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

Exhibit 99.1

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

TRICO BANCSHARES ANNOUNCES QUARTERLY AND ANNUAL RESULTS

CHICO,CA – (January 29, 2019) – TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $23,211,000 for the quarter ended December 31, 2018, compared to $2,989,000 for the fourth quarter of 2017. Diluted earnings per share were $0.76 for the fourth quarter of 2018, compared to $0.13 for the fourth quarter of 2017. Net income was $68,320,000 for the year ended December 31, 2018, compared to $40,554,000 for the year ended December 31, 2017. Diluted earnings per share were $2.54 for the year ended December 31, 2018, compared to $1.74 for the year ended December 31, 2017.

Net income for the twelve months ended December 31, 2018 and 2017 includes $5,227,000 and $530,000, respectively, of the FNB Bancorp (FNBB) related merger and acquisition expenses. Excluding the impact of the FNBB merger expenses, net of income taxes, net income totaled $72,327,000 for the year ended December 31, 2018, or $2.69 per diluted share. Net income for the fourth quarter of 2017 includes income tax expense of $7,416,000 due to there-measurement of the Company’s net deferred tax asset (“DTA”) resulting from the Tax Cuts and Jobs Act of 2017. Excluding the impact of the FNBB related merger expenses, net of tax, and the DTAre-measurement, net income totaled $48,462,000 for the year ended December 31, 2017, or $2.08 per diluted share.

Financial Highlights

Performance highlights and other developments for the Company during the three and twelve months ended December 31, 2018 included the following:

• For the three and twelve months ended December 31, 2018, the Company’s return on average assets was 1.47% and 1.24% and the return on average equity was 11.40% and 10.75%.

• As of December 31, 2018, the Company reached record levels of total assets and total deposits which were $6.35 billion and $5.37 billion, respectively.

• The loan to deposit ratio remained stable at 74.9% at December 31, 2018 as compared to 75.2% at December 31, 2017.

• Net interest margin grew 14 basis points to 4.46% on a tax equivalent basis as compared to 4.32% in the trailing quarter.

• Non-interest bearing deposits as a percentage of total deposits were 32.8% at December 31, 2018 as compared to 34.1% at December 31, 2017.

• The average rate of interest paid on deposits, including noninterest-bearing deposits, remained low at 0.20%, an increase of 4 basis points from the trailing quarter.

• Non-performing assets to total assets were 0.47% as of December 31, 2018 as compared to 0.46% and 0.58% at September 30, 2018 and December 31, 2017, respectively.

• Revenue growth and operational changes resulted in notable improvement in the efficiency ratio which was 59.1% for the quarter ended December 31, 2018 as compared to 65.2% in the trailing quarter and 66.1% in the same quarter of the prior year.

President and CEO, Rick Smith commented, “We are very pleased with the Bank’s strong financial results for 2018. In addition to consistent organic loan and deposit growth, the completion of the acquisition of First National Bank of Northern California in July of this year provided meaningful scale that drove improvement in both our net interest margin and operational efficiency.”

Smith continued, “While TriCo’s franchise covers twenty nine counties across Northern California and the Central Valley, we remain mindful of the communities that were impacted by natural disasters. Our Company and our employees will continue to play a leadership role in driving the restoration efforts and we are continually thankful to those who have partnered with us and who have been so generous with their support.”

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 December 31,
(dollars and shares in thousands)	2018			2017			$ Change			% Change
Net interest income	$	64,002		$	45,093		$	18,909			41.9	%
Prevision for loan losses		(806	)		(1,677	)		871			nm
Noninterest income		12,634			12,478			156			1.3	%
Noninterest expense		(45,285	)		(38,076	)		(7,209	)		18.9	%
Provision for income taxes		(7,334	)		(14,829	)		7,495			(50.5	%)
Net income	$	23,211		$	2,989		$	20,222			676.5	%
Diluted earnings per share	$	0.76		$	0.13		$	0.63			484.6	%
Dividends per share	$	0.19		$	0.17		$	0.02			11.8	%
Average common shares		30,423			22,945			7,478			32.6	%
Average diluted common shares		30,672			23,290			7,382			31.7	%
Return on average total assets		1.47	%		0.26	%
Return on average equity		11.40	%		2.33	%
Efficiency ratio		59.09	%		66.14	%
	Three months ended
	December 31,			September 30,
(dollars and shares in thousands)	2018			2018			$ Change			% Change
Net interest income	$	64,002		$	60,489		$	3,513			5.8	%
Provision for loan losses		(806	)		(2,651	)		1,845			nm
Noninterest income		12,634			12,186			448			3.7	%
Noninterest expense		(45,285	)		(47,378	)		2,093			(4.4	%)
Provision for income taxes		(7,334	)		(6,476	)		(858	)		13.2	%
Net income	$	23,211		$	16,170		$	7,041			43.5	%
Diluted earnings per share	$	0.76		$	0.53		$	0.23			42.4	%
Dividends per share	$	0.19		$	0.17		$	0.02			11.8	%
Average common shares		30,423			30,011			412			1.4	%
Average diluted common shares		30,672			30,291			381			1.3	%
Return on average total assets		1.47	%		1.05	%
Return on average equity		11.40	%		9.11	%
Efficiency ratio		59.09	%		65.19	%

	Twelve months ended December 31,
(dollars and shares in thousands)	2018			2017			$ Change			% Change
Net interest income	$	215,346		$	174,604		$	40,742			23.3	%
Provision for loan losses		(2,583	)		(89	)		(2,494	)		nm
Noninterest income		49,284			50,021			(737	)		(1.5	%)
Noninterest expense		(168,695	)		(147,024	)		(21,671	)		14.7	%
Provision for income taxes		(25,032	)		(36,958	)		11,926			(32.3	%)
Net income	$	68,320		$	40,554		$	27,766			68.5	%
Diluted earnings per share	$	2.54		$	1.74		$	0.80			46.0	%
Dividends per share	$	0.70		$	0.66		$	0.04			6.1	%
Average common shares		26,593			22,912			3,681			16.1	%
Average diluted common shares		26,881			23,250			3,631			15.6	%
Return on average total assets		1.24	%		0.89	%
Return on average equity		10.75	%		8.10	%
Efficiency ratio		63.75	%		65.45	%

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

Ending balances	As of December 31,						Acquired Balances		Organic $ Change			Organic % Change
($’s in thousands)	2018		2017		$ Change
Total assets	$	6,352,441	$	4,761,315	$	1,591,126	$	1,463,200	$	127,926			2.7	%
Total loans		4,022,014		3,015,165		1,006,849		834,683		172,166			5.7	%
Total investments		1,580,096		1,262,683		317,413		335,667		(18,254	)		(1.4	%)
Total deposits	$	5,366,466	$	4,009,131	$	1,357,335	$	991,935	$	365,400			9.1	%
Qtrly avg balances	As of December 31,						Acquired Balances		Organic $ Change			Organic % Change
($’s in thousands)	2018		2017		$ Change
Total assets	$	6,325,130	$	4,658,677	$	1,666,453	$	1,463,200	$	203,253			4.4	%
Total loans		4,022,651		2,948,277		1,074,374		834,683		239,691			8.1	%
Total investments		1,523,094		1,254,868		268,226		335,667		(67,441	)		(5.4	%)
Total deposits	$	5,253,123	$	3,961,422	$	1,291,701	$	991,935	$	299,766			7.6	%

Overall results for the three and twelve months ended December 31, 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 twelve month periods ended December 31, 2018 totalnon-interest expenses increased by $7,209,000 (18.9%) and $21,671,000 (14.7%) as compared to the same periods in 2017. There were no merger related costs incurred in the fourth quarter of 2018. Costs related to the merger were $5,227,000 for the twelve months ended December 31, 2018, as compared to $530,000 during the year ended December 31, 2017.

In addition to the $834,683,000 in loans acquired, recorded net of a $33,417,000 discount, organic loan growth totaled $172,166,000 (5.7%) during 2018. Organic deposit growth for 2018 was $365,400,000 (9.1%) in addition to the $991,935,000 in acquired deposits. 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 December 31,
(dollars in thousands)	2018			2017			$ Change			% Change
Interest income	$	68,065		$	46,961		$	21,104			44.9	%
Interest expense		(4,063	)		(1,868	)		(2,195	)		117.5	%
FTE adjustment		322			625			(303	)		(48.5	%)
Net interest income (FTE)	$	64,324		$	45,718		$	18,606			40.7	%
Net income margin (FTE)		4.46	%		4.26	%
Acquired loans discount accretion:
Amount (included in interest income)	$	1,982		$	1,498		$	484			32.3	%
Effect on average loan yield		0.20	%		0.20	%
Effect on net interest margin (FTE)		0.14	%		0.14	%
	Three months ended December 31,
(dollars in thousands)	2018			2017			$ Change			% Change
Interest income	$	228,218		$	181,402		$	46,816			25.8	%
Interest expense		(12,872	)		(6,798	)		(6,074	)		89.3	%
FTE adjustment		1,304			2,499			(1,195	)		(47.8	%)
Net interest income (FTE)	$	216,650		$	177,103		$	39,547			22.3	%
Net income margin (FTE)		4.28	%		4.22	%
Acquired loans discount accretion:
Amount (included in interest income)	$	5,271		$	6,564		$	(1,293	)		(19.7	%)
Effect on average loan yield		0.15	%		0.23	%
Effect on net interest margin (FTE)		0.10	%		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 twelve months ended December 31, 2018, purchased loan discount accretion was $1,982,000 and $5,271,000, respectively; for the three and twelve months ended December 31, 2017, purchased loan accretion was $1,498,000 and $6,564,000, respectively. The changes in volume of interest earning assets and interest bearing liabilities contributed an additional $15,601,000 in interest income while the changes in rates contributed $3,005,000 during the current quarter as compared to the quarter ended December 31, 2017. The decreases in Federal tax equivalent yield adjustment are due to 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 December 31, 2018							Three Months Ended September 30, 2018							Three Months Ended December 31, 2017
	Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate
Assets
Loans	$	4,022,651	$	55,662		5.53	%	$	4,028,462	$	53,102		5.27	%	$	2,948,277	$	38,194		5.18	%
Investments – taxable		1,380,693		8,955		2.59	%		1,336,361		9,648		2.89	%		1,118,547		7,459		2.67	%
Investments – nontaxable(1)		142,401		1,395		3.92	%		153,704		1,546		4.02	%		136,321		1,666		4.89	%
Total investments		1,523,094		10,350		2.72	%		1,490,065		11,194		3.00	%		1,254,868		9,125		2.91	%
Cash at Federal Reserve and other banks		220,317		2,375		4.31	%		119,635		615		2.06	%		86,211		267		1.24	%
Total earning assets		5,766,062		68,387		4.74	%		5,638,162		64,911		4.61	%		4,289,356		47,586		4.44	%
Other assets, net		559,068							530,182							369,021
Total assets	$	6,325,130						$	6,168,344						$	4,658,377
Liabilities and shareholders’ equity
Interest-bearing demand deposits	$	1,184,999		272		0.09	%	$	1,125,159		248		0.09	%	$	964,827		210		0.09	%
Savings deposits		1,868,664		1,132		0.24	%		1,803,022		833		0.18	%		1,380,384		430		0.12	%
Time deposits		460,555		1,190		1.03	%		430,286		991		0.92	%		307,446		422		0.55	%
Total interest-bearing deposits		3,514,218		2,594		0.30	%		3,358,467		2,072		0.25	%		2,652,657		1,062		0.16	%
Other borrowings		122,410		639		2.09	%		246,637		1,178		1.91	%		61,769		141		0.91	%
Junior subordinated debt		57,016		830		5.82	%		56,973		815		5.72	%		56,837		665		4.68	%
Total interest-bearing liabilities		3,693,644		4,063		0.44	%		3,662,077		4,065		0.44	%		2,771,263		1,868		0.27	%
Noninterest-bearing deposits		1,738,905							1,710,374							1,308,765
Other liabilities		78,136							86,131							65,642
Shareholders’ equity		814,445							709,762							513,007
Total liabilities and shareholders’ equity	$	6,325,130						$	6,168,344						$	4,658,677
Net interest rate spread(1)(2)						4.30	%						4.17	%						4.17	%
Net interest income and net interest margin(1)(3)			$	64,324		4.46	%			$	60,846		4.32	%			$	45,718		4.26	%

⁽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 December 31, 2018 increased $3,478,000 or 5.7% to $64,324,000 compared to $60,846,000 during the three months ended September 30, 2018. The increase in net interest income (FTE) was due primarily to an increase in the average rates on loans which increased 26 basis points.

The index utilized in a significant portion of the Company’s variable rate loans, Wall Street Journal Prime, has increased by 1.00% to 5.50% at December 31, 2018 as compared to 4.50% at December 31, 2017. The 35 basis point increase in loan yields from 5.18% during the three months ended December 31, 2017 to 5.53% during the three months ended December 31, 2018 was due to increases in market rates. More specifically, there was no change on the effect purchased loan discount accretion had to net interest margin between the three months ended December 31, 2018 and September 30, 2018.    More importantly, yields on loans increased 26 basis points as compared to the prior quarter from 5.27% for the three months ended September 30, 2018 of which 28 basis points were contributed by changes in the coupon rate associated with loans, offset by a decrease of 2 basis points attributed to the decreased impact from accretion of purchased loans.

The impact of changes in rates and volumes of interest bearing liabilities resulted in neutral impact as interest expense declined by $2,000 during the quarter. Comparing the quarter ended December 31, 2018 to the trailing quarter the total cost of interest bearing liabilities remained unchanged at 0.44% but increased 17 basis points from the same quarter in the prior year 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 average rate paid on other borrowings was 2.09% at December 31, 2018 as compared to 1.91% and 0.91% as of the trailing quarter and the same quarter in the prior year, respectively.

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

	Twelve Months Ended December 31, 2018							Twelve Months Ended December 31, 2017
	Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate
Assets
Loans	$	3,548,498	$	186,117		5.24	%	$	2,842,659	$	146,794		5.16	%
Investments – taxable		1,241,829		33,997		2.74	%		1,087,302		29,096		2.68	%
Investments – nontaxable(1)		142,146		5,649		3.97	%		136,240		6,664		4.89	%
Total investments		1,383,975		39,646		2.86	%		1,223,542		35,760		2.92	%
Cash at Federal Reserve and other banks		131,496		3,759		2.86	%		126,432		1,347		1.07	%
Total earning assets		5,063,969		229,522		4.53	%		4,192,633		183,901		4.39	%
Other assets, net		452,157							361,872
Total assets	$	5,516,126						$	4,554,505
Liabilities and shareholders’ equity
Interest-bearing demand deposits	$	1,075,331		945		0.09	%	$	939,516		744		0.08	%
Savings deposits		1,610,202		2,803		0.17	%		1,368,705		1,683		0.12	%
Time deposits		378,058		3,248		0.86	%		317,724		1,531		0.48	%
Total interest-bearing deposits		3,063,591		6,996		0.23	%		2,625,945		3,958		0.15	%
Other borrowings		154,372		2,745		1.78	%		41,252		305		0.74	%
Junior subordinated debt		56,950		3,131		5.50	%		56,762		2,535		4.47	%
Total interest-bearing liabilities		3,274,913		12,872		0.39	%		2,723,959		6,798		0.25	%
Noninterest-bearing deposits		1,531,383							1,262,592
Other liabilities		74,113							67,301
Shareholders’ equity		635,717							500,653
Total liabilities and shareholders’ equity	$	5,516,126						$	4,554,505
Net interest rate spread(1)(2)						4.14	%						4.14	%
Net interest income and net interest margin(1)(3)			$	216,650		4.28	%			$	177,103		4.22	%

⁽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 year ended December 31, 2018 increased $39,547,000 or 22.3% to $216,650,000 compared to $177,103,000 during the year ended December 31, 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 14 basis point increase in the average rate paid on interest-bearing liabilities.

During the twelve months ended December 31, 2018, the average balance of loans increased by $705,839,000 (24.8%) to $3,548,498,000. The increase in net interest income was partially offset by a decrease in theyear-to-date purchased loan discount accretion from $6,564,000 during the year ended December 31, 2017 to $5,271,000 during the year ended December 31, 2018. This decrease in purchased loan discount accretion reduced loan yields by 8 basis points, and net interest margin by 6 basis points. The 14 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 twelve months ended December 31, 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 2017 to 3.97% during 2018.

Asset Quality and Loan Loss Provisioning

The Company recorded provision for loan losses of $806,000 during the three months ended December 31, 2018 as compared to a provision of $1,677,000 in the prior year quarter. While the Company did record net recoveries of $172,000 during the fourth quarter of 2018 as compared to net charge-offs of $101,000 in the 2017 quarter, the primary cause for the increase in provision for loan losses was due to estimated losses related to the Camp Fire. As of December 31, 2018 the Company had established reserves totaling $3,250,000 related to the Camp Fire. While the Company remains cautious about the risks associated with trends in California real estate prices and the affordability of housing in the markets served by the Company, changes in affordability and energy related index rates improved during the quarter ended December 31, 2018. The qualitative factors associated with these two measures reduced the level of calculated required reserves by approximately $2,000,000.

During the twelve months ended December 31, 2018 the Company recorded a loan loss provision of $2,583,000 as compared to a loan loss provision of $89,000 during the twelve months ended December 31, 2017. Nonperforming loans were $27,494,000, or 0.68% of loans outstanding as of December 31, 2018, compared to $27,148,000, or 0.67% of loans outstanding as of September 30, 2018 and $24,394,000 or 0.81% of loans outstanding as of December 31, 2017.

Provision for Income Taxes

The Company’s effective tax rate was 24.0% and 26.8%, respectively, for the quarter and year ended December 31, 2018. During the quarter ended December 31, 2018, the Company made certain tax method elections in order to benefit from the change in corporate tax rates associated with the Tax Cut and Jobs Act of 2017. As a result, the provision for income taxes was benefited by approximately $1,058,000. Absent this benefit, the Company’s effective tax rate would have been 27.5% and 27.9% for the quarter and year ended December 31, 2018, respectively.

Non-interest Income

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

	Three months ended December 31,
(dollars in thousands)	2018			2017		$ Change			% Change
ATM fees and interchange	$	4,914		$	4,255	$	659			15.5	%
Service charges on deposit accounts		4,059			3,954		105			2.7	%
Other service fees		832			761		71			9.3	%
Mortgage banking service fees		511			515		(4	)		(0.8	%)
Change in value of mortgage servicing rights		(184	)		77		(261	)		(339.0	%)
Total service charges and fees		10,132			9,562		570			6.0	%
Commission on nondeposit investment products		737			745		(8	)		(1.1	%)
Increase in cash value of life insurance		722			642		80			12.5	%
Gain on sale of loans		540			816		(276	)		(33.8	%)
Lease brokerage income		164			181		(17	)		(9.4	%)
Gain on sale of foreclosed assets		18			403		(385	)		(95.5	%)
Other noninterest income		321			129		192			148.8	%
Total other noninterest income		2,502			2,916		(414	)		(14.2	%)
Total noninterest income	$	12,634		$	12,478	$	156			1.3	%

Noninterest income increased $156,000 (1.3%) to $12,634,000 during the three months ended December 31, 2018 compared to the three months ended December 31, 2017. The increase in noninterest income was due primarily to a $659,000 (15.5%) increase in ATM fees and interchange and a $105,000 (2.7%) increase in service charges on deposit accounts. The increases in noninterest income as compared to the prior year quarter were offset by decreases in gain on sale of loans of $276,000 (33.8%) and gain on sale of foreclosed assets of $385,000 (95.5%). The $276,000 decrease in gain on sale of loans was due primarily to decreased residential mortgage refinance activity compared to theyear-ago quarter during a rising rate environment.

	Twelve months ended December 31,
(dollars in thousands)	2018			2017			$ Change			% Change
ATM fees and interchange	$	18,249		$	16,727		$	1,522			9.1	%
Service charges on deposit accounts		15,467			16,056			(589	)		(3.7	%)
Other service fees		2,852			3,282			(430	)		(13.1	%)
Mortgage banking service fees		2,038			2,076			(38	)		(1.8	%)
Change in value of mortgage servicing rights		(146	)		(718	)		572			(79.7	%)
Total service charges and fees		38,460			37,423			1,037			2.8	%
Commission on nondeposit investment products		3,151			2,729			422			15.5	%
Increase in cash value of life insurance		2,718			2,685			33			1.2	%
Gain on sale of loans		2,371			3,109			(738	)		(23.7	%)
Gain on sale of investment securities		207			961			(754	)		(78.5	%)
Lease brokerage income		678			782			(104	)		(13.3	%)
Gain on sale of foreclosed assets		408			711			(303	)		(42.6	%)
Other noninterest income		1,291			1,621			(330	)		(20.4	%)
Total other noninterest income		10,824			12,598			(1,774	)		(14.1	%)
Total noninterest income	$	49,284		$	50,021		$	(737	)		(1.5	%)

Noninterest income decreased $737,000 (1.5%) to $49,284,000 during the twelve months ended December 31, 2018 compared to the twelve months ended December 31, 2017. The decrease in noninterest income was due primarily to decreases in gain on sale of loans of $738,000 (23.7%), gain on sale of investment securities of $754,000 (78.5%), gain on sale of foreclosed assets of $303,000 (42.6%), and decreases of $330,000 (20.4%) in miscellaneous income were partially offset by an increase in commissions onnon-deposit investment products of $422,000 (15.5%). Additionally, service charges and fees increased by $1,037,000 (2.8%). The increase in service charges and fees was driven by an increase in ATM fees and interchange of $1,522,000 (9.1%).

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

	Three months ended December 31,
(dollars in thousands)	2018		2017		$ Change			% Change
Base salaries, overtime and temporary help, net of deferred loan origination costs	$	16,980	$	13,942	$	3,038			21.8	%
Commissions and incentives		3,313		2,247		1,066			47.4	%
Employee benefits		4,721		4,421		300			6.8	%
Total salaries and benefits expense		25,014		20,610		4,404			21.4	%
Occupancy		3,565		2,698		867			32.1	%
Data processing and software		3,042		3,116		(74	)		(2.4	%)
Equipment		1,713		1,797		(84	)		(4.7	%)
ATM and POS network charges		1,413		1,399		14			1.0	%
Advertising		1,364		928		436			47.0	%
Intangible amortization		1,431		339		1,092			322.1	%
Professional fees		1,071		1,388		(317	)		(22.8	%)
Telecommunications		822		686		136			19.8	%
Regulatory assessments and insurance		522		424		98			23.1	%
Courier service		518		283		235			83.0	%
Operational losses		497		228		269			118.0	%
Postage		220		238		(18	)		(7.6	%)
Merger and acquisition expense		—		530		(530	)		(100.0	%)
Other miscellaneous expense		4,093		3,412		681			20.0	%
Total other noninterest expense		20,271		17,466		2,805			16.1	%
Total noninterest expense	$	45,285	$	38,076	$	7,209			18.9	%
Average full time equivalent employees		1,134		985		149			15.1	%

Salary and benefit expenses increased $4,404,000 (21.4%) to $25,014,000 during the three months ended December 31, 2018 compared to $20,610,000 during the three months ended December 31, 2017. Base salaries, net of deferred loan origination costs increased $3,038,000 (21.8%) to $16,980,000. The increase in base salaries was due primarily to a 15.1% increase in average full time equivalent employees to 1,134 from 985 in theyear-ago quarter. Commissions and incentive compensation increased $1,066,000 (47.4%) to $3,313,000 during the three months ended December 31, 2018 compared to theyear-ago quarter due primarily to organic loan and deposit growth. Benefits & other compensation expense increased $300,000 (6.8%) to $4,721,000 during the three months ended December 31, 2018 due primarily to increases in the average full time equivalent employees, as mentioned above.

Other noninterest expense increased $2,805,000 (16.1%) to $20,271,000 during the three months ended December 31, 2018 compared to the three months ended December 31, 2017. The increase in other noninterest expense was due primarily to increased costs related to the merger of FNBB. Highlighting those increases were intangible amortization, occupancy, and advertising, which increased by $1,092,000, $867,000 and $436,000, respectively, as compared to the prior year quarter. The increases in noninterest expenses were partially offset by decreased professional fees and merger & acquisition expenses of $317,000 and $530,000, respectively.

	Twelve months ended December 31,
(dollars in thousands)	2018		2017		$ Change			% Change
Base salaries, overtime and temporary help, net of deferred loan origination costs	$	62,422	$	54,589	$	7,833			14.3	%
Commissions and incentives		11,147		9,227		1,920			20.8	%
Employee benefits		20,373		19,114		1,259			6.6	%
Total salaries and benefits expense		93,942		82,930		11,012			13.3	%
Occupancy		12,139		10,894		1,245			11.4	%
Data processing and software		11,021		10,448		573			5.5	%
Equipment		6,651		7,141		(490	)		(6.9	%)
Merger and acquisition expense		5,227		530		4,697			886.2	%
ATM and POS network charges		5,271		4,752		519			10.9	%
Advertising		4,578		4,101		477			11.6	%
Professional fees		3,546		3,745		(199	)		(5.3	%)
Intangible amortization		3,499		1,389		2,110			151.9	%
Telecommunications		3,023		2,713		310			11.4	%
Regulatory assessments and insurance		1,906		1,676		230			13.7	%
Courier service		1,287		1,035		252			24.3	%
Operational losses		1,260		1,394		(134	)		(9.6	%)
Postage		1,154		1,296		(142	)		(11.0	%)
Other miscellaneous expense		14,191		12,980		1,211			9.3	%
Total other noninterest expense		74,753		64,094		10,659			16.6	%
Total noninterest expense	$	168,695	$	147,024	$	21,671			14.7	%
Average full time equivalent employees		1,071		1,000		71			7.1	%

Salary and benefit expenses increased $11,012,000 (13.3%) to $93,942,000 during the twelve months ended December 31, 2018 compared to $82,930,000 during the prior twelve months ended December 31, 2017. Base salaries, net of deferred loan origination costs increased $7,833,000 (14.3%) to $62,422,000. The increase in base salaries was due primarily to a 7.1% increase in average full time equivalent employees to 1,071 from 1,000 in the prioryear-to-date period. Also affecting the increase in base salaries were annual merit increases and a higher wage base from the acquired employees of FNBB due to the Bay Area region’s higher cost of living. Commissions and incentive compensation increased $1,920,000 (20.8%) to $11,147,000 during 2018 compared to 2017 primarily due to organic growth of loans and deposits. Benefits & other compensation expense increased $1,259,000 (6.6%) to $20,373,000 during the year ended December 31, 2018 due primarily to increases in the average full time equivalent employees, as mentioned above.

Other noninterest expense increased $10,659,000 (16.6%) to $74,753,000 during the year ended December 31, 2018 compared to the year ended December 31, 2017. The increase in other noninterest expense was due primarily to increased costs related to the merger of FNBB. Highlighting some of those increases were merger expenses, increases in intangible amortization, occupancy, data processing, and advertising, which increased by $4,697,000, $2,110,000, $1,245,000, $573,000, and $477,000, respectively, as compared to the prior year. The increases in noninterest expenses were partially offset by decreased equipment expenses and professional fees of $490,000 and $199,000, respectively.

Balance Sheet

In addition to the balance sheet changes which resulted from the acquisition of FNB Bancorp, total assets grew by $127,926,000 between December 2017 and December 2018. This growth was led by $172,166,000 related to organic loan growth which was funded by $365,400,000 in organic deposit growth. Total equity increased to $827,373,000 at December 31, 2018 as compared to $802,115,000 at the close of the trailing quarter and inclusive of $17,879,000 and $26,959,000 in accumulated other comprehensive loss at the same periods. As a result the Company’s book value per share increased to $27.20 at December 31, 2018 from $26.37 per share at September 30, 2018. The Company’s tangible book value, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, increased to $18.97 per share at December 31, 2018 from $18.10 per share at September 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 – CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands, except share data)

	Three months ended
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017
Revenue and Expense Data
Interest income	$	68,065		$	64,554		$	48,478		$	47,121		$	46,961
Interest expense		4,063			4,065			2,609			2,135			1,868
Net interest income		64,002			60,489			45,869			44,986			45,093
Provision for (benefit from) loan losses		806			2,651			(638	)		(236	)		1,677
Noninterest income:
Service charges and fees		10,132			9,743			9,228			9,356			9,562
Gain on sale of investment securities		—			207			—			—			—
Other income		2,502			2,236			2,946			2,934			2,916
Total noninterest income		12,634			12,186			12,174			12,290			12,478
Noninterest expense:
Salaries and benefits		25,014			25,823			21,453			21,652			20,610
Occupancy and equipment		5,278			5,056			4,357			4,232			4,495
Data processing and network		4,455			3,981			4,116			3,740			4,515
Other noninterest expense		10,538			12,518			7,944			8,538			8,456
Total noninterest expense		45,285			47,378			37,870			38,162			38,076
Total income before taxes		30,545			22,646			20,811			19,350			17,818
Net income	$	23,211		$	16,170		$	15,029		$	13,910		$	2,989
Share Data
Basic earnings per share	$	0.76		$	0.54		$	0.65		$	0.61		$	0.13
Diluted earnings per share	$	0.76		$	0.53		$	0.65		$	0.60		$	0.13
Dividends per share	$	0.19		$	0.17		$	0.17		$	0.17		$	0.17
Book value per common share	$	27.20		$	26.37		$	22.27		$	22.01		$	22.03
Tangible book value per common share(1)	$	18.97		$	18.10		$	19.28		$	19.00		$	19.01
Shares outstanding		30,417,223			30,417,818			23,004,153			22,956,323			22,955,963
Weighted average shares		30,422,687			30,011,307			22,983,439			22,956,239			22,944,523
Weighted average diluted shares		30,671,723			30,291,225			23,276,471			23,283,127			23,289,545
Credit Quality
Past due greater than 30 days	$	17,368		$	13,218		$	11,626		$	20,416		$	11,609
Nonperforming originated loans		19,416			17,087			17,077			16,080			15,463
Total nonperforming loans		27,494			27,148			25,420			24,381			24,394
Total nonperforming assets		29,774			28,980			26,794			25,945			27,620
Loans charged-off		424			1,142			318			480			627
Loans recovered	$	596		$	570		$	507		$	366		$	526
Selected Financial Ratios
Return on average total assets		1.47	%		1.05	%		1.25	%		1.17	%		0.26	%
Return on average equity		11.40	%		9.11	%		11.78	%		11.00	%		2.33	%
Average yield on loans		5.53	%		5.27	%		5.06	%		5.03	%		5.18	%
Average yield on interest-earning assets		4.74	%		4.61	%		4.38	%		4.33	%		4.44	%
Average rate on interest-bearing deposits		0.30	%		0.25	%		0.18	%		0.16	%		0.16	%
Average cost of total deposits		0.20	%		0.16	%		0.12	%		0.11	%		0.11	%
Average rate on borrowings and subordinated debt		3.27	%		2.63	%		2.80	%		2.52	%		2.72	%
Average rate on interest-bearing liabilities		0.44	%		0.44	%		0.36	%		0.30	%		0.27	%
Net interest margin (fully tax-equivalent)		4.46	%		4.32	%		4.14	%		4.14	%		4.26	%
Loans to deposits		74.95	%		79.08	%		77.17	%		75.16	%		75.21	%
Efficiency ratio		59.09	%		65.19	%		65.24	%		66.63	%		66.14	%
Supplemental Loan Interest Income Data:
Discount accretion on acquired loans	$	1,982		$	2,098		$	559		$	632		$	1,489
All other loan interest income		53,680			51,004			38,745			37,417			36,705
Total loan interest income	$	55,662		$	53,102		$	39,304		$	38,049		$	38,194

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 – CONDENSED CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands)

	Three months ended
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017
Balance Sheet Data
Cash and due from banks	$	227,533		$	226,543		$	184,062		$	182,979		$	205,428
Securities, available for sale		1,117,910			1,058,806			757,075			738,785			730,883
Securities, held to maturity		444,936			459,897			477,745			496,035			514,844
Restricted equity securities		17,250			17,250			16,956			16,956			16,956
Loans held for sale		3,687			3,824			3,601			2,149			4,616
Loans:
Commercial loans		276,548			289,645			237,619			216,015			220,500
Consumer loans		418,982			421,287			350,925			348,789			365,113
Real estate mortgage loans		3,143,100			3,132,202			2,401,040			2,359,379			2,291,995
Real estate construction loans		183,384			184,302			156,729			145,550			137,557
Total loans, gross		4,022,014			4,027,436			3,146,313			3,069,733			3,015,165
Allowance for loan losses		(32,582	)		(31,603	)		(29,524	)		(29,973	)		(30,323	)
Total loans, net		3,989,432			3,995,833			3,116,789			3,039,760			2,984,842
Foreclosed assets		2,280			1,832			1,374			1,564			3,226
Premises and equipment		89,347			89,290			59,014			58,558			57,742
Cash value of life insurance		117,318			116,596			99,047			98,391			97,783
Goodwill		220,972			220,972			64,311			64,311			64,311
Other intangible assets		29,280			30,711			4,496			4,835			5,174
Accrued interest receivable		19,412			19,592			14,253			12,407			13,772
Other assets		73,084			77,719			64,430			63,227			61,738
Total assets	$	6,352,441		$	6,318,865		$	4,863,153		$	4,779,957		$	4,761,315
Deposits:
Noninterest-bearing demand deposits	$	1,760,580		$	1,710,505		$	1,369,834		$	1,359,996		$	1,368,218
Interest-bearing demand deposits		1,252,366			1,152,705			1,006,331			1,022,299			971,459
Savings deposits		1,921,324			1,801,087			1,385,268			1,395,481			1,364,518
Time certificates		432,196			428,820			315,789			306,628			304,936
Total deposits		5,366,466			5,093,117			4,077,222			4,084,404			4,009,131
Accrued interest payable		1,997			1,729			1,175			958			930
Other liabilities		83,724			82,077			62,623			67,393			66,422
Other borrowings		15,839			282,831			152,839			65,041			122,166
Junior subordinated debt		57,042			56,996			56,950			56,905			56,858
Total liabilities	$	5,525,068		$	5,516,750		$	4,350,809		$	4,274,701		$	4,255,507
Common stock		541,762			541,519			256,590			256,226			255,836
Retained earnings		303,490			287,555			276,877			266,235			255,200
Accumulated other comprehensive loss		(17,879	)		(26,959	)		(21,123	)		(17,205	)		(5,228	)
Total shareholders’ equity	$	827,373		$	802,115		$	512,344		$	505,256		$	505,808
Average Balance Data
Average loans	$	4,022,651		$	4,028,462		$	3,104,126		$	3,028,178		$	2,948,277
Average interest-earning assets	$	5,766,062		$	5,638,162		$	4,457,660		$	4,380,596		$	4,289,656
Average total assets	$	6,325,130		$	6,168,344		$	4,814,523		$	4,741,227		$	4,658,677
Average deposits	$	5,253,123		$	5,068,841		$	4,042,110		$	4,004,332		$	3,961,422
Average borrowings and subordinated debt	$	179,426		$	303,610		$	196,235		$	164,663		$	118,606
Average real equity	$	814,445		$	709,762		$	510,433		$	506,013		$	513,007
Capital Ratio Data
Total risk based capital ratio		14.4	%		13.9	%		13.9	%		13.9	%		14.1	%
Tier 1 capital ratio		13.7	%		13.2	%		13.1	%		13.0	%		13.2	%
Tier 1 common equity ratio		12.5	%		12.0	%		11.7	%		11.6	%		11.7	%
Tier 1 leverage ratio		10.7	%		10.7	%		10.9	%		10.8	%		10.8	%
Tangible capital ratio		9.5	%		9.1	%		9.3	%		9.3	%		9.3	%

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