What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-02-29 · 137 added, 141 removed, 846 unchanged (25% of the section changed)

5 unchanged sentences

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

28 TriCo Bancshares 2023 10-K

Financial Overview

1 unchanged sentence

Earnings per share on a diluted basis for the year were $3.46, down 1.7% from the prior year.

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

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

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

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

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

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

The net interest margin expansion was driven by the higher rate environment driving an increase in loan and lease and investment security yields, partially offset by higher cost of funds from both deposits and borrowings.

The current year net income reported was impacted by declines in net interest income primarily associated with elevated interest expense and partially offset by a reduction in provision for loan losses.

In 2024, total interest expense was reported at $135.2 million, an increase of $53.5 million or 65.5% from the prior year.

Net interest income on a fully tax equivalent (FTE) basis, a non-GAAP financial measure, was $332.5 million, a decrease of $25.7 million, or 7.2%, from 2023.

The decrease in FTE net interest income reflects the $64.9 million, or 0.7%, decrease in average earning assets and a 25 basis point decrease in the FTE net interest margin to 3.71%.

Average earning asset declines included a $308.7 million or 12.6% decrease in average securities, partially offset by an $189.8 million, or 2.9% increase in average loans and leases.

The decrease in average securities was driven by the redeployment of liquidity from prepayments and maturities into the pay down of borrowings and loan growth during 2024.

The net interest margin contraction was driven by the higher rate environment and a liability sensitive balance sheet, resulting in an increase in the higher cost of funds from both deposits and borrowings.

This increase in interest expense was partially offset by improved yields on loan balances and to a greater extent, by the continued balance sheet mix shift where liquidity from deposit growth and investment security principal repayments were utilized to pay down borrowings.

Total average interest-bearing deposits was $5.4 billion and $5.0 billion during 2024 and 2023, respectively, while average other borrowings totaled $294.3 million and $430.7 million, respectively, during the same periods.

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

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

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

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

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

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

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

The provision for credit losses decreased $17.4 million to $6.6 million, primarily due to muted loan volume during 2024 and generally stable qualitative reserve levels, relative to the 2023 volatility driven by CA unemployment trends and rising Corporate BBB bond yields.

The allowance for credit losses (ACL) was $125.4 million, or 1.85% of total loans and leases, at December 31, 2024, compared to $121.5 million, or 1.79% of total loans and leases, at December 31, 2023.

Noninterest income was $64.4 million, up $3.0 million, or 4.9%, from the prior year.

While noninterest expense of $234.1 million remained generally consistent (up $0.9 million or 0.4%, from the prior year), a variety of both increases and decreases in individual expense items offset one another.

The year over year changes in noninterest income reflected improved earnings on deposit accounts and other fees, coupled with elevated earnings from asset management from continued growth in assets under management.

The tangible common equity to tangible assets ratio, a non-GAAP financial measure, was 9.72% at December 31, 2024, up 92 basis points from December 31, 2023, primarily due to an increase in tangible common equity related primarily to the retention of 2024 earnings.

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TRICO BANCSHARES

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

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Net interest margin less effect of acquired loan discount accretion (Non-GAAP) 3.66 % 3.90 %

PPP loans yield, net:

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

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

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

Acquired loan discount accretion and PPP loan yield, net:

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

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

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

Twelve months ended

8 unchanged sentences

Average equity (GAAP) $1,200,140 $1,102,436

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

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

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

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

31 TriCo Bancshares 2023 10-K

Return on average assets (GAAP) 1.18 % 1.19 %

Pre-tax pre-provision return on average assets (Non-GAAP) 1.66 % 1.87 %

Return on average equity (GAAP) 9.57 % 10.65 %

Pre-tax pre-provision return on average equity (Non-GAAP) 13.48 % 16.77 %

Twelve months ended

11 unchanged sentences

Return on average tangible common equity (Non-GAAP) 13.28 % 15.52 %

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Three months ended

23 unchanged sentences

Allowance for Credit Losses

The Company’s method for assessing the appropriateness of the allowance for credit losses includes specific allowances for individually analyzed loans, formula allowance factors for pools of credits, and qualitative considerations which include, among other things, current and

32 TriCo Bancshares 2023 10-K

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

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

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As such, the proper risk grading of loans in the portfolio is important to the determination of the calculation of and determination of adequacy of the allowance for credit losses.

Utilizing the historical loss data described above, the Company applies reserve rates within any unique pool based on its loss and risk grade migration.

Utilizing the historical loss data described above, the Company applies

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reserve rates within any unique pool based on its loss and risk grade migration.

Therefore, within any given pool, a larger loss estimation factor is applied to less than satisfactory loans as compared to those that the Company last graded as satisfactory.

22 unchanged sentences

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

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

33 TriCo Bancshares 2023 10-K

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

4 unchanged sentences

For further discussion, refer to “—Risk Factors – Risks Related to Interest Rates.” Following is a summary of the Company’s net interest income for the periods indicated (dollars in thousands):

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Year ended December 31,

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Effect of purchased loan discount accretion on net interest margin (FTE) 0.05 % 0.06 % 0.07 %

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

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

Net interest income (FTE) during the year ended December 31, 2024 decreased $25.7 million or 7.2% to $332.5 million compared against $358.2 million during the year ended December 31, 2023.

The decreased amount of net interest income reflects the higher rate environment driving an increase in the cost of funds from both deposits and borrowings, partially offset by improved yields on loan and lease balances, and investment securities during 2024.

Average loan balances increased by $189.8 million or 2.9% from December 31, 2023.

Meanwhile, the yield on interest earning assets was 5.21% and 4.87% for the years ended December 31, 2024 and 2023, respectively.

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

This 34 basis point increase in total earning asset yield was attributable to a 35 basis point increase in total loan yields and a 7 basis point increase in yields on total investments.

Of the 35 basis point increase in loan yields, 11 basis points was attributable to increased volume in average loans outstanding, and 26 basis points from elevated interest rates.

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

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

There was a decline of 2 basis points attributed to the accretion of purchased loan fees.

Meanwhile, the costs of total interest bearing liabilities increased 85 basis points to 2.33% during the year ended December 31, 2024, as compared to 1.48% for the year ended December 31, 2023.

During the same period, costs associated with interest bearing deposits increased by 99 basis points to 2.09% as compared to 1.10% in the prior year.

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

The increase in interest expense for the year ended December 31, 2024, as compared to the trailing year, was due to the increase in short term interest rates, as influenced by the FOMC actions, that began in 2023 and which remained elevated until late 2024.

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

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

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

Average loan balances increased by $690.9 million or 11.8% from December 31, 2022.

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

This 33 basis point increase in total earning asset yield was primarily attributable to a 11 basis point decrease in total loan yields and a 85 basis point increase in yields on total investments.

Of the 11 basis point decrease in yields on loans, a 3 basis point decline was attributable to decreases in market rates, as well as an 8 basis point benefit from the accretion of purchased loans.

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

Of the 58 basis point increase in yields on loans, a 3 basis point decline was attributable to decreases in market rates, as well as an 8 basis point benefit from the accretion of purchased loans.

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

1 unchanged sentence

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

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

For more information related to loan interest income, including loan purchase discount accretion, see the Summary of Average Balances, Yields/Rates and Interest Differential .

The “Yield” and “Volume/Rate” tables shown below are useful in illustrating and quantifying the developments that affected net interest income during 2024 and 2023.

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

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

34 TriCo Bancshares 2023 10-K

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

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

Average loan balances include nonperforming loans.

1 unchanged sentence

Yields on securities and certain loans have been adjusted upward to reflect the effect of income thereon exempt from federal income taxation at the statutory tax rate applicable during the period presented (dollars in thousands):

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Year ended December 31,

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Loans $ 6,747,072 $ 390,491 5.79 % $ 6,557,246 $ 356,710 5.44 % $ 5,866,360 $ 285,375 4.86 %

PPP Loans 1,360 12 0.88 % 24,590 2,390 9.72 % 250,391 16,643 6.65 %

Investment securities—taxable 2,008,823 68,434 3.41 % 2,272,301 75,203 3.31 % 2,459,032 60,499 2.46 %

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Net interest income and interest margin (3) $ 332,519 3.71 % $ 358,213 3.96 % $ 347,536 3.88 %

(1) The fully-taxable equivalent (FTE) adjustment for interest income of non-taxable investment securities was $1,536, $1,560, and $1,070 for the years ended December 31, 2023, 2022 and 2021, respectively.

(1) The fully-taxable equivalent (FTE) adjustment for interest income of non-taxable investment securities was $1.1 million, $1.5 million, and $1.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.

1 unchanged sentence

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Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid – Volume/Rate Tables

2 unchanged sentences

Amounts are calculated on a fully taxable equivalent basis:

2023 over 2022 2022 over 2021

2024 over 2023

2023 over 2022

Volume Rate Total Volume Rate Total

1 unchanged sentence

Loans $ 10,327 $ 23,454 $ 33,781 $ 33,577 $ 37,758 $ 71,335

Investment securities—taxable (304) 202 (102) 8,653 21,494 30,147

Investment securities—nontaxable (4,594) 19,298 14,704 849 1,270 2,119

Investment securities (10,376) 1,651 (8,725) (4,961) 19,562 14,601

Cash at Federal Reserve and other banks 2,694 83 2,777 (4,173) 1,062 (3,111)

13 unchanged sentences

Total loans 6,768,523 6,794,470 (25,947) (0.4) %

Total loans, excluding PPP 6,793,334 6,448,845 344,489 5.3 %

Total investments 2,036,610 2,305,882 (269,272) (11.7) %

1 unchanged sentence

Total other borrowings 89,610 632,582 (542,972) (85.8) %

Balance sheet mix shift where liquidity from deposit growth and investment security principal repayments were utilized to pay down borrowings assisted in minimizing the compression in net interest income and net interest margin during the year ended 2024.

More specifically, deposit increases of $253.5 million and principal repayments on investment securities of $269.3 million, facilitated a $543.0 million reduction in higher cost balances of other borrowings.

Provision for Credit Losses

2 unchanged sentences

The Company recorded a provision for credit losses of $6.6 million during the year ended December 31, 2024, versus $24.0 million during the trailing year end.

The decrease in required provisioning during 2024 was largely attributed to muted loan growth and less change in qualitative reserves driven by more stability in CA unemployment trends and Corporate BBB bond yields, as compared to the trailing year.

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

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

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

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

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

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

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

Net charge-offs for the year ended December 31, 2024 totaled $2.6 million , as compared to net recoveries of $6.6 million for the year ended December 31, 2023.

Total nonperforming loans increased by 19 basis points to 0.65% of total loans at December 31, 2024 from 0.46% of total loans at December 31, 2023.

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

For further details of the chan1ge in nonperforming loans during the period ended December 31, 2024 see the Tables, and associated narratives, labeled “Changes in nonperforming assets during the year ended December 31, 2024” and “Changes in nonperforming assets during the three months ended December 31, 2024” under the heading “Asset Quality and Non-Performing Assets ” below.

37 TriCo Bancshares 2024 10-K

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

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

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

Year ended December 31,

(dollars in thousands) 2024 2023 2022

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

Provision for allowance for credit losses $ 6,482 $ 22,455 $ 17,945

Change in reserve for unfunded loan commitments

150 1,535 525

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

Total provision for credit losses $ 6,632 $ 23,990 $ 18,470

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

10 unchanged sentences

Total service charges and fees 51,330 50,088 49,765

Asset management and commission income 3,150 3,986 3,668

Increase in cash value of life insurance 3,257 3,150 2,858

Asset management and commission income 5,573 4,517 3,986

Gain on sale of loans 1,532 1,166 2,342

1 unchanged sentence

Sale of customer checks 1,216 1,383 1,167

Loss on sale of investment securities (284) — —

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

(Loss) gain on sale/exchange of investment securities (43) (284) —

(Loss) gain on marketable equity securities 126 36 (340)

Other 961 903 2,448

1 unchanged sentence

Total non-interest income $ 64,407 $ 61,400 $ 63,046

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

Non-interest income increased $3.0 million or 4.90% to $64.4 million during the year ended December 31, 2024, as compared to $61.4 million during the year ended December 31, 2023.

ATM and interchange fees declined in the 2024 period by $1.1 million as compared to the twelve months ended December 31, 2023.

Meanwhile, service charges on deposit accounts and other service fees increased by $1.9 million and $0.6 million, respectively, as compared to the equivalent period in 2023 following $0.9 million in waived or reversed fees as a courtesy to customers in the prior year.

Elevated levels of assets under management and transaction activity within asset management operations further contributed to the overall improvement in income during the year ended 2024.

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

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

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

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

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

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

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

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

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

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Non-interest Expense

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Courier service 2,119 1,851 2,013

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

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

(Gain) loss on sale or acquisition of foreclosed assets (73) (133) (481)

(Gain) loss on disposal of fixed assets 19 23 (1,070)

Other miscellaneous expense 16,742 19,344 15,201

2 unchanged sentences

Average full-time equivalent staff 1,170 1,214 1,169

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

Total non-interest expense increased $0.9 million or 0.40% to $234.1 million during the year ended December 31, 2024, as compared to $233.2 million for the comparative period in 2023, This was largely attributed to an increase of $4.8 million or 3.5% in total salaries and benefits expense to $140.6 million, from routine compensation adjustments and other increases in benefits and compensation.

As noted above, salaries expense was also impacted by an increase in average compensation per employee as various strategic talent acquisitions were made in order to further prepare the Company to execute its growth objectives beyond $10 billion in total assets.

Additionally, data processing and software expenses increased by $2.0 million or 10.7% related to ongoing investments in the Company's data management and security infrastructure.

These increases were partially offset by declines in non-cash intangible amortization expense of $2.0 million or 32.7% and reductions in operational losses of $0.8 million or 31.2% due to ATM burglary expenses totaling $0.7 million in the comparative period.

Non-interest expense increased by $16.5 million or 7.63% to $233.2 million during the year ended December 31, 2023 as compared to $216.6 million for the trailing twelve month period for reasons primarily associated with the acquisition of Valley Republic Bank in March of 2022 which resulted in expense increases for nearly every identified category.

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

1 unchanged sentence

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

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

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

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The provisions for income taxes applicable to income before taxes for the years ended December 31, 2024, 2023, and 2022 differ from amounts computed by applying the statutory Federal income tax rates to income before taxes.

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Restricted Equity Securities

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

Restricted equity securities were $17.3 million at December 31, 2024 and 2023 .

The entire balance of restricted equity securities at December 31, 2024 and 2023 represents the Bank’s investment in the Federal Home Loan Bank of San Francisco (“FHLB”).

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

Loan Portfolio Composition

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Loan Portfolio Composition

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

3 unchanged sentences

Consumer 1,281,059 1,313,268 1,240,743

Commercial and industrial, excluding PPP 585,319 568,319 198,208

SBA PPP loans 1,136 1,602 61,147

Commercial and industrial 471,271 586,455 569,921

Construction 279,933 347,198 211,560

3 unchanged sentences

Allowance for credit losses $ (125,366) $ (121,522) $ (105,680)

The Company did not purchase any loans during 2023.

The Company did not purchase any loans during 2024 or 2023.

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

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

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

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

9 unchanged sentences

Allowance for credit losses 1.85 % 1.79 % 1.64 %

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

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

At December 31, 2024, loans including net deferred loan fees, totaled $6.8 billion which was a 0.4% or $25.9 million decrease over the balance at the end of December 31, 2023.

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

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

3 unchanged sentences

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

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

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

41 TriCo Bancshares 2024 10-K

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

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(dollars in thousands) 2024 2023 2022 2021 2020

13 unchanged sentences

The following table shows the activity in the balance of nonperforming assets for the year ended December 31, 2024:

(in thousands) Balance at

December 31, 2022 Additions Advances/

(in thousands) Balance at December 31, 2023 Additions Advances/

Paydowns, net Charge-offs/

Write-downs Transfers to

Assets Balance at

December 31, 2023

Assets Balance at December 31, 2024

Commercial real estate:

16 unchanged sentences

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

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

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

Nonperforming assets increased by $12.3 million or 35.5% to $46.9 million at December 31, 2024 from $34.6 million at December 31, 2023.

The increase in nonperforming assets during 2024 was primarily the result of additions of nonperforming loans totaling $27.6 million, partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $11.5 million, and net charge-offs of $3.7 million.

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Changes in nonperforming assets during the year ended December 31, 2023

The following table shows the activity in the balance of nonperforming assets for the year ended December 31, 2023:

(in thousands) Balance at

December 31, 2021 Additions Advances/

(in thousands) Balance at December 31, 2022 Additions Advances/

Paydowns, net Charge-offs/

Write-downs Transfers to

Assets Balance at

December 31, 2022

Assets Balance at December 31, 2023

Commercial real estate:

16 unchanged sentences

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

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

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

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

The increase in nonperforming assets during 2023 was the result of $48.6 million of additions to non-performing loans, which was partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $30.1 million and net charge-offs of $7.8 million.

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Changes in nonperforming assets during the three months ended December 31, 2024

The following table shows the activity in the balance of nonperforming assets for the quarter ended December 31, 2024:

(in thousands) Balance at

September 30, 2023 Additions Advances/

(in thousands) Balance at September 30, 2024 Additions Advances/

Paydowns, net Charge-offs/

Write-downs (1) Transfers to

Assets Balance at

December 31, 2023

Assets Balance at December 31, 2024

Commercial real estate:

19 unchanged sentences

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Changes in nonperforming assets during the three months ended December 31, 2023

The following table shows the activity in the balance of nonperforming assets for the quarter ended December 31, 2023:

(in thousands) Balance at

September 30, 2022 Additions Advances/

(in thousands) Balance at September 30, 2023 Additions Advances/

Paydowns, net Charge-offs/

Write-downs (1) Transfers to

Assets Balance at

December 31, 2022

Assets Balance at December 31, 2023

Commercial real estate:

35 unchanged sentences

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Allowance for Credit Losses - Unfunded Commitments

9 unchanged sentences

Allowance for individually evaluated loans 4,625 3,092 2,414 982 1,450

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

Total allowance for credit losses $ 125,366 $ 121,522 $ 105,680 $ 85,376 $ 91,847

4 unchanged sentences

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

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

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

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

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

Core inflation is slowing but prices remain elevated relative to wage increases, as reflected by higher living costs such as housing, energy and general services.

Actions by the Federal Reserve to cut rates during 2024 and beyond may help improve this outlook overall, but the uncertainty associated with the extent and timing of these potential reductions has inhibited a material change to forecasted reserve levels.

Furthermore, geopolitical risks remain elevated, which may lead to further negative effects on domestic economic outcomes.

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

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

7 unchanged sentences

Total allowance for credit losses $ 125,366 $ 121,522 $ 105,680 $ 85,376 $ 91,847

45 TriCo Bancshares 2023 10-K

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

7 unchanged sentences

Total allowance for credit losses 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

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The following table summarizes the allocation of the allowance for credit losses between loan types as a percentage of total loans in each of the loan categories listed:

27 unchanged sentences

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

46 TriCo Bancshares 2023 10-K

Foreclosed Assets, Net of Allowance for Losses

The following tables detail the components and summarize the activity in foreclosed assets, net of allowances for losses for the years indicated (dollars in thousands):

2022 Additions Advances/

Balance at December 31, 2023 Additions Advances/

Costs/Other Sales Valuation

Adjustments Balance at

Adjustments Balance at December 31, 2024

Land & Construction $ 154 $ 11 $ — $ — $ 39 $ 204

2 unchanged sentences

Total foreclosed assets $ 2,705 $ 682 $ — $ (359) $ (242) $ 2,786

2021 Additions Advances/

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Balance at December 31, 2022 Additions Advances/

Costs/Other Sales Valuation

Adjustments Balance at

Adjustments Balance at December 31, 2023

Land & Construction $ 154 $ — $ — $ — $ — $ 154

20 unchanged sentences

On February 25, 2021 the Board of Directors approved the authorization to repurchase 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.

In connection with approval of the 2021 Repurchase Plan, the Company’s previous repurchase program adopted on November 12, 2019 (the 2019 Repurchase Plan) was terminated.

The following table shows the repurchases made by the Company during 2024 under the 2021 Plan:

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Period Total number of

4 unchanged sentences

the 2021 Plan

October 1-31, 2024 — — 865,478

November 1-30, 2024 — — 865,478

December 1-31, 2024 34,955 $48.56 830,523

January 1, 2024 - December 31, 2024

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

379,279 $37.39 830,523

Market Risk Management

3 unchanged sentences

The Company does not hold any financial instruments that are not maintained in US dollars and is not party to any contracts that may be settled or repaid in a denomination other than US dollars.

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Asset/Liability Management.

31 unchanged sentences

-300 (shock) 1.7 % (13.9) %

These simulations indicate that given a “flat” balance sheet size scenario, and if interest-bearing checking, savings and money market interest rates track the general interest rate changes by the rate shock values listed above, the Company’s balance sheet is slightly liability sensitive over a twelve month time horizon for both a rates up and rates down shock scenario.

These simulations indicate that given a “flat” balance sheet size scenario, and if interest-bearing checking, savings and money market interest rates track the general interest rate changes by the rate shock values listed above, the Company’s balance sheet is liability sensitive over a twelve month time horizon for both a rates up and rates down shock scenario, with greater sensitivity skewed toward rates up.

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

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

“Neutral sensitivity” implies that net interest income does not

48 TriCo Bancshares 2023 10-K

change when interest rates change.

“Neutral sensitivity” implies that net interest income does not change when interest rates change.

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

10 unchanged sentences

Further, a change in U.S.

Treasury rates accompanied by a change in the shape of the treasury yield curve could result in different estimations from those presented herein.

Treasury rates accompanied by a change in the shape of the treasury yield curve could result in different estimations from those presented

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Accordingly, the results in the preceding tables should not be relied upon as indicative of actual results in the event of changing market interest rates.

13 unchanged sentences

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

49 TriCo Bancshares 2023 10-K

As of December 31, 2024 Repricing within:

22 unchanged sentences

Net cash from investing activities totaled $285.0 million in 2024.

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

Proceeds from the maturity and sales of investment securities, net of purchases, provided the bulk of the cash flows totaling approximately $266.5 million, in addition to $22.6 million from the net origination and collection of loans outstanding.

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

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

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

In 2024, financing activities used funds totaling $348.5 million, resulting from a reduction in short term borrowings of $543.0 million, $43.6 million in dividend payment outflows, and an additional $15.5 million

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allocated toward the repurchase of common stock, partially offset by an increase in deposits totaling $253.5 million.

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

15 unchanged sentences

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

50 TriCo Bancshares 2023 10-K

Loan demand during 2025 will depend in part on economic and competitive conditions.

1 unchanged sentence

The outlook for deposit balances during 2025 is also subject to actions from the Federal Reserve, heightened competition, the success of the Company’s sales efforts, as well as the delivery of superior customer service and market conditions.

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

The Federal Reserve's recent decrease in Fed Funds rates provided a modest level of relief on deposit margin expense, however, the competitive landscape for attracting and retaining deposit balances will continue to remain challenging during 2025.

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

8 unchanged sentences

These deposits are generally more rate sensitive than other deposits and, therefore, are more likely to be withdrawn to obtain higher yields elsewhere if available.

Certificates of Deposit in Denominations of $250,000 or More

Amounts as of December 31,

(dollars in thousands) 2023 2022

Portion of certificates of deposit in excess of $250,000

(dollars in thousands) At December 31, 2024

Time remaining until maturity:

4 unchanged sentences

Total $ 283,680

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Loan maturities

Loan demand also affects the Company’s liquidity position.

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

51 TriCo Bancshares 2023 10-K

The following table presents the maturities of loans, net of deferred loan fees, at December 31, 2024:

One Year After One

50 unchanged sentences

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Off-Balance Sheet Items

11 unchanged sentences

Time deposits $ 1,122,485 $ 1,081,409 $ 40,209 $ 867 $ —

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

400,000 400,000 — — —

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

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

75,000 75,000 — — —

21 unchanged sentences

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

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

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

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

6 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis