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TriCo Bancshares Announces Second Quarter 2022 Results

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·10 min read
In this article:
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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."

CHICO, Calif., July 27, 2022--(BUSINESS WIRE)--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

...