TCBK 1Q-15 EPS Tops Estimates on Stronger Spread Income, Loan Growth

TCBK First Look

“Outperform” Rated / $28.00 Price Target / HQ = Chico, CA / $539 Mil. Mkt. Cap.

TCBK-TriCo Bancshares reported 1Q-15 EPS of $0.36, topping both our estimate of $0.33 and Consensus, ex-FIG Partners, of $0.32.  Stronger spread income from good loan growth and an expanding margin drive the earnings beat.  We estimated Core Pre-Tax, Pre-Provision EPS of $0.65 and Core Pre-Pre ROAA of 1.53%, compared to $0.53 and 1.26% the previous quarter.  Tangible book value increased 2% sequentially to $15.59 and TCE-Tangible Common Equity ended the quarter at 9.27% of tangible assets.

NII-Net Interest Income increased 4% to $36.3 Million and NIM-Net Interest Margin expanded 11bps to 4.10%.  Gross loans grew by 2%, or $40 Mil, to $2.3 Billion on increases in mortgage and construction loans.  Average loans ended the quarter at $2.28 Bil, or 64% of average earning assets, unchanged from the previous quarter.  Loan yields were unchanged at 5.46% and earning asset yields expanded 9bps to 4.25%.  Average balances of cash declined to 10% of earning assets from 14% the previous quarter.

Total deposits declined 1% to $3.35 Bil with non-interest bearing deposits declining 4.6% to 31% of total deposits.  The company’s cost of interest-bearing liabilities expanded 4bps to 0.16%.

TCBK booked a provision expense of $197,000 on the loan growth.  NPA-Non-Performing Assets, excluding restructured credits that were not provided, increased 6% to $55 Mil, or 2.36% of Loans+OREO.  NCO-Net Charge-Offs were $727,000, or 0.13% of average loans.  Reserves ended the quarter at $36 Mil, or 1.55% of loans and 73% of adjusted NPAs.

Core non-interest income declined 1% to $9.8 Mil, or 1.01% of average assets, which was below the trailing four quarter average of 1.08%.  The company also booked gains on the sale of mortgage loans of $622,000 and on sale of OREO of $311,000.  Core non-interest expenses increased 4% to $31.2 Mil, or 3.21% of average assets, which was well-below the trailing average of 3.48%.  TCBK also booked $586,000 in merger-related expenses from the acquisition of North Valley Bank last year.  The company’s efficiency ratio ended the quarter at 67.5% from 72.8% the previous quarter.

We will have a full report and updated EPS model following our conversation with management.  We currently rate the stock “Outperform.”