Notable Items for First Quarter 2022
- Completed the merger and system conversion of Valley Republic Bancorp («VRB») effective March 25, 2022
- Organic loan growth, excluding PPP, for the quarter of $187.9 million or 15.5% annualized
- Increase in net interest margin less acquired loan discount accretion and PPP loan yield of 0.04% to 3.29%
- Quarterly pre-tax pre-provision net revenues of $36.6 million, inclusive of $4.0 million in merger expenses, as compared to $39.6 million, inclusive of $0.9 million in merger expenses, in the trailing quarter and $40.9 million in the same quarter of the prior year
- A reduction in nonperforming assets of $15.9 million or 48.4% to $17.0 million
«With the legal close, system conversion and substantially all of the integration of the merger behind us, our banking team can be fully focused on growth across our California footprint», noted Rick Smith, President and Chief Executive Officer. Peter Wiese, EVP and Chief Financial Officer added, «Financially speaking, there are a number of metrics that began moving in our favor during late December and we believe those positive trends continued into the first quarter of 2022, the results of which are evidenced in the financial metrics that we have the pleasure of sharing with you today.»
CHICO, Calif.–(BUSINESS WIRE)–$Stock #CommunityBank–TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $20,374,000 for the quarter ended March 31, 2022, compared to $28,222,000 during the trailing quarter ended December 31, 2021, and $33,649,000 during the quarter ended March 31, 2021. Diluted earnings per share were $0.67 for the first quarter of 2022, compared to $0.94 for the fourth quarter of 2021 and $1.13 for the first quarter of 2021.
Financial Highlights
Performance highlights and other developments for the Company as of or for the three months ended March 31, 2022, included the following:
- For the three months ended March 31, 2022, the Company’s return on average assets was 0.94%, and the return on average equity was 8.19%.
- Organic loan growth, excluding PPP and acquired loans, totaled $187.9 million (15.5% annualized) for the current quarter and $437.3 million (9.5% annualized) for the trailing twelve-month period.
- For the current quarter, net interest margin, less effect of acquired loan discount accretion and PPP yields (non-GAAP), on a tax equivalent basis was 3.29%, an increase of 4 basis points from 3.25% in the trailing quarter.
- The efficiency ratio was 55.95% for the three months ended March 31, 2022, as compared to 54.10% for the trailing quarter.
- As of March 31, 2022, the Company reported total loans, total assets and total deposits of $5.9 billion, $10.1 billion and $8.7 billion, respectively. As a direct result of significant deposit growth in the last year, the loan to deposit ratio has declined to 67.15% as of March 31, 2022, as compared to 72.37% at March 31, 2021.
- The average rate of interest paid on deposits, including non-interest-bearing deposits, equaled 0.04% during the first quarter of 2022, consistent with 0.04% during the trailing quarter, and representing a decrease of 2 basis points from the average rate paid of 0.06% during the same quarter of the prior year.
- Noninterest income related to service charges and fees was $11.7 million for the three month period ended March 31, 2022, an increase of 11.6% when compared to the same period in 2021.
- The provision for credit losses for loans and debt securities was approximately $8.3 million during the quarter ended March 31, 2022, as compared to a provision expense of $1.0 million during the trailing quarter ended December 31, 2021, and a reversal of provision expense totaling $6.1 million for the three month period ended March 31, 2021.
- The allowance for credit losses to total loans was 1.64% as of March 31, 2022, compared to 1.74% as of the trailing quarter end, and 1.73% as of March 31, 2021. Non-performing assets to total assets were 0.17% at March 31, 2022, as compared to 0.38% as of December 31, 2021, and 0.39% at March 31, 2021.
Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Annual Report on Form 10-Q for the period ended March 31, 2022, 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.
Summary Results
The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:
|
|
Three months ended |
|
|
||||||||||||
|
|
March 31, |
December 31, |
|
|
|||||||||||
|
(dollars and shares in thousands, except per share data) |
2022 |
2021 |
$ Change |
% Change |
|||||||||||
|
Net interest income |
$ |
67,924 |
|
$ |
69,783 |
|
$ |
(1,859 |
) |
(2.7 |
)% |
||||
|
(Provision for) reversal of credit losses |
|
(8,330 |
) |
|
(980 |
) |
|
(7,350 |
) |
750.0 |
% |
||||
|
Noninterest income |
|
15,096 |
|
|
16,502 |
|
|
(1,406 |
) |
(8.5 |
)% |
||||
|
Noninterest expense |
|
(46,447 |
) |
|
(46,679 |
) |
|
232 |
|
(0.5 |
)% |
||||
|
Provision for income taxes |
|
(7,869 |
) |
|
(10,404 |
) |
|
2,535 |
|
(24.4 |
)% |
||||
|
Net income |
$ |
20,374 |
|
$ |
28,222 |
|
$ |
(7,848 |
) |
(27.8 |
)% |
||||
|
Diluted earnings per share |
$ |
0.67 |
|
$ |
0.94 |
|
$ |
(0.27 |
) |
(28.7 |
)% |
||||
|
Dividends per share |
$ |
0.25 |
|
$ |
0.25 |
|
$ |
— |
|
— |
% |
||||
|
Average common shares |
|
30,050 |
|
|
29,724 |
|
|
326 |
|
1.1 |
% |
||||
|
Average diluted common shares |
|
30,202 |
|
|
29,870 |
|
|
332 |
|
1.1 |
% |
||||
|
Return on average total assets |
|
0.94 |
% |
|
1.31 |
% |
|
|
|||||||
|
Return on average equity |
|
8.19 |
% |
|
11.20 |
% |
|
|
|||||||
|
Efficiency ratio |
|
55.95 |
% |
|
54.10 |
% |
|
|
|||||||
|
|
Three months ended |
|
|
||||||||||||
|
(dollars and shares in thousands, except per share data) |
2022 |
2021 |
$ Change |
% Change |
|||||||||||
|
Net interest income |
$ |
67,924 |
|
$ |
66,440 |
|
$ |
1,484 |
|
2.2 |
% |
||||
|
(Provision for) reversal of credit losses |
|
(8,330 |
) |
|
6,060 |
|
|
(14,390 |
) |
(237.5 |
)% |
||||
|
Noninterest income |
|
15,096 |
|
|
16,110 |
|
|
(1,014 |
) |
(6.3 |
)% |
||||
|
Noninterest expense |
|
(46,447 |
) |
|
(41,618 |
) |
|
(4,829 |
) |
11.6 |
% |
||||
|
Provision for income taxes |
|
(7,869 |
) |
|
(13,343 |
) |
|
5,474 |
|
(41.0 |
)% |
||||
|
Net income |
$ |
20,374 |
|
$ |
33,649 |
|
$ |
(13,275 |
) |
(39.5 |
)% |
||||
|
Diluted earnings per share |
$ |
0.67 |
|
$ |
1.13 |
|
$ |
(0.46 |
) |
(40.7 |
)% |
||||
|
Dividends per share |
$ |
0.25 |
|
$ |
0.25 |
|
$ |
— |
|
— |
% |
||||
|
Average common shares |
|
30,050 |
|
|
29,727 |
|
|
323 |
|
1.1 |
% |
||||
|
Average diluted common shares |
|
30,202 |
|
|
29,905 |
|
|
297 |
|
1.0 |
% |
||||
|
Return on average total assets |
|
0.94 |
% |
|
1.75 |
% |
|
|
|||||||
|
Return on average equity |
|
8.19 |
% |
|
14.51 |
% |
|
|
|||||||
|
Efficiency ratio |
|
55.95 |
% |
|
50.42 |
% |
|
|
|||||||
Merger Update
On March 25, 2022, the Company completed its acquisition of Valley Republic Bancorp, including the merger of Valley Republic Bank (collectively «VRB») into Tri Counties Bank, with Tri Counties Bank as the surviving entity, in accordance with the terms of the merger agreement dated as of July 27, 2021. The cash and stock transaction was valued at approximately $174.0 million in aggregate, based on TriCo’s closing stock price of $42.48 on March 25, 2022. Under the terms of the merger agreement, the Company issued approximately 4.1 million shares, in addition to approximately $431,000 in cash paid for the settlement of stock option awards at VRB.
As a result of the merger with VRB, the Company acquired assets consisting primarily of cash totaling $427.3 million, investment securities of $109.7 million, loans totaling $771.4 million (inclusive of $21.4 million in PPP and fair value discounts of $20.4 million), core deposit intangibles of $10.7 million, and liabilities consisting primarily of $1.2 billion in deposits and $47.3 million in subordinated debt (of which $4.4 million was retired as TriCo Bancshares was the counter party).
VRB was headquartered in Bakersfield, California, and had four branch locations in and around Bakersfield, which all now operate as branches for Tri Counties Bank, and a loan production office in Fresno, California. The Company anticipates that Tri Counties Bank’s previously existing Bakersfield branch and the VRB loan production office in Fresno will be consolidated, subject to regulatory approval, into the overlapping locations in the near future.
Balance Sheet
Total loans outstanding, excluding PPP, grew to $5.80 billion as of March 31, 2022, an increase of 25.8% over the prior year, of which 9.5% was related to organic loan growth. Investments increased to $2.57 billion as of March 31, 2022, an increase of 30.9% annualized over the prior year. Average earning assets to total average assets remained flat at 92.9% at March 31, 2022, as compared to 93.0% and 92.7% at December 31, 2021, and March 31, 2021, respectively. The loan to deposit ratio was 67.2% at March 31, 2022, as compared to 66.7% and 72.4% at December 31, 2021, and March 31, 2021, respectively.
Total shareholders’ equity increased by $108,998,000 during the quarter ended March 31, 2022, as a result of issuing $173,585,000 in common stock associated with the VRB merger and net income of $20,374,000, which was partially offset by a decrease in accumulated other comprehensive income of $78,339,000 and $7,433,000 in cash dividends paid on common stock. As a result, the Company’s book value was $32.78 per share at March 31, 2022 as compared to $33.64 and $31.71 at December 31, 2021, and March 31, 2021, respectively. 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 $23.04 per share at March 31, 2022, as compared to $25.80 and $23.72 at December 31, 2021, and March 31, 2021, respectively.
Trailing Quarter Balance Sheet Change
|
Ending balances |
March 31, |
December 31, |
|
Acquired |
Organic |
Annualized |
||||||||||||
|
(dollars in thousands) |
2022 |
2021 |
$ Change |
|||||||||||||||
|
Total assets |
$ |
10,118,328 |
$ |
8,614,787 |
$ |
1,503,541 |
$ |
1,363,529 |
$ |
140,012 |
6.5 |
% |
||||||
|
Total loans |
|
5,851,975 |
|
4,916,624 |
|
935,351 |
|
773,390 |
|
161,961 |
13.2 |
|
||||||
|
Total loans, excluding PPP |
|
5,795,370 |
|
4,855,477 |
|
939,893 |
|
751,978 |
|
187,915 |
15.5 |
|
||||||
|
Total investments |
|
2,569,706 |
|
2,427,885 |
|
141,821 |
|
109,716 |
|
32,105 |
5.3 |
|
||||||
|
Total deposits |
$ |
8,714,477 |
$ |
7,367,159 |
$ |
1,347,318 |
$ |
1,215,479 |
$ |
131,839 |
7.2 |
% |
||||||
Organic loan growth, excluding PPP, of $187,915,000 or 15.5% on an annualized basis was realized during the quarter ended March 31, 2022, primarily within commercial real estate and commercial and industrial. In addition, investment security organic growth was $32,105,000 or 5.3% on an annualized basis as excess liquidity, driven by continued strong deposit growth, was put to use in higher yielding earning assets. Deposit balances continue to increase, with an organic change of $131,839,000 or 7.2% annualized during the period, which provides management with opportunities to deploy excess cash within the investment portfolio or other interest earnings assets. During the three months ended March 31, 2022 and excluding PPP balance changes, loan originations totaled approximately $396 million while payoffs of loans totaled $225 million which compares to origination and payoff activity during the three months ended December 31, 2021 of $412 million and $297 million, respectively. Investment securities increased to $2,569,706,000 at March 31, 2022, an organic change of $497,210,000 or 25.3% from the prior year.
Average Trailing Quarter Balance Sheet Change
|
Quarterly average balances for the period ended |
March 31, |
December 31, |
|
Annualized |
||||||||
|
(dollars in thousands) |
2022 |
2021 |
$ Change |
|||||||||
|
Total assets |
$ |
8,778,256 |
$ |
8,546,004 |
$ |
232,252 |
10.9 |
% |
||||
|
Total loans |
|
4,988,560 |
|
4,862,457 |
|
126,103 |
10.4 |
|
||||
|
Total loans, excluding PPP |
|
4,937,865 |
|
4,759,294 |
|
178,571 |
15.0 |
|
||||
|
Total investments |
|
2,457,077 |
|
2,402,582 |
|
54,495 |
9.1 |
|
||||
|
Total deposits |
$ |
7,521,930 |
$ |
7,304,659 |
$ |
217,271 |
11.9 |
% |
||||
As a result of the timing of the merger with VRB being close to quarter end, there was an immaterial impact from the acquired balances on the quarterly averages reflected above, therefore the average balance impact of the acquired balances have not been provided.
Year Over Year Balance Sheet Change
|
Ending balances |
As of March 31, |
|
Acquired |
Organic |
Organic |
|||||||||||||
|
(dollars in thousands) |
2022 |
2021 |
$ Change |
Balances |
||||||||||||||
|
Total assets |
$ |
10,118,328 |
$ |
8,031,612 |
$ |
2,086,716 |
$ |
1,363,529 |
$ |
723,187 |
9.0 |
% |
||||||
|
Total loans |
|
5,851,975 |
|
4,966,977 |
|
884,998 |
|
773,390 |
|
111,608 |
2.2 |
|
||||||
|
Total loans, excluding PPP |
|
5,795,370 |
|
4,606,133 |
|
1,189,237 |
|
751,978 |
|
437,259 |
9.5 |
|
||||||
|
Total investments |
|
2,569,706 |
|
1,962,780 |
|
606,926 |
|
109,716 |
|
497,210 |
25.3 |
|
||||||
|
Total deposits |
$ |
8,714,477 |
$ |
6,863,400 |
$ |
1,851,077 |
$ |
1,215,479 |
$ |
635,598 |
9.3 |
% |
||||||
PPP loan balances outstanding, net of related deferred fees, have declined by $304,239,000 during the twelve months ended March 31, 2022, meanwhile, non-PPP loan balances have increased as a result of organic activities by approximately $437,259,000 during the same period. This has led to a long-term beneficial and meaningful shift in the makeup of the loan portfolio, despite total loan balances increasing modestly during the 12 month period ended March 31, 2022, by $111,608,000 or 2.2%. The Company’s non-PPP loan originations have increased significantly over the past year but have also been challenged by an acceleration in payoffs. Specifically, during the twelve months ended March 31, 2022 and excluding PPP balance changes, loan originations totaled approximately $1.40 billion while payoffs of loans totaled $0.91 billion. Investment securities increased to $2,569,706,000 at March 31, 2022, an organic change of $497,210,000 or 25.3% from the prior year.
Net Interest Income and Net Interest Margin
The following is a summary of the components of net interest income for the periods indicated:
|
|
Three months ended |
|
|
||||||||||||
|
|
March 31, |
December 31, |
|
|
|||||||||||
|
(dollars in thousands) |
2022 |
2021 |
Change |
% Change |
|||||||||||
|
Interest income |
$ |
69,195 |
|
$ |
71,024 |
|
$ |
(1,829 |
) |
(2.6 |
)% |
||||
|
Interest expense |
|
(1,271 |
) |
|
(1,241 |
) |
|
(30 |
) |
2.4 |
% |
||||
|
Fully tax-equivalent adjustment (FTE) (1) |
|
283 |
|
|
274 |
|
|
9 |
|
3.3 |
% |
||||
|
Net interest income (FTE) |
$ |
68,207 |
|
$ |
70,057 |
|
$ |
(1,850 |
) |
(2.6 |
)% |
||||
|
Net interest margin (FTE) |
|
3.39 |
% |
|
3.50 |
% |
|
|
|||||||
|
|
|
|
|
|
|||||||||||
|
Acquired loans discount accretion, net: |
|
|
|
|
|||||||||||
|
Amount (included in interest income) |
$ |
1,323 |
|
$ |
1,780 |
|
$ |
(457 |
) |
(25.7 |
)% |
||||
|
Net interest margin less effect of acquired loan discount accretion(1) |
|
3.32 |
% |
|
3.41 |
% |
|
(0.09 |
)% |
|
|||||
|
PPP loans yield, net: |
|
|
|
|
|||||||||||
|
Amount (included in interest income) |
$ |
1,097 |
|
$ |
4,094 |
|
$ |
(2,997 |
) |
(73.2 |
)% |
||||
|
Net interest margin less effect of PPP loan yield (1) |
|
3.36 |
% |
|
3.34 |
% |
|
0.02 |
% |
|
|||||
|
Acquired loans discount accretion and PPP loan yield, net: |
|
|
|
|
|||||||||||
|
Amount (included in interest income) |
$ |
2,420 |
|
$ |
5,874 |
|
$ |
(3,454 |
) |
(58.8 |
)% |
||||
|
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1) |
|
3.29 |
% |
|
3.25 |
% |
|
0.04 |
% |
|
|||||
|
|
Three months ended |
|
|
||||||||||||
|
(dollars in thousands) |
2022 |
2021 |
Change |
% Change |
|||||||||||
|
Interest income |
$ |
69,195 |
|
$ |
67,916 |
|
$ |
1,279 |
|
1.9 |
% |
||||
|
Interest expense |
|
(1,271 |
) |
|
(1,476 |
) |
|
205 |
|
(13.9 |
)% |
||||
|
Fully tax-equivalent adjustment (FTE) (1) |
|
283 |
|
|
277 |
|
|
6 |
|
2.2 |
% |
||||
|
Net interest income (FTE) |
$ |
68,207 |
|
$ |
66,717 |
|
$ |
1,490 |
|
2.2 |
% |
||||
|
Net interest margin (FTE) |
|
3.39 |
% |
|
3.74 |
% |
|
|
|||||||
|
|
|
|
|
|
|||||||||||
|
Acquired loans discount accretion, net: |
|
|
|
|
|||||||||||
|
Amount (included in interest income) |
$ |
1,323 |
|
$ |
1,712 |
|
$ |
(389 |
) |
(22.7 |
)% |
||||
|
Net interest margin less effect of acquired loan discount accretion(1) |
|
3.32 |
% |
|
3.64 |
% |
|
(0.32 |
)% |
|
|||||
|
PPP loans yield, net: |
|
|
|
|
|||||||||||
|
Amount (included in interest income) |
$ |
1,097 |
|
$ |
5,863 |
|
$ |
(4,766 |
) |
(81.3 |
)% |
||||
|
Net interest margin less effect of PPP loan yield (1) |
|
3.36 |
% |
|
3.59 |
% |
|
(0.23 |
)% |
|
|||||
|
Acquired loans discount accretion and PPP loan yield, net: |
|
|
|
|
|||||||||||
|
Amount (included in interest income) |
$ |
2,420 |
|
$ |
7,575 |
|
$ |
(5,155 |
) |
(68.1 |
) % |
||||
|
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1) |
|
3.29 |
% |
|
3.48 |
% |
|
(0.19 |
)% |
|
|||||
|
(1) |
Certain information included herein is presented on a fully tax-equivalent (FTE) basis and / or to present additional financial details which may be desired by users of this financial information. The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provide additional clarity in assessing its results, and the presentation of these measures are common practice within the banking industry. See additional information related to non-GAAP measures at the back of this document. |
Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. Generally, as time goes on, the dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. As a result of the increase in interest rates, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, declined during the first quarter of 2022. During the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, purchased loan discount accretion was $1,323,000, $1,780,000, and $1,712,000, respectively.
The following table shows the components of net interest income and net interest margin on a fully tax-equivalent (FTE) basis for the quarterly periods indicated:
|
ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS |
|||||||||||||||||||||||||||
|
(unaudited, dollars in thousands) |
|||||||||||||||||||||||||||
|
|
Three months ended |
Three months ended |
Three months ended |
||||||||||||||||||||||||
|
|
March 31, 2022 |
December 31, 2021 |
March 31, 2021 |
||||||||||||||||||||||||
|
|
Average |
Income/ |
Yield/ |
Average |
Income/ |
Yield/ |
Average |
Income/ |
Yield/ |
||||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Loans, excluding PPP |
$ |
4,937,865 |
$ |
56,648 |
4.65 |
% |
$ |
4,759,294 |
$ |
56,710 |
4.73 |
% |
$ |
4,407,150 |
$ |
54,573 |
5.02 |
% |
|||||||||
|
PPP loans |
|
50,695 |
|
1,097 |
8.78 |
% |
|
103,163 |
|
4,094 |
15.74 |
% |
|
355,875 |
|
5,863 |
6.68 |
% |
|||||||||
|
Investments-taxable |
|
2,313,204 |
|
10,223 |
1.79 |
% |
|
2,261,161 |
|
9,028 |
1.58 |
% |
|
1,649,980 |
|
6,394 |
1.57 |
% |
|||||||||
|
Investments-nontaxable (1) |
|
143,873 |
|
1,225 |
3.45 |
% |
|
141,421 |
|
1,186 |
3.33 |
% |
|
125,055 |
|
1,200 |
3.89 |
% |
|||||||||
|
Total investments |
|
2,457,077 |
|
11,448 |
1.89 |
% |
|
2,402,582 |
|
10,214 |
1.69 |
% |
|
1,775,035 |
|
7,594 |
1.74 |
% |
|||||||||
|
Cash at Federal Reserve and other banks |
|
707,563 |
|
285 |
0.16 |
% |
|
682,759 |
|
280 |
0.16 |
% |
|
701,666 |
|
163 |
0.09 |
% |
|||||||||
|
Total earning assets |
|
8,153,200 |
|
69,478 |
3.46 |
% |
|
7,947,798 |
|
71,298 |
3.56 |
% |
|
7,239,726 |
|
68,193 |
3.82 |
% |
|||||||||
|
Other assets, net |
|
625,056 |
|
|
|
598,206 |
|
|
|
569,186 |
|
|
|||||||||||||||
|
Total assets |
$ |
8,778,256 |
|
|
$ |
8,546,004 |
|
|
$ |
7,808,912 |
|
|
|||||||||||||||
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Interest-bearing demand deposits |
$ |
1,597,309 |
$ |
84 |
0.02 |
% |
$ |
1,544,176 |
$ |
58 |
0.01 |
% |
$ |
1,430,943 |
$ |
76 |
0.02 |
% |
|||||||||
|
Savings deposits |
|
2,571,023 |
|
327 |
0.05 |
% |
|
2,486,532 |
|
291 |
0.05 |
% |
|
2,228,281 |
|
329 |
0.06 |
% |
|||||||||
|
Time deposits |
|
301,499 |
|
268 |
0.36 |
% |
|
315,953 |
|
349 |
0.44 |
% |
|
336,605 |
|
532 |
0.64 |
% |
|||||||||
|
Total interest-bearing deposits |
|
4,469,831 |
|
679 |
0.06 |
% |
|
4,346,661 |
|
698 |
0.06 |
% |
|
3,995,829 |
|
937 |
0.10 |
% |
|||||||||
|
Other borrowings |
|
44,731 |
|
5 |
0.05 |
% |
|
50,667 |
|
7 |
0.05 |
% |
|
32,709 |
|
4 |
0.05 |
% |
|||||||||
|
Junior subordinated debt |
|
60,971 |
|
587 |
3.90 |
% |
|
58,004 |
|
536 |
3.67 |
% |
|
57,688 |
|
535 |
3.76 |
% |
|||||||||
|
Total interest-bearing liabilities |
|
4,575,533 |
|
1,271 |
0.11 |
% |
|
4,455,332 |
|
1,241 |
0.11 |
% |
|
4,086,226 |
|
1,476 |
0.15 |
% |
|||||||||
|
Noninterest-bearing deposits |
|
3,052,099 |
|
|
|
2,957,998 |
|
|
|
2,657,925 |
|
|
|||||||||||||||
|
Other liabilities |
|
141,400 |
|
|
|
132,910 |
|
|
|
123,986 |
|
|
|||||||||||||||
|
Shareholders’ equity |
|
1,009,224 |
|
|
|
999,764 |
|
|
|
940,775 |
|
|
|||||||||||||||
|
Total liabilities and shareholders’ equity |
$ |
8,778,256 |
|
|
$ |
8,546,004 |
|
|
$ |
7,808,912 |
|
|
|||||||||||||||
|
Net interest rate spread (1) (2) |
|
|
3.35 |
% |
|
|
3.45 |
% |
|
|
3.67 |
% |
|||||||||||||||
|
Net interest income and margin (1) (3) |
|
$ |
68,207 |
3.39 |
% |
|
$ |
70,057 |
3.50 |
% |
|
$ |
66,717 |
3.74 |
% |
||||||||||||
|
(1) |
Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable. |
|
|
(2) |
Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities. |
|
|
(3) |
Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets. |
Net interest income (FTE) during the three months ended March 31, 2022 decreased $1,850,000 or 2.6% to $68,207,000 compared to $70,057,000 during the three months ended December 31, 2021. Over the same period, net interest margin declined 11 basis points to 3.39%, as compared to the trailing quarter. The decline in net interest income is attributed to a reduction of $2,997,000 in the revenues recognized from PPP loans, partially offset by increases in average volume and rates on investment securities which increased interest income by $1,234,000 over the trailing quarter.
As compared to the same quarter in the prior year, average loan yields, excluding PPP, decreased 37 basis points from 5.02% during the three months ended March 31, 2021, to 4.65% during the three months ended March 31, 2022. The accretion of discounts from acquired loans added 7 and 10 basis points to loan yields during the quarters ended March 31, 2022 and March 31, 2021, respectively. Therefore, of the 37 basis point decrease in yields on loans during the comparable three month periods ended March 31, 2022 and 2021, 34 basis points was attributable to decreases in market rates, while 3 basis points resulted from less accretion of discounts.
The rates paid on interest bearing liabilities generally remained flat during the quarter ended March 31, 2022 compared to the trailing quarter. The decline in interest expense when compared to the same quarter from the prior year, however, was primarily attributed to reductions in the rates offered on deposit products. As a result, the cost of interest-bearing deposits decreased by 4 basis points during the quarter ended March 31, 2022, to 0.06% from 0.10% during the same quarter of the prior year. In addition, the level of noninterest-bearing deposits continues to benefit the average cost of total deposits which remained flat at 0.04% in both the current and trailing quarter, compared to 0.6% in the first quarter of the prior year. Specifically, the ratio of average total noninterest-bearing deposits to total average deposits was 40.6% and 40.5% as of March 31, 2022 and December 31, 2021, respectively, as compared to 39.9% for the quarter ended March 31, 2021.
Interest Rates and Loan Portfolio Composition
During the quarter ended March 31, 2022, market interest rates, including many rates that serve as reference indices for variable rate loans, increased modestly. However, the loan portfolio yield continues to have a downward bias due to the repricing of loans at lower rates and increased market competition stemming from loan to deposit ratios being at historic lows. As of March 31, 2022, the Company’s loan portfolio consisted of approximately $5.9 billion in outstanding principal with a weighted average coupon rate of 4.24%, inclusive of the PPP program loans. Excluding PPP loans, the Company’s loan portfolio has approximately $5.8 billion outstanding with a weighted average coupon rate of 4.27% as of March 31, 2022. Included in the March 31, 2022 loan total, exclusive of PPP loans, are variable rate loans totaling $3.4 billion, of which, $800 million are considered floating based on the Wall Street Prime index.
Asset Quality and Credit Loss Provisioning
During the three months ended March 31, 2022, the Company recorded a provision for credit losses of $8,330,000, as compared to a $980,000 provision during the trailing quarter, and a reversal of provision expense of $6,060,000 during the first quarter of 2021.
The following table presents details of the provision for credit losses for the periods indicated:
|
|
Three months ended |
|||||||||
|
(dollars in thousands) |
March 31, 2022 |
December 31, 2021 |
March 31, 2021 |
|||||||
|
Addition to (reversal of) allowance for credit losses |
$ |
8,205 |
$ |
715 |
$ |
(6,240 |
) |
|||
|
Addition to reserve for unfunded loan commitments |
|
125 |
|
265 |
|
180 |
|
|||
|
Total provision for (reversal of) credit losses |
$ |
8,330 |
$ |
980 |
$ |
(6,060 |
) |
|||
The followi
Contacts
Peter G. Wiese, EVP & CFO, (530) 898-0300
