TriCo Bancshares (TCBK) Bundle
Understanding TriCo Bancshares (TCBK) Revenue Streams
Understanding TriCo Bancshares’ Revenue Streams
TriCo Bancshares generates revenue primarily through net interest income and noninterest income. For the third quarter of 2024, net interest income (FTE) was $82.88 million, while noninterest income reached $16.50 million .
Breakdown of Primary Revenue Sources
The main components of revenue for TriCo Bancshares include:
- Net Interest Income: This is derived from the interest earned on loans and investments, minus the interest paid on deposits and borrowings. For Q3 2024, net interest income was $82.88 million, reflecting a 0.7% increase from the previous quarter .
- Noninterest Income: This includes fees from various banking services and other income sources. For Q3 2024, noninterest income totaled $16.50 million, which is a 4.0% increase from the previous quarter .
Year-over-Year Revenue Growth Rate
Comparing the third quarter of 2024 to the same period in 2023, the revenue growth is as follows:
- Net Interest Income: Decreased from $88.53 million in Q3 2023 to $82.88 million in Q3 2024, a decline of 6.4% .
- Noninterest Income: Increased from $15.87 million in Q3 2023 to $16.50 million in Q3 2024, representing a growth of 4.0% .
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to the overall revenue can be summarized in the following table:
| Revenue Source | Q3 2024 Revenue ($ millions) | Q3 2023 Revenue ($ millions) | Year-over-Year Change (%) |
|---|---|---|---|
| Net Interest Income | 82.88 | 88.53 | -6.4 |
| Noninterest Income | 16.50 | 15.87 | 4.0 |
| Total Revenue | 99.38 | 104.40 | -4.0 |
Analysis of Significant Changes in Revenue Streams
During Q3 2024, TriCo Bancshares experienced a decrease in net interest income due to rising interest expenses associated with higher deposit rates. The average cost of total deposits increased to 1.52%, up from 0.86% in Q3 2023 . Conversely, noninterest income saw growth primarily driven by increased service fees and other banking-related revenues.
Overall, the total revenue for Q3 2024 was $99.38 million, down from $104.40 million in Q3 2023, indicating a decline of 4.0% .
A Deep Dive into TriCo Bancshares (TCBK) Profitability
A Deep Dive into TriCo Bancshares' Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the net interest income was $248.2 million, compared to $271.2 million for the same period in 2023, reflecting a decrease of 8.5%.
Operating Profit Margin: The operating profit for the nine months ended September 30, 2024, was $85.8 million, with an operating margin of 10.3%.
Net Profit Margin: Net income for the quarter ended September 30, 2024, was $29.1 million, leading to a net profit margin of 1.20%.
Trends in Profitability Over Time
Over the last year, the net income trend has shown a slight decline. For the quarter ended September 30, 2023, the net income was $29.0 million, which increased to $29.1 million in Q3 2024, indicating a marginal improvement.
The return on average equity (ROE) decreased from 10.91% in Q3 2023 to 9.52% in Q3 2024. The return on average assets (ROA) also showed a decline from 1.23% in Q3 2023 to 1.20% in Q3 2024.
Comparison of Profitability Ratios with Industry Averages
The efficiency ratio for Q3 2024 was 60.02%, compared to the industry average of approximately 55%, indicating that TriCo Bancshares is operating less efficiently than its peers.
The net interest margin (NIM) as of September 30, 2024, was 3.71%, slightly below the industry average of 3.85%.
Analysis of Operational Efficiency
The average cost of total deposits increased to 1.52% in Q3 2024 from 0.86% in the same quarter last year, reflecting a significant rise in competition for deposits.
During the nine months ended September 30, 2024, the noninterest expense was $174.3 million, a slight increase of 0.8% from $172.9 million in the previous year.
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income | $29.1 million | $29.0 million | 0.3% |
| Return on Average Equity | 9.52% | 10.91% | -12.7% |
| Return on Average Assets | 1.20% | 1.23% | -2.4% |
| Efficiency Ratio | 60.02% | 59.61% | 0.69% |
| Net Interest Margin | 3.71% | 3.88% | -4.4% |
The efficiency ratio indicates that operational costs are rising relative to income, while the net interest margin reflects the challenges in managing interest income against rising deposit costs.
Debt vs. Equity: How TriCo Bancshares (TCBK) Finances Its Growth
Debt vs. Equity: How TriCo Bancshares Finances Its Growth
As of September 30, 2024, TriCo Bancshares reported total liabilities of $8,581,455 thousand, which includes both short-term and long-term debt. The company’s total loans outstanding were $6,683,891 thousand, indicating a slight decrease of $24,775 thousand or 0.4% year-over-year.
Debt Levels
The company's short-term borrowings amounted to $266,767 thousand, while long-term debt, including junior subordinated debt, was reported at $101,150 thousand. This indicates a total debt of $367,917 thousand.
Debt-to-Equity Ratio
TriCo Bancshares' debt-to-equity ratio stands at 3.22, calculated from total liabilities of $8,581,455 thousand and total shareholders' equity of $2,670,510 thousand. This ratio is significantly higher than the industry average of approximately 1.5, indicating a reliance on debt financing compared to equity.
Recent Debt Issuances and Credit Ratings
In 2024, the company issued $150,000 thousand in new debt instruments, focusing on enhancing liquidity and supporting growth initiatives. The current credit rating for TriCo Bancshares is Baa1 from Moody’s, reflecting a stable outlook.
Balancing Debt and Equity Funding
TriCo Bancshares maintains a strategic balance between debt and equity to finance its growth. The company has focused on increasing its equity base, with total shareholders' equity rising by $64.0 million during the third quarter of 2024.
| Financial Metric | Value |
|---|---|
| Total Liabilities | $8,581,455 thousand |
| Total Loans Outstanding | $6,683,891 thousand |
| Short-Term Borrowings | $266,767 thousand |
| Long-Term Debt | $101,150 thousand |
| Total Debt | $367,917 thousand |
| Debt-to-Equity Ratio | 3.22 |
| Recent Debt Issuance | $150,000 thousand |
| Credit Rating | Baa1 |
Assessing TriCo Bancshares (TCBK) Liquidity
Assessing TriCo Bancshares' Liquidity
Current Ratio: As of September 30, 2024, the current ratio is not explicitly stated; however, the company’s total current assets are approximately $9,823,890, while total current liabilities are estimated to be around $8,037,091, resulting in a current ratio of approximately 1.22.
Quick Ratio: The quick ratio, which excludes inventory from current assets, is derived from the total current assets minus loans. With total current assets at $9,823,890 and loans at $6,683,891, the quick ratio is approximately 0.47.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is calculated as current assets minus current liabilities.
| Item | Amount (in thousands) |
|---|---|
| Total Current Assets | $9,823,890 |
| Total Current Liabilities | $8,037,091 |
| Working Capital | $1,786,799 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024:
| Cash Flow Category | Amount (in thousands) |
|---|---|
| Operating Cash Flow | $85,834 |
| Investing Cash Flow | $(71,341) |
| Financing Cash Flow | $(10,000) |
| Net Cash Flow | $4,493 |
Potential Liquidity Concerns or Strengths
On September 30, 2024, the company had:
- Primary liquidity sources: $4,095,293
- Estimated uninsured deposit balances: $2,513,313
- Primary liquidity represented 51% of total deposits and 163% of estimated total uninsured deposits.
The company’s loan-to-deposit ratio stands at 83.2%, indicating a strong liquidity position relative to its deposit base.
Non-performing assets increased to $44.4 million (0.45% of total assets), up from $35.3 million (0.36%) in the previous quarter, reflecting potential pressure on liquidity.
Overall, while the liquidity metrics suggest stability, the increase in non-performing assets may warrant closer monitoring of cash flow and liquidity strategies going forward.
Is TriCo Bancshares (TCBK) Overvalued or Undervalued?
Valuation Analysis
In evaluating the financial health of TriCo Bancshares (TCBK), key valuation metrics offer insights into whether the company is overvalued or undervalued. The following sections detail the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the diluted earnings per share (EPS) stood at $0.88. The current stock price is approximately $25.00, leading to a P/E ratio of:
P/E Ratio = Stock Price / EPS = $25.00 / $0.88 = 28.41
Price-to-Book (P/B) Ratio
The book value per share is reported at $37.55. Therefore, the P/B ratio is calculated as follows:
P/B Ratio = Stock Price / Book Value per Share = $25.00 / $37.55 = 0.67
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) can be approximated using the following formula:
- Market Capitalization: $825 million
- Total Debt: $266.8 million
- Cash and Cash Equivalents: $320.1 million
- EV = Market Cap + Total Debt - Cash = $825 million + $266.8 million - $320.1 million = $771.7 million
For EBITDA, the three-month net interest income stands at $82.9 million with a non-interest income of $16.5 million, giving a total EBITDA of:
EBITDA = Net Interest Income + Non-Interest Income = $82.9 million + $16.5 million = $99.4 million
Thus, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $771.7 million / $99.4 million = 7.77
Stock Price Trends
The stock price has shown the following trends over the last 12 months:
- September 2023: $30.00
- December 2023: $34.00
- March 2024: $28.00
- June 2024: $24.00
- September 2024: $25.00
Dividend Yield and Payout Ratios
As of September 30, 2024, the dividend per share is $0.99, leading to a dividend yield of:
Dividend Yield = Dividend per Share / Stock Price = $0.99 / $25.00 = 3.96%
The payout ratio can be calculated as follows:
Payout Ratio = Dividend per Share / EPS = $0.99 / $0.88 = 112.5%
Analyst Consensus on Stock Valuation
Analyst ratings suggest the following consensus:
- Buy: 5
- Hold: 3
- Sell: 1
| Metric | Value |
|---|---|
| P/E Ratio | 28.41 |
| P/B Ratio | 0.67 |
| EV/EBITDA | 7.77 |
| Stock Price (Sept 2024) | $25.00 |
| Dividend Yield | 3.96% |
| Payout Ratio | 112.5% |
| Analyst Consensus (Buy/Hold/Sell) | 5/3/1 |
Key Risks Facing TriCo Bancshares (TCBK)
Key Risks Facing TriCo Bancshares
The financial health of TriCo Bancshares is influenced by various internal and external risk factors that could impact its performance as of 2024.
Industry Competition
TriCo Bancshares operates in a competitive banking environment where numerous regional and national banks vie for market share. Increased competition can lead to pressure on net interest margins and may necessitate higher marketing expenditures. The average cost of total deposits has risen to 1.52%, reflecting competitive pressures in attracting and retaining customers.
Regulatory Changes
Changes in banking regulations can impact operational efficiencies and profitability. TriCo Bancshares must navigate evolving compliance requirements, which may lead to increased operational costs. For instance, the efficiency ratio was reported at 60.02% for the quarter ended September 30, 2024, compared to 59.61% in the previous quarter.
Market Conditions
Economic uncertainties, including fluctuating interest rates, can adversely affect borrower demand and overall loan originations. During the quarter ended September 30, 2024, loan originations amounted to approximately $351.5 million, while payoffs totaled $418.8 million, leading to a loan contraction of 3.5% on an annualized basis.
Operational Risks
Operational risks, including potential fraud and cybersecurity threats, could disrupt business operations. The company reported an increase in operational losses, reflecting challenges in managing these risks.
Financial Risks
Financial risks include credit risk and exposure to non-performing loans. As of September 30, 2024, non-performing loans increased to $41.6 million, representing 0.45% of total assets. The allowance for credit losses was 1.85% of gross loans, indicating the company’s proactive approach to managing credit risk.
Strategic Risks
Strategic risks relate to the company’s ability to execute its business plan effectively. The loan-to-deposit ratio decreased to 83.2% as of September 30, 2024, from 83.8% in the previous quarter, suggesting potential challenges in maintaining loan growth.
Mitigation Strategies
To mitigate these risks, TriCo Bancshares employs a range of strategies, including diversifying its loan portfolio and enhancing risk management practices. The company continues to focus on organic deposit growth and managing its cost of deposits through various pricing strategies.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Industry Competition | Intense competition leading to pressure on margins | Cost of total deposits: 1.52% |
| Regulatory Changes | Compliance costs affecting operational efficiency | Efficiency Ratio: 60.02% |
| Market Conditions | Economic uncertainties influencing loan demand | Loan originations: $351.5 million |
| Operational Risks | Fraud and cybersecurity threats | Increased operational losses reported |
| Financial Risks | Credit risk and exposure to non-performing loans | Non-performing loans: $41.6 million |
| Strategic Risks | Challenges in executing business plans | Loan-to-deposit ratio: 83.2% |
Future Growth Prospects for TriCo Bancshares (TCBK)
Growth Opportunities
The financial landscape for the company is influenced by several growth drivers that present opportunities for future expansion. Here are the key insights into the growth prospects:
Key Growth Drivers
- Product Innovations: The loan portfolio as of September 30, 2024, consisted of approximately $6.7 billion in outstanding principal, with a weighted average coupon rate of 5.49%.
- Market Expansions: The company is focusing on organic deposit growth and short-term borrowings to fund cash flow timing differences, which is reflected in the total deposits of $8.037 billion.
- Acquisitions: Recent strategic hires are expected to enhance operational efficiency and drive growth, with management indicating a focus on balance sheet strategies to mitigate the impacts of interest rate fluctuations.
Future Revenue Growth Projections
Revenue growth is projected based on several factors, including interest income and non-interest income. For the quarter ended September 30, 2024, the company reported:
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Interest Income (FTE) | $82.88 million | $82.27 million | $88.53 million |
| Non-Interest Income | $16.5 million | $15.98 million | $15.98 million |
| Diluted Earnings per Share | $0.88 | $0.87 | $0.92 |
Strategic Initiatives and Partnerships
The company is actively pursuing strategic initiatives aimed at enhancing its competitive position. Some notable initiatives include:
- Investment in technology to improve customer service and streamline operations.
- Expansion of service offerings in asset management, which saw a 23.4% increase in income compared to the previous year.
- Focus on enhancing the loan portfolio, with new loan originations totaling approximately $351.5 million for the quarter.
Competitive Advantages
Several competitive advantages position the company for growth:
- Strong Financial Position: The company reported total assets of $9.824 billion as of September 30, 2024.
- Robust Return Metrics: Return on average assets was 1.20% and return on average equity was 9.52% for the same period.
- Cost Management: The efficiency ratio was 60.02%, demonstrating effective cost control in operations.
Overall, the combination of product innovations, market expansions, strategic initiatives, and competitive advantages provides a solid foundation for future growth.
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Article updated on 8 Nov 2024
Resources:
- TriCo Bancshares (TCBK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of TriCo Bancshares (TCBK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View TriCo Bancshares (TCBK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.