8-K: TriCo Bancshares Announces Fourth Quarter 2024 Results: Net Income Stable at $29.0 Million

TriCo Bancshares reported a fourth quarter 2024 net income of $29.0 million, with diluted EPS of $0.88, consistent with the previous quarter.

Summary

• TriCo Bancshares reported a net income of $29.0 million for the fourth quarter of 2024, resulting in diluted earnings per share of $0.88.
• This performance is nearly identical to the trailing quarter, which also reported a net income of $29.1 million and diluted EPS of $0.88.
• The net interest margin (FTE) increased slightly to 3.76%, up from 3.71% in the previous quarter.
• Net interest income (FTE) also saw an increase, reaching $84.4 million, a $1.5 million rise from the trailing quarter.
• Loan balances grew by $84.6 million, representing an annualized increase of 5.1% compared to the trailing quarter, but decreased by 0.4% compared to the same quarter last year.
• Deposit balances increased by $50.5 million, or 2.5% annualized, from the trailing quarter and increased 3.2% from the same quarter of the prior year.
• The average yield on earning assets decreased slightly to 5.22%, a 4 basis point decrease from the trailing quarter.
• The average cost of total deposits decreased by 6 basis points to 1.46% compared to the trailing quarter, but increased 41 basis points from the same quarter last year.
• The return on average assets was 1.19%, and the return on average equity was 9.30% for the quarter.
• The efficiency ratio was 59.56% for the quarter, compared to 60.02% for the trailing quarter.
• The provision for credit losses was $1.7 million, compared to $0.2 million in the trailing quarter, due to loan growth.
• The allowance for credit losses to total loans was 1.85% as of December 31, 2024.
• Non-performing assets to total assets were 0.48% on December 31, 2024.
• Total loans outstanding were $6.8 billion as of December 31, 2024, a decrease of 0.4% over December 31, 2023, but an increase of 5.1% annualized as compared to the trailing quarter ended September 30, 2024.
• Total shareholders' equity decreased by $18.1 million during the quarter ended December 31, 2024, as net income of $29.0 million was partially offset by a $35.5 million increase in accumulated other comprehensive losses and cash dividend payments on common stock of approximately $10.9 million.

Sentiment

Score: 7

Explanation: The sentiment is neutral to positive. The company reports stable earnings, growth in key areas like loans and deposits, and improvements in efficiency. However, there are some negative aspects, such as a decrease in shareholders' equity and a slight increase in non-performing assets.

Positives

• Net interest margin increased by 5 basis points to 3.76%.
• Net interest income increased by $1.5 million to $84.4 million compared to the trailing quarter.
• Loan balances increased by $84.6 million or 5.1% annualized from the trailing quarter.
• Deposit balances increased by $50.5 million or 2.5% annualized from the trailing quarter.
• The efficiency ratio improved to 59.56% from 60.02% in the trailing quarter.
• The company has readily available and unused funding sources totaling approximately $4.1 billion.
• All regulatory capital ratios continue to climb, with five successive quarters of increases.
• Tangible capital ratio of 9.7% at December 2024, an increase from 8.8% at December 2023.

Negatives

• Total shareholders' equity decreased by $18.1 million during the quarter.
• The average yield on earning assets decreased slightly to 5.22%, a 4 basis point decrease from the trailing quarter.
• Non-performing assets to total assets increased to 0.48% on December 31, 2024, as compared to 0.45% as of September 30, 2024, and 0.35% at December 31, 2023.

Risks

• The document contains forward-looking statements that are subject to risks and uncertainties, including economic conditions, interest rate fluctuations, and regulatory changes.
• The company acknowledges the potential impact of extreme weather, natural disasters, and other catastrophic events on its business.
• The company is exposed to risks related to cybersecurity incidents, including the impact of the 2023 ransomware incident and pending litigation.
• The company acknowledges the potential for deterioration in the value of California real estate.

Future Outlook

Management believes that changes in the financial services industry and at Tri Counties Bank will likely create significant opportunity to further differentiate and elevate performance.

Management Comments

• Rick Smith, President and CEO, stated that the company remains focused on its path forward and believes changes in the financial services industry will create significant opportunity.
• Peter Wiese, EVP and CFO, noted that both net interest margin and net interest income expanded for the second consecutive quarter despite Federal Funds rate cuts.

Industry Context

The report indicates that TriCo Bancshares is managing its net interest margin and income effectively in a changing interest rate environment, which is a key focus for banks in the current economic climate. The company's focus on organic deposit growth and strategic talent acquisitions aligns with industry trends.

Comparison to Industry Standards

• The company's non-performing assets as a percentage of total assets is 0.48%, which is better than the peer average of 0.53%.
• The company's coverage ratio (allowance as a percentage of non-performing loans) is 284%, which is better than the peer average of 172%.
• The peer group consists of 99 closest peers in terms of asset size, range $6.2-13.4 Billion, source: BankRegData.com.

Stakeholder Impact

• Shareholders: The company maintained its quarterly dividend, indicating a commitment to shareholder returns.
• Customers: The company continues to provide a range of financial services through its branch network and digital channels.
• Employees: The company made strategic talent acquisitions to prepare for growth, indicating a positive outlook for employees.

Next Steps

• The company intends to utilize cash flows from the investment security portfolio and organic deposit growth to support loan growth.
• Excess liquidity will be utilized for purchases of investment securities to support net interest income growth and net interest margin expansion.

Key Dates