TriBancshares(TCBK) - 2025 Q2 - Quarterly Results

Financial Performance Overview Q2 2025 Financial Highlights The company reported strong Q2 2025 results driven by loan and deposit growth, leading to higher net income and an expanded net interest margin Key Financial Metrics | Metric | Q2 2025 | Q1 2025 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Net Income | $27.5 million | $26.4 million | +$1.1 million | | Diluted EPS | $0.84 | $0.80 | +$0.04 | | Net Interest Income (FTE) | $86.8 million | $82.8 million | +$4.0 million (4.82%) | | Net Interest Margin (FTE) | 3.88% | 3.73% | +15 bps | | Loan Balances | +8.1% (annualized) | - | - | | Deposit Balances | +8.3% (annualized) | - | - | Key Performance Ratios | Performance Ratio | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Return on Average Assets (ROA) | 1.13% | 1.09% | | Return on Average Equity (ROE) | 8.68% | 8.54% | | Efficiency Ratio | 59.00% | 60.42% | - The allowance for credit losses (ACL) to total loans stood at 1.79%, while non-performing assets to total assets increased to 0.68%[6] Executive Commentary Management highlighted strong loan and deposit growth as key drivers for future net interest income and noted improved operational leverage - President and CEO Rick Smith emphasized that significant growth in both loans and deposits was the highlight of the quarter, expecting this to drive net interest income growth for the remainder of 2025[2] - EVP and CFO Peter Wiese noted a stable net interest margin outlook and an improved efficiency ratio, indicating better operating leverage despite higher personnel costs[3] Detailed Financial Analysis Operating Results and Performance Ratios Net income grew quarter-over-quarter on higher revenue but declined year-over-year due to a significantly larger provision for credit losses Quarter-over-Quarter Operating Results | (in thousands) | Q2 2025 | Q1 2025 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $86,519 | $82,542 | 4.8% | | Provision for Credit Losses | ($4,665) | ($3,728) | 25.1% | | Net Income | $27,542 | $26,363 | 4.5% | | Diluted EPS | $0.84 | $0.80 | 5.0% | Year-over-Year Operating Results | (in thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $86,519 | $81,997 | 5.5% | | Provision for Credit Losses | ($4,665) | ($405) | 1,051.9% | | Net Income | $27,542 | $29,034 | (5.1)% | | Diluted EPS | $0.84 | $0.87 | (3.4)% | Balance Sheet Analysis The balance sheet expanded with strong annualized growth in both loans and deposits, alongside an increase in shareholders' equity Quarter-over-Quarter Balance Sheet | Ending Balances (in thousands) | June 30, 2025 | March 31, 2025 | Annualized % Change | | :--- | :--- | :--- | :--- | | Total Loans | $6,958,993 | $6,820,774 | 8.1% | | Total Deposits | $8,375,809 | $8,205,332 | 8.3% | | Total Assets | $9,923,983 | $9,819,599 | 4.3% | Year-over-Year Balance Sheet | Ending Balances (in thousands) | June 30, 2025 | June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Loans | $6,958,993 | $6,742,526 | 3.2% | | Total Deposits | $8,375,809 | $8,050,230 | 4.0% | | Total Assets | $9,923,983 | $9,741,399 | 1.9% | - Total shareholders' equity increased by $11.3 million during the quarter, and book value per share increased to $38.92 from $38.17[9] - Loan origination volume was elevated at $457.7 million for the quarter, compared to $357.5 million in the trailing quarter[10] Net Interest Income and Net Interest Margin Net interest income and margin grew sequentially, driven by higher loan yields, lower deposit costs, and a planned debt repayment Net Interest Income and Margin (FTE) | Metric (FTE) | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $86.8M | $82.8M | $82.3M | | Net Interest Margin | 3.88% | 3.73% | 3.68% | | Yield on Loans | 5.76% | 5.71% | 5.82% | | Cost of Interest-Bearing Deposits | 1.97% | 2.06% | 2.14% | - The QoQ increase in net interest income was attributed to a $2.3 million improvement in interest income and a $1.7 million reduction in interest expense[21] - The company plans to repay subordinated debt with a total face value of $57.7 million and a weighted average rate of 6.54% before September 30, 2025[24] Asset Quality and Credit Loss Provisioning Asset quality saw an increased provision for credit losses and a rise in non-performing loans, primarily in the agricultural portfolio Provision for Credit Losses | (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Total Provision for Credit Losses | $4,665 | $3,728 | $405 | - The allowance for credit losses (ACL) was $124.5 million, or 1.79% of total loans, as of June 30, 2025[30] - Non-performing loans increased by $9.9 million during the quarter to $64.8 million, concentrated in commercial real estate farmland[35] - Charge-offs for the quarter totaled $8.6 million, primarily related to non-performing relationships that had been fully reserved for in previous quarters[30] Non-interest Income Non-interest income grew both sequentially and year-over-year, driven by higher service fees and asset management income Non-interest Income Breakdown | (in thousands) | Q2 2025 | Q1 2025 | % Change | | :--- | :--- | :--- | :--- | | Total Service Charges and Fees | $13,650 | $12,678 | 7.7% | | Gain on Sale of Loans | $503 | $344 | 46.2% | | (Loss) Gain on Sale of Securities | $4 | ($1,146) | 100.3% | | Total Non-interest Income | $17,090 | $16,073 | 6.3% | - The prior quarter's results were impacted by two significant non-recurring events: a $1.2 million loss on security sales and a $1.2 million gain from death benefit proceeds[40] - Compared to Q2 2024, non-interest income increased by $1.2 million (7.7%), driven by higher service fees and asset management income[41] Non-interest Expense Non-interest expenses rose quarter-over-quarter and year-over-year, primarily due to higher salaries and incentive compensation Non-interest Expense Breakdown | (in thousands) | Q2 2025 | Q1 2025 | % Change | | :--- | :--- | :--- | :--- | | Salaries and Benefits Expense | $38,286 | $36,855 | 3.9% | | Incentive Compensation | $5,223 | $4,038 | 29.3% | | Total Non-interest Expense | $61,131 | $59,585 | 2.6% | - The increase in salaries and benefits was largely due to incentive compensation associated with increased production volumes for deposits and loans[43] - Compared to Q2 2024, total non-interest expense increased by $2.8 million (4.8%), with salaries and benefits rising $2.9 million (8.1%)[45] Provision for Income Taxes The effective tax rate increased to 27.2% but remained below the statutory rate due to non-taxable revenues and tax credits - The effective tax rate was 27.2% for Q2 2025, compared to 25.3% for Q1 2025 and 25.8% for Q2 2024[47] - The difference between the effective rate and the statutory rate of ~29.6% is attributed to non-taxable revenues and tax credits[47] Supplementary Information About TriCo Bancshares & Forward-Looking Statements This section provides company background and outlines risks and uncertainties associated with forward-looking statements in the report - TriCo Bancshares (NASDAQ: TCBK) is the parent company of Tri Counties Bank, which was established in 1975 and is headquartered in Chico, California[48] - The report contains forward-looking statements that are subject to numerous risks and uncertainties, including macroeconomic conditions and regulatory changes[49] Condensed Consolidated Financial Data This section presents unaudited condensed financial tables for the last five quarters, covering key operational and balance sheet metrics - This section presents detailed, unaudited financial tables for the last five quarters (Q2 2024 through Q2 2025)[50][51] - The tables cover comprehensive data including income statements, balance sheets, per-share data, credit quality, and capital ratios[50][51] Non-GAAP Financial Measures This section explains the use of non-GAAP measures and provides reconciliations to their nearest GAAP equivalents for better analysis - The company uses non-GAAP financial measures because it believes they provide useful and comparative information to assess core operational trends[52] - Reconciliations are provided for key non-GAAP measures such as pre-tax pre-provision return on average assets and various tangible equity metrics[52][54]