TriCo Bancshares Announces Quarterly Results

CHICO, Calif.--()--TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company of Tri Counties Bank (the “Bank”), today announced earnings of $4,722,000, or $0.29 per diluted share, for the three months ended December 31, 2012. These results compare to earnings of $6,549,000, or $0.41 per diluted share reported by the Company for the three months ended December 31, 2011. Included in the results for the three months ended December 31, 2012 and 2011 were life insurance benefits of $75,000 and $789,000, respectively. Excluding these life insurance benefits, earnings for the three months ended December 31, 2012 and 2011 would have been approximately $4,647,000 and $5,760,000, respectively, or $0.29 and $0.36 per diluted share, respectively.

Diluted earnings per share for the years ended December 31, 2012 and 2011 were $1.18 and $1.16, respectively, on earnings of $18,944,000 and $18,590,000, respectively. Included in the results for the year ended December 31, 2012 is a legal settlement expense of $2,090,000 that was previous disclosed on September 27, 2012, and $675,000 of life insurance benefits. Included in the results for the year ended December 31, 2011 was a $7,575,000 bargain purchase gain related to the Company’s acquisition of the banking operations of Citizens Bank of Northern California on September 23, 2011, and $789,000 of life insurance benefits. Excluding the $2,090,000 legal settlement expense, and the $675,000 of life insurance benefits, earnings for the year ended December 31, 2012 would have been approximately $19,530,000, or approximately $1.22 per diluted share. Excluding the $7,575,000 bargain purchase gain, and the $789,000 of life insurance benefits, earnings for the year ended December 31, 2011 would have been approximately $13,411,000, or $0.84 per diluted share.

Total assets of the Company increased $53,672,000 (2.1%) to $2,609,269,000 at December 31, 2012 from $2,555,597,000 at December 31, 2011. Total loans of the Company increased $13,791,000 (0.9%) to $1,564,823,000 at December 31, 2012 from $1,551,032,000 at December 31, 2011. Total deposits of the Company increased $99,166,000 (4.5%) to $2,289,702,000 at December 31, 2012 from $2,190,536,000 at December 31, 2011.

The following is a summary of the components of the Company’s consolidated net income for the periods indicated:

 
  Three months ended      
December 31,
(dollars in thousands) 2012   2011

$ Change

% Change

Net Interest Income $ 24,771 $ 27,280 ($2,509 ) (9.2 %)
Provision for loan losses (1,524 ) (5,429 ) 3,905 (71.9 %)
Noninterest income 10,011 10,489 (478 ) (4.6 %)
Noninterest expense (25,126 ) (22,076 ) (3,050 ) 13.8 %
Provision for income taxes   (3,410 )   (3,715 )   305   (8.2 %)
Net income $ 4,722   $ 6,549     ($1,827 ) (27.9 %)
 

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

December 31, 2012

September 30, 2012

December 31, 2011

Average   Income/   Yield/ Average   Income/   Yield/ Average   Income/   Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets
Earning assets
Loans $ 1,574,329 $ 24,245 6.16 % $ 1,573,816 $ 25,530 6.49 % $ 1,570,648 $ 27,247 6.94 %
Investments - taxable 174,954 1,348 3.08 % 195,951 1,455 2.97 % 245,683 1,887 3.07 %
Investments - nontaxable 9,433 168 7.12 % 9,561 173 7.24 % 10,128 181 7.15 %
Federal funds sold   624,510     445   0.29 %   571,837     372   0.26 %   493,746     361   0.29 %
Total earning assets 2,383,226   26,206   4.40 % 2,351,164   27,530   4.68 % 2,320,205   29,676   5.12 %
Other assets, net   182,081   168,095   193,429
Total assets $ 2,565,307 $ 2,519,259 $ 2,513,634

Liabilities and shareholders' equity

Interest-bearing
Demand deposits $ 494,259 174 0.14 % $ 479,565 196 0.16 % $ 424,109 235 0.22 %
Savings deposits 772,233 305 0.16 % 757,491 314 0.17 % 800,035 351 0.18 %
Time deposits 347,714 570 0.66 % 359,507 596 0.66 % 433,844 801 0.74 %
Other borrowings 9,024 2 0.09 % 41,852 395 3.78 % 75,179 617 3.28 %
Trust preferred securities   41,238     321   3.11 %   41,238     333   3.23 %   41,238     325   3.15 %
Total interest-bearing liabilities 1,664,468   1,372   0.33 % 1,679,652   1,834   0.44 % 1,774,405   2,329   0.53 %
Noninterest-bearing deposits 633,570 577,523 491,434
Other liabilities 36,973 35,227 32,816
Shareholders' equity   230,296   226,857   214,979

Total liabilities and shareholders' equity

$ 2,565,307 $ 2,519,259 $ 2,513,634
Net interest rate spread 4.07 % 4.24 % 4.59 %
Net interest income/net interest margin (FTE)   24,834   4.17 %   25,696   4.37 %   27,347   4.71 %
FTE adjustment   (63 )   (65 )   (67 )
Net interest income (not FTE) $ 24,771   $ 25,631   $ 27,280  
 

Net interest income (FTE) during the three months ended December 31, 2012 decreased $862,000 (3.4%) when compared to the three months ended September 30, 2012, and decreased $2,513,000 (9.2%) when compared to the three months ended December 31, 2011. These decreases in net interest income (FTE) are primarily due to decreases in the average yield on loans that are primarily due to decreases in market yields on new and renewed loans, and from decreased discount amortization from purchased loans. Loans acquired through purchase or acquisition of other banks are classified as Purchased Not Credit Impaired (PNCI), Purchased Credit Impaired – cash basis (PCI – cash basis), or Purchased Credit Impaired – other (PCI – other). Loans not acquired in an acquisition or otherwise “purchased” are classified as “originated”. Often, such purchased loans are purchased at a discount to face value, and part of this discount is accreted into (added to) interest income over the remaining life of the loan. Generally, as time goes on, the effect of this discount accretion becomes less and less as these purchased loans mature or payoff early. Further details regarding interest income from loans, including fair value discount accretion, may be found under the heading “Supplemental Loan Interest Income Data” in the Consolidated Financial Data table at the end of this announcement.

The Company provided $1,524,000 for loan losses in the fourth quarter of 2012 versus $532,000 in the third quarter of 2012 and $5,429,000 in the fourth quarter of 2011. The decrease in provision for loan losses during the fourth quarter of 2012 compared to the fourth quarter of 2011 was primarily the result of improvement in collateral values and estimated cash flows related to nonperforming and purchased credit impaired loans, and a reduction in nonperforming loans.

The following table presents the key components of noninterest income for the periods indicated:

 
  Three months ended      
December 31,
(dollars in thousands) 2012   2011

$ Change

% Change

Service charges on deposit accounts 3,502 3,877 ($375 ) (9.7 %)
ATM fees and interchange 2,040 1,857 183 9.9 %
Other service fees 483 419 64 15.3 %
Mortgage banking service fees 512 389 123 31.6 %
Change in value of mortgage servicing rights (502 ) (85 )   (417 ) 490.6 %
Total service charges and fees 6,035   6,457     (422 ) (6.5 %)
 
Gain on sale of loans 2,493 1,219 1,274 104.5 %
Commission on NDIP 745 555 190 34.2 %
Increase in cash value of life insurance 470 535 (65 ) (12.1 %)
Change in indemnification asset (501 ) 512 (1,013 ) (197.9 %)
Gain on sale of foreclosed assets 422 213 209 98.1 %
Gain on life insurance death benefit 75 789 (714 ) (90.5 %)
Other noninterest income 272   209     63   30.1 %
Total other noninterest income 3,976   4,032     (56 ) (1.4 %)
Total noninterest income 10,011   10,489     ($478 ) (4.6 %)
 

The $375,000 decrease in service charges on deposit accounts is due to decreased nonsufficient funds fees. The $183,000 increase in ATM fees and interchange revenue is primarily due to increased interchange revenue as a result of additional resources focused on growing that line of business. The $123,000 increase in mortgage banking service fees, and the $1,274,000 increase in gain on sale of loans are due to a significant increase in residential real estate mortgage loans originated and sold by the Bank for which the Bank remains as the loan servicer. The increase in residential real estate mortgage loans originated by the Bank is primarily due to historically low interest rates, and an increase in resources focused in this area. These same historically low interest rates have shortened the estimated life of the loans that the Bank services, thus shortening and reducing the estimated cash flow stream of servicing revenue from such loans, and thus, reducing the value the Bank’s mortgage servicing rights. This decrease in mortgage servicing rights negatively impacted service charge and fee revenue by $417,000 when compared to the year-ago quarter. The $190,000 increase in commission on sale of non-deposit investment products (NDIP) is due to increase resources focused in that area. The $1,013,000 negative impact from change in indemnification asset is due to improved (lessened) future loss estimates related to loans covered by FDIC loss-sharing agreements. While this item has a negative impact on this revenue item, it is more than offset by a reduction in the Bank’s loan loss provision.

Salary and benefit expenses increased $1,573,000 (14.6%) to $12,338,000 during the three months ended December 31, 2012 compared to the three months ended December 31, 2011. Base salaries increased $253,000 (3.1%) to $8,324,000 during the three months ended December 31, 2012. The increase in base salaries was mainly due to annual merit increases. Incentive and commission related salary expenses increased $974,000 (518%) to $1,162,000 during three months ended December 31, 2012 due primarily to large net income related bonus accrual reversals made during the three months ended December 31, 2011. These reversals were made in the year-ago period when it became apparent that certain production targets would not be achieved. Benefits expense, including retirement, medical and workers’ compensation insurance, and taxes, increased $346,000 (13.8%) to $2,852,000 during the three months ended December 31, 2012 primarily due to increased medical insurance costs.

Other noninterest expenses increased $1,477,000 (13.1%) to $12,788,000 during the three months ended December 31, 2012 when compared to the three months ended December 31, 2011. The increase in other noninterest expense is primarily due to a $960,000 increase in change in reserve for unfunded commitments to $1,060,000 for the three months ended December 31, 2012. This increase in change in reserve for unfunded commitments is primarily due to an increase in unfunded construction loan commitments during the three months ended December 31, 2012. Other changes in the various categories of other noninterest expense are reflected in the table below. The changes are indicative of the economic environment which has led to increases, or fluctuations, in professional loan collection expenses, provision for foreclosed asset losses, and foreclosed asset expenses.

The following table presents the key components of the Company’s noninterest expense for the periods indicated:

 
  Three months ended    
December 31,
(dollars in thousands) 2012   2011 $Change % Change
Salaries $ 8,324 $ 8,071 $ 253 3.1 %
Commissions and incentives 1,162 188 974 518.1 %
Employee benefits   2,852   2,506   346   13.8 %
Total salaries and benefits expense   12,338   10,765   1,573   14.6 %
 
Occupancy 1,839 1,815 24 1.3 %
Equipment 1,063 1,020 43 4.2 %
Change in reserve for unfunded commitments 1,060 100 960
Data processing and software 1,204 1,232 (28 ) (2.3 %)
Telecommunications 575 567 8 1.4 %
ATM network charges 762 525 237 45.1 %
Professional fees 763 682 81 11.9 %
Advertising and marketing 805 871 (66 ) (7.6 %)
Postage 216 337 (121 ) (35.9 %)
Courier service 298 302 (4 ) (1.3 %)
Intangible amortization 52 52 0 0.0 %
Operational losses 357 207 150 72.5 %
Provision for foreclosed asset losses 208 592 (384 ) (64.9 %)
Foreclosed asset expense 398 258 140 54.3 %
Assessments 607 589 18 3.1 %
Other   2,581   2,162   419   19.4 %
Total other noninterest expense   12,788   11,311   1,477   13.1 %
Total noninterest expense $ 25,126 $ 22,076 $ 3,050   13.8 %
 

In addition to the historical information contained herein, this press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The reader of this press release should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome. The Company’s actual results could differ materially from those suggested by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, interest rate fluctuations, economic conditions in the Company's primary market area, demand for loans, regulatory and accounting changes, loan losses, expenses, rates charged on loans and earned on securities investments, rates paid on deposits, competition effects, fee and other noninterest income earned as well as other factors detailed in the Company's reports filed with the Securities and Exchange Commission which are incorporated herein by reference, including the Form 10-K for the year ended December 31, 2011. These reports and this entire press release should be read to put such forward-looking statements in context and to gain a more complete understanding of the uncertainties and risks involved in the Company's business. Any forward-looking statement may turn out to be wrong and cannot be guaranteed. The Company does not intend to update any of the forward-looking statements after the date of this release.

TriCo Bancshares and Tri Counties Bank are headquartered in Chico, California. Tri Counties Bank has a 37-year history in the banking industry. It operates 41 traditional branch locations and 25 in-store branch locations in 23 California counties. Tri Counties Bank offers financial services and provides a diversified line of products and services to consumers and businesses, which include demand, savings and time deposits, consumer finance, online banking, mortgage lending, and commercial banking throughout its market area. It operates a network of 72 ATMs and a 24-hour, seven days-a-week telephone customer service center. Brokerage services are provided by the Bank’s investment services affiliate, Raymond James Financial Services, Inc. For further information please visit the Tri Counties Bank web site at http://www.tricountiesbank.com.

 
TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)
  Three months ended
December 31,   September 30,   June 30,   March 31,   December 31,
2012   2012   2012   2012   2011
Statement of Income Data
Interest income $ 26,143 $ 27,465 $ 27,944 $ 27,164 $ 29,609
Interest expense 1,372 1,834 2,010 2,128 2,329
Net interest income 24,771 25,631 25,934 25,036 27,280
Provision for loan losses 1,524 532 3,371 3,996 5,429
Noninterest income:
Service charges and fees 6,035 5,783 6,155 5,952 6,457
Other income 3,976 3,344 4,422 2,313 4,032
Total noninterest income 10,011 9,127 10,577 8,265 10,489
Noninterest expense:

Base salaries net of deferred loan origination costs

8,324 8,337 8,273 8,159 8,071
Incentive compensation expense 1,162 1,254 1,347 1,375 188

Employee benefits and other compensation expense

2,852 2,771 2,870 3,228 2,506
Total salaries and benefits expense 12,338 12,362 12,490 12,762 10,765
Other noninterest expense 12,788 13,228 11,877 10,153 11,311
Total noninterest expense 25,126 25,590 24,367 22,915 22,076
Income before taxes 8,132 8,636 8,773 6,390 10,264
Net income $ 4,722 $ 5,020 $ 5,321 $ 3,931 $ 6,549
Share Data
Basic earnings per share $ 0.30 $ 0.31 $ 0.33 $ 0.25 $ 0.41
Diluted earnings per share $ 0.29 $ 0.31 $ 0.33 $ 0.25 $ 0.41
Book value per common share $ 14.33 $ 14.21 $ 13.96 $ 13.71 $ 13.55
Tangible book value per common share $ 13.30 $ 13.16 $ 12.91 $ 12.66 $ 12.49
Shares outstanding 16,000,838 15,992,893 15,992,893 15,978,958 15,978,958
Weighted average shares 15,996,137 15,992,893 15,985,922 15,978,958 15,978,958
Weighted average diluted shares 16,064,685 16,051,876 16,047,344 16,042,765 16,015,312
Credit Quality
Nonperforming originated loans $ 61,769 $ 66,654 $ 69,749 $ 70,764 $ 75,775
Total nonperforming loans 72,516 81,611 82,877 82,575 85,731
Guaranteed portion of nonperforming loans 131 218 218 218 3,061
Foreclosed assets, net of allowance 7,498 10,185 12,743 14,789 16,332
Loans charged-off 4,006 3,368 4,188 4,922 5,340
Loans recovered 983 1,133 1,214 464 525
Selected Financial Ratios
Return on average total assets 0.74 % 0.80 % 0.85 % 0.63 % 1.04 %
Return on average equity 8.20 % 8.85 % 9.54 % 7.14 % 12.19 %
Average yield on loans 6.16 % 6.49 % 6.73 % 6.53 % 6.94 %
Average yield on interest-earning assets 4.40 % 4.68 % 4.81 % 4.66 % 5.12 %
Average rate on interest-bearing liabilities 0.33 % 0.44 % 0.48 % 0.49 % 0.53 %
Net interest margin (fully tax-equivalent) 4.17 % 4.37 % 4.46 % 4.30 % 4.71 %
Supplemental Loan Interest Income Data:
Discount accretion PCI - cash basis loans 42 24 108 18 418
Discount accretion PCI - other loans 979 1,192 886 776 949
Discount accretion PNCI loans 841 591 1,391 1,286 1,738
Regular interest Purchased loans 3,226 3,251 3,439 3,420 3,651
All other loan interest income 19,157 20,472 19,968 19,429 20,491
Total loan interest income 24,245 25,530 25,792 24,929 27,247
 
 
TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)
  Three months ended
December 31,   September 30,   June 30,   March 31,   December 31,
Balance Sheet Data 2012   2012   2012   2012   2011
Cash and due from banks $ 748,899 $ 622,494 $ 644,102 $ 681,760 $ 637,275
Securities, available-for-sale 163,027 183,432 202,849 212,157 229,223
Federal Home Loan Bank Stock 9,647 9,647 9,990 10,508 10,610
Loans held for sale 12,053 14,937 5,321 5,869 10,219
Loans:
Commercial loans 135,528 145,469 139,733 129,906 139,131
Consumer loans 386,111 388,844 393,248 419,539 406,330
Real estate mortgage loans 1,010,130 1,007,432 984,147 924,336 965,922
Real estate construction loans 33,054 33,902 35,354 37,304 39,649
Total loans, gross 1,564,823 1,575,647 1,552,482 1,511,085 1,551,032
Allowance for loan losses (42,648 ) (44,146 ) (45,849 ) (45,452 ) (45,914 )
Foreclosed assets 7,498 10,185 12,743 14,789 16,332
Premises and equipment 26,985 24,083 22,595 19,814 19,893
Cash value of life insurance 50,582 50,742 50,292 50,853 50,403
Goodwill 15,519 15,519 15,519 15,519 15,519
Intangible assets 1,092 1,144 1,196 1,248 1,301
Mortgage servicing rights 4,552 4,485 4,757 4,784 4,603
FDIC indemnification asset 1,997 2,485 4,046 3,405 4,405
Accrued interest receivable 6,636 7,638 7,545 7,095 7,312
Other assets 38,607 37,189 38,030 39,474 43,384
Total assets 2,609,269 2,515,481 2,525,618 2,532,908 2,555,597
Deposits:
Noninterest-bearing demand deposits 684,833 592,529 578,010 564,143 541,276
Interest-bearing demand deposits 503,465 483,557 480,337 488,573 431,565
Savings deposits 762,919 767,244 737,433 724,449 797,182
Time certificates 338,485 358,309 369,997 392,581 420,513
Total deposits 2,289,702 2,201,639 2,165,777 2,169,746 2,190,536
Accrued interest payable 1,036 1,139 1,415 1,587 1,674
Reserve for unfunded commitments 3,615 2,555 2,590 2,550 2,740
Other liabilities 35,122 32,449 30,538 29,675 30,427
Other borrowings 9,197 9,264 60,831 69,074 72,541
Junior subordinated debt 41,238 41,238 41,238 41,238 41,238
Total liabilities 2,379,910 2,288,284 2,302,389 2,313,870 2,339,156
Total shareholders' equity 229,359 227,197 223,229 219,038 216,441

Accumulated other comprehensive gain

2,159 3,635 3,537 3,658 3,811
Average loans 1,574,329 1,573,816 1,534,006 1,527,536 1,570,648
Average interest-earning assets 2,383,226 2,351,164 2,331,148 2,334,842 2,320,205
Average total assets 2,565,307 2,519,259 2,509,099 2,514,541 2,513,634
Average deposits 2,247,776 2,174,085 2,148,964 2,149,212 2,149,422
Average total equity $ 230,296 $ 226,857 $ 223,028 $ 220,366 $ 214,979
Total risk based capital ratio 14.5 % 14.4 % 14.3 % 14.3 % 13.9 %
Tier 1 capital ratio 13.3 % 13.1 % 13.0 % 13.0 % 12.7 %
Tier 1 leverage ratio 9.8 % 9.9 % 9.7 % 9.5 % 9.5 %
Tangible capital ratio 8.2 % 8.4 % 8.2 % 8.0 % 7.9 %
 

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TriCo Bancshares
Richard P. Smith, 530-898-0300
President & CEO

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NASDAQ:TCBK

ISIN: US8960951064