8-K
TRICO BANCSHARES / (TCBK)
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):
April 26, 2023
_______________________
(Exact name of registrant as specified in its charter)
_______________________
| California | 0-10661 | 94-2792841 | |
|---|---|---|---|
| (State or other jurisdiction of<br>incorporation or organization) | (Commission File No.) | (I.R.S. Employer<br>Identification No.) | |
| 63 Constitution Drive | Chico, | California | 95973 |
| --- | --- | --- | --- |
| (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<br>Symbol(s) | Name of each exchange<br>on which registered |
|---|---|---|
| Common Stock, no par value | TCBK | Nasdaq |
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 April 26, 2023, TriCo Bancshares (the "Company") announced its unaudited financial results as of and for the three month period ended March 31, 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
99.1 Press release dated April 26, 2023
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: April 26, 2023 | /s/ Peter G. Wiese |
| Peter G. Wiese, Executive Vice President and Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Document
Exhibit 99.1
| Contact: Peter G. Wiese, EVP & CFO, (530) 898-0300 |
|---|
| For Immediate Release |
TRICO BANCSHARES ANNOUNCES FIRST QUARTER 2023 RESULTS
Notable Items for First Quarter 2023
•Net income was $35.8 million compared to $36.3 million in the trailing quarter, and compared to $20.4 million in the same quarter of the prior year; Pre-tax pre-provision net revenue was $53.2 million compared to $55.3 million in the trailing quarter, and compared to $36.6 million in the same quarter of the prior year
•Balance sheet flexibility anchored in readily accessible sources of liquidity including undrawn borrowing capacities, on-balance sheet cash and unpledged investment securities totaling in excess of $4.4 billion
•Diversified and granular deposit base including approximately 250,000 accounts which are spread over the Northern two-thirds of California and having an average account size of just over $30,000
•Credit quality remains strong and stable with non-performing assets representing less than 0.2% of total assets and an allowance for credit losses of 1.69% of total loans or 686% of non-performing loans
•Average yields on earning assets were 4.64%, an increase of 12 basis points over the 4.52% in the trailing quarter; net interest margin was 4.21%, a change of 13 basis points from 4.34% in the trailing quarter
•The average cost of total deposits were 0.25% for the quarter as compared to 0.10% 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 21 basis points since FOMC rate actions began, which translates to a cycle to date deposit beta of 4.42%
•Deposit balances declined by $303.1 million or 3.64% versus the prior quarter and the Bank did not utilize brokered deposits or FRB borrowing facilities
"Despite the turmoil and challenges currently facing the community banking industry we are thankful to have built a franchise that is anchored by a diverse customer base that continues to demonstrate their trust in us by allowing us the privilege to deliver Services with Solutions," explained Rick Smith, President and Chief Executive Officer. Peter Wiese, EVP and Chief Financial Officer added, "We believe that TriCo's performance will be both positive and differentiated amongst our peers and competitors through a variety of possible economic scenarios."
CHICO, CA – (April 26, 2023) – TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $35.8 million for the quarter ended March 31, 2023, compared to $36.3 million during the trailing quarter ended December 31, 2022, and $20.4 million during the quarter ended March 31, 2022. Diluted earnings per share were $1.07 for the first quarter of 2023, compared to $1.09 for the fourth quarter of 2022 and $0.67 during the first quarter of 2022.
Financial Highlights
Performance highlights for the Company as of or for the three months ended March 31, 2023, included the following:
•For the quarter ended March 31, 2023, the Company’s return on average assets was 1.47%, while the return on average equity was 13.36%.
•Deposit balances for the quarter ended March 31, 2023, decreased by $303.1 million as compared to December 31, 2022. The deposit contraction during the quarter resulted in the loan to deposit ratio increasing to 80.0% as of March 31, 2023, as compared to 77.4% as of the trailing quarter.
•The efficiency ratio was 50.3% for the three months ended March 31, 2023, as compared to 51.8% for the trailing quarter.
•The provision for credit losses for loans and debt securities was approximately $4.2 million during the quarter ended March 31, 2023, as compared to a provision for credit losses of $4.2 million during the trailing quarter ended December 31, 2022, and a provision for credit losses of $8.3 million for the three-month period ended March 31, 2022.
•The allowance for credit losses to total loans was 1.69% as of March 31, 2023, compared to 1.64% as of the trailing quarter end, and 1.64% as of March 31, 2022. Non-performing assets to total assets were 0.20% at March 31, 2023, as compared to 0.25% as of December 31, 2022, and 0.17% at March 31, 2022.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the period ended March 31, 2023, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.
Summary Results
The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:
| Three months ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, | ||||||||
| (dollars and shares in thousands, except per share data) | 2023 | 2022 | Change | % Change | |||||
| Net interest income | $ | 93,336 | $ | 98,900 | (5.6) | % | |||
| Provision for credit losses | (4,195) | (4,245) | 50 | (1.2) | % | ||||
| Noninterest income | 13,635 | 15,880 | (2,245) | (14.1) | % | ||||
| Noninterest expense | (53,794) | (59,469) | 5,675 | (9.5) | % | ||||
| Provision for income taxes | (13,149) | (14,723) | 1,574 | (10.7) | % | ||||
| Net income | $ | 35,833 | $ | 36,343 | (1.4) | % | |||
| Diluted earnings per share | $ | 1.07 | $ | 1.09 | (1.8) | % | |||
| Dividends per share | $ | 0.30 | $ | 0.30 | — | % | |||
| Average common shares | 33,296 | 33,330 | (34) | (0.1) | % | ||||
| Average diluted common shares | 33,438 | 33,467 | (29) | (0.1) | % | ||||
| Return on average total assets | 1.47 | % | 1.45 | % | |||||
| Return on average equity | 13.36 | % | 14.19 | % | |||||
| Efficiency ratio | 50.29 | % | 51.81 | % |
All values are in US Dollars.
| Three months ended<br>March 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (dollars and shares in thousands, except per share data) | 2023 | 2022 | Change | % Change | |||||
| Net interest income | $ | 93,336 | $ | 67,924 | 37.4 | % | |||
| Provision for credit losses | (4,195) | (8,330) | 4,135 | (49.6) | % | ||||
| Noninterest income | 13,635 | 15,096 | (1,461) | (9.7) | % | ||||
| Noninterest expense | (53,794) | (46,447) | (7,347) | 15.8 | % | ||||
| Provision for income taxes | (13,149) | (7,869) | (5,280) | 67.1 | % | ||||
| Net income | $ | 35,833 | $ | 20,374 | 75.9 | % | |||
| Diluted earnings per share | $ | 1.07 | $ | 0.67 | 59.7 | % | |||
| Dividends per share | $ | 0.30 | $ | 0.25 | 20.0 | % | |||
| Average common shares | 33,296 | 30,050 | 3,246 | 10.8 | % | ||||
| Average diluted common shares | 33,438 | 30,202 | 3,236 | 10.7 | % | ||||
| Return on average total assets | 1.47 | % | 0.94 | % | |||||
| Return on average equity | 13.36 | % | 8.19 | % | |||||
| Efficiency ratio | 50.29 | % | 55.95 | % |
All values are in US Dollars.
Balance Sheet
Total loans outstanding, excluding PPP, grew to $6.42 billion as of March 31, 2023, an increase of 10.8% over the prior twelve months, and is entirely related to organic loan growth. As compared to December 31, 2022, total loans outstanding declined by $28.0 million or 1.7%. Investments increased to $2.58 billion as of March 31, 2023, an increase of 0.3% over the prior year quarter end. Quarterly average earning assets to quarterly total average assets were 91.4% at March 31, 2023, as compared to 91.4% and 92.9% at December 31, 2022, and March 31, 2022, respectively. The loan to deposit ratio was 80.0% at March 31, 2023, as compared to 77.4% and 67.2% at December 31, 2022, and March 31, 2022, respectively. During the current quarter and throughout the 2022 year, the Company held no brokered deposits and relied solely on short-term borrowings to fund cash flow timing differences.
Total shareholders' equity increased by $43.8 million during the quarter ended March 31, 2023, as a result of an improvement in accumulated other comprehensive losses of $24.4 million and net income of $35.8 million, partially offset by cash dividend payments on common stock of approximately $9.9 million. As a result, the Company’s book value was $32.84 per share at March 31, 2023, as compared to $31.39 and $32.78 at December 31, 2022, and March 31, 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 $23.22 per share at March 31, 2023, as compared to $21.76 and $23.04 at December 31, 2022, and March 31, 2022, respectively.
Trailing Quarter Balance Sheet Change
| Ending balances | March 31, | December 31, | Annualized<br> % Change | ||||
|---|---|---|---|---|---|---|---|
| (dollars in thousands) | 2023 | 2022 | Change | ||||
| Total assets | $ | 9,842,394 | $ | 9,930,986 | (3.6) | % | |
| Total loans | 6,422,421 | 6,450,447 | (28,026) | (1.7) | |||
| Total investments | 2,577,769 | 2,633,269 | (55,500) | (8.4) | |||
| Total deposits | 8,025,865 | 8,329,013 | (303,148) | (14.6) | |||
| Total other borrowings | $ | 434,140 | $ | 264,605 | 256.3 | % |
All values are in US Dollars.
Loans outstanding declined by $28.0 million or 1.7% on an annualized basis during the quarter ended March 31, 2023. During the quarter, loan originations/draws totaled approximately $357.0 million while payoffs/repayments of loans totaled $389.0 million, which compares to originations/draws and payoffs/repayments during the trailing quarter ended of $470.0 million and $343.0 million, respectively. While management believes the loan pipeline remains sufficient to support the Company's objectives, origination activity continues to moderate due to customer sensitivity from the rising interest rate environment and the Company's continued focus on disciplined underwriting. Investment security balances decreased $55.5 million or 8.4% on an annualized basis as the result of prepayments/maturities totaling approximating $65.8 million and proceeds from sale of $24.2 million, partially offset by increases in the market value of securities of $34.6 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 $303.1 million or 14.6% annualized during the period. Cash flow needs were supported by net increases in short-term FHLB advances which totaled $434.1 million as of the quarter ended March 31, 2023.
Average Trailing Quarter Balance Sheet Change
| Quarterly average balances for the period ended | March 31, | December 31, | Annualized<br>% Change | ||||
|---|---|---|---|---|---|---|---|
| (dollars in thousands) | 2023 | 2022 | Change | ||||
| Total assets | $ | 9,878,927 | $ | 9,932,931 | (2.2) | % | |
| Total loans | 6,413,958 | 6,358,998 | 54,960 | 3.5 | |||
| Total investments | 2,587,285 | 2,624,062 | (36,777) | (5.6) | |||
| Total deposits | 8,218,576 | 8,545,172 | (326,596) | (15.3) | |||
| Total other borrowings | $ | 277,632 | $ | 85,927 | 892.4 | % |
All values are in US Dollars.
Year Over Year Balance Sheet Change
| Ending balances | As of March 31, | % Change | |||||
|---|---|---|---|---|---|---|---|
| (dollars in thousands) | 2023 | 2022 | Change | ||||
| Total assets | $ | 9,842,394 | $ | 10,118,328 | (2.7) | % | |
| Total loans | 6,422,421 | 5,851,975 | 570,446 | 9.7 | |||
| Total loans, excluding PPP | 6,420,903 | 5,795,370 | 625,533 | 10.8 | |||
| Total investments | 2,577,769 | 2,569,706 | 8,063 | 0.3 | |||
| Total deposits | 8,025,865 | 8,714,477 | (688,612) | (7.9) | |||
| Total other borrowings | $ | 434,140 | $ | 36,184 | 1,099.8 | % |
All values are in US Dollars.
Non-PPP loan balances increased as a result of organic activities by approximately $625.5 million or 10.8% during the twelve-month period ending March 31, 2023. Over the same period deposit balances have declined by $688.6 million or 7.9%. The Company has offset these declines through the deployment of excess cash balances and proceeds from short-term FHLB borrowings. As of March 31, 2023, short-term borrowings from the FHLB totaled $394.1 million and had an interest rate of 5.11%.
Liquidity
The Company's primary sources of liquidity include the following for the periods indicated:
| (dollars in thousands) | March 31, 2023 | December 31, 2022 | March 31, 2022 | |||
|---|---|---|---|---|---|---|
| Borrowing capacity at correspondent banks and FRB | $ | 2,853,219 | 2,815,594 | $ | 2,540,995 | |
| Less: borrowings outstanding | (394,095) | (216,700) | — | |||
| Unpledged available-for-sale (AFS) investment securities | 1,883,353 | 1,990,451 | 2,036,202 | |||
| Cash held or in transit with FRB | 67,468 | 56,910 | 969,558 | |||
| Total primary liquidity | $ | 4,409,945 | $ | 4,862,738.3 | $ | 5,546,755 |
At March 31, 2023, the Company's primary sources of liquidity represented 54.9% of total deposits and 190.7% of estimated total uninsured deposits, respectively. As a secondary source of liquidity, the Company's held-to-maturity investment securities had a fair value of $142.1 million, including approximately $9.9 million in net unrealized losses or 0.6% of after tax total shareholders' equity.
Net Interest Income and Net Interest Margin
During the twelve-month period ended March 31, 2023, the Federal Open Market Committee's (FOMC) actions have resulted in nine rate hike events for a cumulative increase in the Fed Funds Rate of 4.75%. During the same period the Company's yield on total loans (excluding PPP) increased 56 basis points to 5.21% for the three months ended March 31, 2023, from 4.65% for the three months ended March 31, 2022. Moreover, the tax equivalent yield on the Company's investment security portfolio increased by 1.34% to 3.23% during the twelve months ended March 31, 2023. The cost of total interest-bearing deposits and total interest-bearing liabilities increased by 37 basis points and 63 basis points respectively between the three-month periods ended March 31, 2023 and 2022. Since FOMC rate actions began, the Company's total cost of deposits has increased 21 basis points which translates to a cycle to date deposit beta of 4.42%.
The Company continues to manage its cost of deposits through the use of pricing strategies and delayed changes to the deposit rates offered to the general public. As of March 31, 2023, and December 31, 2022, total deposits priced utilizing these strategies totaled $731.9 million and $579.1 million, respectively, and carried weighted average rates of 2.68% and 1.64%, respectively.
The following is a summary of the components of net interest income for the periods indicated:
| Three months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, | ||||||||||
| (dollars in thousands) | 2023 | 2022 | Change | % Change | |||||||
| Interest income | $ | 102,907 | $ | 102,989 | $ | (82) | (0.1) | % | |||
| Interest expense | (9,571) | (4,089) | (5,482) | 134.1 | % | ||||||
| Fully tax-equivalent adjustment (FTE) (1) | 392 | 440 | (48) | (10.9) | % | ||||||
| Net interest income (FTE) | $ | 93,728 | $ | 99,340 | $ | (5,612) | (5.6) | % | |||
| Net interest margin (FTE) | 4.21 | % | 4.34 | % | |||||||
| Acquired loans discount accretion, net: | |||||||||||
| Amount (included in interest income) | $ | 1,397 | $ | 1,751 | $ | (354) | (20.2) | % | |||
| Net interest margin less effect of acquired loan discount accretion(1) | 4.15 | % | 4.27 | % | (0.12) | % | |||||
| PPP loans yield, net: | |||||||||||
| Amount (included in interest income) | $ | 5 | $ | 16 | $ | (11) | (68.8) | % | |||
| Net interest margin less effect of PPP loan yield (1) | 4.21 | % | 4.34 | % | (0.13) | % | |||||
| Acquired loans discount accretion and PPP loan yield, net: | |||||||||||
| Amount (included in interest income) | $ | 1,402 | $ | 1,767 | $ | (365) | (20.7) | % | |||
| Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1) | 4.15 | % | 4.27 | % | (0.12) | % | |||||
| Three months ended<br>March 31, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (dollars in thousands) | 2023 | 2022 | Change | % Change | |||||||
| Interest income | $ | 102,907 | $ | 69,195 | $ | 33,712 | 48.7 | % | |||
| Interest expense | (9,571) | (1,271) | (8,300) | 653.0 | % | ||||||
| Fully tax-equivalent adjustment (FTE) (1) | 392 | 283 | 109 | 38.5 | % | ||||||
| Net interest income (FTE) | $ | 93,728 | $ | 68,207 | $ | 25,521 | 37.4 | % | |||
| Net interest margin (FTE) | 4.21 | % | 3.39 | % | |||||||
| Acquired loans discount accretion, net: | |||||||||||
| Amount (included in interest income) | $ | 1,397 | $ | 1,323 | $ | 74 | 5.6 | % | |||
| Net interest margin less effect of acquired loan discount accretion(1) | 4.15 | % | 3.32 | % | 0.83 | % | |||||
| PPP loans yield, net: | |||||||||||
| Amount (included in interest income) | $ | 5 | $ | 1,097 | $ | (1,092) | (99.5) | % | |||
| Net interest margin less effect of PPP loan yield (1) | 4.21 | % | 3.36 | % | 0.85 | % | |||||
| Acquired loans discount accretion and PPP loan yield, net: | |||||||||||
| Amount (included in interest income) | $ | 1,402 | $ | 2,420 | $ | (1,018) | (42.1) | % | |||
| Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1) | 4.15 | % | 3.29 | % | 0.86 | % |
(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 March 31, 2023, December 31, 2022, and March 31, 2022, purchased loan discount accretion was $1.4 million, $1.8 million, and $1.3 million, respectively.
The following table shows the components of net interest income and net interest margin on a fully tax-equivalent (FTE) basis for the quarterly periods indicated:
ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in thousands)
| Three months ended | Three months ended | Three months ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||||||||||||||
| Average<br>Balance | Income/<br>Expense | Yield/<br>Rate | Average<br>Balance | Income/<br>Expense | Yield/<br>Rate | Average<br>Balance | Income/<br>Expense | Yield/<br>Rate | ||||||||||
| Assets | ||||||||||||||||||
| Loans, excluding PPP | $ | 6,412,386 | $ | 82,410 | 5.21 | % | $ | 6,357,250 | $ | 81,740 | 5.10 | % | $ | 4,937,865 | $ | 56,648 | 4.65 | % |
| PPP loans | 1,572 | 5 | 1.29 | % | 1,748 | 16 | 3.63 | % | 50,695 | 1,097 | 8.78 | % | ||||||
| Investments-taxable | 2,398,235 | 18,916 | 3.20 | % | 2,414,236 | 18,804 | 3.09 | % | 2,313,204 | 10,223 | 1.79 | % | ||||||
| Investments-nontaxable (1) | 189,050 | 1,699 | 3.64 | % | 209,826 | 1,906 | 3.60 | % | 143,873 | 1,225 | 3.45 | % | ||||||
| Total investments | 2,587,285 | 20,615 | 3.23 | % | 2,624,062 | 20,710 | 3.13 | % | 2,457,077 | 11,448 | 1.89 | % | ||||||
| Cash at Federal Reserve and other banks | 26,818 | 269 | 4.07 | % | 93,390 | 963 | 4.09 | % | 707,563 | 285 | 0.16 | % | ||||||
| Total earning assets | 9,028,061 | 103,299 | 4.64 | % | 9,076,450 | 103,429 | 4.52 | % | 8,153,200 | 69,478 | 3.46 | % | ||||||
| Other assets, net | 850,866 | 856,481 | 625,056 | |||||||||||||||
| Total assets | $ | 9,878,927 | $ | 9,932,931 | $ | 8,778,256 | ||||||||||||
| Liabilities and shareholders’ equity | ||||||||||||||||||
| Interest-bearing demand deposits | $ | 1,673,114 | $ | 387 | 0.09 | % | $ | 1,709,494 | $ | 150 | 0.03 | % | $ | 1,597,309 | $ | 84 | 0.02 | % |
| Savings deposits | 2,898,463 | 4,154 | 0.58 | % | 2,921,935 | 1,815 | 0.25 | % | 2,571,023 | 327 | 0.05 | % | ||||||
| Time deposits | 274,805 | 604 | 0.89 | % | 251,218 | 205 | 0.32 | % | 301,499 | 268 | 0.36 | % | ||||||
| Total interest-bearing deposits | 4,846,382 | 5,145 | 0.43 | % | 4,882,647 | 2,170 | 0.18 | % | 4,469,831 | 679 | 0.06 | % | ||||||
| Other borrowings | 277,632 | 2,809 | 4.10 | % | 85,927 | 406 | 1.87 | % | 44,731 | 5 | 0.05 | % | ||||||
| Junior subordinated debt | 101,044 | 1,617 | 6.49 | % | 101,030 | 1,513 | 5.94 | % | 60,971 | 587 | 3.90 | % | ||||||
| Total interest-bearing liabilities | 5,225,058 | 9,571 | 0.74 | % | 5,069,604 | 4,089 | 0.32 | % | 4,575,533 | 1,271 | 0.11 | % | ||||||
| Noninterest-bearing deposits | 3,372,194 | 3,662,525 | 3,052,099 | |||||||||||||||
| Other liabilities | 194,202 | 184,334 | 141,400 | |||||||||||||||
| Shareholders’ equity | 1,087,473 | 1,016,468 | 1,009,224 | |||||||||||||||
| Total liabilities and shareholders’ equity | $ | 9,878,927 | $ | 9,932,931 | $ | 8,778,256 | ||||||||||||
| Net interest rate spread (1) (2) | 3.90 | % | 4.20 | % | 3.35 | % | ||||||||||||
| Net interest income and margin (1) (3) | $ | 93,728 | 4.21 | % | $ | 99,340 | 4.34 | % | $ | 68,207 | 3.39 | % |
(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 March 31, 2023, decreased $5.6 million or 5.6% to $93.7 million compared to $99.3 million during the three months ended December 31, 2022. In addition, net interest margin declined 13 basis points to 4.21%, compared to the trailing quarter. The decrease in net interest income is primarily attributed to an additional $3.0 million in deposit interest expense and $2.4 million in additional interest expense on other borrowings, both due to increases in interest rates as compared to the trailing quarter, respectively. Total interest income was effectively unchanged as compared to the trailing quarter, down $0.1 million or 0.1%.
As compared to the same quarter in the prior year, average loan yields, excluding PPP, increased 56 basis points from 4.65% during the three months ended March 31, 2022, to 5.21% during the three months ended March 31, 2023. The accretion of discounts from acquired loans added 9 and 7 basis points to loan yields during the quarters ended March 31, 2023 and March 31, 2022, respectively.
The rates paid on interest bearing deposits increased by 25 basis points during the quarter ended March 31, 2023, compared to the trailing quarter. The cost of interest-bearing deposits increased by 37 basis points between the quarter ended March 31, 2023, and the same quarter of the prior year. In addition, the level of noninterest-bearing deposits decreased by $290.3 million quarter over quarter but remains $320.1 million above quarter ended March 31, 2022. As of March 31, 2023, the ratio of average total noninterest-bearing deposits to total average deposits was 41.0%, as compared to 42.9% and 40.6% at December 31, 2022 and March 31, 2022, respectively.
Interest Rates and Earning Asset Composition
During the quarter ended March 31, 2023, 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 March 31, 2023, the Company's loan portfolio consisted of approximately $6.4 billion in outstanding principal with a weighted average coupon rate of 5.0%. During the three-month periods ending March 31, 2023, December 31, 2022, and September 30, 2022, the weighted average coupon on loan production in the quarter was 6.55%, 6.25%, and 5.24%, respectively. Included in the March 31, 2023 loan total are variable rate loans totaling $3.6 billion, of which, $810.8 million are considered floating based on the Wall Street Prime index. In addition, the Company holds certain investment securities totaling $384.1 million which are subject to repricing on not less than a quarterly basis.
Asset Quality and Credit Loss Provisioning
During the three months ended March 31, 2023, the Company recorded a provision for credit losses of $4.2 million, as compared to $4.2 million during the trailing quarter, and $8.3 million during the first quarter of 2022.
The following table presents details of the provision for credit losses for the periods indicated:
| Three months ended | ||||||
|---|---|---|---|---|---|---|
| (dollars in thousands) | March 31, 2023 | December 31, 2022 | March 31, 2022 | |||
| Addition to allowance for credit losses | $ | 4,315 | $ | 4,300 | $ | 8,205 |
| Addition to (reversal of) reserve for unfunded loan commitments | (120) | (55) | 125 | |||
| Total provision for credit losses | $ | 4,195 | $ | 4,245 | $ | 8,330 |
The following table presents the activity in the allowance for credit losses on loans for the periods indicated:
| Three months ended | ||||||
|---|---|---|---|---|---|---|
| (dollars in thousands) | March 31, 2023 | December 31, 2022 | March 31, 2022 | |||
| Balance, beginning of period | $ | 105,680 | $ | 101,488 | $ | 85,376 |
| ACL at acquisition for PCD loans | — | — | 2,037 | |||
| Provision for credit losses | 4,315 | 4,300 | 8,205 | |||
| Loans charged-off | (1,758) | (174) | (743) | |||
| Recoveries of previously charged-off loans | 170 | 66 | 1,174 | |||
| Balance, end of period | $ | 108,407 | $ | 105,680 | $ | 96,049 |
The allowance for credit losses (ACL) was $108.4 million as of March 31, 2023, a net increase of $2.7 million over the immediately preceding quarter. The provision for credit losses of $4.3 million during the recent quarter was the net effect of increases in required reserves due to qualitative factors, individually analyzed credits and quantitative reserves under the cohort model. On a comparative basis, the provision for credit losses of $8.2 million during the three months ended March 31, 2022 was largely the result of day 1 required reserves from loans acquired in connection with the Valley Republic Bank merger in the same period. For the current quarter, the qualitative components of the ACL resulted in a net increase in required reserves totaling approximately $4.7 million due to increased uncertainty in US economic policy, and the ramifications on local and statewide unemployment rates. Meanwhile, the quantitative component of the ACL decreased reserve requirements by approximately $1.9 million over the trailing quarter due to improvement in needed in specific reserves on loans.
The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date. This forecast data continues to evolve and included improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date, particularly CA unemployment trends. As compared to historical norms, inflation remains elevated from continued disruptions in the supply chain, wage pressures, and higher living costs such as housing and food prices Despite the expected continued benefit to the net interest income of the Company from the elevated rate environment, Management notes the rapid intervals of rate increases by the Federal Reserve and flattening or inversion of the yield curve, have boosted expectations of the US entering a recession within 12 months. As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors.
Loans past due 30 days or more increased by $2.9 million during the quarter ended March 31, 2023, to $7.9 million, as compared to $4.9 million at December 31, 2022. Non-performing loans were $16.0 million at March 31, 2023, a decrease of $5.3 million from $21.3 million as of December 31, 2022, and a decrease of $1.9 million from $14.1 million as of March 31, 2022. Of the $16.0 million loans designated as non-performing, approximately $10.2 million are less than 30 days past due as of March 31, 2023.
The following table illustrates the total loans by risk rating and their respective percentage of total loans for the periods presented:
| March 31, | % of Loans Outstanding | December 31, | % of Loans Outstanding | March 31, | % of Loans Outstanding | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | 2023 | 2022 | 2022 | |||||||||||||
| Risk Rating: | ||||||||||||||||
| Pass | $ | 6,232,962 | 97.0 | % | $ | 6,251,945 | 96.9 | % | $ | 5,682,026 | 97.1 | % | ||||
| Special Mention | 125,492 | 2.0 | % | 127,000 | 2.0 | % | 120,684 | 2.1 | % | |||||||
| Substandard | 63,967 | 1.0 | % | 71,502 | 1.1 | % | 49,265 | 0.8 | % | |||||||
| Total | $ | 6,422,421 | $ | 6,450,447 | $ | 5,851,975 | ||||||||||
| Classified loans to total loans | 1.00 | % | 1.11 | % | 0.84 | % | ||||||||||
| Loans past due 30+ days to total loans | 0.12 | % | 0.08 | % | 0.14 | % |
The ratio of classified loans decreased to 1.00% as of March 31, 2023, as compared to 1.11% in the trailing quarter, but increased by 16 basis points from the equivalent period in 2022. The Company's criticized loan balances decreased during the current quarter by $9.0 million to $189.5 million as of March 31, 2023.
There were no changes to Other Real Estate Owned balances during the first quarter of 2023. As of March 31, 2023, other real estate owned consisted of nine properties with a carrying value of approximately $3.4 million.
Non-performing assets of $19.5 million at March 31, 2023, represented 0.20% of total assets, generally in line with the $24.8 million or 0.25% and $17.0 million or 0.17% as of December 31, 2022 and March 31, 2022, respectively.
Allocation of Credit Loss Reserves by Loan Type
| As of March 31, 2023 | As of December 31, 2022 | As of March 31, 2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | Amount | % of Loans Outstanding | Amount | % of Loans Outstanding | Amount | % of Loans Outstanding | ||||||
| Commercial real estate: | ||||||||||||
| CRE - Non Owner Occupied | $ | 32,963 | 1.53 | % | $ | 30,962 | 1.44 | % | $ | 28,055 | 1.48 | % |
| CRE - Owner Occupied | 14,559 | 1.50 | % | 14,014 | 1.42 | % | 12,071 | 1.42 | % | |||
| Multifamily | 13,873 | 1.47 | % | 13,132 | 1.39 | % | 11,987 | 1.43 | % | |||
| Farmland | 3,542 | 1.29 | % | 3,273 | 1.17 | % | 2,879 | 1.15 | % | |||
| Total commercial real estate loans | 64,937 | 1.49 | % | 61,381 | 1.41 | % | 54,992 | 1.43 | % | |||
| Consumer: | ||||||||||||
| SFR 1-4 1st Liens | 11,920 | 1.48 | % | 11,268 | 1.43 | % | 10,669 | 1.50 | % | |||
| SFR HELOCs and Junior Liens | 10,914 | 2.91 | % | 11,413 | 2.90 | % | 10,843 | 2.99 | % | |||
| Other | 2,062 | 3.76 | % | 1,958 | 3.45 | % | 2,340 | 3.73 | % | |||
| Total consumer loans | 24,896 | 2.02 | % | 24,639 | 1.99 | % | 23,852 | 2.10 | % | |||
| Commercial and Industrial | 12,069 | 2.18 | % | 13,597 | 2.39 | % | 8,869 | 1.77 | % | |||
| Construction | 5,655 | 2.50 | % | 5,142 | 2.43 | % | 7,437 | 2.45 | % | |||
| Agricultural Production | 833 | 1.77 | % | 906 | 1.48 | % | 883 | 1.27 | % | |||
| Leases | 17 | 0.20 | % | 15 | 0.19 | % | 16 | 0.20 | % | |||
| Allowance for credit losses | 108,407 | 1.69 | % | 105,680 | 1.64 | % | 96,049 | 1.64 | % | |||
| Reserve for unfunded loan commitments | 4,195 | 4,315 | 3,915 | |||||||||
| Total allowance for credit losses | $ | 112,602 | 1.75 | % | $ | 109,995 | 1.71 | % | $ | 99,964 | 1.71 | % |
For the periods presented in the table above and for purposes of calculating the "% of Loans Outstanding", PPP loans are included in the segment "Commercial and Industrial." PPP loans are fully guaranteed and therefore would not require any loss reserve allocation. Excluding the net outstanding balances of PPP loans from the ratio of the ACL to total loans results in a reserve ratio of approximately 1.69% as of March 31, 2023. 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 March 31, 2023, the unamortized discount associated with acquired loans totaled $29.1 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) | March 31, 2023 | December 31, 2022 | Change | % Change | ||||
| ATM and interchange fees | $ | 6,344 | $ | 6,826 | $ | (482) | (7.1) | % |
| Service charges on deposit accounts | 3,431 | 4,103 | (672) | (16.4) | % | |||
| Other service fees | 1,166 | 1,091 | 75 | 6.9 | % | |||
| Mortgage banking service fees | 465 | 465 | — | — | % | |||
| Change in value of mortgage servicing rights | (209) | (142) | (67) | 47.2 | % | |||
| Total service charges and fees | 11,197 | 12,343 | (1,146) | (9.3) | % | |||
| Increase in cash value of life insurance | 802 | 809 | (7) | (0.9) | % | |||
| Asset management and commission income | 934 | 1,040 | (106) | (10.2) | % | |||
| Gain on sale of loans | 206 | 197 | 9 | 4.6 | % | |||
| Lease brokerage income | 98 | 172 | (74) | (43.0) | % | |||
| Sale of customer checks | 288 | 296 | (8) | (2.7) | % | |||
| Loss on sale of investment securities | (164) | — | (164) | — | % | |||
| Gain on marketable equity securities | 42 | 6 | 36 | 600.0 | % | |||
| Other income | 232 | 1,017 | (785) | (77.2) | % | |||
| Total other non-interest income | 2,438 | 3,537 | (1,099) | (31.1) | % | |||
| Total non-interest income | $ | 13,635 | $ | 15,880 | $ | (2,245) | (14.1) | % |
Non-interest income decreased $2.2 million or 14.1% to $13.6 million during the three months ended March 31, 2023, compared to $15.9 million during the quarter ended December 31, 2022. Total service charges and fees declined by $1.1 million or 9.3% during the period, of which $0.9 million is due to waived or reversed fees related to the network outage disclosed in the Company's 8-K filed with the SEC on February 14, 2023. A loss on the sale of investment securities totaling $0.2 million was recorded during the quarter in connection with the Company's strategic sale of $24.3 million in available-for-sale securities. Other income decreased by $0.8 million, $0.6 million of which was non-recurring income recognized in the prior period for fees earned from the temporary sale of deposits.
The following table presents the key components of non-interest income for the current and prior year periods indicated:
| Three months ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | 2023 | 2022 | Change | % Change | ||||
| ATM and interchange fees | $ | 6,344 | $ | 6,243 | $ | 101 | 1.6 | % |
| Service charges on deposit accounts | 3,431 | 3,834 | (403) | (10.5) | % | |||
| Other service fees | 1,166 | 882 | 284 | 32.2 | % | |||
| Mortgage banking service fees | 465 | 463 | 2 | 0.4 | % | |||
| Change in value of mortgage servicing rights | (209) | 274 | (483) | (176.3) | % | |||
| Total service charges and fees | 11,197 | 11,696 | (499) | (4.3) | % | |||
| Increase in cash value of life insurance | 802 | 638 | 164 | 25.7 | % | |||
| Asset management and commission income | 934 | 887 | 47 | 5.3 | % | |||
| Gain on sale of loans | 206 | 1,246 | (1,040) | (83.5) | % | |||
| Lease brokerage income | 98 | 158 | (60) | (38.0) | % | |||
| Sale of customer checks | 288 | 104 | 184 | 176.9 | % | |||
| Loss on sale of investment securities | (164) | — | (164) | — | % | |||
| Gain (loss) on marketable equity securities | 42 | (137) | 179 | (130.7) | % | |||
| Other income | 232 | 504 | (272) | (54.0) | % | |||
| Total other non-interest income | 2,438 | 3,400 | (962) | (28.3) | % | |||
| Total non-interest income | $ | 13,635 | $ | 15,096 | $ | (1,461) | (9.7) | % |
Non-interest income decreased $1.5 million or 9.7% to $13.6 million during the three months ended March 31, 2023, compared to $15.1 million during the quarter ended March 31, 2022. In addition to a decline in service charges and fees noted above, the declining
mortgage related activity resulting from elevated interest rates reduced income recorded from the sale of loans by $1.0 million or 83.5%, as compared to the three months ended March 31, 2022.
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) | March 31, 2023 | December 31, 2022 | Change | % Change | ||||
| Base salaries, net of deferred loan origination costs | $ | 23,000 | $ | 22,099 | $ | 901 | 4.1 | % |
| Incentive compensation | 2,895 | 6,211 | (3,316) | (53.4) | % | |||
| Benefits and other compensation costs | 6,668 | 8,301 | (1,633) | (19.7) | % | |||
| Total salaries and benefits expense | 32,563 | 36,611 | (4,048) | (11.1) | % | |||
| Occupancy | 4,160 | 3,957 | 203 | 5.1 | % | |||
| Data processing and software | 4,032 | 4,102 | (70) | (1.7) | % | |||
| Equipment | 1,383 | 1,525 | (142) | (9.3) | % | |||
| Intangible amortization | 1,656 | 1,702 | (46) | (2.7) | % | |||
| Advertising | 759 | 1,249 | (490) | (39.2) | % | |||
| ATM and POS network charges | 1,709 | 2,134 | (425) | (19.9) | % | |||
| Professional fees | 1,589 | 1,111 | 478 | 43.0 | % | |||
| Telecommunications | 595 | 638 | (43) | (6.7) | % | |||
| Regulatory assessments and insurance | 792 | 815 | (23) | (2.8) | % | |||
| Postage | 299 | 319 | (20) | (6.3) | % | |||
| Operational loss | 435 | 235 | 200 | 85.1 | % | |||
| Courier service | 339 | 616 | (277) | (45.0) | % | |||
| Gain on sale or acquisition of foreclosed assets | — | (235) | 235 | (100.0) | % | |||
| Gain on disposal of fixed assets | — | (1) | 1 | (100.0) | % | |||
| Other miscellaneous expense | 3,483 | 4,691 | (1,208) | (25.8) | % | |||
| Total other non-interest expense | 21,231 | 22,858 | (1,627) | (7.1) | % | |||
| Total non-interest expense | $ | 53,794 | $ | 59,469 | $ | (5,675) | (9.5) | % |
| Average full-time equivalent staff | 1,219 | 1,210 | 9 | 0.7 | % |
Non-interest expense for the quarter ended March 31, 2023, decreased $5.7 million or 9.5% to $53.8 million as compared to $59.5 million during the trailing quarter ended December 31, 2022. Total salaries and benefits expense decreased by $4.0 million or 11.1%, led primarily by a $3.3 million reduction in incentive compensation expense. The Company also recorded approximately $2.0 million less in benefits and other compensation costs as compared to the trailing quarter, following the amendments to certain retirement plans announced in December of 2022. Advertising costs decreased $0.5 million or 39.2% during the quarter, connected to a decrease in media advertising for promotional campaigns. ATM and point of service network charges decreased $0.4 million or 19.9% to $1.7 million, primarily due to one-time card processing equipment conversion expenses of $0.3 million in the previous quarter. Professional fees increased by $0.5 million and included $0.7 million associated with the network outage disclosed in the Company's 8-K filed with the SEC on February 14, 2023. Finally, other miscellaneous expenses decreased $1.2 million or 25.8%, largely from $0.7 million less in appraisal and other loan costs.
The following table presents the key components of non-interest expense for the current and prior year quarterly periods indicated:
| Three months ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | 2023 | 2022 | Change | % Change | ||||
| Base salaries, net of deferred loan origination costs | $ | 23,000 | $ | 18,216 | $ | 4,784 | 26.3 | % |
| Incentive compensation | 2,895 | 2,583 | 312 | 12.1 | % | |||
| Benefits and other compensation costs | 6,668 | 5,972 | 696 | 11.7 | % | |||
| Total salaries and benefits expense | 32,563 | 26,771 | 5,792 | 21.6 | % | |||
| Occupancy | 4,160 | 3,575 | 585 | 16.4 | % | |||
| Data processing and software | 4,032 | 3,513 | 519 | 14.8 | % | |||
| Equipment | 1,383 | 1,333 | 50 | 3.8 | % | |||
| Intangible amortization | 1,656 | 1,228 | 428 | 34.9 | % | |||
| Advertising | 759 | 637 | 122 | 19.2 | % | |||
| ATM and POS network charges | 1,709 | 1,375 | 334 | 24.3 | % | |||
| Professional fees | 1,589 | 876 | 713 | 81.4 | % | |||
| Telecommunications | 595 | 521 | 74 | 14.2 | % | |||
| Regulatory assessments and insurance | 792 | 720 | 72 | 10.0 | % | |||
| Merger and acquisition expenses | — | 4,032 | (4,032) | (100.0) | % | |||
| Postage | 299 | 228 | 71 | 31.1 | % | |||
| Operational loss | 435 | (183) | 618 | (337.7) | % | |||
| Courier service | 339 | 414 | (75) | (18.1) | % | |||
| Loss on disposal of fixed assets | — | (1,078) | 1,078 | (100.0) | % | |||
| Other miscellaneous expense | 3,483 | 2,485 | 998 | 40.2 | % | |||
| Total other non-interest expense | 21,231 | 19,676 | 1,555 | 7.9 | % | |||
| Total non-interest expense | $ | 53,794 | $ | 46,447 | $ | 7,347 | 15.8 | % |
| Average full-time equivalent staff | 1,219 | 1,084 | 135 | 12.5 | % |
Generally, the increases in recurring non-interest expense items reflect the VRB merger closing on March 25, 2022, and therefore, related expenses for the combined entities, less certain realized cost savings, are largely only being captured within the most recent three months ended March 31, 2023. Total non-interest expense increased $7.3 million or 15.8% to $53.8 million during the three months ended March 31, 2023 as compared to $46.4 million for the quarter ended March 31, 2022. Total salaries and benefits expense increased by $5.8 million or 21.6% to $32.6 million, largely from a net increase of 135 full-time equivalent positions, 99 of which resulted from the aforementioned merger with VRB. Professional fees increased by $0.7 million which was directly associated with the network outage disclosed in the Company's 8-K filed with the SEC on February 14, 2023.
Provision for Income Taxes
The Company’s effective tax rate was 26.8% for the quarter ended March 31, 2023, as compared to 27.9% for the year ended December 31, 2022. Differences between the Company's effective tax rate and applicable federal and state blended statutory rate of approximately 29.6% are due to the proportion of non-taxable revenues, non-deductible expenses, and benefits from tax credits as compared to the levels of pre-tax earnings.
About TriCo Bancshares
Established in 1975, Tri Counties Bank is a wholly-owned subsidiary of TriCo Bancshares (NASDAQ: TCBK) headquartered in Chico, California, providing a unique brand of customer Service with Solutions available in traditional stand-alone and in-store bank branches and loan production offices in communities throughout California. Tri Counties Bank provides an extensive and competitive breadth of consumer, small business and commercial banking financial services, along with convenient around-the-clock ATMs, online and mobile banking access. Brokerage services are provided by Tri Counties Advisors through affiliation with Raymond James Financial Services, Inc. Visit www.TriCountiesBank.com to learn more.
Forward-Looking Statements
The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. There can be no assurance that future developments affecting us will be the same as those anticipated by management. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations impacts on the Company's business condition and financial operating results; the impact of changes in financial services industry policies, laws and regulations; regulatory restrictions on 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 economic and business environments in which the Company operates; the continuing adverse impact on the U.S. economy, including the markets in which we operate due to the lingering effects of the COVID-19 global pandemic; 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, 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; the quality and quantity of our deposits; 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 mergers, acquisitions or dispositions, or identify and complete favorable transactions in the future, and/or realize the contemplated financial business benefits associated with any such activities; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the 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 lending 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 timing and effects of the implementation of the current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effectiveness of the Company's asset management activities 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; possible other-than-temporary impairment of securities held by us due to changes in credit quality or rates; 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; our noninterest expense and the efficiency ratio; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; the challenges of attracting, integrating and retaining key employees; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; 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; increased data security risks due to work from home arrangements and email vulnerability; failure to safeguard personal information; changes to U.S. tax policies, including our effective income tax rate; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the transition away from the London Interbank Offered Rate toward new interest rate benchmarks; and our ability to manage the risks involved in the foregoing. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2022, which has been filed with the Securities and Exchange Commission (the “SEC”) and all subsequent filings with the SEC under Sections 13(a), 13(c), 14, and 15(d) of the Securities Act of 1934, as amended. Such filings are also available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. We undertake no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)
| Three months ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | June 30,<br>2022 | March 31,<br>2022 | |||||||||||
| Revenue and Expense Data | |||||||||||||||
| Interest income | $ | 102,907 | $ | 102,989 | $ | 96,366 | $ | 86,955 | $ | 69,195 | |||||
| Interest expense | 9,571 | 4,089 | 2,260 | 1,909 | 1,271 | ||||||||||
| Net interest income | 93,336 | 98,900 | 94,106 | 85,046 | 67,924 | ||||||||||
| Provision for credit losses | 4,195 | 4,245 | 3,795 | 2,100 | 8,330 | ||||||||||
| Noninterest income: | |||||||||||||||
| Service charges and fees | 11,197 | 12,343 | 12,682 | 13,044 | 11,696 | ||||||||||
| Loss on sale of investment securities | (164) | — | — | — | — | ||||||||||
| Other income | 2,602 | 3,537 | 2,958 | 3,386 | 3,400 | ||||||||||
| Total noninterest income | 13,635 | 15,880 | 15,640 | 16,430 | 15,096 | ||||||||||
| Noninterest expense (2): | |||||||||||||||
| Salaries and benefits | 32,563 | 36,611 | 33,528 | 34,370 | 28,597 | ||||||||||
| Occupancy and equipment | 5,543 | 5,482 | 5,387 | 5,449 | 4,925 | ||||||||||
| Data processing and network | 5,741 | 6,236 | 5,143 | 5,468 | 5,089 | ||||||||||
| Other noninterest expense | 9,947 | 11,140 | 10,407 | 10,977 | 7,836 | ||||||||||
| Total noninterest expense | 53,794 | 59,469 | 54,465 | 56,264 | 46,447 | ||||||||||
| Total income before taxes | 48,982 | 51,066 | 51,486 | 43,112 | 28,243 | ||||||||||
| Provision for income taxes | 13,149 | 14,723 | 14,148 | 11,748 | 7,869 | ||||||||||
| Net income | $ | 35,833 | $ | 36,343 | $ | 37,338 | $ | 31,364 | $ | 20,374 | |||||
| Share Data | |||||||||||||||
| Basic earnings per share | $ | 1.08 | $ | 1.09 | $ | 1.12 | $ | 0.93 | $ | 0.68 | |||||
| Diluted earnings per share | $ | 1.07 | $ | 1.09 | $ | 1.12 | $ | 0.93 | $ | 0.67 | |||||
| Dividends per share | $ | 0.30 | $ | 0.30 | $ | 0.30 | $ | 0.25 | $ | 0.25 | |||||
| Book value per common share | $ | 32.84 | $ | 31.39 | $ | 29.71 | $ | 31.25 | $ | 32.78 | |||||
| Tangible book value per common share (1) | $ | 23.22 | $ | 21.76 | $ | 19.92 | $ | 21.41 | $ | 23.04 | |||||
| Shares outstanding | 33,195,250 | 33,331,513 | 33,332,189 | 33,350,974 | 33,837,935 | ||||||||||
| Weighted average shares | 33,295,750 | 33,330,029 | 33,348,322 | 33,561,389 | 30,049,919 | ||||||||||
| Weighted average diluted shares | 33,437,680 | 33,467,393 | 33,463,364 | 33,705,280 | 30,201,698 | ||||||||||
| Credit Quality | |||||||||||||||
| Allowance for credit losses to gross loans | 1.69 | % | 1.64 | % | 1.61 | % | 1.60 | % | 1.64 | % | |||||
| Loans past due 30 days or more | $ | 7,891 | $ | 4,947 | $ | 6,471 | $ | 5,920 | $ | 8,402 | |||||
| Total nonperforming loans | $ | 16,025 | $ | 21,321 | $ | 17,471 | $ | 11,925 | $ | 14,088 | |||||
| Total nonperforming assets | $ | 19,464 | $ | 24,760 | $ | 20,912 | $ | 15,304 | $ | 16,995 | |||||
| Loans charged-off | $ | 1,758 | $ | 174 | $ | 267 | $ | 401 | $ | 743 | |||||
| Loans recovered | $ | 170 | $ | 66 | $ | 311 | $ | 356 | $ | 1,174 | |||||
| Selected Financial Ratios | |||||||||||||||
| Return on average total assets | 1.47 | % | 1.45 | % | 1.46 | % | 1.24 | % | 0.94 | % | |||||
| Return on average equity | 13.36 | % | 14.19 | % | 13.78 | % | 11.53 | % | 8.19 | % | |||||
| Average yield on loans, excluding PPP | 5.21 | % | 5.10 | % | 4.87 | % | 4.70 | % | 4.65 | % | |||||
| Average yield on interest-earning assets | 4.64 | % | 4.52 | % | 4.12 | % | 3.76 | % | 3.46 | % | |||||
| Average rate on interest-bearing deposits | 0.43 | % | 0.18 | % | 0.08 | % | 0.07 | % | 0.06 | % | |||||
| Average cost of total deposits | 0.25 | % | 0.10 | % | 0.04 | % | 0.04 | % | 0.04 | % | |||||
| Average cost of total deposits and other borrowings | 0.38 | % | 0.12 | % | 0.04 | % | 0.02 | % | 0.02 | % | |||||
| Average rate on borrowings & subordinated debt | 4.74 | % | 4.07 | % | 3.60 | % | 3.12 | % | 2.27 | % | |||||
| Average rate on interest-bearing liabilities | 0.74 | % | 0.32 | % | 0.17 | % | 0.15 | % | 0.11 | % | |||||
| Net interest margin (fully tax-equivalent) (1) | 4.21 | % | 4.34 | % | 4.02 | % | 3.67 | % | 3.39 | % | |||||
| Loans to deposits | 80.02 | % | 77.45 | % | 72.95 | % | 69.81 | % | 67.15 | % | |||||
| Efficiency ratio | 50.29 | % | 51.81 | % | 49.63 | % | 55.45 | % | 55.95 | % | |||||
| Supplemental Loan Interest Income Data | |||||||||||||||
| Discount accretion on acquired loans | $ | 1,397 | $ | 1,751 | $ | 714 | $ | 1,677 | $ | 1,323 | |||||
| All other loan interest income (excluding PPP) (1) | $ | 81,013 | $ | 79,989 | $ | 74,929 | $ | 67,277 | $ | 55,325 | |||||
| Total loan interest income (excluding PPP) (1) | $ | 82,410 | $ | 81,740 | $ | 75,643 | $ | 68,954 | $ | 56,648 |
(1) Non-GAAP measure
(2) Inclusive of merger related expenses
TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)
| Balance Sheet Data | March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | June 30,<br>2022 | March 31,<br>2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash and due from banks | $ | 110,335 | $ | 107,230 | $ | 246,509 | $ | 488,868 | $ | 1,035,683 | |||||
| Securities, available for sale, net | 2,408,452 | 2,455,036 | 2,482,857 | 2,608,771 | 2,365,708 | ||||||||||
| Securities, held to maturity, net | 152,067 | 160,983 | 168,038 | 176,794 | 186,748 | ||||||||||
| Restricted equity securities | 17,250 | 17,250 | 17,250 | 17,250 | 17,250 | ||||||||||
| Loans held for sale | 226 | 1,846 | 247 | 1,216 | 1,030 | ||||||||||
| Loans: | |||||||||||||||
| Commercial real estate | 4,353,959 | 4,359,083 | 4,238,930 | 4,049,893 | 3,832,974 | ||||||||||
| Consumer | 1,233,797 | 1,240,743 | 1,217,297 | 1,162,989 | 1,136,712 | ||||||||||
| Commercial and industrial | 553,098 | 569,921 | 534,960 | 507,685 | 500,882 | ||||||||||
| Construction | 225,996 | 211,560 | 243,571 | 313,646 | 303,960 | ||||||||||
| Agriculture production | 47,062 | 61,414 | 71,599 | 71,373 | 69,339 | ||||||||||
| Leases | 8,509 | 7,726 | 7,933 | 7,835 | 8,108 | ||||||||||
| Total loans, gross | 6,422,421 | 6,450,447 | 6,314,290 | 6,113,421 | 5,851,975 | ||||||||||
| Allowance for credit losses | (108,407) | (105,680) | (101,488) | (97,944) | (96,049) | ||||||||||
| Total loans, net | 6,314,014 | 6,344,767 | 6,212,802 | 6,015,477 | 5,755,926 | ||||||||||
| Premises and equipment | 72,096 | 72,327 | 73,266 | 73,811 | 73,692 | ||||||||||
| Cash value of life insurance | 134,544 | 133,742 | 132,933 | 132,857 | 132,104 | ||||||||||
| Accrued interest receivable | 31,388 | 31,856 | 27,070 | 25,861 | 22,769 | ||||||||||
| Goodwill | 304,442 | 304,442 | 307,942 | 307,942 | 307,942 | ||||||||||
| Other intangible assets | 15,014 | 16,670 | 18,372 | 20,074 | 21,776 | ||||||||||
| Operating leases, right-of-use | 30,000 | 26,862 | 26,622 | 27,154 | 28,404 | ||||||||||
| Other assets | 252,566 | 257,975 | 262,971 | 224,536 | 169,296 | ||||||||||
| Total assets | $ | 9,842,394 | $ | 9,930,986 | $ | 9,976,879 | $ | 10,120,611 | $ | 10,118,328 | |||||
| Deposits: | |||||||||||||||
| Noninterest-bearing demand deposits | $ | 3,236,696 | $ | 3,502,095 | $ | 3,678,202 | $ | 3,604,237 | $ | 3,583,269 | |||||
| Interest-bearing demand deposits | 1,635,706 | 1,718,541 | 1,749,123 | 1,796,580 | 1,788,639 | ||||||||||
| Savings deposits | 2,807,796 | 2,884,378 | 2,924,674 | 3,028,787 | 2,993,873 | ||||||||||
| Time certificates | 345,667 | 223,999 | 303,770 | 327,171 | 348,696 | ||||||||||
| Total deposits | 8,025,865 | 8,329,013 | 8,655,769 | 8,756,775 | 8,714,477 | ||||||||||
| Accrued interest payable | 1,643 | 1,167 | 853 | 755 | 653 | ||||||||||
| Operating lease liability | 32,228 | 29,004 | 28,717 | 29,283 | 30,500 | ||||||||||
| Other liabilities | 157,222 | 159,741 | 153,110 | 155,529 | 126,348 | ||||||||||
| Other borrowings | 434,140 | 264,605 | 47,068 | 35,089 | 36,184 | ||||||||||
| Junior subordinated debt | 101,051 | 101,040 | 101,024 | 101,003 | 100,984 | ||||||||||
| Total liabilities | 8,752,149 | 8,884,570 | 8,986,541 | 9,078,434 | 9,009,146 | ||||||||||
| Common stock | 695,168 | 697,448 | 696,348 | 696,441 | 706,672 | ||||||||||
| Retained earnings | 564,538 | 542,873 | 516,699 | 491,705 | 479,868 | ||||||||||
| Accum. other comprehensive loss, net of tax | (169,461) | (193,905) | (222,709) | (145,969) | (77,358) | ||||||||||
| Total shareholders’ equity | $ | 1,090,245 | $ | 1,046,416 | $ | 990,338 | $ | 1,042,177 | $ | 1,109,182 | |||||
| Quarterly Average Balance Data | |||||||||||||||
| Average loans, excluding PPP | $ | 6,412,386 | $ | 6,357,250 | $ | 6,162,267 | $ | 5,890,578 | $ | 4,937,865 | |||||
| Average interest-earning assets | $ | 9,028,061 | $ | 9,076,450 | $ | 9,320,152 | $ | 9,330,059 | $ | 8,153,200 | |||||
| Average total assets | $ | 9,878,927 | $ | 9,932,931 | $ | 10,131,118 | $ | 10,121,714 | $ | 8,778,256 | |||||
| Average deposits | $ | 8,218,576 | $ | 8,545,172 | $ | 8,752,215 | $ | 8,743,320 | $ | 7,521,930 | |||||
| Average borrowings and subordinated debt | $ | 378,676 | $ | 186,957 | $ | 139,919 | $ | 136,244 | $ | 105,702 | |||||
| Average total equity | $ | 1,087,473 | $ | 1,016,468 | $ | 1,074,776 | $ | 1,091,454 | $ | 1,009,224 | |||||
| Capital Ratio Data | |||||||||||||||
| Total risk-based capital ratio | 14.5 | % | 14.2 | % | 14.0 | % | 14.1 | % | 15.0 | % | |||||
| Tier 1 capital ratio | 12.7 | % | 12.4 | % | 12.2 | % | 12.3 | % | 13.1 | % | |||||
| Tier 1 common equity ratio | 12.0 | % | 11.7 | % | 11.4 | % | 11.5 | % | 12.3 | % | |||||
| Tier 1 leverage ratio | 10.2 | % | 10.1 | % | 9.6 | % | 9.3 | % | 10.8 | % | |||||
| Tangible capital ratio (1) | 8.1 | % | 7.6 | % | 6.9 | % | 7.3 | % | 8.0 | % |
(1) Non-GAAP measure
TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES
(Unaudited. Dollars in thousands)
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this press release because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results, and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:
| Three months ended | |||
|---|---|---|---|
| (dollars in thousands) | March 31,2023 | December 31,2022 | March 31,2022 |
| Net interest margin | |||
| Acquired loans discount accretion, net: | |||
| Amount (included in interest income) | 1,397 | 1,751 | 1,323 |
| Effect on average loan yield | 0.09 | 0.11 | 0.11 |
| Effect on net interest margin (FTE) | 0.06 | 0.07 | 0.07 |
| Net interest margin (FTE) | 4.21 | 4.34 | 3.39 |
| Net interest margin less effect of acquired loan discount accretion (Non-GAAP) | 4.15 | 4.27 | 3.32 |
| PPP loans yield, net: | |||
| Amount (included in interest income) | 5 | 16 | 1,097 |
| Effect on net interest margin (FTE) | — | — | 0.03 |
| Net interest margin less effect of PPP loan yield (Non-GAAP) | 4.21 | 4.34 | 3.36 |
| Acquired loan discount accretion and PPP loan yield, net: | |||
| Amount (included in interest income) | 1,402 | 1,767 | 2,420 |
| Effect on net interest margin (FTE) | 0.06 | 0.07 | 0.10 |
| Net interest margin less effect of acquired loan discount accretion and PPP yields, net (Non-GAAP) | 4.15 | 4.27 | 3.29 |
All values are in US Dollars.
| Three months ended | |||
|---|---|---|---|
| (dollars in thousands) | March 31,2023 | December 31,2022 | March 31,2022 |
| Pre-tax pre-provision return on average assets or equity | |||
| Net income (GAAP) | 35,833 | 36,343 | 20,374 |
| Exclude provision for income taxes | 13,149 | 14,723 | 7,869 |
| Exclude provision (benefit) for credit losses | 4,195 | 4,245 | 8,330 |
| Net income before income tax and provision expense (Non-GAAP) | 53,177 | 55,311 | 36,573 |
| Average assets (GAAP) | 9,878,927 | 9,932,931 | 8,778,256 |
| Average equity (GAAP) | 1,087,473 | 1,016,468 | 1,009,224 |
| Return on average assets (GAAP) (annualized) | 1.47 | 1.45 | 0.94 |
| Pre-tax pre-provision return on average assets (Non-GAAP) (annualized) | 2.18 | 2.21 | 1.69 |
| Return on average equity (GAAP) (annualized) | 13.36 | 14.19 | 8.19 |
| Pre-tax pre-provision return on average equity (Non-GAAP) (annualized) | 19.83 | 21.59 | 14.70 |
All values are in US Dollars.
| Three months ended | |||
|---|---|---|---|
| (dollars in thousands) | March 31,2023 | December 31,2022 | March 31,2022 |
| Return on tangible common equity | |||
| Average total shareholders' equity | 1,087,473 | 1,016,468 | 1,009,224 |
| Exclude average goodwill | 304,442 | 306,192 | 226,676 |
| Exclude average other intangibles | 15,842 | 17,521 | 12,604 |
| Average tangible common equity (Non-GAAP) | 767,189 | 692,755 | 769,944 |
| Net income (GAAP) | 35,833 | 36,343 | 20,374 |
| Exclude amortization of intangible assets, net of tax effect | 1,166 | 1,199 | 865 |
| Tangible net income available to common shareholders (Non-GAAP) | 36,999 | 37,542 | 21,239 |
| Return on average equity | 13.36 | 14.19 | 8.19 |
| Return on average tangible common equity (Non-GAAP) | 19.56 | 21.50 | 11.19 |
All values are in US Dollars.
| Three months ended | |||||
|---|---|---|---|---|---|
| (dollars in thousands) | March 31,2023 | December 31,2022 | September 30,2022 | June 30,2022 | March 31,2022 |
| Tangible shareholders' equity to tangible assets | |||||
| Shareholders' equity (GAAP) | 1,090,245 | 1,046,416 | 990,338 | 1,042,177 | 1,109,182 |
| Exclude goodwill and other intangible assets, net | 319,456 | 321,112 | 326,314 | 328,016 | 329,718 |
| Tangible shareholders' equity (Non-GAAP) | 770,789 | 725,304 | 664,024 | 714,161 | 779,464 |
| Total assets (GAAP) | 9,842,394 | 9,930,986 | 9,976,879 | 10,120,611 | 10,118,328 |
| Exclude goodwill and other intangible assets, net | 319,456 | 321,112 | 326,314 | 328,016 | 329,718 |
| Total tangible assets (Non-GAAP) | 9,522,938 | 9,609,874 | 9,650,565 | 9,792,595 | 9,788,610 |
| Shareholders' equity to total assets (GAAP) | 11.08 | 10.54 | 9.93 | 10.30 | 10.96 |
| Tangible shareholders' equity to tangible assets (Non-GAAP) | 8.09 | 7.55 | 6.88 | 7.29 | 7.96 |
All values are in US Dollars.
| Three months ended | |||||
|---|---|---|---|---|---|
| (dollars in thousands) | March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | June 30,<br>2022 | March 31,<br>2022 |
| Tangible common shareholders' equity per share | |||||
| Tangible s/h equity (Non-GAAP) | $770,789 | $725,304 | $664,024 | $714,161 | $779,464 |
| Common shares outstanding at end of period | 33,195,250 | 33,331,513 | 33,332,189 | 33,350,974 | 33,837,935 |
| Common s/h equity (book value) per share (GAAP) | $32.84 | $31.39 | $29.71 | $31.25 | $32.78 |
| Tangible common shareholders' equity (tangible book value) per share (Non-GAAP) | $23.22 | $21.76 | $19.92 | $21.41 | $23.04 |
*****************
15
a2023q1investorpresentat
Investor Presentation First Quarter 2023 Richard P. Smith, President & Chief Executive Officer Peter G. Wiese, EVP & Chief Financial Officer Dan K. Bailey, EVP & Chief Banking Officer John S. Fleshood, EVP & Chief Operating Officer Exhibit 99.2
Safe Harbor Statement Investor Presentation | First 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. There can be no assurance that future developments affecting us will be the same as those anticipated by management. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations impacts on the Company's business condition and financial operating results; the impact of changes in financial services industry policies, laws and regulations; regulatory restrictions on 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 economic and business environments in which the Company operates; the continuing adverse impact on the U.S. economy, including the markets in which we operate due to the lingering effects of the COVID-19 global pandemic; 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, 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; the quality and quantity of our deposits; 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 mergers, acquisitions or dispositions, or identify and complete favorable transactions in the future, and/or realize the contemplated financial business benefits associated with any such activities; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the 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 lending 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 timing and effects of the implementation of the current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effectiveness of the Company's asset management activities 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; possible other-than-temporary impairment of securities held by us due to changes in credit quality or rates; 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; our noninterest expense and the efficiency ratio; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; the challenges of attracting, integrating and retaining key employees; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; 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; increased data security risks due to work from home arrangements and email vulnerability; failure to safeguard personal information; changes to U.S. tax policies, including our effective income tax rate; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the transition away from the London Interbank Offered Rate toward new interest rate benchmarks; and our ability to manage the risks involved in the foregoing. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 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 | First 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 | First Quarter 2023
Most Recent Quarter Highlights Investor Presentation | First Quarter 20235 Operating Leverage and Profitability • Pre-tax pre-provision ROAA and ROAE were 2.18% and 19.83%, respectively, for the quarter ended March 31, 2023, and 1.69% and 14.70%, respectively, for the same quarter in the prior year • Our efficiency ratio was 50.3% for the quarter ended March 31, 2023, compared to 51.8% and 56.0% for the quarters ended December 31, 2022 and March 31, 2022, respectively Balance Sheet Management • Earning asset mix shift and liquidity management have been critical to our revenue generation and navigation of our total asset size which approximates $10 billion • Loan to deposit ratio has grown to 80.0% at March 31, 2023 compared to 67.2% a year ago • While cash flows generated from investment securities continue to perform as expected, management will remain opportunistic regarding the execution of portfolio sales while placing greater emphasis on the use of short-term borrowing or brokered deposits to support funding needs • Unrealized losses on HTM investment securities, and not recognized in equity through AOCI, represent less than 1% of total shareholders’ equity Liquidity • Readily available and unused funding sources, which total approximately $4.4 billion and represent 55% of total deposits and 191% of total estimated uninsured deposits. • No reliance on brokered deposits or FRB borrowing facilities during the quarter Net Interest Income and Margin • Net interest margin (FTE) of 4.21%, compared to 4.34% in the prior quarter, and 3.39% in March 31, 2022, was influenced by the rising rate environment, deposit pricing strategies, and increased borrowings • The loan portfolio yields increased 11 basis points to 5.21% during the quarter • Yield on earning assets (FTE) of 4.64% in the quarter, an increase of 12 basis points from 4.52% in the trailing quarter, partially offset increased funding costs in both deposits and borrowings Credit Quality • The allowance for credit losses to total loans was 1.69% as of March 31, 2023, compared to 1.64% as of December 31, 2022, and 1.64% as of March 31, 2022 • Classified loans to total loans was 1.00% at March 31, 2023 as compared to 1.11% December 31, 2022 • Loans past due 30+ days to total loans was 0.12% at quarter end Diverse Deposit Base • Non-interest-bearing deposits comprise 40.3% of total deposits • Deposit betas remain low with a cycle-to-date deposit beta of 4.42% Capital Strategies • Quarterly dividend of $0.30 or $1.20 annually • Approximately 1.2 million shares remain as being authorized for repurchase • Tangible capital ratio of 8.1% at March 31, 2023, an increase from 7.6% in the trailing quarter • Strength in core earnings is key to self-financed and self-funded growth
Company Overview Investor Presentation | First Quarter 20236 Nasdaq: TCBK Headquarters: Chico, California Stock Price*: $41.59 Market Cap.: $1.38 Billion Asset Size: $9.84 Billion Loans: $6.42 Billion Deposits: $8.03 Billion Bank Branches: 70 ATMs: 88 Bank ATMs, with access to over 37,000 in network Market Area: TriCo currently serves 31 counties throughout California • As of close of business March 31, 2023
Key Executive Management Themes and Topics 7 “Top of Mind for Today and Tomorrow” • Deposit Granularity and Liquidity – the Ability to Remain in a Position of Strength While Shifts in Money Supply Occur • Active Monitoring of Loans for Early Warning Signs While Maintaining Sufficient Reserves • Domestic Implications on Growing Global Economic and Political Uncertainty • Maintaining Investor and Depositor Confidence in the Strength of the Community Banking Industry, Inclusive of the Deposit Insurance Fund • Balancing Appropriate Risk Adjusted Loan Revenue • Divergent Actions of the FOMC and State / National Administrations • Capital, Scaling and Leverage – Meticulously Patient in Finding the Right Partner at the Right Time to Cross $10 Billion in Total Assets • Regulatory Focus Areas – Compliance, Data Governance and M&A Investor Presentation | First Quarter 2023
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Net Income ($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 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 $0.00 $0.40 $0.80 $1.20 $0 $4 $8 $12 $16 $20 $24 $28 $32 $36 $40 Q trl y EP S (d ilu te d) Ea rn in gs (i n M illi on s) Positive Earnings Track Record Investor Presentation | First 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
8.10% 10.75% 10.49% 7.18% 12.10% 11.67% 13.36% 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 $0.51 $0.53 $0.76 $0.59 $0.92 $1.12 $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 Q437% 27% 27% 41% 25% 29% 28% 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 $0.17 $0.17 $0.22 $0.22 $0.25 $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 $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 | First 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 QTD annualized
Consistent Growth Investor Presentation | First Quarter 202310 Organic Growth and Disciplined Acquisitions Asset Dollars in Billions. 5 yrs. 10 yrs. 15.5% 14.2% CAGR, Assets Trailing 10 years Trailing 5 quarters
11 Investor Presentation | First Quarter 2023 Deposits 11
Liability Mix: Strength in Funding Investor Presentation | First Quarter 202312 Total Deposits = $8.03 billion 93.7% of Funding Liabilities Liability Mix 03/31/2023 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, 37.0% Interest-bearing Demand & Savings Deposits, 50.8% Time Deposits, 3.9% Borrowings & Subordinated Debt, 6.1% Other liabilities, 2.2% 81 .6 76 .9 75 .9 72 .6 71 .8 70 .1 66 .9 66 .0 66 .4 69 .1 72 .1 76 .5 77 .8 0 20 40 60 80 100 120 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 Loans to Core Deposits (%) TCBK Peers 34 .9 39 .8 39 .7 39 .7 40 .3 40 .7 40 .7 40 .4 41 .1 41 .2 42 .5 42 .0 40 .3 0 10 20 30 40 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 Non Interest-bearing Deposits as % of Total Deposits TCBK Peers
Deposits: Strength in Cost of Funds Investor Presentation | First Quarter 202313 Balances presented in millions, end of period Relationship focused market share growth. Continued best in class total deposit Beta; (less than 4.42% rate rise cycle to date) $419 $399 $376 $345 $328 $324 $327 $298 $349 $327 $304 $224 $346 $3,101 $3,363 $3,446 $3,580 $3,769 $3,824 $3,967 $4,090 $4,783 $4,825 $4,674 $4,603 $4,443 $1,883 $2,487 $2,518 $2,582 $2,767 $2,844 $2,943 $2,980 $3,583 $3,604 $3,678 $3,502 $3,237 $5,403 $6,248 $6,341 $6,506 $6,863 $6,992 $7,237 $7,367 $8,714 $8,757 $8,656 $8,329 $8,026 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 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
Deposits by Region Investor Presentation | First Quarter 202314 Excludes bank owned operational deposits, public funds, and Direct Banking division. $190 $180 $148 $143 $318 - 100 200 300 400 500 600 700 800 $0-$100k >$100k-$250k >$250k-$500k >$500k-$1 mln >$1 mln Ba y Ar ea $236 $216 $220 $206 $590 - 100 200 300 400 500 600 700 800 C en tra l V al le y $627 $422 $285 $202 $326 - 100 200 300 400 500 600 700 800 G re at er C hi co $730 $392 $225 $132 $147 - 100 200 300 400 500 600 700 800 Prior Quarter N or th er n $400 $284 $189 $136 $216 - 100 200 300 400 500 600 700 800 Sa cr am en to V al le y $1.626 billion, total $1.862 billion, total $1.225 billion, total $1.468 billion, total $0.978 billion, total
34,897 # 209,845 Total Demand & Savings ($ millions exterior, count interior) Business $3,184 Consumer $4,007 Deposits: Demand & Savings Deposit Mix Investor Presentation | First Quarter 202315 [1] Excludes time deposits, bank owned operational deposits and public funds. 479 497 481 472 1,255 1,721 1,003 588 349 346 $0-$100k >$100k-$250k >$250k-$500k >$500k-$1 mln >$1 mln Consumer Business Prior Quarter, Total Balance Tier, $ millions [1] Business $0-$100k >$100k-$250k >$250k-$500k >$500k-$1 mln >$1 mln # of Accounts 29,193 3,117 1,393 687 507 Avg Bal / Account ($000s) $16 $159 $345 $687 $2,475 Consumer $0-$100k >$100k-$250k >$250k-$500k >$500k-$1 mln >$1 mln # of Accounts 200,903 6,493 1,756 523 170 Avg Bal / Account ($000s) $9 $154 $335 $668 $2,037
Liquidity Investor Presentation | First Quarter 202316 [1] $ millions, as of 3/31/2023, 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 $2,459 $1,883 $67 Liquidity Sources [1] Total Borrow Capacity Unpledged Securities Cash 77.2 74.1 74.0 73.2 72.7 72.5 71.2 70.3 66.3 66.3 66.5 67.6 71.2 67.3 66.5 65.6 64.9 63.8 63.6 63.7 62.8 62.1 62.6 62.7 64.5 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Insured Deposits as % of Total Deposits [2][3] TCBK Peers $4.4 Billion 191% of estimated uninsured deposits 33.9 35.9 31.6 25.2 21.5 21.9 19.0 17.6 18.6 19.8 21.8 22.8 26.9 42.9 45.1 43.4 40.1 37.5 37.2 35.7 34.2 36.5 35.6 35.1 39.1 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Pledged Securities as % of Total Securities [3] TCBK Peers In addition to a strong deposit base, the bank maintains a variety of easily accessible funding sources
Investor Presentation | First Quarter 2023 Loans and Credit Quality 1717
Loan Portfolio and Yield Investor Presentation | First 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%. VRB total included $21MM of PPP loans. $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 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% 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 Non-PPP PPP Loans Loan Yield Loan Yield Excl PPP
Gross Production vs. Payoff Investor Presentation | First 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. $178 $199 $165 $250 $464 $285 $303 $412 $396 $473 $446 $250 $159 -$118 -$139 -$131 -$166 -$241 -$192 -$243 -$250 -$225 -$205 -$270 -$110 -$92 $6 -$56 -$20 -$47 -$59 $6 -$33 -$47 $4 $33 $42 -$4 -$94 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 Origination Payoffs Balance Change net of Originations and Payoffs
Diversified Loan Portfolio Investor Presentation | First Quarter 202320 Dollars in millions, Net Book Value at period end, excludes LHFS; Auto & other includes Leases; Commercial & Industrial includes six Municipality Loans for $21.3 mln. CRE Non- Owner Occupied 34% CRE-Owner Occupied 15% Multifamily 15% SFR 1-4 Term 12% Commercial & Industrial 9% SFR HELOC and Junior Liens 6% Construction 3% Agriculture & Farmland 5% Auto & Other 1% $2,161 $1,891 $971 $851 $947 $840 $804 $712 $553 $494 $376 $362 $226 $304 $322 $320 $55 $61 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 CR E No n- Ow ne r Oc cu pie d CR E- Ow ne r Oc cu pie d Mu ltif am ily SF R 1- 4 T er m Co mm er cia l & Ind us tria l SF R HE LO C an d J un ior Lie ns Co ns tru cti on Ag ric ult ur e & Fa rm lan d Au to & Ot he r
Office RE Collateral Investor Presentation | First Quarter 202321 California Office Secured by Region Regions by Collateral Code Regions by Occupancy Type Graph circle size represent total loan Commitments in the Region CRE loans secured by office collateral represent 9.6% of total Loan Portfolio Commitments. TCBK Community Banking Regions Loan Count Commitments Net Book Balance Net Book Balance (Avg) Wtd Avg LTV Central Valley 296 $309,868,158 $272,445,290 $920,423 60.7% Bay Area 118 168,961,869 156,308,282 1,324,646 51.6% Sacramento Valley 174 162,994,628 156,468,319 899,243 60.7% Chico 110 72,498,410 67,870,337 617,003 64.0% Southern 32 55,165,964 49,124,643 1,535,145 59.2% Northern 85 34,535,743 31,187,659 366,914 60.1% Outside CA 16 20,209,502 20,146,179 1,259,136 55.8% Total 831 $824,234,274 $753,550,710 $906,800 58.8%
69% 51% 79% 63% 88% 72% 39% 49% 29% 46% 21% 37% 12% 24% 60% 44% 2% 3% 0% 0% 0% 4% 1% 7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Retail Building Office Building Hotel/Motel Light Industrial Self Storage Other Multifamily CRE Owner Occupied <= 60% > 60% - 75% > 75% CRE Collateral Values Investor Presentation | First Quarter 202322 Distribution by LTV (1) LTV Range (1) LTV as of most recent origination or renewal date. CRE Non-Owner Occupied by Collateral Type Loan Segment Outstanding ($MM) LTV # Loans Avg Loan Size (000s) CRE Non Owner Occupied $2,183 53% 1,535 $1,422 Retail Building $573 53% 348 $1,646 Office Building $462 57% 374 $1,236 Hotel/Motel $325 50% 98 $3,311 Light Industrial $171 52% 176 $970 Self Storage $130 51% 50 $2,610 Other $523 51% 489 $1,069 Multifamily $952 60% 505 $1,884 CRE Owner Occupied $979 59% 1,225 $799 Total $4,114 56% 3,265 $1,260
$2,183 $1,914 $952 $845 $373 $360 $549 $460 $979 $860 $806 $715 $307 $229 $327 $325 $60 $52 $162 $158 $55 $46 $646 $558 $628 $557 $60 $36 $288 $307 $263 $121 $9 $8 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 1Q-2023 1Q-2022 CRE Non-Owner Occupied Multifamily SFR HELOC and Junior Liens Commercial & Industrial CRE-Owner Occupied SFR 1-4 Term Construction Agriculture & Farmland Auto & Other Outstanding Principal ($MM) Unfunded Commitment ($MM) Unfunded Loan Commitments Investor Presentation | First Quarter 202323 HELOCs – by vintage, with weighted avg. coupon (6.52% total WAC) Outstanding Principal and Commitments exclude unearned fees and discounts/premiums, Leases, DDA Overdraft, and Credit Cards PPP Excluded from C&I for $0.5 million and $39 million in Outstanding Principal as of Q1 2023 and Q1 2022, respectively. 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 $275 20232022202120202019201820172016201520142013201220112010<2010 Private Balance (MM) Unfunded (MM) WA Rate 8.25% 5.24%5.08% 6.80% 7.56% 8.11%7.79%7.68%7.57%7.72%8.13% 7.65% 8.61% 6.82% 7.88%
C&I Utilization Investor Presentation | First Quarter 202324 Excludes PPP loans; Outstanding Principal excludes unearned fees and discounts/premiums ($ millions) C&I utilization 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: 1Q-2023 $262 $208 $205 $197 $187 $206 $186 $191 $448 $476 $509 $544 $265 $273 $372 $384 $360 $353 $339 $552 $547 $603 $593 $628 44.0% 42.9% 34.5% 32.7% 36.4% 34.5% 36.0% 44.8% 46.5% 45.8% 47.8% 45.7% 5.14% 5.10% 4.91% 4.85% 4.84% 4.97% 4.96% 4.46% 5.12% 6.11% 6.79% 7.31% 0% 1% 2% 3% 4% 5% 6% 7% 8% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2Q-2020 3Q-2020 4Q-2020 1Q-2021 2Q-2021 3Q-2021 4Q-2021 1Q-2022 2Q-2022 3Q-2022 4Q-2022 1Q-2023 Outstanding Principal ($MM) Unfunded Commitment Utilization WAR $196 $43 $52 $55 $55 $12 $27 $11 $67 $162 $88 $53 $46 $29 $44 $12 $20 $178 55% 33% 50% 54% 66% 22% 70% 57% 48% 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 44% Adjustable 43% Floating 13% Loan Yield Composition Investor Presentation | First Quarter 202325 Dollars in millions, excludes PPP as well as unearned fees and accretion/amortization therein Wtd Avg Rate (weighted average rate) as of 03/31/2023 and based upon outstanding principal; Next Reprice signifies either the next scheduled reprice date or maturity. 97% of Floating benchmarked to Prime Predominantly benchmarked to 5 Year Treasury 56% Adjustable + Floating $811 $226 $272 $394 $597 $660 $686 8.68% 5.53% 4.77% 4.33% 4.18% 4.88% 4.24% 8.74% 7.41% 6.52% 6.52% 6.34% 6.37% 6.52% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% - 100 200 300 400 500 600 700 800 900 1,000 Monthly (Floating) < 1 Year 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years > 5 Years Adjustable Loans, Principal Outstanding ($MM) Adj Wtd Avg Rate Adj Wtd Avg Rate if Repriced 03/31/2023
Allowance for Credit Losses Investor Presentation | First Quarter 202326 Drivers of Change under CECL Loan decline of $28 million Q1 Continued low loss experience offset by increases in factors for Unemployment Outlook and US Policy Uncertainty Gross charge-offs $1.758 million Gross recoveries $0.170 million 1.64% of Total Loans 1.69% of Total Loans Reduction in Criticized & Classified loans of $9.0 million Excludes gross charge-offs Scaled to reflect $90MM
Allowance for Credit Losses Investor Presentation | First Quarter 202327 Allocation of Allowance by Segment Municipal loans included in Commercial and industrial segment within the presented table
Risk Grade Migration Investor Presentation | First Quarter 202328 Zero balance in Doubtful and Loss 87.8%89.0%87.8%87.6%89.6%87.2% 9.2%8.0%9.7%9.5%7.8%9.3% 2.0%2.0%1.8%2.1%1.6%2.5% 1.0%1.1%0.8%0.8%1.1%1.0% 1Q-20234Q-20223Q-20222Q-20221Q-20224Q-2021 Pass Watch Special Mention Substandard
Asset Quality Investor Presentation | First 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 Coverage Ratio: Allowance as % of Non-Performing Loans Net charge offs of $1.6MM related to previously identified specific reserves, while forward-looking Q factors drove increased allowance. 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 0.30% 0.31% 0.33% 0.38% 0.38% 0.42% 0.37% 0.38% 0.17% 0.15% 0.21% 0.25% 0.20% 0.73% 0.53% 0.58% 0.75% 0.73% 0.68% 0.64% 0.54% 0.55% 0.51% 0.50% 0.62% 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 TCBK Peers 343% 385% 395% 342% 297% 263% 293% 281% 690% 831% 586% 501% 686% 13 9% 20 2% 19 1% 17 9% 18 7% 19 4% 19 7% 21 0% 21 7% 30 9% 32 2% 30 4% 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 TCBK Peers
Financials 3030 Investor Presentation | First Quarter 2023
4Q22 to1Q23 Reported Net Interest Income (NII) & NIM Walk NII $ in millions, NIM change in bps, all full taxable equivalent (FTE) NII NIM 4Q22 $99.3 4.34% Market rate changes - earning assets 3.1 11 Loan balances / mix 0.7 3 Securities portfolio balances / mix (0.3) (1) Loan deferred fees (0.7) (3) Interest-bearing cash volume (0.7) (3) Borrowings (2.5) (9) Deposit rate changes (3.0) (11) Day Count (2.2) 1Q23 $93.7 4.21% $68.2 $85.4 $94.5 $99.3 $93.7 3.39% 3.67% 4.02% 4.34% 4.21% $69.5 $87.4 $96.8 $103.4 $103.3 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 1Q22 2Q22 3Q22 4Q22 1Q23 Int Income (FTE) Net Int Income (FTE) NIM (FTE) Net Interest Income (NII) and Margin (NIM) Investor Presentation | First Quarter 202331
1Q22 to1Q23 Reported Net Interest Income (NII) & NIM Walk NII $ in millions, NIM change in bps, all full taxable equivalent (FTE) NII NIM 1Q22 $68.2 3.39% Market rate changes - earning assets 19.0 61 Loan balances / mix 15.3 49 Securities portfolio balances / mix 0.8 2 Loan deferred fees (1.0) (3) Interest-bearing cash volume (0.3) (1) Borrowings (3.8) (12) Deposit rate changes (4.5) (14) Day Count (0.0) 1Q23 $93.7 4.21% $69.5 $87.4 $96.8 $103.4 $103.3 $68.2 $85.4 $94.5 $99.3 $93.7 3.39% 3.67% 4.02% 4.34% 4.21% 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 1Q22 2Q22 3Q22 4Q22 1Q23 Int Income (FTE) Net Int Income (FTE) NIM (FTE) Net Interest Income (NII) and Margin (NIM) Investor Presentation | First Quarter 202332
0.89% 1.24% 1.43% 0.91% 1.43% 1.28% 1.47% 2017 2018 2019 2020 2021 2022 2023 1.70% 1.73% 1.94% 1.83% 1.91% 1.97% 2.18% 2017 2018 2019 2020 2021 2022 2023 65.4% 63.7% 59.7% 58.4% 53.2% 53.0% 50.3% 2017 2018 2019 2020 2021 2022 2023 4.22% 4.30% 4.47% 3.96% 3.58% 3.88% 4.21% 2017 2018 2019 2020 2021 2022 2023 Current Operating Metrics Investor Presentation | First Quarter 202333 Net Interest Margin (FTE) PPNR as % of Average Assets Efficiency Ratio ROAA 2023 values through quarter ended 3/31/2023, annualized
9.3% 9.5% 10.6% 9.3% 9.2% 7.6% 8.1% 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 14.8% 14.1% 14.4% 15.1% 15.2% 15.4% 14.2% 2016 2017 2018 2019 2020 2021 2022 Well Capitalized Investor Presentation | First Quarter 202334 Tier 1 Capital Ratio Total Risk Based Capital CET1 Ratio Tangible Capital Ratio 2023 values at quarter ended 3/31/2023
XYZ Investor Presentation | First Quarter 202335 Pending update – no material change to format