TriCo Bancshares Announces Quarterly Results

TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company of Tri Counties Bank, today announced earnings of $8,336,000, or $0.36 per diluted share, for the three months ended March 31, 2015. For the three months ended March 31, 2014 the Company reported earnings of $7,365,000, or $0.45 per diluted share. Diluted shares outstanding were 22,949,902 and 16,322,295 for the three months ended March 31, 2015 and 2014, respectively.

On October 3, 2014, TriCo completed its acquisition of North Valley Bancorp. North Valley Bancorp was headquartered in Redding, California, and was the parent of North Valley Bank that had approximately $935 million in assets and 22 commercial banking offices in Shasta, Humboldt, Del Norte, Mendocino, Yolo, Sonoma, Placer and Trinity Counties in Northern California. In connection with the acquisition, North Valley Bank was merged into Tri Counties Bank. Beginning on October 4, 2014, the effect of revenue and expenses from the operations of North Valley Bancorp, and 6,575,550 shares of TriCo Bancshares common shares issued in consideration of the merger are included in the results of the Company.

On October 25, 2014, North Valley Bank’s electronic customer service and other data processing systems were converted into Tri Counties Bank’s systems. Between January 7, 2015 and January 21, 2015, four Tri Counties Bank branches and four former North Valley Bank branches were consolidated into other Tri Counties Bank or other former North Valley Bank branches.

Included in the results of the Company for the three months ended March 31, 2015 and 2014 were $586,000 and $225,000, respectively, of nonrecurring noninterest expenses related to the merger with North Valley Bancorp of which $0 and $109,000, respectively, were not deductible for income tax purposes. Excluding these nonrecurring merger related expenses, but including the revenue and other expenses from the operations of North Valley Bancorp from January 1, 2015 to March 31, 2015, diluted earnings per share for the three months ended March 31, 2015 and 2014 would have been $0.38 and $0.46, respectively, on earnings of $8,676,000 and $7,541,000, respectively.

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

Included in the changes in the Company’s assets and deposits from March 31, 2014 to March 31, 2015 is the effect of those assets and deposits acquired as part of the North Valley Bancorp acquisition on October 3, 2014. The following table discloses the fair value of consideration transferred, the total identifiable net assets acquired and the resulting goodwill related to the North Valley Bancorp acquisition:

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:

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:

Net interest income (FTE) during the first quarter of 2015 increased $10,286,000 (39.3%) from the same period in 2014 to $36,440,000. The increase in net interest income (FTE) was due primarily to a $612,391,000 (36.6%) increase in the average balance of loans to $2,283,622,000, and a $520,030,000 (127.5%) increase in the average balance of investments to $927,878,000 that were partially offset by a 22 basis point decrease in the average yield on loans from 5.68% during the three months ended March 31, 2014 to 5.46% during the three months ended March 31, 2015, and a 38 basis point decrease in the average yield on investments from 3.13% during the three months ended March 31, 2014 to 2.76% during the three months ended March 31, 2015. The $612,391,000 increase in average loan balances from the year ago quarter was primarily due to the addition of $499,327,000 of loans through the acquisition of North Valley Bancorp on October 4, 2014. The $520,030,000 increase in average investment balances from the year-ago quarter was primarily due to the use of cash at the Federal Reserve and other banks to purchase investments and the addition of $212,616,000 of investments through the acquisition of North Valley Bancorp on October 4, 2014. The decrease in average loan yields is due primarily to declines in market yields on new and renewed loans compared to yields on repricing, maturing, and paid off loans. The decrease in average investment yields is due primarily to declines in market yields on new investments compared to yields on existing investments. The increases in average loan and investment balances added $8,696,000 and $3,984,000, respectively, to net interest income (FTE) while the decreases in average loan and investment yields reduced net interest income (FTE) by $1,269,000 and $777,000, respectively, compared to the year-ago quarter.

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. Generally, as time goes on, the effect of this discount accretion decreases as these purchased loans mature or pay off early. Further details regarding interest income from loans, including fair value discount accretion, may be found under the heading “Supplemental Loan Interest Income Data” in the Consolidated Financial Data table at the end of this press release.

The Company recorded a provision for loan losses of $197,000 during the three months ended March 31, 2015 compared to a $1,421,000 benefit from reversal of provision for loan losses during the three months ended March 31, 2014. The increase in provision for loan losses from the year-ago period was primarily due to $38 million of net loan growth during the three months ended March 31, 2015.

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

Noninterest income increased $1,885,000 (22.7%) to $10,180,000 during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. The increase in noninterest income was due primarily to an increase in service charges on deposit accounts of $910,000 (33.8%) to $3,600,000, and an increase in ATM fees and interchange revenue of 989,000 (49.1%) to $3,002,000. These increases, and the increases in other categories of noninterest income noted in the table above, are primarily the result of the acquisition of North Valley Bancorp on October 4, 2014. Partially offsetting these increases were decreases of $325,000 and $916,000 in change in value of mortgage servicing rights and gain on sale of foreclosed assets, respectively, to $(506,000) and $311,000, respectively. The decrease in change in value of mortgage servicing rights is primarily due to a larger increase in estimated prepayment speeds of serviced loans during the three months ended March 31, 2015 than the three months ended March 31, 2014. An increase in prepayment speeds of serviced loans results in reduced expected servicing cash flows, and thus, a lower value of such servicing rights. The decrease in gain on sale foreclosed assets is due to decreased foreclosed asset sales during the three months ended March 31, 2015 compared to the year-ago period.

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

Salary and benefit expenses increased $4,797,000 (36.1%) to $18,100,000 during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. Base salaries, incentive compensation and benefits & other compensation expense increased $2,878,000 (32.5%), 473,000 (42.1%), and 1,446,000 (43.6%), respectively, to $11,744,000, $1,596,000 and $4,760,000, respectively, during the three months ended March 31, 2015. The increases in these categories of salary and benefits expense are primarily due to the Company’s acquisition of North Valley Bancorp on October 4, 2014. The average number of full-time equivalent staff increased 234 (32.0%) from 732 during the three months ended March 31, 2014 to 966 for the three months ended March 31, 2015.

Other noninterest expense increased $4,168,000 (38.4%) to $14,182,000 during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. The increase in other noninterest expense was primarily due to the Company’s acquisition of North Valley Bancorp on October 4, 2014. Nonrecurring merger expenses related to the North Valley Bancorp acquisition totaling $586,000 are included in noninterest expense for the three months ended March 31, 2015. These nonrecurring merger related expenses include $108,000 of data processing expense, $120,000 of professional fees, and $358,000 of lease contract resolution, leasehold improvement write-off and facility restoration, and moving expenses related to the consolidation of four former North Valley Bank and four Tri Counties Bank branches during the three months ended March 31, 2015, six of which were leased. As of March 31, 2015, the Company had substantially completed all of its previously planned facility consolidations related to the North Valley Bancorp acquisition. The annualized run rate of noninterest expense for the three months ended March 31, 2015, excluding the nonrecurring merger expenses noted above, is within 4% of management’s goal for noninterest expense in 2015 for the combined company following the North Valley acquisition. Following a thorough analysis of profitability and market opportunity, the bank has identified five additional branches for closure. Two of those branches are former North Valley Bank branches. The bank expects that all five branches will close by September 30, 2015.

Richard Smith, President and CEO of the Company commented, “We continue to make progress integrating the banking operations of Tri Counties Bank and North Valley Bank. With the data systems conversion behind us, we are now seeing our commercial lending teams from North Valley Bank increasing lending activity in our newly acquired markets. The North Valley commercial teams played a significant role in contributing to our commercial loan growth in the quarter.”

Smith added, “While we continue to see improved lending opportunities in our markets, we remain focused upon improvements in bank efficiency efforts as a result of our combination with North Valley Bank.”

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, competition effects, fee and other noninterest income earned, the Company’s ability to effectively integrate the business of North Valley Bancorp, 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, 2014. 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.