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What changed in TRICO BANCSHARES /'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TRICO BANCSHARES /'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+441 added−399 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in TRICO BANCSHARES /'s 2023 10-K

441 paragraphs added · 399 removed · 276 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

71 edited+44 added−28 removed66 unchanged
Biggest changeIn addition, the CFPB has taken a number of actions that may affect the Bank’s operations and compliance costs, including the following: • The issuance of final rules for residential mortgage lending, which became effective January 10, 2013, including definitions for “qualified mortgages” and detailed standards by which lenders must satisfy themselves of the borrower’s ability to repay the loan and revised forms of disclosure under the Truth in Lending Act and the Real Estate Settlement Procedures Act. • Actions taken to regulate and supervise credit bureaus and debt collections. • Positions taken by the CFPB on fair lending, including applying the disparate impact theory in auto financing, which could make it harder for lenders, such as the Bank, to charge different rates or apply different terms to loans to different customers.
Biggest changeThe CFPB has also taken positions on fair lending, including applying the disparate impact theory in auto financing, which could make it harder for lenders, such as the Bank, to charge different rates or apply different terms to loans to different customers.
The Bank takes real estate, listed and unlisted securities, savings and time deposits, automobiles, machinery, equipment, inventory, accounts receivable and notes receivable secured by property as collateral for loans. Most of the Bank’s deposits are attracted from individuals and business-related sources.
The Bank takes real estate, listed and unlisted securities, savings and time deposits, automobiles, machinery, equipment, inventory, accounts receivable and notes receivable secured by property as collateral for loans. Most of the Bank’s deposits are from individuals and business-related sources.
This regulation is intended primarily for the protection of customers, depositors, the FDIC deposit insurance fund and the banking system as a whole, and not for the protection of shareholders of the Company. Set forth below is a summary description of the significant laws and regulations applicable to the Company and the Bank.
This regulation is intended primarily for the protection of customers, depositors, the FDIC deposit insurance fund and the banking system as a whole, and not for the protection of our shareholders. Set forth below is a summary description of the significant laws and regulations applicable to the Company and the Bank.
Penalties for violations of the above laws may include fines, reimbursements, injunctive relief and other penalties. Privacy, Data Protection and Cybersecurity We are subject to a number of U.S. federal, state, local and foreign laws and regulations relating to consumer privacy and data protection.
Penalties for violations of the above laws may include fines, reimbursements, injunctive relief and other penalties. Privacy and Data Protection We are subject to a number of U.S. federal, state, local and foreign laws and regulations relating to consumer privacy and data protection.
Recent cyberattacks against banks and other financial institutions that resulted in unauthorized access to confidential customer information have prompted the federal banking regulators to issue extensive guidance on cybersecurity.
Recent cyberattacks against banks and other financial institutions that resulted in unauthorized access to confidential customer information have prompted the federal banking regulators to issue guidance on cybersecurity.
To compete effectively, the Bank relies substantially on local promotional activity, personal contacts by its officers, directors, employees and shareholders, extended hours, personalized service and its reputation in the communities it services. Regulation and Supervision General The Company and the Bank are subject to extensive regulation under both federal and state law governing most aspects of our operations.
To compete effectively, the Bank relies substantially on local promotional activity, personal contacts by its officers, directors, employees and shareholders, extended hours, personalized service and its reputation in the communities it services. Regulation and Supervision General The Company and the Bank are subject to extensive regulation under both federal and state law affecting most aspects of our operations.
Commercial banks also compete for available funds with money market instruments and mutual funds. During periods of high or rising interest rates, money market funds have provided substantial competition to banks for deposits and they may continue to do so in the future. Mutual funds are also a major source of competition for savings dollars.
We also compete for available funds with money market instruments and mutual funds. During periods of high or rising interest rates, money market funds have provided substantial competition to banks for deposits and they may continue to do so in the future. Mutual funds are also a major source of competition for savings dollars.
In many instances the owners or stakeholders of the business and commercial customers are also personal customers. The industries that we serve are diverse in both number and type and include, but are not limited to, manufacturing, real estate development, retail, wholesale, transportation, agriculture, commerce, and professional services.
In many instances the owners or stakeholders of the business and commercial customers are also personal customers. The industries that we serve are diverse in both number and type and include, but are not limited to, manufacturing, real estate development, retail, wholesale, transportation, agriculture, commerce, oil & gas, and professional services.
In addition to competing with other banks, the Bank competes with savings institutions, credit unions and the financial markets for funds. Yields on corporate and government debt securities and other commercial paper may be higher than on deposits, and therefore affect the ability of commercial banks to attract and hold deposits.
In addition to competing with other banks, the Bank competes with savings institutions, credit unions, brokerage firms and the financial markets for funds. Yields on corporate and government debt securities and other commercial paper may be higher than on deposits, and therefore affect the ability of commercial banks to attract and hold deposits.
We believe that we were in compliance with the requirements of the Basel III capital rules applicable to us as of December 31, 2022. For a discussion of the regulatory capital requirements, see “Note 26 – Regulatory Matters” to the consolidated financial statements at Part II, Item 8 of this report.
We believe that we were in compliance with the requirements of the Basel III capital rules applicable to us as of December 31, 2023. For a discussion of the regulatory capital requirements, see “Note 26 – Regulatory Matters” to the consolidated financial statements at Part II, Item 8 of this report.
The description is qualified in its entirety by reference to the applicable laws and regulations. Regulatory Agencies 3 TriCo Bancshares 2022 10-K Table of Contents The Company is a legal entity separate and distinct from the Bank and its other subsidiaries.
The description is qualified in its entirety by reference to the applicable laws and regulations. Regulatory Agencies 3 TriCo Bancshares 2023 10-K Table of Contents The Company is a legal entity separate and distinct from the Bank and its other subsidiaries.
Consumer Protection Laws and Supervision The Bank is subject to many federal consumer protection statues and regulations, some of which are discussed below. • The Equal Credit Opportunity Act generally prohibits discrimination in any credit transaction, whether for consumer or business purposes, on the basis of race, color, religion, national origin, sex, marital status, age (except in limited circumstances), receipt of income from public assistance programs, or good faith exercise of any rights under the Consumer Credit Protection Act. • The Truth-in-Lending Act is designed to ensure that credit terms are disclosed in a meaningful way so that consumers may compare credit terms more readily and knowledgeably. • The Fair Housing Act regulates many practices, including making it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status. • The Home Mortgage Disclosure Act, which includes a “fair lending” aspect, requires the collection and disclosure of data about applicant and borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes. 5 TriCo Bancshares 2022 10-K Table of Contents • The Real Estate Settlement Procedures Act requires lenders to provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits certain abusive practices, such as kickbacks, and places limitations on the amount of escrow accounts.
Consumer Protection Laws and Supervision The Bank is subject to many federal consumer protection statutes and regulations, some of which are discussed below. • The Equal Credit Opportunity Act generally prohibits discrimination in any credit transaction, whether for consumer or business purposes, on the basis of race, color, religion, national origin, sex, marital status, age (except in limited circumstances), receipt of income from public assistance programs, or good faith exercise of any rights under the Consumer Credit Protection Act. • The Truth-in-Lending Act is designed to ensure that credit terms are disclosed in a meaningful way so that consumers may compare credit terms more readily and knowledgeably. • The Fair Housing Act regulates many practices, including making it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status. • The Home Mortgage Disclosure Act, which includes a “fair lending” aspect, requires the collection and disclosure of data about applicant and borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes. • The Real Estate Settlement Procedures Act requires lenders to provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits certain abusive practices, such as kickbacks, and places limitations on the amount of escrow accounts.
The information on our website is not part this annual report. Tri Counties Bank The Bank was organized in 1975 and had total assets of approximately $9.9 billion at December 31, 2022.
The information on our website is not part this annual report. Tri Counties Bank The Bank was organized in 1975 and had total assets of approximately $9.9 billion at December 31, 2023.
Banking institutions that fail to maintain a full capital conservation buffer face constraints on dividends, equity repurchases and discretionary executive compensation based on the amount of the shortfall and the institution’s “eligible retained income” (that is, four quarter trailing net income, net of distributions and tax effects not reflected in net income).
Banking institutions that fail to maintain a full capital conservation buffer face constraints on dividends, equity repurchases and discretionary executive compensation based on the amount of the shortfall and the institution’s “eligible retained income” (that is, trailing net income for four quarters, net of distributions and tax effects not reflected in net income).
Depending on the financial condition of TriCo and the Bank and other factors, our regulators could determine that payment of dividends or other payments by TriCo or the Bank might constitute an unsafe or unsound practice.
Depending on the financial condition of TriCo and the Bank and other factors, our regulators could determine that payment of dividends or other payments or stock repurchases by TriCo or the Bank might constitute an unsafe or unsound practice.
Extensions of credit must be made on substantially the same terms, including interest rates and collateral as, and follow credit underwriting procedures that are not less stringent than, those prevailing at the time for comparable transactions with persons not affiliated with the bank, and must not involve more than the normal risk of repayment or present other unfavorable features.
Regulation O requires that such extensions of credit must be made on substantially the same terms, including interest rates and collateral as, and follow credit underwriting procedures that are not less stringent than, those prevailing at the time for comparable transactions with persons not affiliated with the bank, and must not involve more than the normal risk of repayment or present other unfavorable features.
The CFPB has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks, including, among other things, laws relating to fair lending and the authority to prohibit “unfair, deceptive or abusive” acts and practices.
The CFPB has broad rule making authority for a wide range of consumer financial laws that apply to all banks, including, among other things, laws relating to fair lending and the authority to prohibit “unfair, deceptive or abusive” acts and practices.
Restrictions on Dividends and Distributions A California corporation such as TriCo may make a distribution to its shareholders to the extent that either the corporation’s retained earnings meet or exceed the amount of the proposed distribution or the value of the corporation’s assets exceed the amount of its liabilities plus the amount of shareholders preferences, if any, and certain other conditions are met.
Dividends, Distributions and Stock Repurchases A California corporation such as TriCo may make a distribution to its shareholders to the extent that either the corporation’s retained earnings meet or exceed the amount of the proposed distribution or the value of the corporation’s assets exceed the amount of its liabilities plus the amount of shareholders preferences, if any, and certain other conditions are met.
Under Basel III, we are subject to the following minimum capital ratios: (1) common equity Tier 1 capital or “CET1” to risk‑weighted assets of 4.5%; (2) Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk‑weighted assets of 6.0%; (3) Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk‑weighted assets of 8%; and (4) a leverage ratio (Tier 1 capital to average consolidated assets as reported on regulatory financial statements) of 4.0%.
Under Basel III, the Company (on a consolidated basis) and the Bank are each subject to the following minimum capital ratios: (1) common equity Tier 1 capital or “CET1” to risk‑weighted assets of 4.5%; (2) Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk‑weighted assets of 6.0%; (3) Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk‑weighted assets of 8%; and (4) a leverage ratio (Tier 1 capital to average consolidated assets as reported on regulatory financial statements) of 4.0%.
There are many steps that must be taken by the agencies before any formal changes to the framework for evaluating bank mergers can be finalized and the prospects for such action are uncertain at this time; however, the adoption of more expansive or prescriptive standards may have an impact on our acquisition activities.
There are many steps that must be taken by the agencies before any formal changes to the framework for evaluating bank mergers can be finalized and the prospects for such action are uncertain at this time; however, the adoption of more expansive or prescriptive standards may have a negative impact on any future acquisition activities.
In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other activities that the FRB has determined to be so closely related to banking as to be a proper incident thereto.
The Bank Holding Company Act The Company is registered as a bank holding company under the BHC Act. In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other activities that the FRB has determined to be so closely related to banking as to be a proper incident thereto.
Treasury Department’s Office of Foreign Assets Control, or OFAC, administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries.
Office of Foreign Assets Control Regulation The U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries.
In addition to its California community bank network, the Bank provides advanced online and mobile banking, a shared nationwide network of over 37,000 ATMs, and bankers available by phone 7 days per week.
In addition to its California community bank network, the Bank provides advanced online and mobile banking, a shared nationwide network of over 40,000 surcharge-free ATMs, and bankers available by phone 7 days per week.
The Dodd-Frank Act requires the federal banking agencies and the SEC to establish joint regulations or guidelines for specified regulated entities, such as us, having at least $1 billion in total assets, to prohibit incentive-based payment arrangements that encourage inappropriate risk taking by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity.
The Dodd-Frank Act requires the federal banking agencies and the SEC to establish joint regulations or guidelines for specified regulated entities having at least $1 billion in total assets, such as us, to prohibit incentive-based payment arrangements that encourage inappropriate risk taking by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits or 9 TriCo Bancshares 2023 10-K Table of Contents that could lead to material financial loss to the entity.
See “Regulatory Capital Requirements.” The primary source of funds for payment of dividends by TriCo to its shareholders has been and will be the receipt of dividends and management fees from the Bank. TriCo’s ability to receive dividends from the Bank is limited by applicable state and federal law.
The primary source of funds for payment of dividends by TriCo to its shareholders has been and will be the receipt of dividends and management fees from the Bank. TriCo’s ability to receive dividends from the Bank is limited by applicable state and federal law.
The agencies may elect to initiate enforcement actions in certain cases rather than relying on a plan, particularly where failure to meet one or more of the standards could threaten the safe and sound operation of the institution.
The agencies may elect to initiate enforcement actions in certain cases rather than relying on a plan, particularly where and institution has failed to comply with an acceptable plan or where a failure to meet one or more of the standards could threaten the safe and sound operation of the institution.
Among other things, financial institutions are expected to design multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risks posed by compromised customer credentials, including security measures to authenticate customers accessing internet-based services.
Among other things, financial institutions are expected to design multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risks 6 TriCo Bancshares 2023 10-K Table of Contents posed by compromised customer credentials, including security measures to authenticate customers accessing internet-based services.
It is the FRB’s policy that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.
It is the FRB’s policy that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention 4 TriCo Bancshares 2023 10-K Table of Contents is consistent with the organization’s expected future needs and financial condition.
In determining whether to approve a proposed bank acquisition, bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low- and moderate-income neighborhoods under the Community Reinvestment Act of 1997, as amended ("CRA").
In determining whether to approve a proposed bank acquisition, bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, capital adequacy and the acquiring institution’s effectiveness in combating money laundering and its record of addressing the credit needs of the communities it serves, including the needs of low- and moderate-income neighborhoods under the Community Reinvestment Act of 1997, as amended ("CRA").
Banks' service providers are required under the final rule to notify any affected bank to or on behalf of which the service provider provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank 6 TriCo Bancshares 2022 10-K Table of Contents for as much as four hours.
Banks' service providers are required to notify any affected bank to or on behalf of which the service provider provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.
Based on the FDIC’s recent projections, however, the FDIC determined that the DIF reserve ratio is at risk of not reaching the statutory minimum by the statutory deadline of September 30, 2028 without increasing the deposit insurance assessment rates.
This plan did not include an increase in the deposit insurance assessment rate. Based on the FDIC’s recent projections, however, the FDIC determined that the DIF reserve ratio is at risk of not reaching the statutory minimum by the statutory deadline of September 30, 2028 without increasing the deposit insurance assessment rates.
Prompt Corrective Action Prompt Corrective Action regulations of the federal bank regulatory agencies establish five capital categories in descending order based on an institution’s regulatory capital ratios: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically 7 TriCo Bancshares 2022 10-K Table of Contents undercapitalized.
Prompt Corrective Action Prompt Corrective Action regulations of the federal bank regulatory agencies establish five capital categories in descending order based on an institution’s regulatory capital ratios: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.
Bank Secrecy Act / Anti-Money Laundering The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions to develop policies, procedures, and practices to prevent and deter money laundering, mandates that every bank have a written, board-approved program that is reasonably designed to assure and monitor compliance with the BSA.
Bank Secrecy Act / Anti-Money Laundering The Bank Secrecy Act of 1970 and the USA Patriot Act of 2001 require financial institutions to develop policies, procedures, and practices to prevent and deter money laundering ("BSA/AML"), and mandate that every bank have a written, board-approved program that is reasonably designed to assure and monitor compliance with the BSA/AML laws.
An institution’s risk classification is assigned based on a combination of its financial ratios and supervisory ratings, reflecting, among other things, its capital levels and the level of supervisory concern that the institution poses to the regulators. In addition, the FDIC can impose special assessments in certain instances.
An institution’s risk classification is assigned based on a combination of its financial ratios and supervisory ratings, reflecting, among other things, its capital levels and the level of supervisory concern that the institution poses to the regulators.
Further, the Company’s financial institution customers have obligations to safeguard their systems and sensitive information and the Company may be bound contractually and/or by regulation to comply with the same requirements.
Further, our service providers have obligations to safeguard their systems and sensitive information and the Company may be bound contractually and/or by regulation to comply with the same requirements.
In general, the difference between the interest paid by a bank on its deposits and other borrowings, and the interest rate earned by banks on loans, securities and other interest-earning assets, comprises the major source of banks’ earnings.
Impact of Monetary Policies Banking is a business that depends on interest rate differentials. In general, the difference between the interest paid by a bank on its deposits and other borrowings, and the interest rate earned by banks on loans, securities and other interest-earning assets, comprises the major source of banks’ earnings.
Incentive Compensation Policies and Restrictions 9 TriCo Bancshares 2022 10-K Table of Contents In July 2010, the federal banking agencies issued guidance on sound incentive compensation policies that applies to all banking organizations supervised by the agencies (thereby including both the Company and the Bank).
Incentive Compensation Policies and Restrictions In July 2010, the federal banking agencies issued guidance on sound incentive compensation policies that applies to all banking organizations supervised by the agencies (thereby including both the Company and the Bank).
During 2022, team members logged more than 10,000 hours, supporting nearly 360 organizations, and more than 3,200 of those hours were for the benefit of community development efforts to support programs and services to low- or moderate-income communities.
During 2023, our team members logged more than 11,000 volunteer hours, supporting nearly 400 organizations, and more than 3,700 of those hours were for the benefit of community development efforts to support programs and services to low- or moderate-income communities.
Data privacy and data protection are areas of increasing state legislative focus. For example, in June 2018, the Governor of California signed into law the California Consumer Privacy Act ("CCPA"). The CCPA, which became effective on January 1, 2020, applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.
Similar state laws may impose additional requirements on the Company and the Bank. Data privacy and data protection are areas of increasing state legislative focus. For example, the California Consumer Privacy Act ("CCPA"), which became effective on January 1, 2020, applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.
However, if the DPFI finds that the shareholders’ equity of the bank is not adequate or that the payment of a dividend would be unsafe or unsound, the Commissioner may order the bank not to pay a dividend to shareholders. The Bank’s ability to pay dividends may be limited if the Bank fails to maintain an adequate capital conservation buffer.
However, if the DPFI finds that the shareholders’ equity of the bank is not adequate or that the payment of a dividend would be unsafe or unsound, the Commissioner may order the bank not to pay a dividend to shareholders.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) created the Consumer Financial Protection Bureau (the “CFPB”) as an independent entity with broad rulemaking, supervisory and enforcement authority over consumer financial products and services.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) created the Consumer Financial Protection Bureau (the “CFPB”) as an independent entity with broad rulemaking, supervisory and enforcement authority over consumer financial products and services. In addition, the CFPB is authorized to investigate consumer complaints and enforce rules related to consumer financial products and services.
The Bank is generally unable to control the amount of premiums that it is required to pay for FDIC insurance or the amount of credit, if any, that it may be allowed to offset such assessments.
The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain. The Bank is generally unable to control the amount of premiums that it is required to pay for FDIC insurance or the amount of credit, if any, that it may be allowed to offset such assessments.
Effective July 1, 2023, a new FRB Federal Reserve rule will require that debit card issuers enable all debit card transactions, including card-not-present transactions such as online payments, to be processed on at least two unaffiliated payment card networks.
Effective July 1, 2023, debit card issuers are required to enable all debit card transactions, including card-not-present transactions such as online payments, to be processed on at least two unaffiliated payment card networks.
See the Risk Factors section for a discussion of some of the risks the Bank will encounter when it exceeds $10 billion in assets as of a December 31 measurement date. The Bank Holding Company Act The Company is registered as a bank holding company under the BHC Act.
At December 31, 2023, the Company had $9.9 billion in total assets. See the Risk Factors section for a discussion of some of the risks the Bank will encounter when it exceeds $10 billion in assets as of a December 31 annual measurement date.
While we believe that the diversity of our employees generally represents and reflects the diversity of the communities which we serve, we recognize and continue to promote the need for diversity enhancement in leadership roles throughout the Company. We have assembled a team to assist us in progressing the Bank's diversity, inclusion, and equity efforts.
While we believe that the diversity of our employees generally represents and reflects the communities which we serve, we recognize and continue to promote the need for diversity enhancements in leadership roles throughout the Company.
See “Regulatory Capital Requirements.” The FRB, FDIC and the DPFI have authority to prohibit a bank holding company or a bank from engaging in practices which are considered to be unsafe and unsound.
In addition, the Bank’s ability to pay dividends may be limited if the Bank fails to maintain an adequate capital conservation buffer. See “Regulatory Capital Requirements.” The FRB, FDIC and the DPFI have authority to prohibit a bank holding company or a bank from engaging in practices which are considered to be unsafe and unsound.
The cash and stock transaction was valued at approximately $174.0 million in aggregate, based on TriCo's closing stock price of $42.48 on March 25, 2022. Under the terms of the merger agreement, the Company issued approximately 4.1 million shares, in addition to approximately $431,000 in cash paid out for settlement of stock option awards at VRB.
Acquisition of Valley Republic Bancorp On March 25, 2022, the Company acquired Valley Republic Bancorp and its subsidiary Valley Republic Bank ("VRB") in a merger transaction in which the Company issued approximately 4.1 million shares of common stock valued at approximately $174.4 million based on the closing stock price of TriCo common stock of $42.48 on March 25, 2022 in addition to approximately $431,000 in cash paid out for settlement of stock option awards.
In addition, these regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements. The agencies have not yet finalized these rules; however, on October 26, 2022, the SEC adopted a final rule regarding "clawbacks" of incentive-based executive compensation.
In addition, these regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements. The agencies have not yet finalized these rules.
Use of such data is regulated under the Fair Credit Reporting Act (“FCRA”), and the FCRA also regulates reporting information to credit bureaus, prescreening individuals for credit offers, sharing of information between affiliates, and using affiliate data for marketing purposes. Similar state laws may impose additional requirements on the Company and the Bank.
Like other lenders, the Bank uses credit bureau data in their underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act (“FCRA”), and the FCRA also regulates reporting information to credit bureaus, prescreening individuals for credit offers, sharing of information between affiliates, and using affiliate data for marketing purposes.
If the Company or its service providers fail to comply with applicable regulations and contractual requirements, the Company could be exposed to lawsuits, governmental proceedings or the imposition of fines, among other consequences. In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents.
If the Company or its service providers fail to comply with applicable regulations and contractual requirements, the Company could be exposed to lawsuits, governmental proceedings or the imposition of fines, among other consequences.
The mortgage-related final rules issued by the CFPB have materially restructured the origination, servicing, and securitization of residential mortgages in the United States. These rules have impacted, and will continue to impact, the business practices of mortgage lenders, including the Company.
The mortgage-related rules issued by the CFPB have materially restructured the origination, servicing, and securitization of residential mortgages in the United States.
The Bank is currently not subject to these restrictions, however if our assets exceed $10 billion or more at December 31, 2023, these rules would be applicable to the Bank in July 2024. Impact of Monetary Policies Banking is a business that depends on interest rate differentials.
The Bank is currently not subject to these restrictions or those proposed, however if our assets exceed $10 billion or more at December 31, 2024, these rules would be applicable to the Bank in July 2025.
The scope and content of the U.S. banking regulators’ policies on executive compensation may continue to evolve in the near future. It cannot be determined at this time whether compliance with such policies will adversely affect the Company’s ability to hire, retain and motivate its key employees.
It cannot be determined at this time whether compliance with such policies will adversely affect the Company’s ability to hire, retain and motivate its key employees.
Regulatory Capital Requirements The Company and the Bank are subject to the minimum capital requirements of the FRB and FDIC, respectively. Capital requirements may have an effect on the Company’s and the Bank’s profitability and ability to pay dividends.
Capital requirements may have an effect on the Company’s and the Bank’s profitability and ability to pay dividends.
In addition, we offer a portfolio of additional services and tools to support our employees’ health and well-being. TriCo team members actively share their talents in their communities through volunteer activities in education, economic development, human and health services, and community reinvestment.
We encourage our team members to share their talents in their communities through volunteer activities in education, economic development, human and health services, and community reinvestment.
At December 31, 2022, the Bank’s consumer loans net of deferred fees outstanding were $1,240,743,000 (19.2%), commercial and industrial loans outstanding were $569,921,000 (8.8%), real estate construction loans of $211,560,000 (3.3%), and commercial real estate loans were $4,359,083,000 (67.6%) of total loans.
At December 31, 2023, the Bank’s consumer loans net of deferred fees outstanding were $1.3 billion (19.3%), commercial and industrial loans outstanding were $586.5 million (8.6%), real estate construction loans of $347.2 million (5.1%), and commercial real estate loans were $4.4 billion (64.7%) of total loans.
California voters also recently passed the CPRA, which took effect on January 1, 2023, and significantly modifies the CCPA, including imposing additional obligations on covered companies and expanding California consumers’ rights with respect to certain sensitive personal information. On July 8, 2022, the CPPA commenced formal rulemaking to adopt regulations to implement the CPRA.
In addition, the California Privacy Rights Act (“CPRA”), which took effect on January 1, 2023, significantly modified the CCPA, including imposing additional obligations on covered companies and expanding California consumers’ rights with respect to certain sensitive personal information.
Refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information. Competition The banking business in California generally is highly competitive with respect to both loans and deposits.
Competition The banking business in California generally is highly competitive with respect to both loans and deposits.
The FDIC, as required under the FDIA, established a plan on September 15, 2020, to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years. This plan did not include an increase in the deposit insurance assessment rate.
In addition, the FDIC can impose special assessments in certain instances. 7 TriCo Bancshares 2023 10-K Table of Contents The FDIC, as required under the FDIA, established a plan on September 15, 2020, to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years.
We are also subject to certain state consumer protection laws and state attorneys general and other state officials are empowered to enforce certain federal consumer protection laws and regulations. State authorities have increased their focus on and enforcement of consumer protection rules.
The CFPB’ rules and policies have impacted, and will continue to impact, the business practices of mortgage lenders, including the Bank. We are also subject to certain state consumer protection laws and state attorneys general and other state officials are empowered to enforce certain federal consumer protection laws and regulations.
Banks with less than $10 billion in assets, including the Bank, continue to be examined for compliance with federal consumer laws by their primary federal banking agency. At December 31, 2022, the Company had $9.9 billion in total assets.
CFPB regulations and guidance apply to all financial institutions, including the Bank. Banks with $10 billion or more in assets are subject to examination by the CFPB, while banks with less than $10 billion in assets, including the Bank, continue to be examined for compliance with federal consumer laws by their primary federal banking agency.
Safety and Soundness Standards Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), the federal bank regulatory agencies have established safety and soundness standards for insured depository institutions covering: • Internal controls, information systems and internal audit systems; • Loan documentation; • Credit underwriting; • Interest rate exposure; • Asset growth; • Compensation, fees and benefits; • Asset quality, earnings and stock valuation; and • Excessive compensation for executive officers, directors or principal shareholders which could lead to material financial loss. 4 TriCo Bancshares 2022 10-K Table of Contents If a federal bank regulatory agency determines that a depository institution fails to meet any standard established by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.
Safety and Soundness Standards Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), the federal bank regulatory agencies have established safety and soundness standards for insured depository institutions covering internal controls, information systems and internal audit systems; loan documentation; credit underwriting; interest rate exposure; asset growth; compensation (including executive compensation) fees and benefits; and asset quality, earnings and stock valuation.
The CFPB has promulgated many mortgage-related final rules since it was established under the Dodd-Frank Act, including rules related to the ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, HMDA requirements, and appraisal and escrow standards for higher priced mortgages.
The CFPB has promulgated 5 TriCo Bancshares 2023 10-K Table of Contents many mortgage-related rules, including rules related to requirements for "qualified mortgages," standards by which lenders must satisfy themselves of a borrower's ability to repay a mortgage loan, mortgage servicing standards, disclosure requirements, loan originator compensation standards, high-cost mortgage requirements, HMDA requirements, and appraisal and escrow standards for higher priced mortgages.
None of our employees are presently represented by a union or covered under a collective bargaining agreement. Management believes that its employee relations are good. Our employees are critical to our success and competition for qualified banking personnel has historically been intense.
Full time equivalent employees numbered 1,207. Additionally, we at times will utilize temporary personnel to supplement our workforce. None of our employees are presently represented by a union or covered under a collective bargaining agreement. Management believes that its employee relations are good.
Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.
This statement does not apply to cannabis-related business; thus, the statement only pertains to customers who are lawfully growing or cultivating hemp and are not otherwise engaged in unlawful or suspicious activity. 8 TriCo Bancshares 2023 10-K Table of Contents Failure to comply with these requirements could have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.
For more information regarding the trust preferred securities please refer to “Note 14 – Junior Subordinated Debt” to the financial statements at Item 8 of this report. Additional Information Additional information concerning the Company can be found on our website at www.tcbk.com.
For more information regarding the trust preferred securities please refer to “Note 14 – Junior Subordinated Debt” to the consolidated financial statements at Part II, Item 8 of this report. Additional Information Our executive offices are located at 63 Constitution Drive, Chico, California 95973, and our telephone number is (530) 898-0300.
We provide a wide variety of opportunities for professional growth for all employees with a focus on in-classroom and on-line trainings, on-the-job experience, including active mentoring and education tuition assistance. We seek to create an engaged workforce through proactive listening, forward looking career conversation and constructive dialogue through periodic performance discussions as well as employee engagement and exit surveys.
We provide a wide variety of opportunities for professional growth for all employees with a focus on in-classroom and on-line trainings, on-the-job experience, internal and external development opportunities and education tuition assistance.
In addition, banks are required to adopt a customer identification program as part of their BSA compliance program. Banks are also required to file reports when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.
In addition, banks are required to adopt a customer identification program, performing ongoing customer due diligence to understand the nature and purpose of customer relationships for the purpose of developing customer risk profiles and file reports regarding known or suspected violations of federal law or suspicious transactions.
We focus on attracting and retaining employees by providing compensation and benefits packages that we believe are competitive within the applicable market, taking into account the position’s location and responsibilities. We provide competitive health and financial focused benefits such as but not limited to employer subsidized health insurance, a 401(k) retirement plan and an employee stock ownership plan.
We seek to create an engaged workforce through proactive listening, forward-looking career conversation and constructive dialogue through frequent and ongoing performance discussions as well as employee engagement and exit surveys. We focus on attracting and retaining employees by providing compensation and benefits packages that we believe are competitive within the applicable market, taking into account the position’s location and responsibilities.
As of its most recent CRA examination, the Bank’s CRA rating was “Satisfactory." On May 5, 2022, the FRB, OCC and FDIC jointly issued a notice of proposed rulemaking proposing revisions to the agencies’ CRA regulations, including with respect to the delineation of assessment areas, the overall evaluation framework and performance standards and metrics, the definition of community development activities, and data collection and reporting.
As of its most recent CRA examination, the Bank’s CRA rating was “Satisfactory." On October 24, 2023, the FRB, OCC and FDIC issued a joint final rule to modernize the CRA regulatory framework.
VRB was headquartered in Bakersfield, California, and had four branch locations in and around Bakersfield, and a loan production office in Fresno, California.
At the time of the acquisition, VRB merged with and into the Bank. VRB was headquartered in Bakersfield, California, and operated four branch locations in and around Bakersfield, and a loan production office in Fresno, California. Human Capital Resources 2 TriCo Bancshares 2023 10-K Table of Contents At December 31, 2023, we employed 1,231 persons.
Removed
Merger with Valley Republic Bancorp On March 25, 2022, the Company completed its acquisition of Valley Republic Bancorp, including the merger of Valley Republic Bank into Tri Counties Bank, with Tri Counties Bank as the surviving entity, in accordance with the terms of the merger agreement dated as of July 27, 2021.
Added
Additional information concerning the Company can be found on our website at www.tcbk.com.
Removed
The Bank's overlapping Bakersfield branch was consolidated into the acquired VRB branch during the quarter ended June 30, 2022, and the VRB loan production office in Fresno was consolidated with the nearby legacy TCBK loan production office during the fourth quarter of 2022.
Added
Our employees are critical to our success and competition for qualified banking personnel has historically been intense; therefore our corporate culture is an important element of our board of director's oversight of risk. Senior management is responsible for embodying, maintaining, and communicating our culture to employees.
Removed
All remaining branches now operate as Tri Counties Bank. 2 TriCo Bancshares 2022 10-K Table of Contents Human Capital Resources At December 31, 2022, we employed 1,231 persons, including five executive officers. Full time equivalent employees numbered 1,210. Additionally, we at times will utilize independent contractors and temporary personnel to supplement our workforce.
Added
In that regard, our culture is designed to promote our commitment to improving the livelihood of our employees and guides us in making decisions throughout the Company. Our culture is designed to adhere to TriCo’s values of trust, respect, integrity, communication and opportunity.
Removed
Our efforts to foster an environment that embraces employee perspectives through understanding one another's opinions, beliefs, experiences, innate differences and the promotion of dialogue and actions will make us a stronger company.
Added
In keeping with that culture, we expect our people to treat each other and our customers with the highest level of honesty and respect and to do the right thing. We strive to be a force for good in everyday life.
Removed
We also believe that a diverse workforce that is representative of our customers in the community will enable us to better serve our customers, enhancing our success as an organization. We know the process is a journey and expect our efforts to develop and progress over time.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

90 edited+80 added−48 removed101 unchanged
Biggest changeThose parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or that of our customers or clients.
Biggest changeThose parties may attempt, for example, to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or that of our customers and others; may seek to exploit bugs, errors, misconfigurations or other vulnerabilities in our systems to obtain access to our systems; may seek to obtain unauthorized access to our systems or confidential information by exploiting insider access or utilizing log-in credentials taken from our customers, employees, or third-party providers by various illicit means; and may seek to disrupt and damage our business operations and systems through ransomware or distributed denial of service attacks.
We also are subject to regulatory capital requirements. We could be subject to regulatory enforcement actions if any of our regulators determines for example, that we have violated a law of regulation, engaged in unsafe or unsound banking practice or lack adequate capital.
We also are subject to regulatory capital requirements. We could be subject to regulatory enforcement actions if any of our regulators determines for example, that we have violated a law or regulation, engaged in unsafe or unsound banking practice or lack adequate capital.
Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things: • incurring substantial expenses in pursuing potential acquisitions without completing such acquisitions, • exposure to potential asset quality issues of the target company, • losing key clients as a result of the change of ownership, • the acquired business not performing in accordance with our expectations, • difficulties and expenses arising in connection with the integration of the operations or systems conversion of the acquired business with our operations, • difficulty in estimating the value of the target company, • potential exposure to unknown or contingent liabilities of the target company, • management needing to divert attention from other aspects of our business, • potentially losing key employees of the acquired business, • incurring unanticipated costs which could reduce our earnings per share, • assuming potential liabilities of the acquired company as a result of the acquisition, • potential changes in banking or tax laws or regulations that may affect the target company, • potential disruption to our business, and • an acquisition may dilute our earnings per share, in both the short and long term, or it may reduce our tangible capital ratios.
Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things: • incurring substantial expenses in pursuing potential acquisitions without completing such acquisitions, • exposure to potential asset quality issues of the target company, • losing key clients as a result of the change of ownership, • the acquired business not performing in accordance with our expectations, • difficulties and expenses arising in connection with the integration of the operations or systems conversion of the acquired business with our operations, • difficulty in estimating the value of the target company, • potential exposure to unknown or contingent liabilities of the target company, • management needing to divert attention from other aspects of our business, • potentially losing key employees of the acquired business, • incurring unanticipated costs which could reduce our earnings per share, • assuming potential liabilities of the acquired company as a result of the acquisition, • potential changes in banking or tax laws or regulations that may affect the target company, • potential disruption to our business, • an acquisition may dilute our earnings per share, in both the short and long term, or it may reduce our tangible capital ratios.
The federal bank regulatory agencies have proposed enhanced cyber risk management standards, which would apply to a wide range of large financial institutions and their third-party service providers, including us, and would focus on cyber risk governance and management, management of internal and external dependencies, and incident response, cyber resilience and situational awareness.
The federal bank regulatory agencies have proposed enhanced cyber risk management standards, which would apply to a wide range of large financial institutions and their third-party service providers, including us, and would focus on cyber risk governance and management, management of internal and external dependencies, incident response, cyber resilience and situational awareness.
These forecasts, assumptions and models are inherently uncertain and are based upon our management’s reasonable judgment in light of information currently available. In addition to periodic reviews completed by independent third parties retained by the Bank, Federal and state bank regulatory agencies, as an integral part of their examination process, review our loans and allowance for credit losses.
These forecasts, assumptions and models are inherently uncertain and are based upon our management’s reasonable judgment in light of information currently available. In addition to periodic reviews completed by management and independent third parties retained by the Bank, Federal and state bank regulatory agencies, as an integral part of their examination process, review our loans and allowance for credit losses.
Disruptions to our customers caused by the COVID-19 pandemic could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans, as well as reductions in loan demand, the liquidity of loan guarantors, loan collateral values (particularly in real estate), loan originations, interest and noninterest income and deposit availability.
Continued disruptions to our customers caused by the COVID-19 pandemic could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans, as well as reductions in loan demand, the liquidity of loan guarantors, loan collateral values (particularly in real estate), loan originations, interest and noninterest income and deposit availability.
Interest rates may be affected by many factors that are beyond the control of our management, including general economic conditions and the policies of various governmental and regulatory authorities. The actions of the Federal Reserve Board influence the rates of interest that we charge on loans and that we pay on borrowings and interest-bearing deposits.
Interest rates may be affected by many factors that are beyond the control of our management, including general economic conditions and the policies of various governmental and regulatory authorities. The actions of the Federal Reserve influence the rates of interest that we charge on loans and that we pay on borrowings and interest-bearing deposits.
In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law or contractual claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
Deterioration in the economic conditions in California could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows: • problem assets and foreclosures may increase, • demand for our products and services may decline, • low cost or non-interest bearing deposits may decrease, and • collateral for loans made by us, especially real estate, may decline in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with our existing loans.
Deterioration in the economic conditions in California could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows: • problem assets and foreclosures may increase, • demand for our products and services may decline, • low cost or non-interest bearing deposits may continue to decrease, and • collateral for loans made by us, especially real estate, may decline in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with our existing loans.
Conditions such as an economic recession, rising unemployment, inflation, changes in interest rates, declines in asset values and other factors beyond our control may adversely affect our asset quality, deposit levels and our net income.
Conditions such as an economic recession, pandemics, rising unemployment, inflation, changes in interest rates, declines in asset values and other factors beyond our control may adversely affect our asset quality, deposit levels and our net income.
Nonetheless, the risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties.
The risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties.
To supplement our organic loan growth, we from time-to-time will purchase loans from third parties that may have lower yields than those loans that we originate on our own.
To supplement our organic loan growth, we from time-to-time may purchase loans from third parties that may have lower yields than those loans that we originate on our own.
Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies, including, without limitation, issues related to BSA compliance, CRA compliance, fair lending laws, fair housing laws, consumer protection laws and other laws and regulations.
Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies, including, without limitation, issues related to BSA/AML compliance, CRA performance, fair lending laws, fair housing laws, consumer protection laws and other laws and regulations.
The Bank had slightly less than $10 billion in total assets at December 31, 2022, so it is possible that with only modest growth, the CFPB, instead of the FDIC, may soon have primary examination and enforcement authority over the Bank.
The Bank had slightly less than $10 billion in total assets at December 31, 2023, so it is possible that with only modest growth, the CFPB, instead of the FDIC, may soon have primary examination and enforcement authority over the Bank.
The effects of COVID-19 or a similar health crisis or pandemic, could adversely affect or operations or financial performance.
The lingering effects of COVID-19 or a similar health crisis or pandemic, could adversely affect or operations or financial performance.
Uncertainty about the federal fiscal policymaking process, the fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers and investors in the United States The COVID-19 pandemic has caused and may continue to cause disruptions in the U.S. economy at large, and for small businesses in particular, and has resulted and may continue to result in disruptions to our customers’ businesses, and a decrease in consumer confidence and business generally.
Uncertainty about the federal fiscal policymaking process, the fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers and investors in the United States The COVID-19 pandemic caused, and its lingering impact may continue to cause, disruptions in the U.S. economy at large, and for small businesses in particular, and has resulted in and may continue to result in disruptions to our customers’ businesses, and a decrease in consumer confidence and business generally.
Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance. Although we were successful in generating new loans during 2022, increasing interest rates may adversely affect the demand for new loans and our loan growth.
Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance. Although we were successful in generating new loans during 2023, increasing interest rates may adversely affect the demand for new loans and our loan growth.
Any inadequacy or lapse in our risk management framework, governance structure, practices, models or reporting systems could expose it to unexpected losses, and our financial condition or results of operations could be materially and adversely affected.
Any inadequacy or lapse in our risk management framework, governance structure, practices, models or reporting systems could expose us to unexpected losses, and our financial condition or results of operations could be materially and adversely affected.
Our current or future approach to in-office and work-from-home arrangements may not meet the needs or expectations of our current or prospective employees or may not be perceived as favorable as compared to the arrangements offered by competitors, which could adversely affect our ability to attract and retain employees. Our previous results may not be indicative of our future results.
Our current or future approach to in-office and work-from-home arrangements may not meet the needs or expectations of our current or prospective employees or may not be perceived as favorable as compared to the arrangements offered by competitors, which could adversely affect our ability to attract and retain employees.
The actual amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, unemployment and gross domestic product that may be beyond our control and these losses may exceed current estimates.
The actual amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, unemployment and economic conditions that may be beyond our control and these losses may exceed current estimates.
As of December 31, 2022, approximately 90.5% of the book value of our loan portfolio consisted of loans collateralized by various types of real estate. Substantially all of our real estate collateral is located in California. So, if there is a significant adverse decline in real estate values in California, the collateral for our loans will provide less security.
As of December 31, 2023, approximately 90.5% of the book value of our loan portfolio consisted of loans collateralized by various types of real estate. Substantially all of our real estate collateral is located in California; therefore, if there is a significant adverse decline in real estate values in California, the collateral for our loans will provide less security.
Although we devote significant resources to maintain and regularly upgrade our systems and processes that are designed to protect the security of our computer systems, software, networks, and other technology assets and the confidentiality, integrity, and availability of information belonging to us and our customers, there is no assurance that our security measures will provide absolute security.
Although we devote significant resources to maintain and regularly upgrade our systems and processes that are designed to protect the security of our computer systems, software, networks, and other technology assets and the confidentiality, integrity, and availability of information belonging to us and our customers, there is no assurance that our security measures will be sufficient.
In addition, the Federal Reserve raised benchmark interest rates throughout 2022 and may continue to raise interest rates in response to economic conditions, particularly inflationary pressures. We cannot predict the nature or timing of future changes in monetary, tax and other policies or the effects that they may have on our activities and financial results.
The Federal Reserve raised benchmark interest rates in 2022 and 2023 and may continue to raise or keep interest rates high in response to economic conditions, particularly inflationary pressures. We cannot predict the nature or timing of future changes in monetary, tax and other policies or the effects that they may have on our activities and financial results.
We receive, maintain and store non-public personal information of our customers and counterparties, including, but not limited to, personally identifiable information and personal financial information. The sharing, use, disclosure, and protection of this information are governed by federal and state law.
Business - Supervision and Regulation.” We receive, maintain and store non-public personal information of our customers and counterparties, including, but not limited to, personally identifiable information and personal financial information. The sharing, use, disclosure, and protection of this information are governed by federal and state law.
We may become subject to new legislation or regulation concerning cybersecurity or the privacy of personally identifiable information and personal financial information or of any other information we may store or maintain.
Business - Supervision and Regulation.” We may become subject to new legislation or regulation concerning cybersecurity or the privacy of personally identifiable information and personal financial information or of any other information we may store or maintain.
We may close or sell certain branches and restructure or reduce our remaining branches and work force. These actions could lead to losses on assets, expense to reconfigure branches and loss of customers in certain markets. As a result, our business, financial condition or results of operations may be adversely affected.
We may close or sell certain branches and restructure or reduce our remaining branches and work force. These actions could lead to losses on assets, expense to reconfigure branches and loss of customers in certain markets. As a result, our business, financial condition or results of operations may be adversely affected. Our business is susceptible to fraud and conduct risk.
Economic and market conditions may also be affected by political developments in the U.S. and other countries and global conflicts, such as the conflict in Ukraine.
Economic and market conditions may also be affected by political developments in the U.S. and other countries and global conflicts, such as the conflicts in Ukraine and the Middle East.
If new or existing cybersecurity, data privacy, data protection, data transfer or data retention laws are implemented, interpreted or applied in a manner inconsistent with our current practices, including as a result of the network security incident discussed above, we may be subject to fines, litigation or regulatory enforcement actions or ordered to change our 19 TriCo Bancshares 2022 10-K Table of Contents business practices, policies or systems in a manner that adversely impacts our operating results.
If new or existing cybersecurity, data privacy, data protection, data transfer or data retention laws are implemented, interpreted or applied in a manner inconsistent with our current practices, including as a result of the network security incident discussed above, we may be subject to fines, litigation or regulatory enforcement actions or ordered to change our business practices, policies or systems in a manner that adversely impacts our operating results.
See “Regulation and Supervision – Restrictions on Dividends and Distributions.” As a holding company with no significant assets other than the Bank, our ability to continue to pay dividends depends in large part upon the Bank’s ability to pay dividends to us.
See “Item 1. Business - Regulation and Supervision – Restrictions on Dividends and Distributions.” As a holding company with no significant assets other than the Bank, our ability to continue to pay dividends depends in large part upon the Bank’s ability to pay dividends to us.
We may be adversely affected by the soundness of other financial institutions. Financial services institutions are interrelated as a result of clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, and other institutional clients.
Financial services institutions are interrelated as a result of clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, and other institutional clients.
Banking regulations, designed primarily for the protection of depositors, may limit our growth and the return to our shareholders by restricting certain of our activities, such as: • the payment of dividends to our shareholders, • possible mergers with or acquisitions of or by other institutions, • desired investments, • loans and interest rates on loans, • interest rates paid on deposits, • service charges on deposit account transactions, • the possible expansion or reduction of branch offices, and • the ability to provide new products or services.
Banking regulations or the actions of our banking regulators may limit our growth, earnings and the return to our shareholders by restricting certain of our activities, such as: • the payment of dividends to our shareholders, • possible mergers with or acquisitions of or by other institutions, • desired investments, • loans and interest rates on loans, • interest rates paid on deposits, • service charges on deposit account transactions, • the possible expansion or reduction of branch offices, and • the ability to provide new products or services.
In the course of our business, we may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties.
We are exposed to the risk of environmental liabilities with respect to properties to which we take title. In the course of our business, we may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties.
We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition. 22 TriCo Bancshares 2022 10-K Table of Contents
We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.
Our holding company expenses and obligations with respect to our trust preferred securities and corresponding junior subordinated deferrable interest debentures issued by us may limit or impair our ability to declare or pay dividends. Provisions of our governing documents and federal law may limit the ability of another party to acquire us, which could cause our stock price to decline.
Our holding company expenses and obligations with respect to our trust preferred securities and corresponding junior subordinated deferrable interest debentures issued by us may limit or impair our ability to declare or pay dividends. 17 TriCo Bancshares 2023 10-K Table of Contents Provisions of our governing documents and federal law may limit the ability of another party to acquire us, which could cause our stock price to decline.
As an independent bureau within the Federal Reserve Board focused solely on consumer financial protection, the CFPB may interpret or enforce consumer protection laws more strictly or severely than the FDIC.
As an independent bureau focused solely on consumer financial protection, the CFPB may interpret or enforce consumer protection laws more strictly or severely than the FDIC.
We maintained a balance of $2.6 billion, or approximately 26% of our assets, in investment securities at December 31, 2022. Changes in market interest rates can affect the fair value of these investment securities, with increasing interest rates generally resulting in a reduction of value.
We maintained a balance of $2.3 billion, or approximately 23.2% of our assets, in investment securities at December 31, 2023. Changes in market interest rates can affect the fair value of these investment securities, with increasing interest rates generally resulting in a reduction of value.
Climate change could have a material negative impact on us and our clients. Our business, as well as the operations and activities of our clients, could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to us and our clients, and these risks are expected to increase over time.
Our business, as well as the operations and activities of our clients, could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to us and our clients, and these risks are expected to increase over time.
Technological innovation continues to contribute to greater competition in domestic and international financial 11 TriCo Bancshares 2022 10-K Table of Contents services markets as technological advances enable more companies, such as Internet-based marketplace lenders, financial technology (or “fintech”) companies that rely on technology to provide financial services, often without many of the regulatory and capital restrictions that we face.
Technological innovation continues to contribute to greater competition in domestic and international financial services markets as technological advances enable more companies, such as Internet-based marketplace lenders, financial technology (or “fintech”) companies that rely on technology to provide financial services, often without many of the regulatory and capital restrictions that we face.
In addition, litigation, regulatory interventions, and media reports of perceived security vulnerabilities and any resulting damage to our reputation or loss of confidence in the security of our systems could adversely affect our business.
In addition, litigation, government interventions, and negative media reports and any resulting damage to our reputation or loss of confidence in the security of our systems could adversely affect our business.
These provisions may prevent a merger or acquisition that would be attractive to shareholders and could limit the price investors would be willing to pay in the future for our common stock 16 TriCo Bancshares 2022 10-K Table of Contents Holders of our junior subordinated debentures have rights that are senior to those of our shareholders.
These provisions may prevent a merger or acquisition that would be attractive to shareholders and could limit the price investors would be willing to pay in the future for our common stock Holders of our junior subordinated debentures have rights that are senior to those of our shareholders.
We have supported our growth through the prior issuance of trust preferred securities from special purpose trusts and accompanying junior subordinated debentures. At December 31, 2022, we had outstanding trust preferred securities and accompanying junior subordinated debentures with principal amount of $98,889,000. Payments of the principal and interest on the trust preferred securities are conditionally guaranteed by us.
We have supported our growth through the prior issuance of trust preferred securities from special purpose trusts and accompanying junior subordinated debentures. At December 31, 2023, we had outstanding trust preferred securities and accompanying junior subordinated debentures with principal amount of $101.1 million. Payments of the principal and interest on the trust preferred securities are conditionally guaranteed by us.
Several states have also proposed or adopted cybersecurity legislation and regulations, which require, among other things, notification to affected individuals when there has been a security breach of their personal data. For more information regarding cybersecurity regulation, refer to the “Supervision and Regulation” section of this report.
Several states have also proposed or adopted cybersecurity legislation and regulations, which require, among other things, notification to affected individuals when there has been a security breach of their personal data. For more information regarding cybersecurity regulation, refer to "Item 1.
Claims, litigation, government investigations, and other proceedings may adversely affect our business and results of operations As a community financial institution, we are at times subject to actual and threatened claims, litigation, reviews, investigations, and other proceedings, including proceedings by governments and regulatory authorities, involving a wide range of issues, including labor and employment, data protection, data security, network security, consumer protection, commercial disputes, goods and services offered by us and by third parties, and other matters.
As a financial institution, we are at times subject to actual and threatened claims, litigation, arbitration, reviews, investigations, and other proceedings, including proceedings by governments and regulatory authorities, involving a wide range of issues, including labor and employment, data protection, data security, network security, consumer protection, commercial disputes, goods and services offered by us and by third parties, and other matters.
We may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a result of our inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all.
We may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a result of our inability, or 16 TriCo Bancshares 2023 10-K Table of Contents perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all.
If personal, confidential or proprietary information of customers or clients in the Bank’s or such vendors’ or other third-parties’ possession were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage and financial loss.
If personal, confidential or proprietary information of customers or others in the Bank’s or such vendors’ or other third-parties’ possession were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage and financial loss, as discussed earlier regarding the Bank's 2023 cyberattack.
However, the Bank’s internal system access as well as communication capabilities, including e-mail correspondence and telephones, required approximately one week of time for the restoration process to be completed in a safe and secure environment.
However, the Bank’s internal system/server access as well as communication capabilities, including e-mail correspondence and telephones, required approximately one week of time for the restoration process to be completed in a safe and secure environment. The Company restored its systems without paying ransom.
Risks Related to Interest Rates 12 TriCo Bancshares 2022 10-K Table of Contents Changes in interest rates may make it difficult for us to improve or maintain our current interest income spread and could result in reduced earnings and negatively impact our financial performance. Like other financial institutions, we are subject to risks resulting from changes in interest rates.
Risks Related to Interest Rates Changes in interest rates may make it difficult for us to improve or maintain our current interest income spread and could result in reduced earnings and negatively impact our financial performance. Like other financial institutions, we are subject to risks resulting from changes in interest rates.
These provisions provide for, among other things, specified actions that the Board of Directors shall or may take when an offer to merge, an offer to acquire all assets or a tender offer is received and the authority to issue preferred stock by action of the board of directors acting alone, without obtaining shareholder approval.
These provisions provide for, among other things, specified factors that the Board of Directors shall or may consider when evaluating an offer to merge, an offer to acquire all assets or a tender offer is received; advance notice provisions for director nominations and shareholder proposals; and the authority to issue preferred stock by action of the board of directors acting alone, without obtaining shareholder approval.
Both personally identifiable information and personal financial information is increasingly subject to legislation and regulation, the intent of which is to protect the privacy of personal information that is collected and handled. For more information regarding data privacy regulation, refer to the “Supervision and Regulation” section of this report.
Both personally identifiable information and personal financial information is increasingly subject to legislation and regulation, the intent of which is to protect the privacy of personal information that is collected and handled. For more information regarding data privacy regulation, refer to “Item 1.
Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, asset quality, loan origination volume, business, financial condition and results of operations. Higher inflation could have a negative impact on our financial results and operations.
Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, asset quality, loan origination volume, business, financial condition and results of operations.
A significant majority of the loans in our portfolio are secured by California real estate and a decline in real estate values could hurt our business. A downturn in real estate values in the markets which we conduct our business in California could hurt our business because most of our loans are secured by real estate.
A significant majority of the loans in our portfolio are secured by California real estate and a decline in real estate values could hurt our business. 11 TriCo Bancshares 2023 10-K Table of Contents A downturn in real estate values in the markets which we conduct our business in California could hurt our business because most of our loans are secured by real estate.
Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for credit losses.
Business - Regulation and Supervision" of this report for information on the regulation and supervision which governs our activities. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for credit losses.
Should any of our estimates and assumptions 21 TriCo Bancshares 2022 10-K Table of Contents change or prove to have been incorrect, it could have a material effect on our business, financial condition and results of operations.
Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material effect on our business, financial condition and results of operations.
Our future operating results also depend in significant part upon our ability to attract and retain qualified management, financial, technical, marketing, sales and support personnel. Competition for qualified personnel is intense, and we cannot ensure success in attracting or retaining qualified personnel.
Our future operating results also depend in significant part upon our ability to attract and retain qualified management, financial, technical, marketing, sales and support personnel. Competition for qualified personnel is intense, including with respect to compensation and emerging workplace practices, accommodations and remote work options, and we cannot ensure success in attracting or retaining qualified personnel.
In addition, it is possible that a resolution of one or more such proceedings, including as a result of a settlement, could involve licenses, sanctions, consent decrees, or orders requiring us to make substantial future payments, preventing us from offering certain products or services, requiring us to change our business practices in a manner materially adverse to our business, requiring development of non-infringing or otherwise altered products or technologies, damaging our reputation, or otherwise having a material effect on our operations.
In addition, it is possible that a resolution of one or more such proceedings, including as a result of a settlement, could involve licenses, sanctions, consent decrees, or orders requiring us to make substantial future payments, preventing us from offering certain products or services, requiring us to change our business practices in a manner materially adverse to our business, requiring development of non-infringing or otherwise altered products or technologies, damaging our reputation, or otherwise having a material effect on our operations. 23 TriCo Bancshares 2023 10-K Table of Contents We contest liability and/or the amount of damages as appropriate in each pending matter.
Our earnings are significantly affected by our ability to properly originate, underwrite and service loans. We have underwriting and credit monitoring procedures and credit policies, including the establishment and review of the allowance for credit losses, that we believe appropriately address this risk by assessing the likelihood of nonperformance, tracking loan performance and diversifying our respective loan portfolios.
We have underwriting and credit monitoring procedures and credit policies, including the establishment and review of the allowance for credit losses, that we believe appropriately address this risk by assessing the likelihood of nonperformance, tracking loan performance and diversifying our respective loan portfolios.
From time to time, we may become a party to financing agreements or other contractual arrangements that have the effect of limiting or prohibiting us or the Bank from declaring or paying dividends.
Business - Supervision and Regulation — Regulatory Capital Requirements” in this report. From time to time, we may become a party to financing agreements or other contractual arrangements that have the effect of limiting or prohibiting us or the Bank from declaring or paying dividends.
If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We continually review and analyze our internal control over financial reporting for Sarbanes-Oxley Section 404 compliance.
If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We continually review and analyze our internal control over financial reporting for Sarbanes-Oxley Section 404 compliance. As part of that process we may discover material weaknesses or significant deficiencies in our internal controls.
Furthermore, regulations may prevent or impair our ability to pay dividends, engage in acquisitions or operate in other ways. We are subject to extensive regulation, supervision and examination by the DPFI, FDIC, and the FRB. See Item 1—Regulation and Supervision of this report for information on the regulation and supervision which governs our activities.
Furthermore, regulations may prevent or impair our ability to pay dividends, engage in acquisitions or operate in other ways. We are subject to extensive regulation, supervision and examination by the DFPI, FDIC, and the FRB as well as regulations and policies of the CFPB. See "Item 1.
Our ability to pay dividends to our shareholder and the ability of the Bank to pay in dividends to us are by the requirements that the we and the Bank maintain a certain minimum amount of capital to be considered a “well capitalized” institution as well as a separate capital conservation buffer, as further described under “Item 1 – Supervision and Regulation — Regulatory Capital Requirements” in this report.
Our ability to pay dividends to our shareholders and the ability of the Bank to pay in dividends to us are subject to the requirements that we and the Bank maintain a sufficient level of capital to be considered a “well capitalized” institution as well as a separate capital conservation buffer, as further described under “Item 1.
In assessing whether the impairment of investment securities is other-than-temporary, we consider the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability to retain our investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. 13 TriCo Bancshares 2022 10-K Table of Contents Changes to LIBOR or SOFR may adversely affect the value of, and the return on, our financial instruments that are indexed to LIBOR or SOFR.
In assessing whether the impairment of investment securities is other-than-temporary, we consider the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability to retain our investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value in the near term.
See also Item 1 - Regulation and Supervision - Interchange Fees in this report. Further, deposit insurance assessment rates are calculated differently, and may be higher, for insured depository institutions with $10 billion or more in total consolidated assets. Risks Relating to Ownership of Our Common Stock Our ability to pay dividends is subject to legal and regulatory restrictions.
See also "Item 1 - Business - Regulation and Supervision - Interchange Fees" in this report. Further, deposit insurance assessment rates are calculated differently, and may be higher, for insured depository institutions with $10 billion or more in total consolidated assets.
Our ability to pay dividends to our shareholders is limited by California law and the policies and regulations of the FRB.
Risks Relating to Ownership of Our Common Stock Our ability to pay dividends is subject to legal and regulatory restrictions. Our ability to pay dividends to our shareholders is limited by California law and the policies and regulations of the FRB.
Inflation may negatively affect us by increasing our labor costs, through higher wages and higher interest rates, which may negatively affect the market value of securities on our balance sheet, higher interest expenses on our deposits, especially CDs, and a higher cost of our borrowings.
Higher or prolonged inflation could have a negative impact on our financial results and operations. 14 TriCo Bancshares 2023 10-K Table of Contents Inflation may negatively affect us by increasing our labor costs, through higher wages and higher interest rates, which may negatively affect the market value of securities on our balance sheet, higher interest expenses on our deposits, especially CDs, and a higher cost of our borrowings.
Our goodwill and other intangible assets have increased substantially as a result of our acquisitions of Valley Republic Bank in 2022, FNB Bancorp in 2018 and North Valley Bancorp in 2014. Potential impairment of goodwill and amortization of other intangible assets could adversely affect our financial condition and results of operations.
Our balance sheet contains a substantial level of goodwill and other intangible assets as a result of our acquisitions, including Valley Republic Bancorp in 2022. Potential impairment of goodwill and amortization of other intangible assets could adversely affect our financial condition and results of operations.
For example, the United States government has warned that sanctions imposed against Russia by the United States in response to its conflict with Ukraine could motivate Russia to engage in malicious cyber activities against the United States. If such cyberattacks occurred, it could result in severe costs and disruptions to governmental entities and companies and their operations.
For example, the United States government has warned that sanctions imposed against Russia by the United States in response to its conflict with Ukraine could motivate Russia to engage in malicious cyber activities against the United States.
Our inability to attract additional deposits at competitive rates could have a material adverse effect on our business, financial condition and results of operations.
Our inability to attract additional deposits at competitive rates could have a material adverse effect on our business, financial condition and results of operations. Our growth and expansion may strain our ability to manage our operations and our financial resources. Our financial performance and profitability depend on our ability to execute our corporate growth strategy.
Credit losses in excess of our allowance or addition provisions to our allowance would reduce our net income and capital, potentially materially. 10 TriCo Bancshares 2022 10-K Table of Contents Our business may be adversely affected by business conditions in California. We conduct most of our business in California.
Credit losses in excess of our allowance or addition provisions to our allowance would reduce our net income and capital, potentially materially. Our business may be adversely affected by business conditions in California. We conduct most of our business in California. As a result of this geographic concentration, our financial results may be impacted by economic conditions in California.
For example, as previously disclosed in the Current Report 8-K filed by us on February 14, 2023, the Bank experienced a network security incident, where unusual network activity was detected, and management shut down all networked systems which prevented employees from accessing internal systems, data and telephones for a limited period of time.
As previously disclosed in the Current Report on Form 8-K we filed on February 14, 2023, the Bank experienced a cybersecurity incident in February 2023. After detecting unusual network activity, we shut down networked systems by taking them offline, which prevented access to internal systems, data and telephones for a limited period of time.
Risks Related to the Nature and Geographic Area of Our Business The majority of our assets are loans, which are subject to credits risks. As a lender, we face a significant risk that we will sustain losses because borrowers, guarantors or related parties may fail to perform in accordance with the terms of the loans we make or acquire.
As a lender, we face a significant risk that we will sustain losses because borrowers, guarantors or related parties may fail to perform in accordance with the terms of the loans we make or acquire. Our earnings are significantly affected by our ability to properly originate, underwrite and service loans.
Furthermore, the pandemic could cause us to recognize impairment of our goodwill and our financial assets. The COVID-19 pandemic has also resulted in heightened operational risks. Some of our colleagues continue to work remotely at least part-time basis, which may create additional cybersecurity risks.
The COVID-19 pandemic has also resulted in heightened operational risks. Some of our colleagues continue to work remotely at least part-time basis, which may create additional cybersecurity risks. The increase in online and remote banking activities may also increase the risk of fraud in certain instances.
General Risk Factors 20 TriCo Bancshares 2022 10-K Table of Contents We depend on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects. Our future operating results depend substantially upon the continued service of our executive officers and key personnel.
General Risk Factors We depend on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects. Furthermore, our business could suffer if we fail to attract and retain skilled people. Our future operating results depend substantially upon the continued service of our executive officers and key personnel.
Upon discovering the incident, the Bank immediately launched an investigation and engaged a digital forensics firm to help determine the scope of the incident and identify potentially impacted data. In addition, the Bank promptly notified law enforcement and banking regulators about the incident.
We immediately launched an investigation and notified law enforcement and banking regulators. A digital forensics firm was engaged to help determine the scope of the incident and identify potentially impacted data. We received a demand for ransom from a party claiming responsibility for the incident.
The Bank believes that its core banking systems, including those that facilitate loan or deposit related transactions, were not affected by this event as evidenced by the Bank’s general ability to resume customer facing operations within two days.
The Bank’s core banking systems, including those that facilitate loan and deposit related transactions, were not affected and the Bank’s resumed customer facing operations within two days.
Third-party vendors provide key components of our business infrastructure, including certain data processing and information services. On our behalf, third parties may transmit confidential, propriety information. Some of these third parties may engage vendors of their own, which introduces the risk that these "fourth parties" could be the source of operational and/or security failures.
Some of these third parties may engage vendors of their own, which introduces the risk that these "fourth parties" could be the source of operational and/or security failures.
Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material adverse impact on our operations, including the cost to conduct business. Risks Related to Our Growth and Expansion 14 TriCo Bancshares 2022 10-K Table of Contents Goodwill resulting from acquisitions may adversely affect our results of operations.
Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material adverse impact on our operations, including the cost to conduct business. 15 TriCo Bancshares 2023 10-K Table of Contents Furthermore, The evolving landscape of legislative and regulatory actions, influenced by election cycles, introduces an additional layer of uncertainty for our operations.
While we continue to evaluate the impact of this incident, we remain subject to risks and uncertainties as a result, including legal, reputational, and financial risks, the results of our ongoing investigation of this security incident, any potential regulatory inquiries and/or litigation to which we may become subject in connection with this incident, and the extent of remediation and other additional costs that may be incurred by us.
These risks may stem from litigation or governmental inquiries litigation to which we currently are or may become subject in connection with this incident, and the extent of remediation and other additional costs that may be incurred by us.
Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our securities. 17 TriCo Bancshares 2022 10-K Table of Contents A failure or breach, including cyberattacks, of our operational or security systems or of those of our customers or contracted vendors, could disrupt our business, result in the disclosure of confidential information, damage our reputation, and create significant financial and legal exposure.
Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our securities.
We, our customers, our vendors, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyberattacks.
We, our customers, our vendors, and other third parties have been subject to, and are likely to continue to be the target of, persistent cyberattacks. Despite our efforts to ensure the integrity of our systems, we may not be able to anticipate or to implement effective preventive measures against all security breaches.
Any of these types of proceedings can have an adverse effect on us because of legal costs, disruption of our operations, diversion of management resources, negative publicity, and other factors. The outcomes of these matters are inherently unpredictable and subject to significant uncertainties.
Litigation matters range from individual actions involving a single plaintiff to class action lawsuits and can involve claims for substantial or indeterminate alleged damages or for injunctive or other relief. Any of these types of proceedings can have an adverse effect on us because of legal costs, disruption of our operations, diversion of management resources, negative publicity, and other factors.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES The Company is engaged in the banking business through 64 traditional branches, 6 in-store branches and 8 loan production offices in 32 counties throughout California including the counties of Butte, Colusa, Contra Costa, Del Norte, Fresno, Glenn, Humboldt, Kern, Lake, Los Angeles, Madera, Mendocino, Merced, Nevada, Orange, Placer, Sacramento, San Diego, San Francisco, San Mateo, Santa Clara, Shasta, Siskiyou, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Yolo and Yuba.
Biggest changePROPERTIES The Company is engaged in the banking business through 63 traditional branches, 6 in-store branches and 8 loan production offices in 31 counties throughout California including the counties of Butte, Colusa, Contra Costa, Del Norte, Fresno, Glenn, Humboldt, Kern, Lake, Los Angeles, Madera, Mendocino, Merced, Nevada, Orange, Placer, Sacramento, San Diego, San Francisco, San Mateo, Santa Clara, Shasta, Siskiyou, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Yolo and Yuba.
The Company leased 31 branch office locations, 6 in-store branch locations, 8 loan production offices and 3 other operational buildings. Most of the leases contain multiple renewal options and provisions for rental increases, principally for changes in the cost of living index, property taxes and maintenance.
The Company leased 30 branch office locations, 6 in-store branch locations, 8 loan production offices and 3 other operational buildings. Most of the leases contain multiple renewal options and provisions for rental increases, principally for changes in the cost of living index, property taxes and maintenance.
All offices are constructed and equipped to meet prescribed security requirements. As of December 31, 2022, the Company owned 31 branch office locations, two administrative buildings that include branch locations, and 10 other buildings that are used as either administrative, operational, or loan production offices.
All offices are constructed and equipped to meet prescribed security requirements. As of December 31, 2023, the Company owned 31 branch office locations, two administrative buildings that include branch locations, and 10 other buildings that are used as either administrative, operational, or loan production offices.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNone of those proceedings are currently expected to have a material adverse impact upon the Company’s and the Bank’s business, their consolidated financial position nor their operations in any material amount not already accrued, after taking into consideration any applicable insurance.
Biggest changeNone of those proceedings are currently expected to have a material adverse impact upon the Company’s consolidated financial position, its operations in any material amount not already accrued, after taking into consideration any applicable insurance.
ITEM 3. LEGAL PROCEEDINGS Neither the Company nor its subsidiaries are a party to any pending legal proceedings that are material, nor is their property the subject of any other material pending legal proceeding at this time. All other legal proceedings are routine and arise out of the ordinary course of the Bank’s business.
Neither the Company nor its subsidiaries are a party to any pending legal proceedings that are material, nor is their property the subject of any other material pending legal proceeding at this time. All other legal proceedings are routine and arise out of the ordinary course of the Company's business.
Added
ITEM 3. LEGAL PROCEEDINGS 26 TriCo Bancshares 2023 10-K Table of Contents TriCo and its subsidiaries are routinely subject to actual or threatened legal proceedings, including litigation and regulatory matters, arising in the ordinary course of business.
Added
Litigation matters range from individual actions involving a single plaintiff to class action lawsuits and can involve claims for substantial or indeterminate alleged damages or for injunctive or other relief. See “Item 1A - Risk Factors” and “Item 1C - Cybersecurity” for a discussion of the Bank’s cybersecurity attack in 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe SNL Western Bank Index compiled by SNL Financial includes banks located in California, Oregon, Washington, Montana, Hawaii and Alaska with market capitalization similar to that of TriCo’s. The amounts shown assume that any dividends were reinvested.
Biggest changeThe S&P Western Bank Index includes banks located in California, Oregon, Washington, Montana, Hawaii and Alaska with market capitalization similar to that of TriCo’s. The amounts shown assume that any dividends were reinvested.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Market Prices and Dividends The Company’s common stock is traded on the Nasdaq under the symbol “TCBK.” As of February 24, 2023, there were approximately 1,900 shareholders of record of the Company’s common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Market Prices and Dividends The Company’s common stock is traded on the Nasdaq under the symbol “TCBK.” As of February 23, 2024, there were approximately 1,814 shareholders of record of the Company’s common stock.
Removed
On February 24, 2023, the closing market price was $50.14 per share. The Company has paid cash dividends on its common stock in every quarter since March 1990, and it is currently the intention of the Board of Directors of the Company to continue payment of cash dividends on a quarterly basis.
Added
On February 23, 2024, the closing market price was $33.95 per share. Information regarding restrictions on dividends, as required by this Item, is set forth in Item 1: “Business - Dividends, Distributions and Regulatory Matters” and in Note 26 - “Regulatory Matters” of the Notes to consolidated financial statements and incorporated into this Item by reference.
Removed
There is no assurance, however, that any dividends will be paid since they are dependent upon earnings, financial condition and capital requirements of the Company and the Bank.
Added
TriCo Bancshares Stock Performance The following graph presents the cumulative total yearly shareholder return from investing $100 on December 31, 2018, in each of TriCo common stock, the Russell 3000 Index, and the S&P Western Bank Index.
Removed
During the calendar year ended December 31, 2022, the Company paid quarterly dividends of $0.25 per share for Q1 and Q2, increasing to $0.30 per share of cash dividends for Q3 and Q4, equaling a total of $1.20 per share for the year then ended.
Added
Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 TriCo Bancshares 100.00 123.36 109.99 136.99 166.52 144.78 Russell 3000 Index 100.00 129.65 154.05 191.03 151.91 188.30 SNL Western Bank Index 100.00 119.27 86.36 131.33 99.76 96.00
Removed
As of December 31, 2022, there was $157,036,000 available for payment of dividends by the Bank to the Company, under applicable laws and regulations. See “Note 27 – Summary of Quarterly Results of Operations (unaudited)” for the quarterly cash dividends paid by the Company in 2022 and 2021.
Removed
Issuer Repurchases of Common Stock The Company has one previously announced stock repurchase plan under which it is currently authorized to purchase shares of its common stock. The table that follows provides additional information regarding this plan.
Removed
Announcement Date Total shares approved for purchase Total shares repurchased under the plan Expiration date 2/25/2021 2,000,000 640,198 none The following table shows the repurchases made by the Company or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the fourth quarter of 2022: Period (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as of part of publicly announced plans or programs (d) Maximum number of shares that may yet be purchased under the plans or programs (1) October 1-31, 2022 5,000 $ 45.61 5,000 1,359,802 November 1-30, 2022 — $ — — 1,359,802 December 1-31, 2022 — $ — — 1,359,802 Total 5,000 $ — 5,000 1,359,802 (1) Does not include shares that may be purchased by the Company’s Employee Stock Ownership Plan and pursuant to various other equity incentive plans. 24 TriCo Bancshares 2022 10-K Table of Contents TriCo Bancshares Stock Performance The following graph presents the cumulative total yearly shareholder return from investing $100 on December 31, 2017, in each of TriCo common stock, the Russell 3000 Index, and the SNL Western Bank Index.
Removed
Period Ending Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 TriCo Bancshares 100.00 90.91 112.14 99.99 124.53 151.38 Russell 3000 Index 100.00 92.50 118.90 141.28 175.19 139.32 SNL Western Bank Index 100.00 79.17 96.55 72.25 111.40 86.45

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

108 edited+36 added−40 removed61 unchanged
Biggest changeThe following table summarizes the allocation of the allowance for credit losses between loan types: December 31, (in thousands) 2022 2021 2020 2019 2018 Commercial real estate $ 61,381 $ 51,140 $ 53,693 $ 11,995 $ 12,944 Consumer 24,639 23,474 25,148 10,084 11,051 Commercial and industrial 13,597 3,862 4,252 4,867 5,610 Construction 5,142 5,667 7,540 3,388 2,497 Agriculture production 906 1,215 1,209 261 480 Leases 15 18 5 21 — Total allowance for credit losses $ 105,680 $ 85,376 $ 91,847 $ 30,616 $ 32,582 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: December 31, 2022 2021 2020 2019 2018 Commercial real estate 58.1 % 59.9 % 58.5 % 39.2 % 39.7 % Consumer 23.3 % 27.5 % 27.4 % 32.9 % 33.9 % Commercial and industrial 12.9 % 4.5 % 4.6 % 15.9 % 16.9 % Construction 4.9 % 6.6 % 8.2 % 11.0 % 7.7 % Agriculture production 0.9 % 1.4 % 1.3 % 0.9 % 1.8 % Leases — % 0.1 % — % 0.1 % — % Total allowance for credit losses 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 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: December 31, 2022 2021 2020 2019 2018 Commercial real estate 1.41 % 1.55 % 1.82 % 0.42 % 0.49 % Consumer 1.99 % 2.19 % 2.62 % 1.05 % 1.18 % Commercial and industrial 2.39 % 1.49 % 0.81 % 1.81 % 2.24 % Construction 2.43 % 2.55 % 2.65 % 1.36 % 1.36 % Agriculture production 1.48 % 2.39 % 2.74 % 1.82 % 1.85 % Leases 0.19 % 0.27 % 0.13 % 1.63 % — % Total allowance for credit losses 1.64 % 1.74 % 1.93 % 0.71 % 0.81 % 41 TriCo Bancshares 2022 10-K Table of Contents The following tables summarize the net charge-off (recovery) activity in the allowance for credit/loan losses as a percentage of loans for the years indicated (dollars in thousands): Year ended December 31, Ratios: 2022 2021 2020 2019 2018 Net charge-offs (recoveries) during period to average loans outstanding during period Commercial real estate: (0.01) % CRE non-owner occupied — % — % 0.01 % (0.09) % n/a CRE owner occupied — % (0.11) % — % 0.13 % n/a Multifamily — % — % — % — % n/a Farmland 0.01 % 0.07 % 0.12 % — % n/a Consumer: (0.01) % SFR 1-4 1st DT liens — % 0.02 % (0.08) % (0.01) % n/a SFR HELOCs and junior liens — % 0.33 % (0.06) % (0.26) % n/a Other 0.20 % 0.32 % 0.41 % 0.54 % n/a Commercial and industrial 0.17 % 0.28 % 0.04 % 0.64 % 0.26 % Construction — % 0.01 % — % — % — % Agriculture production — % (0.05) % (0.05) % (0.02) % (0.01) % Leases — % — % — % — % — % Provision for (benefit from) credit losses to average loans outstanding during period 0.29 % (0.15) % 0.92 % (0.04) % 0.07 % Allowance for credit losses to loans at year-end 1.64 % 1.74 % 1.93 % 0.71 % 0.81 % 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.
Biggest changeThe following table summarizes the allocation of the allowance for credit losses between loan types: December 31, (in thousands) 2023 2022 2021 2020 2019 Commercial real estate $ 68,864 $ 61,381 $ 51,140 $ 53,693 $ 11,995 Consumer 27,453 24,639 23,474 25,148 10,084 Commercial and industrial 12,750 13,597 3,862 4,252 4,867 Construction 8,856 5,142 5,667 7,540 3,388 Agriculture production 3,589 906 1,215 1,209 261 Leases 10 15 18 5 21 Total allowance for credit losses $ 121,522 $ 105,680 $ 85,376 $ 91,847 $ 30,616 45 TriCo Bancshares 2023 10-K Table of Contents 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: December 31, 2023 2022 2021 2020 2019 Commercial real estate 56.7 % 58.1 % 59.9 % 58.5 % 39.2 % Consumer 22.6 % 23.3 % 27.5 % 27.4 % 32.9 % Commercial and industrial 10.5 % 12.9 % 4.5 % 4.6 % 15.9 % Construction 7.3 % 4.9 % 6.6 % 8.2 % 11.0 % Agriculture production 3.0 % 0.9 % 1.4 % 1.3 % 0.9 % Leases — % — % 0.1 % — % 0.1 % Total allowance for credit losses 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 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: December 31, 2023 2022 2021 2020 2019 Commercial real estate 1.57 % 1.41 % 1.55 % 1.82 % 0.42 % Consumer 2.09 % 1.99 % 2.19 % 2.62 % 1.05 % Commercial and industrial 2.17 % 2.39 % 1.49 % 0.81 % 1.81 % Construction 2.55 % 2.43 % 2.55 % 2.65 % 1.36 % Agriculture production 2.48 % 1.48 % 2.39 % 2.74 % 1.82 % Leases 0.12 % 0.19 % 0.27 % 0.13 % 1.63 % Total allowance for credit losses 1.79 % 1.64 % 1.74 % 1.93 % 0.71 % The following tables summarize the net charge-off (recovery) activity in the allowance for credit/loan losses as a percentage of loans for the years indicated (dollars in thousands): Year ended December 31, Ratios: 2023 2022 2021 2020 2019 Net charge-offs (recoveries) during period to average loans outstanding during period Commercial real estate: CRE non-owner occupied — % — % — % 0.01 % (0.09) % CRE owner occupied 0.38 % — % (0.11) % — % 0.13 % Multifamily — % — % — % — % — % Farmland — % 0.01 % 0.07 % 0.12 % — % Consumer: SFR 1-4 1st DT liens (0.02) % — % 0.02 % (0.08) % (0.01) % SFR HELOCs and junior liens (0.01) % — % 0.33 % (0.06) % (0.26) % Other 0.50 % 0.20 % 0.32 % 0.41 % 0.54 % Commercial and industrial 0.60 % 0.17 % 0.28 % 0.04 % 0.64 % Construction — % — % 0.01 % — % — % Agriculture production — % — % (0.05) % (0.05) % (0.02) % Leases — % — % — % — % — % Provision for (benefit from) credit losses to average loans outstanding during period 0.35 % 0.29 % (0.15) % 0.92 % (0.04) % Allowance for credit losses to loans at year-end 1.79 % 1.64 % 1.74 % 1.93 % 0.71 % 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 Table of Contents 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): Balance at December 31, 2022 Additions Advances/ Capitalized Costs/Other Sales Valuation Adjustments Balance at December 31, 2023 Land & Construction $ 154 $ — $ — $ — $ — $ 154 Residential real estate 1,709 105 — (127) (14) 1,673 Commercial real estate 1,576 50 — (79) (669) 878 Total foreclosed assets $ 3,439 $ 155 $ — $ (206) $ (683) $ 2,705 Balance at December 31, 2021 Additions Advances/ Capitalized Costs/Other Sales Valuation Adjustments Balance at December 31, 2022 Land & Construction $ 154 $ 313 $ — $ (313) $ — $ 154 Residential real estate 1,257 751 — (392) 93 1,709 Commercial real estate 1,183 283 — — 110 1,576 Total foreclosed assets $ 2,594 $ 1,347 $ — $ (705) $ 203 $ 3,439 Deposit Portfolio Composition The following table shows the Company’s deposit balances at the dates indicated: Year ended December 31, (dollars in thousands) 2023 2022 2021 Noninterest-bearing demand $ 2,722,689 $ 3,502,095 $ 2,979,882 Interest-bearing demand 1,731,814 1,718,541 1,568,682 Savings 2,682,068 2,884,378 2,520,959 Time certificates, over $250,000 250,180 46,350 44,652 Other time certificates 447,287 177,649 252,984 Total deposits $ 7,834,038 $ 8,329,013 $ 7,367,159 Total uninsured deposits were estimated to be approximately $2.4 billion and $2.7 billion at December 31, 2023 and 2022, respectively.
The following table presents the maturities of loans, net of deferred loan costs, at December 31, 2022: Within One Year After One But Within Five Years After Five But Within 15 Years After 15 Years Total (dollars in thousands) Loans with predetermined interest rates: Commercial Real Estate $ 58,681 $ 415,410 $ 1,177,462 $ 21,758 $ 1,673,311 Consumer 89,992 54,531 121,461 478,171 744,155 Commercial & Industrial 57,689 168,275 53,708 8,048 287,720 Construction 10,691 13,509 26,041 11,054 61,295 Agricultural Production 177 8,553 10,265 — 18,995 Leases — 7,726 — — 7,726 Total loans with predetermined interest rates 217,230 668,004 1,388,937 519,031 2,793,202 Loans with floating interest rates: Commercial Real Estate 86,848 513,917 2,023,972 61,035 2,685,772 Consumer 30,309 45,984 104,617 315,678 496,588 Commercial & Industrial 98,532 151,275 12,572 19,822 282,201 Construction 44,044 41,890 57,839 6,492 150,265 Agricultural Production 32,320 9,730 360 9 42,419 Leases — — — — — Total loans with floating interest rates 292,053 762,796 2,199,360 403,036 3,657,245 Total loans $ 509,283 $ 1,430,800 $ 3,588,297 $ 922,067 $ 6,450,447 Investment maturities The maturity distribution and yields of the investment portfolio at December 31, 2022 is presented in the following tables.
The following table presents the maturities of loans, net of deferred loan costs, at December 31, 2023: 51 TriCo Bancshares 2023 10-K Table of Contents Within One Year After One But Within Five Years After Five But Within 15 Years After 15 Years Total (dollars in thousands) Loans with predetermined interest rates: Commercial Real Estate $ 58,681 $ 415,410 $ 1,177,462 $ 21,758 $ 1,673,311 Consumer 89,992 54,531 121,461 478,171 744,155 Commercial & Industrial 57,689 168,275 53,708 8,048 287,720 Construction 10,691 13,509 26,041 11,054 61,295 Agricultural Production 177 8,553 10,265 — 18,995 Leases — 7,726 — — 7,726 Total loans with predetermined interest rates 217,230 668,004 1,388,937 519,031 2,793,202 Loans with floating interest rates: Commercial Real Estate 86,848 513,917 2,023,972 61,035 2,685,772 Consumer 30,309 45,984 104,617 315,678 496,588 Commercial & Industrial 98,532 151,275 12,572 19,822 282,201 Construction 44,044 41,890 57,839 6,492 150,265 Agricultural Production 32,320 9,730 360 9 42,419 Leases — — — — — Total loans with floating interest rates 292,053 762,796 2,199,360 403,036 3,657,245 Total loans $ 509,283 $ 1,430,800 $ 3,588,297 $ 922,067 $ 6,450,447 Investment maturities The maturity distribution and yields of the investment portfolio at December 31, 2023 is presented in the following tables.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The following discussion and analysis is designed to provide a better understanding of the significant changes and trends related to the Company and the Bank’s financial condition, operating results, asset and liability management, liquidity and capital resources and should be read in conjunction with the consolidated financial statements of the Company and the related notes at Item 8 of this report.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The following discussion and analysis is designed to provide a better understanding of the significant changes and trends related to the Company and the Bank’s financial condition, operating results, asset and liability management, liquidity and capital resources and should be read in conjunction with the consolidated financial statements of the Company and the related notes at Part II, Item 8 of this report.
The following table summarizes the estimated effect on net interest income and market value of equity to changing interest rates as measured against a flat rate (no interest rate change) instantaneous shock scenario over a twelve month period utilizing the Company's specific mix of interest earning assets and interest bearing liabilities as of December 31, 2022.
The following table summarizes the estimated effect on net interest income and market value of equity to changing interest rates as measured against a flat rate (no interest rate change) instantaneous shock scenario over a twelve month period utilizing the Company's specific mix of interest earning assets and interest bearing liabilities as of December 31, 2023.
(5) Junior subordinated debt, adjustable rate of three-month LIBOR plus 1.33%, callable in whole or in part by the Company on a quarterly basis beginning March 15, 2011, matures March 15, 2036. (6) Junior subordinated debt, fixed rate of 6% until March 29, 2024, then floating rate of three-month LIBOR plus 3.52% until maturity in 2029.
(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.
The Company expects that the cash dividends paid by the Bank to the Company will be sufficient to meet this payment schedule. Dividends from the Bank are subject to certain regulatory restrictions. The maturity distribution of certificates of deposit in denominations of $100,000 or more is set forth in the following table.
The Company expects that the cash dividends paid by the Bank to the Company will be sufficient to meet this payment schedule. Dividends from the Bank are subject to certain regulatory restrictions. The maturity distribution of certificates of deposit in denominations of $250,000 or more is set forth in the following table.
The goal for managing the assets and liabilities of the Bank is to maximize shareholder value and earnings while maintaining a high quality balance sheet without exposing the Bank to undue interest rate risk. The Board of Directors has overall responsibility for the Company’s interest rate risk management policies.
Market Risk Management Overview. The goal for managing the assets and liabilities of the Bank is to maximize shareholder value and earnings while maintaining a high quality balance sheet without exposing the Bank to undue interest rate risk. The Board of Directors has overall responsibility for the Company’s interest rate risk management policies.
(8) These amounts represent known certain payments to participants under the Company’s deferred compensation and supplemental retirement plans. See Note 22 in the financial statements at Item 8 of this report for additional information related to the Company’s deferred compensation and supplemental retirement plan liabilitie s.
(8) These amounts represent known certain payments to participants under the Company’s deferred compensation and supplemental retirement plans. See Note 22 in the financial statements at Part II, Item 8 of this report for additional information related to the Company’s deferred compensation and supplemental retirement plan liabilitie s.
(4) Junior subordinated debt, adjustable rate of three-month LIBOR plus 2.80%, callable in whole or in part by the Company on a quarterly basis beginning July 23, 2009, matures July 23, 2034.
(4) Junior subordinated debt, adjustable rate of three-month SOFR plus 2.80%, callable in whole or in part by the Company on a quarterly basis beginning July 23, 2009, matures July 23, 2034.
As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors.
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.
(2) Junior subordinated debt, adjustable rate of three-month LIBOR plus 2.55%, callable in whole or in part by the Company on a quarterly basis beginning July 23, 2009, matures July 23, 2034.
(2) Junior subordinated debt, adjustable rate of three-month SOFR plus 2.55%, callable in whole or in part by the Company on a quarterly basis beginning July 23, 2009, matures July 23, 2034.
(3) Junior subordinated debt, adjustable rate of three-month LIBOR plus 3.25%, callable in whole or in part by the Company on a quarterly basis beginning April 24, 2008, matures April 24, 2033.
(3) Junior subordinated debt, adjustable rate of three-month SOFR plus 3.25%, callable in whole or in part by the Company on a quarterly basis beginning April 24, 2008, matures April 24, 2033.
The remaining increase in the allowance for credit reserves was the result of changes in loan volume and changes in credit quality associated with levels of classified, past due and non-performing loans in addition to changes in qualitative factors.
The 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.
Long-Term Debt See Note 13 to the consolidated financial statements at Item 8 of this report for information about the Company’s other borrowings and long-term debt. Junior Subordinated Debt See Note 14 to the consolidated financial statements at Item 8 of this report for information about the Company’s junior subordinated debt.
Long-Term Debt See Note 13 to the consolidated financial statements at Part II, Item 8 of this report for information about the Company’s other borrowings and long-term debt. Junior Subordinated Debt See Note 14 to the consolidated financial statements at Part II, Item 8 of this report for information about the Company’s junior subordinated debt.
During the years ended December 31, 2022 and 2021, no allowance for credit losses nor impairment recognized in earnings related to available for sale investment securities was recorded.
During the years ended December 31, 2023 and 2022, no allowance for credit losses nor impairment recognized in earnings related to available for sale investment securities was recorded.
The resulting allowance for any pool is the sum of the calculated reserves determined in this manner. Certain loans are not included in pools of loans that are collectively evaluated. The segregation of these loans is based on the results from analysis of identified credits that meet management’s criteria for specific evaluation.
The resulting allowance for any pool is the sum of the calculated reserves determined in this manner. Certain loans are not included in pools of loans that are collectively evaluated. The segregation of these loans is based on the results from analysis of individually identified credits that meet management’s criteria for individual evaluation.
Equity See Note 16 and Note 26 in the consolidated financial statements at Item 8 of this report for a discussion of shareholders’ equity and regulatory capital, respectively.
Equity See Note 16 and Note 26 in the consolidated financial statements at Part II, Item 8 of this report for a discussion of shareholders’ equity and regulatory capital, respectively.
(3) Net interest margin is computed by dividing net interest income by total average earning assets. 30 TriCo Bancshares 2022 10-K Table of Contents Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid – Volume/Rate Tables The following table sets forth a summary of the changes in the Company’s interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated.
(3) Net interest margin is computed by dividing net interest income by total average earning assets. 35 TriCo Bancshares 2023 10-K Table of Contents Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid – Volume/Rate Tables The following table sets forth a summary of the changes in the Company’s interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated.
As the 96.1% of the HTM portfolio consisted of investment securities where payment performance has an implicit or explicit guarantee from the U.S. government and where no history of credit losses exist, management believes that indicators for zero loss are present and therefore, no loss reserves were recognized in conjunction with the adoption of the CECL standard.
As the 97.9% of the HTM portfolio consisted of investment securities where payment performance has an implicit or explicit guarantee from the U.S. government and where no history of credit losses exist, management believes that indicators for zero loss are present and therefore, no loss reserves were recognized in conjunction with the adoption of the CECL standard.
Interest Rate Risk Simulations: Change in Interest Rates (Basis Points) Estimated Change in Net Interest Income (NII) (as % of NII) Estimated Change in Market Value of Equity (MVE) (as % of MVE) +300 (shock) (2.5) % (4.1) % +200 (shock) (1.7) % (2.4) % +100 (shock) (0.7) % (0.3) % + 0 (flat) — — -100 (shock) (2.2) % (3.9) % -200 (shock) (6.5) % (12.9) % -300 (shock) (9.9) % (26.1) % 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.
Interest Rate Risk Simulations: Change in Interest Rates (Basis Points) Estimated Change in Net Interest Income (NII) (as % of NII) Estimated Change in Market Value of Equity (MVE) (as % of MVE) +300 (shock) (8.9) % (9.9) % +200 (shock) (6.0) % (7.0) % +100 (shock) (2.8) % (2.5) % + 0 (flat) — — -100 (shock) 0.7 % (2.0) % -200 (shock) 1.1 % (7.1) % -300 (shock) 1.9 % (17.6) % 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.
See Note 11 of the financial statements at Item 8 of this report for the terms. These commitments do not significantly impact operating results. As of December 31, 2022, commitments to extend credit and commitments related to the Bank’s deposit overdraft privilege product were the Bank’s only financial instruments with off-balance sheet risk.
See Note 11 of the financial statements at Part II, Item 8 of this report for the terms. These commitments do not significantly impact operating results. As of December 31, 2023, commitments to extend credit and commitments related to the Bank’s deposit overdraft privilege product were the Bank’s only financial instruments with off-balance sheet risk.
The Company’s policies related to these estimates can be found in Note 1 in the financial statements at Item 8 of this report.
The Company’s policies related to these estimates can be found in Note 1 in the financial statements at Part II, Item 8 of this report.
The “Yield” and “Volume/Rate” tables shown below are useful in illustrating and quantifying the developments that affected net interest income during 2022 and 2021.
The “Yield” and “Volume/Rate” tables shown below are useful in illustrating and quantifying the developments that affected net interest income during 2023 and 2022.
At December 31, 2022, the overnight Federal funds rate, the rate primarily used in these interest rate shock scenarios, was 4.25%. These scenarios assume that 1) interest rates increase or decrease evenly (in a “ramp” fashion) over a twelve-month period and remain at the new levels beyond twelve months or 2) that interest rates change instantaneously (“shock”).
At December 31, 2023, the overnight Federal funds rate, the rate primarily used in these interest rate shock scenarios, was 5.25%. These scenarios assume that 1) interest rates increase or decrease evenly (in a “ramp” fashion) over a twelve-month period and remain at the new levels beyond twelve months or 2) that interest rates change instantaneously (“shock”).
The increase in nonperforming assets during 2021 was the result of new nonperforming loans of $20,037,000, which was partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $13,439,000, dispositions of foreclosed assets totaling $1,293,000, and net charge-offs of $2,069,000. 37 TriCo Bancshares 2022 10-K Table of Contents Changes in nonperforming assets during the three months ended December 31, 2022 The following table shows the activity in the balance of nonperforming assets for the quarter ended December 31, 2022: (in thousands) Balance at September 30, 2022 Additions Advances/ Paydowns, net Charge-offs/ Write-downs (1) Transfers to Foreclosed Assets Balance at December 31, 2022 Commercial real estate: CRE non-owner occupied $ 2,032 $ — $ (293) $ — $ — $ 1,739 CRE owner occupied 1,778 3,213 (53) — — 4,938 Multifamily 132 — (7) — — 125 Farmland 695 1,772 (695) — — 1,772 Total commercial real estate loans 4,637 4,985 (1,048) — — 8,574 Consumer: SFR 1-4 1st DT 3,255 1,283 (99) — (219) 4,220 SFR HELOCs and junior liens 3,365 486 (674) (22) — 3,155 Other 61 23 (7) (1) — 76 Total consumer loans 6,681 1,792 (780) (23) (219) 7,451 Commercial and industrial 660 3,030 (114) (50) — 3,526 Construction 120 379 (8) — — 491 Agriculture production 5,373 — (4,094) — — 1,279 Leases — — — — — — Total nonperforming loans 17,471 10,186 (6,044) (73) (219) 21,321 Foreclosed assets 3,441 92 (313) — 219 3,439 Total nonperforming assets $ 20,912 $ 10,278 $ (6,357) $ (73) $ — $ 24,760 (1) Charge-offs and write-downs exclude deposit overdraft charge-offs.
The increase in nonperforming assets during the fourth quarter of 2023 was the result of new nonperforming loans of $6.5 million, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $3.7 million, and net charge-offs of $0.6 million in non-performing loans. 43 TriCo Bancshares 2023 10-K Table of Contents Changes in nonperforming assets during the three months ended December 31, 2022 The following table shows the activity in the balance of nonperforming assets for the quarter ended December 31, 2022: (in thousands) Balance at September 30, 2022 Additions Advances/ Paydowns, net Charge-offs/ Write-downs (1) Transfers to Foreclosed Assets Balance at December 31, 2022 Commercial real estate: CRE non-owner occupied $ 2,032 $ — $ (293) $ — $ — $ 1,739 CRE owner occupied 1,778 3,213 (53) — — 4,938 Multifamily 132 — (7) — — 125 Farmland 695 1,772 (695) — — 1,772 Total commercial real estate loans 4,637 4,985 (1,048) — — 8,574 Consumer: SFR 1-4 1st DT 3,255 1,283 (99) — (219) 4,220 SFR HELOCs and junior liens 3,365 486 (674) (22) — 3,155 Other 61 23 (7) (1) — 76 Total consumer loans 6,681 1,792 (780) (23) (219) 7,451 Commercial and industrial 660 3,030 (114) (50) — 3,526 Construction 120 379 (8) — — 491 Agriculture production 5,373 — (4,094) — — 1,279 Leases — — — — — — Total nonperforming loans 17,471 10,186 (6,044) (73) (219) 21,321 Foreclosed assets 3,441 92 (313) — 219 3,439 Total nonperforming assets $ 20,912 $ 10,278 $ (6,357) $ (73) $ — $ 24,760 (1) Charge-offs and write-downs exclude deposit overdraft charge-offs.
However, due to concerns such as uncertainty in the general economic environment, competition and political uncertainty, loan demand and levels of customer deposits are not certain and forecasted changes in those balances are subject to significant volatility and uncertainty.
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.
Other Accounting Policies and Estimates On an on-going basis, the Company evaluates its estimates, including those that materially affect the financial statements and are related to investments, mortgage servicing rights, fair value measurements, retirement plans, intangible assets and the fair value of acquired assets and liabilities.
Other Accounting Policies and Estimates that are Not Considered Critical On an on-going basis, the Company evaluates its estimates, including those that may materially affect the financial statements and are related to investments, mortgage servicing rights, fair value measurements, retirement plans, intangible assets and the fair value of acquired assets and liabilities.
See the Tables labeled “Allowance for Credit Losses – December 31, 2022 and 2021” at Note 5 in Item 8 of Part II of this report for the components that make up the provision for credit losses for the years ended December 31, 2022 and 2021.
See the Tables labeled “Allowance for Credit Losses – December 31, 2023 and 2022” at Note 5 in Item 8 of Part II of this report for the components that make up the provision for credit losses for the years ended December 31, 2023 and 2022.
Certificates of Deposit in Denominations of $250,000 or More Amounts as of December 31, (dollars in thousands) 2022 2021 Time remaining until maturity: Less than 3 months $ 7,653 $ 12,978 3 months to 6 months 8,284 6,741 6 months to 12 months 17,662 11,451 More than 12 months 12,751 13,482 Total $ 46,350 $ 44,652 46 TriCo Bancshares 2022 10-K Table of Contents Loan maturities Loan demand also affects the Company’s liquidity position.
Certificates of Deposit in Denominations of $250,000 or More Amounts as of December 31, (dollars in thousands) 2023 2022 Time remaining until maturity: Less than 3 months $ 7,653 $ 12,978 3 months to 6 months 8,284 6,741 6 months to 12 months 17,662 11,451 More than 12 months 12,751 13,482 Total $ 46,350 $ 44,652 Loan maturities Loan demand also affects the Company’s liquidity position.
The increase in required provisioning during 2022 was largely attributed to the $10,820,000 in day 1 required reserves from loans acquired in connection with the VRB merger in the first quarter of 2022. Additionally, the Company designated certain loans and leases purchased from VRB as PCD, which required $2,037,000 in additional credit reserves as of the acquisition date.
The 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.
The effective tax rate and the statutory 33 TriCo Bancshares 2022 10-K Table of Contents federal income tax rate are reconciled as follows: Year Ended December 31, 2022 2021 2020 Federal statutory income tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal tax benefit 7.9 7.9 7.7 Tax-exempt interest on municipal obligations (0.7) (0.5) (0.9) Tax-exempt life insurance related income (0.4) (0.5) (0.8) Low income housing and other tax credits (3.7) (2.6) (4.8) Low income housing tax credit amortization 3.6 2.2 4.1 Compensation and benefits (0.2) (0.1) 0.4 Non-deductible merger expenses 0.1 0.1 — Other 0.3 0.6 (0.9) Effective Tax Rate 27.9 % 28.1 % 25.8 % The effective tax rate on income was 27.9%, 28.1%, and 25.8% in 2022, 2021, and 2020, respectively.
The effective tax rate and the statutory federal income tax rate are reconciled as follows: Year Ended December 31, 2023 2022 2021 Federal statutory income tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal tax benefit 7.9 7.9 7.9 Tax-exempt interest on municipal obligations (0.7) (0.7) (0.5) Tax-exempt life insurance related income (0.4) (0.4) (0.5) Low income housing and other tax credits (6.6) (3.7) (2.6) Low income housing tax credit amortization 5.6 3.6 2.2 Compensation and benefits 0.3 (0.2) (0.1) Non-deductible merger expenses — 0.1 0.1 Other (0.1) 0.3 0.6 Effective Tax Rate 27.0 % 27.9 % 28.1 % The effective tax rate on income was 27.0%, 27.9%, and 28.1% in 2023, 2022, and 2021, respectively.
Allowance for Credit Losses The Company’s method for assessing the appropriateness of the allowance for credit losses includes specific allowances for individually analyzed loans, formula allowance factors for pools of credits, and qualitative considerations which include, among other things, current and forecast economic and environmental factors (e.g., interest rates, growth, economic conditions, etc.).
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 Table of Contents forecast economic and environmental factors (e.g., interest rates, growth, economic conditions, etc.).
Therefore, during the year ended December 31, 2022 no allowance for credit losses related to HTM securities was recorded. Allowance for Credit Losses - Unfunded Commitments The estimated credit losses associated with these unfunded lending commitments is calculated using the same models and methodologies noted above and incorporate utilization assumptions at the estimated time of default.
Therefore, during the year ended December 31, 2023 as 2022, no allowance for credit losses related to HTM securities was recorded. 44 TriCo Bancshares 2023 10-K Table of Contents Allowance for Credit Losses - Unfunded Commitments The estimated credit losses associated with these unfunded lending commitments is calculated using the same models and methodologies noted above and incorporate utilization assumptions at the estimated time of default.
The Company is dependent upon the payment of cash dividends by the Bank to service its commitments. Shareholder dividends are expected to continue subject to the Board’s discretion and continuing evaluation of capital levels, earnings, asset quality and other factors.
The principal cash requirements of the Company are dividends on common stock when declared. The Company is dependent upon the payment of cash dividends by the Bank to service its commitments. Shareholder dividends are expected to continue subject to the Board’s discretion and continuing evaluation of capital levels, earnings, asset quality and other factors.
The Components of the Allowance for Credit Losses The following table sets forth the Bank’s allowance for credit losses related to loans as of the dates indicated (dollars in thousands): December 31, (dollars in thousands) 2022 2021 2020 2019 2018 Allowance for credit losses: Qualitative and forecast factor allowance $ 70,777 $ 59,855 $ 61,935 $ 12,146 $ 11,577 Quantitative (Cohort) model allowance reserves 32,489 24,539 28,462 17,529 18,689 Total allowance for credit losses 103,266 84,394 90,397 29,675 30,266 Allowance for individually evaluated loans 2,414 982 1,450 935 2,194 Allowance for PCI loan losses n/a n/a n/a 6 122 Total allowance for credit losses $ 105,680 $ 85,376 $ 91,847 $ 30,616 $ 32,582 Ratio of allowance for credit losses to gross loans 1.64 % 1.74 % 1.93 % 0.71 % 0.81 % Based on the current conditions of the loan portfolio, management believes that the $105,680,000 allowance for credit losses at December 31, 2022 is adequate to absorb probable losses inherent in the Bank’s loan portfolio.
The Components of the Allowance for Credit Losses The following table sets forth the Bank’s allowance for credit losses related to loans as of the dates indicated (dollars in thousands): December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Allowance for credit losses: Qualitative and forecast factor allowance $ 84,291 $ 70,777 $ 59,855 $ 61,935 $ 12,146 Quantitative (Cohort) model allowance reserves 34,139 32,489 24,539 28,462 17,529 Total allowance for credit losses 118,430 103,266 84,394 90,397 29,675 Allowance for individually evaluated loans 3,092 2,414 982 1,450 935 Allowance for PCI loan losses n/a n/a n/a n/a 6 Total allowance for credit losses $ 121,522 $ 105,680 $ 85,376 $ 91,847 $ 30,616 Ratio of allowance for credit losses to gross loans 1.79 % 1.64 % 1.74 % 1.93 % 0.71 % Based on the current conditions of the loan portfolio, management believes that the $121.5 million allowance for credit losses at December 31, 2023 is adequate to absorb probable losses inherent in the Bank’s loan portfolio.
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 28 TriCo Bancshares 2022 10-K Table of Contents 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.
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.
The increase in nonperforming assets during the fourth quarter of 2022 was the result of new nonperforming loans of $10,186,000, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $6,044,000, and net charge-offs of $73,000 in non-performing loans.
The increase in nonperforming assets during the fourth quarter of 2022 was the result of new nonperforming loans of $10.2 million, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $6.0 million, and net charge-offs of $0.1 million in non-performing loans.
The following table summarizes the components of the provision for (benefit to) credit losses during the periods indicated (dollars in thousands): Year ended December 31, (dollars in thousands) 2022 2021 2020 Provision (benefit) to allowance for credit losses $ 17,945 $ (7,165) $ 42,188 Change in reserve for unfunded loan commitments 525 390 625 Total provision for (benefit to) credit losses $ 18,470 $ (6,775) $ 42,813 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.
The following table summarizes the components of the provision for (benefit to) credit losses during the periods indicated (dollars in thousands): Year ended December 31, (dollars in thousands) 2023 2022 2021 Provision for (reversal of) allowance for credit losses $ 22,455 $ 17,945 $ (7,165) Change in reserve for unfunded loan commitments 1,535 525 390 Total provision for (reversal of) credit losses $ 23,990 $ 18,470 $ (6,775) The provision for credit losses is based on management’s evaluation of inherent risks in the loan portfolio and a corresponding analysis of the allowance for credit losses.
Interest income includes proceeds from loans on nonaccrual loans only to the extent cash payments have been received and applied to interest income.
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.
The effective tax rate was greater than the Federal statutory rates of 21% due to the combination of state tax expenses of 7.9% in 2022, 7.9% in 2021, and 7.7% in 2020.
The effective tax rate was greater than the Federal statutory rates of 21% due to the combination of state tax expenses of 7.9%.
These macroeconomic scenarios incorporate variables that have historically been key drivers of increases and decreases in credit losses. These variables include, but are not limited to, changes in environmental conditions, such as California unemployment rates, household debt levels, the pace of change in corporate bond yields, and U.S. gross domestic product.
These macroeconomic scenarios incorporate variables that have historically been key drivers of increases and decreases in credit losses. These variables include, but are not limited to, changes in environmental conditions, such as California unemployment rates, household debt levels, and the pace of change in corporate bond yields. The Company also considers macroeconomic forecasts to estimate the ACL.
The Company recorded a provision for credit losses of $18,470,000 during the year ended December 31, 2022, versus a reversal of credit losses totaling $6,775,000 during the trailing year end.
The 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 following table shows the Company’s loan balances, including net deferred loan fees, as a percentage of total loans at the dates indicated: Year ended December 31, (dollars in thousands) 2022 2021 2020 Commercial real estate 67.6 % 67.2 % 62.0 % Consumer 19.2 % 21.8 % 20.0 % Commercial and industrial, excluding PPP 8.8 % 4.1 % 4.2 % SBA PPP loans — % 1.2 % 6.9 % Construction 3.3 % 4.5 % 6.0 % Agriculture production 1.0 % 1.1 % 0.9 % Leases 0.1 % 0.1 % 0.1 % Total loans 100 % 100 % 100 % Allowance for credit losses 1.64 % 1.74 % 1.93 % At December 31, 2022, loans including net deferred loan costs, totaled $6,450,447,000 which was a 31.2% ($1,533,823,000) increase over the balance at the end of December 31, 2021.
The following table shows the Company’s loan balances, including net deferred loan fees, as a percentage of total loans at the dates indicated: Year ended December 31, (dollars in thousands) 2023 2022 2021 Commercial real estate 64.7 % 67.6 % 67.2 % Consumer 19.3 % 19.2 % 21.8 % Commercial and industrial 8.7 % 8.8 % 5.3 % Construction 5.1 % 3.3 % 4.5 % Agriculture production 2.1 % 1.0 % 1.1 % Leases 0.1 % 0.1 % 0.1 % Total loans 100 % 100 % 100 % Allowance for credit losses 1.79 % 1.64 % 1.74 % 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.
For further details of the change in nonperforming loans during the period ended December 31, 2022 see the Tables, and associated narratives, labeled “Changes in nonperforming assets during the year ended December 31, 2022” and “Changes in nonperforming assets during the three months ended December 31, 2022” under the heading “Asset Quality and Non-Performing Assets ” below.
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 36 TriCo Bancshares 2023 10-K Table of Contents in nonperforming assets during the three months ended December 31, 2023” under the heading “Asset Quality and Non-Performing Assets ” below.
Summary of Average Balances, Yields/Rates and Interest Differential – Yield Tables The following tables present, for the periods indicated, information regarding the Company’s consolidated average assets, liabilities and shareholders’ equity, the amounts of interest income from average earning assets and resulting yields, and the amount of interest expense paid on interest-bearing liabilities. Average loan balances include nonperforming loans.
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 Table of Contents 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.
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): Year ended December 31, 2022 2021 2020 Interest income $ 355,505 $ 277,047 $ 267,184 Interest expense (9,529) (5,508) (9,457) Net interest income (not FTE) 345,976 271,539 257,727 FTE adjustment 1,560 1,071 1,069 Net interest income (FTE) $ 347,536 $ 272,610 $ 258,796 Net interest margin (FTE) 3.88 % 3.58 % 3.96 % Acquired loans discount accretion: Purchased loan discount accretion $ 5,465 $ 8,091 $ 8,171 Effect on average loan yield 0.09 % 0.17 % 0.19 % Effect of purchased loan discount accretion on net interest margin (FTE) 0.06 % 0.11 % 0.13 % Net interest income (FTE) during the year ended December 31, 2022 increased $74,926,000 or 27.5% to $347,536,000 compared against $272,610,000 during the year ended December 31, 2021.
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): Year ended December 31, 2023 2022 2021 Interest income $ 438,354 $ 355,505 $ 277,047 Interest expense (81,677) (9,529) (5,508) Net interest income (not FTE) 356,677 345,976 271,539 FTE adjustment 1,536 1,560 1,071 Net interest income (FTE) $ 358,213 $ 347,536 $ 272,610 Net interest margin (FTE) 3.96 % 3.88 % 3.58 % Acquired loans discount accretion: Purchased loan discount accretion $ 5,651 $ 5,465 $ 8,091 Effect on average loan yield 0.09 % 0.09 % 0.17 % Effect of purchased loan discount accretion on net interest margin (FTE) 0.06 % 0.07 % 0.11 % Net interest income (FTE) during the year ended December 31, 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 Bank has not entered into any material contracts for financial derivative instruments such as futures, swaps, options, etc. Commitments to extend credit were $2,215,159,000 and $1,607,939,000 at December 31, 2022 and 2021, respectively, and represent 34.3% of the total loans outstanding at year-end 2022 versus 32.7% at December 31, 2021.
The Bank has not entered into any material contracts for financial derivative instruments such as futures, swaps, options, etc. Commitments to extend credit were $2.38 billion and $2.22 billion at December 31, 2023 and 2022, respectively, and represent 35.0% of the total loans outstanding at year-end 2023 versus 34.3% at December 31, 2022.
The tangible common equity to tangible assets ratio, a non-GAAP financial measure, was 7.6% at December 31, 2022, down 161 basis points from December 31, 2021, primarily due to a decrease in tangible common equity related to elevated interest rates causing an increase in accumulated other comprehensive loss, partially offset by the retention of earnings. 26 TriCo Bancshares 2022 10-K Table of Contents TRICO BANCSHARES Financial Summary (In thousands, except per share amounts; unaudited) Year ended December 31, 2022 2021 2020 Interest income $ 355,505 $ 277,047 $ 267,184 Interest expense (9,529) (5,508) (9,457) Net interest income 345,976 271,539 257,727 (Provision for) benefit from loan losses (18,470) 6,775 (42,813) Noninterest income 63,046 63,664 55,194 Noninterest expense (216,645) (178,275) (182,758) Income before income taxes 173,907 163,703 87,350 Provision for income taxes (48,488) (46,048) (22,536) Net income $ 125,419 $ 117,655 $ 64,814 Share Data Earnings per share: Basic $ 3.85 $ 3.96 $ 2.17 Diluted $ 3.83 $ 3.94 $ 2.16 Per share: Dividends paid $ 1.10 $ 1.00 $ 0.88 Book value at period end $ 31.39 $ 33.64 $ 31.12 Tangible book value at period end (2) $ 21.76 $ 25.80 $ 23.09 Average common shares outstanding 32,584 29,721 29,917 Average diluted common shares outstanding 32,721 29,882 30,028 Shares outstanding at period end 33,332 29,730 29,727 Financial Ratios During the period: Return on average assets 1.28 % 1.43 % 0.91 % Return on average equity 11.67 % 12.10 % 7.18 % Net interest margin(1) 3.88 % 3.58 % 3.96 % Efficiency ratio 52.97 % 53.18 % 58.40 % Average equity to average assets 11.00 % 11.84 % 12.66 % Dividend payout ratio 28.54 % 25.26 % 40.58 % At period end: Equity to assets 10.54 % 11.61 % 12.11 % Total capital to risk-weighted assets 14.19 % 15.42 % 15.22 % Balance Sheet Data Total investments $ 2,633,269 $ 2,427,885 $ 1,719,102 Total loans 6,450,447 4,916,624 4,763,127 Total assets 9,930,986 8,614,787 7,639,529 Total non-interest bearing deposits 3,502,095 2,979,882 2,581,517 Total deposits 8,329,013 7,367,159 6,505,934 Total other borrowings 264,605 50,087 26,914 Total junior subordinated debt 101,040 58,079 57,635 Total shareholders’ equity 1,046,416 1,000,184 925,114 Total tangible equity (2) $ 725,304 $ 766,943 $ 686,409 (1) Fully taxable equivalent (FTE) (2) Tangible equity is calculated by subtracting Goodwill and Other intangible assets from total shareholders’ equity.
The tangible common equity to tangible assets ratio, a non-GAAP financial measure, was 8.8% at December 31, 2023, up 120 basis points from December 31, 2022, primarily due to an increase in tangible common equity related primarily to the retention of 2023 earnings. 29 TriCo Bancshares 2023 10-K Table of Contents TRICO BANCSHARES Financial Summary (In thousands, except per share amounts; unaudited) Year ended December 31, 2023 2022 2021 Interest income $ 438,354 $ 355,505 $ 277,047 Interest expense (81,677) (9,529) (5,508) Net interest income 356,677 345,976 271,539 (Provision for) benefit from loan losses (23,990) (18,470) 6,775 Noninterest income 61,400 63,046 63,664 Noninterest expense (233,182) (216,645) (178,275) Income before income taxes 160,905 173,907 163,703 Provision for income taxes (43,515) (48,488) (46,048) Net income $ 117,390 $ 125,419 $ 117,655 Share Data Earnings per share: Basic $ 3.53 $ 3.85 $ 3.96 Diluted $ 3.52 $ 3.83 $ 3.94 Per share: Dividends paid $ 1.20 $ 1.10 $ 1.00 Book value at period end $ 34.86 $ 31.39 $ 33.64 Tangible book value at period end (2) $ 25.39 $ 21.76 $ 25.80 Average common shares outstanding 33,267 32,584 29,721 Average diluted common shares outstanding 33,352 32,721 29,882 Shares outstanding at period end 33,268 33,332 29,730 Financial Ratios During the period: Return on average assets 1.19 % 1.28 % 1.43 % Return on average equity 10.65 % 11.67 % 12.10 % Net interest margin(1) 3.96 % 3.88 % 3.58 % Efficiency ratio 55.77 % 52.97 % 53.18 % Average equity to average assets 11.17 % 11.00 % 11.84 % Dividend payout ratio 33.99 % 28.54 % 25.26 % At period end: Equity to assets 11.70 % 10.54 % 11.61 % Total capital to risk-weighted assets 14.70 % 14.19 % 15.42 % Balance Sheet Data Total investments $ 2,305,882 $ 2,633,269 $ 2,427,885 Total loans 6,794,470 6,450,447 4,916,624 Total assets 9,910,089 9,930,986 8,614,787 Total non-interest bearing deposits 2,722,689 3,502,095 2,979,882 Total deposits 7,834,038 8,329,013 7,367,159 Total other borrowings 632,582 264,605 50,087 Total junior subordinated debt 101,099 101,040 58,079 Total shareholders’ equity 1,159,682 1,046,416 1,000,184 Total tangible equity (2) $ 844,688 $ 725,304 $ 766,943 (1) Fully taxable equivalent (FTE) (2) Tangible equity is calculated by subtracting Goodwill and Other intangible assets from total shareholders’ equity.
Nonperforming assets increased during the fourth quarter of 2022 by $3,848,000 (18.4%) to $24,760,000 at December 31, 2022 compared to $20,912,000 at September 30, 2022.
Nonperforming assets increased during the fourth quarter of 2022 by $3.8 million or 18.4% to $24.7 million at December 31, 2022 compared to $20.9 million at September 30, 2022.
As of December 31, 2022 and 2021, the outstanding carrying value of purchased loans that were not acquired in a business combination totaled $167,014,000 and $159,373,000, respectively. 35 TriCo Bancshares 2022 10-K Table of Contents Asset Quality and Nonperforming Assets Nonperforming Assets The following tables set forth the amount of the Bank’s nonperforming assets as of the dates indicated.
As of December 31, 2023 and 2022, the outstanding carrying value of purchased loans that were not acquired in a business combination totaled $159.1 million and $167.0 million, respectively. Asset Quality and Nonperforming Assets Nonperforming Assets The following tables set forth the amount of the Bank’s nonperforming assets as of the dates indicated.
“Asset sensitive” implies that net interest income increases when interest rates rise and decrease when interest rates decrease. “Liability sensitive” implies that net interest income decreases when interest rates rise and increase when interest rates decrease.“Neutral sensitivity” implies that net interest income does not change when interest rates change.
“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 Table of Contents change when interest rates change.
Non-interest Income The following table summarizes the Company’s non-interest income for the periods indicated (dollars in thousands): Year Ended December 31, 2022 2021 2020 ATM and interchange fees $ 26,767 $ 25,356 $ 21,660 Service charges on deposit accounts 16,536 14,013 13,944 Other service fees 4,274 3,570 3,156 Mortgage banking service fees 1,887 1,881 1,855 Change in value of mortgage loan servicing rights 301 (872) (2,634) Total service charges and fees 49,765 43,948 37,981 Asset management and commission income 3,986 3,668 2,989 Increase in cash value of life insurance 2,858 2,775 2,949 Gain on sale of loans 2,342 9,580 9,122 Lease brokerage income 820 746 668 Sale of customer checks 1,167 459 414 Gain on sale of investment securities — — 7 Gain (loss) on marketable equity securities (340) (86) 64 Other 2,448 2,574 1,000 Total other non-interest income 13,281 19,716 17,213 Total non-interest income $ 63,046 $ 63,664 $ 55,194 Non-interest income decreased by $618,000 or 1.0% to $63,046,000 during the twelve months ended December 31, 2022, compared to $63,664,000 during the same period ended December 31, 2021.
Non-interest Income The following table summarizes the Company’s non-interest income for the periods indicated (dollars in thousands): Year Ended December 31, 2023 2022 2021 ATM and interchange fees $ 26,459 $ 26,767 $ 25,356 Service charges on deposit accounts 17,595 16,536 14,013 Other service fees 4,732 4,274 3,570 Mortgage banking service fees 1,808 1,887 1,881 Change in value of mortgage loan servicing rights (506) 301 (872) Total service charges and fees 50,088 49,765 43,948 Asset management and commission income 3,150 3,986 3,668 Increase in cash value of life insurance 4,517 2,858 2,775 Gain on sale of loans 1,166 2,342 9,580 Lease brokerage income 441 820 746 Sale of customer checks 1,383 1,167 459 Loss on sale of investment securities (284) — — Gain (loss) on marketable equity securities 36 (340) (86) Other 903 2,448 2,574 Total other non-interest income 11,312 13,281 19,716 Total non-interest income $ 61,400 $ 63,046 $ 63,664 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.
In March 2022, the Company closed the acquisition of Valley Republic Bancorp. Historical periods prior to March 25, 2022 reflect results of legacy Trico Bancshares operations. Subsequent to closing, results reflect all post-acquisition activity. For further information, refer to Note 2 “Business Combinations” of the Notes to Consolidated Financial Statements.
In March 2022, the Company closed the acquisition of Valley Republic Bancorp. Historical periods prior to March 25, 2022 reflect results of legacy Trico Bancshares operations. Subsequent to closing, results reflect all post-acquisition activity.
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): Year ended December 31, 2022 2021 2020 Average Balance Interest Income/ Expense Rates Earned /Paid Average Balance Interest Income/ Expense Rates Earned /Paid Average Balance Interest Income/ Expense Rates Earned /Paid Assets: Loans $ 5,841,770 $ 282,985 4.84 % $ 4,625,410 $ 225,626 4.88 % $ 4,361,679 $ 223,086 5.11 % PPP Loans 24,590 2,390 9.72 % 250,391 16,643 6.65 % 284,326 10,635 3.74 % Investment securities—taxable 2,459,032 60,499 2.46 % 1,914,788 30,352 1.59 % 1,302,367 28,659 2.20 % Investment securities—nontaxable (1) 190,339 6,759 3.55 % 160,863 4,639 2.88 % 116,717 4,636 3.97 % Total investments 2,649,371 67,258 2.54 % 2,075,651 34,991 1.69 % 1,419,084 33,295 2.35 % Cash at Federal Reserve and other banks 452,300 4,432 0.98 % 663,801 858 0.13 % 467,376 1,237 0.26 % Total interest-earning assets 8,968,031 357,065 3.98 % 7,615,253 278,118 3.65 % 6,532,465 268,253 4.11 % Other assets 803,570 594,420 590,966 Total assets $ 9,771,601 $ 8,209,673 $ 7,123,431 Liabilities and shareholders’ equity: Interest-bearing demand deposits $ 1,720,932 $ 452 0.03 % $ 1,493,922 $ 327 0.02 % $ 1,313,804 332 0.03 % Savings deposits 2,878,189 3,356 0.12 % 2,360,605 1,256 0.05 % 2,015,134 2,595 0.13 % Time deposits 302,619 881 0.29 % 324,636 1,735 0.53 % 397,216 3,958 1.00 % Total interest-bearing deposits 4,901,740 4,689 0.10 % 4,179,163 3,318 0.08 % 3,726,154 6,885 0.18 % Other borrowings 33,410 421 1.26 % 43,236 22 0.05 % 28,863 17 0.06 % Junior subordinated debt 91,138 4,419 4.85 % 57,844 2,168 3.75 % 57,426 2,555 4.45 % Total interest-bearing liabilities 5,026,288 9,529 0.19 % 4,280,243 5,508 0.13 % 3,812,443 9,457 0.25 % Noninterest-bearing deposits 3,492,713 2,837,745 2,289,168 Other liabilities 178,163 119,471 119,710 Shareholders’ equity 1,074,437 972,214 902,110 Total liabilities and shareholders’ equity $ 9,771,601 $ 8,209,673 $ 7,123,431 Net interest spread (2) 3.79 % 3.52 % 3.86 % Net interest income and interest margin (3) $ 347,536 3.88 % $ 272,610 3.58 % $ 258,796 3.96 % (1) The fully-taxable equivalent (FTE) adjustment for interest income of non-taxable investment securities was $1,560, $1,071, and $1,069 for the years ended December 31, 2022, 2021 and 2020, respectively.
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): Year ended December 31, 2023 2022 2021 Average Balance Interest Income/ Expense Rates Earned /Paid Average Balance Interest Income/ Expense Rates Earned /Paid Average Balance Interest Income/ Expense Rates Earned /Paid Assets: Loans $ 6,555,886 $ 356,698 5.44 % $ 5,841,770 $ 282,985 4.84 % $ 4,625,410 $ 225,626 4.88 % PPP Loans 1,360 12 0.88 % 24,590 2,390 9.72 % 250,391 16,643 6.65 % Investment securities—taxable 2,272,301 75,203 3.31 % 2,459,032 60,499 2.46 % 1,914,788 30,352 1.59 % Investment securities—nontaxable (1) 181,766 6,656 3.66 % 190,339 6,759 3.55 % 160,863 4,639 2.88 % Total investments 2,454,067 81,859 3.34 % 2,649,371 67,258 2.54 % 2,075,651 34,991 1.69 % Cash at Federal Reserve and other banks 26,469 1,321 4.99 % 452,300 4,432 0.98 % 663,801 858 0.13 % Total interest-earning assets 9,037,782 439,890 4.87 % 8,968,031 357,065 3.98 % 7,615,253 278,118 3.65 % Other assets 832,407 803,570 594,420 Total assets $ 9,870,189 $ 9,771,601 $ 8,209,673 Liabilities and shareholders’ equity: Interest-bearing demand deposits $ 1,709,930 $ 11,190 0.65 % $ 1,720,932 $ 452 0.03 % $ 1,493,922 $ 327 0.02 % Savings deposits 2,805,424 31,444 1.12 % 2,878,189 3,356 0.12 % 2,360,605 1,256 0.05 % Time deposits 473,688 12,453 2.63 % 302,619 881 0.29 % 324,636 1,735 0.53 % Total interest-bearing deposits 4,989,042 55,087 1.10 % 4,901,740 4,689 0.10 % 4,179,163 3,318 0.08 % Other borrowings 430,736 19,712 4.58 % 33,410 421 1.26 % 43,236 22 0.05 % Junior subordinated debt 101,064 6,878 6.81 % 91,138 4,419 4.85 % 57,844 2,168 3.75 % Total interest-bearing liabilities 5,520,842 81,677 1.48 % 5,026,288 9,529 0.19 % 4,280,243 5,508 0.13 % Noninterest-bearing deposits 3,068,839 3,492,713 2,837,745 Other liabilities 178,072 178,163 119,471 Shareholders’ equity 1,102,436 1,074,437 972,214 Total liabilities and shareholders’ equity $ 9,870,189 $ 9,771,601 $ 8,209,673 Net interest spread (2) 3.39 % 3.79 % 3.52 % Net interest income and interest margin (3) $ 358,213 3.96 % $ 347,536 3.88 % $ 272,610 3.58 % (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.
Additionally, changes in factors and inputs may move independently of one another, such that improvement in one or certain factors may offset deterioration in others. Management believes that the ACL was adequate as of December 31, 2022.
Additionally, changes in factors and inputs may move independently of one another, such that improvement in one or certain factors may offset deterioration in others.
The increased amount of net interest income reflects growth in both total average loan and investment balances outstanding and the correlated yields, during 2022. Average loan balances, inclusive of acquisitions, increased by $1,496,541,000 or 30.4% from December 31, 2021. The yield on interest earning assets was 3.98% and 3.65% for the years ended December 31, 2022 and 2021, respectively.
The increased amount of net interest income reflects growth in total average loan balances outstanding and the correlated yields in both loans and investments during 2023. Average loan balances increased by $691 million or 11.7% from December 31, 2022. Meanwhile, the yield on interest earning assets was 4.87% and 3.98% for the years ended December 31, 2023 and 2022, respectively.
The net interest margin expansion was driven by the higher rate environment driving an increase in loan and lease and investment security yields, partially offset by higher cost of funds and the impact of lower accelerated PPP loan fees recognized upon forgiveness payments from the SBA in 2022.
The 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.
Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings.
Credit-related impairment is recognized as an allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Both the allowance for credit losses and the adjustment to net income may be reversed if conditions change.
They are then specifically reviewed and evaluated individually by management for loss potential by evaluating sources of repayment, including collateral as applicable, and a specified allowance for credit losses is established where necessary. By definition, any loan that management has placed on non-accrual is required to be individually evaluated, however, not all individually evaluated loans need be placed on non-accrual.
They are then specifically reviewed and evaluated individually by management for loss potential by evaluating sources of repayment, including collateral as applicable, and a specified allowance for credit losses is established where necessary.
The costs of total interest bearing liabilities decreased 12 basis points to 0.13% during the year ended December 31, 2021, as compared to 0.25% for the year ended December 31, 2020. During the same period, costs associated with interest bearing deposits decreased by 10 basis points to 0.08% as compared to 0.18% in the prior year.
The costs of total interest bearing liabilities increased 129 basis points to 1.48% during the year ended December 31, 2023, as compared to 0.19% for the year ended December 31, 2022. During the same period, costs associated with interest bearing deposits increased by 100 basis points to 1.10% as compared to 0.10% in the prior year.
Nonperforming assets decreased by $8,184,000 (24.8%) to $24,760,000 at December 31, 2022 from $32,944,000 at December 31, 2021.
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.
As of December 31, 2022, the Company's HTM investment portfolio had a carrying value of approximately $160,983,000 and was comprised of $154,830,000 in obligations backed by U.S. government agencies and $6,153,000 in obligations of states and political subdivisions.
As of December 31, 2023, the Company's HTM investment portfolio had a carrying value of approximately $133.5 million and was comprised of $130.8 million in obligations backed by U.S. government agencies and $2.7 million in obligations of states and political subdivisions.
Commitments related to the Bank’s deposit overdraft privilege product totaled $126,634,000 and $125,670,000 at December 31, 2022 and 2021, respectively.
Commitments related to the Bank’s deposit overdraft privilege product totaled $121.5 million and $126.6 million at December 31, 2023 and 2022, respectively.
Therefore, the shares are considered as restricted investment securities. Management periodically evaluates FHLB stock for other-than-temporary impairment. Management’s determination of whether these investments are impaired is based on its assessment of the ultimate recoverability of cost rather than by recognizing temporary declines in value.
Management’s determination of whether these investments are impaired is based on its assessment of the ultimate recoverability of cost rather than by recognizing temporary declines in value.
Results of Operations Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances for the Company. Within Management’s Discussion and Analysis of Financial Condition and Results of Operations, certain performance measures including interest income, net interest income, net interest yield, and efficiency ratio are generally presented on a fully tax-equivalent (FTE) basis.
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 Table of Contents basis.
“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: December 31, (dollars in thousands) 2022 2021 2020 2019 2018 Performing nonaccrual loans $ 19,543 $ 27,713 $ 22,896 $ 11,266 $ 22,689 Nonperforming nonaccrual loans 1,770 2,637 3,968 5,579 4,805 Total nonaccrual loans 21,313 30,350 26,864 16,845 27,494 Loans 90 days past due and still accruing 8 — — 19 — Total nonperforming loans 21,321 30,350 26,864 16,864 27,494 Foreclosed assets 3,439 2,594 2,844 2,541 2,280 Total nonperforming assets $ 24,760 $ 32,944 $ 29,708 $ 19,405 $ 29,774 U.S. government, including its agencies and its government-sponsored agencies, guaranteed portion of nonperforming loans $ 225 $ 756 $ 811 $ 992 $ 1,173 Nonperforming assets to total assets 0.25 % 0.38 % 0.39 % 0.30 % 0.47 % Nonperforming loans to total loans 0.33 % 0.61 % 0.56 % 0.39 % 0.68 % Allowance for credit losses to nonperforming loans 516 % 281 % 342 % 182 % 119 % Changes in nonperforming assets during the year ended December 31, 2022 The following table shows the activity in the balance of nonperforming assets for the year ended December 31, 2022: (in thousands) Balance at December 31, 2021 Additions Advances/ Paydowns, net Charge-offs/ Write-downs Transfers to Foreclosed Assets Balance at December 31, 2022 Commercial real estate: CRE non-owner occupied $ 7,899 $ 2,214 $ (8,374) $ — $ — $ 1,739 CRE owner occupied 5,036 3,861 (3,675) — (284) 4,938 Multifamily 4,457 — (4,332) — — 125 Farmland 3,020 2,498 (3,139) (294) (313) 1,772 Total commercial real estate loans 20,412 8,573 (19,520) (294) (597) 8,574 Consumer: SFR 1-4 1st DT 3,596 2,005 (1,003) — (378) 4,220 SFR HELOCs and junior liens 3,801 2,578 (2,827) (22) (375) 3,155 Other 71 164 (35) (124) — 76 Total consumer loans 7,468 4,747 (3,865) (146) (753) 7,451 Commercial and industrial 2,415 3,741 (1,933) (697) — 3,526 Construction 55 464 (28) — — 491 Agriculture production — 5,373 (4,094) — — 1,279 Leases — — — — — — Total nonperforming loans 30,350 22,898 (29,440) (1,137) (1,350) 21,321 Foreclosed assets 2,594 203 (708) — 1,350 3,439 Total nonperforming assets $ 32,944 $ 23,101 $ (30,148) $ (1,137) $ — $ 24,760 The table above does not include deposit overdraft charge-offs.
“Performing non-accrual loans” are loans that may be current for both principal and interest payments, or are less than 90 days past due, but for which payment in full of both 40 TriCo Bancshares 2023 10-K Table of Contents principal and interest is not expected, and are not well secured and in the process of collection: December 31, (dollars in thousands) 2023 2022 2021 2019 2018 Performing nonaccrual loans $ 25,380 $ 19,543 $ 27,713 $ 22,896 $ 11,266 Nonperforming nonaccrual loans 6,501 1,770 2,637 3,968 5,579 Total nonaccrual loans 31,881 21,313 30,350 26,864 16,845 Loans 90 days past due and still accruing 10 8 — — 19 Total nonperforming loans 31,891 21,321 30,350 26,864 16,864 Foreclosed assets 2,705 3,439 2,594 2,844 2,541 Total nonperforming assets $ 34,596 $ 24,760 $ 32,944 $ 29,708 $ 19,405 U.S. government, including its agencies and its government-sponsored agencies, guaranteed portion of nonperforming loans $ 877 $ 225 $ 756 $ 811 $ 992 Nonperforming assets to total assets 0.35 % 0.25 % 0.38 % 0.39 % 0.30 % Nonperforming loans to total loans 0.47 % 0.33 % 0.61 % 0.56 % 0.39 % Allowance for credit losses to nonperforming loans 381 % 516 % 281 % 342 % 182 % 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, 2022 Additions Advances/ Paydowns, net Charge-offs/ Write-downs Transfers to Foreclosed Assets Balance at December 31, 2023 Commercial real estate: CRE non-owner occupied $ 1,739 $ 1,268 $ (983) $ — $ — $ 2,024 CRE owner occupied 4,938 15,884 (13,142) (3,636) (50) 3,994 Multifamily 125 — (125) — — — Farmland 1,772 14,843 (2,131) — — 14,484 Total commercial real estate loans 8,574 31,995 (16,381) (3,636) (50) 20,502 Consumer: SFR 1-4 1st DT 4,220 943 (2,247) — (105) 2,811 SFR HELOCs and junior liens 3,155 1,979 (1,496) (67) — 3,571 Other 76 345 (134) (182) — 105 Total consumer loans 7,451 3,267 (3,877) (249) (105) 6,487 Commercial and industrial 3,526 9,014 (6,148) (3,879) — 2,513 Construction 491 — (424) — — 67 Agriculture production 1,279 4,340 (3,298) — — 2,321 Leases — — — — — — Total nonperforming loans 21,321 48,616 (30,128) (7,764) (155) 31,890 Foreclosed assets 3,439 65 (323) (631) 155 2,705 Total nonperforming assets $ 24,760 $ 48,681 $ (30,451) $ (8,395) $ — $ 34,595 The table above does not include deposit overdraft charge-offs.
Because the Company may reprice its transaction deposits at will, transaction deposits may or may not reprice immediately with changes in interest rates. Due to the limitations of gap analysis, as described above, the Company does not actively use gap analysis in managing interest rate risk.
Due to the limitations of gap analysis, as described above, the Company does not actively use gap analysis in managing interest rate risk.
Depending on economic conditions, interest rate levels, and a variety of other conditions, proceeds from the sale or maturity of investment securities may be used to fund loans, or reduce short-term borrowings.
Depending on economic conditions, interest rate levels, and a variety of other conditions, proceeds from the sale or maturity of investment securities may be used to fund loans, or reduce short-term borrowings. At December 31, 2023, we believe the Company has sufficient liquidity and capital resources to meet its cash flow obligations over the foreseeable future.
Other non-interest income increased $1,574,000 during the twelve months ended December 31, 2021, largely attributed to an increase of $804,000 in the change of fair value of non-readily marketable equity investments and a $204,000 increase in proceeds from life insurance, respectively, as compared to the trailing 12 months ended. 32 TriCo Bancshares 2022 10-K Table of Contents Non-interest Expense The following table summarizes the Company’s other non-interest expense for the periods indicated (dollars in thousands): Year Ended December 31, 2022 2021 2020 Base salaries, net of deferred loan origination costs $ 84,861 $ 69,844 $ 70,164 Incentive compensation 17,908 14,957 10,022 Benefits and other compensation costs 27,083 21,550 31,935 Total salaries and benefits expense 129,852 106,351 112,121 Occupancy 15,493 14,910 14,528 Data processing and software 14,660 13,985 13,504 Equipment 5,733 5,358 5,704 Intangible amortization 6,334 5,464 5,723 Advertising 3,694 2,899 2,827 ATM and POS network charges 6,984 6,040 5,433 Professional fees 4,392 3,657 3,222 Telecommunications 2,298 2,253 2,601 Regulatory assessments and insurance 3,142 2,581 1,594 Merger and acquisition expenses 6,253 1,523 — Postage 1,147 710 1,068 Operational losses 1,000 964 1,168 Courier service 2,013 1,214 1,414 Gain on sale or acquisition of foreclosed assets (481) (233) (234) (Gain) loss on disposal of fixed assets (1,070) (439) 67 Other miscellaneous expense 15,201 11,038 12,018 Total other non-interest expense 86,793 71,924 70,637 Total non-interest expense $ 216,645 $ 178,275 $ 182,758 Average full-time equivalent staff 1,169 1,039 1,093 Non-interest expense increased by $38,370,000 (21.5%) to $216,645,000 during the year ended December 31, 2022 as compared to $178,275,000 for the trailing twelve month period.
As an offset, increases in interest rates during 2022 led to significant declines in mortgage lending related activity, resulting in a decrease of $7.2 million in gain from the sale of loans, as compared to the trailing year then ended. 37 TriCo Bancshares 2023 10-K Table of Contents Non-interest Expense The following table summarizes the Company’s other non-interest expense for the periods indicated (dollars in thousands): Year Ended December 31, 2023 2022 2021 Base salaries, net of deferred loan origination costs $ 94,564 $ 84,861 $ 69,844 Incentive compensation 15,557 17,908 14,957 Benefits and other compensation costs 25,674 27,083 21,550 Total salaries and benefits expense 135,795 129,852 106,351 Occupancy 16,135 15,493 14,910 Data processing and software 18,933 14,660 13,985 Equipment 5,644 5,733 5,358 Intangible amortization 6,118 6,334 5,464 Advertising 3,531 3,694 2,899 ATM and POS network charges 7,080 6,984 6,040 Professional fees 7,358 4,392 3,657 Telecommunications 2,547 2,298 2,253 Regulatory assessments and insurance 5,276 3,142 2,581 Merger and acquisition expenses — 6,253 1,523 Postage 1,236 1,147 710 Operational losses 2,444 1,000 964 Courier service 1,851 2,013 1,214 Gain on sale or acquisition of foreclosed assets (133) (481) (233) Loss (gain) loss on disposal of fixed assets 23 (1,070) (439) Other miscellaneous expense 19,344 15,201 11,038 Total other non-interest expense 97,387 86,793 71,924 Total non-interest expense $ 233,182 $ 216,645 $ 178,275 Average full-time equivalent staff 1,214 1,169 1,039 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.
Management believes that tangible equity is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy. Tangible book value is calculated by dividing tangible equity by shares outstanding at period end. As TriCo Bancshares has not commenced any business operations independent of the Bank, the following discussion pertains primarily to the Bank.
Management believes that tangible equity is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy. Tangible book value is calculated by dividing tangible equity by shares outstanding at period end. See tables below for further details.
In this table transaction deposits, which may be repriced at will by the Company, have been included in the less than 3-month category. The inclusion of all of the transaction deposits in the less than 3-month repricing category causes the Company to appear liability sensitive.
The following interest rate sensitivity table shows the Company’s repricing gaps as of December 31, 2023. In this table transaction deposits, which may be repriced at will by the Company, have been included in the less than 3-month category.
The presentation of interest income and net interest income on a FTE basis is a common practice within the banking industry.
Within Management’s Discussion and Analysis of Financial Condition and Results of Operations, interest income and net interest income may be presented on a fully tax-equivalent (FTE) basis. The presentation of interest income and net interest income on a FTE basis is a common practice within the banking industry.
The items noted above resulted in an effective combined Federal and State income tax rate that differed from the combined Federal and State statutory income tax rate of approximately 29.6% during the three years ended 2022, 2021 and 2020. Financial Condition Restricted Equity Securities Restricted equity securities were $17,250,000 at December 31, 2022 and December 31, 2021.
The low-income housing tax credits and the equity compensation excess tax benefits represent direct reductions in tax expense. The items noted above resulted in an effective combined Federal and State income tax rate that differed from the combined Federal and State statutory income tax rate of approximately 29.6% during the three years ended 2023, 2022 and 2021.
Interest rate sensitivity gaps are measured as the difference between the volumes of assets and liabilities in the Company’s current portfolio that are subject to repricing at various time horizons. 44 TriCo Bancshares 2022 10-K Table of Contents The following interest rate sensitivity table shows the Company’s repricing gaps as of December 31, 2022.
Interest rate sensitivity management focuses on the maturity of assets and liabilities and their repricing during periods of changes in market interest rates. Interest rate sensitivity gaps are measured as the difference between the volumes of assets and liabilities in the Company’s current portfolio that are subject to repricing at various time horizons.
The Bank makes loans to borrowers whose applications include a sound purpose, a viable repayment source and a plan of repayment established at inception and generally backed by a secondary source of repayment. 34 TriCo Bancshares 2022 10-K Table of Contents Loan Portfolio Composition The following table shows the Company’s loan balances, including net deferred loan fees, at the dates indicated: Year ended December 31, (dollars in thousands) 2022 2021 2020 Commercial real estate $ 4,359,083 $ 3,306,054 $ 2,951,902 Consumer 1,240,743 1,071,551 952,108 Commercial and industrial, excluding PPP 568,319 198,208 199,557 SBA PPP loans 1,602 61,147 326,770 Construction 211,560 222,281 284,842 Agriculture production 61,414 50,811 44,164 Leases 7,726 6,572 3,784 Total loans $ 6,450,447 $ 4,916,624 $ 4,763,127 Allowance for credit losses $ (105,680) $ (85,376) $ (91,847) During the year ended 2022, the Company acquired loans totaling $773,390,000 in connection with the merger with VRB in March of 2022, inclusive of approximately $68,513,000 in loans with credit deterioration.
Loan Portfolio Composition 39 TriCo Bancshares 2023 10-K Table of Contents The following table shows the Company’s loan balances, including net deferred loan fees, at the dates indicated: Year ended December 31, (dollars in thousands) 2023 2022 2021 Commercial real estate 4,394,802 $ 4,359,083 $ 3,306,054 Consumer 1,313,268 1,240,743 1,071,551 Commercial and industrial, excluding PPP 585,319 568,319 198,208 SBA PPP loans 1,136 1,602 61,147 Construction 347,198 211,560 222,281 Agriculture production 144,497 61,414 50,811 Leases 8,250 7,726 6,572 Total loans $ 6,794,470 $ 6,450,447 $ 4,916,624 Allowance for credit losses $ (121,522) $ (105,680) $ (85,376) The Company did not purchase any loans during 2023.
Net interest income (FTE) during the year ended December 31, 2021 increased $13,814,000 or 5.3% to $272,610,000 compared against $258,796,000 during the year ended December 31, 2020. The increase amount of net interest income reflects growth in total average loan balances outstanding during 2021, which increased by $229,796,000 or 4.9% from December 31, 2020.
Net interest income (FTE) during the year ended December 31, 2022 increased $74.9 million or 27.5% to $347.5 million compared against $272.6 million during the year ended December 31, 2021. The increased amount of net interest income reflects growth in both total average loan and investment balances outstanding and the correlated yields, during 2022.
Net cash used by investing activities, excluding cash acquired from VRB, totaled $1,149,582,000 in 2022. Net increases in loan balances from both originations and purchases used approximately $761,357,000 of cash, while purchases of investment securities, net of calls and maturities, used approximately $392,806,000 of cash. Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding.
Net cash from investing activities totaled $28.6 million in 2023. Net increases in loan balances from both originations and purchases used approximately $345.9 million of cash, while proceeds from the maturity and sales of investment securities, net of purchases, provided approximately $385.6 million of cash. Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding.
These increases in tax expense were partially offset by Federal tax-exempt interest income of $5,462,000, $3,069,000, and $3,566,000, respectively, Federal and State tax-exempt income of $3,167,000, $3,478,000, and $3,447,000, respectively, from increase in cash value and gain on death benefit of life insurance, low income housing tax credits and losses, net of amortization of $192,000, $620,000, and $619,000, respectively, and equity compensation excess tax benefits, net of non-deductible compensation of $1,966,000, $1,495,000, and $403,000, respectively.
The impact of Federal and state tax expenses were partially offset by Federal tax-exempt interest income of $5.6 million, $5.5 million, and $3.1 million, respectively, Federal and State tax-exempt income of $3.1 million, $3.2 million, and $3.5 million, respectively, from increase in cash value and gain on death benefit of life insurance, and low income housing tax credits and losses, net of amortization of $1.5 million, $0.2 million, and $0.6 million, respectively.
The Company recorded a reversal of credit loses of $6,775,000 during the year ended December 31, 2021, versus a provision for credit losses totaling $42,813,000 during the trailing year end.
The 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 following table shows the repurchases made by the Company during 2022 under the 2021 Plan: Period Total number of shares purchased Average price paid per share Maximum number of shares remaining that may yet be purchased under the 2021 Plan January 1, 2022 - December 31, 2022 576,881 $41.67 1,359,802 Market Risk Management Overview.
The following table shows the repurchases made by the Company during 2023 under the 2021 Plan: 47 TriCo Bancshares 2023 10-K Table of Contents Period Total number of shares purchased Average price paid per share Maximum number of shares remaining that may yet be purchased under the 2021 Plan January 1, 2023 - December 31, 2023 150,000 $46.50 1,209,802 We repurchased no shares of the Company's common stock during the quarter ended December 31, 2023.

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