# Trico Bancshares /: Form 10-Q for the period ended Sep 30, 2024

- Company: [Trico Bancshares /](/companies/tcbk.md) (CIK 356171)
- Form: 10-Q
- Filed: 2024-11-07
- Accepted by EDGAR: Nov 7, 2024, 16:33 ET
- Period: 2024-09-30
- Accession: 0000356171-24-000133
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/356171/000035617124000133/tcbk-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/356171/000035617124000133/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $12.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $38.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $10.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $30.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $29.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $85.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.88 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $2.58 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.88 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $2.59 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 33,137,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 33,251,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $85.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $3.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $32.8m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $13.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $320.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-09-30 | $9.82bn | us-gaap:Assets |
| Total liabilities | at 2024-09-30 | $8.58bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $1.24bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 77,405 characters.

### FORWARD-LOOKING STATEMENTS

### Cautionary Statements Regarding Forward-Looking Information

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the conditions of the United States economy in general and the strength of the local economies in which we conduct operations; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit or changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; the impacts of inflation, interest rate, market and monetary fluctuations on the Company's business condition and financial operating results; the impact of changes in financial services industry policies, laws and regulations; regulatory restrictions affecting our ability to successfully market and price our products to consumers; the risks related to the development, implementation, use and management of emerging technologies, including artificial intelligence and machine learning; extreme weather, natural disasters and other catastrophic events that may or may not be caused by climate change and their effects on the Company's customers and the economic and business environments in which the Company operates; the impact of a slowing U.S. economy, decreases in housing and commercial real estate prices, and potentially increased unemployment on the performance of our loan portfolio, the market value of our investment securities and possible other-than-temporary impairment of securities held by us due to changes in credit quality or rates; the availability of, and cost of, sources of funding and the demand for our products; adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, commodities prices, inflationary pressures and labor shortages on the economic recovery and our business; the impacts of international hostilities, wars, terrorism or geopolitical events; adverse developments in the financial services industry generally such as the recent bank failures and any related impact on depositor behavior or investor sentiment; risks related to the sufficiency of liquidity; the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital; the costs or effects of mergers, acquisitions or dispositions we may make, as well as whether we are able to obtain any required governmental approvals in connection with any such activities, or identify and complete favorable transactions in the future, and/or realize the anticipated financial and business benefits; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the negative impact on our reputation and profitability in the event customers experience economic harm or in the event that regulatory violations are identified; the ability to execute our business plan in new markets; the future operating or financial performance of the Company, including our outlook for future growth and changes in the level and direction of our nonperforming assets and charge-offs; the appropriateness of the allowance for credit losses, including the assumptions made under our current expected credit losses model; any deterioration in values of California real estate, both residential and commercial; the effectiveness of the Company's asset management activities managing the mix of earning assets and in improving, resolving or liquidating lower-quality assets; the effect of changes in the financial performance and/or condition of our borrowers; changes in accounting standards and practices; changes in consumer spending, borrowing and savings habits; our ability to attract and maintain deposits and other sources of liquidity; the effects of changes in the level or cost of checking or savings account deposits on our funding costs and net interest margin; increasing noninterest expense and its impact on our financial performance; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional competitors including retail businesses and technology companies; the challenges of attracting, integrating and retaining key employees; the vulnerability of the Company's operational or security systems or infrastructure, the systems of third-party vendors or other service providers with whom the Company contracts, and the Company's customers to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and data/security breaches and the cost to defend against and respond to such incidents; the impact of the 2023 cyber security ransomware incident, including the pending litigation, on our operations and reputation; increased data security risks due to work from home arrangements and email vulnerability; failure to safeguard personal information, and any resulting litigation; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the transition from the LIBOR to new interest rate benchmarks; the emergence or continuation of widespread health emergencies or pandemics; the Company’s potential judgments, orders, settlements, penalties, fines and reputational damage resulting from pending or future litigation and regulatory investigations, proceedings and enforcement actions; and our ability to manage the risks involved in the foregoing. There can be no assurance that future developments affecting us will be the same as those anticipated by management. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2023, which has been filed with the Securities and Exchange Commission (the “SEC”) and all subsequent filings with the SEC under Sections 13(a), 13(c), 14, and 15(d) of the Securities Act of 1934, as amended. Such filings are also available in the “Investor Relations” section of our website, *https://www.tcbk.com/investor-relations* and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. We undertake no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

### General

As TriCo Bancshares (referred to in this report as “we”, “our” or the “Company”) has not commenced any business operations independent of Tri Counties Bank (the “Bank”), the following discussion pertains primarily to the Bank. Average balances, including such balances used in calculating certain financial ratios, are generally comprised of average daily balances for the Company. Within Management’s Discussion and Analysis of Financial Condition and Results of Operations, interest income, net interest income, and net interest yield are generally presented on a FTE basis. The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provides additional clarity in assessing its results, and the presentation of these measures on a FTE basis is a common practice within the banking industry. Interest income and net interest income are shown on a non-FTE basis in the Part I - Financial Information section of this Form 10-Q, and a reconciliation of the FTE and non-FTE presentations is provided below in the discussion of net interest income.

### Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those that materially affect the financial statements and are related to the adequacy of the allowance for loan losses, investments, mortgage servicing rights, fair value measurements, retirement plans and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A detailed discussion related to the Company’s accounting policies including those related to estimates on the allowance for credit losses related to loans and investment securities, and impairment of intangible assets, can be found in Note 1 of the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2023.

### Geographical Descriptions

For the purpose of describing the geographical location of the Company’s operations, the Company has defined northern California as that area of California north of, and including, Stockton to the east and San Jose to the west; central California as that area of the state south of Stockton and San Jose, to and including, Bakersfield to the east and San Luis Obispo to the west; and southern California as that area of the state south of Bakersfield and San Luis Obispo.

### Financial Highlights

Performance highlights and other developments for the Company as of or for the three and nine months ended September 30, 2024, included the following:

- Net income was $29.1 million or $0.88 per diluted share as compared to $29.0 million or $0.87 per diluted share in the trailing quarter
- Deposit balances decreased $13.1 million or 0.7% (annualized) from the trailing quarter and have increased $27.4 million or 0.3% (annualized) from the same quarter of the prior year
- Average yield on earning assets was 5.26%, an increase of 2 basis points over the 5.24% in the trailing quarter
- Net interest margin (FTE) was 3.71% in the recent quarter, an increase of 3 basis points over 3.68% in the trailing quarter
- Non-interest bearing deposits averaged 31.7% of total deposits during the quarter
- The average cost of total deposits was 1.52%, an increase of 7 basis points as compared to 1.45% in the trailing quarter, and an increase of 66 basis points from 0.86% in the same quarter of the prior year; the Company's total cost of deposits have increased 148 basis points since FOMC rate actions began in March 2022, which translates to a cycle-to-date deposit beta of 31.2%
- For the quarter ended September 30, 2024, the Company’s return on average assets was 1.20%, while the return on average equity was 9.52%; for the trailing quarter ended June 30, 2024, the Company’s return on average assets was 1.19%, while the return on average equity was 9.99%
- Diluted earnings per share were $0.88 for the third quarter of 2024, compared to $0.87 for the trailing quarter and $0.92 during the third quarter of 2023
- The loan to deposit ratio decreased to 83.2% as of September 30, 2024, as compared to 83.8% for the trailing quarter end, as a result of loan contraction during the quarter
- The efficiency ratio was 60.02% for the quarter ended September 30, 2024, as compared to 59.61% for the trailing quarter
- The provision for credit losses was approximately $0.2 million during the quarter ended September 30, 2024, as compared to $0.4 million during the trailing quarter
- The allowance for credit losses (ACL) to total loans was 1.85% as of September 30, 2024, compared to 1.83% as of the trailing quarter end, and 1.73% as of September 30, 2023. Non-performing assets to total assets were 0.45% on September 30, 2024, as compared to 0.36% as of June 30, 2024, and 0.33% at September 30, 2023. At September 30, 2024, the ACL represented 297% of non-performing loans

### Financial Summary

(In thousands, except per share amounts; unaudited)

|  | Three months ended September 30, 2024 | 2023 | Nine months ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net interest income | $82,611 | $88,123 | $247,344 | $270,060 |
| Provision for credit losses | (220) | (4,155) | (4,930) | (18,000) |
| Non-interest income | 16,495 | 15,984 | 48,132 | 45,360 |
| Non-interest expense | (59,487) | (57,878) | (174,330) | (172,915) |
| Provision for income taxes | (10,348) | (11,484) | (30,382) | (33,190) |
| Net income | $29,051 | $30,590 | $85,834 | $91,315 |
| Per Share Data: |  |  |  |  |
| Basic earnings per share | $0.88 | $0.92 | $2.59 | $2.75 |
| Diluted earnings per share | $0.88 | $0.92 | $2.58 | $2.74 |
| Dividends paid | $0.33 | $0.30 | $0.99 | $0.90 |
| Book value at period end |  |  | $37.55 | $32.18 |
| Average common shares outstanding | 32,993 | 33,263 | 33,119 | 33,259 |
| Average diluted common shares outstanding | 33,137 | 33,319 | 33,251 | 33,356 |
| Shares outstanding at period end |  |  | 33,001 | 33,263 |
| At period end: |  |  |  |  |
| Loans |  |  | $6,683,891 | $6,708,666 |
| Total investment securities |  |  | $2,116,469 | $2,333,162 |
| Total assets |  |  | $9,823,890 | $9,897,006 |
| Total deposits |  |  | $8,037,091 | $8,009,643 |
| Other borrowings |  |  | $266,767 | $537,975 |
| Shareholders’ equity |  |  | $1,239,015 | $1,070,401 |
| Financial Ratios: |  |  |  |  |
| During the period: |  |  |  |  |
| Return on average assets (annualized) | 1.20% | 1.23% | 1.17% | 1.24% |
| Return on average equity (annualized) | 9.52% | 10.91% | 9.67% | 11.06% |
| Net interest margin(1) (annualized) | 3.71% | 3.88% | 3.69% | 4.01% |
| Efficiency ratio | 60.02% | 55.59% | 59.00% | 54.82% |
| Average equity to average assets | 12.56% | 11.27% | 12.14% | 11.19% |
| At end of period: |  |  |  |  |
| Equity to assets |  |  | 12.61% | 10.82% |
| Total capital to risk-adjusted assets |  |  | 15.56% | 14.51% |

(1) Fully Taxable Equivalent (FTE)

### Results of Operations

The following discussion and analysis is designed to provide a better understanding of the significant changes and trends related to the Company and the Bank’s financial condition, operating results, asset and liability management, liquidity and capital resources and should be read in conjunction with the Condensed Consolidated Financial Statements of the Company and the Notes thereto located at Item 1 of this report.

### Net Interest Income

The Company’s primary source of revenue is net interest income, or the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Following is a summary of the components of FTE net income for the periods indicated.

*(in thousands)*

|  | Three months ended September 30, 2024 | June 30, 2024 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $117,347 | $117,032 | $315 | 0.3% |
| Interest expense | (34,736) | (35,035) | 299 | (0.9)% |
| Fully tax-equivalent adjustment (FTE) (1) | 269 | 275 | (6) | (2.2)% |
| Net interest income (FTE) | $82,880 | $82,272 | $608 | 0.7% |
| Net interest margin (FTE) | 3.71% | 3.68% |  |  |
| Acquired loans discount accretion, net: |  |  |  |  |
| Amount (included in interest income) | $1,018 | $850 | $168 | 19.8% |
| Net interest margin less effect of acquired loan discount accretion(1) | 3.66% | 3.64% | 0.02% |  |

*(in thousands)*

|  | Three months ended September 30, 2024 | 2023 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $117,347 | $112,380 | $4,967 | 4.4% |
| Interest expense | (34,736) | (24,257) | (10,479) | 43.2% |
| Fully tax-equivalent adjustment (FTE) (1) | 269 | 405 | (136) | (33.6)% |
| Net interest income (FTE) | $82,880 | $88,528 | $(5,648) | (6.4)% |
| Net interest margin (FTE) | 3.71% | 3.88% |  |  |
| Acquired loans discount accretion, net: |  |  |  |  |
| Amount (included in interest income) | $1,018 | $1,324 | $(306) | (23.1)% |
| Net interest margin less effect of acquired loan discount accretion(1) | 3.66% | 3.82% | (0.16)% |  |

*(in thousands)*

|  | Nine months ended September 30, 2024 | 2023 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $349,796 | $322,445 | $27,351 | 8.5% |
| Interest expense | (102,452) | (52,385) | (50,067) | 95.6% |
| Fully tax-equivalent adjustment (FTE) (1) | 819 | 1,176 | (357) | (30.4)% |
| Net interest income (FTE) | $248,163 | $271,236 | $(23,073) | (8.5)% |
| Net interest margin (FTE) | 3.69% | 4.01% |  |  |
| Acquired loans discount accretion, net: |  |  |  |  |
| Amount (included in interest income) | $3,200 | $4,192 | $(992) | (23.7)% |
| Net interest margin less effect of acquired loan discount accretion(1) | 3.64% | 3.95% | (0.31)% |  |

(1) Certain information included herein is presented on a FTE basis and/or to present additional financial details which may be desired by users of this financial information. The Company believes the use of this non-generally accepted accounting principles (non-GAAP) measure provides additional clarity in assessing its results, and the presentation of these measures is a common practice within the banking industry.

Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. The dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. Despite the elevated rate environment, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, remains generally consistent. During the quarters ended September 30, 2024, June 30, 2024 and September 30, 2023, the purchased loan discount accretion was $1.0 million, $0.9 million and $1.3 million, respectively.

### Summary of Average Balances, Yields/Rates and Interest Differential

The following table presents, for the three month periods indicated, information regarding the Company’s consolidated average assets, liabilities and shareholders’ equity, the amounts of interest income from average interest-earning assets and resulting yields, and the amount of interest expense paid on interest-bearing liabilities. Average loan balances include nonperforming loans. Interest income includes proceeds from loans on nonaccrual loans only to the extent cash payments have been received and applied to interest income. Yields on securities and certain loans have been adjusted upward to reflect the effect of income thereon exempt from federal income taxation at the current statutory tax rate (dollars in thousands).

| Assets: | Three months ended September 30, 2024 Average Balance | Interest Income/ Expense | Rates Earned /Paid | 2023 Average Balance | Interest Income/ Expense | Rates Earned /Paid |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans | $6,690,326 | $98,085 | 5.83% | $6,597,400 | $91,707 | 5.51% |
| Investment securities - taxable | 1,972,859 | 17,188 | 3.47% | 2,246,569 | 18,990 | 3.35% |
| Investment securities - nontaxable(1) | 135,500 | 1,166 | 3.42% | 182,766 | 1,755 | 3.81% |
| Total investments | 2,108,359 | 18,354 | 3.46% | 2,429,335 | 20,745 | 3.39% |
| Cash at Federal Reserve and other banks | 93,538 | 1,177 | 5.01% | 26,654 | 333 | 4.96% |
| Total interest-earning assets | 8,892,223 | 117,616 | 5.26% | 9,053,389 | 112,785 | 4.94% |
| Other assets | 774,756 |  |  | 820,851 |  |  |
| Total assets | $9,666,979 |  |  | $9,874,240 |  |  |
| Liabilities and shareholders’ equity: |  |  |  |  |  |  |
| Interest-bearing demand deposits | $1,736,442 | $6,132 | 1.40% | $1,751,625 | $3,916 | 0.89% |
| Savings deposits | 2,686,303 | 13,202 | 1.96% | 2,790,197 | 9,526 | 1.35% |
| Time deposits | 1,055,612 | 11,354 | 4.28% | 535,715 | 3,937 | 2.92% |
| Total interest-bearing deposits | 5,478,357 | 30,688 | 2.23% | 5,077,537 | 17,379 | 1.36% |
| Other borrowings | 175,268 | 2,144 | 4.87% | 449,274 | 5,106 | 4.51% |
| Junior subordinated debt | 101,150 | 1,904 | 7.49% | 101,070 | 1,772 | 6.96% |
| Total interest-bearing liabilities | 5,754,775 | 34,736 | 2.40% | 5,627,881 | 24,257 | 1.71% |
| Noninterest-bearing deposits | 2,542,579 |  |  | 2,965,564 |  |  |
| Other liabilities | 155,115 |  |  | 168,391 |  |  |
| Shareholders’ equity | 1,214,510 |  |  | 1,112,404 |  |  |
| Total liabilities and shareholders’ equity | $9,666,979 |  |  | $9,874,240 |  |  |
| Net interest spread(2) |  |  | 2.86% |  |  | 3.23% |
| Net interest income and interest margin(3) |  | $82,880 | 3.71% |  | $88,528 | 3.88% |

(1) Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.

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

(3) Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets, then annualized based on the number of days in the given period.

Net interest income (FTE) during the three months ended September 30, 2024, decreased $5.6 million or 6% to $82.9 million compared to $88.5 million during the three months ended September 30, 2023. In addition, net interest margin declined 17 basis points to 3.71%, compared to the same quarter last year. The decrease in net interest income is primarily attributed to an additional $13.3 million in deposit interest expense due to rate increases associated with competitive pricing pressures, and to a lesser extent, changes in product mix. The cost of interest-bearing deposits increased by 87 basis points between the quarter ended September 30, 2024 and the same quarter of the prior year. In addition, the average balance of noninterest-bearing deposits decreased by $423.0 million from the three month average for the period ended September 30, 2023 as customers continued to migrate towards higher yielding term deposit accounts. As of September 30, 2024, the ratio of average total noninterest-bearing deposits to total average deposits was 31.7%, as compared to 32.0% and 36.9% at June 30, 2024 and September 30, 2023, respectively. The increase in cost of interest bearing liabilities was partially offset by increased interest and fee income on loans totaling $6.4 million compared to the same quarter of the prior year. Average loan yields increased 32 basis points from 5.51% during the three months ended September 30, 2023, to 5.83% during the three months ended September 30, 2024. The accretion of discounts from acquired loans added 6 and 8 basis points to loan yields during the quarters ended September 30, 2024 and 2023, respectively. Additionally, the average balance of loans during the quarter increased $92.9 million compared to the same period in the prior year.

| Assets: | Nine months ended September 30, 2024 Average Balance | Interest Income/ Expense | Rates Earned /Paid | 2023 Average Balance | Interest Income/ Expense | Rates Earned /Paid |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans | $6,755,916 | $292,799 | 5.79% | $6,493,585 | $260,868 | 5.37% |
| Investment securities - taxable | 2,034,336 | 52,021 | 3.42% | 2,328,883 | 56,681 | 3.25% |
| Investment securities - nontaxable(1) | 137,515 | 3,548 | 3.45% | 184,524 | 5,096 | 3.69% |
| Total investments | 2,171,851 | 55,569 | 3.42% | 2,513,407 | 61,777 | 3.29% |
| Cash at Federal Reserve and other banks | 58,792 | 2,247 | 5.11% | 27,606 | 976 | 4.73% |
| Total interest-earning assets | 8,986,559 | 350,615 | 5.21% | 9,034,598 | 323,621 | 4.79% |
| Other assets | 781,406 |  |  | 832,501 |  |  |
| Total assets | $9,767,965 |  |  | $9,867,099 |  |  |
| Liabilities and shareholders’ equity: |  |  |  |  |  |  |
| Interest-bearing demand deposits | $1,738,876 | $17,294 | 1.33% | $1,694,438 | $6,476 | 0.51% |
| Savings deposits | 2,670,555 | 36,362 | 1.82% | 2,818,817 | 20,616 | 0.98% |
| Time deposits | 961,577 | 29,582 | 4.11% | 413,359 | 6,889 | 2.23% |
| Total interest-bearing deposits | 5,371,008 | 83,238 | 2.07% | 4,926,614 | 33,981 | 0.92% |
| Other borrowings | 361,175 | 13,640 | 5.04% | 402,016 | 13,318 | 4.43% |
| Junior subordinated debt | 101,128 | 5,574 | 7.36% | 101,057 | 5,086 | 6.73% |
| Total interest-bearing liabilities | 5,833,311 | 102,452 | 2.35% | 5,429,687 | 52,385 | 1.29% |
| Noninterest-bearing deposits | 2,584,705 |  |  | 3,153,807 |  |  |
| Other liabilities | 163,704 |  |  | 179,483 |  |  |
| Shareholders’ equity | 1,186,245 |  |  | 1,104,122 |  |  |
| Total liabilities and shareholders’ equity | $9,767,965 |  |  | $9,867,099 |  |  |
| Net interest spread(2) |  |  | 2.86% |  |  | 3.50% |
| Net interest income and interest margin(3) |  | $248,163 | 3.69% |  | $271,236 | 4.01% |

(1) Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.

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

(3) Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets, then annualized based on the number of days in the given period.

Net interest income (FTE) during the nine months ended September 30, 2024, decreased $23.1 million, or 9%, to $248.2 million compared to $271.2 million during the nine months ended September 30, 2023. In addition, net interest margin declined 32 basis points to 3.69%, compared to the same period in the prior year. The decrease in net interest income is primarily attributed to an increased cost of interest bearing liabilities, primarily on deposits. The cost of interest bearing deposits increased by 115 basis points during the nine months ended September 30, 2024, compared to the same period in the prior year. In addition, the average balance of noninterest-bearing deposits decreased by $569.1 million from the nine month average for the period ended September 30, 2023 amidst a continued migration of customer funds to interest-bearing products, as discussed above. The increases in the cost of interest bearing liabilities were partially offset by increased interest and fee income on loans. As compared to the same period in the prior year, the average balance of loans increased $262.3 million and average loan yields increased 42 basis points from 5.37% during the nine months ended September 30, 2023, to 5.79% during the nine months ended September 30, 2024. The accretion of discounts from acquired loans added 6 and 9 basis points to loan yields during the nine months ended September 30, 2024 and September 30, 2023, respectively.

### Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid

The following table sets forth, for the period identified, a summary of the changes in interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated. Changes not solely attributable to volume or rates have been allocated in proportion to the respective volume and rate components.

*(in thousands)*

| Increase (decrease) in interest income: | Three months ended September 30, 2024 compared with three months ended September 30, 2023 Volume | Rate | Total |
| --- | ---: | ---: | ---: |
| Loans | $1,281 | $5,097 | $6,378 |
| Investment securities | (2,742) | 351 | (2,391) |
| Cash at Federal Reserve and other banks | 829 | 15 | 844 |
| Total interest-earning assets | (632) | 5,463 | 4,831 |
| Increase (decrease) in interest expense: |  |  |  |
| Interest-bearing demand deposits | (34) | 2,250 | 2,216 |
| Savings deposits | (351) | 4,027 | 3,676 |
| Time deposits | 3,795 | 3,622 | 7,417 |
| Other borrowings | (3,089) | 127 | (2,962) |
| Junior subordinated debt | 1 | 131 | 132 |
| Total interest-bearing liabilities | 322 | 10,157 | 10,479 |
| Decrease in net interest income | $(954) | $(4,694) | $(5,648) |

The following commentary regarding net interest income, interest income and interest expense may be best understood while referencing the *Summary of Average Balances, Yields/Rates and Interest Differential* and the *Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid* shown above.

Net interest income (FTE) during the three months ended September 30, 2024 decreased $5.6 million to $82.9 million compared to $88.5 million during the three months ended September 30, 2023. The overall decrease in net interest income (FTE) was due to increasing interest rates elevating interest expense on interest-bearing liabilities, most significantly deposits. Elevated interest rates also improved interest income on earning assets by $4.8 million, partially offsetting the increases in interest expense.

*(in thousands)*

| Increase (decrease) in interest income: | Nine months ended September 30, 2024 compared with nine months ended September 30, 2023 Volume | Rate | Total |
| --- | ---: | ---: | ---: |
| Loans | $10,565 | $21,366 | $31,931 |
| Investment securities | (8,481) | 2,273 | (6,208) |
| Cash at Federal Reserve and other banks | 1,106 | 165 | 1,271 |
| Total interest-earning assets | 3,190 | 23,804 | 26,994 |
| Increase (decrease) in interest expense: |  |  |  |
| Interest-bearing demand deposits | 170 | 10,648 | 10,818 |
| Savings deposits | (1,090) | 16,836 | 15,746 |
| Time deposits | 9,169 | 13,524 | 22,693 |
| Other borrowings | (1,357) | 1,679 | 322 |
| Junior subordinated debt | 4 | 484 | 488 |
| Total interest-bearing liabilities | 6,896 | 43,171 | 50,067 |
| Decrease in net interest income | $(3,706) | $(19,367) | $(23,073) |

Net interest income (FTE) during the nine months ended September 30, 2024 decreased $23.1 million to $248.2 million compared to $271.2 million during the nine months ended September 30, 2023. The overall decrease in net interest income (FTE) was due to increasing interest rates elevating interest expense on interest-bearing liabilities, most significantly deposits and other borrowings, resulting in a net increase of $49.3 million and $0.3 million, respectively. Elevated interest rates also improved interest income on earning assets by $27.0 million, partially offsetting the increases in interest expense.

### Asset Quality and Credit Loss Provisioning

During the three months ended September 30, 2024, the Company recorded a provision for credit losses of $0.2 million, as compared to $0.4 million during the trailing quarter, and $4.2 million during the third quarter of 2023.

*(dollars in thousands)*

|  | Three months ended September 30, 2024 | September 30, 2023 | Nine months ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: |
| Addition to allowance for credit losses | $320 | $3,120 | $4,670 | $16,415 |
| Addition to (reversal of) reserve for unfunded loan commitments | (100) | 1,035 | 260 | 1,585 |
| Total provision for credit losses | $220 | $4,155 | $4,930 | $18,000 |

The provision for credit losses on loans of $0.3 million during the recent quarter was the result of net charge-offs approximating $0.1 million and decreases in reserves for qualitative factors due to improved concentration levels and overall lower loan balances, offset by a $3.7 million increase in specific reserves for individually evaluated credits within the commercial and industrial portfolio.

*(dollars in thousands)*

|  | Three months ended September 30, 2024 | 2023 | Nine months ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Balance, beginning of period | $123,517 | $117,329 | $121,522 | $105,680 |
| Provision for credit losses | 320 | 3,120 | 4,670 | 16,415 |
| Loans charged-off | (444) | (5,357) | (3,329) | (7,391) |
| Recoveries of previously charged-off loans | 367 | 720 | 897 | 1,108 |
| Balance, end of period | $123,760 | $115,812 | $123,760 | $115,812 |

The allowance for credit losses (ACL) was $123.8 million or 1.85% of total loans as of September 30, 2024. The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date. This forecast data continues to evolve and includes improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date. Core inflation is slowing but prices remain elevated relative to wage increases, as reflected by higher living costs such as housing, energy and general services. Actions by the Federal Reserve to cut rates during 2024 and beyond may help improve this outlook overall, but the uncertainty associated with the extent and timing of these potential reductions has inhibited a material change to forecasted reserve levels. Furthermore, geopolitical risks remain elevated and appear to be getting worse, which may lead to further negative effects on domestic economic outcomes. As a result, management continues to believe that certain credit weaknesses are present in the overall economy and that it is appropriate to maintain a reserve level that incorporates such risk factors.

Loans past due 30 days or more increased by $7.5 million during the quarter ended September 30, 2024, to $37.9 million, as compared to $30.4 million at June 30, 2024. The majority of loans identified as past due are well-secured by collateral, and approximately $16.3 million is less than 90 days delinquent. Non-performing loans were $41.6 million at September 30, 2024, an increase of $8.9 million from $32.8 million as of June 30, 2024, and an increase of $11.8 million from $29.8 million as of September 30, 2023. Management continues to proactively work with these borrowers to identify actionable and appropriate resolution strategies which are customary for the industries. Of the $41.6 million loans designated as non-performing as of September 30, 2024, approximately $10.0 million are current or less than 30 days past due with respect to payments required under their existing loan agreements.

*(dollars in thousands)*

| Risk Rating: | September 30, 2024 | % of Loans Outstanding | June 30, 2024 | % of Loans Outstanding | September 30, 2023 | % of Loans Outstanding |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Pass | $6,461,451 | 96.7% | $6,536,223 | 96.9% | $6,532,424 | 97.4% |
| Special Mention | 104,759 | 1.6% | 101,324 | 1.5% | 94,614 | 1.4% |
| Substandard | 117,681 | 1.8% | 104,979 | 1.6% | 81,628 | 1.2% |
| Total | $6,683,891 |  | $6,742,526 |  | $6,708,666 |  |
| Classified loans to total loans | 1.76% |  | 1.56% |  | 1.22% |  |
| Loans past due 30+ days to total loans | 0.57% |  | 0.45% |  | 0.12% |  |

The ratio of classified loans to total loans of 1.76% as of September 30, 2024, increased 20 basis points from June 30, 2024, and increased 55 basis points from the comparative quarter ended 2023. The change in classified loans outstanding as compared to the trailing quarter totaled $16.1 million. Loans with the risk grade classification substandard increased by $12.7 million over the trailing quarter and relate primarily to the commercial and industrial portfolio. As a percentage of total loans outstanding, classified assets remain consistent with volumes experienced prior to the recent quantitative easing cycle spurred by the COVID pandemic and reflect management's historically conservative approach to credit risk monitoring. The Company's combined criticized loan balances totaled $222.4 million as of September 30, 2024, an increase of $46.2 million from September 30, 2023.

Outstanding balances on construction loans, which have historically been associated with elevated levels of risk, experienced balance reductions of $7.3 million during the current quarter and $44.9 million since September 30, 2023. These reductions were primarily associated with balances that were converted to term loans upon the completion of construction and achievement of stabilized occupancy, and were partially offset by new draws or originations.

Management continues to proactively assess the repayment capacity of borrowers that will be subject to rate resets in the near term. To date this analysis as well as management's observations of loans that have experienced a rate reset, have resulted in an insignificant need to provide concessions to borrowers.

As of September 30, 2024, other real estate owned consisted of 10 properties with a carrying value of approximately $2.8 million, compared to 10 properties with a carrying value of approximately $2.5 million as of June 30, 2024. Non-performing assets of $44.4 million at September 30, 2024, represented 0.45% of total assets, a change from the $35.3 million or 0.36% and $32.7 million or 0.33% as of June 30, 2024 and September 30, 2023, respectively.

### Non-interest Income

The following table summarizes the Company’s non-interest income for the periods indicated (in thousands):

*(in thousands)*

|  | Three months ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| ATM and interchange fees | $6,472 | $6,728 | $(256) | (3.8)% |
| Service charges on deposit accounts | 4,979 | 4,851 | 128 | 2.6% |
| Other service fees | 1,224 | 1,142 | 82 | 7.2% |
| Mortgage banking service fees | 439 | 445 | (6) | (1.3)% |
| Change in value of mortgage servicing rights | (332) | (91) | (241) | 264.8% |
| Total service charges and fees | 12,782 | 13,075 | (293) | (2.2)% |
| Increase in cash value of life insurance | 786 | 684 | 102 | 14.9% |
| Asset management and commission income | 1,502 | 1,141 | 361 | 31.6% |
| Gain on sale of loans | 549 | 382 | 167 | 43.7% |
| Lease brokerage income | 62 | 160 | (98) | (61.3)% |
| Sale of customer checks | 303 | 396 | (93) | (23.5)% |
| (Loss) gain on sale or exchange of investment securities | 2 | — | 2 | n/m |
| (Loss) gain on marketable equity securities | 356 | (81) | 437 | (539.5)% |
| Other | 153 | 227 | (74) | (32.6)% |
| Total other non-interest income | 3,713 | 2,909 | 804 | 27.6% |
| Total non-interest income | $16,495 | $15,984 | $511 | 3.2% |

Non-interest income increased $0.5 million or 3.2% to $16.5 million during the three months ended September 30, 2024, compared to $16.0 million during the comparative quarter ended September 30, 2023. Elevated activity and volumes of assets under management drove an increase in asset management and commission income, in addition to the benefit mentioned above related to Visa stock. These increases were partially offset by a decline in interchange fees earned related to decreased customer activity in the third quarter of 2024 as compared to the equivalent quarter in 2023.

*(in thousands)*

|  | Nine months ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| ATM and interchange fees | $19,013 | $19,928 | $(915) | (4.6)% |
| Service charges on deposit accounts | 14,489 | 12,863 | 1,626 | 12.6% |
| Other service fees | 3,876 | 3,300 | 576 | 17.5% |
| Mortgage banking service fees | 1,305 | 1,364 | (59) | (4.3)% |
| Change in value of mortgage servicing rights | (468) | (215) | (253) | 117.7% |
| Total service charges and fees | 38,215 | 37,240 | 975 | 2.6% |
| Increase in cash value of life insurance | 2,420 | 2,274 | 146 | 6.4% |
| Asset management and commission income | 3,989 | 3,233 | 756 | 23.4% |
| Gain on sale of loans | 1,198 | 883 | 315 | 35.7% |
| Lease brokerage income | 377 | 332 | 45 | 13.6% |
| Sale of customer checks | 916 | 1,091 | (175) | (16.0)% |
| (Loss) gain on sale or exchange of investment securities | (43) | (164) | 121 | (73.8)% |
| (Loss) gain on marketable equity securities | 207 | (81) | 288 | (355.6)% |
| Other | 853 | 552 | 301 | 54.5% |
| Total other non-interest income | 9,917 | 8,120 | 1,797 | 22.1% |
| Total non-interest income | $48,132 | $45,360 | $2,772 | 6.1% |

Non-interest income increased $2.8 million or 6.1% to $48.1 million during the nine months ended September 30, 2024, compared to $45.4 million during the comparative nine months ended September 30, 2023. As noted above, interchange fees as driven by customer activities was elevated in the 2023 period and resulted in a decrease of $0.9 million as compared to the nine months ended September 30, 2024. Meanwhile, service charges on deposit accounts increased by $1.6 million or 12.6% as compared to the equivalent period in 2023 following $0.9 million in waived or reversed fees as a courtesy to customers in the 2023 year. As noted above, elevated activity within asset management and the gain on Visa stock further contributed to the overall improvement.

### Non-interest Expense

The following table summarizes the Company’s non-interest expense for the periods indicated:

*(in thousands)*

|  | Three months ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Base salaries, net of deferred loan origination costs | $24,407 | $23,616 | $791 | 3.3% |
| Incentive compensation | 4,361 | 4,391 | (30) | (0.7)% |
| Benefits and other compensation costs | 6,782 | 6,456 | 326 | 5.0% |
| Total salaries and benefits expense | 35,550 | 34,463 | 1,087 | 3.2% |
| Occupancy | 4,191 | 3,948 | 243 | 6.2% |
| Data processing and software | 5,258 | 5,246 | 12 | 0.2% |
| Equipment | 1,374 | 1,503 | (129) | (8.6)% |
| Intangible amortization | 1,030 | 1,590 | (560) | (35.2)% |
| Advertising | 1,152 | 881 | 271 | 30.8% |
| ATM and POS network charges | 1,712 | 1,606 | 106 | 6.6% |
| Professional fees | 1,893 | 1,752 | 141 | 8.0% |
| Telecommunications | 507 | 567 | (60) | (10.6)% |
| Regulatory assessments and insurance | 1,256 | 1,194 | 62 | 5.2% |
| Postage | 335 | 306 | 29 | 9.5% |
| Operational losses | 603 | 474 | 129 | 27.2% |
| Courier service | 542 | 492 | 50 | 10.2% |
| (Gain) loss on sale or acquisition of foreclosed assets | 26 | (152) | 178 | (117.1)% |
| (Gain) loss on disposal of fixed assets | 6 | 4 | 2 | 50.0% |
| Other miscellaneous expense | 4,052 | 4,004 | 48 | 1.2% |
| Total other non-interest expense | 23,937 | 23,415 | 522 | 2.2% |
| Total non-interest expense | $59,487 | $57,878 | $1,609 | 2.8% |
| Average full time equivalent staff | 1,161 | 1,215 | (54) | (4.4)% |

Total non-interest expense increased $1.6 million or 2.8% to $59.5 million during the three months ended September 30, 2024, as compared to $57.9 million for the quarter ended September 30, 2023. Total salaries and benefits expense increased by $1.1 million or 3.2%, reflecting the increase of $0.8 million in salaries and $0.3 million in benefits and other costs.

*(in thousands)*

|  | Nine months ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Base salaries, net of deferred loan origination costs | $72,279 | $70,675 | $1,604 | 2.3% |
| Incentive compensation | 12,329 | 11,663 | 666 | 5.7% |
| Benefits and other compensation costs | 20,647 | 19,402 | 1,245 | 6.4% |
| Total salaries and benefits expense | 105,255 | 101,740 | 3,515 | 3.5% |
| Occupancy | 12,205 | 12,099 | 106 | 0.9% |
| Data processing and software | 15,459 | 13,916 | 1,543 | 11.1% |
| Equipment | 4,060 | 4,322 | (262) | (6.1)% |
| Intangible amortization | 3,090 | 4,902 | (1,812) | (37.0)% |
| Advertising | 2,733 | 2,656 | 77 | 2.9% |
| ATM and POS network charges | 5,360 | 5,217 | 143 | 2.7% |
| Professional fees | 5,047 | 5,326 | (279) | (5.2)% |
| Telecommunications | 1,576 | 1,971 | (395) | (20.0)% |
| Regulatory assessments and insurance | 3,651 | 3,979 | (328) | (8.2)% |
| Postage | 983 | 916 | 67 | 7.3% |
| Operational losses | 1,199 | 1,999 | (800) | (40.0)% |
| Courier service | 1,581 | 1,314 | 267 | 20.3% |
| (Gain) loss on sale or acquisition of foreclosed assets | (12) | (152) | 140 | (92.1)% |
| (Gain) loss on disposal of fixed assets | 12 | 22 | (10) | (45.5)% |
| Other miscellaneous expense | 12,131 | 12,688 | (557) | (4.4)% |
| Total other non-interest expense | 69,075 | 71,175 | (2,100) | (3.0)% |
| Total non-interest expense | $174,330 | $172,915 | $1,415 | 0.8% |
| Average full time equivalent staff | 1,170 | 1,215 | (45) | (3.7)% |

Total non-interest expense increased $1.4 million or 0.8% to $174.3 million during the nine months ended September 30, 2024, as compared to $172.9 million for the nine months ended September 30, 2023. This was largely attributed to an increase of $3.5 million or 3.5% in total salaries and benefits expense to $105.3 million, from annual compensation adjustments and other routine increases in benefits and compensation. Salaries expense was also impacted by an increase in average compensation per employee as various strategic talent acquisitions were made in order to further prepare the Company to execute its growth objectives beyond $10 billion in total assets. Additionally, data processing and software expenses increased by $1.5 million or 11.1% related to ongoing investments in the Company's data management and security infrastructure. These increases were partially offset by declines in non-cash intangible amortization expense of $1.8 million or 37.0% and reductions in operational losses of $0.8 million or 40.0% due to non-recurring ATM burglary expenses totaling $0.7 million in the comparative period.

### Income Taxes

The Company’s effective tax rate was 26.3% and 26.1% for the quarter and nine months ended September 30, 2024, respectively as compared to 27.3% and 26.7% for the comparative periods ended September 30, 2023, respectively. Differences between the Company's effective tax rate and applicable federal and state blended statutory rate of approximately 29.6% are due to the proportion of non-taxable revenues, non-deductible expenses, and benefits from tax credits as compared to the levels of pre-tax earnings.

### Financial Condition

For financial reporting purposes, the Company does not separately track the changes in assets and liabilities based on branch location or regional geography. The following is a comparison of the quarterly change in certain assets and liabilities:

*(dollars in thousands)*

| Ending balances | September 30, 2024 | June 30, 2024 $ Change |  | Annualized % Change |
| --- | ---: | ---: | ---: | ---: |
| Total assets | $9,823,890 | $9,741,399 | $82,491 | 3.4% |
| Total loans | 6,683,891 | 6,742,526 | (58,635) | (3.5) |
| Total investments | 2,116,469 | 2,086,090 | 30,379 | 5.8 |
| Total deposits | 8,037,091 | 8,050,230 | (13,139) | (0.7) |
| Total other borrowings | 266,767 | 247,773 | 18,994 | 30.7 |

52

Loans outstanding decreased by $58.6 million or 3.5% on an annualized basis during the quarter ended September 30, 2024. During the quarter, loan originations/draws totaled approximately $310.1 million while payoffs/repayments of loans totaled $368.7 million, which compares to originations/draws and payoffs/repayments during the trailing quarter ended of $325.5 million and $321.3 million, respectively. Origination volume activity levels remain slightly lower relative to the comparative period in 2023 due in part to disciplined pricing and underwriting, as well as decreased borrower demand given economic uncertainties. The increase in payoffs/repayments as compared to the trailing quarter was spread amongst numerous borrowers, regions and loan types.

Investment security balances decreased $30.4 million or 5.8% on an annualized basis during the current quarter as a result of net prepayments, and maturities, collectively totaling approximating $164.0 million and, to a lesser extent, sales totaling $28.6 million, partially offset by security purchases totaling $53.5 million, in addition to net increases in the market value of securities of $4.1 million. Investment security purchases were comprised of floating rate instruments tied to SOFR with an initial weighted average coupon of 6.77% and a weighted average life of 4.7 years. Investment security sales were primarily comprised of fixed rate instruments with a weighted average coupon of 2.39% and a weighted average life of 3.8 years. While management intends to primarily utilize cash flows from the investment security portfolio and organic deposit growth to support loan growth, excess liquidity will be utilized for purchases of investment securities to support net interest income growth and net interest margin expansion.

Deposit balances increased by $13.1 million or 0.7% annualized during the quarter, led by growth within time deposits.

Other borrowings totaled $266.8 million at September 30, 2024, representing a net decrease of $19.0 million from the trailing quarter. This quarter over quarter decrease was facilitated by proceeds from the sale, call or maturity of investment securities, and growth in deposits.

The following is a comparison of the year over year change in certain assets and liabilities:

*(dollars in thousands)*

| Ending balances | As of September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total assets | $9,823,890 | $9,897,006 | $(73,116) | (0.7)% |
| Total loans | 6,683,891 | 6,708,666 | (24,775) | (0.4) |
| Total investments | 2,116,469 | 2,333,162 | (216,693) | (9.3) |
| Total deposits | 8,037,091 | 8,009,643 | 27,448 | 0.3 |
| Total other borrowings | 266,767 | 537,975 | (271,208) | (50.4) |

### Investment Securities

The following table presents the available for sale debt securities portfolio by major type as of September 30, 2024 and December 31, 2023:

*(in thousands)*

| Debt securities available for sale: | September 30, 2024 Fair Value% |  | December 31, 2023 Fair Value% |  |
| --- | ---: | ---: | ---: | ---: |
| Obligations of U.S. government agencies | $1,101,997 | 55.7% | $1,221,737 | 56.8% |
| Obligations of states and political subdivisions | 229,342 | 11.6% | 236,375 | 11.0% |
| Corporate bonds | 5,864 | 0.3% | 5,602 | 0.3% |
| Asset backed securities | 363,540 | 18.3% | 355,281 | 16.5% |
| Non-agency mortgage backed | 278,527 | 14.1% | 333,509 | 15.4% |
| Total debt securities available for sale | $1,979,270 | 100.0% | $2,152,504 | 100.0% |

*(in thousands)*

| Debt securities held to maturity: | September 30, 2024 Amortized Cost% |  | December 31, 2023 Amortized Cost% |  |
| --- | ---: | ---: | ---: | ---: |
| Obligations of U.S. government and agencies | $114,558 | 97.7% | $130,823 | 98.0% |
| Obligations of states and political subdivisions | 2,701 | 2.3% | 2,671 | 2.0% |
| Total debt securities held to maturity | $117,259 | 100.0% | $133,494 | 100.0% |

Investment securities held to maturity decreased $16.2 million to $117.3 million as of September 30, 2024, as compared to December 31, 2023. This decrease is attributable to calls and principal repayments of $16.0 million, and amortization of net purchase premiums of $0.1 million.

### Loans

The Company focuses its primary lending activities in six principal areas: commercial real estate loans, consumer loans, commercial and industrial loans, construction loans, agriculture production loans and leases. The interest rates charged for the loans made by the Company vary with the degree of risk, the size and duration of the loans, the borrower’s relationship with the Company and prevailing money market rates indicative of the Company’s cost of funds.

The majority of the Company’s loans are direct loans made to individuals, and local or regional businesses which service a variety of industries. The Company relies substantially on local promotional activity and personal contacts by bank officers, directors and employees to compete with other financial institutions. The Company makes loans to borrowers whose applications include a sound purpose, a viable repayment source and a plan of repayment established at inception and generally backed by a secondary source of repayment.

The following table shows the Company’s loan balances, net of deferred loan costs and discounts, as of the dates indicated:

*(in thousands)*

|  | September 30, 2024 |  | December 31, 2023 |  |
| --- | ---: | ---: | ---: | ---: |
| Commercial real estate | $4,487,524 | 67.1% | $4,394,802 | 64.7% |
| Consumer | 1,283,963 | 19.2% | 1,313,268 | 19.3% |
| Commercial and industrial | 484,763 | 7.3% | 586,455 | 8.6% |
| Construction | 276,095 | 4.1% | 347,198 | 5.1% |
| Agriculture production | 144,123 | 2.2% | 144,497 | 2.2% |
| Leases | 7,423 | 0.1% | 8,250 | 0.1% |
| Total loans | $6,683,891 | 100.0% | $6,794,470 | 100.0% |

### Nonperforming Assets

The following tables set forth the amount of the Company’s NPAs as of the dates indicated. “Performing nonaccrual loans” are loans that may be current for both principal and interest payments, or are less than 90 days past due, but for which payment in full of both principal and interest is not expected, and are not well secured and in the process of collection:

*(in thousands)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Performing nonaccrual loans | $20,026 | $25,380 |
| Nonperforming nonaccrual loans | 21,525 | 6,500 |
| Total nonaccrual loans | 41,551 | 31,880 |
| Loans 90 days past due and still accruing | 85 | 11 |
| Total nonperforming loans | 41,636 | 31,891 |
| Foreclosed assets | 2,764 | 2,704 |
| Total nonperforming assets | $44,400 | $34,595 |
| Nonperforming assets to total assets | 0.45% | 0.35% |
| Nonperforming loans to total loans | 0.62% | 0.47% |
| Allowance for credit losses to nonperforming loans | 297% | 381% |

54

### Changes in nonperforming assets during the three months ended September 30, 2024

*(in thousands)*

| Commercial real estate: | Balance at June 30, 2024 | New NPA / Valuation Adjustments | Pay-downs /Sales /Upgrades | Charge-offs/ (1) Write-downs | Transfers to Foreclosed Assets | Balance at September 30, 2024 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| CRE non-owner occupied | $4,882 | 587 | (1,846) | — | — | $3,623 |
| CRE owner occupied | 3,426 | — | (148) | — | — | 3,278 |
| Multifamily | — | 502 | — | — | — | 502 |
| Farmland | 13,071 | — | (104) | — | — | 12,967 |
| Total commercial real estate loans | 21,379 | 1,089 | (2,098) | — | — | 20,370 |
| Consumer |  |  |  |  |  |  |
| SFR 1-4 1st DT liens | 5,189 | 878 | (70) | — | — | 5,997 |
| SFR HELOCs and junior liens | 3,291 | 1,046 | (99) | — | — | 4,238 |
| Other | 72 | 113 | (4) | (64) | — | 117 |
| Total consumer loans | 8,552 | 2,037 | (173) | (64) | — | 10,352 |
| Commercial and industrial | 2,623 | 8,631 | (338) | (274) | — | 10,642 |
| Construction | 63 | — | (4) | — | — | 59 |
| Agriculture production | 157 | 198 | (142) | — | — | 213 |
| Leases | — | — | — | — | — | — |
| Total nonperforming loans | 32,774 | 11,955 | (2,755) | (338) | — | 41,636 |
| Foreclosed assets | 2,493 | 665 | (394) | — | — | 2,764 |
| Total nonperforming assets | $35,267 | 12,620 | (3,149) | (338) | — | $44,400 |

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

Nonperforming assets increased during the three months ended September 30, 2024 by $9.1 million or 25.9% to $44.4 million compared to $35.3 million at June 30, 2024. The increase in nonperforming assets during the third quarter of 2024 was primarily the result of nonperforming loan pay-downs and upgrades, which totaled $2.8 million during the quarter, as well as $0.3 million in charge-offs. Management is actively engaged in the collection and recovery efforts for all nonperforming assets and believes that the loan loss reserves associated with these loans is sufficient as of September 30, 2024.

### Changes in nonperforming assets during the nine months ended September 30, 2024

*(in thousands)*

| Commercial real estate: | Balance at December 31, 2023 | New NPA / Valuation Adjustments | Pay-downs /Sales /Upgrades | Charge-offs/ (1) Write-downs | Transfers to Foreclosed Assets | Balance at September 30, 2024 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| CRE non-owner occupied | $2,024 | 4,211 | (2,612) | — | — | $3,623 |
| CRE owner occupied | 3,994 | 26 | (742) | — | — | 3,278 |
| Multifamily | — | 502 | — | — | — | 502 |
| Farmland | 14,484 | — | (1,517) | — | — | 12,967 |
| Total commercial real estate loans | 20,502 | 4,739 | (4,871) | — | — | 20,370 |
| Consumer |  |  |  |  |  |  |
| SFR 1-4 1st DT liens | 2,811 | 3,647 | (435) | (26) | — | 5,997 |
| SFR HELOCs and junior liens | 3,571 | 1,802 | (1,095) | (40) | — | 4,238 |
| Other | 105 | 308 | (35) | (261) | — | 117 |
| Total consumer loans | 6,487 | 5,757 | (1,565) | (327) | — | 10,352 |
| Commercial and industrial | 2,513 | 10,607 | (1,204) | (1,274) | — | 10,642 |
| Construction | 67 | 9 | (5) | — | (12) | 59 |
| Agriculture production | 2,321 | 217 | (875) | (1,450) | — | 213 |
| Leases | — | — | — | — | — | — |
| Total nonperforming loans | 31,890 | 21,329 | (8,520) | (3,051) | (12) | 41,636 |
| Foreclosed assets | 2,705 | 442 | (395) | — | 12 | 2,764 |
| Total nonperforming assets | $34,595 | 21,771 | (8,915) | (3,051) | — | $44,400 |

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

Nonperforming assets increased during the nine months ended September 30, 2024 by $9.8 million or 28.3% to $44.4 million compared to $34.6 million at December 31, 2023. The increase in nonperforming assets during the nine months ended September 30, 2024 was primarily the result of nonperforming loan increases/down-grades, which totaled $21.3 million. Management is actively engaged in the collection and recovery efforts for all nonperforming assets and believes that the loan loss reserves associated with these loans is sufficient as of September 30, 2024.

### Loan charge-offs during the three and nine months ended September 30, 2024

In the third quarter of 2024, the Company recorded $0.4 million in loan charge-offs and $0.1 million in deposit overdraft charge-offs less $0.3 million in loan recoveries and $0.02 million in deposit overdraft recoveries, which collectively resulted in $0.1 million in net charge-offs. During the nine months ended September 30, 2024, the Company recorded $3.3 million in loan charge-offs and $0.2 million in deposit overdraft charge-offs less $0.9 million in loan recoveries and $0.1 million in deposit overdraft recoveries, which collectively resulted in $3.0 million in net charge-offs.

### The Components of the Allowance for Credit Losses for Loans

The following table sets forth the allowance for credit losses for loans as of the dates indicated:

*(in thousands)*

| Allowance for credit losses: | September 30, 2024 | December 31, 2023 | September 30, 2023 |
| --- | ---: | ---: | ---: |
| Qualitative and forecast factor allowance | $85,518 | $84,291 | $80,923 |
| Cohort model allowance reserves | 33,514 | 34,139 | 33,325 |
| Allowance for individually evaluated loans | 4,728 | 3,092 | 1,564 |
| Total allowance for credit losses | $123,760 | $121,522 | $115,812 |
| Allowance for credit losses for loans / total loans | 1.85% | 1.79% | 1.73% |

For additional information regarding the allowance for loan losses, including changes in specific, formula, and environmental factors allowance categories, see “*Asset Quality and Loan Loss Provisioning”* at “*Results of Operations”*, above. Based on the current conditions of the loan portfolio, management believes that the $123.8 million allowance for loan losses at September 30, 2024 is adequate to absorb probable losses inherent in the Bank’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

The following table summarizes the allocation of the allowance for credit losses between loan types and by percentage of the total allowance for credit losses on loans as of the dates indicated:

*(in thousands)*

|  | September 30, 2024 |  | December 31, 2023 |  | September 30, 2023 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial real estate | $71,339 | 57.6% | $68,864 | 56.7% | $66,675 | 57.6% |
| Consumer | 27,504 | 22.2% | 27,453 | 22.6% | 26,618 | 23.0% |
| Commercial and industrial | 14,453 | 11.7% | 12,750 | 10.5% | 12,290 | 10.6% |
| Construction | 7,119 | 5.8% | 8,856 | 7.3% | 8,097 | 7.0% |
| Agriculture production | 3,312 | 2.7% | 3,589 | 2.9% | 2,125 | 1.8% |
| Leases | 33 | 0.0% | 10 | 0.0% | 7 | 0.0% |
| Total allowance for credit losses | $123,760 | 100.0% | $121,522 | 100.0% | $115,812 | 100.0% |

The following table summarizes the allocation of the allowance for credit losses as a percentage of the total loans for each loan category as of the dates indicated:

*(in thousands)*

|  | September 30, 2024 | December 31, 2023 | September 30, 2023 |
| --- | ---: | ---: | ---: |
| Commercial real estate | 1.59% | 1.57% | 1.53% |
| Consumer | 2.14% | 2.09% | 2.07% |
| Commercial and industrial | 2.98% | 2.17% | 2.05% |
| Construction | 2.58% | 2.55% | 2.52% |
| Agriculture production | 2.30% | 2.48% | 1.72% |
| Leases | 0.44% | 0.12% | 0.09% |
| Total loans | 1.85% | 1.79% | 1.73% |

57

The following table summarizes the activity in the allowance for credit losses for the periods indicated:

*(in thousands)*

| Allowance for credit losses: | Three months ended September 30, 2024 | 2023 | Nine months ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | $123,517 | $117,329 | $121,522 | $105,680 |
| Provision for credit losses | 320 | 3,120 | 4,670 | 16,415 |
| Loans charged-off: |  |  |  |  |
| Commercial real estate: |  |  |  |  |
| CRE non-owner occupied | — | — | — | — |
| CRE owner occupied | — | (3,608) | — | (3,608) |
| Multifamily | — | — | — | — |
| Farmland | — | — | — | — |
| Consumer: |  |  |  |  |
| SFR 1-4 1st DT liens | — | — | (26) | — |
| SFR HELOCs and junior liens | — | — | (41) | (42) |
| Other | (170) | (133) | (538) | (438) |
| Commercial and industrial | (274) | (1,616) | (1,274) | (3,303) |
| Construction | — | — | — | — |
| Agriculture production | — | — | (1,450) | — |
| Leases | — | — | — | — |
| Total loans charged-off | (444) | (5,357) | (3,329) | (7,391) |
| Recoveries of previously charged-off loans: |  |  |  |  |
| Commercial real estate: |  |  |  |  |
| CRE non-owner occupied | — | — | — | — |
| CRE owner occupied | 1 | — | 2 | 1 |
| Multifamily | — | — | — | — |
| Farmland | — | — | — | — |
| Consumer: |  |  |  |  |
| SFR 1-4 1st DT liens | — | 262 | — | 262 |
| SFR HELOCs and junior liens | 196 | 314 | 296 | 416 |
| Other | 63 | 52 | 184 | 129 |
| Commercial and industrial | 106 | 91 | 389 | 267 |
| Construction | — | — | — | — |
| Agriculture production | 1 | 1 | 26 | 33 |
| Leases | — | — | — | — |
| Total recoveries of previously charged-off loans | 367 | 720 | 897 | 1,108 |
| Net charge-offs | (77) | (4,637) | (2,432) | (6,283) |
| Balance at end of period | $123,760 | $115,812 | $123,760 | $115,812 |
| Average total loans | $6,690,326 | $6,597,400 | $6,755,916 | $6,493,585 |
| Ratios (annualized): |  |  |  |  |
| Net (charge-offs) recoveries during period to average loans outstanding during period | —% | (0.28)% | (0.05)% | (0.13)% |
| Provision for credit losses to average loans outstanding during period | 0.02% | 0.19% | 0.09% | 0.34% |

58

### Foreclosed Assets, Net of Allowance for Losses

The following table details the components and summarize the activity in foreclosed assets, net of allowances for losses, for the nine months ended September 30, 2024:

*(in thousands)*

|  | Balance at December 31, 2023 | Sales | Valuation Adjustments | Transfers from Loans | Balance at September 30, 2024 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Land & construction | $154 | $12 | $39 | $— | $205 |
| Residential real estate | 1,673 | 446 | (262) | — | 1,857 |
| Commercial real estate | 878 | — | 218 | (394) | 702 |
| Total foreclosed assets | $2,705 | $458 | $(5) | $(394) | $2,764 |

### Deposits

During the nine months ended September 30, 2024, the Company’s deposits increased by $203.1 million to $8.0 billion at quarter end. There were no brokered deposits included in the deposit balances as of September 30, 2024 and December 31, 2023. Estimated uninsured deposits totaled $2.5 billion and $2.4 billion as of September 30, 2024 and December 31, 2023, respectively.

### Off-Balance Sheet Arrangements

See Note 9 to the condensed consolidated financial statements at Item 1 of Part I of this report for information about the Company’s commitments and contingencies including off-balance-sheet arrangements.

### Capital Resources

The current and projected capital position of the Company and the impact of capital plans and long-term strategies are reviewed regularly by Management.

On February 25, 2021 the Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company's common stock (the 2021 Repurchase Plan), which approximated 6.7% of the shares outstanding as of the approval date. The actual timing of any share repurchases will be determined by the Company's management and therefore the total value of the shares to be purchased under the 2021 Repurchase Plan is subject to change. The Company may repurchase its outstanding shares of common stock from time to time in open market or privately-negotiated transactions, including block trades, or pursuant to 10b5-1 trading plans. The 2021 Repurchase Plan has no expiration date (in accordance with applicable laws and regulations).

During the three and nine months ended September 30, 2024, the Company repurchased zero and 344,324 shares with market values of $0.0 million and $12.5 million, respectively. During the three and nine months ended September 30, 2023, the Company repurchased zero and 150,000 shares with market values of zero and $7.0 million, respectively. In addition, the Company’s Tier 1 common equity and tangible capital ratios increased to 13.1% and 9.7%, respectively as of September 30, 2024, compared to 12.2% and 8.8%, respectively, as of December 31, 2023.

Total shareholders' equity increased by $64.0 million during the quarter ended September 30, 2024, as net income of $29.1 million and a $44.5 million decrease in accumulated other comprehensive losses was partially offset by cash dividend payments on common stock of approximately $10.9 million. As a result, the Company’s book value grew to $37.55 per share at September 30, 2024, compared to $32.18 at September 30, 2023. The Company’s tangible book value per share, a non-GAAP measure, calculated by subtracting goodwill and other intangible assets from total shareholders’ equity and dividing that sum by total shares outstanding, was $28.09 per share at September 30, 2024, as compared to $22.67 at September 30, 2023. As noted previously, changes in the fair value of available-for-sale investment securities, net of deferred taxes continue to create moderate levels of volatility in tangible book value per share.

### Current Year Balance Sheet Change

|  | September 30, 2024 Ratio | Minimum Regulatory Requirement | December 31, 2023 Ratio | Minimum Regulatory Requirement |
| --- | ---: | ---: | ---: | ---: |
| Total risk based capital | 15.6% | 10.5% | 14.7% | 10.5% |
| Tier I capital | 13.8% | 8.5% | 12.9% | 8.5% |
| Common equity Tier 1 capital | 13.1% | 7.0% | 12.2% | 7.0% |
| Leverage | 11.6% | 4.0% | 10.7% | 4.0% |

See Note 10 and Note 16 to the condensed consolidated financial statements at Item 1 of Part I of this report for additional information about the Company’s capital resources.

As of September 30, 2024, we had an effective shelf registration statement on file with the Securities and Exchange Commission that allows us to issue various types of debt securities, as well as common stock, preferred stock, warrants, depository shares representing fractional interest in shares of preferred stock, purchase contracts and units from time to time in one or more offerings. Each issuance under the shelf registration statement will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued. The registration statement does not limit the amount of securities that may be issued thereunder. Our ability to issue securities is subject to market conditions and other factors including, in the case of our debt securities, our credit ratings and compliance with current and prospective covenants in credit agreements.

### Liquidity

The Company's primary sources of liquidity include the following for the periods indicated:

*(dollars in thousands)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Borrowing capacity at correspondent banks and FRB | $2,757,640 | $2,921,525 |
| Less: borrowings outstanding | (250,000) | (600,000) |
| Unpledged available-for-sale investment securities | 1,312,745 | 1,558,506 |
| Cash held or in transit with FRB | 274,908 | 51,253 |
| Total primary liquidity | $4,095,293 | $3,931,284 |

At September 30, 2024, the Company's primary sources of liquidity represented 51% of total deposits and 163% of estimated total uninsured (excluding collateralized municipal deposits and intercompany balances) deposits, respectively. As secondary sources of liquidity, the Company's held-to-maturity investment securities had a fair value of $112.0 million, including approximately $5.3 million in net unrealized losses.

The Company’s profitability during the first nine months of 2024 generated cash flows from operations of $85.5 million compared to $102.4 million during the first nine months of 2023. Net cash from investing activities was $345.0 million for the nine months ended September 30, 2024, compared to net cash from investing activities of $13.6 million during the nine months ending 2023. Financing activities used $209.0 million during the nine months ended September 30, 2024, compared to $84.9 million during the nine months ended September 30, 2023.

The changes in contractual obligations of the Company and Bank, to include but not limited to term subordinated debt, operating leases, deferred compensation and supplemental retirement plans as well as off-balance sheet commitments such as unfunded loans and letters of credit, are consistent with similar balances or totals as of December 31, 2023.

The Company is dependent upon the payment of cash dividends by the Bank to service its commitments, which have historically included dividends to shareholders, scheduled debt service payments, and general operations. Shareholder dividends are expected to continue subject to the Board’s discretion and management's continuing evaluation of capital levels, earnings, asset quality and other factors. The Company expects that the cash dividends paid by the Bank to the Company will be sufficient to cover the Company's cash flow needs. However, the Company and its ability to generate liquidity through either the issuance of stock or debt, also serves as a potential source of strength for the Bank. Dividends paid by the Company to holders of its common stock used $32.8 million and $29.9 million of cash during the nine months ended September 30, 2024 and 2023, respectively. The Company’s liquidity is dependent on dividends received from the Bank. Dividends from the Bank are subject to certain regulatory restrictions.

### TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES

(Unaudited. Dollars in thousands)

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this filing contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this filing because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results, and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:

*(dollars in thousands)*

| Net interest margin Acquired loans discount accretion, net: | Three months ended September 30, 2024 | September 30, 2023 | Nine months ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: |
| Amount (included in interest income) | $1,018 | $1,324 | $3,200 | $4,192 |
| Effect on average loan yield | 0.06% | 0.08% | 0.06% | 0.09% |
| Effect on net interest margin (FTE) | 0.05% | 0.06% | 0.05% | 0.06% |
| Net interest margin (FTE) | 3.71% | 3.88% | 3.69% | 4.01% |
| Net interest margin less effect of acquired loan discount accretion (Non-GAAP) | 3.66% | 3.82% | 3.64% | 3.95% |

*(dollars in thousands)*

| Pre-tax pre-provision return on average assets or equity | Three months ended September 30, 2024 | September 30, 2023 | Nine months ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income (GAAP) | $29,051 | $30,590 | $85,834 | $91,315 |
| Exclude provision for income taxes | 10,348 | 11,484 | 30,382 | 33,190 |
| Exclude provision for credit losses | 220 | 4,155 | 4,930 | 18,000 |
| Net income before income tax and provision expense (Non-GAAP) | $39,619 | $46,229 | $121,146 | $142,505 |
| Average assets (GAAP) | $9,666,979 | $9,874,240 | $9,767,965 | $9,867,099 |
| Average equity (GAAP) | $1,214,510 | $1,112,404 | $1,186,245 | $1,104,122 |
| Return on average assets (GAAP) (annualized) | 1.20% | 1.23% | 1.17% | 1.24% |
| Pre-tax pre-provision return on average assets (Non-GAAP) (annualized) | 1.63% | 1.86% | 1.66% | 1.93% |
| Return on average equity (GAAP) (annualized) | 9.52% | 10.91% | 9.67% | 11.06% |
| Pre-tax pre-provision return on average equity (Non-GAAP) (annualized) | 12.98% | 16.49% | 13.64% | 17.26% |

61

*(dollars in thousands)*

| Return on tangible common equity | Three months ended September 30, 2024 | September 30, 2023 | Nine months ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: |
| Average total shareholders' equity | $1,214,510 | $1,112,404 | $1,186,245 | $1,104,122 |
| Exclude average goodwill | 304,442 | 304,442 | 304,442 | 304,442 |
| Exclude average other intangibles | 8,093 | 12,563 | 9,098 | 14,219 |
| Average tangible common equity (Non-GAAP) | $901,975 | $795,399 | $872,705 | $785,461 |
| Net income (GAAP) | $29,051 | $30,590 | $85,834 | $91,315 |
| Exclude amortization of intangible assets, net of tax effect | 725 | 1,120 | 2,175 | 3,453 |
| Tangible net income available to common shareholders (Non-GAAP) | $29,776 | $31,710 | $88,009 | $94,768 |
| Return on average equity (GAAP) (annualized) | 9.52% | 10.91% | 9.67% | 11.06% |
| Return on average tangible common equity (Non-GAAP) | 13.13% | 15.82% | 13.47% | 16.13% |

*(dollars in thousands)*

| Tangible shareholders' equity to tangible assets | As of September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Shareholders' equity (GAAP) | $1,239,015 | $1,159,682 |
| Exclude goodwill and other intangible assets, net | 311,904 | 314,994 |
| Tangible shareholders' equity (Non-GAAP) | $927,111 | $844,688 |
| Total assets (GAAP) | $9,823,890 | $9,910,089 |
| Exclude goodwill and other intangible assets, net | 311,904 | 314,994 |
| Total tangible assets (Non-GAAP) | $9,511,986 | $9,595,095 |
| Shareholders' equity to total assets (GAAP) | 12.61% | 11.70% |
| Tangible shareholders' equity to tangible assets (Non-GAAP) | 9.75% | 8.80% |

*(dollars in thousands)*

| Tangible common shareholders' equity per share | As of September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Tangible shareholders' equity (Non-GAAP) | $927,111 | $844,688 |
| Common shares outstanding at end of period | 33,000,508 | 33,268,102 |
| Common shareholders' equity (book value) per share (GAAP) | $37.55 | $34.86 |
| Tangible common shareholders' equity (tangible book value) per share (Non-GAAP) | $28.09 | $25.39 |

62

## Market risk

As filed, 3,658 characters.

Based on the changes in interest rates as well as the mix shift of interest earning assets and interest bearing liabilities occurring subsequent to December 31, 2023, the following update of the Company’s assessment of market risk as of September 30, 2024 is being provided. These updates and changes should be read in conjunction with the additional quantitative and qualitative disclosures in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of September 30, 2024, the Company's loan portfolio consisted of approximately $6.7 billion in outstanding principal with a weighted average coupon rate of 5.49%. During the three-month periods ending September 30, 2024, June 30, 2024, and September 30, 2023, the weighted average coupon on loan production in the quarter was 7.63%, 7.98% and 7.31%, respectively. Included in the September 30, 2024, total loans are adjustable rate loans totaling $4.2 billion, of which, $891.6 million are considered floating based on the Wall Street Prime index. In addition, the Company holds certain investment securities with fair values totaling $371.1 million which are subject to repricing on not less than a quarterly basis.

Management funds the acquisition of nearly all of its earning assets through its core deposit gathering activities. As of September 30, 2024, non-interest bearing deposits represented 31.7% of total deposits. Further, during the quarter ended September 30, 2024, the cost of interest bearing deposits were 2.23% and the cost of total deposits were 1.52%. With the intent of stabilizing or increasing net interest income, management intends to continue to deploy its excess liquidity and/or seek to migrate certain earning assets into higher yielding categories. However, in situations where deposit balances contract, management may rely upon various borrowing facilities or the use of brokered deposits. Through the third quarter of 2024 and during the entire 2023 year, management did not utilize any brokered deposits. Management did however utilize borrowing lines from the FHLB, both overnight and term structured up to 12 months, due to expectations that such borrowings will be needed through the remainder of the year and into 2025 to support earning asset strategies.

As of September 30, 2024 the overnight Federal funds effective rate, the rate primarily used in these interest rate shock scenarios, was 4.83%. 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 simulation results shown below assume no changes in the structure of the Company’s balance sheet over the twelve months being measured.

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 parallel shock scenario over a twelve month period utilizing a interest sensitivity (GAP) analysis based on the Company's specific mix of interest earning assets and interest bearing liabilities as of September 30, 2024.

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) | (7.4)% | (5.6)% |
| +200 (shock) | (5.0)% | (3.7)% |
| +100 (shock) | (2.4)% | (0.8)% |
| + 0 (flat) | — | — |
| -100 (shock) | 0.2% | (2.8)% |
| -200 (shock) | 0.1% | (9.6)% |
| -300 (shock) | 1.5% | (20.8)% |

## Controls and procedures

As filed, 1,292 characters.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2024. Disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are controls and procedures designed to reasonably assure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis. Disclosure controls are also designed to reasonably assure that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2024.

During the three months ended September 30, 2024, there were no changes in our internal controls or in other factors that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

## Risk factors

As filed, 406 characters.

In evaluating an investment in the Company's common stock, investors should consider carefully, among other things, the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024, and in the information contained in this Quarterly Report on Form 10-Q and our other reports and registration statements.

Filed Nov 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000356171-24-000133. Last ingested by Listed: Nov 6, 2026, 18:20 ET. No prices; not investment advice.