Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
Cautionary Statements Regarding Forward-Looking Information
The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on us. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: macroeconomic, geopolitical, and other challenges and uncertainties, including those related to actual or potential policies and actions from the new U.S. administration, such as tariffs, and reciprocal actions by other countries or regions, significant volatility and disruptions in financial markets, a resurgence of inflation, increases in unemployment rates, increases in interest rates and slowing economic growth or recession in the U.S. and other countries or regions; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit; the impact of changes in financial services industry policies, laws and regulations; regulatory restrictions or adverse regulatory findings affecting our ability to successfully market and price our products to consumers; adverse developments in the financial services industry generally such as bank failures and any related impact on depositor behavior or investor sentiment; the impacts of international hostilities, wars, terrorism or geopolitical events; risks related to the sufficiency of liquidity, including our ability to attract and maintain deposits; the risks related to the development, implementation, use and management of emerging technologies, including artificial intelligence and machine learning; extreme weather, natural disasters and other catastrophic events and their effects on our customers and the economic and business environments in which we operate; current and future economic and market conditions of the local economies in which we conduct operations; declines in housing and commercial real estate prices and changes in the financial performance and/or condition of our borrowers; the market value of our investment securities and possible other-than-temporary impairment of securities held by us due to changes in credit quality or rates; the availability of, and cost of, sources of funding and the demand for our products; the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital; the costs or effects of mergers, acquisitions or dispositions we may make, as well as whether we are able to obtain any required governmental approvals in connection with any such activities, or identify and complete favorable transactions in the future, and/or realize the anticipated financial and business benefits; the volatility of the stock market and its impact on our stock price and our ability to conduct acquisitions; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the ability to execute our business plan in new markets; our future operating or financial performance, including our outlook for future growth; changes in the level and direction of our nonperforming assets and charge-offs and the appropriateness of the allowance for credit losses; the effectiveness of us managing the mix of earning assets and in improving, resolving or liquidating lower-quality assets; changes in accounting standards and practices; changes in consumer spending, borrowing and savings habits; the effects of changes in the level or cost of checking or savings account deposits on our funding costs and net interest margin; increasing noninterest expense and its impact on our financial performance; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional competitors including retail businesses and technology companies; the challenges of attracting, integrating and retaining key employees; the impact of the 2023 cyber security ransomware incident, including the pending litigation, on our operations and reputation; the vulnerability of our operational or security systems or infrastructure, the systems of third-party vendors or other service providers with whom we contract, and our customers to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and data/security breaches and the cost to defend against and respond to such incidents; increased data security risks due to work from home arrangements and email vulnerability; failure to safeguard personal information, and any resulting litigation; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the emergence or continuation of widespread health emergencies or pandemics; potential judgments, orders, settlements, penalties, fines and reputational damage resulting from pending or future litigation and regulatory investigations, proceedings and enforcement actions; and our ability to manage the risks involved in the foregoing. In addition, due to the rapidly evolving and changes in U.S. trade policies and practices, the amount and duration of any tariffs and their ultimate impact on us, our customers, financial markets, and the overall U.S. and global economies is currently uncertain. Nonetheless, prolonged uncertainty, elevated tariff levels or their wide-spread use in U.S. trade policy could weaken economic conditions and adversely impact the ability of borrowers to repay outstanding loans or the value of collateral securing these loans or adversely affect financial markets. There can be no assurance that future developments affecting us will be the same as those anticipated by management. Additional factors that could cause results to differ materially from those described above can be found in our filings with the U.S. Securities and Exchange Commission, including without limitation the “Risk Factors” Section of TriCo’s Annual Report on Form 10-K for the year ended December 31, 2024, Such filings are also available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations . Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. We undertake no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
General
As TriCo Bancshares (referred to in this report as “we”, “our” or the “Company”) has not commenced any business operations independent of Tri Counties Bank (the “Bank”), the following discussion pertains primarily to the Bank. Average balances, including such balances used in calculating certain financial ratios, are generally comprised of average daily balances for the Company. Within Management’s Discussion and Analysis of Financial Condition and Results of Operations, interest income, net interest income, and net interest yield are generally presented on a FTE basis. The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provides additional clarity in assessing its results, and the presentation of these measures on a FTE basis is a common practice within the banking industry. Interest income and net interest income are shown on a non-FTE basis in the Part I - Financial Information section of this Form 10-Q, and a reconciliation of the FTE and non-FTE presentations is provided below in the discussion of net interest income.
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Critical Accounting Policies and Estimates
The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those that materially affect the financial statements and are related to the adequacy of the allowance for loan losses, investments, mortgage servicing rights, fair value measurements, retirement plans and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A detailed discussion related to the Company’s accounting policies including those related to estimates on the allowance for credit losses related to loans and investment securities, and impairment of intangible assets, can be found in Note 1 of the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2024.
Geographical Descriptions
For the purpose of describing the geographical location of the Company’s operations, the Company has defined northern California as that area of California north of, and including, Stockton to the east and San Jose to the west; central California as that area of the state south of Stockton and San Jose, to and including, Bakersfield to the east and San Luis Obispo to the west; and southern California as that area of the state south of Bakersfield and San Luis Obispo.
Financial Highlights
Performance highlights and other developments for the Company as of or for the three and six months ended June 30, 2025, included the following:
• Net income was $27.5 million or $0.84 per diluted share as compared to $26.4 million or $0.80 per diluted share in the trailing quarter
• Net interest income (FTE) was $86.8 million, an increase of $4.0 million or 4.82% over the trailing quarter; net interest margin (FTE) was 3.88% in the recent quarter, an increase of 15 basis points over 3.73% in the trailing quarter
• Loan balances increased $138.2 million or 8.1% (annualized) from the trailing quarter and increased $216.5 million or 3.2% from the same quarter of the prior year
• Deposit balances increased $170.5 million or 8.3% (annualized) from the trailing quarter and increased $325.6 million or 4.0% from the same quarter of the prior year
• Average yield on earning assets was 5.21%, an increase of 6 basis points over the 5.15% in the trailing quarter; average yield on loans was 5.76%, an increase of 5 basis points over the 5.71% in the trailing quarter
• Non-interest bearing deposits averaged 30.6% of total deposits during the quarter
• The average cost of total deposits was 1.37%, a decrease of 6 basis points as compared to 1.43% in the trailing quarter, and a decrease of 8 basis points from 1.45% in the same quarter of the prior year
• For the quarter ended June 30, 2025, the Company’s return on average assets was 1.13%, while the return on average equity was 8.68%; for the trailing quarter ended March 31, 2025, the Company’s return on average assets was 1.09%, while the return on average equity was 8.54%
• Diluted earnings per share were $0.84 for the second quarter of 2025, compared to $0.80 for the trailing quarter and $0.87 during the second quarter of 2024
• The loan to deposit ratio was 83.08% as of June 30, 2025, as compared to 83.13% for the trailing quarter end
• The efficiency ratio was 59.00% for the quarter ended June 30, 2025, as compared to 60.42% for the trailing quarter
• The provision for credit losses was approximately $4.7 million during the quarter ended June 30, 2025, as compared to $3.7 million during the trailing quarter end. The change was attributed to an increase in required reserves totaling $2.8 million on individually evaluated loans and an increase of $1.7 million general reserves, which was primary attributed to loan growth
• The allowance for credit losses (ACL) to total loans was 1.79% as of June 30, 2025, compared to 1.88% as of the trailing quarter end, and 1.83% as of June 30, 2024. Non-performing assets to total assets were 0.68% on June 30, 2025, as compared to 0.59% as of March 31, 2025, and 0.36% at June 30, 2024. At June 30, 2025, the ACL represented 192% of non-performing loans
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TRICO BANCSHARES
Financial Summary
(In thousands, except per share amounts; unaudited)
Three months ended
June 30, Six months ended
June 30,
2025 2024 2025 2024
Net interest income $ 86,519 $ 81,997 $ 169,061 $ 164,733
Provision for credit losses (4,665) (405) (8,393) (4,710)
Non-interest income 17,090 15,866 33,163 31,637
Non-interest expense (61,131) (58,339) (120,716) (114,843)
Provision for income taxes (10,271) (10,085) (19,210) (20,034)
Net income $ 27,542 $ 29,034 $ 53,905 $ 56,783
Per Share Data:
Basic earnings per share $ 0.84 $ 0.88 $ 1.64 $ 1.71
Diluted earnings per share $ 0.84 $ 0.87 $ 1.63 $ 1.70
Dividends paid $ 0.33 $ 0.33 $ 0.66 $ 0.66
Book value at period end $ 38.92 $ 35.62
Weighted average common shares outstanding 32,757 33,121 32,854 33,183
Weighted average diluted common shares outstanding 32,936 33,244 33,033 33,306
Shares outstanding at period end 32,550 32,989 32,550 32,989
At period end:
Loans $ 6,958,993 $ 6,742,526
Total investment securities $ 1,936,954 $ 2,086,090
Total assets $ 9,923,983 $ 9,741,399
Total deposits $ 8,375,809 $ 8,050,230
Other borrowings $ 17,788 $ 247,773
Shareholders’ equity $ 1,266,823 $ 1,175,050
Financial Ratios:
During the period:
Return on average assets (annualized) 1.13 % 1.19 % 1.11 % 1.16 %
Return on average equity (annualized) 8.68 % 9.99 % 8.61 % 9.74 %
Net interest margin (1) (annualized)
3.88 % 3.68 % 3.81 % 3.68 %
Efficiency ratio 59.00 % 59.61 % 59.69 % 58.48 %
Average equity to average assets 13.02 % 11.95 % 12.89 % 11.94 %
At end of period:
Equity to assets 12.77 % 12.06 %
Total capital to risk-adjusted assets 15.55 % 15.19 %
(1) Fully Taxable Equivalent (FTE)
Results of Operations
The following discussion and analysis is designed to provide a better understanding of the significant changes and trends related to the Company and the Bank’s financial condition, operating results, asset and liability management, liquidity and capital resources and should be read in conjunction with the unaudited Condensed Consolidated Financial Statements of the Company and the Notes thereto located at Item 1 of this report.
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Net Interest Income
The Company’s primary source of revenue is net interest income, or the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Following is a summary of the components of FTE net income for the periods indicated.
Three months ended
(in thousands) June 30,
2025 March 31,
2025 Change % Change
Interest income $ 116,361 $ 114,077 $ 2,284 2.0 %
Interest expense (29,842) (31,535) 1,693 (5.4) %
Fully tax-equivalent adjustment (FTE) (1)
264 265 (1) (0.4) %
Net interest income (FTE) $ 86,783 $ 82,807 $ 3,976 4.8 %
Net interest margin (FTE) 3.88 % 3.73 %
Acquired loans discount accretion, net:
Amount (included in interest income) $ 1,247 $ 1,995 $ (748) (37.5) %
Net interest margin less effect of acquired loan discount accretion (1)
3.82 % 3.64 % 0.18 %
Three months ended June 30,
(in thousands) 2025 2024 Change % Change
Interest income $ 116,361 $ 117,032 $ (671) (0.6) %
Interest expense (29,842) (35,035) 5,193 (14.8) %
Fully tax-equivalent adjustment (FTE) (1)
264 275 (11) (4.0) %
Net interest income (FTE) $ 86,783 $ 82,272 $ 4,511 5.5 %
Net interest margin (FTE) 3.88 % 3.68 %
Acquired loans discount accretion, net:
Amount (included in interest income) $ 1,247 $ 850 $ 397 46.7 %
Net interest margin less effect of acquired loan discount accretion (1)
3.82 % 3.64 % 0.18 %
Six months ended June 30,
(in thousands) 2025 2024 Change % Change
Interest income $ 230,438 $ 232,449 $ (2,011) (0.9) %
Interest expense (61,377) (67,716) 6,339 (9.4) %
Fully tax-equivalent adjustment (FTE) (1)
529 550 (21) (3.8) %
Net interest income (FTE) $ 169,590 $ 165,283 $ 4,307 2.6 %
Net interest margin (FTE) 3.81 % 3.68 %
Acquired loans discount accretion, net:
Amount (included in interest income) $ 3,242 $ 2,182 $ 1,060 48.6 %
Net interest margin less effect of acquired loan discount accretion (1)
3.73 % 3.63 % 0.10 %
(1) Certain information included herein is presented on a FTE basis and/or to present additional financial details which may be desired by users of this financial information. The Company believes the use of this non-generally accepted accounting principles (non-GAAP) measure provides additional clarity in assessing its results, and the presentation of these measures is a common practice within the banking industry.
Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. The dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. Despite the elevated rate environment, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, remains generally consistent. During the quarters ended June 30, 2025, March 31, 2025 and June 30, 2024, the purchased loan discount accretion was $1.2 million, $2.0 million and $0.9 million, respectively.
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Summary of Average Balances, Yields/Rates and Interest Differential
The following table presents, for the three month periods indicated, information regarding the Company’s consolidated average assets, liabilities and shareholders’ equity, the amounts of interest income from average interest-earning assets and resulting yields, and the amount of interest expense paid on interest-bearing liabilities. Average loan balances include nonperforming loans. Interest income includes proceeds from loans on nonaccrual loans only to the extent cash payments have been received and applied to interest income. Yields on securities and certain loans have been adjusted upward to reflect the effect of income thereon exempt from federal income taxation at the current statutory tax rate (dollars in thousands).
Three months ended June 30,
2025 2024
Average
Balance Interest
Income/
Expense Rates
Earned
/Paid Average
Balance Interest
Income/
Expense Rates
Earned
/Paid
Assets:
Loans $ 6,878,186 $ 98,695 5.76 % $ 6,792,303 $ 98,229 5.82 %
Investment securities - taxable 1,818,814 14,921 3.29 % 2,003,124 17,004 3.41 %
Investment securities - nontaxable (1)
132,576 1,143 3.46 % 138,167 1,190 3.46 %
Total investments 1,951,390 16,064 3.30 % 2,141,291 18,194 3.42 %
Cash at Federal Reserve and other banks 144,383 1,866 5.18 % 68,080 884 5.22 %
Total interest-earning assets 8,973,959 116,625 5.21 % 9,001,674 117,307 5.24 %
Other assets 804,875 780,554
Total assets $ 9,778,834 $ 9,782,228
Liabilities and shareholders’ equity:
Interest-bearing demand deposits $ 1,804,856 $ 6,076 1.35 % $ 1,769,370 $ 6,215 1.41 %
Savings deposits 2,799,470 12,246 1.75 % 2,673,272 12,260 1.84 %
Time deposits 1,102,025 9,716 3.54 % 1,016,190 10,546 4.17 %
Total interest-bearing deposits 5,706,351 28,038 1.97 % 5,458,832 29,021 2.14 %
Other borrowings 22,707 92 1.63 % 325,604 4,118 5.09 %
Junior subordinated debt 101,236 1,712 6.78 % 101,128 1,896 7.54 %
Total interest-bearing liabilities 5,830,294 29,842 2.05 % 5,885,564 35,035 2.39 %
Noninterest-bearing deposits 2,516,631 2,565,609
Other liabilities 158,817 161,731
Shareholders’ equity 1,273,092 1,169,324
Total liabilities and shareholders’ equity $ 9,778,834 $ 9,782,228
Net interest spread (2)
3.16 % 2.85 %
Net interest income and interest margin (3)
$ 86,783 3.88 % $ 82,272 3.68 %
(1) Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.
(2) Net interest spread represents the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.
(3) Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of i nterest-earning assets, then annualized based on the number of days in the given period .
Net interest income (FTE) during the three months ended June 30, 2025, increased $4.5 million or 5.5% to $86.8 million compared to $82.3 million during the three months ended June 30, 2024. Net interest margin totaled 3.88% for the three months ended June 30, 2025, an increase of 20 basis points from the same quarter in 2024. The primary drivers behind the change in net interest margin was related to an improvement in yield on interest-bearing liabilities, namely, the cost of interest-bearing deposits decreased by 17 basis points between the quarter ended June 30, 2025, and the same quarter of the prior year. The accretion of discounts from acquired loans added 8 basis points and 5 basis points to loan yields during the quarters ended June 30, 2025 and June 30, 2024, respectively. In addition, the average balance of noninterest-bearing deposits decreased by $49.0 million from the three-month average for the period ended June 30, 2024 amidst a continued migration of customer funds to interest-bearing products.
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Six months ended June 30,
2025 2024
Average
Balance Interest
Income/
Expense Rates
Earned
/Paid Average
Balance Interest
Income/
Expense Rates
Earned
/Paid
Assets
Loans $ 6,827,469 $ 194,073 5.73 % $ 6,789,072 $ 194,713 5.77 %
Investments-taxable 1,851,439 30,673 3.34 % 2,065,412 34,833 3.39 %
Investments-nontaxable (1)
132,980 2,292 3.48 % 138,534 2,382 3.46 %
Total investments 1,984,419 32,965 3.35 % 2,203,946 37,215 3.40 %
Cash at Federal Reserve and other banks 175,315 3,929 4.52 % 41,229 1,071 5.22 %
Total earning assets 8,987,203 230,967 5.18 % 9,034,247 232,999 5.19 %
Other assets, net 806,241 784,765
Total assets $ 9,793,444 $ 9,819,012
Liabilities and shareholders’ equity
Interest-bearing demand deposits $ 1,817,515 $ 12,297 1.36 % $ 1,740,107 $ 11,162 1.29 %
Savings deposits 2,765,057 24,444 1.78 % 2,662,595 23,159 1.75 %
Time deposits 1,111,382 20,162 3.66 % 914,042 18,229 4.01 %
Total interest-bearing deposits 5,693,954 56,903 2.02 % 5,316,744 52,550 1.99 %
Other borrowings 55,902 1,061 3.83 % 455,150 11,496 5.08 %
Junior subordinated debt 101,219 3,413 6.80 % 101,117 3,670 7.30 %
Total interest-bearing liabilities 5,851,075 61,377 2.12 % 5,873,011 67,716 2.32 %
Noninterest-bearing deposits 2,515,508 2,605,999
Other liabilities 164,259 168,044
Shareholders’ equity 1,262,602 1,171,958
Total liabilities and shareholders’ equity $ 9,793,444 $ 9,819,012
Net interest rate spread (1) (2)
3.06 % 2.87 %
Net interest income and margin (1) (3)
$ 169,590 3.81 % $ 165,283 3.68 %
Net interest income (FTE) during the six months ended June 30, 2025, increased $4.3 million, or 2.6%, to $169.6 million compared to $165.3 million during the six months ended June 30, 2024. In addition, net interest margin increased 13 basis points to 3.81%, compared to 3.68% for the same period in the prior year. The increase in net interest income during the six month period is primarily attributed to a decrease in interest expense; specifically, decreases in the volume of other average borrowings, contributed to a decrease in interest expense of $10.1 million while increases in the volume of average time deposits increased interest expense by approximately $4.0 million. The changes in rate resulted in a $1.4 million decrease in net interest income during the comparable period.
Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid
The following table sets forth, for the period identified, a summary of the changes in interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated. Changes not solely attributable to volume or rates have been allocated in proportion to the respective volume and rate components.
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Three months ended June 30, 2025
compared with three months ended June 30, 2024
(in thousands) Volume Rate Total
Increase (decrease) in interest income:
Loans $ 1,249 $ (783) $ 466
Investment securities
(1,621) (509) (2,130)
Cash at Federal Reserve and other banks 996 (14) 982
Total interest-earning assets 624 (1,306) (682)
Increase (decrease) in interest expense:
Interest-bearing demand deposits 125 (264) (139)
Savings deposits 582 (596) (14)
Time deposits 896 (1,726) (830)
Other borrowings (3,852) (174) (4,026)
Junior subordinated debt 2 (186) (184)
Total interest-bearing liabilities (2,247) (2,946) (5,193)
Increase in net interest income $ 2,871 $ 1,640 $ 4,511
The following commentary regarding net interest income, interest income and interest expense may be best understood while referencing the Summary of Average Balances, Yields/Rates and Interest Differential and the Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid shown above.
Net interest income (FTE) during the three months ended June 30, 2025 increased $4.5 million to $86.8 million compared to $82.3 million during the three months ended June 30, 2024. The increase in net interest income (FTE) was due largely to a shift in funding mix, resulting in a decrease in short-term FHLB borrowings and an increase in interest-bearing deposits, which provided a favorable mix in interest expense.
Six months ended June 30, 2025
compared with six months ended June 30, 2024
(in thousands) Volume Rate Total
Increase (decrease) in interest income:
Loans $ 1,107 $ (1,747) $ (640)
Investment securities
(3,724) (526) (4,250)
Cash at Federal Reserve and other banks 3,502 (644) 2,858
Total interest-earning assets 885 (2,917) (2,032)
Increase (decrease) in interest expense:
Interest-bearing demand deposits 499 636 1,135
Savings deposits 896 389 1,285
Time deposits 3,957 (2,024) 1,933
Other borrowings (10,139) (296) (10,435)
Junior subordinated debt 4 (261) (257)
Total interest-bearing liabilities (4,783) (1,556) (6,339)
Increase in net interest income $ 5,668 $ (1,361) $ 4,307
Asset Quality and Credit Loss Provisioning
During the three months ended June 30, 2025, the Company recorded a provision for credit losses of $4.7 million, as compared to $3.7 million during the trailing quarter, and $0.4 million during the second quarter of 2024.
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Three months ended Six months ended
(dollars in thousands) June 30,
2025 March 31,
2025 June 30,
2024 June 30,
2025 June 30,
2024
Addition to allowance for credit losses $ 4,525 $ 2,663 $ 335 $ 7,188 $ 4,350
Addition to reserve for unfunded loan commitments
140 1,065 70 1,205 360
Total provision for credit losses $ 4,665 $ 3,728 $ 405 $ 8,393 $ 4,710
The allowance for credit losses (ACL) was $124.5 million or 1.79% of total loans as of June 30, 2025. The provision for credit losses on loans of $4.5 million recorded during the current quarter resulted from a net increase of $2.8 million in reserves on individually evaluated loans or loan relationships, in addition to a net increase of $1.7 million in general reserves. The charge-offs incurred during the quarter ended June 30, 2025, were primarily related to non-performing relationships which had been fully reserved for by Management on an individual basis in previous quarters.
Three months ended June 30, Six months ended June 30,
(dollars in thousands) 2025 2024 2025 2024
Balance, beginning of period $ 128,423 $ 124,394 $ 125,366 $ 121,522
Provision for credit losses 4,525 335 7,188 4,350
Loans charged-off (8,595) (1,610) (8,969) (2,885)
Recoveries of previously charged-off loans 102 398 870 530
Balance, end of period $ 124,455 $ 123,517 $ 124,455 $ 123,517
The $2.8 million increase in individually evaluated reserves was largely attributed to changes in observable market valuations associated with agricultural real estate despite what appears to be a stable water supply and improving commodity prices for the crops associated with collateral for these loans. Management believes the provisioning for this individually analyzed relationship is sufficient relative to expected future losses, if any.
The $1.7 million recorded for general reserves is primarily attributed to net loan growth for the quarter of approximately $138.2 million. Additionally, Management notes that economic indicators through the end of the current quarter, as well as actual and forecasted trends including, but not limited to, unemployment, gross domestic product, and corporate borrowing rates continued to evidence stability and were supportive of general economic expansion, and generally consistent with the trailing period ended March 31, 2025, which is aligned with the Company's direct experiences with borrowers. Steepening of the yield curve or actions by the Federal Reserve to cut rates during 2025 and beyond may help further improve this outlook overall, but the uncertainty associated with the extent and timing of these potential reductions has inhibited a material change to monetary policy assumptions. Furthermore, geopolitical policy risks remain elevated, which may lead to further negative effects on domestic economic outcomes. The uncertainties related to the nature, duration and potential economic impact of proposed tariffs, while modestly improved since the period ended March 31, 2025, continue to present challenges in correlating potential improvement of credit risks within the Company's loan portfolio. Therefore, in conjunction with most economists' belief that tariffs may have a generally unfavorable impact on the economy as a whole, 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.
(dollars in thousands) As of June 30, 2025 % of Loans Outstanding As of March 31, 2025 % of Loans Outstanding As of June 30, 2024 % of Loans Outstanding
Risk Rating:
Pass $ 6,751,005 97.01 % $ 6,582,345 96.50 % $ 6,536,223 96.94 %
Special Mention 73,215 1.05 % 106,243 1.56 % 101,324 1.50 %
Substandard 134,773 1.94 % 132,186 1.94 % 104,979 1.56 %
Total $ 6,958,993 100.00 % $ 6,820,774 100.00 % $ 6,742,526 100.00 %
Classified loans to total loans 1.94 % 1.94 % 1.56 %
Loans past due 30+ days to total loans 0.62 % 0.66 % 0.45 %
ACL to non-performing loans 192.11 % 234.12 % 376.87 %
The ratio of classified loans to total loans of 1.94% as of June 30, 2025, was unchanged from March 31, 2025, and increased 38 basis points from the comparative quarter ended 2024. The change in classified loans outstanding as compared to the trailing quarter represented an increase of $2.6 million. While the increase is concentrated within commercial real estate farmland, the corresponding loans are current as of the reporting date with no history of delinquency.
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Loans past due 30 days or more decreased by $1.8 million during the quarter ended June 30, 2025, to $43.0 million, as compared to $44.8 million at March 31, 2025. The majority of loans identified as past due are well-secured by collateral, and approximately $12.4 million are less than 90 days delinquent.
Non-performing loans increased by $9.9 million during the quarter ended June 30, 2025 to $64.8 million as compared to $54.9 million at March 31, 2025. As noted above, this increase is concentrated within commercial real estate farmland and management continues to proactively work with these borrowers to identify actionable and appropriate resolution strategies which are customary for the industries. We anticipate that these actionable strategies will further benefit from the continued improvement in agricultural commodity prices, stable water supply, and growing crop demand. Of the $64.8 million loans designated as non-performing as of June 30, 2025, approximately $30.7 million are current or less than 30 days past due with respect to payments required under their existing loan agreements.
Management continues to proactively assess the repayment capacity of borrowers that will be subject to rate resets in the near term. To date this analysis as well as management's observations of loans that have experienced a rate reset, have resulted in an insignificant need to provide concessions to borrowers.
As of June 30, 2025, other real estate owned consisted of 9 properties with a carrying value of approximately $2.7 million, consistent with March 31, 2025. Non-performing assets of $67.5 million at June 30, 2025, represented 0.68% of total assets, a change from $57.5 million or 0.59% and $35.3 million or 0.36% as of March 31, 2025 and June 30, 2024, respectively.
Non-interest Income
The following table summarizes the Company’s non-interest income for the periods indicated (in thousands):
Three months ended
June 30,
(in thousands) 2025 2024 $ Change % Change
ATM and interchange fees $ 6,590 $ 6,372 $ 218 3.4 %
Service charges on deposit accounts 5,189 4,847 342 7.1 %
Other service fees 1,485 1,286 199 15.5 %
Mortgage banking service fees 438 438 — — %
Change in value of mortgage servicing rights (52) (147) 95 64.6 %
Total service charges and fees 13,650 12,796 854 6.7 %
Increase in cash value of life insurance 842 831 11 1.3 %
Asset management and commission income 1,635 1,359 276 20.3 %
Gain on sale of loans 503 388 115 29.6 %
Lease brokerage income 50 154 (104) (67.5) %
Sale of customer checks 318 301 17 5.6 %
(Loss) gain on sale or exchange of investment securities 4 (45) 49 108.9 %
(Loss) gain on marketable equity securities 8 (121) 129 106.6 %
Other 80 203 (123) (60.6) %
Total other non-interest income 3,440 3,070 370 12.1 %
Total non-interest income $ 17,090 $ 15,866 $ 1,224 7.7 %
Non-interest income increased $1.2 million or 7.7% to $17.1 million during the three months ended June 30, 2025, compared to $15.9 million during the comparative quarter ended June 30, 2024. Growth in deposit balances and related transactional activities contributed to elevated interchange fees and services charge income, which increased by $0.9 million. Further, elevated activity and volume of assets under management drove an increase of $0.3 million or 20.3% in asset management and commission income for the period ended June 30, 2025 as compared to the same period in 2024.
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Six months ended
June 30,
(in thousands) 2025 2024 $ Change % Change
ATM and interchange fees $ 12,696 $ 12,541 $ 155 1.2 %
Service charges on deposit accounts 10,103 9,510 593 6.2 %
Other service fees 2,844 2,652 192 7.2 %
Mortgage banking service fees 877 866 11 1.3 %
Change in value of mortgage servicing rights (192) (136) (56) 41.2 %
Total service charges and fees 26,328 25,433 895 3.5 %
Increase in cash value of life insurance 1,662 1,634 28 1.7 %
Asset management and commission income 3,123 2,487 636 25.6 %
Gain on sale of loans 847 649 198 30.5 %
Lease brokerage income 116 315 (199) (63.2) %
Sale of customer checks 663 613 50 8.2 %
Gain (loss) on sale or exchange of investment securities (1,142) (45) (1,097) (2,437.8) %
Gain (loss) on marketable equity securities 47 (149) 196 131.5 %
Other 1,519 700 819 117.0 %
Total other non-interest income 6,835 6,204 631 10.2 %
Total non-interest income $ 33,163 $ 31,637 $ 1,526 4.8 %
Non-interest income increased $1.5 million or 4.8% to $33.2 million during the six months ended June 30, 2025, compared to $31.6 million during the comparative six months ended June 30, 2024. Service charges and customer fees are elevated in the 2025 period and resulted in an increase of $0.9 million as compared to the six months ended June 30, 2024. Further, as noted previously, elevated activity within asset management and commission income contributed to overall improvement in total non-interest income.
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Non-interest Expense
The following table summarizes the Company’s non-interest expense for the periods indicated:
Three months ended
June 30,
(in thousands) 2025 2024 $ Change % Change
Base salaries, net of deferred loan origination costs $ 25,757 $ 23,852 $ 1,905 8.0 %
Incentive compensation 5,223 4,711 512 10.9 %
Benefits and other compensation costs 7,306 6,838 468 6.8 %
Total salaries and benefits expense 38,286 35,401 2,885 8.1 %
Occupancy 4,200 4,063 137 3.4 %
Data processing and software 4,959 5,094 (135) (2.7) %
Equipment 1,189 1,330 (141) (10.6) %
Intangible amortization 483 1,030 (547) (53.1) %
Advertising 808 819 (11) (1.3) %
ATM and POS network charges 1,843 1,987 (144) (7.2) %
Professional fees 1,667 1,814 (147) (8.1) %
Telecommunications 513 558 (45) (8.1) %
Regulatory assessments and insurance 1,297 1,144 153 13.4 %
Postage 385 340 45 13.2 %
Operational losses 270 244 26 10.7 %
Courier service 544 559 (15) (2.7) %
Loss (gain) on disposal of fixed assets 5 1 4 400.0 %
Other miscellaneous expense 4,682 3,955 727 18.4 %
Total other non-interest expense 22,845 22,938 (93) (0.4) %
Total non-interest expense $ 61,131 $ 58,339 $ 2,792 4.8 %
Average full time equivalent staff 1,171 1,160 11 0.9 %
Total non-interest expense increased $2.8 million or 4.8% to $61.1 million during the three months ended June 30, 2025, as compared to $58.3 million for the quarter ended June 30, 2024. Total salaries and benefits expense increased by $2.9 million or 8.1%, reflecting the increase of $1.9 million in salaries, largely the result of routine merit increases and more recently strategic hiring focused on loan and deposit production; incentive compensation costs also increased by $0.5 million, reflecting elevated levels of production in both loans and deposits during the second quarter of 2025, as compared to 2024. Other non-interest expense line items generally evidenced broad based incremental decreases, slightly offset by elevated business travel, donations, as well as contract termination costs as noted above.
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Six months ended
June 30,
(in thousands) 2025 2024 $ Change % Change
Base salaries, net of deferred loan origination costs $ 51,158 $ 47,872 $ 3,286 6.9 %
Incentive compensation 9,261 7,968 1,293 16.2 %
Benefits and other compensation costs 14,722 13,865 857 6.2 %
Total salaries and benefits expense 75,141 69,705 5,436 7.8 %
Occupancy 8,277 8,014 263 3.3 %
Data processing and software 10,017 10,201 (184) (1.8) %
Equipment 2,473 2,686 (213) (7.9) %
Intangible amortization 997 2,060 (1,063) (51.6) %
Advertising 2,012 1,581 431 27.3 %
ATM and POS network charges 3,694 3,648 46 1.3 %
Professional fees 3,185 3,154 31 1.0 %
Telecommunications 1,001 1,069 (68) (6.4) %
Regulatory assessments and insurance 2,580 2,395 185 7.7 %
Postage 705 648 57 8.8 %
Operational losses 694 596 98 16.4 %
Courier service 1,032 1,039 (7) (0.7) %
(Gain) loss on sale or acquisition of foreclosed assets (3) (38) 35 (92.1) %
(Gain) loss on disposal of fixed assets 90 6 84 1,400.0 %
Other miscellaneous expense 8,821 8,079 742 9.2 %
Total other non-interest expense 45,575 45,138 437 1.0 %
Total non-interest expense $ 120,716 $ 114,843 $ 5,873 5.1 %
Average full time equivalent staff 1,183 1,174 9 0.8 %
Non-interest expense increased $5.9 million or 5.1% to $120.7 million during the six months ended June 30, 2025, as compared to $114.8 million for the six months ended June 30, 2024. The largest component was salaries and benefits expense which increased $5.4 million or 7.8% to $75.1 million, largely for the reasons mentioned above. Other non-interest expense line items evidenced broad based but incremental increases, led by elevated business travel, donations, and non-recurring contract termination costs.
Income Taxes
The Company’s effective tax rate was 27.2% for the quarter ended June 30, 2025, as compared to 25.3% for the year ended March 31, 2025. Differences between the Company's effective tax rate and applicable federal and state blended statutory rate of approximately 29.6% are due to the proportion of non-taxable revenues, non-deductible expenses, and benefits from tax credits as compared to the levels of pre-tax earnings.
Financial Condition
For financial reporting purposes, the Company does not separately track the changes in assets and liabilities based on branch location or regional geography. The following is a comparison of the quarterly change in certain assets and liabilities:
Ending balances June 30,
2025 March 31,
2025 Annualized
% Change
(dollars in thousands) $ Change
Total assets $ 9,923,983 $ 9,819,599 $ 104,384 4.3 %
Total loans 6,958,993 6,820,774 138,219 8.1
Total investments 1,936,954 1,979,116 (42,162) (8.5)
Total deposits 8,375,809 8,205,332 170,477 8.3
Total other borrowings 17,788 91,706 (73,918) (322.4)
Loans outstanding increased by $138.2 million or 8.1% on an annualized basis during the quarter ended June 30, 2025. During the quarter, loan originations/draws totaled approximately $457.7 million while payoffs/repayments of loans totaled $329.3 million, which compares to originations/draws and payoffs/repayments during the trailing quarter ended of $357.5 million and $321.3 million, respectively. Origination volume was elevated relative to recent quarters as interest rates have contracted from the highs experienced in early 2025, and the macro-economic outlook continues to improve for borrowers following the passage of tax and spending legislation that is expected to promote
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continued economic expansion, in addition to progress toward finalizing tariff policies with our largest trade partners. The activity within loan payoffs/repayments remains spread amongst numerous borrowers, regions and loan types.
Investment security balances decreased $42.2 million or 8.5% on an annualized basis during the quarter as a result of net prepayments/maturities of $64.5 million, partially offset by net increases in the market value of securities of $12.8 million and purchases of $10.2 million. Investment security purchases were comprised of fixed rate agency mortgage-backed securities. While management intends to primarily utilize cash flows from the investment security portfolio and organic deposit growth to support loan growth, excess liquidity will be utilized for purchases of investment securities to support net interest income growth and net interest margin expansion.
Deposit balances increased by $170.5 million or 8.3% annualized during the period, primarily due to increases in demand and savings deposit accounts. Other borrowings decreased by $73.9 million or 322.4% during the quarter following the repayment of all short-term FHLB advances.
Prior to September 30, 2025, management anticipates repayment to the holders of the North Valley Trust II, III and IV as well as the VRB Subordinated debt issued by TriCo, which had a total face value of $57.7 million, recorded book value of $60.0 million, and weighted average rate of 6.54% as of June 30, 2025.
The following is a comparison of the year over year change in certain assets and liabilities:
Ending balances As of June 30, % Change
(dollars in thousands) 2025 2024 $ Change
Total assets $ 9,923,983 $ 9,741,399 $ 182,584 1.9 %
Total loans 6,958,993 6,742,526 216,467 3.2
Total investments 1,936,954 2,086,090 (149,136) (7.1)
Total deposits 8,375,809 8,050,230 325,579 4.0
Total other borrowings 17,788 247,773 (229,985) (92.8)
Investment Securities
The following table presents the available for sale debt securities portfolio by major type as of June 30, 2025 and December 31, 2024:
June 30, 2025 December 31, 2024
(in thousands) Fair Value % Fair Value %
Debt securities available for sale :
Obligations of U.S. government agencies $ 1,086,082 59.8 % $ 1,094,185 57.4 %
Obligations of states and political subdivisions 212,571 11.7 % 220,744 11.6 %
Corporate bonds 5,503 0.3 % 5,837 0.3 %
Asset backed securities 263,679 14.5 % 314,263 16.5 %
Non-agency mortgage backed 247,541 13.7 % 269,856 14.2 %
Total debt securities available for sale $ 1,815,376 100.0 % $ 1,904,885 100.0 %
June 30, 2025 December 31, 2024
(in thousands) Amortized
Cost % Amortized
Cost %
Debt securities held to maturity :
Obligations of U.S. government and agencies $ 98,940 97.3 % $ 109,155 97.6 %
Obligations of states and political subdivisions 2,732 2.7 % 2,711 2.4 %
Total debt securities held to maturity $ 101,672 100.0 % $ 111,866 100.0 %
Investment securities held to maturity decreased $10.2 million to $101.7 million as of June 30, 2025, as compared to December 31, 2024. This decrease is attributable to calls and principal repayments of $10.1 million, and amortization of net purchase premiums of $0.1 million.
Loans
The Company focuses its primary lending activities in six principal areas: commercial real estate loans, consumer loans, commercial and industrial loans, construction loans, agriculture production loans and leases. The interest rates charged for the loans made by the Company vary with the degree of risk, the size and duration of the loans, the borrower’s relationship with the Company and prevailing money market rates indicative of the Company’s cost of funds.
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The majority of the Company’s loans are direct loans made to individuals, and local or regional businesses which service a variety of industries. The Company relies substantially on local promotional activity and personal contacts by bank officers, directors and employees to compete with other financial institutions. The Company makes loans to borrowers whose applications include a sound purpose, a viable repayment source and a plan of repayment established at inception and generally backed by a secondary source of repayment.
The following table shows the Company’s loan balances, net of deferred loan costs and discounts, as of the dates indicated:
(in thousands) June 30, 2025 December 31, 2024
Commercial real estate $ 4,730,732 68.0 % $ 4,577,632 67.6 %
Consumer 1,288,691 18.5 % 1,281,059 18.9 %
Commercial and industrial 467,564 6.7 % 471,271 7.0 %
Construction 304,920 4.4 % 279,933 4.1 %
Agriculture production 161,457 2.3 % 151,822 2.3 %
Leases 5,629 0.1 % 6,806 0.1 %
Total loans $ 6,958,993 100.0 % $ 6,768,523 100.0 %
Nonperforming Assets
The following tables set forth the amount of the Company’s NPAs as of the dates indicated. “Performing nonaccrual loans” are loans that may be current for both principal and interest payments, or are less than 90 days past due, but for which payment in full of both principal and interest is not expected, and are not well secured and in the process of collection:
(in thousands) June 30,
2025 December 31,
2024
Performing nonaccrual loans $ 34,121 $ 19,543
Nonperforming nonaccrual loans 30,464 24,493
Total nonaccrual loans 64,585 44,036
Loans 90 days past due and still accruing 198 60
Total nonperforming loans 64,783 44,096
Foreclosed assets 2,683 2,786
Total nonperforming assets $ 67,466 $ 46,882
Nonperforming assets to total assets 0.68 % 0.48 %
Nonperforming loans to total loans 0.93 % 0.65 %
Allowance for credit losses to nonperforming loans 192 % 284 %
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Changes in nonperforming assets during the three months ended June 30, 2025
(in thousands) Balance at March 31, 2025 New NPA /
Valuation
Adjustments Pay-downs
/Sales
/Upgrades Charge-offs/ (1)
Write-downs
Transfers to
Foreclosed
Assets Balance at June 30, 2025
Commercial real estate:
CRE non-owner occupied $ 3,004 603 (59) — — $ 3,548
CRE owner occupied 5,339 4,919 (3,582) — — 6,676
Multifamily 467 — (7) — — 460
Farmland 21,472 14,655 (316) — — 35,811
Total commercial real estate loans 30,282 20,177 (3,964) — — 46,495
Consumer
SFR 1-4 1st DT liens 5,867 828 (319) — — 6,376
SFR HELOCs and junior liens 4,708 424 (346) — — 4,786
Other 262 218 (73) (89) — 318
Total consumer loans 10,837 1,470 (738) (89) — 11,480
Commercial and industrial 10,220 170 (108) (8,384) — 1,898
Construction 54 1,863 (3) — — 1,914
Agriculture production 3,461 202 (656) (11) — 2,996
Leases — — — — — —
Total nonperforming loans 54,854 23,882 (5,469) (8,484) — 64,783
Foreclosed assets 2,685 — (2) — 2,683
Total nonperforming assets $ 57,539 23,882 (5,469) (8,486) — $ 67,466
(1) The table above does not include deposit overdraft charge-offs.
Nonperforming assets increased during the three months ended June 30, 2025 by $9.9 million or 17.3% to $67.5 million compared to $57.5 million at March 31, 2025. The increase in nonperforming assets during the second quarter of 2025 was primarily the result of nonperforming loan additions totaling $23.9 million, partially offset by pay-downs and upgrades, which totaled $5.5 million during the quarter, as well as $8.5 million in charge-offs. Management is actively engaged in the collection and recovery efforts for all nonperforming assets and believes that the loan loss reserves associated with these loans is sufficient as of June 30, 2025.
(in thousands) Balance at December 31, 2024 New NPA /
Valuation
Adjustments Pay-downs
/Sales
/Upgrades Charge-offs/ (1)
Write-downs
Transfers to
Foreclosed
Assets Balance at June 30, 2025
Commercial real estate:
CRE non-owner occupied $ 3,017 603 (72) — — $ 3,548
CRE owner occupied 3,874 6,538 (3,736) — — 6,676
Multifamily 480 — (20) — — 460
Farmland 16,195 20,140 (524) — — 35,811
Total commercial real estate loans 23,566 27,281 (4,352) — — 46,495
Consumer
SFR 1-4 1st DT liens 5,979 1,134 (737) — 6,376
SFR HELOCs and junior liens 3,868 1,593 (675) — 4,786
Other 204 284 (80) (90) 318
Total consumer loans 10,051 3,011 (1,492) (90) — 11,480
Commercial and industrial 9,765 978 (204) (8,641) 1,898
Construction 57 1,863 (6) — 1,914
Agriculture production 657 3,203 (853) (11) 2,996
Leases — — — — —
Total nonperforming loans 44,096 36,336 (6,907) (8,742) — 64,783
Foreclosed assets 2,786 — (101) (2) 2,683
Total nonperforming assets $ 46,882 36,336 (7,008) (8,744) — $ 67,466
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(1) The table above does not include deposit overdraft charge-offs.
Loan charge-offs during the three months ended June 30, 2025
In the second quarter of 2025, the Company recorded $8.6 million in loan charge-offs and $0.1 million in loan recoveries which collectively resulted in $8.5 million in net charge-offs. Nearly all of the charge-offs were associated with loans that were individually analyzed and reserved for in prior periods and thus had limited impact on the provision for credit losses during the three months ended June 30, 2025.
The Components of the Allowance for Credit Losses for Loans
The following table sets forth the allowance for credit losses for loans as of the dates indicated:
(in thousands) June 30,
2025 December 31,
2024 June 30,
2024
Allowance for credit losses:
Allowance for collectively evaluated loans $ 120,490 $ 120,741 $ 122,499
Allowance for individually evaluated loans 3,965 4,625 1,018
Total allowance for credit losses $ 124,455 $ 125,366 $ 123,517
Allowance for credit losses for loans / total loans 1.79 % 1.85 % 1.83 %
For additional information regarding the allowance for loan losses, including changes in specific, formula, and environmental factors allowance categories, see “Asset Quality and Loan Loss Provisioning” at “Results of Operations” , above. For additional information on the current ACL methodology, see "Allowance for Credit Losses - Loans" within footnote 1 of the Company's 10-Q/10-K. Based on the current conditions of the loan portfolio, management believes that the $124.5 million allowance for loan losses at June 30, 2025 is adequate to absorb expected losses inherent in the Bank’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.
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The following table summarizes the allocation of the allowance for credit losses between loan types and by percentage of the total allowance for credit losses on loans as of the dates indicated:
(in thousands) June 30, 2025 December 31, 2024 June 30, 2024
Commercial real estate $ 74,484 59.8 % $ 72,849 58.1 % $ 73,032 59.1 %
Consumer 25,318 20.3 % 27,463 21.9 % 27,674 22.4 %
Commercial and industrial 10,024 8.1 % 14,397 11.5 % 12,128 9.8 %
Construction 10,995 8.8 % 7,224 5.8 % 7,466 6.0 %
Agriculture production 3,609 3.0 % 3,403 2.7 % 3,180 2.7 %
Leases 25 0.0 % 30 0.0 % 37 0.0 %
Total allowance for credit losses $ 124,455 100.0 % $ 125,366 100.0 % $ 123,517 100.0 %
The following table summarizes the allocation of the allowance for credit losses as a percentage of the total loans for each loan category as of the dates indicated:
(in thousands) June 30, 2025 December 31, 2024 June 30, 2024
Commercial real estate 1.57 % 1.59 % 1.64 %
Consumer 1.96 % 2.14 % 2.13 %
Commercial and industrial 2.14 % 3.05 % 2.21 %
Construction 3.61 % 2.58 % 2.63 %
Agriculture production 2.24 % 2.24 % 2.27 %
Leases 0.44 % 0.44 % 0.44 %
Total loans 1.79 % 1.85 % 1.83 %
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The following table summarizes the activity in the allowance for credit losses for the periods indicated:
Three months ended
June 30, Six months ended
June 30,
(in thousands) 2025 2024 2025 2024
Allowance for credit losses:
Balance at beginning of period $ 128,423 $ 124,394 $ 125,366 $ 121,522
ACL on PCD loans — — — —
Provision for credit losses 4,525 335 7,188 4,350
Loans charged-off:
Commercial real estate:
CRE non-owner occupied — — — —
CRE owner occupied — — — —
Multifamily — — — —
Farmland — — — —
Consumer:
SFR 1-4 1st DT liens — — — (26)
SFR HELOCs and junior liens — (9) — (41)
Other (200) (118) (317) (368)
Commercial and industrial (8,384) (870) (8,641) (1,000)
Construction — — — —
Agriculture production (11) (613) (11) (1,450)
Leases — — — —
Total loans charged-off (8,595) (1,610) (8,969) (2,885)
Recoveries of previously charged-off loans:
Commercial real estate:
CRE non-owner occupied — — — —
CRE owner occupied 1 1 1 1
Multifamily — — — —
Farmland — — — —
Consumer:
SFR 1-4 1st DT liens — — — —
SFR HELOCs and junior liens 4 51 16 100
Other 36 81 73 121
Commercial and industrial 60 261 166 283
Construction — — — —
Agriculture production 1 4 614 25
Leases — — — —
Total recoveries of previously charged-off loans 102 398 870 530
Net charge-offs (8,493) (1,212) (8,099) (2,355)
Balance at end of period $ 124,455 $ 123,517 $ 124,455 $ 123,517
Average total loans $ 6,878,186 $ 6,792,303 $ 6,827,469 $ 6,789,072
Ratios (annualized):
Net (charge-offs) recoveries during period to average loans outstanding during period (0.49) % (0.07) % (0.24) % (0.07) %
Provision for credit losses to average loans outstanding during period 0.26 % 0.02 % 0.21 % 0.13 %
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Foreclosed Assets, Net of Allowance for Losses
The following table details the components and summarize the activity in foreclosed assets, net of allowances for losses, for the six months ended June 30, 2025:
(in thousands) Balance at December 31,
2024 Sales Valuation
Adjustments Transfers
from Loans Balance at June 30, 2025
Land & construction $ 204 $ — $ — $ — $ 204
Residential real estate 1,683 (101) (2) — 1,580
Commercial real estate 899 — — — 899
Total foreclosed assets $ 2,786 $ (101) $ (2) $ — $ 2,683
Deposits
During the six months ended June 30, 2025, the Company’s deposits increased by $288.2 million to $8.4 billion at quarter end. There were no brokered deposits included in the deposit balances as of June 30, 2025 and December 31, 2024. Estimated uninsured deposits totaled $2.8 billion and $2.5 billion as of June 30, 2025 and December 31, 2024, respectively.
Off-Balance Sheet Arrangements
See Note 9 to the condensed consolidated financial statements at Item 1 of Part I of this report for information about the Company’s commitments and contingencies including off-balance-sheet arrangements.
Capital Resources
The current and projected capital position of the Company and the impact of capital plans and long-term strategies are reviewed regularly by Management.
On February 25, 2021 the Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company's common stock (the 2021 Repurchase Plan), which approximated 6.7% of the shares outstanding as of the approval date. The actual timing of any share repurchases will be determined by the Company's management and therefore the total value of the shares to be purchased under the 2021 Repurchase Plan is subject to change. The Company may repurchase its outstanding shares of common stock from time to time in open market or privately-negotiated transactions, including block trades, or pursuant to 10b5-1 trading plans. The 2021 Repurchase Plan has no expiration date (in accordance with applicable laws and regulations).
During the three and six months ended June 30, 2025, the Company repurchased 379,978 and 469,632 shares with market values of $15.2 million and$18.9 million, respectively. In addition, the Company’s Tier 1 common equity and tangible capital ratios increased to 13.1% and 10.0%, respectively as of June 30, 2025, compared to 13.2% and 9.7%, respectively, as of December 31, 2024.
Total shareholders' equity increased by $11.3 million during the quarter ended June 30, 2025, as net income of $27.5 million and a $9.0 million decrease in accumulated other comprehensive losses were partially offset by $10.8 million in cash dividends on common stock and $15.7 million in share repurchase activity. As a result, the Company’s book value increased to $38.92 per share at June 30, 2025, compared to $38.17 at March 31, 2025. The Company’s tangible book value per share, a non-GAAP measure, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $29.40 per share at June 30, 2025, as compared to $28.73 at March 31, 2025. Changes in the fair value of available-for-sale investment securities, net of deferred taxes, continue to create moderate levels of volatility in tangible book value per share. 15.7%
The following is a comparison of various capital ratios for the current period with the trailing quarter and applicable minimum regulatory requirements.
June 30, 2025 December 31, 2024
Ratio Minimum
Regulatory
Requirement Ratio Minimum
Regulatory
Requirement
Total risk based capital 15.6 % 10.5 % 15.7 % 10.5 %
Tier I capital 13.9 % 8.5 % 14.0 % 8.5 %
Common equity Tier 1 capital 13.1 % 7.0 % 13.2 % 7.0 %
Leverage 11.8 % 4.0 % 11.7 % 4.0 %
See Note 10 and Note 16 to the condensed consolidated financial statements at Item 1 of Part I of this report for additional information about the Company’s capital resources.
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Prior to September 30, 2025, management anticipates providing notice of and repayment to the holders of the North Valley Trust II, III and IV as well as the VRB Subordinated debt issued by TriCo, which had a total face value of $57.7 million, recorded book value of $60.0 million, and weighted average rate of 6.54% as of June 30, 2025. The repayment of this debt will be facilitated through a cash dividend from the Bank to the Company, however, it is not anticipated to have any significant impact on the Bank's liquidity, shareholder equity or regulatory capital positions.
As of June 30, 2025, we had an effective shelf registration statement on file with the Securities and Exchange Commission that allows us to issue various types of debt securities, as well as common stock, preferred stock, warrants, depository shares representing fractional interest in shares of preferred stock, purchase contracts and units from time to time in one or more offerings. Each issuance under the shelf registration statement will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued. The registration statement does not limit the amount of securities that may be issued thereunder. Our ability to issue securities is subject to market conditions and other factors including, in the case of our debt securities, our credit ratings and compliance with current and prospective covenants in credit agreements.
Liquidity
The Company's primary sources of liquidity include the following for the periods indicated:
(dollars in thousands) June 30, 2025 December 31, 2024
Borrowing capacity at correspondent banks and FRB $ 3,006,667 $ 2,882,859
Less: borrowings outstanding — (367,000)
Unpledged available-for-sale investment securities
1,005,774 1,435,990
Cash held or in transit with FRB
263,922 41,541
Total primary liquidity $ 4,276,363 $ 3,993,390
At June 30, 2025, the Company's primary sources of liquidity represented 51% of total deposits and 153% of estimated total uninsured (excluding collateralized municipal deposits and intercompany balances) deposits, respectively. As secondary sources of liquidity, the Company's held-to-maturity investment securities had a fair value of $97.0 million, including approximately $4.7 million in net unrealized losses.
The Company’s profitability during the first six months of 2025 generated cash flows from operations of $53.8 million compared to $56.9 million during the first six months of 2024. Net cash from investing activities was $59.4 million for the six months ended June 30, 2025, compared to net cash from investing activities of $255.0 million during the six months ending 2024. Financing activities provided $174.9 million during the six months ended June 30, 2025, compared to using $204.1 million during the six months ended June 30, 2024.
The types of contractual obligations of the Company and Bank, include but are not limited to term subordinated debt, operating leases, deferred compensation and supplemental retirement plans as well as off-balance sheet commitments such as unfunded loans and letters of credit, are consistent with those as of December 31, 2024. However, as borrowings have been repaid, the borrowing capacity at correspondent banks has increased. In addition, as the balance of investment securities has declined, so has the balance of unpledged securities. In total, and as illustrated above, the balance of total primary liquidity has increased during the first half of 2025.
The Company is dependent upon the payment of cash dividends by the Bank to service its commitments, which have historically included dividends to shareholders, scheduled debt service payments, and general operations. Shareholder dividends are expected to continue subject to the Board’s discretion and management's continuing evaluation of capital levels, earnings, asset quality and other factors. The Company expects that the cash dividends paid by the Bank to the Company will be sufficient to cover the Company's cash flow needs. However, the Company and its ability to generate liquidity through either the issuance of stock or debt, also serves as a potential source of strength for the Bank. Dividends paid by the Company to holders of its common stock used $21.6 million and $21.9 million of cash during the six months ended June 30, 2025 and 2024, respectively. The Company’s liquidity is dependent on dividends received from the Bank. Dividends from the Bank are subject to certain regulatory restrictions.
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TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES
(Unaudited. Dollars in thousands)
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this filing contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this filing because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results, and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:
Three months ended Six months ended
(dollars in thousands) June 30,
2025 June 30,
2024 June 30,
2025 June 30,
2024
Net interest margin
Acquired loans discount accretion, net:
Amount (included in interest income) $1,247 $850 $3,242 $2,182
Effect on average loan yield 0.08 % 0.05 % 0.09 % 0.06 %
Effect on net interest margin (FTE) 0.06 % 0.04 % 0.07 % 0.05 %
Net interest margin (FTE) 3.88 % 3.68 % 3.81 % 3.68 %
Net interest margin less effect of acquired loan discount accretion (Non-GAAP) 3.82 % 3.64 % 3.73 % 3.63 %
Three months ended Six months ended
(dollars in thousands) June 30,
2025 June 30,
2024 June 30,
2025 June 30,
2024
Pre-tax pre-provision return on average assets or equity
Net income (GAAP) $27,542 $29,034 $53,905 $56,783
Exclude provision for income taxes 10,271 10,085 19,210 20,034
Exclude provision for credit losses 4,665 405 8,393 4,710
Net income before income tax and provision expense (Non-GAAP) $42,478 $39,524 $81,508 $81,527
Average assets (GAAP) $9,778,834 $9,782,228 $9,793,444 $9,819,012
Average equity (GAAP) $1,273,092 $1,169,324 $1,262,602 $1,171,958
Return on average assets (GAAP) (annualized) 1.13 % 1.19 % 1.11 % 1.16 %
Pre-tax pre-provision return on average assets (Non-GAAP) (annualized) 1.74 % 1.63 % 1.68 % 1.67 %
Return on average equity (GAAP) (annualized) 8.68 % 9.99 % 8.61 % 9.74 %
Pre-tax pre-provision return on average equity (Non-GAAP) (annualized) 13.38 % 13.59 % 13.02 % 13.95 %
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Three months ended Six months ended
(dollars in thousands) June 30,
2025 June 30,
2024 June 30,
2025 June 30,
2024
Return on tangible common equity
Average total shareholders' equity $1,273,092 $1,169,324 $1,262,602 $1,171,958
Exclude average goodwill 304,442 304,442 304,442 304,442
Exclude average other intangibles 5,743 9,007 5,987 9,522
Average tangible common equity (Non-GAAP) $962,907 $855,875 $952,173 $857,994
Net income (GAAP) $27,542 $29,034 $53,905 $56,783
Exclude amortization of intangible assets, net of tax effect 340 725 702 1,451
Tangible net income available to common shareholders (Non-GAAP) $27,882 $29,759 $54,607 $58,234
Return on average equity (GAAP) (annualized) 8.68 % 9.99 % 8.61 % 9.74 %
Return on average tangible common equity (Non-GAAP) 11.61 % 13.98 % 11.57 % 13.65 %
As of
(dollars in thousands) June 30,
2025 December 31,
2024
Tangible shareholders' equity to tangible assets
Shareholders' equity (GAAP) $1,266,823 $1,220,907
Exclude goodwill and other intangible assets, net 309,877 310,874
Tangible shareholders' equity (Non-GAAP) $956,946 $910,033
Total assets (GAAP) $9,923,983 $9,673,728
Exclude goodwill and other intangible assets, net 309,877 310,874
Total tangible assets (Non-GAAP) $9,614,106 $9,362,854
Shareholders' equity to total assets (GAAP) 12.77 % 12.62 %
Tangible shareholders' equity to tangible assets (Non-GAAP) 9.95 % 9.72 %
As of
(dollars in thousands) June 30,
2025 December 31,
2024
Tangible common shareholders' equity per share
Tangible shareholders' equity (Non-GAAP) $956,946 $910,033
Common shares outstanding at end of period 32,550,264 32,970,425
Common shareholders' equity (book value) per share (GAAP) $38.92 $37.03
Tangible common shareholders' equity (tangible book value) per share (Non-GAAP) $29.40 $27.60
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