Trico Bancshares : Announces Quarter 4 Earnings

PRESS RELEASE Contact: Thomas J. Reddish

PRESS RELEASE Contact: Richard P. Smith

For Immediate Release President & CEO [phone]

TRICO BANCSHARES ANNOUNCES QUARTERLY RESULTS

CHICO, Calif. - (January 28, 2016) - TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company of Tri Counties Bank, today announced earnings of $11,422,000, or $0.50 per diluted share, for the three months ended December 31, 2015. For the three months ended December 31, 2014 the Company reported earnings of $5,650,000, or $0.25 per diluted share. Diluted shares outstanding were 23,055,900 and 22,726,795 for the three months ended December 31, 2015 and 2014, respectively.

On October 3, 2014, TriCo completed its acquisition of North Valley Bancorp. North Valley Bancorp was headquartered in Redding, California, and was the parent of North Valley Bank that had approximately $935 million in assets and 22 commercial banking offices in Shasta, Humboldt, Del Norte, Mendocino, Yolo, Sonoma, Placer and Trinity Counties in Northern California. In connection with the acquisition, North Valley Bank was merged into Tri Counties Bank. Beginning on October 4, 2014, the effect of revenue and expenses from the operations of North Valley Bancorp, and 6,575,550 shares of TriCo Bancshares common shares issued in consideration of the merger are included in the results of the Company.

On October 25, 2014, North Valley Bank's electronic customer service and other data processing systems were converted into Tri Counties Bank's systems. Between January 7, 2015 and January 21, 2015, four Tri Counties Bank branches and four former North Valley Bank branches were consolidated into other Tri Counties Bank or other former North Valley Bank branches.

Included in the results of the Company for the three months ended December 31, 2015 and 2014 were $0 and

$3,590,000, respectively, of nonrecurring noninterest expenses related to the merger with North Valley Bancorp of which $0 and $438,000, respectively, were not deductible for income tax purposes. Excluding these nonrecurring merger related expenses, but including the revenue and other expenses from the operations of North Valley Bancorp from October 4, 2014 to December 31, 2015, diluted earnings per share for the three months ended December 31, 2015 and 2014 would have been $0.50 and $0.35, respectively, on earnings of $11,422,000 and $7,916,000, respectively. In addition to these nonrecurring merger related expenses, there were other expense and revenue items during the three months ended December 31, 2015 and 2014 that may be considered nonrecurring, and these items are described below in various sections of this announcement.

The following is a summary of the components of the Company's consolidated net income, average common shares, and average diluted common shares outstanding for the periods indicated:

Three months ended December 31,

(dollars and shares in thousands)	2015	2014	$ Change	% Change
Net Interest Income	$41,141	$34,970	$6,171	17.6%
Benefit from reversal of
provision for loan losses	908	1,421	(513)
Noninterest income	11,445	9,755	1,690	17.3%
Noninterest expense	(34,684)	(36,566)	1,882	(5.1%)
Provision for income taxes	(7,388)	(3,930)	(3,458)	88.0%
Net income	$11,422	$5,650	$5,772	102.2%
Average common shares	22,770	22,501	269	1.2%
Average diluted common shares	23,056	22,727	329	1.4%

The following is a summary of certain of the Company's consolidated assets and deposits as of the dates indicated:

Ending balances

As of December 31,

(dollars in thousands) 2015 2014 $ Change % Change

Total assets	$4,220,722	$3,916,458	$304,264	7.8%
Total loans	2,522,937	2,282,524	240,413	10.5%
Total investments	1,148,371	776,587	371,784	47.9%
Total deposits	$3,631,266	$3,380,423	$250,843	7.4%

Qtrly Avg balances

As of December 31,

(dollars in thousands) 2015 2014 $ Change % Change

Total assets	$4,115,369	$3,806,049	$309,320	8.1%
Total loans	2,489,406	2,253,025	236,381	10.5%
Total investments	1,112,992	781,637	331,355	42.4%
Total deposits	$3,543,423	$3,276,470	$266,953	8.1%

Included in the changes in the Company's deposits from December 31, 2014 to December 31, 2015 is the addition on September 16, 2015 of an additional $45 million certificate of deposit from the State of California, bringing the total of such certificates of deposits from the State of California to $50 million.

The following table shows the components of net interest income and net interest margin on a fully tax-equivalent (FTE) basis for the 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

December 31, 2015 September 30, 2015

December 31, 2014

Assets Earning assets

Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate Balance Expense Rate

Loans

$ 2,489,406

$ 34,838

5.60%

$ 2,427,670

$ 33,814

5.57%

$ 2,253,025

$ 30,736

5.46%

Investments - taxable 1,044,063 6,983 2.68% 1,028,931 6,923 2.69% 763,131 5,197 2.72%

Investments - nontaxable 68,929 841 4.88% 64,914 797 4.91% 18,506 219 4.73%

Cash at Federal Reserve and

other banks 174,746 143 0.33% 95,397 97 0.41% 477,958 337 0.28%

Total earning assets 3,777,144 42,805 4.53% 3,616,912 41,631 4.60% 3,512,620 36,489 4.16%

Other assets, net 338,225 336,380 293,429

Total assets

Liabilities and shareholders' equity Interest-bearing

$ 4,115,369

$ 3,953,292

$ 3,806,049

Demand deposits	$ 830,172	118	0.06%	$ 813,581	117	0.06%	$ 767,103	137	0.07%
Savings deposits	1,231,687	388	0.13%	1,178,684	368	0.12%	1,140,817	360	0.13%
Time deposits	347,742	337	0.39%	324,427	353	0.44%	360,788	455	0.50%
Other borrowings	10,189	1	0.04%	6,994	1	0.05%	10,536	2	0.08%
Trust preferred securities	56,345	505	3.59%	56,394	500	3.55%	53,750	483	3.59%
Total interest-bearing liabilities	2,476,135	1,349	0.22%	2,380,081	1,339	0.23%	2,332,994	1,437	0.25%
Noninterest-bearing deposits	1,133,822	1,073,537	1,007,762
Other liabilities	54,999	60,314	41,791
Shareholders' equity	450,413	439,360	423,502
Total liabilities and shareholders' equity	$ 4,115,369	$ 3,953,292	$ 3,806,049
Net interest rate spread		4.31%	4.37%	3.91%
Net interest income/net interest margin (FTE)		41,456	4.39%	40,292	4.46%	35,052	3.99%
FTE adjustment		(315)	(299)	(82)
Net interest income (not FTE)		$ 41,141	$ 39,993	$ 34,970

Net interest income (FTE) during the three months ended December 31, 2015 increased $6,404,000 (18.3%) from the same period in 2014 to $41,456,000. The increase in net interest income (FTE) was due primarily to a

$236,381,000 (13.5%) increase in the average balance of loans to $2,489,406,000, a $331,355,000 (42.4%) increase in the average balance of investments to $1,112,992,000, and a 14 basis point increase in the average yield on loans from 5.46% during the three months ended December 31, 2014 to 5.60% during the three months ended December 31, 2015. The $236,381,000 increase in average loan balances from the year ago quarter was due to organic loan growth during the quarter and twelve months ended December 31, 2015. The $331,355,000 increase in average investment balances from the year-ago quarter was primarily due to the use of cash at the Federal Reserve and other banks to purchase investments. Average deposit balances were $3,543,423 during the three months ended December 31, 2015, and represented a $266,953,000 (8.1%) increase in average deposit balances compared to the year-ago quarter. This increase in average deposit balances helped fund the increases in average loan and investment balances. The 14 basis point increase in average loan yields was due primarily to an increase in the accretion of loan purchase discounts into interest income and an increase in the recovery of interest income from paid off nonaccrual loans during the quarter ended December 31, 2015 compared to the year-ago quarter that were partially offset by declines in market yields on new and renewed loans compared to yields on repricing, maturing, and paid off loans. The increases in average loan and investment balances added $3,227,000 and $2,506,000, respectively, to net interest income (FTE) while the increases in average loan yields increased net interest income (FTE) by $875,000 compared to the year-ago quarter. Included in loan interest income during the three months ended December 31, 2015 was $2,267,000 of discount accretion from purchased loans compared to $1,853,000 of discount accretion from purchased loans during the three months ended December 31, 2014. The discount accretion of $2,267,000 and

$1,853,000 added 37 and 33 basis points, respectively, to the average yield on loans during the three months ended December 31, 2015 and 2014, respectively. Also included in loan interest income during the three months ended December 31, 2015 was the recovery of $728,000 of loan interest income from the payoff of a single originated loan that was in interest nonaccrual status; and while recoveries of loan interest income from paid off nonaccrual loans occur from time to time, a recovery of this magnitude is unusual. The recovery of $728,000 of loan interest income added 12 basis points to the average yield on loans during the three months ended December 31, 2015.

Loans acquired through purchase or acquisition of other banks are classified by the Company as Purchased Not Credit Impaired (PNCI), Purchased Credit Impaired - cash basis (PCI - cash basis), or Purchased Credit Impaired - other (PCI - other). Loans not acquired in an acquisition or otherwise "purchased" are classified as "originated". Often, such purchased loans are purchased at a discount to face value, and part of this discount is accreted into (added to) interest income over the remaining life of the loan. Generally, as time goes on, the effect of this discount accretion decreases as these purchased loans mature or pay off early. Further details regarding interest income from loans, including fair value discount accretion, may be found under the heading "Supplemental Loan Interest Income Data" in the Consolidated Financial Data table at the end of this press release.

The Company recorded a reversal of provision for loan losses of $908,000 during the three months ended December 31, 2015 compared to a reversal of provision for loan losses of $1,421,000 during the three months ended December 31, 2014. The $908,000 reversal of provision for loan losses during the three months ended December 31, 2015 was due to net recoveries of $401,000 and a $507,000 decrease in the required allowance for loan losses from

$36,518,000 at September 30, 2015 to $36,011,000 at December 31, 2015. The decrease in the required allowance for loan losses was due primarily to the reduced impaired loans, improvements in estimated cash flows and collateral values for the remaining and newly impaired loans, and reductions in historical loss factors that was partially offset by a $53,371,000 increase in loan balances from $2,469,566,000 at September 30, 2015 to $2,522,937,000 at December 31, 2015. During the three months ended December 31, 2015, nonperforming loans decreased

$1,779,000 (4.6%) to $37,119,000, and represented a decrease from 1.58% of loans outstanding as of September 30, 2015 to 1.47% of loans outstanding as of December 31, 2015.

The following table presents the key components of noninterest income for the periods indicated:

Three months ended December 31,

(dollars in thousands)	2015	2014	$ Change	% Change
Service charges on deposit accounts	$3,397	$3,512	($115)	(3.3%)
ATM fees and interchange	3,376	3,117	259	8.3%
Other service fees	712	608	104	17.1%
Mortgage banking service fees	581	609	(28)	(4.6%)
Change in value of mortgage servicing rights	(131)	(681)	550	(80.8%)
Total service charges and fees	7,935	7,165	770	10.7%

Gain on sale of loans	883	545	338	62.0%
Commission on NDIP	788	678	110	16.2%
Increase in cash value of life insurance	665	666	(1)	(0.2%)
Change in indemnification asset	(59)	(365)	306	(83.8%)
Gain on sale of foreclosed assets	209	300	(91)	(30.3%)
Other noninterest income	1,024	766 258		33.7%
Total other noninterest income	3,510	2,590 920		35.5%
Total noninterest income	$11,445	$9,755 $1,690		17.3%

As shown in the table above, noninterest income increased $1,690,000 (17.3%) to $11,445,000 during the three months ended December 31, 2015 compared to the three months ended December 31, 2014. The $550,000 improvement in change in value of mortgage servicing rights was primarily due to the relative change (increase or decrease) in mortgage rates during the three months ended December 31, 2015 compared to the three months ended December 31, 2014, and the impact those changes in mortgage rates had on the value of mortgage servicing rights during those periods. The $338,000 (62.0%) increase in gain on sale of loans was due to the volume of loans originated and sold, and the reduction in loans held for sale during the quarter compared to the year-ago quarter. The $306,000 improvement in change in indemnification asset was due to a decrease in the amount of assets covered