TRICO BANCSHARES

Previous wording

In 2023, the Company reported net income of $117.4 million, an $8.1 million or 6.5% decrease from the prior year. Earnings per share on a diluted basis for the year were $3.52, down 8.1% from the prior year. The current year net income reported was negatively impacted by noninterest expense. In 2023, noninterest expense was reported at $233.1 million, an increase of $16.5 million or 7.6% increase from the prior year.

Current wording

In 2024, the Company reported net income of $114.9 million, an $2.5 million or 2.1% decrease from the prior year. Earnings per share on a diluted basis for the year were $3.46, down 1.7% from the prior year. The current year net income reported was impacted by declines in net interest income primarily associated with elevated interest expense and partially offset by a reduction in provision for loan losses. In 2024, total interest expense was reported at $135.2 million, an increase of $53.5 million or 65.5% from the prior year.

Previous wording

Net interest income on a fully tax equivalent (FTE) basis, a non-GAAP financial measure, was $358.2, an increase of $10.6 million, or 3.1%, from 2022. The increase in FTE net interest income reflected the benefit of a $69.7 million, or 0.8%, increase in average earning assets in addition to a 8 basis point increase in the FTE net interest margin to 3.96%. Average earning asset growth included an $690.9 million, or 11.7% increase in average loans and leases, offset by a $195.0 million or 7.3% decrease in average securities. The decrease in average securities was driven by the redeployment of liquidity from prepayments and maturities into loans during 2023. The net interest margin expansion was driven by the higher rate environment driving an increase in loan and lease and investment security yields, partially offset by higher cost of funds from both deposits and borrowings. Total average interest-bearing deposits was $5.0 billion and $4.9 billion during 2023 and 2022, respectively, while average other borrowings totaled $430.1 million and $33.4 million, respectively, during the same periods. The increase in net interest expense on average interest-bearing liabilities increased by $72.1 million or 758.9% to $81.7 million during 2023 as compared to 2022.

Current wording

Net interest income on a fully tax equivalent (FTE) basis, a non-GAAP financial measure, was $332.5 million, a decrease of $25.7 million, or 7.2%, from 2023. The decrease in FTE net interest income reflects the $64.9 million, or 0.7%, decrease in average earning assets and a 25 basis point decrease in the FTE net interest margin to 3.71%. Average earning asset declines included a $308.7 million or 12.6% decrease in average securities, partially offset by an $189.8 million, or 2.9% increase in average loans and leases. The decrease in average securities was driven by the redeployment of liquidity from prepayments and maturities into the pay down of borrowings and loan growth during 2024. The net interest margin contraction was driven by the higher rate environment and a liability sensitive balance sheet, resulting in an increase in the higher cost of funds from both deposits and borrowings. This increase in interest expense was partially offset by improved yields on loan balances and to a greater extent, by the continued balance sheet mix shift where liquidity from deposit growth and investment security principal repayments were utilized to pay down borrowings. Total average interest-bearing deposits was $5.4 billion and $5.0 billion during 2024 and 2023, respectively, while average other borrowings totaled $294.3 million and $430.7 million, respectively, during the same periods.

Previous wording

The provision for credit losses increased $5.5 million to $24.0 million, primarily due to elevated qualitative reserves driven by CA unemployment trends and rising Corporate BBB bond yields, and to a lesser extent, organic loan and lease growth. The allowance for credit losses (ACL) was $121.5 million, or 1.79% of total loans and leases, at December 31, 2023, compared to $105.7, or 1.64% of total loans and leases, at December 31, 2022.

Current wording

The provision for credit losses decreased $17.4 million to $6.6 million, primarily due to muted loan volume during 2024 and generally stable qualitative reserve levels, relative to the 2023 volatility driven by CA unemployment trends and rising Corporate BBB bond yields. The allowance for credit losses (ACL) was $125.4 million, or 1.85% of total loans and leases, at December 31, 2024, compared to $121.5 million, or 1.79% of total loans and leases, at December 31, 2023.

Previous wording

The tangible common equity to tangible assets ratio, a non-GAAP financial measure, was 8.8% at December 31, 2023, up 120 basis points from December 31, 2022, primarily due to an increase in tangible common equity related primarily to the retention of 2023 earnings.

Current wording

The tangible common equity to tangible assets ratio, a non-GAAP financial measure, was 9.72% at December 31, 2024, up 92 basis points from December 31, 2023, primarily due to an increase in tangible common equity related primarily to the retention of 2024 earnings.

Previous wording

30 TriCo Bancshares 2023 10-K 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:

Current wording

31 TriCo Bancshares 2024 10-K 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:

Previous wording

The Company’s method for assessing the appropriateness of the allowance for credit losses includes specific allowances for individually analyzed loans, formula allowance factors for pools of credits, and qualitative considerations which include, among other things, current and

Current wording

The Company’s method for assessing the appropriateness of the allowance for credit losses includes specific allowances for individually analyzed loans, formula allowance factors for pools of credits, and qualitative considerations which include, among other things, current and forecasted economic and environmental factors (e.g., interest rates, growth, economic conditions, etc.). Allowance factors for loan pools were based on historical loss experience by product type and prior risk rating.

Previous wording

There is a greater chance that the Company would suffer a loss from a loan that was risk rated less than satisfactory than if the loan was last graded satisfactory. As such, the proper risk grading of loans in the portfolio is important to the determination of the calculation of and determination of adequacy of the allowance for credit losses. Utilizing the historical loss data described above, the Company applies reserve rates within any unique pool based on its loss and risk grade migration. Therefore, within any given pool, a larger loss estimation factor is applied to less than satisfactory loans as compared to those that the Company last graded as satisfactory. The resulting allowance for any pool is the sum of the calculated reserves determined in this manner.

Current wording

There is a greater chance that the Company would suffer a loss from a loan that was risk rated less than satisfactory than if the loan was last graded satisfactory. As such, the proper risk grading of loans in the portfolio is important to the determination of the calculation of and determination of adequacy of the allowance for credit losses. Utilizing the historical loss data described above, the Company applies

Previous wording

Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances for the Company. Within Management’s Discussion and Analysis of Financial Condition and Results of Operations, certain performance measures including interest income, net interest income, net interest yield, and efficiency ratio are generally presented on a fully tax-equivalent (FTE)

Current wording

Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances for the Company. Within Management’s Discussion and Analysis of Financial Condition and Results of Operations, certain performance measures including interest income, net interest income, net interest yield, and efficiency ratio are generally presented on a fully tax-equivalent (FTE) basis. The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provides additional clarity in assessing its results.

Previous wording

Net interest income (FTE) during the year ended December 31, 2023 increased $10.7 million or 3.1% to $358.2 million compared against $347.5 million during the year ended December 31, 2022. The increased amount of net interest income reflects growth in total average loan balances outstanding and the correlated yields in both loans and investments during 2023. Average loan balances increased by $691 million or 11.7% from December 31, 2022. Meanwhile, the yield on interest earning assets was 4.87% and 3.98% for the years ended December 31, 2023 and 2022, respectively. This 89 basis point increase in total earning asset yield was primarily attributable to a 58 basis point increase in total loan yields and a 80 basis point increase in yields on total investments. Of the 58 basis point increase in loan yields, 7 basis points was attributable to increased volume in average loans outstanding, and 51 basis points from elevated interest rates. There was no change attributed to the accretion of purchased loan fees. The costs of total interest bearing liabilities increased 129 basis points to 1.48% during the year ended December 31, 2023, as compared to 0.19% for the year ended December 31, 2022. During the same period, costs associated with interest bearing deposits increased by 100 basis points to 1.10% as compared to 0.10% in the prior year. The increase in interest expense for the year ended December 31, 2023, as compared to the trailing year, was due to the increased rate environment for both the interest-bearing deposit expense and other borrowings interest expense.

Current wording

Net interest income (FTE) during the year ended December 31, 2024 decreased $25.7 million or 7.2% to $332.5 million compared against $358.2 million during the year ended December 31, 2023. The decreased amount of net interest income reflects the higher rate environment driving an increase in the cost of funds from both deposits and borrowings, partially offset by improved yields on loan and lease balances, and investment securities during 2024. Average loan balances increased by $189.8 million or 2.9% from December 31, 2023. Meanwhile, the yield on interest earning assets was 5.21% and 4.87% for the years ended December 31, 2024 and 2023, respectively. This 34 basis point increase in total earning asset yield was attributable to a 35 basis point increase in total loan yields and a 7 basis point increase in yields on total investments. Of the 35 basis point increase in loan yields, 11 basis points was attributable to increased volume in average loans outstanding, and 26 basis points from elevated interest rates. There was a decline of 2 basis points attributed to the accretion of purchased loan fees. Meanwhile, the costs of total interest bearing liabilities increased 85 basis points to 2.33% during the year ended December 31, 2024, as compared to 1.48% for the year ended December 31, 2023. During the same period, costs associated with interest bearing deposits increased by 99 basis points to 2.09% as compared to 1.10% in the prior year. The increase in interest expense for the year ended December 31, 2024, as compared to the trailing year, was due to the increase in short term interest rates, as influenced by the FOMC actions, that began in 2023 and which remained elevated until late 2024.

Previous wording

Net interest income (FTE) during the year ended December 31, 2022 increased $74.9 million or 27.5% to $347.5 million compared against $272.6 million during the year ended December 31, 2021. The increased amount of net interest income reflects growth in both total average loan and investment balances outstanding and the correlated yields, during 2022. Average loan balances, inclusive of acquisitions, increased by $1.5 billion or 30.4% from December 31, 2021. The yield on interest earning assets was 3.98% and 3.65% for the years ended December 31, 2022 and 2021, respectively. This 33 basis point increase in total earning asset yield was primarily attributable to a 11 basis point decrease in total loan yields and a 85 basis point increase in yields on total investments. Of the 11 basis point decrease in yields on loans, a 3 basis point decline was attributable to decreases in market rates, as well as an 8 basis point benefit from the accretion of purchased loans. The costs of total interest bearing liabilities increased 6 basis points to 0.19% during the year ended December 31, 2022, as compared to 0.13% for the year ended December 31, 2021. During the same period, costs associated with interest bearing deposits increased by 2 basis points to 0.10% as compared to 0.08% in the prior year. The increase in interest expense for the year ended December 31, 2022, as compared to the trailing year, was due largely to the increased rate environment for both the interest-bearing deposit expense and other borrowings interest expense.

Current wording

Net interest income (FTE) during the year ended December 31, 2023 increased $10.7 million or 3.1% to $358.2 million compared against $347.5 million during the year ended December 31, 2022. The increased amount of net interest income reflects growth in both total average loan and investment balances outstanding and the correlated yields, during 2023. Average loan balances increased by $690.9 million or 11.8% from December 31, 2022. The yield on interest earning assets was 4.87% and 3.98% for the years ended December 31, 2023 and 2022, respectively. This 89 basis point increase in total earning asset yield was primarily attributable to a 58 basis point increase in total loan yields and a 80 basis point increase in yields on total investments. Of the 58 basis point increase in yields on loans, a 3 basis point decline was attributable to decreases in market rates, as well as an 8 basis point benefit from the accretion of purchased loans. The costs of total interest bearing liabilities increased 129 basis points to 1.48% during the year ended December 31, 2023, as compared to 0.19% for the year ended December 31, 2022. During the same period, costs associated with interest bearing deposits increased by 100 basis points to 1.10% as compared to 0.10% in the prior year. The increase in interest expense for the year ended December 31, 2023, as compared to the trailing year, was due largely to the increased rate environment for both the interest-bearing deposit expense and other borrowings interest expense.

Previous wording

For more information related to loan interest income, including loan purchase discount accretion, see the Summary of Average Balances, Yields/Rates and Interest Differential and Note 27 to the consolidated financial statements at Part II, Item 8 of this report. The “Yield” and “Volume/Rate” tables shown below are useful in illustrating and quantifying the developments that affected net interest income during 2023 and 2022.

Current wording

For more information related to loan interest income, including loan purchase discount accretion, see the Summary of Average Balances, Yields/Rates and Interest Differential. The “Yield” and “Volume/Rate” tables shown below are useful in illustrating and quantifying the developments that affected net interest income during 2024 and 2023.

Previous wording

34 TriCo Bancshares 2023 10-K shareholders’ equity, the amounts of interest income from average earning assets and resulting yields, and the amount of interest expense paid on interest-bearing liabilities. Average loan balances include nonperforming loans. Interest income includes proceeds from loans on nonaccrual loans only to the extent cash payments have been received and applied to interest income. Yields on securities and certain loans have been adjusted upward to reflect the effect of income thereon exempt from federal income taxation at the statutory tax rate applicable during the period presented (dollars in thousands):

Current wording

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

Previous wording

(1)The fully-taxable equivalent (FTE) adjustment for interest income of non-taxable investment securities was $1,536, $1,560, and $1,070 for the years ended December 31, 2023, 2022 and 2021, respectively.

Current wording

(1)The fully-taxable equivalent (FTE) adjustment for interest income of non-taxable investment securities was $1.1 million, $1.5 million, and $1.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Previous wording

Net charge-offs for the year ended December 31, 2023 totaled $6.6 million, as compared to net recoveries of $0.3 million for the year ended December 31, 2022. Total nonperforming loans increased by 13 basis points to 0.46% of total loans at December 31, 2023 from 0.33% of total loans at December 31, 2022. For further details of the change in nonperforming loans during the period ended December 31, 2023 see the Tables, and associated narratives, labeled“Changes in nonperforming assets during the year ended December 31, 2023” and“Changes

Current wording

Net charge-offs for the year ended December 31, 2024 totaled$2.6 million, as compared to net recoveries of$6.6 million for the year ended December 31, 2023. Total nonperforming loans increased by 19 basis points to 0.65% of total loans at December 31, 2024 from 0.46% of total loans at December 31, 2023. For further details of the chan1ge in nonperforming loans during the period ended December 31, 2024 see the Tables, and associated narratives, labeled“Changes in nonperforming assets during the year ended December 31, 2024” and“Changes in nonperforming assets during the three months ended December 31, 2024” under the heading“Asset Quality and Non-Performing Assets” below.

Previous wording

The following table summarizes the components of the provision for (benefit to) credit losses during the periods indicated (dollars in thousands):

Current wording

The following table summarizes the components of the provision for credit losses during the periods indicated (dollars in thousands):

Previous wording

Non-interest income decreased $1.6 million or 2.6% to $61.4 million during the year ended December 31, 2023, as compared to $63.0 million during the year ended December 31, 2022. During 2023, total service charges and fees increased $0.3 million which is net of approximately $0.9 million in waived or reversed fees related to the network outage that occurred in the first quarter of the year. Mortgage origination related activity has declined year over year due to elevated interest rates, as the income recorded from the sale of loans was down $1.2 million or 50.2%. Changes in interest rates also led to a decline in fair value of mortgage servicing rights during the twelve months ended December 31, 2023, which decreased by $0.8 million or 268.1%, as compared to the trailing twelve month period ended. Other income declined $1.5 million or 63.1%, $0.6 million of which is attributed to fees from the sale of deposits during the fourth quarter of 2022.

Current wording

During 2023, total service charges and fees increased $0.3 million which is net of approximately $0.9 million in waived or reversed fees related to the network outage that occurred in the first quarter of the year. Mortgage origination related activity declined year over year due to elevated interest rates, as the income recorded from the sale of loans was down $1.2 million or 50.2%. Changes in interest rates also led to a decline in fair value of mortgage servicing rights during the twelve months ended December 31, 2023, which decreased by $0.8 million or 268.1%, as compared to the trailing twelve month period ended. Other income declined $1.5 million or 63.1%, $0.6 million of which is attributed to fees from the sale of deposits during 2022.

Previous wording

Total non-interest expense increased $16.5 million or 7.6% to $233.2 million during the year ended December 31, 2023, as compared to $216.6 million for the comparative period in 2022, for reasons primarily associated with the acquisition of Valley Republic Bank in March of 2022 which resulted in expense increases for nearly every identified category. Merger and acquisition expenses associated with this acquisition totaled $6.2 million for the twelve-month period ended 2022. Regulatory assessment charges also increased by approximately $1.2 million during 2023 as a result of increases in assessment rates. Other miscellaneous expenses also increased by $4.1 million in 2023 due to, among other things, changes in regulatory requirements which resulted in an estimated $0.8 million in refunds to customers previously charged non-sufficient funds fees, changes in the valuation of other real estate owned which contributed to $0.9 million in variance from the prior year, and other increases generally associated with increased operational costs.

Current wording

Non-interest expense increased by $16.5 million or 7.63% to $233.2 million during the year ended December 31, 2023 as compared to $216.6 million for the trailing twelve month period 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 this acquisition totaled $6.2 million for the twelve-month period ended 2022. Regulatory assessment charges also increased by approximately $1.2 million during 2023 as a result of increases in assessment rates. Other miscellaneous expenses also increased by $4.1 million in 2023 due to, among other things, changes in regulatory requirements which resulted in an estimated $0.8 million in refunds to customers previously charged non-sufficient funds fees, changes in the valuation of other real estate owned which contributed to $0.9 million in variance from the prior year, and other increases generally associated with increased operational costs.

Previous wording

The effective tax rate on income was 27.0%, 27.9%, and 28.1% in 2023, 2022, and 2021, respectively. The effective tax rate was greater than the Federal statutory rates of 21% due to the combination of state tax expenses of 7.9%. The impact of Federal and state tax expenses were partially offset by Federal tax-exempt interest income of $5.6 million, $5.5 million, and $3.1 million, respectively, Federal and State tax-exempt income of $3.1 million, $3.2 million, and $3.5 million, respectively, from increase in cash value and gain on death benefit of life insurance, and low income housing tax credits and losses, net of amortization of $1.5 million, $0.2 million, and $0.6 million, respectively. The low-income housing tax credits and the equity compensation excess tax benefits represent direct reductions in tax expense. The items noted above resulted in an effective combined Federal and State income tax rate that differed from the combined Federal and State statutory income tax rate of approximately 29.6% during the three years ended 2023, 2022 and 2021.

Current wording

The effective tax rate on income was 25.9%, 27.0%, and 27.9% in 2024, 2023, and 2022, respectively. The effective tax rate was greater than the Federal statutory rates of 21% due to the combination of state tax expenses of 7.9%. The impact of Federal and state tax expenses were partially offset by Federal tax-exempt interest income of $5.6 million, $5.5 million, and $3.1 million, respectively, Federal and State tax-exempt income of $3.1 million, $3.2 million, and $3.5 million, respectively, from increase in cash value and gain on death benefit of life insurance, and low income housing tax credits and losses, net of amortization of $1.5 million, $0.2 million, and $0.6 million, respectively. The low-income housing tax credits and the equity compensation excess tax benefits represent direct reductions in tax expense. The items noted above resulted in an effective combined Federal and State income tax rate that differed from the combined Federal and State statutory income tax rate of approximately 29.6% during the three years ended 2024, 2023, and 2022.

Previous wording

Restricted equity securities were $17.2 million at December 31, 2023 and December 31, 2022. The entire balance of restricted equity securities at December 31, 2023 and 2022 represents the Bank’s investment in the Federal Home Loan Bank of San Francisco (“FHLB”).

Current wording

Restricted equity securities were $17.3 million at December 31, 2024 and 2023 . The entire balance of restricted equity securities at December 31, 2024 and 2023 represents the Bank’s investment in the Federal Home Loan Bank of San Francisco (“FHLB”).

Previous wording

The Company did not purchase any loans during 2023. During the year ended 2022, the Company acquired loans totaling $773.3 million in connection with the merger with VRB in March of 2022, inclusive of approximately $68.5 million in loans with credit deterioration. During 2021, the Company purchased pools of SFR 1-4 1st DT (consumer) loans totaling approximately $101.5 million inclusive of loan premiums. As of December 31, 2023 and 2022, the total remaining balances outstanding from these purchases equaled approximately $664.1 million and $804.3 million, respectively.

Current wording

The Company did not purchase any loans during 2024 or 2023. During the year ended 2022, the Company acquired loans totaling $773.3 million in connection with the merger with VRB in March of 2022, inclusive of approximately $68.5 million in loans with credit deterioration.

Previous wording

At December 31, 2023, loans including net deferred loan costs, totaled $6.8 billion which was a 5.3% or $344.0 million increase over the balance at the end of December 31, 2022. At December 31, 2022, loans including net deferred loan costs, totaled $6.5 billion, which was a 31.2% or $1.5 billion increase over the balance at the end of December 31, 2021.

Current wording

At December 31, 2024, loans including net deferred loan fees, totaled $6.8 billion which was a 0.4% or $25.9 million decrease over the balance at the end of December 31, 2023. At December 31, 2023, loans including net deferred loan fees, totaled $6.8 billion, which was a 5.3% or $344.0 million increase over the balance at the end of December 31, 2022.

Previous wording

From time to time the Bank may be presented with the opportunity to purchase individual or pools of loans in whole or in part outside of a transaction that would be considered a business combination. As of December 31, 2023 and 2022, the outstanding carrying value of purchased loans that were not acquired in a business combination totaled $159.1 million and $167.0 million, respectively.

Current wording

From time to time the Bank may be presented with the opportunity to purchase individual or pools of loans in whole or in part outside of a transaction that would be considered a business combination. As of December 31, 2024 and 2023, the outstanding carrying value of purchased loans that were not acquired in a business combination totaled $155.6 million and $159.1 million, respectively.

Previous wording

The following tables set forth the amount of the Bank’s nonperforming assets as of the dates indicated. “Performing non-accrual loans” are loans that may be current for both principal and interest payments, or are less than 90 days past due, but for which payment in full of both

Current wording

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

Previous wording

Nonperforming assets increased by $9.8 million (39.7%) to $34.6 million at December 31, 2023 from $24.8 million at December 31, 2022. The increase in nonperforming assets during 2023 was the result of additions totaling $48.7 million, partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $30.1 million, and net charge-offs of $7.8 million.

Current wording

Nonperforming assets increased by $9.8 million or 39.7% to $34.6 million at December 31, 2023 from $24.8 million at December 31, 2022. The increase in nonperforming assets during 2023 was the result of $48.6 million of additions to non-performing loans, which was partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $30.1 million and net charge-offs of $7.8 million.

Previous wording

Nonperforming assets increased during the fourth quarter of 2022 by $3.8 million or 18.4% to $24.7 million at December 31, 2022 compared to $20.9 million at September 30, 2022. The increase in nonperforming assets during the fourth quarter of 2022 was the result of new nonperforming loans of $10.2 million, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $6.0 million, and net charge-offs of $0.1 million in non-performing loans.

Current wording

Nonperforming assets increased during the fourth quarter by $2.5 million or 5.6% to $46.9 million at December 31, 2024 compared to $44.4 million at September 30, 2024. The increase in nonperforming assets during the fourth quarter of 2024 was the result of new nonperforming loans of $6.3 million, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $3.0 million, and net charge-offs of $0.6 million in non-performing loans.

Previous wording

Nonperforming assets increased during the fourth quarter by $1.9 million or 5.8% to $34.6 million at December 31, 2023 compared to $32.7 million at September 30, 2023. The increase in nonperforming assets during the fourth quarter of 2023 was the result of new nonperforming loans of $6.5 million, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $3.7 million, and net charge-offs of $0.6 million in non-performing loans.

Current wording

Nonperforming assets increased during the fourth quarter of 2023 by $1.9 million or 6.0% to $34.6 million at December 31, 2023 compared to $32.7 million at September 30, 2023. The increase in nonperforming assets during the fourth quarter of 2023 was the result of new nonperforming loans of $6.5 million, that were partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $3.7 million, and net charge-offs of $0.6 million in non-performing loans.

Previous wording

In addition to credit losses associated with the Company's loan portfolio, the CECL standard requires that loss estimates be developed for securities classified as held-to-maturity (HTM). As of December 31, 2023, the Company's HTM investment portfolio had a carrying value of approximately $133.5 million and was comprised of $130.8 million in obligations backed by U.S. government agencies and $2.7 million in obligations of states and political subdivisions. As the 97.9% of the HTM portfolio consisted of investment securities where payment performance has an implicit or explicit guarantee from the U.S. government and where no history of credit losses exist, management believes that indicators for zero loss are present and therefore, no loss reserves were recognized in conjunction with the adoption of the CECL standard. Further, management separately evaluated its HTM investment securities from obligations of state and political subdivisions utilizing the historical loss data represented by similar securities over a period of time spanning nearly 50 years. Based on this evaluation, management determined that the expected credit losses associated with these securities is less than significant for financial reporting purposes. Therefore, during the year ended December 31, 2023 as 2022, no allowance for credit losses related to HTM securities was recorded.

Current wording

In addition to credit losses associated with the Company's loan portfolio, the CECL standard requires that loss estimates be developed for securities classified as held-to-maturity (HTM). As of December 31, 2024, the Company's HTM investment portfolio had a carrying value of approximately $111.9 million and was comprised of $109.2 million in obligations backed by U.S. government agencies and $2.7 million in obligations of states and political subdivisions. As the 97.6% of the HTM portfolio consisted of investment securities where payment performance has an implicit or explicit guarantee from the U.S. government and where no history of credit losses exist, management believes that indicators for zero loss are present and therefore, no loss reserves were recognized in conjunction with the adoption of the CECL standard. Further, management separately evaluated its HTM investment securities from obligations of state and political subdivisions utilizing the historical loss data represented by similar securities over a period of time spanning nearly 50 years. Based on this evaluation, management determined that the expected credit losses associated with these securities is less than significant for financial reporting purposes. Therefore, during the year ended December 31, 2024 as 2023, no allowance for credit losses related to HTM securities was recorded.

Previous wording

Based on the current conditions of the loan portfolio, management believes that the $121.5 million allowance for credit losses at December 31, 2023 is adequate to absorb probable losses inherent in the Bank’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

Current wording

Based on the current conditions of the loan portfolio, management believes that the $125.4 million allowance for credit losses at December 31, 2024 is adequate to absorb probable losses inherent in the Bank’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

Previous wording

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. Despite continued declines on a year over year comparative basis, core inflation remains elevated from wage pressures, and higher living costs such as housing, energy and food prices resulting in a rising rate environment for nearly all of 2023. Management notes the rapid intervals of rate increases by the Federal Reserve may create repricing risk for certain borrowers and continued inversion of the yield curve, creates informed expectations of the US potentially entering a recession within 12 months. While projected cuts in interest rates from the Federal Reserve during 2024 may improve this outlook, the uncertainty associated with the extent and timing of these potential reductions has inhibited a material benefit to forecasted reserve levels. 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.

Current wording

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

Previous wording

Total uninsured deposits were estimated to be approximately $2.4 billion and $2.7 billion at December 31, 2023 and 2022, respectively.

Current wording

Total uninsured deposits were estimated to be approximately $2.6 billion and $2.4 billion at December 31, 2024 and 2023, respectively.

Previous wording

On February 25, 2021 the Board of Directors approved the authorization to repurchase up to 2,000,000 shares of the Company's common stock (the 2021 Repurchase Plan), which approximated 6.7% of the shares outstanding as of the approval date. In connection with approval of the 2021 Repurchase Plan, the Company’s previous repurchase program adopted on November 12, 2019 (the 2019 Repurchase Plan) was terminated. The following table shows the repurchases made by the Company during 2023 under the 2021 Plan:

Current wording

On February 25, 2021 the Board of Directors approved the authorization to repurchase up to 2,000,000 shares of the Company's common stock (the 2021 Repurchase Plan), which approximated 6.7% of the shares outstanding as of the approval date. The following table shows the repurchases made by the Company during 2024 under the 2021 Plan:

Previous wording

In the simulation of net interest income and market value of equity, the forecast balance sheet is processed against various interest rate scenarios. These various interest rate scenarios include a flat rate scenario, which assumes interest rates are unchanged in the future, and rate ramp and or shock scenarios including -300, -200, -100, +100, +200, and +300 basis points around the flat scenario. At December 31, 2023, the overnight Federal funds rate, the rate primarily used in these interest rate shock scenarios, was 5.25%. These scenarios assume that 1) interest rates increase or decrease evenly (in a “ramp” fashion) over a twelve-month period and remain at the new levels beyond twelve months or 2) that interest rates change instantaneously (“shock”). The simulation results shown below assume no changes in the structure of the Company’s balance sheet over the twelve months being measured.

Current wording

In the simulation of net interest income and market value of equity, the forecast balance sheet is processed against various interest rate scenarios. These various interest rate scenarios include a flat rate scenario, which assumes interest rates are unchanged in the future, and rate ramp and or shock scenarios including -300, -200, -100, +100, +200, and +300 basis points around the flat scenario. At December 31, 2024, the overnight Federal funds rate, the rate primarily used in these interest rate shock scenarios, was 4.5%. These scenarios assume that 1) interest rates increase or decrease evenly (in a “ramp” fashion) over a twelve-month period and remain at the new levels beyond twelve months or 2) that interest rates change instantaneously (“shock”). The simulation results shown below assume no changes in the structure of the Company’s balance sheet over the twelve months being measured.

Previous wording

These simulations indicate that given a “flat” balance sheet size scenario, and if interest-bearing checking, savings and money market interest rates track the general interest rate changes by the rate shock values listed above, the Company’s balance sheet is slightly liability sensitive over a twelve month time horizon for both a rates up and rates down shock scenario. “Asset sensitive” implies that net interest income increases when interest rates rise and decrease when interest rates decrease. “Liability sensitive” implies that net interest income decreases when interest rates rise and increase when interest rates decrease. “Neutral sensitivity” implies that net interest income does not

Current wording

These simulations indicate that given a “flat” balance sheet size scenario, and if interest-bearing checking, savings and money market interest rates track the general interest rate changes by the rate shock values listed above, the Company’s balance sheet is liability sensitive over a twelve month time horizon for both a rates up and rates down shock scenario, with greater sensitivity skewed toward rates up. “Asset sensitive” implies that net interest income increases when interest rates rise and decrease when interest rates decrease. “Liability sensitive” implies that net interest income decreases when interest rates rise and increase when interest rates decrease. “Neutral sensitivity” implies that net interest income does not change when interest rates change. The asset liability management policy limits aggregate market risk, as measured in this fashion, to an acceptable level within the context of risk-return trade-offs.

Previous wording

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the preceding tables. For example, although certain of the Company’s assets and liabilities may have similar maturities or repricing time frames, they may react in different degrees to changes in market interest rates. In addition, the interest rates on certain of the Company’s asset and liability categories may precede, or lag behind, changes in market interest rates. Also, the actual rates of prepayments on loans and investments could vary significantly from the assumptions utilized in deriving the results as presented in the preceding tables. Further, a change in U.S. Treasury rates accompanied by a change in the shape of the treasury yield curve could result in different estimations from those presented herein. Accordingly, the results in the preceding tables should not be relied upon as indicative of actual results in the event of changing market interest rates. Additionally, the resulting estimates of changes in market value of equity are not intended to represent, and should not be construed to represent, estimates of changes in the underlying value of the Company.

Current wording

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the preceding tables. For example, although certain of the Company’s assets and liabilities may have similar maturities or repricing time frames, they may react in different degrees to changes in market interest rates. In addition, the interest rates on certain of the Company’s asset and liability categories may precede, or lag behind, changes in market interest rates. Also, the actual rates of prepayments on loans and investments could vary significantly from the assumptions utilized in deriving the results as presented in the preceding tables. Further, a change in U.S. Treasury rates accompanied by a change in the shape of the treasury yield curve could result in different estimations from those presented

Previous wording

Liquidity refers to the Company’s ability to provide funds at an acceptable cost to meet loan demand and deposit withdrawals, as well as contingency plans to meet unanticipated funding needs or loss of funding sources. These objectives can be met from either the asset or liability side of the balance sheet. Asset liquidity sources consist of the repayments and maturities of loans, selling of loans, short-term money market investments, maturities of securities and sales of securities from the available-for-sale portfolio. These activities are generally summarized as investing activities in the Consolidated Statement of Cash Flows. Net cash from investing activities totaled $28.6 million in 2023. Net increases in loan balances from both originations and purchases used approximately $345.9 million of cash, while proceeds from the maturity and sales of investment securities, net of purchases, provided approximately $385.6 million of cash.

Current wording

Liquidity refers to the Company’s ability to provide funds at an acceptable cost to meet loan demand and deposit withdrawals, as well as contingency plans to meet unanticipated funding needs or loss of funding sources. These objectives can be met from either the asset or liability side of the balance sheet. Asset liquidity sources consist of the repayments and maturities of loans, selling of loans, short-term money market investments, maturities of securities and sales of securities from the available-for-sale portfolio. These activities are generally summarized as investing activities in the Consolidated Statement of Cash Flows. Net cash from investing activities totaled $285.0 million in 2024. Proceeds from the maturity and sales of investment securities, net of purchases, provided the bulk of the cash flows totaling approximately $266.5 million, in addition to $22.6 million from the net origination and collection of loans outstanding.

Previous wording

Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding. These activities are included under financing activities in the Consolidated Statement of Cash Flows. In 2023, financing activities used funds totaling $176.0 million, resulting from a decline of $495.0 million in deposits, $39.9 million in dividend payment outflows, and an additional $9.2 million used toward the repurchase of common stock, partially offset by an increase in cash from short term borrowings totaling $368.0 million. The Company's primary sources of remaining available liquidity from available borrowings and in transit items include the following for the periods indicated:

Current wording

Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding. These activities are included under financing activities in the Consolidated Statement of Cash Flows. In 2024, financing activities used funds totaling $348.5 million, resulting from a reduction in short term borrowings of $543.0 million, $43.6 million in dividend payment outflows, and an additional $15.5 million

Previous wording

At December 31, 2023, the Company's primary sources of liquidity represented 50% of total deposits and 166% 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 $125.1 million, including approximately $8.3 million in net unrealized losses. The Company did not utilize any brokered deposits during 2023 or 2022. While these sources are expected to continue to provide significant amounts of funds in the future, their mix, as well as the possible use of other sources, will depend on future economic and market conditions.

Current wording

At December 31, 2024, the Company's primary sources of liquidity represented 51% of total deposits and 160% 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 $104.3 million, including approximately $7.5 million in net unrealized losses. The Company did not utilize any brokered deposits during 2024 or 2023. While these sources are expected to continue to provide significant amounts of funds in the future, their mix, as well as the possible use of other sources, will depend on future economic and market conditions.

Previous wording

Liquidity is also provided or used through the results of operating activities. In 2023, operating activities provided cash of $138.9 million, primarily from net income of $117.4 million. In 2022, operating activities provided cash of $162.9 million, primarily from net income of $125.4 million.

Current wording

Liquidity is also provided or used through the results of operating activities. In 2024, operating activities provided cash of $109.7 million, primarily from net income of $114.9 million. In 2023, operating activities provided cash of $138.9 million, primarily from net income of $117.4 million.

Previous wording

Loan demand during 2024 will depend in part on economic and competitive conditions. The Company emphasizes the solicitation of non-interest bearing demand deposits and money market checking deposits, which are the least sensitive to interest rates. The outlook for deposit balances during 2024 is also subject to actions from the Federal Reserve, heightened competition, the success of the Company’s sales efforts, as well as the delivery of superior customer service and market conditions. The Federal Reserve's anticipated decrease in interest rates is expected to relieve some pressure on deposit margin expense, however, the competitive landscape for attracting and retaining deposit balances will continue to remain challenging during 2024. Therefore, due to concerns such as uncertainty in the general economic environment, political uncertainty, and loan demand, levels of customer deposits are not certain and forecasted changes in those balances are subject to significant volatility and uncertainty. Depending on economic conditions, interest rate levels, and a variety of other conditions, proceeds from the sale or maturity of investment securities may be used to fund loans, or reduce short-term borrowings. At December 31, 2023, we believe the Company has sufficient liquidity and capital resources to meet its cash flow obligations over the foreseeable future.

Current wording

Loan demand during 2025 will depend in part on economic and competitive conditions. The Company emphasizes the solicitation of non-interest bearing demand deposits and money market checking deposits, which are the least sensitive to interest rates. The outlook for deposit balances during 2025 is also subject to actions from the Federal Reserve, heightened competition, the success of the Company’s sales efforts, as well as the delivery of superior customer service and market conditions. The Federal Reserve's recent decrease in Fed Funds rates provided a modest level of relief on deposit margin expense, however, the competitive landscape for attracting and retaining deposit balances will continue to remain challenging during 2025. Therefore, due to concerns such as uncertainty in the general economic environment, political uncertainty, and loan demand, levels of customer deposits are not certain and forecasted changes in those balances are subject to significant volatility and uncertainty. Depending on economic conditions, interest rate levels, and a variety of other conditions, proceeds from the sale or maturity of investment securities may be used to fund loans, or reduce short-term borrowings. At December 31, 2024, we believe the Company has sufficient liquidity and capital resources to meet its cash flow obligations over the foreseeable future.

Previous wording

Certificates of Deposit in Denominations of $250,000 or More

Current wording

Portion of certificates of deposit in excess of $250,000