TriCo Bancshares Announces Quarterly Results

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TriCo Bancshares Announces Quarterly Results

CHICO, Calif.--(BUSINESS WIRE)-- TriCo Bancshares (NAS: 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 income10,01110,489(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/
BalanceExpenseRateBalanceExpenseRateBalanceExpenseRate
Assets
Earning assets
Loans$1,574,329$24,2456.16%$1,573,816$25,5306.49%$1,570,648$27,2476.94%
Investments - taxable174,9541,3483.08%195,9511,4552.97%245,6831,8873.07%
Investments - nontaxable9,4331687.12%9,5611737.24%10,1281817.15%
Federal funds sold 624,510  445 0.29% 571,837  372 0.26% 493,746  361 0.29%
Total earning assets2,383,226 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$494,2591740.14%$479,5651960.16%$424,1092350.22%
Savings deposits772,2333050.16%757,4913140.17%800,0353510.18%
Time deposits347,7145700.66%359,5075960.66%433,8448010.74%
Other borrowings9,02420.09%41,8523953.78%75,1796173.28%
Trust preferred securities 41,238  321 3.11% 41,238  333 3.23% 41,238  325 3.15%
Total interest-bearing liabilities1,664,468 1,372 0.33%1,679,652 1,834 0.44%1,774,405 2,329 0.53%
Noninterest-bearing deposits633,570577,523491,434
Other liabilities36,97335,22732,816
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 spread4.07%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 accounts3,5023,877($375)(9.7%)
ATM fees and interchange2,0401,8571839.9%
Other service fees4834196415.3%
Mortgage banking service fees51238912331.6%
Change in value of mortgage servicing rights(502)(85) (417)490.6%
Total service charges and fees6,035 6,457  (422)(6.5%)
 
Gain on sale of loans2,4931,2191,274104.5%
Commission on NDIP74555519034.2%
Increase in cash value of life insurance470535(65)(12.1%)
Change in indemnification asset(501)512(1,013)(197.9%)
Gain on sale of foreclosed assets42221320998.1%
Gain on life insurance death benefit75789(714)(90.5%)
Other noninterest income272 209  63 30.1%
Total other noninterest income3,976 4,032  (56)(1.4%)
Total noninterest income10,011 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 inc

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