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TriCo Bancshares Announces Third Quarter 2022 Results

Notable Items for Third Quarter 2022

  • Net interest margin, excluding the benefit from acquired loan discount accretion and PPP loan yield, increased 0.41% to 3.98%

  • Efficiency ratio improved to 49.6%, largely as a result of revenue growth as non-interest expenses, excluding merger related costs, were relatively unchanged as compared with the prior quarter

  • Organic loan growth (excluding PPP) for the quarter of $216.7 million or 14.2% annualized, with continued strength in credit quality

  • Quarterly pre-tax pre-provision net revenues grew to $55.3 million, as compared to $45.2 million inclusive of $2.2 million in merger expenses in the trailing quarter, and $37.5 million in the same quarter of the prior year inclusive of $0.6 million in merger expenses

"Despite the potential for increasing volatility in interest rates and the general economy, the core franchise value of Tri Counties Bank, being anchored in our credit culture and low costs of funds, continues to drive our financial performance," noted Rick Smith, President and Chief Executive Officer. Peter Wiese, EVP and Chief Financial Officer added, "Non-interest bearing deposits increased by nearly $74 million during the quarter and, to date during the current rising rate cycle, we have been able to maintain a low deposit Beta. Looking forward, we anticipate deposit Betas will be further pressured due to continued rate increases by the Federal Reserve. These rate increases could also decrease loan pipelines as borrowers reconsider the impact of higher rates on proposed projects."

CHICO, Calif., October 26, 2022--(BUSINESS WIRE)--TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company of Tri Counties Bank, today announced net income of $37,338,000 for the quarter ended September 30, 2022, compared to $31,364,000 during the trailing quarter ended June 30, 2022, and $27,422,000 during the quarter ended September 30, 2021. Diluted earnings per share were $1.12 for the third quarter of 2022, compared to $0.93 for the second quarter of 2022 and $0.92 for the third quarter of 2021.

Financial Highlights

Performance highlights and other developments for the Company as of or for the three and nine months ended September 30, 2022, included the following:

  • For the three and nine months ended September 30, 2022, the Company’s return on average assets was 1.46% and 1.23%, while the return on average equity was 13.78% and 11.25%, respectively. The nine-month ratio was impacted by merger related expenses of $6,253,000 during the 2022 period.

  • Organic loan growth, excluding PPP and acquired loans, totaled $216.7 million (14.2% annualized) for the current quarter and $824.3 million (17.4% annualized) for the trailing twelve-month period.

  • As of September 30, 2022, the Company reported total loans, total assets and total deposits of $6.3 billion, $10.0 billion and $8.7 billion, respectively. As a direct result of organic loan growth during the quarter, the loan to deposit ratio has increased to 72.9% as of September 30, 2022, as compared to 69.8% as of the trailing quarter.

  • The average rate of interest paid on deposits, including non-interest-bearing deposits, of 0.04% has remained unchanged during each of the prior four quarters, and represents a decrease of one basis point from the average rate paid of 0.05% during the same quarter of the prior year.

  • Noninterest income related to service charges and fees was $12.7 million for the three month period ended September 30, 2022, an increase of 12.6% when compared to the same period in 2021.

  • The provision for credit losses for loans and debt securities was approximately $3.8 million during the quarter ended September 30, 2022, as compared to a provision expense of $2.1 million during the trailing quarter ended June 30, 2022, and a reversal of provision expense totaling $1.4 million for the three month period ended September 30, 2021.

  • The allowance for credit losses to total loans was 1.61% as of September 30, 2022, compared to 1.60% as of the trailing quarter end, and 1.72% as of September 30, 2021. Non-performing assets to total assets were 0.21% at September 30, 2022, as compared to 0.15% as of June 30, 2022, and 0.37% at September 30, 2021.

Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Annual Report on Form 10-Q for the period ended September 30, 2022, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

Summary Results

The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:

Three months ended

September 30,

June 30,

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

2022

2022

$ Change

% Change

Net interest income

$

94,106

$

85,046

$

9,060

10.7

%

Provision for credit losses

(3,795

)

(2,100

)

(1,695

)

80.7

%

Noninterest income

15,640

16,430

(790

)

(4.8

) %

Noninterest expense

(54,465

)

(56,264

)

1,799

(3.2

) %

Provision for income taxes

(14,148

)

(11,748

)

(2,400

)

20.4

%

Net income

$

37,338

$

31,364

$

5,974

19.0

%

Diluted earnings per share

$

1.12

$

0.93

$

0.19

20.4

%

Dividends per share

$

0.30

$

0.25

$

0.05

20.0

%

Average common shares

33,348

33,561

(213

)

(0.6

) %

Average diluted common shares

33,463

33,705

(242

)

(0.7

) %

Return on average total assets

1.46

%

1.24

%

Return on average equity

13.78

%

11.53

%

Efficiency ratio

49.63

%

55.45

%

Three months ended
September 30,

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

2022

2021

$ Change

% Change

Net interest income

$

94,106

$

68,233

$

25,873

37.9

%

(Provision for) reversal of credit losses

(3,795

)

1,435

(5,230

)

(364.5

) %

Noninterest income

15,640

15,095

545

3.6

%

Noninterest expense

(54,465

)

(45,807

)

(8,658

)

18.9

%

Provision for income taxes

(14,148

)

(11,534

)

(2,614

)

22.7

%

Net income

$

37,338

$

27,422

$

9,916

36.2

%

Diluted earnings per share

$

1.12

$

0.92

$

0.20

21.7

%

Dividends per share

$

0.30

$

0.25

$

0.05

20.0

%

Average common shares

33,348

29,714

3,634

12.2

%

Average diluted common shares

33,463

29,851

3,612

12.1

%

Return on average total assets

1.46

%

1.30

%

Return on average equity

13.78

%

11.02

%

Efficiency ratio

49.63

%

54.97

%

Nine months ended
September 30,

(dollars and shares in thousands)

2022

2021

$ Change

% Change

Net interest income

$

247,076

$

201,756

$

45,320

22.5

%

Reversal of (provision for) credit losses

(14,225

)

7,755

(21,980

)

(283.4

) %

Noninterest income

47,166

47,162

4

%

Noninterest expense

(157,176

)

(131,596

)

(25,580

)

19.4

%

Provision for income taxes

(33,765

)

(35,644

)

1,879

(5.3

) %

Net income

$

89,076

$

89,433

$

(357

)

(0.4

) %

Diluted earnings per share

$

2.74

$

2.99

$

(0.25

)

(8.4

) %

Dividends per share

$

0.80

$

0.75

$

0.05

6.7

%

Average common shares

32,332

29,720

2,612

8.8

%

Average diluted common shares

32,469

29,887

2,582

8.6

%

Return on average total assets

1.23

%

1.48

%

Return on average equity

11.25

%

12.42

%

Efficiency ratio

53.42

%

52.87

%

Balance Sheet

Total loans outstanding, excluding PPP, grew to $6.31 billion as of September 30, 2022, an increase of 33.3% over the prior twelve months, of which 17.4% was related to organic loan growth. Investments increased to $2.67 billion as of September 30, 2022, an increase of 14.4% annualized over the prior twelve months. Quarterly average earning assets to quarterly total average assets were generally unchanged at 92.0% at September 30, 2022, as compared to 92.2% and 92.9% at June 30, 2022, and September 30, 2021, respectively. The loan to deposit ratio was 72.9% at September 30, 2022, as compared to 69.8% and 67.5% at June 30, 2022, and September 30, 2021, respectively.

Total shareholders' equity decreased by $51,839,000 during the quarter ended September 30, 2022, as a result of an increase in accumulated other comprehensive losses of $76,740,000, share repurchases totaling approximately $2,059,000 and cash dividend payments on common stock of $10,004,000, partially offset by net income of $37,338,000. As a result, the Company’s book value was $29.71 per share at September 30, 2022 as compared to $31.25 and $33.05 at June 30, 2022, and September 30, 2021, respectively. The Company’s tangible book value per share, a non-GAAP measure, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $19.92 per share at September 30, 2022, as compared to $21.41 and $25.16 at June 30, 2022, and September 30, 2021, respectively.

Trailing Quarter Balance Sheet Change

Ending balances

September 30,

June 30,

Annualized
% Change

(dollars in thousands)

2022

2022

$ Change

Total assets

$

9,976,879

$

10,120,611

$

(143,732

)

(5.7

) %

Total loans

6,314,290

6,113,421

200,869

13.1

Total loans, excluding PPP

6,312,348

6,095,667

216,681

14.2

Total investments

2,668,145

2,802,815

(134,670

)

(19.2

)

Total deposits

$

8,655,769

$

8,756,775

$

(101,006

)

(4.6

) %

Organic loan growth, excluding PPP, of $216,681,000 or 14.2% on an annualized basis was realized during the quarter ended September 30, 2022, primarily within commercial real estate. During the quarter, and exclusive of PPP balance changes, loan originations/draws totaled approximately $737.0 million while payoffs/repayments of loans totaled $536.0 million, which compares to origination/draws and payoff/repayments activity during the three months ended June 30, 2022 of $697.0 million and $397.0 million, respectively. While management believes that loan pipelines remain sufficient to support loan growth, loan pipeline activity may moderate as customer awareness of the rising interest rate environment weighs more heavily on their decision making criteria. Investment security balances decreased $134,670,000 or 19.2% on an annualized basis as the result of declines in market values grew, and prepayments or maturities from the portfolio were utilized to augment the Company's overall balance sheet position. Deposit balances also decreased, with a change of $101,006,000 or 4.6% annualized during the period. These deposit balance changes are partially the result of approximately $51.6 million in FDIC insured money market account balances being placed with partner institutions.

Average Trailing Quarter Balance Sheet Change

Quarterly average balances for the period ended

September 30,

June 30,

Annualized
% Change

(dollars in thousands)

2022

2022

$ Change

Total assets

$

10,131,118

$

10,121,714

$

9,404

0.4

%

Total loans

6,171,042

5,928,430

242,612

16.4

Total loans, excluding PPP

6,162,267

5,890,578

271,689

18.4

Total investments

2,802,119

2,732,466

69,653

10.2

Total deposits

$

8,752,215

$

8,743,320

$

8,895

0.4

%

Year Over Year Balance Sheet Change

Ending balances

As of September 30,

Acquired
Balances

Organic
$ Change

Organic
% Change

(dollars in thousands)

2022

2021

$ Change

Total assets

$

9,976,879

$

8,458,030

$

1,518,849

$

1,363,529

$

155,320

1.8

%

Total loans

6,314,290

4,887,496

1,426,794

773,390

653,404

13.4

Total loans, excluding PPP

6,312,348

4,736,048

1,576,300

751,978

824,322

17.4

Total investments

2,668,145

2,333,015

335,130

109,716

225,414

9.7

Total deposits

$

8,655,769

$

7,236,822

$

1,418,947

$

1,215,479

$

203,468

2.8

%

Non-PPP loan balances have increased as a result of organic activities by approximately $824.3 million during the twelve month period ending September 30, 2022. Investment securities increased to $2.7 billion at September 30, 2022, an organic change of $225.4 million or 9.7% from the prior year. When combined with balances acquired from Valley Republic Bank, this represents an increase of nearly $1.8 billion in earning assets during the last twelve months.

Net Interest Income and Net Interest Margin

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

Three months ended

September 30,

June 30,

(dollars in thousands)

2022

2022

Change

% Change

Interest income

$

96,366

$

86,955

$

9,411

10.8

%

Interest expense

(2,260

)

(1,909

)

(351

)

18.4

%

Fully tax-equivalent adjustment (FTE) (1)

440

397

43

10.8

%

Net interest income (FTE)

$

94,546

$

85,443

$

9,103

10.7

%

Net interest margin (FTE)

4.02

%

3.67

%

Acquired loans discount accretion, net:

Amount (included in interest income)

$

714

$

1,677

$

(963

)

(57.4

) %

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