TriCo Bancshares : 2024 Annual Report to Shareholders

Published: 2025-04-18 16:14:06 ET TCBK

Dear Fellow Shareholders:

Last year at this time, I wrote about the group of local farmers and business people who - more than 50 years ago - channeled their frustration with big banks into a new venture that would become Tri Counties Bank. We remember the enthusiasm and determination of those who formed Tri Counties Bank and now, upon the occasion of our 50th anniversary, I'm reminded that we continue to stand on the shoulders of leaders such as Alex Vereschagin, Dewayne Caviness, the Casey family, Donald Murphy, Sankey M. Hall, Jr., Everett Beich, Bob Steveson, Carroll Taresh and Joan Jones. As we gathered over the course of 2024 to celebrate this milestone in our Company's history, I was - and continue to be - filled with immense pride and gratitude. In March 2024, we kicked off our anniversary celebration with a contribution to support the Foundation for California Community Colleges' Student Ambassadors. This incredible program helps students access food, housing, and other basic needs and resources, providing crucial support and easing their pathway to success. Throughout 2024 and into early 2025, anniversary events not only marked a momentous occasion but reflected our rich history and underscored our unwavering commitment to the communities we serve across California.

Over the years, we have witnessed significant changes in the banking landscape, including the rise of digital banking and the evolution of customer expectations. However, one thing has remained constant: our dedication to local businesses, consumers and communities. This anniversary is not just a celebration of our past; it's a reaffirmation of our mission to support the financial well-being of our customers and to continue to be an integral part of the economic engine that drives the neighborhoods we serve.

Much ink has been spilled before, during, and after the recent presidential election - the thirteenth such election to have occurred during the history of your Company - and many predictions have been offered regarding the future course of regulation in the financial services industry. To be clear, we believe that much of the foundation of regulation in our industry is both essential and a stabilizing force that makes the United States economy and financial system the envy of the world. This framework was born out of a severe economic depression and tested over subsequent decades and inspires the confidence and trust of the many businesses and consumers we serve. We remain hopeful that regulation that would be cumbersome or detrimental to businesses and consumers will be reconsidered. We look forward to positive and better-balanced proposals that continue to support broad economic growth and the banking industry.

Financial Highlights

For the full year 2024, TriCo Bancshares reported earnings of $114.9 million, or $3.46 per diluted share. This compares with earnings of $117.4 million, or $3.52 per diluted share in 2023. The dramatic rise in short-term interest rates that began in 2022 and concluded in mid-2023 continues to depress net interest income, our largest revenue source, and ultimately our net income, as our loan portfolio continues to reprice and as the cost for deposits, our primary source of funding, adjusts to current market conditions and evolving customer behavior.

Data from TriCo Bancshares 10K:

2024

Chg.

2023

Chg.

2022

Yield on Loans

5.79%

+0.35%

5.44%

+0.60%

4.84%

Cost of Total Interest-Bearing Deposits

2.09%

+0.99%

1.10%

+1.00%

0.10%

Net Interest Margin

3.71%

(0.25%)

3.96%

+0.08%

3.88%

Net Interest Income ($ millions)

$331.4

(7.1%)

$356.7

+3.1%

$346.0

As illustrated in the table above, the cost of interest-bearing deposits, the critical raw material that supports lending, has increased by a total of 199 basis points since 2022 while the yield on loans - our primary revenue source - has increased by just 95 basis points. I noted in last year's letter that ". . . as we contemplate the Federal Reserve maintaining interest rates at a level that is 'higher for longer', we will likely continue to see pressure on our funding costs and ultimately, on our net interest income". To further illustrate this point, consider that more than 80% of the residential mortgages in the United States have an interest rate at or below 5.00%, and 61% have rates below 4.00%, even as current mortgage rates are approximately 6.75%. There's no rush to pay down a loan when current rates are much higher!

The unusually low rates (essentially 0.00%) we saw during the COVID pandemic created both dislocations and disinterest on the part of depositors. Dramatic swings in the value of any commodity (oil, grains, etc.) can create short-term dislocations and the same is true for money. When money has no earning power, depositors become indifferent between a checking account, a savings account, or a CD, for example. With interest rates now seemingly settling into a narrower range in late 2024 and early 2025, we're now seeing depositor behavior that is more consistent with long term trends, and this is a very healthy sign for banks.

In short, the repricing of loans and deposits as interest rates adjust is simply part of our business and we manage the Bank for success across a broad range of interest rate scenarios.

Our company continues to be consistently profitable and has built strong reserves and capital that will allow us to weather economic challenges and remain the partner of choice for smaller community banks that are looking for a better strategic path. We believe that shareholder value - and our long-term success - is built through our continued focus on building a strong and diverse deposit base and through disciplined credit underwriting. Although non-performing assets increased by approximately $12 million from the end of 2023, our net charge-offs, or loan losses, declined by $6.6 million in 2024 to just $2.6 million. We believe these results are more reflective of a normal economic cycle and indicative that borrowers are adjusting to the post-COVID economy.

Just as importantly, our consistent earnings and strong capital will allow us to continue to support the growth of households and businesses throughout our California footprint.

Our Impact In Our Communities

The measure of our success includes not just financial performance but also our positive impact on the people and communities we serve. We have always believed that a bank should be more than just a financial institution; instead, it should be a partner in the growth and development of its community. Over the years, we have invested significantly in local initiatives, supporting education, small businesses and farms, home ownership, and a wide range of deserving community organizations.

In the past year alone, we contributed $1.7 million to more than 340 nonprofit organizations across California. Our commitment to community engagement has fostered strong relationships with local organizations, schools, and hospitals, and has played a crucial role in supporting the growth of home ownership among minority and low-income households and communities around the state. Further, we have worked closely with our partners in local communities to develop flexible and innovative lending and down payment assistance programs that have helped low income and minority families realize the dream of home ownership.

As California's local bank, we are also proud to have provided more than $1.18 billion of new loans in 2024 to businesses and households across the state, helping to create jobs, sustain communities and drive economic growth in the areas we serve. While larger banks withdraw to major urban areas and abandon their responsibilities to serve small towns and communities, we take great pride in our roots and those we serve.

Collectively, our community-focused efforts resulted in Tri Counties Bank receiving the highest performance rating of "Outstanding" from the FDIC in its most recent Community Reinvestment Act Performance Evaluation.

Adapting To Change

As we celebrate our 50th anniversary, we face a rapidly evolving financial landscape. Technology has transformed the way our customers interact - and expect to interact - with us. While we must continue to adapt, we also strive to combine advanced digital capabilities with the personal, local service that is our competitive advantage. This year, we continued to make significant investments in our digital banking platforms, enhancing the user experience, streamlining processes, and providing customers with greater digital access to accounts and services.

We understand that our customers lead busy lives, and we are committed to enhancing the tools they need to manage their finances conveniently and securely. Our online and mobile banking systems for both consumers and businesses of all sizes, combined with our traditional branches and relationship managers, ensure that we continue to deliver the exceptional service our customers expect.

As we reflect on our past and celebrate our achievements, we are excited about the future. The next chapter of Tri Counties Bank will be defined by innovation, community engagement, and a steadfast commitment to our customers. We are continually exploring new opportunities to expand our services. In short, we've accomplished much but we still have work to do.

In Memoriam

In September 2024, we were saddened to learn of the passing of our director emeritus Virginia Walker. Virginia served on the board of directors of our Company for more than twelve years and her guidance and counsel was of immeasurable value to our leadership. Beyond her professional accomplishments, Virginia was known for her profound kindness, her sharp wit, and her strong devotion and connection to our community.

We also mourn the passing of both Carroll Taresh and Joan Jones in January 2025. Each played an integral role in the formation, growth and success of Tri Counties Bank and we'll miss their encouragement, partnership and strong character.

Recognizing Our Employees

Our dedicated employees continue to drive the success of Tri Counties Bank, and we are grateful for their dedication and hard work. Over the past 50 years, they have consistently gone above and beyond to serve our customers and uphold our values. We have cultivated a culture of teamwork and professional growth, ensuring our team is equipped with the skills and knowledge necessary to navigate the evolving financial landscape.

Gratitude To Our Shareholders

As we celebrate our 50th anniversary, we want to take this opportunity to express our heartfelt gratitude to you, our shareholders. Your unwavering support and trust in TriCo Bancshares have been instrumental to our growth and success. We are proud to have you as partners in this journey and we are committed to continuing to deliver strong financial performance and sustainable growth in the years to come.

As always, and on behalf of our more than 1,200 employees and our board of directors, thank you for your continued confidence in, and ongoing support of, TriCo Bancshares - California's Local Bank.

Richard P. Smith

Chairman, President, and Chief Executive Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

_____________________

FORM 10-K

_____________________

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2024

Commission File Number 0-10661

_____________________

(Exact name of Registrant as specified in its charter)

_____________________

California

94-2792841

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification No.)

63 Constitution Drive, Chico, California

95973

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (530) 898-0300

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

Title of each class

Trading

Name of exchange on which

Symbol(s)

registered

Common Stock

TCBK

NASDAQ

Securities registered pursuant to Section 12(g) of the Act: None.

__________________

Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☒ Yes

☐ No

Indicate by check mark whether the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐ Yes

☒ No

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 periods 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 and posted 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 and

post 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. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing

reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received

by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued

its audit report.

☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes

☒ No

The aggregate market value of the voting common stock held by non-affiliates of the Registrant, as of June 30, 2024, was approximately $1.4 billion.

The number of shares outstanding of Registrant's common stock, as of February 28, 2025, was 32,970,425.

DOCUMENTS INCORPORATED BY REFERENCE

The information required to be disclosed pursuant to Part III of this report either shall be (i) deemed to be incorporated by reference from selected portions of the Registrant's definitive proxy statement for the annual meeting of shareholders to be held on May 22, 2025, if such proxy statement is filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the Registrant's most recently completed fiscal year, or (ii) included in an amendment to this report filed with the Commission on Form 10-K/A not later than the end of such 120 day period.

TABLE OF CONTENTS

Page

Number

PART I

Item 1

Business

2

Item 1A

Risk Factors

11

Item 1B

Unresolved Staff Comments

26

Item 1C

Cybersecurity

26

Item 2

Properties

27

Item 3

Legal Proceedings

28

Item 4

Mine Safety Disclosures

28

PART II

Item 5

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

29

Item 6

[Reserved]

30

Item 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

30

Item 7A

Quantitative and Qualitative Disclosures About Market Risk

53

Item 8

Financial Statements and Supplementary Data

54

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

111

Item 9A

Controls and Procedures

111

Item 9B

Other Information

111

Item 9C

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

111

PART III

Item 10

Directors, Executive Officers and Corporate Governance

112

Item 11

Executive Compensation

112

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

112

Item 13

Certain Relationships and Related Transactions, and Director Independence

112

Item 14

Principal Accountant Fees and Services

112

PART IV

Item 15

Exhibits and Financial Statement Schedules

113

Item 16

Form 10-K Summary

115

Signatures

116

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

CODM

Chief Operating Decision Maker

COVID-19

Coronavirus Disease

CRE

Commercial Real Estate

CMO

Collateralized mortgage obligation

DFPI

State Department of Financial Protection and Innovation

FASB

Financial Accounting Standards Board

FDIC

Federal Deposit Insurance Corporation

FDIA

Federal Deposit Insurance Act

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

LIBOR

London Interbank Offered Rate

NIM

Net interest margin

NPA

Nonperforming assets

OCI

Other comprehensive income

PCD

Purchase Credit Deteriorated

ROUA

Right-of-Use Asset

RSU

Restricted Stock Unit

SBA

Small Business Administration

SERP

Supplemental Executive Retirement Plan

SFR

Single Family Residence

SOFR

Secured Overnight Financing Rate

TDR

Troubled Debt Restructuring

VRB

Valley Republic Bancorp

XBRL

eXtensible Business Reporting Language

Disclaimer

TriCo Bancshares published this content on April 18, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 18, 2025 at 20:13 UTC.