TriCo Bancshares Announces Second Quarter 2022 Results

Rhea-AI Summary

TriCo Bancshares (NASDAQ: TCBK) reported a net income of $31.4 million for Q2 2022, compared to $20.4 million in Q1 2022, reflecting a 53.9% increase. The diluted earnings per share rose to $0.93, up from $0.67 in the previous quarter. Organic loan growth reached $300.3 million, representing a 20.7% annualized growth rate. Net interest margin increased to 3.57%, up 28 basis points from Q1. Noninterest income grew by 8.8% to $16.4 million. Despite merger-related expenses affecting net revenues, credit quality improved with non-performing assets decreasing to 0.15% of total assets.

Positive

• Net income rose to $31.4 million, a 53.9% increase from Q1 2022.
• Diluted earnings per share increased to $0.93 from $0.67 in the previous quarter.
• Organic loan growth of $300.3 million, a 20.7% annualized growth.
• Net interest margin grew to 3.57%, an increase of 28 basis points.
• Noninterest income increased by 8.8% to $16.4 million.
• Improvement in credit quality with non-performing assets reducing to 0.15% of total assets.

Negative

• Total shareholders' equity decreased by $67 million due to accumulated losses and cash dividends.
• Diluted earnings per share declined slightly from $0.95 in Q2 2021 to $0.93 in Q2 2022.

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.--(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				283				114			40.3	%
Net interest income (FTE)		$	85,443			$	68,207			$	17,236			25.3	%
Net interest margin (FTE)			3.67	%			3.39	%
Acquired loans discount accretion, net:
Amount (included in interest income)		$	1,677			$	1,323			$	354			26.8	%
Net interest margin less effect of acquired loan discount accretion(1)			3.60	%			3.32	%			0.28	%
PPP loans yield, net:
Amount (included in interest income)		$	964			$	1,097			$	(133	)		(12.1	) %
Net interest margin less effect of PPP loan yield (1)			3.65	%			3.36	%			0.29	%
Acquired loans discount accretion and PPP loan yield, net:
Amount (included in interest income)		$	2,641			$	2,420			$	221			9.1	%
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)			3.57	%			3.29	%			0.28	%

		Three months ended June 30,
(dollars in thousands)		2022				2021				Change				% Change
Interest income		$	86,955			$	68,479			$	18,476			27.0	%
Interest expense			(1,909	)			(1,396	)			(513	)		36.7	%
Fully tax-equivalent adjustment (FTE) (1)			397				255				142			55.7	%
Net interest income (FTE)		$	85,443			$	67,338			$	18,105			26.9	%
Net interest margin (FTE)			3.67	%			3.58	%
Acquired loans discount accretion, net:
Amount (included in interest income)		$	1,677			$	2,566			$	(889	)		(34.6	) %
Net interest margin less effect of acquired loan discount accretion(1)			3.60	%			3.44	%			0.16	%
PPP loans yield, net:
Amount (included in interest income)		$	964			$	3,179			$	(2,215	)		(69.7	) %
Net interest margin less effect of PPP loan yield (1)			3.65	%			3.57	%			0.08	%
Acquired loans discount accretion and PPP loan yield, net:
Amount (included in interest income)		$	2,641			$	5,745			$	(3,104	)		(54.0	) %
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)			3.57	%			3.43	%			0.14	%

		Six months ended June 30,
(dollars in thousands)		2022				2021				Change				% Change
Interest income		$	156,150			$	136,395			$	19,755			14.5	%
Interest expense			(3,180	)			(2,872	)			(308	)		10.7	%
Fully tax-equivalent adjustment (FTE) (1)			680				532				148			27.8	%
Net interest income (FTE)		$	153,650			$	134,055			$	19,595			14.6	%
Net interest margin (FTE)			3.54	%			3.66	%
Acquired loans discount accretion, net:
Amount (included in interest income)		$	3,000			$	4,278			$	(1,278	)		(29.9	) %
Net interest margin less effect of acquired loan discount accretion(1)			3.51	%			3.54	%			(0.03	) %
PPP loans yield, net:
Amount (included in interest income)		$	2,061			$	9,042			$	(6,981	)		(77.2	) %
Net interest margin less effect of PPP loan yield (1)			3.51	%			3.59	%			(0.08	) %
Acquired loans discount accretion and PPP loan yield, net:
Amount (included in interest income)		$	5,061			$	13,320			$	(8,259	)		(62.0	) %
Net interest margin less effect of acquired loans discount and PPP loan yield (1)			3.44	%			3.46	%			(0.02	) %

(1)

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

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

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

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in thousands)
		Three months ended									Three months ended									Three months ended
		June 30, 2022									March 31, 2022									June 30, 2021
		Average Balance			Income/ Expense			Yield/ Rate			Average Balance			Income/ Expense			Yield/ Rate			Average Balance			Income/ Expense			Yield/ Rate
Assets
Loans, excluding PPP		$	5,890,578		$	68,954		4.70	%		$	4,937,865		$	56,648		4.65	%		$	4,646,188		$	57,125		4.93	%
PPP loans			37,852			964		10.22	%			50,695			1,097		8.78	%			332,277			3,179		3.84	%
Investments-taxable			2,536,362			14,350		2.27	%			2,313,204			10,223		1.79	%			1,875,056			7,189		1.54	%
Investments-nontaxable (1)			196,104			1,720		3.52	%			143,873			1,225		3.45	%			132,034			1,106		3.36	%
Total investments			2,732,466			16,070		2.36	%			2,457,077			11,448		1.89	%			2,007,090			8,295		1.66	%
Cash at Federal Reserve and other banks			669,163			1,364		0.82	%			707,563			285		0.16	%			559,026			135		0.10	%
Total earning assets			9,330,059			87,352		3.76	%			8,153,200			69,478		3.46	%			7,544,581			68,734		3.65	%
Other assets, net			791,655									625,056									584,093
Total assets		$	10,121,714								$	8,778,256								$	8,128,674
Liabilities and shareholders’ equity
Interest-bearing demand deposits		$	1,799,205		$	99		0.02	%		$	1,597,309		$	84		0.02	%		$	1,490,247		$	77		0.02	%
Savings deposits			3,003,337			529		0.07	%			2,571,023			327		0.05	%			2,316,889			308		0.05	%
Time deposits			337,007			220		0.26	%			301,499			268		0.36	%			324,867			443		0.55	%
Total interest-bearing deposits			5,139,549			848		0.07	%			4,469,831			679		0.06	%			4,132,003			828		0.08	%
Other borrowings			35,253			5		0.06	%			44,731			5		0.05	%			40,986			5		0.05	%
Junior subordinated debt			100,991			1,056		4.19	%			60,971			587		3.90	%			57,788			563		3.91	%
Total interest-bearing liabilities			5,275,793			1,909		0.15	%			4,575,533			1,271		0.11	%			4,230,777			1,396		0.13	%
Noninterest-bearing deposits			3,603,771									3,052,099									2,811,078
Other liabilities			150,696									141,400									126,674
Shareholders’ equity			1,091,454									1,009,224									960,145
Total liabilities and shareholders’ equity		$	10,121,714								$	8,778,256								$	8,128,674
Net interest rate spread (1) (2)								3.61	%								3.35	%								3.52	%
Net interest income and margin (1) (3)					$	85,443		3.67	%					$	68,207		3.39	%					$	67,338		3.58	%

(1)		Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.
(2)		Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.
(3)		Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.

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

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

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

		Six months ended June 30, 2022									Six months ended June 30, 2021
		Average Balance			Income/ Expense			Yield/ Rate			Average Balance			Income/ Expense			Yield/ Rate
Assets
Loans, excluding PPP		$	5,416,854		$	125,602		4.68	%		$	4,527,329		$	111,698		4.98	%
PPP loans			44,238			2,061		9.40	%			344,011			9,042		5.30	%
Investments-taxable			2,434,045			24,573		2.04	%			1,763,140			13,583		1.55	%
Investments-nontaxable (1)			170,132			2,945		3.49	%			128,564			2,306		3.62	%
Total investments			2,604,177			27,518		2.13	%			1,891,704			15,889		1.69	%
Cash at Federal Reserve and other banks			688,257			1,649		0.48	%			629,952			298		0.10	%
Total earning assets			8,753,526			156,830		3.61	%			7,392,996			136,927		3.73	%
Other assets, net			700,170									575,138
Total assets		$	9,453,696								$	7,968,134
Liabilities and shareholders’ equity
Interest-bearing demand deposits		$	1,698,815		$	183		0.02	%		$	1,461,377		$	153		0.02	%
Savings deposits			2,788,374			856		0.06	%			2,272,830			637		0.06	%
Time deposits			319,351			488		0.31	%			330,703			975		0.59	%
Total interest-bearing deposits			4,806,540			1,527		0.06	%			4,064,910			1,765		0.09	%
Other borrowings			39,966			10		0.05	%			36,870			9		0.05	%
Junior subordinated debt			81,092			1,643		4.09	%			57,739			1,098		3.83	%
Total interest-bearing liabilities			4,927,598			3,180		0.13	%			4,159,519			2,872		0.14	%
Noninterest-bearing deposits			3,329,459									2,734,922
Other liabilities			146,073									123,233
Shareholders’ equity			1,050,566									950,460
Total liabilities and shareholders’ equity		$	9,453,696								$	7,968,134
Net interest rate spread (1) (2)								3.48	%								3.59	%
Net interest income and margin (1) (3)					$	153,650		3.54	%					$	134,055		3.66	%

(1)		Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.
(2)		Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.
(3)		Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.

Interest Rates and Loan Portfolio Composition

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

Asset Quality and Credit Loss Provisioning

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

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

		Three months ended
(dollars in thousands)		June 30, 2022			March 31, 2022			December 31, 2021			June 30, 2021
Addition to (reversal of) allowance for credit losses		$	1,940		$	8,205		$	715		$	(145	)
Addition to (reversal of) reserve for unfunded loan commitments			160			125			265			(115	)
Total provision for (reversal of) credit losses		$	2,100		$	8,330		$	980		$	(260	)

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

		Three months ended								Six months ended
(dollars in thousands)		June 30, 2022				June 30, 2021				June 30, 2022				June 30, 2021
Balance, beginning of period		$	96,049			$	85,941			$	85,376			$	91,847
ACL at acquisition for PCD loans			—				—				2,037				—
Provision for (reversal of) credit losses			1,940				(145	)			10,145				(6,385	)
Loans charged-off			(401	)			(387	)			(1,144	)			(613	)
Recoveries of previously charged-off loans			356				653				1,530				1,213
Balance, end of period		$	97,944			$	86,062			$	97,944			$	86,062

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

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

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

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

		June 30,				% of Total Loans			March 31,				% of Total Loans			June 30,				% of Total Loans
(dollars in thousands)		2022							2022							2021
Risk Rating:
Pass		$	5,960,781			97.5	%		$	5,682,026			97.1	%		$	4,756,381			96.2	%
Special Mention			105,819			1.7	%			120,684			2.1	%			130,232			2.6	%
Substandard			46,821			0.8	%			49,265			0.8	%			58,281			1.2	%
Total		$	6,113,421						$	5,851,975						$	4,944,894
Classified loans to total loans			0.77	%						0.84	%						1.18	%
Loans past due 30+ days to total loans			0.10	%						0.14	%						0.19	%

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

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

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

Allocation of Credit Loss Reserves by Loan Type

	As of June 30, 2022							As of December 31, 2021						As of June 30, 2021
(dollars in thousands)		Amount			% of Loans Outstanding			Amount			% of Loans Outstanding			Amount			% of Loans Outstanding
Commercial real estate:
CRE - Non Owner Occupied		$	28,081		1.41	%		$	25,739		1.61	%		$	26,028		1.70	%
CRE - Owner Occupied			12,620		1.35	%			10,691		1.51	%			10,463		1.59	%
Multifamily			11,795		1.36	%			12,395		1.51	%			13,196		1.59	%
Farmland			2,954		1.17	%			2,315		1.34	%			1,950		1.13	%
Total commercial real estate loans			55,450		1.37	%			51,140		1.55	%			51,637		1.62	%
Consumer:
SFR 1-4 1st Liens			10,311		1.43	%			10,723		1.60	%			10,629		1.61	%
SFR HELOCs and Junior Liens			11,591		3.01	%			10,510		3.11	%			10,701		3.29	%
Other			2,029		3.41	%			2,241		3.34	%			2,620		3.73	%
Total consumer loans			23,931		2.06	%			23,474		2.19	%			23,950		2.27	%
Commercial and Industrial			9,979		1.97	%			3,862		1.49	%			4,511		1.00	%
Construction			7,522		2.40	%			5,667		2.55	%			4,951		2.47	%
Agricultural Production			1,046		1.47	%			1,215		2.39	%			1,007		2.40	%
Leases			16		0.20	%			18		0.27	%			6		0.12	%
Allowance for credit losses			97,944		1.60	%			85,376		1.74	%			86,062		1.74	%
Reserve for unfunded loan commitments			4,075						3,790						3,465
Total allowance for credit losses		$	102,019		1.67	%		$	89,166		1.81	%		$	89,527		1.81	%

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

SBA Paycheck Protection Program

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

(dollars in thousands)		June 30, 2022			December 31, 2021			June 30, 2021
Total number of PPP loans outstanding			90			450			2,209
PPP loan balance (TCBK round 1 origination), gross		$	1,183		$	2,544		$	51,547
PPP loan balance (TCBK round 2 origination), gross			9,442			60,767			197,035
Acquired PPP loan balance (VRB origination), gross			7,447			—			—
Total PPP loans, gross outstanding		$	18,072		$	63,311		$	248,582
PPP deferred loan fees (Round 1 origination)			—			1			477
PPP deferred loan fees (Round 2 origination)			318			2,163			8,513
Total PPP deferred loan fees (costs) outstanding		$	318		$	2,164		$	8,990

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

Non-interest Income

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

		Three months ended
(dollars in thousands)		June 30, 2022				March 31, 2022				Change				% Change
ATM and interchange fees		$	6,984			$	6,243			$	741			11.9	%
Service charges on deposit accounts			4,163				3,834				329			8.6	%
Other service fees			1,279				882				397			45.0	%
Mortgage banking service fees			482				463				19			4.1	%
Change in value of mortgage servicing rights			136				274				(138	)		(50.4	) %
Total service charges and fees			13,044				11,696				1,348			11.5	%
Increase in cash value of life insurance			752				638				114			17.9	%
Asset management and commission income			1,039				887				152			17.1	%
Gain on sale of loans			542				1,246				(704	)		(56.5	) %
Lease brokerage income			238				158				80			50.6	%
Sale of customer checks			441				104				337			324.0	%
Gain on sale of investment securities			—				—				—			n/m
Loss on marketable equity securities			(94	)			(137	)			43			(31.4	) %
Other			468				504				(36	)		(7.1	) %
Total other non-interest income			3,386				3,400				(14	)		(0.4	) %
Total non-interest income		$	16,430			$	15,096			$	1,334			8.8	%

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

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

		Three months ended June 30,
(dollars in thousands)		2022				2021				Change				% Change
ATM and interchange fees		$	6,984			$	6,558			$	426			6.5	%
Service charges on deposit accounts			4,163				3,462				701			20.2	%
Other service fees			1,279				914				365			39.9	%
Mortgage banking service fees			482				467				15			3.2	%
Change in value of mortgage servicing rights			136				(471	)			607			(128.9	) %
Total service charges and fees			13,044				10,930				2,114			19.3	%
Increase in cash value of life insurance			752				745				7			0.9	%
Asset management and commission income			1,039				947				92			9.7	%
Gain on sale of loans			542				2,847				(2,305	)		(81.0	) %
Lease brokerage income			238				249				(11	)		(4.4	) %
Sale of customer checks			441				116				325			280.2	%
Gain on sale of investment securities			—				—				—			n/m
(Loss) gain on marketable equity securities			(94	)			8				(102	)		(1,275.0	) %
Other			468				115				353			307.0	%
Total other non-interest income			3,386				5,027				(1,641	)		(32.6	) %
Total non-interest income		$	16,430			$	15,957			$	473			3.0	%

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

		Six months ended June 30,
(dollars in thousands)		2022				2021				Change				% Change
ATM and interchange fees		$	13,227			$	12,419			$	808			6.5	%
Service charges on deposit accounts			7,997				6,731				1,266			18.8	%
Other service fees			2,161				1,785				376			21.1	%
Mortgage banking service fees			945				930				15			1.6	%
Change in value of mortgage servicing rights			410				(459	)			869			(189.3	) %
Total service charges and fees			24,740				21,406				3,334			15.6	%
Increase in cash value of life insurance			1,390				1,418				(28	)		(2.0	) %
Asset management and commission income			1,926				1,781				145			8.1	%
Gain on sale of loans			1,788				6,094				(4,306	)		(70.7	) %
Lease brokerage income			396				359				37			10.3	%
Sale of customer checks			545				235				310			131.9	%
Gain on sale of investment securities			—				—				—			n/m
Loss on marketable equity securities			(231	)			(45	)			(186	)		413.3	%
Other			972				819				153			18.7	%
Total other non-interest income			6,786				10,661				(3,875	)		(36.3	) %
Total non-interest income		$	31,526			$	32,067			$	(541	)		(1.7	) %

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

Non-interest Expense

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

		Three months ended
(dollars in thousands)		June 30, 2022				March 31, 2022				Change				% Change
Base salaries, net of deferred loan origination costs		$	22,169			$	18,216			$	3,953			21.7	%
Incentive compensation			4,282				2,583				1,699			65.8	%
Benefits and other compensation costs			6,491				5,972				519			8.7	%
Total salaries and benefits expense			32,942				26,771				6,171			23.1	%
Occupancy			3,996				3,575				421			11.8	%
Data processing and software			3,596				3,513				83			2.4	%
Equipment			1,453				1,333				120			9.0	%
Intangible amortization			1,702				1,228				474			38.6	%
Advertising			818				637				181			28.4	%
ATM and POS network charges			1,781				1,375				406			29.5	%
Professional fees			1,233				876				357			40.8	%
Telecommunications			564				521				43			8.3	%
Regulatory assessments and insurance			779				720				59			8.2	%
Merger and acquisition expenses			2,221				4,032				(1,811	)		(44.9	) %
Postage			313				228				85			37.3	%
Operational (gain) loss			456				(183	)			639			(349.2	) %
Courier service			486				414				72			17.4	%
Gain on sale or acquisition of foreclosed assets			(98	)			—				(98	)		n/m
(Gain) loss on disposal of fixed assets			5				(1,078	)			1,083			(100.5	) %
Other miscellaneous expense			4,017				2,485				1,532			61.6	%
Total other non-interest expense			23,322				19,676				3,646			18.5	%
Total non-interest expense		$	56,264			$	46,447			$	9,817			21.1	%
Average full-time equivalent staff			1,183				1,084				99			9.1	%

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

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

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

		Three months ended June 30,
(dollars in thousands)		2022				2021				Change				% Change
Base salaries, net of deferred loan origination costs		$	22,169			$	17,537			$	4,632			26.4	%
Incentive compensation			4,282				4,322				(40	)		(0.9	) %
Benefits and other compensation costs			6,491				5,222				1,269			24.3	%
Total salaries and benefits expense			32,942				27,081				5,861			21.6	%
Occupancy			3,996				3,700				296			8.0	%
Data processing and software			3,596				3,201				395			12.3	%
Equipment			1,453				1,207				246			20.4	%
Intangible amortization			1,702				1,431				271			18.9	%
Advertising			818				734				84			11.4	%
ATM and POS network charges			1,781				1,551				230			14.8	%
Professional fees			1,233				1,046				187			17.9	%
Telecommunications			564				564				—			—	%
Regulatory assessments and insurance			779				618				161			26.1	%
Merger and acquisition expenses			2,221				—				2,221			n/m
Postage			313				124				189			152.4	%
Operational loss			456				212				244			115.1	%
Courier service			486				288				198			68.8	%
Gain on sale or acquisition of foreclosed assets			(98	)			(15	)			(83	)		553.3	%
(Gain) loss on disposal of fixed assets			5				(426	)			431			(101.2	) %
Other miscellaneous expense			4,017				2,855				1,162			40.7	%
Total other non-interest expense			23,322				17,090				6,232			36.5	%
Total non-interest expense		$	56,264			$	44,171			$	12,093			27.4	%
Average full-time equivalent staff			1,183				1,020				163			16.0	%

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

		Six months ended June 30,
(dollars in thousands)		2022				2021				Change				% Change
Base salaries, net of deferred loan origination costs		$	40,385			$	33,048			$	7,337			22.2	%
Incentive compensation			6,865				7,902				(1,037	)		(13.1	) %
Benefits and other compensation costs			12,463				11,461				1,002			8.7	%
Total salaries and benefits expense			59,713				52,411				7,302			13.9	%
Occupancy			7,571				7,426				145			2.0	%
Data processing and software			7,109				6,403				706			11.0	%
Equipment			2,786				2,724				62			2.3	%
Intangible amortization			2,930				2,862				68			2.4	%
Advertising			1,455				1,114				341			30.6	%
ATM and POS network charges			3,156				2,797				359			12.8	%
Professional fees			2,109				1,640				469			28.6	%
Telecommunications			1,085				1,145				(60	)		(5.2	) %
Regulatory assessments and insurance			1,499				1,230				269			21.9	%
Merger and acquisition expenses			6,253				—				6,253			n/m
Postage			541				322				219			68.0	%
Operational loss			273				421				(148	)		(35.2	) %
Courier service			900				582				318			54.6	%
Gain on sale or acquisition of foreclosed assets			(98	)			(66	)			(32	)		48.5	%
Gain on disposal of fixed assets			(1,073	)			(426	)			(647	)		151.9	%
Other miscellaneous expense			6,502				5,204				1,298			24.9	%
Total other non-interest expense			42,998				33,378				9,620			28.8	%
Total non-interest expense		$	102,711			$	85,789			$	16,922			19.7	%
Average full-time equivalent staff			1,133				1,022				111			10.9	%

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

Provision for Income Taxes

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

About TriCo Bancshares

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

Forward-Looking Statement

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

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)
		Three months ended
		June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
Revenue and Expense Data
Interest income		$	86,955			$	69,195			$	71,024			$	69,628			$	68,479
Interest expense			1,909				1,271				1,241				1,395				1,396
Net interest income			85,046				67,924				69,783				68,233				67,083
Provision for (benefit from) credit losses			2,100				8,330				980				(1,435	)			(260	)
Noninterest income:
Service charges and fees			13,044				11,696				11,277				11,265				10,930
Gain on sale of investment securities			—				—				—				—				—
Other income			3,386				3,400				5,225				3,830				5,027
Total noninterest income			16,430				15,096				16,502				15,095				15,957
Noninterest expense (2):
Salaries and benefits			34,370				28,597				27,666				26,274				27,081
Occupancy and equipment			5,449				4,925				5,011				5,107				4,907
Data processing and network			5,468				5,089				5,444				5,381				4,752
Other noninterest expense			10,977				7,836				8,558				9,045				7,431
Total noninterest expense			56,264				46,447				46,679				45,807				44,171
Total income before taxes			43,112				28,243				38,626				38,956				39,129
Provision for income taxes			11,748				7,869				10,404				11,534				10,767
Net income		$	31,364			$	20,374			$	28,222			$	27,422			$	28,362
Share Data
Basic earnings per share		$	0.93			$	0.68			$	0.95			$	0.92			$	0.95
Diluted earnings per share		$	0.93			$	0.67			$	0.94			$	0.92			$	0.95
Dividends per share		$	0.25			$	0.25			$	0.25			$	0.25			$	0.25
Book value per common share		$	31.25			$	32.78			$	33.64			$	33.05			$	32.53
Tangible book value per common share (1)		$	21.41			$	23.04			$	25.80			$	25.16			$	24.60
Shares outstanding			33,350,974				33,837,935				29,730,424				29,714,609				29,716,294
Weighted average shares			33,561,389				30,049,919				29,723,791				29,713,558				29,718,603
Weighted average diluted shares			33,705,280				30,201,698				29,870,059				29,850,530				29,903,560
Credit Quality
Allowance for credit losses to gross loans			1.60	%			1.64	%			1.74	%			1.72	%			1.74	%
Loans past due 30 days or more		$	5,920			$	8,402			$	4,332			$	10,539			$	9,292
Total nonperforming loans		$	11,925			$	14,088			$	30,350			$	28,790			$	32,705
Total nonperforming assets		$	15,304			$	16,995			$	32,944			$	31,440			$	34,952
Loans charged-off		$	401			$	743			$	197			$	1,582			$	387
Loans recovered		$	356			$	1,174			$	552			$	1,321			$	653
Selected Financial Ratios
Return on average total assets			1.24	%			0.94	%			1.31	%			1.30	%			1.40	%
Return on average equity			11.53	%			8.19	%			11.20	%			11.02	%			11.85	%
Average yield on loans, excluding PPP			4.70	%			4.65	%			4.73	%			4.85	%			4.93	%
Average yield on interest-earning assets			3.76	%			3.46	%			3.56	%			3.57	%			3.65	%
Average rate on interest-bearing deposits			0.07	%			0.06	%			0.06	%			0.08	%			0.08	%
Average cost of total deposits			0.04	%			0.04	%			0.04	%			0.05	%			0.05	%
Average rate on borrowings & subordinated debt			3.12	%			2.27	%			1.98	%			2.02	%			2.31	%
Average rate on interest-bearing liabilities			0.15	%			0.11	%			0.11	%			0.13	%			0.13	%
Net interest margin (fully tax-equivalent) (1)			3.67	%			3.39	%			3.50	%			3.50	%			3.58	%
Loans to deposits			69.81	%			67.15	%			66.74	%			67.54	%			70.72	%
Efficiency ratio			55.45	%			55.95	%			54.10	%			54.97	%			53.19	%
Supplemental Loan Interest Income Data
Discount accretion on acquired loans		$	1,677			$	1,323			$	1,780			$	2,034			$	2,566
All other loan interest income (excluding PPP) (1)		$	67,277			$	55,325			$	54,930			$	55,184			$	54,559
Total loan interest income (excluding PPP) (1)		$	68,954			$	56,648			$	56,710			$	57,218			$	57,125

(1) Non-GAAP measure

(2) Inclusive of merger related expenses

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)
Balance Sheet Data		June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
Cash and due from banks		$	488,868			$	1,035,683			$	768,421			$	740,236			$	639,740
Securities, available for sale, net			2,608,771				2,365,708				2,210,876				2,098,786				1,850,547
Securities, held to maturity, net			176,794				186,748				199,759				216,979				235,778
Restricted equity securities			17,250				17,250				17,250				17,250				17,250
Loans held for sale			1,216				1,030				3,466				3,072				5,723
Loans:
Commercial real estate			4,049,893				3,832,974				3,306,054				3,222,737				3,194,336
Consumer			1,162,989				1,136,712				1,071,551				1,053,653				1,050,609
Commercial and industrial			507,685				500,882				259,355				345,027				452,069
Construction			313,646				303,960				222,281				216,680				200,714
Agriculture production			71,373				69,339				50,811				44,410				41,967
Leases			7,835				8,108				6,572				4,989				5,199
Total loans, gross			6,113,421				5,851,975				4,916,624				4,887,496				4,944,894
Allowance for credit losses			(97,944	)			(96,049	)			(85,376	)			(84,306	)			(86,062	)
Total loans, net			6,015,477				5,755,926				4,831,248				4,803,190				4,858,832
Premises and equipment			73,811				73,692				78,687				78,968				79,178
Cash value of life insurance			132,857				132,104				117,857				120,932				120,287
Accrued interest receivable			25,861				22,769				19,292				18,425				18,923
Goodwill			307,942				307,942				220,872				220,872				220,872
Other intangible assets			20,074				21,776				12,369				13,562				14,971
Operating leases, right-of-use			27,154				28,404				25,665				26,815				26,365
Other assets			224,536				169,296				109,025				98,943				81,899
Total assets		$	10,120,611			$	10,118,328			$	8,614,787			$	8,458,030			$	8,170,365
Deposits:
Noninterest-bearing demand deposits		$	3,604,237			$	3,583,269			$	2,979,882			$	2,943,016			$	2,843,783
Interest-bearing demand deposits			1,796,580				1,788,639				1,568,682				1,519,426				1,486,321
Savings deposits			3,028,787				2,993,873				2,521,011				2,447,706				2,337,557
Time certificates			327,171				348,696				297,584				326,674				324,392
Total deposits			8,756,775				8,714,477				7,367,159				7,236,822				6,992,053
Accrued interest payable			755				653				928				1,056				1,026
Operating lease liability			29,283				30,500				26,280				27,290				26,707
Other liabilities			155,529				126,348				112,070				107,282				85,388
Other borrowings			35,089				36,184				50,087				45,601				40,559
Junior subordinated debt			101,003				100,984				58,079				57,965				57,852
Total liabilities			9,078,434				9,009,146				7,614,603				7,476,016				7,203,585
Common stock			696,441				706,672				532,244				531,339				531,038
Retained earnings			491,705				479,868				466,959				446,948				427,575
Accum. other comprehensive income (loss)			(145,969	)			(77,358	)			981				3,727				8,167
Total shareholders’ equity		$	1,042,177			$	1,109,182			$	1,000,184			$	982,014			$	966,780
Quarterly Average Balance Data
Average loans, excluding PPP		$	5,890,578			$	4,937,865			$	4,759,294			$	4,684,492			$	4,646,188
Average interest-earning assets		$	9,330,059			$	8,153,200			$	7,947,798			$	7,758,169			$	7,544,581
Average total assets		$	10,121,714			$	8,778,256			$	8,546,004			$	8,348,111			$	8,128,674
Average deposits		$	8,743,320			$	7,521,930			$	7,304,659			$	7,137,263			$	6,943,081
Average borrowings and subordinated debt		$	136,244			$	105,702			$	108,671			$	106,221			$	98,774
Average total equity		$	1,091,454			$	1,009,224			$	999,764			$	987,026			$	960,145
Capital Ratio Data
Total risk-based capital ratio			14.1	%			15.0	%			15.4	%			15.4	%			15.3	%
Tier 1 capital ratio			12.3	%			13.1	%			14.2	%			14.2	%			14.1	%
Tier 1 common equity ratio			11.5	%			12.3	%			13.2	%			13.2	%			13.0	%
Tier 1 leverage ratio			9.3	%			10.8	%			9.9	%			9.9	%			9.9	%
Tangible capital ratio (1)			7.3	%			8.0	%			9.2	%			9.1	%			9.2	%

(1) Non-GAAP measure

TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES
(Unaudited. Dollars in thousands)

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this press release because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results, and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:

		Three months ended						Six months ended
(dollars in thousands)		June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net interest margin
Acquired loans discount accretion, net:
Amount (included in interest income)		$1,677		$1,323		$2,566		$3,000		$4,278
Effect on average loan yield		0.11 %		0.11 %		0.22 %		0.11 %		0.18 %
Effect on net interest margin (FTE)		0.07 %		0.07 %		0.14 %		0.03 %		0.12 %
Net interest margin (FTE)		3.67 %		3.39 %		3.58 %		3.54 %		3.66 %
Net interest margin less effect of acquired loan discount accretion (Non-GAAP)		3.60 %		3.32 %		3.44 %		3.51 %		3.54 %
PPP loans yield, net:
Amount (included in interest income)		$964		$1,097		$3,179		$2,061		$9,042
Effect on net interest margin (FTE)		0.03 %		0.03 %		0.01 %		0.03 %		0.07 %
Net interest margin less effect of PPP loan yield (Non-GAAP)		3.65 %		3.36 %		3.57 %		3.51 %		3.59 %
Acquired loan discount accretion and PPP loan yield, net:
Amount (included in interest income)		$2,641		$2,420		$5,745		$5,061		$13,320
Effect on net interest margin (FTE)		0.10 %		0.10 %		0.15 %		0.10 %		0.19 %
Net interest margin less effect of acquired loan discount accretion and PPP yields, net (Non-GAAP)		3.57 %		3.29 %		3.43 %		3.44 %		3.46 %

		Three months ended						Six months ended
(dollars in thousands)		June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Pre-tax pre-provision return on average assets or equity
Net income (GAAP)		$31,364		$20,374		$28,362		$51,738		$62,011
Exclude income tax expense		11,748		7,869		10,767		19,617		24,110
Exclude provision (benefit) for credit losses		2,100		8,330		(260)		10,430		(6,320)
Net income before income tax and provision expense (Non-GAAP)		$45,212		$36,573		$38,869		$81,785		$79,801
Average assets (GAAP)		$10,121,714		$8,778,256		$8,128,674		$9,453,696		$7,968,134
Average equity (GAAP)		$1,091,454		$1,009,224		$960,145		$1,050,566		$950,460
Return on average assets (GAAP) (annualized)		1.24 %		0.94 %		1.40 %		1.10 %		1.57 %
Pre-tax pre-provision return on average assets (Non-GAAP) (annualized)		1.79 %		1.69 %		1.92 %		1.74 %		2.03 %
Return on average equity (GAAP) (annualized)		11.53 %		8.19 %		11.85 %		9.93 %		13.16 %
Pre-tax pre-provision return on average equity (Non-GAAP) (annualized)		16.61 %		14.70 %		16.24 %		15.70 %		16.98 %

		Three months ended						Six months ended
(dollars in thousands)		June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Return on tangible common equity
Average total shareholders' equity		$1,091,454		$1,009,224		$960,145		$1,050,566		$950,460
Exclude average goodwill		307,942		226,676		220,872		267,533		220,872
Exclude average other intangibles		21,040		12,604		15,687		16,845		19,264
Average tangible common equity (Non-GAAP)		$762,472		$769,944		$723,586		$766,188		$710,324
Net income (GAAP)		$31,364		$20,374		$28,362		$51,738		$62,011
Exclude amortization of intangible assets, net of tax effect		1,199		865		1,008		2,064		2,016
Tangible net income available to common shareholders (Non-GAAP)		$32,563		$21,239		$29,370		$53,802		$64,027
Return on average equity		11.53 %		8.19 %		11.85 %		9.93 %		13.16 %
Return on average tangible common equity (Non-GAAP)		17.13 %		11.19 %		16.28 %		14.16 %		18.18 %

		Three months ended
(dollars in thousands)		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021
Tangible shareholders' equity to tangible assets
Shareholders' equity (GAAP)		$1,042,177		$1,109,182		$1,000,184		$982,014		$966,780
Exclude goodwill and other intangible assets, net		328,016		329,718		233,241		234,434		235,843
Tangible shareholders' equity (Non-GAAP)		$714,161		$779,464		$766,943		$747,580		$730,937
Total assets (GAAP)		$10,120,611		$10,118,328		$8,614,787		$8,458,030		$8,170,365
Exclude goodwill and other intangible assets, net		328,016		329,718		233,241		234,434		235,843
Total tangible assets (Non-GAAP)		$9,792,595		$9,788,610		$8,381,546		$8,223,596		$7,934,522
Shareholders' equity to total assets (GAAP)		10.30 %		10.96 %		11.61 %		11.61 %		11.83 %
Tangible shareholders' equity to tangible assets (Non-GAAP)		7.29 %		7.96 %		9.15 %		9.09 %		9.21 %

		Three months ended
(dollars in thousands)		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021
Tangible common shareholders' equity per share
Tangible s/h equity (Non-GAAP)		$714,161		$779,464		$766,943		$747,580		$730,937
Common shares outstanding at end of period		33,350,974		33,837,935		29,730,424		29,714,609		29,716,294
Common s/h equity (book value) per share (GAAP)		$31.25		$32.78		$33.64		$33.05		$32.53
Tangible common shareholders' equity (tangible book value) per share (Non-GAAP)		$21.41		$23.04		$25.80		$25.16		$24.60

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220727005230/en/

Peter G. Wiese, EVP & CFO, (530) 898-0300

Source: TriCo Bancshares

FAQ

What were the Q2 2022 earnings for TriCo Bancshares (TCBK)?

TriCo Bancshares reported net income of $31.4 million for Q2 2022.

How much did the diluted earnings per share increase for TCBK in Q2 2022?

The diluted earnings per share increased to $0.93 in Q2 2022 from $0.67 in Q1 2022.

What was the organic loan growth for TriCo Bancshares in Q2 2022?

The organic loan growth for Q2 2022 was $300.3 million, or a 20.7% annualized growth rate.

What is the net interest margin reported by TCBK for Q2 2022?

The net interest margin for Q2 2022 was reported at 3.57%, up 28 basis points from Q1.

How did TriCo Bancshares' noninterest income perform in Q2 2022?

Noninterest income for Q2 2022 increased by 8.8% to $16.4 million.

What was the credit quality status of TriCo Bancshares as of June 30, 2022?

As of June 30, 2022, the non-performing assets were reduced to 0.15% of total assets.