TriCo Bancshares (TCBK) 8-K Trico Bancshares Announces Quarterly Results

Exhibit 99.1

PRESS RELEASE	Contact:	Richard P. Smith
For Immediate Release	President & CEO (530) 898-0300

TRICO BANCSHARES ANNOUNCES QUARTERLY RESULTS

CHICO, Calif. – (October 29, 2018) – TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $16,170,000 for the quarter ended September 30, 2018, compared to $15,029,000 and $11,897,000 for the trailing quarter and the three months ended September 30, 2017, respectively. Diluted earnings per share were $0.53 for the quarter ended September 30, 2018, compared to $0.65 and $0.51 for the trailing quarter and three months ended September 30, 2017. The growth in net income as compared to the trailing quarter is primarily related to the acquisition of FNB Bancorp (“FNBB”) that was completed on July 6, 2018. In addition, the company continued to benefit from the reduction in Federal income tax rate which declined to 21% effective January 1, 2018 as compared to 35% in prior periods.

Financial Highlights

Performance highlights and other developments for the Company included the following:

• For the three and nine months ended September 30, 2018, the Company’s return on average assets was 1.05% and 1.15% and the return on average equity was 9.11% and 10.44%.

• The Company completed the successful merger of FNBB effective July 6, 2018 with the systems integration being achieved just two weeks later.

• As of September 30, 2018, the Company reached record levels of total assets, total loans and total deposits which were $6.32 billion, $4.03 billion and $5.09 billion, respectively.

• The loan to deposit ratio increased to 79.1% at September 30, 2018 as compared to 77.2% at June 30, 2018 and 75.2% at December 31, 2017.

• Net interest margin grew 18 basis points to 4.32% on a tax equivalent basis as compared to 4.14% in the trailing quarter.

• Annualized organic loan and deposit growth during the nine months ended September 30, 3018 was 7.9% and 3.1%. During the current quarter, organic loan and deposit growth was 5.9% and 2.4% on an annualized basis.

• Non-interest bearing deposits as a percentage of total deposits were 33.6% at September 30, 2018 and June 30, 2018 as compared to 34.1% at December 31, 2017.

• The average rate of interest paid on deposits, including noninterest-bearing deposits, remained low and stable at 0.16%. This incorporates the impact of the FNBB deposit portfolio which had a 0.24% average cost of total deposits on the day of acquisition.

• Non-performing assets to total assets were 0.46% as of September 30, 2018 as compared to 0.55% and 0.58% at June 30, 2018 and December 31, 2017, respectively.

President and CEO, Rick Smith commented; “This is an exciting time for Tri Counties Bank. Our entry to the San Francisco Peninsula, with the acquisition of twelve full service branches and an experienced management team from First National Bank of Northern California provides us new and expanded growth opportunities with both potential and existing relationships in that market. The pace of integration between Tri Counties Bank and First National Bank of Northern California demonstrates the commitment of personnel from both institutions to achieve success and also, the complimentary nature of the cultures that have been brought together. As of the end of the quarter, our acquisition related restructuring activities are nearly complete and thenon-recurring costs associated with those activities are on track with budget. We look forward to realizing the synergies made possible by bringing a broader array of financial services with solutions to the deeply rooted relationships that were established during First National Bank’s 55 year history.”

Summary Results

The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:

	Three months ended
	September 30,
(dollars and shares in thousands)	2018			2017			$ Change			% Change
Net interest income	$	60,489		$	44,084		$	16,405			37.2	%
Provision for loan losses		2,651			765			1,886
Noninterest income		12,186			12,930			(744	)		(5.8	%)
Noninterest expense		(47,378	)		(37,222	)		(10,156	)		27.3	%
Provision for income taxes		(6,476	)		(7,130	)		654			(9.2	%)
Net income	$	16,170		$	11,897		$	4,273			35.9	%
Diluted earnings per share	$	0.53		$	0.51		$	0.02			4.3	%
Dividends per share	$	0.17		$	0.17		$	—			0.0	%
Average common shares		30,011			22,932			7,079			30.9	%
Average diluted common shares		30,291			23,244			7,047			30.3	%
Return on average total assets		1.05	%		1.04	%
Return on average equity		9.11	%		9.38	%
Efficiency ratio		65.19	%		65.29	%
	Three months ended
	September 30,			June 30,
(dollars and shares in thousands)	2018			2018			$ Change			% Change
Net interest income	$	60,489		$	45,869		$	14,620			31.9	%
Provision for (benefit from) loan losses		2,651			(638	)		3,289
Noninterest income		12,186			12,174			12			0.1	%
Noninterest expense		(47,378	)		(37,870	)		(9,508	)		25.1	%
Provision for income taxes		(6,476	)		(5,782	)		(694	)		12.0	%
Net income	$	16,170		$	15,029		$	1,141			7.6	%
Diluted earnings per share	$	0.53		$	0.65		$	(0.11	)		(17.3	%)
Dividends per share	$	0.17		$	0.17		$	—			0.0	%
Average common shares		30,011			22,983			7,028			30.6	%
Average diluted common shares		30,291			23,276			7,015			30.1	%
Return on average total assets		1.05	%		1.25	%
Return on average equity		9.11	%		11.78	%
Efficiency ratio		65.19	%		65.24	%

	Nine months ended
	September 30,
(dollars and shares in thousands)	2018			2017			$ Change			% Change
Net interest income	$	151,344		$	129,511		$	21,833			16.9	%
Provision for (benefit from) loan losses		1,777			(1,588	)		3,365
Noninterest income		36,650			37,543			(893	)		(2.4	%)
Noninterest expense		(123,410	)		(108,948	)		(14,462	)		13.3	%
Provision for income taxes		(17,698	)		(22,129	)		4,431			(20.0	%)
Net income	$	45,109		$	37,565		$	7,544			20.1	%
Diluted earnings per share	$	1.76		$	1.62		$	0.14			8.9	%
Dividends per share	$	0.51		$	0.49		$	0.02			4.1	%
Average common shares		25,317			22,901			2,416			10.5	%
Average diluted common shares		25,617			23,239			2,378			10.2	%
Return on average total assets		1.15	%		1.11	%
Return on average equity		10.44	%		10.09	%
Efficiency ratio		65.65	%		65.22	%

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

Ending balances	As of September 30,						Acquired		Organic			Organic
($’s in thousands)	2018		2017		$ Change		Balances		$ Change			% Change
Total assets	$	6,318,865	$	4,656,435	$	1,662,430	$	1,463,199	$	199,231			4.3	%
Total loans		4,027,436		2,931,613		1,095,823		834,683		261,140			8.9	%
Total investments		1,535,953		1,231,759		304,194		335,667		(31,473	)		(2.6	%)
Total deposits	$	5,093,117	$	3,927,456	$	1,165,661	$	991,935	$	173,726			4.4	%
Qtrly avg balances	As of September 30,						Acquired		Organic			Organic
($’s in thousands)	2018		2017		$ Change		Balances		$ Change			% Change
Total assets	$	6,168,344	$	4,572,424	$	1,595,920	$	1,463,199	$	132,721			2.9	%
Total loans		4,028,462		2,878,944		1,149,518		834,683		314,835			10.9	%
Total investments		1,490,065		1,250,207		239,858		335,667		(95,809	)		(7.7	%)
Total deposits	$	5,068,841	$	3,878,183	$	1,190,658	$	991,935	$	198,723			5.1	%

Overall results for the three and nine months ended September 30, 2018 were primarily benefited by the acquisition of First National Bank of Northern California, the wholly owned subsidiary of FNB Bancorp, effective July 6, 2018. In connection with the acquisition and subsequent integration and restructuring, the Company incurred a variety of expenses. During the three and nine month periods ended September 30, 2018 totalnon-interest expenses increased by $10,156,000 and $14,462,000 as compared to the same periods in 2017. Thenon-recurring costs included in those increases were $4,150,000 and $5,227,000 for the three and nine months ended September 30, 2018.

In addition to the $834,683,000 in loans acquired, recorded net of a $33,417,000 discount, organic loan growth totaled $177,588,000 or an annualized rate of 7.9% during the first nine months of 2018.    In addition to the $991,935,000 in acquired deposits, organic deposit growth for the first nine months of 2018 was $92,051,000 or 3.1% on an annualized basis. Total assets acquired from FNB Bancorp totaled $1,306,539,000, inclusive of the core deposit intangible. Goodwill associated with the acquisition of FNB Bancorp was $156,661,000 and the core deposit intangible, which will be amortized over an estimated weighted average life of 6.2 years, was $27,605,000.

Net Interest Income and Net Interest Margin

The following is a summary of the components of net interest income for the periods indicated:

	Three months ended
	September 30,
(dollars in thousands)	2018			2017			$ Change			% Change
Interest income	$	64,554		$	45,913		$	18,641			40.6	%
Interest expense		(4,065	)		(1,829	)		(2,236	)		122.3	%
FTE adjustment		357			624			(267	)		(42.8	%)
Net interest income (FTE)	$	60,846		$	44,708		$	16,138			36.1	%
Net interest margin (FTE)		4.32	%		4.24	%
Acquired loans discount accretion:
Amount (included in interest income)	$	2,098		$	1,364		$	734			53.8	%
Effect on average loan yield		0.21	%		0.19	%
Effect on net interest margin (FTE)		0.15	%		0.13	%
	Three months ended
	September 30,			June 30,
(dollars in thousands)	2018			2018			$ Change			% Change
Interest income	$	64,554		$	48,478		$	16,076			33.2	%
Interest expense		(4,065	)		(2,609	)		(1,456	)		55.8	%
FTE adjustment		357			313			44			14.1	%
Net interest income (FTE)	$	60,846		$	46,182		$	14,664			31.8	%
Net interest margin (FTE)		0.25	%		0.16	%
Acquired loans discount accretion:
Amount (included in interest income)	$	2,098		$	559		$	1,539			275.3	%
Effect on average loan yield		0.21	%		0.07	%
Effect on net interest margin (FTE)		0.15	%		0.05	%
	Nine months ended
	September 30,
(dollars in thousands)	2018			2017			$ Change			% Change
Interest income	$	160,153		$	134,441		$	25,712			19.1	%
Interest expense		(8,809	)		(4,930	)		(3,879	)		78.7	%
FTE adjustment		982			1,874			(892	)		(47.6	%)
Net interest income (FTE)	$	152,326		$	131,385		$	20,941			15.9	%
Net interest margin (FTE)		4.21	%		4.21	%
Acquired loans discount accretion:
Amount (included in interest income)	$	3,289		$	5,075		$	(1,786	)		(35.2	%)
Effect on average loan yield		0.13	%		0.24	%
Effect on net interest margin (FTE)		0.09	%		0.16	%

Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or accreted (added to) interest income over the remaining life of the loan. Generally, as time goes on, the effects of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining (unaccreted) discount or (unamortized) premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. During the three and nine months ended September 30, 2018 purchased loan discount accretion was $2,098,000 and $3,289,000; for the three and nine months ended September 30, 2017 purchased loan accretion was $1,364,000 and $5,075,000. The changes in volume of interest earning assets and interest bearing liabilities contributed an additional $15,937,000 in interest income while the changes in rates contributed $201,000 during the current quarter as compared to the quarter ended September 30, 2017. The decreases in Federal tax equivalent yield adjustment are due to the changes in tax rate changes which became effective on January 1, 2018 whereby the Federal tax rate was reduced from 35% to 21%.

The following table shows the components of net interest income and net interest margin on a fullytax-equivalent (FTE) basis for the periods indicated:

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

	Three Months Ended September 30, 2018							Three Months Ended June 30, 2018							Three Months Ended September 30, 2017
	Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate
Assets
Loans	$	4,028,462	$	53,102		5.27	%	$	3,104,126	$	39,304		5.06	%	$	2,878,944	$	37,268		5.18	%
Investments - taxable		1,336,361		9,648		2.89	%		1,122,534		7,736		2.76	%		1,114,112		7,312		2.63	%
Investments - nontaxable(1)		153,704		1,546		4.02	%		136,126		1,355		3.98	%		136,095		1,665		4.89	%
Total investments		1,490,065		11,194		3.00	%		1,258,660		9,091		2.89	%		1,250,207		8,977		2.87	%
Cash at Federal Reserve and other banks		119,635		615		2.06	%		94,874		396		1.67	%		85,337		292		1.37	%
Total earning assets		5,638,162		64,911		4.61	%		4,457,660		48,791		4.38	%		4,214,488		46,537		4.42	%
Other assets, net		530,182							356,863							357,936
Total assets	$	6,168,344						$	4,814,523						$	4,572,424
Liabilities and shareholders’ equity
Interest-bearing demand deposits	$	1,125,159		248		0.09	%	$	995,528		214		0.09	%	$	949,348		206		0.09	%
Savings deposits		1,803,022		833		0.18	%		1,393,121		427		0.12	%		1,365,249		419		0.12	%
Time deposits		430,286		991		0.92	%		313,556		593		0.76	%		310,325		403		0.52	%
Total interest-bearing deposits		3,358,467		2,072		0.25	%		2,702,205		1,234		0.18	%		2,624,922		1,028		0.16	%
Other borrowings		246,637		1,178		1.91	%		139,307		586		1.68	%		65,234		149		0.91	%
Junior subordinated debt		56,973		815		5.72	%		56,928		789		5.54	%		56,784		652		4.59	%
Total interest-bearing liabilities		3,662,077		4,065		0.44	%		2,898,440		2,609		0.36	%		2,746,940		1,829		0.27	%
Noninterest-bearing deposits		1,710,374							1,339,905							1,253,261
Other liabilities		86,131							65,745							64,834
Shareholders’ equity		709,762							510,433							507,389
Total liabilities and shareholders’ equity	$	6,168,344						$	4,814,523						$	4,572,424
Net interest rate spread (1) (2)						4.17	%						4.02	%						4.15	%
Net interest income and net interest margin (1) (3)			$	60,846		4.32	%			$	46,182		4.14	%			$	44,708		4.24	%

⁽¹⁾  Fully taxable equivalent (FTE)

⁽²⁾  Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

⁽³⁾  Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.

Net interest income (FTE) during the three months ended September 30, 2018 increased $16,138,000 or 36.1% to $60,846,000 compared to $44,708,000 during the three months ended September 30, 2017. The increase in net interest income (FTE) was due primarily to an increase in the average balance of loans and a 9 basis point increase in yield on loans, which was partially offset due to an increase in the average balance of interest-bearing liabilities and a 17 basis point increase in the average rate paid on interest-bearing liabilities.

The index utilized in a significant portion of the Company’s variable rate loans, Wall Street Journal Prime, has increased by 1.00% to 5.25% at September 30, 2018 as compared to 4.25% at September 30, 2017. The 9 basis point increase in loan yields from 5.18% during the three months ended September 30, 2017 to 5.27% during the three months ended September 30, 2018 was primarily due to increases in market rates. More specifically, increases in purchased loan discount accretion between the three months ended September 30, 2018 and 2017 contributed to an increase net interest margin by only 2 basis points.    More importantly, yields on loans increased 21 basis points as compared to the prior quarter from 5.06% for the three months ended June 30, 2018 of which 14 basis points were contributed by increases in loan discount accretion and the remaining 7 basis points were contributed by changes in the coupon rate associated with loans. On their acquisition date, the weighted average coupon rate was 4.88% for loans acquired during the three month period ended September 30, 2018.

The increase in the average rate paid on interest-bearing liabilities for the trailing and comparable quarters of 8 basis points and 17 basis points, respectively, was due in part to differences in market rates associated with deposits acquired from First National Bank of Northern California and to increases in the variable rates paid on other borrowings and subordinated debt. The weighted average rate associated with interest bearing acquired deposits was 0.29% fornon-time deposits and 0.92% for time deposits on the day of acquisition. The rate paid on other borrowings was 2.31% at September 30, 2018 as compared to 2.05% and 1.11% as of the trailing quarter and the same quarter in the prior year, respectively.

The following table shows the components of net interest income and net interest margin on a fullytax-equivalent (FTE) basis for the periods indicated:

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

	Nine Months Ended September 30, 2018							Nine Months Ended September 30, 2017
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate
Assets
Loans	$	3,390,447	$	130,455		5.13	%	$	2,807,453	$	108,600		5.16	%
Investments - taxable		1,195,541		25,042		2.79	%		1,076,887		21,637		2.68	%
Investments - nontaxable(1)		142,061		4,254		3.99	%		136,213		4,998		4.89	%
Total investments		1,337,602		29,296		2.92	%		1,213,100		26,635		2.93	%
Cash at Federal Reserve and other banks		101,889		1,384		1.81	%		139,739		1,080		1.03	%
Total earning assets		4,829,938		161,135		4.45	%		4,160,292		136,315		4.37	%
Other assets, net		416,520							359,489
Total assets	$	5,246,458						$	4,519,781
Liabilities and shareholders’ equity
Interest-bearing demand deposits	$	1,038,775		673		0.09	%	$	931,079		534		0.08	%
Savings deposits		1,524,048		1,671		0.15	%		1,364,812		1,253		0.12	%
Time deposits		350,559		2,058		0.78	%		321,150		1,109		0.46	%
Total interest-bearing deposits		2,913,382		4,402		0.20	%		2,617,041		2,896		0.15	%
Other borrowings		165,026		2,106		1.70	%		34,413		164		0.64	%
Junior subordinated debt		56,928		2,301		5.39	%		56,737		1,870		4.39	%
Total interest-bearing liabilities		3,135,336		8,809		0.37	%		2,708,191		4,930		0.24	%
Noninterest-bearing deposits		1,462,209							1,247,201
Other liabilities		72,772							67,854
Shareholders’ equity		576,141							496,535
Total liabilities and shareholders’ equity	$	5,246,458						$	4,519,781
Net interest rate spread (1) (2)						4.08	%						4.13	%
Net interest income and net interest margin (1) (3)			$	152,326		4.21	%			$	131,385		4.21	%

⁽¹⁾  Fully taxable equivalent (FTE)

⁽²⁾  Net interest spread is the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

⁽³⁾  Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets.

Net interest income (FTE) during the nine months ended September 30, 2018 increased $20,941,000 or 15.9% to $152,326,000 compared to $131,385,000 during the nine months ended September 30, 2017. The increase in net interest income (FTE) was due primarily to an increase in the average balance of loans, which was partially offset by an increase in the average balance of interest-bearing liabilities and a 13 basis point increase in the average rate paid on interest-bearing liabilities.

During the nine months ended September 30, 2018, the average balance of loans increased by $582,994,000 or 20.8% to $3,390,447,000. The increase in net interest income was partially offset by a decrease in theyear-to-date purchased loan discount accretion from $5,075,000 during the nine months ended September 30, 2017 to $3,289,000 during the nine months ended September 30, 2018. This decrease in purchased loan discount accretion reduced loan yields by 11 basis points, and net interest margin by 7 basis points. The 13 basis point increase in the average rate paid on interest-bearing liabilities was primarily due to increases in market rates that increased the rates the Company pays on its time deposits, overnight borrowings, and junior subordinated debt.

Also affecting net interest margin during the three and nine months ended September 30, 2018, was the decrease in the Federal tax rate from 35% to 21%. This decrease in the Federal tax rate caused the fullytax-equivalent (FTE) yield on the Company’s nontaxable investments to decrease from 4.89% during the nine months ended September 30, 2017 to 3.99% during the nine months ended September 30, 2018.

Asset Quality and Loan Loss Provisioning

The Company recorded provisions for loan losses of $2,651,000 and $765,000 during the three months ended September 30, 2018 and 2017, respectively. While the Company did record net charge-offs of $572,000 during the third quarter of 2018 as compared to net charge-offs of $161,000 in the 2017 quarter, the primary cause for the increase in provision for loan losses was due to changes in the Company’s analysis of qualitative factors associated with the

California economy. More specifically, the Company has become more cautious about the risks associated with trends in California real estate prices and the decrease in affordability of housing in the markets served by the Company. Loan growth, excluding acquired loans, also contributed to the need for additional provisioning.

During the nine months ended September 30, 2018 the Company recorded a loan loss provision of $1,777,000 as compared to a reversal of provision for loan losses of $1,588,000 during the nine months ended September 30, 2017. Nonperforming loans were $27,148,000, or 0.67% of loans outstanding as of September 30, 2018, compared to $25,420,000, or 0.81% of loans outstanding as of June 30, 2018 and $24,394,000 or 0.81% of loans outstanding as of December 31, 2017. The fair value of loans acquired with deteriorated credit quality during the current quarter totaled $1,302,000.

The Company continued to experience improvement in the overall credit quality of its loan portfolio. At September 30, 2018 loans past due greater than thirty days totaled $13,218,000 or 0.33% of loans outstanding, as compared to $11,626,000 or 0.37% at June 30, 2018 and $11,609,000 or 0.39% at December 31, 2017. At September 30, 2018, classified loans totaled $45,548,000 (1.13% of total loans) compared to $44,202,000 (1.40%) and $53,593,000 (1.78%) at June 30, 2018 and December 31, 2017, respectively.

Non-interest Income

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

	Three months ended
	September 30,
(dollars in thousands)	2018			2017			$ Change			% Change
ATM fees and interchange	$	4,590		$	4,209		$	381			9.1	%
Service charges on deposit accounts		4,015			4,160			(145	)		(3.5	%)
Other service fees		676			917			(241	)		(26.3	%)
Mortgage banking service fees		499			514			(15	)		(2.9	%)
Change in value of mortgage servicing rights		(37	)		(325	)		288			(88.6	%)
Total service charges and fees		9,743			9,475			268			2.8	%
Commission on nondeposit investment products		728			672			56			8.3	%
Increase in cash value of life insurance		732			732			—			0.0	%
Gain on sale of loans		539			606			(67	)		(11.1	%)
Lease brokerage income		186			234			(48	)		(20.5	%)
Gain on sale of investment securities		207			961			(754	)		(78.5	%)
Gain on sale of foreclosed assets		2			37			(35	)		(94.6	%)
Other noninterest income		49			213			(164	)		(77.0	%)
Total other noninterest income		2,443			3,455			(1,012	)		(29.3	%)
Total noninterest income	$	12,186		$	12,930		$	(744	)		(5.8	%)

Noninterest income decreased $744,000 (5.8%) to $12,186,000 during the three months ended September 30, 2018 compared to the three months ended September 30, 2017. The decrease in noninterest income was due to the changes noted in the table above. The decrease of $241,000 (26.3%) in other service fees was caused primarily by a decrease in merchant residual income due to the lagging effect of transitioning to a new processor, decreasing from $362,000 during the three months ended September 30, 2017 to $161,000 during the three months ended September 30, 2018. Gains from sales of investments securities decreased by $754,000 (78.5%) due to less sales activity during the three month period ending September 30, 2018. Offsetting the decreases innon-interest income was an increase of $288,000 (88.6%) in change in value of mortgage servicing rights (MSRs) due to slight decreases in estimated prepayment speeds during the three months ended September 30, 2018.

	Nine months ended
	September 30,
(dollars in thousands)	2018		2017			$ Change			% Change
ATM fees and interchange	$	13,301	$	12,472		$	829			6.6	%
Service charges on deposit accounts		11,407		12,102			(695	)		(5.7	%)
Other service fees		2,054		2,521			(467	)		(18.5	%)
Mortgage banking service fees		1,527		1,561			(34	)		(2.2	%)
Change in value of mortgage servicing rights		38		(795	)		833			(104.8	%)
Total service charges and fees		28,327		27,861			466			1.7	%
Commission on nondeposit investment products		2,414		1,984			430			21.7	%
Increase in cash value of life insurance		1,996		2,043			(47	)		(2.3	%)
Gain on sale of loans		1,831		2,293			(462	)		(20.1	%)
Lease brokerage income		514		601			(87	)		(14.5	%)
Gain on sale of investment securities		207		961			(754	)		(78.5	%)
Gain on sale of foreclosed assets		390		308			82			26.6	%
Other noninterest income		971		1,492			(521	)		(34.9	%)
Total other noninterest income		8,323		9,682			(1,359	)		(14.0	%)
Total noninterest income	$	36,650	$	37,543		$	(893	)		(2.4	%)

Noninterest income decreased $893,000 (2.4%) to $36,650,000 during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. The decrease in noninterest income was due to the changes noted in the table above. The $695,000 (5.7%) decrease in service charges on deposit accounts was made up of a $688,000 (10%) decrease in nonsufficient fund (NSF) fees to $6,220,000, and a $7,000 (0.1%) decrease in other deposit account service charges to $5,188,000. The decrease in NSF fees was due primarily to continued growth in customer adoption of the Company’s digital services that improves the ability of customers to manage funds and avoid overdrafts. The decrease in other deposit service charges was due primarily to the rapid growth of customer adoption ofe-Statements that reduces statement fees. While both of these revenue generating activities decreased, the Company has a net benefit through a reduction in actual operational costs. The decrease of $467,000 (18.5%) in other service fees was caused primarily by a decrease in merchant residual income due to the lagging effect of transitioning to a new processor, decreasing from $890,000 during the prior nine month period to $471,000 during the nine months ended September 30, 2018. Gains from sales of investments securities decreased by $754,000 (78.5%) due to less sales activity during the nine month period ending September 30, 2018. The $833,000 (104.8%) increase in change in value of mortgage servicing rights (MSRs) was due to slight decreases in prepayment speeds during the nine months ended September 30, 2018. During the nine months ended September 30, 2017, the Company recorded othernon-interest income of $490,000 related to the termination of a loss sharing agreement with the FDIC.

Non-interest Expense

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

	Three months ended
	September 30,
(dollars in thousands)	2018		2017		$ Change			% Change
Base salaries, overtime and temporary help, net of deferred loan origination costs	$	17,051	$	13,600	$	3,451			25.4	%
Commissions and incentives		3,223		2,609		614			23.5	%
Employee benefits		5,549		4,724		825			17.5	%
Total salaries and benefits expense		25,823		20,933		4,890			23.4	%
Occupancy		3,173		2,799		374			13.4	%
Data processing and software		2,786		2,495		291			11.7	%
Merger and acquisition expense		4,150		—		4,150
Equipment		1,750		1,816		(66	)		(3.6	%)
ATM and POS network charges		1,195		1,425		(230	)		(16.1	%)
Advertising		1,341		1,039		302			29.1	%
Professional fees		929		901		28			3.1	%
Telecommunications		819		716		103			14.4	%
Regulatory assessments and insurance		537		427		110			25.8	%
Intangible amortization		1,390		339		1,051			310.0	%
Postage		275		325		(50	)		(15.4	%)
Courier service		278		235		43			18.3	%
Operational losses		217		301		(84	)		(27.9	%)
Other miscellaneous expense		2,715		3,471		(756	)		(21.8	%)
Total other noninterest expense		21,555		16,289		5,266			32.3	%
Total noninterest expense	$	47,378	$	37,222	$	10,156			27.3	%
Average full time equivalent employees		1,146		993		153			15.4	%

Salary and benefit expenses increased $4,890,000 (23.4%) to $25,823,000 during the three months ended September 30, 2018 compared to $20,933,000 during the three months ended September 30, 2017. Base salaries, net of deferred loan origination costs increased $3,451,000 (25.4%) to $17,051,000. The increase in base salaries was primarily due to the additional full-time equivalent employees acquired with the FNBB merger. Average full-time equivalent employees increased by 153 or 15.4% during the comparable quarters. In addition, increases in base salaries due to annual merit increases and the addition of employees with base salaries above the average base salary also contributed to the increase. Commissions and incentive compensation increased $614,000 (23.5%) to $3,223,000 during the three months ended September 30, 2018 compared to theyear-ago quarter. Benefits & other compensation expense increased $825,000 (17.5%) to $5,549,000 during the three months ended September 30, 2018 due primarily to the increase in full time equivalent employees and to a lesser extent an increase in health insurance expense. Severance and other merger relatednon-recurring compensation costs are included with “merger and acquisition expense” in the table above.

Other noninterest expense increased $5,266,000 (32.3%) to $21,555,000 during the three months ended September 30, 2018 compared to the three months ended September 30, 2017.    The increase in other noninterest expense was due to the changes noted in the table above. During the three months ended September 30, 2018, the Company incurred $4,150,000 of merger related expense associated with the merger with FNB Bancorp.

	Nine months ended
	September 30,
(dollars in thousands)	2018		2017		$ Change			% Change
Base salaries, overtime and temporary help, net of deferred loan origination costs	$	45,442	$	40,647	$	4,795			11.8	%
Commissions and incentives		7,834		6,980		854			12.2	%
Employee benefits		15,652		14,693		959			6.5	%
Total salaries and benefits expense		68,928		62,320		6,608			10.6	%
Occupancy		8,574		8,196		378			4.6	%
Data processing and software		7,979		7,332		647			8.8	%
Merger and acquisition expense		5,227		—		5,227
Equipment		4,938		5,344		(406	)		(7.6	%)
ATM and POS network charges		3,858		3,353		505			15.1	%
Advertising		3,214		3,173		41			1.3	%
Professional fees		2,475		2,357		118			5.0	%
Telecommunications		2,201		2,027		174			8.6	%
Regulatory assessments and insurance		1,384		1,252		132			10.5	%
Intangible amortization		2,068		1,050		1,018			97.0	%
Postage		934		1,058		(124	)		(11.7	%)
Courier service		769		752		17			2.3	%
Operational losses		763		1,166		(403	)		(34.6	%)
Other miscellaneous expense		10,098		9,568		530			5.5	%
Total other noninterest expense		54,482		46,628		7,854			16.8	%
Total noninterest expense	$	123,410	$	108,948	$	14,462			13.3	%
Average full time equivalent employees		1,050		1,005		45			4.5	%

Salary and benefit expenses increased $6,608,000 (10.6%) to $68,928,000 during the nine months ended September 30, 2018 compared to $62,320,000 during the nine months ended September 30, 2017. Base salaries, net of deferred loan origination costs increased $4,795,000 (11.8%) to $45,442,000. The increase in base salaries was primarily due to the additional full-time equivalent employees acquired with the FNBB merger. Average full-time equivalent employees increased by 45 or 4.5% during the comparable nine month periods. In addition, increases in base salaries due to annual merit increases and the addition of employees with base salaries above the average base salary also contributed to the increase. Commissions and incentive compensation increased $854,000 (12.2%) to $7,834,000 during the nine months ended September 30, 2018 compared to the prioryear-to-date period. Benefits & other compensation expense increased $959,000 (6.5%) to $15,652,000 during the nine months ended September 30, 2018 due primarily to the increase in full time equivalent employees and to a lesser extent an increase in health insurance expense.

Other noninterest expense increased $7,854,000 (16.8%) to $54,482,000 during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017.    The increase in other noninterest expense was due to the changes noted in the table above. During the nine months ended September 30, 2018, the Company incurred $5,227,000 of merger related expense associated with the merger with FNB Bancorp.

Balance Sheet

In addition to the balance sheet changes which resulted from the acquisition of FNB Bancorp, total assets grew by $199,231,000 between September 2017 and September 2018. This growth was led by $261,140,000 related to organic loan growth which was funded by $31,473,000 in normally scheduled payments on investment securities, $173,726,000 in organic deposit growth and an increase in other borrowings of $19,101,000. Total equity increased to $802,115,000 at September 30, 2018 as compared to $512,344,000 at the close of the trailing quarter and inclusive of $26,959,000 and $21,123,000 in accumulated other comprehensive loss at the same periods. As a result the Company’s book value per share increased to $26.37 from $22.27 per share at June 30, 2018. Based on a net increase in intangible assets of $182,876,000 and an increase in total shares outstanding of 7,413,655, the Company’s tangible book value decreased to $18.10 per share from $19.28 per share at June 30, 2018.

About TriCo Bancshares

Established in 1975, Tri Counties Bank is a wholly-owned subsidiary of TriCo Bancshares (NASDAQ: TCBK) headquartered in Chico, California, providing a unique brand of customer Service with Solutions available in traditional stand-alone andin-store bank branches in communities throughout Northern and Central California. Tri Counties Bank provides an extensive and competitive breadth of consumer, small business and commercial banking financial services, along with convenientaround-the-clock ATM, online and mobile banking access. Brokerage services are provided by the Bank’s investment services through affiliation with Raymond James Financial Services, Inc. Visit www.TriCountiesBank.com to learn more.

Forward-Looking Statement

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. There can be no assurance that future developments affecting us will be the same as those anticipated by management. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the impact of changes in financial services policies, laws and regulations; technological changes; mergers and acquisitions; changes in the level of our nonperforming assets and charge-offs; any deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting standards and practices; possible other-than-temporary impairment of securities held by us; changes in consumer spending, borrowing and savings habits; our ability to attract deposits and other sources of liquidity; changes in the financial performance and/or condition of our borrowers; the impact of competition from other financial service providers; the possibility that any of the anticipated benefits of our recent merger with FNBB will not be realized or will not be realized within the expected time period, or that integration of FNBB’s operations will be more costly or difficult than expected; the challenges of integrating and retaining key employees; unanticipated regulatory or judicial proceedings; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and our ability to manage the risks involved in the foregoing. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form10-K for the year ended December 31, 2017, which is on file with the Securities and Exchange Commission (the “SEC”) and available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results.

TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands, except share data)

	Three months ended
	September 30,			June 30,			March 31,			December 31,			September 30,
	2018			2018			2018			2017			2017
Revenue and Expense Data
Interest income	$	64,554		$	48,478		$	47,121		$	46,961		$	45,913
Interest expense		4,065			2,609			2,135			1,868			1,829
Net interest income		60,489			45,869			44,986			45,093			44,084
Provision for (benefit from) loan losses		2,651			(638	)		(236	)		1,677			765
Noninterest income:
Service charges and fees		9,743			9,228			9,356			9,562			9,475
Gain on sale of investment securities		207			—			—			—			961
Other income		2,236			2,946			2,934			2,916			2,494
Total noninterest income		12,186			12,174			12,290			12,478			12,930
Noninterest expense:
Salaries and benefits		25,823			21,453			21,652			20,610			20,933
Occupancy and equipment		5,056			4,357			4,232			4,495			4,615
Data processing and network		3,981			4,116			3,740			4,515			3,920
Other noninterest expense		12,518			7,944			8,538			8,456			7,754
Total noninterest expense		47,378			37,870			38,162			38,076			37,222
Total income before taxes		22,646			20,811			19,350			17,818			19,027
Net income	$	16,170		$	15,029		$	13,910		$	2,989		$	11,897
Share Data
Basic earnings per share	$	0.54		$	0.65		$	0.61		$	0.13		$	0.52
Diluted earnings per share	$	0.53		$	0.65		$	0.60		$	0.13		$	0.51
Dividends per share	$	0.17		$	0.17		$	0.17		$	0.17		$	0.17
Book value per common share	$	26.37		$	22.27		$	22.01		$	22.03		$	22.09
Tangible book value per common share(1)	$	18.10		$	19.28		$	19.00		$	19.01		$	19.04
Shares outstanding		30,417,818			23,004,153			22,956,323			22,955,963			22,941,464
Weighted average shares		30,011,307			22,983,439			22,956,239			22,944,523			22,931,855
Weighted average diluted shares		30,291,225			23,276,471			23,283,127			23,289,545			23,244,235
Credit Quality
Past due greater than 30 days	$	13,218		$	11,626		$	20,416		$	11,609		$	11,571
Nonperforming originated loans		17,087			17,077			16,080			15,463			11,689
Total nonperforming loans		27,148			25,420			24,381			24,394			21,955
Total nonperforming assets		28,980			26,794			25,945			27,620			25,026
Loanscharged-off		1,142			318			480			627			862
Loans recovered	$	570		$	507		$	366		$	526		$	701
Selected Financial Ratios
Return on average total assets		1.05	%		1.25	%		1.17	%		0.26	%		1.04	%
Return on average equity		9.11	%		11.78	%		11.00	%		2.33	%		9.38	%
Average yield on loans		5.27	%		5.06	%		5.03	%		5.18	%		5.18	%
Average yield on interest-earning assets		4.61	%		4.38	%		4.33	%		4.44	%		4.42	%
Average rate on interest-bearing deposits		0.25	%		0.18	%		0.16	%		0.16	%		0.16	%
Average cost of total deposits		0.16	%		0.12	%		0.11	%		0.11	%		0.11	%
Average rate on borrowings and subordiated debt		2.63	%		2.80	%		2.52	%		2.72	%		2.63	%
Average rate on interest-bearing liabilities		0.44	%		0.36	%		0.30	%		0.27	%		0.27	%
Net interest margin (fullytax-equivalent)		4.32	%		4.14	%		4.14	%		4.26	%		4.24	%
Loans to deposits		79.08	%		77.17	%		75.16	%		75.21	%		74.64	%
Efficiency ratio		65.19	%		65.24	%		66.63	%		66.14	%		65.29	%
Supplemental Loan Interest Income Data:
Discount accretion on acquired loans	$	2,098		$	559		$	632		$	1,489		$	1,364
All other loan interest income		51,004			38,745			37,417			36,705			35,904
Total loan interest income	$	53,102		$	39,304		$	38,049		$	38,194		$	37,268

Note:

⁽¹⁾  Tangible book value per share is calculated by subtracting Goodwill and Other intangible assets from Total shareholders’ equity and dividing that result by the shares outstanding at the end of the period.

TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands)

	Three months ended
	September 30,			June 30,			March 31,			December 31,			September 30,
	2018			2018			2018			2017			2017
Balance Sheet Data
Cash and due from banks	$	226,543		$	184,062		$	182,979		$	205,428		$	188,034
Securities, available for sale		1,058,806			757,075			738,785			730,883			678,236
Securities, held to maturity		459,897			477,745			496,035			514,844			536,567
Restricted equity securities		17,250			16,956			16,956			16,956			16,956
Loans held for sale		3,824			3,601			2,149			4,616			2,733
Loans:
Commercial loans		289,645			237,619			216,015			220,500			227,479
Consumer loans		421,287			350,925			348,789			365,113			361,320
Real estate mortgage loans		3,132,202			2,401,040			2,359,379			2,291,995			2,194,874
Real estate construction loans		184,302			156,729			145,550			137,557			147,940
Total loans, gross		4,027,436			3,146,313			3,069,733			3,015,165			2,931,613
Allowance for loan losses		(31,603	)		(29,524	)		(29,973	)		(30,323	)		(28,747	)
Total loans, net		3,995,833			3,116,789			3,039,760			2,984,842			2,902,866
Foreclosed assets		1,832			1,374			1,564			3,226			3,071
Premises and equipment		89,290			59,014			58,558			57,742			54,995
Cash value of life insurance		116,596			99,047			98,391			97,783			97,142
Goodwill		220,972			64,311			64,311			64,311			64,311
Other intangible assets		30,711			4,496			4,835			5,174			5,513
Accrued interest receivable		19,592			14,253			12,407			13,772			12,656
Other assets		77,719			64,430			63,227			61,738			93,355
Total assets	$	6,318,865		$	4,863,153		$	4,779,957		$	4,761,315		$	4,656,435
Deposits:
Noninterest-bearing demand deposits	$	1,710,505		$	1,369,834		$	1,359,996		$	1,368,218		$	1,283,949
Interest-bearing demand deposits		1,152,705			1,006,331			1,022,299			971,459			965,480
Savings deposits		1,801,087			1,385,268			1,395,481			1,364,518			1,367,597
Time certificates		428,820			315,789			306,628			304,936			310,430
Total deposits		5,093,117			4,077,222			4,084,404			4,009,131			3,927,456
Accrued interest payable		1,729			1,175			958			930			867
Other liabilities		82,077			62,623			67,393			66,422			65,839
Other borrowings		282,831			152,839			65,041			122,166			98,730
Junior subordinated debt		56,996			56,950			56,905			56,858			56,810
Total liabilities	$	5,516,750		$	4,350,809		$	4,274,701		$	4,255,507		$	4,149,702
Common stock		541,519			256,590			256,226			255,836			255,231
Retained earnings		287,555			276,877			266,235			255,200			256,114
Accumulated other comprehensive loss		(26,959	)		(21,123	)		(17,205	)		(5,228	)		(4,612	)
Total shareholders’ equity	$	802,115		$	512,344		$	505,256		$	505,808		$	506,733
Average Balance Data
Average loans	$	4,028,462		$	3,104,126		$	3,028,178		$	2,948,277		$	2,878,944
Average interest-earning assets	$	5,638,162		$	4,457,660		$	4,380,596		$	4,289,656		$	4,214,488
Average total assets	$	6,168,344		$	4,814,523		$	4,741,227		$	4,658,677		$	4,572,424
Average deposits	$	5,068,841		$	4,042,110		$	4,004,332		$	3,961,422		$	3,878,183
Average borrowings and subordinated debt	$	303,610		$	196,235		$	164,663		$	118,606		$	122,018
Average total equity	$	709,762		$	510,433		$	506,013		$	513,007		$	507,389
Capital Ratio Data
Total risk based capital ratio		13.9	%		13.9	%		13.9	%		14.1	%		14.4	%
Tier 1 capital ratio		13.2	%		13.1	%		13.0	%		13.2	%		13.6	%
Tier 1 common equity ratio		12.0	%		11.7	%		11.6	%		11.7	%		12.1	%
Tier 1 leverage ratio		10.7	%		10.9	%		10.8	%		10.8	%		11.0	%
Tangible capital ratio		9.1	%		9.3	%		9.3	%		9.3	%		9.5	%

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