 

 

$

41,529

 

 

27.4

%

Reversal of (provision for) loan losses

 

1,392

 

 

 

(1,777

)

 

 

3,169

 

 

nm

Noninterest income

 

39,334

 

 

 

36,466

 

 

 

2,868

 

 

7.9

%

Noninterest expense

 

(138,493

)

 

 

(123,226

)

 

 

(15,267

)

 

12.4

%

Provision for income taxes

 

(25,924

)

 

 

(17,698

)

 

 

(8,226

)

 

46.5

%

Net income

$

69,182

 

 

$

45,109

 

 

$

17,735

 

 

53.4

%

Diluted earnings per share

$

2.25

 

 

$

1.76

 

 

$

0.49

 

 

27.8

%

Dividends per share

$

0.60

 

 

$

0.51

 

 

$

0.09

 

 

17.6

%

Average common shares

 

30,441

 

 

 

25,317

 

 

 

5,124

 

 

20.2

%

Average diluted common shares

 

30,650

 

 

 

25,617

 

 

 

5,033

 

 

19.6

%

Return on average total assets

 

1.44

%

 

 

1.15

%

 

 

 

 

Return on average equity

 

10.67

%

 

 

10.44

%

 

 

 

 

Efficiency ratio

 

59.64

%

 

 

65.65

%

 

 

 

 

Balance Sheet

Total loans outstanding reached a record high of $4.18 billion as of September 30, 2019, an increase of 3.8% over the trailing twelve month period and an annualized increase of 7.7% over the trailing quarter. In general, year over year increases in deposit balances and reductions in investment security balances were utilized to fund loan growth and pay down outstanding balances of other borrowings.

The retention of earnings generated from the balance sheet changes discussed below was the primary driver in total equity increasing to $896,665,000 at September 30, 2019 as compared to $875,886,000 at June 30, 2019, which is inclusive of $1,499,000 and $(2,198,000) in accumulated other comprehensive income (loss) at the same periods, respectively. As a result, the Company’s book value per share increased to $29.39 per share at September 30, 2019 from $28.71 at June 30, 2019. 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 $21.33 per share at September 30, 2019 from $20.60 per share June 30, 2019. Excluding accumulated other comprehensive losses from total equity for both quarters, tangible book value per share increased to $21.28 at September 30, 2019 from $20.68 at June 30, 2019.

 

Trailing Quarter Balance Sheet Change

 

Ending balances

As of September 30,

 

As of June 30,

 

$ Change

 

Annualized
% Change

($’s in thousands)

2019

 

2019

 

Total assets

$

6,384,883

 

$

6,395,172

 

$

(10,289

)

 

(0.6

)%

Total loans

 

4,182,348

 

 

4,103,687

 

 

78,661

 

 

7.7

%

Total investments

 

1,397,753

 

 

1,566,720

 

 

(168,967

)

 

(43.1

)%

Total deposits

$

5,295,407

 

$

5,342,173

 

$

(46,766

)

 

(3.5

)%

Loan growth of $78,661,000 or 7.7% on an annualized basis during the third quarter of 2019 provided benefit to the yield on earning assets and net interest margin as prepayments and sales of investment securities were utilized to fund loans and to reduce the need for overnight borrowings from the Federal Home Loan Bank.

 

Average Trailing Quarter Balance Sheet Change

 

Qtrly avg balances

As of September 30,

 

As of June 30,

 

$ Change

 

Annualized
% Change

($’s in thousands)

2019

 

2019

 

Total assets

$

6,452,470

 

$

6,385,889

 

$

66,581

 

 

4.2

%

Total loans

 

4,142,602

 

 

4,044,044

 

 

98,558

 

 

9.7

%

Total investments

 

1,536,691

 

 

1,573,112

 

 

(36,421

)

 

(9.3

)%

Total deposits

$

5,327,235

 

$

5,370,879

 

$

(43,644

)

 

(3.3

)%

The growth in average loans of $98,558,000 or 9.7%, on an annualized basis, during the third quarter was greater than the end of period growth as nearly all of the growth for the second quarter occurred during the month of June and third quarter growth was concentrated in July and August.

 

Year Over Year Balance Sheet Change

Ending balances

As of September 30,

 

 

 

 

 

($’s in thousands)

2019

 

2018

 

$ Change

 

 

% Change

Total assets

$

6,384,883

 

$

6,318,865

 

$

66,018

 

 

 

1.0

%

Total loans

 

4,182,348

 

 

4,027,436

 

 

154,912

 

 

 

3.8

%

Total investments

 

1,397,753

 

 

1,535,953

 

 

(138,200

)

 

 

(9.0

)%

Total deposits

$

5,295,407

 

$

5,093,117

 

$

202,290

 

 

 

4.0

%

Total assets have grown by $66,018,000 or 1.0% between September 2018 and September 2019. This growth was led by $154,912,000 or 3.8% in loan growth which was funded by $202,290,000 or 4.0% in deposit growth. Deposit growth in excess of loan growth and the reduction in investment security balances was utilized to reduce other borrowings.

Net Interest Income and Net Interest Margin

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

 

 

 

Three months ended

 

 

 

 

 

September 30,

 

June 30,

 

 

 

 

(dollars in thousands)

 

2019

 

 

 

2019

 

 

$ Change

 

% Change

Interest income

$

68,889

 

 

$

68,180

 

 

$

709

 

 

1.0

%

Interest expense

 

(4,201

)

 

 

(3,865

)

 

 

(336

)

 

8.7

%

Fully tax-equivalent adjustment (FTE) (1)

 

289

 

 

 

298

 

 

 

(9

)

 

(3.0

)%

Net interest income (FTE)

$

64,977

 

 

$

64,613

 

 

$

364

 

 

0.6

%

Net interest margin (FTE)

 

4.44

%

 

 

4.50

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2,360

 

 

$

1,904

 

 

$

456

 

 

23.9

%

Effect on average loan yield

 

0.23

%

 

 

0.19

%

 

 

 

 

Effect on net interest margin (FTE)

 

0.16

%

 

 

0.13

%

 

 

 

 

 

Three months ended
September 30,

 

 

 

 

(dollars in thousands)

 

2019

 

 

 

2018

 

 

$ Change

 

% Change

Interest income

$

68,889

 

 

$

64,554

 

 

$

4,335

 

 

6.7

%

Interest expense

 

(4,201

)

 

 

(4,065

)

 

 

(136

)

 

3.3

%

Fully tax-equivalent adjustment (FTE) (1)

 

289

 

 

 

357

 

 

 

(68

)

 

(19.0

)%

Net interest income (FTE)

$

64,977

 

 

$

60,846

 

 

$

4,131

 

 

6.8

%

Net interest margin (FTE)

 

4.44

%

 

 

4.29

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2,360

 

 

$

2,098

 

 

$

262

 

 

12.5

%

Effect on average loan yield

 

0.23

%

 

 

0.21

%

 

 

 

 

Effect on net interest margin (FTE)

 

0.16

%

 

 

0.14

%

 

 

 

 

 

Nine months ended September 30,

 

 

 

 

(dollars in thousands)

 

2019

 

 

 

2018

 

 

$ Change

 

% Change

Interest income

$

204,526

 

 

$

160,153

 

 

$

44,373

 

 

27.7

%

Interest expense

 

(11,653

)

 

 

(8,809

)

 

 

(2,844

)

 

32.3

%

Fully tax-equivalent adjustment (FTE) (1)

 

929

 

 

 

982

 

 

 

(53

)

 

(5.4

)%

Net interest income (FTE)

$

193,802

 

 

$

152,326

 

 

$

41,476

 

 

27.2

%

Net interest margin (FTE)

 

4.48

%

 

 

4.22

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

5,919

 

 

$

3,289

 

 

$

2,630

 

 

80.0

%

Effect on average loan yield

 

0.19

%

 

 

0.13

%

 

 

0.06

%

 

 

Effect on net interest margin (FTE)

 

0.08

%

 

 

0.05

%

 

 

0.03

%

 

 

(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. As a result of the declining rate environment, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, accelerated and this is evidenced by the 23.9% increase in discount accretion included in interest income during the third quarter of 2019 as compared to the trailing quarter. During the three months ended September 30, 2019, June 30, 2019 and March 31, 2019, purchased loan discount accretion was $2,360,000, $1,904,000, and $1,655,000, respectively. During the three months ended March 31, 2019, loans purchased at net premium 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 quarterly periods indicated:

...
 

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Three Months Ended

 

Three Months Ended

 

 

September 30, 2019

 

June 30, 2019

 

September 30, 2018

 

Average
Balance

 

Income/
Expense

 

Yield/
Rate

 

Average
Balance

 

Income/
Expense

 

Yield/
Rate

 

Average
Balance

 

Income/
Expense

 

Yield/
Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

$

4,142,602

 

$

56,999

 

5.46

%

 

$

4,044,044

 

$

55,491

 

5.50

%

 

$

4,019,391

 

$

53,102

 

5.24

%

Investments-taxable

 

1,403,653

 

 

10,172

 

2.88

%

 

 

1,432,550

 

 

10,763

 

3.01

%

 

 

1,326,756

 

 

9,648

 

2.89

%

Investments-nontaxable (1)

 

133,038

 

 

1,250

 

3.73

%

 

 

140,562

 

 

1,358

 

3.88

%

 

 

163,309

 

 

1,546

 

3.76

%

Total investments

 

1,536,691

 

 

11,422

 

2.95

%

 

 

1,573,112

 

 

12,121

 

3.14

%

 

 

1,490,065

 

 

11,194

 

2.98

%

Cash at Federal Reserve and other banks

 

130,955

 

 

757

 

2.29

%

 

 

147,810

 

 

866

 

2.35

%

 

 

119,635

 

 

615

 

2.04

%

Total earning assets

 

5,810,248

 

 

69,178

 

4.72

%

 

 

5,764,966

 

 

68,478

 

4.76

%

 

 

5,629,091

 

 

64,911

 

4.57

%

Other assets, net

 

642,222

 

 

 

 

 

 

620,923

 

 

 

 

 

 

626,622

 

 

 

 

Total assets

$

6,452,470