richard p. smith, president & ceo...2017/03/03 · • raymond james as broker -dealer –...
TRANSCRIPT
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2017 Annual West Coast Bank CEO Forum
Richard P. Smith, President & CEO
FIG Partners
February 1-2, 2017
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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, 2015 and TriCo’s Quarterly Reports on Form 10-Q as filed with the SEC in fiscal 2016.
2017 West Coast Bank CEO Forum
2 | February 2017
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AGENDA• Company Overview• Recent Activities & Focus• Key Revenue Drivers• Challenges & Opportunities• Financials• Questions
2017 West Coast Bank CEO Forum
3 | February 2017
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OVERVIEWAsset Size: $4.5 BillionLocation: Chico, CAFounded: 1975Deposits: $3.9 BillionLoans (net): $2.7 BillionCustomers: 190,000Bank Branches: 68ATMs: 80
2017 West Coast Bank CEO Forum
4 | February 2017
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OVERVIEWNasdaq: TCBK
*Stock Price: $35.29
Market Capitalization: $808 million
*Price to Book stated: 1.6x*Price to TBVPS 1.9x
**Asset Size Rank ofCA Publicly Traded Banks: 14
2017 West Coast Bank CEO Forum
5 | February 2017
*Valuation Information as of Market Close 01/17/2017**Ranking as of 01/25/2015 – Source: SNL Financial
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2017 West Coast Bank CEO Forum
6 | February 2017
EXECUTIVE TEAM
Rick SmithPresident & CEOTriCo since 1993
John FleshoodEVP Chief Operating Officer
TriCo since 2016
Dan Bailey EVP Retail BankingTriCo since 2007
Craig CarneyEVP Chief Credit Officer
TriCo since 1996
Tom ReddishEVP Chief Financial Officer
TriCo since 1994
Richard O’SullivanEVP Commercial Banking
TriCo since 1984
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2016 ACCOMPLISHMENTS
• Purchase of 3 branches from Bank of America – Completed in March 2016
• Several new technology projects for 2016:– New Mobile Banking program– New Business On-Line Banking– Loan and Operational Imaging projects– Core Conversion
• Continued deposit market share expansion
2017 West Coast Bank CEO Forum
7 | February 2017
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POSITIONED FOR TODAY, PREPARED FOR THE FUTURE
2017 West Coast Bank CEO Forum
• 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– Loan growth of 9.4%– Deposit growth of 7.8% (includes BofA branch purchase)
8 | February 2017
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• Strong focus on risk management and new regulatory realities– Enterprise Risk– Strong Focus on CRA– HMDA Reporting– Fair Lending
• Experienced project teams, well prepared for continued growth through acquisition
2017 West Coast Bank CEO Forum
9 | February 2017
POSITIONED FOR TODAY, PREPARED FOR THE FUTURE continued
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2017 West Coast Bank CEO Forum
10 | February 2017
WHAT IS LONG TERM SUCCESS?• Rewarding our shareholders
– A winning culture with a motivated and talented work force (good people)
– Significant and growing market share– Low cost core deposit base– Strong credit culture– Diversified revenue sources– Efficient operations– Strong risk management practices
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KEY DRIVERS OF BANK REVENUES• Deposits & Margin
– Average Cost of Deposits of .09% as of 12/31/2016– Net Interest Margin in 2016 was 4.23%
• Commercial Loans– Commercial Real Estate
• Diverse portfolio of property types and geographies– Commercial & Industry Lines and Loans & Leases– Agricultural Loans/Ag Related Businesses– Asset-Based Loans
• Non-Interest Income– Service Charge & Fee Income– Mortgage Finance– Bank Wealth Management Program – AUM $577 million
2017 West Coast Bank CEO Forum
11 | February 2017
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KEY DRIVERS OF BANK REVENUES continued
• Consumer Loans– Home Equity Lines/Loans
• Rising rates a positive for growth
– Small Business• Growth Opportunities
– Wealth Management – Bank Managed Program• Raymond James as Broker-Dealer
– Mortgage Banking– Merchant Fee Opportunities– Higher stock valuations a plus for M&A activity
2017 West Coast Bank CEO Forum
12 | February 2017
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Non Interest Bearing
33%
Interest Demand23%
Savings36%
Time Deposits8%
Wtd. Avg. Rate – 0.13%
Wtd. Avg. Rate – 0.05%
Wtd. Avg. Rate – 0.40%
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13 | February 2017
DEPOSIT STRUCTURE
Data as of 12.31.2016
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2017 West Coast Bank CEO Forum
14 | February 2017
TOTAL ENDING DEPOSITS
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
2012 2013 2014 2015 2016
$2,289,702$2,410,483
$3,380,423
$3,631,266
$3,895,560
Data as of 12.31.2016
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2017 West Coast Bank CEO Forum
15 | February 2017
MARKET SHARE OF ALL BRANCHESRank Institution Name State
(Hdqtrd)Charter Deposit
($000)Market Share
1 Wells Fargo Bank, National Association
SD Federal 8,700,167 24.56%
2 Bank of America, National Association
NC Federal 4,135,930 11.68%
3 Rabobank, National Association CA Federal 3,785,681 10.69%
4 Tri Counties Bank CA State 3,376,219 9.53%
5 JP Morgan Chase Bank, National Association
OH Federal 2,487,052 7.02%
6 U.S. Bank National Association OH Federal 1,610,128 4.55%
7 Umpqua Bank OR State 1,476,048 4.17%
8 Bank of the West CA State 1,100,271 3.11%
Source: FDIC Summary of Deposits, June 2016
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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
– Higher rates will slow refinance market in 2017
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16 | February 2017
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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 – $1.1 million in 2016
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17 | February 2017
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CONSUMER LOANS
• Increased demand for consumer loans– Home equity values have increased– Borrowers in 2016 used refinance of 1st mortgage to pay down debt
• Low rate environment led to historically high refi activity– $33MM in Q4 2016 HELOC volume resulted in $14MM reduction in
outstandings– Home equity lines/loans increasing in demand but cannot outpace
1st lien refi volume
• Auto loan demand constant
2017 West Coast Bank CEO Forum
18 | February 2017
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2017 West Coast Bank CEO Forum
19 | February 2017
HOME EQUITY LOANS OUTSTANDING
$300,000
$310,000
$320,000
$330,000
$340,000
$350,000
$360,000
$370,000
$380,000
$390,000
$400,000
2012 2013 2014 2015 2016
$355,582 $354,454
$383,898
$362,854
$331,537
Data as of 12.31.2016
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2017 West Coast Bank CEO Forum
20 | February 2017
LOAN PORTFOLIO BY TYPE
Secured by RE -Residential 1-4
11%
Secured by RE - Com'l63%
Consumer - HELOCS11%
Consumer - Home Eq2%
Consumer - Other1%
Commercial8%
Construction - RE2% Construction - Commercial
2%
Data as of 12.31.2016
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2017 West Coast Bank CEO Forum
21 | February 2017
COMMERCIAL LOANS
Total Commercial76%
Total Consumer24%
Data as of 12.31.2016
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COMMERCIAL BANKING
• Target loans of $2,000,000 to $15,000,000• Personalized banking
• Assigned Relationship Managers• Assigned Cash Management Officers
• In-market lending• Competition is as fierce
and diverse as it has ever been• $177 million in CRE & C&I production in Q4 resulted in $62 million
in net growth, excluding loan purchases
2017 West Coast Bank CEO Forum
22 | February 2017
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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
2017 West Coast Bank CEO Forum
23 | February 2017
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2017 West Coast Bank CEO Forum
24 | February 2017
COMMERCIAL REAL ESTATE PORTFOLIO AS OF 12.31.2016
Real Estate Loan Type # of Loans
Outstandings* % to Total Loans
Avg. Commitment Amount
Office 584 356,778,000 13% 623,000
Retail 422 316,792,000 11% 789,000
Multi-Family 360 291,643,000 11% 840,000
Special PurposeGas Station, Mini Storage, Hotel/Motel, Restaurant
220 233,001,000 8% 1,110,000
OtherWarehouse, Manufacturing, Bare Land, Agricultural Land + Structures
1,205 553,000,000 20% 500,000
Totals 2,791 1,750,999,000 63% -
Averages - - - 661,000
* RE Loan Type segment totals do not include all purchase discount adjustments
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AG PORTFOLIO AS OF 12.31.2016
2017 West Coast Bank CEO Forum
25 | February 2017
• Agricultural Loans (excluding RE secured) total $65 million in total commitments with $40 million outstanding
• The highest crop concentrations by commitments are:
Rice $19.7 million 62 loans $318,000 Avg. Commitment
Multiple Crop $18.8million 19 loans $989,000 Avg. Commitment
Almonds $5.1 million 10 loans $511,000 Avg. Commitment
Dairy $1.2 million 6 loans $204,000 Avg. Commitment
Beef $1.2 million 11 loans $108,000 Avg. Commitment
Walnuts $1.2 million 4 loans $289,000 Avg. Commitment
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• Construction lending totals approx. $122,419,000 outstanding with $221,301,000 in commitments
• Residential construction approx. $55,429,000• Commercial construction approx. $66,990,000• Total construction, land development and land
acquisition loans represent 4.4% of total loans outstanding
2017 West Coast Bank CEO Forum
26 | February 2017
CONSTRUCTION AND A&D
Data as of 12.31.2016
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27 | February 2017
TOTAL LOANSNET OF UNAMORTIZED DEFERRED LOAN FEES AND DISCOUNTS ($000’S)
$1,500,000
$1,700,000
$1,900,000
$2,100,000
$2,300,000
$2,500,000
$2,700,000
$2,900,000
2012 2013 2014 2015 2016
$1,564,823 $1,672,007
$2,282,524
$2,522,937
$2,759,593
Data as of 12.31.2016
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• Mergers and Acquisitions– 3 Branch purchase from Bank of America 2016– 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
2017 West Coast Bank CEO Forum
28 | February 2017
GROWTH OPPORTUNITIES
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• Rising Rate Pricing Adjustments• Interest Rate Risk• Aggressive Competitors• Compliance Regulations• The Cost of Compliance with New Regulations
2017 West Coast Bank CEO Forum
29 | February 2017
WHAT KEEPS US UP AT NIGHT?
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• 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
2017 West Coast Bank CEO Forum
30 | February 2017
CHALLENGES WITHIN BANK STRATEGIES
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31 | February 2017
FINANCIALS
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32 | February 2017
TOTAL ASSETS ($000’S)
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
2012 2013 2014 2015 2016
$2,609,269 $2,744,066
$3,912,358
$4,220,722
$4,517,968
Data as of 12.31.2016
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2017 West Coast Bank CEO Forum
33 | February 2017
CAPITAL RATIOS ($000’S)
Data as of 12.31.2016
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
2012 2013 2014 2015 2016
12.2% 12.0%13.3% 13.5%
14.4% 13.8% 13.6%14.5% 14.8%
15.6% 15.1%14.6%
8.2% 8.6%9.1% 9.2% 9.1%
Common Equity Tier 1 Tier 1 Total Risk Based Tangible Common
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2017 West Coast Bank CEO Forum
34 | February 2017
NET INCOME ($000’S)
Data as of 12.31.2016
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
2012 2013 2014 2015 2016
$3,931 $8,477 $7,365 $8,336 $10,674
$5,321
$6,325 $4,859
$11,366 $9,405
$5,020
$7,361 $8,234
$12,694 $12,199
$4,722
$5,236 $5,650
$11,422 $12,533
Q1 Q2 Q3 Q4
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2017 West Coast Bank CEO Forum
35 | February 2017
NET INTEREST MARGIN
Data as of 12.31.2016
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
2012 2013 2014 2015 20160.20% 0.15% 0.12% 0.10% 0.09%
4.32% 4.18% 4.17% 4.39% 4.23%
Wtd. Avg. Deposit Rate Net Interest Margin
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2017 West Coast Bank CEO Forum
36 | February 2017
NON-INTEREST INCOME ($000’S)
Data as of 12.31.2016
$-
$10,000
$20,000
$30,000
$40,000
$50,000
2012 2013 2014 2015 2016
$8,265 $7,352 $8,295 $10,180 $9,790
$10,577 $9,127 $7,877
$12,080 $11,245
$9,127 $10,131 $8,589
$11,642 $11,066
$10,011 $10,219
$9,755
$11,445 $12,462
Q1 Q2 Q3 Q4
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2017 West Coast Bank CEO Forum
37 | February 2017
EFFICIENCY RATIO (FULLY TAXABLE EQUIVALENT)
Data as of 12.31.2016
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
2012 2013 2014 2015 2016
70.2%
67.3%
72.9%
64.7%
67.9%
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38 | February 2017
DILUTED EARNINGS PER SHARE
Data as of 12.31.2016
$-
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
2012 2013 2014 2015 2016
$0.25 $0.53 $0.45 $0.36 $0.46
$0.33
$0.39 $0.30 $0.49 $0.41
$0.31
$0.45 $0.50
$0.55 $0.53 $0.29
$0.32
$0.25
$0.50 $0.54
Q1 Q2 Q3 Q4
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2017 West Coast Bank CEO Forum
39 | February 2017
DIVIDENDS PER SHARE
Data as of 12.31.2016
0
0.1
0.2
0.3
0.4
0.5
0.6
2012 2013 2014 2015 2016
0.09 0.09 0.11 0.110.15
0.09 0.110.11 0.13
0.150.090.11
0.110.13
0.15
0.09
0.110.11
0.15
0.15
Q1 Q2 Q3 Q4
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2017 West Coast Bank CEO Forum
40 | February 2017
NON-PERFORMING ASSETS TO TOTAL ASSETS
Data as of 12.31.2016
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2012 2013 2014 2015 2016
3.07%
2.17%
1.34%1.01%
0.53%
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2017 West Coast Bank CEO Forum
41 | February 2017
ALLOWANCE FOR LOAN LOSSES TO TOTAL LOANS
Data as of 12.31.2016
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2012 2013 2014 2015 2016
2.73%
2.29%
1.60%1.43%
1.18%
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2017 West Coast Bank CEO Forum
42 | February 2017
ORIGINATED ALLL TO TOTAL ORIGINATED LOANS
Data as of 12.31.2016
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2012 2013 2014 2015 2016
2.54%
2.11%1.85%
1.57%
1.19%
![Page 43: Richard P. Smith, President & CEO...2017/03/03 · • Raymond James as Broker -Dealer – Mortgage Banking – Merchant Fee Opportunities – Higher stock valuations a plus for M&A](https://reader033.vdocuments.net/reader033/viewer/2022051923/6010a7601d2a775acb38eb32/html5/thumbnails/43.jpg)
2017 West Coast Bank CEO Forum
43 | February 2017
ANNUALIZED NET CHARGE-OFFS TO AVERAGE LOANS
Data as of 12.31.2016
-0.20%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
2012 2013 2014 2015 2016
0.82%
0.23%
-0.13% -0.14% -0.19%
![Page 44: Richard P. Smith, President & CEO...2017/03/03 · • Raymond James as Broker -Dealer – Mortgage Banking – Merchant Fee Opportunities – Higher stock valuations a plus for M&A](https://reader033.vdocuments.net/reader033/viewer/2022051923/6010a7601d2a775acb38eb32/html5/thumbnails/44.jpg)
2017 West Coast Bank CEO Forum
44 | February 2017
Data as of 12.31.2016
RETURN ON AVERAGE ASSETS
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
2012 2013 2014 2015 2016
0.75%
1.04%
0.87%
1.11%1.03%
![Page 45: Richard P. Smith, President & CEO...2017/03/03 · • Raymond James as Broker -Dealer – Mortgage Banking – Merchant Fee Opportunities – Higher stock valuations a plus for M&A](https://reader033.vdocuments.net/reader033/viewer/2022051923/6010a7601d2a775acb38eb32/html5/thumbnails/45.jpg)
2017 West Coast Bank CEO Forum
45 | February 2017
Data as of 12.31.2016
RETURN ON AVERAGE SHAREHOLDER’S EQUITY
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2012 2013 2014 2015 2016
8.44%
11.34%
8.67%10.04%
9.47%
![Page 46: Richard P. Smith, President & CEO...2017/03/03 · • Raymond James as Broker -Dealer – Mortgage Banking – Merchant Fee Opportunities – Higher stock valuations a plus for M&A](https://reader033.vdocuments.net/reader033/viewer/2022051923/6010a7601d2a775acb38eb32/html5/thumbnails/46.jpg)
TRICO BANCSHARES IS COMMITTED TO:
Improving the financial success and well-being of our shareholders, customers,
communities and employees.