TCBK Trico Bancshares Dashboard

Management Discussion

• The Company’s primary source of revenue is net interest income, which is the difference between interest income on earning assets and interest expense on interest-bearing liabilities. Following is a summary of the Company’s net interest income for the periods indicated (dollars in thousands):
• Net interest income (FTE) during the year ended December 31, 2020 increased $526,000 or 0.2% to $258,796,000 compared against $258,270,000 during the year ended December 31, 2019. The relatively unchanged amount of net interest income is reflective of the declining rate environment during the year ended December 31, 2020, as total average loan balances increased by approximately $534,912,000 in 2020, and excluding PPP loans, average loan balances increased by approximately $250,586,000 compared to December 31, 2019. The yield on interest earning assets was 4.11% and 4.74% for the year ended December 31, 2020 and 2019, respectively. This 63 basis point decrease in total earning asset yield was primarily attributable to a 33 basis point decrease in non-PPP loan yields and a 75 basis point decrease in yields on total investments. Of the 33 basis point decrease in yields on loans, a 32 basis point decline was attributable to decreases in market rates, offset partially by 1 basis point from the accretion of purchased loans. The decreases in yields on earning assets are consistent with decreased funding expenses as the costs of total interest bearing liabilities decreased 17 basis points to 0.25% during the year ended December 31, 2020, as compared to 0.42% for the year ended December 31, 2019. During the same period, costs associated with interest bearing deposits decreased by 15 basis points to 0.18% as compared to 0.33% in the prior year. The decrease in interest expense for the year ended December 31, 2020, as compared to the trailing year, was due largely to the decreased rate environment benefiting both the interest-bearing deposit expense and other borrowings interest expense.
• Net interest income (FTE) during the year ended December 31, 2019 increased $41,620,000 or 19.2% to $258,270,000 compared to $216,650,000 during the year ended December 31, 2018. The increase was substantially attributable to changes in volume of earning assets from the acquisition of FNB Bancorp in July 2018, in addition to organic loan growth experienced during 2019. The yield on interest earning assets was 4.74% and 4.55% for the year ended December 31, 2019 and 2018, respectively. This 19 basis point increase in total earning asset yield was primarily attributable to a 20 basis point increase in loan yields and a 11 basis point increase in yields on total investments. Of the 20 basis point increase in yields on loans, 15 basis points was attributable to increases in market rates while 5 basis points was from accretion of purchased loans. The increases in yields on earning assets were partially offset by increased funding expenses as the costs of total interest bearing liabilities increased 3 basis points to 0.42% during the year ended December 31, 2019, as compared to 0.39% for the year ended December 31, 2018. During the same period, costs associated with interest bearing deposits increased by 10 basis points to 0.33% as compared to 0.23% in the prior year. The increase in interest expense for the year ended December 31, 2019 as compared to the prior period was due largely to the increases in the average balances of interest-bearing liabilities associated with the acquisition of FNB Bancorp, offset partially by reductions in the average balance of other borrowings.