2Q24 Financial
Highlights
- Net income increased to $29.0 million or $0.87 per diluted
share as compared to $27.7 million or $0.83 per diluted share in
the trailing quarter
- Deposit balances increased $62.6 million or 3.1%
(annualized) from the trailing quarter
- Average yield on earning assets was 5.24%, an increase of 11
basis points over the 5.13% in the trailing quarter
- Net interest margin (FTE) was 3.68% in the recent quarter,
unchanged from the trailing quarter
- Non-interest bearing deposits averaged 32.0% of total
deposits during the quarter
- The average cost of total deposits was 1.45%, an increase of
24 basis points as compared to 1.21% in the trailing quarter, and
an increase of 87 basis points from 0.58% in the same quarter of
the prior year; the Company's total cost of deposits have increased
141 basis points since FOMC rate actions began in March 2022, which
translates to a cycle-to-date deposit beta of 26.9%
TriCo Bancshares (NASDAQ: TCBK):
Executive Commentary:
“Our results for the second quarter continued to demonstrate
TriCo’s stability and ability to operate effectively under various
and changing economic environments. Our focus on core deposit
growth and relationship banking continues to provide positive
traction for our Bank," said Rick Smith, President and CEO. Smith
further commented; "Our loan portfolio risk trends remain strong as
the credit cycle continues to normalize as compared to the past
several years. Borrowers continue to be responsive and supportive
of our proactive efforts to manage credit risk.”
Peter Wiese, EVP and CFO added, “Our net interest margin was
unchanged from the trailing quarter, a positive indicator that net
interest income is poised to gain momentum in the second half of
2024. Our balance sheet strategies around deposit growth and
borrowing reductions continue to be successful, and despite the
modest increase in non-interest expenses during the second quarter,
our full year outlook remains unchanged. In addition, our use of
capital, including a cash dividend and share repurchase activities,
illustrate our commitment to building shareholder value and our
forward-looking confidence in the Company.”
Selected Financial
Highlights
- For the quarter ended June 30, 2024, the Company’s return on
average assets was 1.19%, while the return on average equity was
9.99%; for the trailing quarter ended March 31, 2024, the Company’s
return on average assets was 1.13%, while the return on average
equity was 9.50%.
- Diluted earnings per share were $0.87 for the second quarter of
2024, compared to $0.83 for the trailing quarter and $0.75 during
the second quarter of 2023.
- The loan to deposit ratio decreased to 83.8% as of June 30,
2024, as compared to 85.1% for the trailing quarter end, as a
result of both deposit growth and loan contraction during the
quarter.
- The efficiency ratio was 59.61% for the quarter ended June 30,
2024, as compared to 57.36% for the trailing quarter.
- The provision for credit losses was approximately $0.4 million
during the quarter ended June 30, 2024, as compared to $4.3 million
during the trailing quarter end, reflecting the continued risks
associated with general economic trends and forecasts, partially
offset by a decline in specific reserves and loan balances.
- The allowance for credit losses (ACL) to total loans was 1.83%
as of June 30, 2024, compared to 1.83% as of the trailing quarter
end, and 1.80% as of June 30, 2023. Non-performing assets to total
assets were 0.36% on June 30, 2024, as compared to 0.37% as of
March 31, 2024, and 0.41% at June 30, 2023. At June 30, 2024, the
ACL represented 377% of non-performing loans.
Financial results reported in this document are preliminary and
unaudited. Final financial results and other disclosures will be
reported on Form 10-Q for the period ended June 30, 2024, 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.
Operating Results and Performance
Ratios
Three months ended
June 30, 2024
March 31, 2024
(dollars and shares in thousands, except
per share data)
$ Change
% Change
Net interest income
$
81,997
$
82,736
$
(739
)
(0.9
)%
Provision for credit losses
(405
)
(4,305
)
3,900
(90.6
)%
Noninterest income
15,866
15,771
95
0.6
%
Noninterest expense
(58,339
)
(56,504
)
(1,835
)
3.2
%
Provision for income taxes
(10,085
)
(9,949
)
(136
)
1.4
%
Net income
$
29,034
$
27,749
$
1,285
4.6
%
Diluted earnings per share
$
0.87
$
0.83
$
0.04
4.8
%
Dividends per share
$
0.33
$
0.33
$
—
—
%
Average common shares
33,121
33,245
(124
)
(0.4
)%
Average diluted common shares
33,244
33,370
(126
)
(0.4
)%
Return on average total assets
1.19
%
1.13
%
Return on average equity
9.99
%
9.50
%
Efficiency ratio
59.61
%
57.36
%
Three months ended June 30,
(dollars and shares in thousands, except
per share data)
2024
2023
$ Change
% Change
Net interest income
$
81,997
$
88,601
$
(6,604
)
(7.5
)%
Provision for credit losses
(405
)
(9,650
)
9,245
(95.8
)%
Noninterest income
15,866
15,741
125
0.8
%
Noninterest expense
(58,339
)
(61,243
)
2,904
(4.7
)%
Provision for income taxes
(10,085
)
(8,557
)
(1,528
)
17.9
%
Net income
$
29,034
$
24,892
$
4,142
16.6
%
Diluted earnings per share
$
0.87
$
0.75
$
0.12
16.0
%
Dividends per share
$
0.33
$
0.30
$
0.03
10.0
%
Average common shares
33,121
33,219
(98
)
(0.3
)%
Average diluted common shares
33,244
33,302
(58
)
(0.2
)%
Return on average total assets
1.19
%
1.01
%
Return on average equity
9.99
%
8.98
%
Efficiency ratio
59.61
%
58.69
%
Six months ended June 30,
(dollars and shares in thousands)
2024
2023
$ Change
% Change
Net interest income
$
164,733
$
181,937
$
(17,204
)
(9.5
)%
Provision for credit losses
(4,710
)
(13,845
)
9,135
(66.0
)%
Noninterest income
31,637
29,376
2,261
7.7
%
Noninterest expense
(114,843
)
(115,037
)
194
(0.2
)%
Provision for income taxes
(20,034
)
(21,706
)
1,672
(7.7
)%
Net income
$
56,783
$
60,725
$
(3,942
)
(6.5
)%
Diluted earnings per share
$
1.70
$
1.82
$
(0.12
)
(6.6
)%
Dividends per share
$
0.66
$
0.60
$
0.06
10.0
%
Average common shares
33,183
33,257
(74
)
(0.2
)%
Average diluted common shares
33,306
33,371
(65
)
(0.2
)%
Return on average total assets
1.16
%
1.24
%
Return on average equity
9.74
%
11.13
%
Efficiency ratio
58.48
%
54.44
%
Balance Sheet Data
Total loans outstanding were $6.7 billion as of June 30, 2024,
an organic increase of $221.8 million 3.4% over June 30, 2023, but
a decrease of $58.2 million or 3.4% annualized as compared to the
trailer quarter ended March 31, 2024. As the Company continued with
its balance sheet augmentation strategies, investments decreased by
$135.5 million and $399.3 million for the three and twelve month
periods ended June 30, 2024 and ending the quarter with a balance
of $2.09 billion or 21.4% of total assets. Quarterly average
earning assets to quarterly total average assets was 92.0% on June
30, 2024, compared to 91.6% at June 30, 2023. The loan-to-deposit
ratio was 83.8% on June 30, 2024, as compared to 80.6% at June 30,
2023. The Company did not utilize brokered deposits during 2024 or
2023 and continues to rely on organic deposit customers and
short-term borrowings to fund cash flow timing differences.
Total shareholders' equity increased by $12.0 million during the
quarter ended June 30, 2024, as net income of $29.0 million and a
$2.9 million decrease in accumulated other comprehensive losses was
partially offset by cash dividend payments on common stock of
approximately $10.9 million and net share repurchases totaling $9.0
million. As a result, the Company’s book value grew to $35.62 per
share at June 30, 2024, compared to $32.86 at June 30, 2023. 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 $26.13 per share at June 30, 2024, as compared to
$23.30 at June 30, 2023. As noted above, changes in the fair value
of available-for-sale investment securities, net of deferred taxes
continue to create moderate levels of volatility in tangible book
value per share.
Trailing Quarter Balance Sheet Change
Ending balances
June 30, 2024
March 31, 2024
Annualized
% Change
(dollars in thousands)
$ Change
Total assets
$
9,741,399
$
9,813,767
$
(72,368
)
(2.9
)%
Total loans
6,742,526
6,800,695
(58,169
)
(3.4
)
Total investments
2,086,090
2,221,555
(135,465
)
(24.4
)
Total deposits
8,050,230
7,987,658
62,572
3.1
Total other borrowings
247,773
392,409
(144,636
)
(147.4
)
Loans outstanding decreased by $58.2 million or 3.4% on an
annualized basis during the quarter ended June 30, 2024. During the
quarter, loan originations/draws totaled approximately $310.1
million while payoffs/repayments of loans totaled $368.7 million,
which compares to originations/draws and payoffs/repayments during
the trailing quarter ended of $325.5 million and $321.3 million,
respectively. Origination volume activity levels remain slightly
lower relative to the comparative period in 2023 due in part to
disciplined pricing and underwriting, as well as decreased borrower
demand given economic uncertainties. The increase in
payoffs/repayments as compared to the trailing quarter was spread
amongst numerous borrowers, regions and loan types.
Investment security balances decreased $135.5 million or 24.4%
on an annualized basis as a result of net prepayments, and
maturities, collectively totaling approximating $164.0 million and,
to a lesser extent, sales totaling $28.6 million, partially offset
by security purchases totaling $53.5 million, in addition to net
increases in the market value of securities of $4.1 million.
Investment security purchases were comprised of floating rate
instruments tied to SOFR with an initial weighted average coupon of
6.77% and a weighted average life of 4.7 years. Investment security
sales were primarily comprised of fixed rate instruments with a
weighted average coupon of 2.39% and a weighted average life of 3.8
years. While management intends to primarily utilize cash flows
from the investment security portfolio and organic deposit growth
to support loan growth, excess liquidity will be utilized for
purchases of investment securities to support net interest income
growth and net interest margin expansion.
Deposit balances increased by $62.6 million or 3.1% annualized
during the period, led by growth within time deposits.
Other borrowings totaled $247.8 million at June 30, 2024,
representing a net decrease of $144.6 million from the trailing
quarter. This quarter over quarter decrease was facilitated by
proceeds from the sale, call or maturity of investment securities,
and growth in deposits.
Average Trailing Quarter Balance Sheet Change
Quarterly average balances for the period
ended
June 30, 2024
March 31, 2024
Annualized
% Change
(dollars in thousands)
$ Change
Total assets
$
9,782,228
$
9,855,797
$
(73,569
)
(3.0
)%
Total loans
6,792,303
6,785,840
6,463
0.4
Total investments
2,141,291
2,266,320
(125,029
)
(22.1
)
Total deposits
8,024,441
7,821,044
203,397
10.4
Total other borrowings
325,604
584,696
(259,092
)
(177.2
)
Year Over Year Balance Sheet Change
Ending balances
As of June 30,
% Change
(dollars in thousands)
2024
2023
$ Change
Total assets
$
9,741,399
$
9,853,421
$
(112,022
)
(1.1
)%
Total loans
6,742,526
6,520,740
221,786
3.4
Total investments
2,086,090
2,485,378
(399,288
)
(16.1
)
Total deposits
8,050,230
8,095,365
(45,135
)
(0.6
)
Total other borrowings
247,773
392,714
(144,941
)
(36.9
)
Loan balances increased as a result of organic activities by
approximately $221.8 million or 3.4% during the twelve-month period
ending June 30, 2024. Over the same period deposit balances have
declined by $45.1 million or 0.6%. The Company has offset these
declines through the deployment of excess cash balances and
maturity or sale of investment security balances.
Primary Sources of
Liquidity
(dollars in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Borrowing capacity at correspondent banks
and FRB
$
2,998,009
$
2,882,859
$
2,847,052
Less: borrowings outstanding
(225,000
)
(367,000
)
(350,000
)
Unpledged available-for-sale (AFS)
investment securities
1,285,185
1,435,990
1,813,894
Cash held or in transit with FRB
163,809
41,541
79,530
Total primary liquidity
$
4,222,003
$
3,993,390
$
4,390,476
Estimated uninsured deposit balances
$
2,486,910
$
2,450,179
$
2,522,718
On June 30, 2024, the Company's primary sources of liquidity
represented 52% of total deposits and 170% of estimated total
uninsured (excluding collateralized municipal deposits and
intercompany balances) deposits, respectively. As secondary sources
of liquidity, the Company's held-to-maturity investment securities
had a fair value of $113.7 million, including approximately $9.0
million in net unrealized losses.
Net Interest Income and Net Interest
Margin
During the twelve-month period ended June 30, 2024, the Federal
Open Market Committee's (FOMC) actions have resulted in an increase
in the Fed Funds Rate by approximately 25 basis points. During the
same period the Company's yield on total loans increased 44 basis
points to 5.82% for the three months ended June 30, 2024, from
5.38% for the three months ended June 30, 2023. The tax equivalent
yield on the Company's investment security portfolio was 3.42% for
the quarter ended June 30, 2024, an increase of 18 basis points
from the 3.24% for the three months ended June 30, 2023. The cost
of total interest-bearing deposits and total interest-bearing
liabilities increased by 119 basis points and 102 basis points,
respectively, between the three-month periods ended June 30, 2024
and 2023. Since FOMC rate actions began in March 2022, the
Company's cost of total deposits has increased 141 basis points
which translates to a cycle to date deposit beta of 26.9%.
The Company continues to manage its cost of deposits through the
use of various pricing and product mix strategies. As of June 30,
2024, December 31, 2023, and June 30, 2023, deposits priced
utilizing these strategies totaled $1.4 billion, $1.3 billion and
$1.0 billion, respectively, and carried weighted average rates of
3.80%, 3.60%, and 3.38%, respectively.
Three months ended
June 30, 2024
March 31, 2024
(dollars in thousands)
Change
% Change
Interest income
$
117,032
$
115,417
$
1,615
1.4
%
Interest expense
(35,035
)
(32,681
)
(2,354
)
7.2
%
Fully tax-equivalent adjustment (FTE)
(1)
275
275
—
—
%
Net interest income (FTE)
$
82,272
$
83,011
$
(739
)
(0.9
)%
Net interest margin (FTE)
3.68
%
3.68
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
850
$
1,332
$
(482
)
(36.2
)%
Net interest margin less effect of
acquired loan discount accretion(1)
3.64
%
3.62
%
0.02
%
Three months ended June 30,
(dollars in thousands)
2024
2023
Change
% Change
Interest income
$
117,032
$
107,158
$
9,874
9.2
%
Interest expense
(35,035
)
(18,557
)
(16,478
)
88.8
%
Fully tax-equivalent adjustment (FTE)
(1)
275
379
(104
)
(27.4
)%
Net interest income (FTE)
$
82,272
$
88,980
$
(6,708
)
(7.5
)%
Net interest margin (FTE)
3.68
%
3.96
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
850
$
1,471
$
(621
)
(42.2
)%
Net interest margin less effect of
acquired loan discount accretion(1)
3.64
%
3.89
%
(0.25
)%
Six months ended June 30,
(dollars in thousands)
2024
2023
Change
% Change
Interest income
$
232,449
$
210,065
$
22,384
10.7
%
Interest expense
(67,716
)
(28,128
)
(39,588
)
140.7
%
Fully tax-equivalent adjustment (FTE)
(1)
550
770
(220
)
(28.6
)%
Net interest income (FTE)
$
165,283
$
182,707
$
(17,424
)
(9.5
)%
Net interest margin (FTE)
3.68
%
4.08
%
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
2,182
$
2,868
$
(686
)
(23.9
)%
Net interest margin less effect of
acquired loan discount accretion(1)
3.63
%
4.02
%
(0.39
)%
(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.
Analysis Of Change In Net Interest
Margin On Earning Assets
Three months ended
Three months ended
Three months ended
(dollars in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans
$
6,792,303
$
98,229
5.82
%
$
6,785,840
$
96,485
5.72
%
$
6,467,381
$
86,747
5.38
%
Investments-taxable
2,003,124
17,004
3.41
%
2,127,420
17,829
3.37
%
2,343,511
18,775
3.21
%
Investments-nontaxable (1)
138,167
1,190
3.46
%
138,900
1,192
3.45
%
181,823
1,641
3.62
%
Total investments
2,141,291
18,194
3.42
%
2,266,320
19,021
3.38
%
2,525,334
20,416
3.24
%
Cash at Fed Reserve and other banks
68,080
884
5.22
%
14,377
186
5.20
%
29,349
374
5.11
%
Total earning assets
9,001,674
117,307
5.24
%
9,066,537
115,692
5.13
%
9,022,064
107,537
4.78
%
Other assets, net
780,554
789,260
826,127
Total assets
$
9,782,228
$
9,855,797
$
9,848,191
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,769,370
$
6,215
1.41
%
$
1,710,844
$
4,947
1.16
%
$
1,657,714
$
2,173
0.53
%
Savings deposits
2,673,272
12,260
1.84
%
2,651,917
10,900
1.65
%
2,768,981
6,936
1.00
%
Time deposits
1,016,190
10,546
4.17
%
811,894
7,682
3.81
%
426,689
2,348
2.21
%
Total interest-bearing deposits
5,458,832
29,021
2.14
%
5,174,655
23,529
1.83
%
4,853,384
11,457
0.95
%
Other borrowings
325,604
4,118
5.09
%
584,696
7,378
5.08
%
477,256
5,404
4.54
%
Junior subordinated debt
101,128
1,896
7.54
%
101,106
1,774
7.06
%
101,056
1,696
6.73
%
Total interest-bearing liabilities
5,885,564
35,035
2.39
%
5,860,457
32,681
2.24
%
5,431,696
18,557
1.37
%
Noninterest-bearing deposits
2,565,609
2,646,389
3,128,131
Other liabilities
161,731
174,359
176,141
Shareholders’ equity
1,169,324
1,174,592
1,112,223
Total liabilities and shareholders’
equity
$
9,782,228
$
9,855,797
$
9,848,191
Net interest rate spread (1) (2)
2.85
%
2.89
%
3.41
%
Net interest income and margin (1) (3)
$
82,272
3.68
%
$
83,011
3.68
%
$
88,980
3.96
%
(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,
2024, decreased $0.7 million or 0.9% to $82.3 million compared to
$83.0 million during the three months ended March 31, 2024. Net
interest margin of 3.68% remained consistent with the trailing
quarter. The decrease in net interest income is primarily
attributed to an additional $5.5 million or 23.3% increase in
deposit interest expense due to changes in product mix, as
customers continue to migrate towards higher yielding term deposit
accounts. Deposit cost increases during the current quarter were
also influenced by continued competitive pricing pressures. These
increases in deposit costs were partially offset by a $3.3 million
reduction in interest expense on other borrowings costs as the
average balance of those borrowings decreased by $259.1 million
during the period. Additionally, interest and fee income on loans
increased $1.7 million as both rates and average balances on loans
increased when compared to the trailing quarter.
As compared to the same quarter in the prior year, average loan
yields increased 44 basis points from 5.38% during the three months
ended June 30, 2023, to 5.82% during the three months ended June
30, 2024. The accretion of discounts from acquired loans added 5
basis points and 9 basis points to loan yields during the quarters
ended June 30, 2024 and June 30, 2023, respectively. The cost of
interest-bearing deposits increased by 119 basis points between the
quarter ended June 30, 2024, and the same quarter of the prior
year. In addition, the average balance of noninterest-bearing
deposits decreased by $562.5 million from the three-month average
for the period ended June 30, 2023 amidst a continued migration of
customer funds to interest-bearing products.
For the quarter ended June 30, 2024, the ratio of average total
noninterest-bearing deposits to total average deposits was 32.0%,
as compared to 33.8% and 39.2% for the quarters ended March 31,
2024 and June 30, 2023, respectively.
(dollars in thousands)
Six months ended June 30,
2024
Six months ended June 30,
2023
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans
$
6,789,072
$
194,713
5.77
%
$
6,440,817
$
169,161
5.30
%
Investments-taxable
2,065,412
34,833
3.39
%
2,370,722
37,691
3.21
%
Investments-nontaxable (1)
138,534
2,382
3.46
%
185,417
3,340
3.63
%
Total investments
2,203,946
37,215
3.40
%
2,556,139
41,031
3.24
%
Cash at Fed Reserve and other banks
41,229
1,071
5.22
%
28,090
643
4.62
%
Total earning assets
9,034,247
232,999
5.19
%
9,025,046
210,835
4.71
%
Other assets, net
784,765
838,425
Total assets
$
9,819,012
$
9,863,471
Liabilities and shareholders’ equity
Interest-bearing demand deposits
$
1,740,107
$
11,162
1.29
%
$
1,665,371
$
2,560
0.31
%
Savings deposits
2,662,595
23,159
1.75
%
2,833,365
11,090
0.79
%
Time deposits
914,042
18,229
4.01
%
351,166
2,952
1.70
%
Total interest-bearing deposits
5,316,744
52,550
1.99
%
4,849,902
16,602
0.69
%
Other borrowings
455,150
11,496
5.08
%
377,995
8,213
4.38
%
Junior subordinated debt
101,117
3,670
7.30
%
101,050
3,313
6.61
%
Total interest-bearing liabilities
5,873,011
67,716
2.32
%
5,328,947
28,128
1.06
%
Noninterest-bearing deposits
2,605,999
3,249,488
Other liabilities
168,044
185,123
Shareholders’ equity
1,171,958
1,099,913
Total liabilities and shareholders’
equity
$
9,819,012
$
9,863,471
Net interest rate spread (1) (2)
2.87
%
3.65
%
Net interest income and margin (1) (3)
$
165,283
3.68
%
$
182,707
4.08
%
(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 Earning Asset
Composition
As of June 30, 2024, the Company's loan portfolio consisted of
approximately $6.8 billion in outstanding principal with a weighted
average coupon rate of 5.47%. During the three-month periods ending
June 30, 2024, March 31, 2024, and June 30, 2023, the weighted
average coupon on loan production in the quarter was 7.98%, 7.78%
and 6.85%, respectively. Included in the June 30, 2024 total loans
are adjustable rate loans totaling $4.2 billion, of which, $921.0
million are considered floating based on the Wall Street Prime
index. In addition, the Company holds certain investment securities
with fair values totaling $339.9 million which are subject to
repricing on not less than a quarterly basis.
Asset Quality and Credit Loss
Provisioning
During the three months ended June 30, 2024, the Company
recorded a provision for credit losses of $0.4 million, as compared
to $4.3 million during the trailing quarter, and $9.7 million
during the second quarter of 2023.
Three months ended
Six months ended
(dollars in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Addition to allowance for credit
losses
$
335
$
4,015
$
8,980
$
4,350
$
13,295
Addition to (reversal of) reserve for
unfunded loan commitments
70
290
670
360
550
Total provision for credit losses
$
405
$
4,305
$
9,650
$
4,710
$
13,845
The provision for credit losses on loans of $0.3 million during
the recent quarter was the result of net charge-offs approximating
$1.2 million and increases in reserves for qualitative factors,
partially offset by a $0.5 million decrease in specific reserves
for individually evaluated credits and other decreases in
quantitative reserve requirements driven primarily by a decline in
loan balances. The provision for credit losses was needed to
partially replenish the allowance for credit losses on loans
subsequent to processing net charge-offs during the quarter and to
account for ongoing risks associated with the qualitative
components of the ACL model, as compared to any significant
deterioration in credit quality on the existing loan portfolio.
Three months ended June 30,
Six months ended June 30,
(dollars in thousands)
2024
2023
2024
2023
Balance, beginning of period
$
124,394
$
108,407
$
121,522
$
105,680
Provision for credit losses
335
8,980
4,350
13,295
Loans charged-off
(1,610
)
(277
)
(2,885
)
(2,035
)
Recoveries of previously charged-off
loans
398
219
530
389
Balance, end of period
$
123,517
$
117,329
$
123,517
$
117,329
The allowance for credit losses (ACL) was $123.5 million or
1.83% of total loans as of June 30, 2024. For the current quarter,
the qualitative components of the ACL that contributed to an
increase in required reserves primarily related to uncertainty
around US policy and related effects on domestic economic trends
that are inconsistent with those desired by the FOMC.
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 includes improving shifts in the magnitude of changes
for both the unemployment and GDP factors leading up to the balance
sheet date. Despite continued declines on a year over year
comparative basis, core inflation remains elevated from wage
pressures, and higher living costs such as housing, energy and
general services. Management notes the rapid intervals of rate
increases by the Federal Reserve may create repricing risk for
certain borrowers and continued inversion of the yield curve,
creates informed expectations of the US potentially entering a
recession within 12 months. While projected cuts in interest rates
from the Federal Reserve during 2024 may improve this outlook, the
uncertainty associated with the extent and timing of these
potential reductions has inhibited a change to forecasted reserve
levels. As a result, management continues to believe that certain
credit weaknesses are likely present in the overall economy and
that it is appropriate to maintain a reserve level that
incorporates such risk factors.
Loans past due 30 days or more increased by $13.9 million during
the quarter ended June 30, 2024, to $30.4 million, as compared to
$16.5 million at March 31, 2024. The majority of loans identified
as past due are well-secured by collateral, and approximately $13.3
million is less than 90 days delinquent. Non-performing loans were
$32.8 million at June 30, 2024, a decrease of $1.4 million from
$34.2 million as of March 31, 2024, and a decrease of $4.8 million
from $37.6 million as of June 30, 2023. Management continues to
proactively work with these borrowers to identify actionable and
appropriate resolution strategies which are customary for the
industries. Of the $32.8 million loans designated as non-performing
as of June 30, 2024, approximately $11.7 million are current or
less than 30 days past due with respect to payments required under
their existing loan agreements.
June 30,
% of Loans Outstanding
March 31,
% of Loans Outstanding
June 30,
% of Loans Outstanding
(dollars in thousands)
2024
2024
2023
Risk Rating:
Pass
$
6,536,223
96.9
%
$
6,616,294
97.3
%
$
6,299,893
96.6
%
Special Mention
101,324
1.5
%
108,073
1.6
%
155,678
2.4
%
Substandard
104,979
1.6
%
76,328
1.1
%
65,169
1.0
%
Total
$
6,742,526
$
6,800,695
$
6,520,740
Classified loans to total loans
1.56
%
1.12
%
1.00
%
Loans past due 30+ days to total loans
0.45
%
0.24
%
0.15
%
The ratio of classified loans to total loans of 1.56% as of June
30, 2024, increased 44 basis points from March 31, 2024 and
increased 56 basis points from the comparative quarter ended 2023.
The change in classified loans outstanding as compared to the
trailing quarter totaled $21.9 million. Loans with the risk grade
classification substandard increased by $28.7 million over the
trailing quarter and relate primarily to five loans across two
relationships totaling $25.2 million, including $18.0 million in
agricultural and farmland loans and $7.2 million in non-owner
occupied CRE loans. All loans within these relationships are
performing as agreed and have substantial collateral support and
borrower guarantees. As a percentage of total loans outstanding,
classified assets remain consistent with volumes experienced prior
to the recent quantitative easing cycle spurred by the COVID
pandemic and reflect management's historically conservative
approach to credit risk monitoring. The Company's combined
criticized loan balances totaled $206.3 million as of June 30,
2024, an improvement of $14.5 million from June 30, 2023.
Outstanding balances on construction loans, which have
historically been associated with elevated levels of risk,
experienced balance reductions of $65.6 million during the current
quarter. These reductions were primarily associated with $49.1
million in balances that were converted to term loans upon the
completion of construction and achievement of stabilized occupancy,
$44.0 million in balances that paid down or paid-off, and the
offsetting balance representing new draws or originations.
Further, management has taken action to proactively assess the
repayment capacity of borrowers that will likely be subject to rate
resets in the near term. To date this analysis as well as
management's observations of loans that have experienced a rate
reset, have not resulted in the need to provide any concessions to
borrowers.
As of June 30, 2024, other real estate owned consisted of 10
properties with a carrying value of approximately $2.5 million,
which is unchanged from the trailing quarter end. Non-performing
assets of $35.3 million at June 30, 2024, represented 0.36% of
total assets, a change from the $36.7 million or 0.37% and $40.5
million or 0.41% as of March 31, 2024 and June 30, 2023,
respectively.
Allocation of Credit Loss Reserves by Loan Type
As of June 30, 2024
As of March 31, 2024
As of June 30, 2023
(dollars in thousands)
Amount
% of Loans Outstanding
Amount
% of Loans Outstanding
Amount
% of Loans Outstanding
Commercial real estate:
CRE - Non-Owner Occupied
$
37,155
1.66
%
$
36,687
1.65
%
$
33,042
1.54
%
CRE - Owner Occupied
15,873
1.67
%
16,111
1.65
%
20,208
2.08
%
Multifamily
15,973
1.60
%
15,682
1.60
%
14,075
1.48
%
Farmland
4,031
1.52
%
3,695
1.39
%
3,691
1.33
%
Total commercial real estate loans
73,032
1.64
%
72,175
1.62
%
71,016
1.63
%
Consumer:
SFR 1-4 1st Liens
14,604
1.65
%
14,140
1.60
%
13,134
1.58
%
SFR HELOCs and Junior Liens
10,087
2.91
%
9,942
2.88
%
10,608
2.92
%
Other
2,983
4.30
%
3,359
4.48
%
2,771
4.67
%
Total consumer loans
27,674
2.13
%
27,441
2.10
%
26,513
2.12
%
Commercial and Industrial
12,128
2.21
%
11,867
2.16
%
11,647
2.02
%
Construction
7,466
2.63
%
9,162
2.63
%
7,031
2.53
%
Agricultural Production
3,180
2.27
%
3,708
2.55
%
1,105
1.80
%
Leases
37
0.44
%
41
0.44
%
17
0.20
%
Allowance for credit losses
123,517
1.83
%
124,394
1.83
%
117,329
1.80
%
Reserve for unfunded loan commitments
6,210
6,140
4,865
Total allowance for credit losses
$
129,727
1.92
%
$
130,534
1.92
%
$
122,194
1.87
%
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, 2024, the unamortized discount associated
with acquired loans totaled $22.5 million, which, when combined
with the total allowance for credit losses above, represents 2.26%
of total loans.
Non-interest Income
Three months ended
(dollars in thousands)
June 30, 2024
March 31, 2024
Change
% Change
ATM and interchange fees
$
6,372
$
6,169
$
203
3.3
%
Service charges on deposit accounts
4,847
4,663
184
3.9
%
Other service fees
1,286
1,366
(80
)
(5.9
)%
Mortgage banking service fees
438
428
10
2.3
%
Change in value of mortgage servicing
rights
(147
)
11
(158
)
(1,436.4
)%
Total service charges and fees
12,796
12,637
159
1.3
%
Increase in cash value of life
insurance
831
803
28
3.5
%
Asset management and commission income
1,359
1,128
231
20.5
%
Gain on sale of loans
388
261
127
48.7
%
Lease brokerage income
154
161
(7
)
(4.3
)%
Sale of customer checks
301
312
(11
)
(3.5
)%
(Loss) gain on sale or exchange of
investment securities
(45
)
—
(45
)
n/m
(Loss) gain on marketable equity
securities
(121
)
(28
)
(93
)
332.1
%
Other income
203
497
(294
)
(59.2
)%
Total other non-interest income
3,070
3,134
(64
)
(2.0
)%
Total non-interest income
$
15,866
$
15,771
$
95
0.6
%
Total non-interest income increased $0.10 million or 0.6% to
$15.9 million during the three months ended June 30, 2024, compared
to $15.8 million during the quarter ended March 31, 2024. Increased
transactions that drive interchange and service fee income caused
revenues from these sources to increase by $0.4 million. Asset
management and commission income also increased $0.2 million, or
20.5%, due primarily to increases in assets under management. Net
losses related to investment activities were realized, as the
Company improved liquidity and future earnings through the sale of
investment securities, the losses from which were offset by gains
recognized in association with the exchange of Visa Class B shares.
Other income declined by $0.3 million or 59.2% during the quarter
following $0.2 million in non-recurring realized gains recorded in
the trailing quarter from alternative investments.
Three months ended June 30,
(dollars in thousands)
2024
2023
Change
% Change
ATM and interchange fees
$
6,372
$
6,856
$
(484
)
(7.1
)%
Service charges on deposit accounts
4,847
4,581
266
5.8
%
Other service fees
1,286
992
294
29.6
%
Mortgage banking service fees
438
454
(16
)
(3.5
)%
Change in value of mortgage servicing
rights
(147
)
85
(232
)
(272.9
)%
Total service charges and fees
12,796
12,968
(172
)
(1.3
)%
Increase in cash value of life
insurance
831
788
43
5.5
%
Asset management and commission income
1,359
1,158
201
17.4
%
Gain on sale of loans
388
295
93
31.5
%
Lease brokerage income
154
74
80
108.1
%
Sale of customer checks
301
407
(106
)
(26.0
)%
(Loss) gain on sale or exchange of
investment securities
(45
)
—
(45
)
n/m
(Loss) gain on marketable equity
securities
(121
)
(42
)
(79
)
188.1
%
Other income
203
93
110
118.3
%
Total other non-interest income
3,070
2,773
297
10.7
%
Total non-interest income
$
15,866
$
15,741
$
125
0.8
%
Non-interest income increased $0.1 million or 0.8% to $15.9
million during the three months ended June 30, 2024, compared to
$15.7 million during the comparative quarter ended June 30, 2023.
Interchange fees earned in the second quarter of 2023 were elevated
as compared to the comparable 2024 quarter due to increased
customer activity. The remaining various components of non-interest
income are largely consistent period over period and in-line with
commentary provided above.
Six months ended June 30,
(dollars in thousands)
2024
2023
Change
% Change
ATM and interchange fees
$
12,541
$
13,200
$
(659
)
(5.0
)%
Service charges on deposit accounts
9,510
8,012
1,498
18.7
%
Other service fees
2,652
2,158
494
22.9
%
Mortgage banking service fees
866
919
(53
)
(5.8
)%
Change in value of mortgage servicing
rights
(136
)
(124
)
(12
)
9.7
%
Total service charges and fees
25,433
24,165
1,268
5.2
%
Increase in cash value of life
insurance
1,634
1,590
44
2.8
%
Asset management and commission income
2,487
2,092
395
18.9
%
Gain on sale of loans
649
501
148
29.5
%
Lease brokerage income
315
172
143
83.1
%
Sale of customer checks
613
695
(82
)
(11.8
)%
(Loss) gain on sale or exchange of
investment securities
(45
)
(164
)
119
(72.6
)%
(Loss) gain on marketable equity
securities
(149
)
—
(149
)
n/m
Other income
700
325
375
115.4
%
Total other non-interest income
6,204
5,211
993
19.1
%
Total non-interest income
$
31,637
$
29,376
$
2,261
7.7
%
Non-interest income increased $2.3 million or 7.7% to $31.6
million during the six months ended June 30, 2024, compared to
$29.4 million during the comparative six months ended June 30,
2023. As noted above, interchange fees as driven by customer
activities was elevated in the 2023 period and resulted in a
decrease of $0.7 million as compared to the six months ended June
30, 2024. Service charges on deposit accounts increased by $1.5
million or 18.7% as compared to the equivalent period in 2023
following $0.9 million in waived or reversed fees as a courtesy to
customers in the 2023 year. As noted above, elevated activity
within asset management and realized gains from alternative
investments contributed to the overall improvement.
Non-interest Expense
Three months ended
(dollars in thousands)
June 30, 2024
March 31, 2024
Change
% Change
Base salaries, net of deferred loan
origination costs
$
23,852
$
24,020
$
(168
)
(0.7
)%
Incentive compensation
4,711
3,257
1,454
44.6
%
Benefits and other compensation costs
6,838
7,027
(189
)
(2.7
)%
Total salaries and benefits expense
35,401
34,304
1,097
3.2
%
Occupancy
4,063
3,951
112
2.8
%
Data processing and software
5,094
5,107
(13
)
(0.3
)%
Equipment
1,330
1,356
(26
)
(1.9
)%
Intangible amortization
1,030
1,030
—
—
%
Advertising
819
762
57
7.5
%
ATM and POS network charges
1,987
1,661
326
19.6
%
Professional fees
1,814
1,340
474
35.4
%
Telecommunications
558
511
47
9.2
%
Regulatory assessments and insurance
1,144
1,251
(107
)
(8.6
)%
Postage
340
308
32
10.4
%
Operational loss
244
352
(108
)
(30.7
)%
Courier service
559
480
79
16.5
%
(Gain) loss on sale or acquisition of
foreclosed assets
—
(38
)
38
(100.0
)%
(Gain) loss on disposal of fixed
assets
1
5
(4
)
(80.0
)%
Other miscellaneous expense
3,955
4,124
(169
)
(4.1
)%
Total other non-interest expense
22,938
22,200
738
3.3
%
Total non-interest expense
$
58,339
$
56,504
$
1,835
3.2
%
Average full-time equivalent staff
1,160
1,188
(28
)
(2.4
)%
Total non-interest expense for the quarter ended June 30, 2024,
increased $1.8 million or 3.2% to $58.3 million as compared to
$56.5 million during the trailing quarter ended March 31, 2024.
Total salaries and benefits expense increased by $1.1 million or
3.2%, reflecting the increase of $1.5 million in incentive
compensation accruals related to production volumes associated with
both loans and deposits, offset by a decrease of $0.4 million in
benefits and other routine compensation expenses as it is common to
observe seasonally higher benefit costs in the first quarter of any
calendar year. Professional fees increased by $0.5 million or
35.4%, primarily due to timing differences related to legal and
consulting projects.
Three months ended June 30,
(dollars in thousands)
2024
2023
Change
% Change
Base salaries, net of deferred loan
origination costs
$
23,852
$
24,059
$
(207
)
(0.9
)%
Incentive compensation
4,711
4,377
334
7.6
%
Benefits and other compensation costs
6,838
6,278
560
8.9
%
Total salaries and benefits expense
35,401
34,714
687
2.0
%
Occupancy
4,063
3,991
72
1.8
%
Data processing and software
5,094
4,638
456
9.8
%
Equipment
1,330
1,436
(106
)
(7.4
)%
Intangible amortization
1,030
1,656
(626
)
(37.8
)%
Advertising
819
1,016
(197
)
(19.4
)%
ATM and POS network charges
1,987
1,902
85
4.5
%
Professional fees
1,814
1,985
(171
)
(8.6
)%
Telecommunications
558
809
(251
)
(31.0
)%
Regulatory assessments and insurance
1,144
1,993
(849
)
(42.6
)%
Postage
340
311
29
9.3
%
Operational loss
244
1,090
(846
)
(77.6
)%
Courier service
559
483
76
15.7
%
(Gain) loss on disposal of fixed
assets
1
18
(17
)
(94.4
)%
Other miscellaneous expense
3,955
5,201
(1,246
)
(24.0
)%
Total other non-interest expense
22,938
26,529
(3,591
)
(13.5
)%
Total non-interest expense
$
58,339
$
61,243
$
(2,904
)
(4.7
)%
Average full-time equivalent staff
1,160
1,210
(50
)
(4.1
)%
Non-interest expense decreased $2.9 million or 4.7% to $58.3
million during the three months ended June 30, 2024, as compared to
$61.2 million for the quarter ended June 30, 2023. Regulatory
assessment charges decreased $0.8 million or 42.6% following
changes in various assessments as compared to the same period of
2023. Additionally, operational losses decreased $0.8 million or
77.6% attributable to a normalized quarterly rate following
non-recurring ATM burglary expenses totaling $0.7 million in the
comparative period. Finally, other miscellaneous expense declined
$1.2 million or 24.0% due to non-recurring charges in the
comparative period totaling $0.8 million related to non-sufficient
fee refunds and elevated provision expense on real estate owned
approximating $0.5 million.
Six months ended June 30,
(dollars in thousands)
2024
2023
Change
% Change
Base salaries, net of deferred loan
origination costs
$
47,872
$
47,059
$
813
1.7
%
Incentive compensation
7,968
7,272
696
9.6
%
Benefits and other compensation costs
13,865
12,946
919
7.1
%
Total salaries and benefits expense
69,705
67,277
2,428
3.6
%
Occupancy
8,014
8,151
(137
)
(1.7
)%
Data processing and software
10,201
8,670
1,531
17.7
%
Equipment
2,686
2,819
(133
)
(4.7
)%
Intangible amortization
2,060
3,312
(1,252
)
(37.8
)%
Advertising
1,581
1,775
(194
)
(10.9
)%
ATM and POS network charges
3,648
3,611
37
1.0
%
Professional fees
3,154
3,574
(420
)
(11.8
)%
Telecommunications
1,069
1,404
(335
)
(23.9
)%
Regulatory assessments and insurance
2,395
2,785
(390
)
(14.0
)%
Postage
648
610
38
6.2
%
Operational loss
596
1,525
(929
)
(60.9
)%
Courier service
1,039
822
217
26.4
%
(Gain) loss on sale or acquisition of
foreclosed assets
(38
)
—
(38
)
n/m
(Gain) loss on disposal of fixed
assets
6
18
(12
)
(66.7
)%
Other miscellaneous expense
8,079
8,684
(605
)
(7.0
)%
Total other non-interest expense
45,138
47,760
(2,622
)
(5.5
)%
Total non-interest expense
$
114,843
$
115,037
$
(194
)
(0.2
)%
Average full-time equivalent staff
1,174
1,214
(40
)
(3.3
)%
Non-interest expense decreased $0.2 million or 0.2% to $114.8
million during the six months ended June 30, 2024, as compared to
$115.0 million for the six months ended June 30, 2023. This was
largely attributed to non-cash intangible amortization expense
declines of $1.3 million or 37.8% and operational loss decreases of
$0.9 million or 60.9% due to reasons described above. These
declines were partially offset by an increase of $2.4 million or
3.6% in total salaries and benefits expense to $69.7 million,
largely from annual compensation adjustments and other routine
increases in benefits and compensation. Salaries expense was also
impacted by an increase in average compensation per employee as
various strategic talent acquisitions were made in order to further
prepare the Company to execute its growth objectives beyond $10
billion in total assets. Finally, data processing and software
expenses increased by $1.5 million or 17.7% related to ongoing
investments in the Company's data management and security
infrastructure.
Provision for Income
Taxes
The Company’s effective tax rate was 25.8% for the quarter ended
June 30, 2024, as compared to 26.4% for the quarter ended March 31,
2024 and 28.4% for the year ended December 31, 2023. 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
Statements
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. 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 conditions of
the United States economy in general and the strength of the local
economies in which we conduct operations; the impact of any future
federal government shutdown and uncertainty regarding the federal
government’s debt limit or changes in trade, monetary and fiscal
policies and laws, including interest rate policies of the Board of
Governors of the Federal Reserve System; the impacts of 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; regulatory restrictions affecting our ability to
successfully market and price our products to consumers; the risks
related to the development, implementation, use and management of
emerging technologies, including artificial intelligence and
machine learning; extreme weather, natural disasters and other
catastrophic events that may or may not be caused by climate change
and their effects on the Company's customers and the economic and
business environments in which the Company operates; the impact of
a slowing U.S. economy, decreases in housing and commercial real
estate prices, and potentially increased unemployment on the
performance of our loan portfolio, the market value of our
investment securities and possible other-than-temporary impairment
of securities held by us due to changes in credit quality or rates;
the availability of, and cost 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, commodities prices,
inflationary pressures and labor shortages on the economic recovery
and our business; the impacts of international hostilities, wars,
terrorism or geopolitical events; adverse developments in the
financial services industry generally such as the recent bank
failures and any related impact on depositor behavior or investor
sentiment; risks related to the sufficiency of liquidity; the
possibility that our recorded goodwill could become impaired, which
may have an adverse impact on our earnings and capital; the costs
or effects of mergers, acquisitions or dispositions we may make, as
well as whether we are able to obtain any required governmental
approvals in connection with any such activities, or identify and
complete favorable transactions in the future, and/or realize the
anticipated financial and business benefits; the regulatory and
financial impacts associated with exceeding $10 billion in total
assets; the negative impact on our reputation and profitability in
the event customers experience economic harm or in the event that
regulatory violations are identified; the ability to execute our
business plan in new markets; the future operating or financial
performance of the Company, including our outlook for future growth
and changes in the level and direction of our nonperforming assets
and charge-offs; the appropriateness of the allowance for credit
losses, including the assumptions made under our current expected
credit losses model; any deterioration in values of California real
estate, both residential and commercial; the effectiveness of the
Company's asset management activities managing the mix of earning
assets and in improving, resolving or liquidating lower-quality
assets; the effect of changes in the financial performance and/or
condition of our borrowers; changes in accounting standards and
practices; changes in consumer spending, borrowing and savings
habits; our ability to attract and maintain deposits and other
sources of liquidity; the effects of changes in the level or cost
of checking or savings account deposits on our funding costs and
net interest margin; increasing noninterest expense and its impact
on our financial performance; competition and innovation with
respect to financial products and services by banks, financial
institutions and non-traditional competitors including retail
businesses and technology companies; the challenges of attracting,
integrating and retaining key employees; the vulnerability of the
Company's operational or security systems or infrastructure, the
systems of third-party vendors or other service providers with whom
the Company contracts, and the Company's customers to unauthorized
access, computer viruses, phishing schemes, spam attacks, human
error, natural disasters, power loss and data/security breaches and
the cost to defend against and respond to such incidents; the
impact of the 2023 cyber security ransomware incident on our
operations and reputation; increased data security risks due to
work from home arrangements and email vulnerability; failure to
safeguard personal information, and any resulting litigation; the
effect of a fall in stock market prices on our brokerage and wealth
management businesses; the transition from the LIBOR to new
interest rate benchmarks; the emergence or continuation of
widespread health emergencies or pandemics; the Company’s potential
judgments, orders, settlements, penalties, fines and reputational
damage resulting from pending or future litigation and regulatory
investigations, proceedings and enforcement actions; and our
ability to manage the risks involved in the foregoing. There can be
no assurance that future developments affecting us will be the same
as those anticipated by management. 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, 2023, which has been filed with the Securities and
Exchange Commission (the “SEC”) and all subsequent filings with the
SEC under Sections 13(a), 13(c), 14, and 15(d) of the Securities
Act of 1934, as amended. Such filings are also 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 per share
data)
Three months ended
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Revenue and Expense Data
Interest income
$
117,032
$
115,417
$
115,909
$
112,380
$
107,158
Interest expense
35,035
32,681
29,292
24,257
18,557
Net interest income
81,997
82,736
86,617
88,123
88,601
Provision for credit losses
405
4,305
5,990
4,155
9,650
Noninterest income:
Service charges and fees
12,796
12,637
12,848
13,075
12,968
Loss on sale or exchange of investment
securities
(45
)
—
(120
)
—
—
Other income
3,115
3,134
3,312
2,909
2,773
Total noninterest income
15,866
15,771
16,040
15,984
15,741
Noninterest expense:
Salaries and benefits
35,401
34,304
34,055
34,463
34,714
Occupancy and equipment
5,393
5,307
5,358
5,451
5,427
Data processing and network
7,081
6,768
6,880
6,852
6,540
Other noninterest expense
10,464
10,125
13,974
11,112
14,562
Total noninterest expense
58,339
56,504
60,267
57,878
61,243
Total income before taxes
39,119
37,698
36,400
42,074
33,449
Provision for income taxes
10,085
9,949
10,325
11,484
8,557
Net income
$
29,034
$
27,749
$
26,075
$
30,590
$
24,892
Share Data
Basic earnings per share
$
0.88
$
0.83
$
0.78
$
0.92
$
0.75
Diluted earnings per share
$
0.87
$
0.83
$
0.78
$
0.92
$
0.75
Dividends per share
$
0.33
$
0.33
$
0.30
$
0.30
$
0.30
Book value per common share
$
35.62
$
35.06
$
34.86
$
32.18
$
32.86
Tangible book value per common share
(1)
$
26.13
$
25.60
$
25.39
$
22.67
$
23.30
Shares outstanding
32,989,327
33,168,770
33,268,102
33,263,324
33,259,260
Weighted average shares
33,121,271
33,245,377
33,266,959
33,262,798
33,219,168
Weighted average diluted shares
33,243,955
33,370,118
33,351,737
33,319,291
33,301,548
Credit Quality
Allowance for credit losses to gross
loans
1.83
%
1.83
%
1.79
%
1.73
%
1.80
%
Loans past due 30 days or more
$
30,372
$
16,474
$
19,415
$
8,072
$
9,483
Total nonperforming loans
$
32,774
$
34,242
$
31,891
$
29,799
$
37,592
Total nonperforming assets
$
35,267
$
36,735
$
34,595
$
32,651
$
40,506
Loans charged-off
$
1,610
$
1,275
$
749
$
5,357
$
276
Loans recovered
$
398
$
132
$
419
$
720
$
218
Selected Financial Ratios
Return on average total assets
1.19
%
1.13
%
1.05
%
1.23
%
1.01
%
Return on average equity
9.99
%
9.50
%
9.43
%
10.91
%
8.98
%
Average yield on loans
5.82
%
5.72
%
5.64
%
5.52
%
5.38
%
Average yield on interest-earning
assets
5.24
%
5.13
%
5.09
%
4.94
%
4.78
%
Average rate on interest-bearing
deposits
2.14
%
1.83
%
1.62
%
1.36
%
0.95
%
Average cost of total deposits
1.45
%
1.21
%
1.05
%
0.86
%
0.58
%
Average cost of total deposits and other
borrowings
1.59
%
1.47
%
1.28
%
1.05
%
0.80
%
Average rate on borrowings &
subordinated debt
5.65
%
5.35
%
5.26
%
4.96
%
4.92
%
Average rate on interest-bearing
liabilities
2.39
%
2.24
%
2.01
%
1.71
%
1.37
%
Net interest margin (fully tax-equivalent)
(1)
3.68
%
3.68
%
3.81
%
3.88
%
3.96
%
Loans to deposits
83.76
%
85.14
%
86.73
%
83.76
%
80.55
%
Efficiency ratio
59.61
%
57.36
%
58.71
%
55.59
%
58.69
%
Supplemental Loan Interest Income
Data
Discount accretion on acquired loans
$
850
$
1,332
$
1,459
$
1,324
$
1,471
All other loan interest income (1)
$
97,379
$
95,153
$
94,382
$
90,383
$
85,276
Total loan interest income (1)
$
98,229
$
96,485
$
95,841
$
91,707
$
86,747
(1)
Non-GAAP measure
TriCo Bancshares—Condensed Consolidated
Financial Data (unaudited)
(dollars in thousands, except per share
data)
Balance Sheet Data
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Cash and due from banks
$
206,558
$
82,836
$
98,701
$
111,099
$
118,792
Securities, available for sale, net
1,946,167
2,076,494
2,155,138
2,176,854
2,323,011
Securities, held to maturity, net
122,673
127,811
133,494
139,058
145,117
Restricted equity securities
17,250
17,250
17,250
17,250
17,250
Loans held for sale
474
1,346
458
644
1,058
Loans:
Commercial real estate
4,461,111
4,443,768
4,394,802
4,367,445
4,343,924
Consumer
1,300,727
1,303,757
1,313,268
1,288,810
1,252,225
Commercial and industrial
548,625
549,780
586,455
599,757
576,247
Construction
283,374
348,981
347,198
320,963
278,425
Agriculture production
140,239
145,159
144,497
123,472
61,337
Leases
8,450
9,250
8,250
8,219
8,582
Total loans, gross
6,742,526
6,800,695
6,794,470
6,708,666
6,520,740
Allowance for credit losses
(123,517
)
(124,394
)
(121,522
)
(115,812
)
(117,329
)
Total loans, net
6,619,009
6,676,301
6,672,948
6,592,854
6,403,411
Premises and equipment
70,621
71,001
71,347
71,760
72,619
Cash value of life insurance
138,525
137,695
136,892
136,016
135,332
Accrued interest receivable
35,527
35,783
36,768
34,595
32,835
Goodwill
304,442
304,442
304,442
304,442
304,442
Other intangible assets
8,492
9,522
10,552
11,768
13,358
Operating leases, right-of-use
25,113
26,240
26,133
27,363
29,140
Other assets
246,548
247,046
245,966
273,303
257,056
Total assets
$
9,741,399
$
9,813,767
$
9,910,089
$
9,897,006
$
9,853,421
Deposits:
Noninterest-bearing demand deposits
$
2,557,063
$
2,600,448
$
2,722,689
$
2,857,512
$
3,073,353
Interest-bearing demand deposits
1,791,466
1,742,875
1,731,814
1,746,882
1,751,998
Savings deposits
2,667,006
2,672,537
2,682,068
2,816,816
2,778,118
Time certificates
1,034,695
971,798
697,467
588,433
491,896
Total deposits
8,050,230
7,987,658
7,834,038
8,009,643
8,095,365
Accrued interest payable
12,018
10,224
8,445
6,688
3,655
Operating lease liability
27,122
28,299
28,261
29,527
31,377
Other liabilities
128,063
131,006
145,982
141,692
136,464
Other borrowings
247,773
392,409
632,582
537,975
392,714
Junior subordinated debt
101,143
101,120
101,099
101,080
101,065
Total liabilities
8,566,349
8,650,716
8,750,407
8,826,605
8,760,640
Common stock
691,878
696,464
697,349
696,369
695,305
Retained earnings
644,687
630,954
615,502
599,448
578,852
Accumulated other comprehensive loss, net
of tax
(161,515
)
(164,367
)
(153,169
)
(225,416
)
(181,376
)
Total shareholders’ equity
$
1,175,050
$
1,163,051
$
1,159,682
$
1,070,401
$
1,092,781
Quarterly Average Balance Data
Average loans
$
6,792,303
$
6,785,840
$
6,746,153
$
6,597,400
$
6,467,381
Average interest-earning assets
$
9,001,674
$
9,066,537
$
9,064,483
$
9,070,639
$
9,039,314
Average total assets
$
9,782,228
$
9,855,797
$
9,879,355
$
9,874,240
$
9,848,191
Average deposits
$
8,024,441
$
7,821,044
$
7,990,993
$
8,043,101
$
7,981,515
Average borrowings and subordinated
debt
$
426,732
$
685,802
$
617,046
$
550,344
$
578,312
Average total equity
$
1,169,324
$
1,174,592
$
1,097,431
$
1,112,404
$
1,112,223
Capital Ratio Data
Total risk-based capital ratio
15.2
%
15.0
%
14.7
%
14.5
%
14.5
%
Tier 1 capital ratio
13.4
%
13.2
%
12.9
%
12.7
%
12.7
%
Tier 1 common equity ratio
12.7
%
12.5
%
12.2
%
12.0
%
12.0
%
Tier 1 leverage ratio
11.2
%
11.0
%
10.7
%
10.6
%
10.4
%
Tangible capital ratio (1)
9.1
%
8.9
%
8.8
%
7.9
%
8.1
%
(1)
Non-GAAP measure
TriCo Bancshares—Non-GAAP Financial
Measures (unaudited)
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, 2024
March 31, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Net interest margin
Acquired loans discount accretion,
net:
Amount (included in interest income)
$
850
$
1,332
$
1,471
$
2,182
$
2,868
Effect on average loan yield
0.05
%
0.08
%
0.09
%
0.08
%
0.09
%
Effect on net interest margin (FTE)
0.04
%
0.06
%
0.07
%
0.05
%
0.06
%
Net interest margin (FTE)
3.68
%
3.68
%
3.96
%
3.68
%
4.08
%
Net interest margin less effect of
acquired loan discount accretion (Non-GAAP)
3.64
%
3.62
%
3.89
%
3.63
%
4.02
%
Three months ended
Six months ended
(dollars in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Pre-tax pre-provision return on average
assets or equity
Net income (GAAP)
$
29,034
$
27,749
$
24,892
$
56,783
$
60,725
Exclude provision for income taxes
10,085
9,949
8,557
20,034
21,706
Exclude provision for credit losses
405
4,305
9,650
4,710
13,845
Net income before income tax and provision
expense (Non-GAAP)
$
39,524
$
42,003
$
43,099
$
81,527
$
96,276
Average assets (GAAP)
$
9,782,228
$
9,855,797
$
9,848,191
$
9,819,012
$
9,863,471
Average equity (GAAP)
$
1,169,324
$
1,174,592
$
1,112,223
$
1,171,958
$
1,099,913
Return on average assets (GAAP)
(annualized)
1.19
%
1.13
%
1.01
%
1.16
%
1.24
%
Pre-tax pre-provision return on average
assets (Non-GAAP) (annualized)
1.63
%
1.71
%
1.76
%
1.67
%
1.97
%
Return on average equity (GAAP)
(annualized)
9.99
%
9.50
%
8.98
%
9.74
%
11.13
%
Pre-tax pre-provision return on average
equity (Non-GAAP) (annualized)
13.59
%
14.38
%
15.54
%
13.95
%
17.65
%
Three months ended
Six months ended
(dollars in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Return on tangible common
equity
Average total shareholders' equity
$
1,169,324
$
1,174,592
$
1,112,223
$
1,171,958
$
1,099,913
Exclude average goodwill
304,442
304,442
304,442
304,442
334,565
Exclude average other intangibles
9,007
10,037
14,716
9,522
15,901
Average tangible common equity
(Non-GAAP)
$
855,875
$
860,113
$
793,065
$
857,994
$
749,447
Net income (GAAP)
$
29,034
$
27,749
$
24,892
$
56,783
$
60,725
Exclude amortization of intangible assets,
net of tax effect
725
725
1,166
1,451
2,333
Tangible net income available to common
shareholders (Non-GAAP)
$
29,759
$
28,474
$
26,058
$
58,234
$
63,058
Return on average equity (GAAP)
(annualized)
9.99
%
9.50
%
8.98
%
9.74
%
11.13
%
Return on average tangible common equity
(Non-GAAP)
13.98
%
13.31
%
13.18
%
13.65
%
16.97
%
Three months ended
(dollars in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Tangible shareholders' equity to
tangible assets
Shareholders' equity (GAAP)
$
1,175,050
$
1,163,051
$
1,159,682
$
1,070,401
$
1,092,781
Exclude goodwill and other intangible
assets, net
312,934
313,964
314,994
316,210
317,800
Tangible shareholders' equity
(Non-GAAP)
$
862,116
$
849,087
$
844,688
$
754,191
$
774,981
Total assets (GAAP)
$
9,741,399
$
9,813,767
$
9,910,089
$
9,897,006
$
9,853,421
Exclude goodwill and other intangible
assets, net
312,934
313,964
314,994
316,210
317,800
Total tangible assets (Non-GAAP)
$
9,428,465
$
9,499,803
$
9,595,095
$
9,580,796
$
9,535,621
Shareholders' equity to total assets
(GAAP)
12.06
%
11.85
%
11.70
%
10.82
%
11.09
%
Tangible shareholders' equity to tangible
assets (Non-GAAP)
9.14
%
8.94
%
8.80
%
7.87
%
8.13
%
Three months ended
(dollars in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Tangible common shareholders' equity
per share
Tangible shareholders' equity
(Non-GAAP)
$
862,116
$
849,087
$
844,688
$
754,191
$
774,981
Common shares outstanding at end of
period
32,989,327
33,168,770
33,268,102
33,263,324
33,259,260
Common shareholders' equity (book value)
per share (GAAP)
$
35.62
$
35.06
$
34.86
$
32.18
$
32.86
Tangible common shareholders' equity
(tangible book value) per share (Non-GAAP)
$
26.13
$
25.60
$
25.39
$
22.67
$
23.30
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240725531966/en/
Investor Contact Peter G.
Wiese, EVP & CFO, (530) 898-0300
TriCo Bancshares (NASDAQ:TCBK)
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