TriCo Bancshares Reports Second Quarter 2025 Net Income of $27.5 Million, Diluted EPS of $0.84 2Q25

2Q25 Financial Highlights

• Net income was $27.5 million or $0.84 per diluted share as compared to $26.4 million or $0.80 per diluted share in the trailing quarter
• Net interest income (FTE) was $86.8 million, an increase of $4.0 million or 4.82% over the trailing quarter; net interest margin (FTE) was 3.88% in the recent quarter, an increase of 15 basis points over 3.73% in the trailing quarter
• Loan balances increased $138.2 million or 8.1% (annualized) from the trailing quarter and increased $216.5 million or 3.2% from the same quarter of the prior year
• Deposit balances increased $170.5 million or 8.3% (annualized) from the trailing quarter and increased $325.6 million or 4.0% from the same quarter of the prior year
• Average yield on earning assets was 5.21%, an increase of 6 basis points over the 5.15% in the trailing quarter; average yield on loans was 5.76%, an increase of 5 basis points over the 5.71% in the trailing quarter
• Non-interest bearing deposits averaged 30.6% of total deposits during the quarter
• The average cost of total deposits was 1.37%, a decrease of 6 basis points as compared to 1.43% in the trailing quarter, and a decrease of 8 basis points from 1.45% in the same quarter of the prior year

TriCo Bancshares (NASDAQ: TCBK):

Executive Commentary:

“Growth was certainly the highlight of the quarter with new and expanded relationships being adding for both loans and deposits. We expect this balance sheet growth to further drive the expansion of net interest income through the remainder of 2025. Our credit quality remains strong, and we remain confident that our overall portfolio will continue to perform consistent with our historically high standards,” said Rick Smith, President and CEO.

Peter Wiese, EVP and CFO added, “Our net interest margin outlook remains stable with continued earning asset yield and funding cost improvements leading to additional net interest income growth. While personnel cost increases during the quarter were largely the result of increased production volumes, the Company's overall efficiency ratio declined and we remain focused on continued improvement in operating leverage.”

Selected Financial Highlights

• For the quarter ended June 30, 2025, the Company’s return on average assets was 1.13%, while the return on average equity was 8.68%; for the trailing quarter ended March 31, 2025, the Company’s return on average assets was 1.09%, while the return on average equity was 8.54%
• Diluted earnings per share were $0.84 for the second quarter of 2025, compared to $0.80 for the trailing quarter and $0.87 during the second quarter of 2024
• The loan to deposit ratio was 83.08% as of June 30, 2025, as compared to 83.13% for the trailing quarter end
• The efficiency ratio was 59.00% for the quarter ended June 30, 2025, as compared to 60.42% for the trailing quarter
• The provision for credit losses was approximately $4.7 million during the quarter ended June 30, 2025, as compared to $3.7 million during the trailing quarter end. The change was attributed to an increase in required reserves totaling $2.8 million on individually evaluated loans and an increase of $1.7 million general reserves, which was primary attributed to loan growth
• The allowance for credit losses (ACL) to total loans was 1.79% as of June 30, 2025, compared to 1.88% as of the trailing quarter end, and 1.83% as of June 30, 2024. Non-performing assets to total assets were 0.68% on June 30, 2025, as compared to 0.59% as of March 31, 2025, and 0.36% at June 30, 2024. At June 30, 2025, the ACL represented 192% of non-performing loans

The financial results reported in this document are preliminary and unaudited. Final financial results and other disclosures will be reported on Form 10-Q for the period ended June 30, 2025, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

Operating Results and Performance Ratios

Balance Sheet Data

Total loans outstanding were $7.0 billion as of June 30, 2025, an increase of $216.5 million or 3.2% over June 30, 2024, and an increase of $138.2 million or 8.1% annualized as compared to the trailing quarter ended March 31, 2025. Investments decreased by $42.2 million and $149.1 million for the three and twelve month periods ended June 30, 2025, respectively, and ended the quarter with a balance of $1.94 billion or 19.5% of total assets. Quarterly average earning assets to quarterly total average assets was 91.8% on June 30, 2025, compared to 92.0% at June 30, 2024. The loan-to-deposit ratio was 83.1% on June 30, 2025, as compared to 83.8% at June 30, 2024. The Company did not utilize brokered deposits during 2025 or 2024 and continues to rely on organic deposit customers to fund cash flow timing differences.

Total shareholders' equity increased by $11.3 million during the quarter ended June 30, 2025, as net income of $27.5 million and a $9.0 million decrease in accumulated other comprehensive losses were partially offset by $10.7 million in cash dividends on common stock and $14.8 million in share repurchase activity. As a result, the Company’s book value increased to $38.92 per share at June 30, 2025, compared to $38.17 at March 31, 2025. The Company’s tangible book value per share, a non-GAAP measure, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $29.40 per share at June 30, 2025, as compared to $28.73 at March 31, 2025. Changes in the fair value of available-for-sale investment securities, net of deferred taxes, continue to create moderate levels of volatility in tangible book value per share.

Loans outstanding increased by $138.2 million or 8.1% on an annualized basis during the quarter ended June 30, 2025. During the quarter, loan originations/draws totaled approximately $457.7 million while payoffs/repayments of loans totaled $329.3 million, which compares to originations/draws and payoffs/repayments during the trailing quarter ended of $357.5 million and $321.3 million, respectively. Origination volume was elevated relative to recent quarters as interest rates have contracted from the highs experienced in early 2025, and the macro-economic outlook continues to improve for borrowers following the passage of tax and spending legislation that is expected to promote continued economic expansion, in addition to progress toward finalizing tariff policies with our largest trade partners. The activity within loan payoffs/repayments remains spread amongst numerous borrowers, regions and loan types.

Investment security balances decreased $42.2 million or 8.5% on an annualized basis during the quarter as a result of net prepayments/maturities of $64.5 million, partially offset by net increases in the market value of securities of $12.8 million and purchases of $10.2 million. Investment security purchases were comprised of fixed rate agency mortgage-backed securities. While management intends to primarily 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.

Deposit balances increased by $170.5 million or 8.3% annualized during the period, primarily due to increases in demand and savings deposit accounts. Other borrowings decreased by $73.9 million or 322.4% during the quarter following the repayment of all short-term FHLB advances.

Net Interest Income and Net Interest Margin

The Company's yield on loans for the second quarter was 5.76%, an increase of 5 basis points from 5.71% as of the trailing quarter end and a decrease of 6 basis points as compared to 5.82% for the period ended June 30, 2024. The tax equivalent yield on the Company's investment security portfolio was 3.30% for the quarter ended June 30, 2025, a decrease of 12 basis points from the 3.42% for the three months ended June 30, 2024, and 9 basis points from the trailing quarter end of 3.39%. The cost of total interest-bearing deposits decreased by 17 basis points, while the costs of total interest-bearing liabilities decreased by 34 basis points, respectively, between the three-month periods ended June 30, 2025 and 2024. As compared to the trailing quarter, interest-bearing deposits declined by 9 basis points and interest-bearing liabilities declined by 13 basis points. There were no changes to short-term rates by the FOMC during the current quarter, following 100 basis points in cuts during the fourth quarter in 2024. The fully tax-equivalent net interest income and net interest margin was $86.8 million and 3.88%, respectively, for the quarter ended June 30, 2025, and was $82.8 million and 3.73%, respectively, for the quarter ended March 31, 2025. More specifically, the net interest rate spread improved by 19 basis points to 3.16% for the quarter ended June 30, 2025, as compared to the trailing quarter, while the net interest margin increased by 15 basis points to 3.88% over the same period.

The Company continues to manage its cost of deposits through the use of various pricing and product mix strategies. As of June 30, 2025, March 31, 2025, and June 30, 2024, deposits priced utilizing these customized strategies totaled $1.0 billion, $0.9 billion, and $1.4 billion and carried weighted average rates of 3.38%, 3.43% and 3.80%, respectively.

Analysis Of Change In Net Interest Margin On Earning Assets

Net interest income (FTE) during the three months ended June 30, 2025, increased $4.0 million or 4.8% to $86.8 million compared to $82.8 million during the three months ended March 31, 2025. Net interest margin totaled 3.88% for the three months ended June 30, 2025, an increase of 15 basis points from the trailing quarter. The increase in net interest income is primarily attributed to a $2.3 million improvement in interest income on earning assets, led by elevated loan income totaling $3.3 million, primarily related to the benefit from new originations and fee income from increased refinance activity. The net interest margin was further enhanced by reductions in interest expense on interest-bearing liabilities of $1.7 million as compared to the trailing quarter, primarily attributed to a decrease of $0.8 million in deposit interest expense and $0.9 million in other borrowings expense.

As compared to the same quarter in the prior year, average loan yields decreased 6 basis points from 5.82% during the three months ended June 30, 2024, to 5.76% during the three months ended June 30, 2025. The accretion of discounts from acquired loans added 8 basis points and 5 basis points to loan yields during the quarters ended June 30, 2025 and June 30, 2024, respectively. The cost of interest-bearing deposits decreased by 17 basis points between the quarter ended June 30, 2025, and the same quarter of the prior year. In addition, the average balance of noninterest-bearing deposits decreased by $49.0 million from the three-month average for the period ended June 30, 2024, amidst a continued migration of customer funds to interest-bearing products.

For the quarter ended June 30, 2025, the ratio of average total noninterest-bearing deposits to total average deposits was 30.6%, as compared to 30.7% and 32.0% for the quarters ended March 31, 2025 and June 30, 2024, respectively.

Prior to September 30, 2025, management anticipates providing notice of and repayment to the holders of the North Valley Trust II, III and IV as well as well as the VRB Subordinated debt issued by TriCo, which had a total face value of $57.7 million, recorded book value of $60.0 million, and weighted average rate of 6.54% as of June 30, 2025.

Interest Rates and Earning Asset Composition

As of June 30, 2025, the Company's loan portfolio consisted of approximately $7.0 billion in outstanding principal with a weighted average coupon rate of 5.57%. During the three-month periods ending June 30, 2025, March 31, 2025, and June 30, 2024, the weighted average coupon on loan production in the quarter was 6.87%, 6.96% and 7.98%, respectively. Included in the June 30, 2025 total loans balance are adjustable rate loans totaling $4.5 billion, of which $0.9 billion are considered floating based on the Wall Street Prime index. In addition, the Company holds certain investment securities with fair values totaling $282.8 million which are subject to repricing on not less than a quarterly basis.

Asset Quality and Credit Loss Provisioning

During the three months ended June 30, 2025, the Company recorded a provision for credit losses of $4.7 million, as compared to $3.7 million during the trailing quarter, and $0.4 million during the second quarter of 2024.

The allowance for credit losses (ACL) was $124.5 million or 1.79% of total loans as of June 30, 2025. The provision for credit losses on loans of $4.5 million recorded during the current quarter resulted from a net increase of $2.9 million in reserves on individually evaluated loans or loan relationships, in addition to a net increase of $1.6 million in general reserves. The charge-offs incurred during the quarter ended June 30, 2025, were primarily related to non-performing relationships which had been fully reserved for by Management on an individual basis in previous quarters.

The $2.9 million increase in individually evaluated reserves was largely attributed to changes in observable market valuations associated with agricultural real estate despite what appears to be a stable water supply and improving commodity prices for the crops associated with collateral for these loans. Management believes the provisioning for this individually analyzed relationship is sufficient relative to expected future losses, if any.

The $1.6 million recorded for general reserves is primarily attributed to net loan growth for the quarter of approximately $138.2 million. Additionally, Management notes that economic indicators through the end of the current quarter, as well as actual and forecasted trends including, but not limited to, unemployment, gross domestic product, and corporate borrowing rates continued to evidence stability and were supportive of general economic expansion, and generally consistent with the trailing period ended March 31, 2025, which is aligned with the Company's direct experiences with borrowers. Steepening of the yield curve or actions by the Federal Reserve to cut rates during 2025 and beyond may help further improve this outlook overall, but the uncertainty associated with the extent and timing of these potential reductions has inhibited a material change to monetary policy assumptions. Furthermore, geopolitical policy risks remain elevated, which may lead to further negative effects on domestic economic outcomes. The uncertainties related to the nature, duration and potential economic impact of proposed tariffs, while modestly improved since the period ended March 31, 2025, continue to present challenges in correlating potential improvement of credit risks within the Company's loan portfolio. Therefore, in conjunction with most economists' belief that tariffs may have a generally unfavorable impact on the economy as a whole, management continues to believe that certain credit weaknesses are present in the overall economy and that it is appropriate to maintain a reserve level that incorporates such risk factors.

The ratio of classified loans to total loans of 1.94% as of June 30, 2025, was unchanged from March 31, 2025, and increased 38 basis points from the comparative quarter ended 2024. The change in classified loans outstanding as compared to the trailing quarter represented an increase of $2.6 million. While the increase is concentrated within commercial real estate farmland, the corresponding loans are current as of the reporting date with no history of delinquency.

Loans past due 30 days or more decreased by $1.8 million during the quarter ended June 30, 2025, to $43.0 million, as compared to $44.8 million at March 31, 2025. The majority of loans identified as past due are well-secured by collateral, and approximately $12.4 million are less than 90 days delinquent.

Non-performing loans increased by $9.9 million during the quarter ended June 30, 2025 to $64.8 million as compared to $54.9 million at March 31, 2025. As noted above, this increase is concentrated within commercial real estate farmland and management continues to proactively work with these borrowers to identify actionable and appropriate resolution strategies which are customary for the industries. We anticipate that these actionable strategies will further benefit from the continued improvement in agricultural commodity prices, stable water supply, and growing crop demand. Of the $64.8 million loans designated as non-performing as of June 30, 2025, approximately $27.8 million are current or less than 30 days past due with respect to payments required under their existing loan agreements.

Management continues to proactively assess the repayment capacity of borrowers that will be subject to rate resets in the near term. To date this analysis as well as management's observations of loans that have experienced a rate reset, have resulted in an insignificant need to provide concessions to borrowers.

As of June 30, 2025, other real estate owned consisted of 9 properties with a carrying value of approximately $2.7 million, consistent with March 31, 2025. Non-performing assets of $67.5 million at June 30, 2025, represented 0.68% of total assets, a change from $57.5 million or 0.59% and $35.3 million or 0.36% as of March 31, 2025 and June 30, 2024, respectively.

In addition to the allowance for credit losses above, the Company has acquired various performing loans whose fair value as of the acquisition date was determined to be less than the principal balance owed on those loans. This difference represents the collective discount of credit, interest rate and liquidity measurements, which are expected to be amortized over the life of the loans. As of June 30, 2025, the unamortized discount associated with acquired loans totaled $17.0 million, which, when combined with the total allowance for credit losses above, represents 2.14% of total loans.

Non-interest Income

Total non-interest income increased $1.0 million or 6.3% to $17.1 million during the three months ended June 30, 2025, compared to $16.1 million during the quarter ended March 31, 2025. Growth in deposit balances and related transactional activities during the quarter contributed to elevated interchange fees and services charges income, which increased by $0.9 million as compared to the trailing quarter. In the trailing quarter, two significant non-recurring events impacted financials, including $1.2 million in losses related to the sale of investment securities on proceeds of $30.0 million, offset by excess cash flows from death benefit proceeds of $1.2 million recorded within other income.

Non-interest income increased $1.2 million or 7.7% to $17.1 million during the three months ended June 30, 2025, compared to $15.9 million during the comparative quarter ended June 30, 2024. Elevated activity and volume of assets under management drove an increase of $0.3 million or 20.3% in asset management and commission income for the period ended June 30, 2025 as compared to the same period in 2024. All other notable changes in non-interest income during the current quarter are described above.