Richard P. Smith, President & CEO. Southeast Meetings with Keefe Bruyette & Woods, Inc. February 10-12, 2015

Transcription

1 Richard P. Smith, President & CEO Southeast Meetings with Keefe Bruyette & Woods, Inc. February 10-12, 2015

2 SAFE HARBOR STATEMENT Certain comments included in this presentation may involve forwardlooking statements, for which TriCo claims the protection of the "safe harbor" provisions created by Federal securities laws. Such forwardlooking 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 on Form 10-K for the fiscal year ended December 31, 2013 and TriCo's Quarterly Reports on Form 10-Q as filed with the SEC in fiscal

3 AGENDA Company Overview Recent Activities & Focus Merger announcement Key Revenue Drivers Challenges & Opportunities Financials Questions 3

4 Overview Asset Size $3.9 Billion Location Founded 1975 Asset Size Rank of Publicly Traded Banks Deposits Loans (net) Chico, CA 17 $3.4 Billion $2.2 Billion Customers 190,000 Nasdaq Market Capitalization Bank Branches 73 ATMs 65 TCBK $532,666,000 - as of market close 02/02/ Data as of 12/31/2014

5 Executive Team Rick Smith President & CEO TriCo since 1993 Tom Reddish EVP Chief Financial Officer TriCo since 1994 Dan Bailey EVP Retail Banking TriCo since 2007 Craig Carney EVP Chief Credit Officer TriCo since 1996 Carol Ward EVP Chief Operations Officer TriCo since 2012 Michael Cushman EVP Strategic Initiatives TriCo since 2014 Richard O Sullivan EVP Commercial Banking TriCo since 1984 Glenn Hunter Sr. VP Chief Human Resources Officer TriCo since

6 Recent Activities Merger Agreement to purchase North Valley Bancorp Acquired 2 banks through FDIC bidding process Granite Community Bank, Granite Bay, CA in 2011 Citizens Bank of Northern, California, Nevada City, CA in 2012 Closed 8 non-performing branches since branches closures in 2014 excluding merger with North Valley Bank Opening of New Branch in Colusa, CA Significant investments in technology Mobile and On-line Banking Cash Management Software Data Security and Disaster Recovery 6

7 Transaction Highlights Strategic Merit Low Risk Profile Financially Attractive Creates the Premier Community Bank in Northern California (1) $3.5 billion in total assets Approximately 80 branches from Bakersfield to the Oregon Border; expands the Tri Counties brand into Humboldt, Trinity, and Sonoma counties Top 3 deposit market share rank in 15 of TriCo s 26 pro forma counties of operation (2) Similar Community Banks with Strong Core Deposit Bases Significant Pro Forma Franchise Value Complementary Geographic Footprint Combination of Two Leading Banks in the Region Scarcity Value (3) Broadens and Deepens Competitive Strengths Relative to Competitors Thorough Process Strong Management Teams & Boards with Merger and Integration Experience Due Diligence Complete Compatible Organizational Structures and Familiar Operating Markets Double-digit EPS Accretion in 2015 (4) Meaningful Cost Synergies: targeting 40% of North Valley s core noninterest expense Tangible Book Value Earnback of ~4 years Exceeds Internal Rate of Return Threshold (1) Based on 6/30/2013 deposit market share data per FDIC. (2) Among community banks. (3) One of three community banks headquartered in Northern California with over $3 billion in assets. (4) Based on Consensus Street estimates TCBK for 2014 & 2015, and NOVB for 2014 (with an applied growth rate of 5% for 2015). 7

8 Merger Summary Consideration: Fixed Exchange Ratio: 100% Stock to common shareholders; option holders to be cashed out x shares of TCBK common stock for each share of NOVB common stock Transaction Value (1) : $178.4 million or $26.09 per share as of 1/17/2014 Ownership Split: 71.4% TCBK / 28.6% NOVB Board Representation: 3 NOVB directors to join TCBK s current Board of 9 (Pro forma of 12) Due Diligence: Termination Fees: Minimum Shareholders Equity: Required Approvals: Completed; including an extensive loan review $7.6 million payable to TCBK under certain scenarios; $3.8 million payable to NOVB under certain scenarios $95.1 million at close, subject to certain adjustments including the exclusion of seller transaction costs Customary regulatory approvals and shareholder approvals by both companies Targeted Closing: Mid-year 2014 (1) Based on TCBK s closing price of $27.66 as of 1/17/2014; excludes cash out of NOVB options (estimated to be $3.4mm). 8

9 Transaction Assumptions Cost Savings 40% of NOVB s 3Q 13 annualized core NIE of $36.1 million One-Time Deal Costs $19.6 million pre-tax Gross Loan Mark Loan mark: 3.50% or $17.7 million write-down Credit mark of 3.0% Interest rate mark of 0.5% Other Fair Market Value ( FMV ) Adjustments Securities mark: $4.6 million write-down Fixed asset mark: $1.7 million write-up Deposit mark: $0.3 million write-up Trust Preferred mark: $9.5 million write-down Core deposit intangible created at 1.0% of target core deposits Revenue Enhancements None assumed for modeling purposes Opportunities include loan growth, investment securities growth, SBA and mortgage 9

10 Positioned for today, prepared for the future. 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 organic growth in current environment Strong focus on risk management and new regulatory realities Experienced project teams well prepared for continued growth through acquisition 10

11 What is long term success? A winning culture with a motivated and talented work force Significant and growing market share Low cost core deposit base Diversified revenues sources Efficient operations Strong risk management practices Rewarding our shareholders 11

12 Key Drivers of Bank Revenues Deposits & Margin Non-Interest Income Consumer Loans Commercial Loans Growth Opportunities Average Cost of Deposits of.17 % as of December 31, 2014 Net Interest Margin at is 3.99% Mortgage Finance Service Charge Income Bank Wealth Management Program 39% Home Equity Lines/Loans Small Business Installment Lending Commercial Real Estate Commercial & Industry Lines and Loans & Leases Agricultural Loans Asset Based Loans Wealth Management--Bank Managed Program Raymond James as Broker-Dealer Growth opportunity with North Valley Bank 12

13 Deposit Structure Time Deposits 11% Savings 34% Non Interest Bearing 32% Interest Demand 23% 13

14 Total Ending Deposits $3,700,000 $3,380,423 $3,200,000 $2,700,000 $2,190,536 $2,289,702 $2,410,483 $2,200,000 $1,828,512 $1,852,173 $1,700,000 $1,200,

15 Market Share of all Branches sorted by zip code Rank Institution Name State (Hdqtrd) Charter Deposits ($000) Market Share 1 Wells Fargo Bank, National Association SD Federal 6,367, % 2 Bank of America, National Association NC Federal 3,823, % 3 Rabobank, National Association CA Federal 2,921, % 4 Tri Counties Bank CA State 2,377, % 12 North Valley Bank CA State 431, % 3 Tri Counties Bank CA State 2,808, % 6 Umpqua Bank OR State 1,234, % 7 U.S. Bank National Association OH Federal 1,232, % 8 Citibank, National Association SD Federal 1,223, % 9 Bank of the West CA State 1,043, % 10 Redding Bank of Commerce CA State 755, % 11 Union Bank, National Association CA Federal 567, % 13 Valley Republic Bank CA State 353, % 14 Compass Bank CA State 302, % 15 Westamerica Bank CA State 276, % Source: FDIC Summary of Deposits, June

16 Non-Interest Income Income Consistently Represents Approximately 25+% of Total Bank Revenues Residential Home Mortgage Lending Refinances increasing as rates lower Increasing numbers of purchase transactions and increasing overall activity for home loans Wealth Management Revenues New opportunities with North Valley Bank Lower revenues from service charges but increased Interchange income Cash Management fees continue to increase with merger 16

17 Consumer Loans Increased Demand for Consumer Loans Home equity values have increased Economic uncertainty improving Reluctance to borrow (job security concerns) Underperforming Job Market Auto loans demand constant Home Equity Lines/Loans increasing in demand 17

18 Home Equity Loans Outstanding ($000's) $400,000 $397,563 $376,485 $372,149 $355,582 $354,454 $383,898 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $

19 Loan Portfolio by Type as % to total loans Consumer - Auto Indirect 0.00% Consumer - Home Eq 1.37% Consumer - Other 1.45% Construction - RE 1.69% Commercial 7.66% Construction - Commercial 1.60% Secured by RE - Residential % Consumer - HELOCS 15.45% Secured by RE - Com'l 58.53% 20

20 Commercial Loans Construction - RE 1.69% Construction - Commercial 1.60% C&I 7.08% Secured by RE - Com'l 58.53% 21

21 Commercial Banking Target loans of $500,000 to $3,000,000 Borrowing relationships up to $15,000,000 Personalized banking Assigned Relationship Managers Assigned Cash Management Officers In-market lending Agricultural lending Loans <$1,000,000 served through alternate channel Business Relationship Managers Credit scoring combined with traditional underwriting 22

22 Commercial Real Estate Portfolio as of Real Estate Loan Type # of Loans Outstandings* % to Total Loans Avg. Commitment Amount Office ,931,968 12% 517,234 Retail ,389,847 12% 699,425 Other Warehouse, Mini Storage, Industrial, Special Purpose, etc ,024,305 21% 590,261 Misc. Bare Land, Residential, Apartments, Agricultural land+structures ,579,580 14% 450,115 Totals 2,557 1,335,939,000 59% - Averages ,638 * RE Loan Type segment totals do not include all purchase discount adjustments 23

23 Ag Portfolio as of Agricultural Loans now represent approximately 1.56% of total outstanding loans No crop represents more than 1.00% of Total Loans Committed The highest crop concentrations by commitments are: Multiple Crop $21.3 million 29 loans $734,000 Avg. Commitment Rice $17.8 million 63 loans $283,000 Avg. Commitment Dairy $4.7 million 12 loans $390,000 Avg. Commitment Almonds $3.3 million 9 loans $370,000 Avg. Commitment Beef $3.3 million 11 loans $301,000 Avg. Commitment 24

24 Residential Construction and A&D Outstanding Totals A&D total approximately $75,136,000 Residential construction approx. $38,618,000 Commercial construction approx. $36,518,000 Total Construction, land development and land acquisition loans represent 3.3% of total loans outstanding 25

25 Total Loans Net of unamortized deferred loan fees and discounts ($000's) $2,500,000 $2,282,524 $2,000,000 $1,500,000 $1,552,235 $1,419,571 $1,551,032 $1,564,823 $1,672,007 $1,000,000 $500,000 $

26 Growth Opportunities Mergers and Acquisitions North Valley Bancorp 2014 Citizens Bank of Northern California 2011 Granite Community Bank 2010 North State National Bank Branch purchase Wells Fargo 1997 Sutter Butte Savings 1996 Country National Bank 1993 Branch purchase from Wells Fargo 1987 Shasta County Bank

27 What keeps us up at night? 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 28

28 Challenges Within Bank Strategies Big Banks Aggressive banking in Community Bank space Bad Reputations Technology and Banking New competitors like Google and Apple Bank Operations and Efficiency Managing multiple delivery channels Enterprise Risk Management Many threats, so little time 29

29 Financials

30 $4,000,000 Total Assets ($000's) $3,912,358 $3,500,000 $3,000,000 $2,555,597 $2,609,269 $2,744,066 $2,500,000 $2,170,520 $2,189,789 $2,000,000 $1,500,

31 16.00% 14.00% 12.10% 13.40% 12.90% 14.20% Capital Ratios ($000's) 12.70% 13.90% 14.40% 13.20% 13.40% 14.70% 14.41% 15.66% 12.00% 10.00% 8.20% 8.60% 9.10% 8.00% 6.00% 4.00% 2.00% 0.00% Tier 1 - Bank Total Risk Based - Bank Tangible Common - Company 32

32 $30,000 Net Income ($000's) $27,399 $26,108 $25,000 $20,000 $18,590 $18,994 $15,000 $9,962 $10,000 $6,005 $5,000 $

33 6.00% Net Interest Margin 5.00% 4.77% 4.45% 4.43% 4.32% 4.18% 3.99% 4.00% 3.00% 2.00% 1.00% 0.00% Q4 34

34 Non Interest Income ($000's) $45,000 $42,813 $40,000 $35,000 $30,329 $32,695 $37,980 $36,829 $34,516 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $

35 75.0% Efficiency Ratio (Fully Taxable Equivalent) 70.2% 71.2% 70.0% 67.3% 65.0% 61.5% 62.5% 60.9% 60.0% 55.0% 50.0%

36 $1.80 $1.60 Diluted Earnings per Share $1.69 $1.50 $1.40 $1.20 $1.15 $1.18 $1.00 $0.80 $0.62 $0.60 $0.38 $0.40 $0.20 $

37 Dividends per Share $0.60 $0.52 $0.50 $0.40 $0.40 $0.36 $0.36 $0.42 $0.44 $0.30 $0.20 $0.10 $

38 4.00% Non-Performing Assets to Total Assets 3.92% 3.99% 3.50% 3.07% 3.00% 2.50% 2.24% 2.17% 2.00% 1.50% 1.34% 1.00% 0.50% 0.00%

39 Allowance for Loan Losses to Total Loans 3.00% 3.00% 2.96% 2.73% 2.50% 2.37% 2.29% 2.00% 1.60% 1.50% 1.00% 0.50% 0.00%

40 Annualized Net Charge-offs to Avg Loans 3.00% 2.50% 2.07% 2.00% 1.50% 1.53% 1.35% 1.00% 0.82% 0.50% 0.23% -0.13% 0.00% -0.50%

41 Return on Average Assets 1.40% 1.20% 1.04% 1.00% 0.80% 0.82% 0.75% 0.86% 0.60% 0.48% 0.40% 0.27% 0.20% 0.00%

42 Return on Average Shareholders' Equity 12.00% 11.34% 10.00% 8.93% 8.44% 8.67% 8.00% 6.00% 4.89% 4.00% 2.94% 2.00% 0.00%

43 TriCo Bancshares is committed to: Improving the financial success and well-being of our shareholders, customers, communities and employees.