Jul 27, 2012, 5:01pm

TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company of Tri Counties Bank (the “Bank”), today announced a $2,550,000 (92.0%) increase in earnings to $5,321,000 for the three months ended June 30, 2012 from $2,771,000 for the three months ended June 30, 2011. Diluted earnings per share for the three months ended June 30, 2012 were $0.33 compared to diluted earnings per share of $0.17 for the three months ended June 30, 2011. Diluted earnings per share for the six months ended June 30, 2012 and 2011 were $0.58 and $0.35, respectively, on earnings of $9,252,000 and $5,571,000, respectively.

Total assets of the Company increased $349,434,000 (16.1%) to $2,525,618,000 at June 30, 2012 from $2,176,184,000 at June 30, 2011. Total loans of the Company increased $156,420,000 (11.2%) to $1,552,482,000 at June 30, 2012 from $1,396,062,000 at June 30, 2011. The increase in loans from the year-ago balance is primarily due to $167,484,000 of loans acquired in the acquisition of the banking operations of Citizens Bank of Northern California (“Citizens”) on September 23, 2011 that was partially offset by charge offs and net loan payoffs. Loans increased $41,397,000 (2.7%) during the three months ended June 30, 2012 primarily due to seasonal draws on lines of credit and demand for new loans.

Total deposits of the Company increased $329,046,000 (17.9%) to $2,165,777,000 at June 30, 2012 from $1,836,731,000 at June 30, 2011. The increase in deposits is mainly due to $239,899,000 of deposits acquired in the Citizens acquisition.

The following is a summary of the components of the Company’s consolidated net income for the periods indicated:

		Three months ended
		June 30,
(dollars in thousands)		2012				2011				$ Change				% Change
Net Interest Income		$	25,934			$	21,753			$	4,181			19.2	%
Provision for loan losses			(3,371	)			(5,561	)			2,190			(39.4	%)
Noninterest income			10,577				8,251				2,326			28.2	%
Noninterest expense			(24,367	)			(20,095	)			(4,272	)		21.3	%
Provision for income taxes			(3,452	)			(1,577	)			(1,875	)		118.9	%
Net income		$	5,321			$	2,771			$	2,550			92.0	%

Included in the Company’s results for the three month period ended June 30, 2012 is the acquisition by Tri Counties Bank of the banking operations of Citizens Bank of Northern California, Nevada City, California from the FDIC under a whole bank purchase and assumption agreement without loss sharing on September 23, 2011. The assets acquired and liabilities assumed in the Citizens acquisition have been accounted for under the acquisition method of accounting (formerly the purchase method). Loans acquired through the Citizens acquisition are classified 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”. 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 announcement.

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
		June 30, 2012										June 30, 2011
		Average			Income/				Yield/			Average			Income/				Yield/
		Balance			Expense				Rate			Balance			Expense				Rate
Assets
Earning assets
Loans		$	1,534,006		$	25,792			6.73	%		$	1,393,989		$	21,735			6.24	%
Investments - taxable			208,417			1,615			3.10	%			271,089			2,354			3.47	%
Investments - nontaxable			9,561			171			7.15	%			11,839			216			7.31	%
Federal funds sold			579,164			430			0.30	%			351,512			242			0.28	%
Total earning assets			2,331,148			28,008			4.81	%			2,028,429			24,547			4.84	%
Other assets, net			177,951										164,222
Total assets		$	2,509,099									$	2,192,651
Liabilities and shareholders' equity
Interest-bearing
Demand deposits		$	473,124			197			0.17	%		$	408,109			358			0.35	%
Savings deposits			731,988			296			0.16	%			613,924			372			0.24	%
Time deposits			380,943			584			0.61	%			406,436			1,072			1.06	%
Other borrowings			62,300			601			3.86	%			59,139			600			4.06	%
Trust preferred securities			41,238			332			3.22	%			41,238			312			3.03	%
Total interest-bearing liabilities			1,689,593			2,010			0.48	%			1,528,846			2,714			0.71	%
Noninterest-bearing deposits			562,909										424,331
Other liabilities			33,569										33,711
Shareholders' equity			223,028										205,763
Total liabilities and shareholders' equity		$	2,509,099									$	2,192,651
Net interest rate spread									4.33	%									4.13	%
Net interest income/net interest margin (FTE)						25,998			4.46	%						21,833			4.31	%
FTE adjustment						(64	)									(80	)
Net interest income (not FTE)					$	25,934									$	21,753

Net interest income (FTE) during the three months ended June 30, 2012 increased $4,165,000 (19.1%) from the same period in 2011 to $25,998,000. The increase in net interest income (FTE) was due to a $140,017,000 (10.4%) increase in average balance of loans and a 49 basis point increase in average yield on loans to 6.73%, both of which are primarily due to the Citizens acquisition in September 2011. The operations of Citizens from April 1, 2012 to June 30, 2012 added approximately $5,032,000 and $5,000 to interest income and interest expense, respectively. Included in the $5,032,000 of Citizens related interest income recorded during the three months ended June 30, 2012, is $2,278,000 of interest income from fair value discount accretion. Also contributing to the increase in net interest income during the three months ended June 30, 2012 was a 19 basis point decrease in the cost of deposits from 0.39% during the three months ended June 30, 2011 to 0.20% during the three months ended June 30, 2012.

The Company provided $3,371,000 for loan losses in the second quarter of 2012 versus $3,996,000 in the first quarter of 2012 and $5,561,000 in the second quarter of 2011. Included in the provision for loan losses during the quarter ended June 30, 2012, was $281,000 related to Citizens loans. The allowance for loan losses increased $397,000 from $45,452,000 at March 31, 2012 to $45,849,000 at June 30, 2012. The decrease in provision for loan losses during the second quarter of 2012 compared to the first quarter of 2012 was primarily the result of a decrease in nonperforming Originated loans and a decrease in net loan charge offs.

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

		Three months ended
		June 30,
(dollars in thousands)		2012				2011				$ Change				% Change
Service charges on deposit accounts		$	3,644			$	3,700				($56	)		(1.5	%)
ATM fees and interchange			2,026				1,776				250			14.1	%
Other service fees			570				437				133			30.4	%
Mortgage banking service fees			379				370				9			2.4	%
Change in value of mortgage servicing rights			(464	)			(162	)			(302	)		186.4	%
Total service charges and fees			6,155				6,121				34			0.6	%
Gain on sale of loans			1,237				495				742			149.9	%
Commission on NDIP			842				648				194			29.9	%
Increase in cash value of life insurance			450				450				-			0.0	%
Change in indemnification asset			662				144				518			359.7	%
Gain on sale of foreclosed assets			304				185				119			64.3	%
Life insurance death benefit			600				-				600
Other noninterest income			327				208				119			57.2	%
Total other noninterest income			4,422				2,130				2,292			107.6	%
Total noninterest income		$	10,577			$	8,251			$	2,326			28.2	%

Noninterest income increased $2,326,000 (28.2%) to $10,577,000 in the three months ended June 30, 2012 when compared to the three months ended June 30, 2011. The increase in noninterest income was primarily due to a $742,000 increase in gain on sale of loans, a $600,000 gain on life insurance benefit, a $518,000 increase in change in indemnification asset, a $250,000 increase in ATM fees and interchange, and a $194,000 increase in commissions on sale of nondeposit investment products (NDIP), that were partially offset by a $302,000 decrease in change in value of mortgage servicing rights to a negative $464,000. The increase in gain on sale of loans is due to increased residential real estate loan refinance activity and our focus to service that activity. The increase in change in indemnification asset is due to increased actual and estimated future losses in our covered loan and foreclosed assets portfolios. The increase in commissions on sale of NDIP is due to our application of additional resources in that area. The operations of Citizens from April 1, 2012 to June 30, 2012 accounted for $643,000 of the $10,577,000 of noninterest income during the three months ended June 30, 2012.

Salary and benefit expenses increased $1,775,000 (16.6%) to $12,490,000 during the three months ended June 30, 2012 compared to the three months ended June 30, 2011. Base salaries increased $1,075,000 (14.9%) to $8,273,000 during the three months ended June 30, 2012. The increase in base salaries was mainly due to a 10.3% increase in average full time equivalent staff to 741 and annual merit increases when compared to the three months ended June 30, 2011. The increase in full time equivalent staff is mainly due to the Citizens acquisition on September 23, 2011. Incentive and commission related salary expenses increased $564,000 (72.0%) to $1,347,000 during three months ended June 30, 2012 due primarily to increases in production related incentives and incentives tied to net income. Benefits expense, including retirement, medical and workers’ compensation insurance, and taxes, increased $136,000 (5.0%) to $2,870,000 during the three months ended June 30, 2012 primarily due to the increase in average full time equivalent staff noted above. The operations of Citizens from April 1, 2012 to June 30, 2012 added $894,000 to salaries and benefits expense.

Other noninterest expenses increased $2,497,000 (26.6%) to $11,877,000 during the three months ended June 30, 2012 when compared to the three months ended June 30, 2011. Changes in the various categories of other noninterest expense are reflected in the table below. The changes are indicative of the Citizens acquisition, and the economic environment which has led to increases, or fluctuations, in professional loan collection expenses, provision for foreclosed asset losses, and foreclosed asset expenses. The operations of Citizens from April 1, 2012 to June 30, 2012 added $1,257,000 to other noninterest expense including $419,000 of loan and OREO expenses.

The following table presents the key components of the Company’s noninterest expense for the periods indicated:

		Three months ended
		June 30,
(dollars in thousands)		2012			2011				$ Change				% Change
Salaries		$	8,273		$	7,198			$	1,075			14.9	%
Commissions and incentives			1,347			783				564			72.0	%
Employee benefits			2,870			2,734				136			5.0	%
Total salaries and benefits expense			12,490			10,715				1,775			16.6	%
Occupancy			1,857			1,402				455			32.5	%
Equipment			1,126			880				246			28.0	%
Change in reserve for unfunded commitments			40			(50	)			90
Data processing and software			1,143			956				187			19.6	%
Telecommunications			567			520				47			9.0	%
ATM network charges			532			507				25			4.9	%
Professional fees			691			573				118			20.6	%
Advertising and marketing			863			739				124			16.8	%
Postage			218			219				(1	)		(0.5	%)
Courier service			256			221				35			15.8	%
Intangible amortization			52			20				32			160.0	%
Operational losses			143			118				25			21.2	%
Provision for foreclosed asset losses			1,004			638				366			57.4	%
Foreclosed asset expense			267			115				152			132.2	%
Assessments			590			518				72			13.9	%
Other			2,528			2,004				524			26.1	%
Total other noninterest expense			11,877			9,380				2,497			26.6	%
Total noninterest expense		$	24,367		$	20,095			$	4,272			21.3	%

In addition to the historical information contained herein, this press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The reader of this press release should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome. The Company’s actual results could differ materially from those suggested by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, interest rate fluctuations, economic conditions in the Company's primary market area, demand for loans, regulatory and accounting changes, loan losses, expenses, rates charged on loans and earned on securities investments, rates paid on deposits, competition effects, fee and other noninterest income earned as well as other factors detailed in the Company's reports filed with the Securities and Exchange Commission which are incorporated herein by reference, including the Form 10-K for the year ended December 31, 2011. These reports and this entire press release should be read to put such forward-looking statements in context and to gain a more complete understanding of the uncertainties and risks involved in the Company's business. Any forward-looking statement may turn out to be wrong and cannot be guaranteed. The Company does not intend to update any of the forward-looking statements after the date of this release.

TriCo Bancshares and Tri Counties Bank are headquartered in Chico, California. Tri Counties Bank has a 37-year history in the banking industry. It operates 41 traditional branch locations and 27 in-store branch locations in 23 California counties. Tri Counties Bank offers financial services and provides a diversified line of products and services to consumers and businesses, which include demand, savings and time deposits, consumer finance, online banking, mortgage lending, and commercial banking throughout its market area. It operates a network of 73 ATMs and a 24-hour, seven days-a-week telephone customer service center. Brokerage services are provided by the Bank’s investment services affiliate, Raymond James Financial Services, Inc. For further information please visit the Tri Counties Bank web site at http://www.tricountiesbank.com.

TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)
		Three months ended
		June 30,				March 31,				December 31,				September 30,				June 30,
		2012				2012				2011				2011				2011
Statement of Income Data
Interest income		$	27,944			$	27,164			$	29,609			$	24,472			$	24,467
Interest expense			2,010				2,128				2,329				2,465				2,714
Net interest income			25,934				25,036				27,280				22,007				21,753
Provision for loan losses			3,371				3,996				5,429				5,069				5,561
Noninterest income:
Service charges and fees			6,155				5,952				6,457				5,584				6,121
Other income			4,422				2,313				4,032				9,139				2,130
Total noninterest income			10,577				8,265				10,489				14,723				8,251
Noninterest expense:
Base salaries net of deferred loan origination costs			8,273				8,159				8,071				7,478				7,198
Incentive compensation expense			1,347				1,375				188				1,850				783
Employee benefits and other compensation expense			2,870				3,228				2,506				2,602				2,734
Total salaries and benefits expense			12,490				12,762				10,765				11,930				10,715
Other noninterest expense			11,877				10,153				11,311				8,943				9,380
Total noninterest expense			24,367				22,915				22,076				20,873				20,095
Income before taxes			8,773				6,390				10,264				10,788				4,348
Net income		$	5,321			$	3,931			$	6,549			$	6,470			$	2,771
Share Data
Basic earnings per share		$	0.33			$	0.25			$	0.41			$	0.40			$	0.17
Diluted earnings per share		$	0.33			$	0.25			$	0.41			$	0.40			$	0.17
Book value per common share		$	13.96			$	13.71			$	13.55			$	13.19			$	12.82
Tangible book value per common share		$	12.91			$	12.66			$	12.49			$	12.14			$	11.82
Shares outstanding			15,992,893				15,978,958				15,978,958				15,978,958				15,978,958
Weighted average shares			15,985,922				15,978,958				15,978,958				15,978,958				15,922,228
Weighted average diluted shares			16,047,344				16,042,765				16,015,312				16,006,358				15,953,572
Credit Quality
Nonperforming originated loans		$	69,749			$	70,764			$	75,775			$	74,324			$	73,720
Total nonperforming loans			82,877				82,575				85,731				85,067				73,720
Guaranteed portion of nonperforming loans			218				218				3,061				3,287				3,496
Foreclosed assets, net of allowance			12,743				14,789				16,332				17,870				9,337
Loans charged-off			4,188				4,922				5,340				4,428				5,230
Loans recovered			1,214				464				525				697				407
Selected Financial Ratios
Return on average total assets			0.85	%			0.63	%			1.04	%			1.17	%			0.51	%
Return on average equity			9.54	%			7.14	%			12.19	%			12.41	%			5.39	%
Average yield on loans			6.73	%			6.53	%			6.94	%			6.24	%			6.24	%
Average yield on interest-earning assets			4.81	%			4.66	%			5.12	%			4.82	%			4.84	%
Average rate on interest-bearing liabilities			0.48	%			0.49	%			0.53	%			0.64	%			0.71	%
Net interest margin (fully tax-equivalent)			4.46	%			4.30	%			4.71	%			4.34	%			4.31	%
Supplemental Loan Interest Income Data:
Discount accretion PCI - cash basis loans			108				18				418				28				-
Discount accretion PCI - other loans			886				776				949				223				185
Discount accretion PNCI loans			1,391				1,286				1,738				-				-
Regular interest Purchased loans			3,439				3,420				3,651				978				872
All other loan interest income			19,968				19,429				20,491				20,758				20,678
Total loan interest income			25,792				24,929				27,247				21,987				21,735

TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)
		Three months ended
		June 30,				March 31,				December 31,				September 30,				June 30,
Balance Sheet Data		2012				2012				2011				2011				2011
Cash and due from banks		$	644,102			$	681,760			$	637,275			$	522,636			$	391,054
Securities, available-for-sale			202,849				212,157				229,223				257,300				264,992
Federal Home Loan Bank Stock			9,990				10,508				10,610				11,124				9,199
Loans held for sale			5,321				5,869				10,219				10,872				4,379
Loans:
Commercial loans			139,733				129,906				139,131				154,257				140,531
Consumer loans			393,248				419,539				406,330				400,627				382,864
Real estate mortgage loans			984,147				924,336				965,922				978,492				828,757
Real estate construction loans			35,354				37,304				39,649				42,251				43,910
Total loans, gross			1,552,482				1,511,085				1,551,032				1,575,627				1,396,062
Allowance for loan losses			(45,849	)			(45,452	)			(45,914	)			(45,300	)			(43,962	)
Foreclosed assets			12,743				14,789				16,332				17,870				9,337
Premises and equipment			22,595				19,814				19,893				19,717				20,142
Cash value of life insurance			50,292				50,853				50,403				51,891				51,441
Goodwill			15,519				15,519				15,519				15,519				15,519
Intangible assets			1,196				1,248				1,301				1,353				475
Mortgage servicing rights			4,757				4,784				4,603				4,238				4,818
FDIC indemnification asset			4,046				3,405				4,405				4,473				4,545
Accrued interest receivable			7,545				7,095				7,312				7,397				6,549
Other assets			38,030				39,474				43,384				33,750				41,634
Total assets			2,525,618				2,532,908				2,555,597				2,488,467				2,176,184
Deposits:
Noninterest-bearing demand deposits			578,010				564,143				541,276				469,630				419,391
Interest-bearing demand deposits			480,337				488,573				431,565				425,281				401,040
Savings deposits			737,433				724,449				797,182				788,276				618,413
Time certificates			369,997				392,581				420,513				437,036				397,887
Total deposits			2,165,777				2,169,746				2,190,536				2,120,223				1,836,731
Accrued interest payable			1,415				1,587				1,674				1,815				1,865
Reserve for unfunded commitments			2,590				2,550				2,740				2,640				2,640
Other liabilities			30,538				29,675				30,427				28,808				29,561
Other borrowings			60,831				69,074				72,541				82,919				59,234
Junior subordinated debt			41,238				41,238				41,238				41,238				41,238
Total liabilities			2,302,389				2,313,870				2,339,156				2,277,643				1,971,269
Total shareholders' equity			223,229				219,038				216,441				210,824				204,915
Accumulated other comprehensive gain			3,537				3,658				3,811				3,468				2,644
Average loans			1,534,006				1,527,536				1,570,648				1,410,151				1,393,989
Average interest-earning assets			2,331,148				2,334,842				2,320,205				2,037,348				2,028,429
Average total assets			2,509,099				2,514,541				2,513,634				2,207,800				2,192,651
Average deposits			2,148,964				2,149,212				2,149,422				1,865,399				1,852,800
Average total equity		$	223,028			$	220,366			$	214,979			$	208,560			$	205,763
Total risk based capital ratio			14.3	%			14.3	%			13.9	%			13.5	%			14.6	%
Tier 1 capital ratio			13.0	%			13.0	%			12.7	%			12.2	%			13.3	%
Tier 1 leverage ratio			9.7	%			9.5	%			9.5	%			10.5	%			10.4	%
Tangible capital ratio			8.2	%			8.0	%			7.9	%			7.8	%			8.7	%