Business Overview
TriCo Bancshares, the parent company of Tri Counties Bank, has a rich history as a community banking institution serving Northern and Central California. Established in 1975 and headquartered in Chico, California, the company has grown to become a respected financial services provider, weathering economic cycles and adapting to industry changes over the past five decades.
TriCo Bancshares' primary subsidiary, Tri Counties Bank, operates a network of 64 traditional branches, 4 in-store branches, and 8 loan production offices across 31 counties in California. The bank's focus on personal relationships, local decision-making, and tailored financial solutions has allowed it to establish a strong presence in its core markets.
TriCo Bancshares was incorporated in California in 1981 to serve as the holding company for Tri Counties Bank, which had been established in 1975. The company has a long-standing commitment to community development, providing financing for affordable housing projects and supporting small businesses throughout its history. TriCo has also been recognized for its dedication to environmental, social, and governance (ESG) practices, including efforts to promote diversity and inclusion within the organization.
The company's resilience has been demonstrated through various challenges, including the 2008 financial crisis, which it successfully navigated while continuing to grow its operations. This adaptability has been a key factor in TriCo's nearly 50-year history, allowing it to evolve into a respected regional bank focused on building long-term relationships with its customers and supporting the communities it serves.
In 2022, TriCo Bancshares acquired Valley Republic Bancorp, adding four branch locations and a loan production office to its footprint. This acquisition, valued at approximately $174.4 million, has strengthened the company's market share in the Bakersfield region.
TriCo Bancshares' loan portfolio is diversified, with commercial real estate loans (67.6% of total loans as of December 31, 2024), consumer loans (18.9%), commercial and industrial loans (7.1%), and construction loans (4.1%) comprising the majority of its balances. The company's conservative underwriting practices and active portfolio management have contributed to its relatively low nonperforming asset ratio of 0.48% as of the end of 2024.
Financials and Performance
For the year ended December 31, 2024, TriCo Bancshares reported net income of $114.9 million, or $3.46 per diluted share. This represents a slight decrease of 2.1% compared to the previous year's net income of $117.4 million, or $3.52 per diluted share. The company's revenue for 2024 was $466.6 million, down 6.6% from $499.8 million in 2023.
The company's net interest margin (FTE) declined to 3.71% in 2024 from 3.96% in 2023, primarily due to the higher interest rate environment and a liability-sensitive balance sheet. This decrease in net interest margin was largely responsible for the 7.2% decline in net interest income, which fell to $332.5 million. However, TriCo Bancshares was able to partially offset the margin compression through growth in its loan portfolio, which increased by 0.4% year-over-year to $6.77 billion as of December 31, 2024.
Deposit balances grew 3.2% in 2024 to $8.09 billion, reflecting the company's continued success in attracting and retaining customer relationships. Noninterest-bearing deposits represented 31.5% of total deposits at the end of the year, providing a low-cost funding source.
Noninterest income increased 4.9% to $64.4 million, driven by higher asset management fees and other service charges. Noninterest expense remained relatively flat at $234.1 million, with increases in salaries and data processing offset by declines in intangible amortization and operational losses.
The provision for credit losses decreased due to muted loan growth and stable qualitative reserves, contributing positively to the company's financial performance.
For the most recent quarter (Q4 2024), TriCo Bancshares reported revenue of $133.1 million and net income of $29.0 million. The company's operating cash flow for the full year 2024 was $109.7 million, with free cash flow of $105.2 million.
Liquidity and Capital Position
TriCo Bancshares maintained a strong capital position, with a total risk-based capital ratio of 15.71% and a Tier 1 leverage ratio of 11.70% as of December 31, 2024, well above regulatory requirements for a "well-capitalized" institution.
The company's liquidity position remains solid, with a debt-to-equity ratio of 0.18 and cash and cash equivalents of $145.0 million as of December 31, 2024. TriCo Bancshares has access to $2.82 billion in borrowing capacity at correspondent banks and the Federal Reserve, with only $75 million drawn as of year-end. Additionally, the company has $1.28 billion in unpledged available-for-sale securities.
The current ratio and quick ratio both stood at 1.81 as of December 31, 2024, indicating a strong ability to meet short-term obligations.
Operational Challenges and Responses
In February 2023, TriCo Bancshares experienced a cybersecurity incident that resulted in a temporary interruption of its systems and the disclosure of certain confidential information. The company worked swiftly to restore its systems and investigate the incident, and it continues to cooperate with authorities and defend against related litigation. While the long-term financial impact of this event remains uncertain, TriCo Bancshares has taken steps to enhance its cybersecurity measures and incident response protocols to mitigate future risks.
The COVID-19 pandemic also presented operational challenges for the company, as it did for many businesses. TriCo Bancshares responded by implementing safety protocols, providing remote work options, and offering loan forbearance and other forms of assistance to its customers. Despite these disruptions, the company maintained its focus on serving the needs of its communities and supporting its employees.
Human Capital
As of December 31, 2024, TriCo Bancshares employed 1,200 persons, with 1,170 full-time equivalent employees. The company believes its employee relations are good and offers competitive compensation and benefits to attract and retain talent. This focus on human capital is crucial for maintaining the company's community-oriented approach and delivering high-quality customer service.
Industry Trends and Competitive Landscape
The banking industry has experienced steady loan and deposit growth, although this has moderated due to rising interest rates and economic uncertainty. Competition remains intense, particularly for deposits. Regulatory requirements continue to increase, especially around cybersecurity, consumer protection, and environmental/social issues.
TriCo Bancshares operates primarily in California and faces competition from both large national banks and other community banks in its markets. The company's focus on personalized service and local decision-making helps differentiate it from larger competitors.
Looking Ahead
As TriCo Bancshares approaches the $10 billion asset threshold, it will face additional regulatory requirements and oversight. The company is actively preparing for this transition, investing in technology, talent, and infrastructure to ensure it can continue to deliver superior customer service and maintain its financial strength.
The company's management team has also outlined strategic priorities, including further expanding its commercial banking capabilities, enhancing its digital banking offerings, and pursuing selective acquisition opportunities that align with its growth objectives and community banking model.
In terms of near-term guidance, TriCo Bancshares expects its net interest margin to be in the range of 3.75% to 3.85% for the upcoming quarter. Total loan growth is anticipated to be in the mid-single digit percentage range, and the efficiency ratio is expected to be in the low 50% range. This guidance is based on the current economic environment and the company's expectations for the quarter.
Despite the challenges posed by the evolving regulatory landscape, rising interest rates, and ongoing cybersecurity threats, TriCo Bancshares remains well-positioned to capitalize on opportunities in its markets. The company's commitment to its core values, prudent risk management, and customer-centric approach have been instrumental in navigating these changes and positioning the organization for long-term success.