tcbk-20200727
falseTriCo Bancshares000035617100003561712020-04-012020-06-3000003561712020-07-292020-07-2900003561712020-01-012020-03-31


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
_______________
FORM 8-K
_______________

Current report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
July 27, 2020
_______________________

TriCo Bancshares
(Exact name of registrant as specified in its charter)
_______________________
California0-1066194-2792841
(State or other jurisdiction of
incorporation or organization)
(Commission File No.)(I.R.S. Employer
Identification No.)

63 Constitution Drive
Chico,California95973
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (530898-0300
_______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange
on which registered
Common Stock, no par valueTCBKNasdaq
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Item 2.02. Results of Operations and Financial Condition
On July 27, 2020, TriCo Bancshares (the "Company") announced its financial results for the three and six month periods ended June 30, 2020. A copy of the press release is attached as Exhibit 99.1 to this to this Form 8-K and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 Press release dated July 27, 2020
The information furnished under Item 2.02 and Item 9.01 of this Current Period on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of TriCo Bancshares under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TRICO BANCSHARES
Date: July 27, 2020
/s/ Peter G. Wiese
Peter G. Wiese, Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


Document




Exhibit 99.1
PRESS RELEASEContact: Richard P. Smith
For Immediate ReleasePresident & CEO (530) 898-0300
TRICO BANCSHARES ANNOUNCES QUARTERLY RESULTS
CHICO, CA – (July 27, 2020) – TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $7,430,000 for the quarter ended June 30, 2020, compared to $16,121,000 during the trailing quarter ended March 31, 2020 and $23,061,000 during the quarter ended June 30, 2019. Diluted earnings per share were $0.25 for the second quarter of 2020, compared to $0.53 for the first quarter of 2020 and $0.75 for the second quarter of 2019.
Financial Highlights
Performance highlights and other developments for the Company as of or for the three months ended June 30, 2020 included the following:
For the three and six months ended June 30, 2020, the Company’s return on average assets was 0.43% and 0.70%, respectively, and the return on average equity was 3.39% and 5.06%, respectively.
As of June 30, 2020, the Company reported total loans, total assets and total deposits of $4.80 billion, $7.36 billion and $6.25 billion, respectively.
The loan to deposit ratio was 76.84% as of June 30, 2020, as compared to 81.05% at March 31, 2020 and 76.82% at June 30, 2019.
The Company originated and funded 2,908 loans totaling $436.7 million under the Payment Protection Program (PPP).
For the current quarter, net interest margin was 4.10% on a tax equivalent basis as compared to 4.50% in the quarter ended June 30, 2019, and a decrease of 24 basis points from the 4.34% in the trailing quarter.
Non-interest bearing deposits as a percentage of total deposits were 39.81% at June 30, 2020, as compared to 34.86% at March 31, 2020 and 33.33% at June 30, 2019.
The average rate of interest paid on deposits, including non-interest-bearing deposits, decreased to 0.12% for the second quarter of 2020 as compared with 0.19% for the trailing quarter, and also decreased by ten basis points from the average rate paid of 0.22% during the same quarter of the prior year.
Non-performing assets to total assets were 0.31% at June 30, 2020, as compared to 0.31% as of March 31, 2020, and 0.35% at June 30, 2019.
Credit provision expense for loans and debt securities was $22.1 million during the quarter ended June 30, 2020, as compared to provision expense of $8.0 million during the trailing quarter ended March 31, 2020, and $0.5 million for the three month period ended June 30, 2019.
Gain on sale of loans for the three and six months ended June 30, 2020 totaled $1,736,000 and $2,627,000, as compared to $891,00 and $987,000 for the equivalent periods ended June 30, 2019, respectively.
The efficiency ratio was 59.89% for the second quarter of 2020, as compared to 59.75% in the trailing quarter and 60.07% in the same quarter of the 2019 year.
President and CEO, Rick Smith commented, “While these unprecedented times have created challenges for our customers and the communities we serve, we are hopeful that their actions and those of our civic leaders will lessen the long-term economic and social impacts that would otherwise result. In the midst of these challenges, the Bank continues to be proactive in our approach to ensuring our financial strength and ability to meet the needs and expectations of our customers, shareholders and employees. More specifically, given the outlook of unemployment data, we believe that it was prudent to increase our loan loss reserves despite the overall positive credit quality characteristics that our loan portfolio has demonstrated in the first half of the year. In addition, while the habits of our customers have impacted certain revenues, such as those associated with interchange fees, we are benefiting from other revenue opportunities including but not limited to those associated with the origination and sale of home mortgages.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 June 30, 2020, 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.
1





Summary Results
For the three and six months ended June 30, 2020 the Company’s return on average assets was 0.43% and 0.70%, respectively, and the return on average equity was 3.39% and 5.06%, respectively. For the three and six months ended June 30, 2019, the Company’s return on average assets was 1.45% and 1.43%, respectively, and the return on average equity was 10.68% and 10.71%, 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
June 30,March 31,
(dollars and shares in thousands)20202020$ Change% Change
Net interest income$64,659  $63,192  $1,467  2.3 %
Provision for loan losses(22,089) (8,000) (14,089) 176.1 %
Noninterest income11,657  11,820  (163) (1.4)%
Noninterest expense(45,705) (44,819) (886) 2.0 %
Provision for income taxes(1,092) (6,072) 4,980  (82.0)%
Net income$7,430  $16,121  $(8,691) (53.9)%
Diluted earnings per share$0.25  $0.53  $(0.28) (52.8)%
Dividends per share$0.22  $0.22  $—  0.0 %
Average common shares29,754  30,395  (641) (2.1)%
Average diluted common shares29,883  30,523  (640) (2.1)%
Return on average total assets0.43 %1.00 %
Return on average equity3.39 %7.14 %
Efficiency ratio59.89 %59.75 %

Three months ended
June 30,
(dollars and shares in thousands)20202019$ Change% Change
Net interest income$64,659  $64,315  $344  0.5 %
Provision for loan losses(22,089) (537) (21,552) 4,013.4 %
Noninterest income11,657  13,423  (1,766) (13.2)%
Noninterest expense(45,705) (46,697) 992  (2.1)%
Provision for income taxes(1,092) (7,443) 6,351  (85.3)%
Net income$7,430  $23,061  $(15,631) (67.8)%
Diluted earnings per share$0.25  $0.75  $(0.50) (66.7)%
Dividends per share$0.22  $0.19  $0.03  15.8 %
Average common shares29,754  30,458  (704) (2.3)%
Average diluted common shares29,883  30,643  (760) (2.5)%
Return on average total assets0.43 %1.45 %
Return on average equity3.39 %10.68 %
Efficiency ratio59.89 %60.07 %


Six months ended
June 30,
(dollars and shares in thousands)20202019$ Change% Change
Net interest income$127,851  $128,185  $(334) (0.3)%
(Provision for) reversal of loan losses(30,088) 1,063  (31,151) — %
Noninterest income23,477  25,226  (1,749) (6.9)%
Noninterest expense(90,525) (92,149) 1,624  (1.8)%
Provision for income taxes(7,164) (16,538) 9,374  (56.7)%
Net income$23,551  $45,787  $40,066  (48.6)%
Diluted earnings per share$0.78  $1.49  $(0.71) 27.8 %
Dividends per share$0.44  $0.38  $0.06  17.6 %
Average common shares30,074  30,441  (367) (1.2)%
Average diluted common shares30,203  30,650  (447) (1.5)%
Return on average total assets0.70 %1.43 %
Return on average equity5.06 %10.71 %
Efficiency ratio59.82 %60.07 %





2





SBA Paycheck Protection Program
In March 2020 the SBA Paycheck Protection Program ("PPP") was created to help small businesses keep workers employed during the COVID-19 crisis. As a Small Business Administration (SBA) Preferred Lender, the Company was able to provide PPP loans to small business customers. During the quarter ended June 30, 2020, the Company originated more than 2,900 loans under the PPP program, with a total balance outstanding of $423,431,000 as of quarter end. In connection with the origination of these loans, the Company earned approximately $15,680,000 in loan fees that will be amortized over the two-year term of the loans, offset by deferred loan costs of approximately $756,000. During the three and six months ended June 30, 2020, interest and fee income recognized from PPP loans totaled $2,356,000, which was inclusive of $1,626,000 in net deferred fee accretion.

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 Company is closely monitoring the effects of the pandemic on our loan and deposit customers. Our management team continues to be focused on assessing the risks in our loan portfolio and working with our customers to mitigate where possible, the risk of potential losses. The Company implemented loan programs to allow certain consumers and businesses impacted by the pandemic to defer loan principal and interest payments.
The following is a summary of COVID related loan customer modifications as of June 30, 2020:
Modification TypeDeferral Term
(dollars in thousands)Balance of Modified Loans% of Total Category of LoansInterest Only DeferralPrincipal and Interest Deferral90 Days180 DaysOther
Commercial real estate:
CRE non-owner occupied$213,39413.4 %10.1 %89.9 %46.7 %53.1 %0.2 %
CRE owner occupied37,8166.5 %18.3 %81.7 %17.4 %82.7 %— %
Multifamily13,7762.4 %— %100.0 %46.0 %54.0 %— %
Farmland2,1021.4 %26.1 %73.9 %— %100.0 %— %
Total commercial real estate loans267,0889.2 %10.9 %89.2 %42.1 %57.7 %0.2 %
Consumer:
SFR 1-4 1st lien34,7426.9 %1.3 %98.7 %97.1 %2.9 %— %
SFR HELOCs and junior liens8,2752.3 %76.1 %23.9 %93.3 %6.7 %— %
Other4,6295.7 %— %100.0 %100.0 %— %— %
Total consumer loans47,6465.0 %14.2 %85.8 %96.7 %3.3 %— %
Commercial and industrial19,8313.1 %24.5 %75.5 %23.8 %75.9 %0.3 %
Construction6,3492.3 %— %100.0 %100.0 %— %— %
Agriculture production— %— %— %— %— %— %
Leases— %— %— %— %— %— %
Total modifications$340,9157.1 %11.9 %88.1 %49.8 %50.1 %0.2 %

Management has evaluated its COVID relief modifications to various industries which may have an increased level of risk exposure as a result of the economic conditions brought about by the pandemic. As of June 30, 2020 those modifications included the following:
Total Loan Balances OutstandingBalance of Modified Loans% of Total Segment of Loans% of Total COVID Loan Modifications
(dollars in thousands)
Hotel, recreation and leisure$225,604  $105,920  47.0 %31.1 %
Healthcare65,261  6,1699.5 %1.8 %
Retail74,174  6780.9 %0.2 %
Restaurants, bars and catering55,551  9,77117.6 %2.9 %
Gas stations47,383  — %— %
Trucking and transportation32,828  7592.3 %0.2 %
Grocery and beverage stores24,852  2220.9 %0.1 %
Personal and professional services19,146  5012.6 %0.2 %
Nursing and residential care facilities19,882  — %— %
Education13,674  9717.1 %0.3 %
Childcare2,452  — %— %
           Total $580,807  $124,991  n/a36.7 %
3





Balance Sheet
Total loans outstanding grew to $4.80 billion as of June 30, 2020, an increase of 17.0% over the same quarter of the prior year, and an annualized increase of 38.6% over the trailing quarter. Investments outstanding declined to $1.35 billion as of June 30, 2020, a decrease of 8.2% annualized over the trailing quarter as the result of prepayments and maturities. Average earning assets to total average assets continued to increase slightly to 90.6% at June 30, 2020, as compared to 90.4% and 90.3% at March 31, 2020, and June 30, 2019 respectively. The Company's loan to deposit ratio was 76.8% at June 30, 2020, as compared to 81.1% and 76.8% at March 31, 2020, and June 30, 2019 respectively.
Total shareholders' equity increased by $19,260,000 during the quarter ended June 30, 2020 primarily as a result of an improvement in unrealized gains (losses), net of tax, on investment securities totaling $25,751,000 and net income of $7,430,000, partially offset by $8,009,000 in common stock repurchases. As a result, the Company’s book value was $29.76 per share at June 30, 2020 as compared to $28.91 and $28.71 at March 31, 2020, and June 30, 2019, respectively. The Company’s tangible book value per share, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $21.64 per share at June 30, 2020 as compared to $20.76 and $20.60 at March 31, 2020, and June 30, 2019, respectively.
Trailing Quarter Balance Sheet Change
Ending balancesAs of June 30,As of March 31,
$ Change
Annualized
% Change
($‘s in thousands)20202020
Total assets$7,360,071  $6,474,309  $885,762  54.7 %
Total loans4,801,405  4,379,062  422,343  38.6 %
Total loans, excluding PPP4,377,974  4,379,062  (1,088) (0.1)%
Total investments1,353,728  1,382,026  (28,298) (8.2)%
Total deposits$6,248,258  $5,402,698  $845,560  62.6 %
Loan growth of $422,343,000 or 38.6% on an annualized basis during the second quarter of 2020 was primarily attributed to the PPP program, as total loan balances, excluding PPP, were effectively unchanged during the quarter ended June 30, 2020. Growth of deposit balances during the second quarter of 2020 were $845,560,000 or 62.6% annualized. Expansion of Federal stimulus programs and the delay of 2019 income tax payments likely attributed to the significant deposit growth during the quarter.
Average Trailing Quarter Balance Sheet Change
Qtrly avg balancesAs of June 30,As of March 31,$ ChangeAnnualized
% Change
($‘s in thousands)20202020
Total assets$7,027,735  $6,506,587  $521,148  32.0 %
Total loans4,656,050  4,329,357  326,693  30.2 %
Total loans, excluding PPP4,363,481  4,329,357  34,124  3.2 %
Total investments1,371,733  1,354,664  17,069  5.0 %
Total deposits$5,937,294  $5,395,933  $541,361  40.1 %
The growth in average loans of $326,693,000, or 30.2% on an annualized basis, during the second quarter of 2020 was well above the annual year over year growth rate of 17.0%, but below the annualized quarterly growth of 38.6%. Despite the significant volume of PPP loans originated during the second quarter, the Company was also able to generate core loan growth with the average balance of non-PPP loans by increasing by $34,124,000 or an annualized growth of 3.2%, during the period.
Year Over Year Balance Sheet Change
Ending balancesAs of June 30,
($'s in thousands)20202019$ Change% Change
Total assets$7,360,071  $6,395,172  $964,899  15.1 %
Total loans4,801,405  4,103,687  697,718  17.0 %
Total loans, excluding PPP4,377,974  4,103,687  274,287  6.7 %
Total investments1,353,728  1,566,720  (212,992) (13.6)%
Total deposits$6,248,258  $5,342,173  $906,085  17.0 %
As discussed above, the PPP program has generated significant increases in volume during the second quarter ended June 30, 2020 for loan and deposit balances. Excess deposit proceeds have been temporarily allocated to cash and due from banks, which increased to $705,852,000 at June 30, 2020 from $175,582,000 as of June 20, 2019. Investment securities declined to $1,353,728,000, a change of $212,992,000 or 13.6% from $1,566,720,000, due to the accelerated rate of prepayment or maturity of these debt instruments during the period, and the Company's desire to migrate a greater percentage of its earning assets to loans. Total loans as a percentage of earning assets were 75.4% as of June 30, 2020, an increase of 4.2% over the June 30, 2019 ratio of 71.2%.


4





Net Interest Income and Net Interest Margin
The following is a summary of the components of net interest income for the periods indicated:
Three months ended
June 30,March 31,
(dollars in thousands)20202020$ Change% Change
Interest income$67,148  $66,517  $631  0.9 %
Interest expense(2,489) (3,325) 836  (25.1)%
Fully tax-equivalent adjustment (FTE) (1)
286  271  15  5.5 %
Net interest income (FTE)$64,945  $63,463  $1,482  2.3 %
Net interest margin (FTE)4.10 %4.34 %
Acquired loans discount accretion, net:
Amount (included in interest income)$2,587  $1,748  $839  48.0 %
Effect on average loan yield0.24 %0.16 %
Effect on net interest margin (FTE)0.16 %0.12 %
Net interest margin less effect of acquired loan discount accretion3.94 %4.22 %
PPP loans yield:
Amount (included in interest income)$2,356  — %$2,356  n/m
Effect on net interest margin (FTE)(0.04)%— %
Net interest margin less effect of PPP loan yield4.14 %— %

Three months ended
June 30,
(dollars in thousands)20202019$ Change% Change
Interest income$67,148  $68,180  $(1,032) (1.5)%
Interest expense(2,489) (3,865) 1,376  (35.6)%
Fully tax-equivalent adjustment (FTE) (1)
286  298  (12) (4.0)%
Net interest income (FTE)$64,945  $64,613  $332  0.5 %
Net interest margin (FTE)4.10 %4.50 %
Acquired loans discount accretion, net:
Amount (included in interest income)$2,587  $1,904  $683  35.9 %
Effect on average loan yield0.24 %0.19 %
Effect on net interest margin (FTE)0.16 %0.13 %
Net interest margin less effect of acquired loan discount accretion3.94 %4.37 %

Six months ended
June 30,
(dollars in thousands)20202019$ Change% Change
Interest income$133,665  $135,637  $(1,972) (1.5)%
Interest expense(5,814) (7,452) 1,638  (22.0)%
Fully tax-equivalent adjustment (FTE) (1)
557  619  (62) (10.0)%
Net interest income (FTE)$128,408  $128,804  $(396) (0.3)%
Net interest margin (FTE)4.22 %4.51 %
Acquired loans discount accretion, net:
Amount (included in interest income)$4,335  $3,559  $776  21.8 %
Effect on average loan yield0.20 %0.17 %
Effect on net interest margin (FTE)0.14 %0.12 %
Net interest margin less effect of acquired loan discount accretion4.08 %4.39 %
PPP loans yield:
Amount (included in interest income)$2,356$2,356  n/m
Effect on net interest margin (FTE)(0.03)%
Net interest margin less effect of PPP loan yield4.25 %
(1)Information is presented on a fully tax-equivalent (FTE) basis. The Company believes the use of this non-generally accepted accounting principles (non-GAAP) measure provides additional clarity in assessing its results, and the presentation of these measures on a FTE basis is a common practice within the banking industry.
5





Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or accreted (added to) interest income over the remaining life of the loan. Generally, as time goes on, the effects 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 uncertain economic environment and corresponding rate volatility, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, increased during the second quarter of 2020. During the three months ended June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019, purchased loan discount accretion was $2,587,000, $1,748,000, $2,218,000, and $2,360,000, respectively. Net accretion for the quarter ended March 31, 2019 was reduced by $259,000 from the early repayment of loans purchased at a premium several years ago.
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 endedThree months endedThree months ended
June 30, 2020March 31, 2020June 30, 2019
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans, excluding PPP$4,363,481  $56,053  5.17 %$4,329,357  $56,258  5.23 %$4,044,044  $55,492  5.50 %
PPP loans292,569  2,356  3.24 %—  —  — %—  —  — %
Investments-taxable1,251,873  7,689  2.47 %1,235,672  8,572  2.79 %1,432,550  10,762  3.01 %
Investments-nontaxable (1)
119,860  1,238  4.15 %118,992  1,175  3.97 %140,562  1,358  3.88 %
Total investments1,371,733  8,927  2.62 %1,354,664  9,747  2.89 %1,573,112  12,120  3.09 %
Cash at Federal Reserve and other banks338,082  98  0.12 %199,729  783  1.58 %147,810  866  2.35 %
Total earning assets6,365,865  67,434  4.26 %5,883,750  66,788  4.57 %5,764,966  68,478  4.76 %
Other assets, net661,870  622,837  620,923  
Total assets$7,027,735  $6,506,587  $6,385,889  
Liabilities and shareholders’ equity
Interest-bearing demand deposits$1,293,007  64  0.02 %$1,245,896  169  0.05 %$1,276,388  $289  0.09 %
Savings deposits1,968,374  644  0.13 %1,864,967  1,062  0.23 %1,888,234  1,306  0.28 %
Time deposits409,242  1,105  1.09 %430,064  1,320  1.23 %441,116  1,404  1.28 %
Total interest-bearing deposits3,670,623  1,813  0.20 %3,540,927  2,551  0.29 %3,605,738  2,999  0.33 %
Other borrowings26,313   0.06 %22,790   0.09 %17,963  37  0.83 %
Junior subordinated debt57,372  672  4.71 %57,272  769  5.40 %57,222  829  5.81 %
Total interest-bearing liabilities3,754,308  2,489  0.27 %3,620,989  3,325  0.37 %3,680,923  3,865  0.42 %
Noninterest-bearing deposits2,266,671  1,855,006  1,765,141  
Other liabilities126,351  121,959  73,541  
Shareholders’ equity880,405  908,633  866,284  
Total liabilities and shareholders’ equity$7,027,735  $6,506,587  $6,385,889  
Net interest rate spread (1) (2)
3.99 %4.20 %4.34 %
Net interest income and margin (1) (3)
$64,945  4.10 %$63,463  4.34 %$64,613  4.50 %
(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 June 30, 2020 increased $1,482,000 or 2.3% to $64,945,000 compared to $63,463,000 during the three months ended March 31, 2020. Over the same period net interest margin declined 24 basis points to 4.10% as compared to 4.34% in the trailing quarter. The decline in net interest income (FTE) was due primarily to a decline in yield on interest earning assets, which was 4.26% for the quarter ended June 30, 2020, which represents a decrease of 31 basis points over the trailing quarter and a decrease of 50 basis points over the same quarter in the prior year. The index utilized in a significant portion of the Company’s variable rate loans, Wall Street Journal Prime, remained unchanged during the quarter ended June 30, 2020 but
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decreased by 150 basis points during the prior quarter to 3.25% at March 31, 2020, continuing the downward trend as compared to 4.75% at December 31, 2019 and 5.50% at June 30, 2019.
As compared to the same quarter in the prior year, average loan yields, excluding PPP, decreased 33 basis points from 5.50% during the three months ended June 30, 2019 to 5.17% during the three months ended June 30, 2020. Of the 33 basis point decrease in yields on loans during the comparable three month period ended June 30, 2020 and 2019, 34 basis points was attributable to decreases in market rates while 1 basis point was gained from the accretion of purchased loan discounts.
The decline in interest expense is primarily attributed to the reduction in the cost of interest bearing liabilities, which decreased by 10 basis points as of June 30, 2020 to 0.27% from 0.37% at March 31, 2020, as a direct result of the aforementioned declining interest rate environment.
ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in thousands)
Six months ended June 30, 2020Six months ended June 30, 2019
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Loans, excluding PPP$4,346,419  $112,311  5.20 %$4,033,954  $109,889  5.49 %
PPP loans146,285  2,356  3.24 %—  —  — %
Investments-taxable1,235,672  16,261  2.65 %1,428,951  21,677  3.06 %
Investments-nontaxable (1)
118,992  2,413  4.08 %141,397  2,753  3.93 %
Total investments1,354,664  18,674  2.77 %1,570,348  24,430  3.14 %
Cash at Federal Reserve and other banks266,752  881  0.66 %158,164  1,937  2.47 %
Total earning assets6,114,120  134,222  4.41 %5,762,466  136,256  4.77 %
Other assets, net653,006  643,592  
Total assets$6,767,126  $6,406,058  
Liabilities and shareholders’ equity
Interest-bearing demand deposits$1,269,452  233  0.04 %$1,274,882  576  0.09 %
Savings deposits1,918,918  1,706  0.18 %1,907,677  2,439  0.26 %
Time deposits419,638  2,425  1.16 %441,447  2,703  1.23 %
Total interest-bearing deposits3,608,008  4,364  0.24 %3,624,006  5,718  0.32 %
Other borrowings24,552   0.07 %16,736  50  0.60 %
Junior subordinated debt57,324  1,441  5.06 %57,086  1,684  5.95 %
Total interest-bearing liabilities3,689,884  5,814  0.32 %3,697,828  7,452  0.41 %
Noninterest-bearing deposits2,059,242  1,754,973  
Other liabilities123,481  98,570  
Shareholders’ equity894,519  854,687  
Total liabilities and shareholders’ equity$6,767,126  $6,406,058  
Net interest rate spread (1) (2)
4.09 %4.36 %
Net interest income and margin (1) (3)
$128,408  4.22 %$128,804  4.51 %

(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 Loan Portfolio Composition

During 2020, declines in several market interest rates, including many rates that serve as reference indices for variable rate loans declined markedly from previous levels. As of March 31, 2020 the Company's loan portfolio consisted of approximately $4,420,000,000 in outstanding principal with a weighted average coupon rate of 4.80%. As of June 30, 2020 the Company's loan portfolio consisted of approximately $4,854,000,000 in outstanding principal balances with weighted average coupon rate of 4.37%, inclusive of the PPP program loans. Excluding these loans, the Company's loan portfolio has approximately $4,417,000,000 outstanding with a weighted average coupon rate of 4.70% as of June 30, 2020. Included in this June 30, 2020 loan total exclusive of PPP loans, are variable rate loans totaling $2,984,000,000 of which 86.5% or $2,582,000,000 were at their floor rate. The remaining variable rate loans totaling $402,000,000, which carried a weighted average coupon rate of 5.13% as of June 30, 2020, are subject to further rate adjustment. If those remaining variable rate loans were to collectively, through future rate adjustments, be reduced to their
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respective floors, they would have a weighted average coupon rate of approximately 4.37% which would result in the reduction of the weighted average coupon rate of the total loan portfolio, exclusive of PPP loans, from 4.70% to approximately 4.61%.
Asset Quality and Credit Loss Provisioning
The Company adopted CECL on January 1, 2020. During the three months ended June 30, 2020, the Company recorded a provision for credit losses of $22,089,000, as compared to provision expense of $8,000,000 for the trailing quarter, and $537,000 during the same period in 2019.
The net increase in allowance for credit losses (ACL) as of quarter ended June 30, 2020 totaled $21,828,000. More specifically, the changes in loan volume and changes in credit quality associated with levels of classified, past due and non-performing loans, resulted in the need for a provision for credit losses of $2,685,000. However, the majority of the increase in ACL reflects potential future credit deterioration. Specifically, portfolio-wide qualitative indicators such as the outlook for changes in California Unemployment and Gross Domestic Product (GDP), resulted in a $19,143,000 increase in credit reserves on loans as of June 30, 2020. 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 rapidly evolve and included significant shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date. Management noted that the majority of economic forecasts, as of the end of the current quarter, utilized in the ACL calculation have shown a migration in the estimated timing of recovery from late 2020 as the end of the first quarter to mid-2021 or beyond.
Loans past due 30 days or more decreased by $12,071,000 during the quarter ended June 30, 2020 to $16,622,000, as compared to $28,693,000 at March 31, 2020. The decrease in past due balances was driven primarily by a single loan in excess of $13,000,000 that was 60 days past due as of March 31, 2020 but was brought current during the current quarter. Total non-performing loans were $20,730,000 at June 30, 2020 and $17,955,000 at March 31, 2020 and have remained generally consistent with the $16,864,000 and $20,585,000 as of December 31, 2019 and June 30, 2019, respectively. Immediately following the quarter ended June 30, 2020, two non-accrual loans totaling $2,024,000 were paid in full including approximately $160,000 in past due interest and fees.
There were no additions and two sales of other real estate owned during the three month period ended June 30, 2020. The sold properties generated $217,000 in proceeds and had a carrying value of $201,000. As of June 30, 2020, other real estate owned consisted of three properties with a carrying value of $1,922,000.

Allocation of Loan Loss Reserves by Loan Type
As of June 30, 2020As of March 31, 2020
(dollars in thousands)Amount% of Loans OutstandingAmount% of Loans Outstanding
Commercial real estate:
     CRE - Non Owner Occupied$26,091  1.63 %$18,034  1.10 %
     CRE - Owner Occupied8,710  1.50 %5,366  0.99 %
     Multifamily8,581  1.49 %5,140  0.92 %
     Farmland1,468  0.97 %713  0.50 %
Total commercial real estate loans44,8501.54 %29,2531.01 %
Consumer:
     SFR 1-4 1st Liens8,015  1.58 %5,650  1.18 %
     SFR HELOCs and Junior Liens12,108  3.38 %11,196  3.08 %
     Other3,042  3.73 %2,746  3.33 %
Total consumer loans 23,1652.45 %19,5922.05 %
Commercial and Industrial4,018  0.63 %3,867  1.46 %
Construction6,775  2.43 %4,595  0.65 %
Agricultural Production919  2.59 %593  2.51 %
Leases12  0.68 %11  1.90 %
     Allowance for credit losses79,739  1.66 %57,911  1.32 %
Reserve for unfunded loan commitments3,000  2,845  
     Total allowance for credit losses$82,739  1.72 %$60,756  1.39 %

As of June 30, 2020, total loans includes PPP loans which are fully guaranteed and therefore would not require any loss reserve allocation. In the table above, PPP loans are included in the segment "Commercial and Industrial" which is the primary driver of the allowance as a percentage of loans outstanding decreasing from 1.46% to 0.63% during the quarter. Excluding PPP loans from the
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ratio of the allowance for credit losses (ACL) to total loans results in a reserve ratio of approximately 1.82%. 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 June 30, 2020, the unamortized discount associated with acquired loans totaled $28,692,000 and if aggregated with the ACL would collectively represent 2.24% of total gross loans and 2.47% total loans less PPP loans.

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)June 30, 2020March 31, 2020$ Change% Change
ATM and interchange fees$5,165  $5,111  $54  1.1 %
Service charges on deposit accounts3,046  4,046  (1,000) (24.7)%
Other service fees734  758  (24) (3.2)%
Mortgage banking service fees459  469  (10) (2.1)%
Change in value of mortgage servicing rights(1,236) (1,258) 22  (1.7)%
Total service charges and fees8,168  9,126  (958) (10.5)%
Increase in cash value of life insurance710  720  (10) (1.4)%
Asset management and commission income661  916  (255) (27.8)%
Gain on sale of loans1,736  891  845  94.8 %
Lease brokerage income127  193  (66) (34.2)%
Sale of customer checks88  124  (36) (29.0)%
Gain on sale of investment securities—  —  —  n/a
Gain on marketable equity securities25  47  (22) (46.8)%
Other142  (197) 339  (172.1)%
Total other non-interest income3,489  2,694  795  29.5 %
Total non-interest income$11,657  $11,820  $(163) (1.4)%
Non-interest income decreased $163,000 or 1.4% to $11,657,000 during the three months ended June 30, 2020 compared to $11,820,000 during the trailing quarter March 31, 2020. Declines on deposit account activity and related fee income was notable during the quarter, totaling $1,000,000 during the three months ended June 30, 2020 to $3,046,000, as compared to $4,046,000 at March 31, 2020. This was directly related to the COVID-19 pandemic and depressed levels of e-commerce activity during the quarter. Conversely, mortgage loan origination volume demand increased notably during the period ended June 30, 2020 as a result of the low interest rate environment, leading to an additional $845,000 gain on sale of loans over the trailing quarter.
The following table presents the key components of non-interest income for the periods indicated:

Three months ended
June 30,
(dollars in thousands)20202019$ Change% Change
ATM and interchange fees$5,165  $5,404  $(239) (4.4)%
Service charges on deposit accounts3,046  4,182  (1,136) (27.2)%
Other service fees734  619  115  18.6 %
Mortgage banking service fees459  475  (16) (3.4)%
Change in value of mortgage servicing rights(1,236) (552) (684) 123.9 %
Total service charges and fees8,168  10,128  (1,960) (19.4)%
Increase in cash value of life insurance710  746  (36) (4.8)%
Asset management and commission income661  739  (78) (10.6)%
Gain on sale of loans1,736  575  1,161  201.9 %
Lease brokerage income127  239  (112) (46.9)%
Sale of customer checks88  135  (47) (34.8)%
Gain on sale of investment securities—  42  (42) — %
Gain on marketable equity securities25  —  25  — %
Other142  819  (677) (82.7)%
Total other non-interest income3,489  3,295  194  5.9 %
Total non-interest income$11,657  $13,423  $(1,766) (13.2)%
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In addition to the discussion above within the non-interest income for the three months ended June 30, 2020 and trailing March 31, 2020, a decline in the value of mortgage servicing rights was significant for the most recent quarter end. This is consistent with the low rate environment an increase in the mortgage refinance index and changes in other fair value assumptions. Specifically, accelerated prepayment speeds resulting from decreases in the 15 and 30 year mortgage rates, continued to be the largest contributor to the decline in fair value of the mortgage servicing asset which decreased to $1,236,000 during the quarter, representing an additional $684,000 decline over the same period ended 2019.
The following table presents the key components of non-interest income for the current and prior year six-month periods indicated:
Six months ended
June 30,
(dollars in thousands)20202019$ Change% Change
ATM and interchange fees$10,276  $9,985  $291  2.9 %
Service charges on deposit accounts7,092  8,062  (970) (12.0)%
Other service fees1,492  1,390  102  7.3 %
Mortgage banking service fees928  958  (30) (3.1)%
Change in value of mortgage servicing rights(2,494) (1,197) (1,297) 108.4 %
Total service charges and fees17,294  19,198  (1,904) (9.9)%
Increase in cash value of life insurance1,430  1,521  (91) (6.0)%
Asset management and commission income1,577  1,381  196  14.2 %
Gain on sale of loans2,627  987  1,640  166.2 %
Lease brokerage income320  459  (139) (30.3)%
Sale of customer checks212  275  (63) (22.9)%
Gain on marketable equity securities72  78  (6) (7.7)%
Other(55) 1,327  (1,382) (104.1)%
Total other non-interest income6,183  6,028  155  2.6 %
Total non-interest income$23,477  $25,226  $(1,749) (6.9)%

Non-interest income decreased $1,749,000 or 6.9% to $23,477,000 during the six months ended June 30, 2020 compared to $25,226,000 during the comparable six month period in 2019. Non-interest income for the six months ended June 30, 2020 as compared to the same period in 2019 was negatively impacted by changes in the fair value of the Company’s mortgage servicing assets, as noted above, which contributed to a $1,297,000 decline. Other non-interest income declined by $1,382,000, partially from decreases in the fair value of assets used to fund acquired deferred compensation plans totaling $514,000 for the six months ended June 30, 2020 as compared to the same period 2019, as well as from an absence of one-time death benefits totaling $728,000 realized during the six months ended June 30, 2019. The declines noted above were partially offset by gains from the sale of mortgage loans, which resulted from increased volume, and contributed $1,640,000 to the overall increase in non-interest income during the six months ended June 30, 2020.













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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)June 30, 2020March 31, 2020$ Change% Change
Base salaries, net of deferred loan origination costs$17,277  $17,623  $(346) (2.0)%
Incentive compensation2,395  3,101  (706) (22.8)%
Benefits and other compensation costs7,383  6,548  835  12.8 %
Total salaries and benefits expense27,055  27,272  (217) (0.8)%
Occupancy3,398  3,875  (477) (12.3)%
Data processing and software3,657  3,367  290  8.6 %
Equipment1,350  1,512  (162) (10.7)%
Intangible amortization1,431  1,431  —  — %
Advertising531  665  (134) (20.2)%
ATM and POS network charges1,210  1,373  (163) (11.9)%
Professional fees741  703  38  5.4 %
Telecommunications639  725  (86) (11.9)%
Regulatory assessments and insurance360  95  265  278.9 %
Postage283  290  (7) (2.4)%
Operational losses184  221  (37) (16.7)%
Courier service337  331   1.8 %
Gain on sale of foreclosed assets(16) (41) 25  (61)%
Loss on disposal of fixed assets15  —  15  n/m
Other miscellaneous expense4,530  3,000  1,530  51.0 %
Total other non-interest expense18,650  17,547  1,103  6.3 %
Total non-interest expense$45,705  $44,819  $886  2.0 %
Average full-time equivalent staff1,1571,165(8) (0.7)%
Non-interest expense for the quarter ended June 30, 2020 increased $886,000 or 2.0% to $45,705,000 as compared to $44,819,000 during the trailing quarter ended March 31, 2020. The increase in other miscellaneous expenses was led by an increase in indirect loan documentation and administrative costs incurred in conjunction with the PPP loan program, totaling $1,479,000 during the quarter ended June 30, 2020.

The following table presents the key components of non-interest expense for the current and prior year quarterly periods indicated:
Three months ended June 30,
(dollars in thousands)20202019$ Change% Change
Base salaries, net of deferred loan origination costs$17,277  $17,211  $66  0.4 %
Incentive compensation2,395  3,706  (1,311) (35.4)%
Benefits and other compensation costs7,383  5,802  1,581  27.2 %
Total salaries and benefits expense27,055  26,719  336  1.3 %
Occupancy3,398  3,738  (340) (9.1)%
Data processing and software3,657  3,354  303  9.0 %
Equipment1,350  1,752  (402) (22.9)%
Intangible amortization1,431  1,431  —  — %
Advertising531  1,533  (1,002) (65.4)%
ATM and POS network charges1,210  1,270  (60) (4.7)%
Professional fees741  1,057  (316) (29.9)%
Telecommunications639  773  (134) (17.3)%
Regulatory assessments and insurance360  490  (130) (26.5)%
Postage283  315  (32) (10.2)%
Operational losses184  226  (42) (18.6)%
Courier service337  412  (75) (18.2)%
Gain on sale of foreclosed assets(16) (99) 83  (83.8)%
Loss on disposal of fixed assets15  42  (27) (64.3)%
Other miscellaneous expense4,530  3,684  846  23.0 %
Total other non-interest expense18,650  19,978  (1,328) (6.6)%
Total non-interest expense$45,705  $46,697  $(992) (2.1)%
Average full-time equivalent staff1,1241,138(14) (1.2)%
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Non-interest expense decreased by $992,000 or 2.1% to $45,705,000 during the three months ended June 30, 2020 as compared to $46,697,000 for the three months ended June 30, 2019. Salary and benefit expense increased modestly by $336,000 or 1.3% to $27,055,000 during the three months ended June 30, 2020 as compared to $26,719,000 for the same period in 2019. This increase was attributed to increases in benefits and other compensations costs, partially offset by decreases in incentive compensation. Miscellaneous expenses also increased during the period by $846,000 or 23.0% to $4,530,000 as a result of the additional non-payroll related indirect lending costs incurred with the PPP program discussed above. Reductions in advertising expense totaled $1,002,000 or 65.4%, to $531,000 during the three months ended June 30, 2020 as compared to $1,533,000 for the same period in 2019. Additional decreases in expenditures for the quarter ended June 30, 2020 totaling $340,000, $402,000 and $316,000 were realized within occupancy, equipment and professional fees, respectively.
Six months ended June 30,
(dollars in thousands)20202019$ Change% Change
Base salaries, net of deferred loan origination costs$34,900  $33,968  $932  2.7 %
Incentive compensation5,4966,273  (777) (12.4)%
Benefits and other compensation costs13,93111,606  2,325  20.0 %
Total salaries and benefits expense54,327  51,847  2,480  4.8 %
Occupancy7,273  7,512  (239) (3.2)%
Data processing and software7,024  6,703  321  4.8 %
Equipment2,862  3,619  (757) (20.9)%
Intangible amortization2,862  2,862  —  — %
Advertising1,196  2,864  (1,668) (58.2)%
ATM and POS network charges2,583  2,593  (10) (0.4)%
Professional fees1,444  1,896  (452) (23.8)%
Telecommunications1,364  1,570  (206) (13.1)%
Regulatory assessments and insurance455  1,001  (546) (54.5)%
Postage573  625  (52) (8.3)%
Operational losses405  451  (46) (10.2)%
Courier service668  682  (14) (2.1)%
Gain on sale of foreclosed assets(57) (198) 141  (71.2)%
Loss on disposal of fixed assets15  66  (51) (77.3)%
Other miscellaneous expense7,531  8,056  (525) (6.5)%
Total other non-interest expense36,198  40,302  (4,104) (10.2)%
Total non-interest expense$90,525  $92,149  $(1,624) (1.8)%
Average full-time equivalent staff1,124  1,138  (14) (1.2)%
Non-interest expense decreased by $1,624,000 or 1.8% to $90,525,000 during the six months ended June 30, 2020 as compared to $92,149,000 for the same period in 2019. Reductions in advertising expenses totaling $1,668,000 or 58.2% to $1,196,000 provided a benefit to the bottom line, as did declines in miscellaneous expenses totaling $525,000 or 6.5% attributed primarily to reduced travel and training expenses expenses as a result of state-wide shelter-in-place restrictions which were partially offset by the loan documentation and administrative costs associated with PPP lending activity.

Provision for Income Taxes
The Company’s effective tax rate was 23.3% for the six months ended June 30, 2020, as compared to 27.4% for the year ended December 31, 2019. The reduction in effective tax rate was made possible through the provisions of the Coronavirus Aid, Relief, and
Economic Security Act (“CARES Act”) which provided the Company with an opportunity to file amended tax returns and generate proposed refunds of approximately $805,000. Other differences between the Company's effective tax rate and applicable federal and state statutory rates are due to the proportion of non-taxable revenue and low income housing 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 in communities throughout Northern and Central 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 ATM, online and mobile banking access. Brokerage services are provided by the Bank’s investment services through affiliation with Raymond James Financial Services, Inc. Visit www.TriCountiesBank.com to learn more.
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Forward-Looking Statement
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. There can be no assurance that future developments affecting us will be the same as those anticipated by management. 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 strength 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; inflation, interest rate, market and monetary fluctuations; the impact of changes in financial services policies, laws and regulations; technological changes; weather, natural disasters and other catastrophic events that may or may not be caused by climate change and their effects on economic and business environments in which the Company operates; the adverse impact on the U.S. economy, including the markets in which we operate, of the novel coronavirus, which caused the Coronavirus disease 2019 (“COVID-19”) global pandemic, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products; the costs or effects of mergers, acquisitions or dispositions we may make; the future operating or financial performance of the Company, including our outlook for future growth, changes in the level of our nonperforming assets and charge-offs; the appropriateness of the allowance for credit losses including the timing and effects of the implementation of the current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting standards and practices; possible other-than-temporary impairment of securities held by us; changes in consumer spending, borrowing and savings habits; our ability to attract deposits and other sources of liquidity; changes in the financial performance and/or condition of our borrowers; our noninterest expense and the efficiency ratio; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; the challenges of integrating and retaining key employees; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks and the cost to defend against such attacks; the effect of a fall in stock market prices on our brokerage and wealth management businesses; and our ability to manage the risks involved in the foregoing. 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, 2019, which is on file with the Securities and Exchange Commission (the “SEC”) and 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.

13





TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)
Three months ended
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Revenue and Expense Data
Interest income$67,148  $66,517  $67,918  $68,889  $68,180  
Interest expense2,489  3,325  3,722  4,201  3,865  
Net interest income64,659  63,192  64,196  64,688  64,315  
Provision for (benefit from) credit losses22,089  8,000  (298) (329) 537  
Noninterest income:
Service charges and fees8,168  9,126  10,629  10,590  10,128  
Gain on sale of investment securities—  —   107  —  
Other income3,489  2,694  3,554  3,411  3,295  
Total noninterest income11,657  11,820  14,186  14,108  13,423  
Noninterest expense:
Salaries and benefits27,055  27,272  27,319  26,899  26,719  
Occupancy and equipment4,748  5,387  5,394  5,390  5,490  
Data processing and network4,867  4,740  4,914  4,754  4,624  
Other noninterest expense9,035  7,420  9,337  9,301  9,864  
Total noninterest expense45,705  44,819  46,964  46,344  46,697  
Total income before taxes8,522  22,193  31,716  32,781  30,504  
Provision for (benefit from) income taxes1,092  6,072  8,826  9,386  7,443  
Net income$7,430  $16,121  $22,890  $23,395  $23,061  
Share Data
Basic earnings per share$0.25  $0.53  $0.75  $0.77  $0.76  
Diluted earnings per share$0.25  $0.53  $0.75  $0.76  $0.75  
Dividends per share$0.22  $0.22  $0.22  $0.22  $0.19  
Book value per common share$29.76  $28.91  $29.70  $29.39  $28.71  
Tangible book value per common share (1)$21.64  $20.76  $21.69  $21.33  $20.60  
Shares outstanding29,759,209  29,973,516  30,523,824  30,512,187  30,502,757  
Weighted average shares29,753,699  30,394,904  30,520,490  30,509,057  30,458,427  
Weighted average diluted shares29,883,193  30,522,842  30,650,071  30,629,027  30,642,518  
Credit Quality
Allowance for credit losses to gross loans1.66 %1.32 %0.71 %0.75 %0.80 %
Loans past due 30 days or more$16,622  $28,693  $9,024  $8,089  $14,580  
Total nonperforming loans$20,730  $17,955  $16,864  $18,565  $20,585  
Total nonperforming assets$22,652  $20,184  $19,405  $20,111  $22,133  
Loans charged-off$491  $510  $1,098  $1,522  $293  
Loans recovered$230  $892  $475  $520  $560  
Selected Financial Ratios
Return on average total assets0.43 %1.00 %1.40 %1.44 %1.45 %
Return on average equity3.39 %7.14 %10.03 %10.42 %10.68 %
Average yield on loans, excluding PPP5.17 %5.23 %5.33 %5.46 %5.50 %
Average yield on interest-earning assets4.26 %4.57 %4.65 %4.72 %4.76 %
Average rate on interest-bearing deposits0.20 %0.29 %0.33 %0.34 %0.33 %
Average cost of total deposits0.12 %0.19 %0.22 %0.23 %0.22 %
Average rate on borrowings & subordinated debt3.25 %3.89 %3.96 %3.50 %4.62 %
Average rate on interest-bearing liabilities0.27 %0.37 %0.41 %0.45 %0.42 %
Net interest margin (fully tax-equivalent)4.10 %4.34 %4.39 %4.44 %4.50 %
Loans to deposits76.84 %81.05 %80.26 %78.98 %76.82 %
Efficiency ratio59.89 %59.75 %59.92 %58.82 %60.07 %
Supplemental Loan Interest Income Data
Discount accretion on acquired loans$2,587  $1,748  $2,218  $2,360  $1,904  
All other loan interest income$53,466  $54,510  $54,644  $54,639  $53,587  
Total loan interest income$56,053  $56,258  $56,862  $56,999  $55,491  
(1)Tangible book value per share is calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that result by the shares outstanding at the end of the period. Management believes that tangible book value per common share is meaningful because it is a measure that the Company and investors commonly use to assess shareholder value.
14





TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)
Balance Sheet DataJune 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Cash and due from banks$705,852  $185,466  $276,507  $259,047  $175,582  
Securities, available for sale, net999,313  1,005,006  953,098  987,054  1,136,946  
Securities, held to maturity, net337,165  359,770  375,606  393,449  412,524  
Restricted equity securities17,250  17,250  17,250  17,250  17,250  
Loans held for sale8,352  2,695  5,265  7,604  5,875  
Loans:
Commercial loans667,263  285,830  283,707  278,458  276,045  
Consumer loans416,490  428,313  445,542  442,539  434,388  
Real estate mortgage loans3,437,960  3,422,440  3,328,290  3,247,156  3,178,730  
Real estate construction loans279,692  242,479  249,827  214,195  214,524  
Total loans, gross4,801,405  4,379,062  4,307,366  4,182,348  4,103,687  
Allowance for credit losses(79,739) (57,911) (30,616) (31,537) (32,868) 
Total loans, net4,721,666  4,321,151  4,276,750  4,150,811  4,070,819  
Premises and equipment85,292  86,304  87,086  87,424  88,534  
Cash value of life insurance119,254  118,543  117,823  117,088  116,606  
Accrued interest receivable20,337  18,575  18,897  18,205  20,990  
Goodwill220,872  220,872  220,872  220,872  220,972  
Other intangible assets20,694  22,126  23,557  24,988  26,418  
Operating leases, right-of-use29,842  30,221  27,879  28,957  30,030  
Other assets74,182  86,330  70,591  72,134  72,626  
Total assets$7,360,071  $6,474,309  $6,471,181  $6,384,883  $6,395,172  
Deposits:
Noninterest-bearing demand deposits$2,487,120  $1,883,143  $1,832,665  $1,777,357  $1,780,339  
Interest-bearing demand deposits1,318,951  1,243,192  1,242,274  1,222,955  1,263,635  
Savings deposits2,043,593  1,857,684  1,851,549  1,843,873  1,856,749  
Time certificates398,594  418,679  440,506  451,222  441,450  
Total deposits6,248,258  5,402,698  5,366,994  5,295,407  5,342,173  
Accrued interest payable1,734  1,986  2,407  2,847  2,665  
Operating lease liability29,743  30,007  27,540  28,494  29,434  
Other liabilities98,684  96,560  91,984  87,867  74,590  
Other borrowings38,544  19,309  18,454  16,423  13,292  
Junior subordinated debt57,422  57,323  57,232  57,180  57,132  
Total liabilities6,474,385  5,607,883  5,564,611  5,488,218  5,519,286  
Common stock530,422  534,623  543,998  543,415  542,939  
Retained earnings354,645  356,935  367,794  351,751  335,145  
Accum. other comprehensive income (loss)619  (25,132) (5,222) 1,499  (2,198) 
Total shareholders’ equity$885,686  $866,426  $906,570  $896,665  $875,886  
Quarterly Average Balance Data
Average loans$4,363,481  $4,329,357  $4,231,347  $4,142,602  $4,044,044  
Average interest-earning assets$6,365,865  $5,883,750  $5,823,795  $5,810,248  $5,764,966  
Average total assets$7,027,735  $6,506,587  $6,482,832  $6,452,470  $6,385,889  
Average deposits$5,937,294  $5,395,933  $5,385,190  $5,327,235  $5,370,879  
Average borrowings and subordinated debt$83,685  $80,062  $77,452  $130,506  $75,185  
Average total equity$880,405  $908,633  $905,585  $890,667  $866,284  
Capital Ratio Data
Total risk based capital ratio15.1 %15.1 %15.1 %15.2 %14.9 %
Tier 1 capital ratio13.9 %13.9 %14.4 %14.5 %14.2 %
Tier 1 common equity ratio12.8 %12.8 %13.3 %13.4 %13.0 %
Tier 1 leverage ratio10.3 %11.2 %11.6 %11.3 %11.1 %
Tangible capital ratio (1)9.1 %10.0 %10.6 %10.6 %10.2 %
(1)Tangible capital ratio is calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and total assets and then dividing the adjusted assets by the adjusted equity. Management believes that the tangible capital ratio is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.
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15
v3.20.2
Cover
3 Months Ended
Jul. 29, 2020
Jun. 30, 2020
Mar. 31, 2020
Cover [Abstract]      
Document Type   8-K  
Document Period End Date Jul. 27, 2020    
Entity Registrant Name   TriCo Bancshares  
Entity Incorporation, State or Country Code CA    
Entity File Number 0-10661    
Entity Tax Identification Number 94-2792841    
Entity Address, Address Line One 63 Constitution Drive    
Entity Address, City or Town Chico,    
Entity Address, State or Province CA    
Entity Address, Postal Zip Code 95973    
City Area Code 530    
Local Phone Number 898-0300    
Written Communications false    
Soliciting Material false    
Pre-commencement Tender Offer false    
Pre-commencement Issuer Tender Offer false    
Title of 12(b) Security Common Stock, no par value    
Trading Symbol TCBK    
Security Exchange Name NASDAQ    
Entity Emerging Growth Company false    
Amendment Flag     false
Entity Central Index Key 0000356171