Market Overview

TriCo Bancshares Announces Quarterly Results

Share:

TriCo Bancshares (NASDAQ:TCBK) (the "Company"), parent company of Tri
Counties Bank, today announced earnings of $11,897,000, or $0.51 per
diluted share, for the three months ended September 30, 2017. For the
three months ended September 30, 2016 the Company reported earnings of
$12,199,000, or $0.53 per diluted share.

The following is a summary of the components of the Company's
consolidated net income, average common shares, and average diluted
common shares outstanding for the periods indicated:

  Three months ended    
September 30,
(dollars and shares in thousands) 2017   2016 $ Change % Change
Net Interest Income $44,084 $42,270 $1,814 4.3%
Reversal of (provision for) loan losses (765 ) 3,973 (4,738 )
Noninterest income 12,930 11,066 1,864 16.8%
Noninterest expense (37,222 ) (37,416 ) 194 (0.5%)
Provision for income taxes (7,130 ) (7,694 ) 564   (7.3%)
Net income $11,897   $12,199   ($302 ) (2.5%)
 
Average common shares 22,932 22,825 107 0.5%
Average diluted common shares 23,244 23,099 145 0.6%
 

The following is a summary of certain of the Company's consolidated
assets and deposits as of the dates indicated:

Ending balances  

As of September 30,

   
($'s in thousands) 2017   2016  

$ Change

  % Change
Total assets $4,656,435   $4,467,131 $189,304 4.2%
Total loans 2,931,613 2,712,226 219,387 8.1%
Total investments 1,231,759 1,168,314 63,445 5.4%
Total deposits $3,927,456 $3,836,012 $91,444 2.4%
 
 
Qtrly avg balances

As of September 30,

($'s in thousands) 2017   2016  

$ Change

  % Change
Total assets $4,572,424 $4,407,322 $165,102 3.7%
Total loans 2,878,944 2,669,954 208,990 7.8%
Total investments 1,250,207 1,199,941 50,266 4.2%
Total deposits $3,878,183 $3,784,748 $93,435 2.5%
 

Performance highlights for the Company during the three months ended
September 30, 2017 included the following:

  • Loan balances increased $105,220,000 representing a 3.7% increase in
    total loans, and an annualized growth rate of 14.9%, during the three
    months ended September 30, 2017.
  • Service charge and fee income increased $1,453,000, or 18.1%, compared
    to the three months ended September 30, 2016.
  • The average rate of interest paid on deposits, including the effect of
    noninterest-bearing deposits, remained low at 0.11%.
  • Total noninterest expense decreased $194,000, or 0.5%, compared to the
    three months ended September 30, 2016.

Included in the Company's results of operations for the three months
ended September 30, 2017 is a gain of $961,000 recorded in noninterest
income from the sale of $24,797,000 of available for sale mortgage
backed investment securities on September 28, 2017.

Also, included in the Company's results of operations for the three
months ended September 30, 2017 is $150,000 of excess tax benefits (a
reduction of tax expense) related to equity compensation instruments
during this time period. Prior to January 1, 2017, generally accepted
accounting principles required these types of excess tax benefits, and
tax deficiencies, be recorded directly to shareholders' equity, and not
affect tax expense. During the three month period ended September 30,
2016, the Company recorded no equity compensation related tax benefit or
deficiency to shareholders' equity.

Included in the Company's results of operations for the three months
ended September 30, 2016 is the impact of the sale on August 22, 2016,
of two performing loans with recorded book value of $166,000, and 48
nonperforming loans with recorded book value, including pre-sale write
downs and purchase discounts, of approximately $2,757,000. The loans
sold on August 22, 2016 had contractual amounts outstanding of
$6,558,000. Net sale proceeds of $4,980,000 resulted in the recovery of
loan balances previously charged off of $1,727,000, additional loan
charge offs of $159,000, and interest income of $488,000 from the
recovery of interest payments previously applied to principal balances.

Also, included in the Company's results of operations for the three
months ended September 30, 2016 was a $716,000 valuation allowance
expense related to a closed branch building held for sale, the value of
which was written down to current market value, and subsequently sold
during the three months ended September 30, 2016. Net proceeds from the
sale of this building were $1,218,000, and resulted in no gain or
additional loss being recorded upon the sale of this building.

In addition to the nonrecurring income statement items noted above,
there were other expense and revenue items during the three months ended
September 30, 2017 and 2016 of less significance that may be considered
nonrecurring, and these items are described below in various sections of
this announcement.

The Company's primary source of revenue is net interest income, or the
difference between interest income on interest-earning assets and
interest expense on interest-bearing liabilities. Included in the
Company's net interest income is interest income from municipal bonds
that is almost entirely exempt from Federal income tax. These municipal
bonds are classified as investments – nontaxable, and the Company may
present the interest income from these bonds on a fully tax equivalent
(FTE) basis.

Loans acquired through purchase, or acquisition of other banks, are
classified by the Company as Purchased Not Credit Impaired (PNCI),
Purchased Credit Impaired – cash basis (PCI – cash basis), or Purchased
Credit Impaired – other (PCI – other). Loans not acquired in an
acquisition or otherwise "purchased" are classified as "originated".
Often, such purchased loans are purchased at a discount to face value,
and part of this discount is accreted into (added to) interest income
over the remaining life of the loan. A loan may also be purchased at a
premium to face value, in which case, the premium is amortized into
(subtracted from) 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. Further details regarding interest
income from loans, including fair value discount accretion, may be found
under the heading "Supplemental Loan Interest Income Data" in the
Consolidated Financial Data table at the end of this announcement.

Following is a summary of the components of net interest income for the
periods indicated (dollars in thousands):

      Three months ended    

September 30,

(dollars and shares in thousands) 2017   2016

$ Change

% Change

Interest income $45,913 $43,709 $2,204 5.0%
Interest expense (1,829 ) (1,439 ) (390 ) 27.1%
FTE adjustment 624   587   37   6.4%
Net interest income (FTE) $44,708   $42,857   $1,851   4.3%
Net interest margin (FTE) 4.24 % 4.23 %
Purchased loan discount accretion:
Amount (included in interest income) $1,364 $2,229
Effect on average loan yield 0.19 % 0.33 %
Effect on net interest margin (FTE) 0.13 % 0.22 %
Interest income recovered via loan sales:
Amount (included in interest income) - $488
Effect on average loan yield 0.00 % 0.07 %
Effect on net interest margin (FTE) 0.00 % 0.05 %
 

The following table shows the components of net interest income and net
interest margin on a fully tax-equivalent (FTE) basis for the periods
indicated:

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in thousands)
 

Three Months Ended

   

Three Months Ended

   

Three Months Ended

September 30, 2017

June 30, 2017

September 30, 2016

Average   Income/   Yield/ Average   Income/   Yield/ Average   Income/   Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets
Earning assets
Loans $ 2,878,944 $ 37,268 5.18 % $ 2,783,686 $ 36,418 5.23 % $ 2,669,954 $ 35,769 5.36 %
Investments - taxable 1,114,112 7,312 2.63 % 1,077,703 7,231 2.68 % 1,073,030 6,687 2.49 %
Investments - nontaxable 136,095 1,665 4.89 % 136,256 1,667 4.89 % 126,910 1,565 4.93 %
Cash at Federal Reserve and other banks   85,337     292   1.37 %   137,376     353   1.03 %   185,552     275   0.59 %
Total earning assets 4,214,488   46,537   4.42 % 4,135,021   45,669   4.42 % 4,055,446   44,296   4.37 %
Other assets, net   357,937   357,368   351,875
Total assets $ 4,572,424 $ 4,492,389 $ 4,407,322
Liabilities and shareholders' equity
Interest-bearing
Demand deposits $ 949,348 206 0.09 % $ 936,482 201 0.09 % $ 888,377 111 0.05 %
Savings deposits 1,365,249 419 0.12 % 1,353,132 410 0.12 % 1,357,359 426 0.13 %
Time deposits 310,325 403 0.52 % 321,515 363 0.45 % 340,709 338 0.40 %
Other borrowings 65,234 149 0.91 % 20,011 13 0.26 % 18,951 2 0.05 %
Trust preferred securities   56,784     652   4.59 %   56,736     623   4.39 %   56,584     562   3.97 %
Total interest-bearing liabilities 2,746,941   1,829   0.27 % 2,687,876   1,610   0.24 % 2,661,981   1,439   0.22 %
Noninterest-bearing deposits 1,253,261 1,240,390 1,198,302
Other liabilities 64,834 66,898 66,464
Shareholders' equity   507,389   497,225   480,575
Total liabilities and shareholders' equity $ 4,572,424 $ 4,492,389 $ 4,407,322
Net interest rate spread 4.15 % 4.18 % 4.15 %
Net interest income/net interest margin (FTE)   44,708   4.24 %   44,059   4.26 %   42,857   4.23 %
FTE adjustment   (624 )   (625 )   (587 )
Net interest income (not FTE) $ 44,084   $ 43,434   $ 42,270  
 
Purchase loan discount accretion effect:
Amount (included in interest income) $ 1,364 $ 2,170 $ 2,229
Effect on avg loan yield 0.19 % 0.31 % 0.33 %
Effect on net interest margin 0.13 % 0.21 % 0.22 %
Loan sale effect:
Amount (included in interest income) - - $ 488
Effect on avg loan yield 0.00 % 0.00 % 0.07 %
Effect on net interest margin 0.00 % 0.00 % 0.05 %
 

Net interest income (FTE) during the three months ended September 30,
2017 increased $1,851,000 (4.3%) to $44,708,000 compared to $42,857,000
during the three months ended September 30, 2016. The increase in net
interest income (FTE) was due primarily to increases in the average
balance of loans and investments, and an increase in yield on
investments – taxable, that were partially offset by a decrease in yield
on loans and an increase in other borrowings compared to the three
months ended September 30, 2016.

During the three months ended September 30, 2017, loan interest income
increased $1,499,000 (4.2%) to $37,268,000. The increase in loan
interest income was due to a $208,990,000 (7.8%) increase in the average
balance of loans that was partially offset by an 18 basis point decrease
in the average yield on loans to 5.18% compared to 5.36% during the
three months ended September 30, 2016. Included in loan interest income
for the quarter ended September 30, 2017 was $1,364,000 of purchased
loan discount accretion. Included in loan interest income for the
quarter ended September 30, 2016 was $2,229,000 of purchased loan
discount accretion, and $488,000 of interest income recovered upon the
sale of certain nonperforming loans. During the three months ended
September 30, 2017, investment interest income (FTE) increased $725,000
(8.8%) from the year-ago quarter to $8,977,000. The increase in
investment interest income was due to a $50,267,000 (4.2%) increase in
the average balance of investments and a 12 basis point increase in the
average investment yield to 2.87% compared to 2.75% in the year-ago
quarter. The increase in loan and investment balances noted above was
funded primarily by a $93,436,000 (2.5%) increase in the average balance
of total deposits, a $100,215,000 (54.0%) decrease in the average
balance of interest earning cash at banks, and a $46,283,000 (244%)
increase in other borrowings during the three months ended September 30,
2017 compared to the three months ended September 30, 2016. Despite the
54.0% decrease in the average balance of interest earning cash at banks,
interest income from cash at banks increased $17,000 (6.2%) to $292,000
due to a 78 basis point increase in the average yield on cash at banks
to 1.37% during the three months ended September 30, 2017 compared to
0.59% during the three months ended September 30, 2016. While the
average balance of total deposits grew $93,435,000 (2.5%) from the three
months ended September 30, 2016 to the three months ended September 30,
2017, the average balance of interest bearing deposits grew $38,477,000
(1.5%), and the average rate paid on those interest bearing deposits
increased 2 basis points to 0.16%. The $46,283,000 increase in the
average balance of other borrowings was due to the addition of
borrowings from the FHLB, and resulted in an 86 basis point increase in
the average rate paid on other borrowings during the three months ended
September 30, 2017 compared to the three months ended September 30,
2016. The average rate paid on junior subordinated debt increased 62
basis points to 4.59% during the three months ended September 30, 2017
compared to 3.97% during the three months ended September 30, 2016. The
changes in the average balances of interest bearing assets and
liabilities, and their respective yields and rates, from the three
months ended September 30, 2016 to the three months ended September 30,
2017 is indicative of moderate to strong loan demand and loan
origination capabilities of the Company from September 30, 2016 to
September 30, 2017, and the increases in short-term interest rates
during this time frame that did not result in significant increases in
deposit rates or long-term fixed-rate loan rates. For more information
related to loan interest income, including loan purchase discount
accretion, see the Supplemental Loan Interest Income Data in the
tables at the end of this announcement.

The table below that sets forth a summary of the changes in interest
income and interest expense from changes in average asset and liability
balances (volume) and changes in average interest yields and rates for
each category of interest earning asset and interest paying liability
for the periods indicated:

 

Three months ended September 30, 2017
compared with three
months ended September 30, 2016

Volume   Yield/Rate   Total
Increase (decrease) in interest income:    
Loans $ 2,800 $ (1,301 ) $ 1,499
Investments - taxable 256 369 625
Investments - nontaxable 113 (13 ) 100
Federal funds sold   (148 )     165       17  
Total   3,021       (780 )     2,241  
Increase (decrease) in interest expense:
Demand deposits (interest-bearing) 8 87 95
Savings deposits 3 (10 ) (7 )
Time deposits (30 ) 95 65
Other borrowings 6 141 147
Junior subordinated debt   2       88       90  
Total   (11 )     401       390  
Increase (decrease) in net interest income $ 3,032     $ (1,181 )   $ 1,851  
 

The Company recorded a provision for loan losses of $765,000 during the
three months ended September 30, 2017 compared to a reversal of
provision for loan losses of $3,973,000 during the three months ended
September 30, 2016. The $765,000 provision for loan losses during the
three months ended September 30, 2017 was primarily due to an increase
in nonperforming loans, and an increase in the concentration of
nonowner-occupied commercial real estate secured loans that were
partially offset by continued low historical loan loss experience, and
stable to improving economic environmental factors. Nonperforming loans
were $21,955,000, or 0.75% of loans outstanding as of September 30,
2017, and represented an increase from 0.73% of loans outstanding at
December 31, 2016, and a decrease from 0.77% of loans outstanding as of
September 30, 2016. Net loan charge-offs during the three months ended
September 30, 2017 were $161,000, and included $187,000 of charge-offs
related to purchased credit impaired (PCI-other) loans for which an
allowance was previously provided. Excluding these PCI loan charge-offs,
charge-offs for the three months ended September 30, 2017 would have
been $675,000, and charge-offs, net of recoveries, would have been a net
recovery of $26,000.

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

  Three months ended    
September 30,
(dollars in thousands) 2017   2016

$ Change

 

% Change

Service charges on deposit accounts 4,160 3,641 $519 14.3%
ATM fees and interchange 4,209 3,851 358 9.3%
Other service fees 917 792 125 15.8%
Mortgage banking service fees 514 537 (23 ) (4.3%)
Change in value of mortgage servicing rights (325 ) (799 ) 474   (59.3%)
Total service charges and fees 9,475   8,022   1,453   18.1%
 
Gain on sale of loans 606 953 (347 ) (36.4%)
Commission on nondeposit investment products 672 747 (75 ) (10.0%)
Increase in cash value of life insurance 732 709 23 3.2%
Gain on sale of investment securities 961 - 961
Change in indemnification asset - (10 ) 10 (100.0%)
Gain on sale of foreclosed assets 37 69 (32 ) (46.4%)
Other noninterest income 447   576   (129 ) (22.4%)
Total other noninterest income 3,455   3,044   411   13.5%
Total noninterest income $12,930   $11,066   $1,864   16.8%
 

Noninterest income increased $1,864,000 (16.8%) to $12,930,000 during
the three months ended September 30, 2017 compared to the three months
ended September 30, 2016. The increase in noninterest income was due
primarily to a $519,000 (14.3%) increase in service charges on deposit
accounts, a $358,000 (9.3%) increase in ATM fees and interchange income,
a $474,000 improvement in change in value of mortgage servicing rights,
and a $961,000 gain on sale of investment securities that were partially
offset by a $347,000 decrease in gain on sale of loans. The $519,000
increase in service charges on deposit accounts was due primarily to
increased fee generation from both consumer and business checking
customers. The $358,000 increase in ATM fees and interchange revenue was
due primarily to the Company's continued focus in this area, and growth
in electronic payments volume. The $474,000 improvement in change in
value of mortgage servicing rights (MSRs) was due primarily to an
increase in the discount rate used by investors to calculate the present
value of future servicing fee income that caused the fair value of the
servicing asset to decrease during the three months ended September 30,
2016 while no similar discount rate increase occurred during the three
months ended September 30, 2017. The $347,000 decrease in gain on sale
of loans was due primarily to decreased residential mortgage refinance
activity compared to the year-ago quarter.

The following table presents the key components of the Company's
noninterest expense for the periods indicated:

  Three months ended    
September 30,
(dollars in thousands) 2017   2016

$ Change

% Change
Base salaries, overtime and temporary help, net of deferred loan
origination costs
13,600 13,419 $181 1.3%
Commissions and incentives 2,609 2,798 (189 ) (6.8%)
Employee benefits 4,724 4,643 81   1.7%
Total salaries and benefits expense 20,933 20,860 73   0.3%
 
Occupancy 2,799 2,667 132 4.9%
Equipment 1,816 1,607 209 13.0%
Provision for losses unfunded 390 25 365 1460.0%
Data processing and software 2,495 2,068 427 20.6%
Telecommunications 716 702 14 2.0%
ATM & POS network charges 1,425 1,915 (490 ) (25.6%)
Professional fees 901 1,018 (117 ) (11.5%)
Advertising and marketing 1,039 1,049 (10 ) (1.0%)
Postage 325 381 (56 ) (14.7%)
Courier service 235 280 (45 ) (16.1%)
Intangible amortization 339 359 (20 ) (5.6%)
Operational losses 301 497 (196 ) (39.4%)
Provision for OREO losses 134 8 126 1575.0%
OREO Expense 41 37 4 10.8%
Assessments 427 654 (227 ) (34.7%)
Other 2,906 3,289 (383 ) (11.6%)
Total other noninterest expense 16,289 16,556 (267 ) (1.6%)
Total noninterest expense $37,222 $37,416 ($194 ) (0.5%)
 
Average full time equivalent employees 993 1,022 (29 ) (2.8%)
 

Salary and benefit expenses increased $73,000 (0.3%) to $20,933,000
during the three months ended September 30, 2017 compared to $20,860,000
during the three months ended September 30, 2016. Base salaries, net of
deferred loan origination costs increased $181,000 (1.3%) to 13,600,000.
The increase in base salaries was due primarily to annual merit
increases that were substantially offset by a 2.8% decrease in average
full time equivalent employees to 993 from 1,022 in the year-ago
quarter. Commissions and incentive compensation decreased $189,000
(6.8%) to $2,609,000 during the three months ended September 30, 2017
compared to the year-ago quarter due primarily to a decrease in
commissions on loans. Benefits & other compensation expense increased
$81,000 (1.7%) to $4,724,000 during the three months ended September 30,
2017 due primarily to increases in group medical and workers
compensation insurance, and employee stock ownership plan (ESOP) expense.

Other noninterest expense decreased $267,000 (1.6%) to $16,289,000
during the three months ended September 30, 2017 compared to the three
months ended September 30, 2016. The decrease in other noninterest
expense was due primarily to a $490,000 decrease in ATM & POS network
charges, a $227,000 decrease in deposit insurance and other assessments,
and a $384,000 decrease in other noninterest expense that were partially
offset by increases of $427,000 in data processing and software expense,
$365,000 in change in reserve for unfunded commitments, and $341,000 in
occupancy and equipment expense. The $490,000 decrease in ATM & POS
network charges was due to nonrecurring ATM & POS network charges that
occurred during the third quarter of 2016 related to system
enhancements. The $227,000 decrease in assessments was due the lowering
of FDIC deposit insurance rates during the third quarter of 2016. The
$384,000 decrease in other noninterest expense was due to a $716,000
valuation allowance expense taken during the third quarter of 2016 on a
closed branch building that was also sold during the third quarter of
2016 without further loss or gain. The $365,000 increase in change in
reserve for unfunded commitments was due primarily to a larger increase
in unfunded loan commitments during the three months ended September 30,
2017, compared to the three months ended September 30, 2016. The
$341,000 increase in occupancy and equipment expense was due primarily
to increased depreciation expense on equipment and maintenance and
repair expense on facilities and equipment.

The effective combined Federal and State income tax rate on income was
37.5% and 38.7% for the three months ended September 30, 2017 and 2016,
respectively. The effective combined Federal and State income tax rate
was greater than the Federal statutory tax rate of 35.0% due to State
income tax expense of $2,010,000 and $2,123,000, respectively, in these
periods that were partially offset by the effects of tax-exempt income
of $1,041,000 and $978,000, respectively, from investment securities,
$732,000 and $709,000, respectively, from increase in cash value of life
insurance, low-income housing tax credits of $94,000 and $62,000,
respectively, and $150,000 and $0, respectively, of equity compensation
excess tax benefits. The low income housing tax credits and the equity
compensation excess tax benefits represent direct reductions in tax
expense. These offsetting items helped to reduce the effective combined
Federal and State income tax rate from the combined Federal and State
statutory income tax rate of approximately 42.0%.

President and CEO of the Company commented, "Our bank enjoyed a solid
quarter of performance. We continue to see strong loan growth which
contributed to higher levels of net interest income during the quarter.
Loan balances grew by $105 million or 3.7% during the quarter. Service
charges and fees also increased significantly over 3rd
quarter 2016 results from $8.022 million to $9.475 or 18.1%.
Improvements in service charge and fee income are largely a result of
our new deposit product lineup that was implemented during the first
quarter of 2017. Notably, our deposits costs are largely unchanged over
the past year. In addition, our total noninterest expenses decreased
$194,000 or 0.5% compared to September 30, 2016."

Smith added, "Due to the recent firestorms throughout Northern
California many people have expressed their support and concerns. Thank
you! Currently, all of our branches are open and operating with full
staffing levels. We will be there to help our communities as they
recover from these devastating fires. Our Santa Rosa community was
hardest hit by the fires and many homes have been destroyed. We expect a
significant need for banking services in the Santa Rosa area in the
years ahead."

In addition to the historical information contained herein, this press
release may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to various uncertainties and risks that could
affect their outcome. The Company's actual results could differ
materially. Factors that could cause or contribute to such differences
include, but are not limited to, variances in the actual versus
projected growth in assets, return on assets, interest rate
fluctuations, economic conditions in the Company's primary market area,
demand for loans, regulatory and accounting changes, loan losses,
expenses, rates charged on loans and earned on securities investments,
rates paid on deposits, competitive effects, fee and other noninterest
income earned, the outcome of litigation, as well as other factors
detailed in the Company's reports filed with the Securities and Exchange
Commission which are incorporated herein by reference, including the
Form 10-K for the year ended December 31, 2016. These reports and this
entire press release should be read to put such forward-looking
statements in context and to gain a more complete understanding of the
uncertainties and risks involved in the Company's business. The Company
does not intend to update any of the forward-looking statements after
the date of this release.

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.

 
TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)
  Three months ended
September 30,   June 30,   March 31,   December 31,   September 30,
2017 2017 2017 2016 2016
Statement of Income Data
Interest income $45,913 $45,044 $43,484 $44,615 $43,709
Interest expense 1,829 1,610 1,491 1,460 1,439
Net interest income 44,084 43,434 41,993 43,155 42,270
Provision (benefit from reversal of provision) for loan losses 765 (796 ) (1,557 ) (1,433 ) (3,973 )
Noninterest income:
Service charges and fees 9,475 9,479 8,907 9,800 8,022
Other income 3,455 3,431 2,796 2,662 3,044
Total noninterest income 12,930 12,910 11,703 12,462 11,066
Noninterest expense:

Base salaries net of deferred loan origination costs

13,600 13,657 13,390 14,074 13,419
Incentive compensation expense 2,609 2,173 2,198 1,864 2,798

Employee benefits and other compensation expense

4,724 4,664 5,305 4,616 4,644
Total salaries and benefits expense 20,933 20,494 20,893 20,554 20,860
Other noninterest expense 16,289 15,410 14,929 16,009 16,556
Total noninterest expense 37,222 35,904 35,822 36,563 37,416
Income before taxes 19,027 21,236 19,431 20,487 19,893
Net income $11,897 $13,589 $12,079 $12,533 $12,199
Share Data
Basic earnings per share $0.52 $0.59 $0.53 $0.55 $0.53
Diluted earnings per share $0.51 $0.58 $0.52 $0.54 $0.53
Book value per common share $22.09 $21.76 $21.28 $20.87 $21.11
Tangible book value per common share $19.04 $18.70 $18.20 $17.77 $17.99
Shares outstanding 22,941,464 22,925,069 22,873,305 22,867,802 22,827,277
Weighted average shares 22,931,855 22,899,600 22,870,467 22,845,623 22,824,868
Weighted average diluted shares 23,244,235 23,240,112 23,231,778 23,115,708 23,098,534
Credit Quality
Nonperforming originated loans $11,689 $10,581 $13,234 $12,894 $13,083
Total nonperforming loans 21,955 17,429 19,511 20,128 20,952
Foreclosed assets, net of allowance 3,071 3,489 3,529 3,986 4,124
Loans charged-off 862 2,512 409 635 664
Loans recovered 701 434 480 1,087 2,612
Selected Financial Ratios
Return on average total assets 1.04 % 1.21 % 1.08 % 1.13 % 1.11 %
Return on average equity 9.38 % 10.93 % 9.97 % 10.47 % 10.15 %
Average yield on loans 5.18 % 5.23 % 5.06 % 5.38 % 5.36 %
Average yield on interest-earning assets 4.42 % 4.42 % 4.27 % 4.42 % 4.37 %
Average rate on interest-bearing liabilities 0.27 % 0.24 % 0.22 % 0.22 % 0.22 %
Net interest margin (fully tax-equivalent) 4.24 % 4.26 % 4.13 % 4.28 % 4.23 %
Supplemental Loan Interest Income Data:
Discount accretion PCI - cash basis loans $398 $386 $112 $483 $777
Discount accretion PCI - other loans 407 797 631 658 569
Discount accretion PNCI loans 559 987 798 637 883
All other loan interest income 35,904 34,248 33,373 34,463 33,540
Total loan interest income $37,268 $36,418 $34,914 $36,241 $35,769
 
TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)
      Three months ended
September 30,   June 30,   March 31,   December 31,   September 30,
Balance Sheet Data 2017   2017   2017   2016   2016
Cash and due from banks $188,034 $167,649 $323,706 $305,612 $315,088
Securities, available for sale 678,236 672,569 571,719 550,233 510,209
Securities, held to maturity 536,567 559,518 580,137 602,536 641,149
Restricted equity securities 16,956 16,956 16,956 16,956 16,956
Loans held for sale 2,733 2,537 1,176 2,998 7,777
Loans:
Commercial loans 227,479 225,743 212,685 217,047 217,110
Consumer loans 361,320 360,782 357,593 366,111 381,250
Real estate mortgage loans 2,194,874 2,106,567 2,066,372 2,054,016 1,994,679
Real estate construction loans 147,940 133,301 124,542 122,419 119,187
Total loans, gross 2,931,613 2,826,393 2,761,192 2,759,593 2,712,226
Allowance for loan losses (28,747 ) (28,143 ) (31,017 ) (32,503 ) (33,484 )
Foreclosed assets 3,071 3,489 3,529 3,986 4,124
Premises and equipment

54,995

51,558 49,508 48,406 49,448
Cash value of life insurance 97,142 96,410 95,783 95,912 95,281
Goodwill 64,311 64,311 64,311 64,311 64,311
Other intangible assets 5,513 5,852 6,204 6,563 6,923
Mortgage servicing rights 6,419 6,596 6,860 6,595 6,208
Accrued interest receivable 12,656 11,605 11,236 12,027 10,819
Other assets 86,936 62,635 66,654 74,743 60,096
Total assets $4,656,435 $4,519,935 $4,527,954 $4,517,968 $4,467,131
Deposits:
Noninterest-bearing demand deposits $1,283,949 $1,261,355 $1,254,431 $1,275,745 $1,221,503
Interest-bearing demand deposits 965,480 956,690 947,006 887,625 910,638
Savings deposits 1,367,597 1,346,016 1,370,015 1,397,036 1,366,892
Time certificates 310,430 314,361 327,432 335,154 336,979
Total deposits 3,927,456 3,878,422 3,898,884 3,895,560 3,836,012
Accrued interest payable 867 781 770 818 774
Reserve for unfunded commitments 2,989 2,599 2,734 2,719 2,908
Other liabilities 62,850 59,868 66,938 67,364 69,695
Other borrowings 98,730 22,560 15,197 17,493 19,235
Junior subordinated debt 56,810 56,761 56,713 56,667 56,617
Total liabilities $4,149,702 $4,020,991 $4,041,236 $4,040,621 $3,985,241
Total shareholders' equity $506,733 $498,944 $486,718 $477,347 $481,890

Accumulated other comprehensive gain (loss)

(4,612 ) (4,501 ) (7,402 ) (7,913 ) 4,953
Average loans $2,878,944 $2,783,686 $2,758,544 $2,695,743 $2,669,954
Average interest-earning assets 4,214,488 4,135,021 4,130,469 4,094,011 4,055,446
Average total assets 4,572,424 4,492,389 4,493,657 4,445,310 4,407,322
Average deposits 3,878,183 3,851,519 3,862,793 3,820,773 3,784,748
Average total equity 507,389 497,225 484,811 478,993 480,575
Total risk based capital ratio 14.4 %

14.8

%

15.0

% 14.8 % 14.8 %
Tier 1 capital ratio 13.6 %

13.9

%

14.0

% 13.7 % 13.7 %
Tier 1 common equity ratio 12.1 %

12.3

%

12.4

% 12.2 % 12.1 %
Tier 1 leverage ratio 11.0 % 11.0 % 10.8 % 10.6 % 10.6 %
Tangible capital ratio 9.5 % 9.6 % 9.3 % 9.1 % 9.3 %
 

During the three months ended September 30, 2017, the Company changed
its classification of 1st and 2nd lien non-owner occupied 1-4
residential real estate mortgage loans from commercial real estate
mortgage loans to residential real estate mortgage loans and consumer
home equity loans, respectively. This change in loan category
classification was made to better align the Company's financial
reporting classifications with regulatory reporting classifications, and
to properly classify these loans for regulatory risk-based capital ratio
calculations. As a result of these reclassifications, at September 30,
2017, loans with balances of $60,957,000, and $5,620,000, that would
have been classified as commercial real estate mortgage loans prior to
this change, were classified as residential real estate mortgage loans,
and consumer home equity loans, respectively; and the Company's Total
risk based capital ratio, Tier 1 capital ratio, and Tier 1 common equity
ratio were all recalculated to be 0.10%-0.20% higher than they would
have been prior to this change. Similar loan reclassifications, and
related regulatory capital ratio recalculations, have been retroactively
applied to amounts reported in previous periods and reflected in the
table above. These reclassifications did not affect previously reported
net income or total shareholders' equity.

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