What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-01 compared with 2022-03-01 · 94 added, 86 removed, 235 unchanged (43% of the section changed)

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on expectations, estimates, and projections as of the date of this filing.

Actual results may differ materially from those expressed in forward-looking statements.

See Item 1A of Part I — “Risk Factors.”

As used in this report, “TriCo,” the “Company”, “we,” “our,” and similar terms include TriCo Bancshares and its subsidiaries, unless the context indicates otherwise.

TriCo Bancshares is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”).

TriCo's principal business is to serve as the holding company for our wholly-owned subsidiary, Tri Counties Bank, a California-chartered commercial bank (the “Bank”) was established in Chico, California in 1975.

TriCo's principal business is to serve as the holding company for our wholly-owned subsidiary, Tri Counties Bank, a California-chartered commercial bank (the “Bank”).

TriCo is a California corporation and was incorporated in 1981.

6 unchanged sentences

For more information regarding the trust preferred securities please refer to “Note 14 – Junior Subordinated Debt” to the financial statements at Item 8 of this report.

Additional Information

Additional information concerning the Company can be found on our website at www.tcbk.com.

Our website is not incorporated into this report.

Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports are available free of charge through the investors relations page of our website, www.tcbk.com , as soon as reasonably practicable after the Company files these reports with the U.S.

Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports are available free of charge through the investors relations page of our website, www.tcbk.com/about/investor-relations , as soon as reasonably practicable after the Company files these reports with the U.S.

Securities and Exchange Commission (“SEC”).

7 unchanged sentences

Brokerage services are provided at the Bank’s offices by Tri Counties Wealth Management Advisors through the Bank’s arrangement with Raymond James Financial Services, Inc., an independent financial services provider and broker-dealer.

Over 80% of the Bank’s customers are personal banking customers.

Less than 20% are business and commercial banking customers serving a diverse number of industry types including manufacturing, real estate development, retail, wholesale, transportation, agriculture, commerce, and professional services.

The Bank offers a variety of banking and financial services to both personal, small business and commercial customers.

In many instances the owners or stakeholders of the business and commercial customers are also personal customers.

The industries that we serve are diverse in both number and type and include, but are not limited to, manufacturing, real estate development, retail, wholesale, transportation, agriculture, commerce, and professional services.

The majority of the Bank’s loans are direct loans made to individuals and businesses in California where its branches or business lending centers are located.

At December 31, 2021, the Bank’s consumer loans net of deferred fees outstanding were $1,071,551 (21.8%), commercial and industrial loans (including the Paycheck Protection Program [PPP] loans) outstanding were $259,355,000 (5.3%), real estate construction loans of $222,281,000 (4.5%), and commercial real estate loans were $3,306,054,000 (67.2%) of total loans.

At December 31, 2022, the Bank’s consumer loans net of deferred fees outstanding were $1,240,743,000 (19.2%), commercial and industrial loans outstanding were $569,921,000 (8.8%), real estate construction loans of $211,560,000 (3.3%), and commercial real estate loans were $4,359,083,000 (67.6%) of total loans.

The Bank takes real estate, listed and unlisted securities, savings and time deposits, automobiles, machinery, equipment, inventory, accounts receivable and notes receivable secured by property as collateral for loans.

2 unchanged sentences

Merger with Valley Republic Bancorp

On July 27, 2021, TriCo and Valley Republic Bancorp ("VRB") entered into a definitive merger agreement under which VRB will merge into TriCo in a stock-for-stock transaction and Valley Republic Bank, a wholly owned subsidiary of VRB, will merge into the Bank.

Under the terms of the merger agreement, shareholders of VRB will receive 0.95 common shares of TriCo common stock for each share of VRB common stock.

Including outstanding options and restricted stock grants, the transaction is valued at approximately $177,450,000.

Upon closing, TriCo shareholders will own approximately 88% of the combined company and VRB shareholders will own approximately 12%, on a fully diluted basis.

The merger was approved by the Federal Deposit Insurance Corporation ("FDIC") and the California Department of Financial Protection and Innovation ("DFPI") in 2021 and is awaiting approval from the the Board of Governors of the Federal Reserve System and is expected to close in the first quarter of 2022.

Once completed, the merger will position the combined company to better serve the San Joaquin Valley in California.

On March 25, 2022, the Company completed its acquisition of Valley Republic Bancorp, including the merger of Valley Republic Bank into Tri Counties Bank, with Tri Counties Bank as the surviving entity, in accordance with the terms of the merger agreement dated as of July 27, 2021.

The cash and stock transaction was valued at approximately $174.0 million in aggregate, based on TriCo's closing stock price of $42.48 on March 25, 2022.

Under the terms of the merger agreement, the Company issued approximately 4.1 million shares, in addition to approximately $431,000 in cash paid out for settlement of stock option awards at VRB.

VRB was headquartered in Bakersfield, California, and had four branch locations in and around Bakersfield, and a loan production office in Fresno, California.

The Bank's overlapping Bakersfield branch was consolidated into the acquired VRB branch during the quarter ended June 30, 2022, and the VRB loan production office in Fresno was consolidated with the nearby legacy TCBK loan production office during the fourth quarter of 2022.

All remaining branches now operate as Tri Counties Bank.

2 TriCo Bancshares 2022 10-K

Human Capital Resources

At December 31, 2022, we employed 1,231 persons, including five executive officers.

Full time equivalent employees were 1,074.

Full time equivalent employees numbered 1,210.

Additionally, we at times will utilize independent contractors and temporary personnel to supplement our workforce.

9 unchanged sentences

During 2022, team members logged more than 10,000 hours, supporting nearly 360 organizations, and more than 3,200 of those hours were for the benefit of community development efforts to support programs and services to low- or moderate-income communities.

We have assembled a team to assist us in framing and progressing the Bank's diversity, inclusion, and equity efforts.

While we believe that the diversity of our employees generally represents and reflects the diversity of the communities which we serve, we recognize and continue to promote the need for diversity enhancement in leadership roles throughout the Company.

We have assembled a team to assist us in progressing the Bank's diversity, inclusion, and equity efforts.

Our efforts to foster an environment that embraces employee perspectives through understanding one another's opinions, beliefs, experiences, innate differences and the promotion of dialogue and actions will make us a stronger company.

1 unchanged sentence

We know the process is a journey and expect our efforts to develop and progress over time.

In response to COVID-19, we continue to provide administrative paid leave support to employees where operations are closed or impacted, make work from home options as broadly available as possible, and enhanced safety measures throughout our company, notably for customer-facing employees.

Refer to Item 7:

2 unchanged sentences

It is dominated by a relatively small number of national and regional banks with many offices operating over a wide geographic area;

with the San Francisco Bay area having a larger number of national and regional banks than the rest of our footprint.

with the more metropolitan areas that we serve having a larger number of national and regional banks than the rest of our footprint.

Among the advantages such major banks have over the Bank are their greater ability to finance investments in technology and marketing campaigns and to allocate their investment assets to regions of high yield and demand.

3 unchanged sentences

Commercial banks also compete for available funds with money market instruments and mutual funds.

During past periods of high interest rates, money market funds have provided substantial competition to banks for deposits and they may continue to do so in the future.

During periods of high or rising interest rates, money market funds have provided substantial competition to banks for deposits and they may continue to do so in the future.

Mutual funds are also a major source of competition for savings dollars.

As the financial services industry becomes increasingly oriented toward technology-driven delivery systems, we face competition from banks and non-bank institutions without offices in its primary service area.

We also increasingly compete with financial technology or “fintech” companies for loans and other financial services customers.

To compete, the Bank relies substantially on local promotional activity, personal contacts by its officers, directors, employees and shareholders, extended hours, personalized service and its reputation in the communities it services to compete effectively.

Additional Information

Additional information about the Company can be found on our website at www.tcbk.com .

Our website is not incorporated into this report.

Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other public filings we make with the Securities and Exchange Commission (“SEC”) are available free of charge through the investors relations page of our website, www.tcbk.com , as soon as reasonably practicable after we file these reports with the SEC.

The information on our website is not part this annual report.

To compete effectively, the Bank relies substantially on local promotional activity, personal contacts by its officers, directors, employees and shareholders, extended hours, personalized service and its reputation in the communities it services.

Regulation and Supervision

The Company and the Bank are subject to extensive regulation under both federal and state law.

The Company and the Bank are subject to extensive regulation under both federal and state law governing most aspects of our operations.

This regulation is intended primarily for the protection of customers, depositors, the FDIC deposit insurance fund and the banking system as a whole, and not for the protection of shareholders of the Company.

2 unchanged sentences

Regulatory Agencies

3 TriCo Bancshares 2022 10-K

The Company is a legal entity separate and distinct from the Bank and its other subsidiaries.

2 unchanged sentences

The Company’s common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbol “TCBK” and the Company is, therefore, subject to the rules of Nasdaq for listed companies.

The Bank is subject to regulation, supervision and periodic examination by the FDIC, which is the Bank’s primary federal regulator because the bank is a state-chartered bank that is not a member of the Federal Reserve System, and the DFPI, because the Bank is a California state chartered bank.

The regulations and requirements as promulgated by these agencies are broad and extend to all of the Bank’s operations.

The Bank is subject to regulation, supervision and periodic examination by the FDIC, which is the Bank’s primary federal regulator and the DFPI.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) created the Consumer Financial Protection Bureau (the “CFPB”) as an independent entity with broad rulemaking, supervisory and enforcement authority over consumer financial products and services.

3 unchanged sentences

Banks with less than $10 billion in assets, including the Bank, continue to be examined for compliance with federal consumer laws by their primary federal banking agency.

However, pending regulatory approval for the Company's proposed merger with Valley Republic Bancorp, it is anticipated that subsequent to the closing of that transaction that the combined entity will have more than $10 billion in total assets.

See the Risk Factors section for a a discussion of some of the risks the Bank will encounter when it exceeds $10 billion in assets.

At December 31, 2022, the Company had $9.9 billion in total assets.

See the Risk Factors section for a discussion of some of the risks the Bank will encounter when it exceeds $10 billion in assets as of a December 31 measurement date.

The Bank Holding Company Act

6 unchanged sentences

A bank holding company is required by law to serve as a source of financial and managerial strength to its subsidiary bank and, under appropriate circumstances, to commit resources to support the subsidiary bank.

Legislative and Regulatory Responses to the COVID-19 Pandemic

The COVID-19 pandemic has continued to cause extensive disruptions to the global economy, to businesses, and to the lives of individuals throughout the world.

On March 27, 2020, the Coronavirus Relief and Economic Security Act (“CARES Act”) was signed into law.

The CARES Act was a $2.2 trillion economic stimulus bill that was intended to provide relief in the wake of the COVID-19 pandemic.

There have also been a number of regulatory actions intended to help mitigate the adverse economic impact of the COVID-19 pandemic on borrowers, including several mandates from the bank regulatory agencies, requiring financial institutions to work constructively with borrowers affected by the COVID-19 pandemic.

The bank regulatory agencies ensured that adequate flexibility will be given to financial institutions who work with borrowers affected by the COVID-19 pandemic, and indicated that they would not criticize institutions who do so in a safe and sound manner.

Further, the bank regulatory agencies have encouraged financial institutions to report accurate information to credit bureaus regarding relief provided to borrowers and have urged the importance of financial institutions to continue assisting those borrowers impacted by the COVID-19 pandemic.

Also, on April 3, 2020, the bank regulatory agencies issued a joint policy statement to facilitate mortgage servicers’ ability to place consumers in short-term payment forbearance programs.

This policy statement was followed by an interim final rule, on June 23, 2020, that makes it easier for consumers to transition out of financial hardship caused by the COVID-19 pandemic.

The rule makes it clear that servicers do not violate Regulation X (which places restrictions and requirements upon lenders, mortgage brokers, or servicers of home loans related to consumers when they apply for and receive mortgage loans) by offering certain COVID-19-related loss mitigation options based on an evaluation of limited application information collected from the borrower.

A final rule issued by the bank regulatory agencies on June 28, 2021 permits servicers to also offer certain COVID-19 related loan modification options based on the evaluation of an incomplete application.

Federal and state moratoria on evictions and foreclosures that were implemented during 2020 in response to COVID-19 were extended late into 2021.

Although these programs generally have expired, governmental authorities may take additional actions in the future to limit the adverse impact of COVID-19 on borrowers and tenants.

The Paycheck Protection Program ("PPP'), originally established under the CARES Act and extended under the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, authorized financial institutions to make federally-guaranteed loans to qualifying small businesses and non-profit organizations.

These loans carry an interest rate of 1% per annum and a maturity of 2 years for loans originated prior to June 5, 2020 and 5 years for loans originated on or after June 5, 2020.

The PPP provides that such loans may be forgiven if the borrowers meet certain requirements with respect to maintaining employee headcount and payroll and the use of the loan proceeds after the loan is originated.

The initial phase of the PPP, after being extended multiple times by Congress, expired on August 8, 2020.

However, on January 11, 2021, the SBA reopened the PPP for First Draw PPP loans to small businesses and non-profit organizations that did not receive a loan through the initial PPP phase.

Further, on January 13, 2021, the SBA reopened the PPP for Second Draw PPP loans to small businesses and non-profit organizations that did receive a loan through the initial PPP phase.

amounts were also increased for accommodation and food service businesses.

Although the PPP ended in accordance with its terms on May 31, 2021, outstanding PPP loans continue to go through the process of either obtaining forgiveness from the SBA or pursuing claims under the SBA guaranty.

Banking Acquisitions

Bank Acquisitions

We are required to obtain prior FRB approval before acquiring more than 5% of the voting shares, or substantially all of the assets, of a bank holding company, bank or savings association.

In addition, the prior approval of the FDIC and DFPI is required for a California chartered bank to merge with another bank or purchase the assets or assume the deposits of another bank.

In determining whether to approve a proposed bank acquisition, bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the CRA.

In determining whether to approve a proposed bank acquisition, bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low- and moderate-income neighborhoods under the Community Reinvestment Act of 1997, as amended ("CRA").

On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy.

5 unchanged sentences

Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), the federal bank regulatory agencies have established safety and soundness standards for insured depository institutions covering:

Under FDICIA, the federal ban regulatory agencies have established safety and soundness standards for insured financial institutions covering:

• Internal controls, information systems and internal audit systems;

6 unchanged sentences

• Excessive compensation for executive officers, directors or principal shareholders which could lead to material financial loss.

4 TriCo Bancshares 2022 10-K

If a federal bank regulatory agency determines that a depository institution fails to meet any standard established by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.

19 unchanged sentences

The FRB, FDIC and the DPFI have authority to prohibit a bank holding company or a bank from engaging in practices which are considered to be unsafe and unsound.

Depending on the financial condition of TriCo and the Bank and other factors, the FRB, FDIC or the DPFI could determine that payment of dividends or other payments by TriCo or the Bank might constitute an unsafe or unsound practice.

Depending on the financial condition of TriCo and the Bank and other factors, our regulators could determine that payment of dividends or other payments by TriCo or the Bank might constitute an unsafe or unsound practice.

The Community Reinvestment Act

The Community Reinvestment Act of 1977 (“CRA”) requires the federal banking regulatory agencies to periodically assess a bank’s record of helping meet the credit needs of its entire community, including low- and moderate-income neighborhoods.

The CRA requires the federal banking regulatory agencies to periodically assess a bank’s record of helping meet the credit needs of its entire community, including low- and moderate-income neighborhoods.

The CRA also requires the agencies to consider a financial institution’s record of meeting its community credit when evaluating applications for, among other things, domestic branches and mergers or acquisitions.

2 unchanged sentences

As of its most recent CRA examination, the Bank’s CRA rating was “Satisfactory."

Consumer Protection Laws

On May 5, 2022, the FRB, OCC and FDIC jointly issued a notice of proposed rulemaking proposing revisions to the agencies’ CRA regulations, including with respect to the delineation of assessment areas, the overall evaluation framework and performance standards and metrics, the definition of community development activities, and data collection and reporting.

The proposed rule would adjust CRA evaluations based on bank size and type, with many of the proposed changes applying only to banks with over $2 billion in assets and several applying only to banks with over $10 billion in assets.

We will continue to evaluate the impact of any changes to the regulations implementing the CRA.

Consumer Protection Laws and Supervision

The Bank is subject to many federal consumer protection statues and regulations, some of which are discussed below.

3 unchanged sentences

• The Home Mortgage Disclosure Act, which includes a “fair lending” aspect, requires the collection and disclosure of data about applicant and borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes.

5 TriCo Bancshares 2022 10-K

• The Real Estate Settlement Procedures Act requires lenders to provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits certain abusive practices, such as kickbacks, and places limitations on the amount of escrow accounts.

4 unchanged sentences

The CFPB has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks, including, among other things, laws relating to fair lending and the authority to prohibit “unfair, deceptive or abusive” acts and practices.

Abusive acts or practices are defined as those that materially interfere with a consumer’s ability to understand a term or condition of a consumer financial product or service or take unreasonable advantage of a consumer’s (i) lack of financial savvy, (ii) inability to protect himself in the selection or use of consumer financial products or services, or (iii) reasonable reliance on a covered entity to act in the consumer’s interests.

The CFPB has promulgated many mortgage-related final rules since it was established under the Dodd-Frank Act, including rules related to the ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, HMDA requirements, and appraisal and escrow standards for higher priced mortgages.

The mortgage-related final rules issued by the CFPB have materially restructured the origination, servicing, and securitization of residential mortgages in the United States.

These rules have impacted, and will continue to impact, the business practices of mortgage lenders, including the Company.

We are also subject to certain state consumer protection laws and state attorneys general and other state officials are empowered to enforce certain federal consumer protection laws and regulations.

State authorities have increased their focus on and enforcement of consumer protection rules.

These federal and state consumer protection laws apply to a broad range of our activities and to various aspects of our business and include laws relating to interest rates, fair lending, disclosures of credit terms and estimated transaction costs to consumer borrowers, debt collection practices, the use of and the provision of information to consumer reporting agencies, and the prohibition of unfair, deceptive, or abusive acts or practices in connection with the offer, sale, or provision of consumer financial products and services.

Penalties for violations of the above laws may include fines, reimbursements, injunctive relief and other penalties.

2 unchanged sentences

federal, state, local and foreign laws and regulations relating to consumer privacy and data protection.

Under privacy protection provisions of the Gramm-Leach-Bliley Act of 1999 and its implementing regulations and guidance, we are limited in our ability to disclose certain non-public information about consumers to nonaffiliated third parties.

Financial institutions, such as the Bank, are required by statute and regulation to notify consumers of their privacy policies and practices and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party.

Under privacy protection provisions of the Gramm-Leach-Bliley Act of 1999 ("GLBA") and its implementing regulations and guidance, we are limited in our ability to disclose certain non-public information about consumers to non-affiliated third parties.

In addition, such financial institutions must appropriately safeguard their customers’ nonpublic, personal information.

Consumers must be notified in the event of a data breach under applicable state laws.

The changing privacy laws in the United States and elsewhere, including the California Consumer Privacy Act ("CCPA"), which became effective in January 2020 and was amended in November 2020 by a ballot initiative titled the California Privacy Rights Act, create new individual privacy rights and impose increased obligations on companies handling personal data.

In addition, multiple states, Congress and regulators outside the United States are considering similar laws or regulations which could create new individual privacy rights and impose increased obligations on companies handling personal data.

Data privacy and data protection are areas of increasing state legislative focus.

For example, in June 2018, the Governor of California signed into law the California Consumer Privacy Act ("CCPA").

The CCPA, which became effective on January 1, 2020, applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.

The CCPA gives consumers the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of the consumer’s personal information, and the right not to be discriminated against for exercising these rights.

The CCPA contains several exemptions, including that many, but not all, requirements of the CCPA are inapplicable to information that is collected, processed, sold, or disclosed pursuant to the GLBA.

California voters also recently passed the CPRA, which took effect on January 1, 2023, and significantly modifies the CCPA, including imposing additional obligations on covered companies and expanding California consumers’ rights with respect to certain sensitive personal information.

On July 8, 2022, the CPPA commenced formal rulemaking to adopt regulations to implement the CPRA.

However, regulations did not come into effect prior to the CPRA’s effective date.

The CPPA has stated that the earliest proposed regulations could be in effect is April 2023, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply with the regulations.

In California, the CCPA, the CPRA, and upcoming regulations may be interpreted or applied in a manner inconsistent with our understanding.

In addition, numerous other states have also enacted or are in the process of enacting state-level privacy, data protection and/or data security laws and regulations.

The federal government and regulators outside of the United States may also pass additional data privacy or data protection legislation, including possible amendment of the GLBA.

For example, on November 23, 2021, the federal financial regulatory agencies published a final rule that will impose upon banking organizations and their service providers new notification requirements for significant cybersecurity incidents.

Specifically, the final rule requires banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours after the discovery of a "computer-security incident" that rises to the level of a "notification incident" within the meaning attributed to those terms by the final rule.

Banks' service providers are required under the final rule to notify any affected bank to or on behalf of

which the service provider provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.

The final rule will take effect on April 1, 2022 and banks and their service providers must be in compliance with the requirements of the rule by May 1, 2022.

Banks' service providers are required under the final rule to notify any affected bank to or on behalf of which the service provider provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank

6 TriCo Bancshares 2022 10-K

for as much as four hours.

The final rule took effect on April 1, 2022 and banks and their service providers were required to be in compliance with the requirements of the rule by May 1, 2022.

Federal banking agencies, including the FDIC and FRB, have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of the board of directors.

3 unchanged sentences

A financial institution also should have a robust business continuity program to recover from a cyberattack and procedures for monitoring the security of third-party service providers that may have access to nonpublic data at the institution.

Further, the Company’s financial institution customers have obligations to safeguard their systems and sensitive information and the Company may be bound contractually and/or by regulation to comply with the same requirements.

If the Company or its service providers fail to comply with applicable regulations and contractual requirements, the Company could be exposed to lawsuits, governmental proceedings or the imposition of fines, among other consequences.

In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents.

These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

During 2021, we did not identify any material cybersecurity incidents.

We and other U.S.

financial services providers continue to be targeted with evolving and adaptive cybersecurity threats from sophisticated third parties.

Unauthorized access or cybersecurity incidents could occur more frequently and on a more significant scale.

If future attacks are successful or if customers are unable to access their accounts online for other reasons, it could adversely impact our ability to service customer accounts or loans, complete financial transactions for our customers or otherwise operate any of our businesses or services.

In addition, a breach or attack affecting one of our third-party service providers or partners could harm our business even if we do not control the service that is attacked.

Any inability to prevent or adequately respond to the issues described above could disrupt the Company’s business, inhibit its ability to retain existing customers or attract new customers, otherwise harm its reputation and/or result in financial losses, litigation, increased costs or other adverse consequences that could be material to the Company.

See Risk Factors below for additional information and discussion related to cybersecurity.

Like other lenders, the Bank uses credit bureau data in their underwriting activities.

10 unchanged sentences

government and agency securities, to 1,250% for certain trading securitization exposures, resulting in higher risk weights for a variety of asset classes than previous regulations.

Under Basel III, we are subject to the following minimum capital ratios (1) common equity Tier 1 capital or “CET1” to risk‑weighted assets of 4.5%;

Under Basel III, we are subject to the following minimum capital ratios:

(1) common equity Tier 1 capital or “CET1” to risk‑weighted assets of 4.5%;

(2) Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk‑weighted assets of 6.0%;

2 unchanged sentences

The Basel III capital framework includes a “capital conservation buffer” of 2.5%, composed entirely of CET1, on top of the minimum risk‑weighted asset ratios.

Banking institutions that fail to maintain a full capital conservation buffer face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall and the institution’s “eligible retained income” (that is, four quarter trailing net income, net of distributions and tax effects not reflected in net income).

Banking institutions that fail to maintain a full capital conservation buffer face constraints on dividends, equity repurchases and discretionary executive compensation based on the amount of the shortfall and the institution’s “eligible retained income” (that is, four quarter trailing net income, net of distributions and tax effects not reflected in net income).

The 2.5% capital conservation buffer effectively results in minimum ratios of (i) CET1 to risk‑weighted assets of at least 7%, (ii) Tier 1 capital to risk‑weighted assets of at least 8.5%, and (iii) total capital to risk‑weighted assets of at least 10.5%.

3 unchanged sentences

Prompt Corrective Action regulations of the federal bank regulatory agencies establish five capital categories in descending order based on an institution’s regulatory capital ratios:

well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.

well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically

7 TriCo Bancshares 2022 10-K

undercapitalized.

Under the Prompt Corrective Action framework, insured depository institutions are required to meet the following minimum capital level requirements in order to qualify as “well capitalized:” (i) a common equity Tier 1 capital ratio of 6.5%;

8 unchanged sentences

The Bank pays deposit insurance assessments as determined by the FDIC.

The assessment rate for an institution with less than $10.0 billion in assets, such as the Bank, is based

on its risk category, with certain adjustments for any unsecured debt or brokered deposits held by the bank.

The assessment rate for an institution with less than $10.0 billion in assets, such as the Bank, is based on its risk category, with certain adjustments for any unsecured debt or brokered deposits held by the bank.

The assessment base against which the assessment rate is applied to determine the total assessment due for a given period is the depository institution’s average total consolidated assets during the assessment period less average tangible equity during that assessment period.

2 unchanged sentences

In addition, the FDIC can impose special assessments in certain instances.

The FDIC, as required under the FDIA, established a plan on September 15, 2020, to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years.

This plan did not include an increase in the deposit insurance assessment rate.

Based on the FDIC’s recent projections, however, the FDIC determined that the DIF reserve ratio is at risk of not reaching the statutory minimum by the statutory deadline of September 30, 2028 without increasing the deposit insurance assessment rates.

In October 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning on January 1, 2023.

The FDIC also concurrently maintained the Designated Reserve Ratio for the DIF at 2%.

The Bank is generally unable to control the amount of premiums that it is required to pay for FDIC insurance or the amount of credit, if any, that it may be allowed to offset such assessments.

4 unchanged sentences

Bank Secrecy Act / Anti-Money Laundering

Bank Secrecy Act of 1970 (“BSA”), which is intended to require financial institutions to develop policies, procedures, and practices to prevent and deter money laundering, mandates that every bank have a written, board-approved program that is reasonably designed to assure and monitor compliance with the BSA.

The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions to develop policies, procedures, and practices to prevent and deter money laundering, mandates that every bank have a written, board-approved program that is reasonably designed to assure and monitor compliance with the BSA.

The program must, at a minimum:

4 unchanged sentences

In addition, banks are required to adopt a customer identification program as part of their BSA compliance program.

Banks are also required to file SARs when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.

In May 2016, the regulations implementing the BSA were amended, effective May 2018, to explicitly include risk-based procedures for conducting ongoing customer due diligence and procedures for understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile.

In addition, FinCEN promulgated customer due diligence and customer identification rules that require banks to identify and verify the identity of the beneficial owners of all legal entity customers (other than those that are excluded) at the time a new account is opened (other than accounts that are exempted), which rules became effective on May 11, 2018.

Banks are also required to file reports when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.

BSA regulations require that we that we verify customer information when opening a new account, which includes identifying and verifying the beneficial owners of all customer that are legal entity customers, and performing ongoing customer due diligence to understand the nature and purpose of customer relationships for the purpose of developing customer risk profiles.

In addition to complying with the BSA, the Bank is subject to the USA Patriot Act of 2001 (“Patriot Act”).

5 unchanged sentences

thus, the statement only pertains to customers who are lawfully growing or cultivating hemp and are not otherwise engaged in unlawful or suspicious activity.

8 TriCo Bancshares 2022 10-K

Further, on January 1, 2021, Congress passed the National Defense Authorization Act, which enacted the most significant overhaul of the BSA and related AML laws since the Patriot Act.

5 unchanged sentences

Many of the amendments require the Department of Treasury and FinCEN to promulgate rules.

On December 8, 2021, FinCEN issued proposing regulations that would implement the amendments with respect to beneficial ownership.

On September 29, 2022, FinCEN issued final regulations implementing the amendments with respect to beneficial ownership.

Office of Foreign Assets Control Regulation

7 unchanged sentences

Banks are also subject to certain lending limits and restrictions on overdrafts to such persons.

Regulation W requires that certain transactions between the Bank and its affiliates, including its holding company, be on terms substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving nonaffiliated companies or, in the absence of comparable transactions, on terms and under circumstances, including credit standards, that in good faith would be offered to or would apply to nonaffiliated companies.

Regulation W requires that certain transactions between the Bank and its affiliates, including its holding company, be on terms substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving non-affiliated companies or, in the absence of comparable transactions, on terms and under circumstances, including credit standards, that in good faith would be offered to or would apply to non-affiliated companies.

Interchange Fees

Under the Durbin Amendment to the Dodd-Frank Act, the Federal Reserve adopted rules establishing standards for assessing whether the interchange fees that may be charged with respect to certain electronic debit transactions are “reasonable and proportional” to the costs incurred by issuers for processing such transactions.

Under the Durbin Amendment, adopted as part of the Dodd-Frank Act, the FRB adopted rules establishing standards for assessing whether the interchange fees that may be charged with respect to certain electronic debit transactions are “reasonable and proportional” to the costs incurred by issuers for processing such transactions.

Interchange fees, or “swipe” fees, are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions.

Federal Reserve Board rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction.

FRB rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction.

An upward adjustment of no more than 1 cent to an issuer's debit card interchange fee is allowed if the card issuer develops and implements policies and procedures reasonably designed to achieve certain fraud-prevention standards.

The Federal Reserve Board also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.

Assuming completion of the merger with VRB in 2022, we expect these rules will be applicable to the Bank in 2023.

The FRB also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.

Effective July 1, 2023, a new FRB Federal Reserve rule will require that debit card issuers enable all debit card transactions, including card-not-present transactions such as online payments, to be processed on at least two unaffiliated payment card networks.

The Bank is currently not subject to these restrictions, however if our assets exceed $10 billion or more at December 31, 2023, these rules would be applicable to the Bank in July 2024.

Impact of Monetary Policies

7 unchanged sentences

Incentive Compensation Policies and Restrictions

9 TriCo Bancshares 2022 10-K

In July 2010, the federal banking agencies issued guidance on sound incentive compensation policies that applies to all banking organizations supervised by the agencies (thereby including both the Company and the Bank).

7 unchanged sentences

The agencies have not yet finalized these rules;

however, on October 14, 2021, the SEC signaled a renewed interest in this rulemaking initiative by re-opening the comment period on a proposed rule issued originally in 2015 regarding "clawbacks" of incentive-based executive compensation.

however, on October 26, 2022, the SEC adopted a final rule regarding "clawbacks" of incentive-based executive compensation.

The scope and content of the U.S.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business