TriCo Bancshares : Announces Quarter 1 Earnings

PRESS RELEASE Contact: Thomas J. Reddish

PRESS RELEASE Contact: Richard P. Smith

For Immediate Release President & CEO (530) 898-0300

TRICO BANCSHARES ANNOUNCES QUARTERLY RESULTS

CHICO, Calif. - (April 28, 2016) - TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company of Tri Counties Bank, today announced earnings of $10,674,000, or $0.46 per diluted share, for the three months ended March 31, 2016. For the three months ended March 31, 2015 the Company reported earnings of $8,336,000, or

$0.36 per diluted share. Diluted shares outstanding were 23,046,165 and 22,949,902 for the three months ended March 31, 2016 and 2015, respectively.

Included in the results of the Company for the three months ended March 31, 2016 was $622,000 of nonrecurring noninterest expense related to the Company's acquisition of three bank branches from Bank of America on March 18, 2016. Included in the results of the Company for the three months ended March 31, 2015 was $586,000 of nonrecurring noninterest expense related to the Company's merger with, and integration of, North Valley Bancorp that occurred on October 3, 2014. Excluding these nonrecurring merger and acquisition related expenses, but including the revenue and other expenses from the operations of the three acquired Bank of America branches from March 18, 2016, and the operations of North Valley Bancorp from October 4, 2014, diluted earnings per share for the three months ended March 31, 2016 and 2015 would have been higher by $0.02 and $0.02 than reported above, respectively, on earnings of $11,035,000 and $8,676,000, respectively. In addition to these nonrecurring merger and acquisition related expenses, there were other expense and revenue items during the three months ended March 31, 2016 and 2015 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 March 31,

(dollars and shares in thousands)	2016	2015	$ Change	% Change
Net Interest Income	$41,402	$36,343	$5,059	13.9%
Provision for loan losses	(209)	(197)	(12)
Noninterest income	9,790	10,180	(390)	(3.8%)
Noninterest expense	(33,751)	(32,282)	(1,469)	4.6%
Provision for income taxes	(6,558)	(5,708)	(850)	14.9%
Net income	$10,674	$8,336	$2,338	28.0%
Average common shares	22,783	22,727	56	0.2%
Average diluted common shares	23,046	22,950	96	0.4%

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

Ending balances

As of March 31,

(dollars in thousands) 2016 2015 $ Change % Change

Total assets	$4,394,956	$3,895,860	$499,096	12.8%
Total loans	2,541,547	2,320,883	220,664	9.5%
Total investments	1,199,543	1,044,564	154,979	14.8%
Total deposits	$3,785,040	$3,349,488	$435,552	13.0%

Qtrly Avg balances

As of March 31,

(dollars in thousands) 2016 2015 $ Change % Change

Total assets	$4,212,388	$3,892,476	$319,912	8.2%
Total loans	2,537,574	2,283,622	253,952	11.1%
Total investments	1,184,106	927,878	256,228	27.6%
Total deposits	$3,616,618	$3,350,370	$266,248	7.9%

Included in the changes in the Company's deposits from March 31, 2015 to March 31, 2016 is the addition of a

$45 million certificate of deposit from the State of California on September 16, 2015, bringing the total of such certificates of deposit from the State of California to $50 million, and the addition of $161 million of deposits from the acquisition of three bank branches from Bank of America on March 18, 2016.

On March 18, 2016, Tri Counties Bank acquired three branches from Bank of America. The branches are located in the cities of Arcata, Eureka, and Fortuna in Humboldt County, California. The Bank paid $3,204,000 for deposit relationships with balances of $161,231,000 and loans with balances of $289,000, and received $159,520,000 in cash from Bank of America.

The following table discloses the fair value of consideration transferred, the total identifiable net assets acquired and the resulting goodwill relating to the acquisition of three branch banking offices and certain deposits from Bank of America on March 18, 2016:

(in thousands) March 18, 2016 Fair value of consideration transferred:

Cash consideration $3,204 Total fair value of consideration 3,204

Asset acquired:

Cash and cash equivalents	159,520
Loans	289
Premises and equipment	1,590
Core deposit intangible	2,046
Other assets	141
Total assets acquired	163,586

Liabilities assumed:

Deposits	161,231
Total liabilities assumed	161,231
Total net assets acquired	2,355
Goodwill recognized	$849

Included in the Company's results of operations for the three months ended March 31, 2016 is the impact of the Company's acquisition, on March 18, 2016, of three branch offices from Bank of America that included the acquisition of deposit relationships with balances totaling $161,231,000. Interest expense associated with the acquired deposit relationships was $5,000 from March 18, 2016 to March 31, 2016, and interest income from the net cash received in the transaction was estimated to be $27,000, assuming it was invested in Fed funds at an annualized earnings rate of 0.50%. Direct noninterest income and expense related to these branches from March 18, 2016 to March 31, 2016 were $14,000 and $659,000, respectively. Included in the $659,000 of noninterest expense related to these branches for the three months ended March 31, 2016 was $10,000 of core deposit intangible amortization, and $622,000 of nonrecurring acquisition expenses such as system conversion and customer communication related expenses. Other (indirect) noninterest income and expenses related to these branches and associated deposits, such as, increased data processing expense, are not readily distinguishable on a branch by branch basis.

Also included in the Company's results of operations for the three months ended March 31, 2016 is the impact of the sale, on March 31, 2016, of twenty-seven nonperforming loans, nine substandard performing loans, and three purchased credit impaired loans with total contractual principal balances outstanding of $31,487,000, and recorded book value, including pre-sale write downs and purchase discounts, of approximately $24,810,000. Net proceeds from the sale of these loans were $27,049,000, and resulted in additional net loan write downs of $21,000, the recovery of $1,237,000 of interest income that was previously applied to the principal balance of loans in nonaccrual status, and a gain on sale of loans of $103,000.

The twenty-seven nonperforming loans that were sold had a total recorded value of $13,058,000, and were sold for net proceeds of $14,973,000, resulting in the recovery of $575,000 of previously charged off principal balances, the recognition of $1,237,000 of interest income from interest payments previously applied to principal balances on nonaccrual loans, and a gain on sale of $103,000. The $13,058,000 recorded value of these nonperforming loans was the result of contractual principal balances outstanding of $17,169,000, less $1,578,000 of principal balances

previously charged off, less $2,684,000 of interest payments previously applied to principal balances on nonaccrual loans, and the addition of $151,000 of unamortized loan purchase premiums net of unearned deferred loan fees.

The nine substandard performing loans that were sold had a total recorded value of $9,508,000, and were sold for net proceeds of $8,912,000, resulting in a net loan principal write down and charge off of $596,000. The $9,508,000 recorded value of these performing loans was the result of contractual principal balances outstanding of

$10,438,000, less $930,000 of unamortized loan purchase discounts and unearned deferred loan fees.

Prior to their sale, the three loans with deteriorated credit quality acquired in a business combination were accounted for under Accounting Standards Codification Topic 310-30 using the "pooled method" of accounting for loans acquired with deteriorated credit quality. The Company classifies these types of loans in a category of loan it refers to as Purchased Credit Impaired-other (PCI-other) loans. The combined contractual principal balance of the three PCI-other loans sold on March 31, 2016 was $3,880,000, and they were sold for net proceeds of $3,164,000. The net sale proceeds of $3,164,000, along with other cash flows received on these loans during the three months ended March 31, 2016, represented a $446,000 decrease in estimated cash flows over their estimated remaining lives when compared to their previous estimated cash flows as of December 31, 2015. Previously, these three PCI-other loans were expected to be resolved by September 30, 2017. As a result of the magnitude and timing of the decrease in estimated cash flows for these three PCI-other loans, the loan pools associated with these PCI-other loans experienced an increase in interest income of $23,000 during the three months ended March 31, 2016, but are expected to realize a decrease in interest income of $469,000 over the remaining lives of the associated loan pools when compared to projected interest income under the previous (December 31, 2015) estimated cash flows for these three PCI-other loans.

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's primary source of revenue is net interest income, or the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Following is a summary of the components of net interest income for the periods indicated (dollars in thousands):

Three months ended March 31,

2016 2015
Interest income	$42,794 $37,725
Interest expense	(1,392) (1,382)
FTE adjustment	538 97
Net interest income (FTE)	$41,940 $36,440
Net interest margin (FTE)	4.33% 4.10%

Purchased loan discount accretion	$1,092	$2,794
Interest income recovered from sale of loans	$1,264	-
Effect of purchased loan discount
accretion on net interest margin (FTE)	0.11%	0.31%

Effect of interest income recovered from sale

of loans on net interest margin (FTE) 0.13% -

Net interest income (FTE) during the first quarter of 2016 increased $5,500,000 (15.1%) from the same period in 2015 to $41,940,000. The increase in net interest income (FTE) was due primarily to a $253,952,000 (11.1%) increase in the average balance of loans to $2,537,574,000, and a $256,228,000 (27.6%) increase in the average balance of investments to $1,184,106,000 that were partially offset by a 12 basis point decrease in the average yield on Investments-taxable from 2.71% during the three months ended March 31, 2015 to 2.59% during the three

months ended March 31, 2016. The $253,952,000 increase in average loan balances from the year ago quarter was entirely organic growth as no loans were purchased during 2015 or the three months ended March 31, 2016. The

$253,952,000 increase in average loan balances and the $256,228,000 increase in average investment balances, from the year-ago quarter, were funded by the use of cash at the Federal Reserve and other banks that in turn was substantially funded by a $266,248,000 (7.9%) increase in average balance of deposits to $3,616,618,000 compared to the year-ago quarter. The decrease in the average yield on Investments-taxable was due primarily to declines in market yields on new investments compared to yields on existing investments. The increases in average loan and investment balances added $3,466,000 and $2,230,000, respectively, to net interest income (FTE) while the decreases in average Investments-taxable yield reduced net interest income (FTE) by $310,000, when compared to the year-ago quarter.

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

March 31, 2016 December 31, 2015

March 31, 2015

Assets Earning assets

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

Loans

$ 2,537,574

$ 34,738

5.48%

$ 2,489,406

$ 34,838

5.60%

$ 2,283,622

$ 31,165

5.46%

Investments - taxable 1,068,018 6,920 2.59% 1,044,063 6,983 2.68% 906,366 6,135 2.71%

Investments - nontaxable 116,088 1,435 4.94% 68,929 841 4.88% 21,512 258 4.80%

Cash at Federal Reserve and

other banks 155,106 239 0.62% 174,746 143 0.33% 345,603 264 0.31%

Total earning assets 3,876,786 43,332 4.47% 3,777,144 42,805 4.53% 3,557,103 37,822 4.25%

Other assets, net 335,602 338,225 335,373

Total assets

Liabilities and shareholders' equity Interest-bearing

$ 4,212,388

$ 4,115,369

$ 3,892,476

Demand deposits	$ 846,189	116	0.05%	$ 830,172	118	0.06%	$ 792,204	125	0.06%
Savings deposits	1,274,868	397	0.12%	1,231,687	388	0.13%	1,156,710	357	0.12%
Time deposits	340,847	342	0.40%	347,742	337	0.39%	353,616	417	0.47%
Other borrowings	18,264	2	0.04%	10,189	1	0.04%	9,614	1	0.04%
Trust preferred securities	56,494	535	3.79%	56,345	505	3.59%	56,296	482	3.42%
Total interest-bearing liabilities	2,536,662	1,392	0.22%	2,476,135	1,349	0.22%	2,368,440	1,382	0.23%
Noninterest-bearing deposits	1,154,714	1,133,822	1,047,840
Other liabilities	59,492	54,999	51,495
Shareholders' equity	461,520	450,413	424,701
Total liabilities and shareholders' equity	$ 4,212,388	$ 4,115,369	$ 3,892,476
Net interest rate spread		4.25%	4.31%	4.02%
Net interest income/net interest margin (FTE)		41,940	4.33%	41,456	4.39%	36,440	4.10%
FTE adjustment		(538)	(315)	(97)
Net interest income (not FTE)		$ 41,402	$ 41,141	$ 36,343

The Company recorded a provision for loan losses of $209,000 during the three months ended March 31, 2016 compared to a provision for loan losses of $197,000 during the three months ended March 31, 2015. The $209,000 provision for loan losses during the three months ended March 31, 2016 was due to a $377,000 increase in the required allowance for loan losses from $36,011,000 at December 31, 2015 to $36,388,000 at March 31, 2016 that was partially offset by net recoveries of $168,000. The increase in the required allowance for loan losses was due primarily to reductions in estimated cash flows and collateral values for impaired originated and purchased loans, and a $18,610,000 increase in loan balances from $2,522,937,000 at December 31, 2015 to $2,541,547,000 at March 31, 2016. During the three months ended March 31, 2016 nonperforming loans decreased $13,085,000 (35.3%) to $24,034,000, and represented a decrease from 1.47% of loans outstanding as of December 31, 2015 to