TriCo Bancshares Announces Quarterly Results

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 $8,477,000, or $0.53 per diluted share, for the three months ended March 31, 2013. These results compare to earnings of $3,931,000, or $0.25 per diluted share reported by the Company for the three months ended March 31, 2012.

Total assets of the Company increased $79,525,000 (3.1%) to $2,612,433,000 at March 31, 2013 from $2,532,908,000 at March 31, 2012. Total loans increased $21,277,000 (1.4%) to $1,532,362,000 at March 31, 2013 from $1,511,085,000 at March 31, 2012. Total deposits increased $115,804,000 (5.3%) to $2,285,550,000 at March 31, 2013 from $2,169,746,000 at March 31, 2012.


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

Three months ended

March 31,

(dollars in thousands)

2013

2012

$ Change

% Change

Net Interest Income

$

24,569

$

25,036

($467

)

(1.9

%)

Benefit from (provision for) loan losses

1,108

(3,996

)

5,104

(127.7

%)

Noninterest income

10,218

8,265

1,953

23.6

%

Noninterest expense

(21,601

)

(22,915

)

1,314

(5.7

%)

Provision for income taxes

(5,817

)

(2,459

)

(3,358

)

136.6

%

Net income

$

8,477

$

3,931

$

4,546

115.6

%

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

March 31, 2013

December 31, 2012

March 31, 2012

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets

Earning assets

Loans

$

1,548,565

$

24,072

6.22

%

$

1,574,329

$

24,245

6.16

%

$

1,527,536

$

24,929

6.53

%

Investments - taxable

156,057

1,187

3.04

%

174,954

1,348

3.08

%

224,737

1,759

3.13

%

Investments - nontaxable

8,884

162

7.29

%

9,433

168

7.12

%

9,561

173

7.24

%

Federal funds sold

721,424

446

0.25

%

624,510

445

0.29

%

573,008

368

0.26

%

Total earning assets

2,434,930

25,867

4.25

%

2,383,226

26,206

4.40

%

2,334,842

27,229

4.66

%

Other assets, net

174,864

182,081

179,699

Total assets

$

2,609,794

$

2,565,307

$

2,514,541

Liabilities and shareholders' equity

Interest-bearing

Demand deposits

$

520,507

141

0.11

%

$

494,259

174

0.14

%

$

439,786

217

0.20

%

Savings deposits

782,173

271

0.14

%

772,233

305

0.16

%

790,590

297

0.15

%

Time deposits

333,556

513

0.62

%

347,714

570

0.66

%

402,985

670

0.67

%

Other borrowings

8,188

1

0.05

%

9,024

2

0.09

%

70,104

606

3.46

%

Trust preferred securities

41,238

311

3.02

%

41,238

321

3.11

%

41,238

338

3.28

%

Total interest-bearing liabilities

1,685,662

1,237

0.29

%

1,664,468

1,372

0.33

%

1,744,703

2,128

0.49

%

Noninterest-bearing deposits

651,303

633,570

515,851

Other liabilities

39,150

36,973

33,621

Shareholders' equity

233,679

230,296

220,366

Total liabilities and shareholders' equity

$

2,609,794

$

2,565,307

$

2,514,541

Net interest rate spread

3.96

%

4.07

%

4.17

%

Net interest income/net interest margin (FTE)

24,630

4.05

%

24,834

4.17

%

25,101

4.30

%

FTE adjustment

(61

)

(63

)

(65

)

Net interest income (not FTE)

$

24,569

$

24,771

$

25,036

Net interest income (FTE) during the first quarter of 2013 decreased $471,000 (1.9%) from the same period in 2012 to $24,630,000. The decrease in net interest income (FTE) was due primarily to a 31 basis point decrease in average yield on loans, and a $69,357,000 decrease in average balance of investments, that were partially offset by a $21,029,000 increase in the average balance of loans, and a $61,916,000 decrease in the average balance of other borrowings. The 31 basis point decrease in average loan yields reduced net interest income by $1,200,000 while the decrease in average investment balances reduced net interest income by $549,000 from the year ago period. The increase in average loan balances added $343,000 to net interest income, and the decrease in average other borrowings added $536,000 to net interest income when compared to the year ago period. Accretion of loan purchase discounts totaling $1,530,000 and $2,080,000 are included in interest income for the three months ended March 31, 2013 and 2012, respectively.

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 benefited from a $1,108,000 reversal of provision for loan losses in the first quarter of 2013 versus a $1,524,000 provision for loan losses in the fourth quarter of 2012, and a $3,996,000 provision for loan losses in the first quarter of 2012. The $1,108,000 reversal of provision for loan losses in the first quarter of 2013 is due primarily to a decrease in the required allowance for loan losses as of March 31, 2013 when compared to the required allowance for loan losses as of December 31, 2012 less net loan charge offs during the three months ended March 31, 2013. The decrease in the required allowance for loan losses during the quarter ended March 31, 2013 is due primarily to reduced impaired loans, improvements in estimated cash flows and collateral values for the remaining impaired loans, and reductions in historical loss factors that, in part, determine the required loan loss allowance for performing loans in accordance with the Company's allowance for loan losses methodology.

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

Three months ended

March 31,

(dollars in thousands)

2013

2012

$ Change

% Change

Service charges on deposit accounts

3,140

3,527

($387

)

(11.0

%)

ATM fees and interchange

1,875

1,819

56

3.1

%

Other service fees

559

603

(44

)

(7.3

%)

Mortgage banking service fees

416

372

44

11.8

%

Change in value of mortgage servicing rights

(61

)

(369

)

308

(83.5

%)

Total service charges and fees

5,929

5,952

(23

)

(0.4

%)

Gain on sale of loans

2,294

1,650

644

39.0

%

Commission on NDIP

761

819

(58

)

(7.1

%)

Increase in cash value of life insurance

426

450

(24

)

(5.3

%)

Change in indemnification asset

(101

)

(353

)

252

(71.4

%)

Gain on sale of foreclosed assets

551

(358

)

909

(253.9

%)

Other noninterest income

358

105

253

241.0

%

Total other noninterest income

4,289

2,313

1,976

85.4

%

Total noninterest income

10,218

8,265

$

1,953

23.6

%

Noninterest income increased $1,953,000 (23.6%) to $10,218,000 in the three months ended March 31, 2013 when compared to the three months ended March 31, 2012. The increase in noninterest income was due primarily to a $909,000 increase in gain/loss on sale of foreclosed assets to $551,000, and a $644,000 increase in gain on sale of loans to $2,294,000. The increase in gain on sale of foreclosed assets is due to a general increase in property values and sales activity from their lows during the financial crisis that started in 2008. The increase in gain on sale of loans is due to increased residential real estate loan refinance activity and our focus to service that activity.

Salary and benefit expenses increased $199,000 (1.6%) to $12,961,000 during the three months ended March 31, 2013 compared to the three months ended March 31, 2012. Base salaries increased $189,000 (2.3%) to $8,348,000 during the three months ended March 31, 2013 versus the year ago period due mainly to a 2.6% increase in average full time equivalent staff to 750 and annual merit increases, that were substantially offset by a March 2012 reduction in temporary employee expense that was related to the Citizens acquisition in September 2011. Incentive and commission related salary expenses decreased $89,000 (6.5%) to $1,286,000 during three months ended March 31, 2013 due primarily to decreases in production related incentives. Benefits expense, including retirement, medical and workers' compensation insurance, and taxes, increased $99,000 (3.1%) to $3,327,000 during the three months ended March 31, 2013 due primarily to the increase in average full time equivalent staff noted above.

Other noninterest expenses decreased $1,513,000 (14.9%) to $8,640,000 during the three months ended March 31, 2013 when compared to the three months ended March 31, 2012. The decrease in other noninterest expense is due primarily a $482,000 (79.3%) decrease in the provision for, and expenses related to, foreclosed assets, a $250,000 increase in reversal of provision for loan losses related to unfunded commitments from $190,000 to $440,000, a $216,000 (16.7%) decrease in data processing and software expense, and a $173,000 (34.7%) decrease in advertising and marketing expense. The decreases in foreclosed asset provision and expenses are due to increased property values and a reduction in foreclosed assets from $14,789,000 at March 31, 2012 to $6,124,000 at March 31, 2013. The increase in reversal of provision for loan losses related to unfunded commitments is due to a decrease in expected losses related to those commitments and the relative change in the amount unfunded commitment from the previous year end. The decrease in data processing and software expense is due primarily to the absence of expenses associated with a system conversion in March 2012 related to the Citizens acquisition in September 2011, and cost savings efforts in this area. The decrease in advertising and marketing expense from the year ago period is due to cost savings efforts in this area. The following table presents the key components of the Company's noninterest expense for the periods indicated:

Three months ended

March 31,

(dollars in thousands)

2013

2012

$ Change

% Change

Salaries

$