TRICO BANCSHARES / (TCBK) stock intrinsic value fair value estimate & owner earnings analysis

TriCo Bancshares is the holding company for Tri Counties Bank, a roughly $9.9 billion community bank serving Northern and Central California, funded by about $8.4 billion of deposits and lending mostly against real estate. We value it on a standalone basis. One important fact for anyone considering the shares: on July 15, 2026 TriCo agreed to be acquired by First Hawaiian in an all-stock deal at 2.095 First Hawaiian shares per TriCo share, expected to close in the fourth quarter of 2026 subject to shareholder and regulatory approvals. If it closes, TriCo holders will own First Hawaiian shares, which would need to be judged on their own merits. What the bank earns. For a bank, borrowing from depositors is the raw material of the business, so we count earnings after interest and do not subtract deposits as debt. Stock compensation is already deducted in those earnings. Earnings per diluted share were $1.94 in 2016, $1.74 in 2017 (reduced by a one-time $7.4 million deferred-tax charge from the 2017 tax law change), $2.54 in 2018 and $3.00 in 2019 as the FNB Bancorp acquisition came in, $2.16 in 2020 on pandemic loan-loss reserves, then $3.94, $3.83, $3.52, $3.46 and $3.70 in 2021 through 2025. The 2022 Valley Republic acquisition added shares, so some of the growth was bought rather than earned. We anchor on the median of 2021 to 2025, $3.70, because those years describe the bank as it exists now and span both the 2021-2022 peak and the 2023-2024 squeeze when deposit costs rose faster than loan yields. Earlier years describe a smaller bank. Earnings improved in 2025 as the net interest margin widened to 3.89% from 3.71% on lower deposit costs, and the first half of 2026 earned $2.10 per share against $1.63 a year earlier; the last four quarters have run at a steady $1.03 to $1.06 per share, about $4.15 annualized. Growth check. Earnings per share grew 7.0% in 2025 ($3.46 to $3.70). Our base case assumes about 6.8% for the next year ($3.95), which is below that trailing rate and below the first-half 2026 run rate. We deliberately sit below the $4.15 run rate because credit costs are low ($12.1 million provision in 2025, 0.14% net charge-offs) and we expect some normalization. Base case, $74.27 per share. Earnings of $3.95 next year, growing 3% a year through year five and 2% a year after that. The growth credited is modest and has support: deposits grew 2.2% in 2025, and the share count fell 1.9% in 2025 and another 1.1% in the first half of 2026 as the bank repurchased $32.0 million and then $24.2 million of stock out of its own cash. We do not credit new branches, new markets, further acquisitions, or a wider margin. Because a bank has historically had a credit bad patch roughly once a decade, we include one in year six: earnings fall 20% for a year (the 2020 pandemic year saw a 28% drop) and then resume their path. Beyond year ten we assume the earnings level simply persists, reduced by 7% to allow for future credit cycles, because the franchise has operated since 1975 and earned money through the 2008-2010 credit crisis; we credit no growth after year ten. There is no debt to subtract for a lender; value is entirely the earnings stream. Bear case, $49.89 per share. This is a full credit cycle of the kind the bank has actually lived through. In 2009 the bank's net loan losses ran at 1.53% of average loans, its profit fell about 40% from 2008, and its reserve rose to 2.36% of loans. Today 92.8% of loans are secured by real estate and $4.6 billion, or 67.6%, are commercial real estate. We apply that 1.5% loss rate for three years to roughly $7.0 billion of loans. Provisions of $70 million, $140 million, $120 million, $70 million and $35 million over years two through six (about $435 million, 6.2% of loans, against a current reserve of about $126 million) take pre-provision pre-tax profit of roughly $180 million down to net income of $118 million, $14 million, $29 million, $68 million and $97 million, then a recovery to $112 million, or $3.50 per share, which is the 2023-2024 earnings level when margins were squeezed. This also gives back the recent margin gain. No growth is credited afterward, and the same 7% allowance for later cycles applies. The bank never loses money in this case and tangible equity (10.7% of tangible assets at the end of 2025) stays well above regulatory needs, so no share issuance at trough prices is assumed; dividends would likely be cut for a few years. This case's value exceeds the bank's tangible book value of about $32 per share ($31.52 at December 31, 2025) because, even in this severe cycle, the franchise keeps its low-cost deposit base and returns to earning about $3.50 per share, a double-digit return on tangible equity. Bull case, $88.17 per share. The recent margin gain holds, earnings start at $4.20 and grow 4.5% a year for four years and 3.5% a year after that: deposit growth near the 2.2% seen in 2025 plus buybacks near the recent 1% to 2% a year pace. No credit downturn occurs in the decade, which the bank last experienced in 2012 to 2019. Nothing else is credited. What could make this wrong. Credit is the main exposure: nonperforming loans rose to 0.90% of loans at the end of 2025 from 0.65% a year earlier and 0.33% in 2022, mostly farmland loans added in 2025 ($55.4 million of new problem loans), and net charge-offs rose to $9.9 million from $2.6 million. Reserves cover those problem loans 1.96 times. The margin is the second exposure: if earnings revert to the $3.46 of 2024 and stay there, the base case is worth about $65 per share. California wildfire, earthquake and commercial-property risk are inherent to the loan book and not diversified away. Our earlier published figures (bear $35, base $60, bull $88) were prepared on a different basis and are not comparable. Margin-of-safety price, $24.00. We are sure of an earnings level of roughly $3.50 to $3.70 (the five-year range was $3.46 to $3.94), and less sure of the recent $4.15 pace, which depends on deposit costs staying low. The worst plausible outcome is a California real-estate downturn like 2009 scaled to today's loan book, with losses eating about three years of profit; the bank's capital and reserves would survive it, but dividends would be cut. Two things we may be most wrong about are credit losses (bear case) and the margin (the $65 outcome). The price assumes a holding period of about five years, with a dividend near $1.40 per share a year (37% of 2025 earnings, $45.0 million) while buybacks shrink the share count. In the bear case, a five-year holder would have collected roughly $5 of dividends and own a bank worth about $54 per share on the recovered $3.50 earnings, about $59 in total, which implies a 20% annual return only from a price of about $24. At that price the shares are about six times our $3.95 normal earnings and well under tangible book value, and the base case implies a return far above 20%. Hence $24. The price applies only if the First Hawaiian merger is terminated and TriCo continues as an independent bank.