0000356171us-gaap:~~AccumulatedNetUnrealizedInvestmentGainLossMember2022-03-31~~FinancialServiceOtherMember2023-01-012023-03-31

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________

FORM 10-Q

___________________


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended: March 31, ~~2022~~2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

Commission File Number: 000-10661

___________________

(Exact Name of Registrant as Specified in Its Charter)

___________________


CA						94-2792841
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification Number)

63 Constitution Drive

Chico, California 95973

(Address of Principal Executive Offices)(Zip Code)

(530) 898-0300

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock

TCBK

The NASDAQ Stock Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “accelerated filer”, “large accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☒

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding for each of the issuer’s classes of common stock, as of the latest practical date:

Common stock, no par value: ~~33,630,830~~33,206,788 shares outstanding as of May 5, ~~2022.~~2023.

Table of Contents

TriCo Bancshares

FORM 10-Q

TABLE OF CONTENTS

Table of Contents

GLOSSARY OF ACRONYMS AND TERMS

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:


ACL			Allowance for Credit Losses
AFS			Available-for-Sale
AOCI			Accumulated Other Comprehensive Income
ASC			Accounting Standards Codification
CARES			Coronavirus Aid, Relief and Economic Security Act
CDs			Certificates of Deposit
CDI			Core Deposit Intangible
CECL			Current Expected Credit Loss
COVID-19			Coronavirus Disease
CRE			Commercial Real Estate
DFPI			State Department of Financial Protection and Innovation
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
FHLB			Federal Home Loan Bank
FRB			Federal Reserve Board
FTE			Fully taxable equivalent
GAAP			Generally Accepted Accounting Principles (United States of America)
HELOC			Home equity line of credit
HTM			Held-to-Maturity
NPA			Nonperforming assets
OCI			Other Comprehensive Income
PCD			Purchase Credit Deteriorated
PPP			Paycheck Protection Program
ROUA			Right-of-Use Asset
RSU			Restricted Stock Unit
SBA			Small Business Administration
SERP			Supplemental Executive Retirement Plan
SFR			Single Family Residence
TDR			Troubled Debt Restructuring
VRB			Valley Republic Bancorp
XBRL			eXtensible Business Reporting Language

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

TRICO BANCSHARES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data; unaudited)


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	$	49,705	$	57,032	Cash and due from banks	$	77,933	$	96,323
Cash at Federal Reserve and other banks	Cash at Federal Reserve and other banks	985,978		711,389		Cash at Federal Reserve and other banks	32,402		10,907
Cash and cash equivalents	Cash and cash equivalents	1,035,683		768,421		Cash and cash equivalents	110,335		107,230
Investment securities:	Investment securities:					Investment securities:
Marketable equity securities	Marketable equity securities	2,801		2,938		Marketable equity securities	2,640		2,598
Available for sale debt securities, net of allowance for credit losses of $—		2,362,907		2,207,938
Held to maturity debt securities, net of allowance for credit losses of $—		186,748		199,759
Available for sale debt securities, net of allowance for credit losses of $0						Available for sale debt securities, net of allowance for credit losses of $0	2,405,812		2,452,438
Held to maturity debt securities, net of allowance for credit losses of $0						Held to maturity debt securities, net of allowance for credit losses of $0	152,067		160,983
Restricted equity securities	Restricted equity securities	17,250		17,250		Restricted equity securities	17,250		17,250
Loans held for sale	Loans held for sale	1,030		3,466		Loans held for sale	226		1,846
Loans	Loans	5,851,975		4,916,624		Loans	6,422,421		6,450,447
Allowance for credit losses	Allowance for credit losses	(96,049)		(85,376)		Allowance for credit losses	(108,407)		(105,680)
Total loans, net	Total loans, net	5,755,926		4,831,248		Total loans, net	6,314,014		6,344,767
Premises and equipment, net	Premises and equipment, net	73,692		78,687		Premises and equipment, net	72,096		72,327
Cash value of life insurance	Cash value of life insurance	132,104		117,857		Cash value of life insurance	134,544		133,742
Accrued interest receivable	Accrued interest receivable	22,769		19,292		Accrued interest receivable	31,388		31,856
Goodwill	Goodwill	307,942		220,872		Goodwill	304,442		304,442
Other intangible assets, net	Other intangible assets, net	21,776		12,369		Other intangible assets, net	15,014		16,670
Operating leases, right-of-use	Operating leases, right-of-use	28,404		25,665		Operating leases, right-of-use	30,000		26,862
Other assets	Other assets	169,296		109,025		Other assets	252,566		257,975
Total assets	Total assets	$	10,118,328	$	8,614,787	Total assets	$	9,842,394	$	9,930,986
Liabilities and Shareholders’ Equity:	Liabilities and Shareholders’ Equity:					Liabilities and Shareholders’ Equity:
Liabilities:	Liabilities:					Liabilities:
Deposits:	Deposits:					Deposits:
Noninterest-bearing demand	Noninterest-bearing demand	$	3,583,269	$	2,979,882	Noninterest-bearing demand	$	3,236,696	$	3,502,095
Interest-bearing	Interest-bearing	5,131,208		4,387,277		Interest-bearing	4,789,169		4,826,918
Total deposits	Total deposits	8,714,477		7,367,159		Total deposits	8,025,865		8,329,013
Accrued interest payable	Accrued interest payable	653		928		Accrued interest payable	1,643		1,167
Operating lease liability	Operating lease liability	30,500		26,280		Operating lease liability	32,228		29,004
Other liabilities	Other liabilities	126,348		112,070		Other liabilities	157,222		159,741
Other borrowings	Other borrowings	36,184		50,087		Other borrowings	434,140		264,605
Junior subordinated debt	Junior subordinated debt	100,984		58,079		Junior subordinated debt	101,051		101,040
Total liabilities	Total liabilities	9,009,146		7,614,603		Total liabilities	8,752,149		8,884,570
Commitments and contingencies (Note 9)	Commitments and contingencies (Note 9)	0		0		Commitments and contingencies (Note 9)
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock, no par value: 1,000,000 shares authorized, zero issued and outstanding at March 31, 2022 and December 31, 2021		—		—
Common stock, no par value: 50,000,000 shares authorized; 33,837,935 and 29,730,424 issued and outstanding at March 31, 2022 and December 31, 2021, respectively		706,672		532,244
Preferred stock, no par value: 1,000,000 shares authorized, zero issued and outstanding at March 31, 2023 and December 31, 2022						Preferred stock, no par value: 1,000,000 shares authorized, zero issued and outstanding at March 31, 2023 and December 31, 2022	—		—
Common stock, no par value: 50,000,000 shares authorized; 33,195,250 and 33,331,513 issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, no par value: 50,000,000 shares authorized; 33,195,250 and 33,331,513 issued and outstanding at March 31, 2023 and December 31, 2022, respectively	695,168		697,448
Retained earnings	Retained earnings	479,868		466,959		Retained earnings	564,538		542,873
Accumulated other comprehensive (loss) income, net of tax		(77,358)		981
Accumulated other comprehensive loss, net of tax						Accumulated other comprehensive loss, net of tax	(169,461)		(193,905)
Total shareholders’ equity	Total shareholders’ equity	1,109,182		1,000,184		Total shareholders’ equity	1,090,245		1,046,416
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	10,118,328	$	8,614,787	Total liabilities and shareholders’ equity	$	9,842,394	$	9,930,986

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TRICO BANCSHARES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data; unaudited)


		Three months ended March 31,				Three months ended March 31,
		2022		2021				2023		2022
Interest and dividend income:	Interest and dividend income:						Interest and dividend income:
Loans, including fees	Loans, including fees	$	57,745	$	60,436		Loans, including fees	$	82,415	$	57,745
Investments:	Investments:						Investments:
Taxable securities	Taxable securities	9,962		6,177			Taxable securities	18,622		9,962
Tax exempt securities	Tax exempt securities	942		923			Tax exempt securities	1,307		942
Dividends	Dividends	261		217			Dividends	304		261
Interest bearing cash at Federal Reserve and other banks	Interest bearing cash at Federal Reserve and other banks	285		163			Interest bearing cash at Federal Reserve and other banks	259		285
Total interest and dividend income	Total interest and dividend income	69,195		67,916			Total interest and dividend income	102,907		69,195
Interest expense:	Interest expense:						Interest expense:
Deposits	Deposits	678		937			Deposits	5,145		678
Other borrowings	Other borrowings	5		4			Other borrowings	2,809		5
Junior subordinated debt	Junior subordinated debt	588		535			Junior subordinated debt	1,617		588
Total interest expense	Total interest expense	1,271		1,476			Total interest expense	9,571		1,271
Net interest income	Net interest income	67,924		66,440			Net interest income	93,336		67,924
Provision for (reversal of) credit losses		8,330		(6,060)
Net interest income after credit loss provision (reversal)		59,594		72,500
Provision for credit losses							Provision for credit losses	4,195		8,330
Net interest income after credit loss provision							Net interest income after credit loss provision	89,141		59,594
Non-interest income:	Non-interest income:						Non-interest income:
Service charges and fees	Service charges and fees	11,696		10,476			Service charges and fees	11,197		11,696
Gain on sale of loans	Gain on sale of loans	1,246		3,247			Gain on sale of loans	206		1,246
Gain on sale of investment securities		—		—
Loss on sale of investment securities							Loss on sale of investment securities	(164)		—
Asset management and commission income	Asset management and commission income	887		834			Asset management and commission income	934		887
Increase in cash value of life insurance	Increase in cash value of life insurance	638		673			Increase in cash value of life insurance	802		638
Other	Other	629		880			Other	660		629
Total non-interest income	Total non-interest income	15,096		16,110			Total non-interest income	13,635		15,096
Non-interest expense:	Non-interest expense:						Non-interest expense:
Salaries and related benefits	Salaries and related benefits	28,597		25,330			Salaries and related benefits	32,563		28,597
Other	Other	17,850		16,288			Other	21,231		17,850
Total non-interest expense	Total non-interest expense	46,447		41,618			Total non-interest expense	53,794		46,447
Income before provision for income taxes	Income before provision for income taxes	28,243		46,992			Income before provision for income taxes	48,982		28,243
Provision for income taxes	Provision for income taxes	7,869		13,343			Provision for income taxes	13,149		7,869
Net income	Net income	$	20,374	$	33,649		Net income	$	35,833	$	20,374
Per share data:	Per share data:						Per share data:
Basic earnings per share	Basic earnings per share	$	0.68	$	1.13		Basic earnings per share	$	1.08	$	0.68
Diluted earnings per share	Diluted earnings per share	$	0.67	$	1.13		Diluted earnings per share	$	1.07	$	0.67
Dividends per share	Dividends per share	$	0.25	$	0.25		Dividends per share	$	0.30	$	0.25

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In thousands; unaudited)


		Three months ended March 31,				Three months ended March 31,
		2022		2021				2023		2022
Net income	Net income	$	20,374	$	33,649		Net income	$	35,833	$	20,374
Other comprehensive loss, net of tax:
Unrealized losses on available for sale securities arising during the period		(78,397)		(8,690)
Other comprehensive income (loss), net of tax:							Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available for sale securities arising during the period							Unrealized gains (losses) on available for sale securities arising during the period	24,444		(78,397)
Change in minimum pension liability	Change in minimum pension liability	58		—			Change in minimum pension liability	—		58
Change in joint beneficiary agreements	Change in joint beneficiary agreements	—		(629)			Change in joint beneficiary agreements	—		—
Other comprehensive loss		(78,339)		(9,319)
Other comprehensive income (loss)							Other comprehensive income (loss)	24,444		(78,339)
Comprehensive income (loss)	Comprehensive income (loss)	$	(57,965)	$	24,330		Comprehensive income (loss)	$	60,277	$	(57,965)

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TRICO BANCSHARES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except share and per share data; unaudited)

Shares of
Common
Stock Common
Stock Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Balance at January 1, 2021 29,727,214 $ 530,835 $ 381,999 $ 12,280 $ 925,114
Net income 33,649 33,649
Other comprehensive income (9,319) (9,319)
Stock options exercised — — —
RSU vesting 352 352
PSU vesting 185 185
RSUs released 201 —
PSUs released —
Repurchase of common stock (293) (5) (5) (10)
Dividends paid ($0.25 per share) (7,432) (7,432)
Three months ended March 31, 2021 29,727,122 $ 531,367 $ 408,211 $ 2,961 $ 942,539
Balance at January 1, 2022 29,730,424 $ 532,244 $ 466,959 $ 981 $ 1,000,184
Net income 20,374 20,374
Other comprehensive loss (78,339) (78,339)
Stock options exercised 3,325 55 55
RSU vesting 565 565
PSU vesting 247 247
RSUs released —
PSUs released —
Issuance of common stock 4,105,518 173,585 173,585
Repurchase of common stock (1,332) (24) (32) (56)
Dividends paid ($0.25 per share) (7,433) (7,433)
Three months ended March 31, 2022 33,837,935 $ 706,672 $ 479,868 $ (77,358) $ 1,109,182


	Shares of Common Stock	Common Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at January 1, 2022	29,730,424	$	532,244	$	466,959	$	981	$	1,000,184
Net income				20,374				20,374
Other comprehensive loss						(78,339)		(78,339)
Stock options exercised	3,325	55						55
RSU vesting		565						565
PSU vesting		247						247
RSUs released								—

Issuance of common stock	4,105,518	173,585						173,585
Repurchase of common stock	(1,332)	(24)		(32)				(56)
Dividends paid ($0.30 per share)				(7,433)				(7,433)
Three months ended March 31, 2022	33,837,935	$	706,672	$	479,868	$	(77,358)	$	1,109,182

Balance at January 1, 2023	33,331,513	$	697,448	$	542,873	$	(193,905)	$	1,046,416
Net income				35,833				35,833
Other comprehensive income						24,444		24,444
Stock options exercised	4,000	78						78
RSU vesting		728						728
PSU vesting		313						313
RSUs released	22,118							—


Repurchase of common stock	(162,381)	(3,399)		(4,196)				(7,595)
Dividends paid ($0.30 per share)				(9,972)				(9,972)
Three months ended March 31, 2023	33,195,250	$	695,168	$	564,538	$	(169,461)	$	1,090,245

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TRICO BANCSHARES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands; unaudited)


		For the three months ended March 31,					For the three months ended March 31,
		2022		2021			2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	20,374	$	33,649	Net income	$	35,833	$	20,374
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment, and amortization	Depreciation of premises and equipment, and amortization	1,409		1,698		Depreciation of premises and equipment, and amortization	1,566		1,409
Amortization of intangible assets	Amortization of intangible assets	1,228		1,431		Amortization of intangible assets	1,656		1,228
Provision for (reversal of) credit losses		8,330		(6,060)
Provision for credit losses						Provision for credit losses	4,195		8,330
Amortization of investment securities premium, net	Amortization of investment securities premium, net	5,618		1,186		Amortization of investment securities premium, net	174		5,618
Gain on sale of investment securities		—		—
Loss on sale of investment securities						Loss on sale of investment securities	164		—
Originations of loans for resale	Originations of loans for resale	(30,187)		(65,970)		Originations of loans for resale	(6,281)		(30,187)
Proceeds from sale of loans originated for resale	Proceeds from sale of loans originated for resale	33,509		70,987		Proceeds from sale of loans originated for resale	8,058		33,509
Gain on sale of loans	Gain on sale of loans	(1,246)		(3,247)		Gain on sale of loans	(206)		(1,246)
Change in market value of mortgage servicing rights	Change in market value of mortgage servicing rights	(274)		(12)		Change in market value of mortgage servicing rights	209		(274)
Provision for losses on foreclosed assets		—		9

Gain on sale of foreclosed assets		—		(51)

Operating lease expense payments	Operating lease expense payments	(1,292)		(1,204)		Operating lease expense payments	(1,653)		(1,292)
Gain on disposal of fixed assets	Gain on disposal of fixed assets	(1,078)		—		Gain on disposal of fixed assets	—		(1,078)
Increase in cash value of life insurance	Increase in cash value of life insurance	(638)		(673)		Increase in cash value of life insurance	(802)		(638)

Loss on marketable equity securities		137		53
(Gain) loss on marketable equity securities						(Gain) loss on marketable equity securities	(42)		137
Equity compensation vesting expense	Equity compensation vesting expense	812		537		Equity compensation vesting expense	1,041		812
Change in:	Change in:					Change in:
Interest receivable	Interest receivable	(83)		562		Interest receivable	468		(83)
Interest payable	Interest payable	(801)		(392)		Interest payable	476		(801)
Amortization of operating lease ROUA	Amortization of operating lease ROUA	1,374		1,317		Amortization of operating lease ROUA	1,739		1,374
Other assets and liabilities, net	Other assets and liabilities, net	(2,347)		7,376		Other assets and liabilities, net	(7,640)		(2,347)
Net cash from operating activities	Net cash from operating activities	34,845		41,196		Net cash from operating activities	38,955		34,845
Investing activities:	Investing activities:					Investing activities:
Proceeds from maturities of securities available for sale	Proceeds from maturities of securities available for sale	85,298		91,813		Proceeds from maturities of securities available for sale	56,905		85,298
Proceeds from maturities of securities held to maturity	Proceeds from maturities of securities held to maturity	12,894		23,850		Proceeds from maturities of securities held to maturity	8,842		12,894

Proceeds from sale of available for sale securities						Proceeds from sale of available for sale securities	24,160		—
Purchases of securities available for sale	Purchases of securities available for sale	(247,354)		(372,917)		Purchases of securities available for sale	—		(247,354)
Loan origination and principal collections, net	Loan origination and principal collections, net	(161,865)		(102,230)		Loan origination and principal collections, net	26,558		(161,865)
Loans purchased		—		(101,466)
Proceeds from sale of other real estate owned		—		577

Proceeds from sale of premises and equipment	Proceeds from sale of premises and equipment	6,689		—		Proceeds from sale of premises and equipment	—		6,689
Purchases of premises and equipment	Purchases of premises and equipment	(631)		(188)		Purchases of premises and equipment	(1,213)		(631)
Cash acquired from VRB, net of cash consideration paid	Cash acquired from VRB, net of cash consideration paid	426,883		—		Cash acquired from VRB, net of cash consideration paid	—		426,883
Net cash from (used by) investing activities		121,914		(460,561)
Net cash from investing activities						Net cash from investing activities	115,252		121,914
Financing activities:	Financing activities:					Financing activities:
Net change in deposits	Net change in deposits	131,839		357,466		Net change in deposits	(303,148)		131,839
Net change in other borrowings	Net change in other borrowings	(13,903)		9,312		Net change in other borrowings	169,535		(13,903)
Repurchase of common stock, net of option exercises	Repurchase of common stock, net of option exercises	—		(10)		Repurchase of common stock, net of option exercises	(7,595)		—
Dividends paid	Dividends paid	(7,433)		(7,432)		Dividends paid	(9,972)		(7,433)

Net cash from financing activities		110,503		359,336
Exercise of stock options						Exercise of stock options	78		—
Net cash (used by) from financing activities						Net cash (used by) from financing activities	(151,102)		110,503
Net change in cash and cash equivalents	Net change in cash and cash equivalents	267,262		(60,029)		Net change in cash and cash equivalents	3,105		267,262
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	768,421		669,551		Cash and cash equivalents, beginning of period	107,230		768,421
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	1,035,683	$	609,522	Cash and cash equivalents, end of period	$	110,335	$	1,035,683

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Supplemental disclosure of noncash activities:
Unrealized loss on securities available for sale $ (111,302) $ (12,337)
Loans transferred to held-for-sale 12,044 —
Market value of shares tendered in-lieu of cash to pay for exercise of options and/or related taxes 55 2
Obligations incurred in conjunction with leased assets 521 1,308
Loans transferred to foreclosed assets 313 —
Supplemental disclosure of cash flow activity:
Cash paid for interest expense 1,546 1,868
Cash paid for income taxes — —


Supplemental disclosure of noncash activities:
Unrealized gain (loss) on securities available for sale	$	34,540	$	(111,302)
Loans transferred to held-for-sale	—		12,044
Market value of shares tendered in-lieu of cash to pay for exercise of options and/or related taxes	621		55
Obligations incurred in conjunction with leased assets	4,484		521
Loans transferred to foreclosed assets	—		313
Supplemental disclosure of cash flow activity:
Cash paid for interest expense	$	9,095	$	1,546
Cash paid for income taxes	—		—
Business combination (1)

(1) During the period ended March 31, 2022, the VRB acquisition included fair value tangible assets acquired of $1.37 billion, liabilities assumed of $1.28 billion, resulting in goodwill of $0.09 billion.

See accompanying notes to unaudited condensed consolidated financial statements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies

Description of Business and Basis of Presentation

TriCo Bancshares (the “Company” or “we”) is a California corporation organized to act as a bank holding company for Tri Counties Bank (the “Bank”). The Company and the Bank are headquartered in Chico, California. The Bank is a California-chartered bank that is engaged in the general commercial banking business in 3133 California counties. The consolidated financial statements are prepared in accordance with accounting policies generally accepted in the United States of America and general practices in the banking industry. All adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. The financial statements include the accounts of the Company. All inter-company accounts and transactions have been eliminated in consolidation.

The Company has 5five capital subsidiary business trusts (collectively, the “Capital Trusts”) that issued trust preferred securities, including two organized by the Company and 3three acquired with the acquisition of North Valley Bancorp. For financial reporting purposes, the Company’s investments in the Capital Trusts of ~~$1,748,000~~$1.76 million are accounted for under the equity method and, accordingly, are not consolidated and are included in other assets on the consolidated balance sheet. See the footnote 'Junior Subordinated Debt' for additional information on borrowings outstanding.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“2022 Annual Report”). The Company believes that the disclosures made are adequate to make the information not misleading.

Segment and Significant Group Concentration of Credit Risk

The Company grants agribusiness, commercial, consumer, and residential loans to customers located throughout California. The Company has a diversified loan portfolio within the business segments located in this geographical area. The Company currently classifies all its operation into 1one business segment that it denotes as community banking.

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.

Reclassification

Some items in the prior year consolidated financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

Cash and Cash Equivalents

Net cash flows are reported for loan and deposit transactions and other borrowings. For purposes of the consolidated statement of cash flows, cash, due from banks with original maturities less than 90 days, interest-earning deposits in other banks, and Federal funds sold are considered to be cash equivalents.

Allowance for Credit Losses - Securities

The Company measures expected credit losses on HTM debt securities on a collective basis by major security type, then further disaggregated by sector and bond rating. Accrued interest receivable on HTM debt securities ~~totaled~~ was considered insignificant at March 31, ~~2022~~2023 and is therefore excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current ~~condition~~conditions and reasonable and supportable forecasts based on current and expected changes in credit ratings and default rates. Based on the implied guarantees of the U. S. Government or its agencies related to certain of these investment securities, and the absence of any historical or expected losses, substantially all qualify for a zero loss assumption.

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Management has separately evaluated its HTM investment securities from obligations of state and political subdivisions utilizing the historical loss data represented by similar securities over a period of time spanning nearly 50 years. As a result of this evaluation, management determined that the expected credit losses associated with these securities is not significant for financial reporting purposes and therefore, no allowance for credit losses has been recognized.

The Company evaluates AFS debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. 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. Both the allowance for credit losses and the adjustment to net income may be reversed if conditions change. However, if the Company intends to sell an impaired available for sale debt security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount is recognized in earnings with a corresponding adjustment to the security's amortized cost basis. In evaluating available for sale debt securities in unrealized loss positions for impairment and the criteria regarding its intent or requirement to sell such securities, the Company considers the extent to which fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers' financial condition, among other factors. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the ACL when management believes the uncollectability of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met. No security credit losses were recognized during the three month periods ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Loans

Loans that management has the intent and ability to hold until maturity or payoff are reported at principle amount outstanding, net of deferred loan fees and costs. Loans are placed in nonaccrual status when reasonable doubt exists as to the full, timely collection of interest or principal, or a loan becomes contractually past due by 90 days or more with respect to interest or principal and is not well secured and in the process of collection. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is considered probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of Management, the loan is estimated to be fully collectible as to both principal and interest. Accrued interest receivable is not included in the calculation of the allowance for credit losses.

Allowance for Credit Losses - Loans

The ACL is a valuation account that is deducted from the loan's amortized cost basis to present the net amount expected to be collected on the loans. Loans are ~~charged off~~charged-off against the allowance when management believes the recorded loan balance is confirmed as uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Regardless of the determination that a charge-off is appropriate for financial accounting purposes, the Company manages its loan portfolio by continually monitoring, where possible, a borrower's ability to pay through the collection of financial information, delinquency status, borrower discussion and the encouragement to repay in accordance with the original contract or modified terms, if appropriate.

Management estimates the allowance balance using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. Historical credit loss experience provides the basis for the estimation of expected credit losses, which captures loan balances as of a point in time to form a cohort, then tracks the respective losses generated by that cohort of loans over the remaining life. The Company identified and accumulated loan cohort historical loss data beginning with the fourth quarter of 2008 and through the current period. In situations where the Company's actual loss history was not statistically relevant, the loss history of peers, defined as financial institutions with assets greater than three billion and less than ten billion, were utilized to create a minimum loss rate. Adjustments to historical loss information are made for differences in relevant current loan-specific risk characteristics, such as historical timing of losses relative to the loan origination. In its loss forecasting framework, the Company incorporates forward-looking information through the use of macroeconomic scenarios applied over the forecasted life of the assets. 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, changes in corporate debt yields, and U.S. gross domestic product.

A loan is considered to be collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral. The ACL on collateral dependent loans is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset. If the value of underlying collateral is determined to be less than the recorded amount of the loan, a charge-off will be taken. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR. The ACL on a TDR is measured using the same method as all other portfolio loans, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.

PCD assets are assets acquired at a discount that is due, in part, to credit quality deterioration since origination. PCD assets are accounted for in accordance with ASC 326-20 and are initially recorded at fair value, by taking the sum of the present value of expected future cash flows and an allowance for credit losses, at acquisition. The allowance for credit losses for PCD assets is recorded through a gross-up of reserves on the balance sheet, while the allowance for acquired non-PCD assets, such as loans, is recorded through the provision for credit losses on the income statement, consistent with originated loans. Subsequent to acquisition, the allowance for credit losses for PCD loans will generally follow the same forward-looking estimation, provision, and charge-off process as non-PCD acquired and originated loans.

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The Company has identified the following portfolio segments to evaluate and measure the allowance for credit loss:

Commercial real estate:

Commercial real estate - Non-owner occupied: These commercial properties typically consist of buildings which are leased to others for their use and rely on rents as the primary source of repayment. Property types are predominantly office, retail, or light industrial but the portfolio also has some special use properties. As such, the risk of loss associated with these properties is primarily driven by general

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economic changes or changes in regional economies and the impact of such on a tenant’s ability to pay. Ultimately this can affect occupancy, rental rates, or both. Additional risk of loss can come from new construction resulting in oversupply, the costs to hold or operate the property, or changes in interest rates. The terms on these loans at origination typically have maturities from five to ten years with amortization periods from fifteen to thirty years.

Commercial real estate - Owner occupied: These credits are primarily susceptible to changes in the financial condition of the business operated by the property owner. This may be driven by changes in, among other things, industry challenges, factors unique to the operating geography of the borrower, change in the individual fortunes of the business owner, general economic conditions and changes in business cycles. When default is driven by issues related specifically to the business owner, collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven more by general economic conditions, the underlying collateral may have devalued more and thus result in larger losses in the event of default. The terms on these loans at origination typically have maturities from five to ten years with amortization periods from fifteen to thirty years.

Multifamily: These commercial properties are generally comprised of more than four rentable units, such as apartment buildings, with each unit intended to be occupied as the primary residence for one or more persons. Multifamily properties are also subject to changes in general or regional economic conditions, such as unemployment, ultimately resulting in increased vacancy rates or reduced rents or both. In addition, new construction can create an oversupply condition and market competition resulting in increased vacancy, reduced market rents, or both. Due to the nature of their use and the greater likelihood of tenant turnover, the management of these properties is more intensive and therefore is more critical to the preclusion of loss.

Farmland: While the Company has few loans that were originated for the purpose of the acquisition of these commercial properties, loans secured by farmland represent unique risks that are associated with the operation of an agricultural businesses. The valuation of farmland can vary greatly over time based on the property's access to resources including but not limited to water, crop prices, foreign exchange rates, government regulation or restrictions, and the nature of ongoing capital investment needed to maintain the quality of the property. Loans secured by farmland typically represent less risk to the Company than other agriculture loans as the real estate typically provides greater support in the event of default or need for longer term repayment.

Consumer loans:

SFR 1-4 1st DT Liens: The most significant drivers of potential loss within the Company's residential real estate portfolio relate general, regional, or individual changes in economic conditions and their effect on employment and borrowers cash flow. Risk in this portfolio is best measured by changes in borrower credit score and loan-to-value. Loss estimates are based on the general movement in credit score, economic outlook and its effects on employment and the value of homes and the Bank’s historical loss experience adjusted to reflect the economic outlook and the unemployment rate.

SFR HELOCs and Junior Liens: Similar to residential real estate term loans, HELOCs and junior liens performance is also primarily driven by borrower cash flows based on employment status. However, HELOCs carry additional risks associated with the fact that most of these loans are secured by a deed of trust in a position that is junior to the primary lien holder. Furthermore, the risk that as the borrower's financial strength deteriorates, the outstanding balance on these credit lines may increase as they may only be canceled by the Company if certain limited criteria are met. In addition to the allowance for credit losses maintained as a percent of the outstanding loan balance, the Company maintains additional reserves for the unfunded portion of the HELOC.

Other: The majority of consumer loans are secured by automobiles, with the remainder primarily unsecured revolving debt (credit cards). These loans are susceptible to three primary risks; non-payment due to income loss, over-extension of credit and, when the borrower is unable to pay, shortfall in collateral value, if any. Typically non-payment is due to loss of job and will follow general economic trends in the marketplace driven primarily by rises in the unemployment rate. Loss of collateral value can be due to market demand shifts, damage to collateral itself or a combination of those factors. Credit card loans are unsecured and while collection efforts are pursued in the event of default, there is typically limited opportunity for recovery. Loss estimates are based on the general movement in credit score, economic outlook and its effects on employment and the Bank’s historical loss experience adjusted to reflect the economic outlook and the unemployment rate.

Commercial and Industrial:

Repayment of these loans is primarily based on the cash flow of the borrower, and secondarily on the underlying collateral provided by the borrower. A borrower's cash flow may be unpredictable, and collateral securing these loans may fluctuate in value. Most often, collateral includes accounts receivable, inventory, or equipment. Collateral securing these loans may depreciate over time, may be difficult to appraise, may be illiquid and may fluctuate in value based on the success of the business. Actual and forecast changes in gross domestic product are believed to be corollary to losses associated with these credits.

Construction:

While secured by real estate, construction loans represent a greater level of risk than term real estate loans due to the nature of the additional risks associated with the not only the completion of construction within an estimated time period and budget, but also the need to either sell the building or reach a level of stabilized occupancy sufficient to generate the cash flows necessary to support debt

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service and operating costs. The Company seeks to mitigate the additional risks associated with construction lending by requiring borrowers to comply with lower loan to value ratios and additional covenants as well as strong tertiary support of guarantors. The loss forecasting model applies the historical rate of loss for similar loans over the expected life of the asset as adjusted for macroeconomic factors.

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Agriculture Production:

Repayment of agricultural loans is dependent upon successful operation of the agricultural business, which is greatly impacted by factors outside the control of the borrower. These factors include adverse weather conditions, including access to water, that may impact crop yields, loss of livestock due to disease or other factors, declines in market prices for agriculture products, changes in foreign exchange, and the impact of government regulations. In addition, many farms are dependent on a limited number of key individuals whose injury or death may significantly affect the successful operation of the business. Consequently, agricultural production loans may involve a greater degree of risk than other types of loans.

Leases:

The loss forecasting model applies the historical rate of loss for similar loans over the expected life of the asset. Leases typically represent an elevated level of credit risk as compared to loans secured by real estate as the collateral for leases is often subject to a more rapid rate of depreciation or depletion. The ultimate severity of loss is impacted by the type of collateral securing the exposure, the size of the exposure, the borrower’s industry sector, any guarantors and the geographic market. Assumptions of expected loss are conditioned to the economic outlook and the other variables discussed above.

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

Accounting Standards ~~Pending Adoption~~Recently Issued or Adopted

FASB issued ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. This ASU permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The adoption of this accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements.

FASB issued ASU 2022-02, Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU addresses feedback received from adopters of CECL, specifically regarding accounting guidance for TDRs and disclosures of gross write-offs by year of loan origination. Accounting guidance for TDRs by creditors will be eliminated under this amendment, while also enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Amendments in this ASU ~~are~~were effective for the Company beginning ~~after December 31, 2022, with early~~January 1, 2023 and applied on a prospective basis. The adoption ~~permitted. Management is evaluating~~of this accounting guidance did not have a material impact on the ~~extent to which this will impact the~~Company's consolidated financial statements.

~~FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.~~ This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform by providing optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The election to apply the optional relief for existing fair value and cash flow hedge accounting relationships may be made on a hedge-by-hedge basis and across multiple reporting periods. Amendments in this ASU are effective for the Company through December 31, 2022. As the Company has an insignificant number of instruments that are applicable to this ASU, management has determined that no impact to the valuations of these instruments are applicable for financial reporting purposes.

Note 2 - Business Combinations

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. 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~~$0.4 million in cash paid out for settlement of stock option awards at VRB.

VRB was headquartered in Bakersfield, California, and had 4 branch locations in and around Bakersfield, which all now operate as branches for Tri Counties Bank, and a loan production office in Fresno, California. The Company anticipates that Tri Counties Bank's previously existing Bakersfield branch and the VRB loan production office in Fresno will be consolidated, subject to regulatory approval, into the overlapping locations in the near future.

The acquisition of VRB has been accounted for as a business combination. We recorded the fair values based on the valuations available as of reporting date. In accordance with business combination accounting guidance, we will continue to evaluate these fair values for up to one year following the merger date of March 25, 2022. While management believes the information available and presented below provide a reasonable basis for estimating fair value, we may obtain additional information and evidence during the measurement period that could result in changes to the estimated fair value amounts. Valuations subject to change include, but are not limited to, loans and leases, deposits, deferred tax items, and certain other assets and liabilities.

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The following table summarizes the consideration paid for VRB and the amounts of assets acquired and liabilities assumed that were recorded at the acquisition date (in thousands):

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~~Valley Republic Bancorp~~Fair Value as of
March 25, 2022

Fair value of consideration transferred:

Fair value of shares issued

173,585

Cash consideration

431

Total fair value of consideration transferred

174,016

Assets acquired:

Cash and cash equivalents

427,314

Securities available for sale

109,716

Loans and leases

771,353

Premises and equipment

4,658

Cash value of life insurance

13,609

Core deposit intangible

10,635

Other assets

~~26,244~~29,744

Total assets acquired

~~1,363,529~~1,367,029

Liabilities assumed:

Deposits

(1,215,479)

Subordinated debt

(47,236)

SERP liability

(3,352)

Other liabilities

(10,516)

Total liabilities assumed

(1,276,583)

Total net assets acquired

~~86,946~~90,446

Goodwill recognized

~~87,070~~83,570

Note 3 - Investment Securities

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


		March 31, 2022											March 31, 2023
(in thousands)	(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
Debt Securities Available for Sale	Debt Securities Available for Sale											Debt Securities Available for Sale
Obligations of U.S. government agencies	Obligations of U.S. government agencies	$	1,789,218	$	578	$	(99,052)	$	—	$	1,690,744	Obligations of U.S. government agencies	$	1,531,759	$	5	$	(174,329)	$	—	$	1,357,435
Obligations of states and political subdivisions	Obligations of states and political subdivisions	276,042		2,557		(11,404)		—		267,195		Obligations of states and political subdivisions	308,129		698		(28,927)		—		279,900
Corporate bonds	Corporate bonds	7,652		29		(65)		—		7,616		Corporate bonds	6,165		—		(427)		—		5,738
Asset backed securities	Asset backed securities	401,689		508		(4,845)		—		397,352		Asset backed securities	440,259		18		(12,913)		—		427,364
Non-agency collateralized mortgage obligations												Non-agency collateralized mortgage obligations	375,345		—		(39,970)		—		335,375
Total debt securities available for sale	Total debt securities available for sale	$	2,474,601	$	3,672	$	(115,366)	$	—	$	2,362,907	Total debt securities available for sale	$	2,661,657	$	721	$	(256,566)	$	—	$	2,405,812
Debt Securities Held to Maturity												Debt Securities Held to Maturity
Obligations of U.S. government agencies												Obligations of U.S. government agencies	$	148,700	$	1	$	(9,942)	—		138,759
Obligations of states and political subdivisions												Obligations of states and political subdivisions	3,367		14		(5)		—		3,376
Total debt securities held to maturity												Total debt securities held to maturity	$	152,067	$	15	$	(9,947)	$	—	$	142,135

Debt Securities Held to Maturity
Obligations of U.S. government agencies $ 180,289 $ 222 $ (3,070) $ — $ 177,441
Obligations of states and political subdivisions 6,459 70 — — 6,529
Total debt securities held to maturity $ 186,748 $ 292 $ (3,070) $ — $ 183,970

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		December 31, 2021											December 31, 2022
(in thousands)	(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
Debt Securities Available for Sale	Debt Securities Available for Sale											Debt Securities Available for Sale
Obligations of U.S. government agencies	Obligations of U.S. government agencies	$	1,260,226	$	8,193	$	(11,030)	$	—	$	1,257,389	Obligations of U.S. government agencies	$	1,568,408	$	3	$	(195,642)	$	—	$	1,372,769
Obligations of states and political subdivisions	Obligations of states and political subdivisions	187,197		5,832		(785)		—		192,244		Obligations of states and political subdivisions	332,625		401		(39,821)		—		293,205
Corporate bonds	Corporate bonds	6,722		34		—		—		6,756		Corporate bonds	6,164		—		(413)		—		5,751
Asset backed securities	Asset backed securities	754,185		2,354		(4,990)		—		751,549		Asset backed securities	454,943		17		(15,193)		—		439,767
Non-agency collateralized mortgage obligations												Non-agency collateralized mortgage obligations	380,847		—		(39,901)		—		340,946
Total debt securities available for sale	Total debt securities available for sale	$	2,208,330	$	16,413	$	(16,805)	$	—	$	2,207,938	Total debt securities available for sale	$	2,742,987	$	421	$	(290,970)	$	—	$	2,452,438
Debt Securities Held to Maturity	Debt Securities Held to Maturity											Debt Securities Held to Maturity
Obligations of U.S. government agencies	Obligations of U.S. government agencies	192,068		8,131		—		$	—	200,199		Obligations of U.S. government agencies	$	154,830	$	2	$	(11,013)	$	—	$	143,819
Obligations of states and political subdivisions	Obligations of states and political subdivisions	7,691		250		—		—		7,941		Obligations of states and political subdivisions	6,153		13		(47)		—		6,119
Total debt securities held to maturity	Total debt securities held to maturity	$	199,759	$	8,381	$	—	$	—	$	208,140	Total debt securities held to maturity	$	160,983	$	15	$	(11,060)	$	—	$	149,938

Proceeds from the sale of investment securities totaled $24.2 million for the three months ended March 31, 2023, resulting in gross realized losses of $0.2 million. There were no sales of investment securities during the three months ended March 31, ~~2022 and 2021, respectively.~~2022. Investment securities with an aggregate carrying value of ~~$475,674,000~~$648.4 million and ~~$423,892,000~~$595.8 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, were pledged as collateral for specific borrowings, lines of credit or local agency deposits.

The amortized cost and estimated fair value of debt securities at March 31, ~~2022~~2023 by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At March 31, ~~2022,~~2023, obligations of U.S. government corporations and agencies with a cost basis totaling ~~$1,404,095,000~~$1,502.5 billion consist almost entirely of residential real estate mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages. For purposes of the following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations and agencies is categorized based on final maturity date. At March 31, ~~2022,~~2023, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S. government corporations and agencies to be approximately ~~6.28~~6.53 years. Average remaining life is defined as the time span after which the principal balance has been reduced by half.

As of March 31, ~~2022,~~2023, the contractual final maturity for available for sale and held to maturity investment securities is as follows:


Debt Securities	Debt Securities	Available for Sale						Held to Maturity				Debt Securities		Available for Sale								Held to Maturity
(in thousands)	(in thousands)	Amortized Cost		Estimated Fair Value				Amortized Cost		Estimated Fair Value		(in thousands)		Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value

Due in one year	Due in one year	$	14,060			$	13,955					$	—			$	—		Due in one year	$	57,662			$	56,205			$	—	$	—
Due after one year through five years	Due after one year through five years	124,473		120,609				1,693		1,717		Due after one year through five years		114,294				109,745				5,316				5,157
Due after five years through ten years	Due after five years through ten years	376,294		370,606				14,559		14,431		Due after five years through ten years		407,960				389,802				9,592				9,081
Due after ten years	Due after ten years	1,959,774		1,857,737				170,496		167,822		Due after ten years		2,081,741				1,850,060				137,159				127,897
Totals	Totals	$	2,474,601	$	2,362,907			$	186,748	$	183,970	Totals		$	2,661,657			$	2,405,812			$	152,067			$	142,135

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

March 31, 2022: Less than 12 months 12 months or more Total
(in thousands) Fair
Value Unrealized
Loss Fair
Value Unrealized
Loss Fair
Value Unrealized
Loss
Debt Securities Available for Sale
Obligations of U.S. government agencies $ 1,385,647 $ (79,940) $ 220,899 $ (19,112) $ 1,606,546 $ (99,052)
Obligations of states and political subdivisions 106,944 (10,040) 9,045 (1,364) 115,989 (11,404)
Corporate bonds 4,112 (65) — — 4,112 (65)
Asset backed securities 212,168 (2,544) 107,603 (2,301) 319,771 (4,845)
Total debt securities available for sale $ 1,708,871 $ (92,589) $ 337,547 $ (22,777) $ 2,046,418 $ (115,366)
Debt Securities Held to Maturity
Obligations of U.S. government agencies $ 147,078 $ (3,070) $ — $ — $ 147,078 $ (3,070)

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December 31, 2021:		Less than 12 months				12 months or more				Total
March 31, 2023:														March 31, 2023:	Less than 12 months				12 months or more				Total
(in thousands)	(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Debt Securities Available for Sale	Debt Securities Available for Sale													Debt Securities Available for Sale
Obligations of U.S. government agencies	Obligations of U.S. government agencies	$	947,108	$	(9,737)	$	44,086	$	(1,293)	$	991,194	$	(11,030)	Obligations of U.S. government agencies	$	298,264	$	(18,024)	$	1,058,654	$	(156,305)	$	1,356,918	$	(174,329)
Obligations of states and political subdivisions	Obligations of states and political subdivisions	56,153		(785)		—		—		56,153		(785)		Obligations of states and political subdivisions	126,230		(7,797)		105,039		(21,130)		231,269		(28,927)
Corporate bonds														Corporate bonds	1,846		(135)		3,892		(292)		5,738		(427)
Asset backed securities	Asset backed securities	389,837		(4,118)		109,748		(872)		499,585		(4,990)		Asset backed securities	112,239		(1,994)		309,739		(10,919)		421,978		(12,913)
Non-agency collateralized mortgage obligations														Non-agency collateralized mortgage obligations	73,343		(2,639)		248,617		(37,331)		321,960		(39,970)
Total debt securities available for sale	Total debt securities available for sale	$	1,393,098	$	(14,640)	$	153,834	$	(2,165)	$	1,546,932	$	(16,805)	Total debt securities available for sale	$	611,922	$	(30,589)	$	1,725,941	$	(225,977)	$	2,337,863	$	(256,566)
Debt Securities Held to Maturity														Debt Securities Held to Maturity
Obligations of U.S. government agencies														Obligations of U.S. government agencies	$	41,389	$	(2,252)	$	97,370	$	(7,690)	$	138,759	$	(9,942)
Obligations of states and political subdivisions														Obligations of states and political subdivisions	1,050		(5)		—		—		1,050		(5)
Total debt securities held to maturity														Total debt securities held to maturity	$	42,439	$	(2,257)	$	97,370	$	(7,690)	$	139,809	$	(9,947)


December 31, 2022:	Less than 12 months				12 months or more				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	605,615	$	(61,408)	$	766,612	$	(134,234)	$	1,372,227	$	(195,642)
Obligations of states and political subdivisions	219,532		(26,904)		43,282		(12,917)		262,814		(39,821)
Corporate bonds	5,751		(413)		—		—		5,751		(413)
Asset backed securities	231,703		(4,955)		205,329		(10,238)		437,032		(15,193)
Non-agency collateralized mortgage obligations	123,075		(3,421)		203,620		(36,480)		326,695		(39,901)
Total debt securities available for sale	$	1,185,676	(97,101)		$	1,218,843	$	(193,869)	$	2,404,519	$	(290,970)
Debt Securities Held to Maturity
Obligations of U.S. government agencies	$	143,577	$	(11,013)	$	—	$	—	$	143,577	$	(11,013)
Obligations of states and political subdivisions	4,530		(47)		—		—		4,530		(47)
Total debt securities held to maturity	$	148,107	$	(11,060)	$	—	$	—	$	148,107	$	(11,060)

Obligations of U.S. government agencies: The unrealized losses on investments in obligations of U.S. government agencies are caused by interest rate increases and illiquidity. The contractual cash flows of these securities are guaranteed by U.S. Government Sponsored Entities (principally Fannie Mae and Freddie Mac). It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded. At March 31, ~~2022, 199~~2023, 261 debt securities representing obligations of U.S. government agencies had unrealized losses with aggregate depreciation of ~~5.50%~~10.97% from the Company’s amortized cost basis.

Obligations of states and political subdivisions: The unrealized losses on investments in obligations of states and political subdivisions were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded as of March 31, ~~2022.~~2023. At March 31, ~~2022, 79~~2023, 159 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of ~~8.95%~~11.07% from the Company’s amortized cost basis.

Corporate bonds: The unrealized losses on investments in corporate bonds were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded as of March 31, ~~2022.~~2023. At March 31, ~~2022, 3~~2023, 6 debt securities representing corporate bonds had unrealized losses with aggregate depreciation of ~~1.56%~~6.93% from the Company’s amortized cost basis.

Asset backed securities: The unrealized losses on investments in asset backed securities were caused by increases in required yields by investors for these types of securities. At the time of purchase, each of these securities was rated AA or AAA and through March 31, ~~2022~~ 2023

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has not experienced any deterioration in credit rating. At March 31, ~~2022, 29~~2023, 47 asset backed securities had unrealized losses with aggregate depreciation of ~~1.49%~~2.97% from the Company’s amortized cost basis. The Company continues to monitor these securities for changes in credit rating or other indications of credit deterioration. Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded as of March 31, ~~2022.~~2023.

Non-agency collateralized mortgage obligations: The unrealized losses on investments in asset backed securities were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses as of and for the year ended March 31, 2023. At March 31, 2023, 22 asset backed securities had unrealized losses with aggregate depreciation of 11.04% from the Company’s amortized cost basis.

The Company monitors credit quality of debt securities held-to-maturity through the use of credit rating. The Company monitors the credit rating on a monthly basis. The following table summarizes the amortized cost of debt securities held-to-maturity at the dates indicated, aggregated by credit quality indicator:


		March 31, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		AAA/AA/A		BBB/BB/B		AAA/AA/A		BBB/BB/B
		(In thousands)				(In thousands)
Debt Securities Held to Maturity
(in thousands)										(in thousands)	AAA/AA/A		BBB/BB/B		AAA/AA/A		BBB/BB/B
Obligations of U.S. government agencies	Obligations of U.S. government agencies	$	180,290	$	—	$	192,068	$	—	Obligations of U.S. government agencies	$	148,700	$	—	$	154,830	$	—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	6,458		—		7,691		—		Obligations of states and political subdivisions	3,367		—		6,153		—
Total debt securities held to maturity	Total debt securities held to maturity	$	186,748	$	—	$	199,759	$	—	Total debt securities held to maturity	$	152,067	$	—	$	160,983	$	—

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Note 4 – Loans

A summary of loan balances at amortized cost are as follows:
(in thousands) March 31, 2022 December 31, 2021
Commercial real estate:
CRE non-owner occupied $ 1,891,022 $ 1,603,141
CRE owner occupied 851,434 706,307
Multifamily 839,918 823,500
Farmland 250,600 173,106
Total commercial real estate loans 3,832,974 3,306,054
Consumer:
SFR 1-4 1st DT liens 711,389 666,960
SFR HELOCs and junior liens 362,501 337,513
Other 62,822 67,078
Total consumer loans 1,136,712 1,071,551
Commercial and industrial 500,882 259,355
Construction 303,960 222,281
Agriculture production 69,339 50,811
Leases 8,108 6,572
Total loans, net of deferred loan fees and discounts $ 5,851,975 $ 4,916,624
Total principal balance of loans owed, net of charge-offs $ 5,900,663 $ 4,946,653
Unamortized net deferred loan fees (13,780) (13,922)
Discounts to principal balance of loans owed, net of charge-offs (34,908) (16,107)
Total loans, net of unamortized deferred loan fees and discounts $ 5,851,975 $ 4,916,624
Allowance for credit losses on loans $ (96,049) $ (85,376)

~~In March 2020 (Round 1) and subsequently in December 2020 (Round 2), the Small Business Administration ("SBA") Paycheck~~

~~Protection Program ("PPP") was created to help small businesses keep workers employed during the COVID-19 crisis. Tri Counties~~

~~Bank, through its online portal, facilitated the ability for borrowers to open a new deposit account and submit PPP applications during~~

the entirety of the Programs. The SBA ended PPP and did not accept new borrowing applications, effective May 31, 2021. PPP loan balances included in commercial and industrial loan totals above were $56,605,000 and $61,147,000, net of approximately $1,190,000 and $2,164,000 in deferred fee income as of March 31, 2022 and December 31, 2021, respectively. During the three months ended March 31, 2022, the Company recognized $974,000 in fees on PPP loans as compared with $3,482,000 and $4,978,000 for the three months ended December 31, 2021 and March 31, 2021, respectively. Based on the payment guarantee provided by the SBA as well as the expected short-term duration of the PPP loans acquired from VRB, the fair value of these loans approximates the principal balance outstanding as of the merger date, and therefore, no purchase discount was recorded.


(in thousands)	March 31, 2023		December 31, 2022
Commercial real estate:
CRE non-owner occupied	$	2,161,059	$	2,149,725
CRE owner occupied	971,210		984,807
Multifamily	946,693		944,537
Farmland	274,997		280,014
Total commercial real estate loans	4,353,959		4,359,083
Consumer:
SFR 1-4 1st DT liens	803,407		790,349
SFR HELOCs and junior liens	375,591		393,666
Other	54,799		56,728
Total consumer loans	1,233,797		1,240,743
Commercial and industrial	553,098		569,921
Construction	225,996		211,560
Agriculture production	47,062		61,414
Leases	8,509		7,726
Total loans, net of deferred loan fees and discounts	$	6,422,421	$	6,450,447
Total principal balance of loans owed, net of charge-offs	$	6,467,936	$	6,496,210
Unamortized net deferred loan fees	(16,423)		(15,275)
Discounts to principal balance of loans owed, net of charge-offs	(29,092)		(30,488)
Total loans, net of unamortized deferred loan fees and discounts	$	6,422,421	$	6,450,447
Allowance for credit losses on loans	$	(108,407)	$	(105,680)

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Note 5 – Allowance for Credit Losses

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


		Allowance for credit losses – Three months ended March 31, 2022													Allowance for credit losses – Three months ended March 31, 2023
(in thousands)	(in thousands)	Beginning Balance		ACL on PCD Loans		Charge-offs		Recoveries		Provision (benefit)		Ending Balance		(in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (benefit)		Ending Balance
Commercial real estate:	Commercial real estate:													Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	$	25,739	$	746	$	��	$	—	$	1,570	$	28,055	CRE non-owner occupied	$	30,962	$	—	$	—	$	2,001	$	32,963
CRE owner occupied	CRE owner occupied	10,691		63		—		—		1,317		12,071		CRE owner occupied	14,014		—		—		545		14,559
Multifamily	Multifamily	12,395		—		—		—		(408)		11,987		Multifamily	13,132		—		—		741		13,873
Farmland	Farmland	2,315		764		(294)		—		94		2,879		Farmland	3,273		—		—		269		3,542
Total commercial real estate loans	Total commercial real estate loans	51,140		1,573		(294)		—		2,573		54,992		Total commercial real estate loans	61,381		—		—		3,556		64,937
Consumer:	Consumer:													Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	10,723		144		—		40		(238)		10,669		SFR 1-4 1st DT liens	11,268		—		—		652		11,920
SFR HELOCs and junior liens	SFR HELOCs and junior liens	10,510		—		—		175		158		10,843		SFR HELOCs and junior liens	11,413		(42)		65		(522)		10,914
Other	Other	2,241		—		(119)		71		(26)		2,167		Other	1,958		(142)		51		195		2,062
Total consumer loans	Total consumer loans	23,474		144		(119)		286		(106)		23,679		Total consumer loans	24,639		(184)		116		325		24,896
Commercial and industrial	Commercial and industrial	3,862		81		(330)		887		4,542		9,042		Commercial and industrial	13,597		(1,574)		53		(7)		12,069
Construction	Construction	5,667		201		—		—		1,569		7,437		Construction	5,142		—		—		513		5,655
Agriculture production	Agriculture production	1,215		38		—		1		(371)		883		Agriculture production	906		—		1		(74)		833
Leases	Leases	18		—		—		—		(2)		16		Leases	15		—		—		2		17
Allowance for credit losses on loans	Allowance for credit losses on loans	$	85,376	$	2,037	$	(743)	$	1,174	$	8,205	$	96,049	Allowance for credit losses on loans	105,680		(1,758)		170		4,315		108,407
Reserve for unfunded commitments	Reserve for unfunded commitments	3,790		—		—		—		125		3,915		Reserve for unfunded commitments	4,315		—		—		(120)		4,195
Total	Total	$	89,166	$	2,037	$	(743)	$	1,174	$	8,330	$	99,964	Total	$	109,995	$	(1,758)	$	170	$	4,195	$	112,602

In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. To estimate expected losses the Company generally utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period. Individual loan credit quality indicators including loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various econometrics, including California unemployment, gross domestic product, and corporate bond yields. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results.

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 included improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date. However, management notes that the majority of economic forecasts utilized in the ACL calculation have remained directionally consistent with preceding quarters, as general economic conditions continuedate, particularly CA unemployment trends. As compared to ~~improve, albeit at a pace slower than expected due to unforeseen~~historical norms, inflation remains elevated from continued disruptions in the supply chain, wage pressures, and ~~increasing energy prices. In addition, management~~higher living costs such as housing and food prices Despite the expected continued benefit to the net interest income of the Company from the elevated rate environment, Management notes ~~that~~ the ~~level~~rapid intervals of ~~governmental assistance provided through PPP as well as other programs during~~rate increases by the ~~last several quarters has been unprecedented.~~Federal Reserve and flattening or inversion of the yield curve, have boosted expectations of the US entering a recession within 12 months. 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.

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ACL on the date of acquisition using the same methodology as other loans and leases held-for-investment. The following table provides a summary of loans and leases purchased as part of the VRB acquisition with credit deterioration at acquisition:


	As of March 25, 2022
(in thousands)	Commercial Real Estate		Consumer		Commercial and Industrial		Construction		Agriculture Production		Total
Par value	$	27,237	$	3,877	$	2,674	$	25,645	$	9,080	$	68,513
ACL at acquisition	(1,573)		(144)		(81)		(201)		(38)		(2,037)
Non-credit discount	(2,305)		(360)		(47)		(232)		(12)		(2,956)
Purchase price	$	23,359	$	3,373	$	2,546	$	25,212	$	9,030	$	63,520

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		Allowance for credit losses – Year ended December 31, 2021								Allowance for credit losses – Year ended December 31, 2022
(in thousands)	(in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (benefit)			Ending Balance		(in thousands)	Beginning Balance		ACL of PCD Loans		Charge-offs		Recoveries		Provision (benefit)		Ending Balance
Commercial real estate:	Commercial real estate:												Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	$	29,380	$	—	$	12	$	(3,653)		$	25,739	CRE non-owner occupied	$	25,739	$	746	$	—	$	1	$	4,476	$	30,962
CRE owner occupied	CRE owner occupied	10,861		(18)		794		(946)			10,691		CRE owner occupied	10,691		63		—		2		3,258		14,014
Multifamily	Multifamily	11,472		—		—		923			12,395		Multifamily	12,395		—		—		—		737		13,132
Farmland	Farmland	1,980		(126)		—		461			2,315		Farmland	2,315		764		(294)		—		488		3,273
Total commercial real estate loans	Total commercial real estate loans	53,693		(144)		806		(3,215)			51,140		Total commercial real estate loans	51,140		1,573		(294)		3		8,959		61,381
Consumer:	Consumer:												Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	10,117		(145)		13		738			10,723		SFR 1-4 1st DT liens	10,723		144		—		79		322		11,268
SFR HELOCs and junior liens	SFR HELOCs and junior liens	11,771		(29)		1,127		(2,359)			10,510		SFR HELOCs and junior liens	10,510		—		(22)		429		496		11,413
Other	Other	3,260		(577)		361		(803)			2,241		Other	2,241		—		(572)		235		54		1,958
Total consumer loans	Total consumer loans	25,148		(751)		1,501		(2,424)			23,474		Total consumer loans	23,474		144		(594)		743		872		24,639
Commercial and industrial	Commercial and industrial	4,252		(1,470)		755		325			3,862		Commercial and industrial	3,862		81		(697)		1,157		9,194		13,597
Construction	Construction	7,540		(27)		—		(1,846)			5,667		Construction	5,667		201		—		—		(726)		5,142
Agriculture production	Agriculture production	1,209		—		24		(18)			1,215		Agriculture production	1,215		38		—		4		(351)		906
Leases	Leases	5		—		—		13			18		Leases	18		—		—		—		(3)		15
Allowance for credit losses on loans	Allowance for credit losses on loans	$	91,847	$	(2,392)	$	3,086	$	(7,165)		$	85,376	Allowance for credit losses on loans	85,376		2,037		(1,585)		1,907		17,945		105,680
Reserve for unfunded commitments	Reserve for unfunded commitments	3,400		—		—		390			3,790		Reserve for unfunded commitments	3,790		—		—		—		525		4,315
Total	Total	$	95,247	$	(2,392)	$	3,086	$	(6,775)		$	89,166	Total	$	89,166	$	2,037	$	(1,585)	$	1,907	$	18,470	$	109,995


		Allowance for credit losses – Three months ended March 31, 2021											Allowance for credit losses – Three months ended March 31, 2022
(in thousands)	(in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision		Ending Balance		(in thousands)	Beginning Balance		ACL of PCD Loans		Charge-offs		Recoveries		Provision		Ending Balance
Commercial real estate:	Commercial real estate:											Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	$	29,380	$	—	$	2	$	(2,948)	$	26,434	CRE non-owner occupied	$	25,739	$	746	$	—	$	—	$	1,570	$	28,055
CRE owner occupied	CRE owner occupied	10,861		—		1		(988)		9,874		CRE owner occupied	10,691		63		—		—		1,317		12,071
Multifamily	Multifamily	11,472		—		—		899		12,371		Multifamily	12,395		—		—		—		(408)		11,987
Farmland	Farmland	1,980		—		—		(256)		1,724		Farmland	2,315		764		(294)		—		94		2,879
Total commercial real estate loans	Total commercial real estate loans	53,693		—		3		(3,293)		50,403		Total commercial real estate loans	51,140		1,573		(294)		—		2,573		54,992
Consumer:	Consumer:											Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	10,117		—		10		538		10,665		SFR 1-4 1st DT liens	10,723		144		—		40		(238)		10,669
SFR HELOCs and junior liens	SFR HELOCs and junior liens	11,771		—		285		(977)		11,079		SFR HELOCs and junior liens	10,510		—		—		175		158		10,843
Other	Other	3,260		(193)		106		(313)		2,860		Other	2,241		—		(119)		71		(26)		2,167
Total consumer loans	Total consumer loans	25,148		(193)		401		(752)		24,604		Total consumer loans	23,474		144		(119)		286		(106)		23,679
Commercial and industrial	Commercial and industrial	4,252		(33)		136		109		4,464		Commercial and industrial	3,862		81		(330)		887		4,542		9,042
Construction	Construction	7,540		—		—		(2,064)		5,476		Construction	5,667		201		—		—		1,569		7,437
Agriculture production	Agriculture production	1,209		—		20		(241)		988		Agriculture production	1,215		38		—		1		(371)		883
Leases	Leases	5		—		—		1		6		Leases	18		—		—		—		(2)		16
Allowance for credit losses on loans	Allowance for credit losses on loans	$	91,847	$	(226)	$	560	$	(6,240)	$	85,941	Allowance for credit losses on loans	85,376		2,037		(743)		1,174		8,205		96,049
Reserve for unfunded commitments	Reserve for unfunded commitments	3,400		—		—		180		3,580		Reserve for unfunded commitments	3,790		—		—		—		125		3,915
Total	Total	$	95,247	$	(226)	$	560	$	(6,060)	$	89,521	Total	$	89,166	$	2,037	$	(743)	$	1,174	$	8,330	$	99,964

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including, but not limited to, trends relating to (i) the level of criticized and classified loans, (ii) net charge-offs, (iii) non-performing loans, and (iv) delinquency within the portfolio. The Company analyzes loans individually to classify the loans as to credit risk and grading. This analysis is performed annually for all outstanding balances greater than ~~$1,000,000~~$1 million and non-homogeneous loans, such as commercial real

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estate loans, unless other indicators, such as delinquency, trigger more frequent evaluation. Loans below the ~~$1,000,000~~$1 million threshold and homogenous in nature are evaluated as needed for proper grading based on delinquency and borrower credit scores.

The Company utilizes a risk grading system to assign a risk grade to each of its loans. Loans are graded on a scale ranging from Pass to Loss. A description of the general characteristics of the risk grades is as follows:

•Pass – This grade represents loans ranging from acceptable to very little or no credit risk. These loans typically meet most if not all policy standards in regard to: loan amount as a percentage of collateral value, debt service coverage, profitability, leverage, and working capital.

•Special Mention – This grade represents “Other Assets Especially Mentioned” in accordance with regulatory guidelines and includes loans that display some potential weaknesses which, if left unaddressed, may result in deterioration of the repayment prospects for the asset or may inadequately protect the Company’s position in the future. These loans warrant more than normal supervision and attention.

•Substandard – This grade represents “Substandard” loans in accordance with regulatory guidelines. Loans within this rating typically exhibit weaknesses that are well defined to the point that repayment is jeopardized. Loss potential is, however, not necessarily evident. The underlying collateral supporting the credit appears to have sufficient value to protect the Company from loss of principal and accrued interest, or the loan has been written down to the point where this is true. There is a definite need for a well-defined workout/rehabilitation program.

•Doubtful – This grade represents “Doubtful” loans in accordance with regulatory guidelines. An asset classified as Doubtful has all the weaknesses inherent in a loan classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and financing plans.

•Loss – This grade represents “Loss” loans in accordance with regulatory guidelines. A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan, even though some recovery may be affected in the future. The portion of the loan that is graded loss should be charged off no later than the end of the quarter in which the loss is identified.

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


		Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2022																			Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2023
(in thousands)	(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Commercial real estate:	Commercial real estate:																			Commercial real estate:
CRE non-owner occupied risk ratings	CRE non-owner occupied risk ratings																			CRE non-owner occupied risk ratings
Pass	Pass	$	80,551	$	325,092	$	147,713	$	238,512	$	165,707	$	812,548	$	76,874	$	—	$	1,846,997	Pass	$	29,991	$	412,225	$	293,358	$	152,186	$	225,912	$	868,576	$	120,771	$	—	$	2,103,019
Special Mention	Special Mention	—		—		—		8,349		396		24,786		1,733		—		35,264		Special Mention	—		—		7,430		—		19,905		25,555		1,556		—		54,446
Substandard	Substandard	—		1,237		1,006		—		1,087		5,431		—		—		8,761		Substandard	—		—		827		743		218		1,806		—		—		3,594
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total CRE non-owner occupied risk ratings		$	80,551	$	326,329	$	148,719	$	246,861	$	167,190	$	842,765	$	78,607	$	—	$	1,891,022
Total																				Total	$	29,991	$	412,225	$	301,615	$	152,929	$	246,035	$	895,937	$	122,327	$	—	$	2,161,059
Current period gross write-offs																				Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Commercial real estate:	Commercial real estate:																			Commercial real estate:
CRE owner occupied risk ratings	CRE owner occupied risk ratings																			CRE owner occupied risk ratings
Pass	Pass	$	49,344	$	180,823	$	134,430	$	74,908	$	54,344	$	296,260	$	30,655	$	—	$	820,764	Pass	$	17,630	$	201,342	$	194,894	$	121,856	$	63,323	$	291,219	$	33,526	$	—	$	923,790
Special Mention	Special Mention	—		14,728		240		—		289		8,272		—		—		23,529		Special Mention	—		131		16,818		232		724		7,794		838		—		26,537
Substandard	Substandard	—		—		—		—		1,195		4,954		992		—		7,141		Substandard	—		3,153		—		5,217		1,877		10,479		157		—		20,883
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total CRE owner occupied risk ratings		$	49,344	$	195,551	$	134,670	$	74,908	$	55,828	$	309,486	$	31,647	$	—	$	851,434
Total																				Total	$	17,630	$	204,626	$	211,712	$	127,305	$	65,924	$	309,492	$	34,521	$	—	$	971,210
Current period gross write-offs																				Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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		Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2022																			Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2023
(in thousands)	(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Commercial real estate:	Commercial real estate:																			Commercial real estate:
Multifamily risk ratings	Multifamily risk ratings																			Multifamily risk ratings
Pass	Pass	$	33,046	$	292,678	$	102,708	$	71,759	$	108,383	$	201,858	$	29,338	$	—	$	839,770	Pass	$	2,849	$	178,177	$	289,301	$	95,352	$	108,051	$	239,322	$	33,524	$	—	$	946,576
Special Mention	Special Mention	—		—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		148		—		—		148		Substandard	—		—		—		—		—		117		—		—		117
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total multifamily loans		$	33,046	$	292,678	$	102,708	$	71,759	$	108,383	$	202,006	$	29,338	$	—	$	839,918
Total																				Total	$	2,849	$	178,177	$	289,301	$	95,352	$	108,051	$	239,439	$	33,524	$	—	$	946,693
Current period gross write-offs																				Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Commercial real estate:	Commercial real estate:																			Commercial real estate:
Farmland risk ratings	Farmland risk ratings																			Farmland risk ratings
Pass	Pass	$	11,578	$	59,288	$	19,659	$	26,042	$	15,887	$	45,231	$	48,739	$	—	$	226,424	Pass	$	14,429	$	46,353	$	53,146	$	16,430	$	18,037	$	46,924	$	52,382	$	—	$	247,701
Special Mention	Special Mention	—		—		—		—		—		—		9,081		—		9,081		Special Mention	—		3,140		—		304		5,000		3,386		—		—		11,830
Substandard	Substandard	—		—		—		2,263		2,137		9,798		897		—		15,095		Substandard	—		—		775		371		—		10,837		3,483		—		15,466
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total farmland loans		$	11,578	$	59,288	$	19,659	$	28,305	$	18,024	$	55,029	$	58,717	$	—	$	250,600
Total																				Total	$	14,429	$	49,493	$	53,921	$	17,105	$	23,037	$	61,147	$	55,865	$	—	$	274,997
Current period gross write-offs																				Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Consumer loans:	Consumer loans:																			Consumer loans:
SFR 1-4 1st DT liens risk ratings	SFR 1-4 1st DT liens risk ratings																			SFR 1-4 1st DT liens risk ratings
Pass	Pass	$	43,212	$	278,719	$	147,268	$	38,680	$	33,975	$	138,236	$	11,886	$	3,294	$	695,270	Pass	$	15,719	$	193,110	$	271,654	$	127,830	$	32,755	$	141,016	$	8	$	3,506	$	785,598
Special Mention	Special Mention	—		—		—		285		3,332		5,576		—		429		9,622		Special Mention	—		1,079		—		3,234		280		8,662		—		67		13,322
Substandard	Substandard	—		—		—		—		1,069		5,020		—		408		6,497		Substandard	—		—		1,189		—		—		2,667		—		631		4,487
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total SFR 1st DT liens		$	43,212	$	278,719	$	147,268	$	38,965	$	38,376	$	148,832	$	11,886	$	4,131	$	711,389
Total																				Total	$	15,719	$	194,189	$	272,843	$	131,064	$	33,035	$	152,345	$	8	$	4,204	$	803,407
Current period gross write-offs																				Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Consumer loans:	Consumer loans:																			Consumer loans:
SFR HELOCs and Junior Liens	SFR HELOCs and Junior Liens																			SFR HELOCs and Junior Liens
Pass	Pass	$	12,803	$	—	$	—	$	—	$	—	$	170	$	331,450	$	9,392	$	353,815	Pass	$	360	$	—	$	—	$	—	$	—	$	119	$	362,806	$	7,858	$	371,143
Special Mention	Special Mention	—		—		—		—		—		51		3,547		585		4,183		Special Mention	—		—		—		—		—		—		646		23		669
Substandard	Substandard	—		—		—		—		—		—		3,803		700		4,503		Substandard	—		—		—		—		—		—		3,159		620		3,779
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total SFR HELOCs and Junior Liens		$	12,803	$	—	$	—	$	—	$	—	$	221	$	338,800	$	10,677	$	362,501
Total																				Total	$	360	$	—	$	—	$	—	$	—	$	119	$	366,611	$	8,501	$	375,591
Current period gross write-offs																				Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	43	$	43


Consumer loans:	Consumer loans:																			Consumer loans:
Other risk ratings	Other risk ratings																			Other risk ratings
Pass	Pass	$	4,341	$	17,317	$	14,321	$	15,221	$	7,214	$	2,771	$	544	$	—	$	61,729	Pass	$	4,305	$	11,888	$	12,044	$	9,376	$	9,680	$	6,274	$	588	$	—	$	54,155
Special Mention	Special Mention	—		—		106		177		179		170		63		—		695		Special Mention	—		—		13		64		130		200		16		—		423
Substandard	Substandard	—		—		53		92		93		146		14		—		398		Substandard	—		—		—		42		70		87		22		—		221
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total other consumer loans		$	4,341	$	17,317	$	14,480	$	15,490	$	7,486	$	3,087	$	621	$	—	$	62,822
Total																				Total	$	4,305	$	11,888	$	12,057	$	9,482	$	9,880	$	6,561	$	626	$	—	$	54,799
Current period gross write-offs																				Current period gross write-offs	$	96	$	6	$	—	$	—	$	29	$	7	$	3	$	—	$	141

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		Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2022																			Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2023
(in thousands)	(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Commercial and industrial loans:	Commercial and industrial loans:																			Commercial and industrial loans:
Commercial and industrial risk ratings	Commercial and industrial risk ratings																			Commercial and industrial risk ratings
Pass	Pass	$	64,688	$	144,121	$	39,381	$	33,231	$	11,485	$	14,428	$	185,117	$	776	$	493,227	Pass	$	34,754	$	107,807	$	64,490	$	15,801	$	20,277	$	11,093	$	273,269	$	402	$	527,893
Special Mention	Special Mention	—		98		2,222		2,010		131		84		296		—		4,841		Special Mention	44		2,750		60		20		29		1,037		9,453		—		13,393
Substandard	Substandard	—		—		—		135		65		1,623		851		140		2,814		Substandard	—		1,223		1,869		3,235		11		298		5,076		100		11,812
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans		$	64,688	$	144,219	$	41,603	$	35,376	$	11,681	$	16,135	$	186,264	$	916	$	500,882
Total																				Total	$	34,798	$	111,780	$	66,419	$	19,056	$	20,317	$	12,428	$	287,798	$	502	$	553,098
Current period gross write-offs																				Current period gross write-offs	$	6	$	—	$	—	$	1,550	$	—	$	—	$	—	$	18	$	1,574


Construction loans:	Construction loans:																			Construction loans:
Construction risk ratings	Construction risk ratings																			Construction risk ratings
Pass	Pass	$	7,207	$	86,235	$	98,971	$	72,182	$	3,727	$	9,430	$	—	$	—	$	277,752	Pass	$	10,823	$	93,294	$	67,911	$	41,776	$	4,904	$	6,736	$	—	$	—	$	225,444
Special Mention	Special Mention	—		—		—		11,795		13,850		—		—		—		25,645		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	—		222		106		85		—		150		—		—		563		Substandard	—		—		—		—		458		94		—		—		552
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total construction loans		$	7,207	$	86,457	$	99,077	$	84,062	$	17,577	$	9,580	$	—	$	—	$	303,960
Total																				Total	$	10,823	$	93,294	$	67,911	$	41,776	$	5,362	$	6,830	$	—	$	—	$	225,996
Current period gross write-offs																				Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Agriculture production loans:	Agriculture production loans:																			Agriculture production loans:
Agriculture production risk ratings	Agriculture production risk ratings																			Agriculture production risk ratings
Pass	Pass	$	60	$	4,443	$	1,651	$	1,787	$	3,815	$	1,589	$	44,825	$	—	$	58,170	Pass	$	50	$	3,140	$	2,567	$	1,003	$	929	$	9,755	$	21,690	$	—	$	39,134
Special Mention	Special Mention	—		—		1,805		—		137		36		5,846		—		7,824		Special Mention	—		—		—		—		—		103		4,769		—		4,872
Substandard	Substandard	—		—		—		—		—		—		3,345		—		3,345		Substandard	—		—		—		—		—		—		3,056		—		3,056
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total agriculture production loans		$	60	$	4,443	$	3,456	$	1,787	$	3,952	$	1,625	$	54,016	$	—	$	69,339
Total																				Total	$	50	$	3,140	$	2,567	$	1,003	$	929	$	9,858	$	29,515	$	—	$	47,062
Current period gross write-offs																				Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Leases:	Leases:																			Leases:
Lease risk ratings	Lease risk ratings																			Lease risk ratings
Pass	Pass	$	8,108	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$8,108		Pass	$	8,509	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$8,509
Special Mention	Special Mention	—		—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—		—
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total leases		$	8,108	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	8,108
Total																				Total	$	8,509	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	8,509
Current period gross write-offs																				Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Total loans outstanding:	Total loans outstanding:																			Total loans outstanding:
Risk ratings	Risk ratings																			Risk ratings
Pass	Pass	$	314,938	$	1,388,716	$	706,102	$	572,322	$	404,537	$	1,522,521	$	759,428	$	13,462	$	5,682,026	Pass	$	139,419	$	1,247,336	$	1,249,365	$	581,610	$	483,868	$	1,621,034	$	898,564	$	11,766	$	6,232,962
Special Mention	Special Mention	—		14,826		4,373		22,616		18,314		38,975		20,566		1,014		120,684		Special Mention	44		7,100		24,321		3,854		26,068		46,737		17,278		90		125,492
Substandard	Substandard	—		1,459		1,165		2,575		5,646		27,270		9,902		1,248		49,265		Substandard	—		4,376		4,660		9,608		2,634		26,385		14,953		1,351		63,967
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total loans outstanding		$	314,938	$	1,405,001	$	711,640	$	597,513	$	428,497	$	1,588,766	$	789,896	$	15,724	$	5,851,975
Total																				Total	$	139,463	$	1,258,812	$	1,278,346	$	595,072	$	512,570	$	1,694,156	$	930,795	$	13,207	$	6,422,421
Current period gross write-offs																				Current period gross write-offs	$	102	$	6	$	—	$	1,550	$	29	$	7	$	3	$	61	$	1,758

Table of Contents


		Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2021																			Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2022
(in thousands)	(in thousands)	2021		2020		2019		2018		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Commercial real estate:	Commercial real estate:																			Commercial real estate:
CRE non-owner occupied risk ratings	CRE non-owner occupied risk ratings																			CRE non-owner occupied risk ratings
Pass	Pass	$	275,305	$	127,299	$	199,764	$	133,046	$	224,581	$	543,430	$	49,899	$	—	$	1,553,324	Pass	$	399,910	$	304,636	$	152,960	$	221,659	$	147,842	$	748,994	$	123,794	$	—	$	2,099,795
Special Mention	Special Mention	—		—		8,386		399		4,390		20,612		1,732		—		35,519		Special Mention	—		—		—		20,033		—		21,681		1,346		—		43,060
Substandard	Substandard	—		—		—		1,382		739		12,177		—		—		14,298		Substandard	—		864		768		—		1,059		4,179		—		—		6,870
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total CRE non-owner occupied risk ratings		$	275,305	$	127,299	$	208,150	$	134,827	$	229,710	$	576,219	$	51,631	$	—	$	1,603,141
Total																				Total	$	399,910	$	305,500	$	153,728	$	241,692	$	148,901	$	774,854	$	125,140	$	—	$	2,149,725


Commercial real estate:	Commercial real estate:																			Commercial real estate:
CRE owner occupied risk ratings	CRE owner occupied risk ratings																			CRE owner occupied risk ratings
Pass	Pass	$	178,092	$	104,571	$	63,979	$	48,721	$	55,399	$	203,431	$	22,745	$	—	$	676,938	Pass	$	210,101	$	197,787	$	120,929	$	64,244	$	49,755	$	251,137	$	43,343	$	—	$	937,296
Special Mention	Special Mention	15,515		—		—		289		2,964		3,833		—		—		22,601		Special Mention	131		16,296		234		731		—		6,971		879		—		25,242
Substandard	Substandard	—		—		858		1,214		455		4,241		—		—		6,768		Substandard	3,213		—		5,249		1,893		1,103		10,654		157		—		22,269
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total CRE owner occupied risk ratings		$	193,607	$	104,571	$	64,837	$	50,224	$	58,818	$	211,505	$	22,745	$	—	$	706,307
Total																				Total	$	213,445	$	214,083	$	126,412	$	66,868	$	50,858	$	268,762	$	44,379	$	—	$	984,807


Commercial real estate:	Commercial real estate:																			Commercial real estate:
Multifamily risk ratings	Multifamily risk ratings																			Multifamily risk ratings
Pass	Pass	$	278,942	$	100,752	$	71,822	$	109,374	$	85,932	$	146,984	$	25,236	$	—	$	819,042	Pass	$	159,318	$	290,170	$	96,937	$	108,586	$	106,287	$	154,125	$	28,989	$	—	$	944,412
Special Mention	Special Mention	—		—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		4,305		—		—		153		—		—		4,458		Substandard	—		—		—		—		—		125		—		—		125
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total multifamily loans		$	278,942	$	100,752	$	76,127	$	109,374	$	85,932	$	147,137	$	25,236	$	—	$	823,500
Total																				Total	$	159,318	$	290,170	$	96,937	$	108,586	$	106,287	$	154,250	$	28,989	$	—	$	944,537


Commercial real estate:	Commercial real estate:																			Commercial real estate:
Farmland risk ratings	Farmland risk ratings																			Farmland risk ratings
Pass	Pass	$	43,601	$	17,399	$	20,223	$	15,119	$	9,129	$	18,455	$	37,612	$	—	$	161,538	Pass	$	47,067	$	53,275	$	16,739	$	18,589	$	12,386	$	34,528	$	53,684	$	—	$	236,268
Special Mention	Special Mention	—		—		—		—		1,197		2,519		1,491		—		5,207		Special Mention	3,139		783		246		5,000		—		3,991		14,275		—		27,434
Substandard	Substandard	—		—		2,895		—		578		1,371		1,517		—		6,361		Substandard	—		—		1,772		765		3,158		7,094		3,523		—		16,312
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total farmland loans		$	43,601	$	17,399	$	23,118	$	15,119	$	10,904	$	22,345	$	40,620	$	—	$	173,106
Total																				Total	$	50,206	$	54,058	$	18,757	$	24,354	$	15,544	$	45,613	$	71,482	$	—	$	280,014


Consumer loans:	Consumer loans:																			Consumer loans:
SFR 1-4 1st DT liens risk ratings	SFR 1-4 1st DT liens risk ratings																			SFR 1-4 1st DT liens risk ratings
Pass	Pass	$	268,743	$	159,860	$	40,661	$	30,880	$	36,197	$	113,519	$	—	$	3,527	$	653,387	Pass	$	194,933	$	265,370	$	131,922	$	33,395	$	28,545	$	115,469	$	8	$	2,924	$	772,566
Special Mention	Special Mention	—		—		286		3,282		416		1,476		—		383		5,843		Special Mention	—		—		1,531		282		3,277		5,854		—		465		11,409
Substandard	Substandard	1,103		—		—		1,089		256		4,758		—		524		7,730		Substandard	—		1,204		—		—		1,004		3,521		—		645		6,374
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total SFR 1st DT liens		$	269,846	$	159,860	$	40,947	$	35,251	$	36,869	$	119,753	$	—	$	4,434	$	666,960
Total																				Total	$	194,933	$	266,574	$	133,453	$	33,677	$	32,826	$	124,844	$	8	$	4,034	$	790,349

Table of Contents


		Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2021																			Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2022
(in thousands)	(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Consumer loans:	Consumer loans:																			Consumer loans:
SFR HELOCs and Junior Liens	SFR HELOCs and Junior Liens																			SFR HELOCs and Junior Liens
Pass	Pass	$	494	$	—	$	—	$	—	$	—	$	185	$	317,381	$	9,675	$	327,735	Pass	$	505	$	—	$	—	$	—	$	—	$	127	$	378,939	$	8,462	$	388,033
Special Mention	Special Mention	—		—		—		—		—		53		3,655		832		4,540		Special Mention	—		—		—		—		—		—		1,842		81		1,923
Substandard	Substandard	—		—		—		—		—		2		4,164		1,072		5,238		Substandard	—		—		—		—		—		—		3,072		638		3,710
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total SFR HELOCs and Junior Liens		$	494	$	—	$	—	$	—	$	—	$	240	$	325,200	$	11,579	$	337,513
Total																				Total	$	505	$	—	$	—	$	—	$	—	$	127	$	383,853	$	9,181	$	393,666


Consumer loans:	Consumer loans:																			Consumer loans:
Other risk ratings	Other risk ratings																			Other risk ratings
Pass	Pass	$	20,920	$	15,939	$	17,316	$	8,016	$	2,137	$	1,079	$	612	$	—	$	66,019	Pass	$	14,070	$	12,990	$	10,211	$	10,650	$	5,225	$	1,945	$	899	$	—	$	55,990
Special Mention	Special Mention	—		46		157		233		98		51		69		—		654		Special Mention	—		18		77		135		176		32		47		—		485
Substandard	Substandard	—		53		96		94		67		85		10		—		405		Substandard	—		—		42		92		—		96		23		—		253
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total other consumer loans		$	20,920	$	16,038	$	17,569	$	8,343	$	2,302	$	1,215	$	691	$	—	$	67,078
Total																				Total	$	14,070	$	13,008	$	10,330	$	10,877	$	5,401	$	2,073	$	969	$	—	$	56,728


Commercial and industrial loans:
Commercial and industrial risk ratings
Pass	$	125,710	$	64,966	$	17,746	$	23,131	$	7,628	$	5,051	$	297,341	$	483	$	542,056
Special Mention	3,032		139		21		49		138		768		11,547		—		15,694
Substandard	1,293		1,142		5,179		14		33		611		3,798		101		12,171
Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total	$	130,035	$	66,247	$	22,946	$	23,194	$	7,799	$	6,430	$	312,686	$	584	$	569,921


Commercial and industrial loans:
Commercial and industrial risk ratings
Construction loans:																				Construction loans:
Construction risk ratings																				Construction risk ratings
Pass	Pass	$	92,972	$	17,933	$	27,335	$	11,335	$	6,355	$	6,774	$	89,358	$	860	$	252,922	Pass	$	72,840	$	72,308	$	43,409	$	15,358	$	2,159	$	4,900	$	—	$	—	$	210,974
Special Mention	Special Mention	—		2,417		69		152		71		80		116		—		2,905		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		146		152		804		414		1,832		180		3,528		Substandard	—		—		—		457		—		129		—		—		586
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans		$	92,972	$	20,350	$	27,550	$	11,639	$	7,230	$	7,268	$	91,306	$	1,040	$	259,355
Total																				Total	$	72,840	$	72,308	$	43,409	$	15,815	$	2,159	$	5,029	$	—	$	—	$	211,560

Construction loans:
Construction risk ratings
Pass $ 66,318 $ 79,567 $ 58,383 $ 4,849 $ 1,716 $ 8,148 $ — $ — $ 218,981
Special Mention — — — — — — — — —
Substandard 2,675 472 — — — 153 — — 3,300
Doubtful/Loss — — — — — — — — —
Total construction loans $ 68,993 $ 80,039 $ 58,383 $ 4,849 $ 1,716 $ 8,301 $ — $ — $ 222,281


Agriculture production loans:	Agriculture production loans:																			Agriculture production loans:
Agriculture production risk ratings	Agriculture production risk ratings																			Agriculture production risk ratings
Pass	Pass	$	2,068	$	878	$	1,393	$	801	$	940	$	853	$	43,686	$	—	$	50,619	Pass	$	3,414	$	2,777	$	1,149	$	1,104	$	8,902	$	1,058	$	38,425	$	—	$	56,829
Special Mention	Special Mention	—		—		—		150		—		42		—		—		192		Special Mention	—		—		—		—		90		31		1,632		—		1,753
Substandard	Substandard	—		—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		2,832		—		2,832
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total agriculture production loans		$	2,068	$	878	$	1,393	$	951	$	940	$	895	$	43,686	$	—	$	50,811
Total																				Total	$	3,414	$	2,777	$	1,149	$	1,104	$	8,992	$	1,089	$	42,889	$	—	$	61,414

Table of Contents


		Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2021																			Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2022
(in thousands)	(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Leases:	Leases:																			Leases:
Lease risk ratings	Lease risk ratings																			Lease risk ratings
Pass	Pass	$	6,572	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	6,572	Pass	$	7,726	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	7,726
Special Mention	Special Mention	—		—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—		—
Doubtful/Loss	Doubtful/Loss	—		—		—		—		—		—		—		—		—		Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total leases		$	6,572	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	6,572
Total																				Total	$	7,726	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	7,726

Total loans outstanding:
Risk ratings
Pass $ 1,234,027 $ 624,198 $ 500,876 $ 362,141 $ 422,386 $ 1,042,858 $ 586,529 $ 14,062 $ 4,787,077
Special Mention 15,515 2,463 8,898 4,505 9,136 28,666 7,063 1,215 77,461
Substandard 3,778 525 8,300 3,931 2,899 23,354 7,523 1,776 52,086
Doubtful/Loss — — — — — — — — —
Total loans outstanding $ 1,253,320 $ 627,186 $ 518,074 $ 370,577 $ 434,421 $ 1,094,878 $ 601,115 $ 17,053 $ 4,916,624


Total loans outstanding:
Risk ratings
Pass	$	1,235,594	$	1,264,279	$	592,002	$	496,716	$	368,729	$	1,317,334	$	965,422	$	11,869	$	6,251,945
Special Mention	6,302		17,236		2,109		26,230		3,681		39,328		31,568		546		127,000
Substandard	4,506		3,210		13,010		3,221		6,357		26,409		13,405		1,384		71,502
Doubtful/Loss	—		—		—		—		—		—		—		—		—
Total	$	1,246,402	$	1,284,725	$	607,121	$	526,167	$	378,767	$	1,383,071	$	1,010,395	$	13,799	$	6,450,447

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


		Analysis of Past Due Loans - As of March 31, 2022													Analysis of Past Due Loans - As of March 31, 2023
(in thousands)	(in thousands)	30-59 days		60-89 days		> 90 days		Total Past Due Loans		Current		Total		(in thousands)	30-59 days		60-89 days		> 90 days		Total Past Due Loans		Current		Total
Commercial real estate:	Commercial real estate:													Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	$	269	$	998	$	414	$	1,681	$	1,889,341	$	1,891,022	CRE non-owner occupied	$	623	$	—	$	—	$	623	$	2,160,436	$	2,161,059
CRE owner occupied	CRE owner occupied	—		—		273		273		851,161		851,434		CRE owner occupied	156		82		172		410		970,800		971,210
Multifamily	Multifamily	—		—		—		—		839,918		839,918		Multifamily	—		—		—		—		946,693		946,693
Farmland	Farmland	237		—		152		389		250,211		250,600		Farmland	150		—		—		150		274,847		274,997
Total commercial real estate loans	Total commercial real estate loans	506		998		839		2,343		3,830,631		3,832,974		Total commercial real estate loans	929		82		172		1,183		4,352,776		4,353,959
Consumer:	Consumer:													Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	219		67		324		610		710,779		711,389		SFR 1-4 1st DT liens	442		557		356		1,355		802,052		803,407
SFR HELOCs and junior liens	SFR HELOCs and junior liens	175		409		786		1,370		361,131		362,501		SFR HELOCs and junior liens	—		1,342		793		2,135		373,456		375,591
Other	Other	292		7		40		339		62,483		62,822		Other	49		136		121		306		54,493		54,799
Total consumer loans	Total consumer loans	686		483		1,150		2,319		1,134,393		1,136,712		Total consumer loans	491		2,035		1,270		3,796		1,230,001		1,233,797
Commercial and industrial	Commercial and industrial	75		206		435		716		500,166		500,882		Commercial and industrial	471		1,620		364		2,455		550,643		553,098
Construction	Construction	2,852		—		—		2,852		301,108		303,960		Construction	—		78		379		457		225,539		225,996
Agriculture production	Agriculture production	172		—		—		172		69,167		69,339		Agriculture production	—		—		—		—		47,062		47,062
Leases	Leases	—		—		—		—		8,108		8,108		Leases	—		—		—		—		8,509		8,509
Total	Total	$	4,291	$	1,687	$	2,424	$	8,402	$	5,843,573	$	5,851,975	Total	$	1,891	$	3,815	$	2,185	$	7,891	$	6,414,530	$	6,422,421

Table of Contents


		Analysis of Past Due Loans - As of December 31, 2021													Analysis of Past Due Loans - As of December 31, 2022
(in thousands)	(in thousands)	30-59 days		60-89 days		> 90 days		Total Past Due Loans		Current		Total		(in thousands)	30-59 days		60-89 days		> 90 days		Total Past Due Loans		Current		Total
Commercial real estate:	Commercial real estate:													Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	$	226	$	37	$	—	$	263	$	1,602,878	$	1,603,141	CRE non-owner occupied	$	—	$	—	$	—	$	—	$	2,149,725	$	2,149,725
CRE owner occupied	CRE owner occupied	271		127		273		671		705,636		706,307		CRE owner occupied	—		98		75		173		984,634		984,807
Multifamily	Multifamily	—		—		—		—		823,500		823,500		Multifamily	159		—		—		159		944,378		944,537
Farmland	Farmland	—		—		575		575		172,531		173,106		Farmland	—		—		—		—		280,014		280,014
Total commercial real estate loans	Total commercial real estate loans	497		164		848		1,509		3,304,545		3,306,054		Total commercial real estate loans	159		98		75		332		4,358,751		4,359,083
Consumer:	Consumer:													Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	—		13		362		375		666,585		666,960		SFR 1-4 1st DT liens	24		—		279		303		790,046		790,349
SFR HELOCs and junior liens	SFR HELOCs and junior liens	36		361		1,212		1,609		335,904		337,513		SFR HELOCs and junior liens	172		166		707		1,045		392,621		393,666
Other	Other	109		7		28		144		66,934		67,078		Other	26		34		55		115		56,613		56,728
Total consumer loans	Total consumer loans	145		381		1,602		2,128		1,069,423		1,071,551		Total consumer loans	222		200		1,041		1,463		1,239,280		1,240,743
Commercial and industrial	Commercial and industrial	146		245		166		557		258,798		259,355		Commercial and industrial	2,300		190		283		2,773		567,148		569,921
Construction	Construction	—		90		—		90		222,191		222,281		Construction	—		—		379		379		211,181		211,560
Agriculture production	Agriculture production	48		—		—		48		50,763		50,811		Agriculture production	—		—		—		—		61,414		61,414
Leases	Leases	—		—		—		—		6,572		6,572		Leases	—		—		—		—		7,726		7,726
Total	Total	$	836	$	880	$	2,616	$	4,332	$	4,912,292	$	4,916,624	Total	$	2,681	$	488	$	1,778	$	4,947	$	6,445,500	$	6,450,447

The following table shows the ending balance of non accrual loans by loan category as of the date indicated:


		Non Accrual Loans													Non Accrual Loans
		As of March 31, 2022						As of December 31, 2021							As of March 31, 2023						As of December 31, 2022
(in thousands)	(in thousands)	Non accrual with no allowance for credit losses		Total non accrual		Past due 90 days or more and still accruing		Non accrual with no allowance for credit losses		Total non accrual		Past due 90 days or more and still accruing		(in thousands)	Non accrual with no allowance for credit losses		Total non accrual		Past due 90 days or more and still accruing		Non accrual with no allowance for credit losses		Total non accrual		Past due 90 days or more and still accruing
Commercial real estate:	Commercial real estate:													Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	$	2,383	$	2,383	$	—	$	7,899	$	7,899	$	—	CRE non-owner occupied	$	1,671	$	1,671	$	—	$	1,739	$	1,739	$	—
CRE owner occupied	CRE owner occupied	1,468		1,468		—		4,763		5,036		—		CRE owner occupied	3,848		3,848		—		4,938		4,938		—
Multifamily	Multifamily	148		148		—		4,457		4,457		—		Multifamily	117		117		—		125		125		—
Farmland	Farmland	1,621		1,860		152		452		3,020		—		Farmland	371		371		—		1,772		1,772		—
Total commercial real estate loans	Total commercial real estate loans	5,620		5,859		152		17,571		20,412		—		Total commercial real estate loans	6,007		6,007		—		8,574		8,574		—
Consumer:	Consumer:													Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	3,496		3,496		—		3,594		3,595		—		SFR 1-4 1st DT liens	3,532		3,532		—		4,117		4,220		—
SFR HELOCs and junior liens	SFR HELOCs and junior liens	2,648		3,170		—		3,285		3,801		—		SFR HELOCs and junior liens	2,790		3,373		—		2,498		3,155		—
Other	Other	45		78		—		48		71		—		Other	78		139		—		47		84		—
Total consumer loans	Total consumer loans	6,189		6,744		—		6,927		7,467		—		Total consumer loans	6,400		7,044		—		6,662		7,459		—
Commercial and industrial	Commercial and industrial	581		1,194		—		1,904		2,416		—		Commercial and industrial	95		1,372		189		1,224		3,518		—
Construction	Construction	139		139		—		15		55		—		Construction	457		457		—		491		491		—
Agriculture production	Agriculture production	—		—		—		—		—		—		Agriculture production	957		957		—		1,279		1,279		—
Leases	Leases	—		—		—		—		—		—		Leases	—		—		—		—		—		—
Sub-total	Sub-total	12,529		13,936		152		26,417		30,350		—		Sub-total	13,916		15,837		189		18,230		21,321		—
Less: Guaranteed loans	Less: Guaranteed loans	(81)		(170)		—		(713)		(775)				Less: Guaranteed loans	(75)		(230)		—		(105)		(225)
Total, net	Total, net	$	12,448	$	13,766	$	152	$	25,704	$	29,575	$	—	Total, net	$	13,841	$	15,607	$	189	$	18,125	$	21,096	$	—

Interest income on non accrual loans that would have been recognized during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, if all such loans had been current in accordance with their original terms, totaled ~~$167,000~~$0.32 million and ~~$536,000,~~$0.17 million, respectively. Interest income actually recognized on these originated loans during the three months ended March 31, 2023 and 2022 was $17 thousand and ~~2021 was $13,000 and $17,000,~~$13 thousand, respectively.

Table of Contents

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


		As of March 31, 2022																							As of March 31, 2023
(in thousands)	(in thousands)	Retail		Office		Warehouse		Other		Multifamily		Farmland		SFR-1st Deed		SFR-2nd Deed		Automobile/Truck		A/R and Inventory		Equipment			Total		(in thousands)	Retail		Office		Warehouse		Other		Multifamily		Farmland		SFR-1st Deed		SFR-2nd Deed		Automobile/Truck		A/R and Inventory		Equipment		Total
Commercial real estate:	Commercial real estate:																										Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	$	247	$	109	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—		$	356	CRE non-owner occupied	$	749	$	95	$	—	$	827	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,671
CRE owner occupied	CRE owner occupied	272		—		1,196		—		—		—		—		—		—		—		—			1,468		CRE owner occupied	523		75		—		3,250		—		—		—		—		—		—		—		3,848
Multifamily	Multifamily	—		—		—		—		148		—		—		—		—		—		—			148		Multifamily	—		—		—		—		117		—		—		—		—		—		—		117
Farmland	Farmland	—		—		—		—		—		1,621		—		—		—		—		—			1,621		Farmland	—		—		—		—		—		371		—		—		—		—		—		371
Total commercial real estate loans	Total commercial real estate loans	519		109		1,196		—		148		1,621		—		—		—		—		—			3,593		Total commercial real estate loans	1,272		170		—		4,077		117		371		—		—		—		—		—		6,007
Consumer:	Consumer:																							Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	—		—		—		—		—		—		3,156		—		—		—		—			3,156		SFR 1-4 1st DT liens	—		—		—		—		—		—		3,532		—		—		—		—		3,532
SFR HELOCs and junior liens	SFR HELOCs and junior liens	—		—		—		—		—		—		1,348		1,181		—		—		—			2,529		SFR HELOCs and junior liens	—		—		—		—		—		—		1,705		1,308		—		—		—		3,013
Other	Other	—		—		—		41		—		—		—		—		4		—		14			59		Other	—		—		—		4		—		—		—		—		124		—		2		130
Total consumer loans	Total consumer loans	—		—		—		41		—		—		4,504		1,181		4		—		14			5,744		Total consumer loans	—		—		—		4		—		—		5,237		1,308		124		—		2		6,675
Commercial and industrial	Commercial and industrial	—		—		—		—		—		—		—		—		—		1,028		125			1,153		Commercial and industrial	—		—		—		—		—		—		—		—		—		1,298		74		1,372
Construction	Construction	—		—		—		—		—		—		139		—		—		—		—			139		Construction	—		—		—		379		—		—		78		—		—		—		—		457
Agriculture production	Agriculture production	—		—		—		—		—		—		—		—		—		—		—			—		Agriculture production	—		—		—		—		—		—		—		—		—		—		957		957
Leases	Leases	—		—		—		—		—		—		—		—		—		—		—			—		Leases	—		—		—		—		—		—		—		—		—		—		—		—
Total	Total	$	519	$	109	$	1,196	$	41	$	148	$	1,621	$	4,643	$	1,181	$	4	$	1,028	$	139		$	10,629	Total	$	1,272	$	170	$	—	$	4,460	$	117	$	371	$	5,315	$	1,308	$	124	$	1,298	$	1,033	$	15,468


		As of December 31, 2021																								As of December 31, 2022
(in thousands)	(in thousands)	Retail		Office		Warehouse		Other		Multifamily			Farmland		SFR -1st Deed		SFR -2nd Deed		Automobile/Truck		A/R and Inventory		Equipment			Total		(in thousands)	Retail		Office		Warehouse		Other		Multifamily		Farmland		SFR -1st Deed		SFR -2nd Deed		Automobile/Truck		A/R and Inventory		Equipment		Total
Commercial real estate:	Commercial real estate:																											Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	$	2,591	$	1,253	$	1,545	$	7,272	$	—		$	—	$	—	$	—	$	—	$	—	$	—		$	12,661	CRE non-owner occupied	$	777	$	98	$	—	$	864	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,739
CRE owner occupied	CRE owner occupied	—		—		—		—		—			—		—		—		—		—		—			—		CRE owner occupied	548		75		1,103		3,212		—		—		—		—		—		—		—		4,938
Multifamily	Multifamily	—		—		—		—		4,458			—		—		—		—		—		—			4,458		Multifamily	—		—		—		—		125		—		—		—		—		—		—		125
Farmland	Farmland	—		—		—		—		—		—	1,027		—		—		—		—		—			1,027		Farmland	—		—		—		—		—		1,772		—		—		—		—		—		1,772
Total commercial real estate loans	Total commercial real estate loans	2,591		1,253		1,545		7,272		4,458			1,027		—		—		—		—		—			18,146		Total commercial real estate loans	1,325		173		1,103		4,076		125		1,772		—		—		—		—		—		8,574
Consumer:	Consumer:																								Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	—		—		—		—		—			—		3,589		—		—		—		—			3,589		SFR 1-4 1st DT liens	—		—		—		—		—		—		4,220		—		—		—		—		4,220
SFR HELOCs and junior liens	SFR HELOCs and junior liens	—		—		—		—		—			—		1,649		1,636		—		—		—			3,285		SFR HELOCs and junior liens	—		—		—		—		—		—		1,664		1,121		—		—		—		2,785
Other	Other	—		—		—		43		—			—		—		—		5		—		5			53		Other	—		—		—		5		—		—		—		—		61		—		2		68
Total consumer loans	Total consumer loans	—		—		—		43		—			—		5,238		1,636		5		—		5			6,927		Total consumer loans	—		—		—		5		—		—		5,884		1,121		61		—		2		7,073
Commercial and industrial	Commercial and industrial	—		—		—		—		—			—		—		—		—		2,162		112			2,274		Commercial and industrial	—		—		—		1,874		—		—		—		—		—		1,596		48		3,518
Construction	Construction	—		—		—		—		—			—		15		—		—		—		—			15		Construction	—		—		—		379		—		—		112		—		—		—		—		491
Agriculture production	Agriculture production	—		—		—		—		—			—		—		—		—		—		—			—		Agriculture production	—		—		—		—		—		—		—		—		—		—		1,279		1,279
Leases	Leases	—		—		—		—		—			—		—		—		—		—		—			—		Leases	—		—		—		—		—		—		—		—		—		—		—		—
Total	Total	$	2,591	$	1,253	$	1,545	$	7,315	$	4,458		$	1,027	$	5,253	$	1,636	$	5	$	2,162	$	117		$	27,362	Total	$	1,325	$	173	$	1,103	$	6,334	$	125	$	1,772	$	5,996	$	1,121	$	61	$	1,596	$	1,329	$	20,935

Table of Contents

Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

The following tables show ~~certain information regarding TDRs~~the amortized cost basis of loans that ~~occurred~~were both experiencing financial difficulty and modified during the periods ~~indicated:~~presented. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivables is also presented below.


	For the three months ended March 31, 2023
(in thousands)	Payment Delay/Term Extension		Total % of Loans Outstanding
Commercial real estate:
CRE non-owner occupied	$	—	—	%
CRE owner occupied	—		—
Multifamily	—		—
Farmland	—		—
Total commercial real estate loans	—		—
Consumer:
SFR 1-4 1st DT liens	—		—
SFR HELOCs and junior liens	—		—
Other	—		—
Total consumer loans	—		—
Commercial and industrial	177		0.03
Construction	—		—
Agriculture production	—		—
Leases	—		—
Total	$	177	0.03	%

TDR information for the three months ended March 31, 2022
(dollars in thousands) Number Pre-mod
outstanding
principal
balance Post-mod
outstanding
principal
balance Financial
impact due to
TDR taken as
additional
provision Number that
defaulted during
the period Recorded
investment of
TDRs that
defaulted during
the period Financial impact
due to the
default of
previous TDR
taken as charge-
offs or additional
provisions
Commercial real estate:
CRE non-owner occupied — $ — $ — $ — — $ — $ —
CRE owner occupied — — — — — — —
Multifamily — — — — — — —
Farmland 3 1,228 1,440 — — — —
Total commercial real estate loans 3 1,228 1,440 — — — —
Consumer:
SFR 1-4 1st DT liens — — — — — — —
SFR HELOCs and junior liens — — — — — — —
Other — — — — — — —
Total consumer loans — — — — — — —
Commercial and industrial — — — — — — —
Construction — — — — — — —
Agriculture production — — — — — — —
Leases — — — — — — —
Total 3 $ 1,228 $ 1,440 $ — — $ — $ —

TDR information for the three months ended March 31, 2021
(dollars in thousands) Number Pre-mod
outstanding
principal
balance Post-mod
outstanding
principal
balance Financial
impact due to
TDR taken as
additional
provision Number that
defaulted during
the period Recorded
investment of
TDRs that
defaulted during
the period Financial impact
due to the
default of
previous TDR
taken as charge-
offs or additional
provisions
Commercial real estate:
CRE non-owner occupied 1 $ 317 $ 314 $ 314 — $ — $ —
CRE owner occupied 1 740 742 742 — — —
Multifamily — — — — — — —
Farmland — — — — 3 847 —
Total commercial real estate loans 2 1,057 1,056 1,056 3 847 —
Consumer:
SFR 1-4 1st DT liens — — — — — — —
SFR HELOCs and junior liens — — — — — — —
Other — — — — — — —
Total consumer loans — — — — — — —
Commercial and industrial 3 316 310 310 1 247 —
Construction — — — — — — —
Agriculture production — — — — — — —
Leases — — — — — — —
Total 5 $ 1,373 $ 1,366 $ 1,366 $ 4 $ 1,094 $ —
The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the quarter ended March 31, 2023.

Weighted Average Months Term Extension

Commercial and industrial

~~Table of Contents~~

~~The Company also modified the terms of select~~There were no loans ~~in an effort to assist~~with payment defaults by borrowers ~~that were not related to the COVID-19 pandemic. If the borrower was~~ experiencing financial difficulty and a concession was granted, the Company considered such modifications as troubled debt restructurings. Modifications classified as TDRs can include one or a combination of the following: rate modifications, term extensions, interest only modifications, either temporary or long-term, payment modifications, and collateral substitutions/additions. The objective of the modifications was to increase loan repayments by customers and thereby reduce net charge-offs. The modified loans are included in impaired loans for purposes of determining the level of the allowance for credit losses.

For all new TDRs, an impairment analysis is conducted. If the loan is determined to be collateral dependent, any additional amount of impairment will be calculated based on the difference between estimated collectible value and the current carrying balance of the loan. This difference could result in an increased provision and is typically charged off. If the asset is determined not to be collateral dependent, the impairment is measured on the net present value difference between the expected cash flows of the restructured loan and the cash flows which would have been received under the original terms. The effect of this could result in a requirement for additional provision to the reserve. The effect of these required provisions for the period are indicated above.

~~Typically if a TDR defaults~~ during the ~~period, the loan is then considered collateral dependent and, if it was not already considered collateral dependent, an appropriate provision will be reserved~~quarter ended March 31, 2023 which had material modifications in rate, term or ~~charge will be taken. The additional provisions required resulting from default of previously modified TDR’s are noted above. Loans that defaulted within~~principal forgiveness during the twelve ~~month period subsequent~~months prior to ~~modification were not considered significant for financial reporting purposes.~~

default.

Note 6 - Leases

The Company records a ROUA on the consolidated balance sheets for those leases that convey rights to control use of identified assets for a period of time in exchange for consideration. The Company also records a lease liability on the consolidated balance sheets for the present value of future payment commitments. All of the Company’s leases are comprised of operating leases in which the Company is lessee of real estate property for branches, ATM locations, and general administration and operations. The Company has elected not to include short-term leases (i.e. leases with initial terms of 12 month or less) within the ROUA and lease liability. Known or determinable adjustments to the required minimum future lease payments were included in the calculation of the Company’s ROUA and lease liability. Adjustments to the required minimum future lease payments that are variable and will not be determinable until a future period, such as changes in the consumer price index, are included as variable lease costs. Additionally, expected variable payments for common area maintenance, taxes and insurance were unknown and not determinable at lease commencement and therefore, were not included in the determination of the Company’s ROUA or lease liability.

The value of the ROUA and lease liability is impacted by the amount of the periodic payment required, length of the lease term, and the discount rate used to calculate the present value of the minimum lease payments. The Company’s lease agreements often include 1one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. The lease liability is reduced based on the discounted present value of remaining payments as of each reporting period. The ROUA value is measured using the amount of lease liability and adjusted for prepaid or accrued lease payments, remaining lease incentives, unamortized direct costs (if any), and impairment (if any).

Table of Contents

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


		Three months ended March 31,				Three months ended March 31,
(in thousands)	(in thousands)	2022		2021			(in thousands)	2023		2022
Operating lease cost	Operating lease cost	$	1,319	$	1,258		Operating lease cost	$	1,609	$	1,319
Short-term lease cost	Short-term lease cost	53		61			Short-term lease cost	118		53
Variable lease cost	Variable lease cost	2		(2)			Variable lease cost	12		2
Sublease income	Sublease income	—		(13)			Sublease income	—		—
Total lease cost	Total lease cost	$	1,374	$	1,304		Total lease cost	$	1,739	$	1,374

The following table presents supplemental cash flow information related to leases for the periods ended:
Three months ended March 31,
(in thousands) 2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 1,292 $ 1,204
ROUA obtained in exchange for operating lease liabilities $ 3,867 $ 1,308

~~Table of Contents~~


	Three months ended March 31,
(in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	1,653	$	1,292
ROUA obtained in exchange for operating lease liabilities	$	4,484	$	3,867

The following table presents the weighted average operating lease term and discount rate as of the period ended:


		March 31,					March 31,
		2022		2021			2023		2022
Weighted-average remaining lease term (years)	Weighted-average remaining lease term (years)	8.8		9.8		Weighted-average remaining lease term (years)	8.3		8.8
Weighted-average discount rate	Weighted-average discount rate	2.90	%	3.03	%	Weighted-average discount rate	3.27	%	2.90	%

At March 31, ~~2022,~~2023, future expected operating lease payments are as follows:
(in thousands)
Periods ending December 31,
2022 $ 4,321
2023 5,146
2024 4,694
2025 4,017
2026 3,612
Thereafter 13,378
35,168
Discount for present value of expected cash flows (4,668)
Lease liability at March 31, 2022 $ 30,500


(in thousands)
Periods ending December 31,
2023	$	4,505
2024	5,798
2025	5,229
2026	4,688
2027	4,001
Thereafter	13,071
	37,292
Discount for present value of expected cash flows	(5,064)
Lease liability at March 31, 2023	$	32,228

Note 7 - Deposits

A summary of the balances of deposits follows:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Noninterest-bearing demand	Noninterest-bearing demand	$	3,583,269	$	2,979,882	Noninterest-bearing demand	$	3,236,696	$	3,502,095
Interest-bearing demand	Interest-bearing demand	1,788,639		1,568,682		Interest-bearing demand	1,635,706		1,718,541
Savings	Savings	2,993,873		2,520,959		Savings	2,807,796		2,884,378
Time certificates, $250,000 or more	Time certificates, $250,000 or more	57,126		44,652		Time certificates, $250,000 or more	94,917		46,350
Other time certificates	Other time certificates	291,570		252,984		Other time certificates	250,750		177,649
Total deposits	Total deposits	$	8,714,477	$	7,367,159	Total deposits	$	8,025,865	$	8,329,013

Certificate of deposit balances of $1,000,000 from the State of California were included in time certificates, over $250,000, at March 31, 2022 and December 31, 2021, respectively. The Company participates in a deposit program offered by the State of California whereby the State may make deposits at the Company’s request subject to collateral and credit worthiness constraints. The negotiated rates on these State deposits are generally more favorable than other wholesale funding sources available to the Company. Overdrawn deposit balances of ~~$1,399,000~~$1.4 million and ~~$2,324,000~~$1.8 million were classified as consumer loans at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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Note 8 - Subordinated Debentures

The following table summarizes the terms and recorded balances of each debenture as of the date indicated (dollars in thousands):

Coupon Rate (Variable) 3 mo. LIBOR + As of March 31, 2022 December 31, 2021
Subordinated Debt Series Maturity
Date Face
Value Current
Coupon Rate Recorded
Book Value Recorded
Book Value
TriCo Cap Trust I 10/7/2033 $ 20,619 3.05 % 3.29 % $ 20,619 $ 20,619
TriCo Cap Trust II 7/23/2034 20,619 2.55 % 2.67 % 20,619 20,619
North Valley Trust II 4/24/2033 6,186 3.25 % 3.38 % 5,428 5,403
North Valley Trust III 7/23/2034 5,155 2.80 % 2.92 % 4,315 4,291
North Valley Trust IV 3/15/2036 10,310 1.33 % 1.53 % 7,211 7,147
VRB Subordinated - 6% 3/29/2029 16,000 Fixed 6.00 % 17,774 —
VRB Subordinated - 5% 8/27/2035 20,000 Fixed 5.00 % 25,018 —
$ 98,889 $ 100,984 $ 58,079

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				Coupon Rate (Variable) 3 mo. LIBOR +		As of March 31, 2023				As of December 31, 2022
Subordinated Debt Series	Maturity Date	Face Value				Current Coupon Rate		Recorded Book Value		Recorded Book Value
TriCo Cap Trust I	10/7/2033	$	20,619	3.05	%	7.88	%	$	20,619	$	20,619
TriCo Cap Trust II	7/23/2034	20,619		2.55	%	7.36	%	20,619		20,619
North Valley Trust II	4/24/2033	6,186		3.25	%	8.06	%	5,527		5,503
North Valley Trust III	7/23/2034	5,155		2.80	%	7.61	%	4,404		4,383
North Valley Trust IV	3/15/2036	10,310		1.33	%	6.19	%	7,446		7,393
VRB Subordinated - 6%	3/29/2029	16,000		Fixed		6.00	%	17,140		17,187
VRB Subordinated - 5%	8/27/2035	20,000		Fixed		5.00	%	25,296		25,336
		$	98,889					$	101,051	$	101,040

The VRB - 6% Subordinated Debt issuance has a fixed rate of 6.0% through March 29, 2024, then indexed to the three-month LIBOR plus 3.5% through the maturity date. The VRB - 5% Subordinated Debt issuance is fixed at 5.0% through August 27, 2025, then indexed to the three-month LIBOR plus 4.9% through the maturity date.

Note 9 - Commitments and Contingencies

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


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Financial instruments whose amounts represent risk:	Financial instruments whose amounts represent risk:					Financial instruments whose amounts represent risk:
Commitments to extend credit:	Commitments to extend credit:					Commitments to extend credit:
Commercial loans	Commercial loans	$	648,867	$	409,950	Commercial loans	$	726,505	$	656,705
Consumer loans	Consumer loans	662,658		628,791		Consumer loans	751,193		760,588
Real estate mortgage loans	Real estate mortgage loans	373,565		333,764		Real estate mortgage loans	473,894		458,896
Real estate construction loans	Real estate construction loans	289,454		213,563		Real estate construction loans	307,152		312,371
Standby letters of credit	Standby letters of credit	28,472		21,871		Standby letters of credit	24,070		26,599
Deposit account overdraft privilege	Deposit account overdraft privilege	124,816		125,670		Deposit account overdraft privilege	129,147		126,634

Note 10 - Shareholders’ Equity

Dividends Paid

The Bank paid to the Company cash dividends in the aggregate amounts of ~~$7,782,000~~$18.2 million and ~~$7,772,000~~$7.8 million during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The Bank is regulated by the FDIC and the DFPI. Absent approval from the Commissioner of the DFPI, California banking laws generally limit the Bank’s ability to pay dividends to the lesser of (1) retained earnings or (2) net income for the last three fiscal years, less cash distributions paid during such period.

Stock Repurchase Plan

On February 25, 2021 the Board of Directors authorized the repurchase of up to ~~2,000,000~~2.0 million 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~~can 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 2021 Repurchase Plan has no expiration date (in accordance with applicable laws and regulations) ~~and no share repurchases were made by the Company during either of the three month periods ending March 31, 2022 and March 31, 2021.~~

In connection with approval of the 2021 Repurchase Plan, the Company’s previous repurchase program adopted on November 12, 2019 (the 2019 Repurchase Plan) was terminated. Under the 2019 Repurchase Plan, the Company repurchased 223 shares during. During the three months ended March 31, ~~2021.~~2023 and 2022, the Company repurchased 150,000 and zero shares with market values of $7.0 million and $0, respectively.

Stock Repurchased Under Equity Compensation Plans

The Company's shareholder-approved equity compensation plans permit employees to tender recently vested shares in lieu of cash for the payment of exercise price, if applicable, and the tax withholding on such shares. During the three months ended March 31, 2023 and 2022, ~~and 2021, employees~~exercising option holders tendered zero shares, respectively, of the Company’s common stock in connection with option exercises.

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Employees also tendered ~~zero~~12,381 and 70zero shares in connection with the tax withholding requirements of other share based awards during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. In total, shares of the Company's common stock tendered had market values of ~~$55,145~~$0.62 million and ~~$2,500~~$0 during the quarters ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The tendered shares were retired. The market value of tendered shares is the last market trade price at closing on the day an option is exercised or the other share based award vests. Stock repurchased under equity incentive plans are not included in the total of stock repurchased under the 2021 ~~or 2019~~ Stock Repurchase Plans.

Note 11 - Stock Options and Other Equity-Based Incentive Instruments

On April 16, 2019, the Board of Directors adopted the 2019 Equity Incentive Plan (2019 Plan) which was approved by shareholders on May 21, 2019. The 2019 Plan allows for up to 1,500,000 shares to be issued in connection with equity-based incentives. The Company’s 2009 Equity Incentive Plan (2009 Plan) expired on March 26, 2019. While no new awards can be granted under the 2009 Plan, existing grants continue to be governed by the terms, conditions and procedures set forth in any applicable award agreement.

Stock option activity during the three months ended March 31, ~~2022~~2023 is summarized in the following table:

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Number
of Shares Weighted
Average
Exercise Price
Outstanding at December 31, 2021 78,825 $ 19.28
Options granted — —
Options exercised (3,325) 16.59
Options forfeited — —
Outstanding at March 31, 2022 75,500 $ 19.40


	Number of Shares	Weighted Average Exercise Price
Outstanding at December 31, 2022	15,500	$	21.27
Options granted	—	—
Options exercised	(4,000)	19.46
Options forfeited	—	—
Outstanding at March 31, 2023	11,500	$	21.90

The following table shows the number, weighted-average exercise price, intrinsic value, and weighted average remaining contractual life of options exercisable, options not yet exercisable and total options outstanding as of March 31, ~~2022:~~2023:


		Currently Exercisable		Currently Not Exercisable		Total Outstanding			Currently Exercisable		Currently Not Exercisable		Total Outstanding
Number of options	Number of options	75,500		—		75,500		Number of options	11,500		—		11,500
Weighted average exercise price	Weighted average exercise price	$	19.40	$	—	$	19.40	Weighted average exercise price	$	21.90	$	—	$	21.90
Intrinsic value (in thousands)	Intrinsic value (in thousands)	$	1,558	$	—	$	1,558	Intrinsic value (in thousands)	$	226	$	—	$	226
Weighted average remaining contractual term (yrs.)	Weighted average remaining contractual term (yrs.)	1.1		0 years		1.1		Weighted average remaining contractual term (yrs.)	1.0		0 years		1.0

As of March 31, ~~2022~~2023 all options outstanding are fully vested and are expected to be exercised prior to expiration. The Company did not modify any option grants during ~~2021~~2022 or the three months ended March 31, ~~2022.~~

2023.

Activity related to restricted stock unit awards during the three months ended March 31, ~~2022~~2023 is summarized in the following table:


		Service Condition Vesting RSUs	Market Plus Service Condition Vesting RSUs		Service Condition Vesting RSUs	Market Plus Service Condition Vesting RSUs
Outstanding at December 31, 2021		103,517	99,763
Outstanding at December 31, 2022				Outstanding at December 31, 2022	139,194	114,481
RSUs granted	RSUs granted	21,597	—	RSUs granted	—	—
RSUs added through dividend and performance credits	RSUs added through dividend and performance credits	—	—	RSUs added through dividend and performance credits	817	—
RSUs released	RSUs released	730	—	RSUs released	(22,118)	—
RSUs forfeited/expired	RSUs forfeited/expired	—	—	RSUs forfeited/expired	—	—
Outstanding at March 31, 2022		125,844	99,763
Outstanding at March 31, 2023				Outstanding at March 31, 2023	117,893	114,481

The ~~125,844~~117,893 of service condition vesting RSUs outstanding as of March 31, ~~2022~~2023 include a feature whereby each RSU outstanding is credited with a dividend amount equal to any common stock cash dividend declared and paid, and the credited amount is divided by the closing price of the Company’s stock on the dividend payable date to arrive at an additional amount of RSUs outstanding under the original grant. The dividend credits follow the same vesting requirements as the RSU awards and are not considered participating securities. The ~~125,844~~117,893 of service condition vesting RSUs outstanding as of March 31, ~~2022~~2023 are expected to vest, and be released, on a weighted-average basis, over the next ~~2.0~~2.1 years. The Company expects to recognize ~~$3,269,785~~$3.1 million of pre-tax compensation costs related to these service condition vesting RSUs between March 31, ~~2022~~2023 and their vesting dates. The Company did not modify any service condition vesting RSUs during ~~2021~~2022 or during the three months ended March 31, ~~2022.~~2023.

The ~~99,763~~114,481 of market plus service condition vesting RSUs outstanding as of March 31, ~~2022~~2023 are expected to vest, and be released, on a weighted-average basis, over the next ~~1.8~~2.1 years. The Company expects to recognize ~~$1,352,856~~$1.8 million of pre-tax compensation costs related to these RSUs between March 31, ~~2022~~2023 and their vesting dates. As of March 31, ~~2022,~~2023, the number of market plus service condition vesting

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RSUs outstanding that will actually vest, and be released, may be reduced to zero or increased to ~~149,645~~171,722 depending on the total return of the Company’s common stock versus the total return of an index of bank stocks from the grant date to the vesting date. The Company did not modify any market plus service condition vesting RSUs during ~~2021~~2022 or during the three months ended March 31, ~~2022.~~

2023.

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Note 12 - Non-interest Income and Expense

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


		Three months ended March 31,				Three months ended March 31,
(in thousands)	(in thousands)	2022		2021			(in thousands)	2023		2022
ATM and interchange fees	ATM and interchange fees	$	6,243	$	5,861		ATM and interchange fees	$	6,344	$	6,243
Service charges on deposit accounts	Service charges on deposit accounts	3,834		3,269			Service charges on deposit accounts	3,431		3,834
Other service fees	Other service fees	882		871			Other service fees	1,166		882
Mortgage banking service fees	Mortgage banking service fees	463		463			Mortgage banking service fees	465		463
Change in value of mortgage servicing rights	Change in value of mortgage servicing rights	274		12			Change in value of mortgage servicing rights	(209)		274
Total service charges and fees	Total service charges and fees	11,696		10,476			Total service charges and fees	11,197		11,696
Increase in cash value of life insurance	Increase in cash value of life insurance	638		673			Increase in cash value of life insurance	802		638
Asset management and commission income	Asset management and commission income	887		834			Asset management and commission income	934		887
Gain on sale of loans	Gain on sale of loans	1,246		3,247			Gain on sale of loans	206		1,246
Lease brokerage income	Lease brokerage income	158		110			Lease brokerage income	98		158
Sale of customer checks	Sale of customer checks	104		119			Sale of customer checks	288		104
Gain on sale of investment securities		—		—
Loss on marketable equity securities		(137)		(53)
Loss on sale of investment securities							Loss on sale of investment securities	(164)		—
Gain (loss) on marketable equity securities							Gain (loss) on marketable equity securities	42		(137)
Other	Other	504		704			Other	232		504
Total other non-interest income	Total other non-interest income	3,400		5,634			Total other non-interest income	2,438		3,400
Total non-interest income	Total non-interest income	$	15,096	$	16,110		Total non-interest income	$	13,635	$	15,096

The components of non-interest expense were as follows:
Three months ended
March 31,
(in thousands) 2022 2021
Base salaries, net of deferred loan origination costs $ 18,216 $ 15,511
Incentive compensation 2,583 3,580
Benefits and other compensation costs 5,972 6,239
Total salaries and benefits expense 26,771 25,330
Occupancy 3,575 3,726
Data processing and software 3,513 3,202
Equipment 1,333 1,517
Intangible amortization 1,228 1,431
Advertising 637 380
ATM and POS network charges 1,375 1,246
Professional fees 876 594
Telecommunications 521 581
Regulatory assessments and insurance 720 612
Merger and acquisition expense 4,032 —
Postage 228 198
Operational (gain) losses (183) 209
Courier service 414 294
Gain on sale or acquisition of foreclosed assets — (51)
Gain on disposal of fixed assets (1,078) —
Other miscellaneous expense 2,485 2,349
Total other non-interest expense 19,676 16,288
Total non-interest expense $ 46,447 $ 41,618


	Three months ended March 31,
(in thousands)	2023		2022
Base salaries, net of deferred loan origination costs	$	23,000	$	18,216
Incentive compensation	2,895		2,583
Benefits and other compensation costs	6,668		5,972
Total salaries and benefits expense	32,563		26,771
Occupancy	4,160		3,575
Data processing and software	4,032		3,513
Equipment	1,383		1,333
Intangible amortization	1,656		1,228
Advertising	759		637
ATM and POS network charges	1,709		1,375
Professional fees	1,589		876
Telecommunications	595		521
Regulatory assessments and insurance	792		720
Merger and acquisition expense	—		4,032
Postage	299		228
Operational (gain) losses	435		(183)
Courier service	339		414

Gain on disposal of fixed assets	—		(1,078)
Other miscellaneous expense	3,483		2,485
Total other non-interest expense	21,231		19,676
Total non-interest expense	$	53,794	$	46,447

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Note 13 - Earnings Per Share

Basic earnings per share represent income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options and restricted stock units (RSUs), and are determined using the treasury stock method. Earnings per share have been computed based on the following:


		Three months ended March 31,					Three months ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Net income	Net income	$	20,374	$	33,649	Net income	$	35,833	$	20,374
Average number of common shares outstanding	Average number of common shares outstanding	30,050		29,727		Average number of common shares outstanding	33,296		30,050
Effect of dilutive stock options and restricted stock	Effect of dilutive stock options and restricted stock	152		178		Effect of dilutive stock options and restricted stock	142		152
Average number of common shares outstanding used to calculate diluted earnings per share	Average number of common shares outstanding used to calculate diluted earnings per share	30,202		29,905		Average number of common shares outstanding used to calculate diluted earnings per share	33,438		30,202
Options excluded from diluted earnings per share because of their antidilutive effect	Options excluded from diluted earnings per share because of their antidilutive effect	—		—		Options excluded from diluted earnings per share because of their antidilutive effect	—		—

Note 14 – Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet identified as accumulated other comprehensive income (AOCI), such items, along with net income, are components of other comprehensive income (loss) (OCI).

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


		Three months ended March 31,				Three months ended March 31,
(in thousands)	(in thousands)	2022		2021			(in thousands)	2023		2022
Unrealized holding losses on available for sale securities before reclassifications		$	(111,302)	$	(12,337)
Unrealized holding gains (losses) on available for sale securities before reclassifications							Unrealized holding gains (losses) on available for sale securities before reclassifications	$	34,540	$	(111,302)
Amounts reclassified out of AOCI:	Amounts reclassified out of AOCI:						Amounts reclassified out of AOCI:
Realized gain on debt securities		—		—
Realized loss on debt securities							Realized loss on debt securities	164		—

Unrealized holding losses on available for sale securities after reclassifications		(111,302)		(12,337)
Unrealized holding gains (losses) on available for sale securities after reclassifications							Unrealized holding gains (losses) on available for sale securities after reclassifications	34,704		(111,302)
Tax effect	Tax effect	32,905		3,647			Tax effect	(10,260)		32,905
Unrealized holding losses on available for sale securities, net of tax		(78,397)		(8,690)
Unrealized holding gains (losses) on available for sale securities, net of tax							Unrealized holding gains (losses) on available for sale securities, net of tax	24,444		(78,397)
Change in unfunded status of the supplemental retirement plans before reclassifications	Change in unfunded status of the supplemental retirement plans before reclassifications	63		(49)			Change in unfunded status of the supplemental retirement plans before reclassifications	114		63
Amounts reclassified out of AOCI:	Amounts reclassified out of AOCI:						Amounts reclassified out of AOCI:
Amortization of prior service cost	Amortization of prior service cost	(7)		(14)			Amortization of prior service cost	—		(7)
Amortization of actuarial losses	Amortization of actuarial losses	2		63			Amortization of actuarial losses	(114)		2

Total amounts reclassified out of accumulated other comprehensive (loss) income	Total amounts reclassified out of accumulated other comprehensive (loss) income	(5)		49			Total amounts reclassified out of accumulated other comprehensive (loss) income	(114)		(5)
Change in unfunded status of the supplemental retirement plans after reclassifications	Change in unfunded status of the supplemental retirement plans after reclassifications	58		—			Change in unfunded status of the supplemental retirement plans after reclassifications	—		58
Tax effect	Tax effect	—		—			Tax effect	—		—
Change in unfunded status of the supplemental retirement plans, net of tax	Change in unfunded status of the supplemental retirement plans, net of tax	58		—			Change in unfunded status of the supplemental retirement plans, net of tax	—		58
Change in joint beneficiary agreement liability before reclassifications	Change in joint beneficiary agreement liability before reclassifications	—		(629)			Change in joint beneficiary agreement liability before reclassifications	—		—
Tax effect	Tax effect	—		—			Tax effect	—		—
Change in joint beneficiary agreement liability before reclassifications, net of tax	Change in joint beneficiary agreement liability before reclassifications, net of tax	—		(629)			Change in joint beneficiary agreement liability before reclassifications, net of tax	—		—
Total other comprehensive income (loss)	Total other comprehensive income (loss)	$	(78,339)	$	(9,319)		Total other comprehensive income (loss)	$	24,444	$	(78,339)

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The components of accumulated other comprehensive ~~income,~~loss, included in shareholders’ equity, are as follows:
(in thousands) March 31,
2022 December 31,
2021
Net unrealized gain on available for sale securities $ (111,694) $ (392)
Tax effect 33,021 116
Unrealized holding gain on available for sale securities, net of tax (78,673) (276)
Unfunded status of the supplemental retirement plans 2,481 2,399
Tax effect (733) (709)
Unfunded status of the supplemental retirement plans, net of tax 1,748 1,690
Joint beneficiary agreement liability (433) (433)
Tax effect — 0
Joint beneficiary agreement liability, net of tax (433) (433)
Accumulated other comprehensive (loss) income $ (77,358) $ 981


(in thousands)	March 31, 2023		December 31, 2022
Net unrealized gain on available for sale securities	$	(255,845)	$	(290,549)
Tax effect	75,637		85,897
Unrealized holding gain on available for sale securities, net of tax	(180,208)		(204,652)
Unfunded status of the supplemental retirement plans	13,901		13,901
Tax effect	(4,110)		(4,110)
Unfunded status of the supplemental retirement plans, net of tax	9,791		9,791
Joint beneficiary agreement liability	956		956
Tax effect	—		—
Joint beneficiary agreement liability, net of tax	956		956
Accumulated other comprehensive loss	$	(169,461)	$	(193,905)

Note 15 - Fair Value Measurement

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, income approach, and/or the cost approach. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance. Marketable equity securities, debt securities available-for-sale, loans held for sale, and mortgage servicing rights are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application impairment write-downs of individual assets.

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observable nature of the assumptions used to determine fair value. These levels are:

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

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

Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Marketable equity securities and debt securities available for sale - Marketable equity securities and debt securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. The Company had no securities classified as Level 3 during any of the periods covered in these financial statements.

Loans held for sale - Loans held for sale are carried at the lower of cost or fair value. The fair value of loans held for sale is based on what secondary markets are currently offering for loans with similar characteristics. As such, we classify those loans subjected to recurring fair value adjustments as Level 2.

Individually evaluated loans - Loans are not recorded at fair value on a recurring basis. However, from time to time, certain loans have individual risk characteristics not consistent with a pool of loans and is individually evaluated for credit reserves. Loans for which it is probable that payment of interest and principal will not be made in accordance with the original contractual terms of the loan agreement are typically individually evaluated. The fair value of these loans are estimated using one of several methods, including collateral value, fair value of similar debt, enterprise value, liquidation value and discounted cash flows. Those loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further

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impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from

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

Foreclosed assets - Foreclosed assets include assets acquired through, or in lieu of, loan foreclosure. Foreclosed assets are held for sale and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, management periodically performs valuations and the assets are carried at the lower of carrying amount or fair value less cost to sell. When the fair value of foreclosed assets is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3. Revenue and expenses from operations and changes in the valuation allowance are included in other non-interest expense.

Mortgage servicing rights - Mortgage servicing rights are carried at fair value. A valuation model, which utilizes a discounted cash flow analysis using a discount rate and prepayment speed assumptions is used in the computation of the fair value measurement. While the prepayment speed assumption is currently quoted for comparable instruments, the discount rate assumption currently requires a significant degree of management judgment and is therefore considered an unobservable input. As such, the Company classifies mortgage servicing rights subjected to recurring fair value adjustments as Level 3.

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


Fair value at March 31, 2022		Total		Level 1		Level 2		Level 3
Fair value at March 31, 2023										Fair value at March 31, 2023	Total		Level 1		Level 2		Level 3
Marketable equity securities	Marketable equity securities	$	2,801	$	2,801	0		0		Marketable equity securities	$	2,640	$	2,640
Debt securities available for sale:	Debt securities available for sale:									Debt securities available for sale:
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	1,690,744		0		1,690,744		0		Obligations of U.S. government corporations and agencies	1,357,435				1,357,435
Obligations of states and political subdivisions	Obligations of states and political subdivisions	267,195		0		267,195		0		Obligations of states and political subdivisions	279,900				279,900
Corporate bonds	Corporate bonds	7,616		0		7,616		0		Corporate bonds	5,738				5,738
Asset backed securities	Asset backed securities	397,352		0		397,352		0		Asset backed securities	427,364				427,364
Non-agency mortgage backed securities										Non-agency mortgage backed securities	335,375				335,375
Loans held for sale	Loans held for sale	1,030		0		1,030		0		Loans held for sale	226				226
Mortgage servicing rights	Mortgage servicing rights	6,405		0		0		6,405		Mortgage servicing rights	6,553						6,553
Total assets measured at fair value	Total assets measured at fair value	$	2,373,143	$	2,801	$	2,363,937	$	6,405	Total assets measured at fair value	$	2,415,231	$	2,640	$	2,406,038	$	6,553


Fair value at December 31, 2021		Total		Level 1		Level 2		Level 3
Fair value at December 31, 2022										Fair value at December 31, 2022	Total		Level 1		Level 2		Level 3
Marketable equity securities	Marketable equity securities	$	2,938	$	2,938	$	—	$	—	Marketable equity securities	$	2,598	$	2,598	$	—	$	—
Debt securities available for sale:	Debt securities available for sale:									Debt securities available for sale:
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	1,257,389		—		1,257,389		—		Obligations of U.S. government corporations and agencies	1,372,769		—		1,372,769		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	192,244		—		192,244		—		Obligations of states and political subdivisions	293,205		—		293,205		—
Corporate bonds	Corporate bonds	6,756		—		6,756		—		Corporate bonds	5,751		—		5,751		—
Asset backed securities	Asset backed securities	751,549		—		751,549		—		Asset backed securities	439,767		—		439,767		—
Non-agency mortgage backed securities										Non-agency mortgage backed securities	340,946				340,946
Loans held for sale	Loans held for sale	3,466		—		3,466		—		Loans held for sale	1,846		—		1,846		—
Mortgage servicing rights	Mortgage servicing rights	5,874		—		—		5,874		Mortgage servicing rights	6,712		—		—		6,712
Total assets measured at fair value	Total assets measured at fair value	$	2,220,216	$	2,938	$	2,211,404	$	5,874	Total assets measured at fair value	$	2,463,594	$	2,598	$	2,454,284	$	6,712

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally corresponds with the Company’s quarterly valuation process. There were no transfers between any levels during the three months ended March 31, ~~2022,~~2023 or the year ended December 31, ~~2021.~~2022.

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the time periods indicated. Had there been any transfer into or out of Level 3 during the time periods indicated, the amount included in the “Transfers into (out of) Level 3” column would represent the beginning balance of an item in the period (interim quarter) during which it was transferred (in thousands):


Three months ended March 31,	Three months ended March 31,	Beginning Balance		Transfers into (out of) Level 3	Change Included in Earnings		Issuances		Ending Balance		Three months ended March 31,	Beginning Balance		Transfers into (out of) Level 3	Change Included in Earnings		Issuances		Ending Balance
2023: Mortgage servicing rights											2023: Mortgage servicing rights	$	6,712		$	(209)	$	50	$	6,553
2022: Mortgage servicing rights	2022: Mortgage servicing rights	$	5,874	—	$	274	$	257	$	6,405	2022: Mortgage servicing rights	$	5,874	—	$	274	$	257	$	6,405
2021: Mortgage servicing rights		$	5,092	—	$	12	$	503	$	5,607

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Three months ended March 31,

~~Table of Contents~~

The key unobservable inputs used in determining the fair value of mortgage servicing rights are mortgage prepayment speeds and the discount rate used to discount cash projected cash flows. Generally, any significant increases in the mortgage prepayment speed and discount rate utilized in the fair value measurement of the mortgage servicing rights will result in a negative fair value adjustments (and decrease in the fair value measurement). Conversely, a decrease in the mortgage prepayment speed and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement).

The following table presents quantitative information about recurring Level 3 fair value measurements at March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

As of March 31, ~~2022:~~2023:

Fair Value
(in thousands)

Valuation
Technique

Unobservable
Inputs

Range,
Weighted
Average

Mortgage Servicing Rights

~~6,405~~6,553

Discounted cash flow

Constant prepayment rate

9%121% - ~~16%~~216%; ~~9.8%~~130.0%

Discount rate

10% - 14%; 12%

As of December 31, ~~2021:~~2022:

Mortgage Servicing Rights

~~5,874~~6,712

Discounted cash flow

Constant prepayment rate

~~11%~~116% - ~~15.8%~~226.0%; ~~12.5%~~127.0%

Discount rate

10% - 14%; 12%

The tables below present the recorded investment in assets and liabilities measured at fair value on a nonrecurring basis, as of the dates indicated, that had a write-down or an additional allowance provided during the periods indicated (in thousands):
March 31, 2022 Total Level 1 Level 2 Level 3 Total Losses
Fair value:
Individually evaluated loans $ 684 — — $ 684 $ (615)
Foreclosed assets 313 — — 313 (294)
Total assets measured at fair value $ 997 $ — $ — $ 997 $ (909)

December 31, 2021 Total Level 1 Level 2 Level 3 Total Losses
Fair value:
Individually evaluated loans $ 3,683 — — $ 3,683 $ (1,105)
Foreclosed assets — — — — —
Total assets measured at fair value $ 3,683 — — $ 3,683 $ (1,105)


March 31, 2023	Total		Level 1	Level 2	Level 3
Fair value:
Individually evaluated loans	$	1,223	—	—	$	1,223


December 31, 2022	Total		Level 1	Level 2	Level 3
Fair value:
Individually evaluated loans	$	5,719	—	—	$	5,719
Foreclosed assets	311		—	—	311
Total assets measured at fair value	$	6,030	—	—	$	6,030

March 31, 2021 Total Level 1 Level 2 Level 3 Total Losses
Fair value:
Individually evaluated loans $ 4,557 — — $ 4,557 $ (2,710)
Foreclosed assets 214 — — 214 (31)
Total assets measured at fair value $ 4,771 — — $ 4,771 $ (2,741)
The tables below present the losses resulting from non-recurring fair value adjustments of assets and liabilities for the periods indicated (in thousands):


	Three months ended March 31,
	2023		2022
Individually evaluated loans	$	(277)	$	(615)
Foreclosed assets	—		(294)
Total losses from non-recurring measurements	$	(277)	$	(909)

The individually evaluated loan amounts above represent collateral dependent loans that have been adjusted to fair value. When the Company identifies a collateral dependent loan with unique risk characteristics, the Company evaluates the need for an allowance using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan, the fair value of collateral is generally estimated by obtaining external appraisals. If the Company determines that the value of the loan is less than the recorded investment in the loan, the Company recognizes this impairment and adjust the carrying value of the loan to fair value through the allowance for credit losses. The loss represents charge-offs or impairments on collateral dependent loans for fair value adjustments based on the fair value of collateral. The carrying value of loans fully charged-off is zero.

The foreclosed assets amount above represents impaired real estate that has been adjusted to fair value. Foreclosed assets represent real estate which the Company has taken control of in partial or full satisfaction of loans. At the time of foreclosure, other real estate owned is recorded at fair value less costs to sell, which becomes the property’s new basis. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for credit losses. After foreclosure, management periodically performs valuations such that the real estate is carried at the lower of its new cost basis or fair value, net of estimated costs to sell. Fair value adjustments on other real estate owned are recognized within net loss on real estate owned. The loss represents impairments on real estate owned for fair value adjustments based on the fair value of the real estate.

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The Company’s property appraisals are primarily based on the sales comparison approach and income approach methodologies, which consider recent sales of comparable properties, including their income generating characteristics, and then make adjustments to reflect the

~~Table of Contents~~

general assumptions that a market participant would make when analyzing the property for purchase. These adjustments may increase or decrease an appraised value and can vary significantly depending on the location, physical characteristics and income producing potential of each property. Additionally, the quality and volume of market information available at the time of the appraisal can vary from period to period and cause significant changes to the nature and magnitude of comparable sale adjustments. Given these variations, comparable sale adjustments are generally not a reliable indicator for how fair value will increase or decrease from period to period. Under certain circumstances, management discounts are applied based on specific characteristics of an individual property.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at March 31, ~~2022:~~2023:

March 31, ~~2022~~2023

Fair Value
(in thousands)

Valuation
Technique

Unobservable Inputs

Range,
Weighted Average

Individually evaluated loans

~~684~~1,223

Sales comparison
approach
Income approach

Adjustment for differences between
comparable sales;
Capitalization rate

Not meaningful
N/A

~~Foreclosed assets (Residential real estate)~~

~~313~~

Sales comparison
approach

Adjustment for differences between
comparable sales

Not meaningful
N/A

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at December 31, ~~2021:~~2022:

December 31, ~~2021~~2022

Fair Value
(in thousands)

Valuation
Technique

Unobservable Inputs

Range,
Weighted Average

Individually evaluated loans

~~3,683~~5,719

Sales comparison
approach
Income approach

Adjustment for differences between
comparable sales;
Capitalization rate

Not meaningful
N/A

Foreclosed assets (Residential real estate)

311

Sales comparison
approach

Adjustment for differences between
comparable sales

Not meaningful
N/A

Fair values for financial instruments are management’s estimates of the values at which the instruments could be exchanged in a transaction between willing parties. The Company uses the exit price notion when measuring the fair value of financial instruments. These estimates are subjective and may vary significantly from amounts that would be realized in actual transactions. In addition, other significant assets are not considered financial assets including, any mortgage banking operations, deferred tax assets, and premises and equipment. Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered in any of these estimates.
March 31, 2022 December 31, 2021
(in thousands) Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Financial assets:
Level 1 inputs:
Cash and due from banks $ 49,705 $ 49,705 $ 57,032 $ 57,032
Cash at Federal Reserve and other banks 985,978 985,978 711,389 711,389
Level 2 inputs:
Securities held to maturity 186,748 183,970 199,759 208,140
Restricted equity securities 17,250 N/A 17,250 N/A
Level 3 inputs:
Loans, net 5,755,926 5,761,682 4,831,248 4,880,044
Financial liabilities:
Level 2 inputs:
Deposits 8,714,477 8,710,991 7,367,159 7,366,422
Other borrowings 36,184 36,184 50,087 50,087
Level 3 inputs:
Junior subordinated debt 100,984 107,396 58,079 57,173


	March 31, 2023				December 31, 2022
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Level 1 inputs:
Cash and due from banks	$	77,933	$	77,933	$	96,323	$	96,323
Cash at Federal Reserve and other banks	32,402		32,402		10,907		10,907
Level 2 inputs:
Securities held to maturity	152,067		142,135		160,983		149,938
Restricted equity securities	17,250		N/A		17,250		N/A

Level 3 inputs:
Loans, net	6,314,014		6,073,450		6,344,767		6,153,155
Financial liabilities:
Level 2 inputs:
Deposits	8,025,865		8,018,642		8,329,013		8,321,517
Other borrowings	434,140		434,140		264,605		264,605
Level 3 inputs:
Junior subordinated debt	101,051		94,442		101,040		92,613

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(in thousands)	(in thousands)	Contract Amount		Fair Value		Contract Amount		Fair Value		(in thousands)	Contract Amount		Fair Value		Contract Amount		Fair Value
Off-balance sheet:	Off-balance sheet:									Off-balance sheet:
Level 3 inputs:	Level 3 inputs:									Level 3 inputs:
Commitments	Commitments	$	1,974,544	$	19,745	$	1,586,068	$	15,861	Commitments	$	2,258,744	$	22,587	$	2,188,560	$	21,886
Standby letters of credit	Standby letters of credit	28,472		285		21,871		219		Standby letters of credit	24,070		241		26,599		266
Overdraft privilege commitments	Overdraft privilege commitments	124,816		1,249		125,670		1,257		Overdraft privilege commitments	129,147		1,291		126,634		1,266

Note 16 - Regulatory Matters

The Company is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. The following tables present actual and required capital ratios as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 for the Company and the Bank under applicable Basel III Capital Rules. The minimum capital amounts presented include the minimum required capital levels as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 based on the then phased-in provisions of the Basel III Capital Rules. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.


		Actual				Required for Capital Adequacy Purposes				Required to be Considered Well Capitalized					Actual				Required for Capital Adequacy Purposes				Required to be Considered Well Capitalized
As of March 31, 2022:		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2023:														As of March 31, 2023:	Amount		Ratio		Amount		Ratio		Amount		Ratio
		(dollars in thousands)													(dollars in thousands)
Total Capital (to Risk Weighted Assets):	Total Capital (to Risk Weighted Assets):													Total Capital (to Risk Weighted Assets):
Consolidated	Consolidated	$	1,041,638	14.96	%	$	731,146	10.50	%	N/A		N/A		Consolidated	$	1,134,613	14.50	%	$	821,668	10.50	%	N/A		N/A
Tri Counties Bank	Tri Counties Bank	$	1,031,120	14.81	%	$	730,800	10.50	%	$	696,000	10.00	%	Tri Counties Bank	$	1,127,852	14.42	%	$	821,470	10.50	%	$	782,352	10.00	%
Tier 1 Capital (to Risk Weighted Assets):	Tier 1 Capital (to Risk Weighted Assets):													Tier 1 Capital (to Risk Weighted Assets):
Consolidated	Consolidated	$	911,624	13.09	%	$	591,880	8.50	%	N/A		N/A		Consolidated	$	994,155	12.70	%	$	665,160	8.50	%	N/A		N/A
Tri Counties Bank	Tri Counties Bank	$	943,960	13.56	%	$	591,600	8.50	%	$	556,800	8.00	%	Tri Counties Bank	$	1,029,875	13.16	%	$	665,000	8.50	%	$	625,882	8.00	%
Common equity Tier 1 Capital (to Risk Weighted Assets):	Common equity Tier 1 Capital (to Risk Weighted Assets):													Common equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated	Consolidated	$	855,180	12.28	%	$	487,431	7.00	%	N/A		N/A		Consolidated	$	937,300	11.98	%	$	547,779	7.00	%	N/A		N/A
Tri Counties Bank	Tri Counties Bank	$	943,960	13.56	%	$	487,200	7.00	%	$	452,300	6.50	%	Tri Counties Bank	$	1,029,875	13.16	%	$	547,647	7.00	%	$	508,529	6.50	%
Tier 1 Capital (to Average Assets):	Tier 1 Capital (to Average Assets):													Tier 1 Capital (to Average Assets):
Consolidated	Consolidated	$	911,624	10.80	%	$	337,680	4.00	%	N/A		N/A		Consolidated	$	994,155	10.20	%	$	393,017	4.00	%	N/A		N/A
Tri Counties Bank	Tri Counties Bank	$	943,960	11.18	%	$	337,635	4.00	%	$	422,043	5.00	%	Tri Counties Bank	$	1,029,875	10.57	%	$	392,873	4.00	%	$	491,091	5.00	%

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		Actual				Required for Capital Adequacy Purposes			Required to be Considered Well Capitalized					Actual								Required for Capital Adequacy Purposes	Required to be Considered Well Capitalized
As of December 31, 2021:		Amount		Ratio			Amount		Ratio			Amount			Ratio
As of December 31, 2022:																	As of December 31, 2022:	Amount		Ratio			Amount		Ratio		Amount		Ratio
		(dollars in thousands)									(dollars in thousands)
Total Capital (to Risk Weighted Assets):	Total Capital (to Risk Weighted Assets):																Total Capital (to Risk Weighted Assets):
Consolidated	Consolidated	$	893,294	15.42	%		$	608,258	10.50	%		N/A			N/A		Consolidated	$	1,115,257	14.19	%		$	825,234	10.50	%	N/A		N/A
Tri Counties Bank	Tri Counties Bank	$	884,255	15.28	%		$	607,610	10.50	%		$	578,676		10.00	%	Tri Counties Bank	$	1,107,941	14.10	%		$	825,039	10.50	%	$	785,751	10.00	%
Tier 1 Capital (to Risk Weighted Assets):	Tier 1 Capital (to Risk Weighted Assets):																Tier 1 Capital (to Risk Weighted Assets):
Consolidated	Consolidated	$	820,654	14.17	%		$	492,399	8.50	%		N/A			N/A		Consolidated	$	974,325	12.40	%		$	668,047	8.50	%	N/A		N/A
Tri Counties Bank	Tri Counties Bank	$	811,713	14.03	%		$	491,875	8.50	%		$	462,941		8.00	%	Tri Counties Bank	$	1,009,577	12.85	%		$	667,888	8.50	%	$	628,601	8.00	%
Common equity Tier 1 Capital (to Risk Weighted Assets):	Common equity Tier 1 Capital (to Risk Weighted Assets):																Common equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated	Consolidated	$	764,319	13.19	%		$	405,505	7.00	%		N/A			N/A		Consolidated	$	917,565	11.67	%		$	550,156	7.00	%	N/A		N/A
Tri Counties Bank	Tri Counties Bank	$	811,713	14.03	%		$	405,073	7.00	%		$	376,140		6.50	%	Tri Counties Bank	$	1,009,577	12.85	%		$	550,026	7.00	%	$	510,738	6.50	%
Tier 1 Capital (to Average Assets):	Tier 1 Capital (to Average Assets):																Tier 1 Capital (to Average Assets):
Consolidated	Consolidated	$	820,654	9.88	%		$	332,205	4.00	%		N/A			N/A		Consolidated	$	974,325	10.14	%		$	384,337	4.00	%	N/A		N/A
Tri Counties Bank	Tri Counties Bank	$	811,713	9.77	%		$	332,196	4.00	%		$	415,245		5.00	%	Tri Counties Bank	$	1,009,577	10.51	%		$	384,146	4.00	%	$	480,183	5.00	%

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, capital levels at the Company and the Bank exceed all capital adequacy requirements under the Basel III Capital Rules. Also, at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Bank’s capital levels exceeded the minimum amounts necessary to be considered well capitalized under the current regulatory framework for prompt corrective action.

The Basel III Capital Rules require for all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively composed of common equity tier 1 capital, and it applies to each of the risk-based capital ratios but not the leverage ratio. At March 31, ~~2022,~~2023, the Company and the Bank are in compliance with the capital conservation buffer requirement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Cautionary Statements Regarding Forward-Looking Information

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. There can be no assurance that future developments affecting us will be the same as those anticipated by management. 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 strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary ~~fluctuations;~~fluctuations impacts on the Company's business condition and financial operating results; the impact of changes in financial services industry policies, laws and regulations; regulatory restrictions on our ability to successfully market and price our products to consumers; technological changes; weather, natural disasters and other catastrophic events that may or may not be caused by climate change and their effects on economic and business environments in which the Company operates; the continuing adverse impact on the U.S. economy, including the markets in which we operate due to the ~~length, severity, magnitude and duration~~lingering effects of the COVID-19 global ~~pandemic, and~~pandemic; the impact of a slowing U.S. economy and potentially increased unemployment on the performance of our loan portfolio, the market value of our investment securities, 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, terrorism or geopolitical events; the quality and quantity of our deposits; 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 ~~as our recently completed acquisition of Valley Republic Bancorp, including~~mergers, acquisitions or dispositions, or identify and complete favorable transactions in the ~~impact of international hostilities or geopolitical events, without limitation, the failure to achieve the expected revenue growth~~future, and/or ~~expense savings from~~realize the contemplated financial business benefits associated with any such ~~acquisitions, and/or~~activities; the ~~failure to effectively integrate an acquisition target into~~regulatory and financial impacts associated with exceeding $10 billion in total assets; the negative impact on our ~~operations; the possibility that the merger between us~~reputation and Valley will not close when expected or at all because required regulatory, shareholder, or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated (and the risk that required regulatory approvals may resultprofitability in the ~~imposition of conditions that could adversely affect the combined company~~event customers experience economic harm or the expected benefits of the proposed transaction); the occurrence of any event, change, or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between the Company and Valley; the risk that any announcements relating to the merger could have adverse effects on the market price of the common stock of either or both parties to the transaction; changes in the ~~economy, which could materially impact credit quality trends and~~event that regulatory violations are identified; the ability ~~to generate loans and gather deposits, including the pace of the recovery following the COVID-19 pandemic; the ability of us~~ to execute our business plan in new lending 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 timing and effects of the implementation of the 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 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; possible other-than-temporary impairment of securities held by ~~us;~~us due to changes in credit quality or rates; 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 ~~financial performance and/~~level or ~~condition~~cost of checking or savings account deposits on our ~~borrowers;~~funding costs and net interest margin; our noninterest expense and the efficiency ratio; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; the challenges of attracting, integrating and retaining key employees; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; ~~a failure in or breach~~the vulnerability of ~~our~~the Company's operational or security systems or infrastructure, ~~or those~~the systems of ~~our~~ third-party vendors or other service providers ~~including as a result of cyber-attacks~~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 ~~attacks;~~incidents; increased data security risks due to work from home arrangements and email vulnerability; failure to safeguard personal information; changes to U.S. tax policies, including our effective income tax rate; the effect of a fall in stock market prices on our brokerage and wealth management businesses; the transition away from the London Interbank Offered Rate toward new interest rate benchmarks; and our ability to manage the risks involved in the foregoing. Additional factors that could cause results to differ materially from those described above can be found ~~under "Risk Factors"~~ in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, which ~~is on file~~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

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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 ~~loan~~credit losses ~~other than temporary impairment of investments~~related to loans and investment securities, and impairment of intangible assets, can be found in Note 1 of the consolidated financial statements

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included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Geographical Descriptions

~~Recent Developments~~

On March 25, 2022, the Company completed its acquisition of Valley Republic Bancorp, including the merger of Valley Republic Bank (collectively "VRB") 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. 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 for the settlement of stock option awards at VRB.

As a result of the merger with VRB, the Company acquired assets consisting primarily of cash totaling $427.3 million, investment securities of $109.7 million, loans totaling $771.4 million (inclusive of $21.4 million in PPP and fair value discounts of $20.4 million), core deposit intangibles of $10.6 million, and liabilities consisting primarily of $1.2 billion in deposits and $47.3 million in subordinated debt (of which $4.4 million was retired as TriCo Bancshares was the counter party).

VRB was headquartered in Bakersfield, California, and had four branch locations in and around Bakersfield, which all now operate as branches for Tri Counties Bank, and a loan production office in Fresno, California. The Company anticipates that Tri Counties Bank's previously existing Bakersfield branch and the VRB loan production office in Fresno will be consolidated, subject to regulatory approval, into the overlapping locations in the near future.

Financial Highlights

Performance highlights and other developments for the Company as of or for the three months ended March 31, ~~2022~~2023 included the following:

•For the ~~three months~~quarter ended March 31, ~~2022,~~2023, the Company’s return on average assets was ~~0.94%~~1.47%, ~~and~~while the return on average equity was ~~8.19%~~13.36%.

•~~Organic loan growth, excluding PPP and acquired loans, totaled $187.9~~Net income was $35.8 million ~~(15.5% annualized) for the current quarter and $437.3 million (9.5% annualized) for the trailing twelve-month period.~~

•~~For the current quarter, net interest margin, less effect of acquired loan discount accretion and PPP yields (non-GAAP), on a tax equivalent basis was 3.29%, an increase of 4 basis points from 3.25% in the trailing quarter.~~

•~~Inclusive of merger related expenses, the efficiency ratio was 55.95% for the three months ended March 31, 2022, as~~ compared to ~~54.10% for~~$36.3 million in the trailing quarter, and ~~50.42% for the quarter ended March 31, 2021.~~

•~~As of March 31, 2022, the Company reported total loans, total assets and total deposits of $5.9 billion, $10.1 billion and $8.7 billion, respectively. As a direct result of significant deposit growth~~compared to $20.4 million in the ~~last year,~~same quarter of the ~~loan to deposit ratio has declined to 67.15% as of March 31, 2022, as~~prior year; Pre-tax pre-provision net revenue was $53.2 million compared to ~~72.37% at March 31, 2021.~~

•~~The average rate of interest paid on deposits, including non-interest-bearing deposits, equaled 0.04% during the first quarter of 2022, consistent with 0.04% during~~$55.3 million in the trailing quarter, and ~~representing a decrease of 2 basis points from the average rate paid of 0.06% during~~compared to $36.6 million in the same quarter of the prior year.

•~~Noninterest income related~~Deposit balances for the quarter ended March 31, 2023, decreased by $303.1 million as compared to ~~service charges and fees~~December 31, 2022. The deposit contraction during the quarter resulted in the loan to deposit ratio increasing to 80.0% as of March 31, 2023, as compared to 77.4% as of the trailing quarter. The Bank did not utilize brokered deposits or FRB borrowing facilities during the 2022 or 2023 periods.

•The efficiency ratio was ~~$11.7 million~~50.3% for the three ~~month period~~months ended March 31, ~~2022, an increase of 11.6% when~~2023, as compared to 51.8% for the ~~$10.5 million in service charge fees earned during the first three months of 2021.~~trailing quarter.

•The provision for credit losses for loans and debt securities was approximately ~~$8.3~~$4.2 million during the quarter ended March 31, ~~2022,~~2023, as compared to a provision ~~expense~~for credit losses of ~~approximately $1.0~~$4.2 million during the trailing quarter ended December 31, ~~2021,~~2022, and a ~~reversal~~provision for credit losses of ~~provision expense totaling $6.1~~$8.3 million for the ~~three month~~three-month period ended March 31, ~~2021.~~2022.

•The allowance for credit losses to total loans was ~~1.64%~~1.69% as of March 31, ~~2022,~~2023, compared to ~~1.74%~~1.64% as of the trailing quarter end, and ~~1.73%~~1.64% as of March 31, ~~2021.~~2022. Non-performing assets to total assets were 0.20% at March 31, 2023, as compared to 0.25% as of December 31, 2022, and 0.17% at March 31, ~~2022, as compared to 0.38%~~2022.

•Average yields on earning assets were 4.64%, an increase of 12 basis points over the 4.52% in the trailing quarter and an increase of 118 basis points over March 31, 2022; net interest margin was 4.21%, a change of 13 basis points from 4.34% in the trailing quarter and a change of 82 basis points from 3.39% as of ~~December 31, 2021, and 0.39% at~~quarter ended March 31, ~~2021.~~2022.

•Balance sheet flexibility anchored in readily accessible sources of liquidity including undrawn borrowing capacities, on-balance sheet cash and unpledged investment securities totaling in excess of $4.4 billion

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TRICO BANCSHARES

Financial Summary

(In thousands, except per share amounts; unaudited)


		Three months ended March 31,								Three months ended March 31,
			2022			2021					2023			2022
Net interest income	Net interest income		$	67,924		$	66,440		Net interest income		$	93,336		$	67,924
Reversal of (provision for) credit losses			(8,330)			6,060
Provision for credit losses									Provision for credit losses		(4,195)			(8,330)
Non-interest income	Non-interest income		15,096			16,110			Non-interest income		13,635			15,096
Non-interest expense	Non-interest expense		(46,447)			(41,618)			Non-interest expense		(53,794)			(46,447)
Provision for income taxes	Provision for income taxes		(7,869)			(13,343)			Provision for income taxes		(13,149)			(7,869)
Net income	Net income		$	20,374		$	33,649		Net income		$	35,833		$	20,374
Per Share Data:	Per Share Data:								Per Share Data:
Basic earnings per share	Basic earnings per share		$	0.68		$	1.13		Basic earnings per share		$	1.08		$	0.68
Diluted earnings per share	Diluted earnings per share		$	0.67		$	1.13		Diluted earnings per share		$	1.07		$	0.67
Dividends paid	Dividends paid		$	0.25		$	0.25		Dividends paid		$	0.30		$	0.25
Book value at period end	Book value at period end		$	32.78		$	31.71		Book value at period end		$	32.84		$	32.78
Average common shares outstanding	Average common shares outstanding		30,050			29,727			Average common shares outstanding		33,296			30,050
Average diluted common shares outstanding	Average diluted common shares outstanding		30,202			29,905			Average diluted common shares outstanding		33,438			30,202
Shares outstanding at period end	Shares outstanding at period end		33,838			29,727			Shares outstanding at period end		33,195			33,838
At period end:	At period end:								At period end:
Loans	Loans		$	5,851,975		$	4,966,977		Loans		$	6,422,421		$	5,851,975
Total investment securities	Total investment securities		$	2,569,706		$	1,962,780		Total investment securities		$	2,577,769		$	2,569,706
Total assets	Total assets		$	10,118,328		$	8,031,612		Total assets		$	9,842,394		$	10,118,328
Total deposits	Total deposits		$	8,714,477		$	6,863,400		Total deposits		$	8,025,865		$	8,714,477
Other borrowings	Other borrowings		$	36,184		$	36,226		Other borrowings		$	434,140		$	36,184
Shareholders’ equity	Shareholders’ equity		$	1,109,182		$	942,539		Shareholders’ equity		$	1,090,245		$	1,109,182
Financial Ratios:	Financial Ratios:								Financial Ratios:
During the period:	During the period:								During the period:
Return on average assets (annualized)	Return on average assets (annualized)		0.94		%	1.75		%	Return on average assets (annualized)		1.47		%	0.94		%
Return on average equity (annualized)	Return on average equity (annualized)		8.19		%	14.51		%	Return on average equity (annualized)		13.36		%	8.19		%
Net interest margin(1) (annualized)	Net interest margin(1) (annualized)		3.39		%	3.74		%	Net interest margin(1) (annualized)		4.21		%	3.39		%
Efficiency ratio	Efficiency ratio		55.95		%	50.42		%	Efficiency ratio		50.29		%	55.95		%
Average equity to average assets	Average equity to average assets		11.50		%	12.05		%	Average equity to average assets		11.00		%	11.50		%
At end of period:	At end of period:								At end of period:
Equity to assets	Equity to assets		10.96		%	11.73		%	Equity to assets		11.08		%	10.96		%
Total capital to risk-adjusted assets	Total capital to risk-adjusted assets		14.96		%	15.13		%	Total capital to risk-adjusted assets		14.50		%	14.96		%

(1) Fully Taxable Equivalent (FTE)

The Company announced net income of ~~$20,374,000~~$35.8 million for the quarter ended March 31, ~~2022,~~2023, compared to ~~$28,222,000~~$36.3 million during the trailing quarter ended December 31, ~~2021~~2022, and ~~$33,649,000~~$20.4 million during the quarter ended March 31, ~~2021.~~2022. Diluted earnings per share were ~~$0.67~~$1.07 for the first quarter of ~~2022,~~2023, compared to ~~$0.94~~$1.09 for the fourth quarter of ~~2021~~2022 and ~~$1.13 for~~$0.67 during the first quarter of ~~2021.~~2022..

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.

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Net Interest Income

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


		Three months ended												Three months ended
(in thousands)	(in thousands)	March 31, 2022			March 31, 2021			Change			% Change		(in thousands)	March 31, 2023			March 31, 2022			Change			% Change
Interest income	Interest income	$	69,195		$	67,916		$	1,279		1.9	%	Interest income	$	102,907		$	69,195		$	33,712		48.7	%
Interest expense	Interest expense	(1,271)			(1,476)			205			(13.9)	%	Interest expense	(9,571)			(1,271)			(8,300)			653.0	%
Fully tax-equivalent adjustment (FTE) (1)	Fully tax-equivalent adjustment (FTE) (1)	283			277			6			2.2	%	Fully tax-equivalent adjustment (FTE) (1)	392			283			109			38.5	%
Net interest income (FTE)	Net interest income (FTE)	$	68,207		$	66,717		$	1,490		2.2	%	Net interest income (FTE)	$	93,728		$	68,207		$	25,521		37.4	%
Net interest margin (FTE)	Net interest margin (FTE)	3.39		%	3.74		%						Net interest margin (FTE)	4.21		%	3.39		%

Acquired loans discount accretion, net:	Acquired loans discount accretion, net:												Acquired loans discount accretion, net:
Amount (included in interest income)	Amount (included in interest income)	$	1,323		$	1,712		$	(389)		(22.7)	%	Amount (included in interest income)	$	1,397		$	1,323		$	74		5.6	%
Net interest margin less effect of acquired loan discount accretion(1)	Net interest margin less effect of acquired loan discount accretion(1)	3.32		%	3.64		%	(0.32)		%			Net interest margin less effect of acquired loan discount accretion(1)	4.15		%	3.32		%	0.83		%

PPP loans yield, net:	PPP loans yield, net:												PPP loans yield, net:
Amount (included in interest income)	Amount (included in interest income)	$	1,097		$	5,863		$	(4,766)		(81.3)	%	Amount (included in interest income)	$	5		$	1,097		$	(1,092)		(99.5)	%
Net interest margin less effect of PPP loan yield (1)	Net interest margin less effect of PPP loan yield (1)	3.36		%	3.59		%	(0.23)		%			Net interest margin less effect of PPP loan yield (1)	4.21		%	3.36		%	0.85		%

Acquired loans discount accretion and PPP loan yield, net: (1)	Acquired loans discount accretion and PPP loan yield, net: (1)												Acquired loans discount accretion and PPP loan yield, net: (1)
Amount (included in interest income)	Amount (included in interest income)	$	2,420		$	7,575		$	(5,155)		(68.1)	%	Amount (included in interest income)	$	1,402		$	2,420		$	(1,018)		(42.1)	%
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)	Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)	3.29		%	3.48		%	(0.19)		%			Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1)	4.15		%	3.29		%	0.86		%

(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. Generally, as time goes on, 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. ~~As a result of the increase in interest rates, the~~The prepayment ~~rate~~speed of portfolio loans, inclusive of those acquired at a premium or discount, ~~declined during~~is heavily influenced by the ~~first quarter~~rate of ~~2022.~~change in interest rates. During the three months ended March 31, ~~2022,~~2023, December 31, ~~2021,~~2022, and March 31, ~~2021,~~2022, purchased loan discount accretion was ~~$1,323,000, $1,780,000,~~$1.4 million, $1.8 million, and ~~$1,712,000,~~$1.3 million, respectively.

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Summary of Average Balances, Yields/Rates and Interest Differential

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


		For the three months ended													For the three months ended
		March 31, 2022						March 31, 2021							March 31, 2023						March 31, 2022
		Average Balance		Interest Income/ Expense		Rates Earned /Paid		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:	Assets:													Assets:
Loans, excluding PPP	Loans, excluding PPP	$	4,937,865	$	56,648	4.65	%	$	4,407,150	$	54,573	5.02	%	Loans, excluding PPP	$	6,412,386	$	82,410	5.21	%	$	4,937,865	$	56,648	4.65	%
PPP loans	PPP loans	50,695		1,097		8.78	%	355,875		5,863		6.68	%	PPP loans	1,572		5		1.29	%	50,695		1,097		8.78	%
Investment securities - taxable	Investment securities - taxable	2,313,204		10,223		1.79	%	1,649,980		6,394		1.57	%	Investment securities - taxable	2,398,235		18,916		3.20	%	2,313,204		10,223		1.79	%
Investment securities - nontaxable(1)	Investment securities - nontaxable(1)	143,873		1,225		3.45	%	125,055		1,200		3.89	%	Investment securities - nontaxable(1)	189,050		1,699		3.64	%	143,873		1,225		3.45	%
Total investments	Total investments	2,457,077		11,448		1.89	%	1,775,035		7,594		1.74	%	Total investments	2,587,285		20,615		3.23	%	2,457,077		11,448		1.89	%
Cash at Federal Reserve and other banks	Cash at Federal Reserve and other banks	707,563		285		0.16	%	701,666		163		0.09	%	Cash at Federal Reserve and other banks	26,818		269		4.07	%	707,563		285		0.16	%
Total interest-earning assets	Total interest-earning assets	8,153,200		69,478		3.46	%	7,239,726		68,193		3.82	%	Total interest-earning assets	9,028,061		103,299		4.64	%	8,153,200		69,478		3.46	%
Other assets	Other assets	625,056						569,186						Other assets	850,866						625,056
Total assets	Total assets	$	8,778,256					$	7,808,912					Total assets	$	9,878,927					$	8,778,256
Liabilities and shareholders’ equity:	Liabilities and shareholders’ equity:													Liabilities and shareholders’ equity:
Interest-bearing demand deposits	Interest-bearing demand deposits	$	1,597,309	$	84	0.02	%	$	1,430,943	$	76	0.02	%	Interest-bearing demand deposits	$	1,673,114	$	387	0.09	%	$	1,597,309	$	84	0.02	%
Savings deposits	Savings deposits	2,571,023		327		0.05	%	2,228,281		329		0.06	%	Savings deposits	2,898,463		4,154		0.58	%	2,571,023		327		0.05	%
Time deposits	Time deposits	301,499		268		0.36	%	336,605		532		0.64	%	Time deposits	274,805		604		0.89	%	301,499		268		0.36	%
Total interest-bearing deposits	Total interest-bearing deposits	4,469,831		679		0.06	%	3,995,829		937		0.10	%	Total interest-bearing deposits	4,846,382		5,145		0.43	%	4,469,831		679		0.06	%
Other borrowings	Other borrowings	44,731		5		0.05	%	32,709		4		0.05	%	Other borrowings	277,632		2,809		4.10	%	44,731		5		0.05	%
Junior subordinated debt	Junior subordinated debt	60,971		587		3.90	%	57,688		535		3.76	%	Junior subordinated debt	101,044		1,617		6.49	%	60,971		587		3.90	%
Total interest-bearing liabilities	Total interest-bearing liabilities	4,575,533		1,271		0.11	%	4,086,226		1,476		0.15	%	Total interest-bearing liabilities	5,225,058		9,571		0.74	%	4,575,533		1,271		0.11	%
Noninterest-bearing deposits	Noninterest-bearing deposits	3,052,099						2,657,925						Noninterest-bearing deposits	3,372,194						3,052,099
Other liabilities	Other liabilities	141,400						123,986						Other liabilities	194,202						141,400
Shareholders’ equity	Shareholders’ equity	1,009,224						940,775						Shareholders’ equity	1,087,473						1,009,224
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	8,778,256					$	7,808,912					Total liabilities and shareholders’ equity	$	9,878,927					$	8,778,256
Net interest spread(2)	Net interest spread(2)					3.35	%					3.67	%	Net interest spread(2)					3.90	%					3.35	%
Net interest income and interest margin(3)	Net interest income and interest margin(3)			$	68,207	3.39	%			$	66,717	3.74	%	Net interest income and interest margin(3)			$	93,728	4.21	%			$	68,207	3.39	%

(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 March 31, 2023, decreased $5.6 million or 5.6% to $93.7 million compared to $99.3 million during the three months ended December 31, 2022. In addition, net interest margin declined 13 basis points to 4.21%, compared to the trailing quarter. The decrease in net interest income is primarily attributed to an additional $3.0 million in deposit interest expense and $2.4 million in additional interest expense on other borrowings, both due to increases in interest rates as compared to the trailing quarter, respectively. Total interest income was effectively unchanged as compared to the trailing quarter, down $0.1 million or 0.1%.

As compared to the same quarter in the prior year, average loan yields, excluding PPP, ~~decreased 37~~increased 56 basis points from ~~5.02% during the three months ended March 31, 2021, to~~ 4.65% during the three months ended March 31, ~~2022.~~2022, to 5.21% during the three months ended March 31, 2023. The accretion of discounts from acquired loans added 79 and 107 basis points to loan yields during the quarters ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively. ~~Therefore, of the 37 basis point decrease in yields~~The rates paid on loans during the comparable three month periods ended March 31, 2022 and 2021, 34 basis points was attributable to decreases in market rates, while 3 basis points resulted from less accretion of discounts. Net interest ~~income was also benefited~~bearing deposits increased by a 15 basis point increase in rates earned on investment securities which was 1.89% during the three month periods ended March 31, 2022 as compared to 1.74% during the three month period ended March 31, 2021, which combined with increases in volume of approximately $682,042,000 contributed to a $3,854,000 increase in interest income.

The decline in interest expense during March 31, 2022 when compared to the same quarter from the prior year was primarily attributed to reductions in the rates offered on deposit products. This benefit was primarily realized as the terms on higher yielding time deposits were replace with time deposits at lower rates. As a result, the cost of interest-bearing deposits decreased by 425 basis points during the quarter ended March 31, ~~2022,~~2023, compared to ~~0.06% from 0.10% during~~the trailing quarter. The cost of interest-bearing deposits increased by 37 basis points between the quarter ended March 31, 2023, and the same quarter of the prior year. In addition, the level of noninterest-bearing deposits ~~continues to benefit~~decreased by $290.3 million quarter over quarter but remains $320.1 million above quarter ended March 31, 2022. As of March 31, 2023, the ~~average cost of total deposits at 0.04% during the current quarter, compared to 0.6% in the first quarter of the prior year. The~~ ratio of average total noninterest-bearing deposits to total average deposits was 41.0%, as compared to 42.9% and 40.6% ~~as of~~at December 31, 2022 and March 31, 2022, ~~as compared to 39.9% for the quarter ended March 31, 2021.~~respectively.

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

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.


		Three months ended March 31, 2022 compared with three months ended March 31, 2021							Three months ended March 31, 2023 compared with three months ended March 31, 2022
(in thousands)	(in thousands)	Volume		Rate		Total		(in thousands)	Volume		Rate		Total
Increase (decrease) in interest income:	Increase (decrease) in interest income:							Increase (decrease) in interest income:
Loans, including PPP	Loans, including PPP	$	6,597	$	(9,288)	$	(2,691)	Loans, including PPP	$	16,063	$	8,607	$	24,670
Investment securities(1)		9,310		(5,456)		3,854
Investment securities								Investment securities	771		8,396		9,167
Cash at Federal Reserve and other banks	Cash at Federal Reserve and other banks	1		121		122		Cash at Federal Reserve and other banks	(272)		256		(16)
Total interest-earning assets	Total interest-earning assets	15,908		(14,623)		1,285		Total interest-earning assets	16,562		17,259		33,821
Increase (decrease) in interest expense:	Increase (decrease) in interest expense:							Increase (decrease) in interest expense:
Interest-bearing demand deposits	Interest-bearing demand deposits	8		—		8		Interest-bearing demand deposits	4		299		303
Savings deposits	Savings deposits	51		(53)		(2)		Savings deposits	41		3,786		3,827
Time deposits	Time deposits	(56)		(208)		(264)		Time deposits	(24)		360		336
Other borrowings	Other borrowings	2		(1)		1		Other borrowings	29		2,775		2,804
Junior subordinated debt	Junior subordinated debt	31		21		52		Junior subordinated debt	391		639		1,030
Total interest-bearing liabilities	Total interest-bearing liabilities	36		(241)		(205)		Total interest-bearing liabilities	441		7,859		8,300
Increase (decrease) in net interest income	Increase (decrease) in net interest income	$	15,872	$	(14,382)	$	1,490	Increase (decrease) in net interest income	$	16,121	$	9,400	$	25,521

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 March 31, ~~2022~~2023 increased ~~$1,490,000 or 2.2%~~$25.5 million to ~~$68,207,000~~$93.7 million compared to ~~$66,717,000~~$68.2 million during the three months ended March 31, ~~2021.~~2022. The overall increase in net interest income (FTE) was due to ~~largely an increase~~increases in both average investment and loan balances, which resulted in improvements totaling ~~$9,310,000~~$0.8 million and ~~$6,597,000,~~$16.1 million, respectively, ~~despite lower~~and higher yields ~~offsetting~~further improving those earnings by ~~$5,456,000~~$8.4 million and ~~$9,288,000,~~$8.6 million, respectively. ~~In addition, net interest income on loans was impacted by a $4,766,000 decrease in PPP related income during the comparable periods. Declining~~Increasing interest rates ~~also continued to benefit~~boosted interest expenses on on interest-bearing liabilities, most significantly deposits and other borrowings, resulting in a net ~~decrease~~increase of ~~$258,000 while net changes in deposit volumes resulted in an increase in interest expense of $3,000.~~$3.8 million and $2.8 million, respectively.

Asset Quality and Credit Loss Provisioning

During the three months ended March 31, ~~2022,~~2023, the Company recorded a provision for credit losses of ~~$8,330,000,~~$4.2 million, as compared to ~~a $980,000 provision~~$4.2 million during the trailing quarter, and ~~a reversal of provision expense of $6,060,000~~$8.3 million during the first quarter of ~~2021.~~2022.

The following table presents details of the provision for credit losses for the periods indicated:


		Three months ended				Three months ended
(dollars in thousands)	(dollars in thousands)	March 31, 2022		December 31, 2021			March 31, 2021		(dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Addition to (reversal of) allowance for credit losses	Addition to (reversal of) allowance for credit losses	$	8,205	$	715		$	(6,240)	Addition to (reversal of) allowance for credit losses	$	4,315	$	4,300	$	8,205
Addition to reserve for unfunded loan commitments		125		265			180
Addition to (reversal of) reserve for unfunded loan commitments									Addition to (reversal of) reserve for unfunded loan commitments	(120)		(55)		125
Total provision for (reversal of) credit losses	Total provision for (reversal of) credit losses	$	8,330	$	980		$	(6,060)	Total provision for (reversal of) credit losses	$	4,195	$	4,245	$	8,330

The allowance for credit losses (ACL) was ~~$96,049,000~~$108.4 million as of March 31, ~~2022,~~2023, a net increase of ~~$10,108,000~~$2.7 million over the immediately preceding quarter. The ~~provision~~addition to the allowance for credit losses of ~~$8,205,000~~$4.3 million during the quarter was the net effect of ~~increases~~changes in required reserves due to qualitative factors, individually analyzed credits and quantitative reserves under the cohort model. On a comparative basis, the provision for credit losses of $8.2 million during the three months ended March 31, 2022 was largely the result of day 1 required reserves from loans acquired in connection with the Valley Republic Bank merger in the same period. For the current quarter, the qualitative components of the ACL resulted in a net increase in required reserves totaling ~~$10,820,000 related~~approximately $4.7 million due to increased uncertainty in US economic policy, and the ~~loan portfolio acquired from VRB totaling $703,848,000, which is net of $68,513,000 in purchase credit deteriorated loans (PCD)~~ramifications on local and ~~$21,412,000 in PPP loans as~~statewide unemployment rates. Meanwhile, the quantitative component of the ~~merger date, partially offset~~ACL decreased reserve requirements by approximately $1.9 million over the trailing quarter due to a decline in ~~required~~needed specific reserves ~~from the Company's organic loan portfolio totaling $2,615,000.~~

on loans.

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The following table presents the activity in the allowance for credit losses on loans for the periods indicated:

Three months ended
(dollars in thousands) March 31, 2022 March 31, 2021
Balance, beginning of period $ 85,376 $ 91,847
ACL at acquisition for PCD loans 2,037 —
Provision for (reversal of) credit losses 8,205 (6,240)
Loans charged-off (743) (226)
Recoveries of previously charged-off loans 1,174 560
Balance, end of period $ 96,049 $ 85,941

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ACL on the date of acquisition using both a discounted cash flow model, and the same methodology as other loans and leases held-for-investment. The ACL recorded as of the VRB merger date for PCD loans totaled $2,037,000.


	Three months ended
(dollars in thousands)	March 31, 2023		March 31, 2022
Balance, beginning of period	$	105,680	$	85,376
ACL at acquisition for PCD loans	—		2,037
Provision for (reversal of) credit losses	4,315		8,205
Loans charged-off	(1,758)		(743)
Recoveries of previously charged-off loans	170		1,174
Balance, end of period	$	108,407	$	96,049

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 included improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date, particularly CA unemployment trends. However, management notes that the majority of economic forecasts utilized in the ACL calculation have remained directionally consistent with preceding quarters, as general economic conditions continueAs compared to ~~improve, albeit at a pace slower than expected due to unforeseen~~historical norms, inflation remains elevated from continued disruptions in the supply chain, wage pressures, and ~~increasing energy prices. In addition, management~~higher living costs such as housing and food prices Despite the expected continued benefit to the net interest income of the Company from the elevated rate environment, Management notes ~~that~~ the ~~actual and forecast~~rapid intervals of rate increases ~~in inflation that were previously identified~~ by the Federal Reserve ~~Board as "transitory", combined with overseas conflicts and leading to the likely rise in short-term interest rates~~ and flattening or inversion of the yield curve, ~~may be further indication~~have boosted expectations of ~~future economic contraction.~~the US entering a recession within 12 months. 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.

Loans past due 30 days or more increased by ~~$4,070,000~~$2.9 million during the quarter ended March 31, ~~2022~~2023 to ~~$8,402,000,~~$7.9 million, as compared to ~~$4,332,000~~$4.9 million at December 31, ~~2021.~~2022 but decreased by $0.5 million compared to the March 31, 2022 past due balance of $8.4 million. Non-performing loans were ~~$14,088,000~~$16.0 million at March 31, ~~2022,~~2023, a decrease of ~~$16,262,000 and $14,853,000~~$5.3 million from ~~$30,350,000 and $28,941,000~~$21.3 million as of December 31, ~~2021~~2022, and a decrease of $1.9 million from $14.1 million as of March 31, ~~2021, respectively.~~2022. Of the $16.0 million loans designated as non-performing, approximately $10.2 million are less than 30 days past due as of March 31, 2023.

The following table illustrates the total loans by risk rating and their respective percentage of total loans for the periods presented.


		March 31,			% of Total Loans		December 31,			% of Total Loans		March 31			% of Total Loans								March 31,			% of Loans Outstanding			December 31,			% of Loans Outstanding		March 31,			% of Loans Outstanding
(dollars in thousands)	(dollars in thousands)	2022					2021					2021					(dollars in thousands)	2023	% of Loans Outstanding		2022		% of Loans Outstanding					2022	% of Loans Outstanding
Risk Rating:	Risk Rating:																			Risk Rating:
Pass	Pass	$	5,682,026		97.1	%	$	4,787,077		97.4	%	$	4,765,180		95.9	%						Pass	$	6,232,962		97.1	%		$	6,251,945		96.9	%	$	5,682,026		97.1	%
Special Mention	Special Mention	120,684			2.1	%	77,461			1.5	%	143,677			2.9	%						Special Mention	125,492			2.0	%		127,000			2.0	%	120,684			2.1	%
Substandard	Substandard	49,265			0.8	%	52,086			1.1	%	58,120			1.2	%						Substandard	63,967			1.0	%		71,502			1.1	%	49,265			0.8	%
Total	Total	$	5,851,975				$	4,916,624				$	4,966,977									Total	$	6,422,421					$	6,450,447				$	5,851,975

Classified loans to total loans	Classified loans to total loans	0.84		%			1.06		%			1.17		%								Classified loans to total loans	1.00		%				1.11		%			0.84		%
Loans past due 30+ days to total loans	Loans past due 30+ days to total loans	0.14		%			0.09		%			0.21		%								Loans past due 30+ days to total loans	0.12		%				0.08		%			0.14		%

The ratio of classified loans decreased to ~~total loans improved to 0.84%~~1.00% as of March 31, ~~2022~~2023 as compared to ~~both 1.06% and 1.17% for~~1.11% in the trailing quarter, ~~and same quarter of~~but increased by 16 basis points from the ~~prior year, respectively.~~equivalent period in 2022. The Company's criticized loan balances ~~increased~~decreased during the current quarter by ~~approximately $40,402,000~~$9.0 million to ~~$169,949,000~~$189.5 million as of March 31, ~~2022, primarily from the merger with VRB which added approximately $65,556,000 in criticized loans, net of $2,957,000 in purchase discounts. All of the criticized loans acquired from VRB~~2023.

There were ~~identified by management as PCD as of the acquisition date. The Company's organic classified loan~~no changes to Other Real Estate Owned balances ~~outstanding improved by approximately $19,100,000~~ during the first quarter ~~ended March 31, 2022, the majority~~ of ~~which was attributed to a sale of substandard loans totaling approximately $12,043,000. In addition, one relationship totaling $4,982,000 was upgraded during the quarter.~~

~~There was one property added to other real estate owned totaling $313,000 during the quarter ended March 31, 2022, and no disposals.~~2023. As of March 31, ~~2022,~~2023, other real estate owned consisted of ~~seven~~nine properties with a carrying value of approximately ~~$2,907,000.~~$3.4 million.

Non-performing assets of ~~$16,995,000~~$19.5 million at March 31, ~~2022~~2023 represented ~~0.17%~~0.20% of total assets, ~~a substantial decrease from~~generally in line with the ~~$32,944,000~~$24.8 million or ~~0.38%~~0.25% and ~~$31,250,000~~$17.0 million or ~~0.39%~~0.17% as of December 31, ~~2021~~2022 and March 31, ~~2021,~~2022, respectively. ~~The improvement in non-performing assets relates to the loan sale and grading changes discussed above.~~

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~~SBA Paycheck Protection Program and COVID Deferrals~~

In March 2020 (Round 1) and subsequently in December 2020 (Round 2), the SBA PPP was created to help small businesses keep workers employed during the COVID-19 crisis. Tri Counties Bank, through its online portal, facilitated the ability for borrowers to open a new deposit account and submit PPP applications during the entirety of the Programs. The SBA ended PPP and did not accept new borrowing applications, effective May 31, 2021.

~~The following is a summary of PPP loan related information as of the periods indicated:~~

(dollars in thousands) March 31, 2022 December 31, 2021 March 31, 2021
Total number of PPP loans outstanding 243 450 2,484
PPP loan balance (TCBK round 1 origination), gross $ 1,323 $ 2,544 $ 193,958
PPP loan balance (TCBK round 2 origination), gross 37,305 60,767 176,316
Acquired PPP loan balance (VRB origination), gross 19,167 — —
Total PPP loans, gross outstanding $ 57,795 $ 63,311 $ 370,274
PPP deferred loan fees (Round 1 origination) — 1 2,358
PPP deferred loan fees (Round 2 origination) 1,190 2,163 7,072
Total PPP deferred loan fees (costs) outstanding $ 1,190 $ 2,164 $ 9,430

Non-interest Income

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


		Three months ended March 31,									Three months ended March 31,
(in thousands)	(in thousands)	2022		2021		$ Change		% Change		(in thousands)	2023		2022		$ Change		% Change
ATM and interchange fees	ATM and interchange fees	$	6,243	$	5,861	$	382	6.5	%	ATM and interchange fees	$	6,344	$	6,243	$	101	1.6	%
Service charges on deposit accounts	Service charges on deposit accounts	3,834		3,269		565		17.3	%	Service charges on deposit accounts	3,431		3,834		(403)		(10.5)	%
Other service fees	Other service fees	882		871		11		1.3	%	Other service fees	1,166		882		284		32.2	%
Mortgage banking service fees	Mortgage banking service fees	463		463		—		—	%	Mortgage banking service fees	465		463		2		0.4	%
Change in value of mortgage servicing rights	Change in value of mortgage servicing rights	274		12		262		2,183.3	%	Change in value of mortgage servicing rights	(209)		274		(483)		(176.3)	%
Total service charges and fees	Total service charges and fees	11,696		10,476		1,220		11.6	%	Total service charges and fees	11,197		11,696		(499)		(4.3)	%
Increase in cash value of life insurance	Increase in cash value of life insurance	638		673		(35)		(5.2)	%	Increase in cash value of life insurance	802		638		164		25.7	%
Asset management and commission income	Asset management and commission income	887		834		53		6.4	%	Asset management and commission income	934		887		47		5.3	%
Gain on sale of loans	Gain on sale of loans	1,246		3,247		(2,001)		(61.6)	%	Gain on sale of loans	206		1,246		(1,040)		(83.5)	%
Lease brokerage income	Lease brokerage income	158		110		48		43.6	%	Lease brokerage income	98		158		(60)		(38.0)	%
Sale of customer checks	Sale of customer checks	104		119		(15)		(12.6)	%	Sale of customer checks	288		104		184		176.9	%
Gain on sale of investment securities	Gain on sale of investment securities	—		—		—		n/m		Gain on sale of investment securities	(164)		—		(164)		n/m
Gain on marketable equity securities	Gain on marketable equity securities	(137)		(53)		(84)		158.5	%	Gain on marketable equity securities	42		(137)		179		(130.7)	%
Other	Other	504		704		(200)		(28.4)	%	Other	232		504		(272)		(54.0)	%
Total other non-interest income	Total other non-interest income	3,400		5,634		(2,234)		(39.7)	%	Total other non-interest income	2,438		3,400		(962)		(28.3)	%
Total non-interest income	Total non-interest income	$	15,096	$	16,110	$	(1,014)	(6.3)	%	Total non-interest income	$	13,635	$	15,096	$	(1,461)	(9.7)	%

Non-interest income decreased ~~$1,014,000~~$1.5 million or ~~6.3%~~9.7% to ~~$15,096,000~~$13.6 million during the three months ended March 31, ~~2022,~~2023, compared to $16,110,000 during the comparable 2020 quarter. This was largely the result of the $2,001,000 decrease in gain on sale of loans which is a direct result of increases in mortgage rates and a corresponding decline in mortgage loan volumes. However, this decrease was partially offset by increases in ATM and interchange fees of $382,000 or 6.5%, and service charges on deposit accounts totaling $565,000 or 17.3%, both as a result of increased usage due to relaxed social distancing guidelines during the quarter March 31, 2022 when compared to the same period in the prior year. Other non-interest income$15.1 million during the quarter ended March 31, ~~2022 included a gain on debt extinguishment~~2022. Total service charges and fees declined by $0.5 million or 4.3% during the period, of ~~$235,000 and an increase~~which $0.9 million is due to waived or reversed fees related to the network outage disclosed in the ~~fair value~~Company's 8-K filed with the SEC on February 14, 2023. In addition, the declining mortgage related activity resulting from elevated interest rates reduced income recorded from the sale of ~~certain equity investments of $225,000. Other non-interest income during the quarter ended March 31, 2021 included an increase in the value of funded retirement account values of $445,000~~loans by $1.0 million or 83.5%, as compared to ~~a decrease in value of $59,000 related to~~ the ~~same retirement accounts during the quarter~~three months ended March 31, 2022.

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Non-interest Expense

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


		Three months ended March 31,									Three months ended March 31,
(in thousands)	(in thousands)	2022		2021		$ Change		% Change		(in thousands)	2023		2022		$ Change		% Change
Base salaries, net of deferred loan origination costs	Base salaries, net of deferred loan origination costs	$	18,216	$	15,511	$	2,705	17.4	%	Base salaries, net of deferred loan origination costs	$	23,000	$	18,216	$	4,784	26.3	%
Incentive compensation	Incentive compensation	2,583		3,580		(997)		(27.8)	%	Incentive compensation	2,895		2,583		312		12.1	%
Benefits and other compensation costs	Benefits and other compensation costs	5,972		6,239		(267)		(4.3)	%	Benefits and other compensation costs	6,668		5,972		696		11.7	%
Total salaries and benefits expense	Total salaries and benefits expense	26,771		25,330		1,441		5.7	%	Total salaries and benefits expense	32,563		26,771		5,792		21.6	%
Occupancy	Occupancy	3,575		3,726		(151)		(4.1)	%	Occupancy	4,160		3,575		585		16.4	%
Data processing and software	Data processing and software	3,513		3,202		311		9.7	%	Data processing and software	4,032		3,513		519		14.8	%
Equipment	Equipment	1,333		1,517		(184)		(12.1)	%	Equipment	1,383		1,333		50		3.8	%
Intangible amortization	Intangible amortization	1,228		1,431		(203)		(14.2)	%	Intangible amortization	1,656		1,228		428		34.9	%
Advertising	Advertising	637		380		257		67.6	%	Advertising	759		637		122		19.2	%
ATM and POS network charges	ATM and POS network charges	1,375		1,246		129		10.4	%	ATM and POS network charges	1,709		1,375		334		24.3	%
Professional fees	Professional fees	876		594		282		47.5	%	Professional fees	1,589		876		713		81.4	%
Telecommunications	Telecommunications	521		581		(60)		(10.3)	%	Telecommunications	595		521		74		14.2	%
Regulatory assessments and insurance	Regulatory assessments and insurance	720		612		108		17.6	%	Regulatory assessments and insurance	792		720		72		10.0	%
Merger and acquisition expense	Merger and acquisition expense	4,032		—		4,032		n/m		Merger and acquisition expense	—		4,032		(4,032)		(100.0)	%
Postage	Postage	228		198		30		15.2	%	Postage	299		228		71		31.1	%
Operational (gain) losses		(183)		209		(392)		(187.6)	%
Operational losses (gain)										Operational losses (gain)	435		(183)		618		(337.7)	%
Courier service	Courier service	414		294		120		40.8	%	Courier service	339		414		(75)		(18.1)	%
Gain on sale or acquisition of foreclosed assets		—		(51)		51		n/m
(Gain) loss on disposal of fixed assets		(1,078)		—		(1,078)		n/m

Loss on disposal of fixed assets										Loss on disposal of fixed assets	—		(1,078)		1,078		(100.0)	%
Other miscellaneous expense	Other miscellaneous expense	2,485		2,349		136		5.8	%	Other miscellaneous expense	3,483		2,485		998		40.2	%
Total other non-interest expense	Total other non-interest expense	19,676		16,288		3,388		20.8	%	Total other non-interest expense	21,231		19,676		1,555		7.9	%
Total non-interest expense	Total non-interest expense	$	46,447	$	41,618	$	4,829	11.6	%	Total non-interest expense	$	53,794	$	46,447	$	7,347	15.8	%
Average full time equivalent staff	Average full time equivalent staff	1,084		1,024		60		5.9	%	Average full time equivalent staff	1,219		1,084		135		12.5	%

~~Non-interest~~Generally, the increases in recurring non-interest expense items reflect the VRB merger closing on March 25, 2022, and therefore, related expenses for the combined entities, less certain realized cost savings, are largely only being captured within the most recent three months ended March 31, 2023. Total non-interest expense increased ~~by $4,829,000~~$7.3 million or ~~11.6%~~15.8% to ~~$46,447,000~~$53.8 million during the three months ended March 31, ~~2022~~2023 as compared to ~~$41,618,000~~$46.4 million for the ~~three months~~quarter ended March 31, ~~2021.~~2022. Total salaries and benefits expense increased by ~~$1,441,000~~$5.8 million or ~~5.7%~~21.6% to ~~$26,771,000 for the three months ended March 31, 2022 as compared to $25,330,000 for the quarterly period ended March 31, 2021 as~~$32.6 million, largely from a ~~direct result~~net increase of ~~increases in~~135 full-time equivalent ~~staffing similarly increasing~~positions, 99 of which resulted from the aforementioned merger with VRB. Professional fees increased by ~~5.9% or 60 FTE. Merger and acquisition expenses~~$0.7 million which was directly associated with the ~~merger~~cybersecurity incident disclosed in the Company's 8-K filed with ~~Valley Republic Bancorp totaled $4,032,000 during~~ the ~~current quarter. The Company sold a former administrative building~~SEC on February 14, 2023. While management has accrued for costs incurred through the balance sheet date that are probable and ~~relocated a branch during~~reasonably estimable, additional expenses will be incurred in future periods as management works to complete its investigation of the ~~quarter resulting in a net gain~~incident. See also "Part II - Other Information - Item 1A — Risk Factors beginning on ~~disposal of approximately $1,078,000 as noted above.~~

page 57.

Income Taxes

The Company’s effective tax rate was ~~27.9%~~26.8% for the ~~three months~~quarter ended March 31, ~~2022,~~2023, as compared to ~~28.1%~~27.9% for the year ended December 31, ~~2021.~~2022. 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.

~~Table of Contents~~

Financial Condition

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

Ending balances March 31, December 31, Acquired Balances Organic
$ Change Annualized Organic
% Change
(dollars in thousands) 2022 2021 $ Change
Total assets $ 10,118,328 $ 8,614,787 $ 1,503,541 $ 1,363,529 $ 140,012 6.5 %
Total loans 5,851,975 4,916,624 935,351 773,390 161,961 13.2
Total loans, excluding PPP 5,795,370 4,855,477 939,893 751,978 187,915 15.5
Total investments 2,569,706 2,427,885 141,821 109,716 32,105 5.3
Total deposits $ 8,714,477 $ 7,367,159 $ 1,347,318 $ 1,215,479 $ 131,839 7.2 %

Table of Contents


Ending balances	March 31,		December 31,				Annualized % Change
(dollars in thousands)	2023		2022		$ Change
Total assets	$	9,842,394	$	9,930,986	$	(88,592)	(3.6)	%
Total loans	6,422,421		6,450,447		(28,026)		(1.7)
Total investments	2,577,769		2,633,269		(55,500)		(8.4)
Total deposits	8,025,865		8,329,013		(303,148)		(14.6)
Other borrowings	434,140		264,605		169,535		256.3

~~Organic loan growth, excluding PPP, of $187,915,000~~Loans outstanding declined by $28.0 million or ~~15.5%~~1.7% on an annualized basis ~~was realized~~ during the quarter ended March 31, ~~2022, primarily within commercial real estate~~2023. During the quarter, loan originations/draws totaled approximately $357.0 million while payoffs/repayments of loans totaled $389.0 million, which compares to originations/draws and ~~commercial~~payoffs/repayments during the trailing quarter ended of $470.0 million and ~~industrial. In addition, investment~~$343.0 million, respectively. While management believes the loan pipeline remains sufficient to support the Company's objectives, origination activity continues to moderate due to customer sensitivity from the rising interest rate environment and the Company's continued focus on disciplined underwriting. Investment security ~~organic growth was $32,105,000~~balances decreased $55.5 million or ~~5.3%~~8.4% on an annualized basis as the result of prepayments/maturities totaling approximating $65.8 million and proceeds from sale of $24.2 million, partially offset by increases in the market value of securities of $34.6 million. Management seeks to utilize excess ~~liquidity, driven by continued strong deposit~~cash flows from the investment security portfolio to support loan growth ~~was put to use~~or reduce borrowings thus resulting in ~~higher yielding~~an improved mix of earning assets. Deposit balances ~~continue to increase, with an organic change of $131,839,000~~decreased by $303.1 million or ~~7.2%~~14.6% annualized during the ~~period,~~period. Cash flow needs were supported by net increases in short-term FHLB advances which ~~provides management with opportunities to deploy excess cash within~~totaled $434.1 million as of the ~~investment portfolio or other interest earnings assets. During the three months~~quarter ended March 31, 2022 and excluding PPP balance changes, loan originations totaled approximately $396 million while payoffs of loans totaled $225 million which compares to origination and payoff activity during the three months ended December 31, 2021 of $412 million and $297 million, respectively. Investment securities increased to $2,569,706,000 at March 31, 2022, an organic change of $497,210,000 or 25.3% from the prior year.2023.

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


Ending balances	Ending balances	As of March 31,						Acquired		Organic $ Change		Organic % Change		Ending balances	As of March 31,						% Change
(dollars in thousands)	(dollars in thousands)	2022		2021		$ Change		Balances						(dollars in thousands)	2023		2022		$ Change
Total assets	Total assets	$	10,118,328	$	8,031,612	$	2,086,716	$	1,363,529	$	723,187	9.0	%	Total assets	$	9,842,394	$	10,118,328	$	(275,934)	(2.7)	%
Total loans	Total loans	5,851,975		4,966,977		884,998		773,390		111,608		2.2		Total loans	6,422,421		5,851,975		570,446		9.7
Total loans, excluding PPP	Total loans, excluding PPP	5,795,370		4,606,133		1,189,237		751,978		437,259		9.5		Total loans, excluding PPP	6,420,903		5,795,370		625,533		10.8
Total investments	Total investments	2,569,706		1,962,780		606,926		109,716		497,210		25.3		Total investments	2,577,769		2,569,706		8,063		0.3
Total deposits	Total deposits	$	8,714,477	$	6,863,400	$	1,851,077	$	1,215,479	$	635,598	9.3	%	Total deposits	8,025,865		8,714,477		(688,612)		(7.9)
Total other borrowings														Total other borrowings	434,140		36,184		397,956		1,099.8

~~PPP~~Non-PPP loan balances ~~outstanding, net of related deferred fees, have declined by $304,239,000 during the twelve months ended March 31, 2022, meanwhile, non-PPP loan balances have~~ increased as a result of organic activities by approximately ~~$437,259,000~~$625.5 million or 10.8% during the ~~same period. This has led to a long-term beneficial and meaningful shift in the makeup of the loan portfolio, despite total loan balances increasing modestly during the 12 month~~twelve-month period ~~ended~~ending March 31, ~~2022,~~2023. Over the same period deposit balances have declined by ~~$111,608,000~~$688.6 million or ~~2.2%~~7.9%. The ~~Company's non-PPP loan originations have increased significantly over~~Company has offset these declines through the ~~past year but have also been challenged by an acceleration in payoffs. Specifically, during the twelve months ended~~deployment of excess cash balances and proceeds from short-term FHLB borrowings. As of March 31, 2022 and excluding PPP balance changes, loan originations totaled approximately $1.40 billion while payoffs of loans totaled $0.91 billion. Investment securities increased to $2,569,706,000 at March 31, 2022, an organic change of $497,210,000 or 25.3%2023, short-term borrowings from the ~~prior year.~~FHLB totaled $394.1 million and had an interest rate of 5.11%.

Investment Securities

Investment securities available for sale ~~increased $154,969,000~~decreased $46.6 million to ~~$2,362,907,000~~$2.4 billion as of March 31, ~~2022,~~2023, compared to December 31, ~~2021. This increase~~2022. The decrease is ~~primarily supported~~attributed to $56.9 million in calls and principal repayments, partially offset by ~~deposit growth and available cash reserves.~~$34.7 million in market value appreciation. In addition, proceeds from the sale of investment securities totaled $24.2 million for the three months ended March 31, 2023, resulting in gross realized losses of $0.16 million. There were no sales of investment securities during the three months ended March 31, ~~2022 and 2021, respectively.~~2022.

The following table presents the available for sale debt securities portfolio by major type as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:


		March 31, 2022				December 31, 2021					March 31, 2023				December 31, 2022
(in thousands)	(in thousands)	Fair Value		%		Fair Value		%		(in thousands)	Fair Value		%		Fair Value		%
Debt securities available for sale:	Debt securities available for sale:									Debt securities available for sale:
Obligations of U.S. government agencies	Obligations of U.S. government agencies	$	1,690,744	71.6	%	$	1,257,389	57.0	%	Obligations of U.S. government agencies	$	1,357,435	56.4	%	$	1,372,769	56.0	%
Obligations of states and political subdivisions	Obligations of states and political subdivisions	267,195		11.3	%	192,244		8.7	%	Obligations of states and political subdivisions	279,900		11.6	%	293,205		12.0	%
Corporate bonds	Corporate bonds	7,616		0.3	%	6,756		0.3	%	Corporate bonds	5,738		0.3	%	5,751		0.2	%
Asset backed securities	Asset backed securities	397,352		16.8	%	751,549		34.0	%	Asset backed securities	427,364		17.8	%	439,767		17.9	%
Non-agency mortgage backed										Non-agency mortgage backed	335,375		13.9	%	340,946		13.9	%
Total debt securities available for sale	Total debt securities available for sale	$	2,362,907	100.0	%	$	2,207,938	100.0	%	Total debt securities available for sale	$	2,405,812	100.0	%	$	2,452,438	100.0	%

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		March 31, 2022				December 31, 2021					March 31, 2023				December 31, 2022
(in thousands)	(in thousands)	Amortized Cost		%		Amortized Cost		%		(in thousands)	Amortized Cost		%		Amortized Cost		%
Debt securities held to maturity:	Debt securities held to maturity:									Debt securities held to maturity:
Obligations of U.S. government and agencies	Obligations of U.S. government and agencies	$	180,289	96.5	%	$	192,068	96.1	%	Obligations of U.S. government and agencies	$	148,700	97.8	%	$	154,830	96.2	%
Obligations of states and political subdivisions	Obligations of states and political subdivisions	6,459		3.5	%	7,691		3.9	%	Obligations of states and political subdivisions	3,367		2.2	%	6,153		3.8	%
Total debt securities held to maturity	Total debt securities held to maturity	$	186,748	100.0	%	$	199,759	100.0	%	Total debt securities held to maturity	$	152,067	100.0	%	$	160,983	100.0	%

Investment securities held to maturity decreased ~~$13,011,000~~$8.9 million to ~~$186,748,000~~$152.1 million as of March 31, ~~2022,~~2023, as compared to December 31, ~~2021.~~2022. This decrease is attributable to calls and principal repayments of ~~$12,894,000,~~$8.8 million, and amortization of net purchase premiums of ~~$117,000.~~$0.1 million.

Loans

The Company ~~concentrates~~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 ~~maturity~~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, ~~farmers~~ and local ~~businesses.~~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 deferred loan costs and discounts, as of the dates indicated:


(in thousands)	(in thousands)	March 31, 2022				December 31, 2021				(in thousands)	March 31, 2023				December 31, 2022
Commercial real estate	Commercial real estate	$	3,832,974	65.5	%	$	3,306,054	67.2	%	Commercial real estate	$	4,353,959	67.8	%	$	4,359,083	67.6	%
Consumer	Consumer	1,136,712		19.4	%	1,071,551		21.8	%	Consumer	1,233,797		19.2	%	1,240,743		19.2	%
Commercial and industrial	Commercial and industrial	500,882		8.6	%	259,355		5.3	%	Commercial and industrial	553,098		8.6	%	569,921		8.8	%
Construction	Construction	303,960		5.2	%	222,281		4.5	%	Construction	225,996		3.5	%	211,560		3.3	%
Agriculture production	Agriculture production	69,339		1.2	%	50,811		1.1	%	Agriculture production	47,062		0.7	%	61,414		1.0	%
Leases	Leases	8,108		0.1	%	6,572		0.1	%	Leases	8,509		0.1	%	7,726		0.1	%
Total loans	Total loans	$	5,851,975	100.0	%	$	4,916,624	100.0	%	Total loans	$	6,422,421	100.0	%	$	6,450,447	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)	(in thousands)	March 31, 2022			December 31, 2021			(in thousands)	March 31, 2023			December 31, 2022
Performing nonaccrual loans	Performing nonaccrual loans	$	11,643		$	27,713		Performing nonaccrual loans	$	13,840		$	19,543
Nonperforming nonaccrual loans	Nonperforming nonaccrual loans	2,293			2,637			Nonperforming nonaccrual loans	1,996			1,770
Total nonaccrual loans	Total nonaccrual loans	13,936			30,350			Total nonaccrual loans	15,836			21,313
Loans 90 days past due and still accruing	Loans 90 days past due and still accruing	152			—			Loans 90 days past due and still accruing	189			8
Total nonperforming loans	Total nonperforming loans	14,088			30,350			Total nonperforming loans	16,025			21,321
Foreclosed assets	Foreclosed assets	2,907			2,594			Foreclosed assets	3,439			3,439
Total nonperforming assets	Total nonperforming assets	$	16,995		$	32,944		Total nonperforming assets	$	19,464		$	24,760
Nonperforming assets to total assets	Nonperforming assets to total assets	0.17		%	0.38		%	Nonperforming assets to total assets	0.20		%	0.25		%
Nonperforming loans to total loans	Nonperforming loans to total loans	0.24		%	0.62		%	Nonperforming loans to total loans	0.25		%	0.33		%
Allowance for credit losses to nonperforming loans	Allowance for credit losses to nonperforming loans	682		%	294		%	Allowance for credit losses to nonperforming loans	676		%	516		%

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Changes in nonperforming assets during the three months ended March 31, ~~2022~~2023


(in thousands)	(in thousands)	Balance at December 31, 2021		New NPA / Valuation Adjustments	Pay-downs /Sales /Upgrades	Charge-offs/ (1) Write-downs	Transfers to Foreclosed Assets	Balance at March 31, 2022		(in thousands)	Balance at December 31, 2022		New NPA / Valuation Adjustments	Pay-downs /Sales /Upgrades	Charge-offs/ (1) Write-downs	Transfers to Foreclosed Assets	Balance at March 31, 2023
Commercial real estate:	Commercial real estate:									Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	$	7,899	2,214	(7,730)	—	—	$	2,383	CRE non-owner occupied	$	1,739	—	(68)	—	—	$	1,671
CRE owner occupied	CRE owner occupied	5,036		—	(3,568)	—	—	1,468		CRE owner occupied	4,938		97	(1,187)	—	—	3,848
Multifamily	Multifamily	4,457		—	(4,309)	—	—	148		Multifamily	125		—	(8)	—	—	117
Farmland	Farmland	3,020		391	(792)	(294)	(313)	2,012		Farmland	1,772		—	(1,401)	—	—	371
Total commercial real estate loans	Total commercial real estate loans	20,412		2,605	(16,399)	(294)	(313)	6,011		Total commercial real estate loans	8,574		97	(2,664)	—	—	6,007
Consumer	Consumer									Consumer
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	3,596		340	(440)	—	—	3,496		SFR 1-4 1st DT liens	4,220		406	(1,095)	—	—	3,531
SFR HELOCs and junior liens	SFR HELOCs and junior liens	3,801		931	(1,562)	—	—	3,170		SFR HELOCs and junior liens	3,155		427	(166)	(43)	—	3,373
Other	Other	71		14	(6)	(1)	—	78		Other	76		110	(2)	(45)	—	139
Total consumer loans	Total consumer loans	7,468		1,285	(2,008)	(1)	—	6,744		Total consumer loans	7,451		943	(1,263)	(88)	—	7,043
Commercial and industrial	Commercial and industrial	2,415		396	(1,287)	(330)	—	1,194		Commercial and industrial	3,526		292	(683)	(1,574)	—	1,561
Construction	Construction	55		85	(1)	—	—	139		Construction	491		—	(34)	—	—	457
Agriculture production	Agriculture production	—		—	—	—	—	—		Agriculture production	1,279		—	(322)	—	—	957
Leases	Leases	—		—	—	—	—	—		Leases	—		—	—	—	—	—
Total nonperforming loans	Total nonperforming loans	30,350		4,371	(19,695)	(625)	(313)	14,088		Total nonperforming loans	21,321		1,332	(4,966)	(1,662)	—	16,025
Foreclosed assets	Foreclosed assets	2,594		—	—	—	313	2,907		Foreclosed assets	3,439		—	—	—	—	3,439
Total nonperforming assets	Total nonperforming assets	$	32,944	4,371	(19,695)	(625)	—	$	16,995	Total nonperforming assets	$	24,760	1,332	(4,966)	(1,662)	—	$	19,464

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

Nonperforming assets decreased during the three months ended March 31, ~~2022~~2023 by ~~$14,255,000~~$5.3 million or ~~45.62%~~21.4% to ~~$16,995,000 at March 31, 2022~~$19.5 million compared to ~~$32,944,000~~$24.8 million at December 31, ~~2021.~~2022. The decrease in nonperforming assets during the first quarter of ~~2022~~2023 was primarily the result of nonperforming loan ~~sales,~~pay-downs/upgrades, which totaled ~~approximately $12,043,000~~$5.0 million during the ~~quarter.~~quarter and charge-offs of $1.7 million. The nonperforming loans added during the period ~~totaling $4,371,000 were acquired from VRB and identified as PCD.~~totaled $1.3 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 March 31, ~~2022.~~2023.

Loan charge-offs during the three months ended March 31, ~~2022~~2023

In the ~~third~~first quarter of ~~2021,~~2023, the Company recorded ~~$1,493,000~~$1.7 million in loan charge-offs and ~~$89,000~~$0.01 million in deposit overdraft charge-offs less ~~$1,288,000~~$0.1 million in loan recoveries and ~~$33,000~~$0.1 million in deposit overdraft recoveries, which collectively resulted in ~~$261,000 of~~$1.6 million in net recoveries. Loan charge-offs within the commercial and industrial portfolio totaled $1,112,000, with $655,000 related to a single borrower and two additional borrowers with charge-offs totaling $199,000 and $100,000, respectively. Concentrated recovery activity included $793,000 from a single CRE owner-occupied borrower and $290,000 from a single commercial and industrial loan.charge-offs.

(in thousands)

~~Table of Contents~~

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)	(in thousands)	March 31, 2022			December 31, 2021			March 31, 2021			(in thousands)	March 31, 2023			December 31, 2022			March 31, 2022
Allowance for credit losses:	Allowance for credit losses:										Allowance for credit losses:
Qualitative and forecast factor allowance	Qualitative and forecast factor allowance	$	64,334		$	59,855		$	56,500		Qualitative and forecast factor allowance	$	75,467		$	70,777		$	64,334
Cohort model allowance reserves	Cohort model allowance reserves	30,880			24,539			27,959			Cohort model allowance reserves	32,054			32,489			30,880
Allowance for individually evaluated loans	Allowance for individually evaluated loans	835			982			1,482			Allowance for individually evaluated loans	886			2,414			835

Total allowance for credit losses	Total allowance for credit losses	$	96,049		$	85,376		$	85,941		Total allowance for credit losses	$	108,407		$	105,680		$	96,049
Allowance for credit losses for loans / total loans	Allowance for credit losses for loans / total loans	1.64		%	1.74		%	1.73		%	Allowance for credit losses for loans / total loans	1.69		%	1.64		%	1.64		%

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 ~~$96,049,000~~$108.4 million allowance for loan losses at March 31, ~~2022~~2023 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.

Table of Contents

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


(in thousands)	(in thousands)	March 31, 2022				December 31, 2021			March 31, 2021				(in thousands)	March 31, 2023				December 31, 2022			March 31, 2022
Commercial real estate	Commercial real estate	$	54,992	57.3	%	51,140	59.9	%	$	50,403	58.7	%	Commercial real estate	$	64,937	59.9	%	61,381	58.1	%	$	54,992	57.3	%
Consumer	Consumer	23,852		24.8	%	23,474	27.5	%	24,604		28.6	%	Consumer	24,896		23.0	%	24,639	23.3	%	23,852		24.8	%
Commercial and industrial	Commercial and industrial	8,869		9.2	%	3,862	4.5	%	4,464		5.2	%	Commercial and industrial	12,069		11.1	%	13,597	12.9	%	8,869		9.2	%
Construction	Construction	7,437		7.7	%	5,667	6.7	%	5,476		6.4	%	Construction	5,655		5.2	%	5,142	4.8	%	7,437		7.7	%
Agriculture production	Agriculture production	883		0.9	%	1,215	1.4	%	988		1.1	%	Agriculture production	833		0.7	%	906	0.8	%	883		0.9	%
Leases	Leases	16		0.1	%	18	—	%	6		—	%	Leases	17		0.1	%	15	0.1	%	16		0.1	%
Total allowance for credit losses	Total allowance for credit losses	$	96,049	100.0	%	85,376	100.0	%	$	85,941	100.0	%	Total allowance for credit losses	$	108,407	100.0	%	105,680	100.0	%	$	96,049	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)	(in thousands)	March 31, 2022		December 31, 2021			March 31, 2021			(in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Commercial real estate	Commercial real estate	1.43	%		1.55	%		1.62	%	Commercial real estate	1.49	%	1.41	%		1.43	%
Consumer	Consumer	2.10	%		2.19	%		2.36	%	Consumer	2.02	%	1.99	%		2.10	%
Commercial and industrial	Commercial and industrial	1.77	%		1.49	%		0.81	%	Commercial and industrial	2.18	%	2.39	%		1.77	%
Construction	Construction	2.45	%		2.55	%		2.47	%	Construction	2.50	%	2.43	%		2.45	%
Agriculture production	Agriculture production	1.27	%		2.39	%		2.49	%	Agriculture production	1.77	%	1.48	%		1.27	%
Leases	Leases	0.20	%		0.27	%		0.13	%	Leases	0.20	%	0.19	%		0.20	%
Total loans	Total loans	1.64	%		1.74	%		1.73	%	Total loans	1.69	%	1.64	%		1.64	%

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


		Three months ended March 31,						Three months ended March 31,
(in thousands)	(in thousands)	2022			2021				(in thousands)	2023			2022
Allowance for credit losses:	Allowance for credit losses:								Allowance for credit losses:
Balance at beginning of period	Balance at beginning of period	$	85,376		$	91,847			Balance at beginning of period	$	105,680		$	85,376
ACL on PCD loans	ACL on PCD loans	2,037			—				ACL on PCD loans	—			2,037
Provision for (reversal of) loan losses	Provision for (reversal of) loan losses	8,205			(6,240)				Provision for (reversal of) loan losses	4,315			8,205
Loans charged-off:	Loans charged-off:								Loans charged-off:
Commercial real estate:	Commercial real estate:								Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	—			—				CRE non-owner occupied	—			—
CRE owner occupied	CRE owner occupied	—			—				CRE owner occupied	—			—
Multifamily	Multifamily	—			—				Multifamily	—			—
Farmland	Farmland	(294)			—				Farmland	—			(294)
Consumer:	Consumer:								Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	—			—				SFR 1-4 1st DT liens	—			—
SFR HELOCs and junior liens	SFR HELOCs and junior liens	—			—				SFR HELOCs and junior liens	(42)			—
Other	Other	(119)			(193)				Other	(142)			(119)
Commercial and industrial	Commercial and industrial	(330)			(33)				Commercial and industrial	(1,574)			(330)
Construction	Construction	—			—				Construction	—			—
Agriculture production	Agriculture production	—			—				Agriculture production	—			—
Leases	Leases	—			—				Leases	—			—
Total loans charged-off	Total loans charged-off	(743)			(226)				Total loans charged-off	(1,758)			(743)
Recoveries of previously charged-off loans:	Recoveries of previously charged-off loans:								Recoveries of previously charged-off loans:
Commercial real estate:	Commercial real estate:								Commercial real estate:
CRE non-owner occupied	CRE non-owner occupied	—			2				CRE non-owner occupied	—			—
CRE owner occupied	CRE owner occupied	—			1				CRE owner occupied	—			—
Multifamily	Multifamily	—			—				Multifamily	—			—
Farmland	Farmland	—			—				Farmland	—			—
Consumer:	Consumer:								Consumer:
SFR 1-4 1st DT liens	SFR 1-4 1st DT liens	40			10				SFR 1-4 1st DT liens	—			40
SFR HELOCs and junior liens	SFR HELOCs and junior liens	175			285				SFR HELOCs and junior liens	65			175
Other	Other	71			106				Other	51			71
Commercial and industrial	Commercial and industrial	887			136				Commercial and industrial	53			887
Construction	Construction	—			—				Construction	—			—
Agriculture production	Agriculture production	1			20				Agriculture production	1			1
Leases	Leases	—			—				Leases	—			—
Total recoveries of previously charged-off loans	Total recoveries of previously charged-off loans	1,174			560				Total recoveries of previously charged-off loans	170			1,174
Net recoveries	Net recoveries	431			334				Net recoveries	(1,588)			431
Balance at end of period	Balance at end of period	$	96,049		$	85,941			Balance at end of period	$	108,407		$	96,049
Average total loans	Average total loans	$	4,988,560		$	4,763,025			Average total loans	$	6,413,958		$	4,988,560
Ratios (annualized):	Ratios (annualized):								Ratios (annualized):
Net recoveries during period to average loans outstanding during period		0.03		%	0.03		%
Provision for credit losses (benefit from reversal of) to average loans outstanding during period		0.66		%	(0.52)		%
Net (charge-offs) recoveries during period to average loans outstanding during period									Net (charge-offs) recoveries during period to average loans outstanding during period	(0.10)		%	0.03		%
Provision for credit losses to average loans outstanding during period									Provision for credit losses to average loans outstanding during period	0.27		%	0.66		%

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Foreclosed Assets, Net of Allowance for Losses

The following table details the components and summarize the activity in foreclosed assets, net of allowances for losses, for the three months ended March 31, ~~2022:~~2023:


(in thousands)	(in thousands)	Balance at December 31, 2021		Sales		Valuation Adjustments		Transfers from Loans		Balance at March 31, 2022		(in thousands)	Balance at December 31, 2022		Sales		Valuation Adjustments		Transfers from Loans		Balance at March 31, 2023
Land & construction	Land & construction	$	155	$	—	$	—	$	—	$	155	Land & construction	$	154	$	—	$	—	$	—	$	154
Residential real estate	Residential real estate	1,258		—		—		313		1,571		Residential real estate	1,709		—		—		—		1,709
Commercial real estate	Commercial real estate	1,181		—		—		—		1,181		Commercial real estate	1,576		—		—		—		1,576
Total foreclosed assets	Total foreclosed assets	$	2,594	$	—	$	—	$	313	$	2,907	Total foreclosed assets	$	3,439	$	—	$	—	$	—	$	3,439

Deposits

During the three months ended March 31, ~~2022,~~2023, the Company’s deposits ~~increased~~decreased by ~~$1,347,318,000~~$303.1 million to ~~$8,714,477,000~~$8.7 billion at quarter ~~end, of which $131,839,000 was organic growth, and the remainder is attributed to the acquisition of VRB. Included~~end. There were no brokered deposits included in the deposit balances as of March 31, ~~2022~~2023 and December 31, 2021 certificate of deposit balances is $1,000,000, respectively, from the State of California. The Company participates in a deposit program offered by the State of California whereby the State may make deposits at the Company’s request subject to collateral and creditworthiness constraints. The negotiated rates on these State deposits are generally more favorable than other wholesale funding sources available to the Company.2022, respectively.

Off-Balance Sheet Arrangements

See Note 79 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).

Concurrently with the announcement of the completion of the VRB merger, the Company announced the resumption of its 2021 Repurchase Plan planned activities. During the three ~~month period~~months ended March 31, 2023 and 2022, the Company norepurchased 150,000 and zero shares ~~were repurchased under this Plan,~~with market values of $7.0 million and $0, respectively. ~~As of March 31, 2022 a total of 1,936,683 shares remained authorized for repurchase under the 2021 Repurchase Plan.~~

Total shareholders' equity increased by ~~$108,998,000~~$43.8 million during the quarter ended March 31, ~~2022,~~2023, as a result of ~~issuing $173,585,000~~an improvement in ~~common stock associated with the VRB merger~~accumulated other comprehensive losses of $24.4 million and net income of ~~$20,374,000, which was~~$35.8 million, partially offset by ~~a decrease in accumulated other comprehensive income of $78,339,000 and $7,433,000 in~~ cash ~~dividends paid~~dividend payments on common ~~stock.~~stock of approximately $9.9 million. As a result, the Company’s book value was ~~$32.78~~$32.84 per share at March 31, ~~2022~~2023, as compared to ~~$33.64~~$31.39 and ~~$31.71~~$32.78 at December 31, ~~2021,~~2022, and March 31, ~~2021,~~2022, respectively. 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 ~~$23.04~~$23.22 per share at March 31, ~~2022,~~2023, as compared to ~~$25.80~~$21.76 and ~~$23.72~~$23.04 at December 31, ~~2021,~~2022, and March 31, ~~2021,~~2022, respectively.

Trailing Quarter Balance Sheet Change


		March 31, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Ratio		Minimum Regulatory Requirement		Ratio		Minimum Regulatory Requirement			Ratio		Minimum Regulatory Requirement		Ratio		Minimum Regulatory Requirement
Total risk based capital	Total risk based capital	15.0	%	10.5	%	15.4	%	10.5	%	Total risk based capital	14.5	%	10.5	%	14.2	%	10.5	%
Tier I capital	Tier I capital	13.1	%	8.5	%	14.2	%	8.5	%	Tier I capital	12.7	%	8.5	%	12.4	%	8.5	%
Common equity Tier 1 capital	Common equity Tier 1 capital	12.3	%	7.0	%	13.2	%	7.0	%	Common equity Tier 1 capital	12.0	%	7.0	%	11.7	%	7.0	%
Leverage	Leverage	10.8	%	4.0	%	9.9	%	4.0	%	Leverage	10.2	%	4.0	%	10.1	%	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.

~~Table of Contents~~

As of March 31, ~~2022,~~2023, 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, ~~depositary~~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

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


(dollars in thousands)	March 31, 2023		December 31, 2022
Borrowing capacity at correspondent banks and FRB	$	2,853,219	$	2,815,594
Less: borrowings outstanding	(394,095)		(216,700)
Unpledged available-for-sale investment securities	1,883,353		1,990,451
Cash held or in transit with FRB	67,468		56,910
Total primary liquidity	$	4,409,945	$	4,862,738.3

At March 31, 2023, the Company's primary sources of liquidity represented 54.9% of total deposits and 190.7% of estimated total uninsured deposits, respectively. As a secondary source of ~~asset~~ liquidity, ~~is cash at~~ the ~~Federal Reserve Bank of San Francisco (“Federal Reserve”) and other banks and marketable~~Company's held-to-maturity investment securities ~~available for sale. As~~had a fair value of March 31, 2022, Federal Reserve cash reserve ratios continue to be temporarily reduced to zero as a response to the worldwide COVID-19 pandemic and on-going impact on supply chains and the energy markets. $142.1 million, including approximately $9.9 million in net unrealized losses or 0.6% of after tax total shareholders' equity.

The Company’s profitability during the first three months of ~~2022~~2023 generated cash flows from operations of ~~$34,845,000~~$39.0 million compared to ~~$41,196,000~~$34.8 million during the first three months of ~~2021.~~2022. Net cash from investing activities was ~~$121,914,000~~$115.3 million for the three months ended March 31, ~~2022,~~2023, compared to net cash used by investing activities of ~~$460,561,000~~$121.9 million during the three months ending ~~2021.~~2022. Financing activities ~~provided $110,503,000~~used $151.1 million during the three months ended March 31, ~~2022,~~2023, compared to ~~$359,336,000 used~~providing $110.5 million during the three months ended March 31, ~~2021.~~2022. During the three months ended March 31, ~~2022 cash acquired in connection with the VRB merger of $426,883,000 and~~2023 deposit balance ~~increases~~decreases of ~~$131,839,000 were~~$303.1 million was the largest ~~contributor~~detractor of funding, which attributed to the ~~source~~increase in other borrowings of funding that facilitated net organic loan growth of $161,961,000 and net organic investment security growth of $32,105,000, inclusive of changes in the fair value of available for sale investment securities, compared to an increase of deposit balances of $357,466,000$169.5 million during the same ~~period in 2021.~~period.

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. These contractual obligations ~~increased as a result of the merger with VRB during the quarter ended March 31, 2022, but organically, remained~~are otherwise consistent with similar balances or totals as of December 31, ~~2021.~~

The Company maintains a collateralized line of credit with the FHLB. Based on the FHLB stock requirements at March 31, 2022, this line provided for maximum borrowings of $2.22 billion of which none was outstanding. As of March 31, 2022, the Company had designated investment securities with a fair value of $67,027,000 and loans totaling $3.53 billion as potential collateral under this collateralized line of credit with the FHLB.

The Company maintains a collateralized line of credit with the Federal Reserve Bank of San Francisco (“FRB”). As of March 31, 2021, this line provided for maximum borrowings of $182,331,000 of which none was outstanding. As of March 31, 2021, the Company has designated investment securities with fair value of $5,800 and loans totaling $307,596,000 as potential collateral under this collateralized line of credit with the FRB.2022.

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 ~~$7,433,000~~$10.0 million and ~~$7,432,000~~$7.4 million of cash during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company’s liquidity is dependent on dividends received from the Bank. Dividends from the Bank are subject to certain regulatory restrictions.

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TRICO BANCSHARES—NON-GAAP FINANCIAL MEASURES

(Unaudited. Dollars in thousands)

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


	Three months ended
(dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Net interest margin
Acquired loans discount accretion, net:
Amount (included in interest income)	$1,397		$1,751		$1,323
Effect on average loan yield	0.09	%	0.11	%	0.11	%
Effect on net interest margin (FTE)	0.06	%	0.07	%	0.07	%
Net interest margin (FTE)	4.21	%	4.34	%	3.39	%
Net interest margin less effect of acquired loan discount accretion (Non-GAAP)	4.15	%	4.27	%	3.32	%
PPP loans yield, net:
Amount (included in interest income)	$5		$16		$1,097
Effect on net interest margin (FTE)	—	%	—	%	0.03	%
Net interest margin less effect of PPP loan yield (Non-GAAP)	4.21	%	4.34	%	3.36	%
Acquired loan discount accretion and PPP loan yield, net:
Amount (included in interest income)	$1,402		$1,767		$2,420
Effect on net interest margin (FTE)	0.06	%	0.07	%	0.10	%
Net interest margin less effect of acquired loan discount accretion and PPP yields, net (Non-GAAP)	4.15	%	4.27	%	3.29	%


	Three months ended
(dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Pre-tax pre-provision return on average assets or equity
Net income (GAAP)	$35,833		$36,343		$20,374
Exclude provision for income taxes	13,149		14,723		7,869
Exclude provision (benefit) for credit losses	4,195		4,245		8,330
Net income before income tax and provision expense (Non-GAAP)	$53,177		$55,311		$36,573

Average assets (GAAP)	$9,878,927		$9,932,931		$8,778,256
Average equity (GAAP)	$1,087,473		$1,016,468		$1,009,224

Return on average assets (GAAP) (annualized)	1.47	%	1.45	%	0.94	%
Pre-tax pre-provision return on average assets (Non-GAAP) (annualized)	2.18	%	2.21	%	1.69	%
Return on average equity (GAAP) (annualized)	13.36	%	14.19	%	8.19	%
Pre-tax pre-provision return on average equity (Non-GAAP) (annualized)	19.83	%	21.59	%	14.70	%

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	Three months ended
(dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Return on tangible common equity
Average total shareholders' equity	$1,087,473		$1,016,468		$1,009,224
Exclude average goodwill	304,442		306,192		226,676
Exclude average other intangibles	15,842		17,521		12,604
Average tangible common equity (Non-GAAP)	$767,189		$692,755		$769,944

Net income (GAAP)	$35,833		$36,343		$20,374
Exclude amortization of intangible assets, net of tax effect	1,166		1,199		865
Tangible net income available to common shareholders (Non-GAAP)	$36,999		$37,542		$21,239

Return on average equity	13.36	%	14.19	%	8.19	%
Return on average tangible common equity (Non-GAAP)	19.56	%	21.50	%	11.19	%


	Three months ended
(dollars in thousands)	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Tangible shareholders' equity to tangible assets
Shareholders' equity (GAAP)	$1,090,245		$1,046,416		$990,338		$1,042,177		$1,109,182
Exclude goodwill and other intangible assets, net	319,456		321,112		326,314		328,016		329,718
Tangible shareholders' equity (Non-GAAP)	$770,789		$725,304		$664,024		$714,161		$779,464

Total assets (GAAP)	$9,842,394		$9,930,986		$9,976,879		$10,120,611		$10,118,328
Exclude goodwill and other intangible assets, net	319,456		321,112		326,314		328,016		329,718
Total tangible assets (Non-GAAP)	$9,522,938		$9,609,874		$9,650,565		$9,792,595		$9,788,610

Shareholders' equity to total assets (GAAP)	11.08	%	10.54	%	9.93	%	10.30	%	10.96	%
Tangible shareholders' equity to tangible assets (Non-GAAP)	8.09	%	7.55	%	6.88	%	7.29	%	7.96	%


	Three months ended
(dollars in thousands)	March 31, 2023	December 31, 2022	September 30, 2022	June 30, 2022	March 31, 2022
Tangible common shareholders' equity per share
Tangible s/h equity (Non-GAAP)	$770,789	$725,304	$664,024	$714,161	$779,464


Common shares outstanding at end of period	33,195,250	33,331,513	33,332,189	33,350,974	33,837,935

Common s/h equity (book value) per share (GAAP)	$32.84	$31.39	$29.71	$31.25	$32.78
Tangible common shareholders' equity (tangible book value) per share (Non-GAAP)	$23.22	$21.76	$19.92	$21.41	$23.04

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Based on the changes in interest rates occurring subsequent to December 31, ~~2021,~~2022, the following update of the Company’s assessment of market risk as of March 31, ~~2022~~2023 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, ~~2021.~~2022.

During the quarter ended March 31, ~~2022,~~2023, market interest rates, including many rates that serve as reference indices for variable rate loans ~~increased modestly. However, the loan portfolio yield continues~~and investment securities continued to increase. As noted above, these rate increases have ~~a downward bias due~~continued to ~~the repricing of loans at lower rates and increased market competition stemming from loan to deposit ratios being at historic lows.~~benefit growth in total interest income. As of March 31, ~~2022,~~2023, the Company's loan portfolio consisted of approximately ~~$5.9~~$6.4 billion in outstanding principal with a weighted average coupon rate of ~~4.24%, inclusive of~~5.0%. During the ~~PPP program loans. Excluding PPP loans,~~three-month periods ending March 31, 2023 and December 31, 2022, the ~~Company's loan portfolio has approximately $5.8 billion outstanding with a~~ weighted average coupon ~~rate of 4.27% as of March 31, 2022.~~on loan production in the quarter was 6.55% and 6.25%, respectively. Included in the March 31, ~~2022~~2023 loan total ~~exclusive of PPP loans,~~ are variable rate loans totaling ~~$3.4~~$3.6 billion, of which, ~~$800,000,000~~$810.8 million are considered floating based on the Wall Street Prime ~~index and an additional $2,550,000 of variable rate loans~~index. In addition, the Company holds certain investment securities totaling $384.1 million which are ~~generally tied to the 5-year US Treasury rate and are generally~~ subject to ~~reprice~~repricing on not less than a quarterly ~~subsequent to the expiration of a fixed rate period of three months to five years.~~basis.

Management funds the acquisition of nearly all of its earning assets through its core deposit gathering activities. As of March 31, ~~2022,~~2023, non-interest bearing deposits represented ~~41.1%~~40.3% of total deposits. Further, during the quarter ended March 31, ~~2022,~~2023, the cost of interest bearing deposits were ~~0.06%~~0.43% and the cost of total deposits were ~~0.04%~~0.25%. With the intent of stabilizing or increasing net interest income, management intends to continue to deploy its excess liquidity and seek to migrate certain earning assets into higher yielding categories (from investment securities and into loans, for example).

~~Table~~ However, in situations where deposit balances contract, management relies upon various borrowing facilities or the use of ~~Contents~~

brokered deposits. Through the first quarter of 2023 and during the entire 2022 year, management did not utilize any brokered deposits. Management did however utilize borrowing lines from the FHLB and expects that such borrowings will be needed and likely continue to grow through the remainder of the year and into 2024. As the rate paid on these borrowed funds are correlated with short-term interest rates, the costs associated with these borrowings, particularly in a rising rate environment, are also expected to increase.

As of March 31, ~~2022~~2023 the overnight Federal funds rate, the rate primarily used in these interest rate shock scenarios, was ~~less than 1.00%~~4.83%. Based on the historical nature of these rates in the United States not falling below zero, management believes that a shock scenario that reduces interest rates below zero would not provide meaningful results and therefore, have not been modeled. 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 March 31, ~~2022.~~2023.

Interest Rate Risk Simulations:


Change in Interest Rates (Basis Points)	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)		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)						+300 (shock)	(3.5)	%	(6.3)	%
+200 (shock)	+200 (shock)	4.0	%	7.1	%	+200 (shock)	(2.5)	%	(4.0)	%
+100 (shock)	+100 (shock)	2.1	%	4.9	%	+100 (shock)	(1.2)	%	(1.0)	%
+ 0 (flat)	+ 0 (flat)	—		—		+ 0 (flat)	—		—
-100 (shock)	-100 (shock)	(4.4)	%	(16.2)	%	-100 (shock)	(2.1)	%	(3.9)	%
-200 (shock)	-200 (shock)	nm		nm		-200 (shock)	(4.6)	%	(11.0)	%
-300 (shock)						-300 (shock)	(6.6)	%	(23.4)	%

Item 4. Controls and Procedures

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 March 31, ~~2022.~~2023. 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 March 31, ~~2022.~~2023.

During the three months ended March 31, ~~2022,~~2023, 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.

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PART II – OTHER INFORMATION

Item 1 - Legal Proceedings

Due to the nature of our business, we are involved in legal proceedings that arise in the ordinary course of our business. While the outcome of these matters is currently not determinable, we do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Item 1A - Risk Factors

The following risk factor represents a material update and addition to the risk factors previously disclosed in the Company’s 2022 Annual Report on Form 10-K. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our ~~2021~~2022 Annual Report on Form 10-K, which could materially affect our business, financial condition, or results of operations. In

Adverse developments affecting the financial services industry, such as recent bank failures or concerns involving liquidity, may have a material effect on the Company’s operations, earnings and financial condition.

Late in the first quarter of ~~2022,~~2023, the financial services industry was negatively affected by several bank failures. These recent events have caused general uncertainty and concern regarding the adequacy of liquidity within the banking sector as a whole and have decreased confidence in banks among depositors and investors. Although we ~~identified~~were not directly affected by these bank failures, the ~~following additional risk factor:~~resulting speed and ease in which news or rumors, including social media commentary, led depositors to withdraw or attempt to withdraw their funds from these and other financial institutions as well as caused the stock prices of many financial institutions to become volatile, in particular regional, as well as community banks like the Company. As a result of these recent events, customers may choose to maintain deposits with larger financial institutions or in other higher yielding alternatives, which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.

~~Instability~~In response to these failures and the resulting market reaction, the Secretary of the Treasury approved actions enabling the FDIC to complete its resolutions of the failed banks in ~~global economic conditions~~a manner that fully protects depositors by utilizing the Deposit Insurance Fund, including the use of Bridge Banks to assume all of the deposit obligations of the failed banks, while leaving unsecured lenders and ~~geopolitical matters,~~equity holders of such institutions exposed to losses. In addition, the Federal Reserve Bank announced it would make available additional funding to eligible depository institutions under a Bank Term Funding Program to help assure banks have the ability to meet the needs of all their depositors. In an effort to strengthen public confidence in the banking system and protect depositors, regulators announced that any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as ~~well as volatility~~required by law, which is expected to increase the cost of our FDIC insurance assessments. However, it is uncertain whether these steps by the government will be sufficient to calm the financial markets, reduce the risk of significant depositor withdrawals at other institutions and thereby reduce the risk of additional bank failures. As a result of this uncertainty, we face the potential for reputational risk, deposit outflows, increased costs and competition for liquidity, and increased credit risk which, individually or in ~~financial markets,~~the aggregate, could have a material adverse effect on ~~the Company’s~~our business, financial condition and results of ~~operations and financial condition.~~operations.

~~Instability~~Banking regulators have signaled further review of regulatory requirements and the potential for changes to laws or regulations governing banks and bank holding companies. Changes resulting from these events could include increased regulatory focus on deposit composition, the level of uninsured deposits, the level of unrealized losses in ~~global economic conditions~~either available for sale or held to maturity securities portfolios, contingent liquidity, CRE loan composition and ~~geopolitical matters,~~concentration, capital position and general oversight or supervisory or internal control structures regarding the foregoing. Changes in regulatory requirements could impact our ability to achieve our strategic objectives and may result in changes to our balance sheet position or business which could, in turn, negatively impact our profitability.

If we are required to sell securities to meet liquidity needs, we could realize significant losses.

As a result of increases in interest rates over the last year, the market values of previously issued government and other debt securities have declined in value, resulting in unrealized losses in our securities portfolio. While we anticipate that the scheduled cash flows generated from our investment portfolio will be adequate to support the liquidity needs of the Company, if we were required to sell these securities to expedite the generation of cash flows to meet liquidity needs, we may incur significant losses, which could impair our capital and financial condition and adversely affect our results of operations. Further, while we have taken actions to maximize our sources of liquidity, there is no guarantee that such sources will be available or sufficient in the event of sudden liquidity needs.

The following risk factor updates and supplements the risk factor regarding cyberattacks appearing on page 18 of the Company’s Form 10-K filed with the SEC on March 1, 2023.

We were subject to a cyberattack, which could damage our reputation, result in the disclosure of confidential information, or create additional financial and legal exposure.

As previously disclosed in the Current Report 8-K filed by us on February 14, 2023, the Bank experienced a cybersecurity incident, where unusual network activity was detected, and management shut down networked systems which prevented access to internal systems, data and telephones for a limited period of time. Upon discovering the incident, the Bank immediately launched an investigation. A digital forensics firm was engaged to help determine the scope of the incident and identify potentially impacted data. We received a demand for

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ransom from a party claiming responsibility for the incident and the Bank promptly notified law enforcement and banking regulators. The Bank believes that its core banking systems, including those that facilitate loan or deposit related transactions, were not affected by this incident as evidenced by the Bank’s general ability to resume customer facing operations within two days. However, the Bank’s internal system access as well as ~~volatility~~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 Bank continues to work with third-party forensic investigators to understand the nature and scope of the incident and to determine what information was accessed and who was impacted. The investigation is on-going.

While we continue to evaluate the full impact of this incident, we remain subject to a number of risks and uncertainties, including legal, reputational, and financial ~~markets,~~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. To date, we do not believe such financial consequences will be material, however the cybersecurity incident is still under investigation. Although the Company has insurance coverage, including cybersecurity insurance, the amount of coverage maintained may not cover all losses. We anticipate that we will incur additional expenses in future periods, including the notification of those impacted by the cybersecurity incident in accordance with applicable laws. Given the uncertainties about the impact of the incident and the inherent uncertainties involved in litigation, contractual obligations, government investigations and regulatory enforcement decisions, any outcomes from these risks could have a material adverse effect on ~~the Company’s results of operations and~~our reputation, business and/or financial condition. ~~The macroeconomic environment~~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 ~~United States is susceptible to global events and volatility in financial markets. For example, trade negotiations between the U.S. and other nations remain uncertain and~~security of our systems could adversely impact economic and market conditions for the Company and its clients and counterparties. In addition, global demand for products may exceed supply during the economic recovery from the COVID-19 pandemic, and such shortages may cause inflation, adversely impact consumer and business confidence, and adversely affect the economy as well as the Company’s financial condition and results.

Specifically, on February 24, 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of the ongoing war in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time. Any of the above-mentioned factors could affect our ~~business, financial condition~~business. As cyber threats and ~~operating results. Any such disruptions may also magnify~~ the ~~impact~~sophistication of ~~other risks described in this Quarterly Report on Form 10-Q~~threat actors continue to evolve, we have been and will likely continue to enhance our ~~Form 10-K for the year ended December 31, 2021.~~

protective measures and will expend resources to investigate and remediate any information security vulnerabilities or incidents.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

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 periods indicated:
Period
(a) Total number of
shares purchased (1)
(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 at period end (2)
January 1-31, 2022 — $ — — 1,936,683
February 1-28, 2022 — — — 1,936,683
March 1-31, 2022 1,332 41.40 — 1,936,683
Total 1,332 —


Period	(a) Total number of shares purchased (1)	(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 at period end (2)
January 1-31, 2023	—	$	—	—	1,359,802
February 1-28, 2023	48,475	50.69		36,094	1,323,708
March 1-31, 2023	113,906	45.11		113,906	1,209,802
Total	162,381	$	46.77	150,000

(1)Includes shares purchased by the Company’s Employee Stock Ownership Plan in open market purchases and shares tendered by employees pursuant to various other equity incentive plans. See Notes 910 and 1011 to the condensed consolidated financial statements at Item 1 of Part I of this report, for a discussion of the Company’s stock repurchased under equity compensation plans.

(2)Does not include shares that may be purchased by the Company’s Employee Stock Ownership Plan and pursuant to various other equity incentive plans. See Note 910 to the condensed consolidated financial statements at Item 1 of Part I of this report, for a discussion of the Company’s stock repurchase plan.

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Item 6 – Exhibits

EXHIBIT INDEX


Exhibit No.						Exhibit

~~2.1~~						Agreement and Plan of Reorganization dated as of July 27, 2021, by and between TriCo Bancshares and Valley Republic Bancorp (incorporated by reference to Exhibit in TriCo's current report on Form 8-K filed on July 28, 2021).

31.1						Rule 13a-14(a)/15d-14(a) Certification of CEO

31.2						Rule 13a-14(a)/15d-14(a) Certification of CFO

32.1						Section 1350 Certification of CEO

32.2						Section 1350 Certification of CFO

101.INS						XBRL Instance Document

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

*Management contract or compensatory plan or arrangement

5759

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


			TRICO BANCSHARES
			(Registrant)

Date: May 10, ~~2022~~2023			/s/ Peter G. Wiese
			Peter G. Wiese
			Executive Vice President and Chief Financial Officer
			(Duly authorized officer and principal financial and chief accounting officer)

5860


			Page
PART I – FINANCIAL INFORMATION			3
Item 1 – Financial Statements (Unaudited)			3
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			3837
Item 3 – Quantitative and Qualitative Disclosures about Market Risk			5456
Item 4 – Controls and Procedures			5556
PART II – OTHER INFORMATION			5657
Item 1 – Legal Proceedings			5657
Item 1A – Risk Factors			5657
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			5658
Item 6 – Exhibits			5759
Signatures			5860


Supplemental disclosure of noncash activities:
Unrealized loss on securities available for sale	$	(111,302)	$	(12,337)
Loans transferred to held-for-sale	12,044		—
Market value of shares tendered in-lieu of cash to pay for exercise of options and/or related taxes	55		2
Obligations incurred in conjunction with leased assets	521		1,308
Loans transferred to foreclosed assets	313		—
Supplemental disclosure of cash flow activity:
Cash paid for interest expense	1,546		1,868
Cash paid for income taxes	—		—


March 31, 2022:	Less than 12 months				12 months or more				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	1,385,647	$	(79,940)	$	220,899	$	(19,112)	$	1,606,546	$	(99,052)
Obligations of states and political subdivisions	106,944		(10,040)		9,045		(1,364)		115,989		(11,404)
Corporate bonds	4,112		(65)		—		—		4,112		(65)
Asset backed securities	212,168		(2,544)		107,603		(2,301)		319,771		(4,845)
Total debt securities available for sale	$	1,708,871	$	(92,589)	$	337,547	$	(22,777)	$	2,046,418	$	(115,366)

Debt Securities Held to Maturity
Obligations of U.S. government agencies	$	147,078	$	(3,070)	$	—	$	—	$	147,078	$	(3,070)


	TDR information for the three months ended March 31, 2022
(dollars in thousands)	Number	Pre-mod outstanding principal balance		Post-mod outstanding principal balance		Financial impact due to TDR taken as additional provision		Number that defaulted during the period	Recorded investment of TDRs that defaulted during the period		Financial impact due to the default of previous TDR taken as charge- offs or additional provisions
Commercial real estate:
CRE non-owner occupied	—	$	—	$	—	$	—	—	$	—	$	—
CRE owner occupied	—	—		—		—		—	—		—
Multifamily	—	—		—		—		—	—		—
Farmland	3	1,228		1,440		—		—	—		—
Total commercial real estate loans	3	1,228		1,440		—		—	—		—
Consumer:
SFR 1-4 1st DT liens	—	—		—		—		—	—		—
SFR HELOCs and junior liens	—	—		—		—		—	—		—
Other	—	—		—		—		—	—		—
Total consumer loans	—	—		—		—		—	—		—
Commercial and industrial	—	—		—		—		—	—		—
Construction	—	—		—		—		—	—		—
Agriculture production	—	—		—		—		—	—		—
Leases	—	—		—		—		—	—		—
Total	3	$	1,228	$	1,440	$	—	—	$	—	$	—