Sandler O’Neill 2016 West Coast Financial Services Conference€¦ · 01/06/2016 · TriCo...
Transcript of Sandler O’Neill 2016 West Coast Financial Services Conference€¦ · 01/06/2016 · TriCo...
TriCo Bancshares Investor Presentation Sandler O’Neill 2016 West Coast Financial Services Conference
Richard P. Smith, President & CEO
March 8, 2016
SAFE HARBOR STATEMENTCertain comments included in this presentation may involve forward-looking statements, for which TriCo claims the protection of the “safe harbor” provisions credited by Federal securities laws. Such forward-looking statements are subject to risks and uncertainties which may cause TriCo’s actual results to differ materially from those contemplated by such statements. Additional information concerning certain of these risks and uncertainties are described in TriCo’s Annual Report of Form 10-K for the fiscal year ended December 31, 2014 and TriCo’sQuarterly Reports on Form 10-Q as filed with the SEC in fiscal 2015.
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AGENDA• Company Overview• Recent Activities & Focus
– Merger Announcement
• Key Revenue Drivers• Challenges & Opportunities• Financials• Questions
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OVERVIEWAsset Size: $4.2 BillionLocation: Chico, CAFounded: 1975Deposits: $3.6 BillionLoans (net): $2.5 BillionCustomers: 190,000Bank Branches: 68ATMs: 80
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OVERVIEWNasdaq: TCBKStock Price: $25.77Market Capitalization: $586 million*Price to TBVPS: 1.67x**Asset Size Rank ofCA Publicly Traded Banks: 13
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*Valuation Information as of Market Close 02/01/2016**Ranking as of 06/30/2015 – Source: SNL Financial
Stock Price over the past 5 years
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EXECUTIVE TEAM
Rick SmithPresident & CEOTriCo since 1993
Tom ReddishEVP Chief Financial Officer
TriCo since 1994
Dan Bailey EVP Retail BankingTriCo since 2007
Craig CarneyEVP Chief Credit Officer
TriCo since 1996
Carol WardEVP Chief Operating Officer
TriCo since 2012
Richard O’SullivanEVP Commercial Banking
TriCo since 1984
RECENT ACTIVITIES• Purchase of 3 branches from Bank of America
– Completion in March, 2016• Completion of merger of North Valley 2015• Closed 13 branches in 2015 as result of merger and
customer migration to technology tools• Opening new branch in Roseville, Ca.• Several new technology projects for 2016:
– New Mobile Banking program– New Business On-Line Banking– Loan and Operational Imaging projects– Several vendor changes for electronic banking
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POSITIONED FOR TODAY, PREPARED FOR THE FUTURE
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• Strong and growing bank capital• Competitive product set to compete with banks both
large and small• Superior reputation versus large bank competitors• Continue to see strong organic growth in current
environment– Double digit loan growth– Strong deposit growth
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• Strong focus on risk management and new regulatory realities
• Experienced project teams, well prepared for continued growth through acquisition
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POSITIONED FOR TODAY, PREPARED FOR THE FUTURE continued
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WHAT IS LONG TERM SUCCESS?• Rewarding our shareholders
– A winning culture with a motivated and talented work force
– Significant and growing market share– Low cost core deposit base– Strong credit culture– Diversified revenue sources– Efficient operations– Strong risk management practices
KEY DRIVERS OF BANK REVENUES• Deposits & Margin
– Average Cost of Deposits of .10% as of 12/31/2015– Net Interest Margin at 12/31/2015 is 4.39%
• Non-Interest Income– Mortgage Finance– Service Charge & Fee Income– Bank Wealth Management Program
• Consumer Loans– Home Equity Lines/Loans– Installment Lending– Small Business
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KEY DRIVERS OF BANK REVENUES continued
• Commercial Loans– Commercial Real Estate– Commercial & Industry Lines and Loans & Leases– Agricultural Loans– Asset Based Loans
• Growth Opportunities–Wealth Management – Bank Managed Program– Raymond James as Broker-Dealer– Merchant Fee Opportunities– Growth Opportunity with North Valley Bank
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Non Interest Bearing
32%
Interest Demand24%
Savings35%
Time Deposits9%
Wtd. Avg. Rate – 0.13%
Wtd. Avg. Rate –0.06%
Wtd. Avg. Rate –0.39%
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DEPOSIT STRUCTURE
Data as of 12.31.2015
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TOTAL ENDING DEPOSITS
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
2011 2012 2013 2014 2015
$2,190,536$2,289,702
$2,410,483
$3,380,423
$3,631,266
Data as of 12.31.2015
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MARKET SHARE OF ALL BRANCHESSORTED BY ZIP CODE
Rank Institution Name State(Hdqtrd)
Charter Deposit($000)
Market Share
1 Wells Fargo Bank, National Association
SD Federal 8,418,824 24.27%
2 Bank of America, National Association
NC Federal 4,528,537 13.05%
3 Rabobank, National Association CA Federal 4,076,603 11.75%
4 Tri Counties Bank CA State 3,271,795 9.43%
5 JP Morgan Chase Bank, National Association
OH Federal 2,280,105 6.86%
6 Umpqua Bank OR State 1,609,334 4.64%
7 U.S. Bank National Association OH Federal 1,570,801 4.53%
8 Bank of the West CA State 1,091,336 3.15%
Source: FDIC Summary of Deposits, June 2015 Total Deposits 06/30/2015: $3,895,680
NON-INTEREST INCOME
• Consistently Represents Approximately 25+% of Total Bank Revenues
• Residential Home Mortgage Lending– Refinances remain consistent
– Increasing numbers of purchase transactions and increasing overall activity for home loans
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NON-INTEREST INCOME continued
• Wealth Management revenues
• Lower revenues from service charges but increased interchange income
• Cash Management fees continue to increase following merger integration
• Merchant Card Services – $1.2 million in 2015
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CONSUMER LOANS• Increased demand for consumer loans
– Home equity values have increased– Economic uncertainty still negative factor– Reluctance to borrow (job security concerns)– Underperforming job market
• Low rate environment led to historically high refi activity– $36MM in Q4 2015 HELOC volume resulted in $7MM reduction in
outstandings
• Auto loans demand constant• Home equity lines/loans increasing in demand
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HOME EQUITY LOANS OUTSTANDING
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
2011 2012 2013 2014 2015
$372,149 $355,582 $354,454 $383,898
$362,854
Data as of 12.31.2015
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HOME EQUITY LINES OF CREDIT<80% LTV AT ORIGINATION
03/31/08 12/31/11 12/31/15 Q4 2015 Prod.
Avg CB Score 757 754 774 774
Avg Loan Commitment to Value at Origination
62% 61% 57% 59%
Avg LTV to Current Value N/A 92% 55% N/A
Utilization Rate 49% 48% 45% 46%
Data as of 12.31.2015
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LOAN PORTFOLIO BY TYPE
Secured by RE -Residential 1-4
12.46%
Secured by RE -Com'l
59.36%
Consumer -HELOCS12.78%
Consumer - Home Eq
1.40%
Consumer - Other1.29%
Commercial7.73%
Construction - RE1.83%
Construction -Commercial
2.96%
Data as of 06.30.2015
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COMMERCIAL LOANS
Total Commercial72%
Total Consumer28%
Data as of 12.31.2015
COMMERCIAL BANKING
• Target loans of $2,000,000 to $10,000,000• Personalized banking
• Assigned Relationship Managers• Assigned Cash Management Officers
• In-market lending• Competition is as fierce
and diverse as it has ever been• $150 million in CRE & C&I production resulted in $38 million
in net growth – Q4
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COMMERCIAL BANKING continued
• Agricultural lending• Improving drought conditions• Ag prices declining may well be a positive
• Loans <$1,000,000 served through alternate channel• Business Relationship Managers• Credit scoring combined with traditional underwriting
• SBA 7A program now offered
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COMMERCIAL REAL ESTATE PORTFOLIO AS OF 09.30.2015
Real Estate Loan Type # of Loans
Outstandings* % to Total Loans
Avg. Commitment Amount
Office 575 313,293,000 12% 559,000
Retail 419 281,392,000 11% 705,000
Multi-Family 307 199,512,000 8% 695,000
Special PurposeGas Station, Mini Storage, Hotel/Motel, Restaurant
162 143,651,000 6% 887,000
OtherWarehouse, Manufacturing, Bare Land, Agricultural Land + Structures
1,193 521,040,000 21% 446,000
Totals 2,656 1,458,888,000 58% -
Averages - - - 577,000
* RE Loan Type segment totals do not include all purchase discount adjustments
AG PORTFOLIO AS OF 09.30.2015
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• Agricultural Loans (excluding RE secured) total $69 million in total commitments with $39 million outstanding
• The highest crop concentrations by commitments are:
Rice $27.0 million 66 loans $410,000 Avg. Commitment
Multiple Crop $20.2 million 21 loans $962,000 Avg. Commitment
Almonds $5.1 million 10 loans $505,000 Avg. Commitment
Walnuts $3.1 million 3 loans $1,026,000 Avg. Commitment
Beef $1.9 million 11 loans $173,000 Avg. Commitment
Dairy $970 thousand 6 loans $162,000 Avg. Commitment
• Construction lending totals approx. $120,909,000 outstanding with $187,894,000 in commitments
• Residential construction approx. $46,135,000• Commercial construction approx. $74,774,000• Total construction, land development and land
acquisition loans represent 4.8% of total loans outstanding
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CONSTRUCTION AND A&D
Data as of 12.31.2015
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TOTAL LOANSNET OF UNAMORTIZED DEFERRED LOAN FEES AND DISCOUNTS ($000’S)
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2011 2012 2013 2014 2015
$1,551,032 $1,564,823 $1,672,007
$2,282,524 $2,522,937
Data as of 12.31.2015
• Mergers and Acquisitions– North Valley Bancorp 2014– Citizens Bank of Northern California 2011– Granite Community Bank 2010– North State National Bank 2003– 9 Branch purchase Wells Fargo 1997– Sutter Butte Savings 1996– Country National Bank 1993– Branch purchase from Wells Fargo 1987– Shasta County Bank 1981
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GROWTH OPPORTUNITIES
• Near Zero Interest Rate Environment• Aggressive Competitors• Bank Regulation• The Cost of Compliance with New Regulations• Interest Rate Risk• Economic Malaise• Slow Industry Consolidation• Dysfunction in Washington
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WHAT KEEPS US UP AT NIGHT?
• Big Banks– Aggressive banking in community bank space– Bad reputations– Large banks cost saving a new opportunity in rural markets
• Technology and Banking– New technology is expensive– New technology will streamline banking ultimately lowering costs
• Bank Operations and Efficiency– Managing multiple delivery channels
• Enterprise Risk Management– Many threats, so little time
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CHALLENGES WITHIN BANK STRATEGIES
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FINANCIALS
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TOTAL ASSETS ($000’S)
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
2011 2012 2013 2014 2015
$2,555,597 $2,609,269 $2,744,066
$3,912,358
$4,220,722
Data as of 12.31.2015
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CAPITAL RATIOS ($000’S)
Data as of 12.31.2015
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
2011 2012 2013 2014 2015
12.20%12.70%
13.30% 13.50%14.40%
13.80%13.90%14.50% 14.80%
15.60%15.10%
7.90% 8.20% 8.60% 9.10% 9.20%
Common Equity Tier 1 Tier 1 Total Risk Based Tangible Common
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NET INCOME ($000’S)
Data as of 12.31.2015
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
2011 2012 2013 2014 2015
$2,800 $3,931 $8,477 $7,365 $8,336 $2,771
$5,321
$6,325 $4,859
$11,366
$6,470 $5,020
$7,361 $8,234
$12,694
$6,549 $4,722
$5,236 $5,650
$11,422
Q1 Q2 Q3 Q4
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NET INTEREST MARGIN
Data as of 12.31.2015
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
2011 2012 2013 2014 2015
0.34% 0.20% 0.15% 0.12% 0.10%
4.43%4.32% 4.18% 4.17% 4.39%
Wtd. Avg. Deposit Rate Net Interest Margin
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NON INTEREST INCOME ($000’S)
Data as of 12.31.2015
$-
$10,000
$20,000
$30,000
$40,000
$50,000
2011 2012 2013 2014 2015
$9,350 $8,265 $7,352 $8,295 $10,180
$8,251 $10,577 $9,127 $7,877
$12,080
$7,198 $9,127
$10,131 $8,589
$11,642 $10,489
$10,011 $10,219
$9,755
$11,445
Q1 Q2 Q3 Q4
*2011 has been adjusted to remove Bargain Purchase Gains
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EFFICIENCY RATIO (FULLY TAXABLE EQUIVALENT)
Data as of 12.31.2015
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
2011 2012 2013 2014 2015
60.9%
70.2%
67.3%
72.9%
64.7%
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DILUTED EARNINGS PER SHARE
Data as of 12.31.2015
$-
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
2011 2012 2013 2014 2015
$0.17 $0.25 $0.53 $0.45 $0.36
$0.17
$0.33
$0.39 $0.30 $0.49
$0.40
$0.31
$0.45 $0.50
$0.55
$0.41 $0.29
$0.32
$0.25
$0.50
Q1 Q2 Q3 Q4
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DIVIDENDS PER SHARE
Data as of 12.31.2015
0
0.1
0.2
0.3
0.4
0.5
0.6
2011 2012 2013 2014 2015
0.09 0.09 0.09 0.11 0.11
0.09 0.09 0.110.11 0.13
0.09 0.090.11
0.110.130.09 0.09
0.110.11
0.15
Q1 Q2 Q3 Q4
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NON-PERFORMING ASSETS TO TOTAL ASSETS
Data as of 12.31.2015
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
2011 2012 2013 2014 2015
3.99%
3.07%
2.17%
1.34%1.01%
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ALLOWANCE FOR LOAN LOSSES TO TOTAL LOANS
Data as of 12.31.2015
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2011 2012 2013 2014 2015
2.96%2.73%
2.29%
1.60%1.43%
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ORIGINATED ALLL TO TOTAL ORIGINATED LOANS
Data as of 12.31.2015
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2011 2012 2013 2014 2015
3.10%
2.54%
2.11%1.85%
1.57%
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ANNUALIZED NET CHARGE-OFFS TO AVERAGE LOANS
Data as of 12.31.2015
-0.20%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
2011 2012 2013 2014 2015
1.35%
0.82%
0.23%
-0.13% -0.14%
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Data as of 12.31.2015
RETURN ON AVERAGE ASSETS
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
2011 2012 2013 2014 2015
0.82%0.75%
1.04%
0.87%
1.11%
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Data as of 06.30.2015
RETURN ON AVERAGE SHAREHOLDER’S EQUITY
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2010 2011 2012 2013 2014 Q2 2015
2.94%
8.93% 8.44%
11.34%
8.67%
10.56%
TRICO BANCSHARES IS COMMITTED TO:
Improving the financial success and well-being of our shareholders, customers,
communities and employees.