What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-05-08 · 311 added, 175 removed, 1206 unchanged (29% of the section changed)

3 unchanged sentences

(In thousands, except share data;

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash and due from banks $ 81,342 $ 81,626

3 unchanged sentences

Marketable equity securities 2,595 2,634

Trading securities 2,789 —

Available for sale debt securities, at fair value (amortized cost of $ 2,184,452 and $ 2,384,325 )

29 unchanged sentences

Preferred stock, no par value:

1,000,000 shares authorized, zero issued and outstanding at March 31, 2024 and December 31, 2023

1,000,000 shares authorized, zero issued and outstanding at June 30, 2024 and December 31, 2023

Common stock, no par value:

50,000,000 shares authorized;

33,168,770 and 33,268,102 issued and outstanding at March 31, 2024 and December 31, 2023, respectively

32,989,327 and 33,268,102 issued and outstanding at June 30, 2024 and December 31, 2023, respectively

691,878 697,349

8 unchanged sentences

Three months ended

June 30, Six months ended

2024 2023 2024 2023

Interest and dividend income:

16 unchanged sentences

Gain on sale of loans 388 295 649 501

Loss on sale of investment securities — ( 164 )

Loss on sale or exchange of investment securities ( 45 ) — ( 45 ) ( 164 )

Asset management and commission income 1,359 1,158 2,487 2,092

16 unchanged sentences

Three months ended

June 30, Six months ended

2024 2023 2024 2023

Net income $ 29,034 $ 24,892 $ 56,783 $ 60,725

12 unchanged sentences

Comprehensive Income (Loss) Total

Balance at April 1, 2023 33,195,250 $ 695,168 $ 564,538 $ ( 169,461 ) $ 1,090,245

Net income 24,892 24,892

Other comprehensive income ( 11,915 ) ( 11,915 )

Stock options exercised 4,000 78 78

RSU vesting 626 626

PSU vesting 304 304

RSUs released 45,668 —

PSUs released 55,928 —

Repurchase of common stock ( 41,586 ) ( 871 ) ( 608 ) ( 1,479 )

Dividends paid ($ 0.30 per share)

( 9,970 ) ( 9,970 )

Three months ended June 30, 2023 33,259,260 $ 695,305 $ 578,852 $ ( 181,376 ) $ 1,092,781

Balance at April 1, 2024 33,168,770 $ 696,464 $ 630,954 $ ( 164,367 ) $ 1,163,051

Net income 29,034 29,034

Other comprehensive loss 2,852 2,852

Stock options exercised — — —

RSU vesting 851 851

PSU vesting 344 344

RSUs released 63,811 —

PSUs released 32,248 —

Repurchase of common stock ( 275,502 ) ( 5,781 ) ( 4,396 ) ( 10,177 )

Dividends paid ($ 0.33 per share)

( 10,905 ) ( 10,905 )

Three months ended June 30, 2024 32,989,327 $ 691,878 $ 644,687 $ ( 161,515 ) $ 1,175,050

Balance at January 1, 2023 33,331,513 $ 697,448 $ 542,873 $ ( 193,905 ) $ 1,046,416

5 unchanged sentences

RSUs released 67,786 —

PSUs released 55,928 —

Repurchase of common stock ( 203,967 ) ( 4,270 ) ( 4,804 ) ( 9,074 )

1 unchanged sentence

( 19,942 ) ( 19,942 )

Three months ended March 31, 2023 33,195,250 $ 695,168 $ 564,538 $ ( 169,461 ) $ 1,090,245

Six months ended June 30, 2023 33,259,260 $ 695,305 $ 578,852 $ ( 181,376 ) $ 1,092,781

Balance at January 1, 2024 33,268,102 $ 697,349 $ 615,502 $ ( 153,169 ) $ 1,159,682

5 unchanged sentences

RSUs released 63,811 —

PSUs released 32,248 —

Repurchase of common stock ( 374,834 ) ( 7,865 ) ( 5,720 ) ( 13,585 )

1 unchanged sentence

( 21,878 ) ( 21,878 )

Three months ended March 31, 2024 33,168,770 $ 696,464 $ 630,954 $ ( 164,367 ) $ 1,163,051

Six months ended June 30, 2024 32,989,327 $ 691,878 $ 644,687 $ ( 161,515 ) $ 1,175,050

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands;

For the three months ended March 31,

For the six months ended June 30,

Operating activities:

15 unchanged sentences

Increase in cash value of life insurance ( 1,634 ) ( 1,590 )

(Gain) loss on marketable equity securities 28 ( 42 )

Loss on marketable and trading equity securities 149 —

Equity compensation vesting expense 2,394 1,971

8 unchanged sentences

Proceeds from sale of available for sale securities 28,570 24,160

Purchases of securities available for sale ( 53,468 ) ( 34,468 )

Loan origination and principal collections, net 49,578 ( 71,939 )

32 unchanged sentences

For financial reporting purposes, the Company’s investments in the Capital Trusts of $ 1.8 million are accounted for under the equity method and, accordingly, are not consolidated and are included in other assets on the consolidated balance sheet.

See the footnote Junior Subordinated Debt for additional information on borrowings outstanding.

See the Note 8 - footnote Junior Subordinated Debt for additional information on borrowings outstanding.

Use of Estimates in the Preparation of Financial Statements

21 unchanged sentences

The Company measures expected credit losses on HTM debt securities on a collective basis by major security type, then further disaggregated by sector and bond rating.

Accrued interest receivable on HTM debt securities was considered insignificant at March 31, 2024 and December 31, 2023 and is therefore excluded from the estimate of credit losses.

Accrued interest receivable on HTM debt securities was considered insignificant at June 30, 2024 and December 31, 2023 and is therefore excluded from the estimate of credit losses.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts based on current and expected changes in credit ratings and default rates.

2 unchanged sentences

Management has separately evaluated its HTM investment securities from obligations of state and political subdivisions utilizing the historical loss data represented by similar securities over a period of time spanning nearly 50 years.

As a result of this evaluation, management determined that the expected credit losses associated with these securities is not significant for financial reporting purposes and therefore, no allowance for credit losses has been recognized.

The Company evaluates AFS debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors.

6 unchanged sentences

Losses are charged against the ACL when management believes the uncollectability of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

No security credit losses were recognized during the three month periods ended March 31, 2024 and 2023, respectively.

Loans that management has the intent and ability to hold until maturity or payoff are reported at principle amount outstanding, net of deferred loan fees and costs.

No security credit losses were recognized during the six month periods ended June 30, 2024 and 2023, respectively.

Loans that management has the intent and ability to hold until maturity or payoff are reported at principal amount outstanding, net of deferred loan fees and costs.

Loans are placed in nonaccrual status when reasonable doubt exists as to the full, timely collection of interest or principal, or a loan becomes contractually past due by 90 days or more with respect to interest or principal and is not well secured and in the process of collection.

84 unchanged sentences

The reserve for unfunded commitments is maintained on the consolidated balance sheet in other liabilities.

Accounting Standards Recently Issued or Adopted

FASB issued ASU 2024-02, Codification Improvements— Amendments to Remove References to the Concepts Statements.

This ASU facilitates Codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other minor improvements.

The resulting amendments are referred to as Codification improvements.

The amendments in this Update are not intended to result in significant accounting change for most entities.

However, the Board recognizes that changes to that guidance may result in accounting change for some entities.

Therefore, the amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2024.

The adoption of this accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements.

Accounting Standards Update

Accounting standards adopted in the current period

Standard Summary of Guidance Effects on financial statements

Accounting standards yet to be adopted

Standard Summary of Guidance Effects on financial statements

ASU 2023-07 - Segment Reporting (Topic 280):

Improvement to Reportable Segments • Requires disclosure of the position and title of the CODM and significant segment expenses that the CODM is regularly provided.

• Requires the disclosure of other segment items representing the difference between segment revenue and expense and the profit and loss measure of the segment.

• Allows for the CODM to use more than one measure of segment profit and loss, as long as one measure is consistent with GAAP.

• Effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

• Early adoption is permitted.

• The amendments are to be applied retrospectively to all periods presented and segment expense categories should be based on the categories identified at adoption.

• TriCo does not expect adoption of the standard to have a material impact on its consolidated financial statements.

ASU 2023-09 - Income Taxes (Topic 740):

Improvements to Income Tax Disclosures • Requires a tabular rate reconciliation using both percentages and reporting currency amounts between the reported amount of income tax expense (or benefit) to the amount of statutory federal income tax at current rates for specified categories using specified disaggregation criteria.

• The amount of net income taxes paid for federal, state, and foreign taxes, as well as the amount paid to any jurisdiction that net taxes exceed a 5% quantitative threshold.

• The amendments will require the disclosure of pre-tax income disaggregated between domestic and foreign, as well as income tax expense disaggregated by federal, state, and foreign.

• The amendment also eliminates certain disclosures related to unrecognized tax benefits and certain temporary differences.

• Effective for fiscal years beginning after December 15, 2024.

• Early adoption is permitted in any annual period where financial statements have not yet been issued.

• The amendments should be applied on a prospective basis but retrospective application is permitted.

• TriCo does not expect adoption of the standard to have a material impact on its consolidated financial statements.

Note 2 - Investment Securities

The amortized cost, estimated fair values and allowance for credit losses of investments in debt securities are summarized in the following tables:

March 31, 2024

June 30, 2024

(in thousands) Amortized

Losses Allowance for Credit Losses Estimated

Losses Estimated

Debt Securities Available for Sale

13 unchanged sentences

(in thousands) Amortized

Losses Allowance for Credit Losses Estimated

Losses Estimated

Debt Securities Available for Sale

11 unchanged sentences

Total debt securities held to maturity $ 133,494 $ 6 $ ( 8,374 ) $ 125,126

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.

Investment securities with an aggregate carrying value of $ 741.5 million and $ 702.2 million at March 31, 2024 and December 31, 2023, respectively, were pledged as collateral for specific borrowings, lines of credit or local agency deposits.

The amortized cost and estimated fair value of debt securities at March 31, 2024 by contractual maturity are shown below.

Proceeds from the sale of available for sale investment securities totaled $ 28.6 million for the three and six months ended June 30, 2024, resulting in gross realized losses of $ 2.9 million.

Proceeds from the sale of investment securities totaled $ 24.2 million for the six months ended June 30, 2023, resulting in gross realized losses of $ 0.2 million.

In addition, during the three months ended June 30, 2024, the Company participated in and completed an exchange offering with Visa, which resulted in a gain of $ 2.9 million.

See further discussion in Note 9 - Commitments and Contingencies .

There were no sales of investment securities during the three months ended June 30, 2023.

Investment securities with an aggregate carrying value of $ 755.0 million and $ 702.2 million at June 30, 2024 and December 31, 2023, respectively, were pledged as collateral for specific borrowings, lines of credit or local agency deposits.

The amortized cost and estimated fair value of debt securities at June 30, 2024 by contractual maturity are shown below.

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

At March 31, 2024, obligations of U.S.

At June 30, 2024, obligations of U.S.

government corporations and agencies with a cost basis totaling $ 1.3 billion consist almost entirely of residential real estate mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages.

1 unchanged sentence

government corporations and agencies is categorized based on final maturity date.

At March 31, 2024, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S.

At June 30, 2024, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S.

government corporations and agencies to be approximately 6.69 years.

Average remaining life is defined as the time span after which the principal balance has been reduced by half.

As of March 31, 2024, the contractual final maturity for available for sale and held to maturity investment securities is as follows:

As of June 30, 2024, the contractual final maturity for available for sale and held to maturity investment securities is as follows:

Debt Securities Available for Sale Held to Maturity

8 unchanged sentences

Totals $ 2,184,452 $ 1,940,783 $ 122,673 $ 113,709

Based on an evaluation of available information including security type, counterparty credit quality, past events, current conditions, and reasonable and supportable forecasts that are relevant to collectability of cash flows, as of June 30, 2024, the Company has concluded that it expects to receive all contractual cash flows from each security held in its AFS and HTM debt securities portfolio.

There was no allowance for credit losses related to investment securities as of June 30, 2024 or December 31, 2023.

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

March 31, 2024:

June 30, 2024:

Less than 12 months 12 months or more Total

41 unchanged sentences

Government Sponsored Entities (principally Fannie Mae and Freddie Mac).

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded.

At March 31, 2024, 168 debt securities representing obligations of U.S.

It is expected that the securities would not be settled at a price less than the amortized cost of

the investment.

At June 30, 2024, 157 debt securities representing obligations of U.S.

government agencies had unrealized losses with aggregate depreciation of 14.01 % from the Company’s amortized cost basis.

2 unchanged sentences

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

At March 31, 2024, 157 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 11.25 % from the Company’s amortized cost basis.

At June 30, 2024, 155 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 11.96 % from the Company’s amortized cost basis.

Corporate bonds:

1 unchanged sentence

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

At March 31, 2024, 6 debt securities representing corporate bonds had unrealized losses with aggregate depreciation of 6.95 % from the Company’s amortized cost basis.

At June 30, 2024, 6 debt securities representing corporate bonds had unrealized losses with aggregate depreciation of 5.94 % from the Company’s amortized cost basis.

Asset backed securities:

The unrealized losses on investments in asset backed securities were caused by increases in required yields by investors for these types of securities.

At the time of purchase, each of these securities was rated AA or AAA and through March 31, 2024

has not experienced any deterioration in credit rating.

At March 31, 2024, 29 asset backed securities had unrealized losses with aggregate depreciation of 1.56 % from the Company’s amortized cost basis.

At the time of purchase, each of these securities was rated AA or AAA and through June 30, 2024 has not experienced any deterioration in credit rating.

At June 30, 2024, 18 asset backed securities had unrealized losses with aggregate depreciation of 1.03 % from the Company’s amortized cost basis.

The Company continues to monitor these securities for changes in credit rating or other indications of credit deterioration.

Non-agency collateralized mortgage obligations:

1 unchanged sentence

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

At March 31, 2024, 22 asset backed securities had unrealized losses with aggregate depreciation of 10.59 % from the Company’s amortized cost basis.

At June 30, 2024, 19 asset backed securities had unrealized losses with aggregate depreciation of 11.23 % from the Company’s amortized cost basis.

The Company monitors credit quality of debt securities held-to-maturity through the use of credit rating.

1 unchanged sentence

The following table summarizes the amortized cost of debt securities held-to-maturity at the dates indicated, aggregated by credit quality indicator:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands)

6 unchanged sentences

A summary of loan balances at amortized cost are as follows:

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Commercial real estate:

20 unchanged sentences

For the periods indicated, the following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the balance sheet within other liabilities:

Allowance for credit losses – Three months ended March 31, 2024

Allowance for credit losses – Three months ended June 30, 2024

(in thousands) Beginning

17 unchanged sentences

Total $ 130,534 $ ( 1,610 ) $ 398 $ 405 $ 129,727

Allowance for credit losses – Six months ended June 30, 2024

(in thousands) Beginning

Balance Charge-offs Recoveries Provision (benefit) Ending

Commercial real estate:

CRE non-owner occupied $ 35,077 $ — $ — $ 2,078 $ 37,155

CRE owner occupied 15,081 — 1 791 15,873

Multifamily 14,418 — — 1,555 15,973

Farmland 4,288 — — ( 257 ) 4,031

Total commercial real estate loans 68,864 — 1 4,167 73,032

SFR 1-4 1st DT liens 14,009 ( 26 ) — 621 14,604

SFR HELOCs and junior liens 10,273 ( 41 ) 100 ( 245 ) 10,087

Other 3,171 ( 368 ) 121 59 2,983

Total consumer loans 27,453 ( 435 ) 221 435 27,674

Commercial and industrial 12,750 ( 1,000 ) 283 95 12,128

Construction 8,856 — — ( 1,390 ) 7,466

Agriculture production 3,589 ( 1,450 ) 25 1,016 3,180

Leases 10 — — 27 37

Allowance for credit losses on loans 121,522 ( 2,885 ) 530 4,350 123,517

Reserve for unfunded commitments 5,850 — — 360 6,210

Total $ 127,372 $ ( 2,885 ) $ 530 $ 4,710 $ 129,727

In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively.

To estimate expected losses the Company generally utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period.

Individual loan credit quality indicators including loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various econometrics, including California unemployment, gross domestic product, and corporate bond yields.

Individual loan credit quality indicators including loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various econometrics,

including California unemployment, gross domestic product, and corporate bond yields.

Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results.

2 unchanged sentences

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.

Management notes that the recent cumulative increase in interest rates by the Federal Reserve may create repricing risk for certain borrowers and further, 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 change to forecasted reserve levels.

22 unchanged sentences

Total $ 109,995 $ ( 8,140 ) $ 1,527 $ 23,990 $ 127,372

Allowance for credit losses – Three months ended March 31, 2023

Allowance for credit losses – Three months ended June 30, 2023

(in thousands) Beginning

18 unchanged sentences

Total $ 112,602 $ ( 276 ) $ 218 $ 9,650 $ 122,194

Allowance for credit losses – Six months ended June 30, 2023

(in thousands) Beginning

Balance Charge-offs Recoveries Provision

(benefit) Ending Balance

Commercial real estate:

CRE non-owner occupied $ 30,962 $ — $ — $ 2,080 $ 33,042

CRE owner occupied 14,014 — 1 6,193 20,208

Multifamily 13,132 — — 943 14,075

Farmland 3,273 — — 418 3,691

Total commercial real estate loans 61,381 — 1 9,634 71,016

SFR 1-4 1st DT liens 11,268 — — 1,866 13,134

SFR HELOCs and junior liens 11,413 ( 42 ) 102 ( 865 ) 10,608

Other 1,958 ( 305 ) 77 1,041 2,771

Total consumer loans 24,639 ( 347 ) 179 2,042 26,513

Commercial and industrial 13,597 ( 1,687 ) 176 ( 439 ) 11,647

Construction 5,142 — — 1,889 7,031

Agriculture production 906 — 32 167 1,105

Leases 15 — — 2 17

Allowance for credit losses on loans 105,680 ( 2,034 ) 388 13,295 117,329

Reserve for unfunded commitments 4,315 — — 550 4,865

Total $ 109,995 $ ( 2,034 ) $ 388 $ 13,845 $ 122,194

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including, but not limited to, trends relating to (i) the level of criticized and classified loans, (ii) net charge-offs, (iii) non-performing loans, and (iv) delinquency within the portfolio.

The Company analyzes loans individually to classify the loans as to credit risk and grading.

This analysis is performed annually for all outstanding balances greater than $ 1 million and non-homogeneous loans, such as commercial real

estate loans, unless other indicators, such as delinquency, trigger more frequent evaluation.

This analysis is performed annually for all outstanding balances greater than $ 1 million and non-homogeneous loans, such as commercial real estate loans, unless other indicators, such as delinquency, trigger more frequent evaluation.

Loans below the $ 1 million threshold and homogenous in nature are evaluated as needed for proper grading based on delinquency and borrower credit scores.

20 unchanged sentences

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows for the period indicated:

Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2024

(in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Term Loans Amortized Cost Basis by Origination Year – As of June 30, 2024 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

(in thousands) 2024 2023 2022 2021 2020 Prior

Commercial real estate:

5 unchanged sentences

Total $ 40,265 $ 181,312 $ 429,288 $ 274,704 $ 151,948 $ 1,009,439 $ 155,164 $ — $ 2,242,120

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial real estate:

5 unchanged sentences

Total $ 52,256 $ 74,662 $ 208,952 $ 188,180 $ 113,172 $ 287,816 $ 27,458 $ — $ 952,496

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2024

(in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost Basis by Origination Year – As of June 30, 2024 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

(in thousands) 2024 2023 2022 2021 2020 Prior

Commercial real estate:

5 unchanged sentences

Total $ 14,652 $ 28,130 $ 175,293 $ 307,515 $ 119,893 $ 321,168 $ 34,155 $ — $ 1,000,806

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial real estate:

5 unchanged sentences

Total $ 2,216 $ 21,168 $ 48,606 $ 50,992 $ 15,937 $ 69,051 $ 57,719 $ — $ 265,689

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Consumer loans:

5 unchanged sentences

Total $ 37,699 $ 126,364 $ 185,677 $ 255,362 $ 120,509 $ 154,836 $ — $ 4,517 $ 884,964

Current period gross write-offs $ — $ 26 $ — $ — $ — $ — $ — $ — $ 26

Year-to-date gross charge-offs $ — $ 26 $ — $ — $ — $ — $ — $ — $ 26

Consumer loans:

SFR HELOCs and Junior Liens

SFR HELOCs and junior liens risk ratings

Pass $ 252 $ — $ — $ — $ — $ 83 $ 330,700 $ 6,243 $ 337,278

3 unchanged sentences

Total $ 252 $ — $ — $ — $ — $ 83 $ 339,087 $ 6,968 $ 346,390

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ 32 $ — $ 32

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ 41 $ — $ 41

Consumer loans:

5 unchanged sentences

Total $ 10,320 $ 27,653 $ 7,448 $ 7,610 $ 6,356 $ 9,349 $ 637 $ — $ 69,373

Current period gross write-offs $ 76 $ 67 $ — $ 60 $ 28 $ 15 $ 4 $ — $ 250

Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2024

(in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Year-to-date gross charge-offs $ 179 $ 67 $ — $ 74 $ 28 $ 15 $ 5 $ — $ 368

Term Loans Amortized Cost Basis by Origination Year – As of June 30, 2024 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

(in thousands) 2024 2023 2022 2021 2020 Prior

Commercial and industrial loans:

5 unchanged sentences

Total $ 39,855 $ 60,115 $ 74,113 $ 41,340 $ 6,616 $ 13,307 $ 312,979 $ 300 $ 548,625

Current period gross write-offs $ 10 $ — $ — $ — $ — $ — $ 120 $ — $ 130

Year-to-date gross charge-offs $ 106 $ — $ 62 $ 93 $ — $ — $ 739 $ — $ 1,000

Construction loans:

5 unchanged sentences

Total $ 8,485 $ 84,942 $ 113,790 $ 59,177 $ 9,188 $ 7,792 $ — $ — $ 283,374

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Agriculture production loans:

5 unchanged sentences

Total $ 859 $ 1,377 $ 2,823 $ 1,731 $ 446 $ 7,984 $ 125,019 $ — $ 140,239

Current period gross write-offs $ — $ — $ 173 $ — $ — $ — $ 664 $ — $ 837

Year-to-date gross charge-offs $ — $ — $ 173 $ — $ — $ — $ 1,277 $ — $ 1,450

Lease risk ratings

4 unchanged sentences

Total $ 8,450 $ — $ — $ — $ — $ — $ — $ — $ 8,450

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Total loans outstanding:

4 unchanged sentences

Total $ 215,309 $ 605,723 $ 1,245,990 $ 1,186,611 $ 544,065 $ 1,880,825 $ 1,052,218 $ 11,785 $ 6,742,526

Current period gross write-offs $ 86 $ 93 $ 173 $ 60 $ 28 $ 15 $ 820 $ — $ 1,275

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2023

(in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Year-to-date gross charge-offs $ 285 $ 93 $ 235 $ 167 $ 28 $ 15 $ 2,062 $ — $ 2,885

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2023 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

(in thousands) 2023 2022 2021 2020 2019 Prior

Commercial real estate:

5 unchanged sentences

Total $ 180,326 $ 415,192 $ 290,977 $ 142,937 $ 225,640 $ 819,589 $ 143,145 $ — $ 2,217,806

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Period end gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial real estate:

5 unchanged sentences

Total $ 71,288 $ 205,660 $ 199,732 $ 121,211 $ 60,034 $ 274,775 $ 23,740 $ — $ 956,440

Current period gross write-offs $ — $ — $ — $ 1,380 $ — $ 2,228 $ 29 $ — $ 3,637

Period end gross write-offs $ — $ — $ — $ 1,380 $ — $ 2,228 $ 29 $ — $ 3,637

Commercial real estate:

5 unchanged sentences

Total $ 28,445 $ 177,032 $ 291,574 $ 89,106 $ 104,108 $ 225,767 $ 33,470 $ — $ 949,502

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Period end gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial real estate:

5 unchanged sentences

Total $ 21,830 $ 49,381 $ 51,989 $ 16,434 $ 17,041 $ 55,663 $ 58,716 $ — $ 271,054

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Period end gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Consumer loans:

5 unchanged sentences

Total $ 135,812 $ 190,060 $ 262,166 $ 126,571 $ 30,099 $ 134,188 $ — $ 4,542 $ 883,438

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2023

(in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Period end gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2023 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

(in thousands) 2023 2022 2021 2020 2019 Prior

Consumer loans:

SFR HELOCs and Junior Liens

SFR HELOCs and junior liens risk ratings

Pass $ 297 $ — $ — $ — $ — $ 96 $ 343,698 $ 6,444 $ 350,535

3 unchanged sentences

Total $ 297 $ — $ — $ — $ — $ 96 $ 349,184 $ 7,236 $ 356,813

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ 66 $ 66

Period end gross write-offs $ — $ — $ — $ — $ — $ — $ — $ 66 $ 66

Consumer loans:

5 unchanged sentences

Total $ 34,549 $ 9,298 $ 9,275 $ 7,512 $ 6,995 $ 4,708 $ 680 $ — $ 73,017

Current period gross write-offs $ 376 $ 82 $ — $ 36 $ 39 $ 9 $ 16 $ — $ 558

Period end gross write-offs $ 376 $ 82 $ — $ 36 $ 39 $ 9 $ 16 $ — $ 558

Commercial and industrial loans:

5 unchanged sentences

Total $ 70,963 $ 85,861 $ 52,474 $ 9,690 $ 10,197 $ 8,576 $ 348,302 $ 392 $ 586,455

Current period gross write-offs $ 153 $ 287 $ 240 $ 2,285 $ — $ — $ 896 $ 18 $ 3,879

Period end gross write-offs $ 153 $ 287 $ 240 $ 2,285 $ — $ — $ 896 $ 18 $ 3,879

Construction loans:

5 unchanged sentences

Total $ 56,378 $ 146,876 $ 85,144 $ 47,632 $ 4,650 $ 6,518 $ — $ — $ 347,198

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Period end gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Agriculture production loans:

5 unchanged sentences

Total $ 945 $ 2,932 $ 2,138 $ 572 $ 620 $ 8,491 $ 128,799 $ — $ 144,497

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2023

(in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Period end gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2023 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

(in thousands) 2023 2022 2021 2020 2019 Prior

Lease risk ratings

4 unchanged sentences

Total $ 8,250 $ — $ — $ — $ — $ — $ — $ — $ 8,250

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Period end gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Total loans outstanding:

4 unchanged sentences

Total $ 609,083 $ 1,282,292 $ 1,245,469 $ 561,665 $ 459,384 $ 1,538,371 $ 1,086,036 $ 12,170 $ 6,794,470

Current period gross write-offs $ 529 $ 369 $ 240 $ 3,701 $ 39 $ 2,237 $ 941 $ 84 $ 8,140

Period end gross write-offs $ 529 $ 369 $ 240 $ 3,701 $ 39 $ 2,237 $ 941 $ 84 $ 8,140

The following table shows the ending balance of current and past due originated loans by loan category as of the date indicated:

Analysis of Past Due Loans - As of March 31, 2024

Analysis of Past Due Loans - As of June 30, 2024

(in thousands) 30-59 days 60-89 days > 90 days Total Past

35 unchanged sentences

Non Accrual Loans

As of March 31, 2024 As of December 31, 2023

As of June 30, 2024 As of December 31, 2023

(in thousands) Non accrual with no allowance for credit losses Total non accrual Past due 90 days or more and still accruing Non accrual with no allowance for credit losses Total non accrual Past due 90 days or more and still accruing

16 unchanged sentences

Total, net $ 30,304 $ 32,502 $ 272 $ 18,822 $ 31,003 $ 10

Interest income on non accrual loans that would have been recognized during the three months ended March 31, 2024 and 2023, if all such loans had been current in accordance with their original terms, totaled $ 0.85 million and $ 0.32 million, respectively.

Interest income actually recognized on these originated loans during the three months ended March 31, 2024 and 2023 was $ 0.1 million and $ 0.02 million, respectively.

Interest income on non accrual loans that would have been recognized during the three months ended June 30, 2024 and 2023, if all such loans had been current in accordance with their original terms, totaled $ 0.6 million and $ 1.0 million, respectively.

Interest income actually recognized on these originated loans during the three months ended June 30, 2024 and 2023 was $ 0.0 million and $ 0.68 million, respectively.

Interest income on non accrual loans that would have been recognized during the six months ended June 30, 2024 and 2023, if all such loans had been current in accordance with their original terms, totaled $ 1.4 million and $ 1.3 million, respectively.

Interest income actually recognized on these originated loans during the six months ended June 30, 2024 and 2023 was $ 0.1 million and $ 0.7 million, respectively.

The following tables present the amortized cost basis of collateral dependent loans by class of loans as of the following periods:

As of March 31, 2024

As of June 30, 2024

(in thousands) Retail Office Warehouse Other Multifamily Farmland SFR-1st Deed SFR-2nd Deed Automobile/Truck A/R and Inventory Equipment Total

35 unchanged sentences

For the three months ended

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

(in thousands) Combination - Term Extension/Rate Change Payment Delay/Term Extension Total % of Loans Outstanding Payment Delay/Term Extension Total % of Loans Outstanding

Multifamily $ — $ 295 0.03 % $ — — %

Commercial and industrial — 166 0.03 177 0.03

Total $ — $ 461 0.01 % $ 177 0.03 %

For the six months ended

June 30, 2024 June 30, 2023

(in thousands) Combination - Term Extension/Rate Change Payment Delay/Term Extension Total % of Loans Outstanding Payment Delay/Term Extension Total % of Loans Outstanding

CRE non-owner occupied $ 211 $ — 0.01 % $ — — %

Multifamily — 295 0.29 — —

SFR HELOCs and junior liens — 41 0.01 — —

1 unchanged sentence

Total $ 211 $ 1,018 0.02 % $ 177 0.03 %

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the quarter ended March 31, 2024.

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024.

Three months ended June 30, 2024

Modification Type Loan Type Financial Effect

Payment delay / term extension Multifamily Added 12 months to the life of the loan

Payment delay / term extension Commercial and industrial Added a weighted average 60 months to the life of the loans

Six months ended June 30, 2024

Modification Type Loan Type Financial Effect

Combination - Term extension / rate change CRE non-owner occupied Added 120 months to the life of the loan;

1 unchanged sentence

Payment delay / term extension SFR HELOCs and junior liens Added 60 months to the life of the loan

Payment delay / term extension Commercial and industrial Added 66 months to the life of the loan

Payment delay / term extension Commercial and industrial Added 12 months to the life of the loan

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the quarter ended March 31, 2023.

Payment delay / term extension Commercial and industrial Added a weighted average 49 months to the life of the loans

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023.

Modification Type Loan Type Financial Effect

Payment delay / term extension Commercial and industrial Added 12 months to the life of the loan to delay balloon repayment

During the quarters ended March 31, 2024 and March 31, 2023, respectively, there were no loans with payment defaults by borrowers experiencing financial difficulty which had material modifications in rate, term or principal forgiveness during the twelve months prior to default.

During the six months ended June 30, 2024 and June 30, 2023, respectively, there were no loans with payment defaults by borrowers experiencing financial difficulty which had material modifications in rate, term or principal forgiveness during the twelve months prior to default.

Note 5 - Leases

15 unchanged sentences

The following table presents the components of lease expense for the periods ended:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands) 2024 2023 2024 2023

5 unchanged sentences

The following table presents supplemental cash flow information related to leases for the periods ended:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands) 2024 2023 2024 2023

5 unchanged sentences

Weighted-average discount rate 3.45 % 3.29 %

At March 31, 2024, future expected operating lease payments are as follows:

At June 30, 2024, future expected operating lease payments are as follows:

(in thousands)

2 unchanged sentences

Discount for present value of expected cash flows ( 4,118 )

Lease liability at March 31, 2024 $ 28,299

Lease liability at June 30, 2024 $ 27,122

Note 6 - Deposits

A summary of the balances of deposits follows:

(in thousands) March 31,

(in thousands) June 30,

2024 December 31,

5 unchanged sentences

Total deposits $ 8,050,230 $ 7,834,038

Certificate of deposit balances of $ 100.0 million and $ 50.0 million from the State of California were included in time certificates, over $250,000, at March 31, 2024 and December 31, 2023, respectively.

Certificate of deposit balances of $ 100.0 million and $ 50.0 million from the State of California were included in time certificates, over $250,000, at June 30, 2024 and December 31, 2023, respectively.

The Company participates in a deposit program offered by the State of California whereby the State may make deposits at the Company’s request subject to collateral and credit worthiness constraints.

The negotiated rates on these State deposits are generally more favorable than other wholesale funding sources available to the Company.

Overdrawn deposit balances of $ 1.7 million and $ 1.8 million were classified as consumer loans at March 31, 2024 and December 31, 2023, respectively.

Overdrawn deposit balances of $ 2.2 million and $ 1.8 million were classified as consumer loans at June 30, 2024 and December 31, 2023, respectively.

Note 7 - Other Borrowings

2 unchanged sentences

(in thousands)

Term borrowing at FHLB, fixed rate of 5.59 %, payable on July 8, 2024

Term borrowing at FHLB, fixed rate of 5.46 %, payable on October 7, 2024

Term borrowing at FHLB, fixed rate of 5.23 %, payable on April 8, 2025

$ 200,000 $ 200,000

Overnight borrowing at FHLB, fixed rate of 5.69 %, payable on April 1, 2024

Term borrowing at FHLB, fixed rate of 4.75 %, payable on April 8, 2024

Overnight borrowing at FHLB, fixed rate of 5.70 %, payable on January 2, 2024

Other collateralized borrowings, fixed rate, as of March 31, 2024 and December 31, 2023 of 0.05 %, payable on April 1, 2024 and January 2, 2024, respectively

Other collateralized borrowings, fixed rate, as of June 30, 2024 and December 31, 2023 of 0.05 %, payable on July 1, 2024 and January 2, 2024, respectively

22,773 32,582

3 unchanged sentences

(in thousands) Coupon Rate (Variable) 3 mo.

SOFR + As of March 31, 2024 As of December 31, 2023

SOFR + As of June 30, 2024 As of December 31, 2023

Subordinated Debt Series Maturity

14 unchanged sentences

The following table presents a summary of the Bank’s commitments and contingent liabilities:

(in thousands) March 31,

(in thousands) June 30,

2024 December 31,

7 unchanged sentences

Deposit account overdraft privilege 125,671 121,539

In April 2024, Visa Inc.

announced the commencement of an exchange offer for Visa Class B-1 common stock and the Company subsequently tendered all of its Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock.

Completion of the exchange resulted in a gain of $ 2.9 million relating to the Visa Class C common stock, which is held at fair value on the June 30, 2024 balance sheet as trading securities in the amount of $ 2.8 million.

Visa Class B-2 common stock continues to be carried at zero.

The Bank owns 6,698 shares of Class B-2 common stock of Visa Inc.

which may be convertible into Class A common stock at a conversion ratio of 1.5875 per Class B-2 share.

As of June 30, 2024, the value of the Class A shares was $ 262.47 per share.

Utilizing the conversion ratio, the value of unredeemed Class A equivalent shares owned by the Bank was $ 2,791,000 as of June 30, 2024, and has not been reflected in the accompanying consolidated financial statements.

The shares of Visa Class B-2 common stock are restricted and may not be transferred.

Visa Member Banks are required to fund an escrow account to cover settlements, resolution of pending litigation and related claims.

If the funds in the escrow account are insufficient to settle all the covered litigation, Visa may sell additional Class A shares, use the proceeds to settle litigation, and further reduce the conversion ratio.

If funds remain in the escrow account after all litigation is settled, the Class B-2 conversion ratio may be increased to reflect that surplus.

Until all U.S.

covered litigation obligations have been satisfied or the Applicable Conversion Rate for the Class B-2 common stock reaches zero, there is no dollar cap on the amount of payments that a participating holder and its guarantors may be obligated to make under its Makewhole Agreement.

Note 10 - Shareholders’ Equity

Dividends Paid

The Bank paid to the Company cash dividends in the aggregate amounts of $ 20.4 million and $ 18.2 million during the three months ended March 31, 2024 and 2023, respectively.

The Bank paid to the Company cash dividends in the aggregate amounts of $ 23.4 million and $ 11.6 million during the three months ended June 30, 2024 and 2023, respectively and $ 43.9 million and $ 29.8 million during the equivalent six month periods then ended, respectively.

The Bank is regulated by the FDIC and the DFPI.

4 unchanged sentences

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 three and six months ended June 30, 2024, the Company repurchased 244,992 and 344,324 shares with market values of $ 9.1 million and $ 12.5 million, respectively.

During the three and six months ended June 30, 2023, the Company repurchased zero and 150,000 shares with market values of zero and $ 7.0 million, respectively.

Stock Repurchased Under Equity Compensation Plans

The Company's shareholder-approved equity compensation plans permit employees to tender recently vested shares in lieu of cash for the payment of exercise price, if applicable, and the tax withholding on such shares.

During the three months ended March 31, 2024 and 2023, exercising option holders tendered zero shares, respectively, of the Company’s common stock in connection with option exercises.

Employees also tendered zero and 12,381 shares in connection with the tax withholding requirements of other share-based awards during the three months ended March 31, 2024 and 2023, respectively.

In total, shares of the Company's common stock tendered had market values of zero and $ 0.6 million during the quarters ended March 31, 2024 and 2023, respectively.

During the three and six months ended June 30, 2023, exercising option holders tendered 2,506 shares of the Company’s common stock in connection with option exercises.

There were no option exercises during the six months ended June 30, 2024.

Employees also tendered 30,510 and 39,080 shares in connection with the tax withholding requirements of other share-based awards during the three months ended June 30, 2024 and 2023, respectively, and 30,510 and 51,461 during the six months ended June 30, 2024 and 2023, respectively.

In total, shares of the Company's common stock tendered had market values of $ 1.1 million and $ 1.5 million during the quarters ended June 30, 2024 and 2023, respectively and $ 1.1 million and $ 2.1 million, respectively during the year to date periods then ended.

The tendered shares were retired.

4 unchanged sentences

The 2024 Plan allows for up to 1,200,000 shares to be issued in connection with equity-based incentives.

The Company’s 2009 Equity Incentive Plan (2009 Plan) expired on March 26, 2019.

While no new awards can be granted under the 2009 Plan, existing grants continue to be governed by the terms, conditions and procedures set forth in any applicable award agreement.

Stock option activity during the three months ended March 31, 2024, is summarized in the following table:

In conjunction with shareholder approval of the 2024 Plan, the 2019 Equity Incentive Plan (2019 Plan), which allowed for up to 1,500,000 shares to be issued in connection with equity-based incentives, is no longer available for grant issuances.

The Company's 2009 Equity Incentive Plan expired on March 26, 2019.

While no new awards can be granted under the 2019 Plan or 2009 Plan, existing grants continue to be governed by the terms, conditions and procedures set forth in any applicable award agreement.

Stock option activity during the six months ended June 30, 2024, is summarized in the following table:

of Shares Weighted

4 unchanged sentences

Options forfeited — —

Outstanding at March 31, 2024 7,500 $ 23.21

The following table shows the number, weighted-average exercise price, intrinsic value, and weighted average remaining contractual life of options exercisable, options not yet exercisable and total options outstanding as of March 31, 2024:

Outstanding at June 30, 2024 7,500 $ 23.21

Exercisable Currently Not

4 unchanged sentences

Weighted average remaining contractual term (yrs.) 0.3 n/a 0.3

As of March 31, 2024, all options outstanding are fully vested and are expected to be exercised prior to expiration.

The Company did not modify any option grants during the three months ended March 31, 2024 or 2023.

Activity related to restricted stock unit awards during the three months ended March 31, 2024 is summarized in the following table:

As of June 30, 2024, all options outstanding are fully vested and are expected to be exercised prior to expiration.

The Company did not modify any option grants during the six months ended June 30, 2024 or 2023.

Activity related to restricted stock unit awards during the six months ended June 30, 2024 is summarized in the following table:

Vesting RSUs Market Plus

4 unchanged sentences

RSUs forfeited ( 1,886 ) ( 1,933 )

Outstanding at March 31, 2024 210,559 178,414

The 210,559 of service condition vesting RSUs outstanding as of March 31, 2024 include a feature whereby each RSU outstanding is credited with a dividend amount equal to any common stock cash dividend declared and paid, and the credited amount is divided by the closing price of the Company’s stock on the dividend payable date to arrive at an additional amount of RSUs outstanding under the original grant.

Outstanding at June 30, 2024 168,290 146,973

The 168,290 of service condition vesting RSUs outstanding as of June 30, 2024 include a feature whereby each RSU outstanding is credited with a dividend amount equal to any common stock cash dividend declared and paid, and the credited amount is divided by the closing price of the Company’s stock on the dividend payable date to arrive at an additional amount of RSUs outstanding under the original grant.

The dividend credits follow the same vesting requirements as the RSU awards and are not considered participating securities.

The 210,559 of service condition vesting RSUs outstanding as of March 31, 2024 are expected to vest, and be released, on a weighted-average basis, over the next 2.2 years.

The Company expects to recognize $ 5.4 million of pre-tax compensation costs related to these service condition vesting RSUs between March 31, 2024 and their vesting dates.

The Company did not modify any service condition vesting RSUs during the three months ended March 31, 2024 or 2023.

The 178,414 of market plus service condition vesting RSUs outstanding as of March 31, 2024 are expected to vest, and be released, on a weighted-average basis, over the next 2.3 years.

The Company expects to recognize $ 3.0 million of pre-tax compensation costs related to these RSUs between March 31, 2024 and their vesting dates.

As of March 31, 2024, the number of market plus service condition vesting RSUs outstanding that will actually vest, and be released, may be reduced to zero or increased to 267,621 depending on the total return of the Company’s common stock versus the total return of an index of bank stocks from the grant date to the vesting date.

The Company did not modify any market plus service condition vesting RSUs during 2023 or during the three months ended March 31, 2024 .

The 168,290 of service condition vesting RSUs outstanding as of June 30, 2024 are expected to vest, and be released, on a weighted-average basis, over the next 1.9 years.

The Company expects to recognize $ 5.3 million of pre-tax compensation costs related to these service condition vesting RSUs between June 30, 2024 and their vesting dates.

The Company did not modify any service condition vesting RSUs during the six months ended June 30, 2024 or 2023.

The 146,973 of market plus service condition vesting RSUs outstanding as of June 30, 2024 are expected to vest, and be released, on a weighted-average basis, over the next 2.1 years.

The Company expects to recognize $ 2.6 million of pre-tax compensation costs related to these RSUs between June 30, 2024 and their vesting dates.

As of June 30, 2024, the number of market plus service condition vesting RSUs outstanding that will actually vest, and be released, may be reduced to zero or increased to 220,460 depending on the total return of the Company’s common stock versus the total return of an index of bank stocks from the grant date to the vesting date.

The Company did not modify any market plus service condition vesting RSUs during the six months ended June 30, 2024 or 2023.

Note 12 - Non-interest Income and Expense

1 unchanged sentence

Three months ended

June 30, Six months ended

(in thousands) 2024 2023 2024 2023

10 unchanged sentences

Sale of customer checks 301 407 613 695

Loss on sale of investment securities — ( 164 )

(Loss) gain on marketable equity securities ( 28 ) 42

Loss on sale or exchange of investment securities ( 45 ) — ( 45 ) ( 164 )

Loss on marketable equity securities ( 121 ) ( 42 ) ( 149 ) —

Other 203 93 700 325

3 unchanged sentences

Three months ended

June 30, Six months ended

(in thousands) 2024 2023 2024 2023

16 unchanged sentences

Gain on sale or acquisition of foreclosed assets — — ( 38 ) —

Gain on disposal of fixed assets 5 —

Loss on disposal of fixed assets 1 18 6 18

Other miscellaneous expense 3,955 5,201 8,079 8,684

3 unchanged sentences

Basic earnings per share represent income available to common shareholders divided by the weighted-average number of common shares outstanding during the period.

Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from assumed issuance.

Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive

potential common shares had been issued, as well as any adjustments to income that would result from assumed issuance.

Potential common shares that may be issued by the Company relate to outstanding stock options and restricted stock units (RSUs), and are determined using the treasury stock method.

Earnings per share have been computed based on the following:

Three months ended March 31,

Three months ended June 30,

(in thousands) 2024 2023

4 unchanged sentences

Options excluded from diluted earnings per share because of their antidilutive effect — —

Six months ended June 30,

(in thousands) 2024 2023

Net income $ 56,783 $ 60,725

Average number of common shares outstanding 33,183 33,257

Effect of dilutive stock options and restricted stock 123 114

Average number of common shares outstanding used to calculate diluted earnings per share 33,306 33,371

Options excluded from diluted earnings per share because of their antidilutive effect — —

Note 14 – Comprehensive Income (Loss)

2 unchanged sentences

The components of other comprehensive income (loss) and related tax effects are as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands) 2024 2023 2024 2023

18 unchanged sentences

The components of accumulated other comprehensive loss, included in shareholders’ equity, are as follows:

(in thousands) March 31,

(in thousands) June 30,

2024 December 31,

13 unchanged sentences

Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance.

Marketable equity securities, debt securities available-for-sale, loans held for sale, and mortgage servicing rights are recorded at fair value on a recurring basis.

Marketable equity securities, trading securities, debt securities available-for-sale, loans held for sale, and mortgage servicing rights are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such loans held for investment and certain other assets.

3 unchanged sentences

Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in

markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.

1 unchanged sentence

Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Marketable equity securities and debt securities available for sale - Marketable equity securities and debt securities available for sale are recorded at fair value on a recurring basis.

Marketable equity securities, trading securities and debt securities available for sale - Marketable equity, trading and debt securities available for sale are recorded at fair value on a recurring basis.

Fair value measurement is based upon quoted prices, if available.

14 unchanged sentences

When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the loan as nonrecurring Level 2.

When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the Company records the loan as nonrecurring Level 3.

comparable sales, and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Foreclosed assets - Foreclosed assets include assets acquired through, or in lieu of, loan foreclosure.

9 unchanged sentences

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis (in thousands):

Fair value at March 31, 2024 Total Level 1 Level 2 Level 3

Fair value at June 30, 2024 Total Level 1 Level 2 Level 3

Marketable equity securities $ 2,595 $ 2,595 $ — $ —

Trading securities 2,789 2,789 — —

Debt securities available for sale:

21 unchanged sentences

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally corresponds with the Company’s quarterly valuation process.

There were no transfers between any levels during the three months ended March 31, 2024 or March 31, 2023, respectively.

There were no transfers between any levels during the six months ended June 30, 2024 or June 30, 2023, respectively.

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the time periods indicated.

Had there been any transfer into or out of Level 3 during the time periods indicated, the amount included in the “Transfers into (out of) Level 3” column would represent the beginning balance of an item in the period (interim quarter) during which it was transferred (in thousands):

Three months ended March 31, Beginning

Three months ended June 30, Beginning

Balance Transfers

6 unchanged sentences

$ 6,553 — $ 84 $ 104 $ 6,741

Three months ended March 31,

Six months ended June 30, Beginning

Balance Transfers

into (out of)

Level 3 Change

in Earnings Issuances Ending

Mortgage servicing rights

$ 6,606 — $ ( 136 ) $ 196 $ 6,666

Mortgage servicing rights

$ 6,712 — $ ( 125 ) $ 154 $ 6,741

The key unobservable inputs used in determining the fair value of mortgage servicing rights are mortgage prepayment speeds and the discount rate used to discount cash projected cash flows.

1 unchanged sentence

Conversely, a decrease in the mortgage prepayment speed and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement).

The following table presents quantitative information about recurring Level 3 fair value measurements at March 31, 2024 and December 31, 2023:

As of March 31, 2024:

The following table presents quantitative information about recurring Level 3 fair value measurements at June 30, 2024 and December 31, 2023:

As of June 30, 2024:

(in thousands) Valuation

7 unchanged sentences

The tables below present the recorded investment in assets and liabilities measured at fair value on a nonrecurring basis, as of the dates indicated, that had a write-down or an additional allowance provided during the periods indicated (in thousands):

March 31, 2024 Total Level 1 Level 2 Level 3

June 30, 2024 Total Level 1 Level 2 Level 3

Collateral dependent loans $ 6,619 — — $ 6,619

6 unchanged sentences

The tables below present the gains (losses) resulting from non-recurring fair value adjustments of assets and liabilities for the periods indicated (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2024 2023 2024 2023

Collateral dependent loans $ ( 435 ) $ ( 6,754 ) $ ( 307 ) $ ( 7,031 )

9 unchanged sentences

Foreclosed assets represent real estate which the Company has taken control of in partial or full satisfaction of loans.

At the time of foreclosure, other real estate owned is recorded at fair value less costs to sell, which becomes the property’s new basis.

At the time of foreclosure, other real estate owned is

recorded at fair value less costs to sell, which becomes the property’s new basis.

Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for credit losses.

7 unchanged sentences

Under certain circumstances, management discounts are applied based on specific characteristics of an individual property.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at March 31, 2024:

March 31, 2024 Fair Value

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at June 30, 2024:

June 30, 2024 Fair Value

(in thousands) Valuation

25 unchanged sentences

Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered in any of these estimates.

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands) Carrying

15 unchanged sentences

Junior subordinated debt 101,143 104,764 101,099 95,407

(in thousands) Contract

Value Contract

Off-balance sheet:

Level 3 inputs:

Commitments $ 2,206,882 $ 22,069 $ 2,225,677 $ 22,257

Standby letters of credit 41,912 419 38,449 385

Overdraft privilege commitments 129,273 1,293 121,539 1,215

Note 16 - Regulatory Matters

3 unchanged sentences

The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios

(set forth in the table below) of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets.

The following tables present actual and required capital ratios as of March 31, 2024 and December 31, 2023 for the Company and the Bank under applicable Basel III Capital Rules.

The minimum capital amounts presented include the minimum required capital levels as of March 31, 2024 and December 31, 2023 based on the then phased-in provisions of the Basel III Capital Rules.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets.

The following tables present actual and required capital ratios as of June 30, 2024 and December 31, 2023 for the Company and the Bank under applicable Basel III Capital Rules.

The minimum capital amounts presented include the minimum required capital levels as of June 30, 2024 and December 31, 2023 based on the then phased-in provisions of the Basel III Capital Rules.

Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

1 unchanged sentence

Considered Well

As of March 31, 2024:

As of June 30, 2024:

Amount Ratio Amount Ratio Amount Ratio

29 unchanged sentences

Tri Counties Bank $ 1,088,717 11.12 % $ 391,574 4.00 % $ 489,468 5.00 %

As of March 31, 2024 and December 31, 2023, capital levels at the Company and the Bank exceed all capital adequacy requirements under the Basel III Capital Rules.

Also, at March 31, 2024 and December 31, 2023, the Bank’s capital levels exceeded the minimum amounts necessary to be considered well capitalized under the current regulatory framework for prompt corrective action.

As of June 30, 2024 and December 31, 2023, capital levels at the Company and the Bank exceed all capital adequacy requirements under the Basel III Capital Rules.

Also, at June 30, 2024 and December 31, 2023, the Bank’s capital levels exceeded the minimum amounts necessary to be considered well capitalized under the current regulatory framework for prompt corrective action.

The Basel III Capital Rules require for all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers.

The capital conservation buffer is exclusively composed of common equity tier 1 capital, and it applies to each of the risk-based capital ratios but not the leverage ratio.

At March 31, 2024, the Company and the Bank are in compliance with the capital conservation buffer requirement.

At June 30, 2024, the Company and the Bank are in compliance with the capital conservation buffer requirement.

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-Q

Item 1. Financial Statements