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TriCo Bancshares Announces Third Quarter 2023 Results

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TriCo Bancshares announces net income of $30.6 million for Q3 2023, compared to $24.9 million in Q2 2023 and $37.3 million in Q3 2022. Diluted earnings per share were $0.92 for Q3 2023. Loan balances increased by $187.9 million or 2.9%, while deposit balances declined by $85.7 million or 1.1% from the previous quarter.
Positive
  • Net income increased by $5.7 million or 22.9% from the previous quarter.
  • Loan balances increased by $187.9 million or 2.9% from the previous quarter.
  • Diluted earnings per share increased by $0.17 or 22.7% from the previous quarter.
Negative
  • Deposit balances declined by $85.7 million or 1.1% from the previous quarter.

Notable Items for Third Quarter 2023

  • Net income was $30.6 million compared to $24.9 million in the trailing quarter, and compared to $37.3 million in the same quarter of the prior year; Pre-tax pre-provision net revenue was $46.2 million compared to $43.1 million in the trailing quarter, and compared to $55.3 million in the same quarter of the prior year
  • Return on average assets was 1.23% for the current quarter as compared to 1.01% in the trailing quarter and 1.46% in the same quarter of the prior year
  • The Bank continues to operate a balance sheet without the utilization of brokered deposits or FRB borrowings
  • Loan balances increased $187.9 million or 2.9% while deposit balances declined $85.7 million or 1.1% from the trailing quarter
  • The average cost of total deposits was 0.86% for the quarter as compared to 0.58% in the trailing quarter and 0.04% in the same quarter of the prior year and, as a result, the Company's total cost of deposits have increased 82 basis points since FOMC rate actions began in March 2022, which translates to a cycle-to-date deposit beta of 15.6%
  • Balance sheet flexibility remains anchored in readily accessible sources of liquidity including undrawn borrowing capacities, on-balance sheet cash and unpledged investment securities totaling in excess of $4.1 billion
  • Overall credit quality remains within historical norms as non-performing assets represent approximately 0.33% of total assets and the ratio of classified loans to total loans remains low and manageable.
  • Average yield on earning assets was 4.94%, an increase of 16 basis points over the 4.78% in the trailing quarter; net interest margin was 3.88% in the recent quarter, narrowing only 8 basis points from 3.96% in the trailing quarter

"Led by both margin and non-interest expenses, operating results for the quarter were improved over both the immediately preceding quarter and general market expectations," explained Rick Smith, President and Chief Executive Officer. Peter Wiese, EVP and Chief Financial Officer added, "We continue to be mindful about the unique economic circumstances in which we are operating and the need for long-term strategic perseverance consistent with the characteristic strengths for which we are known including consistency in shareholder returns, a conservative credit culture, expense control and depth and strength of our TriCo Team."

CHICO, Calif.--(BUSINESS WIRE)-- TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $30.6 million for the quarter ended September 30, 2023, compared to $24.9 million during the trailing quarter ended June 30, 2023, and $37.3 million during the quarter ended September 30, 2022. Diluted earnings per share were $0.92 for the third quarter of 2023, compared to $0.75 for the second quarter of 2023 and $1.12 during the third quarter of 2022.

Financial Highlights

Performance highlights for the Company as of or for the three and nine months ended September 30, 2023, included the following:

  • For the quarter ended September 30, 2023, the Company’s return on average assets was 1.23%, while the return on average equity was 10.91%.
  • The loan to deposit ratio increased to 83.8% as of September 30, 2023, as compared to 80.6% as of the trailing quarter.
  • The efficiency ratio was 54.8% and 53.4% for the nine months ended September 30, 2023 and 2022, respectively.
  • The provision for credit losses was approximately $4.2 million during the quarter ended September 30, 2023, as compared to a provision for credit losses of $9.7 million during the trailing quarter ended June 30, 2023, and a provision for credit losses of $3.8 million for the three-month period ended September 30, 2022.
  • The allowance for credit losses to total loans was 1.73% as of September 30, 2023, compared to 1.80% as of the trailing quarter end, and 1.61% as of September 30, 2022. Non-performing assets to total assets were 0.33% on September 30, 2023, as compared to 0.41% as of June 30, 2023, and 0.21% at September 30, 2022.
  • While total classified loans increased to 1.2% of total loans, criticized loans as a percentage of total loans decreased by 0.8% ($44.6 million) to 2.6% as a result of loan repayments and improved borrower performance, including a negligible level of past due loans.

Financial results reported in this document are preliminary and unaudited. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the period ended September 30, 2023, 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

 

 

 

 

 

September 30,

 

June 30,

 

 

 

 

(dollars and shares in thousands, except per share data)

 

2023

 

 

 

2023

 

 

$ Change

 

% Change

Net interest income

$

88,123

 

 

$

88,601

 

 

$

(478

)

 

(0.5

)%

Provision for credit losses

 

(4,155

)

 

 

(9,650

)

 

 

5,495

 

 

(56.9

)%

Noninterest income

 

15,984

 

 

 

15,741

 

 

 

243

 

 

1.5

%

Noninterest expense

 

(57,878

)

 

 

(61,243

)

 

 

3,365

 

 

(5.5

)%

Provision for income taxes

 

(11,484

)

 

 

(8,557

)

 

 

(2,927

)

 

34.2

%

Net income

$

30,590

 

 

$

24,892

 

 

$

5,698

 

 

22.9

%

Diluted earnings per share

$

0.92

 

 

$

0.75

 

 

$

0.17

 

 

22.7

%

Dividends per share

$

0.30

 

 

$

0.30

 

 

$

—

 

 

—

%

Average common shares

 

33,263

 

 

 

33,219

 

 

 

44

 

 

0.1

%

Average diluted common shares

 

33,319

 

 

 

33,302

 

 

 

17

 

 

0.1

%

Return on average total assets

 

1.23

%

 

 

1.01

%

 

 

 

 

Return on average equity

 

10.91

%

 

 

8.98

%

 

 

 

 

Efficiency ratio

 

55.59

%

 

 

58.69

%

 

 

 

 

 

Three months ended
September 30,

 

 

 

 

(dollars and shares in thousands, except per share data)

 

2023

 

 

 

2022

 

 

$ Change

 

% Change

Net interest income

$

88,123

 

 

$

94,106

 

 

$

(5,983

)

 

(6.4

)%

Provision for credit losses

 

(4,155

)

 

 

(3,795

)

 

 

(360

)

 

9.5

%

Noninterest income

 

15,984

 

 

 

15,640

 

 

 

344

 

 

2.2

%

Noninterest expense

 

(57,878

)

 

 

(54,465

)

 

 

(3,413

)

 

6.3

%

Provision for income taxes

 

(11,484

)

 

 

(14,148

)

 

 

2,664

 

 

(18.8

)%

Net income

$

30,590

 

 

$

37,338

 

 

$

(6,748

)

 

(18.1

)%

Diluted earnings per share

$

0.92

 

 

$

1.12

 

 

$

(0.20

)

 

(17.9

)%

Dividends per share

$

0.30

 

 

$

0.30

 

 

$

—

 

 

—

%

Average common shares

 

33,263

 

 

 

33,348

 

 

 

(85

)

 

(0.3

)%

Average diluted common shares

 

33,319

 

 

 

33,463

 

 

 

(144

)

 

(0.4

)%

Return on average total assets

 

1.23

%

 

 

1.46

%

 

 

 

 

Return on average equity

 

10.91

%

 

 

13.78

%

 

 

 

 

Efficiency ratio

 

55.59

%

 

 

49.63

%

 

 

 

 

 

Nine months ended
September 30,

 

 

(dollars and shares in thousands)

 

2023

 

 

 

2022

 

 

$ Change

 

% Change

Net interest income

$

270,060

 

 

$

247,076

 

 

$

22,984

 

 

9.3

%

Provision for credit losses

 

(18,000

)

 

 

(14,225

)

 

 

(3,775

)

 

26.5

%

Noninterest income

 

45,360

 

 

 

47,166

 

 

 

(1,806

)

 

(3.8

)%

Noninterest expense

 

(172,915

)

 

 

(157,176

)

 

 

(15,739

)

 

10.0

%

Provision for income taxes

 

(33,190

)

 

 

(33,765

)

 

 

575

 

 

(1.7

)%

Net income

$

91,315

 

 

$

89,076

 

 

$

2,239

 

 

2.5

%

Diluted earnings per share

$

2.75

 

 

$

2.74

 

 

$

0.01

 

 

0.4

%

Dividends per share

$

0.90

 

 

$

0.80

 

 

$

0.10

 

 

12.5

%

Average common shares

 

33,259

 

 

 

32,332

 

 

 

927

 

 

2.9

%

Average diluted common shares

 

33,356

 

 

 

32,469

 

 

 

887

 

 

2.7

%

Return on average total assets

 

1.24

%

 

 

1.23

%

 

 

 

 

Return on average equity

 

11.06

%

 

 

11.25

%

 

 

 

 

Efficiency ratio

 

54.82

%

 

 

53.42

%

 

 

 

 

Balance Sheet

Total loans outstanding grew to $6.7 billion as of September 30, 2023, an organic based increase of 6.2% over the prior twelve months. As compared to June 30, 2023, total loans outstanding increased by $187.9 million or 11.5% annualized. Investments decreased to $2.33 billion as of September 30, 2023, an annualized decrease of 12.6% over the prior year quarter end. Quarterly average earning assets to quarterly total average assets were 91.7% on September 30, 2023, as compared to 91.6% and 92.0% at December 31, 2022, and September 30, 2022, respectively. The loan-to-deposit ratio was 83.8% on September 30, 2023, as compared to 80.6% and 73.0% at December 31, 2022, and September 30, 2022, respectively. During the current year to date period, and throughout the 2022 fiscal year, the Company held no brokered deposits and relied solely on short-term borrowings to fund cash flow timing differences.

Total shareholders' equity decreased by $22.4 million during the quarter ended September 30, 2023, as a result of accumulated other comprehensive losses increasing by $44.0 million and cash dividend payments on common stock of approximately $10.0 million, offset by net income of $30.6 million. As a result, the Company’s book value was $32.18 per share at September 30, 2023, as compared to $32.86 and $29.71 at December 31, 2022 and September 30, 2022, 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 $22.67 per share at September 30, 2023, as compared to $23.30 and $19.92 at December 31, 2022, and September 30, 2022, respectively. As noted above, despite the consistent retention of earnings in each quarter of the Company's history, recent changes in the balance of unrealized losses on available-for-sale investment securities, net of deferred taxes, has been the primary driver of decreases in tangible book value per share.

Trailing Quarter Balance Sheet Change

Ending balances

September 30,

 

June 30,

 

 

 

Annualized
% Change

(dollars in thousands)

 

2023

 

 

2023

 

$ Change

Total assets

$

9,897,006

 

$

9,853,421

 

$

43,585

 

 

1.8

%

Total loans

 

6,708,666

 

 

6,520,740

 

 

187,926

 

 

11.5

 

Total investments

 

2,333,162

 

 

2,485,378

 

 

(152,216

)

 

(24.5

)

Total deposits

 

8,009,643

 

 

8,095,365

 

 

(85,722

)

 

(4.2

)

Total other borrowings

$

537,975

 

$

392,714

 

$

145,261

 

 

148.0

%

Loans outstanding increased by $187.9 million or 11.5% on an annualized basis during the quarter ended September 30, 2023. During the quarter, loan originations/draws totaled approximately $495.0 million while payoffs/repayments of loans totaled $308.0 million, which compares to originations/draws and payoffs/repayments during the trailing quarter ended of $456.0 million and $356.0 million, respectively. While origination volume increased from the previous quarter, activity levels continue to be lower relative to the comparative period in 2022 due in part to disciplined pricing and underwriting, as well as decreased borrower appetite at currently offered lending rates. Investment security balances decreased $152.2 million or 24.5% on an annualized basis as the result of net prepayments, maturities, and purchases totaling approximating $89.7 million and net decreases in the market value of securities of $62.5 million. Management seeks to utilize excess cash flows from the investment security portfolio to support loan growth or reduce borrowings thus resulting in an improved mix of earning assets. Deposit balances decreased by $85.7 million or 4.2% annualized during the period. Funding for the net cash outflows of loans, investment securities and deposits during the quarter were supported by a net increase of $145.3 million in short-term borrowings, which totaled $538.0 million at September 30, 2023.

Average Trailing Quarter Balance Sheet Change

Quarterly average balances for the period ended

September 30,

 

June 30,

 

 

 

Annualized
% Change

(dollars in thousands)

 

2023

 

 

2023

 

$ Change

 

Total assets

$

9,874,240

 

$

9,848,191

 

$

26,049

 

 

1.1

%

Total loans

 

6,597,400

 

 

6,467,381

 

 

130,019

 

 

8.0

 

Total investments

 

2,429,335

 

 

2,525,334

 

 

(95,999

)

 

(15.2

)

Total deposits

 

8,043,101

 

 

7,981,515

 

 

61,586

 

 

3.1

 

Total other borrowings

$

449,274

 

$

477,256

 

$

(27,982

)

 

(23.5

)%

Year Over Year Balance Sheet Change

Ending balances

As of September 30,

 

 

 

% Change

(dollars in thousands)

 

2023

 

 

2022

 

$ Change

 

Total assets

$

9,897,006

 

$

9,976,879

 

$

(79,873

)

 

(0.8

)%

Total loans

 

6,708,666

 

 

6,314,290

 

 

394,376

 

 

6.2

 

Total loans, excluding PPP

 

6,707,530

 

 

6,312,348

 

 

395,182

 

 

6.3

 

Total investments

 

2,333,162

 

 

2,668,145

 

 

(334,983

)

 

(12.6

)

Total deposits

 

8,009,643

 

 

8,655,769

 

 

(646,126

)

 

(7.5

)

Total other borrowings

$

537,975

 

$

47,068

 

$

490,907

 

 

1,043.0

%

Non-PPP loan balances increased as a result of organic activities by approximately $395.2 million or 6.3% during the twelve-month period ending September 30, 2023. Over the same period deposit balances have declined by $646.1 million or 7.5%. The Company has offset these declines through the deployment of excess cash balances, runoff of investment security balances, and proceeds from short-term FHLB borrowings. As of September 30, 2023 and June 30, 2023, short-term borrowings from the FHLB totaled $500.0 and $394.1 million and had a weighted average interest rate of 5.14 and 5.11%, respectively.

Liquidity

The Company's primary sources of liquidity include the following for the periods indicated:

(dollars in thousands)

September 30, 2023

 

June 30, 2023

 

September 30, 2022

Borrowing capacity at correspondent banks and FRB

$

2,927,065

 

 

$

2,847,052

 

 

$

2,720,468

Less: borrowings outstanding

 

(500,000

)

 

 

(350,000

)

 

 

—

Unpledged available-for-sale (AFS) investment securities

 

1,702,265

 

 

 

1,813,894

 

 

 

2,040,802

Cash held or in transit with FRB

 

72,049

 

 

 

79,530

 

 

 

199,994

Total primary liquidity

$

4,201,379

 

 

$

4,390,476

 

 

$

4,961,264

 

Estimated uninsured deposit balances

$

2,406,552

$

2,522,718

$

2,898,347 

At September 30, 2023, the Company's primary sources of liquidity represented 52.5% of total deposits and 175% 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 $124.0 million, including approximately $15.0 million in net unrealized losses. The Company did not utilize any brokered deposits during 2023 or 2022.

Net Interest Income and Net Interest Margin

During the twelve-month period ended September 30, 2023, the Federal Open Market Committee's (FOMC) actions have resulted in an increase in the Fed Funds Rate by approximately 225 basis points. During the same period the Company's yield on total loans (excluding PPP) increased 65 basis points to 5.52% for the three months ended September 30, 2023, from 4.87% for the three months ended September 30, 2022. Moreover, the tax equivalent yield on the Company's investment security portfolio was 3.39%, an increase of 70 basis points from the 2.69% for the three months ended September 30, 2022. The cost of total interest-bearing deposits and total interest-bearing liabilities increased by 128 basis points and 154 basis points, respectively, between the three month periods ended September 30, 2023 and 2022. Since FOMC rate actions began in March 2022, the Company's cost of total deposits has increased 82 basis points which translates to a cycle to date deposit beta of 15.6%.

The Company continues to manage its cost of deposits through the use of various pricing and product mix strategies. As of September 30, 2023, June 30, 2023, and December 31, 2022, deposits priced utilizing these strategies totaled $1,232.4 million, $1,070.7 million and $579.1 million, respectively, and carried weighted average rates of 3.53%, 3.38%, and 1.64%, respectively.

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

 

Three months ended

 

 

 

 

 

September 30,

 

June 30,

 

 

 

 

(dollars in thousands)

 

2023

 

 

 

2023

 

 

Change

 

% Change

Interest income

$

112,380

 

 

$

107,158

 

 

$

5,222

 

 

4.9

%

Interest expense

 

(24,257

)

 

 

(18,557

)

 

 

(5,700

)

 

30.7

%

Fully tax-equivalent adjustment (FTE) (1)

 

405

 

 

 

379

 

 

 

26

 

 

6.9

%

Net interest income (FTE)

$

88,528

 

 

$

88,980

 

 

$

(452

)

 

(0.5

)%

Net interest margin (FTE)

 

3.88

%

 

 

3.96

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,324

 

 

$

1,471

 

 

$

(147

)

 

(10.0

)%

Net interest margin less effect of acquired loan discount accretion(1)

 

3.82

%

 

 

3.89

%

 

 

(0.07

)%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2

 

 

$

4

 

 

$

(2

)

 

(50.0

)%

Net interest margin less effect of PPP loan yield (1)

 

3.88

%

 

 

3.96

%

 

 

(0.08

)%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,326

 

 

$

1,475

 

 

$

(149

)

 

(10.1

)%

Net interest margin less effect of acquired loan discount accretion
and PPP loan yield (1)

 

3.82

%

 

 

3.89

%

 

 

(0.07

)%

 

 

 

Three months ended
September 30,

 

 

 

 

(dollars in thousands)

 

2023

 

 

 

2022

 

 

Change

 

% Change

Interest income

$

112,380

 

 

$

96,366

 

 

$

16,014

 

 

16.6

%

Interest expense

 

(24,257

)

 

 

(2,260

)

 

 

(21,997

)

 

973.3

%

Fully tax-equivalent adjustment (FTE) (1)

 

405

 

 

 

440

 

 

 

(35

)

 

(8.0

)%

Net interest income (FTE)

$

88,528

 

 

$

94,546

 

 

$

(6,018

)

 

(6.4

)%

Net interest margin (FTE)

 

3.88

%

 

 

4.02

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,324

 

 

$

714

 

 

$

610

 

 

85.4

%

Net interest margin less effect of acquired loan discount accretion(1)

 

3.82

%

 

 

3.99

%

 

 

(0.17

)%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

2

 

 

$

313

 

 

$

(311

)

 

(99.4

)%

Net interest margin less effect of PPP loan yield (1)

 

3.88

%

 

 

4.02

%

 

 

(0.14

)%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,326

 

 

$

1,027

 

 

$

299

 

 

29.1

%

Net interest margin less effect of acquired loan discount accretion
and PPP loan yield (1)

 

3.82

%

 

 

3.98

%

 

 

(0.16

)%

 

 

 

Nine months ended
September 30,

 

 

 

 

(dollars in thousands)

 

2023

 

 

 

2022

 

 

Change

 

% Change

Interest income

$

322,445

 

 

$

252,516

 

 

$

69,929

 

 

27.7

%

Interest expense

 

(52,385

)

 

 

(5,440

)

 

 

(46,945

)

 

863.0

%

Fully tax-equivalent adjustment (FTE) (1)

 

1,176

 

 

 

1,120

 

 

 

56

 

 

5.0

%

Net interest income (FTE)

$

271,236

 

 

$

248,196

 

 

$

23,040

 

 

9.3

%

Net interest margin (FTE)

 

4.01

%

 

 

3.71

%

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

4,192

 

 

$

3,714

 

 

$

478

 

 

12.9

%

Net interest margin less effect of acquired loan discount accretion(1)

 

3.95

%

 

 

3.65

%

 

 

0.30

%

 

 

PPP loans yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

11

 

 

$

2,374

 

 

$

(2,363

)

 

(99.5

)%

Net interest margin less effect of PPP loan yield (1)

 

4.01

%

 

 

3.69

%

 

 

0.32

%

 

 

Acquired loans discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

Amount (included in interest income)

$

4,203

 

 

$

6,088

 

 

$

(1,885

)

 

(31.0

)%

Net interest margin less effect of acquired loans discount and PPP
loan yield (1)

 

3.95

%

 

 

3.63

%

 

 

0.32

%

 

 

  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. 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 2023 as compared to 2022. During the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, purchased loan discount accretion was $1.3 million, $1.5 million, and $0.7 million, 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

 

September 30, 2023

 

June 30, 2023

 

September 30, 2022

 

Average
Balance

 

Income/
Expense

 

Yield/
Rate

 

Average
Balance

 

Income/
Expense

 

Yield/
Rate

 

Average
Balance

 

Income/
Expense

 

Yield/
Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

6,596,116

 

$

91,705

 

5.52

%

 

$

6,465,903

 

$

86,743

 

5.38

%

 

$

6,162,267

 

$

75,643

 

4.87

%

PPP loans

 

1,284

 

 

2

 

0.62

%

 

 

1,478

 

 

4

 

1.09

%

 

 

8,775

 

 

313

 

14.15

%

Investments-taxable

 

2,246,569

 

 

18,990

 

3.35

%

 

 

2,343,511

 

 

18,775

 

3.21

%

 

 

2,591,513

 

 

17,122

 

2.62

%

Investments-nontaxable (1)

 

182,766

 

 

1,755

 

3.81

%

 

 

181,823

 

 

1,641

 

3.62

%

 

 

210,606

 

 

1,908

 

3.59

%

Total investments

 

2,429,335

 

 

20,745

 

3.39

%

 

 

2,525,334

 

 

20,416

 

3.24

%

 

 

2,802,119

 

 

19,030

 

2.69

%

Cash at Federal Reserve and other
banks

 

26,654

 

 

333

 

4.96

%

 

 

29,349

 

 

374

 

5.11

%

 

 

346,991

 

 

1,820

 

2.08

%

Total earning assets

 

9,053,389

 

 

112,785

 

4.94

%

 

 

9,022,064

 

 

107,537

 

4.78

%

 

 

9,320,152

 

 

96,806

 

4.12

%

Other assets, net

 

820,851

 

 

 

 

 

 

826,127

 

 

 

 

 

 

810,966

 

 

 

 

Total assets

$

9,874,240

 

 

 

 

 

$

9,848,191

 

 

 

 

 

$

10,131,118

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,751,625

 

$

3,916

 

0.89

%

 

$

1,657,714

 

$

2,173

 

0.53

%

 

$

1,775,884

 

$

119

 

0.03

%

Savings deposits

 

2,790,197

 

 

9,526

 

1.35

%

 

 

2,768,981

 

 

6,936

 

1.00

%

 

 

3,011,145

 

 

685

 

0.09

%

Time deposits

 

535,715

 

 

3,937

 

2.92

%

 

 

426,689

 

 

2,348

 

2.21

%

 

 

321,100

 

 

188

 

0.23

%

Total interest-bearing deposits

 

5,077,537

 

 

17,379

 

1.36

%

 

 

4,853,384

 

 

11,457

 

0.95

%

 

 

5,108,129

 

 

992

 

0.08

%

Other borrowings

 

449,274

 

 

5,106

 

4.51

%

 

 

477,256

 

 

5,404

 

4.54

%

 

 

38,908

 

 

5

 

0.05

%

Junior subordinated debt

 

101,070

 

 

1,772

 

6.96

%

 

 

101,056

 

 

1,696

 

6.73

%

 

 

101,011

 

 

1,263

 

4.96

%

Total interest-bearing liabilities

 

5,627,881

 

 

24,257

 

1.71

%

 

 

5,431,696

 

 

18,557

 

1.37

%

 

 

5,248,048

 

 

2,260

 

0.17

%

Noninterest-bearing deposits

 

2,965,564

 

 

 

 

 

 

3,128,131

 

 

 

 

 

 

3,644,086

 

 

 

 

Other liabilities

 

168,391

 

 

 

 

 

 

176,141

 

 

 

 

 

 

164,208

 

 

 

 

Shareholders’ equity

 

1,112,404

 

 

 

 

 

 

1,112,223

 

 

 

 

 

 

1,074,776

 

 

 

 

Total liabilities and shareholders’
equity

$

9,874,240

 

 

 

 

 

$

9,848,191

 

 

 

 

 

$

10,131,118

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

3.23

%

 

 

 

 

 

3.41

%

 

 

 

 

 

3.95

%

Net interest income and margin (1) (3)

 

 

$

88,528

 

3.88

%

 

 

 

$

88,980

 

3.96

%

 

 

 

$

94,546

 

4.02

%

  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 September 30, 2023, decreased $0.5 million or 0.5% to $88.5 million compared to $89.0 million during the three months ended June 30, 2023. In addition, net interest margin declined 8 basis points to 3.88%, compared to the trailing quarter. The decrease in net interest income is primarily attributed to an additional $5.9 million or 24.3% in deposit interest expense due to increases in interest rates as compared to the trailing quarter. As a partial offset, total interest income also increased as compared to the trailing quarter, up $5.2 million or 4.6%.

As compared to the same quarter in the prior year, average loan yields, excluding PPP, increased 65 basis points from 4.87% during the three months ended September 30, 2022, to 5.52% during the three months ended September 30, 2023. The accretion of discounts from acquired loans added 8 and 5 basis points to loan yields during the quarters ended September 30, 2023 and September 30, 2022, respectively.

The rates paid on interest bearing deposits increased by 41 basis points during the quarter ended September 30, 2023, compared to the trailing quarter. The cost of interest-bearing deposits increased by 128 basis points between the quarter ended September 30, 2023, and the same quarter of the prior year. In addition, the average balance of noninterest-bearing deposits decreased by $162.6 million quarter over quarter and decreased by $678.5 million from three month average for the period ended September 30, 2022. As of September 30, 2023, the ratio of average total noninterest-bearing deposits to total average deposits was 36.9%, as compared to 39.2% and 41.6% at June 30, 2023 and September 30, 2022, respectively.

 

Nine months ended September 30, 2023

 

Nine months ended September 30, 2022

 

Average
Balance

 

Income/
Expense

 

Yield/
Rate

 

Average
Balance

 

Income/
Expense

 

Yield/
Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding PPP

$

6,492,141

 

$

260,857

 

5.37

%

 

$

5,668,055

 

$

201,245

 

4.75

%

PPP loans

 

1,444

 

 

11

 

1.02

%

 

 

32,287

 

 

2,374

 

9.83

%

Investments-taxable

 

2,328,883

 

 

56,681

 

3.25

%

 

 

2,487,111

 

 

41,695

 

2.24

%

Investments-nontaxable (1)

 

184,524

 

 

5,096

 

3.69

%

 

 

183,772

 

 

4,853

 

3.53

%

Total investments

 

2,513,407

 

 

61,777

 

3.29

%

 

 

2,670,883

 

 

46,548

 

2.33

%

Cash at Federal Reserve and other
banks

 

27,606

 

 

976

 

4.73

%

 

 

573,252

 

 

3,469

 

0.81

%

Total earning assets

 

9,034,598

 

 

323,621

 

4.79

%

 

 

8,944,477

 

 

253,636

 

3.79

%

Other assets, net

 

832,501

 

 

 

 

 

 

737,721

 

 

 

 

Total assets

$

9,867,099

 

 

 

 

 

$

9,682,198

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

$

1,694,438

 

$

6,476

 

0.51

%

 

$

1,724,787

 

$

302

 

0.02

%

Savings deposits

 

2,818,817

 

 

20,616

 

0.98

%

 

 

2,863,447

 

 

1,541

 

0.07

%

Time deposits

 

413,359

 

 

6,889

 

2.23

%

 

 

319,940

 

 

676

 

0.28

%

Total interest-bearing deposits

 

4,926,614

 

 

33,981

 

0.92

%

 

 

4,908,174

 

 

2,519

 

0.07

%

Other borrowings

 

402,016

 

 

13,318

 

4.43

%

 

 

39,609

 

 

15

 

0.05

%

Junior subordinated debt

 

101,057

 

 

5,086

 

6.73

%

 

 

87,804

 

 

2,906

 

4.42

%

Total interest-bearing liabilities

 

5,429,687

 

 

52,385

 

1.29

%

 

 

5,035,587

 

 

5,440

 

0.14

%

Noninterest-bearing deposits

 

3,153,807

 

 

 

 

 

 

3,435,487

 

 

 

 

Other liabilities

 

179,483

 

 

 

 

 

 

152,186

 

 

 

 

Shareholders’ equity

 

1,104,122

 

 

 

 

 

 

1,058,938

 

 

 

 

Total liabilities and shareholders’ equity

$

9,867,099

 

 

 

 

 

$

9,682,198

 

 

 

 

Net interest rate spread (1) (2)

 

 

 

 

3.50

%

 

 

 

 

 

3.65

%

Net interest income and margin (1) (3)

 

 

$

271,236

 

4.01

%

 

 

 

$

248,196

 

3.71

%

  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

Market interest rates, including many rates that serve as reference indices for variable rate loans and investment securities continued to increase. As noted above, these rate increases have continued to benefit growth in total interest income. As of September 30, 2023, the Company's loan portfolio consisted of approximately $6.7 billion in outstanding principal with a weighted average coupon rate of 5.33%. During the three-month periods ending September 30, 2023, June 30, 2023, and December 31, 2022, the weighted average coupon on loan production in the quarter was 7.31%, 6.85%, and 6.05%, respectively. Included in the September 30, 2023 loan total are adjustable rate loans totaling $3.5 billion, of which, $933.0 million are considered floating based on the Wall Street Prime index. In addition, the Company holds certain investment securities with fair values totaling $368.9 million which are subject to repricing on not less than a quarterly basis.

Asset Quality and Credit Loss Provisioning

During the three months ended September 30, 2023, the Company recorded a provision for credit losses of $4.2 million, as compared to $9.7 million during the trailing quarter, and $3.8 million during the third quarter of 2022.

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

 

Three months ended

 

Nine months ended

(dollars in thousands)

September 30, 2023

 

September 30, 2022

 

September 30, 2023

 

September 30, 2022

Addition to allowance for credit losses

$

3,120

 

$

3,500

 

$

16,415

 

$

13,645

Addition to reserve for unfunded loan commitments

 

1,035

 

 

295

 

 

1,585

 

 

580

Total provision for credit losses

$

4,155

 

$

3,795

 

$

18,000

 

$

14,225

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

 

Three months ended

 

Nine months ended

(dollars in thousands)

September 30, 2023

 

September 30, 2022

 

September 30, 2023

 

September 30, 2022

Balance, beginning of period

$

117,329

 

 

$

97,944

 

 

$

105,680

 

 

$

85,376

 

ACL at acquisition for PCD loans

 

—

 

 

 

—

 

 

 

—

 

 

 

2,037

 

Provision for credit losses

 

3,120

 

 

 

3,500

 

 

 

16,415

 

 

 

13,645

 

Loans charged-off

 

(5,357

)

 

 

(267

)

 

 

(7,392

)

 

 

(1,411

)

Recoveries of previously charged-off loans

 

720

 

 

 

311

 

 

 

1,109

 

 

 

1,841

 

Balance, end of period

$

115,812

 

 

$

101,488

 

 

$

115,812

 

 

$

101,488

 

The allowance for credit losses (ACL) was $115.8 million or 1.73% of total loans as of September 30, 2023. The provision for credit losses on loans of $3.1 million during the recent quarter was the net effect of charge-offs associated with the disposition of a previously reserved for and individually analyzed relationship of credits, partially offset by increases in reserves for qualitative factors and quantitative reserves under the cohort model from loan growth. On a comparative basis, the provision for credit losses of $3.5 million during the three months ended September 30, 2022, was largely the result of loan growth. For the current quarter, the qualitative components of the ACL resulted in a net increase in required reserves totaling approximately $2.5 million due primarily to softening of the California employment data. Meanwhile, the quantitative component of the ACL decreased reserve requirements by approximately $1.5 million over the trailing quarter primarily due to decreases in specific reserves, offset partially by increases attributed to loan growth.

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, particularly CA unemployment trends. 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 food prices. Management notes the rapid intervals of rate increases by the Federal Reserve and flattening or inversion of the yield curve, have informed expectations of the US entering a recession within 12 months. As a result, management continues to believe that certain credit weaknesses 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 $1.4 million during the quarter ended September 30, 2023, to $8.1 million, as compared to $9.5 million at June 30, 2023. Non-performing loans were $29.8 million at September 30, 2023, a decrease of $7.8 million from $37.6 million as of June 30, 2023, and an increase of $12.3 million from $17.5 million as of September 30, 2022. Of the $29.8 million loans designated as non-performing as of September 30, 2023, approximately $26.6 million are current with respect to payments required under their original loan agreements.

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

 

September 30,

% of Loans
Outstanding

 

June 30,

% of Loans
Outstanding

 

September 30,

% of Loans
Outstanding

(dollars in thousands)

 

2023

 

 

 

2023

 

 

 

2022

 

Risk Rating:

 

 

 

 

 

 

 

 

Pass

$

6,532,424

 

97.4

%

 

$

6,299,893

 

96.6

%

 

$

6,133,805

 

97.1

%

Special Mention

 

94,614

 

1.4

%

 

 

155,678

 

2.4

%

 

 

126,273

 

2.0

%

Substandard

 

81,628

 

1.2

%

 

 

65,169

 

1.0

%

 

 

54,212

 

0.9

%

Total

$

6,708,666

 

 

 

$

6,520,740

 

 

 

$

6,314,290

 

 

 

 

 

 

 

 

 

 

 

Classified loans to total loans

 

1.22

%

 

 

 

1.00

%

 

 

 

0.86

%

 

Loans past due 30+ days to total loans

 

0.12

%

 

 

 

0.15

%

 

 

 

0.10

%

 

The ratio of classified loans of 1.22% as of September 30, 2023 increased 22 basis points from June 30, 2023 and increased 36 basis points from the comparative quarter ended 2022. The newly classified credits are spread amongst several CRE and agriculture relationships. As a percentage of total loans outstanding, classified assets are consistent with volumes experienced prior to the recent quantitative easing cycle spurred by the COVID pandemic, and reflects management's historically conservative approach to credit risk monitoring. The Company's combined criticized loan balances improved during the quarter by $44.6 million to $176.2 million as of September 30, 2023. This improvement was driven by upgrades in several CRE borrower relationships, as well as the disposition of a credit relationship referenced above.

There was one property added and one disposed within Other Real Estate Owned during the third quarter of 2023. As of September 30, 2023, other real estate owned consisted of nine properties with a carrying value of approximately $2.9 million.

Non-performing assets of $32.7 million at September 30, 2023, represented 0.33% of total assets, a change from the $40.5 million or 0.41% and $20.9 million or 0.21% as of June 30, 2023 and September 30, 2022, respectively.

Allocation of Credit Loss Reserves by Loan Type

 

As of September 30, 2023

 

As of June 30, 2023

 

As of September 30, 2022

(dollars in thousands)

Amount

 

% of Loans
Outstanding

 

Amount

 

% of Loans
Outstanding

 

Amount

 

% of Loans
Outstanding

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

CRE - Non Owner Occupied

$

33,723

 

1.55

%

 

$

33,042

 

1.54

%

 

$

29,244

 

1.42

%

CRE - Owner Occupied

 

14,503

 

1.51

%

 

 

20,208

 

2.08

%

 

 

13,525

 

1.39

%

Multifamily

 

14,239

 

1.48

%

 

 

14,075

 

1.48

%

 

 

12,749

 

1.36

%

Farmland

 

4,210

 

1.51

%

 

 

3,691

 

1.33

%

 

 

3,122

 

1.12

%

Total commercial real estate loans

 

66,675

 

1.53

%

 

 

71,016

 

1.63

%

 

 

58,640

 

1.38

%

Consumer:

 

 

 

 

 

 

 

 

 

 

 

SFR 1-4 1st Liens

 

13,535

 

1.56

%

 

 

13,134

 

1.58

%

 

 

10,671

 

1.39

%

SFR HELOCs and Junior Liens

 

10,163

 

2.88

%

 

 

10,608

 

2.92

%

 

 

11,383

 

2.89

%

Other

 

2,920

 

4.44

%

 

 

2,771

 

4.67

%

 

 

1,878

 

3.23

%

Total consumer loans

 

26,618

 

2.07

%

 

 

26,513

 

2.12

%

 

 

23,932

 

1.97

%

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

12,290

 

2.05

%

 

 

11,647

 

2.02

%

 

 

10,400

 

1.94

%

Construction

 

8,097

 

2.52

%

 

 

7,031

 

2.53

%

 

 

6,132

 

2.52

%

Agricultural Production

 

2,125

 

1.72

%

 

 

1,105

 

1.80

%

 

 

2,368

 

3.31

%

Leases

 

7

 

0.09

%

 

 

17

 

0.20

%

 

 

16

 

0.20

%

Allowance for credit losses

 

115,812

 

1.73

%

 

 

117,329

 

1.80

%

 

 

101,488

 

1.61

%

Reserve for unfunded loan commitments

 

5,900

 

 

 

 

4,865

 

 

 

 

4,370

 

 

Total allowance for credit losses

$

121,712

 

1.81

%

 

$

122,194

 

1.87

%

 

$

105,858

 

1.68

%

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 September 30, 2023, the unamortized discount associated with acquired loans totaled $26.1 million.

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)

September 30, 2023

 

June 30, 2023

 

Change

 

% Change

ATM and interchange fees

$

6,728

 

 

$

6,856

 

 

$

(128

)

 

(1.9

)%

Service charges on deposit accounts

 

4,851

 

 

 

4,581

 

 

 

270

 

 

5.9

%

Other service fees

 

1,142

 

 

 

992

 

 

 

150

 

 

15.1

%

Mortgage banking service fees

 

445

 

 

 

454

 

 

 

(9

)

 

(2.0

)%

Change in value of mortgage servicing rights

 

(91

)

 

 

85

 

 

 

(176

)

 

(207.1

)%

Total service charges and fees

 

13,075

 

 

 

12,968

 

 

 

107

 

 

0.8

%

Increase in cash value of life insurance

 

684

 

 

 

788

 

 

 

(104

)

 

(13.2

)%

Asset management and commission income

 

1,141

 

 

 

1,158

 

 

 

(17

)

 

(1.5

)%

Gain on sale of loans

 

382

 

 

 

295

 

 

 

87

 

 

29.5

%

Lease brokerage income

 

160

 

 

 

74

 

 

 

86

 

 

116.2

%

Sale of customer checks

 

396

 

 

 

407

 

 

 

(11

)

 

(2.7

)%

Loss on sale of investment securities

 

—

 

 

 

—

 

 

 

—

 

 

—

%

(Loss) gain on marketable equity securities

 

(81

)

 

 

(42

)

 

 

(39

)

 

92.9

%

Other income

 

227

 

 

 

93

 

 

 

134

 

 

144.1

%

Total other non-interest income

 

2,909

 

 

 

2,773

 

 

 

136

 

 

4.9

%

Total non-interest income

$

15,984

 

 

$

15,741

 

 

$

243

 

 

1.5

%

Non-interest income increased $0.2 million or 1.5% to $16.0 million during the three months ended September 30, 2023, compared to $15.7 million during the quarter ended June 30, 2023. Service charges on deposit accounts increased by $0.3 million or 5.9% resulting from improved profitability on commercial deposit account activity.

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

 

Three months ended September 30,

 

 

 

 

(dollars in thousands)

 

2023

 

 

 

2022

 

 

Change

 

% Change

ATM and interchange fees

$

6,728

 

 

$

6,714

 

 

$

14

 

 

0.2

%

Service charges on deposit accounts

 

4,851

 

 

 

4,436

 

 

 

415

 

 

9.4

%

Other service fees

 

1,142

 

 

 

1,022

 

 

 

120

 

 

11.7

%

Mortgage banking service fees

 

445

 

 

 

477

 

 

 

(32

)

 

(6.7

)%

Change in value of mortgage servicing rights

 

(91

)

 

 

33

 

 

 

(124

)

 

(375.8

)%

Total service charges and fees

 

13,075

 

 

 

12,682

 

 

 

393

 

 

3.1

%

Increase in cash value of life insurance

 

684

 

 

 

659

 

 

 

25

 

 

3.8

%

Asset management and commission income

 

1,141

 

 

 

1,020

 

 

 

121

 

 

11.9

%

Gain on sale of loans

 

382

 

 

 

357

 

 

 

25

 

 

7.0

%

Lease brokerage income

 

160

 

 

 

252

 

 

 

(92

)

 

(36.5

)%

Sale of customer checks

 

396

 

 

 

326

 

 

 

70

 

 

21.5

%

Loss on sale of investment securities

 

—

 

 

 

—

 

 

 

—

 

 

—

%

Loss on marketable equity securities

 

(81

)

 

 

(115

)

 

 

34

 

 

(29.6

)%

Other income

 

227

 

 

 

459

 

 

 

(232

)

 

(50.5

)%

Total other non-interest income

 

2,909

 

 

 

2,958

 

 

 

(49

)

 

(1.7

)%

Total non-interest income

$

15,984

 

 

$

15,640

 

 

$

344

 

 

2.2

%

Non-interest income decreased $0.3 million or 2.2% to $16.0 million during the three months ended September 30, 2023, compared to $15.6 million during the quarter ended September 30, 2022. Service charges on deposit accounts increased by $0.4 million or 9.4% for the same reasons noted above.

 

Nine months ended September 30,

 

 

 

 

(dollars in thousands)

 

2023

 

 

 

2022

 

 

Change

 

% Change

ATM and interchange fees

$

19,928

 

 

$

19,941

 

 

$

(13

)

 

(0.1

)%

Service charges on deposit accounts

 

12,863

 

 

 

12,433

 

 

 

430

 

 

3.5

%

Other service fees

 

3,300

 

 

 

3,183

 

 

 

117

 

 

3.7

%

Mortgage banking service fees

 

1,364

 

 

 

1,422

 

 

 

(58

)

 

(4.1

)%

Change in value of mortgage servicing rights

 

(215

)

 

 

443

 

 

 

(658

)

 

(148.5

)%

Total service charges and fees

 

37,240

 

 

 

37,422

 

 

 

(182

)

 

(0.5

)%

Increase in cash value of life insurance

 

2,274

 

 

 

2,049

 

 

 

225

 

 

11.0

%

Asset management and commission income

 

3,233

 

 

 

2,946

 

 

 

287

 

 

9.7

%

Gain on sale of loans

 

883

 

 

 

2,145

 

 

 

(1,262

)

 

(58.8

)%

Lease brokerage income

 

332

 

 

 

648

 

 

 

(316

)

 

(48.8

)%

Sale of customer checks

 

1,091

 

 

 

871

 

 

 

220

 

 

25.3

%

Loss on sale of investment securities

 

(164

)

 

 

—

 

 

 

(164

)

 

n/m

 

Loss on marketable equity securities

 

(81

)

 

 

(346

)

 

 

265

 

 

(76.6

)%

Other income

 

552

 

 

 

1,431

 

 

 

(879

)

 

(61.4

)%

Total other non-interest income

 

8,120

 

 

 

9,744

 

 

 

(1,624

)

 

(16.7

)%

Total non-interest income

$

45,360

 

 

$

47,166

 

 

$

(1,806

)

 

(3.8

)%

Non-interest income decreased $1.8 million or 3.8% to $45.4 million during the nine months ended September 30, 2023, as compared to $47.2 million during the nine months ended September 30, 2022. Mortgage origination related activity has declined year over year from elevated interest rates, as the income recorded from the sale of loans is down $1.3 million or 58.8%. Changes in interest rates also led to a decline in fair value of mortgage servicing rights during the nine months ended September 30, 2023 , which decreased by $0.7 million or 148.5%, as compared to the trailing nine month period ended. Other income declined $0.9 million or 61.4%, $0.3 million of which is attributed to fair value changes associated with retirement plans, with a corresponding offset being included within benefits and other compensation costs.

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)

September 30, 2023

 

June 30, 2023

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

23,616

 

 

$

24,059

 

$

(443

)

 

(1.8

)%

Incentive compensation

 

4,391

 

 

 

4,377

 

 

14

 

 

0.3

%

Benefits and other compensation costs

 

6,456

 

 

 

6,278

 

 

178

 

 

2.8

%

Total salaries and benefits expense

 

34,463

 

 

 

34,714

 

 

(251

)

 

(0.7

)%

Occupancy

 

3,948

 

 

 

3,991

 

 

(43

)

 

(1.1

)%

Data processing and software

 

5,246

 

 

 

4,638

 

 

608

 

 

13.1

%

Equipment

 

1,503

 

 

 

1,436

 

 

67

 

 

4.7

%

Intangible amortization

 

1,590

 

 

 

1,656

 

 

(66

)

 

(4.0

)%

Advertising

 

881

 

 

 

1,016

 

 

(135

)

 

(13.3

)%

ATM and POS network charges

 

1,606

 

 

 

1,902

 

 

(296

)

 

(15.6

)%

Professional fees

 

1,752

 

 

 

1,985

 

 

(233

)

 

(11.7

)%

Telecommunications

 

567

 

 

 

809

 

 

(242

)

 

(29.9

)%

Regulatory assessments and insurance

 

1,194

 

 

 

1,993

 

 

(799

)

 

(40.1

)%

Postage

 

306

 

 

 

311

 

 

(5

)

 

(1.6

)%

Operational loss

 

474

 

 

 

1,090

 

 

(616

)

 

(56.5

)%

Courier service

 

492

 

 

 

483

 

 

9

 

 

1.9

%

Gain on sale or acquisition of foreclosed assets

 

(152

)

 

 

—

 

 

(152

)

 

n/m

 

Loss on disposal of fixed assets

 

4

 

 

 

18

 

 

(14

)

 

(77.8

)%

Other miscellaneous expense

 

4,004

 

 

 

5,201

 

 

(1,197

)

 

(23.0

)%

Total other non-interest expense

 

23,415

 

 

 

26,529

 

 

(3,114

)

 

(11.7

)%

Total non-interest expense

$

57,878

 

 

$

61,243

 

$

(3,365

)

 

(5.5

)%

Average full-time equivalent staff

 

1,215

 

 

 

1,210

 

 

5

 

 

0.4

%

Non-interest expense for the quarter ended September 30, 2023, decreased $3.4 million or 5.5% to $57.9 million as compared to $61.2 million during the trailing quarter ended June 30, 2023. Data processing and software expenses increased by $0.6 million or 13.1% related to ongoing investments in the Company's data management and security infrastructure. Regulatory assessments decreased by $0.8 million or 40.1% to a normalized quarterly assessment following additional charges incurred in the prior quarter. Management anticipates that these costs may increase further if the economic environment in which the Company operates deteriorates further. Operational losses also decreased by $0.6 million or 56.5% during the quarter, in-line with historical periods. Other miscellaneous expenses decreased by $1.2 million or 23.0%, following non-recurring costs in the prior quarter associated with an estimated $0.8 million in refunds to customers previously charged non-sufficient funds fees as well as an absence in the current period of provision expense on real estate owned of $0.5 million in the trailing quarter.

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

 

Three months ended September 30,

 

 

 

 

(dollars in thousands)

 

2023

 

 

 

2022

 

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

23,616

 

 

$

22,377

 

 

$

1,239

 

 

5.5

%

Incentive compensation

 

4,391

 

 

 

4,832

 

 

 

(441

)

 

(9.1

)%

Benefits and other compensation costs

 

6,456

 

 

 

6,319

 

 

 

137

 

 

2.2

%

Total salaries and benefits expense

 

34,463

 

 

 

33,528

 

 

 

935

 

 

2.8

%

Occupancy

 

3,948

 

 

 

3,965

 

 

 

(17

)

 

(0.4

)%

Data processing and software

 

5,246

 

 

 

3,449

 

 

 

1,797

 

 

52.1

%

Equipment

 

1,503

 

 

 

1,422

 

 

 

81

 

 

5.7

%

Intangible amortization

 

1,590

 

 

 

1,702

 

 

 

(112

)

 

(6.6

)%

Advertising

 

881

 

 

 

990

 

 

 

(109

)

 

(11.0

)%

ATM and POS network charges

 

1,606

 

 

 

1,694

 

 

 

(88

)

 

(5.2

)%

Professional fees

 

1,752

 

 

 

1,172

 

 

 

580

 

 

49.5

%

Telecommunications

 

567

 

 

 

575

 

 

 

(8

)

 

(1.4

)%

Regulatory assessments and insurance

 

1,194

 

 

 

828

 

 

 

366

 

 

44.2

%

Postage

 

306

 

 

 

287

 

 

 

19

 

 

6.6

%

Operational loss

 

474

 

 

 

492

 

 

 

(18

)

 

(3.7

)%

Courier service

 

492

 

 

 

497

 

 

 

(5

)

 

(1.0

)%

Gain on sale or acquisition of foreclosed assets

 

(152

)

 

 

(148

)

 

 

(4

)

 

2.7

%

Loss on disposal of fixed assets

 

4

 

 

 

4

 

 

 

—

 

 

—

%

Other miscellaneous expense

 

4,004

 

 

 

4,008

 

 

 

(4

)

 

(0.1

)%

Total other non-interest expense

 

23,415

 

 

 

20,937

 

 

 

2,478

 

 

11.8

%

Total non-interest expense

$

57,878

 

 

$

54,465

 

 

$

3,413

 

 

6.3

%

Average full-time equivalent staff

 

1,215

 

 

 

1,198

 

 

 

17

 

 

1.4

%

Non-interest expense increased $3.4 million or 6.3% to $57.9 million during the three months ended September 30, 2023, as compared to $54.5 million for the quarter ended September 30, 2022. Total salaries and benefits expense increased by $0.9 million or 2.8% to $34.5 million, largely from a net increase of 17 full-time equivalent positions as well as annual merit increases effective in March, 2023. Data processing and software expenses increased by $1.8 million or 52.1% consist with the discussion above. The increase in professional fees of $0.6 million was directly associated with third party contract negotiation assistance, the benefits of which will be realized in future periods.

 

Nine months ended September 30,

 

 

 

 

(dollars in thousands)

 

2023

 

 

 

2022

 

 

Change

 

% Change

Base salaries, net of deferred loan origination costs

$

70,675

 

 

$

62,762

 

 

$

7,913

 

 

12.6

%

Incentive compensation

 

11,663

 

 

 

11,697

 

 

 

(34

)

 

(0.3

)%

Benefits and other compensation costs

 

19,402

 

 

 

18,782

 

 

 

620

 

 

3.3

%

Total salaries and benefits expense

 

101,740

 

 

 

93,241

 

 

 

8,499

 

 

9.1

%

Occupancy

 

12,099

 

 

 

11,536

 

 

 

563

 

 

4.9

%

Data processing and software

 

13,916

 

 

 

10,558

 

 

 

3,358

 

 

31.8

%

Equipment

 

4,322

 

 

 

4,208

 

 

 

114

 

 

2.7

%

Intangible amortization

 

4,902

 

 

 

4,632

 

 

 

270

 

 

5.8

%

Advertising

 

2,656

 

 

 

2,445

 

 

 

211

 

 

8.6

%

ATM and POS network charges

 

5,217

 

 

 

4,850

 

 

 

367

 

 

7.6

%

Professional fees

 

5,326

 

 

 

3,281

 

 

 

2,045

 

 

62.3

%

Telecommunications

 

1,971

 

 

 

1,660

 

 

 

311

 

 

18.7

%

Regulatory assessments and insurance

 

3,979

 

 

 

2,327

 

 

 

1,652

 

 

71.0

%

Merger and acquisition expenses

 

—

 

 

 

6,253

 

 

 

(6,253

)

 

(100.0

)%

Postage

 

916

 

 

 

828

 

 

 

88

 

 

10.6

%

Operational loss

 

1,999

 

 

 

765

 

 

 

1,234

 

 

161.3

%

Courier service

 

1,314

 

 

 

1,397

 

 

 

(83

)

 

(5.9

)%

Gain on sale or acquisition of foreclosed assets

 

(152

)

 

 

(246

)

 

 

94

 

 

(38.2

)%

Loss (gain) on disposal of fixed assets

 

22

 

 

 

(1,069

)

 

 

1,091

 

 

(102.1

)%

Other miscellaneous expense

 

12,688

 

 

 

10,510

 

 

 

2,178

 

 

20.7

%

Total other non-interest expense

 

71,175

 

 

 

63,935

 

 

 

7,240

 

 

11.3

%

Total non-interest expense

$

172,915

 

 

$

157,176

 

 

$

15,739

 

 

10.0

%

Average full-time equivalent staff

 

1,215

 

 

 

1,155

 

 

 

60

 

 

5.2

%

Total non-interest expense increased $15.7 million or 10.0% to $172.9 million during the nine months ended September 30, 2023, as compared to $157.2 million for the comparative period in 2022, for reasons primarily associated with the acquisition of Valley Republic Bank in March of 2022 which resulted in expense increases for nearly every identified category. Merger and acquisition expenses associated with this acquisition totaled $6.2 million for the nine-month period ended 2022. The reasons for additional and more specific changes in various costs identified above, and including but not limited to data processing, regulatory assessments, operational losses and other miscellaneous expenses are consistent with the discussions provided above for the most recent three months ended September 30, 2023 as compared with the trailing quarter ended June 30, 2023.

Provision for Income Taxes

The Company’s effective tax rate was 27.3% for the quarter ended September 30, 2023, as compared to 25.6% for the period ended June 30, 2023, and 28.1% for the year ended December 31, 2022. 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 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; 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; technological changes; 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 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, 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 recent 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 costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and our ability to manage the risks involved in the foregoing. 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, 2022, 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 share data)

 

 

Three months ended

 

September 30,
2023

 

June 30,
2023

 

March 31,
2023

 

December 31,
2022

 

September 30,
2022

Revenue and Expense Data

 

 

 

 

 

 

 

 

 

Interest income

$

112,380

 

 

$

107,158

 

 

$

102,907

 

 

$

102,989

 

 

$

96,366

 

Interest expense

 

24,257

 

 

 

18,557

 

 

 

9,571

 

 

 

4,089

 

 

 

2,260

 

Net interest income

 

88,123

 

 

 

88,601

 

 

 

93,336

 

 

 

98,900

 

 

 

94,106

 

Provision for credit losses

 

4,155

 

 

 

9,650

 

 

 

4,195

 

 

 

4,245

 

 

 

3,795

 

Noninterest income:

 

 

 

 

 

 

 

 

 

Service charges and fees

 

13,075

 

 

 

12,968

 

 

 

11,197

 

 

 

12,343

 

 

 

12,682

 

Loss on sale of investment securities

 

—

 

 

 

—

 

 

 

(164

)

 

 

—

 

 

 

—

 

Other income

 

2,909

 

 

 

2,773

 

 

 

2,602

 

 

 

3,537

 

 

 

2,958

 

Total noninterest income

 

15,984

 

 

 

15,741

 

 

 

13,635

 

 

 

15,880

 

 

 

15,640

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

34,463

 

 

 

34,714

 

 

 

32,563

 

 

 

36,611

 

 

 

33,528

 

Occupancy and equipment

 

5,451

 

 

 

5,427

 

 

 

5,543

 

 

 

5,482

 

 

 

5,387

 

Data processing and network

 

6,852

 

 

 

6,540

 

 

 

5,741

 

 

 

6,236

 

 

 

5,143

 

Other noninterest expense

 

11,112

 

 

 

14,562

 

 

 

9,947

 

 

 

11,140

 

 

 

10,407

 

Total noninterest expense

 

57,878

 

 

 

61,243

 

 

 

53,794

 

 

 

59,469

 

 

 

54,465

 

Total income before taxes

 

42,074

 

 

 

33,449

 

 

 

48,982

 

 

 

51,066

 

 

 

51,486

 

Provision for income taxes

 

11,484

 

 

 

8,557

 

 

 

13,149

 

 

 

14,723

 

 

 

14,148

 

Net income

$

30,590

 

 

$

24,892

 

 

$

35,833

 

 

$

36,343

 

 

$

37,338

 

Share Data

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.92

 

 

$

0.75

 

 

$

1.08

 

 

$

1.09

 

 

$

1.12

 

Diluted earnings per share

$

0.92

 

 

$

0.75

 

 

$

1.07

 

 

$

1.09

 

 

$

1.12

 

Dividends per share

$

0.30

 

 

$

0.30

 

 

$

0.30

 

 

$

0.30

 

 

$

0.30

 

Book value per common share

$

32.18

 

 

$

32.86

 

 

$

32.84

 

 

$

31.39

 

 

$

29.71

 

Tangible book value per common share (1)

$

22.67

 

 

$

23.30

 

 

$

23.22

 

 

$

21.76

 

 

$

19.92

 

Shares outstanding

 

33,263,324

 

 

 

33,259,260

 

 

 

33,195,250

 

 

 

33,331,513

 

 

 

33,332,189

 

Weighted average shares

 

33,262,798

 

 

 

33,219,168

 

 

 

33,295,750

 

 

 

33,330,029

 

 

 

33,348,322

 

Weighted average diluted shares

 

33,319,291

 

 

 

33,301,548

 

 

 

33,437,680

 

 

 

33,467,393

 

 

 

33,463,364

 

Credit Quality

 

 

 

 

 

 

 

 

 

Allowance for credit losses to gross loans

 

1.73

%

 

 

1.80

%

 

 

1.69

%

 

 

1.64

%

 

 

1.61

%

Loans past due 30 days or more

$

8,072

 

 

$

9,483

 

 

$

7,891

 

 

$

4,947

 

 

$

6,471

 

Total nonperforming loans

$

29,799

 

 

$

37,592

 

 

$

16,025

 

 

$

21,321

 

 

$

17,471

 

Total nonperforming assets

$

32,651

 

 

$

40,506

 

 

$

19,464

 

 

$

24,760

 

 

$

20,912

 

Loans charged-off

$

5,357

 

 

$

276

 

 

$

1,758

 

 

$

174

 

 

$

267

 

Loans recovered

$

720

 

 

$

218

 

 

$

170

 

 

$

66

 

 

$

311

 

Selected Financial Ratios

 

 

 

 

 

 

 

 

 

Return on average total assets

 

1.23

%

 

 

1.01

%

 

 

1.47

%

 

 

1.45

%

 

 

1.46

%

Return on average equity

 

10.91

%

 

 

8.98

%

 

 

13.36

%

 

 

14.19

%

 

 

13.78

%

Average yield on loans, excluding PPP

 

5.52

%

 

 

5.38

%

 

 

5.21

%

 

 

5.10

%

 

 

4.87

%

Average yield on interest-earning assets

 

4.94

%

 

 

4.78

%

 

 

4.64

%

 

 

4.52

%

 

 

4.12

%

Average rate on interest-bearing deposits

 

1.36

%

 

 

0.95

%

 

 

0.43

%

 

 

0.18

%

 

 

0.08

%

Average cost of total deposits

 

0.86

%

 

 

0.58

%

 

 

0.25

%

 

 

0.10

%

 

 

0.04

%

Average cost of total deposits and other borrowings

 

1.05

%

 

 

0.80

%

 

 

0.38

%

 

 

0.12

%

 

 

0.04

%

Average rate on borrowings & subordinated debt

 

4.96

%

 

 

4.92

%

 

 

4.74

%

 

 

4.07

%

 

 

3.60

%

Average rate on interest-bearing liabilities

 

1.71

%

 

 

1.37

%

 

 

0.74

%

 

 

0.32

%

 

 

0.17

%

Net interest margin (fully tax-equivalent) (1)

 

3.88

%

 

 

3.96

%

 

 

4.21

%

 

 

4.34

%

 

 

4.02

%

Loans to deposits

 

83.76

%

 

 

80.55

%

 

 

80.02

%

 

 

77.45

%

 

 

72.95

%

Efficiency ratio

 

55.59

%

 

 

58.69

%

 

 

50.29

%

 

 

51.81

%

 

 

49.63

%

Supplemental Loan Interest Income Data

 

 

 

 

 

 

 

 

 

Discount accretion on acquired loans

$

1,324

 

 

$

1,471

 

 

$

1,397

 

 

$

1,751

 

 

$

714

 

All other loan interest income (excluding PPP) (1)

$

90,381

 

 

$

85,272

 

 

$

81,013

 

 

$

79,989

 

 

$

74,929

 

Total loan interest income (excluding PPP) (1)

$

91,705

 

 

$

86,743

 

 

$

82,410

 

 

$

81,740

 

 

$

75,643

 

(1) Non-GAAP measure

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands)

 

 

Balance Sheet Data

September 30,
2023

 

June 30,
2023

 

March 31,
2023

 

December 31,
2022

 

September 30,
2022

Cash and due from banks

$

111,099

 

 

$

118,792

 

 

$

110,335

 

 

$

107,230

 

 

$

246,509

 

Securities, available for sale, net

 

2,176,854

 

 

 

2,323,011

 

 

 

2,408,452

 

 

 

2,455,036

 

 

 

2,482,857

 

Securities, held to maturity, net

 

139,058

 

 

 

145,117

 

 

 

152,067

 

 

 

160,983

 

 

 

168,038

 

Restricted equity securities

 

17,250

 

 

 

17,250

 

 

 

17,250

 

 

 

17,250

 

 

 

17,250

 

Loans held for sale

 

644

 

 

 

1,058

 

 

 

226

 

 

 

1,846

 

 

 

247

 

Loans:

 

 

 

 

 

 

 

 

 

Commercial real estate

 

4,367,445

 

 

 

4,343,924

 

 

 

4,353,959

 

 

 

4,359,083

 

 

 

4,238,930

 

Consumer

 

1,288,810

 

 

 

1,252,225

 

 

 

1,233,797

 

 

 

1,240,743

 

 

 

1,217,297

 

Commercial and industrial

 

599,757

 

 

 

576,247

 

 

 

553,098

 

 

 

569,921

 

 

 

534,960

 

Construction

 

320,963

 

 

 

278,425

 

 

 

225,996

 

 

 

211,560

 

 

 

243,571

 

Agriculture production

 

123,472

 

 

 

61,337

 

 

 

47,062

 

 

 

61,414

 

 

 

71,599

 

Leases

 

8,219

 

 

 

8,582

 

 

 

8,509

 

 

 

7,726

 

 

 

7,933

 

Total loans, gross

 

6,708,666

 

 

 

6,520,740

 

 

 

6,422,421

 

 

 

6,450,447

 

 

 

6,314,290

 

Allowance for credit losses

 

(115,812

)

 

 

(117,329

)

 

 

(108,407

)

 

 

(105,680

)

 

 

(101,488

)

Total loans, net

 

6,592,854

 

 

 

6,403,411

 

 

 

6,314,014

 

 

 

6,344,767

 

 

 

6,212,802

 

Premises and equipment

 

71,760

 

 

 

72,619

 

 

 

72,096

 

 

 

72,327

 

 

 

73,266

 

Cash value of life insurance

 

136,016

 

 

 

135,332

 

 

 

134,544

 

 

 

133,742

 

 

 

132,933

 

Accrued interest receivable

 

34,595

 

 

 

32,835

 

 

 

31,388

 

 

 

31,856

 

 

 

27,070

 

Goodwill

 

304,442

 

 

 

304,442

 

 

 

304,442

 

 

 

304,442

 

 

 

307,942

 

Other intangible assets

 

11,768

 

 

 

13,358

 

 

 

15,014

 

 

 

16,670

 

 

 

18,372

 

Operating leases, right-of-use

 

27,363

 

 

 

29,140

 

 

 

30,000

 

 

 

26,862

 

 

 

26,622

 

Other assets

 

273,303

 

 

 

257,056

 

 

 

252,566

 

 

 

257,975

 

 

 

262,971

 

Total assets

$

9,897,006

 

 

$

9,853,421

 

 

$

9,842,394

 

 

$

9,930,986

 

 

$

9,976,879

 

Deposits:

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

$

2,857,512

 

 

$

3,073,353

 

 

$

3,236,696

 

 

$

3,502,095

 

 

$

3,678,202

 

Interest-bearing demand deposits

 

1,746,882

 

 

 

1,751,998

 

 

 

1,635,706

 

 

 

1,718,541

 

 

 

1,749,123

 

Savings deposits

 

2,816,816

 

 

 

2,778,118

 

 

 

2,807,796

 

 

 

2,884,378

 

 

 

2,924,674

 

Time certificates

 

588,433

 

 

 

491,896

 

 

 

345,667

 

 

 

223,999

 

 

 

303,770

 

Total deposits

 

8,009,643

 

 

 

8,095,365

 

 

 

8,025,865

 

 

 

8,329,013

 

 

 

8,655,769

 

Accrued interest payable

 

6,688

 

 

 

3,655

 

 

 

1,643

 

 

 

1,167

 

 

 

853

 

Operating lease liability

 

29,527

 

 

 

31,377

 

 

 

32,228

 

 

 

29,004

 

 

 

28,717

 

Other liabilities

 

141,692

 

 

 

136,464

 

 

 

157,222

 

 

 

159,741

 

 

 

153,110

 

Other borrowings

 

537,975

 

 

 

392,714

 

 

 

434,140

 

 

 

264,605

 

 

 

47,068

 

Junior subordinated debt

 

101,080

 

 

 

101,065

 

 

 

101,051

 

 

 

101,040

 

 

 

101,024

 

Total liabilities

 

8,826,605

 

 

 

8,760,640

 

 

 

8,752,149

 

 

 

8,884,570

 

 

 

8,986,541

 

Common stock

 

696,369

 

 

 

695,305

 

 

 

695,168

 

 

 

697,448

 

 

 

696,348

 

Retained earnings

 

599,448

 

 

 

578,852

 

 

 

564,538

 

 

 

542,873

 

 

 

516,699

 

Accum. other comprehensive loss, net of tax

 

(225,416

)

 

 

(181,376

)

 

 

(169,461

)

 

 

(193,905

)

 

 

(222,709

)

Total shareholders’ equity

$

1,070,401

 

 

$

1,092,781

 

 

$

1,090,245

 

 

$

1,046,416

 

 

$

990,338

 

Quarterly Average Balance Data

 

 

 

 

 

 

 

 

 

Average loans, excluding PPP

$

6,596,116

 

 

$

6,465,903

 

 

$

6,412,386

 

 

$

6,357,250

 

 

$

6,162,267

 

Average interest-earning assets

$

9,053,389

 

 

$

9,022,064

 

 

$

9,028,061

 

 

$

9,076,450

 

 

$

9,320,152

 

Average total assets

$

9,874,240

 

 

$

9,848,191

 

 

$

9,878,927

 

 

$

9,932,931

 

 

$

10,131,118

 

Average deposits

$

8,043,101

 

 

$

7,981,515

 

 

$

8,218,576

 

 

$

8,545,172

 

 

$

8,752,215

 

Average borrowings and subordinated debt

$

550,344

 

 

$

578,312

 

 

$

378,676

 

 

$

186,957

 

 

$

139,919

 

Average total equity

$

1,112,404

 

 

$

1,112,223

 

 

$

1,087,473

 

 

$

1,016,468

 

 

$

1,074,776

 

Capital Ratio Data

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

14.5

%

 

 

14.5

%

 

 

14.5

%

 

 

14.2

%

 

 

14.0

%

Tier 1 capital ratio

 

12.7

%

 

 

12.7

%

 

 

12.7

%

 

 

12.4

%

 

 

12.2

%

Tier 1 common equity ratio

 

12.0

%

 

 

12.0

%

 

 

12.0

%

 

 

11.7

%

 

 

11.4

%

Tier 1 leverage ratio

 

10.6

%

 

 

10.4

%

 

 

10.2

%

 

 

10.1

%

 

 

9.6

%

Tangible capital ratio (1)

 

7.9

%

 

 

8.1

%

 

 

8.1

%

 

 

7.6

%

 

 

6.9

%

(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

 

Nine months ended

(dollars in thousands)

September 30,
2023

 

June 30,
2023

 

September 30,
2022

 

September 30,
2023

 

September 30,
2022

Net interest margin

 

 

 

 

 

 

 

 

 

Acquired loans discount accretion, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,324

 

 

$

1,471

 

 

$

714

 

 

$

4,192

 

 

$

3,714

 

Effect on average loan yield

 

0.08

%

 

 

0.09

%

 

 

0.05

%

 

 

0.09

%

 

 

0.09

%

Effect on net interest margin (FTE)

 

0.06

%

 

 

0.07

%

 

 

0.03

%

 

 

0.06

%

 

 

0.06

%

Net interest margin (FTE)

 

3.88

%

 

 

3.96

%

 

 

4.02

%

 

 

4.01

%

 

 

3.71

%

Net interest margin less effect of acquired loan discount
accretion (Non-GAAP)

 

3.82

%

 

 

3.89

%

 

 

3.99

%

 

 

3.95

%

 

 

3.65

%

PPP loans yield, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$

2

 

 

$

4

 

 

$

313

 

 

$

11

 

 

$

2,374

 

Effect on net interest margin (FTE)

 

—

%

 

 

—

%

 

 

0.01

%

 

 

—

%

 

 

0.02

%

Net interest margin less effect of PPP loan yield (Non-GAAP)

 

3.88

%

 

 

3.96

%

 

 

4.02

%

 

 

4.01

%

 

 

3.69

%

Acquired loan discount accretion and PPP loan yield, net:

 

 

 

 

 

 

 

 

 

Amount (included in interest income)

$

1,326

 

 

$

1,475

 

 

$

1,027

 

 

$

4,203

 

 

$

6,088

 

Effect on net interest margin (FTE)

 

0.06

%

 

 

0.07

%

 

 

0.04

%

 

 

0.06

%

 

 

0.08

%

Net interest margin less effect of acquired loan discount
accretion and PPP yields, net (Non-GAAP)

 

3.82

%

 

 

3.89

%

 

 

3.98

%

 

 

3.95

%

 

 

3.63

%

 

Three months ended

 

Nine months ended

(dollars in thousands)

September 30,
2023

 

June 30,
2023

 

September 30,
2022

 

September 30,
2023

 

September 30,
2022

Pre-tax pre-provision return on average assets or equity

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$

30,590

 

 

$

24,892

 

 

$

37,338

 

 

$

91,315

 

 

$

89,076

 

Exclude provision for income taxes

 

11,484

 

 

 

8,557

 

 

 

14,148

 

 

 

33,190

 

 

 

33,765

 

Exclude provision for credit losses

 

4,155

 

 

 

9,650

 

 

 

3,795

 

 

 

18,000

 

 

 

14,225

 

Net income before income tax and provision expense
(Non-GAAP)

$

46,229

 

 

$

43,099

 

 

$

55,281

 

 

$

142,505

 

 

$

137,066

 

 

 

 

 

 

 

 

 

 

 

Average assets (GAAP)

$

9,874,240

 

 

$

9,848,191

 

 

$

10,131,118

 

 

$

9,867,099

 

 

$

9,682,198

 

Average equity (GAAP)

$

1,112,404

 

 

$

1,112,223

 

 

$

1,074,776

 

 

$

1,104,122

 

 

$

1,058,938

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (GAAP) (annualized)

 

1.23

%

 

 

1.01

%

 

 

1.46

%

 

 

1.24

%

 

 

1.23

%

Pre-tax pre-provision return on average assets (Non-GAAP)
(annualized)

 

1.86

%

 

 

1.76

%

 

 

2.16

%

 

 

1.93

%

 

 

1.89

%

Return on average equity (GAAP) (annualized)

 

10.91

%

 

 

8.98

%

 

 

13.78

%

 

 

11.06

%

 

 

11.25

%

Pre-tax pre-provision return on average equity (Non-GAAP)
(annualized)

 

16.49

%

 

 

15.54

%

 

 

20.41

%

 

 

17.26

%

 

 

17.31

%

 

Three months ended

 

Nine months ended

(dollars in thousands)

September 30,
2023

 

June 30,
2023

 

September 30,
2022

 

September 30,
2023

 

September 30,
2022

Return on tangible common equity

 

 

 

 

 

 

 

 

 

Average total shareholders' equity

$

1,112,404

 

 

$

1,112,223

 

 

$

1,074,776

 

 

$

1,104,122

 

 

$

1,058,938

 

Exclude average goodwill

 

304,442

 

 

 

304,442

 

 

 

307,942

 

 

 

304,442

 

 

 

281,151

 

Exclude average other intangibles

 

12,563

 

 

 

14,716

 

 

 

19,433

 

 

 

14,219

 

 

 

17,717

 

Average tangible common equity (Non-GAAP)

$

795,399

 

 

$

793,065

 

 

$

747,401

 

 

$

785,461

 

 

$

760,070

 

 

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$

30,590

 

 

$

24,892

 

 

$

37,338

 

 

$

91,315

 

 

$

89,076

 

Exclude amortization of intangible assets, net of tax
effect

 

1,120

 

 

 

1,166

 

 

 

1,199

 

 

 

3,453

 

 

 

3,263

 

Tangible net income available to common shareholders (Non-GAAP)

$

31,710

 

 

$

26,058

 

 

$

38,537

 

 

$

94,768

 

 

$

92,339

 

 

 

 

 

 

 

 

 

 

 

Return on average equity

 

10.91

%

 

 

8.98

%

 

 

13.78

%

 

 

11.06

%

 

 

11.25

%

Return on average tangible common equity (Non-GAAP)

 

15.82

%

 

 

13.18

%

 

 

20.46

%

 

 

16.13

%

 

 

16.24

%

 

Three months ended

(dollars in thousands)

September 30,
2023

 

June 30,
2023

 

March 31,
2023

 

December 31,
2022

 

September 30,
2022

Tangible shareholders' equity to tangible assets

 

 

 

 

 

 

 

 

 

Shareholders' equity (GAAP)

$

1,070,401

 

 

$

1,092,781

 

 

$

1,090,245

 

 

$

1,046,416

 

 

$

990,338

 

Exclude goodwill and other intangible assets, net

 

316,210

 

 

 

317,800

 

 

 

319,456

 

 

 

321,112

 

 

 

326,314

 

Tangible shareholders' equity (Non-GAAP)

$

754,191

 

 

$

774,981

 

 

$

770,789

 

 

$

725,304

 

 

$

664,024

 

 

 

 

 

 

 

 

 

 

 

Total assets (GAAP)

$

9,897,006

 

 

$

9,853,421

 

 

$

9,842,394

 

 

$

9,930,986

 

 

$

9,976,879

 

Exclude goodwill and other intangible assets, net

 

316,210

 

 

 

317,800

 

 

 

319,456

 

 

 

321,112

 

 

 

326,314

 

Total tangible assets (Non-GAAP)

$

9,580,796

 

 

$

9,535,621

 

 

$

9,522,938

 

 

$

9,609,874

 

 

$

9,650,565

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity to total assets (GAAP)

 

10.82

%

 

 

11.09

%

 

 

11.08

%

 

 

10.54

%

 

 

9.93

%

Tangible shareholders' equity to tangible assets (Non-
GAAP)

 

7.87

%

 

 

8.13

%

 

 

8.09

%

 

 

7.55

%

 

 

6.88

%

 

Three months ended

(dollars in thousands)

September 30,
2023

 

June 30,
2023

 

March 31,
2023

 

December 31,
2022

 

September 30,
2022

Tangible common shareholders' equity per share

 

 

 

 

 

 

 

 

 

Tangible shareholders' equity (Non-GAAP)

$

754,191

 

$

774,981

 

$

770,789

 

$

725,304

 

$

664,024

 

 

 

 

 

 

 

 

 

 

Common shares outstanding at end of period

 

33,263,324

 

 

33,259,260

 

 

33,195,250

 

 

33,331,513

 

 

33,332,189

 

 

 

 

 

 

 

 

 

 

Common shareholders' equity (book value) per share (GAAP)

$

32.18

 

$

32.86

 

$

32.84

 

$

31.39

 

$

29.71

Tangible common shareholders' equity (tangible book
value) per share (Non-GAAP)

$

22.67

 

$

23.30

 

$

23.22

 

$

21.76

 

$

19.92

 

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

Source: TriCo Bancshares

FAQ

What was the net income for Q3 2023?

The net income for Q3 2023 was $30.6 million.

How much did loan balances increase by in the previous quarter?

Loan balances increased by $187.9 million or 2.9% from the previous quarter.

What was the change in deposit balances from the previous quarter?

Deposit balances declined by $85.7 million or 1.1% from the previous quarter.

What was the diluted earnings per share for Q3 2023?

The diluted earnings per share for Q3 2023 were $0.92.

How much did the net income increase by from the previous quarter?

The net income increased by $5.7 million or 22.9% from the previous quarter.

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Trico Bancshares

NASDAQ:TCBK

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TCBK Latest News

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