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TriCo Bancshares Announces Quarterly Results

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CHICO, Calif., October 26, 2021--(BUSINESS WIRE)--TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company of Tri Counties Bank, today announced net income of $27,422,000 for the quarter ended September 30, 2021, compared to $28,362,000 during the trailing quarter ended June 30, 2021 and $17,606,000 during the quarter ended September 30, 2020. Diluted earnings per share were $0.92 for the third quarter of 2021, compared to $0.95 for the second quarter of 2021 and $0.59 for the third quarter of 2020.

Financial Highlights

Performance highlights and other developments for the Company as of or for the three and nine months ended September 30, 2021 included the following:

  • For the three and nine months ended September 30, 2021, the Company’s return on average assets was 1.30% and 1.48%, respectively, and the return on average equity was 11.02% and 12.42%, respectively.

  • Organic loan growth, excluding PPP, totaled $30.7 million (2.6% annualized) for the current quarter and $335.7 million (7.6%) for the trailing twelve-month period.

  • For the current quarter, net interest margin was 3.50% on a tax equivalent basis as compared to 3.72% in the quarter ended September 30, 2020, and a decrease of 8 basis points from 3.58% in the trailing quarter.

  • The efficiency ratio was 52.87% for the nine months ended September 30, 2021, as compared to 59.59% for the same period of the prior year.

  • As of September 30, 2021, the Company reported total loans, total assets and total deposits of $4.89 billion, $8.46 billion and $7.24 billion, respectively. As a direct result of significant deposit growth in the last year, the loan to deposit ratio was 67.54% as of September 30, 2021, as compared to 73.21% at December 31, 2020 and 76.12% at September 30, 2020.

  • The average rate of interest paid on deposits, including non-interest-bearing deposits, remained at 0.05% for the third quarter of 2021 as compared with 0.05% for the trailing quarter, and decreased by 4 basis points from the average rate paid of 0.09% during the same quarter of the prior year.

  • The balance of PPP loans outstanding at September 30, 2021 totaled $157.5 million and the balance of SBA fees remaining to be accreted totaled $6.0 million. Approximately 98% of all round one and 25% of all round two PPP loans have been forgiven and repaid by the SBA.

  • Noninterest income related to service charges and fees was $11.3 million and $32.7 million for the three and nine month periods ended September 30, 2021, an increase of 7.6% and 17.7% when compared to the same periods in 2020.

  • Gains generated from the origination and sale of mortgage loans were $1,814,000 in the third quarter of 2021 as compared with $2,847,000 and $3,035,000 during the trailing quarter and same quarter of the prior year.

  • The reversal of provision for credit losses for loans and debt securities was $1.4 million during the quarter ended September 30, 2021, as compared to a reversal of provision expense of $0.3 million during the trailing quarter ended June 30, 2021, and a provision expense totaling $7.6 million for the three month period ended September 30, 2020.

  • The allowance for credit losses to total loans was 1.72% as of September 30, 2021, compared to 1.93% as of December 31, 2020, and 1.81% as of September 30, 2020. Non-performing assets to total assets were 0.37% at September 30, 2021, as compared to 0.43% as of June 30, 2021, and 0.34% at September 30, 2020.

"Our ability to grow and shift the mix of our earning assets continues to benefit increases in net interest income. While we maintain a positive outlook on the impacts that possible rate increases and Fed balance sheet tapering will have on our asset sensitive structure, our production teams continue to drive increases in the level of organic loan originations and our operational team members remain vigilant in their efforts to create efficiencies," commented Peter Wiese, EVP and Chief Financial Officer. Rick Smith, President and Chief Executive Officer, added: "We are very pleased with the open and transparent lines of communication that have already formed between our legacy employees and the employees of Valley Republic Bank. As we seek to complete the formal close of the merger in the coming months, our excitement and confidence about the benefits this union will provide to our collective communities, customers, and shareholders continues to grow."

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 September 30, 2021, 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

For the three and nine months ended September 30, 2021, the Company’s return on average assets was 1.30% and 1.48%, respectively, while the return on average equity was 11.02% and 12.42%, respectively. For the three and nine months ended September 30, 2020, the Company’s return on average assets was 0.95% and 0.79%, respectively, while the return on average equity was 7.79% and 6.13%, respectively.

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)

2021

2021

$ Change

% Change

Net interest income

$

68,233

$

67,083

$

1,150

1.7

%

Reversal of credit losses

1,435

260

1,175

451.9

%

Noninterest income

15,095

15,957

(862

)

(5.4

)%

Noninterest expense

(45,807

)

(44,171

)

(1,636

)

3.7

%

Provision for income taxes

(11,534

)

(10,767

)

(767

)

7.1

%

Net income

$

27,422

$

28,362

$

(940

)

(3.3

)%

Diluted earnings per share

$

0.92

$

0.95

$

(0.03

)

(3.2

)%

Dividends per share

$

0.25

$

0.25

$

%

Average common shares

29,714

29,719

(5

)

(0.00

)%

Average diluted common shares

29,851

29,904

(53

)

(0.02

)%

Return on average total assets

1.30

%

1.40

%

Return on average equity

11.02

%

11.85

%

Efficiency ratio

54.97

%

53.19

%

Three months ended
September 30,

(dollars and shares in thousands)

2021

2020

$ Change

% Change

Net interest income

$

68,233

$

63,454

$

4,779

7.5

%

Reversal of (provision for) credit losses

1,435

(7,649

)

9,084

(118.8

)%

Noninterest income

15,095

15,137

(42

)

(0.3

)%

Noninterest expense

(45,807

)

(46,714

)

907

(1.9

)%

Provision for income taxes

(11,534

)

(6,622

)

(4,912

)

74.2

%

Net income

$

27,422

$

17,606

$

9,816

55.8

%

Diluted earnings per share

$

0.92

$

0.59

$

0.33

55.9

%

Dividends per share

$

0.25

$

0.22

$

0.03

13.6

%

Average common shares

29,714

29,764

(50

)

(0.2

)%

Average diluted common shares

29,851

29,844

7

%

Return on average total assets

1.30

%

0.95

%

Return on average equity

11.02

%

7.79

%

Efficiency ratio

54.97

%

59.44

%

Nine months ended
September 30,

(dollars and shares in thousands)

2021

2020

$ Change

% Change

Net interest income

$

201,756

$

191,305

$

10,451

5.5

%

Reversal of (provision for) credit losses

7,755

(37,963

)

45,718

(120.4

)%

Noninterest income

47,162

38,614

8,548

22.1

%

Noninterest expense

(131,596

)

(137,013

)

5,417

(4.0

)%

Provision for income taxes

(35,644

)

(13,786

)

(21,858

)

158.6

%

Net income

$

89,433

$

41,157

$

48,276

117.3

%

Diluted earnings per share

$

2.99

$

1.37

$

1.62

118.2

%

Dividends per share

$

0.75

$

0.66

$

0.09

13.6

%

Average common shares

29,720

29,971

(251

)

(0.8

)%

Average diluted common shares

29,887

30,083

(196

)

(0.7

)%

Return on average total assets

1.48

%

0.79

%

Return on average equity

12.42

%

6.13

%

Efficiency ratio

52.87

%

59.59

%

SBA Paycheck Protection Program

In March 2020 (Round 1) and subsequently in December 2020 (Round 2), the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") was created to help small businesses keep workers employed during the COVID-19 crisis. Tri Counties Bank, through its online portal, facilitated the ability for borrowers to open a new account and submit PPP applications during the entirety of the Programs. The SBA ended PPP and did not accept new borrowing applications, effective May 31, 2021.

The following is a summary of PPP loan related information as of the periods indicated:

(dollars in thousands)

September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020

Total number of PPP loans outstanding

1,449

2,209

2,484

2,310

2,924

PPP loan balance (Round 1 origination), gross

$

9,302

$

51,547

$

193,958

$

333,982

$

437,793

PPP loan balance (Round 2 origination), gross

148,159

197,035

176,316

n/a

n/a

Total PPP loans, gross outstanding

$

157,461

$

248,582

$

370,274

$

333,982

$

437,793

PPP deferred loan fees (Round 1 origination)

$

40

$

477

$

2,358

$

7,212

$

11,846

PPP deferred loan fees (Round 2 origination)

5,973

8,513

7,072

n/a

n/a

Total PPP deferred loan fees outstanding

$

6,013

$

8,990

$

9,430

$

7,212

$

11,846

As of September 30, 2021, the total gross balance outstanding of PPP loans was $157,461,000 as compared to total PPP originations of $640,410,000. In connection with the origination of these loans, the Company earned approximately $25,299,000 in loan fees, offset by deferred loan costs of approximately $1,245,000, the net of which will be recognized over the earlier of loan maturity (between 24-60 months), repayment or receipt of forgiveness confirmation. As of September 30, 2021, there was approximately $6,013,000 in net deferred fee income remaining to be recognized. During the three and nine months ended September 30, 2021, the Company recognized $2,984,000 and $10,306,000, respectively in fees on PPP loans as compared with $2,603,000 and $4,959,000 for the three and nine months ended September 30, 2020, respectively.

COVID Deferrals

Following the passage of the CARES Act legislation, the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus" was issued by federal bank regulators, which offers temporary relief from troubled debt restructuring accounting for loan payment deferrals for certain customers whose businesses are experiencing economic hardship due to Coronavirus. The applicable period for this relief, originally expected to expire on December 31, 2020, was extended through 2021 by way of the Consolidated Appropriations Act.

The following is a summary of COVID related loan customer modifications with outstanding balances as of September 30, 2021:

Modification Type

Deferral Term

(dollars in thousands)

Modified

Loan

Balances

Outstanding

% of Total

Category of

Loans

Interest Only

Deferral

Principal and

Interest

Deferral

90 Days

180 Days

Other

Commercial real estate:

CRE non-owner occupied

$

22,264

1.5

%

100.0

%

%

17.4

%

65.6

%

17.0

%

CRE owner occupied

1,243

0.2

100.0

100.0

Multifamily

Farmland

Total commercial real estate loans

23,507

0.7

16.5

62.2

21.4

Consumer loans

Commercial and industrial

550

0.1

100.0

100.0

Construction

Agriculture production

Leases

Total modifications

$

24,057

0.5

%

100.0

%

%

16.1

%

60.8

%

23.1

%

Of the remaining balance outstanding as of September 30, 2021, $5,665,000 is related to second deferrals which are expected to conclude their modification period during 2021, and the remainder of deferrals are expected to conclude in the first quarter of 2022. However, as long as the current pandemic and recessionary economic conditions continue, it is possible that additional borrowers may request an initial or subsequent modification to their loan terms.

Balance Sheet

Total loans outstanding, excluding PPP, grew to $4.74 billion as of September 30, 2021, an increase of 7.6% over the same quarter of the prior year, and an annualized increase of 2.6% over the trailing quarter. Investments outstanding increased to $2.33 billion as of September 30, 2021, an increase of 43.6% annualized over the trailing quarter. Average earning assets to total average assets continued to increase to 92.9% at September 30, 2021, as compared to 92.8% and 92.3% at June 30, 2021, and September 30, 2020, respectively. The loan to deposit ratio was 67.5% at September 30, 2021, as compared to 70.7% and 76.1% at June 30, 2021, and September 30, 2020, respectively.

Total shareholders' equity increased by $15,234,000 during the quarter ended September 30, 2021, primarily as a result of net income of $27,422,000, offset by a decrease in accumulated other comprehensive income of $4,440,000, and $7,429,000 in cash dividends paid on common stock. As a result, the Company’s book value increased to $33.05 per share at September 30, 2021 as compared to $32.53 and $30.31 at June 30, 2021, and September 30, 2020, 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 $25.16 per share at September 30, 2021, as compared to $24.60 and $22.24 at June 30, 2021, and September 30, 2020, respectively.

Trailing Quarter Balance Sheet Change

Ending balances

As of September 30,

June 30,

$ Change

Annualized

% Change

(dollars in thousands)

2021

2021

Total assets

$

8,458,030

$

8,170,365

$

287,665

14.1

%

Total loans

4,887,496

4,944,894

(57,398

)

(4.6

)

%

Total loans, excluding PPP

4,736,048

30,746

2.6

%

Total investments

2,333,015

2,103,575

229,440

43.6

%

Total deposits

$

7,236,822

$

6,992,053

$

244,769

...

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