What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-03-01 · 248 added, 178 removed, 739 unchanged (37% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is designed to provide a better understanding of the significant changes and trends related to the Company and the Bank’s financial condition, operating results, asset and liability management, liquidity and capital resources and should be read in conjunction with the consolidated financial statements of the Company and the related notes at Item 8 of this report.

In March 2022, the Company closed the acquisition of Valley Republic Bancorp.

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For further information, refer to Note 2 “Business Combinations” of the Notes to Consolidated Financial Statements.

28 TriCo Bancshares 2023 10-K

Financial Overview

In 2022, the Company reported net income of $125,419,000, a $7,764,000 or 6.6% increase from the prior year.

In 2023, the Company reported net income of $117.4 million, an $8.1 million or 6.5% decrease from the prior year.

Earnings per share on a diluted basis for the year were $3.52, down 8.1% from the prior year.

The current year net income reported was negatively impacted by acquisition-related expenses totaling $6,253,000, compared to $1,523,000 in the prior year.

In 2022, net interest income was reported at $345,976,000, an increase of $74,437,000 or 27.4% from the prior year.

Net interest income on a fully tax equivalent (FTE) basis, a non-GAAP financial measure, was $347,536,000, an increase of $74,926,000, or 27.4%, from 2021.

The increase in FTE net interest income reflected the benefit of a $1,352,778,000, or 17.8%, increase in average earning assets in addition to a 30 basis point increase in the FTE net interest marign to 3.88%.

Average earning asset growth included an $990,559,000, or 20.3%, increase in average loans and leases and an $573,720,000, or 26.3%, increase in average securities.

25 TriCo Bancshares 2022 10-K

balances across earning asset categories reflect organic growth in addition to the late first quarter 2022 VRB acquisition.

The increase in average securities was additionally driven by the redeployment of excess liquidity into securities in the first half of 2022.

The net interest margin expansion was driven by the higher rate environment driving an increase in loan and lease and investment security yields, partially offset by higher cost of funds and the impact of lower accelerated PPP loan fees recognized upon forgiveness payments from the SBA in 2022.

The provision for credit losses increased $25,245,000 to $18,470,000, primarily due to the acquisition of VRB and organic loan and lease growth.

The allowance for credit losses (ACL) was $105,680,000, or 1.64% of total loans and leases, at December 31, 2022, compared to $85,376,000, or 1.74% of total loans and leases, at December 31, 2021.

The increase in the total ACL was primarily driven by loan and lease growth, while the overall risk profile of the loan portfolio continued to improve despite management's observation of future recessionary risks.

Noninterest income was $63,046,000, down $618,000, or 1%, from the prior year.

Noninterest expense was $216,645,000, up $38,370,000, or 21.5%, from the prior year.

The changes in noninterest income and noninterest expense were impacted by the VRB acquisition, completed in March 2022.

Noninterest income was additionally negatively impacted by a decline in gain on sale of mortgage loans totaling of $7,238,000, to $2,342,000 for the 2022 year.

The tangible common equity to tangible assets ratio, a non-GAAP financial measure, was 7.6% at December 31, 2022, down 161 basis points from December 31, 2021, primarily due to a decrease in tangible common equity related to elevated interest rates causing an increase in accumulated other comprehensive loss, partially offset by the retention of earnings.

The current year net income reported was negatively impacted by noninterest expense.

In 2023, noninterest expense was reported at $233.1 million, an increase of $16.5 million or 7.6% increase from the prior year.

Net interest income on a fully tax equivalent (FTE) basis, a non-GAAP financial measure, was $358.2, an increase of $10.6 million, or 3.1%, from 2022.

The increase in FTE net interest income reflected the benefit of a $69.7 million, or 0.8%, increase in average earning assets in addition to a 8 basis point increase in the FTE net interest margin to 3.96%.

Average earning asset growth included an $690.9 million, or 11.7% increase in average loans and leases, offset by a $195.0 million or 7.3% decrease in average securities.

The decrease in average securities was driven by the redeployment of liquidity from prepayments and maturities into loans during 2023.

Total average interest-bearing deposits was $5.0 billion and $4.9 billion during 2023 and 2022, respectively, while average other borrowings totaled $430.1 million and $33.4 million, respectively, during the same periods.

The increase in net interest expense on average interest-bearing liabilities increased by $72.1 million or 758.9% to $81.7 million during 2023 as compared to 2022.

The provision for credit losses increased $5.5 million to $24.0 million, primarily due to elevated qualitative reserves driven by CA unemployment trends and rising Corporate BBB bond yields, and to a lesser extent, organic loan and lease growth.

The allowance for credit losses (ACL) was $121.5 million, or 1.79% of total loans and leases, at December 31, 2023, compared to $105.7, or 1.64% of total loans and leases, at December 31, 2022.

Noninterest income was $61.4 million, down $1.6 million, or 2.6%, from the prior year.

Noninterest expense was $233.1 million, up $16.5 million, or 7.6%, from the prior year.

The year over year changes in noninterest income and noninterest expense were impacted by the VRB acquisition, completed in March 2022, as well as rising technology and regulatory costs in addition to the rising costs of operations associated with levels of high inflation.

Noninterest income was additionally negatively impacted by a decline in gain on sale of mortgage loans, as is typically observed during periods of a rising rate environment, totaling $1.1 million, to $1.2 million for the 2023 year.

The tangible common equity to tangible assets ratio, a non-GAAP financial measure, was 8.8% at December 31, 2023, up 120 basis points from December 31, 2022, primarily due to an increase in tangible common equity related primarily to the retention of 2023 earnings.

29 TriCo Bancshares 2023 10-K

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Tangible book value is calculated by dividing tangible equity by shares outstanding at period end.

See tables below for further details.

As TriCo Bancshares has not commenced any business operations independent of the Bank, the following discussion pertains primarily to the Bank.

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The presentation of interest income and net interest income on a FTE basis is a common practice within the banking industry.

Interest income and net interest income are shown on a non-FTE basis within Item 7 and Item 8 of this report, and a reconciliation of the FTE and non-FTE presentations is provided below in the discussion of net interest income.

Interest income and net interest income are shown on a non-FTE basis within Part II, Item 7 and Item 8 of this report, and a reconciliation of the FTE and non-FTE presentations is provided below in the discussion of net interest income.

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this 10-K contains certain non-GAAP financial measures.

Management has presented these non-GAAP financial measures because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the periods presented

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and facilitate the comparison of our performance with the performance of our peers.

However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP.

Where applicable, comparable earnings information using GAAP financial measures is also presented.

Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies.

For a reconciliation of these non-GAAP financial measures, see the tables below:

Twelve months ended

(dollars in thousands) December 31,

2023 December 31,

Net interest margin

Acquired loans discount accretion, net:

Amount (included in interest income) $5,651 $5,465

Effect on average loan yield 0.09 % 0.09 %

Effect on net interest margin (FTE) 0.06 % 0.06 %

Net interest margin (FTE) 3.96 % 3.88 %

Net interest margin less effect of acquired loan discount accretion (Non-GAAP) 3.90 % 3.81 %

PPP loans yield, net:

Amount (included in interest income) $12 $2,390

Effect on net interest margin (FTE) — % 0.02 %

Net interest margin less effect of PPP loan yield (Non-GAAP) 3.96 % 3.86 %

Acquired loan discount accretion and PPP loan yield, net:

Amount (included in interest income) $5,663 $7,855

Effect on net interest margin (FTE) 0.06 % 0.08 %

Net interest margin less effect of acquired loan discount accretion and PPP yields, net (Non-GAAP) 3.90 % 3.80 %

Twelve months ended

(dollars in thousands) December 31,

2023 December 31,

Pre-tax pre-provision return on average assets or equity

Net income (GAAP) $117,390 $125,419

Exclude provision for income taxes 43,515 48,488

Exclude provision for credit losses 23,990 18,470

Net income before income tax and provision expense (Non-GAAP) $184,895 $192,377

Average assets (GAAP) $9,870,189 $9,771,601

Average equity (GAAP) $1,102,436 $1,074,437

Return on average assets (GAAP) (annualized) 1.19 % 1.28 %

Pre-tax pre-provision return on average assets (Non-GAAP) (annualized) 1.87 % 1.97 %

Return on average equity (GAAP) (annualized) 10.65 % 11.67 %

Pre-tax pre-provision return on average equity (Non-GAAP) (annualized) 16.77 % 17.90 %

31 TriCo Bancshares 2023 10-K

Twelve months ended

(dollars in thousands) December 31,

2023 December 31,

Return on tangible common equity

Average total shareholders' equity $1,102,436 $1,074,437

Exclude average goodwill 304,442 287,904

Exclude average other intangibles 13,611 15,901

Average tangible common equity (Non-GAAP) $784,383 $770,632

Net income (GAAP) $117,390 $125,419

Exclude amortization of intangible assets, net of tax effect 4,309 4,461

Tangible net income available to common shareholders (Non-GAAP) $121,699 $129,880

Return on average equity 10.65 % 11.67 %

Return on average tangible common equity (Non-GAAP) 15.52 % 16.85 %

Three months ended

(dollars in thousands) December 31,

2023 December 31,

Tangible shareholders' equity to tangible assets

Shareholders' equity (GAAP) $1,159,682 $1,046,416

Exclude goodwill and other intangible assets, net 314,994 321,112

Tangible shareholders' equity (Non-GAAP) $844,688 $725,304

Total assets (GAAP) $9,910,089 $9,930,986

Exclude goodwill and other intangible assets, net 314,994 321,112

Total tangible assets (Non-GAAP) $9,595,095 $9,609,874

Shareholders' equity to total assets (GAAP) 11.70 % 10.54 %

Tangible shareholders' equity to tangible assets (Non-GAAP) 8.80 % 7.55 %

Three months ended

(dollars in thousands) December 31,

2023 December 31,

Tangible common shareholders' equity per share

Tangible shareholders' equity (Non-GAAP) $844,688 $725,304

Common shares outstanding at end of period 33,268,102 33,331,513

Common shareholders' equity (book value) per share (GAAP) $34.86 $31.39

Tangible common shareholders' equity (tangible book value) per share (Non-GAAP) $25.39 $21.76

Critical Accounting Policies and Estimates

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Allowance for Credit Losses

The Company’s method for assessing the appropriateness of the allowance for credit losses includes specific allowances for individually analyzed loans, formula allowance factors for pools of credits, and qualitative considerations which include, among other things, current and forecast economic and environmental factors (e.g., interest rates, growth, economic conditions, etc.).

32 TriCo Bancshares 2023 10-K

forecast economic and environmental factors (e.g., interest rates, growth, economic conditions, etc.).

Allowance factors for loan pools were based on historical loss experience by product type and prior risk rating.

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These macroeconomic scenarios incorporate variables that have historically been key drivers of increases and decreases in credit losses.

These variables include, but are not limited to, changes in environmental conditions, such as California unemployment rates, household debt levels, the pace of change in corporate bond yields, and U.S.

gross domestic product.

These variables include, but are not limited to, changes in environmental conditions, such as California unemployment rates, household debt levels, and the pace of change in corporate bond yields.

The Company also considers macroeconomic forecasts to estimate the ACL.

There is a greater chance that the Company would suffer a loss from a loan that was risk rated less than satisfactory than if the loan was last graded satisfactory.

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Certain loans are not included in pools of loans that are collectively evaluated.

The segregation of these loans is based on the results from analysis of identified credits that meet management’s criteria for specific evaluation.

The segregation of these loans is based on the results from analysis of individually identified credits that meet management’s criteria for individual evaluation.

These loans are first reviewed individually to determine if such loans have a unique risk profile that would warrant individual evaluation.

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They are then specifically reviewed and evaluated individually by management for loss potential by evaluating sources of repayment, including collateral as applicable, and a specified allowance for credit losses is established where necessary.

By definition, any loan that management has placed on non-accrual is required to be individually evaluated, however, not all individually evaluated loans need be placed on non-accrual.

By definition, any loan that management has placed on non-accrual is required to be individually evaluated, however, not all individually evaluated loans need to be placed on non-accrual.

Because current economic conditions and forecasts can change and future events make it inherently difficult to predict the anticipated amount of estimated credit losses on loans, management's determination of the appropriateness of the ACL, could change significantly.

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Additionally, changes in factors and inputs may move independently of one another, such that improvement in one or certain factors may offset deterioration in others.

Thus, as a result of the significant size of the loan portfolio, the numerous assumptions in the model, and the high degree of potential change in such assumptions, there is a high degree of sensitivity to the reported amounts.

Management believes that the ACL was adequate as of December 31, 2023.

Other Accounting Policies and Estimates

On an on-going basis, the Company evaluates its estimates, including those that materially affect the financial statements and are related to investments, mortgage servicing rights, fair value measurements, retirement plans, intangible assets and the fair value of acquired assets and liabilities.

Other Accounting Policies and Estimates that are Not Considered Critical

On an on-going basis, the Company evaluates its estimates, including those that may materially affect the financial statements and are related to investments, mortgage servicing rights, fair value measurements, retirement plans, intangible assets and the fair value of acquired assets and liabilities.

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

The Company’s policies related to these estimates can be found in Note 1 in the financial statements at Item 8 of this report.

The Company’s policies related to these estimates can be found in Note 1 in the financial statements at Part II, Item 8 of this report.

Geographical Descriptions

For the purpose of describing the geographical location of the Company’s operations, the Company has defined northern California as that area of California north of, and including, Stockton to the east and San Jose to the west;

central California as that area of the state south of

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Stockton and San Jose, to and including, Bakersfield to the east and San Luis Obispo to the west;

central California as that area of the state south of Stockton and San Jose, to and including, Bakersfield to the east and San Luis Obispo to the west;

and southern California as that area of the state south of Bakersfield and San Luis Obispo.

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Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances for the Company.

Within Management’s Discussion and Analysis of Financial Condition and Results of Operations, certain performance measures including interest income, net interest income, net interest yield, and efficiency ratio are generally presented on a fully tax-equivalent (FTE) basis.

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The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provides additional clarity in assessing its results.

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Effect of purchased loan discount accretion on net interest margin (FTE) 0.06 % 0.07 % 0.11 %

Net interest income (FTE) during the year ended December 31, 2022 increased $74,926,000 or 27.5% to $347,536,000 compared against $272,610,000 during the year ended December 31, 2021.

Net interest income (FTE) during the year ended December 31, 2023 increased $10.7 million or 3.1% to $358.2 million compared against $347.5 million during the year ended December 31, 2022.

The increased amount of net interest income reflects growth in total average loan balances outstanding and the correlated yields in both loans and investments during 2023.

Average loan balances increased by $691 million or 11.7% from December 31, 2022.

Meanwhile, the yield on interest earning assets was 4.87% and 3.98% for the years ended December 31, 2023 and 2022, respectively.

This 89 basis point increase in total earning asset yield was primarily attributable to a 58 basis point increase in total loan yields and a 80 basis point increase in yields on total investments.

Of the 58 basis point increase in loan yields, 7 basis points was attributable to increased volume in average loans outstanding, and 51 basis points from elevated interest rates.

There was no change attributed to the accretion of purchased loan fees.

The costs of total interest bearing liabilities increased 129 basis points to 1.48% during the year ended December 31, 2023, as compared to 0.19% for the year ended December 31, 2022.

During the same period, costs associated with interest bearing deposits increased by 100 basis points to 1.10% as compared to 0.10% in the prior year.

The increase in interest expense for the year ended December 31, 2023, as compared to the trailing year, was due to the increased rate environment for both the interest-bearing deposit expense and other borrowings interest expense.

Net interest income (FTE) during the year ended December 31, 2022 increased $74.9 million or 27.5% to $347.5 million compared against $272.6 million during the year ended December 31, 2021.

The increased amount of net interest income reflects growth in both total average loan and investment balances outstanding and the correlated yields, during 2022.

Average loan balances, inclusive of acquisitions, increased by $1,496,541,000 or 30.4% from December 31, 2021.

Average loan balances, inclusive of acquisitions, increased by $1.5 billion or 30.4% from December 31, 2021.

The yield on interest earning assets was 3.98% and 3.65% for the years ended December 31, 2022 and 2021, respectively.

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The increase in interest expense for the year ended December 31, 2022, as compared to the trailing year, was due largely to the increased rate environment for both the interest-bearing deposit expense and other borrowings interest expense.

Net interest income (FTE) during the year ended December 31, 2021 increased $13,814,000 or 5.3% to $272,610,000 compared against $258,796,000 during the year ended December 31, 2020.

The increase amount of net interest income reflects growth in total average loan balances outstanding during 2021, which increased by $229,796,000 or 4.9% from December 31, 2020.

The yield on interest earning assets was 3.65% and 4.11% for the years ended December 31, 2021 and 2020, respectively.

This 46 basis point decrease in total earning asset yield was primarily attributable to a 23 basis point decrease in non-PPP loan yields and a 66 basis point decrease in yields on total investments.

Of the 23 basis point decrease in yields on loans, a 21 basis point decline was attributable to decreases in market rates, in addition to 2 basis points from the accretion of purchased loans.

The costs of total interest bearing liabilities decreased 12 basis points to 0.13% during the year ended December 31, 2021, as compared to 0.25% for the year ended December 31, 2020.

During the same period, costs associated with interest bearing deposits decreased by 10 basis points to 0.08% as compared to 0.18% in the prior year.

The decrease in interest expense for the year ended December 31, 2021, as compared to the trailing year, was due largely to the decreased rate environment benefiting both the interest-bearing deposit expense and other borrowings interest expense.

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For more information related to loan interest income, including loan purchase discount accretion, see the Summary of Average Balances, Yields/Rates and Interest Differential and Note 27 to the consolidated financial statements at Part II, Item 8 of this report.

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Summary of Average Balances, Yields/Rates and Interest Differential – Yield Tables

The following tables present, for the periods indicated, information regarding the Company’s consolidated average assets, liabilities and shareholders’ equity, the amounts of interest income from average earning assets and resulting yields, and the amount of interest expense paid on interest-bearing liabilities.

The following tables present, for the periods indicated, information regarding the Company’s consolidated average assets, liabilities and

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shareholders’ equity, the amounts of interest income from average earning assets and resulting yields, and the amount of interest expense paid on interest-bearing liabilities.

Average loan balances include nonperforming loans.

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Volume Rate Total Volume Rate Total

Increase in interest income:

Increase (decrease) in interest income:

Loans $ 32,305 $ 39,029 $ 71,334 $ 114,211 $ (71,105) $ 43,106

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Total interest-earning assets 23,234 59,591 82,825 123,438 (44,492) 78,946

Increase in interest expense:

Increase (decrease) in interest expense:

Interest-bearing demand deposits (3) 10,741 10,738 45 80 125

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Total interest-bearing liabilities 5,893 66,255 72,148 1,431 2,590 4,021

Increase in net interest income $ 122,007 $ (47,082) $ 74,925 $ 36,269 $ (22,455) $ 13,814

Increase (decrease) in net interest income $ 17,341 $ (6,664) $ 10,677 $ 122,007 $ (47,082) $ 74,925

Year Over Year Balance Sheet Change

Ending balances As of December 31, Acquired Balances Organic

$ Change Organic

Ending balances As of December 31,

($’s in thousands) 2023 2022 $ Change

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See the Tables labeled “Allowance for Credit Losses – December 31, 2023 and 2022” at Note 5 in Item 8 of Part II of this report for the components that make up the provision for credit losses for the years ended December 31, 2023 and 2022.

The Company recorded a provision for credit losses of $18,470,000 during the year ended December 31, 2022, versus a reversal of credit losses totaling $6,775,000 during the trailing year end.

The increase in required provisioning during 2022 was largely attributed to the $10,820,000 in day 1 required reserves from loans acquired in connection with the VRB merger in the first quarter of 2022.

Additionally, the Company designated certain loans and leases purchased from VRB as PCD, which required $2,037,000 in additional credit reserves as of the acquisition date.

The Company recorded a provision for credit losses of $24.0 million during the year ended December 31, 2023, versus $18.5 million during the trailing year end.

The increase in required provisioning during 2023 was largely attributed to elevated qualitative reserves driven by CA unemployment trends and rising Corporate BBB bond yields, and to a lesser extent, organic loan and lease growth.

The Company recorded a provision for credit losses of $18.5 million during the year ended December 31, 2022, versus a reversal of credit losses totaling $6.8 million during the trailing year end.

The increase in required provisioning during 2022 was largely attributed to the $10.8 million in day 1 required reserves from loans acquired in connection with the VRB merger in the first quarter of 2022.

Additionally, the Company designated certain loans and leases purchased from VRB as PCD, which required $2.0 million in additional credit reserves as of the acquisition date.

For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ACL on the date of acquisition using the same methodology as other loans and leases held-for-investment.

The remaining increase in the allowance for credit reserves was the result of changes in loan volume and changes in credit quality associated with levels of classified, past due and non-performing loans in addition to changes in qualitative factors.

The Company recorded a reversal of credit loses of $6,775,000 during the year ended December 31, 2021, versus a provision for credit losses totaling $42,813,000 during the trailing year end.

The decrease in required provisioning during 2021 was attributed to improvement in both external economic indicators and the Company's internal credit risk assessment under the cohort method including changes in the level of past due and nonperforming loans.

Declines in California unemployment levels, reduced concentration risks and an improved gross domestic product outlook contributed to total required qualitative reserves of $59,855,000 as of December 31, 2021, a decline of $2,080,000 or 3.4% from December 31, 2020.

Quantitative reserves calculated using the Company's cohort loss model totaled $25,521,000 at December 31, 2021, a decline of $4,391,000 or 14.7% from the trailing period December 31, 2020.

The remaining increase in the allowance for credit losses was the result of changes in loan volume and changes in credit quality associated with levels of classified, past due and non-performing loans in addition to changes in qualitative factors.

Net charge-offs for the year ended December 31, 2023 totaled $6.6 million, as compared to net recoveries of $0.3 million for the year ended December 31, 2022.

Total nonperforming loans increased by 13 basis points to 0.46% of total loans at December 31, 2023 from 0.33% of total loans at December 31, 2022.

For further details of the change in nonperforming loans during the period ended December 31, 2023 see the Tables, and associated narratives, labeled “Changes in nonperforming assets during the year ended December 31, 2023” and “Changes

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Net recoveries for the year ended December 31, 2022 totaled $322,000 as compared to $694,000 for the year ended December 31, 2021.

Total nonperforming loans declined by 28 basis points to 0.33% of total loans at December 31, 2022 from 0.61% of total loans at December 31, 2021.

For further details of the change in nonperforming loans during the period ended December 31, 2022 see the Tables, and associated narratives, labeled “Changes in nonperforming assets during the year ended December 31, 2022” and “Changes in nonperforming assets during the three months ended December 31, 2022” under the heading “Asset Quality and Non-Performing Assets ” below.

in nonperforming assets during the three months ended December 31, 2023” under the heading “Asset Quality and Non-Performing Assets ” below.

The following table summarizes the components of the provision for (benefit to) credit losses during the periods indicated (dollars in thousands):

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(dollars in thousands) 2023 2022 2021

Provision (benefit) to allowance for credit losses $ 17,945 $ (7,165) $ 42,188

Provision for (reversal of) allowance for credit losses $ 22,455 $ 17,945 $ (7,165)

Change in reserve for unfunded loan commitments

Total provision for (benefit to) credit losses $ 18,470 $ (6,775) $ 42,813

1,535 525 390

Total provision for (reversal of) credit losses $ 23,990 $ 18,470 $ (6,775)

The provision for credit losses is based on management’s evaluation of inherent risks in the loan portfolio and a corresponding analysis of the allowance for credit losses.

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Sale of customer checks 1,383 1,167 459

Gain on sale of investment securities — — 7

Loss on sale of investment securities (284) — —

Gain (loss) on marketable equity securities 36 (340) (86)

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Total non-interest income $ 61,400 $ 63,046 $ 63,664

Non-interest income decreased by $618,000 or 1.0% to $63,046,000 during the twelve months ended December 31, 2022, compared to $63,664,000 during the same period ended December 31, 2021.

Non-interest income decreased $1.6 million or 2.6% to $61.4 million during the year ended December 31, 2023, as compared to $63.0 million during the year ended December 31, 2022.

During 2023, total service charges and fees increased $0.3 million which is net of approximately $0.9 million in waived or reversed fees related to the network outage that occurred in the first quarter of the year.

Mortgage origination related activity has declined year over year due to elevated interest rates, as the income recorded from the sale of loans was down $1.2 million or 50.2%.

Changes in interest rates also led to a decline in fair value of mortgage servicing rights during the twelve months ended December 31, 2023, which decreased by $0.8 million or 268.1%, as compared to the trailing twelve month period ended.

Other income declined $1.5 million or 63.1%, $0.6 million of which is attributed to fees from the sale of deposits during the fourth quarter of 2022.

Non-interest income decreased by $0.6 million or 1.0% to $63.0 million during the twelve months ended December 31, 2022, compared to $63.6 million during the same period ended December 31, 2021.

Generally, the increases in recurring non-interest income service charges and fees reflected during 2022 is the result of the VRB merger closing in March of 2022, and therefore, not reflected in 2021 operating results.

As an offset, increases in interest rates during 2022 led to significant declines in mortgage lending related activity, resulting in a decrease of $7,238,000 in gain from the sale of loans, as compared to the trailing year then ended.

Non-interest income increased by $8,470,000 or 15.3% to $63,664,000 during the twelve months ended December 31, 2021, compared to $55,194,000 during the same period ended December 31, 2020.

ATM and interchange fees improved $3,696,000 or 17.1% as a result of increased use due to relaxed social distancing guidelines during the year ended December 31, 2021 when compared to the same period in the prior year.

Additionally, during the year ended 2020, there was substantial downward pressure on interest rates following the COVID-19 pandemic, resulting in a decline in the fair value of mortgage servicing rights totaling $2,634,000 during the period.

Other non-interest income increased $1,574,000 during the twelve months ended December 31, 2021, largely attributed to an increase of $804,000 in the change of fair value of non-readily marketable equity investments and a $204,000 increase in proceeds from life insurance, respectively, as compared to the trailing 12 months ended.

As an offset, increases in interest rates during 2022 led to significant declines in mortgage lending related activity, resulting in a decrease of $7.2 million in gain from the sale of loans, as compared to the trailing year then ended.

37 TriCo Bancshares 2023 10-K

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Gain on sale or acquisition of foreclosed assets (133) (481) (233)

(Gain) loss on disposal of fixed assets (1,070) (439) 67

Loss (gain) loss on disposal of fixed assets 23 (1,070) (439)

Other miscellaneous expense 19,344 15,201 11,038

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Average full-time equivalent staff 1,214 1,169 1,039

Non-interest expense increased by $38,370,000 (21.5%) to $216,645,000 during the year ended December 31, 2022 as compared to $178,275,000 for the trailing twelve month period.

Total non-interest expense increased $16.5 million or 7.6% to $233.2 million during the year ended December 31, 2023, as compared to $216.6 million for the comparative period in 2022, for reasons primarily associated with the acquisition of Valley Republic Bank in March of 2022 which resulted in expense increases for nearly every identified category.

Merger and acquisition expenses associated with this acquisition totaled $6.2 million for the twelve-month period ended 2022.

Regulatory assessment charges also increased by approximately $1.2 million during 2023 as a result of increases in assessment rates.

Other miscellaneous expenses also increased by $4.1 million in 2023 due to, among other things, changes in regulatory requirements which resulted in an estimated $0.8 million in refunds to customers previously charged non-sufficient funds fees, changes in the valuation of other real estate owned which contributed to $0.9 million in variance from the prior year, and other increases generally associated with increased operational costs.

Non-interest expense increased by $38.3 million or 21.5% to $216.6 million during the year ended December 31, 2022 as compared to $178.2 million for the trailing twelve month period.

Generally, the increases in recurring non-interest expenses and FTEs during 2022 is the result of the VRB merger closing in March of 2022, and therefore, not reflected in 2021 operating results.

Salaries and benefit expense decreased $5,770,000 (5.1%) to $129,852,000 during the year ended December 31, 2021 as compared to $106,351,000 for the trailing twelve month period.

Base salaries, net of deferred loan origination costs remained nearly flat, decreasing by $320,000 (0.4%) to $84,861,000 due to a decrease in average full time equivalent employees to 1,039 from 1,093 in the prior year-to-date period, offset by a higher average wage per employee due to both, the addition of personnel with elevated technical skillets to adhere to elevated regulatory expectations and annual merit increases.

Commissions and incentive compensation increased $4,935,000 (49.2%) to $14,957,000 during 2021 compared to 2020 primarily due to increased organic non-PPP loan originations as borrower interaction and business demands for loans improved following the disruption from COVID-19 and related mandates in 2020.

Benefits and other compensation costs decreased by $10,385,000 (32.5%) to $21,550,000 during the year ended December 31, 2021 as compared to $31,935,000 for the trailing twelve month period, caused by declines in expenses associated with retirement obligations and insurance costs.

Merger and acquisition expenses associated with our 2022 acquisition of VRB totaled $1,523,000 during the year ended December 31, 2021 and $6,253,000 in 2022.

Further, during the year ended December 31, 2021, expenses totaling approximately $1,745,000 are attributable to the Company's recently opened loan production offices, of which approximately $1,430,000 relates to salaries and benefits.

During 2018, the FDIC's Deposit Insurance Fund's (DIF) reserves exceeded the minimum set by the Dodd-Frank Act and the Company, with total assets less than $10 billion, was entitled to receive credits to offset a portion of its assessments.

As a result, during the year ended December 31, 2020, the Bank received credits of $610,000, which contributed to the lower regulatory assessments and insurance expense during the period.

There were no credits provided to the Bank during 2021 or 2022.

The provisions for income taxes applicable to income before taxes for the years ended December 31, 2022, 2021 and 2020 differ from amounts computed by applying the statutory Federal income tax rates to income before taxes.

The effective tax rate and the statutory

38 TriCo Bancshares 2023 10-K

federal income tax rate are reconciled as follows:

The provisions for income taxes applicable to income before taxes for the years ended December 31, 2023, 2022 and 2021 differ from amounts computed by applying the statutory Federal income tax rates to income before taxes.

The effective tax rate and the statutory federal income tax rate are reconciled as follows:

Year Ended December 31,

11 unchanged sentences

The effective tax rate on income was 27.0%, 27.9%, and 28.1% in 2023, 2022, and 2021, respectively.

The effective tax rate was greater than the Federal statutory rates of 21% due to the combination of state tax expenses of 7.9% in 2022, 7.9% in 2021, and 7.7% in 2020.

These increases in tax expense were partially offset by Federal tax-exempt interest income of $5,462,000, $3,069,000, and $3,566,000, respectively, Federal and State tax-exempt income of $3,167,000, $3,478,000, and $3,447,000, respectively, from increase in cash value and gain on death benefit of life insurance, low income housing tax credits and losses, net of amortization of $192,000, $620,000, and $619,000, respectively, and equity compensation excess tax benefits, net of non-deductible compensation of $1,966,000, $1,495,000, and $403,000, respectively.

The effective tax rate was greater than the Federal statutory rates of 21% due to the combination of state tax expenses of 7.9%.

The impact of Federal and state tax expenses were partially offset by Federal tax-exempt interest income of $5.6 million, $5.5 million, and $3.1 million, respectively, Federal and State tax-exempt income of $3.1 million, $3.2 million, and $3.5 million, respectively, from increase in cash value and gain on death benefit of life insurance, and low income housing tax credits and losses, net of amortization of $1.5 million, $0.2 million, and $0.6 million, respectively.

The low-income housing tax credits and the equity compensation excess tax benefits represent direct reductions in tax expense.

In addition, the 2020 Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided the Company with an opportunity to file amended federal tax returns and generate refunds of approximately $805,000 during the year ended December 31, 2020.

The items noted above resulted in an effective combined Federal and State income tax rate that differed from the combined Federal and State statutory income tax rate of approximately 29.6% during the three years ended 2023, 2022 and 2021.

1 unchanged sentence

Restricted Equity Securities

Restricted equity securities were $17,250,000 at December 31, 2022 and December 31, 2021.

Restricted equity securities were $17.2 million at December 31, 2023 and December 31, 2022.

The entire balance of restricted equity securities at December 31, 2023 and 2022 represents the Bank’s investment in the Federal Home Loan Bank of San Francisco (“FHLB”).

14 unchanged sentences

The Bank makes loans to borrowers whose applications include a sound purpose, a viable repayment source and a plan of repayment established at inception and generally backed by a secondary source of repayment.

34 TriCo Bancshares 2022 10-K

Loan Portfolio Composition

39 TriCo Bancshares 2023 10-K

The following table shows the Company’s loan balances, including net deferred loan fees, at the dates indicated:

10 unchanged sentences

Allowance for credit losses $ (121,522) $ (105,680) $ (85,376)

During the year ended 2022, the Company acquired loans totaling $773,390,000 in connection with the merger with VRB in March of 2022, inclusive of approximately $68,513,000 in loans with credit deterioration.

During 2021, the Company purchased pools of SFR 1-4 1st DT (consumer) loans totaling approximately $101,466,000, inclusive of loan premiums.

As of December 31, 2022 and 2021, the total remaining balances outstanding from these purchases equaled approximately $804,382,000 and $94,973,000, respectively.

During 2020, the Company purchased $41,126,000 in loans, with $30,080,000 outstanding as of December 31, 2022.

The Company did not purchase any loans during 2023.

During the year ended 2022, the Company acquired loans totaling $773.3 million in connection with the merger with VRB in March of 2022, inclusive of approximately $68.5 million in loans with credit deterioration.

During 2021, the Company purchased pools of SFR 1-4 1st DT (consumer) loans totaling approximately $101.5 million inclusive of loan premiums.

As of December 31, 2023 and 2022, the total remaining balances outstanding from these purchases equaled approximately $664.1 million and $804.3 million, respectively.

The following table shows the Company’s loan balances, including net deferred loan fees, as a percentage of total loans at the dates indicated:

3 unchanged sentences

Consumer 19.3 % 19.2 % 21.8 %

Commercial and industrial, excluding PPP 8.8 % 4.1 % 4.2 %

SBA PPP loans — % 1.2 % 6.9 %

Commercial and industrial 8.7 % 8.8 % 5.3 %

Construction 5.1 % 3.3 % 4.5 %

3 unchanged sentences

Allowance for credit losses 1.79 % 1.64 % 1.74 %

At December 31, 2022, loans including net deferred loan costs, totaled $6,450,447,000 which was a 31.2% ($1,533,823,000) increase over the balance at the end of December 31, 2021.

At December 31, 2021 loans, including net deferred loan costs, totaled $4,916,624,000 which was a 3.2% ($153,497,000) increase over the balances at the end of 2020.

At December 31, 2020 loans, including net deferred loan costs, totaled $4,763,127,000 which was a 10.6% ($455,761,000) increase over the balances at the end of 2019.

In March 2020, the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") was created to help small businesses keep workers employed during the COVID-19 crisis.

As a SBA Preferred Lender, the Company was able to provide PPP loans to small business customers.

The SBA ended PPP and did not accept new borrowing applications, effective May 31, 2021.

As of December 31, 2022 and 2021, the total gross balances outstanding of PPP loans was $1,617,000 and $63,311,000, respectively, as compared to total PPP originations of $640,410,000.

In connection with the origination of these loans, the Company earned approximately $25,299,000 in loan fees, offset by deferred loan costs of approximately $1,245,000, the net of which will be recognized over the earlier of loan maturity (between 24-60 months), repayment or receipt of forgiveness confirmation.

As of December 31, 2022, nearly all PPP loans originated have been forgiven and repaid by the SBA and there was approximately $15,000 in net deferred fee income remaining to be recognized.

During the year ended December 31, 2022, the Company recognized approximately $2,149,000 in fees on PPP loans as compared with $14,148,000 for the year ended December 31, 2021.

At December 31, 2023, loans including net deferred loan costs, totaled $6.8 billion which was a 5.3% or $344.0 million increase over the balance at the end of December 31, 2022.

At December 31, 2022, loans including net deferred loan costs, totaled $6.5 billion, which was a 31.2% or $1.5 billion increase over the balance at the end of December 31, 2021.

From time to time the Bank may be presented with the opportunity to purchase individual or pools of loans in whole or in part outside of a transaction that would be considered a business combination.

As of December 31, 2022 and 2021, the outstanding carrying value of purchased loans that were not acquired in a business combination totaled $167,014,000 and $159,373,000, respectively.

35 TriCo Bancshares 2022 10-K

As of December 31, 2023 and 2022, the outstanding carrying value of purchased loans that were not acquired in a business combination totaled $159.1 million and $167.0 million, respectively.

Asset Quality and Nonperforming Assets

1 unchanged sentence

The following tables set forth the amount of the Bank’s nonperforming assets as of the dates indicated.

“Performing non-accrual loans” are loans that may be current for both principal and interest payments, or are less than 90 days past due, but for which payment in full of both principal and interest is not expected, and are not well secured and in the process of collection:

“Performing non-accrual loans” are loans that may be current for both principal and interest payments, or are less than 90 days past due, but for which payment in full of both

40 TriCo Bancshares 2023 10-K

principal and interest is not expected, and are not well secured and in the process of collection:

(dollars in thousands) 2023 2022 2021 2019 2018

37 unchanged sentences

The table above does not include deposit overdraft charge-offs.

Nonperforming assets decreased by $8,184,000 (24.8%) to $24,760,000 at December 31, 2022 from $32,944,000 at December 31, 2021.

The decrease in nonperforming assets during 2022 was the result of net paydowns, sales or upgrades of nonperforming loans to performing status totaling $29,440,000, which was partially offset by $22,898,000 of additions to non-performing loans and net charge-offs of $1,137,000.

Nonperforming assets increased by $9.8 million (39.7%) to $34.6 million at December 31, 2023 from $24.8 million at December 31, 2022.

The increase in nonperforming assets during 2023 was the result of additions totaling $48.7 million, partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $30.1 million, and net charge-offs of $7.8 million.

41 TriCo Bancshares 2023 10-K

25 unchanged sentences

The table above does not include deposit overdraft charge-offs.

Nonperforming assets increased by $3,236,000 (10.9%) to $32,944,000 at December 31, 2021 from $29,708,000 at December 31, 2020.

The increase in nonperforming assets during 2021 was the result of new nonperforming loans of $20,037,000, which was partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $13,439,000, dispositions of foreclosed assets totaling $1,293,000, and net charge-offs of $2,069,000.

Nonperforming assets decreased by $8.1 million or 24.8% to $24.8 million at December 31, 2022 from $32.9 million at December 31, 2021.

The decrease in nonperforming assets during 2022 was the result of net paydowns, sales or upgrades of nonperforming loans to performing status totaling $29.4 million, which was partially offset by $22.9 million of additions to non-performing loans and net charge-offs of $1.1 million.

42 TriCo Bancshares 2023 10-K

25 unchanged sentences

(1) Charge-offs and write-downs exclude deposit overdraft charge-offs.

Nonperforming assets increased during the fourth quarter of 2022 by $3,848,000 (18.4%) to $24,760,000 at December 31, 2022 compared to $20,912,000 at September 30, 2022.

The increase in nonperforming assets during the fourth quarter of 2022 was the result of new nonperforming loans of $10,186,000, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $6,044,000, and net charge-offs of $73,000 in non-performing loans.

The current quarter change in non-performing assets is nearly entirely attributed to a single CRE relationship, which is considered well-secured as of the current period end.

Nonperforming assets increased during the fourth quarter by $1.9 million or 5.8% to $34.6 million at December 31, 2023 compared to $32.7 million at September 30, 2023.

The increase in nonperforming assets during the fourth quarter of 2023 was the result of new nonperforming loans of $6.5 million, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $3.7 million, and net charge-offs of $0.6 million in non-performing loans.

43 TriCo Bancshares 2023 10-K

25 unchanged sentences

(1) Charge-offs and write-downs exclude deposit overdraft charge-offs.

Nonperforming assets increased during the fourth quarter of 2021 by $1,504,000 (4.8%) to $32,944,000 at December 31, 2020 compared to $31,440,000 at September 30, 2021.

The increase in nonperforming assets during the fourth quarter of 2021 was the result of new nonperforming loans of $3,858,000, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $1,690,000, dispositions of foreclosed assets totaling $559,000, and net charge-offs of $105,000 in non-performing loans.

The $3,858,000 in new nonperforming loans during the fourth quarter of 2021 was comprised of, most notably, an increase of $1,992,000 and $1,633,000, respectively, on separate farmland relationships, both of which have been individually evaluated for collectability under the collateral methodology.

Reserves of approximately $275,000 have been recorded in connections with these relationships has been recorded as of December 31, 2021.

39 TriCo Bancshares 2022 10-K

Nonperforming assets increased during the fourth quarter of 2022 by $3.8 million or 18.4% to $24.7 million at December 31, 2022 compared to $20.9 million at September 30, 2022.

The increase in nonperforming assets during the fourth quarter of 2022 was the result of new nonperforming loans of $10.2 million, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $6.0 million, and net charge-offs of $0.1 million in non-performing loans.

Allowance for Credit Losses - Investment Securities

7 unchanged sentences

In addition to credit losses associated with the Company's loan portfolio, the CECL standard requires that loss estimates be developed for securities classified as held-to-maturity (HTM).

As of December 31, 2022, the Company's HTM investment portfolio had a carrying value of approximately $160,983,000 and was comprised of $154,830,000 in obligations backed by U.S.

government agencies and $6,153,000 in obligations of states and political subdivisions.

As of December 31, 2023, the Company's HTM investment portfolio had a carrying value of approximately $133.5 million and was comprised of $130.8 million in obligations backed by U.S.

government agencies and $2.7 million in obligations of states and political subdivisions.

As the 97.9% of the HTM portfolio consisted of investment securities where payment performance has an implicit or explicit guarantee from the U.S.

2 unchanged sentences

Based on this evaluation, management determined that the expected credit losses associated with these securities is less than significant for financial reporting purposes.

Therefore, during the year ended December 31, 2022 no allowance for credit losses related to HTM securities was recorded.

Therefore, during the year ended December 31, 2023 as 2022, no allowance for credit losses related to HTM securities was recorded.

44 TriCo Bancshares 2023 10-K

Allowance for Credit Losses - Unfunded Commitments

9 unchanged sentences

Allowance for individually evaluated loans 3,092 2,414 982 1,450 935

Allowance for PCI loan losses n/a n/a n/a 6 122

Allowance for PCI loan losses n/a n/a n/a n/a 6

Total allowance for credit losses $ 121,522 $ 105,680 $ 85,376 $ 91,847 $ 30,616

Ratio of allowance for credit losses to gross loans 1.79 % 1.64 % 1.74 % 1.93 % 0.71 %

Based on the current conditions of the loan portfolio, management believes that the $105,680,000 allowance for credit losses at December 31, 2022 is adequate to absorb probable losses inherent in the Bank’s loan portfolio.

Based on the current conditions of the loan portfolio, management believes that the $121.5 million allowance for credit losses at December 31, 2023 is adequate to absorb probable losses inherent in the Bank’s loan portfolio.

No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

The credit quality of the Company’s loan portfolio, as measured by trends in the volume of past due loans, non-accrual loans, net loan charge-offs (recoveries) and risk grades, remained stable throughout the year.

On a year over year basis, improved trends in the actual and forecasted levels of unemployment and GDP further contributed to the lower ratio of credit reserves as a percentage of total loans outstanding.

One notable exception to the improved qualitative reserves was caused by the observed volatility and increase in corporate debt yields, signaling greater risk of default.

The allowance for credit losses increased by $20,304,000 during the year ended December 31, 2022 which is primarily reflective of the acquisition of VRB during March 2022, organic growth within the loan portfolio improvement in both the Company's qualitative and quantitative factors, and increase in reserve on individually analyzed loans.

Ex-growth in loans outstanding, quantitative factors from the cohort model improved slightly during the year as a result of continued improvement in the Company's loss experience as a percentage of

40 TriCo Bancshares 2022 10-K

total loans outstanding;

2) reductions in past due loans, and 3) avoidance of loan concentrations.

However, specific reserves did increase by $1,432,000 as compared to the previous year end, but still remain at historically modest levels.

As compared to historical norms, inflation remains elevated from continued disruptions in the supply chain, wage pressures, and higher living costs such as housing and food prices Despite the expected continued benefit to the net interest income of the Company from the elevated rate environment, Management notes the rapid intervals of rate increases by the Federal Reserve and inversion of the yield curve, have boosted expectations of the US entering a recession within 12 months and has led to the lowest levels of consumer sentiment in decades.

As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors.

The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date.

This forecast data continues to evolve and includes improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date.

Despite continued declines on a year over year comparative basis, core inflation remains elevated from wage pressures, and higher living costs such as housing, energy and food prices resulting in a rising rate environment for nearly all of 2023.

Management notes the rapid intervals of rate increases by the Federal Reserve may create repricing risk for certain borrowers and continued inversion of the yield curve, creates informed expectations of the US potentially entering a recession within 12 months.

While projected cuts in interest rates from the Federal Reserve during 2024 may improve this outlook, the uncertainty associated with the extent and timing of these potential reductions has inhibited a material benefit to forecasted reserve levels.

As a result, management continues to believe that certain credit weaknesses are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors.

The following table summarizes the allocation of the allowance for credit losses between loan types:

7 unchanged sentences

Total allowance for credit losses $ 121,522 $ 105,680 $ 85,376 $ 91,847 $ 30,616

45 TriCo Bancshares 2023 10-K

The following table summarizes the allocation of the allowance for credit losses between loan types as a percentage of the total allowance for credit losses:

16 unchanged sentences

Total allowance for credit losses 1.79 % 1.64 % 1.74 % 1.93 % 0.71 %

41 TriCo Bancshares 2022 10-K

The following tables summarize the net charge-off (recovery) activity in the allowance for credit/loan losses as a percentage of loans for the years indicated (dollars in thousands):

3 unchanged sentences

Commercial real estate:

CRE non-owner occupied — % — % 0.01 % (0.09) % n/a

CRE owner occupied — % (0.11) % — % 0.13 % n/a

Multifamily — % — % — % — % n/a

Farmland 0.01 % 0.07 % 0.12 % — % n/a

SFR 1-4 1st DT liens — % 0.02 % (0.08) % (0.01) % n/a

SFR HELOCs and junior liens — % 0.33 % (0.06) % (0.26) % n/a

Other 0.20 % 0.32 % 0.41 % 0.54 % n/a

CRE non-owner occupied — % — % — % 0.01 % (0.09) %

CRE owner occupied 0.38 % — % (0.11) % — % 0.13 %

Multifamily — % — % — % — % — %

Farmland — % 0.01 % 0.07 % 0.12 % — %

SFR 1-4 1st DT liens (0.02) % — % 0.02 % (0.08) % (0.01) %

SFR HELOCs and junior liens (0.01) % — % 0.33 % (0.06) % (0.26) %

Other 0.50 % 0.20 % 0.32 % 0.41 % 0.54 %

Commercial and industrial 0.60 % 0.17 % 0.28 % 0.04 % 0.64 %

6 unchanged sentences

Generally, losses are triggered by non-performance by the borrower and calculated based on any difference between the current loan amount and the current value of the underlying collateral less any estimated costs associated with the disposition of the collateral.

46 TriCo Bancshares 2023 10-K

Foreclosed Assets, Net of Allowance for Losses

14 unchanged sentences

Total foreclosed assets $ 2,594 $ 1,347 $ — $ (705) $ 203 $ 3,439

42 TriCo Bancshares 2022 10-K

Deposit Portfolio Composition

8 unchanged sentences

Total deposits $ 7,834,038 $ 8,329,013 $ 7,367,159

Total uninsured deposits were estimated to be approximately $2,701,000,000 at December 31, 2022.

Total uninsured deposits were estimated to be approximately $2.4 billion and $2.7 billion at December 31, 2023 and 2022, respectively.

Long-Term Debt

See Note 13 to the consolidated financial statements at Item 8 of this report for information about the Company’s other borrowings and long-term debt.

See Note 13 to the consolidated financial statements at Part II, Item 8 of this report for information about the Company’s other borrowings and long-term debt.

Junior Subordinated Debt

See Note 14 to the consolidated financial statements at Item 8 of this report for information about the Company’s junior subordinated debt.

See Note 16 and Note 26 in the consolidated financial statements at Item 8 of this report for a discussion of shareholders’ equity and regulatory capital, respectively.

See Note 14 to the consolidated financial statements at Part II, Item 8 of this report for information about the Company’s junior subordinated debt.

See Note 16 and Note 26 in the consolidated financial statements at Part II, Item 8 of this report for a discussion of shareholders’ equity and regulatory capital, respectively.

Management believes that the Company’s capital is adequate to support anticipated growth, meet the cash dividend requirements of the Company and meet the future risk-based capital requirements of the Bank and the Company.

2 unchanged sentences

The following table shows the repurchases made by the Company during 2023 under the 2021 Plan:

47 TriCo Bancshares 2023 10-K

Period Total number of

5 unchanged sentences

January 1, 2023 - December 31, 2023 150,000 $46.50 1,209,802

We repurchased no shares of the Company's common stock during the quarter ended December 31, 2023.

Market Risk Management

15 unchanged sentences

deposits/borrowings) positions as the beginning base.

43 TriCo Bancshares 2022 10-K

In the simulation of net interest income and market value of equity, the forecast balance sheet is processed against various interest rate scenarios.

21 unchanged sentences

“Asset sensitive” implies that net interest income increases when interest rates rise and decrease when interest rates decrease.

“Liability sensitive” implies that net interest income decreases when interest rates rise and increase when interest rates decrease.“Neutral sensitivity” implies that net interest income does not change when interest rates change.

“Liability sensitive” implies that net interest income decreases when interest rates rise and increase when interest rates decrease.

“Neutral sensitivity” implies that net interest income does not

48 TriCo Bancshares 2023 10-K

change when interest rates change.

The asset liability management policy limits aggregate market risk, as measured in this fashion, to an acceptable level within the context of risk-return trade-offs.

20 unchanged sentences

Interest rate sensitivity gaps are measured as the difference between the volumes of assets and liabilities in the Company’s current portfolio that are subject to repricing at various time horizons.

44 TriCo Bancshares 2022 10-K

The following interest rate sensitivity table shows the Company’s repricing gaps as of December 31, 2023.

4 unchanged sentences

Instead, the Company relies on the more sophisticated interest rate risk simulation model described above as its primary tool in measuring and managing interest rate risk.

49 TriCo Bancshares 2023 10-K

As of December 31, 2023 Repricing within:

21 unchanged sentences

These activities are generally summarized as investing activities in the Consolidated Statement of Cash Flows.

Net cash used by investing activities, excluding cash acquired from VRB, totaled $1,149,582,000 in 2022.

Net increases in loan balances from both originations and purchases used approximately $761,357,000 of cash, while purchases of investment securities, net of calls and maturities, used approximately $392,806,000 of cash.

Net cash from investing activities totaled $28.6 million in 2023.

Net increases in loan balances from both originations and purchases used approximately $345.9 million of cash, while proceeds from the maturity and sales of investment securities, net of purchases, provided approximately $385.6 million of cash.

Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding.

These activities are included under financing activities in the Consolidated Statement of Cash Flows.

In 2022, financing activities used funds totaling $100,862,000, resulting from a decline of $253,625,000 in deposits, $35,797,000 in dividend payments, and an additional $27,148,000 used toward the repurchase of common stock, partially offset by an increase in cash from short term borrowings totaling $214,518,000.

In addition, at December 31, 2022, the Company had loans and securities available to pledge towards future borrowings from the Federal Home Loan Bank and the Federal Reserve Bank of up to $2,485,905,000 and $299,689,000, respectively.

As of December 31, 2022, the Company had $80,460,000 of other borrowings as described in Note 13 of the consolidated financial statements of the Company and the related notes at Item 8 of this report.

In 2023, financing activities used funds totaling $176.0 million, resulting from a decline of $495.0 million in deposits, $39.9 million in dividend payment outflows, and an additional $9.2 million used toward the repurchase of common stock, partially offset by an increase in cash from short term borrowings totaling $368.0 million.

The Company's primary sources of remaining available liquidity from available borrowings and in transit items include the following for the periods indicated:

(dollars in thousands) December 31, 2023 December 31, 2022

Borrowing capacity at correspondent banks and FRB $ 2,921,525 $ 2,815,574

borrowings outstanding (600,000) (216,700)

Unpledged available-for-sale (AFS) investment securities

1,558,506 1,990,451

Cash held or in transit with FRB

51,253 56,910

Total primary liquidity $ 3,931,284 $ 4,646,235

Estimated uninsured deposit balances $ 2,371,000 $ 2,701,000

At December 31, 2023, the Company's primary sources of liquidity represented 50% of total deposits and 166% of estimated total uninsured (excluding collateralized municipal deposits and intercompany balances) deposits, respectively.

As secondary sources of liquidity, the Company's held-to-maturity investment securities had a fair value of $125.1 million, including approximately $8.3 million in net unrealized losses.

The Company did not utilize any brokered deposits during 2023 or 2022.

While these sources are expected to continue to provide significant amounts of funds in the future, their mix, as well as the possible use of other sources, will depend on future economic and market conditions.

Liquidity is also provided or used through the results of operating activities.

In 2022, operating activities provided cash of $162,895,000 and primarily from net income of $125,419,000.

The Company’s investment securities, excluding held-to-maturity securities, plus cash and cash equivalents in excess of reserve requirements totaled $2,559,668,000 at December 31, 2022, which was 25.8% of total assets at that time.

This was a decrease of $416,691,000 from $2,976,359,000 and 34.5% of total assets as of December 31, 2021.

In 2023, operating activities provided cash of $138.9 million, primarily from net income of $117.4 million.

In 2022, operating activities provided cash of $162.9 million, primarily from net income of $125.4 million.

50 TriCo Bancshares 2023 10-K

Loan demand during 2024 will depend in part on economic and competitive conditions.

The Company emphasizes the solicitation of non-interest bearing demand deposits and money market checking deposits, which are the least sensitive to interest rates.

The outlook for deposit balances during 2023 is subject to actions from the Federal Reserve, heightened competition, the success of the Company’s sales

45 TriCo Bancshares 2022 10-K

efforts, delivery of superior customer service and market conditions.

In addition to the Federal Reserve's increase in interest rates, quantitative tightening through reduction of the Federal balance sheet is expected to place downward pressure on deposits balances during 2023.

The outlook for deposit balances during 2024 is also subject to actions from the Federal Reserve, heightened competition, the success of the Company’s sales efforts, as well as the delivery of superior customer service and market conditions.

The Federal Reserve's anticipated decrease in interest rates is expected to relieve some pressure on deposit margin expense, however, the competitive landscape for attracting and retaining deposit balances will continue to remain challenging during 2024.

Therefore, due to concerns such as uncertainty in the general economic environment, political uncertainty, and loan demand, levels of customer deposits are not certain and forecasted changes in those balances are subject to significant volatility and uncertainty.

Depending on economic conditions, interest rate levels, and a variety of other conditions, proceeds from the sale or maturity of investment securities may be used to fund loans, or reduce short-term borrowings.

However, due to concerns such as uncertainty in the general economic environment, competition and political uncertainty, loan demand and levels of customer deposits are not certain and forecasted changes in those balances are subject to significant volatility and uncertainty.

At December 31, 2022, we believe the Company has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.

At December 31, 2023, we believe the Company has sufficient liquidity and capital resources to meet its cash flow obligations over the foreseeable future.

The principal cash requirements of the Company are dividends on common stock when declared.

14 unchanged sentences

Total $ 46,350 $ 44,652

46 TriCo Bancshares 2022 10-K

Loan maturities

1 unchanged sentence

The following table presents the maturities of loans, net of deferred loan costs, at December 31, 2023:

51 TriCo Bancshares 2023 10-K

One Year After One

52 unchanged sentences

The Bank has certain ongoing commitments under leases.

See Note 11 of the financial statements at Item 8 of this report for the terms.

See Note 11 of the financial statements at Part II, Item 8 of this report for the terms.

These commitments do not significantly impact operating results.

1 unchanged sentence

The Bank has not entered into any material contracts for financial derivative instruments such as futures, swaps, options, etc.

Commitments to extend credit were $2,215,159,000 and $1,607,939,000 at December 31, 2022 and 2021, respectively, and represent 34.3% of the total loans outstanding at year-end 2022 versus 32.7% at December 31, 2021.

Commitments related to the Bank’s deposit overdraft privilege product totaled $126,634,000 and $125,670,000 at December 31, 2022 and 2021, respectively.

Commitments to extend credit were $2.38 billion and $2.22 billion at December 31, 2023 and 2022, respectively, and represent 35.0% of the total loans outstanding at year-end 2023 versus 34.3% at December 31, 2022.

Commitments related to the Bank’s deposit overdraft privilege product totaled $121.5 million and $126.6 million at December 31, 2023 and 2022, respectively.

Certain Contractual Obligations

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Time deposits $ 697,467 $ 626,979 $ 67,506 $ 2,982 $ —

Other collateralized borrowings, fixed rate, as of December 31, 2022 of 0.05%, payable on January 3, 2023

47,905 47,905 — — —

Overnight borrowing at FHLB, fixed rate, as of December 31, 2023 of 5.70%, payable on January 2, 2024

400,000 400,000 — — —

Term borrowing at FHLB, fixed rate, as of December 31, 2023 of 4.75%, payable on April 8, 2024

200,000 200,000 — — —

Junior subordinated debt:

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Total contractual obligations $ 1,441,620 $ 1,234,716 $ 84,878 $ 10,617 $ 111,409

(1) Junior subordinated debt, adjustable rate of three-month LIBOR plus 3.05%, callable in whole or in part by the Company on a quarterly basis beginning October 7, 2008, matures October 7, 2033.

(2) Junior subordinated debt, adjustable rate of three-month LIBOR plus 2.55%, callable in whole or in part by the Company on a quarterly basis beginning July 23, 2009, matures July 23, 2034.

(3) Junior subordinated debt, adjustable rate of three-month LIBOR plus 3.25%, callable in whole or in part by the Company on a quarterly basis beginning April 24, 2008, matures April 24, 2033.

(4) Junior subordinated debt, adjustable rate of three-month LIBOR plus 2.80%, callable in whole or in part by the Company on a quarterly basis beginning July 23, 2009, matures July 23, 2034.

(5) Junior subordinated debt, adjustable rate of three-month LIBOR plus 1.33%, callable in whole or in part by the Company on a quarterly basis beginning March 15, 2011, matures March 15, 2036.

(6) Junior subordinated debt, fixed rate of 6% until March 29, 2024, then floating rate of three-month LIBOR plus 3.52% until maturity in 2029.

(1) Junior subordinated debt, adjustable rate of three-month SOFR plus 3.05%, callable in whole or in part by the Company on a quarterly basis beginning October 7, 2008, matures October 7, 2033.

(2) Junior subordinated debt, adjustable rate of three-month SOFR plus 2.55%, callable in whole or in part by the Company on a quarterly basis beginning July 23, 2009, matures July 23, 2034.

(3) Junior subordinated debt, adjustable rate of three-month SOFR plus 3.25%, callable in whole or in part by the Company on a quarterly basis beginning April 24, 2008, matures April 24, 2033.

(4) Junior subordinated debt, adjustable rate of three-month SOFR plus 2.80%, callable in whole or in part by the Company on a quarterly basis beginning July 23, 2009, matures July 23, 2034.

(5) Junior subordinated debt, adjustable rate of three-month SOFR plus 1.33%, callable in whole or in part by the Company on a quarterly basis beginning March 15, 2011, matures March 15, 2036.

(6) Junior subordinated debt, fixed rate of 6% until March 29, 2024, then floating rate of three-month SOFR plus 3.52% until maturity in 2029.

Redeemable in whole or in part by the Company beginning March 29, 2024.

2 unchanged sentences

(8) These amounts represent known certain payments to participants under the Company’s deferred compensation and supplemental retirement plans.

See Note 22 in the financial statements at Item 8 of this report for additional information related to the Company’s deferred compensation and supplemental retirement plan liabilitie s.

See Note 22 in the financial statements at Part II, Item 8 of this report for additional information related to the Company’s deferred compensation and supplemental retirement plan liabilitie s.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 7. Management’s Discussion and Analysis