Company Overview and History

TriCo Bancshares is a California-based bank holding company that has demonstrated resilience and consistent performance amidst the evolving financial landscape. With a history spanning over four decades, the company has established itself as a trusted financial institution, catering to the diverse needs of its customers across 31 counties in the Golden State.

Founded in 1975, TriCo Bancshares started as a single-branch bank in Chico, California, established to serve the banking needs of local communities in Northern California. Over the years, the company has strategically expanded its footprint through organic growth and strategic acquisitions, solidifying its position as a prominent regional player. In 2005, TriCo Bancshares made its first major acquisition, merging with North Valley Bancorp, which expanded the company's geographic reach into the Central California market and added over $1 billion in assets. This merger, along with subsequent acquisitions, significantly bolstered TriCo's presence across Northern and Central California.

During the financial crisis of 2008-2009, TriCo Bancshares faced challenges like many other banks, experiencing an increase in nonperforming assets and credit losses. However, the company's conservative underwriting, diversified loan portfolio, and strong capital position allowed it to weather the storm better than many of its peers. TriCo emerged from the crisis in a position of strength, ready to continue its growth trajectory.

In the past decade, TriCo Bancshares has focused on organic growth, expanding its suite of products and services, and leveraging technology to enhance the customer experience. The company has also remained active in the community, supporting local nonprofits and economic development initiatives. Today, TriCo Bancshares operates Tri Counties Bank, a full-service commercial bank with a diverse portfolio of lending and deposit products, serving both individuals and businesses.

Financials

TriCo Bancshares' financial performance has been commendable, showcasing its ability to navigate challenging environments. In the fiscal year 2023, the company reported net income of $117.39 million, with a robust return on average assets (ROAA) of 1.24% and a return on average equity (ROAE) of 11.06%. The company's net interest margin, a key metric in the banking industry, stood at 4.01% during the same period, further underscoring its efficient management of its balance sheet.

For the most recent quarter ending September 30, 2024, TriCo Bancshares reported revenue of $97,368,000 and net income of $29,051,000. The company's operating cash flow for the quarter was $29,014,000, while free cash flow stood at $31,024,000. These figures demonstrate the company's ability to generate solid financial results in the current economic environment.

The company's loan portfolio is well-diversified, with a balanced mix of commercial real estate (67.1%), consumer loans (19.2%), commercial and industrial loans (7.3%), construction loans (4.1%), and agricultural production loans (2.2%). This diversification has helped TriCo Bancshares mitigate concentration risks and maintain a healthy credit profile. As of September 30, 2024, the total loan portfolio amounted to $6.68 billion.

Breaking down the loan portfolio further:

- Commercial real estate loans totaled $4.49 billion, including non-owner occupied CRE ($2.25 billion), owner-occupied CRE ($947.28 million), multifamily ($1.02 billion), and farmland ($268.07 million) loans. - Consumer loans amounted to $1.28 billion, comprising 1-4 family residential first deed of trust liens ($865.76 million), home equity lines of credit and junior liens ($355.34 million), and other consumer loans ($62.87 million). - Commercial and industrial loans stood at $484.76 million. - Construction loans totaled $276.10 million. - Agriculture production loans amounted to $144.12 million. - Leases accounted for $7.42 million.

On the deposit side, TriCo Bancshares reported total deposits of $8.04 billion as of September 30, 2024, consisting of $2.55 billion in noninterest-bearing demand deposits and $5.49 billion in interest-bearing deposits.

The company's net interest income for the third quarter of 2024 was $82.61 million, down from $88.12 million in the year-ago quarter. The net interest margin (FTE) decreased to 3.71% in Q3 2024 from 3.88% in Q3 2023, reflecting the challenges posed by the current interest rate environment. Non-interest income saw a slight increase to $16.50 million in Q3 2024 from $15.98 million in Q3 2023, while non-interest expense rose to $59.49 million from $57.88 million in the same period.

Liquidity

TriCo Bancshares' liquidity position remains strong, with a loan-to-deposit ratio of 86.8% as of December 31, 2023. The company's primary sources of liquidity include borrowing capacity at correspondent banks and the Federal Reserve Bank, unpledged available-for-sale investment securities, and cash on hand. As of September 30, 2024, the company reported cash of $320,110,000, further bolstering its liquidity position.

The company's capital position continues to be well-capitalized, exceeding regulatory requirements. As of December 31, 2023, TriCo Bancshares' total risk-based capital ratio stood at 14.7%, with a Tier 1 capital ratio of 12.9% and a Common Equity Tier 1 capital ratio of 12.2%. These robust capital ratios provide a solid foundation for the bank to withstand potential economic headwinds and continue its growth trajectory.

Additional financial metrics as of September 30, 2024, include:

- Debt/Equity ratio: 0.2969 - Current ratio: 0.0359 - Quick ratio: 0.0359

These ratios indicate that TriCo Bancshares maintains a conservative financial structure with relatively low leverage and adequate liquidity to meet its short-term obligations.

Community Focus and Recent Developments

TriCo Bancshares' focus on serving the needs of its communities has been a key driver of its success. The company's community banking model, which emphasizes personalized service and local decision-making, has fostered strong relationships with its customers and contributed to its reputation as a trusted financial partner.

In terms of recent developments, TriCo Bancshares announced the hire of Scott Myers as Head of Wholesale Banking in September 2024. Myers brings over 25 years of industry experience, which is expected to bolster the company's commercial banking capabilities and further enhance its service offerings to middle-market and specialty banking clients.

Outlook

Looking ahead, TriCo Bancshares remains well-positioned to navigate the evolving financial landscape. The company's prudent risk management, diversified business model, and commitment to serving its communities position it for continued success. As the banking industry navigates challenges such as rising interest rates and economic uncertainties, TriCo Bancshares' strong financial footing and adaptable strategy will be crucial in maintaining its competitive edge and delivering long-term value to its shareholders.

The banking industry has generally experienced moderate growth in recent years, with a compound annual growth rate (CAGR) in the low to mid single digits. However, the ongoing interest rate increases by the Federal Reserve have put pressure on net interest margins for banks like TriCo Bancshares. This is evident in the company's recent financial performance, where net interest income and net interest margin have seen slight declines compared to the previous year.

TriCo Bancshares operates primarily in the state of California, with a focus on Northern, Central, and Southern regions of the state. As a small-cap company, TCBK does not have significant operations outside of California. This geographic focus allows the company to maintain a deep understanding of local market conditions and customer needs, which is a key strength of its community banking model.

It's worth noting that there have been no reports of any major scandals, short seller attacks, or CEO departures for TriCo Bancshares, which speaks to the company's stability and sound governance practices.

As TriCo Bancshares continues to navigate the challenging interest rate environment and evolving regulatory landscape, its focus on maintaining a diversified loan portfolio, strong liquidity position, and commitment to community banking principles should help the company sustain its competitive position in the California banking market.