kbw winter financial services symposium...loan portfolio mix: february 2019; kbw winter financial...
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KBW Winter FinancialServices Symposium
Richard P. Smith – President & Chief Executive OfficerJohn S. Fleshood – EVP & Chief Operating Officer
February 2019
SAFE HARBOR STATEMENTThe 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; mergers and acquisitions; changes in the level of our nonperforming assets and charge-offs; 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; the impact of competition from other financial service providers; the possibility that any of the anticipated benefits of our recent merger with FNBB will not be realized or will not be realized within the expected time period, or that integration of FNBB’s operations will be more costly or difficult than expected; the challenges of integrating and retaining key employees; unanticipated regulatory or judicial proceedings; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and our ability to manage the risks involved in the foregoing. 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, 2017, 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.
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AGENDA• Most Recent Quarter Recap
• Company Overview
• Lending Overview
• Deposit Overview
• Financials
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MOST RECENT QUARTER HIGHLIGHTS
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Robust Earnings•Q4 2018 return on average assets of 1.47% versus 1.05% linked quarter.• Loans to deposits ratio of 75% in Q4 2018, down slightly from 79% in Q3
2018.
Industry Leading Net Interest Margin
•Net Interest Margin increased 14 bps versus Q3 2018 and 20 bps versus Q4 2017.
•Net Interest Income grew 23.2% on an annualized linked quarter basis versus prior quarter.
•Yield on loans increased by 26 basis points linked quarter and 35 basis points versus prior year.
Low Efficiency Ratio•Revenue growth and operating expense management resulted in
improvement in the efficiency ratio to 59.1% for Q4 compared to 65.2% in the prior quarter and 66.1% for the prior year.
Profitable Deposit Base•Average cost of total deposits rose 4 bps versus the prior quarter to
0.20%.•Total deposits grew 21.5% on an annualized linked quarter basis, with
non-interest bearing demand deposits comprising 33% of total deposits.
Strong Capital Levels•Tangible capital consistent at 9.5%.•Common dividend increased to $0.19 during Q4 2018, and 11.8%
increase over Q4 2017.
COMPANY OVERVIEW
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COMPANY OVERVIEWAsset Size: $6.4 Billion
Founded: 1975
Deposits: $5.4 Billion
Loans (net): $4.0 Billion
Bank Branches: 79
ATMs: 99Market Area: TriCo currently serves 29 counties
throughout Northern and Central California. These counties represent over 30% of California’s population.
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COMPANY OVERVIEWNasdaq: TCBK
Stock Price*: $37.76
Market Capitalization: $1.15 billion
Price to Book stated: 1.4xPrice to TBVPS 2.00x
Rank (Total Assets) amongCA Publicly Traded Banks: 12(Source: SNL Financial)
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_________________________________________________________________________
*as of 02/08/2019 COB
EXECUTIVE TEAM
Rick SmithPresident & CEOTriCo since 1993
John FleshoodEVP Chief Operating Officer
TriCo since 2016
Dan Bailey EVP Chief Retail Banking Officer
TriCo since 2007
Craig CarneyEVP Chief Credit Officer
TriCo since 1996
Peter WieseEVP Chief Financial Officer
TriCo since 2018
Richard O’SullivanEVP Chief Commercial
Lending OfficerTriCo since 1984
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Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018Earnings $12.2 $12.5 $12.1 $13.6 $11.9 $3.0 $13.9 $15.0 $16.2 $23.2E.P.S. (Diluted) $0.53 $0.54 $0.52 $0.58 $0.51 $0.13 $0.60 $0.65 $0.53 $0.76
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
$22
$24
E.P.
S (D
ilute
d)
Earn
ings
(in
Mill
ions
)
CONSISTENT EARNINGS TRACK RECORD
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DILUTED EARNINGS PER SHARE
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$-
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
2013 2014 2015 2016 2017 2018
$0.53 $0.45 $0.36 $0.46 $0.52 $0.60
$0.39 $0.30 $0.49 $0.41
$0.58 $0.65
$0.45 $0.50
$0.55 $0.53 $0.51
$0.53 $0.32 $0.25
$0.50 $0.54 $0.13
$0.76
Q1 Q2 Q3 Q4
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February 201911 *Total Assets for years ending 2000-2018.
CAGR5 yrs. 18.3%10 yrs.12.0%
CONSISTENT ORGANIC GROWTH AND DISCIPLINED ACQUIRER
• Deposit Betas• Ability to Increase Loan Yields• Interest Rate Risk• Aggressive Competitors• The Cost of Compliance with New Regulations• Dysfunction in Washington
WHAT KEEPS US UP AT NIGHT?
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LOANS
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CONSISTENT LOAN GROWTH
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February 201914*Note: Q3 2018 includes acquisition of FNB Bancorp (Loan Yield was 5.04%)
6.06%
5.62%5.52%
5.37%5.16%
5.03% 5.06%5.27%
5.53%
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
2013 2014 2015 2016 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Loan
Yie
ld (%
)
Tota
l Loa
ns (0
00's)
Total Loans Loan Yield
CAGR5 yrs. 19.7%10 yrs. 9.9%
LOAN PORTFOLIO MIX:
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Consumer Loans$47,925
1%
Agri. Production$25,838
1%
Farmland$128,995
3%
Total Construction$184,333
5%Commercial &
Industrial$263,094
7%
CRE - Multifamily$485,024
12%
Revolving LOC$330,132
8%
1st Lien Closed-End Loans$528,474
13%
CRE - Owner Occupied$537,062
13%
CRE - Non-Owner Occupied$1,459,050
36%
Junior Lien Closed-End Loans$40,713
1%
DIVERSIFIED CRE & CONSTRUCTION PORTFOLIO
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Office Building, $555,150,000
Multifamily Residence,
$538,303,000
Retail Building, $427,452,000
Warehouse, $286,140,000
Hospitality,$247,796,000
Mini Storage, $92,576,000
Gas Station /Convenience,
$79,623,000
Restaurant, $48,347,000
SFR (1-4/Condo),
$19,529,000
All Other, $371,615,000
Property Type Loan SizeAvg. Loan Amount
Office Building $769,000
Multifamily Residence $1,092,000
Retail Building $786,000
Warehouse $705,000
Hospitality $2,503,000
Mini Storage $1,624,000
Gas Station /Convenience $959,000
Restaurant $488,000
SFR (1-4/Condo) $814,000
All Other $527,000
CONSERVATIVE CONSTRUCTION AND CRE UNDERWRITING CULTURE – LTV DISTRIBUTION
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30%
23%
16%15%
10%
3%2%
1%0%
5%
10%
15%
20%
25%
30%
35%
% o
f Por
tfolio
LTV Range
Loan to Value Avg. Loan Amount
<50% $637,000
51%-60% $959,000
61%-65% $1,176,000
66%-70% $898,000
71%-75% $845,000
76%-80% $706,000
81%-90% $906,000
>90% $780,000
DIVERSIFIED GEOGRAPHY – CRE & CONSTRUCTION
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County Principal City Outstanding Balance% of CRE-Related
Average Loan Amount
Bay Area San Francisco $628,664,000 24% $906,000
Sacramento Sacramento/Elk Grove $253,822,000 10% $1,203,000
Kern Bakersfield $191,885,000 7% $1,487,000
Butte Chico $157,586,000 6% $461,000
Placer Roseville/Auburn $114,251,000 5% $1,053,000
Shasta Redding $140,287,000 5% $533,000
Stanislaus Modesto $129,068,000 5% $963,000
Fresno Fresno $84,872,000 3% $690,000
Sonoma Sonoma/Santa Rosa $78,781,000 3% $856,000
Nevada Truckee $78,158,000 3% $511,000
17 Other Counties N.A. $779,170,000 29% $817,000
TOTAL $2,666,533,000 AVG. $825,000
NON-PERFORMING ASSETS & NET CHARGE OFFS
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2.17%
1.34%
1.01%
0.53% 0.58% 0.55%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
2013 2014 2015 2016 2017 2018
Non
-Per
form
ing
Asse
ts a
s % o
f Tot
al A
sset
s
-0.20%
-0.10%
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
2013 2014 2015 2016 2017 2018
0.23%
-0.13%
-0.07%-0.10%
0.08%
0.04%Net
Cha
rge
Offs
HOME EQUITY LOANS OUTSTANDING
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$300,000
$310,000
$320,000
$330,000
$340,000
$350,000
$360,000
$370,000
$380,000
$390,000
$400,000
2013 2014 2015 2016 2017 2018
$354,454
$383,898
$362,854
$331,537 $331,719
$363,260
Loan
s (00
0’s)
DEPOSITS
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Non Interest Bearing
33%
Interest Demand23%
Savings36%
Time Deposits9%
Wtd. Avg. Rate – 0.24%
Wtd. Avg. Rate – 0.09%
Wtd. Avg. Rate – 1.03%
*Weighted average costs of deposits for the quarter ended 12/31/2018
CONSISTENT AND BALANCED CORE DEPOSIT FUNDING*
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Wtd. Avg. Rate – 0.18%
Wtd. Avg. Rate – 0.09%
Wtd. Avg. Rate – 0.92%
MARKET SHARE OF ALL BRANCHESSORTED BY ZIP CODE
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Source: FDIC Summary of Deposits, June 2018*Includes acquisition of FNB Bancorp – July 2018
Rank Institution Name State (Hdqtrd) Charter Deposits
($000) Market Share
1 U.S. Bank National Association OH Federal 9,893,012 21.2%
2 Wells Fargo & Company SD Federal 8,782,186 18.8%
3 Bank of America, National Association NC Federal 6,017,267 12.9%
4 Tri Counties Bank CA State 3,881,355 8.3%
5 JP Morgan Chase Bank, National Association OH Federal 2,994,175 6.4%
6 MUFG Union Bank, National Association CA Federal 2,177,323 4.7%
7 Bank of the West CA State 1,832,370 3.9%
8 Umpqua Bank CA State 1,636,359 3.5%
CONSISTENT DEPOSIT GROWTH – ATTRACTIVE COST
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February 201924 *Note: Q3 2018 includes acquisition of FNB Bancorp (Deposit cost of 0.28%)
0.15%
0.12%0.10% 0.09%
0.10%
0.11%
0.12%
0.16%0.20%
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
2013 2014 2015 2016 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Tota
l Cos
t of D
epos
its
Tota
l Dep
osits
(000
’s)
Total Deposits Cost of Deposits
CAGR5 yrs. 17.4%10 yrs. 12.4%
*
FINANCIALS
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NET INTEREST MARGIN –CONTRIBUTION FROM DISCOUNT ACCRETION
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1.00%
2.00%
3.00%
4.00%
5.00%
2015 2016 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
4.39% 4.23% 4.22% 4.14% 4.14% 4.32% 4.46%
0.10%0.09% 0.10% 0.11% 0.12%
0.15%0.16%
Effect of Loan Discount Accretion Net Interest Margin
RETURN ON AVERAGE ASSETS
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0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
2013 2014 2015 2016 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
1.04%
0.87%
1.11%1.03%
0.89%
1.17%1.25%
1.05%
1.47%
RETURN ON AVERAGE SHAREHOLDER’S EQUITY
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2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2013 2014 2015 2016 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
11.34%
8.67%
10.04%9.47%
8.10%
11.00%11.78%
9.11%
11.40%
EFFICIENCY RATIO (FULLY TAXABLE EQUIVALENT)
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50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
2013 2014 2015 2016 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
67.3%
72.9%
64.7%
67.9%
65.5% 66.3%65.2% 65.2%
59.1%
DIVIDENDS PAID
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$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
2013 2014 2015 2016 2017 2018
$0.09 $0.11 $0.11 $0.15 $0.15 $0.17$0.11 $0.11 $0.13
$0.15 $0.17 $0.17$0.11 $0.11$0.13
$0.15$0.17 $0.17
$0.11 $0.11
$0.15
$0.15$0.17
$0.19
Annual Dividends $0.70$0.60$0.42 $0.44 $0.52 $0.66
CAPITAL RATIOS ($000’S)
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0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2013 2014 2015 2016 2017 Q4 2018
12.2% 12.2% 11.7%12.5%
13.5%14.4%
13.8% 13.7%13.2%
13.7%14.8%
15.7%15.1% 14.8%
14.1% 14.4%
8.6% 9.1% 9.2% 9.1% 9.3% 9.5%
Common Equity Tier 1 Tier 1 Total Risk Based Tangible Common
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TRICO BANCSHARES IS COMMITTED TO:
Improving the financial success and well-being of our shareholders, customers,
communities and employees.