TRICO BANCSHARES / 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS Cautionary Statements Regarding Forward-Looking Information The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the conditions of the United States economy in general and the strength of the local economies in which we conduct operations; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit or changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; the impacts of inflation, interest rate, market and monetary fluctuations on the Company's business condition and financial operating results; the impact of changes in financial services industry policies, laws and regulations; regulatory restrictions affecting our ability to successfully market and price our products to consumers; the risks related to the development, implementation, use and management of emerging technologies, including artificial intelligence and machine learning; extreme weather, natural disasters and other catastrophic events that may or may not be caused by climate change and their effects on the Company's customers and the economic and business environments in which the Company operates; the impact of a slowing U.S. economy, decreases in housing and commercial real estate prices, and potentially increased unemployment on the performance of our loan portfolio, the market value of our investment securities and possible other-than-temporary impairment of securities held by us due to changes in credit quality or rates; the availability of, and cost of, sources of funding and the demand for our products; adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, commodities prices, inflationary pressures and labor shortages on the economic recovery and our business; the impacts of international hostilities, wars, terrorism or geopolitical events; adverse developments in the financial services industry generally such as the recent bank failures and any related impact on depositor behavior or investor sentiment; risks related to the sufficiency of liquidity; the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital; the costs or effects of mergers, acquisitions or dispositions we may make, as well as whether we are able to obtain any required governmental approvals in connection with any such activities, or identify and complete favorable transactions in the future, and/or realize the anticipated financial and business benefits; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the negative impact on our reputation and profitability in the event customers experience economic harm or in the event that regulatory violations are identified; the ability to execute our business plan in new markets; the future operating or financial performance of the Company, including our outlook for future growth and changes in the level and direction of our nonperforming assets and charge-offs; the appropriateness of the allowance for credit losses, including the assumptions made under our current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effectiveness of the Company's asset management activities managing the mix of earning assets and in improving, resolving or liquidating lower-quality assets; the effect of changes in the financial performance and/or condition of our borrowers; changes in accounting standards and practices; changes in consumer spending, borrowing and savings habits; our ability to attract and maintain deposits and other sources of liquidity; the effects of changes in the level or cost of checking or savings account deposits on our funding costs and net interest margin; increasing noninterest expense and its impact on our financial performance; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional competitors including retail businesses and technology companies; the challenges of attracting, integrating and retaining key employees; the vulnerability of the Company's operational or security systems or infrastructure, the systems of third-party vendors or other service providers with whom the Company contracts, and the Company's customers to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and data/security breaches and the cost to defend against and respond to such incidents; the impact of the 2023 cyber security ransomware incident on our operations and reputation; increased data security risks due to work from home arrangements and email vulnerability; failure to safeguard personal information, and any resulting litigation; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the transition from the LIBOR to new interest rate benchmarks; the emergence or continuation of widespread health emergencies or pandemics; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and our ability to manage the risks involved in the foregoing. There can be no assurance that future developments affecting us will be the same as those anticipated by management. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2023, which has been filed with the Securities and Exchange Commission (the “SEC”) and all subsequent filings with the SEC under Sections 13(a), 13(c), 14, and 15(d) of the Securities Act of 1934, as amended. Such filings are also available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. We undertake no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. General As TriCo Bancshares (referred to in this report as “we”, “our” or the “Company”) has not commenced any business operations independent of Tri Counties Bank (the “Bank”), the following discussion pertains primarily to the Bank. Average balances, including such 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, interest income, net interest income, and net interest yield are generally presented on a FTE basis. The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provides additional clarity in assessing its results, and the presentation of these measures 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 in the Part I - Financial Information section of this Form 10-Q, and a reconciliation of the FTE and non-FTE presentations is provided below in the discussion of net interest income. 37 Table of Contents Critical Accounting Policies and Estimates The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those that materially affect the financial statements and are related to the adequacy of the allowance for loan losses, investments, mortgage servicing rights, fair value measurements, retirement plans and intangible assets. 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. A detailed discussion related to the Company’s accounting policies including those related to estimates on the allowance for credit losses related to loans and investment securities, and impairment of intangible assets, can be found in Note 1 of the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2023. 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 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. Financial Highlights Performance highlights and other developments for the Company as of or for the three months ended March 31, 2024, included the following: • For the quarter ended March 31, 2024, the Company’s return on average assets was 1.13%, while the return on average equity was 9.50%; for the trailing quarter ended December 31, 2023, the Company’s return on average assets was 1.05%, while the return on average equity was 9.43%. • Diluted earnings per share were $0.83 for the first quarter of 2024, compared to $0.78 for the trailing quarter and $1.07 during the first quarter of 2023. • Net income was $27.7 million compared to $26.1 million in the trailing quarter; pre-tax pre-provision net revenue was $42.0 million compared to $42.4 million in the trailing quarter. • Deposit balances increased $153.6 million or 7.8% (annualized) from the trailing quarter. • The loan to deposit ratio decreased to 85.1% as of March 31, 2024, as compared to 86.7% for the trailing quarter end, as a result of deposit growth during the quarter. • The efficiency ratio improved to 57.36% for the quarter ended March 31, 2024, as compared to 58.71% for the trailing quarter end, due to management's focus on expense control as well as the absence of non-recurring costs in the quarter. • The provision for credit losses was approximately $4.3 million during the quarter ended March 31, 2024, as compared to $6.0 million during the trailing quarter end, reflecting the risks associated with general economic trends and forecasts. • The allowance for credit losses (ACL) to total loans was 1.83% as of March 31, 2024, compared to 1.79% as of the trailing quarter end, and 1.69% as of March 31, 2023. Non-performing assets to total assets were 0.37% on March 31, 2024, as compared to 0.35% as of December 31, 2023, and 0.20% at March 31, 2023. At March 31, 2024, the ACL represented 363% of non-performing loans. • Average yield on earning assets was 5.13%, an increase of 4 basis points over the 5.09% in the trailing quarter. • Net interest margin was 3.68% in the recent quarter, narrowing 13 basis points from 3.81% in the trailing quarter; management expects that net interest margin will reach an inflection point in the second half of 2024. • Non-interest bearing deposits averaged 33.8% of total deposits during the first quarter of 2024. • The average cost of total deposits was 1.21%, an increase of 16 basis points as compared to 1.05% in the trailing quarter, and an increase of 96 basis points from 0.25% in the same quarter of the prior year; the Company's total cost of deposits have increased 117 basis points since FOMC rate actions began in March 2022, which translates to a cycle-to-date deposit beta of 22.3%. 38 Table of Contents TRICO BANCSHARES Financial Summary (In thousands, except per share amounts; unaudited) Three months ended March 31, 2024 2023 Net interest income $ 82,736 $ 93,336 Provision for credit losses (4,305) (4,195) Non-interest income 15,771 13,635 Non-interest expense (56,504) (53,794) Provision for income taxes (9,949) (13,149) Net income $ 27,749 $ 35,833 Per Share Data: Basic earnings per share $ 0.83 $ 1.08 Diluted earnings per share $ 0.83 $ 1.07 Dividends paid $ 0.33 $ 0.30 Book value at period end $ 35.06 $ 32.84 Average common shares outstanding 33,245 33,296 Average diluted common shares outstanding 33,370 33,438 Shares outstanding at period end 33,169 33,195 At period end: Loans $ 6,800,695 $ 6,422,421 Total investment securities $ 2,221,555 $ 2,577,769 Total assets $ 9,813,767 $ 9,842,394 Total deposits $ 7,987,658 $ 8,025,865 Other borrowings $ 392,409 $ 434,140 Shareholders’ equity $ 1,163,051 $ 1,090,245 Financial Ratios: During the period: Return on average assets (annualized) 1.13 % 1.47 % Return on average equity (annualized) 9.50 % 13.36 % Net interest margin (1) (annualized) 3.68 % 4.20 % Efficiency ratio 57.36 % 50.29 % Average equity to average assets 11.92 % 11.00 % At end of period: Equity to assets 11.85 % 11.08 % Total capital to risk-adjusted assets 14.97 % 14.50 % (1) Fully Taxable Equivalent (FTE) 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 Condensed Consolidated Financial Statements of the Company and the Notes thereto located at Item 1 of this report. 39 Table of Contents Net Interest Income The Company’s primary source of revenue is net interest income, or the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Following is a summary of the components of FTE net income for the periods indicated. Three months ended (in thousands) March 31, 2024 March 31, 2023 Change % Change Interest income $ 115,417 $ 102,907 $ 12,510 12.2 % Interest expense (32,681) (9,571) (23,110) 241.5 % Fully tax-equivalent adjustment (FTE) (1) 275 392 (117) (29.8) % Net interest income (FTE) $ 83,011 $ 93,728 $ (10,717) (11.4) % Net interest margin (FTE) 3.68 % 4.20 % Acquired loans discount accretion, net: Amount (included in interest income) $ 1,332 $ 1,397 $ (65) (4.7) % Net interest margin less effect of acquired loan discount accretion (1) 3.62 % 4.14 % (0.52) % (1) Certain information included herein is presented on a FTE basis and/or to present additional financial details which may be desired by users of this financial information. The Company believes the use of this non-generally accepted accounting principles (non-GAAP) measure provides additional clarity in assessing its results, and the presentation of these measures is a common practice within the banking industry. Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. The dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. Despite the elevated rate environment, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, remains consistent. During the quarter ended March 31, 2024 and March 31, 2023, the purchased loan discount accretion was $1.3 million and $1.4 million, respectively. 40 Table of Contents Summary of Average Balances, Yields/Rates and Interest Differential The following table presents, for the three month periods indicated, information regarding the Company’s consolidated average assets, liabilities and shareholders’ equity, the amounts of interest income from average interest-earning assets and resulting yields, and the amount of interest expense paid on interest-bearing liabilities. Average loan balances include nonperforming loans. Interest income includes proceeds from loans on nonaccrual loans only to the extent cash payments have been received and applied to interest income. Yields on securities and certain loans have been adjusted upward to reflect the effect of income thereon exempt from federal income taxation at the current statutory tax rate (dollars in thousands). For the three months ended March 31, 2024 March 31, 2023 Average Balance Interest Income/ Expense Rates Earned /Paid Average Balance Interest Income/ Expense Rates Earned /Paid Assets: Loans $ 6,785,840 $ 96,485 5.72 % $ 6,413,958 $ 82,415 5.21 % Investment securities - taxable 2,127,420 17,829 3.37 % 2,415,485 18,916 3.18 % Investment securities - nontaxable (1) 138,900 1,192 3.45 % 189,050 1,699 3.64 % Total investments 2,266,320 19,021 3.38 % 2,604,535 20,615 3.21 % Cash at Federal Reserve and other banks 14,377 186 5.20 % 26,818 269 4.07 % Total interest-earning assets 9,066,537 115,692 5.13 % 9,045,311 103,299 4.63 % Other assets 789,260 850,866 Total assets $ 9,855,797 $ 9,878,927 Liabilities and shareholders’ equity: Interest-bearing demand deposits $ 1,710,844 $ 4,947 1.16 % $ 1,673,114 $ 387 0.09 % Savings deposits 2,651,917 10,900 1.65 % 2,898,463 4,154 0.58 % Time deposits 811,894 7,682 3.81 % 274,805 604 0.89 % Total interest-bearing deposits 5,174,655 23,529 1.83 % 4,846,382 5,145 0.43 % Other borrowings 584,696 7,378 5.08 % 277,632 2,809 4.10 % Junior subordinated debt 101,106 1,774 7.06 % 101,044 1,617 6.49 % Total interest-bearing liabilities 5,860,457 32,681 2.24 % 5,225,058 9,571 0.74 % Noninterest-bearing deposits 2,646,389 3,372,194 Other liabilities 174,359 194,202 Shareholders’ equity 1,174,592 1,087,473 Total liabilities and shareholders’ equity $ 9,855,797 $ 9,878,927 Net interest spread (2) 2.89 % 3.89 % Net interest income and interest margin (3) $ 83,011 3.68 % $ 93,728 4.20 % (1) Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable. (2) Net interest spread represents the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities. (3) Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of i nterest-earning assets, then annualized based on the number of days in the given period . Net interest income (FTE) during the three months ended March 31, 2024, decreased $4.0 million or 4.6% to $83.0 million compared to $87.0 million during the three months ended December 31, 2023. In addition, net interest margin declined 13 basis points to 3.68%, compared to the trailing quarter. The decrease in net interest income is primarily attributed to an additional $2.4 million or 11.4% in deposit interest expense due to changes in product mix as customers continue to be drawn towards higher yielding term deposit accounts. Deposit cost increases during the current quarter were also influenced by continued competitive pricing pressures. Net interest income for the quarter was also impacted by an increase of $1.0 million in other borrowings costs and declines in investment income totaling $1.4 million, with a partial offset from increased loan income of $1.0 million. As compared to the same quarter in the prior year, average loan yields increased 51 basis points from 5.21% during the three months ended March 31, 2023, to 5.72% during the three months ended March 31, 2024. The accretion of discounts from acquired loans added 9 and 11 basis points to loan yields during the quarters ended March 31, 2024 and March 31, 2023, respectively. The rates paid on interest bearing deposits increased by 21 basis points during the quarter ended March 31, 2024, compared to the trailing quarter. The cost of interest-bearing deposits increased by 140 basis points between the quarter ended March 31, 2024, and the same quarter of the prior year. In addition, the average balance of noninterest-bearing deposits decreased by $170.3 million quarter over quarter and decreased by $725.8 million from three month average for the period ended March 31, 2023 amidst a continued migration of customer funds to interest-bearing products. As of March 31, 2024, the ratio of average total noninterest-bearing deposits to total average deposits was 33.8%, as compared to 35.2% and 41.0% at December 31, 2023 and March 31, 2023, respectively. 41 Table of Contents Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid The following table sets forth, for the period identified, a summary of the changes in interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated. Changes not solely attributable to volume or rates have been allocated in proportion to the respective volume and rate components. Three months ended March 31, 2024 compared with three months ended March 31, 2023 (in thousands) Volume Rate Total Increase (decrease) in interest income: Loans $ 4,859 $ 9,211 $ 14,070 Investment securities (2,748) 1,154 (1,594) Cash at Federal Reserve and other banks (127) 44 (83) Total interest-earning assets 1,984 10,409 12,393 Increase (decrease) in interest expense: Interest-bearing demand deposits 8 4,552 4,560 Savings deposits (357) 7,103 6,746 Time deposits 1,195 5,883 7,078 Other borrowings 3,147 1,422 4,569 Junior subordinated debt 1 156 157 Total interest-bearing liabilities 3,994 19,116 23,110 Decrease in net interest income $ (2,010) $ (8,707) $ (10,717) The following commentary regarding net interest income, interest income and interest expense may be best understood while referencing the Summary of Average Balances, Yields/Rates and Interest Differential and the Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid shown above. Net interest income (FTE) during the three months ended March 31, 2024 decreased $10.7 million to $83.0 million compared to $93.7 million during the three months ended March 31, 2023. The overall decrease in net interest income (FTE) was due to increasing interest rates elevating interest expense on interest-bearing liabilities, most significantly deposits and other borrowings, resulting in a net increase of $18.3 million and $4.5 million, respectively. Elevated interest rates also improved interest income on earning assets by $10.4 million, partially offsetting the increases in interest expense. Asset Quality and Credit Loss Provisioning During the three months ended March 31, 2024, the Company recorded a provision for credit losses of $4.3 million, as compared to $6.0 million during the trailing quarter, and $4.2 million during the first quarter of 2023. Three months ended (dollars in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Addition to allowance for credit losses $ 4,015 $ 6,040 $ 4,315 Addition to (reversal of) reserve for unfunded loan commitments 290 (50) (120) Total provision for (reversal of) credit losses $ 4,305 $ 5,990 $ 4,195 The allowance for credit losses (ACL) was $124.4 million or 1.83% of total loans as of March 31, 2024. The provision for credit losses on loans of $4.0 million during the recent quarter was the net effect of charge-offs and increases in reserves for qualitative factors and quantitative reserves under the cohort model, inclusive of a $1.5 million decrease in specific reserves for individually evaluated credits. On a comparative basis, the provision for credit losses of $4.3 million during the three months ended March 31, 2023, was attributed to both loan growth and qualitative components of the ACL model. For the current quarter, the qualitative components of the ACL resulted in a net increase in required reserves due primarily to year over year increases in concentrated loan growth and California unemployment trends. The quantitative component of the ACL decreased reserve requirements by approximately $1.3 million over the trailing quarter, primarily attributed to decreases in specific reserves. 42 Table of Contents Three months ended (dollars in thousands) March 31, 2024 March 31, 2023 Balance, beginning of period $ 121,522 $ 105,680 Provision for credit losses 4,015 4,315 Loans charged-off (1,275) (1,758) Recoveries of previously charged-off loans 132 170 Balance, end of period $ 124,394 $ 108,407 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. 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. Loans past due 30 days or more decreased by $2.9 million during the quarter ended March 31, 2024, to $16.5 million, as compared to $19.4 million at December 31, 2023. Of the total $16.5 million in loans identified as past due, approximately $4.7 million is less than 90 days past due, the majority of which is well-secured. Non-performing loans were $34.2 million at March 31, 2024, an increase of $2.4 million from $31.9 million as of December 31, 2023, and an increase of $18.2 million from $16.0 million as of March 31, 2023. The increase in non-performing loans as compared to the trailing quarter is concentrated between non-owner occupied commercial real estate and agriculture l ending, specifically the result of declines in commodity pricing and therefore, expected revenue available to borrowers from harvest proceeds. Management continues to proactively work with these borrowers to identify actionable and appropriate resolution strategies which are customary for the industries. Of the $34.2 million loans designated as non-performing as of March 31, 2024, approximately $21.3 million are current with respect to payments required under their original loan agreements. March 31, % of Loans Outstanding December 31, % of Loans Outstanding March 31 % of Loans Outstanding (dollars in thousands) 2024 2023 2023 Risk Rating: Pass $ 6,616,294 97.3 % $ 6,603,161 97.2 % $ 6,232,962 97.0 % Special Mention 108,073 1.6 % 103,812 1.5 % 125,492 2.0 % Substandard 76,328 1.1 % 87,497 1.3 % 63,967 1.0 % Total $ 6,800,695 $ 6,794,470 $ 6,422,421 Classified loans to total loans 1.12 % 1.29 % 1.00 % Loans past due 30+ days to total loans 0.24 % 0.29 % 0.12 % The ratio of classified loans to total loans of 1.12% as of March 31, 2024 decreased 17 basis points from December 31, 2023 and increased 12 basis points from the comparative quarter ended 2023. The improvement in classified loans outstanding was spread amongst several substandard relationships primarily within commercial real estate. As a percentage of total loans outstanding, classified assets remain consistent with volumes experienced prior to the recent quantitative easing cycle spurred by the COVID pandemic, and reflects management's historically conservative approach to credit risk monitoring. The Company's combined criticized loan balances decreased during the quarter by $6.9 million to $184.4 million as of March 31, 2024 and Management believes the associated credit risk has been adequately reserved against. As of March 31, 2024, other real estate owned consisted of 10 properties with a carrying value of approximately $2.5 million, a decrease of $0.2 million from the trailing quarter ended. Non-performing assets of $36.7 million at March 31, 2024, represented 0.37% of total assets, a change from the $34.6 million or 0.35% and $19.5 million or 0.20% as of December 31, 2023 and March 31, 2023, respectively. 43 Table of Contents Non-interest Income The following table summarizes the Company’s non-interest income for the periods indicated (in thousands): Three months ended March 31, (in thousands) 2024 2023 $ Change % Change ATM and interchange fees $ 6,169 $ 6,344 $ (175) (2.8) % Service charges on deposit accounts 4,663 3,431 1,232 35.9 % Other service fees 1,366 1,166 200 17.2 % Mortgage banking service fees 428 465 (37) (8.0) % Change in value of mortgage servicing rights 11 (209) 220 (105.3) % Total service charges and fees 12,637 11,197 1,440 12.9 % Increase in cash value of life insurance 803 802 1 0.1 % Asset management and commission income 1,128 934 194 20.8 % Gain on sale of loans 261 206 55 26.7 % Lease brokerage income 161 98 63 64.3 % Sale of customer checks 312 288 24 8.3 % Loss on sale of investment securities — (164) 164 n/m Gain (loss) on marketable equity securities (28) 42 (70) (166.7) % Other 497 232 265 114.2 % Total other non-interest income 3,134 2,438 696 28.5 % Total non-interest income $ 15,771 $ 13,635 $ 2,136 15.7 % Non-interest income increased $2.1 million or 15.7% to $15.8 million during the three months ended March 31, 2024, compared to $13.6 million during the comparative quarter ended March 31, 2023. Service charges on deposit accounts increased by $1.2 million or 35.9% as compared to the equivalent period in 2023 following $0.9 million in waived or reversed fees due to a network outage in the earlier period. 44 Table of Contents Non-interest Expense The following table summarizes the Company’s non-interest expense for the periods indicated: Three months ended March 31, (in thousands) 2024 2023 $ Change % Change Base salaries, net of deferred loan origination costs $ 24,020 $ 23,000 $ 1,020 4.4 % Incentive compensation 3,257 2,895 362 12.5 % Benefits and other compensation costs 7,027 6,668 359 5.4 % Total salaries and benefits expense 34,304 32,563 1,741 5.3 % Occupancy 3,951 4,160 (209) (5.0) % Data processing and software 5,107 4,032 1,075 26.7 % Equipment 1,356 1,383 (27) (2.0) % Intangible amortization 1,030 1,656 (626) (37.8) % Advertising 762 759 3 0.4 % ATM and POS network charges 1,661 1,709 (48) (2.8) % Professional fees 1,340 1,589 (249) (15.7) % Telecommunications 511 595 (84) (14.1) % Regulatory assessments and insurance 1,251 792 459 58.0 % Postage 308 299 9 3.0 % Operational losses 352 435 (83) (19.1) % Courier service 480 339 141 41.6 % Gain on sale or acquisition of foreclosed assets (38) — (38) n/m Loss on disposal of fixed assets 5 — 5 n/m Other miscellaneous expense 4,124 3,483 641 18.4 % Total other non-interest expense 22,200 21,231 969 4.6 % Total non-interest expense $ 56,504 $ 53,794 $ 2,710 5.0 % Average full time equivalent staff 1,188 1,219 (31) (2.5) % Non-interest expense increased $2.7 million or 5.0% to $56.5 million during the three months ended March 31, 2024, as compared to $53.8 million for the quarter ended March 31, 2023. Total salaries and benefits expense increased by $1.7 million or 5.3% to $34.3 million, largely from annual compensation adjustments and other routine increases in benefits and compensation. Data processing and software expenses increased by $1.1 million or 26.7% related to ongoing investments in the Company's data management and security infrastructure. Regulatory assessment charges increased $0.5 million or 58.0% following the increase in assessment rates beginning in the second quarter of 2023. Income Taxes The Company’s effective tax rate was 26.4% for the quarter and year ended March 31, 2024, as compared to 28.4% for the period ended December 31, 2023. Differences between the Company's effective tax rate and applicable federal and state blended statutory rate of approximately 29.6% are due to the proportion of non-taxable revenues, non-deductible expenses, and benefits from tax credits as compared to the levels of pre-tax earnings. Financial Condition For financial reporting purposes, the Company does not separately track the changes in assets and liabilities based on branch location or regional geography. The following is a comparison of the quarterly change in certain assets and liabilities: Ending balances March 31, December 31, Annualized % Change (dollars in thousands) 2024 2023 $ Change Total assets $ 9,813,767 $ 9,910,089 $ (96,322) (3.9) % Total loans 6,800,695 6,794,470 6,225 0.4 Total investments 2,221,555 2,305,882 (84,327) (14.6) Total deposits 7,987,658 7,834,038 153,620 7.8 Total other borrowings 392,409 632,582 (240,173) (151.9) 45 Table of Contents Loans outstanding increased by $6.2 million or 0.4% on an annualized basis during the quarter ended March 31, 2024. During the quarter, loan originations/draws totaled approximately $325.5 million while payoffs/repayments of loans totaled $321.3 million, which compares to originations/draws and payoffs/repayments during the trailing quarter ended of $450.0 million and $368.0 million, respectively. While origination volume decreased from the previous quarter, activity levels continue to be lower relative to the comparative period in 2023 due in part to disciplined pricing and underwriting, as well as decreased borrower demand given economic uncertainties. Investment security balances decreased $84.3 million or 14.6% on an annualized basis as the result of net prepayments, and maturities, collectively totaling approximating $66.4 million, in addition to net decreases in the market value of securities of $15.9 million. For the foreseeable future, management intends to utilize cash flows from the investment security portfolio and organic deposit growth to support loan growth or reduce borrowings, thus driving an improved mix of earning assets. Deposit balances increased by $153.6 million or 7.8% annualized during the period, led by growth within time deposits. Proceeds from the call or maturity of investment securities, and growth in deposits, during the quarter supported a net decrease of $240.2 million in short-term borrowings, which totaled $392.4 million at March 31, 2024. The following is a comparison of the year over year change in certain assets and liabilities: Ending balances As of March 31, % Change (dollars in thousands) 2024 2023 $ Change Total assets $ 9,813,767 $ 9,842,394 $ (28,627) (0.3) % Total loans 6,800,695 6,422,421 378,274 5.9 Total investments 2,221,555 2,577,769 (356,214) (13.8) Total deposits 7,987,658 8,025,865 (38,207) (0.5) Total other borrowings 392,409 434,140 (41,731) (9.6) Loan balances increased as a result of organic activities by approximately $378.3 million or 5.9% during the twelve-month period ending March 31, 2024. Over the same period deposit balances have declined by $38.2 million or 0.5%. The Company has offset these declines through the deployment of excess cash balances, runoff of investment security balances, and proceeds from short-term Federal Home Loan Bank (FHLB) borrowings. Investment Securities Investment securities available for sale decreased $84.3 million to $2.1 billion as of March 31, 2024, compared to December 31, 2023. The decrease is attributed to $66.4 million in calls and principal repayments, in addition to $15.9 million in market value declines. There were no sales of investment securities during the three months ended March 31, 2024. Proceeds from the sale of investment securities totaled $24.2 million for the three months ended March 31, 2023, resulting in gross realized losses of $0.2 million. The following table presents the available for sale debt securities portfolio by major type as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 (in thousands) Fair Value % Fair Value % Debt securities available for sale : Obligations of U.S. government agencies $ 1,170,192 56.4 % $ 1,221,737 56.8 % Obligations of states and political subdivisions 234,177 11.3 % 236,375 11.0 % Corporate bonds 5,746 0.3 % 5,602 0.3 % Asset backed securities 359,673 17.3 % 355,281 16.5 % Non-agency mortgage backed 304,100 14.7 % 333,509 15.4 % Total debt securities available for sale $ 2,073,888 100.0 % $ 2,152,504 100.0 % March 31, 2024 December 31, 2023 (in thousands) Amortized Cost % Amortized Cost % Debt securities held to maturity : Obligations of U.S. government and agencies $ 125,131 97.9 % $ 130,823 98.0 % Obligations of states and political subdivisions 2,680 2.1 % 2,671 2.0 % Total debt securities held to maturity $ 127,811 100.0 % $ 133,494 100.0 % Investment securities held to maturity decreased $5.7 million to $127.8 million as of March 31, 2024, as compared to December 31, 2023. This decrease is attributable to calls and principal repayments of $5.6 million, and amortization of net purchase premiums of $0.1 million. 46 Table of Contents Loans The Company focuses its primary lending activities in six principal areas: commercial real estate loans, consumer loans, commercial and industrial loans, construction loans, agriculture production loans and leases. The interest rates charged for the loans made by the Company vary with the degree of risk, the size and duration of the loans, the borrower’s relationship with the Company and prevailing money market rates indicative of the Company’s cost of funds. The majority of the Company’s loans are direct loans made to individuals, and local or regional businesses which service a variety of industries. The Company relies substantially on local promotional activity and personal contacts by bank officers, directors and employees to compete with other financial institutions. The Company 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. The following table shows the Company’s loan balances, net deferred loan costs and discounts, as of the dates indicated: (in thousands) March 31, 2024 December 31, 2023 Commercial real estate $ 4,443,768 65.4 % $ 4,394,802 64.7 % Consumer 1,303,757 19.2 % 1,313,268 19.3 % Commercial and industrial 549,780 8.1 % 586,455 8.6 % Construction 348,981 5.1 % 347,198 5.1 % Agriculture production 145,159 2.1 % 144,497 2.2 % Leases 9,250 0.1 % 8,250 0.1 % Total loans $ 6,800,695 100.0 % $ 6,794,470 100.0 % Nonperforming Assets The following tables set forth the amount of the Company’s NPAs as of the dates indicated. “Performing nonaccrual 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: (in thousands) March 31, 2024 December 31, 2023 Performing nonaccrual loans $ 22,449 $ 25,380 Nonperforming nonaccrual loans 11,686 6,500 Total nonaccrual loans 34,135 31,880 Loans 90 days past due and still accruing 107 10 Total nonperforming loans 34,242 31,890 Foreclosed assets 2,493 2,705 Total nonperforming assets $ 36,735 $ 34,595 Nonperforming assets to total assets 0.37 % 0.35 % Nonperforming loans to total loans 0.50 % 0.47 % Allowance for credit losses to nonperforming loans 363 % 381 % 47 Table of Contents Changes in nonperforming assets during the three months ended March 31, 2024 (in thousands) Balance at December 31, 2023 New NPA / Valuation Adjustments Pay-downs /Sales /Upgrades Charge-offs/ (1) Write-downs Transfers to Foreclosed Assets Balance at March 31, 2024 Commercial real estate: CRE non-owner occupied $ 2,024 2,338 (250) — — $ 4,112 CRE owner occupied 3,994 — (89) — — 3,905 Multifamily — — — — — — Farmland 14,484 — (704) — — 13,780 Total commercial real estate loans 20,502 2,338 (1,043) — — 21,797 Consumer SFR 1-4 1st DT liens 2,811 2,490 (181) (26) — 5,094 SFR HELOCs and junior liens 3,571 557 (694) (31) — 3,403 Other 105 171 (4) (173) — 99 Total consumer loans 6,487 3,218 (879) (230) — 8,596 Commercial and industrial 2,513 720 (695) (130) — 2,408 Construction 67 9 — — (12) 64 Agriculture production 2,321 — (107) (837) — 1,377 Leases — — — — — — Total nonperforming loans 31,890 6,285 (2,724) (1,197) (12) 34,242 Foreclosed assets 2,705 (223) (1) — 12 2,493 Total nonperforming assets $ 34,595 6,062 (2,725) (1,197) — $ 36,735 (1) The table above does not include deposit overdraft charge-offs. Nonperforming assets increased during the three months ended March 31, 2024 by $2.1 million or 6.0% to $36.7 million compared to $34.6 million at December 31, 2023. The increase in nonperforming assets during the first quarter of 2024 was primarily the result of nonperforming loan increases/down-grades, which totaled $6.3 million during the quarter. Management is actively engaged in the collection and recovery efforts for all nonperforming assets and believes that the loan loss reserves associated with these loans is sufficient as of March 31, 2024. Loan charge-offs during the three months ended March 31, 2024 In the first quarter of 2024, the Company recorded $1.2 million in loan charge-offs and $0.1 million in deposit overdraft charge-offs less $0.1 million in loan recoveries and $0.03 million in deposit overdraft recoveries, which collectively resulted in $1.1 million in net charge-offs. (in thousands) The Components of the Allowance for Credit Losses for Loans The following table sets forth the allowance for credit losses for loans as of the dates indicated: (in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Allowance for credit losses: Qualitative and forecast factor allowance $ 88,526 $ 84,291 $ 75,467 Cohort model allowance reserves 34,385 34,139 32,054 Allowance for individually evaluated loans 1,483 3,092 886 Total allowance for credit losses $ 124,394 $ 121,522 $ 108,407 Allowance for credit losses for loans / total loans 1.83 % 1.79 % 1.69 % For additional information regarding the allowance for loan losses, including changes in specific, formula, and environmental factors allowance categories, see “Asset Quality and Loan Loss Provisioning” at “Results of Operations” , above. Based on the current conditions of the loan portfolio, management believes that the $124.4 million allowance for loan losses at March 31, 2024 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. 48 Table of Contents The following table summarizes the allocation of the allowance for credit losses between loan types and by percentage of the total allowance for credit losses on loans as of the dates indicated: (in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Commercial real estate $ 72,175 58.0 % $ 68,864 56.7 % $ 64,937 59.9 % Consumer 27,441 22.1 % 27,453 22.6 % 24,896 23.0 % Commercial and industrial 11,867 9.5 % 12,750 10.5 % 12,069 11.1 % Construction 9,162 7.4 % 8,856 7.3 % 5,655 5.2 % Agriculture production 3,708 2.9 % 3,589 2.9 % 833 0.7 % Leases 41 0.1 % 10 — % 17 0.1 % Total allowance for credit losses $ 124,394 100.0 % $ 121,522 100.0 % $ 108,407 100.0 % The following table summarizes the allocation of the allowance for credit losses as a percentage of the total loans for each loan category as of the dates indicated: (in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Commercial real estate 1.62 % 1.57 % 1.49 % Consumer 2.10 % 2.09 % 2.02 % Commercial and industrial 2.16 % 2.17 % 2.18 % Construction 2.63 % 2.55 % 2.50 % Agriculture production 2.55 % 2.48 % 1.77 % Leases 0.44 % 0.12 % 0.20 % Total loans 1.83 % 1.79 % 1.69 % 49 Table of Contents The following table summarizes the activity in the allowance for credit losses for the periods indicated: Three months ended March 31, (in thousands) 2024 2023 Allowance for credit losses: Balance at beginning of period $ 121,522 $ 105,680 ACL on PCD loans — — Provision for (reversal of) loan losses 4,015 4,315 Loans charged-off: Commercial real estate: CRE non-owner occupied — — CRE owner occupied — — Multifamily — — Farmland — — Consumer: SFR 1-4 1st DT liens (26) — SFR HELOCs and junior liens (32) (42) Other (250) (142) Commercial and industrial (130) (1,574) Construction — — Agriculture production (837) — Leases — — Total loans charged-off (1,275) (1,758) Recoveries of previously charged-off loans: Commercial real estate: CRE non-owner occupied — — CRE owner occupied — — Multifamily — — Farmland — — Consumer: SFR 1-4 1st DT liens — — SFR HELOCs and junior liens 49 65 Other 40 51 Commercial and industrial 22 53 Construction — — Agriculture production 21 1 Leases — — Total recoveries of previously charged-off loans 132 170 Net recoveries (1,143) (1,588) Balance at end of period $ 124,394 $ 108,407 Average total loans $ 6,785,840 $ 6,413,958 Ratios (annualized): Net (charge-offs) recoveries during period to average loans outstanding during period (0.07) % (0.10) % Provision for credit losses to average loans outstanding during period 0.24 % 0.27 % 50 Table of Contents Foreclosed Assets, Net of Allowance for Losses The following table details the components and summarize the activity in foreclosed assets, net of allowances for losses, for the three months ended March 31, 2024: (in thousands) Balance at December 31, 2023 Sales Valuation Adjustments Transfers from Loans Balance at March 31, 2024 Land & construction $ 154 $ — $ 39 $ 12 $ 205 Residential real estate 1,673 — (261) — 1,412 Commercial real estate 877 — — — 877 Total foreclosed assets $ 2,704 $ — $ (222) $ 12 $ 2,494 Deposits During the three months ended March 31, 2024, the Company’s deposits increased by $153.6 million to $8.0 billion at quarter end. There were no brokered deposits included in the deposit balances as of March 31, 2024 and December 31, 2023, respectively. Off-Balance Sheet Arrangements See Note 9 to the condensed consolidated financial statements at Item 1 of Part I of this report for information about the Company’s commitments and contingencies including off-balance-sheet arrangements. Capital Resources The current and projected capital position of the Company and the impact of capital plans and long-term strategies are reviewed regularly by Management. On February 25, 2021 the Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company's common stock (the 2021 Repurchase Plan), which approximated 6.7% of the shares outstanding as of the approval date. The actual timing of any share repurchases will be determined by the Company's management and therefore the total value of the shares to be purchased under the 2021 Repurchase Plan is subject to change. The Company may repurchase its outstanding shares of common stock from time to time in open market or privately-negotiated transactions, including block trades, or pursuant to 10b5-1 trading plans. The 2021 Repurchase Plan has no expiration date (in accordance with applicable laws and regulations). During the three months ended March 31, 2024 and 2023, the Company repurchased 99,332 and 150,000 shares with market values of $3.4 million and $7.0 million, respectively. During the quarter ended March 31, 2024, the Company repurchased 99,332 shares of common stock at an average price of $34.31 per share or 97.9% of the book value per share as of March 31, 2024. In addition, the Company’s Tier 1 common equity and tangible capital ratios increased to 12.5% and 8.9%, respectively as of March 31, 2024, compared to 12.2% and 8.8%, respectively, as of December 31, 2023. Total shareholders' equity increased by $3.4 million during the quarter ended March 31, 2024, as net income of $27.7 million was partially offset by a $11.2 million increase in accumulated other comprehensive losses, and cash dividend payments on common stock of approximately $11.0 million. As a result, the Company’s book value grew to $35.06 per share at March 31, 2024, compared to $32.84 at March 31, 2023. The Company’s tangible book value per share, a non-GAAP measure, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $25.60 per share at March 31, 2024, as compared to $23.22 at March 31, 2023. As noted above, changes in the fair value of available-for-sale investment securities, net of deferred taxes continue to create moderate levels of volatility in tangible book value per share. Trailing Quarter Balance Sheet Change March 31, 2024 December 31, 2023 Ratio Minimum Regulatory Requirement Ratio Minimum Regulatory Requirement Total risk based capital 15.0 % 10.5 % 14.7 % 10.5 % Tier I capital 13.2 % 8.5 % 13.0 % 8.5 % Common equity Tier 1 capital 12.5 % 7.0 % 12.3 % 7.0 % Leverage 11.0 % 4.0 % 10.8 % 4.0 % See Note 10 and Note 16 to the condensed consolidated financial statements at Item 1 of Part I of this report for additional information about the Company’s capital resources. 51 Table of Contents As of March 31, 2024, we had an effective shelf registration statement on file with the Securities and Exchange Commission that allows us to issue various types of debt securities, as well as common stock, preferred stock, warrants, depository shares representing fractional interest in shares of preferred stock, purchase contracts and units from time to time in one or more offerings. Each issuance under the shelf registration statement will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued. The registration statement does not limit the amount of securities that may be issued thereunder. Our ability to issue securities is subject to market conditions and other factors including, in the case of our debt securities, our credit ratings and compliance with current and prospective covenants in credit agreements. Liquidity The Company's primary sources of liquidity include the following for the periods indicated: (dollars in thousands) March 31, 2024 December 31, 2023 Borrowing capacity at correspondent banks and FRB $ 2,882,859 $ 2,921,525 Less: borrowings outstanding (367,000) (600,000) Unpledged available-for-sale investment securities 1,435,990 1,558,506 Cash held or in transit with FRB 41,541 51,253 Total primary liquidity $ 3,993,390 $ 3,931,284 At March 31, 2024, the Company's primary sources of liquidity represented 50% of total deposits and 163% 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 $118.5 million, including approximately $9.3 million in net unrealized losses. At March 31, 2024, the Company had $200.0 million of short-term fixed rate FHLB borrowings maturing on April 8, 2024. This debt was repaid at maturity. Separately, on April 8, 2024, the Company borrowed four tranches of short-term fixed rate advances totaling $280.0 million from the FHLB as follows: (in thousands) Term borrowing at FHLB, fixed rate of 5.61%, payable on June 7, 2024 $ 55,000 Term borrowing at FHLB, fixed rate of 5.59%, payable on July 8, 2024 75,000 Term borrowing at FHLB, fixed rate of 5.46%, payable on October 7, 2024 75,000 Term borrowing at FHLB, fixed rate of 5.23%, payable on April, 8, 2025 75,000 Total other borrowings $ 280,000 The Company’s profitability during the first three months of 2024 generated cash flows from operations of $25.1 million compared to $39.0 million during the first three months of 2023. Net cash from investing activities was $60.0 million for the three months ended March 31, 2024, compared to net cash from investing activities of $115.3 million during the three months ending 2023. Financing activities used $100.9 million during the three months ended March 31, 2024, compared to $151.1 million during the three months ended March 31, 2023. The changes in contractual obligations of the Company and Bank, to include but not limited to term subordinated debt, operating leases, deferred compensation and supplemental retirement plans as well as off-balance sheet commitments such as unfunded loans and letters of credit. These contractual obligations are otherwise consistent with similar balances or totals as of December 31, 2023. The Company is dependent upon the payment of cash dividends by the Bank to service its commitments, which have historically included dividends to shareholders, scheduled debt service payments, and general operations. Shareholder dividends are expected to continue subject to the Board’s discretion and management's continuing evaluation of capital levels, earnings, asset quality and other factors. The Company expects that the cash dividends paid by the Bank to the Company will be sufficient to cover the Company's cash flow needs. However, the Company and its ability to generate liquidity through either the issuance of stock or debt, also serves as a potential source of strength for the Bank. Dividends paid by the Company to holders of its common stock used $11.0 million and $10.0 million of cash during the three months ended March 31, 2024 and 2023, respectively. The Company’s liquidity is dependent on dividends received from the Bank. Dividends from the Bank are subject to certain regulatory restrictions. 52 Table of Contents TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES (Unaudited. Dollars in thousands) In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this filing contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this filing because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results, 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: Three months ended (dollars in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Net interest margin Acquired loans discount accretion, net: Amount (included in interest income) $1,332 $1,459 $1,397 Effect on average loan yield 0.08 % 0.09 % 0.09 % Effect on net interest margin (FTE) 0.06 % 0.06 % 0.06 % Net interest margin (FTE) 3.68 % 3.81 % 4.20 % Net interest margin less effect of acquired loan discount accretion (Non-GAAP) 3.62 % 3.75 % 4.14 % Three months ended (dollars in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Pre-tax pre-provision return on average assets or equity Net income (GAAP) $27,749 $26,075 $35,833 Exclude provision for income taxes 9,949 10,325 13,149 Exclude provision for credit losses 4,305 5,990 4,195 Net income before income tax and provision expense (Non-GAAP) $42,003 $42,390 $53,177 Average assets (GAAP) $9,855,797 $9,879,355 $9,878,927 Average equity (GAAP) $1,174,592 $1,097,431 $1,087,473 Return on average assets (GAAP) (annualized) 1.13 % 1.05 % 1.47 % Pre-tax pre-provision return on average assets (Non-GAAP) (annualized) 1.71 % 1.70 % 2.18 % Return on average equity (GAAP) (annualized) 9.50 % 9.43 % 13.36 % Pre-tax pre-provision return on average equity (Non-GAAP) (annualized) 14.38 % 15.32 % 19.83 % 53 Table of Contents Three months ended (dollars in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Return on tangible common equity Average total shareholders' equity $1,174,592 $1,097,431 $1,087,473 Exclude average goodwill 304,442 304,442 304,442 Exclude average other intangibles 10,037 11,160 15,842 Average tangible common equity (Non-GAAP) $860,113 $781,829 $767,189 Net income (GAAP) $27,749 $26,075 $35,833 Exclude amortization of intangible assets, net of tax effect 725 857 1,166 Tangible net income available to common shareholders (Non-GAAP) $28,474 $26,932 $36,999 Return on average equity (GAAP) (annualized) 9.50 % 9.43 % 13.36 % Return on average tangible common equity (Non-GAAP) 13.31 % 13.67 % 19.56 % Three months ended (dollars in thousands) March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 Tangible shareholders' equity to tangible assets Shareholders' equity (GAAP) $1,163,051 $1,159,682 $1,070,401 $1,092,781 $1,090,245 Exclude goodwill and other intangible assets, net 313,964 314,994 316,210 317,800 319,456 Tangible shareholders' equity (Non-GAAP) $849,087 $844,688 $754,191 $774,981 $770,789 Total assets (GAAP) $9,813,767 $9,910,089 $9,897,006 $9,853,421 $9,842,394 Exclude goodwill and other intangible assets, net 313,964 314,994 316,210 317,800 319,456 Total tangible assets (Non-GAAP) $9,499,803 $9,595,095 $9,580,796 $9,535,621 $9,522,938 Shareholders' equity to total assets (GAAP) 11.85 % 11.70 % 10.82 % 11.09 % 11.08 % Tangible shareholders' equity to tangible assets (Non-GAAP) 8.94 % 8.80 % 7.87 % 8.13 % 8.09 % Three months ended (dollars in thousands) March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 Tangible common shareholders' equity per share Tangible shareholders' equity (Non-GAAP) $849,087 $844,688 $754,191 $774,981 $770,789 Common shares outstanding at end of period 33,168,770 33,268,102 33,263,324 33,259,260 33,195,250 Common shareholders' equity (book value) per share (GAAP) $35.06 $34.86 $32.18 $32.86 $32.84 Tangible common shareholders' equity (tangible book value) per share (Non-GAAP) $25.60 $25.39 $22.67 $23.30 $23.22 54 Table of Contents