TriCo Bancshares Announces Third Quarter 2023 Results

TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $30.6 million for the quarter ended September 30, 2023, compared to $24.9 million during the trailing quarter ended June 30, 2023, and $37.3 million during the quarter ended September 30, 2022. Diluted earnings per share were $0.92 for the third quarter of 2023, compared to $0.75 for the second quarter of 2023 and $1.12 during the third quarter of 2022.

Financial Highlights

Performance highlights for the Company as of or for the three and nine months ended September 30, 2023, included the following:

• For the quarter ended September 30, 2023, the Company’s return on average assets was 1.23%, while the return on average equity was 10.91%.
• The loan to deposit ratio increased to 83.8% as of September 30, 2023, as compared to 80.6% as of the trailing quarter.
• The efficiency ratio was 54.8% and 53.4% for the nine months ended September 30, 2023 and 2022, respectively.
• The provision for credit losses was approximately $4.2 million during the quarter ended September 30, 2023, as compared to a provision for credit losses of $9.7 million during the trailing quarter ended June 30, 2023, and a provision for credit losses of $3.8 million for the three-month period ended September 30, 2022.
• The allowance for credit losses to total loans was 1.73% as of September 30, 2023, compared to 1.80% as of the trailing quarter end, and 1.61% as of September 30, 2022. Non-performing assets to total assets were 0.33% on September 30, 2023, as compared to 0.41% as of June 30, 2023, and 0.21% at September 30, 2022.
• While total classified loans increased to 1.2% of total loans, criticized loans as a percentage of total loans decreased by 0.8% ($44.6 million) to 2.6% as a result of loan repayments and improved borrower performance, including a negligible level of past due loans.

Financial results reported in this document are preliminary and unaudited. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the period ended September 30, 2023, 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)		2023				2023			$ Change				% Change
Net interest income	$	88,123			$	88,601			$	(478	)		(0.5	)%
Provision for credit losses		(4,155	)			(9,650	)			5,495			(56.9	)%
Noninterest income		15,984				15,741				243			1.5	%
Noninterest expense		(57,878	)			(61,243	)			3,365			(5.5	)%
Provision for income taxes		(11,484	)			(8,557	)			(2,927	)		34.2	%
Net income	$	30,590			$	24,892			$	5,698			22.9	%
Diluted earnings per share	$	0.92			$	0.75			$	0.17			22.7	%
Dividends per share	$	0.30			$	0.30			$	—			—	%
Average common shares		33,263				33,219				44			0.1	%
Average diluted common shares		33,319				33,302				17			0.1	%
Return on average total assets		1.23	%			1.01	%
Return on average equity		10.91	%			8.98	%
Efficiency ratio		55.59	%			58.69	%

	Three months ended September 30,
(dollars and shares in thousands, except per share data)		2023				2022			$ Change				% Change
Net interest income	$	88,123			$	94,106			$	(5,983	)		(6.4	)%
Provision for credit losses		(4,155	)			(3,795	)			(360	)		9.5	%
Noninterest income		15,984				15,640				344			2.2	%
Noninterest expense		(57,878	)			(54,465	)			(3,413	)		6.3	%
Provision for income taxes		(11,484	)			(14,148	)			2,664			(18.8	)%
Net income	$	30,590			$	37,338			$	(6,748	)		(18.1	)%
Diluted earnings per share	$	0.92			$	1.12			$	(0.20	)		(17.9	)%
Dividends per share	$	0.30			$	0.30			$	—			—	%
Average common shares		33,263				33,348				(85	)		(0.3	)%
Average diluted common shares		33,319				33,463				(144	)		(0.4	)%
Return on average total assets		1.23	%			1.46	%
Return on average equity		10.91	%			13.78	%
Efficiency ratio		55.59	%			49.63	%

	Nine months ended September 30,
(dollars and shares in thousands)		2023				2022			$ Change				% Change
Net interest income	$	270,060			$	247,076			$	22,984			9.3	%
Provision for credit losses		(18,000	)			(14,225	)			(3,775	)		26.5	%
Noninterest income		45,360				47,166				(1,806	)		(3.8	)%
Noninterest expense		(172,915	)			(157,176	)			(15,739	)		10.0	%
Provision for income taxes		(33,190	)			(33,765	)			575			(1.7	)%
Net income	$	91,315			$	89,076			$	2,239			2.5	%
Diluted earnings per share	$	2.75			$	2.74			$	0.01			0.4	%
Dividends per share	$	0.90			$	0.80			$	0.10			12.5	%
Average common shares		33,259				32,332				927			2.9	%
Average diluted common shares		33,356				32,469				887			2.7	%
Return on average total assets		1.24	%			1.23	%
Return on average equity		11.06	%			11.25	%
Efficiency ratio		54.82	%			53.42	%

Balance Sheet

Total loans outstanding grew to $6.7 billion as of September 30, 2023, an organic based increase of 6.2% over the prior twelve months. As compared to June 30, 2023, total loans outstanding increased by $187.9 million or 11.5% annualized. Investments decreased to $2.33 billion as of September 30, 2023, an annualized decrease of 12.6% over the prior year quarter end. Quarterly average earning assets to quarterly total average assets were 91.7% on September 30, 2023, as compared to 91.6% and 92.0% at December 31, 2022, and September 30, 2022, respectively. The loan-to-deposit ratio was 83.8% on September 30, 2023, as compared to 80.6% and 73.0% at December 31, 2022, and September 30, 2022, respectively. During the current year to date period, and throughout the 2022 fiscal year, the Company held no brokered deposits and relied solely on short-term borrowings to fund cash flow timing differences.

Total shareholders' equity decreased by $22.4 million during the quarter ended September 30, 2023, as a result of accumulated other comprehensive losses increasing by $44.0 million and cash dividend payments on common stock of approximately $10.0 million, offset by net income of $30.6 million. As a result, the Company’s book value was $32.18 per share at September 30, 2023, as compared to $32.86 and $29.71 at December 31, 2022 and September 30, 2022, 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 $22.67 per share at September 30, 2023, as compared to $23.30 and $19.92 at December 31, 2022, and September 30, 2022, respectively. As noted above, despite the consistent retention of earnings in each quarter of the Company's history, recent changes in the balance of unrealized losses on available-for-sale investment securities, net of deferred taxes, has been the primary driver of decreases in tangible book value per share.

Trailing Quarter Balance Sheet Change

Ending balances	September 30,			June 30,							Annualized % Change
(dollars in thousands)		2023			2023		$ Change
Total assets	$	9,897,006		$	9,853,421		$	43,585			1.8	%
Total loans		6,708,666			6,520,740			187,926			11.5
Total investments		2,333,162			2,485,378			(152,216	)		(24.5	)
Total deposits		8,009,643			8,095,365			(85,722	)		(4.2	)
Total other borrowings	$	537,975		$	392,714		$	145,261			148.0	%

Loans outstanding increased by $187.9 million or 11.5% on an annualized basis during the quarter ended September 30, 2023. During the quarter, loan originations/draws totaled approximately $495.0 million while payoffs/repayments of loans totaled $308.0 million, which compares to originations/draws and payoffs/repayments during the trailing quarter ended of $456.0 million and $356.0 million, respectively. While origination volume increased from the previous quarter, activity levels continue to be lower relative to the comparative period in 2022 due in part to disciplined pricing and underwriting, as well as decreased borrower appetite at currently offered lending rates. Investment security balances decreased $152.2 million or 24.5% on an annualized basis as the result of net prepayments, maturities, and purchases totaling approximating $89.7 million and net decreases in the market value of securities of $62.5 million. Management seeks to utilize excess cash flows from the investment security portfolio to support loan growth or reduce borrowings thus resulting in an improved mix of earning assets. Deposit balances decreased by $85.7 million or 4.2% annualized during the period. Funding for the net cash outflows of loans, investment securities and deposits during the quarter were supported by a net increase of $145.3 million in short-term borrowings, which totaled $538.0 million at September 30, 2023.

Average Trailing Quarter Balance Sheet Change

Quarterly average balances for the period ended	September 30,			June 30,							Annualized % Change
(dollars in thousands)		2023			2023		$ Change
Total assets	$	9,874,240		$	9,848,191		$	26,049			1.1	%
Total loans		6,597,400			6,467,381			130,019			8.0
Total investments		2,429,335			2,525,334			(95,999	)		(15.2	)
Total deposits		8,043,101			7,981,515			61,586			3.1
Total other borrowings	$	449,274		$	477,256		$	(27,982	)		(23.5	)%

Year Over Year Balance Sheet Change

Ending balances	As of September 30,										% Change
(dollars in thousands)		2023			2022		$ Change
Total assets	$	9,897,006		$	9,976,879		$	(79,873	)		(0.8	)%
Total loans		6,708,666			6,314,290			394,376			6.2
Total loans, excluding PPP		6,707,530			6,312,348			395,182			6.3
Total investments		2,333,162			2,668,145			(334,983	)		(12.6	)
Total deposits		8,009,643			8,655,769			(646,126	)		(7.5	)
Total other borrowings	$	537,975		$	47,068		$	490,907			1,043.0	%

Non-PPP loan balances increased as a result of organic activities by approximately $395.2 million or 6.3% during the twelve-month period ending September 30, 2023. Over the same period deposit balances have declined by $646.1 million or 7.5%. The Company has offset these declines through the deployment of excess cash balances, runoff of investment security balances, and proceeds from short-term FHLB borrowings. As of September 30, 2023 and June 30, 2023, short-term borrowings from the FHLB totaled $500.0 and $394.1 million and had a weighted average interest rate of 5.14 and 5.11%, respectively.

Liquidity

The Company's primary sources of liquidity include the following for the periods indicated:

(dollars in thousands)	September 30, 2023				June 30, 2023				September 30, 2022
Borrowing capacity at correspondent banks and FRB	$	2,927,065			$	2,847,052			$	2,720,468
Less: borrowings outstanding		(500,000	)			(350,000	)			—
Unpledged available-for-sale (AFS) investment securities		1,702,265				1,813,894				2,040,802
Cash held or in transit with FRB		72,049				79,530				199,994
Total primary liquidity	$	4,201,379			$	4,390,476			$	4,961,264
Estimated uninsured deposit balances	$	2,406,552			$	2,522,718			$	2,898,347

At September 30, 2023, the Company's primary sources of liquidity represented 52.5% of total deposits and 175% of estimated total uninsured (excluding collateralized municipal deposits and intercompany balances) deposits, respectively. As secondary sources of liquidity, the Company's held-to-maturity investment securities had a fair value of $124.0 million, including approximately $15.0 million in net unrealized losses. The Company did not utilize any brokered deposits during 2023 or 2022.

Net Interest Income and Net Interest Margin

During the twelve-month period ended September 30, 2023, the Federal Open Market Committee's (FOMC) actions have resulted in an increase in the Fed Funds Rate by approximately 225 basis points. During the same period the Company's yield on total loans (excluding PPP) increased 65 basis points to 5.52% for the three months ended September 30, 2023, from 4.87% for the three months ended September 30, 2022. Moreover, the tax equivalent yield on the Company's investment security portfolio was 3.39%, an increase of 70 basis points from the 2.69% for the three months ended September 30, 2022. The cost of total interest-bearing deposits and total interest-bearing liabilities increased by 128 basis points and 154 basis points, respectively, between the three month periods ended September 30, 2023 and 2022. Since FOMC rate actions began in March 2022, the Company's cost of total deposits has increased 82 basis points which translates to a cycle to date deposit beta of 15.6%.

The Company continues to manage its cost of deposits through the use of various pricing and product mix strategies. As of September 30, 2023, June 30, 2023, and December 31, 2022, deposits priced utilizing these strategies totaled $1,232.4 million, $1,070.7 million and $579.1 million, respectively, and carried weighted average rates of 3.53%, 3.38%, and 1.64%, respectively.

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)		2023				2023			Change				% Change
Interest income	$	112,380			$	107,158			$	5,222			4.9	%
Interest expense		(24,257	)			(18,557	)			(5,700	)		30.7	%
Fully tax-equivalent adjustment (FTE) (1)		405				379				26			6.9	%
Net interest income (FTE)	$	88,528			$	88,980			$	(452	)		(0.5	)%
Net interest margin (FTE)		3.88	%			3.96	%
Acquired loans discount accretion, net:
Amount (included in interest income)	$	1,324			$	1,471			$	(147	)		(10.0	)%
Net interest margin less effect of acquired loan discount accretion(1)		3.82	%			3.89	%			(0.07	)%
PPP loans yield, net:
Amount (included in interest income)	$	2			$	4			$	(2	)		(50.0	)%
Net interest margin less effect of PPP loan yield (1)		3.88	%			3.96	%			(0.08	)%
Acquired loans discount accretion and PPP loan yield, net:
Amount (included in interest income)	$	1,326			$	1,475			$	(149	)		(10.1	)%
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)		3.82	%			3.89	%			(0.07	)%

	Three months ended September 30,
(dollars in thousands)		2023				2022			Change				% Change
Interest income	$	112,380			$	96,366			$	16,014			16.6	%
Interest expense		(24,257	)			(2,260	)			(21,997	)		973.3	%
Fully tax-equivalent adjustment (FTE) (1)		405				440				(35	)		(8.0	)%
Net interest income (FTE)	$	88,528			$	94,546			$	(6,018	)		(6.4	)%
Net interest margin (FTE)		3.88	%			4.02	%
Acquired loans discount accretion, net:
Amount (included in interest income)	$	1,324			$	714			$	610			85.4	%
Net interest margin less effect of acquired loan discount accretion(1)		3.82	%			3.99	%			(0.17	)%
PPP loans yield, net:
Amount (included in interest income)	$	2			$	313			$	(311	)		(99.4	)%
Net interest margin less effect of PPP loan yield (1)		3.88	%			4.02	%			(0.14	)%
Acquired loans discount accretion and PPP loan yield, net:
Amount (included in interest income)	$	1,326			$	1,027			$	299			29.1	%
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)		3.82	%			3.98	%			(0.16	)%

	Nine months ended September 30,
(dollars in thousands)		2023				2022			Change				% Change
Interest income	$	322,445			$	252,516			$	69,929			27.7	%
Interest expense		(52,385	)			(5,440	)			(46,945	)		863.0	%
Fully tax-equivalent adjustment (FTE) (1)		1,176				1,120				56			5.0	%
Net interest income (FTE)	$	271,236			$	248,196			$	23,040			9.3	%
Net interest margin (FTE)		4.01	%			3.71	%
Acquired loans discount accretion, net:
Amount (included in interest income)	$	4,192			$	3,714			$	478			12.9	%
Net interest margin less effect of acquired loan discount accretion(1)		3.95	%			3.65	%			0.30	%
PPP loans yield, net:
Amount (included in interest income)	$	11			$	2,374			$	(2,363	)		(99.5	)%
Net interest margin less effect of PPP loan yield (1)		4.01	%			3.69	%			0.32	%
Acquired loans discount accretion and PPP loan yield, net:
Amount (included in interest income)	$	4,203			$	6,088			$	(1,885	)		(31.0	)%
Net interest margin less effect of acquired loans discount and PPP loan yield (1)		3.95	%			3.63	%			0.32	%

1. Certain information included herein is presented on a fully tax-equivalent (FTE) basis and / or to present additional financial details which may be desired by users of this financial information. The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provide additional clarity in assessing its results, and the presentation of these measures are common practice within the banking industry. See additional information related to non-GAAP measures at the back of this document.

Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. The dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. As a result of the increase in interest rates, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, declined during 2023 as compared to 2022. During the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, purchased loan discount accretion was $1.3 million, $1.5 million, and $0.7 million, respectively.

The following table shows the components of net interest income and net interest margin on a fully tax-equivalent (FTE) basis for the quarterly 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
	September 30, 2023									June 30, 2023									September 30, 2022
	Average Balance			Income/ Expense			Yield/ Rate			Average Balance			Income/ Expense			Yield/ Rate			Average Balance			Income/ Expense			Yield/ Rate
Assets
Loans, excluding PPP	$	6,596,116		$	91,705		5.52	%		$	6,465,903		$	86,743		5.38	%		$	6,162,267		$	75,643		4.87	%
PPP loans		1,284			2		0.62	%			1,478			4		1.09	%			8,775			313		14.15	%
Investments-taxable		2,246,569			18,990		3.35	%			2,343,511			18,775		3.21	%			2,591,513			17,122		2.62	%
Investments-nontaxable (1)		182,766			1,755		3.81	%			181,823			1,641		3.62	%			210,606			1,908		3.59	%
Total investments		2,429,335			20,745		3.39	%			2,525,334			20,416		3.24	%			2,802,119			19,030		2.69	%
Cash at Federal Reserve and other banks		26,654			333		4.96	%			29,349			374		5.11	%			346,991			1,820		2.08	%
Total earning assets		9,053,389			112,785		4.94	%			9,022,064			107,537		4.78	%			9,320,152			96,806		4.12	%
Other assets, net		820,851									826,127									810,966
Total assets	$	9,874,240								$	9,848,191								$	10,131,118
Liabilities and shareholders’ equity
Interest-bearing demand deposits	$	1,751,625		$	3,916		0.89	%		$	1,657,714		$	2,173		0.53	%		$	1,775,884		$	119		0.03	%
Savings deposits		2,790,197			9,526		1.35	%			2,768,981			6,936		1.00	%			3,011,145			685		0.09	%
Time deposits		535,715			3,937		2.92	%			426,689			2,348		2.21	%			321,100			188		0.23	%
Total interest-bearing deposits		5,077,537			17,379		1.36	%			4,853,384			11,457		0.95	%			5,108,129			992		0.08	%
Other borrowings		449,274			5,106		4.51	%			477,256			5,404		4.54	%			38,908			5		0.05	%
Junior subordinated debt		101,070			1,772		6.96	%			101,056			1,696		6.73	%			101,011			1,263		4.96	%
Total interest-bearing liabilities		5,627,881			24,257		1.71	%			5,431,696			18,557		1.37	%			5,248,048			2,260		0.17	%
Noninterest-bearing deposits		2,965,564									3,128,131									3,644,086
Other liabilities		168,391									176,141									164,208
Shareholders’ equity		1,112,404									1,112,223									1,074,776
Total liabilities and shareholders’ equity	$	9,874,240								$	9,848,191								$	10,131,118
Net interest rate spread (1) (2)							3.23	%								3.41	%								3.95	%
Net interest income and margin (1) (3)				$	88,528		3.88	%					$	88,980		3.96	%					$	94,546		4.02	%

1. Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.
2. Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.
3. Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.

Net interest income (FTE) during the three months ended September 30, 2023, decreased $0.5 million or 0.5% to $88.5 million compared to $89.0 million during the three months ended June 30, 2023. In addition, net interest margin declined 8 basis points to 3.88%, compared to the trailing quarter. The decrease in net interest income is primarily attributed to an additional $5.9 million or 24.3% in deposit interest expense due to increases in interest rates as compared to the trailing quarter. As a partial offset, total interest income also increased as compared to the trailing quarter, up $5.2 million or 4.6%.

As compared to the same quarter in the prior year, average loan yields, excluding PPP, increased 65 basis points from 4.87% during the three months ended September 30, 2022, to 5.52% during the three months ended September 30, 2023. The accretion of discounts from acquired loans added 8 and 5 basis points to loan yields during the quarters ended September 30, 2023 and September 30, 2022, respectively.

The rates paid on interest bearing deposits increased by 41 basis points during the quarter ended September 30, 2023, compared to the trailing quarter. The cost of interest-bearing deposits increased by 128 basis points between the quarter ended September 30, 2023, and the same quarter of the prior year. In addition, the average balance of noninterest-bearing deposits decreased by $162.6 million quarter over quarter and decreased by $678.5 million from three month average for the period ended September 30, 2022. As of September 30, 2023, the ratio of average total noninterest-bearing deposits to total average deposits was 36.9%, as compared to 39.2% and 41.6% at June 30, 2023 and September 30, 2022, respectively.

	Nine months ended September 30, 2023									Nine months ended September 30, 2022
	Average Balance			Income/ Expense			Yield/ Rate			Average Balance			Income/ Expense			Yield/ Rate
Assets
Loans, excluding PPP	$	6,492,141		$	260,857		5.37	%		$	5,668,055		$	201,245		4.75	%
PPP loans		1,444			11		1.02	%			32,287			2,374		9.83	%
Investments-taxable		2,328,883			56,681		3.25	%			2,487,111			41,695		2.24	%
Investments-nontaxable (1)		184,524			5,096		3.69	%			183,772			4,853		3.53	%
Total investments		2,513,407			61,777		3.29	%			2,670,883			46,548		2.33	%
Cash at Federal Reserve and other banks		27,606			976		4.73	%			573,252			3,469		0.81	%
Total earning assets		9,034,598			323,621		4.79	%			8,944,477			253,636		3.79	%
Other assets, net		832,501									737,721
Total assets	$	9,867,099								$	9,682,198
Liabilities and shareholders’ equity
Interest-bearing demand deposits	$	1,694,438		$	6,476		0.51	%		$	1,724,787		$	302		0.02	%
Savings deposits		2,818,817			20,616		0.98	%			2,863,447			1,541		0.07	%
Time deposits		413,359			6,889		2.23	%			319,940			676		0.28	%
Total interest-bearing deposits		4,926,614			33,981		0.92	%			4,908,174			2,519		0.07	%
Other borrowings		402,016			13,318		4.43	%			39,609			15		0.05	%
Junior subordinated debt		101,057			5,086		6.73	%			87,804			2,906		4.42	%
Total interest-bearing liabilities		5,429,687			52,385		1.29	%			5,035,587			5,440		0.14	%
Noninterest-bearing deposits		3,153,807									3,435,487
Other liabilities		179,483									152,186
Shareholders’ equity		1,104,122									1,058,938
Total liabilities and shareholders’ equity	$	9,867,099								$	9,682,198
Net interest rate spread (1) (2)							3.50	%								3.65	%
Net interest income and margin (1) (3)				$	271,236		4.01	%					$	248,196		3.71	%

1. Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.
2. Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.
3. Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.

Interest Rates and Earning Asset Composition

Market interest rates, including many rates that serve as reference indices for variable rate loans and investment securities continued to increase. As noted above, these rate increases have continued to benefit growth in total interest income. As of September 30, 2023, the Company's loan portfolio consisted of approximately $6.7 billion in outstanding principal with a weighted average coupon rate of 5.33%. During the three-month periods ending September 30, 2023, June 30, 2023, and December 31, 2022, the weighted average coupon on loan production in the quarter was 7.31%, 6.85%, and 6.05%, respectively. Included in the September 30, 2023 loan total are adjustable rate loans totaling $3.5 billion, of which, $933.0 million are considered floating based on the Wall Street Prime index. In addition, the Company holds certain investment securities with fair values totaling $368.9 million which are subject to repricing on not less than a quarterly basis.

Asset Quality and Credit Loss Provisioning

During the three months ended September 30, 2023, the Company recorded a provision for credit losses of $4.2 million, as compared to $9.7 million during the trailing quarter, and $3.8 million during the third quarter of 2022.

The following table presents details of the provision for credit losses for the periods indicated:

	Three months ended						Nine months ended
(dollars in thousands)	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Addition to allowance for credit losses	$	3,120		$	3,500		$	16,415		$	13,645
Addition to reserve for unfunded loan commitments		1,035			295			1,585			580
Total provision for credit losses	$	4,155		$	3,795		$	18,000		$	14,225

The following table presents the activity in the allowance for credit losses on loans for the periods indicated:

	Three months ended								Nine months ended
(dollars in thousands)	September 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
Balance, beginning of period	$	117,329			$	97,944			$	105,680			$	85,376
ACL at acquisition for PCD loans		—				—				—				2,037
Provision for credit losses		3,120				3,500				16,415				13,645
Loans charged-off		(5,357	)			(267	)			(7,392	)			(1,411	)
Recoveries of previously charged-off loans		720				311				1,109				1,841
Balance, end of period	$	115,812			$	101,488			$	115,812			$	101,488

The allowance for credit losses (ACL) was $115.8 million or 1.73% of total loans as of September 30, 2023. The provision for credit losses on loans of $3.1 million during the recent quarter was the net effect of charge-offs associated with the disposition of a previously reserved for and individually analyzed relationship of credits, partially offset by increases in reserves for qualitative factors and quantitative reserves under the cohort model from loan growth. On a comparative basis, the provision for credit losses of $3.5 million during the three months ended September 30, 2022, was largely the result of loan growth. For the current quarter, the qualitative components of the ACL resulted in a net increase in required reserves totaling approximately $2.5 million due primarily to softening of the California employment data. Meanwhile, the quantitative component of the ACL decreased reserve requirements by approximately $1.5 million over the trailing quarter primarily due to decreases in specific reserves, offset partially by increases attributed to loan growth.

The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date. This forecast data continues to evolve and includes improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date, particularly CA unemployment trends. Despite continued declines on a year over year comparative basis, core inflation remains elevated from wage pressures, and higher living costs such as housing, energy and food prices. Management notes the rapid intervals of rate increases by the Federal Reserve and flattening or inversion of the yield curve, have informed expectations of the US entering a recession within 12 months. As a result, management continues to believe that certain credit weaknesses are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors.

Loans past due 30 days or more decreased by $1.4 million during the quarter ended September 30, 2023, to $8.1 million, as compared to $9.5 million at June 30, 2023. Non-performing loans were $29.8 million at September 30, 2023, a decrease of $7.8 million from $37.6 million as of June 30, 2023, and an increase of $12.3 million from $17.5 million as of September 30, 2022. Of the $29.8 million loans designated as non-performing as of September 30, 2023, approximately $26.6 million are current with respect to payments required under their original loan agreements.

The following table illustrates the total loans by risk rating and their respective percentage of total loans for the periods presented:

	September 30,				% of Loans Outstanding			June 30,			% of Loans Outstanding			September 30,				% of Loans Outstanding
(dollars in thousands)		2023							2023						2022
Risk Rating:
Pass	$	6,532,424			97.4	%		$	6,299,893		96.6	%		$	6,133,805			97.1	%
Special Mention		94,614			1.4	%			155,678		2.4	%			126,273			2.0	%
Substandard		81,628			1.2	%			65,169		1.0	%			54,212			0.9	%
Total	$	6,708,666						$	6,520,740					$	6,314,290
Classified loans to total loans		1.22	%						1.00	%					0.86	%
Loans past due 30+ days to total loans		0.12	%						0.15	%					0.10	%

The ratio of classified loans of 1.22% as of September 30, 2023 increased 22 basis points from June 30, 2023 and increased 36 basis points from the comparative quarter ended 2022. The newly classified credits are spread amongst several CRE and agriculture relationships. As a percentage of total loans outstanding, classified assets are consistent with volumes experienced prior to the recent quantitative easing cycle spurred by the COVID pandemic, and reflects management's historically conservative approach to credit risk monitoring. The Company's combined criticized loan balances improved during the quarter by $44.6 million to $176.2 million as of September 30, 2023. This improvement was driven by upgrades in several CRE borrower relationships, as well as the disposition of a credit relationship referenced above.

There was one property added and one disposed within Other Real Estate Owned during the third quarter of 2023. As of September 30, 2023, other real estate owned consisted of nine properties with a carrying value of approximately $2.9 million.

Non-performing assets of $32.7 million at September 30, 2023, represented 0.33% of total assets, a change from the $40.5 million or 0.41% and $20.9 million or 0.21% as of June 30, 2023 and September 30, 2022, respectively.

Allocation of Credit Loss Reserves by Loan Type

	As of September 30, 2023						As of June 30, 2023						As of September 30, 2022
(dollars in thousands)	Amount			% of Loans Outstanding			Amount			% of Loans Outstanding			Amount			% of Loans Outstanding
Commercial real estate:
CRE - Non Owner Occupied	$	33,723		1.55	%		$	33,042		1.54	%		$	29,244		1.42	%
CRE - Owner Occupied		14,503		1.51	%			20,208		2.08	%			13,525		1.39	%
Multifamily		14,239		1.48	%			14,075		1.48	%			12,749		1.36	%
Farmland		4,210		1.51	%			3,691		1.33	%			3,122		1.12	%
Total commercial real estate loans		66,675		1.53	%			71,016		1.63	%			58,640		1.38	%
Consumer:
SFR 1-4 1st Liens		13,535		1.56	%			13,134		1.58	%			10,671		1.39	%
SFR HELOCs and Junior Liens		10,163		2.88	%			10,608		2.92	%			11,383		2.89	%
Other		2,920		4.44	%			2,771		4.67	%			1,878		3.23	%
Total consumer loans		26,618		2.07	%			26,513		2.12	%			23,932		1.97	%
Commercial and Industrial		12,290		2.05	%			11,647		2.02	%			10,400		1.94	%
Construction		8,097		2.52	%			7,031		2.53	%			6,132		2.52	%
Agricultural Production		2,125		1.72	%			1,105		1.80	%			2,368		3.31	%
Leases		7		0.09	%			17		0.20	%			16		0.20	%
Allowance for credit losses		115,812		1.73	%			117,329		1.80	%			101,488		1.61	%
Reserve for unfunded loan commitments		5,900						4,865						4,370
Total allowance for credit losses	$	121,712		1.81	%		$	122,194		1.87	%		$	105,858		1.68	%

In addition to the allowance for credit losses above, the Company has acquired various performing loans whose fair value as of the acquisition date was determined to be less than the principal balance owed on those loans. This difference represents the collective discount of credit, interest rate and liquidity measurements which is expected to be amortized over the life of the loans. As of September 30, 2023, the unamortized discount associated with acquired loans totaled $26.1 million.

Non-interest Income

The following table presents the key components of non-interest income for the current and trailing quarterly periods indicated:

	Three months ended
(dollars in thousands)	September 30, 2023				June 30, 2023				Change				% Change
ATM and interchange fees	$	6,728			$	6,856			$	(128	)		(1.9	)%
Service charges on deposit accounts		4,851				4,581				270			5.9	%
Other service fees		1,142				992				150			15.1	%
Mortgage banking service fees		445				454				(9	)		(2.0	)%
Change in value of mortgage servicing rights		(91	)			85				(176	)		(207.1	)%
Total service charges and fees		13,075				12,968				107			0.8	%
Increase in cash value of life insurance		684				788				(104	)		(13.2	)%
Asset management and commission income		1,141				1,158				(17	)		(1.5	)%
Gain on sale of loans		382				295				87			29.5	%
Lease brokerage income		160				74				86			116.2	%
Sale of customer checks		396				407				(11	)		(2.7	)%
Loss on sale of investment securities		—				—				—			—	%
(Loss) gain on marketable equity securities		(81	)			(42	)			(39	)		92.9	%
Other income		227				93				134			144.1	%
Total other non-interest income		2,909				2,773				136			4.9	%
Total non-interest income	$	15,984			$	15,741			$	243			1.5	%

Non-interest income increased $0.2 million or 1.5% to $16.0 million during the three months ended September 30, 2023, compared to $15.7 million during the quarter ended June 30, 2023. Service charges on deposit accounts increased by $0.3 million or 5.9% resulting from improved profitability on commercial deposit account activity.

The following table presents the key components of non-interest income for the current and prior year periods indicated:

	Three months ended September 30,
(dollars in thousands)		2023				2022			Change				% Change
ATM and interchange fees	$	6,728			$	6,714			$	14			0.2	%
Service charges on deposit accounts		4,851				4,436				415			9.4	%
Other service fees		1,142				1,022				120			11.7	%
Mortgage banking service fees		445				477				(32	)		(6.7	)%
Change in value of mortgage servicing rights		(91	)			33				(124	)		(375.8	)%
Total service charges and fees		13,075				12,682				393			3.1	%
Increase in cash value of life insurance		684				659				25			3.8	%
Asset management and commission income		1,141				1,020				121			11.9	%
Gain on sale of loans		382				357				25			7.0	%
Lease brokerage income		160				252				(92	)		(36.5	)%
Sale of customer checks		396				326				70			21.5	%
Loss on sale of investment securities		—				—				—			—	%
Loss on marketable equity securities		(81	)			(115	)			34			(29.6	)%
Other income		227				459				(232	)		(50.5	)%
Total other non-interest income		2,909				2,958				(49	)		(1.7	)%
Total non-interest income	$	15,984			$	15,640			$	344			2.2	%

Non-interest income decreased $0.3 million or 2.2% to $16.0 million during the three months ended September 30, 2023, compared to $15.6 million during the quarter ended September 30, 2022. Service charges on deposit accounts increased by $0.4 million or 9.4% for the same reasons noted above.

	Nine months ended September 30,
(dollars in thousands)		2023				2022			Change				% Change
ATM and interchange fees	$	19,928			$	19,941			$	(13	)		(0.1	)%
Service charges on deposit accounts		12,863				12,433				430			3.5	%
Other service fees		3,300				3,183				117			3.7	%
Mortgage banking service fees		1,364				1,422				(58	)		(4.1	)%
Change in value of mortgage servicing rights		(215	)			443				(658	)		(148.5	)%
Total service charges and fees		37,240				37,422				(182	)		(0.5	)%
Increase in cash value of life insurance		2,274				2,049				225			11.0	%
Asset management and commission income		3,233				2,946				287			9.7	%
Gain on sale of loans		883				2,145				(1,262	)		(58.8	)%
Lease brokerage income		332				648				(316	)		(48.8	)%
Sale of customer checks		1,091				871				220			25.3	%
Loss on sale of investment securities		(164	)			—				(164	)		n/m
Loss on marketable equity securities		(81	)			(346	)			265			(76.6	)%
Other income		552				1,431				(879	)		(61.4	)%
Total other non-interest income		8,120				9,744				(1,624	)		(16.7	)%
Total non-interest income	$	45,360			$	47,166			$	(1,806	)		(3.8	)%

Non-interest income decreased $1.8 million or 3.8% to $45.4 million during the nine months ended September 30, 2023, as compared to $47.2 million during the nine months ended September 30, 2022. Mortgage origination related activity has declined year over year from elevated interest rates, as the income recorded from the sale of loans is down $1.3 million or 58.8%. Changes in interest rates also led to a decline in fair value of mortgage servicing rights during the nine months ended September 30, 2023 , which decreased by $0.7 million or 148.5%, as compared to the trailing nine month period ended. Other income declined $0.9 million or 61.4%, $0.3 million of which is attributed to fair value changes associated with retirement plans, with a corresponding offset being included within benefits and other compensation costs.

Non-interest Expense

The following table presents the key components of non-interest expense for the current and trailing quarterly periods indicated:

	Three months ended
(dollars in thousands)	September 30, 2023				June 30, 2023			Change				% Change
Base salaries, net of deferred loan origination costs	$	23,616			$	24,059		$	(443	)		(1.8	)%
Incentive compensation		4,391				4,377			14			0.3	%
Benefits and other compensation costs		6,456				6,278			178			2.8	%
Total salaries and benefits expense		34,463				34,714			(251	)		(0.7	)%
Occupancy		3,948				3,991			(43	)		(1.1	)%
Data processing and software		5,246				4,638			608			13.1	%
Equipment		1,503				1,436			67			4.7	%
Intangible amortization		1,590				1,656			(66	)		(4.0	)%
Advertising		881				1,016			(135	)		(13.3	)%
ATM and POS network charges		1,606				1,902			(296	)		(15.6	)%
Professional fees		1,752				1,985			(233	)		(11.7	)%
Telecommunications		567				809			(242	)		(29.9	)%
Regulatory assessments and insurance		1,194				1,993			(799	)		(40.1	)%
Postage		306				311			(5	)		(1.6	)%
Operational loss		474				1,090			(616	)		(56.5	)%
Courier service		492				483			9			1.9	%
Gain on sale or acquisition of foreclosed assets		(152	)			—			(152	)		n/m
Loss on disposal of fixed assets		4				18			(14	)		(77.8	)%
Other miscellaneous expense		4,004				5,201			(1,197	)		(23.0	)%
Total other non-interest expense		23,415				26,529			(3,114	)		(11.7	)%
Total non-interest expense	$	57,878			$	61,243		$	(3,365	)		(5.5	)%
Average full-time equivalent staff		1,215				1,210			5			0.4	%

Non-interest expense for the quarter ended September 30, 2023, decreased $3.4 million or 5.5% to $57.9 million as compared to $61.2 million during the trailing quarter ended June 30, 2023. Data processing and software expenses increased by $0.6 million or 13.1% related to ongoing investments in the Company's data management and security infrastructure. Regulatory assessments decreased by $0.8 million or 40.1% to a normalized quarterly assessment following additional charges incurred in the prior quarter. Management anticipates that these costs may increase further if the economic environment in which the Company operates deteriorates further. Operational losses also decreased by $0.6 million or 56.5% during the quarter, in-line with historical periods. Other miscellaneous expenses decreased by $1.2 million or 23.0%, following non-recurring costs in the prior quarter associated with an estimated $0.8 million in refunds to customers previously charged non-sufficient funds fees as well as an absence in the current period of provision expense on real estate owned of $0.5 million in the trailing quarter.

The following table presents the key components of non-interest expense for the current and prior year quarterly periods indicated:

	Three months ended September 30,
(dollars in thousands)		2023				2022			Change				% Change
Base salaries, net of deferred loan origination costs	$	23,616			$	22,377			$	1,239			5.5	%
Incentive compensation		4,391				4,832				(441	)		(9.1	)%
Benefits and other compensation costs		6,456				6,319				137			2.2	%
Total salaries and benefits expense		34,463				33,528				935			2.8	%
Occupancy		3,948				3,965				(17	)		(0.4	)%
Data processing and software		5,246				3,449				1,797			52.1	%
Equipment		1,503				1,422				81			5.7	%
Intangible amortization		1,590				1,702				(112	)		(6.6	)%
Advertising		881				990				(109	)		(11.0	)%
ATM and POS network charges		1,606				1,694				(88	)		(5.2	)%
Professional fees		1,752				1,172				580			49.5	%
Telecommunications		567				575				(8	)		(1.4	)%
Regulatory assessments and insurance		1,194				828				366			44.2	%
Postage		306				287				19			6.6	%
Operational loss		474				492				(18	)		(3.7	)%
Courier service		492				497				(5	)		(1.0	)%
Gain on sale or acquisition of foreclosed assets		(152	)			(148	)			(4	)		2.7	%
Loss on disposal of fixed assets		4				4				—			—	%
Other miscellaneous expense		4,004				4,008				(4	)		(0.1	)%
Total other non-interest expense		23,415				20,937				2,478			11.8	%
Total non-interest expense	$	57,878			$	54,465			$	3,413			6.3	%
Average full-time equivalent staff		1,215				1,198				17			1.4	%

Non-interest expense increased $3.4 million or 6.3% to $57.9 million during the three months ended September 30, 2023, as compared to $54.5 million for the quarter ended September 30, 2022. Total salaries and benefits expense increased by $0.9 million or 2.8% to $34.5 million, largely from a net increase of 17 full-time equivalent positions as well as annual merit increases effective in March, 2023. Data processing and software expenses increased by $1.8 million or 52.1% consist with the discussion above. The increase in professional fees of $0.6 million was directly associated with third party contract negotiation assistance, the benefits of which will be realized in future periods.

	Nine months ended September 30,
(dollars in thousands)		2023				2022			Change				% Change
Base salaries, net of deferred loan origination costs	$	70,675			$	62,762			$	7,913			12.6	%
Incentive compensation		11,663				11,697				(34	)		(0.3	)%
Benefits and other compensation costs		19,402				18,782				620			3.3	%
Total salaries and benefits expense		101,740				93,241				8,499			9.1	%
Occupancy		12,099				11,536				563			4.9	%
Data processing and software		13,916				10,558				3,358			31.8	%
Equipment		4,322				4,208				114			2.7	%
Intangible amortization		4,902				4,632				270			5.8	%
Advertising		2,656				2,445				211			8.6	%
ATM and POS network charges		5,217				4,850				367			7.6	%
Professional fees		5,326				3,281				2,045			62.3	%
Telecommunications		1,971				1,660				311			18.7	%
Regulatory assessments and insurance		3,979				2,327				1,652			71.0	%
Merger and acquisition expenses		—				6,253				(6,253	)		(100.0	)%
Postage		916				828				88			10.6	%
Operational loss		1,999				765				1,234			161.3	%
Courier service		1,314				1,397				(83	)		(5.9	)%
Gain on sale or acquisition of foreclosed assets		(152	)			(246	)			94			(38.2	)%
Loss (gain) on disposal of fixed assets		22				(1,069	)			1,091			(102.1	)%
Other miscellaneous expense		12,688				10,510				2,178			20.7	%
Total other non-interest expense		71,175				63,935				7,240			11.3	%
Total non-interest expense	$	172,915			$	157,176			$	15,739			10.0	%
Average full-time equivalent staff		1,215				1,155				60			5.2	%

Total non-interest expense increased $15.7 million or 10.0% to $172.9 million during the nine months ended September 30, 2023, as compared to $157.2 million for the comparative period in 2022, for reasons primarily associated with the acquisition of Valley Republic Bank in March of 2022 which resulted in expense increases for nearly every identified category. Merger and acquisition expenses associated with this acquisition totaled $6.2 million for the nine-month period ended 2022. The reasons for additional and more specific changes in various costs identified above, and including but not limited to data processing, regulatory assessments, operational losses and other miscellaneous expenses are consistent with the discussions provided above for the most recent three months ended September 30, 2023 as compared with the trailing quarter ended June 30, 2023.

Provision for Income Taxes

The Company’s effective tax rate was 27.3% for the quarter ended September 30, 2023, as compared to 25.6% for the period ended June 30, 2023, and 28.1% for the year ended December 31, 2022. Differences between the Company's effective tax rate and applicable federal and state blended statutory rate of approximately 29.6% are due to the proportion of non-taxable revenues, non-deductible expenses, and benefits from tax credits as compared to the levels of pre-tax earnings.

About TriCo Bancshares

Established in 1975, Tri Counties Bank is a wholly-owned subsidiary of TriCo Bancshares (NASDAQ: TCBK) headquartered in Chico, California, providing a unique brand of customer Service with Solutions available in traditional stand-alone and in-store bank branches and loan production offices in communities throughout California. Tri Counties Bank provides an extensive and competitive breadth of consumer, small business and commercial banking financial services, along with convenient around-the-clock ATMs, online and mobile banking access. Brokerage services are provided by Tri Counties Advisors through affiliation with Raymond James Financial Services, Inc. Visit www.TriCountiesBank.com to learn more.

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the conditions of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; the impacts of inflation, interest rate, market and monetary fluctuations on the Company's business condition and financial operating results; the impact of changes in financial services industry policies, laws and regulations; regulatory restrictions affecting our ability to successfully market and price our products to consumers; technological changes; weather, natural disasters and other catastrophic events that may or may not be caused by climate change and their effects on the Company's customers and the economic and business environments in which the Company operates; the impact of a slowing U.S. economy and potentially increased unemployment on the performance of our loan portfolio, the market value of our investment securities and possible other-than-temporary impairment of securities held by us due to changes in credit quality or rates; the availability of, and cost of, sources of funding and the demand for our products; adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, commodities prices, inflationary pressures and labor shortages on the economic recovery and our business; the impacts of international hostilities, terrorism or geopolitical events; adverse developments in the financial services industry generally such as the recent bank failures and any related impact on depositor behavior or investor sentiment; risks related to the sufficiency of liquidity; the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital; the costs or effects of mergers, acquisitions or dispositions we may make, as well as whether we are able to obtain any required governmental approvals in connection with any such activities, or identify and complete favorable transactions in the future, and/or realize the anticipated financial and business benefits; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the negative impact on our reputation and profitability in the event customers experience economic harm or in the event that regulatory violations are identified; the ability to execute our business plan in new markets; the future operating or financial performance of the Company, including our outlook for future growth and changes in the level and direction of our nonperforming assets and charge-offs; the appropriateness of the allowance for credit losses, including the assumptions made under our current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effectiveness of the Company's asset management activities managing the mix of earning assets and in improving, resolving or liquidating lower-quality assets; the effect of changes in the financial performance and/or condition of our borrowers; changes in accounting standards and practices; changes in consumer spending, borrowing and savings habits; our ability to attract and maintain deposits and other sources of liquidity; the effects of changes in the level or cost of checking or savings account deposits on our funding costs and net interest margin; increasing noninterest expense and its impact on our financial performance; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional competitors including retail businesses and technology companies; the challenges of attracting, integrating and retaining key employees; the vulnerability of the Company's operational or security systems or infrastructure, the systems of third-party vendors or other service providers with whom the Company contracts, and the Company's customers to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and data/security breaches and the cost to defend against and respond to such incidents; the impact of the recent cyber security ransomware incident on our operations and reputation; increased data security risks due to work from home arrangements and email vulnerability; failure to safeguard personal information, and any resulting litigation; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the transition from the LIBOR to new interest rate benchmarks; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and our ability to manage the risks involved in the foregoing. There can be no assurance that future developments affecting us will be the same as those anticipated by management. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2022, which has been filed with the Securities and Exchange Commission (the “SEC”) and all subsequent filings with the SEC under Sections 13(a), 13(c), 14, and 15(d) of the Securities Act of 1934, as amended. Such filings are also available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. We undertake no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)
	Three months ended
	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Revenue and Expense Data
Interest income	$	112,380			$	107,158			$	102,907			$	102,989			$	96,366
Interest expense		24,257				18,557				9,571				4,089				2,260
Net interest income		88,123				88,601				93,336				98,900				94,106
Provision for credit losses		4,155				9,650				4,195				4,245				3,795
Noninterest income:
Service charges and fees		13,075				12,968				11,197				12,343				12,682
Loss on sale of investment securities		—				—				(164	)			—				—
Other income		2,909				2,773				2,602				3,537				2,958
Total noninterest income		15,984				15,741				13,635				15,880				15,640
Noninterest expense:
Salaries and benefits		34,463				34,714				32,563				36,611				33,528
Occupancy and equipment		5,451				5,427				5,543				5,482				5,387
Data processing and network		6,852				6,540				5,741				6,236				5,143
Other noninterest expense		11,112				14,562				9,947				11,140				10,407
Total noninterest expense		57,878				61,243				53,794				59,469				54,465
Total income before taxes		42,074				33,449				48,982				51,066				51,486
Provision for income taxes		11,484				8,557				13,149				14,723				14,148
Net income	$	30,590			$	24,892			$	35,833			$	36,343			$	37,338
Share Data
Basic earnings per share	$	0.92			$	0.75			$	1.08			$	1.09			$	1.12
Diluted earnings per share	$	0.92			$	0.75			$	1.07			$	1.09			$	1.12
Dividends per share	$	0.30			$	0.30			$	0.30			$	0.30			$	0.30
Book value per common share	$	32.18			$	32.86			$	32.84			$	31.39			$	29.71
Tangible book value per common share (1)	$	22.67			$	23.30			$	23.22			$	21.76			$	19.92
Shares outstanding		33,263,324				33,259,260				33,195,250				33,331,513				33,332,189
Weighted average shares		33,262,798				33,219,168				33,295,750				33,330,029				33,348,322
Weighted average diluted shares		33,319,291				33,301,548				33,437,680				33,467,393				33,463,364
Credit Quality
Allowance for credit losses to gross loans		1.73	%			1.80	%			1.69	%			1.64	%			1.61	%
Loans past due 30 days or more	$	8,072			$	9,483			$	7,891			$	4,947			$	6,471
Total nonperforming loans	$	29,799			$	37,592			$	16,025			$	21,321			$	17,471
Total nonperforming assets	$	32,651			$	40,506			$	19,464			$	24,760			$	20,912
Loans charged-off	$	5,357			$	276			$	1,758			$	174			$	267
Loans recovered	$	720			$	218			$	170			$	66			$	311
Selected Financial Ratios
Return on average total assets		1.23	%			1.01	%			1.47	%			1.45	%			1.46	%
Return on average equity		10.91	%			8.98	%			13.36	%			14.19	%			13.78	%
Average yield on loans, excluding PPP		5.52	%			5.38	%			5.21	%			5.10	%			4.87	%
Average yield on interest-earning assets		4.94	%			4.78	%			4.64	%			4.52	%			4.12	%
Average rate on interest-bearing deposits		1.36	%			0.95	%			0.43	%			0.18	%			0.08	%
Average cost of total deposits		0.86	%			0.58	%			0.25	%			0.10	%			0.04	%
Average cost of total deposits and other borrowings		1.05	%			0.80	%			0.38	%			0.12	%			0.04	%
Average rate on borrowings & subordinated debt		4.96	%			4.92	%			4.74	%			4.07	%			3.60	%
Average rate on interest-bearing liabilities		1.71	%			1.37	%			0.74	%			0.32	%			0.17	%
Net interest margin (fully tax-equivalent) (1)		3.88	%			3.96	%			4.21	%			4.34	%			4.02	%
Loans to deposits		83.76	%			80.55	%			80.02	%			77.45	%			72.95	%
Efficiency ratio		55.59	%			58.69	%			50.29	%			51.81	%			49.63	%
Supplemental Loan Interest Income Data
Discount accretion on acquired loans	$	1,324			$	1,471			$	1,397			$	1,751			$	714
All other loan interest income (excluding PPP) (1)	$	90,381			$	85,272			$	81,013			$	79,989			$	74,929
Total loan interest income (excluding PPP) (1)	$	91,705			$	86,743			$	82,410			$	81,740			$	75,643

(1) Non-GAAP measure

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)
Balance Sheet Data	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Cash and due from banks	$	111,099			$	118,792			$	110,335			$	107,230			$	246,509
Securities, available for sale, net		2,176,854				2,323,011				2,408,452				2,455,036				2,482,857
Securities, held to maturity, net		139,058				145,117				152,067				160,983				168,038
Restricted equity securities		17,250				17,250				17,250				17,250				17,250
Loans held for sale		644				1,058				226				1,846				247
Loans:
Commercial real estate		4,367,445				4,343,924				4,353,959				4,359,083				4,238,930
Consumer		1,288,810				1,252,225				1,233,797				1,240,743				1,217,297
Commercial and industrial		599,757				576,247				553,098				569,921				534,960
Construction		320,963				278,425				225,996				211,560				243,571
Agriculture production		123,472				61,337				47,062				61,414				71,599
Leases		8,219				8,582				8,509				7,726				7,933
Total loans, gross		6,708,666				6,520,740				6,422,421				6,450,447				6,314,290
Allowance for credit losses		(115,812	)			(117,329	)			(108,407	)			(105,680	)			(101,488	)
Total loans, net		6,592,854				6,403,411				6,314,014				6,344,767				6,212,802
Premises and equipment		71,760				72,619				72,096				72,327				73,266
Cash value of life insurance		136,016				135,332				134,544				133,742				132,933
Accrued interest receivable		34,595				32,835				31,388				31,856				27,070
Goodwill		304,442				304,442				304,442				304,442				307,942
Other intangible assets		11,768				13,358				15,014				16,670				18,372
Operating leases, right-of-use		27,363				29,140				30,000				26,862				26,622
Other assets		273,303				257,056				252,566				257,975				262,971
Total assets	$	9,897,006			$	9,853,421			$	9,842,394			$	9,930,986			$	9,976,879
Deposits:
Noninterest-bearing demand deposits	$	2,857,512			$	3,073,353			$	3,236,696			$	3,502,095			$	3,678,202
Interest-bearing demand deposits		1,746,882				1,751,998				1,635,706				1,718,541				1,749,123
Savings deposits		2,816,816				2,778,118				2,807,796				2,884,378				2,924,674
Time certificates		588,433				491,896				345,667				223,999				303,770
Total deposits		8,009,643				8,095,365				8,025,865				8,329,013				8,655,769
Accrued interest payable		6,688				3,655				1,643				1,167				853
Operating lease liability		29,527				31,377				32,228				29,004				28,717
Other liabilities		141,692				136,464				157,222				159,741				153,110
Other borrowings		537,975				392,714				434,140				264,605				47,068
Junior subordinated debt		101,080				101,065				101,051				101,040				101,024
Total liabilities		8,826,605				8,760,640				8,752,149				8,884,570				8,986,541
Common stock		696,369				695,305				695,168				697,448				696,348
Retained earnings		599,448				578,852				564,538				542,873				516,699
Accum. other comprehensive loss, net of tax		(225,416	)			(181,376	)			(169,461	)			(193,905	)			(222,709	)
Total shareholders’ equity	$	1,070,401			$	1,092,781			$	1,090,245			$	1,046,416			$	990,338
Quarterly Average Balance Data
Average loans, excluding PPP	$	6,596,116			$	6,465,903			$	6,412,386			$	6,357,250			$	6,162,267
Average interest-earning assets	$	9,053,389			$	9,022,064			$	9,028,061			$	9,076,450			$	9,320,152
Average total assets	$	9,874,240			$	9,848,191			$	9,878,927			$	9,932,931			$	10,131,118
Average deposits	$	8,043,101			$	7,981,515			$	8,218,576			$	8,545,172			$	8,752,215
Average borrowings and subordinated debt	$	550,344			$	578,312			$	378,676			$	186,957			$	139,919
Average total equity	$	1,112,404			$	1,112,223			$	1,087,473			$	1,016,468			$	1,074,776
Capital Ratio Data
Total risk-based capital ratio		14.5	%			14.5	%			14.5	%			14.2	%			14.0	%
Tier 1 capital ratio		12.7	%			12.7	%			12.7	%			12.4	%			12.2	%
Tier 1 common equity ratio		12.0	%			12.0	%			12.0	%			11.7	%			11.4	%
Tier 1 leverage ratio		10.6	%			10.4	%			10.2	%			10.1	%			9.6	%
Tangible capital ratio (1)		7.9	%			8.1	%			8.1	%			7.6	%			6.9	%

(1) Non-GAAP measure

TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES

(Unaudited. Dollars in thousands)

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this press release because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:

	Three months ended												Nine months ended
(dollars in thousands)	September 30, 2023				June 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
Net interest margin
Acquired loans discount accretion, net:
Amount (included in interest income)	$	1,324			$	1,471			$	714			$	4,192			$	3,714
Effect on average loan yield		0.08	%			0.09	%			0.05	%			0.09	%			0.09	%
Effect on net interest margin (FTE)		0.06	%			0.07	%			0.03	%			0.06	%			0.06	%
Net interest margin (FTE)		3.88	%			3.96	%			4.02	%			4.01	%			3.71	%
Net interest margin less effect of acquired loan discount accretion (Non-GAAP)		3.82	%			3.89	%			3.99	%			3.95	%			3.65	%
PPP loans yield, net:
Amount (included in interest income)	$	2			$	4			$	313			$	11			$	2,374
Effect on net interest margin (FTE)		—	%			—	%			0.01	%			—	%			0.02	%
Net interest margin less effect of PPP loan yield (Non-GAAP)		3.88	%			3.96	%			4.02	%			4.01	%			3.69	%
Acquired loan discount accretion and PPP loan yield, net:
Amount (included in interest income)	$	1,326			$	1,475			$	1,027			$	4,203			$	6,088
Effect on net interest margin (FTE)		0.06	%			0.07	%			0.04	%			0.06	%			0.08	%
Net interest margin less effect of acquired loan discount accretion and PPP yields, net (Non-GAAP)		3.82	%			3.89	%			3.98	%			3.95	%			3.63	%

	Three months ended												Nine months ended
(dollars in thousands)	September 30, 2023				June 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
Pre-tax pre-provision return on average assets or equity
Net income (GAAP)	$	30,590			$	24,892			$	37,338			$	91,315			$	89,076
Exclude provision for income taxes		11,484				8,557				14,148				33,190				33,765
Exclude provision for credit losses		4,155				9,650				3,795				18,000				14,225
Net income before income tax and provision expense (Non-GAAP)	$	46,229			$	43,099			$	55,281			$	142,505			$	137,066
Average assets (GAAP)	$	9,874,240			$	9,848,191			$	10,131,118			$	9,867,099			$	9,682,198
Average equity (GAAP)	$	1,112,404			$	1,112,223			$	1,074,776			$	1,104,122			$	1,058,938
Return on average assets (GAAP) (annualized)		1.23	%			1.01	%			1.46	%			1.24	%			1.23	%
Pre-tax pre-provision return on average assets (Non-GAAP) (annualized)		1.86	%			1.76	%			2.16	%			1.93	%			1.89	%
Return on average equity (GAAP) (annualized)		10.91	%			8.98	%			13.78	%			11.06	%			11.25	%
Pre-tax pre-provision return on average equity (Non-GAAP) (annualized)		16.49	%			15.54	%			20.41	%			17.26	%			17.31	%

	Three months ended												Nine months ended
(dollars in thousands)	September 30, 2023				June 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
Return on tangible common equity
Average total shareholders' equity	$	1,112,404			$	1,112,223			$	1,074,776			$	1,104,122			$	1,058,938
Exclude average goodwill		304,442				304,442				307,942				304,442				281,151
Exclude average other intangibles		12,563				14,716				19,433				14,219				17,717
Average tangible common equity (Non-GAAP)	$	795,399			$	793,065			$	747,401			$	785,461			$	760,070
Net income (GAAP)	$	30,590			$	24,892			$	37,338			$	91,315			$	89,076
Exclude amortization of intangible assets, net of tax effect		1,120				1,166				1,199				3,453				3,263
Tangible net income available to common shareholders (Non-GAAP)	$	31,710			$	26,058			$	38,537			$	94,768			$	92,339
Return on average equity		10.91	%			8.98	%			13.78	%			11.06	%			11.25	%
Return on average tangible common equity (Non-GAAP)		15.82	%			13.18	%			20.46	%			16.13	%			16.24	%

	Three months ended
(dollars in thousands)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Tangible shareholders' equity to tangible assets
Shareholders' equity (GAAP)	$	1,070,401			$	1,092,781			$	1,090,245			$	1,046,416			$	990,338
Exclude goodwill and other intangible assets, net		316,210				317,800				319,456				321,112				326,314
Tangible shareholders' equity (Non-GAAP)	$	754,191			$	774,981			$	770,789			$	725,304			$	664,024
Total assets (GAAP)	$	9,897,006			$	9,853,421			$	9,842,394			$	9,930,986			$	9,976,879
Exclude goodwill and other intangible assets, net		316,210				317,800				319,456				321,112				326,314
Total tangible assets (Non-GAAP)	$	9,580,796			$	9,535,621			$	9,522,938			$	9,609,874			$	9,650,565
Shareholders' equity to total assets (GAAP)		10.82	%			11.09	%			11.08	%			10.54	%			9.93	%
Tangible shareholders' equity to tangible assets (Non- GAAP)		7.87	%			8.13	%			8.09	%			7.55	%			6.88	%

	Three months ended
(dollars in thousands)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
Tangible common shareholders' equity per share
Tangible shareholders' equity (Non-GAAP)	$	754,191		$	774,981		$	770,789		$	725,304		$	664,024
Common shares outstanding at end of period		33,263,324			33,259,260			33,195,250			33,331,513			33,332,189
Common shareholders' equity (book value) per share (GAAP)	$	32.18		$	32.86		$	32.84		$	31.39		$	29.71
Tangible common shareholders' equity (tangible book value) per share (Non-GAAP)	$	22.67		$	23.30		$	23.22		$	21.76		$	19.92

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231025526893/en/

The Trico Bancshares Stock at the time of publication of the news with a fall of -0,07 % to 30,23USD on Nasdaq stock exchange (25. Oktober 2023, 22:02 Uhr).