EX-99.1 2 tcbk-20236308xk.htm EX-99.1
Exhibit 99.1

Contact: Peter G. Wiese, EVP & CFO, (530) 898-0300
For Immediate Release

TRICO BANCSHARES ANNOUNCES SECOND QUARTER 2023 RESULTS
Notable Items for Second Quarter 2023
•Net income was $24.9 million compared to $35.8 million in the trailing quarter, and compared to $31.4 million in the same quarter of the prior year; Pre-tax pre-provision net revenue was $43.1 million compared to $53.2 million in the trailing quarter, and compared to $45.2 million in the same quarter of the prior year
•Loan balances increased by $98.3 million or 6.1% (annualized) versus the prior quarter and deposit balances increased by $69.5 million or 3.5% (annualized) versus the prior quarter and the Bank has not utilized brokered deposits or FRB borrowing facilities
•The average cost of total deposits was 0.58% for the quarter as compared to 0.25% in the trailing quarter and 0.04% in the same quarter of the prior year and, as a result, the Company's total cost of deposits have increased 54 basis points since FOMC rate actions began, which translates to a cycle-to-date deposit beta of 10.8%
•Balance sheet flexibility remains anchored in readily accessible sources of liquidity including undrawn borrowing capacities, on-balance sheet cash and unpledged investment securities totaling nearly $4.4 billion
•Overall credit quality remains within historical norms as non-performing assets represent approximately 0.41% of total assets and the ratio of classified loans to total loans remains below one percent
•Average yield on earning assets was 4.78%, an increase of 14 basis points over the 4.64% in the trailing quarter; net interest margin was 3.96%, a change of 25 basis points from 4.21% in the trailing quarter
•Operations, as evidenced by the increase in the efficiency ratio from 50.3% in the trailing quarter to 58.7% in the current quarter, were impacted by a variety of both recurring and non-recurring activities
"We were pleased by our ability to grow deposits during the quarter while doing so without the use of brokered funding sources and at rates that were favorable to the Bank. Although nonaccrual and classified loans have increased, they remain below historical averages. Through the Bank's ongoing portfolio review processes and active management, we have not identified any evidence of systemic risk," explained Rick Smith, President and Chief Executive Officer. Peter Wiese, EVP and Chief Financial Officer added, "As deposit balances grew and repayment of principal from the investment security portfolio accelerated, excess proceeds were utilized to reduce the balance and costs associated with short-term borrowing. As we look to the second half of 2023, margin preservation and expense control will be our focused priorities."
CHICO, CA – (July 26, 2023) – TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $24.9 million for the quarter ended June 30, 2023, compared to $35.8 million during the trailing quarter ended March 31, 2023, and $31.4 million during the quarter ended June 30, 2022. Diluted earnings per share were $0.75 for the second quarter of 2023, compared to $1.07 for the first quarter of 2023 and $0.93 during the second quarter of 2022.
Financial Highlights
Performance highlights for the Company as of or for the three and six months ended June 30, 2023, included the following:
•For the quarter ended June 30, 2023, the Company’s return on average assets was 1.01%, while the return on average equity was 8.98%.
•Deposit balances for the quarter ended June 30, 2023, increased by $69.5 million as compared to March 31, 2023. Loan growth for the quarter exceeded deposit growth, resulting in the loan to deposit ratio increasing to 80.5% as of June 30, 2023, as compared to 80.0% as of the trailing quarter.
•The efficiency ratio was 54.4% and 55.67% for the six months ended June 30, 2023 and 2022, respectively.
•The provision for credit losses for loans and debt securities was approximately $9.7 million during the quarter ended June 30, 2023, as compared to a provision for credit losses of $4.2 million during the trailing quarter ended March 31, 2023, and a provision for credit losses of $2.1 million for the three-month period ended June 30, 2022.
•The allowance for credit losses to total loans was 1.80% as of June 30, 2023, compared to 1.69% as of the trailing quarter end, and 1.60% as of June 30, 2022. Non-performing assets to total assets were 0.41% on June 30, 2023, as compared to 0.20% as of March 31, 2023, and 0.15% at June 30, 2022.
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Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the period ended June 30, 2023, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.
1

Summary Results
The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:

| Three months ended |  |  |  |
| June 30, |  | March 31, |  |  |  |
(dollars and shares in thousands, except per share data) | 2023 |  | 2023 |  | $ Change |  | % Change
Net interest income | $ | 88,601 |  |  | $ | 93,336 |  |  | $ | (4,735) |  |  | (5.1) | %
Provision for credit losses | (9,650) |  |  | (4,195) |  |  | (5,455) |  |  | 130.0 | %
Noninterest income | 15,741 |  |  | 13,635 |  |  | 2,106 |  |  | 15.4 | %
Noninterest expense | (61,243) |  |  | (53,794) |  |  | (7,449) |  |  | 13.8 | %
Provision for income taxes | (8,557) |  |  | (13,149) |  |  | 4,592 |  |  | (34.9) | %
Net income | $ | 24,892 |  |  | $ | 35,833 |  |  | $ | (10,941) |  |  | (30.5) | %
Diluted earnings per share | $ | 0.75 |  |  | $ | 1.07 |  |  | $ | (0.32) |  |  | (29.9) | %
Dividends per share | $ | 0.30 |  |  | $ | 0.30 |  |  | $ | — |  |  | — | %
Average common shares | 33,219 |  |  | 33,296 |  |  | (77) |  |  | (0.2) | %
Average diluted common shares | 33,302 |  |  | 33,438 |  |  | (136) |  |  | (0.4) | %
Return on average total assets | 1.01 | % |  | 1.47 | % |  |  |  |
Return on average equity | 8.98 | % |  | 13.36 | % |  |  |  |
Efficiency ratio | 58.69 | % |  | 50.29 | % |  |  |  |

| Three months ended June 30, |  |  |  |
(dollars and shares in thousands, except per share data) | 2023 |  | 2022 |  | $ Change |  | % Change
Net interest income | $ | 88,601 |  |  | $ | 85,046 |  |  | $ | 3,555 |  |  | 4.2 | %
Provision for credit losses | (9,650) |  |  | (2,100) |  |  | (7,550) |  |  | 359.5 | %
Noninterest income | 15,741 |  |  | 16,430 |  |  | (689) |  |  | (4.2) | %
Noninterest expense | (61,243) |  |  | (56,264) |  |  | (4,979) |  |  | 8.8 | %
Provision for income taxes | (8,557) |  |  | (11,748) |  |  | 3,191 |  |  | (27.2) | %
Net income | $ | 24,892 |  |  | $ | 31,364 |  |  | $ | (6,472) |  |  | (20.6) | %
Diluted earnings per share | $ | 0.75 |  |  | $ | 0.93 |  |  | $ | (0.18) |  |  | (19.4) | %
Dividends per share | $ | 0.30 |  |  | $ | 0.25 |  |  | $ | 0.05 |  |  | 20.0 | %
Average common shares | 33,219 |  |  | 33,561 |  |  | (342) |  |  | (1.0) | %
Average diluted common shares | 33,302 |  |  | 33,705 |  |  | (403) |  |  | (1.2) | %
Return on average total assets | 1.01 | % |  | 1.24 | % |  |  |  |
Return on average equity | 8.98 | % |  | 11.53 | % |  |  |  |
Efficiency ratio | 58.69 | % |  | 55.45 | % |  |  |  |

| Six months ended June 30, |  |
(dollars and shares in thousands) | 2023 |  | 2022 |  | $ Change |  | % Change
Net interest income | $ | 181,937 |  |  | $ | 152,970 |  |  | $ | 28,967 |  |  | 18.9 | %
Provision for credit losses | (13,845) |  |  | (10,430) |  |  | (3,415) |  |  | 32.7 | %
Noninterest income | 29,376 |  |  | 31,526 |  |  | (2,150) |  |  | (6.8) | %
Noninterest expense | (115,037) |  |  | (102,711) |  |  | (12,326) |  |  | 12.0 | %
Provision for income taxes | (21,706) |  |  | (19,617) |  |  | (2,089) |  |  | 10.6 | %
Net income | $ | 60,725 |  |  | $ | 51,738 |  |  | $ | 8,987 |  |  | 17.4 | %
Diluted earnings per share | $ | 1.82 |  |  | $ | 1.62 |  |  | $ | 0.20 |  |  | 12.4 | %
Dividends per share | $ | 0.60 |  |  | $ | 0.50 |  |  | $ | 0.10 |  |  | 20.0 | %
Average common shares | 33,257 |  |  | 31,815 |  |  | 1,442 |  |  | 4.5 | %
Average diluted common shares | 33,371 |  |  | 31,963 |  |  | 1,408 |  |  | 4.4 | %
Return on average total assets | 1.24 | % |  | 1.10 | % |  |  |  |
Return on average equity | 11.13 | % |  | 9.93 | % |  |  |  |
Efficiency ratio | 54.44 | % |  | 55.67 | % |  |  |  |

2

Balance Sheet
Total loans outstanding, excluding PPP, grew to $6.5 billion as of June 30, 2023, an increase of 7.0% over the prior twelve months, and is entirely related to organic loan growth. As compared to March 31, 2023, total loans outstanding increased by $98.3 million or 6.1% annualized. Investments decreased to $2.49 billion as of June 30, 2023, an annualized decrease of 14.3% over the prior year quarter end. Quarterly average earning assets to quarterly total average assets were 91.6% on June 30, 2023, as compared to 91.4% and 92.2% at December 31, 2022, and June 30, 2022, respectively. The loan-to-deposit ratio was 80.5% on June 30, 2023, as compared to 80.0% and 69.8% at December 31, 2022, and June 30, 2022, respectively. During the current year to date period, and throughout the 2022 fiscal year, the Company held no brokered deposits and relied solely on short-term borrowings to fund cash flow timing differences.
Total shareholders' equity increased by $2.5 million during the quarter ended June 30, 2023, as a result of accumulated other comprehensive losses increasing by $11.9 million and cash dividend payments on common stock of approximately $10.0 million, offset by net income of $24.9 million. As a result, the Company’s book value was $32.86 per share at June 30, 2023, as compared to $32.84 and $31.25 at December 31, 2022 and June 30, 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 $23.30 per share at June 30, 2023, as compared to $23.22 and $21.41 at December 31, 2022, and June 30, 2022, respectively.
Trailing Quarter Balance Sheet Change

Ending balances | June 30, |  | March 31, |  |  |  |  |  |  |  | Annualized % Change
(dollars in thousands) | 2023 |  | 2023 |  | $ Change |  |
Total assets | $ | 9,853,421 |  |  | $ | 9,842,394 |  |  | $ | 11,027 |  |  |  |  |  |  | 0.4 | %
Total loans | 6,520,740 |  |  | 6,422,421 |  |  | 98,319 |  |  |  |  |  |  | 6.1 |
Total investments | 2,485,378 |  |  | 2,577,769 |  |  | (92,391) |  |  |  |  |  |  | (14.3) |
Total deposits | 8,095,365 |  |  | 8,025,865 |  |  | 69,500 |  |  |  |  |  |  | 3.5 |
Total other borrowings | $ | 392,714 |  |  | $ | 434,140 |  |  | $ | (41,426) |  |  |  |  |  |  | (38.2) | %

Loans outstanding increased by $98.3 million or 6.1% on an annualized basis during the quarter ended June 30, 2023. During the quarter, loan originations/draws totaled approximately $456.0 million while payoffs/repayments of loans totaled $356.0 million, which compares to originations/draws and payoffs/repayments during the trailing quarter ended of $357.0 million and $389.0 million, respectively. While origination volume increased from the previous quarter, activity levels continue to be lower relative to the comparative period in 2022 due in part to disciplined pricing and underwriting, as well as decreased borrower appetite at currently offered lending rates. Management continues to believe that the current loan pipeline is sufficient to support the Company's objectives. Investment security balances decreased $92.4 million or 14.3% on an annualized basis as the result of net prepayments, maturities, and purchases totaling approximating $75.2 million and net decreases in the market value of securities of $16.9 million. Management seeks to utilize excess cash flows from the investment security portfolio to support loan growth or reduce borrowings thus resulting in an improved mix of earning assets. Deposit balances increased by $69.5 million or 3.5% annualized during the period. Net cash flow surpluses during the quarter resulted in a net decrease of $41.4 million in short-term borrowings, which totaled $392.7 million as of the period ended June 30, 2023.
Average Trailing Quarter Balance Sheet Change

Quarterly average balances for the period ended | June 30, |  | March 31, |  |  |  |  |  |  |  | Annualized % Change |  |  |  |  |  |
(dollars in thousands) | 2023 |  | 2023 |  | $ Change |  |  |  |  |
Total assets | $ | 9,848,191 |  |  | $ | 9,878,927 |  |  | $ | (30,736) |  |  |  |  |  |  | (1.2) | % |  |  |  |  |  |
Total loans | 6,467,381 |  |  | 6,413,958 |  |  | 53,423 |  |  |  |  |  |  | 3.3 |  |  |  |  |  |  |
Total investments | 2,525,334 |  |  | 2,587,285 |  |  | (61,951) |  |  |  |  |  |  | (9.6) |  |  |  |  |  |  |
Total deposits | 7,981,515 |  |  | 8,218,576 |  |  | (237,061) |  |  |  |  |  |  | (11.5) |  |  |  |  |  |  |
Total other borrowings | $ | 477,256 |  |  | $ | 277,632 |  |  | $ | 199,624 |  |  |  |  |  |  | 287.6 | % |  |  |  |  |  |

Year Over Year Balance Sheet Change

Ending balances | As of June 30, |  |  |  |  |  |  |  | % Change
(dollars in thousands) | 2023 |  | 2022 |  | $ Change |  |
Total assets | $ | 9,853,421 |  |  | $ | 10,120,611 |  |  | $ | (267,190) |  |  |  |  |  |  | (2.6) | %
Total loans | 6,520,740 |  |  | 6,113,421 |  |  | 407,319 |  |  |  |  |  |  | 6.7 |
Total loans, excluding PPP | 6,519,316 |  |  | 6,095,667 |  |  | 423,649 |  |  |  |  |  |  | 7.0 |
Total investments | 2,485,378 |  |  | 2,802,815 |  |  | (317,437) |  |  |  |  |  |  | (11.3) |
Total deposits | 8,095,365 |  |  | 8,756,775 |  |  | (661,410) |  |  |  |  |  |  | (7.6) |
Total other borrowings | $ | 392,714 |  |  | $ | 35,089 |  |  | $ | 357,625 |  |  |  |  |  |  | 1,019.2 | %

3

Non-PPP loan balances increased as a result of organic activities by approximately $423.6 million or 7.0% during the twelve-month period ending June 30, 2023. Over the same period deposit balances have declined by $661.4 million or 7.6%. The Company has offset these declines through the deployment of excess cash balances, runoff of investment security balances, and proceeds from short-term FHLB borrowings. As of June 30, 2023, short-term borrowings from the FHLB totaled $394.1 million and had an interest rate of 5.11%.
Liquidity
The Company's primary sources of liquidity include the following for the periods indicated:

(dollars in thousands) | June 30, 2023 |  | March 31, 2023 |  | June 30, 2022
Borrowing capacity at correspondent banks and FRB | $ | 2,847,052 |  |  | $ | 2,853,219 |  |  | $ | 2,690,597 |
Less: borrowings outstanding | (350,000) |  |  | (394,095) |  |  | — |
Unpledged available-for-sale (AFS) investment securities | 1,813,894 |  |  | 1,883,353 |  |  | 2,192,704 |
Cash held or in transit with FRB | 79,530 |  |  | 67,468 |  |  | 432,190 |
Total primary liquidity | $ | 4,390,476 |  |  | $ | 4,409,945 |  |  | $ | 5,315,491 |

Estimated uninsured deposit balances | $ | 2,522,718 |  |  | $ | 2,312,309 |  |  | $ | 2,950,614 |

At June 30, 2023, the Company's primary sources of liquidity represented 54.2% of total deposits and 174% of estimated total uninsured (excluding collateralized municipal deposits and intercompany balances) deposits, respectively. As secondary sources of liquidity, the Company's held-to-maturity investment securities had a fair value of $134.4 million, including approximately $10.7 million in net unrealized losses. The Company did not utilize any brokered deposits during 2023 or 2022.
Net Interest Income and Net Interest Margin
During the twelve-month period ended June 30, 2023, the Federal Open Market Committee's (FOMC) actions have resulted in an increase in the Fed Funds Rate by 350 basis points. During the same period the Company's yield on total loans (excluding PPP) increased 68 basis points to 5.38% for the three months ended June 30, 2023, from 4.70% for the three months ended June 30, 2022. Moreover, the tax equivalent yield on the Company's investment security portfolio increased by 88 basis points to 3.24% during the twelve months ended June 30, 2023. The cost of total interest-bearing deposits and total interest-bearing liabilities increased by 88 basis points and 122 basis points, respectively, between the three-month periods ended June 30, 2023 and 2022. Since FOMC rate actions began, the Company's cost of total deposits has increased 54 basis points which translates to a cycle to date deposit beta of 10.80%.
The Company continues to manage its cost of deposits through the use of pricing strategies and delayed changes to the deposit rates offered to the general public. As of June 30, 2023, March 31, 2023, and December 31, 2022, total deposits priced utilizing these strategies totaled $1,070.7 million, $731.9 million and $579.1 million, respectively, and carried weighted average rates of 3.38%, 2.68% and 1.64%, respectively.
The following is a summary of the components of net interest income for the periods indicated:

| Three months ended |  |  |  |
| June 30, |  | March 31, |  |  |  |
(dollars in thousands) | 2023 |  | 2023 |  | Change |  | % Change
Interest income | $ | 107,158 |  |  | $ | 102,907 |  |  | $ | 4,251 |  |  | 4.1 | %
Interest expense | (18,557) |  |  | (9,571) |  |  | (8,986) |  |  | 93.9 | %
Fully tax-equivalent adjustment (FTE) (1) | 379 |  |  | 392 |  |  | (13) |  |  | (3.3) | %
Net interest income (FTE) | $ | 88,980 |  |  | $ | 93,728 |  |  | $ | (4,748) |  |  | (5.1) | %
Net interest margin (FTE) | 3.96 | % |  | 4.21 | % |  |  |  |
Acquired loans discount accretion, net: |  |  |  |  |  |  |
Amount (included in interest income) | $ | 1,471 |  |  | $ | 1,397 |  |  | $ | 74 |  |  | 5.3 | %
Net interest margin less effect of acquired loan discount accretion(1) | 3.89 | % |  | 4.15 | % |  | (0.26) | % |  |
PPP loans yield, net: |  |  |  |  |  |  |
Amount (included in interest income) | $ | 4 |  |  | $ | 5 |  |  | $ | (1) |  |  | (20.0) | %
Net interest margin less effect of PPP loan yield (1) | 3.96 | % |  | 4.21 | % |  | (0.25) | % |  |
Acquired loans discount accretion and PPP loan yield, net: |  |  |  |  |  |  |
Amount (included in interest income) | $ | 1,475 |  |  | $ | 1,402 |  |  | $ | 73 |  |  | 5.2 | %
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1) | 3.89 | % |  | 4.15 | % |  | (0.26) | % |  |

4

| Three months ended June 30, |  |  |  |
(dollars in thousands) | 2023 |  | 2022 |  | Change |  | % Change
Interest income | $ | 107,158 |  |  | $ | 86,955 |  |  | $ | 20,203 |  |  | 23.2 | %
Interest expense | (18,557) |  |  | (1,909) |  |  | (16,648) |  |  | 872.1 | %
Fully tax-equivalent adjustment (FTE) (1) | 379 |  |  | 397 |  |  | (18) |  |  | (4.5) | %
Net interest income (FTE) | $ | 88,980 |  |  | $ | 85,443 |  |  | $ | 3,537 |  |  | 4.1 | %
Net interest margin (FTE) | 3.96 | % |  | 3.67 | % |  |  |  |
Acquired loans discount accretion, net: |  |  |  |  |  |  |
Amount (included in interest income) | $ | 1,471 |  |  | $ | 1,677 |  |  | $ | (206) |  |  | (12.3) | %
Net interest margin less effect of acquired loan discount accretion(1) | 3.89 | % |  | 3.60 | % |  | 0.29 | % |  |
PPP loans yield, net: |  |  |  |  |  |  |
Amount (included in interest income) | $ | 4 |  |  | $ | 964 |  |  | $ | (960) |  |  | (99.6) | %
Net interest margin less effect of PPP loan yield (1) | 3.96 | % |  | 3.64 | % |  | 0.32 | % |  |
Acquired loans discount accretion and PPP loan yield, net: |  |  |  |  |  |  |
Amount (included in interest income) | $ | 1,475 |  |  | $ | 2,641 |  |  | $ | (1,166) |  |  | (44.1) | %
Net interest margin less effect of acquired loan discount accretion and PPP loan yield (1) | 3.89 | % |  | 3.57 | % |  | 0.32 | % |  |

| Six months ended June 30, |  |  |  |
(dollars in thousands) | 2023 |  | 2022 |  | Change |  | % Change
Interest income | $ | 210,064 |  |  | $ | 156,150 |  |  | $ | 53,914 |  |  | 34.5 | %
Interest expense | (28,127) |  |  | (3,180) |  |  | (24,947) |  |  | 784.5 | %
Fully tax-equivalent adjustment (FTE) (1) | 770 |  |  | 680 |  |  | 90 |  |  | 13.2 | %
Net interest income (FTE) | $ | 182,707 |  |  | $ | 153,650 |  |  | $ | 29,057 |  |  | 18.9 | %
Net interest margin (FTE) | 4.08 | % |  | 3.54 | % |  |  |  |
Acquired loans discount accretion, net: |  |  |  |  |  |  |
Amount (included in interest income) | $ | 2,868 |  |  | $ | 3,000 |  |  | $ | (132) |  |  | (4.4) | %
Net interest margin less effect of acquired loan discount accretion(1) | 4.02 | % |  | 3.51 | % |  | 0.51 | % |  |
PPP loans yield, net: |  |  |  |  |  |  |
Amount (included in interest income) | $ | 9 |  |  | $ | 2,061 |  |  | $ | (2,052) |  |  | (99.6) | %
Net interest margin less effect of PPP loan yield (1) | 4.08 | % |  | 3.51 | % |  | 0.57 | % |  |
Acquired loans discount accretion and PPP loan yield, net: |  |  |  |  |  |  |
Amount (included in interest income) | $ | 2,877 |  |  | $ | 5,061 |  |  | $ | (2,184) |  |  | (43.2) | %
Net interest margin less effect of acquired loans discount and PPP loan yield (1) | 4.02 | % |  | 3.44 | % |  | 0.58 | % |  |

(1)Certain information included herein is presented on a fully tax-equivalent (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 these non-generally accepted accounting principles (non-GAAP) measures provide additional clarity in assessing its results, and the presentation of these measures are common practice within the banking industry. See additional information related to non-GAAP measures at the back of this document.
Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. The dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. As a result of the increase in interest rates, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, declined during 2023 as compared to 2022. During the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, purchased loan discount accretion was $1.5 million, $1.4 million, and $1.7 million, respectively.
5

The following table shows the components of net interest income and net interest margin on a fully tax-equivalent (FTE) basis for the quarterly periods indicated:
ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS
(unaudited, dollars in thousands)

| Three months ended |  | Three months ended |  | Three months ended
| June 30, 2023 |  | March 31, 2023 |  | June 30, 2022
| Average Balance |  | Income/ Expense |  | Yield/ Rate |  | Average Balance |  | Income/ Expense |  | Yield/ Rate |  | Average Balance |  | Income/ Expense |  | Yield/ Rate
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans, excluding PPP | $ | 6,465,903 |  |  | $ | 86,743 |  |  | 5.38 | % |  | $ | 6,412,386 |  |  | $ | 82,410 |  |  | 5.21 | % |  | $ | 5,890,578 |  |  | $ | 68,954 |  |  | 4.70 | %
PPP loans | 1,478 |  |  | 4 |  |  | 1.09 | % |  | 1,572 |  |  | 5 |  |  | 1.29 | % |  | 37,852 |  |  | 964 |  |  | 10.22 | %
Investments-taxable | 2,343,511 |  |  | 18,775 |  |  | 3.21 | % |  | 2,398,235 |  |  | 18,916 |  |  | 3.20 | % |  | 2,536,362 |  |  | 14,350 |  |  | 2.27 | %
Investments-nontaxable (1) | 181,823 |  |  | 1,641 |  |  | 3.62 | % |  | 189,050 |  |  | 1,699 |  |  | 3.64 | % |  | 196,104 |  |  | 1,720 |  |  | 3.52 | %
Total investments | 2,525,334 |  |  | 20,416 |  |  | 3.24 | % |  | 2,587,285 |  |  | 20,615 |  |  | 3.23 | % |  | 2,732,466 |  |  | 16,070 |  |  | 2.36 | %
Cash at Federal Reserve and other banks | 29,349 |  |  | 374 |  |  | 5.11 | % |  | 26,818 |  |  | 269 |  |  | 4.07 | % |  | 669,163 |  |  | 1,364 |  |  | 0.82 | %
Total earning assets | 9,022,064 |  |  | 107,537 |  |  | 4.78 | % |  | 9,028,061 |  |  | 103,299 |  |  | 4.64 | % |  | 9,330,059 |  |  | 87,352 |  |  | 3.76 | %
Other assets, net | 826,127 |  |  |  |  |  |  | 850,866 |  |  |  |  |  |  | 791,655 |  |  |  |  |
Total assets | $ | 9,848,191 |  |  |  |  |  |  | $ | 9,878,927 |  |  |  |  |  |  | $ | 10,121,714 |  |  |  |  |
Liabilities and shareholders’ equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing demand deposits | $ | 1,657,714 |  |  | $ | 2,173 |  |  | 0.53 | % |  | $ | 1,673,114 |  |  | $ | 387 |  |  | 0.09 | % |  | $ | 1,799,205 |  |  | $ | 99 |  |  | 0.02 | %
Savings deposits | 2,768,981 |  |  | 6,936 |  |  | 1.00 | % |  | 2,898,463 |  |  | 4,154 |  |  | 0.58 | % |  | 3,003,337 |  |  | 529 |  |  | 0.07 | %
Time deposits | 426,689 |  |  | 2,348 |  |  | 2.21 | % |  | 274,805 |  |  | 604 |  |  | 0.89 | % |  | 337,007 |  |  | 220 |  |  | 0.26 | %
Total interest-bearing deposits | 4,853,384 |  |  | 11,457 |  |  | 0.95 | % |  | 4,846,382 |  |  | 5,145 |  |  | 0.43 | % |  | 5,139,549 |  |  | 848 |  |  | 0.07 | %
Other borrowings | 477,256 |  |  | 5,404 |  |  | 4.54 | % |  | 277,632 |  |  | 2,809 |  |  | 4.10 | % |  | 35,253 |  |  | 5 |  |  | 0.06 | %
Junior subordinated debt | 101,056 |  |  | 1,696 |  |  | 6.73 | % |  | 101,044 |  |  | 1,617 |  |  | 6.49 | % |  | 100,991 |  |  | 1,056 |  |  | 4.19 | %
Total interest-bearing liabilities | 5,431,696 |  |  | 18,557 |  |  | 1.37 | % |  | 5,225,058 |  |  | 9,571 |  |  | 0.74 | % |  | 5,275,793 |  |  | 1,909 |  |  | 0.15 | %
Noninterest-bearing deposits | 3,128,131 |  |  |  |  |  |  | 3,372,194 |  |  |  |  |  |  | 3,603,771 |  |  |  |  |
Other liabilities | 176,141 |  |  |  |  |  |  | 194,202 |  |  |  |  |  |  | 150,696 |  |  |  |  |
Shareholders’ equity | 1,112,223 |  |  |  |  |  |  | 1,087,473 |  |  |  |  |  |  | 1,091,454 |  |  |  |  |
Total liabilities and shareholders’ equity | $ | 9,848,191 |  |  |  |  |  |  | $ | 9,878,927 |  |  |  |  |  |  | $ | 10,121,714 |  |  |  |  |
Net interest rate spread (1) (2) |  |  |  |  | 3.41 | % |  |  |  |  |  | 3.90 | % |  |  |  |  |  | 3.61 | %
Net interest income and margin (1) (3) |  |  | $ | 88,980 |  |  | 3.96 | % |  |  |  | $ | 93,728 |  |  | 4.21 | % |  |  |  | $ | 85,443 |  |  | 3.67 | %

(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 is 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.
Net interest income (FTE) during the three months ended June 30, 2023, decreased $4.7 million or 5.1% to $89.0 million compared to $93.7 million during the three months ended March 31, 2023. In addition, net interest margin declined 25 basis points to 3.96%, compared to the trailing quarter. The decrease in net interest income is primarily attributed to an additional $6.3 million in deposit interest expense and $2.6 million in additional interest expense on other borrowings, both due to increases in interest rates as compared to the trailing quarter. As a partial offset, total interest income also increased as compared to the trailing quarter, up $4.3 million or 4.1%.
As compared to the same quarter in the prior year, average loan yields, excluding PPP, increased 68 basis points from 4.70% during the three months ended June 30, 2022, to 5.38% during the three months ended June 30, 2023. The accretion of discounts from acquired loans added 9 and 11 basis points to loan yields during the quarters ended June 30, 2023 and June 30, 2022, respectively.
The rates paid on interest bearing deposits increased by 52 basis points during the quarter ended June 30, 2023, compared to the trailing quarter. The cost of interest-bearing deposits increased by 88 basis points between the quarter ended June 30, 2023, and the same quarter of the prior year. In addition, the average balance of noninterest-bearing deposits decreased by $244.1 million quarter over quarter. As of June 30, 2023, the ratio of average total noninterest-bearing deposits to total average deposits was 39.2%, as compared to 41.0% and 41.2% at March 31, 2023 and June 30, 2022, respectively.
6

| Six months ended June 30, 2023 |  | Six months ended June 30, 2022
| Average Balance |  | Income/ Expense |  | Yield/ Rate |  | Average Balance |  | Income/ Expense |  | Yield/ Rate
Assets |  |  |  |  |  |  |  |  |  |  |
Loans, excluding PPP | $ | 6,439,292 |  |  | $ | 169,152 |  |  | 5.30 | % |  | $ | 5,416,854 |  |  | $ | 125,602 |  |  | 4.68 | %
PPP loans | 1,525 |  |  | 9 |  |  | 1.19 | % |  | 44,238 |  |  | 2,061 |  |  | 9.40 | %
Investments-taxable | 2,370,722 |  |  | 37,691 |  |  | 3.21 | % |  | 2,434,045 |  |  | 24,573 |  |  | 2.04 | %
Investments-nontaxable (1) | 185,417 |  |  | 3,340 |  |  | 3.63 | % |  | 170,132 |  |  | 2,945 |  |  | 3.49 | %
Total investments | 2,556,139 |  |  | 41,031 |  |  | 3.24 | % |  | 2,604,177 |  |  | 27,518 |  |  | 2.13 | %
Cash at Federal Reserve and other banks | 28,090 |  |  | 643 |  |  | 4.62 | % |  | 688,257 |  |  | 1,649 |  |  | 0.48 | %
Total earning assets | 9,025,046 |  |  | 210,835 |  |  | 4.71 | % |  | 8,753,526 |  |  | 156,830 |  |  | 3.61 | %
Other assets, net | 838,425 |  |  |  |  |  |  | 700,170 |  |  |  |  |
Total assets | $ | 9,863,471 |  |  |  |  |  |  | $ | 9,453,696 |  |  |  |  |
Liabilities and shareholders’ equity |  |  |  |  |  |  |  |  |  |  |
Interest-bearing demand deposits | $ | 1,665,371 |  |  | $ | 2,560 |  |  | 0.31 | % |  | $ | 1,698,815 |  |  | $ | 183 |  |  | 0.02 | %
Savings deposits | 2,833,365 |  |  | 11,090 |  |  | 0.79 | % |  | 2,788,374 |  |  | 856 |  |  | 0.06 | %
Time deposits | 351,166 |  |  | 2,952 |  |  | 1.70 | % |  | 319,351 |  |  | 488 |  |  | 0.31 | %
Total interest-bearing deposits | 4,849,902 |  |  | 16,602 |  |  | 0.69 | % |  | 4,806,540 |  |  | 1,527 |  |  | 0.06 | %
Other borrowings | 377,995 |  |  | 8,212 |  |  | 4.38 | % |  | 39,966 |  |  | 10 |  |  | 0.05 | %
Junior subordinated debt | 101,050 |  |  | 3,314 |  |  | 6.61 | % |  | 81,092 |  |  | 1,643 |  |  | 4.09 | %
Total interest-bearing liabilities | 5,328,947 |  |  | 28,128 |  |  | 1.06 | % |  | 4,927,598 |  |  | 3,180 |  |  | 0.13 | %
Noninterest-bearing deposits | 3,249,488 |  |  |  |  |  |  | 3,329,459 |  |  |  |  |
Other liabilities | 185,123 |  |  |  |  |  |  | 146,073 |  |  |  |  |
Shareholders’ equity | 1,099,913 |  |  |  |  |  |  | 1,050,566 |  |  |  |  |
Total liabilities and shareholders’ equity | $ | 9,863,471 |  |  |  |  |  |  | $ | 9,453,696 |  |  |  |  |
Net interest rate spread (1) (2) |  |  |  |  | 3.65 | % |  |  |  |  |  | 3.48 | %
Net interest income and margin (1) (3) |  |  | $ | 182,707 |  |  | 4.08 | % |  |  |  | $ | 153,650 |  |  | 3.54 | %

(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 is 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.
Interest Rates and Earning Asset Composition
During the quarter ended June 30, 2023, market interest rates, including many rates that serve as reference indices for variable rate loans and investment securities continued to increase. As noted above, these rate increases have continued to benefit growth in total interest income. As of June 30, 2023, the Company's loan portfolio consisted of approximately $6.5 billion in outstanding principal with a weighted average coupon rate of 5.15%. During the three-month periods ending June 30, 2023, March 31, 2023, and December 31, 2022, the weighted average coupon on loan production in the quarter was 6.85%, 6.71%, and 6.05%, respectively. Included in the June 30, 2023 loan total are adjustable rate loans totaling $3.8 billion, of which, $859.9 million are considered floating based on the Wall Street Prime index. In addition, the Company holds certain investment securities with fair values totaling $375.5 million which are subject to repricing on not less than a quarterly basis.
Asset Quality and Credit Loss Provisioning
During the three months ended June 30, 2023, the Company recorded a provision for credit losses of $9.7 million, as compared to $4.2 million during the trailing quarter, and $2.1 million during the first quarter of 2022.
The following table presents details of the provision for credit losses for the periods indicated:

| Three months ended |  | Six months ended |  |  |  |  |  |  |  |
(dollars in thousands) | June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  | June 30, 2022 |  | June 30, 2023 |  | June 30, 2022 |  |  |  |  |  |  |  |
Addition to allowance for credit losses | $ | 8,980 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 1,940 |  |  | $ | 13,295 |  |  | $ | 10,145 |  |  |  |  |  |  |  |  |
Addition to reserve for unfunded loan commitments | 670 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 160 |  |  | 550 |  |  | 285 |  |  |  |  |  |  |  |  |
Total provision for credit losses | $ | 9,650 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,100 |  |  | $ | 13,845 |  |  | $ | 10,430 |  |  |  |  |  |  |  |  |

7

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

| Three months ended |  | Six months ended
(dollars in thousands) | June 30, 2023 |  |  |  | June 30, 2022 |  | June 30, 2023 |  | June 30, 2022
Balance, beginning of period | $ | 108,407 |  |  |  |  | $ | 96,049 |  |  | $ | 105,680 |  |  | $ | 85,376 |
ACL at acquisition for PCD loans | — |  |  |  |  | — |  |  | — |  |  | 2,037 |
Provision for credit losses | 8,980 |  |  |  |  | 1,940 |  |  | 13,295 |  |  | 10,145 |
Loans charged-off | (277) |  |  |  |  | (401) |  |  | (2,035) |  |  | (1,144) |
Recoveries of previously charged-off loans | 219 |  |  |  |  | 356 |  |  | 389 |  |  | 1,530 |
Balance, end of period | $ | 117,329 |  |  |  |  | $ | 97,944 |  |  | $ | 117,329 |  |  | $ | 97,944 |

The allowance for credit losses (ACL) was $117.3 million as of June 30, 2023, a net increase of $8.9 million over the immediately preceding quarter. The provision for credit losses of $9.0 million during the recent quarter was the net effect of increases in required reserves due to individually analyzed credits, qualitative factors, and quantitative reserves under the cohort model. On a comparative basis, the provision for credit losses of $1.9 million during the three months ended June 30, 2022, was largely the result of loan growth in the period. For the current quarter, the qualitative components of the ACL resulted in a net increase in required reserves totaling approximately $2.9 million due to softening of the California employment data, and increase in the corporate debt yields. Meanwhile, the quantitative component of the ACL increased reserve requirements by approximately $6.0 million over the trailing quarter primarily due to increases in specific reserves.
The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date. This forecast data continues to evolve and includes improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date, particularly CA unemployment trends. Despite continued declines on a year over year comparative basis, core inflation remains elevated from wage pressures, and higher living costs such as housing and food prices. Management notes the rapid intervals of rate increases by the Federal Reserve and flattening or inversion of the yield curve, have informed expectations of the US entering a recession within 12 months. As a result, management continues to believe that certain credit weaknesses are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors.
Loans past due 30 days or more increased by $1.6 million during the quarter ended June 30, 2023, to $9.5 million, as compared to $7.9 million at March 31, 2023. Non-performing loans were $37.6 million at June 30, 2023, an increase of $21.6 million from $16.0 million as of March 31, 2023, and an increase of $25.7 million from $11.9 million as of June 30, 2022. The current quarter increase in non-performing assets is nearly entirely attributed to a single relationship. Of the $37.6 million loans designated as non-performing as of June 30, 2023, approximately $31.7 million are current with respect to payments required under their original loan agreements.
The following table illustrates the total loans by risk rating and their respective percentage of total loans for the periods presented:

| June 30, | % of Loans Outstanding |  | March 31, | % of Loans Outstanding |  | June 30, | % of Loans Outstanding |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(dollars in thousands) | 2023 |  | 2023 |  | 2022 |  |  |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 6,299,893 |  | 96.5 | % |  | $ | 6,232,962 |  | 97.0 | % |  | $ | 5,960,781 |  | 97.5 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Special Mention | 155,678 |  | 2.4 | % |  | 125,492 |  | 2.0 | % |  | 105,819 |  | 1.7 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Substandard | 65,169 |  | 1.1 | % |  | 63,967 |  | 1.0 | % |  | 46,821 |  | 0.8 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total | $ | 6,520,740 |  |  |  | $ | 6,422,421 |  |  |  | $ | 6,113,421 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Classified loans to total loans | 1.00 | % |  |  | 1.00 | % |  |  | 0.77 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans past due 30+ days to total loans | 0.15 | % |  |  | 0.12 | % |  |  | 0.10 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

The ratio of classified loans of 1.00% as of June 30, 2023, remained consistent with the trailing quarter, but increased by 23 basis points from June 30, 2022. The Company's criticized loan balances increased during the current quarter by $31.4 million to $220.8 million as of June 30, 2023. The recent increase in special mention loans as a percentage of total loans outstanding is consistent with volumes experienced prior to the recent quantitative easing cycle spurred by the COVID pandemic and reflects management's historically conservative approach to credit risk monitoring. The newly criticized special mention loans are spread amongst a handful of relationships, with diversity amongst geographies and collateral types.
There were no properties added or disposed within Other Real Estate Owned during the second quarter of 2023. Total write-downs of $0.5 million were incurred during the current quarter across four properties. As of June 30, 2023, other real estate owned consisted of nine properties with a carrying value of approximately $2.9 million.
Non-performing assets of $40.5 million at June 30, 2023, represented 0.41% of total assets, a change from the $19.5 million or 0.20% and $15.3 million or 0.15% as of March 31, 2023 and June 30, 2022, respectively.
8

Allocation of Credit Loss Reserves by Loan Type

| As of June 30, 2023 |  | As of March 31, 2023 |  | As of June 30, 2022 |
(dollars in thousands) | Amount |  | % of Loans Outstanding |  | Amount |  | % of Loans Outstanding |  | Amount |  | % of Loans Outstanding |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
CRE - Non Owner Occupied | $ | 33,042 |  |  | 1.54 | % |  | $ | 32,963 |  |  | 1.53 | % |  | $ | 28,081 |  |  | 1.41 | % |
CRE - Owner Occupied | 20,208 |  | 2.08 | % |  | 14,559 |  | 1.50 | % |  | 12,620 |  | 1.35 | % |
Multifamily | 14,075 |  | 1.48 | % |  | 13,873 |  | 1.47 | % |  | 11,795 |  | 1.36 | % |
Farmland | 3,691 |  | 1.33 | % |  | 3,542 |  | 1.29 | % |  | 2,954 |  | 1.17 | % |
Total commercial real estate loans | 71,016 |  | 1.63 | % |  | 64,937 |  | 1.49 | % |  | 55,450 |  | 1.37 | % |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
SFR 1-4 1st Liens | 13,134 |  | 1.58 | % |  | 11,920 |  | 1.48 | % |  | 10,311 |  | 1.43 | % |
SFR HELOCs and Junior Liens | 10,608 |  | 2.92 | % |  | 10,914 |  | 2.91 | % |  | 11,591 |  | 3.01 | % |
Other | 2,771 |  | 4.67 | % |  | 2,062 |  | 3.76 | % |  | 2,029 |  | 3.41 | % |
Total consumer loans | 26,513 |  | 2.12 | % |  | 24,896 |  | 2.02 | % |  | 23,931 |  | 2.06 | % |
Commercial and Industrial | 11,647 |  | 2.02 | % |  | 12,069 |  | 2.18 | % |  | 9,979 |  | 1.97 | % |
Construction | 7,031 |  | 2.53 | % |  | 5,655 |  | 2.50 | % |  | 7,522 |  | 2.40 | % |
Agricultural Production | 1,105 |  | 1.80 | % |  | 833 |  | 1.77 | % |  | 1,046 |  | 1.47 | % |
Leases | 17 |  | 0.20 | % |  | 17 |  | 0.20 | % |  | 16 |  | 0.20 | % |
Allowance for credit losses | 117,329 |  | 1.80 | % |  | 108,407 |  | 1.69 | % |  | 97,944 |  | 1.60 | % |
Reserve for unfunded loan commitments | 4,865 |  |  |  |  | 4,195 |  |  |  |  | 4,075 |  |  |  |
Total allowance for credit losses | $ | 122,194 |  |  | 1.87 | % |  | $ | 112,602 |  |  | 1.75 | % |  | $ | 102,019 |  |  | 1.67 | % |

In addition to the allowance for credit losses above, the Company has acquired various performing loans whose fair value as of the acquisition date was determined to be less than the principal balance owed on those loans. This difference represents the collective discount of credit, interest rate and liquidity measurements which is expected to be amortized over the life of the loans. As of June 30, 2023, the unamortized discount associated with acquired loans totaled $27.6 million.
Non-interest Income
The following table presents the key components of non-interest income for the current and trailing quarterly periods indicated:

| Three months ended |  |  |  |
(dollars in thousands) | June 30, 2023 |  | March 31, 2023 |  | Change |  | % Change
ATM and interchange fees | $ | 6,856 |  |  | $ | 6,344 |  |  | $ | 512 |  |  | 8.1 | %
Service charges on deposit accounts | 4,581 |  |  | 3,431 |  |  | 1,150 |  |  | 33.5 | %
Other service fees | 992 |  |  | 1,166 |  |  | (174) |  |  | (14.9) | %
Mortgage banking service fees | 454 |  |  | 465 |  |  | (11) |  |  | (2.4) | %
Change in value of mortgage servicing rights | 85 |  |  | (209) |  |  | 294 |  |  | (140.7) | %
Total service charges and fees | 12,968 |  |  | 11,197 |  |  | 1,771 |  |  | 15.8 | %
Increase in cash value of life insurance | 788 |  |  | 802 |  |  | (14) |  |  | (1.7) | %
Asset management and commission income | 1,158 |  |  | 934 |  |  | 224 |  |  | 24.0 | %
Gain on sale of loans | 295 |  |  | 206 |  |  | 89 |  |  | 43.2 | %
Lease brokerage income | 74 |  |  | 98 |  |  | (24) |  |  | (24.5) | %
Sale of customer checks | 407 |  |  | 288 |  |  | 119 |  |  | 41.3 | %
Loss on sale of investment securities | — |  |  | (164) |  |  | 164 |  |  | (100.0) | %
(Loss) gain on marketable equity securities | (42) |  |  | 42 |  |  | (84) |  |  | (200.0) | %
Other income | 93 |  |  | 232 |  |  | (139) |  |  | (59.9) | %
Total other non-interest income | 2,773 |  |  | 2,438 |  |  | 335 |  |  | 13.7 | %
Total non-interest income | $ | 15,741 |  |  | $ | 13,635 |  |  | $ | 2,106 |  |  | 15.4 | %

Non-interest income increased $2.1 million or 15.4% to $15.7 million during the three months ended June 30, 2023, compared to $13.6 million during the quarter ended March 31, 2023. Total service charges and fees increased by $1.8 million or 15.8% during the period, which is largely a return to normalcy following the waived or reversed fees during the first quarter of 2023 as previously disclosed.
9

The following table presents the key components of non-interest income for the current and prior year periods indicated:

| Three months ended June 30, |  |  |  |
(dollars in thousands) | 2023 |  | 2022 |  | Change |  | % Change
ATM and interchange fees | $ | 6,856 |  |  | $ | 6,984 |  |  | $ | (128) |  |  | (1.8) | %
Service charges on deposit accounts | 4,581 |  |  | 4,163 |  |  | 418 |  |  | 10.0 | %
Other service fees | 992 |  |  | 1,279 |  |  | (287) |  |  | (22.4) | %
Mortgage banking service fees | 454 |  |  | 482 |  |  | (28) |  |  | (5.8) | %
Change in value of mortgage servicing rights | 85 |  |  | 136 |  |  | (51) |  |  | (37.5) | %
Total service charges and fees | 12,968 |  |  | 13,044 |  |  | (76) |  |  | (0.6) | %
Increase in cash value of life insurance | 788 |  |  | 752 |  |  | 36 |  |  | 4.8 | %
Asset management and commission income | 1,158 |  |  | 1,039 |  |  | 119 |  |  | 11.5 | %
Gain on sale of loans | 295 |  |  | 542 |  |  | (247) |  |  | (45.6) | %
Lease brokerage income | 74 |  |  | 238 |  |  | (164) |  |  | (68.9) | %
Sale of customer checks | 407 |  |  | 441 |  |  | (34) |  |  | (7.7) | %
Loss on sale of investment securities | — |  |  | — |  |  | — |  |  | — | %
Loss on marketable equity securities | (42) |  |  | (94) |  |  | 52 |  |  | (55.3) | %
Other income | 93 |  |  | 468 |  |  | (375) |  |  | (80.1) | %
Total other non-interest income | 2,773 |  |  | 3,386 |  |  | (613) |  |  | (18.1) | %
Total non-interest income | $ | 15,741 |  |  | $ | 16,430 |  |  | $ | (689) |  |  | (4.2) | %

Non-interest income decreased $0.7 million or 4.2% to $15.7 million during the three months ended June 30, 2023, compared to $16.4 million during the quarter ended June 30, 2022. The declining mortgage related activity resulting from elevated interest rates reduced income recorded from the sale of loans by $0.2 million or 45.6%, and to a lesser extent a smaller change in the fair value of mortgage servicing rights, as compared to the three months ended June 30, 2022. Other non-interest income reductions of $0.4 million were primarily the result of a $0.3 million difference in fair value changes of assets associated with retirement plans where the corresponding offset of those changes are included in benefits and other compensation costs.

| Six months ended June 30, |  |  |  |
(dollars in thousands) | 2023 |  | 2022 |  | Change |  | % Change
ATM and interchange fees | $ | 13,200 |  |  | $ | 13,227 |  |  | $ | (27) |  |  | (0.2) | %
Service charges on deposit accounts | 8,012 |  |  | 7,997 |  |  | 15 |  |  | 0.2 | %
Other service fees | 2,158 |  |  | 2,161 |  |  | (3) |  |  | (0.1) | %
Mortgage banking service fees | 919 |  |  | 945 |  |  | (26) |  |  | (2.8) | %
Change in value of mortgage servicing rights | (124) |  |  | 410 |  |  | (534) |  |  | (130.2) | %
Total service charges and fees | 24,165 |  |  | 24,740 |  |  | (575) |  |  | (2.3) | %
Increase in cash value of life insurance | 1,590 |  |  | 1,390 |  |  | 200 |  |  | 14.4 | %
Asset management and commission income | 2,092 |  |  | 1,926 |  |  | 166 |  |  | 8.6 | %
Gain on sale of loans | 501 |  |  | 1,788 |  |  | (1,287) |  |  | (72.0) | %
Lease brokerage income | 172 |  |  | 396 |  |  | (224) |  |  | (56.6) | %
Sale of customer checks | 695 |  |  | 545 |  |  | 150 |  |  | 27.5 | %
Loss on sale of investment securities | (164) |  |  | — |  |  | (164) |  |  | n/m
Loss on marketable equity securities | — |  |  | (231) |  |  | 231 |  |  | (100.0) | %
Other income | 325 |  |  | 972 |  |  | (647) |  |  | (66.6) | %
Total other non-interest income | 5,211 |  |  | 6,786 |  |  | (1,575) |  |  | (23.2) | %
Total non-interest income | $ | 29,376 |  |  | $ | 31,526 |  |  | $ | (2,150) |  |  | (6.8) | %

Non-interest income decreased $2.2 million or 6.8% to $29.4 million during the three months ended June 30, 2023, as compared to $31.5 million during the six months ended June 30, 2022, for reasons similar to those referenced above.
10

Non-interest Expense
The following table presents the key components of non-interest expense for the current and trailing quarterly periods indicated:

| Three months ended |  |  |  |
(dollars in thousands) | June 30, 2023 |  | March 31, 2023 |  | Change |  | % Change
Base salaries, net of deferred loan origination costs | $ | 24,059 |  |  | $ | 23,000 |  |  | $ | 1,059 |  |  | 4.6 | %
Incentive compensation | 4,377 |  |  | 2,895 |  |  | 1,482 |  |  | 51.2 | %
Benefits and other compensation costs | 6,278 |  |  | 6,668 |  |  | (390) |  |  | (5.8) | %
Total salaries and benefits expense | 34,714 |  |  | 32,563 |  |  | 2,151 |  |  | 6.6 | %
Occupancy | 3,991 |  |  | 4,160 |  |  | (169) |  |  | (4.1) | %
Data processing and software | 4,638 |  |  | 4,032 |  |  | 606 |  |  | 15.0 | %
Equipment | 1,436 |  |  | 1,383 |  |  | 53 |  |  | 3.8 | %
Intangible amortization | 1,656 |  |  | 1,656 |  |  | — |  |  | — | %
Advertising | 1,016 |  |  | 759 |  |  | 257 |  |  | 33.9 | %
ATM and POS network charges | 1,902 |  |  | 1,709 |  |  | 193 |  |  | 11.3 | %
Professional fees | 1,985 |  |  | 1,589 |  |  | 396 |  |  | 24.9 | %
Telecommunications | 809 |  |  | 595 |  |  | 214 |  |  | 36.0 | %
Regulatory assessments and insurance | 1,993 |  |  | 792 |  |  | 1,201 |  |  | 151.6 | %
Postage | 311 |  |  | 299 |  |  | 12 |  |  | 4.0 | %
Operational loss | 1,090 |  |  | 435 |  |  | 655 |  |  | 150.6 | %
Courier service | 483 |  |  | 339 |  |  | 144 |  |  | 42.5 | %
Gain on sale or acquisition of foreclosed assets | — |  |  | — |  |  | — |  |  | — | %
Loss on disposal of fixed assets | 18 |  |  | — |  |  | 18 |  |  | n/m
Other miscellaneous expense | 5,201 |  |  | 3,483 |  |  | 1,718 |  |  | 49.3 | %
Total other non-interest expense | 26,529 |  |  | 21,231 |  |  | 5,298 |  |  | 25.0 | %
Total non-interest expense | $ | 61,243 |  |  | $ | 53,794 |  |  | $ | 7,449 |  |  | 13.8 | %
Average full-time equivalent staff | 1,210 |  | 1,219 |  | (9) |  |  | (0.7) | %

Non-interest expense for the quarter ended June 30, 2023, increased $7.4 million or 13.8% to $61.2 million as compared to $53.8 million during the trailing quarter ended March 31, 2023. Total salaries and benefits expense increased by $2.2 million or 6.6%, led by $1.5 million of growth in incentive compensation expense related to the achievement of certain loan and deposit volume targets and a $1.1 million or 4.6% increase in salaries which were primarily driven by Company-wide merit increases which became effective in late March of this year. Data processing and software expenses increased by $0.6 million or 15.0% related to ongoing investments in the Company's data management and security infrastructure. Advertising costs increased $0.3 million or 33.9% during the quarter, connected to an increase in media advertising for promotional campaigns. Professional fees for the three months ended June 30, 2023, include approximately $0.7 million in costs associated with third party assistance with contract negotiation, the benefits of which will be realized in future periods. Regulatory assessments increased $1.2 million or 151.6% during the quarter as a result of increases in assessment rates. Management estimates that the near-term future quarterly run rate of these regulatory assessment expenses will be approximately $1.7 million per quarter, but anticipates that these costs will increase further if the economic environment in which the Company operates continues to deteriorate. The Company does not anticipate that it will be subject to the recently announced special assessments as its total uninsured deposits do not exceed $5.0 billion. Operational losses also increased by $0.7 million or 150.6%, primarily as a result of burglary at several ATM machines. Other miscellaneous expenses increased $1.7 million or 49.3%, due primarily to changes in regulatory requirements which is expected to result in an estimated $0.8 million in refunds to customers previously charged non-sufficient funds fees and an additional increase of $0.5 million in provision expense on real estate owned and various other increases across the Company, including travel and entertainment costs.
11

The following table presents the key components of non-interest expense for the current and prior year quarterly periods indicated:

| Three months ended June 30, |  |  |  |
(dollars in thousands) | 2023 |  | 2022 |  | Change |  | % Change
Base salaries, net of deferred loan origination costs | $ | 24,059 |  |  | $ | 22,169 |  |  | $ | 1,890 |  |  | 8.5 | %
Incentive compensation | 4,377 |  |  | 4,282 |  |  | 95 |  |  | 2.2 | %
Benefits and other compensation costs | 6,278 |  |  | 6,491 |  |  | (213) |  |  | (3.3) | %
Total salaries and benefits expense | 34,714 |  |  | 32,942 |  |  | 1,772 |  |  | 5.4 | %
Occupancy | 3,991 |  |  | 3,996 |  |  | (5) |  |  | (0.1) | %
Data processing and software | 4,638 |  |  | 3,596 |  |  | 1,042 |  |  | 29.0 | %
Equipment | 1,436 |  |  | 1,453 |  |  | (17) |  |  | (1.2) | %
Intangible amortization | 1,656 |  |  | 1,702 |  |  | (46) |  |  | (2.7) | %
Advertising | 1,016 |  |  | 818 |  |  | 198 |  |  | 24.2 | %
ATM and POS network charges | 1,902 |  |  | 1,781 |  |  | 121 |  |  | 6.8 | %
Professional fees | 1,985 |  |  | 1,233 |  |  | 752 |  |  | 61.0 | %
Telecommunications | 809 |  |  | 564 |  |  | 245 |  |  | 43.4 | %
Regulatory assessments and insurance | 1,993 |  |  | 779 |  |  | 1,214 |  |  | 155.8 | %
Merger and acquisition expenses | — |  |  | 2,221 |  |  | (2,221) |  |  | (100.0) | %
Postage | 311 |  |  | 313 |  |  | (2) |  |  | (0.6) | %
Operational loss | 1,090 |  |  | 456 |  |  | 634 |  |  | 139.0 | %
Courier service | 483 |  |  | 486 |  |  | (3) |  |  | (0.6) | %
Gain on sale or acquisition of foreclosed assets | — |  |  | (98) |  |  | 98 |  |  | (100.0) | %
Loss (gain) on disposal of fixed assets | 18 |  |  | 5 |  |  | 13 |  |  | 260.0 | %
Other miscellaneous expense | 5,201 |  |  | 4,017 |  |  | 1,184 |  |  | 29.5 | %
Total other non-interest expense | 26,529 |  |  | 23,322 |  |  | 3,207 |  |  | 13.8 | %
Total non-interest expense | $ | 61,243 |  |  | $ | 56,264 |  |  | $ | 4,979 |  |  | 8.8 | %
Average full-time equivalent staff | 1,210 |  | 1,183 |  | 27 |  |  | 2.3 | %

Total non-interest expense increased $5.0 million or 8.8% to $61.2 million during the three months ended June 30, 2023, as compared to $56.3 million for the quarter ended June 30, 2022. Total salaries and benefits expense increased by $1.8 million or 5.4% to $34.7 million, largely from a net increase of 27 full-time equivalent positions as well as annual merit increases as previously discussed. Professional fees increased by $0.7 million which was directly associated with third party contract negotiation assistance, the benefits of which will be realized in future periods. Other miscellaneous expenses increased $1.2 million or 29.5%, due primarily to changes in regulatory requirements which is expected to result in an estimated $0.8 million in refunds to customers previously charged non-sufficient funds fees and an additional increase of $0.5 million in provision expense on real estate owned and various other increases across the Company, including travel and entertainment costs. Merger and acquisition expenses associated with the VRB merger totaled $2.2 million for the quarter ended June of 2022. The reasons for changes in data processing and software, and operational losses, are consistent with the discussions previously provided.
12

| Six months ended June 30, |  |  |  |
(dollars in thousands) | 2023 |  | 2022 |  | Change |  | % Change
Base salaries, net of deferred loan origination costs | $ | 47,059 |  |  | $ | 40,385 |  |  | $ | 6,674 |  |  | 16.5 | %
Incentive compensation | 7,272 |  |  | 6,865 |  |  | 407 |  |  | 5.9 | %
Benefits and other compensation costs | 12,946 |  |  | 12,463 |  |  | 483 |  |  | 3.9 | %
Total salaries and benefits expense | 67,277 |  |  | 59,713 |  |  | 7,564 |  |  | 12.7 | %
Occupancy | 8,151 |  |  | 7,571 |  |  | 580 |  |  | 7.7 | %
Data processing and software | 8,670 |  |  | 7,109 |  |  | 1,561 |  |  | 22.0 | %
Equipment | 2,819 |  |  | 2,786 |  |  | 33 |  |  | 1.2 | %
Intangible amortization | 3,312 |  |  | 2,930 |  |  | 382 |  |  | 13.0 | %
Advertising | 1,775 |  |  | 1,455 |  |  | 320 |  |  | 22.0 | %
ATM and POS network charges | 3,611 |  |  | 3,156 |  |  | 455 |  |  | 14.4 | %
Professional fees | 3,574 |  |  | 2,109 |  |  | 1,465 |  |  | 69.5 | %
Telecommunications | 1,404 |  |  | 1,085 |  |  | 319 |  |  | 29.4 | %
Regulatory assessments and insurance | 2,785 |  |  | 1,499 |  |  | 1,286 |  |  | 85.8 | %
Merger and acquisition expenses | — |  |  | 6,253 |  |  | (6,253) |  |  | (100.0) | %
Postage | 610 |  |  | 541 |  |  | 69 |  |  | 12.8 | %
Operational loss | 1,525 |  |  | 273 |  |  | 1,252 |  |  | 458.6 | %
Courier service | 822 |  |  | 900 |  |  | (78) |  |  | (8.7) | %
Gain on sale or acquisition of foreclosed assets | — |  |  | (98) |  |  | 98 |  |  | (100.0) | %
Loss (gain) on disposal of fixed assets | 18 |  |  | (1,073) |  |  | 1,091 |  |  | (101.7) | %
Other miscellaneous expense | 8,684 |  |  | 6,502 |  |  | 2,182 |  |  | 33.6 | %
Total other non-interest expense | 47,760 |  |  | 42,998 |  |  | 4,762 |  |  | 11.1 | %
Total non-interest expense | $ | 115,037 |  |  | $ | 102,711 |  |  | $ | 12,326 |  |  | 12.0 | %
Average full-time equivalent staff | 1,214 |  | 1,133 |  | 81 |  |  | 7.1 | %

Total non-interest expense increased $12.3 million or 12.0% to $115.0 million during the six months ended June 30, 2023, as compared to $102.7 million for the comparative period in 2022, for reasons primarily associated with the acquisition of Valley Republic Bank in March of 2022 which resulted in expense increases for nearly every identified category. Merger and acquisition expenses associated with the VRB merger totaled $6.2 million for the six-month period ended 2022. The reasons for additional and more specific changes in various costs identified above, and including but not limited to data processing, regulatory assessments, operational losses and other expenses are consistent with the discussions previously provided.
Provision for Income Taxes
The Company’s effective tax rate was 25.6% for the quarter ended June 30, 2023, as compared to 26.8% for the period ended March 31, 2023, and 28.1% for the year ended December 31, 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.
About TriCo Bancshares
Established in 1975, Tri Counties Bank is a wholly-owned subsidiary of TriCo Bancshares (NASDAQ: TCBK) headquartered in Chico, California, providing a unique brand of customer Service with Solutions available in traditional stand-alone and in-store bank branches and loan production offices in communities throughout California. Tri Counties Bank provides an extensive and competitive breadth of consumer, small business and commercial banking financial services, along with convenient around-the-clock ATMs, online and mobile banking access. Brokerage services are provided by Tri Counties Advisors through affiliation with Raymond James Financial Services, Inc. Visit www.TriCountiesBank.com to learn more.
13

Forward-Looking Statements
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 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 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; adverse developments in the financial services industry generally such as the recent bank failures and any related impact on depositor behavior or investor sentiment; risks related to the sufficiency of liquidity; the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital; the costs or effects of mergers, acquisitions or dispositions we may make, as well as whether we are able to obtain any required governmental approvals in connection with any such activities, or identify and complete favorable transactions in the future, and/or realize the contemplated financial business benefits; the regulatory and financial impacts associated with exceeding $10 billion in total assets; the negative impact on our reputation and profitability in the event customers experience economic harm or in the event that regulatory violations are identified; the ability to execute our business plan in new 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 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 level or cost of checking or savings account deposits on our funding costs and net interest margin; increasing noninterest expense and its impact on our 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 vulnerability of the Company's operational or security systems or infrastructure including the impact of the recent cyber security ransomware incident on our operations and reputation, the systems of third-party vendors or other service providers with whom the Company contracts, and the Company's customers to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and data/security breaches and the cost to defend against and respond to such incidents; increased data security risks due to work from home arrangements and email vulnerability; failure to safeguard personal information; 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; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; 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 in our Annual Report on Form 10-K for the year ended December 31, 2022, which has been filed with the Securities and Exchange Commission (the “SEC”) and all subsequent filings with the SEC under Sections 13(a), 13(c), 14, and 15(d) of the Securities Act of 1934, as amended. Such filings are also available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. We undertake no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
14

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands, except share data)

| Three months ended
| June 30, 2023 |  | March 31, 2023 |  | December 31, 2022 |  | September 30, 2022 |  | June 30, 2022
Revenue and Expense Data |  |  |  |  |  |  |  |  |
Interest income | $ | 107,158 |  |  | $ | 102,907 |  |  | $ | 102,989 |  |  | $ | 96,366 |  |  | $ | 86,955 |
Interest expense | 18,557 |  |  | 9,571 |  |  | 4,089 |  |  | 2,260 |  |  | 1,909 |
Net interest income | 88,601 |  |  | 93,336 |  |  | 98,900 |  |  | 94,106 |  |  | 85,046 |
Provision for credit losses | 9,650 |  |  | 4,195 |  |  | 4,245 |  |  | 3,795 |  |  | 2,100 |
Noninterest income: |  |  |  |  |  |  |  |  |
Service charges and fees | 12,968 |  |  | 11,197 |  |  | 12,343 |  |  | 12,682 |  |  | 13,044 |
Loss on sale of investment securities | — |  |  | (164) |  |  | — |  |  | — |  |  | — |
Other income | 2,773 |  |  | 2,602 |  |  | 3,537 |  |  | 2,958 |  |  | 3,386 |
Total noninterest income | 15,741 |  |  | 13,635 |  |  | 15,880 |  |  | 15,640 |  |  | 16,430 |
Noninterest expense (2): |  |  |  |  |  |  |  |  |
Salaries and benefits | 34,714 |  |  | 32,563 |  |  | 36,611 |  |  | 33,528 |  |  | 34,370 |
Occupancy and equipment | 5,427 |  |  | 5,543 |  |  | 5,482 |  |  | 5,387 |  |  | 5,449 |
Data processing and network | 6,540 |  |  | 5,741 |  |  | 6,236 |  |  | 5,143 |  |  | 5,468 |
Other noninterest expense | 14,562 |  |  | 9,947 |  |  | 11,140 |  |  | 10,407 |  |  | 10,977 |
Total noninterest expense | 61,243 |  |  | 53,794 |  |  | 59,469 |  |  | 54,465 |  |  | 56,264 |
Total income before taxes | 33,449 |  |  | 48,982 |  |  | 51,066 |  |  | 51,486 |  |  | 43,112 |
Provision for income taxes | 8,557 |  |  | 13,149 |  |  | 14,723 |  |  | 14,148 |  |  | 11,748 |
Net income | $ | 24,892 |  |  | $ | 35,833 |  |  | $ | 36,343 |  |  | $ | 37,338 |  |  | $ | 31,364 |
Share Data |  |  |  |  |  |  |  |  |
Basic earnings per share | $ | 0.75 |  |  | $ | 1.08 |  |  | $ | 1.09 |  |  | $ | 1.12 |  |  | $ | 0.93 |
Diluted earnings per share | $ | 0.75 |  |  | $ | 1.07 |  |  | $ | 1.09 |  |  | $ | 1.12 |  |  | $ | 0.93 |
Dividends per share | $ | 0.30 |  |  | $ | 0.30 |  |  | $ | 0.30 |  |  | $ | 0.30 |  |  | $ | 0.25 |
Book value per common share | $ | 32.86 |  |  | $ | 32.84 |  |  | $ | 31.39 |  |  | $ | 29.71 |  |  | $ | 31.25 |
Tangible book value per common share (1) | $ | 23.30 |  |  | $ | 23.22 |  |  | $ | 21.76 |  |  | $ | 19.92 |  |  | $ | 21.41 |
Shares outstanding | 33,259,260 |  |  | 33,195,250 |  |  | 33,331,513 |  |  | 33,332,189 |  |  | 33,350,974 |
Weighted average shares | 33,219,168 |  |  | 33,295,750 |  |  | 33,330,029 |  |  | 33,348,322 |  |  | 33,561,389 |
Weighted average diluted shares | 33,301,548 |  |  | 33,437,680 |  |  | 33,467,393 |  |  | 33,463,364 |  |  | 33,705,280 |
Credit Quality |  |  |  |  |  |  |  |  |
Allowance for credit losses to gross loans | 1.80 | % |  | 1.69 | % |  | 1.64 | % |  | 1.61 | % |  | 1.60 | %
Loans past due 30 days or more | $ | 9,483 |  |  | $ | 7,891 |  |  | $ | 4,947 |  |  | $ | 6,471 |  |  | $ | 5,920 |
Total nonperforming loans | $ | 37,592 |  |  | $ | 16,025 |  |  | $ | 21,321 |  |  | $ | 17,471 |  |  | $ | 11,925 |
Total nonperforming assets | $ | 40,506 |  |  | $ | 19,464 |  |  | $ | 24,760 |  |  | $ | 20,912 |  |  | $ | 15,304 |
Loans charged-off | $ | 276 |  |  | $ | 1,758 |  |  | $ | 174 |  |  | $ | 267 |  |  | $ | 401 |
Loans recovered | $ | 218 |  |  | $ | 170 |  |  | $ | 66 |  |  | $ | 311 |  |  | $ | 356 |
Selected Financial Ratios |  |  |  |  |  |  |  |  |
Return on average total assets | 1.01 | % |  | 1.47 | % |  | 1.45 | % |  | 1.46 | % |  | 1.24 | %
Return on average equity | 8.98 | % |  | 13.36 | % |  | 14.19 | % |  | 13.78 | % |  | 11.53 | %
Average yield on loans, excluding PPP | 5.38 | % |  | 5.21 | % |  | 5.10 | % |  | 4.87 | % |  | 4.70 | %
Average yield on interest-earning assets | 4.78 | % |  | 4.64 | % |  | 4.52 | % |  | 4.12 | % |  | 3.76 | %
Average rate on interest-bearing deposits | 0.95 | % |  | 0.43 | % |  | 0.18 | % |  | 0.08 | % |  | 0.07 | %
Average cost of total deposits | 0.58 | % |  | 0.25 | % |  | 0.10 | % |  | 0.04 | % |  | 0.04 | %
Average cost of total deposits and other borrowings | 0.80 | % |  | 0.38 | % |  | 0.12 | % |  | 0.04 | % |  | 0.02 | %
Average rate on borrowings & subordinated debt | 4.92 | % |  | 4.74 | % |  | 4.07 | % |  | 3.60 | % |  | 3.12 | %
Average rate on interest-bearing liabilities | 1.37 | % |  | 0.74 | % |  | 0.32 | % |  | 0.17 | % |  | 0.15 | %
Net interest margin (fully tax-equivalent) (1) | 3.96 | % |  | 4.21 | % |  | 4.34 | % |  | 4.02 | % |  | 3.67 | %
Loans to deposits | 80.55 | % |  | 80.02 | % |  | 77.45 | % |  | 72.95 | % |  | 69.81 | %
Efficiency ratio | 58.69 | % |  | 50.29 | % |  | 51.81 | % |  | 49.63 | % |  | 55.45 | %
Supplemental Loan Interest Income Data |  |  |  |  |  |  |  |  |
Discount accretion on acquired loans | $ | 1,471 |  |  | $ | 1,397 |  |  | $ | 1,751 |  |  | $ | 714 |  |  | $ | 1,677 |
All other loan interest income (excluding PPP) (1) | $ | 85,272 |  |  | $ | 81,013 |  |  | $ | 79,989 |  |  | $ | 74,929 |  |  | $ | 67,277 |
Total loan interest income (excluding PPP) (1) | $ | 86,743 |  |  | $ | 82,410 |  |  | $ | 81,740 |  |  | $ | 75,643 |  |  | $ | 68,954 |

(1) Non-GAAP measure
(2) Inclusive of merger related expenses
15

TRICO BANCSHARES—CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited. Dollars in thousands)

Balance Sheet Data | June 30, 2023 |  | March 31, 2023 |  | December 31, 2022 |  | September 30, 2022 |  | June 30, 2022
Cash and due from banks | $ | 118,792 |  |  | $ | 110,335 |  |  | $ | 107,230 |  |  | $ | 246,509 |  |  | $ | 488,868 |
Securities, available for sale, net | 2,323,011 |  |  | 2,408,452 |  |  | 2,455,036 |  |  | 2,482,857 |  |  | 2,608,771 |
Securities, held to maturity, net | 145,117 |  |  | 152,067 |  |  | 160,983 |  |  | 168,038 |  |  | 176,794 |
Restricted equity securities | 17,250 |  |  | 17,250 |  |  | 17,250 |  |  | 17,250 |  |  | 17,250 |
Loans held for sale | 1,058 |  |  | 226 |  |  | 1,846 |  |  | 247 |  |  | 1,216 |
Loans: |  |  |  |  |  |  |  |  |
Commercial real estate | 4,343,924 |  |  | 4,353,959 |  |  | 4,359,083 |  |  | 4,238,930 |  |  | 4,049,893 |
Consumer | 1,252,225 |  |  | 1,233,797 |  |  | 1,240,743 |  |  | 1,217,297 |  |  | 1,162,989 |
Commercial and industrial | 576,247 |  |  | 553,098 |  |  | 569,921 |  |  | 534,960 |  |  | 507,685 |
Construction | 278,425 |  |  | 225,996 |  |  | 211,560 |  |  | 243,571 |  |  | 313,646 |
Agriculture production | 61,337 |  |  | 47,062 |  |  | 61,414 |  |  | 71,599 |  |  | 71,373 |
Leases | 8,582 |  |  | 8,509 |  |  | 7,726 |  |  | 7,933 |  |  | 7,835 |
Total loans, gross | 6,520,740 |  |  | 6,422,421 |  |  | 6,450,447 |  |  | 6,314,290 |  |  | 6,113,421 |
Allowance for credit losses | (117,329) |  |  | (108,407) |  |  | (105,680) |  |  | (101,488) |  |  | (97,944) |
Total loans, net | 6,403,411 |  |  | 6,314,014 |  |  | 6,344,767 |  |  | 6,212,802 |  |  | 6,015,477 |
Premises and equipment | 72,619 |  |  | 72,096 |  |  | 72,327 |  |  | 73,266 |  |  | 73,811 |
Cash value of life insurance | 135,332 |  |  | 134,544 |  |  | 133,742 |  |  | 132,933 |  |  | 132,857 |
Accrued interest receivable | 32,835 |  |  | 31,388 |  |  | 31,856 |  |  | 27,070 |  |  | 25,861 |
Goodwill | 304,442 |  |  | 304,442 |  |  | 304,442 |  |  | 307,942 |  |  | 307,942 |
Other intangible assets | 13,358 |  |  | 15,014 |  |  | 16,670 |  |  | 18,372 |  |  | 20,074 |
Operating leases, right-of-use | 29,140 |  |  | 30,000 |  |  | 26,862 |  |  | 26,622 |  |  | 27,154 |
Other assets | 257,056 |  |  | 252,566 |  |  | 257,975 |  |  | 262,971 |  |  | 224,536 |
Total assets | $ | 9,853,421 |  |  | $ | 9,842,394 |  |  | $ | 9,930,986 |  |  | $ | 9,976,879 |  |  | $ | 10,120,611 |
Deposits: |  |  |  |  |  |  |  |  |
Noninterest-bearing demand deposits | $ | 3,073,353 |  |  | $ | 3,236,696 |  |  | $ | 3,502,095 |  |  | $ | 3,678,202 |  |  | $ | 3,604,237 |
Interest-bearing demand deposits | 1,751,998 |  |  | 1,635,706 |  |  | 1,718,541 |  |  | 1,749,123 |  |  | 1,796,580 |
Savings deposits | 2,778,118 |  |  | 2,807,796 |  |  | 2,884,378 |  |  | 2,924,674 |  |  | 3,028,787 |
Time certificates | 491,896 |  |  | 345,667 |  |  | 223,999 |  |  | 303,770 |  |  | 327,171 |
Total deposits | 8,095,365 |  |  | 8,025,865 |  |  | 8,329,013 |  |  | 8,655,769 |  |  | 8,756,775 |
Accrued interest payable | 3,655 |  |  | 1,643 |  |  | 1,167 |  |  | 853 |  |  | 755 |
Operating lease liability | 31,377 |  |  | 32,228 |  |  | 29,004 |  |  | 28,717 |  |  | 29,283 |
Other liabilities | 136,464 |  |  | 157,222 |  |  | 159,741 |  |  | 153,110 |  |  | 155,529 |
Other borrowings | 392,714 |  |  | 434,140 |  |  | 264,605 |  |  | 47,068 |  |  | 35,089 |
Junior subordinated debt | 101,065 |  |  | 101,051 |  |  | 101,040 |  |  | 101,024 |  |  | 101,003 |
Total liabilities | 8,760,640 |  |  | 8,752,149 |  |  | 8,884,570 |  |  | 8,986,541 |  |  | 9,078,434 |
Common stock | 695,305 |  |  | 695,168 |  |  | 697,448 |  |  | 696,348 |  |  | 696,441 |
Retained earnings | 578,852 |  |  | 564,538 |  |  | 542,873 |  |  | 516,699 |  |  | 491,705 |
Accum. other comprehensive loss, net of tax | (181,376) |  |  | (169,461) |  |  | (193,905) |  |  | (222,709) |  |  | (145,969) |
Total shareholders’ equity | $ | 1,092,781 |  |  | $ | 1,090,245 |  |  | $ | 1,046,416 |  |  | $ | 990,338 |  |  | $ | 1,042,177 |
Quarterly Average Balance Data |  |  |  |  |  |  |  |  |
Average loans, excluding PPP | $ | 6,465,903 |  |  | $ | 6,412,386 |  |  | $ | 6,357,250 |  |  | $ | 6,162,267 |  |  | $ | 5,890,578 |
Average interest-earning assets | $ | 9,022,064 |  |  | $ | 9,028,061 |  |  | $ | 9,076,450 |  |  | $ | 9,320,152 |  |  | $ | 9,330,059 |
Average total assets | $ | 9,848,191 |  |  | $ | 9,878,927 |  |  | $ | 9,932,931 |  |  | $ | 10,131,118 |  |  | $ | 10,121,714 |
Average deposits | $ | 7,981,515 |  |  | $ | 8,218,576 |  |  | $ | 8,545,172 |  |  | $ | 8,752,215 |  |  | $ | 8,743,320 |
Average borrowings and subordinated debt | $ | 578,312 |  |  | $ | 378,676 |  |  | $ | 186,957 |  |  | $ | 139,919 |  |  | $ | 136,244 |
Average total equity | $ | 1,112,223 |  |  | $ | 1,087,473 |  |  | $ | 1,016,468 |  |  | $ | 1,074,776 |  |  | $ | 1,091,454 |
Capital Ratio Data |  |  |  |  |  |  |  |  |
Total risk-based capital ratio | 14.5 | % |  | 14.5 | % |  | 14.2 | % |  | 14.0 | % |  | 14.1 | %
Tier 1 capital ratio | 12.7 | % |  | 12.7 | % |  | 12.4 | % |  | 12.2 | % |  | 12.3 | %
Tier 1 common equity ratio | 12.0 | % |  | 12.0 | % |  | 11.7 | % |  | 11.4 | % |  | 11.5 | %
Tier 1 leverage ratio | 10.4 | % |  | 10.2 | % |  | 10.1 | % |  | 9.6 | % |  | 9.3 | %
Tangible capital ratio (1) | 8.1 | % |  | 8.1 | % |  | 7.6 | % |  | 6.9 | % |  | 7.3 | %

(1) Non-GAAP measure
16

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

| Three months ended |  | Six months ended
(dollars in thousands) | June 30, 2023 |  | March 31, 2023 |  | June 30, 2022 |  | June 30, 2023 |  | June 30, 2022
Net interest margin |  |  |  |  |  |  |  |  |
Acquired loans discount accretion, net: |  |  |  |  |  |  |  |  |
Amount (included in interest income) | $1,471 |  | $1,397 |  | $1,677 |  | $2,868 |  | $3,000
Effect on average loan yield | 0.09 | % |  | 0.09 | % |  | 0.11 | % |  | 0.09 | % |  | 0.11 | %
Effect on net interest margin (FTE) | 0.07 | % |  | 0.06 | % |  | 0.07 | % |  | 0.06 | % |  | 0.07 | %
Net interest margin (FTE) | 3.96 | % |  | 4.21 | % |  | 3.67 | % |  | 4.08 | % |  | 3.54 | %
Net interest margin less effect of acquired loan discount accretion (Non-GAAP) | 3.89 | % |  | 4.15 | % |  | 3.60 | % |  | 4.02 | % |  | 3.47 | %
PPP loans yield, net: |  |  |  |  |  |  |  |  |
Amount (included in interest income) | $4 |  | $5 |  | $964 |  | $9 |  | $2,061
Effect on net interest margin (FTE) | — | % |  | — | % |  | 0.03 | % |  | — | % |  | 0.03 | %
Net interest margin less effect of PPP loan yield (Non-GAAP) | 3.96 | % |  | 4.21 | % |  | 3.64 | % |  | 4.08 | % |  | 3.51 | %
Acquired loan discount accretion and PPP loan yield, net: |  |  |  |  |  |  |  |  |
Amount (included in interest income) | $1,475 |  | $1,402 |  | $2,641 |  | $2,877 |  | $5,061
Effect on net interest margin (FTE) | 0.07 | % |  | 0.06 | % |  | 0.10 | % |  | 0.06 | % |  | 0.10 | %
Net interest margin less effect of acquired loan discount accretion and PPP yields, net (Non-GAAP) | 3.89 | % |  | 4.15 | % |  | 3.57 | % |  | 4.02 | % |  | 3.44 | %

| Three months ended |  | Six months ended
(dollars in thousands) | June 30, 2023 |  | March 31, 2023 |  | June 30, 2022 |  | June 30, 2023 |  | June 30, 2022
Pre-tax pre-provision return on average assets or equity |  |  |  |  |  |  |  |  |
Net income (GAAP) | $24,892 |  | $35,833 |  | $31,364 |  | $60,725 |  | $51,738
Exclude provision for income taxes | 8,557 |  | 13,149 |  | 11,748 |  | 21,706 |  | 19,617
Exclude provision for credit losses | 9,650 |  | 4,195 |  | 2,100 |  | 13,845 |  | 10,430
Net income before income tax and provision expense (Non-GAAP) | $43,099 |  | $53,177 |  | $45,212 |  | $96,276 |  | $81,785
Average assets (GAAP) | $9,848,191 |  | $9,878,927 |  | $10,121,714 |  | $9,863,471 |  | $9,453,696
Average equity (GAAP) | $1,112,223 |  | $1,087,473 |  | $1,091,454 |  | $1,099,913 |  | $1,050,566
Return on average assets (GAAP) (annualized) | 1.01 | % |  | 1.47 | % |  | 1.24 | % |  | 1.24 | % |  | 1.10 | %
Pre-tax pre-provision return on average assets (Non-GAAP) (annualized) | 1.76 | % |  | 2.18 | % |  | 1.79 | % |  | 1.97 | % |  | 1.74 | %
Return on average equity (GAAP) (annualized) | 8.98 | % |  | 13.36 | % |  | 11.53 | % |  | 11.13 | % |  | 9.93 | %
Pre-tax pre-provision return on average equity (Non-GAAP) (annualized) | 15.54 | % |  | 19.83 | % |  | 16.61 | % |  | 17.65 | % |  | 15.70 | %

17

| Three months ended |  | Six months ended
(dollars in thousands) | June 30, 2023 |  | March 31, 2023 |  | June 30, 2022 |  | June 30, 2023 |  | June 30, 2022
Return on tangible common equity |  |  |  |  |  |  |  |  |
Average total shareholders' equity | $1,112,223 |  | $1,087,473 |  | $1,091,454 |  | $1,099,913 |  | $1,050,566
Exclude average goodwill | 304,442 |  | 304,442 |  | 307,942 |  | 334,565 |  | 267,533
Exclude average other intangibles | 14,716 |  | 15,842 |  | 21,040 |  | 16 |  | 16,845
Average tangible common equity (Non-GAAP) | $793,065 |  | $767,189 |  | $762,472 |  | $765,332 |  | $766,188
Net income (GAAP) | $24,892 |  | $35,833 |  | $31,364 |  | $60,725 |  | $51,738
Exclude amortization of intangible assets, net of tax effect | 1,166 |  | 1,166 |  | 1,199 |  | 2,333 |  | 2,064
Tangible net income available to common shareholders (Non-GAAP) | $26,058 |  | $36,999 |  | $32,563 |  | $63,058 |  | $53,802
Return on average equity | 8.98 | % |  | 13.36 | % |  | 11.53 | % |  | 11.13 | % |  | 9.93 | %
Return on average tangible common equity (Non-GAAP) | 13.18 | % |  | 19.56 | % |  | 17.13 | % |  | 16.62 | % |  | 14.16 | %

| Three months ended
(dollars in thousands) | June 30, 2023 |  | March 31, 2023 |  | December 31, 2022 |  | September 30, 2022 |  | June 30, 2022
Tangible shareholders' equity to tangible assets |  |  |  |  |  |  |  |  |
Shareholders' equity (GAAP) | $1,092,781 |  | $1,090,245 |  | $1,046,416 |  | $990,338 |  | $1,042,177
Exclude goodwill and other intangible assets, net | 317,800 |  | 319,456 |  | 321,112 |  | 326,314 |  | 328,016
Tangible shareholders' equity (Non-GAAP) | $774,981 |  | $770,789 |  | $725,304 |  | $664,024 |  | $714,161
Total assets (GAAP) | $9,853,421 |  | $9,842,394 |  | $9,930,986 |  | $9,976,879 |  | $10,120,611
Exclude goodwill and other intangible assets, net | 317,800 |  | 319,456 |  | 321,112 |  | 326,314 |  | 328,016
Total tangible assets (Non-GAAP) | $9,535,621 |  | $9,522,938 |  | $9,609,874 |  | $9,650,565 |  | $9,792,595
Shareholders' equity to total assets (GAAP) | 11.09 | % |  | 11.08 | % |  | 10.54 | % |  | 9.93 | % |  | 10.30 | %
Tangible shareholders' equity to tangible assets (Non-GAAP) | 8.13 | % |  | 8.09 | % |  | 7.55 | % |  | 6.88 | % |  | 7.29 | %

| Three months ended
(dollars in thousands) | June 30, 2023 |  | March 31, 2023 |  | December 31, 2022 |  | September 30, 2022 |  | June 30, 2022
Tangible common shareholders' equity per share |  |  |  |  |  |  |  |  |
Tangible s/h equity (Non-GAAP) | $774,981 |  | $770,789 |  | $725,304 |  | $664,024 |  | $714,161
Common shares outstanding at end of period | 33,259,260 |  |  | 33,195,250 |  |  | 33,331,513 |  |  | 33,332,189 |  |  | 33,350,974 |
Common s/h equity (book value) per share (GAAP) | $32.86 |  | $32.84 |  | $31.39 |  | $29.71 |  | $31.25
Tangible common shareholders' equity (tangible book value) per share (Non-GAAP) | $23.30 |  | $23.22 |  | $21.76 |  | $19.92 |  | $21.41

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18