TCBK 8-K
Trico Bancshares / (TCBK)
8-K
2023-10-25
For: 2023-10-25
View Original
Added on
April 04, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
____________________
FORM 8-K
_________________________________________
Current report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
_______________________
(Exact name of registrant as specified in its charter)
_______________________
| (State or other jurisdiction of incorporation or organization) | (Commission File No.) | (I.R.S. Employer Identification No.) | ||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
Registrant’s telephone number, including area code: (530 ) 898-0300
_____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On October 25, 2023, TriCo Bancshares (the "Company") announced its unaudited financial results as of and for the three and nine month periods ended September 30, 2023. A copy of the press release is attached as Exhibit 99.1 to this to this Form 8-K and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure
The executive officers of the Company intend to use the materials filed herewith, in whole or in part, in one or more presentations, discussions or meetings with investors. A copy of the investor presentation is attached hereto as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
The information furnished under Item 2.02, Item 7.01 and Item 9.01 of this Current Period on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of TriCo Bancshares under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TRICO BANCSHARES | |||||
Date: October 25, 2023 | /s/ Peter G. Wiese | ||||
| Peter G. Wiese, Executive Vice President and Chief Financial Officer | |||||
| (Principal Financial and Accounting Officer) | |||||
Exhibit 99.1
| Contact: Peter G. Wiese, EVP & CFO, (530) 898-0300 | ||
| For Immediate Release | ||
TRICO BANCSHARES ANNOUNCES THIRD QUARTER 2023 RESULTS
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, CA – (October 25, 2023) – 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.
1
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 | % | |||||||||||||||||||
2
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 | % | |||||||||||||||
3
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) | % | |||||||||||||||||
4
| 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.
5
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.
6
| 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 | |||||||||||||||
7
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.
8
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.
9
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.
10
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.
11
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.
12
| 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.
13
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.
14
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
15
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
16
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 | % | |||||||||||||||||||
17
| 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 | ||||||||||||||||||||||||
*****************
18
Investor Presentation Third Quarter 2023 Richard P. Smith, President & Chief Executive Officer Dan K. Bailey, EVP & Chief Banking Officer John S. Fleshood, EVP & Chief Operating Officer Peter G. Wiese, EVP & Chief Financial Officer Exhibit 99.2
Safe Harbor Statement Investor Presentation | Third Quarter 20232 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.
Tri Counties Bank Investor Presentation | Third Quarter 20233
Agenda • Most Recent Quarter Recap • Company Overview • Lending Overview • Deposit Overview • Financials 4 • Judi Giem, SVP & Chief Human Resources Officer • Peter Wiese, EVP & Chief Financial Officer • Dan Bailey, EVP & Chief Banking Officer • Rick Smith, President & Chief Executive Officer • John Fleshood, EVP & Chief Operating Officer • Craig Carney, EVP & Chief Credit Officer • Greg Gehlmann, SVP & General Counsel Executive Team (left to right) 4 Investor Presentation | Third Quarter 2023
Most Recent Quarter Highlights Investor Presentation | Third Quarter 20235 • Pre-tax pre-provision ROAA and ROAE were 1.86% and 16.49%, respectively, for the quarter ended September 30, 2023, and 2.16% and 20.41%, respectively, for the same quarter in the prior year • Our efficiency ratio was 55.6% for the quarter ended September 30, 2023, compared to 58.7% and 49.63% for the quarters ended June 30, 2023 and September 30, 2022, respectively Operating Leverage and Profitability • Total loans grew by an annualized 11.5% while deposits declined by an annualized 4.2% • Loan to deposit ratio has grown to 83.8% at September 30, 2023 compared to 72.9% a year ago • Cash flows generated from investment securities continue to reduce short-term borrowing needs • The continued and intentional mix shift of earning assets will benefit both interest income and interest expense in periods of future rate changes as management has not utilized any synthetic rate tools Balance Sheet Management • Readily available and unused funding sources, which total approximately $4.2 billion and represent 52% of total deposits and 175% of total estimated uninsured deposits. • No reliance on brokered deposits or FRB borrowing facilities during the 2023 or 2022 Liquidity • Net interest margin (FTE) of 3.88%, compared to 3.96% in the trailing quarter, and 4.02% in the quarter ended September 30, 2022, was influenced by the rising rate environment and balance sheet augmentation • The loan portfolio yields increased 14 basis points to 5.52% during the quarter • Yield on earning assets (FTE) of 4.94% in the quarter, an increase of 16 basis points from 4.78% in the trailing quarter, while the cost of interest-bearing liabilities increased 34 basis points from 1.37% to 1.71% Net Interest Income and Margin • The allowance for credit losses to total loans was 1.73% as of September 30, 2023, compared to 1.80% as of June 30, 2023, and 1.61% as of September 30, 2022 • Management continues to actively monitor the entire portfolio and decreases in both nonaccrual and criticized loans were realized during the quarter • Overall portfolio credit trends remain below historic averages with loans past due 30+ days to total loans remaining less than 0.15% at quarter end Credit Quality • Non-interest-bearing deposits comprised 35.7% of total deposits • Deposit betas remain low with a cycle-to-date deposit beta of 15.6% Diverse Deposit Base • Quarterly dividend of $0.30 or $1.20 annually • Approximately 1.2 million shares remain as being authorized for repurchase • Tangible capital ratio of 7.9% at September 30, 2023, an increase from 6.9% in the same quarter, prior year • Strength in core earnings is key to self-financed and self-funded growth • All regulatory capital ratios have grown year-over-year Capital Strategies
Company Overview Investor Presentation | Third Quarter 20236 Nasdaq: TCBK Headquarters: Chico, California Stock Price*: $32.03 Market Cap.: $1.07 Billion Asset Size: $9.90 Billion Loans: $6.71 Billion Deposits: $8.01 Billion Bank Branches: 69 ATMs: 87 Bank ATMs, with access to ~ 40,000 in network Market Area: TriCo currently serves 31 counties throughout California • As of close of business September 30, 2023
7 “Recurring Critical and Strategic Themes Noted in Recent Executive Discussions” • Continued Identification and Acquisition of New Customer Relationships While Expanding Services to Existing Customers – A Holistic Understanding of Their Balance Sheet and Ours • Capital – Balance of Regulatory and Shareholder Expectations • Scaling and Leverage – Meticulously Patient in Finding the Right Partner at the Right Time to Cross $10 Billion in Total Assets • Rationalization of Operating Costs Through the Relentless Pursuit of Redundant Expenses / Overlapping Vendor Services and Partially Implemented Technologies • Regulatory Focus Areas – Compliance (Including CRA & ESG) Data Governance and the Hurdles Associated with Merger Approvals • Active Monitoring of Loans for Early Warning Signs of Credit Deterioration and the Impact of Actual or Potential Global Events on Local Markets Investor Presentation | Third Quarter 2023
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Net Income ($MM) $13.9 $15.0 $16.2 $23.2 $22.7 $23.1 $23.4 $22.9 $16.1 $7.4 $17.6 $23.6 $33.6 $28.4 $27.4 $28.2 $20.4 $31.4 $37.3 $36.3 $35.8 $24.9 $30.6 Qtrly Diluted EPS $0.60 $0.65 $0.53 $0.76 $0.74 $0.75 $0.76 $0.75 $0.53 $0.25 $0.59 $0.79 $1.13 $0.95 $0.92 $0.94 $0.67 $0.93 $1.12 $1.09 $1.07 $0.75 $0.92 $0.00 $0.40 $0.80 $1.20 $0 $4 $8 $12 $16 $20 $24 $28 $32 $36 $40 Q tr ly E P S ( di lu te d) E a rn in gs ( in M ill io n s) Positive Earnings Track Record Investor Presentation | Third Quarter 20238 July 2018 Acquired FNB Bancorp ($1.2B assets) March 2022 Acquired Valley Republic Bancorp ($1.4B assets) 2020 Elevated ACL Provisioning Associated with COVID Related Risks
37% 27% 27% 41% 25% 29% 33% 2017 2018 2019 2020 2021 2022 2023 $0.52 $0.60 $0.74 $0.53 $1.13 $0.67 $1.07 $0.58 $0.65 $0.75 $0.25 $0.95 $0.93 $0.75 $0.51 $0.53 $0.76 $0.59 $0.92 $1.12 $0.92 $0.76 $0.75 $0.79 $0.94 $1.09 $1.74 $2.54 $3.00 $2.16 $3.94 $3.83 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 2017 2018 2019 2020 2021 2022 2023 Q1 Q2 Q3 Q4 8.10% 10.75% 10.49% 7.18% 12.10% 11.67% 11.06% 2017 2018 2019 2020 2021 2022 2023 $0.15 $0.17 $0.19 $0.22 $0.25 $0.25 $0.30 $0.17 $0.17 $0.19 $0.22 $0.25 $0.25 $0.30 $0.17 $0.17 $0.22 $0.22 $0.25 $0.30 $0.30 $0.17 $0.19 $0.22 $0.22 $0.25 $0.30 $0.66 $0.70 $0.82 $0.88 $1.00 $1.10 $1.20 $0.00 $0.25 $0.50 $0.75 $1.00 $1.25 2017 2018 2019 2020 2021 2022 2023 Q1 Q2 Q3 Q4 Shareholder Returns Investor Presentation | Third Quarter 20239 Dividends per Share: 11.4% CAGR* Dividends as % of Earnings Return on Avg. Shareholder Equity Diluted EPS • Compound Annual Growth Rate, 5 years 2023 ROE results YTD annualized
Consistent Growth Investor Presentation | Third Quarter 202310 Organic Growth and Disciplined Acquisitions Asset Dollars in Billions. 10 yrs.5 yrs. 14.2%9.4% CAGR, Assets Trailing 10 years Trailing 5 quarters
11 Investor Presentation | Third Quarter 2023 Deposits 11
Liability Mix: Strength in Funding Investor Presentation | Third Quarter 202312 Total Deposits = $8.09 billion 92.6% of Funding Liabilities Liability Mix 09/30/2023 Peer group consists of 99 closest peers in terms of asset size, range $4.7-11.5 Billion; source: BankRegData.com Net Loans includes LHFS and Allowance for Credit Loss; Core Deposits = Total Deposits less CDs > 250k and Brokered Deposits (0.03% Funding Cost) Non Interest- bearing Demand Deposits, 32.4% Interest-bearing Demand & Savings Deposits, 51.7% Time Deposits, 6.7% Borrowings & Subordinated Debt, 7.2% Other liabilities, 2.0% 7 5 .9 7 2 .6 7 1 .8 7 0 .1 6 6 .9 6 6 .0 6 6 .4 6 9 .1 7 2 .1 7 6 .5 7 9 .5 8 0 .4 8 4 .0 0 20 40 60 80 100 120 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3 Loans to Core Deposits (%) TCBK Peers 3 9 .7 3 9 .7 4 0 .3 4 0 .7 4 0 .7 4 0 .4 4 1 .1 4 1 .2 4 2 .5 4 2 .0 4 0 .3 3 8 .0 3 5 .7 0 10 20 30 40 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3 Non Interest-bearing Deposits as % of Total Deposits TCBK Peers
$376 $345 $328 $324 $327 $298 $349 $327 $304 $224 $346 $492 $588 $3,446 $3,580 $3,769 $3,824 $3,967 $4,090 $4,783 $4,825 $4,674 $4,603 $4,443 $4,530 $4,564 $2,518 $2,582 $2,767 $2,844 $2,943 $2,980 $3,583 $3,604 $3,678 $3,502 $3,237 $3,073 $2,858$6,341 $6,506 $6,863 $6,992 $7,237 $7,367 $8,714 $8,757 $8,656 $8,329 $8,026 $8,095 $8,010 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Deposits: Strength in Cost of Funds Investor Presentation | Third Quarter 202313 Balances presented in millions, end of period Relationship focused pricing for retention and acquisition Continued best in class total deposit Beta, 15.6% cycle to date
$186 $170 $132 $126 $287 - 100 200 300 400 500 600 700 800 $0-$100k >$100k-$250k >$250k - $500k >$500k - $1mln >$1mln $233 $207 $203 $210 $705 - 100 200 300 400 500 600 700 800 $387 $265 $178 $149 $283 - 100 200 300 400 500 600 700 800 $758 $476 $293 $201 $452 - 100 200 300 400 500 600 700 800 G re a te r C h ic o $544 $271 $141 $99 $94 - 100 200 300 400 500 600 700 800 Prior Quarter N o rt h er n Deposits by Region Investor Presentation | Third Quarter 202314 Excludes bank owned operational deposits, public funds, and Direct Banking division. $1.149 billion, total $2.180 billion, total $1.262 billion, total $1.558 billion, total $0.901 billion, total S a cr am en to V a lle y C e nt ra l V a lle y B a y A re a
Business $3,342 Consumer $3,708 Deposits: Demand & Savings Deposit Mix Investor Presentation | Third Quarter 202315 [1] Excludes time deposits, bank owned operational deposits and public funds. Balance Tier, $ millions [1]Total Demand & Savings ($ millions exterior, count interior) 486 491 454 481 1,430 1,622 897 493 305 391 Consumer Business Prior Quarter, Total # 34,960 # 203,295
74.0 73.2 72.7 72.5 71.2 70.3 66.3 66.3 66.5 67.6 71.2 68.9 70.0 65.6 64.9 63.8 63.6 63.7 62.8 62.3 62.8 62.9 64.0 68.8 68.5 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Insured Deposits as % of Total Deposits [2][3] TCBK Peers 31.6 25.2 21.5 21.9 19.0 17.6 18.6 19.8 21.8 22.8 25.3 25.3 26.5 43.4 40.1 37.5 37.2 35.7 34.2 37.1 36.3 35.7 39.6 50.4 55.9 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Pledged Securities as % of Total Securities [3] TCBK Peers $2,427 $1,702 $72 Liquidity Sources [1] Total Borrow Capacity Unpledged Securities AFS Cash Liquidity Investor Presentation | Third Quarter 202316 [1] $ millions, as of 9/30/2023, cash based upon total held at or in transit with FRB [2] Based upon estimated uninsured deposits reported in Call Report schedule RC-O includes demand and time deposits [3] Peer group consists of closest 99 peers in terms of assets, sourced from BankRegData.com $4.2 Billion 175% of estimated uninsured deposits In addition to a strong deposit base, the bank maintains a variety of easily accessible funding sources
Investor Presentation | Third Quarter 2023 Loans and Credit Quality 1717
Loan Portfolio and Yield Investor Presentation | Third Quarter 202318 Q1 2021 increase includes $98MM Jumbo Mortgage pool purchase End of period balances are presented net of fees and include LHFS. Yields based on average balance and annualized quarterly interest income. Acquired VRB Loans of $795MM upon 3/25/2022 with a WAR of 4.31%. $4,022 $4,111 $4,381 $4,386 $4,407 $4,443 $4,610 $4,711 $4,739 $4,859 $5,796 $6,097 $6,313 $6,452 $6,422 $6,521 $6,709 5.24% 5.44% 5.23% 5.05% 4.78% 5.09% 5.15% 4.86% 4.92% 4.96% 4.69% 4.73% 4.88% 5.10% 5.21% 5.38% 5.52% 3.50% 4.50% 5.50% 6.50% $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 2018 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 Q1-2023 Q2-2023 Q3-2023 Non-PPP PPP Loans Loan Yield Loan Yield Excl PPP
$178 $199 $165 $250 $464 $285 $303 $412 $396 $473 $446 $250 $159 $170 $247 -$118 -$139 -$131 -$166 -$241 -$192 -$243 -$250 -$225 -$205 -$270 -$110 -$92 -$107 -$77 $6 -$56 -$20 -$47 -$59 $6 -$33 -$47 $4 $33 $42 -$4 -$94 $36 $22 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 Q1-2023 Q2-2023 Q3-2023 Origination Payoffs Balance Change net of Originations and Payoffs Gross Production vs. Payoff Investor Presentation | Third Quarter 202319 Outstanding Principal in Millions, excludes PPP Includes Q1 2021 increase of $98MM and Q4 2020 increase of $40MM in Jumbo Mortgage pool purchases $800MM in outstanding at close of Q1-2022 related to VRB Acquisitions ($795MM at acquisition) excluded from the chart TCBK originated nearly $1.5 billion in 2021, while facing headwinds of an increased $372 million in payoffs during 2021. In addition to the nearly $0.8 billion in non-PPP loan originations in 2020, TCBK originated over $0.4 billion in PPP loans. Originations and net loan growth in 2022 were supportive of the positive mix shift in earning assets and facilitated both NII and NIM expansion.
$2,172 $2,051 $957 $968 $959 $928 $871 $765 $600 $528 $353 $394 $321 $257 $402 $351 $66 $56 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 C R E N o n - O w n e r O cc u p ie d C R E - O w n e r O cc u p ie d M u lti fa m ily S F R 1 -4 T e rm C o m m e rc ia l & In d u st ri al S F R H E L O C a n d Ju n io r L ie n s C o n st ru ct io n A g ric u ltu re & F a rm la n d A u to & O th e r Diversified Loan Portfolio Investor Presentation | Third Quarter 202320 Dollars in millions, Net Book Value at period end, excludes LHFS; Auto & other includes Leases; Commercial & Industrial includes six Municipality Loans for $20.8 mln. CRE Non-Owner Occupied 33% CRE-Owner Occupied 14%Multifamily 14% SFR 1-4 Term 13% Commercial & Industrial 9% SFR HELOC and Junior Liens 5% Construction 5% Agriculture & Farmland 6% Auto & Other 1%
Office RE Collateral Investor Presentation | Third Quarter 202321 Graph circle size represent total loan Commitments in the Region; regional assignment based upon zip code of collateral CRE loans secured by office collateral represents 9.5% of total Loan Portfolio Commitments. California Office Secured by Region Regions by Collateral Code Regions by Occupancy Type Wtd Avg LTV Net Book Balance (Avg) Net Book BalanceCommitmentsLoan Count TCBK Community Banking Regions 60.4%$ 968,012 $ 289,435,595 $ 318,252,747 299Central Valley 50.8%1,359,773 167,252,047 179,079,604 123Bay Area 60.1%913,525 159,866,825 167,727,424 175Sacramento Valley 63.6%578,170 72,271,240 76,285,351 125Chico 59.6%1,478,921 48,804,406 54,806,032 33Southern 60.9%342,747 20,564,794 23,229,741 60Northern 51.8%1,284,189 21,831,217 21,897,124 17Outside CA 58.3%$937,531 $780,026,124 $841,278,022 832Total
68% 52% 80% 63% 89% 73% 38% 49% 30% 45% 20% 37% 11% 23% 61% 44% 2% 3% 0% 0% 0% 4% 1% 7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Retail Building Office Building Hotel/Motel Light Industrial Self Storage Other Multifamily CRE Owner Occupied <= 60% > 60% - 75% > 75% CRE Collateral Values Investor Presentation | Third Quarter 202322 Distribution by LTV (1) LTV Range (1) LTV as of most recent origination or renewal date. CRE Non-Owner Occupied by Collateral Type
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 20232022202120202019201820172016201520142013201220112010<2010 Private Balance (MM) Unfunded (MM) WA Rate $2,193 $2,074 $964 $933 $350 $391 $596 $531 $964 $977 $872 $767 $325 $261 $406 $356 $63 $55 $174 $160 $65 $58 $659 $608 $647 $603 $60 $53 $367 $322 $134 $232 $8 $8 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 3Q-2023 3Q-2022 CRE Non-Owner Occupied Multifamily SFR HELOC and Junior Liens Commercial & Industrial CRE-Owner Occupied SFR 1-4 Term Construction Agriculture & Farmland Auto & Other Outstanding Principal ($MM) Unfunded Commitment ($MM) Unfunded Loan Commitments Investor Presentation | Third Quarter 202323 HELOCs – by vintage, with weighted avg. coupon (8.35% total WAC) Outstanding Principal and Commitments exclude unearned fees and discounts/premiums, Leases, DDA Overdraft, and Credit Cards PPP Excluded from C&I for $0.4 million and $1.0 million in Outstanding Principal as of Q3 2023 and Q3 2022, respectively. 9.71% 7.56%7.60% 8.20% 8.83%9.22%9.08%8.96%8.68%9.08%8.70%8.55% 9.44% 8.60%8.75%
C&I Utilization Investor Presentation | Third Quarter 202324 Excludes PPP loans; Outstanding Principal excludes unearned fees and discounts/premiums ($ millions) C&I yield is expected to grow incrementally through the remainder of 2023. Paired with treasury management services, C&I customers will be a continued source of noninterest bearing deposits. C&I Utilization by NAICS Industry: 3Q-2023 $205 $197 $187 $206 $186 $191 $448 $476 $509 $544 $527 $550 $574 $273 $372 $384 $360 $353 $339 $552 $547 $603 $593 $628 $653 $647 43% 35% 33% 36% 35% 36% 45% 47% 46% 48% 46% 46% 47% 5.10% 4.91% 4.85% 4.84% 4.97% 4.96% 4.46% 5.12% 6.11% 6.79% 7.31% 7.60% 7.89% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 3Q-2020 4Q-2020 1Q-2021 2Q-2021 3Q-2021 4Q-2021 1Q-2022 2Q-2022 3Q-2022 4Q-2022 1Q-2023 2Q-2023 3Q-2023 Outstanding Principal ($MM) Unfunded Commitment Utilization WAR $210 $43 $78 $66 $49 $24 $30 $9 $65 $205 $90 $32 $44 $31 $41 $11 $22 $171 51% 32% 71% 60% 61% 37% 72% 30% 28% 0% 5000% 10000% 15000% 20000% Oil & Gas Extraction Construction Finance and Insurance Wholesale Real Estate Healthcare Trans and Warehouse Retail Trade Other (14 Categories) Outstanding (mln) Unfunded (mln)
Fixed 43% Adjustable 44% Floating 13% Loan Yield Composition Investor Presentation | Third Quarter 202325 Dollars in millions, excludes PPP as well as unearned fees and accretion/amortization therein Wtd Avg Rate (weighted average rate) as of 09/30/2023 and based upon outstanding principal; Next Reprice signifies either the next scheduled reprice date or maturity. 99% of Floating benchmarked to Prime Predominantly benchmarked to 5 Year Treasury 57% Adjustable + Floating $933 $327 $337 $512 $635 $697 $592 9.16% 6.32% 4.53% 4.31% 4.40% 5.30% 4.38% 9.18% 7.91% 7.46% 7.67% 7.49% 7.50% 7.61% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% - 100 200 300 400 500 600 700 800 900 1,000 Monthly (Floating) < 1 Year 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years > 5 Years Adjustable Loans, Principal Outstanding ($MM) Adj Wtd Avg Rate Adj Wtd Avg Rate if Repriced 09/30/2023
Allowance for Credit Losses Investor Presentation | Third Quarter 202326 Drivers of Change under CECL Loan portfolio growth of $188 million in Q3 Growth driven by Ag production and Construction segments, $62 and $43 million, respectively Both Quantitative and Qualitative reserve rates stabilized in the quarter Gross charge-offs $5.357 million Gross recoveries $0.720 million Driven by sale of loan relationship with previously identified specific reserves 1.80% of Total Loans 1.73% of Total Loans Directionally consistent with decrease in Criticized loans Excludes gross charge-offs Scaled to reflect $110MM
Allowance for Credit Losses Investor Presentation | Third Quarter 202327 Allocation of Allowance by Segment
Risk Grade Migration Investor Presentation | Third Quarter 202328 Zero balance in Doubtful and Loss 86.0%87.8%87.8%89.0%87.8%87.6% 11.4%8.8%9.2%8.0%9.7%9.5% 1.4%2.4%2.0%2.0%1.8%2.1% 1.4%1.0%1.0%1.1%0.8%0.8% 3Q-20232Q-20231Q-20234Q-20223Q-20222Q-2022 Pass Watch Special Mention Substandard
395% 342% 297% 263% 293% 281% 690% 831% 586% 501% 686% 320% 401% 19 1% 17 9% 18 7% 19 4% 19 7% 21 0% 21 7% 31 0% 32 2% 30 5% 31 5% 29 8% 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3 TCBK Peers Asset Quality Investor Presentation | Third Quarter 202329 Peer group consists of 99 closest peers in terms of asset size, range $6.0-13.7 Billion, source: BankRegData.com NPA and NPL ratios displayed are net of guarantees. Peer Data for NPA update from Q1-2021 forward. Coverage Ratio: Allowance as % of Non-Performing Loans The Bank continues to actively and aggressively address potential credit issues with short resolution timelines. Over the past three years both the Bank’s total non-performing assets and coverage ratio have remained better than peers. Non-Performing Assets as a % of Total Assets 0.33% 0.38% 0.38% 0.42% 0.37% 0.38% 0.17% 0.15% 0.21% 0.25% 0.20% 0.40% 0.32% 0.58% 0.75% 0.68% 0.64% 0.60% 0.50% 0.46% 0.34% 0.34% 0.32% 0.37% 0.39% 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3 TCBK Peers
Financials 3030 Investor Presentation | Third Quarter 2023
2Q23 to 3Q23 Reported Net Interest Income (NII) & NIM Walk NII $ in millions, NIM change in bps, all full taxable equivalent (FTE) NII NIM 2Q23 $89.0 3.96% Market rate changes - earning assets 3.4 17 Loan balances / mix and deferred fee earnings 1.5 8 Borrowings 0.3 2 Securities portfolio balances / mix (0.8) (4) Deposits balances / mix (1.0) (5) Time deposit rate changes (1.0) (5) Non-maturing deposit rate changes (3.8) (21) Day Count 1.0 3Q23 $88.5 3.88% $96.8 $103.4 $103.3 $107.5 $112.8 $94.5 $99.3 $93.7 $89.0 $88.5 4.02% 4.34% 4.21% 3.96% 3.88% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% - 20.0 40.0 60.0 80.0 100.0 120.0 140.0 3Q22 4Q22 1Q23 2Q23 3Q23 Int Income (FTE) Net Int Income (FTE) NIM (FTE) Net Interest Income (NII) and Margin (NIM) Investor Presentation | Third Quarter 202331
3Q22 to 3Q23 Reported Net Interest Income (NII) & NIM Walk NII $ in millions, NIM change in bps, all full taxable equivalent (FTE) NII NIM 3Q22 $94.5 4.02% Market rate changes - earning assets 16.5 38 Loan balances / mix and deferred fee earnings 3.6 9 Interest-bearing cash & Fed Funds (1.7) (4) Securities portfolio balances / mix (2.4) (6) Time deposits (3.7) (9) Borrowings (5.6) (13) Non-maturing deposits (12.6) (29) Day Count - 3Q23 $88.5 3.88% $96.8 $103.4 $103.3 $107.5 $112.8 $94.5 $99.3 $93.7 $89.0 $88.5 4.02% 4.34% 4.21% 3.96% 3.88% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% - 20.0 40.0 60.0 80.0 100.0 120.0 140.0 3Q22 4Q22 1Q23 2Q23 3Q23 Int Income (FTE) Net Int Income (FTE) NIM (FTE) Net Interest Income (NII) and Margin (NIM) Investor Presentation | Third Quarter 202332
0.89% 1.24% 1.43% 0.91% 1.43% 1.28% 1.24% 2017 2018 2019 2020 2021 2022 2023 1.70% 1.73% 1.94% 1.83% 1.91% 1.97% 1.93% 2017 2018 2019 2020 2021 2022 2023 65.4% 63.7% 59.7% 58.4% 53.2% 53.0% 54.8% 2017 2018 2019 2020 2021 2022 2023 4.22% 4.30% 4.47% 3.96% 3.58% 3.88% 4.01% 2017 2018 2019 2020 2021 2022 2023 Current Operating Metrics Investor Presentation | Third Quarter 202333 Net Interest Margin (FTE) PPNR as % of Average Assets Efficiency Ratio ROAA 2023 values through the nine months ended 9/30/2023, annualized where applicable
14.1% 14.4% 15.1% 15.2% 15.4% 14.2% 14.5% 2017 2018 2019 2020 2021 2022 2023 9.3% 9.5% 10.6% 9.3% 9.2% 7.6% 7.9% 2017 2018 2019 2020 2021 2022 2023 11.7% 12.5% 13.3% 12.9% 13.2% 11.7% 12.0% 2017 2018 2019 2020 2021 2022 2023 13.2% 13.7% 14.4% 14.0% 14.2% 12.4% 12.7% 2017 2018 2019 2020 2021 2022 2023 Well Capitalized Investor Presentation | Third Quarter 202334 Tier 1 Capital Ratio Total Risk Based Capital CET1 Ratio Tangible Capital Ratio 2023 values at quarter ended 9/30/2023
XYZ Investor Presentation | Third Quarter 202335 Pending update – no material change to format